<PAGE> 1
As filed with the Securities and Exchange Commission on Augus 26, 1997
Registration No.333-30757
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO THE
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
INDEPENDENCE COMMUNITY BANK CORP.
(Exact name of registrant as specified in its articles of incorporation)
------------
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<S> <C> <C>
Delaware 6711 11-3387931
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(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Code Number) Identification No.)
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195 Montague Street
Brooklyn, New York 11201
(718) 722-5300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Charles J. Hamm
Chairman of the Board, President and Chief Executive Officer
195 Montague Street
Brooklyn, New York 11201
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Raymond A. Tiernan, Esq.
Philip R. Bevan, Esq.
Hugh T. Wilkinson, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington, D.C. 20005
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ X ]
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AMOUNT
TITLE OF EACH CLASS OF TO BE PURCHASE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share (1) 72,737,499 shares $10.00 $727,374,990(2) $220,417(2)
================================================================================================================================
Participation interests 973,951 shares -- -- (4)
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(1) Includes shares of Common Stock to be issued to the Independence Community
Foundation, a private foundation.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) A registration fee of $190,359.85 was previously paid upon the initial
filing of the Form S-1.
(4) The securities of Independence Community Bank Corp. to be purchased by the
Independence Savings Bank 401(k) Savings Plan are included in the amount
shown for Common Stock. Accordingly, no separate fee is required for the
participation interests. In accordance with Rule 457(h) of the Securities
Act, as amended, the registration fee has been calculated on the basis of
the number of shares of Common Stock that may be purchased with the
current assets of such Plan.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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PROSPECTUS SUPPLEMENT
INDEPENDENCE COMMUNITY BANK CORP.
COMMON STOCK, $.01 PAR VALUE PER SHARE
INDEPENDENCE SAVINGS BANK 401(k)
------------SAVINGS PLAN
(_______ SHARES AND PARTICIPATIONS THEREIN)
This Prospectus Supplement relates to the offer and sale to employees
of Independence Savings Bank (the "Bank" or the "Employer") who are
participants ("Participants") in the Independence Savings Bank 401(k) Savings
Plan in RSI Retirement Trust ("Profit Sharing Plan" or the "Plan") of up to
_________ shares of Independence Community Bank Corp. (the "Company")common
stock, par value $.01 per share (the "Common Stock"), and participation
interests in the Profit Sharing Plan, as set forth herein.
In connection with the reorganization of the Bank and the mutual holding
company parent of the Bank (the "Mutual Holding Company") to the stock form of
organization pursuant to the Bank's and the Mutual Holding Company's Plan of
Conversion (the "Plan" or "Plan of Conversion"), the Company and the Bank have
amended the Profit Sharing Plan to provide, among other things that
Participants in the Profit Sharing Plan be able to direct the investment of the
vested portion of their account balances within the Profit Sharing Plan into an
investment fund consisting of Common Stock (the "Employer Stock Fund"). The
Profit Sharing Plan will permit Participants in the Profit Sharing Plan to
direct the trustee of the Profit Sharing Plan (the "Trustee") to purchase
Common Stock with amounts in the Profit Sharing Plan attributable to such
Participants. This Prospectus Supplement relates to the initial election of a
Participant to direct the purchase of Common Stock in the Conversion. This
Prospectus Supplement does not cover reoffers or resales of the Common Stock.
See "Restrictions on Resale."
The Prospectus dated ______________, 1997 of the Company (the
"Prospectus"), which is attached to this Prospectus Supplement, includes
detailed information with respect to the Company, the Conversion, the Common
Stock and the financial condition, results of operations, and business of the
Bank. This Prospectus Supplement, which provides detailed information with
respect to the Profit Sharing Plan, should be read only in conjunction with the
Prospectus.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS" AT PAGE 19 IN THE PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK,
THE NEW YORK STATE BANKING BOARD, THE NEW YORK STATE BANKING DEPARTMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER FEDERAL OR
STATE AGENCY OR STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, SUPERINTENDENT, BOARD, DEPARTMENT,CORPORATION
OR ANY STATE SECURITIES COMMISSIONERS OR OTHER AGENCY
PASSED UPON THE ACCURACY OF THIS PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE BANK INSURANCE FUND OR THE SAVINGS
ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE COMPANY OR THE BANK.
The date of this Prospectus Supplement is ___________, 1997.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PROSPECTUS OR THIS PROSPECTUS
SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE BANK OR THE PROFIT
SHARING PLAN. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY, THE
BANK OR THE PROFIT SHARING PLAN SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN CONTAINED OR INCORPORATED BY REFERENCE IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT SHOULD BE READ ONLY
IN CONJUNCTION WITH THE PROSPECTUS THAT IS ATTACHED HERETO AND SHOULD BE
RETAINED FOR FUTURE REFERENCE.
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TABLE OF CONTENTS
PAGE
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The Offering.............................................................................................. 1
Securities Offered............................................................................... 1
Election to Purchase Common Stock in the Conversion.............................................. 1
Value of Participation Interests................................................................. 1
Method of Directing Transfer..................................................................... 1
Time for Directing Transfer...................................................................... 2
Irrevocability of Transfer Direction............................................................. 2
Direction to Purchase Common Stock After the Conversion.......................................... 2
Purchase Price of Common Stock................................................................... 2
Nature of Participant's Interest in the Common Stock............................................. 3
Voting and Tender Rights......................................................................... 3
Description of the Profit Sharing Plan.................................................................... 3
Introduction..................................................................................... 3
Eligibility and Participation.................................................................... 4
Contributions Under the Plan .................................................................... 5
Limitations on Contributions..................................................................... 6
Investment of Contributions...................................................................... 8
Vesting.......................................................................................... 11
Withdrawals and Distributions From the Sharing Plan.............................................. 11
Administration of the Profit Sharing Plan........................................................ 12
Reports to Profit Sharing Plan Participants...................................................... 12
Plan Administration.............................................................................. 13
Amendment and Termination........................................................................ 13
Merger, Consolidation or Transfer................................................................ 13
Federal Income Tax Consequences.................................................................. 14
ERISA and Other Qualifications................................................................... 16
Restrictions on Resale........................................................................... 16
SEC Reporting and Shortswing Profit Liability.................................................... 17
Experts................................................................................................... 18
Legal Opinions............................................................................................ 18
Index to Financial Statements and Supplemental Schedules.................................................. F-1
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<PAGE> 4
THE OFFERING
SECURITIES OFFERED
Up to ___________ shares of Common Stock which may be acquired by the
Profit Sharing Plan for the accounts of employees participating in the Profit
Sharing Plan, as well as participation interests in the Profit Sharing Plan,
are offered hereby. Only employees of the Bank may participate in the Profit
Sharing Plan. Information with regard to the Profit Sharing Plan is contained
in this Prospectus Supplement and information with respect to the Company, the
Conversion and the financial condition, results of operations and business of
the Bank is contained in the attached Prospectus. The address of the principal
executive office of the Company is 195 Montague Street, Brooklyn, New York
11201. The Company's telephone number is (718) 722-5300. The address and
telephone number of the Bank's principal executive office are the same as the
Company's.
ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION
In connection with the Conversion, the Profit Sharing Plan has been
amended to permit each Participant to direct that all or part of the funds
which represent his or her beneficial interest in the assets of the Profit
Sharing Plan may be transferred to an investment fund that will invest in
Common Stock (the "Employer Stock Fund") and used to purchase Common Stock in
the Conversion. The Profit Sharing Plan permits this one-time election outside
the specific election dates as discussed below. The ability of a Participant to
purchase Common Stock in the Conversion pursuant to directions to transfer all
or a portion of their beneficial assets in the Profit Sharing Plan will be
based upon the Participant's status as an Eligible Account Holder and/or
Supplemental Eligible Account Holder and/or purchases by such Plan Participant
in the Community Offering and the availability of Common Stock. See
"Description of the Profit Sharing Plan - Investment of Contributions." The
Trustee of the Profit Sharing Plan will follow the Participants' directions to
purchase Common Stock in the Conversion. Funds not transferred to the Employer
Stock Fund will remain in the other investment funds of the Profit Sharing Plan
as directed by the Participants.
VALUE OF PARTICIPATION INTERESTS
The assets of the Profit Sharing Plan were valued as of March 31, 1997
and each Participant was informed of the value of his or her beneficial
interest in the Profit Sharing Plan. The value represented the market value as
of March 31, 1997 of past contributions to the Profit Sharing Plan by the Bank
and the Participants and any earnings thereon, less previous withdrawals.
METHOD OF DIRECTING TRANSFER
The last page of this Prospectus Supplement is a form to direct a
transfer among investment funds (the "Investment Form"). If a Participant
wishes to transfer all or part of his or her beneficial interest in the assets
of the Profit Sharing Plan to the purchase of
<PAGE> 5
Common Stock in the Conversion, he or she should indicate that decision
in Part 2 of the Investment Form. If a Participant does not wish to make such
an election, he or she does not need to take any action.
TIME FOR DIRECTING TRANSFER
The deadline for submitting a direction to transfer amounts to the
Employer Stock Fund to purchase Common Stock in the Conversion is ____________,
1997. The Investment Form should be returned to the Bank by _:__ p.m., Eastern
Time, on such date.
IRREVOCABILITY OF TRANSFER DIRECTION
A Participant's direction to transfer amounts credited in the Profit
Sharing Plan to his or her accounts to the Employer Stock Fund in order to fund
the purchase of Common Stock in the Conversion shall be irrevocable. Subsequent
to the Conversion, however, Participants will be able to direct transfers
within the Profit Sharing Plan, as explained below.
DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION
After the Conversion, a Participant may direct that a certain
percentage of his or her interests in the trust fund established for the
Profit Sharing Plan (the "Trust Fund") be transferred to the Employer Stock
Fund and invested in Common Stock. Alternatively, a Participant may direct
that a certain percentage of his or her interest in the Employer Stock Fund be
transferred to the Trust Fund to be invested in accordance with the terms of
the Profit Sharing Plan. Participants will be permitted to direct that future
contributions made to the Profit Sharing Plan by or on their behalf be
invested in Common Stock. Following the initial election, the allocation of a
Participant's interest in the investment funds may be changed as allowed by
the Profit Sharing Plan. The initial election to invest a percentage of his
or her interest in the Employer Stock Fund shall not be counted as one of the
changes in investment direction that are otherwise permitted to be made by the
Profit Sharing Plan. Special restrictions apply to transfers directed by those
Participants who are officers, directors and principal stockholders of the
Company who are subject to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "1934 Act").
PURCHASE PRICE OF COMMON STOCK
The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in the Conversion will be used by the Trustee to purchase Common
Stock through the exercise of subscription rights granted to participants as an
Eligible Account Holder and/or Supplemental Eligible Account Holder and/or
purchases by such Plan participant in the Community Offering under the Plan of
Conversion. The price paid for such shares of Common Stock will be the same
price as is paid by all other persons who purchase Common
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<PAGE> 6
Stock in the Conversion. The prices paid by the Trustee for shares of Common
Stock will not exceed "adequate consideration" as defined in Section 3(18) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK
The Common Stock will be held in the name of the Trustee for the
Profit Sharing Plan. Each Participant has an allocable interest in the
investment funds of the Profit Sharing Plan but not in any particular assets of
the Profit Sharing Plan. Accordingly, a specific number of shares of Common
Stock will not be directly attributable to the account of any Participant.
Earnings, e.g. , gains and losses, are allocated to the Account of a
Participant based upon the particular investment designation of the
Participant. Therefore, earnings with respect to a Participant's Account
should not be affected by the investment designations (including investments in
Common Stock) of other Participants.
VOTING AND TENDER RIGHTS OF COMMON STOCK
The Trustee will generally exercise voting and tender rights
attributable to all Common Stock held by the Trust as directed by Participants
with interests in the Employer Stock Fund. With respect to each matter as to
which holders of Common Stock have a right to vote, each Participant will be
allocated a number of voting instruction rights reflecting his or her
proportionate interest in the Employer Stock Fund. The number of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
and negative on each matter shall be proportionate to the number of voting
instruction rights exercised in the affirmative and negative, respectively. In
the event of a tender offer for Common Stock, the Plan provides that each
Participant will be allotted a number of tender instruction rights reflecting
his or her proportionate interest in the Employer Stock Fund. The percentage of
shares of Common Stock held in the Employer Stock Fund that will be tendered
will be the same as the percentage of the total number of tender instruction
rights that are exercised in favor of tendering. The remaining shares of Common
Stock held in the Employer Stock Fund will not be tendered. The Profit Sharing
Plan makes provision for Participants to exercise their voting instruction
rights and tender instruction rights on a confidential basis.
DESCRIPTION OF THE PROFIT SHARING PLAN
INTRODUCTION
The Profit Sharing Plan was established September 1, 1973, as the South
Brooklyn Savings Bank Incentive Savings Plan. Subsequent to such date, the
Profit Sharing Plan became known as the Independence Savings Bank Incentive
Savings Plan. Effective January 1, 1991, the Profit Sharing Plan was amended
and restated in its entirety as the Independence Savings Bank 401(k) Savings
Plan in RSI Retirement Trust. The Profit
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<PAGE> 7
Sharing Plan is a qualified retirement plan which includes a cash or
deferred arrangement established in accordance with requirements under Section
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the trust pursuant to which the assets of the Profit Sharing Plan
are held is intended to be a qualified trust under Section 501(a) of the Code.
The Bank intends that the Profit Sharing Plan, in operation, will
comply with the requirements under Section 401(a) and Section 401(k) of the
Code. The Bank will adopt any amendments to the Profit Sharing Plan that may
be necessary to ensure the qualified status of the Profit Sharing Plan under
the Code and applicable Treasury Regulations.
The Profit Sharing Plan is an "individual account plan" other than a
"money purchase pension plan" within the meaning of ERISA. As such, the Profit
Sharing Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Profit Sharing Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to
an individual account plan (other than a money purchase plan). The Profit
Sharing Plan is not subject to Title IV (Plan Termination Insurance) of ERISA.
Neither the funding requirements contained in Part 3 of Title I of ERISA nor
the plan termination insurance provisions contained in Title IV of ERISA will
be extended to Participants (as defined below) or beneficiaries under the
Profit Sharing Plan.
Applicable federal law requires the Profit Sharing Plan to impose
substantial restrictions on the right of a Participant to withdraw amounts held
for his or her benefit under the Profit Sharing Plan prior to the Participant's
termination of employment with the Bank. A substantial federal tax penalty also
may be imposed on withdrawals made prior to the Participant's attainment of age
59 1/2, regardless of whether such a withdrawal occurs during his or her
employment with the Bank or after termination of employment.
The following statements are summaries of certain provisions of the
Profit Sharing Plan. They are not complete and are qualified in their entirety
by the full text of the Profit Sharing Plan which is filed as an exhibit to
the Registration Statement of which this Prospectus Supplement is a part and
which is incorporated by reference herein. Terms not otherwise defined herein
are otherwise defined in the Profit Sharing Plan. Copies of the Profit Sharing
Plan are available to all employees upon request to the Plan Administrator.
Each employee is urged to read carefully the full text of the Profit Sharing
Plan.
ELIGIBILITY AND PARTICIPATION
Certain employees of the Employer are eligible to participate in the
Profit Sharing Plan on the first day of any payroll period the ("Participation
Date") following completion of one year of service (at least 1,000 hours during
a twelve consecutive month period) with the Bank. Employees compensated on a
daily, commission fee or retainer basis, leased employees (within the meaning
of Section 414(n) of the Code) and employees covered by
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<PAGE> 8
a collective bargaining agreement which does not expressly provide for
their coverage under the Profit Sharing Plan, are not eligible to participate
in the Profit Sharing Plan.
As of March 31, 1997, there were approximately 522 employees
eligible to participate in the Profit Sharing Plan, and 498 employees had
elected to participate in the Profit Sharing Plan.
CONTRIBUTIONS UNDER THE PROFIT SHARING PLAN
401(k) CONTRIBUTIONS. Each Participant in the Profit Sharing Plan is
permitted to elect to reduce his or her Compensation (as defined below)
pursuant to a "Compensation Reduction Agreement" by an amount not less than 1%
and not more than 15% and have that amount contributed to the Profit Sharing
Plan on his or her behalf. These amounts are credited to the Participant's
"Basic Contribution Account." The Profit Sharing Plan defines "Compensation" as
a Participant's "Base Compensation" from the Employer for the year prior to any
reduction pursuant to a Compensation Reduction Agreement. Base Compensation
includes salary, Basic Contributions (the contributions of the Employer made in
connection with the Participant's Compensation Reduction Agreement), wages
and wage continuation payments to an employee who is absent due to illness or
disability of a short-term nature. Compensation does not include overtime,
commissions, expense allowances, severance pay, fees, bonuses, incentive
compensation, contributions other than Basic Contributions made by the Employer
to the Profit Sharing Plan, and contributions made by the Employer to any other
pension, insurance, welfare, or other employee benefit or deferred compensation
plan. The annual compensation of each Participant taken into account under the
Profit Sharing Plan is limited to $150,000 (adjusted for increases in the cost
of living as permitted by the Code); the limitation for 1997 is $160,000.
Generally, a Participant may elect to modify the amount contributed to the
Profit Sharing Plan under his or her Compensation Reduction Agreement not more
often than twice in any Plan Year by filing the applicable form to a Profit
Sharing Plan representative at least 10 days prior to the first day of the
payroll period for which the change is to become effective. However, special
restrictions apply to persons subject to Section 16 of the 1934 Act. Basic
Contributions are transferred by the Employer to the Trustee of the Plan.
Notwithstanding the preceding, a Participant who receives a hardship
distribution under the terms of the Profit Sharing Plan, may not be eligible to
make additional contributions under a Compensation Reduction Agreement for a
period of twelve moths after the receipt of the hardship distribution.
EMPLOYER CONTRIBUTIONS. The Bank makes discretionary contributions to
the Profit Sharing Plan, subject to the limitations on the deductibility of
such contributions set forth in the Code. For Participants in the Profit
Sharing Plan for less than 24 months, the Bank may contribute for each Plan
Year 50% of the Participants' Basic Contributions up to a maximum of 6% of the
Participants' Basic Contributions. However, the maximum annual amount of
Matching Contributions for Participants who have been in the Profit Sharing
Plan
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<PAGE> 9
for less than 24 months will not exceed $1,500. For Participants who have been
in the Profit Sharing Plan for greater than 24 months, the Bank may contribute
for each Plan Year 100% of the Participants' Basic Contributions up to a
maximum of 6% of the Participants' Basic Contributions. However, the maximum
annual amount of Matching Contributions for Participants who have been in the
Profit Sharing Plan for greater than 24 months will not exceed $3,000.
Such amounts are credited to the "Participant's Matching
Contribution Account." After the Conversion, at the discretion of the Bank, the
Employer contributions made with respect to Participants who are Bank employees
will be credited to the Participant's Account in the Bank's Employee Stock
Ownership Plan. At its discretion, the Employer may make an additional
contribution to the Plan as of the end of the Plan Year in an amount determined
by the Employer for the purpose of ensuring that the Plan complies with Section
401(k) of the Code ("Special Contribution"). Such amounts are credited to the
Participants' Basic Contribution Accounts. Special Contributions may be made
only to the accounts of non-highly compensated employees.
LIMITATIONS ON CONTRIBUTIONS
LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS. Pursuant to the
requirements of the Code, the Profit Sharing Plan provides that the amount of
contributions and forfeitures allocated to each Participant's Basic
Contribution Account and Matching Contribution Account during any plan year may
not exceed the lesser of 25% of the Participant's Section 415 Compensation for
the Plan Year or $30,000 (adjusted for increases in the cost of living as
permitted by the Code). A Participant's Section 415 Compensation is a
Participant's Compensation, excluding any Employer contribution to the Profit
Sharing Plan or to any other plan of deferred compensation or any distributions
from a plan of deferred compensation. In addition, annual additions shall be
limited to the extent necessary to prevent the limitations set forth in the
Code for all of the qualified defined benefit plans and defined contribution
plans maintained by the Bank from being exceeded. To the extent that these
limitations would be exceeded by reason of excess annual additions with
respect to a Participant, such excess will be disposed of as follows:
(i) Any excess amount in the Participant's Account will be used to
reduce the Employer's contributions for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;
(ii) If, an excess amount still exists, and the Participant is not
covered by the Profit Sharing Plan at the end of the Limitation Year, the
excess amount during the succeeding Limitation Year, shall be allocated during
such succeeding Limitation Year to each Participant then actively
participating in the Profit Sharing Plan which will then be applied to
reduce future Employer contributions for all remaining Participants
in the next Limitation Year, and each succeeding Limitation Year if necessary.
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<PAGE> 10
LIMITATION ON 401(k) PLAN CONTRIBUTIONS. The annual amount of Deferred
Compensation under a Compensation Reduction Agreement of a Participant (when
aggregated with any elective deferrals of the Participant under a simplified
employee pension plan or a tax-deferred annuity) may not exceed $7,000 adjusted
for increases in the cost of living as permitted by the Code (the limitation
for 1997 is $9,500). Contributions in excess of this limitation ("excess
deferrals") will be included in the Participant's gross income for federal
income tax purposes in the year they are made. In addition, any such excess
deferral will again be subject to federal income tax when distributed by the
Profit Sharing Plan to the Participant, unless the excess deferral (together
with any income allocable thereto) is distributed to the Participant not later
than the first April 15th following the close of the taxable year in which
the excess deferral is made. Any income on the excess deferral that is
distributed not later than such date shall be treated, for federal income tax
purposes, as earned and received by the Participant in the taxable year in
which the excess deferral is made.
LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES.
Sections 401(k) and 401(m) of the Code limit the amount of Deferred
Compensation that may be made to the Profit Sharing Plan in any Plan Year on
behalf of Highly Compensated Employees (defined below) in relation to the
amount of Deferred Compensation made by or on behalf of all other employees
eligible to participate in the Profit Sharing Plan. Specifically, the actual
deferral percentage (i.e., the average of the ratios, calculated separately for
each eligible employee in each group, by dividing the amount of Deferred
Compensation credited to the Basic Contribution Account of such eligible
employee by such eligible employee's compensation for the Plan Year) of the
Highly Compensated Employees may not exceed the greater of (i) 125% of the
actual deferral percentage of all other eligible employees, or (ii) the lesser
of (x) 200% of the actual deferral percentage of all other eligible employees,
or (y) the actual deferral percentage of all other eligible employees plus two
percentage points. In addition, the actual contribution percentage for such
Plan Years (i.e., the average of the ratios calculated separately for each
eligible employee in each group, by dividing the amount of voluntary Employee
and Employer matching contribution credited to the Matching Contribution
Account and Special Contribution of such eligible employee by such eligible
employee's compensation for the Plan Year) of the Highly Compensated Employees
may not exceed the greater of (i) 125% of the actual contribution percentage of
all other eligible employees, or (ii) the lesser of (x) 200% of the actual
contribution percentage of all other eligible employees, or (y) the actual
contribution percentage of all other eligible employees plus two percentage
points.
In general, for years beginning after December 31, 1996, a Highly
Compensated Employee includes any employee who, during the Plan Year or the
preceding Plan Year, (1) was at any time a 5% owner (i.e., owns directly or
indirectly more than 5% of the stock of the Employer, or stock possessing more
than 5% of the total combined voting power of all stock of the Employer), or
(2) for the preceding year (i) had compensation from the employer in excess of
$80,000, and (ii) if the employer elects the application of this clause for
such preceding year, was in the top-group of employees for such preceding year.
An
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<PAGE> 11
employee is in the top-paid group of employees for any year if such employee
is in the group consisting of the top 20 percent of employees when ranked on
the basis of compensation paid during such year. Such amounts are adjusted
annually to reflect increases in the cost of living.
In order to prevent the disqualification of the Profit Sharing Plan,
any amount contributed by Highly Compensated Employees that exceeds the average
deferral limitation in any Plan Year ("excess contributions"), together with
any income allocable thereto, must be distributed to such Highly Compensated
Employees before the close of the following Plan Year. However, the Employer
will be subject to a 10% excise tax on any excess contributions unless such
excess contributions, together with any income allocable thereto, either are
recharacterized or are distributed before the close of the first 2 1/2 months
following the Plan Year to which such excess contributions relate.
TOP-HEAVY PLAN REQUIREMENTS. If for any Plan Year the Profit Sharing
Plan is a Top-Heavy Plan (as defined below), then (i) the Bank may be required
to make certain minimum contributions to the Profit Sharing Plan on behalf of
non-key employees (as defined below), and (ii) certain additional restrictions
would apply with respect to the combination of annual additions to the Profit
Sharing Plan and projected annual benefits under any defined benefit plan
maintained by the Bank.
In general, the Profit Sharing Plan will be regarded as a "Top-Heavy
Plan" for any Plan Year if, as of the last day of the preceding Plan Year, the
aggregate balance of the Accounts of Participants who are Key Employees exceeds
60% of the aggregate balance of the Accounts of all Participants. Key Employees
generally include any employee who, at any time during the Plan Year or any of
the four preceding Plan Years, is (1) an officer of the Employer having annual
compensation in excess of 50% of the amount under Section 415(b)(1)(A) ($90,000
for 1997), (2) one of the ten employees having annual compensation in excess of
the amount under Section 415 (c)(1)(A) ($30,000 for 1997) and owning, directly
or indirectly, the largest interests in the Company, (3) a 5% owner of the
Company, (i.e., owns directly or indirectly more than 5% of the stock of the
Company, or stock possessing more than 5% of the total combined voting power
of all stock of the Bank) or (4) a 1% owner of the Company having annual
compensation in excess of $150,000.
INVESTMENT OF CONTRIBUTIONS
GENERAL. All amounts credited to Participants' Accounts under the
Profit Sharing Plan are held in the Plan Trust (the "Trust") which is
administered by the Trustee appointed by the Bank's Board of Directors.
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<PAGE> 12
Prior to __________________, 1997, the Accounts of a Participant held
in the Trust have been invested by the Trustee at the direction of the
Participant in the following funds:
a. Core Equity Fund;
b. Emerging Growth Equity Fund;
c. Value Equity Fund;
d. Intermediate - Term Bond Fund;
e. Actively Managed Bond Fund;
f. International Equity Fund; and
g. Short-Term Investment Fund.
The Profit Sharing Plan, as amended effective _______________, now
provides that in addition to the Funds specified above, a Participant who is
employed by the Bank may direct the Trustee to invest all or a portion of his
Basic Contribution Account or Rollover Account in the Stock Fund. After the
Conversion, at the discretion of the Bank, the Employer contributions to the
Participant's Matching Contribution Account will be credited to the
Participant's Account in the Bank's Employee Stock Ownership Plan.
At least once in each calendar quarter, but in no event more
frequently than two times each Plan Year, a Participant may elect (in
increments of 1%), to have both past and future contributions and additions to
the Participant's Basic Contribution Account and Rollover Account invested
either in the Employer Stock Fund or among such other Funds. Participants may
also elect to have past contributions to their Matching Contribution Accounts
invested in either the Employer Stock Fund or among such other Funds. These
elections will be effective on the effective date of the Participant's written
notice to the plan administrator, provided such notice is filed with the
administrator at least 10 days before it is to become effective. Any amounts
credited to a Participant's Accounts for which investment directions are not
given will be invested in accordance with the terms of the Profit Sharing Plan.
Because investment allocations only are required to be made in increments of
1%, Participants can invest their Accounts in each of the eight available
investment funds.
A Participant who receives a loan from the Profit Sharing Plan has a
separate account established under the Profit Sharing Plan. The balance of a
Participant's loan account represents the unpaid principal and interest (if
any) of such participant's loan from the Profit Sharing Plan. Repayments of
principal and payments of interest on loans are invested by the Trustee as
directed by the Participant or, if no investment directions are given, in
accordance with the terms of the Plan.
The net gain (or loss) of the Funds from investments (including
interest payments, dividends, realized and unrealized gains and losses on
securities, and expenses paid from the Trust) will be determined at least
monthly during the Plan Year. For purposes of such allocations, all assets of
the Trust are valued at their fair market value.
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<PAGE> 13
PREVIOUS FUNDS. Prior to _______________, contributions under the Plan
were invested in the seven Funds specified above. The annual percentage return
on these funds for the prior three years was:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ ------------
<S> <C> <C>
a. Core Equity Fund 21.53% 40.17% 1.31%
b. Emerging Growth Equity Fund 27.09 42.83 2.53
c. Value Equity Fund 25.90 33.96 (1.14)
d. Intermediate -Term Bond Fund 4.02 13.99 (2.54)
e. Actively Managed Bond Fund 3.15 17.70 (4.21)
f. International Equity Fund 10.86 12.46 *
g. Short-term Investment Fund 4.70 5.39 3.40
</TABLE>
------------
* The International Equity Fund was added as an investment option in
1995.
THE EMPLOYER STOCK FUND. The Employer Stock Fund will consist of
investment in Common Stock made on and after the effective date of the
Conversion. Cash dividends, if any, paid on Common Stock held in the Employer
Stock Fund will be credited to a cash dividend subaccount for each Participant
investing in the Employer Stock Fund. The Board of Directors of the Company may
consider a policy of paying cash dividends on the Common Stock in the future;
however, no decision as to the amount or timing of cash dividends, if any, has
been made. The Trustee will, to the extent practicable, use all amounts held by
it in the Employer Stock Fund (except the amounts credited to cash dividend
subaccounts) to purchase shares of Common Stock of the Company. It is expected
that all purchases will be made at prevailing market prices. Under certain
circumstances, the Trustee may be required to limit the daily volume of shares
purchased. Pending investment in Common Stock, assets held in the Employer
Stock Fund will be placed in bank deposits and other short-term investments.
When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale. Participants' Accounts will also be adjusted for any brokerage
commissions, transfer fees and other expenses incurred in the sale and purchase
of Common Stock for the Employer Stock Fund. A Participant's Account will be
adjusted to reflect changes in the value of shares of Common Stock resulting
from stock dividends, stock splits and similar changes.
As of the date of this Prospectus Supplement, none of the shares of
Common Stock have been issued or are outstanding and there is no established
market for the Common Stock. Accordingly, there is no record of the historical
performance of the Employer Stock Fund. Performance will be dependent upon a
number of factors, including the financial condition and profitability of the
Company and the Bank and market conditions for the Common Stock generally.
INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN SPECIAL
RISKS IN INVESTMENT IN COMMON STOCK OF THE COMPANY. FOR A DISCUSSION OF THESE
RISK FACTORS, SEE "RISK FACTORS" ON PAGE 19 IN THE PROSPECTUS.
-10-
<PAGE> 14
VESTING
A Participant at all times has a fully vested nonforfeitable interest
in his Basic Contribution Account and the earnings thereon under the Profit
Sharing Plan. Generally, a Participant vests in his or her Matching
Contribution Account under the Plan according to the following schedule:
<TABLE>
<CAPTION>
Period of Service Vested Percentage
- --------------------------------------- -----------------------------------------
<S> <C>
less than 2 years 0%
2 years but less 3 years 50%
3 years or more 100%
</TABLE>
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT. A Participant may make
a withdrawal from his Basic Contribution Account subject to the hardship
distribution rules under the Plan. These requirements are designed to ensure
that Participants have a true financial need before a withdrawal may be made.
A Participant may make a withdrawal from his or her Rollover
Contribution Account (distributions from a prior employer's tax qualified
defined contribution plan), from After-Tax Contributions, if any (allowable
after-tax contributions made prior to January 1, 1991), and from his or her
Matching Contributions Account (but only if the Participant is 100% vested and
has been a Participant in the Profit Sharing Plan for at least 60 months) or his
or her Basic Contribution Account after he turns 59 1/2. A Participant may also
make withdrawals of certain amounts contributed to the Profit Sharing Plan
prior to June 15, 1995. However, such withdrawals generally may not be made
more often then two times during any Plan Year.
DISTRIBUTION UPON RETIREMENT, DISABILITY OR TERMINATION OF EMPLOYMENT.
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment as soon as administratively feasible after such termination of
employment if the vested value of the Participant's Account is $3,500 or less.
If the vested portion of the Participant's Account balance is greater than
$3,500, the Participant may receive a distribution (subject to the minimum
distribution rules) in a lump sum payment: (a) as soon as administratively
possible after termination, (b) as of any Valuation Date up to 13 months after
termination or (c) as of the date the Participant attains normal retirement
age. Alternatively, a Participant may elect to receive benefits in the form of
quarterly, semi-annual, or annual installments over a period not to exceed 10
years. Benefit payments ordinarily shall be made not later than 60 days
following the end of the Plan Year in which occurs the latest of the
Participant's: (i) termination of employment; (ii) the attainment of age 65 or
(iii) the 10th anniversary of
-11-
<PAGE> 15
commencement of participation in the Plan; but in no event later than
the April 1 following the calendar year in which the Participant attains age 70
1/2; or the calendar year in which the employee retires. However, if the vested
portion of the Participant's Account balances exceeds $3,500, no distribution
shall be made from the Plan prior to the Participant's attaining age 65 unless
the Participant elects to receive to an earlier distribution.
DISTRIBUTION UPON DEATH. A Participant who dies before his or her
entire vested interest has been distributed shall have his or her benefits paid
to the surviving spouse in a lump sum as soon as administratively possible
following the date of his death. If however, the Participant elected prior to
his death to receive a deferred lump sum payment and had not yet received such
distribution, such Beneficiary shall receive a lump sum distribution as of the
earlier of the Valuation Date in the Participant's election or the last
Valuation Date which occurs within one (1) year of the Participant's death. If
the Participant elected to and began receiving a distribution in the form of
installments, such Beneficiary shall receive distributions over the remaining
period, at the times set forth in such election. With respect to an unmarried
Participant, and in the case of a married Participant with spousal consent to
the designation of another beneficiary, payment of benefits to the beneficiary
of a deceased Participant shall be made in the form of a lump-sum payment or in
the same manner described above as to a Participant with a surviving spouse.
NONALIENATION OF BENEFITS. Except with respect to federal income tax
withholdings and as provided with respect to a qualified domestic relations
order (as defined in the Code), benefits payable under the Profit Sharing Plan
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any
rights to benefits payable under the Profit Sharing Plan shall be void.
ADMINISTRATION OF THE PROFIT SHARING PLAN
The Trustee with respect to the Profit Sharing Plan is the named
fiduciary of the Profit Sharing Plan for purposes of Section 402 of ERISA.
The Trustee is appointed by the Board of Directors of the Bank to
serve at its pleasure. The current Trustee of the Profit Sharing Plan is the
RSI Retirement Trust. However, an additional Trustee is being appointed to hold
funds invested in the Employer Stock Fund.
The Trustee receives, holds and invests the contributions to the
Profit Sharing Plan in trust and distributes them to Participants and
beneficiaries in accordance with the terms of the Profit Sharing Plan and the
directions of the Plan Administrator. The Trustee is responsible for investment
of the assets of the Trust.
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<PAGE> 16
REPORTS TO PROFIT SHARING PLAN PARTICIPANTS
The Administrator (as defined below) will furnish to each Participant
a statement at least quarterly showing (i) the balance in the Participant's
Account as of the end of that period, (ii) the amount of contributions
allocated to such Participant's Account for that period, and (iii) the
adjustments to such Participant's Account to reflect earnings or losses,
distributions, loans disbursed, loan repayments and/or transfers between
investment funds.
PLAN ADMINISTRATION
Pursuant to the terms of the Profit Sharing Plan, the Profit Sharing
Plan is administered by one or more persons who are appointed by and who serve
at the pleasure of the Bank (the "Administrator").
Currently, the Administrator is Independence Savings Bank. The address
and telephone number of the Administrator is 195 Montague Street, Brooklyn, New
York 11201; (718) 722-5377. The Administrator is responsible for the
administration of the Profit Sharing Plan, interpretation of the provisions of
the Profit Sharing Plan, prescribing procedures for filing applications for
benefits, preparation and distribution of information explaining the Profit
Sharing Plan, maintenance of Profit Sharing Plan records, books of account and
all other data necessary for the proper administration of the Profit Sharing
Plan, and preparation and filing of all returns and reports relating to the
Profit Sharing Plan which are required to be filed with the U.S. Department of
Labor and the IRS, and for all disclosures required to be made to Participants,
Beneficiaries and others under Sections 104 and 105 of ERISA.
AMENDMENT AND TERMINATION
It is the current intention of the Bank to continue the Profit Sharing
Plan indefinitely. Nevertheless, the Bank may terminate the Profit Sharing Plan
at any time. If the Profit Sharing Plan is terminated in whole or in part, then
regardless of other provisions in the Profit Sharing Plan, each Participant
affected by such termination shall have a fully vested interest in his Account.
The Bank reserves the rights to make, from time to time, any amendment or
amendments to the Profit Sharing Plan which do not cause any part of the Trust
to be used for, or diverted to, any purpose other than the exclusive benefit of
Participants or their beneficiaries; provided, however, that the Bank may make
any amendment it determines necessary or desirable, with or without retroactive
effect, or comply with ERISA.
MERGER, CONSOLIDATION OR TRANSFER
In the event of the merger or consolidation of the Profit Sharing Plan
with another plan, or the transfer of the Trust assets to another plan, the
Profit Sharing Plan requires that each Participant will (if either the Profit
Sharing Plan or the other plan were then
-13-
<PAGE> 17
terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation or transfer (if the Profit Sharing Plan had then terminated).
FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following is only a brief summary of certain federal
income tax aspects of the Profit Sharing Plan which are of general application
under the Code and is not intended to be a complete or definitive description
of the federal income tax consequences of participating in or receiving
distributions from the Profit Sharing Plan. The summary is necessarily general
in nature and does not purport to be complete. Moreover, statutory provisions
are subject to change, as are their interpretations, and their applicable may
vary in individual circumstances. Finally, the consequences under applicable
state and local income tax laws may not be the same as under the federal income
tax laws. PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO
ANY DISTRIBUTION FROM THE PROFIT SHARING PLAN AND TRANSACTIONS INVOLVING THE
PROFIT SHARING PLAN.
The Profit Sharing Plan will be submitted to the IRS in a timely
manner for a determination that it is qualified under Section 401(a) and 401(k)
of the Code, and that the related Trust is exempt from tax under Section 501(a)
of the Code. A plan that is "qualified" under these sections of the Code is
afforded special tax treatment which include the following: (1) the sponsoring
employer is allowed an immediate tax deduction for the amount contributed to
the Profit Sharing Plan each year; (2) participants pay no current income tax
on amounts contributed by the employer on their behalf; and (3) earnings of the
plan are tax-exempt thereby permitting the tax-free accumulation of income and
gains on investments. The Profit Sharing Plan will be administered to comply in
operation with the requirements of the Code as of the applicable effective date
of any change in the law. The Bank expects to timely adopt any amendments to
the Profit Sharing Plan that may be necessary to maintain the qualified status
of the Profit Sharing Plan under the Code. Following such an amendment, the
Bank will submit the Profit Sharing Plan to the IRS for a determination that
the Profit Sharing Plan, as amended, continues to qualify under Sections 401(a)
and 501(a) of the Code and that it continues to satisfy the requirements for a
qualified cash or deferred arrangement under Section 401(k) of the Code. Should
the Profit Sharing Plan receive from the IRS an adverse determination letter
regarding its tax exempt status, all participants would generally recognize
income equal to their vested interest in the Profit Sharing Plan, the
participants would not be permitted to transfer amounts distributed from the
Profit Sharing Plan to an IRA or to another qualified retirement plan, and the
Bank may be denied certain deductions taken with respect to the Profit Sharing
Plan.
LUMP SUM DISTRIBUTION. A distribution from the Profit Sharing Plan to a
Participant or the beneficiary of a Participant will qualify as a Lump Sum
Distribution if it is made: (i) within one taxable year to the Participant or
beneficiary; (ii) on account of the Participant's
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<PAGE> 18
death, disability or separation from service, or after the Participant
attains age 59 1/2; and (iii) consists of the balance to the credit of the
Participant under this Profit Sharing Plan and all other profit sharing plans,
if any, maintained by the Bank. The portion of any Lump Sum Distribution that
is required to be included in the Participant's or beneficiary's taxable income
for federal income tax purposes (the "total taxable amount") consists of the
entire amount of such Lump Sum Distribution less the amount of after-tax
contributions, if any, made by the Participant to any other profit sharing
plans maintained by the Bank which is included in such distribution.
AVERAGING RULES. The Small Business Job Protection Act of 1996 repealed
five-year income averaging for lump sum distributions for taxable years
beginning after 1999. Ten-year averaging which was grandfathered for
individuals who attained the age of 50 before January 1, 1986 was retained. The
portion of the total taxable amount of a Lump Sum Distribution that is
attributable to participation after 1973 in this Profit Sharing Plan or in any
other profit sharing plan maintained by the Bank (the "ordinary income
portion") will be taxable generally as ordinary income for federal income tax
purposes. However for distributions prior to the effective date, a Participant
who has completed at least five years of participation in this Profit Sharing
Plan before the taxable year in which the distribution is made, or a
beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's
participation in this Profit Sharing Plan or any other profit sharing plan
maintained by the Employer), may elect to have the ordinary income portion of
such Lump Sum Distribution taxed according to a special averaging rule
("five-year averaging"). The election of the special averaging rules
may apply only to one Lump Sum Distribution received on or after the
Participant turns 50 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed
under the special averaging rule. Under a special grandfathering rule,
individuals who turned 50 by 1986 may elect to have their Lump Sum Distribution
taxed under either the five-year averaging rule or under the prior law ten-year
averaging rule. Such individuals also may elect to have that portion of the
Lump Sum Distribution attributable to the participant's pre-1974 participation
in the Profit Sharing Plan taxed at a flat 20% rate as gain from the sale of a
capital asset.
COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION. If a Lump Sum
Distribution includes Common Stock, the distribution generally will be taxed in
the manner described above, except that the total taxable amount will be
reduced by the amount of any net unrealized appreciation with respect to such
Common Stock, i.e., the excess of the value of such Common Stock at the time of
the distribution over its cost of the Profit Sharing Plan. The tax basis of
such Common Stock, to the Participant or beneficiary for purposes of computing
gain or loss on its subsequent sale will be the value of the Common Stock at
the time of distribution less the amount of net unrealized appreciation. Any
gain on a subsequent sale or other taxable disposition of such Common Stock, to
the extent of the amount of net unrealized appreciation at the time of
distribution, will be considered long-term capital gain regardless of the
holding period of such Common Stock. Any gain on a subsequent sale or other
taxable disposition of the Common Stock in excess of the amount
-15-
<PAGE> 19
of net unrealized appreciation at the time of distribution will be
considered either short-term capital gain or long-term capital gain depending
upon the length of the holding period of the Common Stock. The recipient of a
distribution may elect to include the amount of any net unrealized appreciation
in the total taxable amount of such distribution to the extent allowed by the
regulations to be issued by the IRS.
DISTRIBUTION: ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN
OR TO AN IRA. Pursuant to a change in the law, effective January 1, 1993,
virtually all distributions from the Profit Sharing Plan may be rolled over to
another qualified retirement plan or to an Individual Retirement Account
("IRA") without regard to whether the distribution is a Lump Sum Distribution
or a Partial Distribution. Effective January 1, 1993, Participants have the
right to elect to have the Trustee transfer all or any portion of an "eligible
rollover distribution" directly to another plan qualified under Section 401(a)
of the Code or to an IRA. If the Participant does not elect to have an
"eligible rollover distribution" transferred directly to another qualified plan
or to an IRA, the distribution will be subject to a mandatory federal
withholding tax equal to 20% of the taxable distribution. The principal types
of distributions which do not constitute eligible rollover distributions are
(i) an annuity type distribution made over the life expectancy of the
Participant (or Participant and another) or for a period of 10 years or more,
(ii) a minimum distribution required by Section 409 (a) (9) of the Code, or
(iii) the portion of any distribution not includable in gross income, except
that unrealized appreciation in employee securities can be included in an
eligible rollover distribution. The tax law change described above did not
modify the special tax treatment of Lump Sum Distributions, that are not rolled
over or transferred i.e., forward averaging, capital gains tax treatment and
the nonrecognition of net unrealized appreciation, discussed earlier.
ERISA AND OTHER QUALIFICATION
As noted above, the Profit Sharing Plan is subject to certain
provisions of the Employee Retirement Income Security Act of 1974, as amended,
and will be submitted to the IRS for a determination that it is qualified under
Section 401(a) of the Code.
THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PROFIT SHARING PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE
CODE AND IS NOT INTENDED TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS
FROM THE PROFIT SHARING PLAN. ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT
A TAX ADVISOR CONCERNING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF
PARTICIPATING IN AND RECEIVING DISTRIBUTIONS FROM THE PROFIT SHARING PLAN.
RESTRICTIONS ON RESALE
Any person receiving shares of Common Stock under the Profit Sharing
Plan who is an "affiliate" of the Company as the term "affiliate" is used in
Rules 144 and 405 under the
-16-
<PAGE> 20
Securities Act of 1933, as amended (the "Securities Act"), (e.g.,
directors, officers and substantial shareholders of the Company) may reoffer or
resell such shares only pursuant to a registration statement filed under the
Securities Act assuming the availability thereof, pursuant to Rule 144 or some
other exemption of the registration requirements of the Securities Act. Any
person who may be an "affiliate" of the Company may wish to consult with
counsel before transferring any Common Stock owned by him. In addition,
Participants are advised to consult with counsel as to the applicability of
Section 16 of the 1934 Act which may restrict the sale of Common Stock where
acquired under the Profit Sharing Plan, or other sales of Common Stock.
Persons who are not deemed to be "affiliates" of the Company at the
time of resale will be free to resell any shares of Common Stock to them under
the Profit Sharing Plan, either publicly or privately, without regard to the
Registration and Prospectus delivery requirements of the Securities Act or
compliance with the restrictions and conditions contained in the exemptive
rules thereunder. An "affiliate" of the Company is someone who directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control, with the Company. Normally, a director, principal
officer or major shareholder of a corporation may be deemed to be an
"affiliate" of that corporation. A person who may be deemed an "affiliate" of
the Company at the time of a proposed resale will be permitted to make public
resales of the Company's Common Stock only pursuant to a "reoffer" Prospectus
or in accordance with the restrictions and conditions contained in Rule 144
under the Securities Act or some other exemption from registration, and will
not be permitted to use this Prospectus in connection with any such resale. In
general, the amount of the Company's Common Stock which any such affiliate may
publicly resell pursuant to Rule 144 in any three-month period may not exceed
the greater of one percent of the Company's Common Stock then outstanding or
the average weekly trading volume reported on the New York Stock Exchange
during the four calendar weeks prior to the sale. Such sales may be made only
through brokers without solicitation and only at a time when the Company is
current in filing the reports required of it under the 1934 Act.
SEC REPORTING AND SHORT-SWING PROFIT LIABILITY
Section 16 of the 1934 Act imposes reports and liability requirements
on officers, directors and persons beneficially owning more than ten percent of
public companies such as the Company. Section 16(a) of the 1934 Act requires
the filing of reports of beneficial ownership. Within ten days of becoming a
person subject to the reporting requirements of Section 16(a), a Form 3
reporting initial beneficial ownership must be filed with the Securities and
Exchange Commission ("SEC"). Certain changes in beneficial ownership, such as
purchases, sales, gifts and participation in savings and retirement plans must
be reported periodically, either on a Form 4 within ten days after the end of
the month in which a change occurs, or annually on a Form 5 within 45 days
after the close of the Company's fiscal year. Participation in the Employer
Stock Fund of the Profit Sharing Plan by officers, directors and persons
beneficially owning more than ten percent of the Common Stock of the Company
must be reported to the SEC annually on a Form 5 by such individuals.
-17-
<PAGE> 21
In addition to the reporting requirements described above, Section
16(b) of the 1934 Act provides for the recovery by the Company of profits
realized by any officer, director or any person beneficially owning more than
ten percent of the Company's Common Stock ("Section 16(b) Persons") resulting
from the purchase and sale or sale and purchase of the Company's Common Stock
within any six-month period.
The SEC has adopted rules that provide exemption from the profit
recovery provisions of Section 16(b) for participant-directed employer security
transactions within an employee benefit plan, such as the Profit Sharing Plan,
provided certain requirements are met.
EXPERTS
The financial statements of the Profit Sharing Plan as of December 31,
1995 and 1994 on and for the years then ended have been included herein in
reliance upon the report of Ernst & Young LLP, independent certified public
accountant, appearing elsewhere wherein, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINIONS
The validity of the issuance of the Common Stock will be passed upon
by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D. C., which firm acted
as special counsel for the Company and the Bank in connection with the
Conversion.
-18-
<PAGE> 22
THE INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1995 AND 1994
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
-19-
<PAGE> 23
THE INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN
Index to Financial Statements
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS:
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTAL SCHEDULES:
SCHEDULE OF INVESTMENT
SCHEDULE OF REPORTABLE TRANSACTIONS
F-1
<PAGE> 24
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
The Board of Directors
Independence Savings Bank
We have audited the accompanying statements of net assets available for plan
benefits of the Independence Savings Bank Incentive Savings Plan (the "Plan")
as of December 31, 1995 and 1994, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
at December 31, 1995 and 1994, and the changes in net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of investments as of December 31, 1995, and reportable transactions for the
year then ended are presented for the purpose of complying with the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974, and are not a required part of
the financial statements. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ ERNST & YOUNG LLP
October 8, 1996
F-2
<PAGE> 25
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
December 31
1995 1994
---- ----
<S> <C> <C>
ASSETS
Loans to participants $ 821,325 $ 731,798
Investments - at fair value 8,911,188 7,327,915
------------- -------------
Net assets available for plan benefits $ 9,732,513 $ 8,059,713
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 26
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
ADDITIONS
Contributions by:
Participating employees $ 648,855 $ 649,613
Employer 435,022 394,077
Interest on loans 51,743 42,932
Net realized and unrealized appreciation in
fair value of investments 1,231,108 127,161
DEDUCTIONS
Distributions and withdrawals 693,928 988,216
---------- ----------
Net Increase 1,672,800 225,567
Net assets available for plan benefits at:
Beginning of year 8,059,713 7,834,146
---------- ----------
End of year $9,732,513 $8,059,713
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 27
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION OF THE PLAN
The following description of the Independence Savings Bank Incentive Savings
Plan (the "Plan") is presented for general information purposes only.
Participants should refer to the Plan document for more complete information.
GENERAL
The Plan is a defined contribution plan sponsored by Independence Savings Bank
(the "Bank"). Employees of the Bank are eligible for participation after one
year of service during which they have rendered 1,000 hours of service. The
Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA"). The Plan was amended to comply with the provisions of
ERISA effective October 1, 1976. The Plan has also been amended to conform with
the current provisions of the Tax Equity and Fiscal Responsibility Act of 1982
("TEFRA"), the Deficit Reduction Act of 1984, the Retirement Equity Act of
1984, and the Tax Reform Act of 1986.
TRUST FUNDS
The Plan is administered by a committee (the "Committee") appointed by the
Board of Directors (the "Board") of the Bank. The Board has appointed
Retirement Systems Group, Inc. as Trustee (the "Trustee") of the Plan's assets.
Under the terms of the trust agreement between the Trustee and the Plan, the
Trustee manages trust funds on behalf of the Plan. The Trustee has been granted
discretionary authority concerning purchases and sales of investments in the
trust funds.
CONTRIBUTIONS
Participants may contribute up to 6% pre-tax of their annual salary. The Bank
will match 50% of these contributions up to a maximum of $1,500 annually during
the first two years of Plan participation, and 100% thereafter up to a maximum
of $3,000 annually. Participants may also contribute a supplemental pre-tax
amount of 9% of their annual salary to the Plan. Total pre-tax contributions
may not exceed 15% of the Participant's annual salary to a maximum of $9,240 in
1995 and 1994. The supplemental contributions are not matched by the Bank.
F-5
<PAGE> 28
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
A Participant may elect to direct the contributions to any of the Plan's
investment funds in multiples of 25% in accordance with any of the four
investment options. Under the trust agreement with the Trustee, a Participant
may change investment direction once in any calendar quarter, but not more than
twice a year, providing that such election has been filed at least ten days in
advance. Transfers are limited to once in any calendar quarter, but not more
than twice a year, providing that such election has been filed at least ten
days in advance.
Participants' contributions and all earnings from investment activities
allocable thereto are always fully vested. The Participant's interest in Bank
contributions and forfeitures credited to the Participant's account, plus any
earnings, appreciation or additions allocable thereto, will vest 50% upon
completion of two years of service and 100% upon completion of three years of
service.
A Participant whose participation in the Plan terminates before he is fully
vested, for any reason other than retirement, disability or death, shall
forfeit any portion of his interest in the Plan which is not vested. Under the
trust agreement with the Trustee, forfeitures are treated as matching
contributions and are applied to reduce the amount of subsequent matching
contributions required to be made by the Bank. At December 31, 1995 and 1994
forfeitures were $6,002 and $3,082, respectively.
FUND DESCRIPTIONS
The following is a description of the funds in which the Plan's assets are
invested under the agreement with the Trustee:
Core Equity Fund: This is a stock fund that invests in a broadly diversified
group of large, high quality, competitively strong companies that exhibit
sustainable growth in earnings and dividends. It offers investors the potential
for long-term capital appreciation, with income as a secondary goal.
Aggressive Equity: Contributions are allocated 50% to the Emerging Growth
Equity Fund and 50% to the Value Equity Fund.
Emerging Growth Equity Fund: The Emerging Growth Equity Fund is a growth stock
fund that seeks capital appreciation by investing primarily in smaller,
relatively new companies that, in the view of the investment manager, have
higher than average potential for earnings growth.
F-6
<PAGE> 29
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
Value Equity Fund: This fund is a growth and income stock fund that seeks
capital appreciation over the longer term. It invests in financially strong
companies with medium to large market capitalizations. These companies are
currently out of favor with investors but have had good earnings growth records
in the past and offer prospects for significant earnings and dividend growth.
In the view of the investment manager, these stocks are currently undervalued
and selling below their potential value.
International Equity Fund: This fund seeks to achieve a total return in excess
of the Lipper International Mutual Funds Average, measured over a period of
three to five years. It invests primarily in equity securities of Non-United
States companies and at least 65% of its assets will be invested in equity
securities companies in at least three countries (other than the United
States). It may also invest in securities of Non-United States governments and
their agencies (no more than 25% of the funds total assets) and may also invest
in securities of United States companies which derive, or are expected to
derive, a substantial portion of their revenues from operations outside the
United States. Investments in such United States companies will normally be
less than 10% of the funds total assets.
Bond Portfolio: Contributions are allocated one-third to the Intermediate-Term
Bond Fund and two-thirds to the Actively Managed Bond Fund.
Intermediate-Term Bond Fund: This fund invests in high quality fixed income
securities that mature within 10 years, or have expected average lives of 10
years or less. At least 65% of the investments in this Fund are in United
States Government or United States Government Agency issues which have the
highest credit rating. At the time of purchase, at least 75% of the holdings
must have a quality rating of "AA" or better, with a minimum quality rating of
"A" for other holdings. This investment fund's goal is to achieve income and
price appreciation.
Actively Managed Bond Fund: This fund invests in high quality fixed-income
securities (bonds and other debt securities), with maturities out to 30 years.
The Fund's investment managers frequently adjust the maturity structure of the
portfolio to respond to perceived changes in the relative attractiveness of the
fixed-income market. At the time of purchase, at least 75% of the investments
in this fund must have a quality rating of "AA" or better, with a minimum
quality rating of "A" for other holdings, and at least 65% of the investments
in this Fund are in United States Government or United States Government Agency
issues. The Fund seeks to achieve both income and price appreciation.
Short-Term Investment Fund: This fund invests in high quality, cash equivalent
type of securities normally maturing in one year or less. While the fund may
invest in United States Government instruments with maturities of up to two
years, the maximum average maturity of the Fund's holding will not exceed one
year. This investment fund offers substantial liquidity and capital
preservation.
Loan Fund: The Loan Fund consists of Loans to Participants (see Loans to
Participants).
F-7
<PAGE> 30
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
WITHDRAWAL OF FUNDS
AFTER TERMINATION OF EMPLOYMENT
When a Participant terminates employment, the Participant or the Participant's
beneficiaries may elect to have the benefits distributed in a lump sum at the
next valuation date, in a lump sum at some other valuation date within thirteen
months of termination or in equal annual installments over a period not to
exceed ten years.
IN-SERVICE WITHDRAWALS
In-service withdrawals of pre-tax Participant contributions may be made only in
the event of hardship or if the Participant has attained age 59-1/2. Hardship
withdrawals are subject to regulations of the Internal Revenue Service.
Post-tax Participant contributions may be withdrawn as of any valuation date
after giving at least ten days written notice, but only twice every Plan year.
Bank contributions and earnings thereon, and earnings on Participant
contributions that are not pre-tax deferrals may be withdrawn as of any
valuation date, subject to certain restrictions.
LOANS TO PARTICIPANTS
All active employees who are Participants in the Plan are eligible to borrow
against their vested account balance once in a twelve-month period.
The Participant shall complete a loan application and a promissory note
provided by the Committee. The promissory note and other loan documentation
shall provide that the outstanding loan balance shall be secured by the
Participant's vested account balance. The minimum loan shall be $1,000 except
for residential loans, for which the minimum shall be $5,000. The maximum loan
shall not exceed 50% of the Participant's vested account balance, subject to a
maximum outstanding loan balance of $50,000. The $50,000 limit is reduced by
the Participant's highest outstanding loan balance during the prior twelve
months.
F-8
<PAGE> 31
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
The period of repayment shall be determined by the Committee, except that it
may not exceed five years, unless the loan is used to acquire the principal
residence of the Participant, in which case the loan term may not exceed 15
years. The interest on a loan shall be the commercial bank prime rate as set
forth in The Wall Street Journal on the first business day of the month in
which the loan is requested. Such rate shall remain in effect until maturity or
termination of the loan.
PLAN TERMINATION
While the Bank has not expressed any intent to terminate the Plan, it may do so
at any time, subject to the provisions set forth in ERISA. In the event of
termination of the Plan, all amounts credited to Participants' accounts become
fully vested and distributable as in the same manner as if the Participant's
service had been terminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual basis.
INVESTMENT VALUATION - TRUSTEE'S FUNDS
The Trustee's valuation of the shares owned by the Plan is based upon quoted
redemption prices on the last business day of the year.
In the absence of an ascertainable market value, investments are valued at
their fair value as determined by the officers of the Trustee using methods and
procedures reviewed and approved by the trustees of the Trustee.
Securities transactions are recorded on a trade date basis. Realized gain and
loss from securities transactions are recorded on a specific cost basis.
Dividend income is recognized on the ex-dividend date or when the dividend
information is known; interest income, including, where applicable,
amortization of discount and premium on investments and zero coupon bonds, is
recognized on the accrual basis.
F-9
<PAGE> 32
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements (continued)
3. PLAN INVESTMENTS
The fair value of individual investments that represent 5% or more of the
Plan's net assets are as follows:
<TABLE>
<CAPTION>
INVESTMENTS AT FAIR VALUE
DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
Core Equity Fund $2,388,715 $1,494,529
Emerging Growth Fund 590,164 303,013
Short-Term Investment Fund 4,430,232 4,321,176
Actively Managed Bond Fund 702,582 636,105
Loans to Participants 821,325 731,798
</TABLE>
4. ADMINISTRATIVE EXPENSES
Administrative expenses are paid directly by the Bank and are not included in
the accompanying financial statements.
5. TAX STATUS
The Plan has received a favorable determination letter dated May 18, 1995 from
the Internal Revenue Service stating that the Plan qualifies under 401(a) of
the Internal Revenue Code (the "IRC") and that the related Trust is exempt from
federal income taxes under the provisions of Section 501(a) of the IRC. The
Plan has been amended, and management of the Plan expects these amendments will
allow the Plan to remain qualified and the related Trust to maintain its tax
exempt status.
F-10
<PAGE> 33
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FUND ACTIVITY
FUND ACTIVITY FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CORE EMERGING INTERNATIONAL
DESCRIPTIONS LOANS EQUITY GROWTH VALUE EQUITY EQUITY FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $731,798 $1,494,529 $303,013 $259,821 $0
Additions:
Employee contributions 0 174006 62940 55853 3507
Employer contributions 0 112755 36281 33052 1504
Interest on loans 0 15178 2839 2692 209
Net realized gains and unrealized
appreciation in fair value of
investments 0 609541 151685 101602 1333
----------------------------------------------------------------------------------------
Total additions 0 911480 253745 193199 6553
Distributions:
Payments to participants 0 -73000 -17171 -13610 0
----------------------------------------------------------------------------------------
Total distributions 0 -73000 -17171 -13610 0
Transfers between funds 89527 55706 50577 -2799 20651
----------------------------------------------------------------------------------------
Balances at December 31, 1995 $821,325 $2,388,715 $590,164 $436,611 $27,204
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE ACTIVELY
DESCRIPTIONS INVESTMENT TERM BOND MANAGED BOND TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1994 $4,321,176 $313,271 $636,105 $8,059,713
Additions:
Employee contributions 261578 30063 60908 648855
Employer contributions 188506 20783 42141 435022
Interest on loans 24256 2150 4419 51743
Net realized gains and unrealized
appreciation in fair value of
investments 226060 39441 101446 1231108
--------------------------------------------------------------------
Total additions 700400 92437 208914 2366728
Distributions:
Payments to participants -413823 -57477 -118847 -693928
--------------------------------------------------------------------
Total distributions -413823 -57477 -118847 -693928
Transfers between funds -177521 -12551 -23590 0
--------------------------------------------------------------------
Balances at December 31, 1995 $4,430,232 $335,680 $702,582 $9,732,513
====================================================================
</TABLE>
F-11
<PAGE> 34
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FUND ACTIVITY (CONTINUED)
FUND ACTIVITY FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
CORE EMERGING SHORT-TERM
DESCRIPTIONS LOANS EQUITY GROWTH VALUE EQUITY INVESTMENT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993 $684,025 $1,328,503 $251,824 $214,603 $4,161,580
Additions:
Employee contributions - 158,115 53,445 53,187 283,771
Employer contributions - 92,406 26,445 26,430 187,500
Interest on loans - 10,332 1,691 1,691 23,642
Net realized gains (losses) and unreal-
ized appreciation (depreciation) in
fair value of investments - 17,502 11,871 (2,866) 143,160
------------------------------------------------------------------------------------
Total additions - 278,355 93,452 78,442 638,073
Distributions:
Payments to participants - (109,629) (20,054) (17,135) (617,375)
------------------------------------------------------------------------------------
Total distributions - (109,629) (20,054) (17,135) (617,375)
Transfers between funds 47,773 (2,700) (22,209) (16,089) 138,898
------------------------------------------------------------------------------------
Balances at December 31, 1994 $731,798 $1,494,529 $303,013 $259,821 $4,321,176
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE ACTIVELY
DESCRIPTIONS TERM BOND MANAGED BOND TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1993 $387,205 $806,406 $7,834,146
Additions:
Employee contributions 33,698 67,397 649,613
Employer contributions 20,429 40,867 394,077
Interest on loans 1,859 3,717 42,932
Net realized gains (losses) and unreal-
ized appreciation (depreciation) in
fair value of investments (9,383) (33,123) 127,161
---------------------------------------------------
Total additions 46,603 78,858 1,213,783
Distributions:
Payments to participants (72,865) (151,158) (988,216)
---------------------------------------------------
Total distributions (72,865) (151,158) (988,216)
Transfers between funds (47,672) (98,001) -
---------------------------------------------------
Balances at December 31, 1994 $313,271 $636,105 $8,059,713
===================================================
</TABLE>
F-12
<PAGE> 35
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Notes to Financial Statements (continued)
7. SUBSEQUENT EVENTS
On June 26, 1995 a definitive agreement ("Agreement") was executed which
outlined the principal elements of a proposed acquisition by Independence
Community Bank Corp. ("ICBC"), the holding company of the Bank, of Bay Ridge
Bancorp Inc. ("BRB"), the holding company for Bay Ridge Federal Savings Bank
("BRFSB"). The acquisition was consummated on January 3, 1996.
Under the terms of the Agreement, employees of BRB or BRFSB who are employed by
ICBC or the Bank shall be entitled to full credit for each year of service with
BRFSB for purposes of determining eligibility for participation and vesting,
but not benefit accruals, in ICBC's or the Bank's employee benefit plans,
subject to applicable break-in-service rules. Notwithstanding the above, each
person employed by the BRB or BRFSB prior to acquisition who becomes an
employee of ICBC or the Bank immediately following the acquisition (each a "New
Employee") shall be entitled, as an employee of ICBC or the Bank, to
participate in such employee benefit plans as may be in effect generally for
employees of ICBC or the Bank and its subsidiaries from time to time ( the
"ICBC Plans"), if such New Employee shall be eligible or selected for
participation therein. New Employees will be eligible to participate on the
same basis as similarly situated employees of ICBC or the Bank. All such
participation shall be subject to the terms of the ICBC Plans as may be in
effect from time to time. As a result of the acquisition, total assets of
$2,248,519 were transferred from the Bay Ridge Federal Savings 401(k) plan to
the Plan.
F-13
<PAGE> 36
SUPPLEMENTAL SCHEDULES
F-14
<PAGE> 37
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Schedule of Investments
December 31, 1995
<TABLE>
<CAPTION>
SHARES FAIR VALUE
------ ----------
<S> <C> <C>
Core Equity Fund 48,072.342 $2,388,715
Emerging Growth Fund 11,095.399 590,164
Value Equity Fund 12,535.483 436,611
International Equity Fund 657.893 27,204
Short-Term Investment Fund 226,494.508 4,430,232
Intermediate-Term Bond Fund 11,639.377 335,680
Actively Managed Bond Fund 22,818.531 702,582
Loans to participants maturing < five years 764,119
Loans to participants maturing > five years 57,206
----------
Total Investments $9,732,513
==========
</TABLE>
F-15
<PAGE> 38
INDEPENDENCE SAVINGS BANK
INCENTIVE SAVINGS PLAN
Schedule of Reportable Transactions
Year ended December 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SECURITY OR PARTY INVOLVED DESCRIPTION OF ASSETS PURCHASES
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Category (i) - A single transaction in excess of 5% of the
current value of plan assets: N/A
Category (ii) - A series of transactions with or in
conjuction with the same person involving property
other than securities, which amount in the aggregate to
more than 5% of the current value of plan assets: N/A
Category (iii) - A series of transactions with respect to Short-term Investment Fund 55
securities of the same issue which amount in the
aggregate to more than 5% of the current value of Core Equity Fund 61
total plan assets:
Category (iv) - Any transaction with respect to securities
with or in conjuction with a person if a prior subsequent
single transaction has occurred with respect to securities
with or in conjuction with that same person in an
amount in excess of 5% of the current value of plan
assets: N/A
</TABLE>
<TABLE>
<CAPTION>
TOTAL PURCHASE NUMBER OF TOTAL SELLING
SECURITY OR PARTY INVOLVED PRICE SALES PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Category (i) - A single transaction in excess of 5% of the
current value of plan assets:
Category (ii) - A series of transactions with or in
conjuction with the same person involving property
other than securities, which amount in the aggregate to
more than 5% of the current value of plan assets:
Category (iii) - A series of transactions with respect to $625,520 114 $742,524
securities of the same issue which amount in the
aggregate to more than 5% of the current value of 464,831 --- ---
total plan assets:
Category (iv) - Any transaction with respect to securities
with or in conjuction with a person if a prior subsequent
single transaction has occurred with respect to securities
with or in conjuction with that same person in an
amount in excess of 5% of the current value of plan
assets:
</TABLE>
F-16
<PAGE> 39
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
INVESTMENT FORM
---------------------
Name of Plan Participant: ___________________________
Social Security Number: ___________________________
1. INSTRUCTIONS. In connection with the proposed reorganization
of Independence Savings Bank and its parent mutual holding company (the
"Conversion"), the Independence Savings Bank 401(k) Savings Plan in RSI
Retirement Trust ("Profit Sharing Plan") has been amended to permit
participants to direct their current account balances for their Basic
Contribution Account and Matching Contribution Account and Rollover Account
into a new fund: the Employer Stock Fund. The percentage of a participant's
account transferred at the direction of the participant into the Employer Stock
Fund will be used to purchase shares of common stock of Independence Community
Bank Corp. (the "Common Stock").
To direct a transfer of all or part of the funds credited to your
Accounts to the Employer Stock Fund, you should complete and file this form
with the Human Resources Department, no later than ______________, 1997. A
representative for the Plan Administrator will retain a copy of this form and
return a copy to you. If you need any assistance in completing this form,
please contact _____________________. If you do not complete and return this
form to the Plan Administrator by _________, the funds credited to your
accounts under the Plan will continue to be invested in accordance with your
prior investment direction, or in accordance with the terms of the Plan if no
investment direction has been provided.
2. INVESTMENT DIRECTIONS. I hereby direct the Plan Administrator
to invest the following percentage (in multiples of not less than 1%) of my
Basic Contribution Account, Matching Contribution Account and Rollover Account.
<TABLE>
<S> <C>
a. Core Equity Fund ____%
b. Emerging Growth Fund ____%
c. Value Equity Fund ____%
d. Intermediate - Term Investment Fund ____%
e. Actively Managed Bond Fund ______%
f. International Equity Fund
g. Short-Term Investment Fund _____%
h. Employer Stock Fund ________%
NOTE: The total percentage of directed investments, above, may not exceed 100%.
</TABLE>
3. ACKNOWLEDGEMENT OF PARTICIPANT. I understand that this
Investment Form shall be subject to all of the terms and conditions of the
Profit Sharing Plan. I acknowledge that I have received a copy of the
Prospectus and the Prospectus Supplement.
- ----------------------------------- ----------
Signature of Participant Date
- -------------------------------------------------------------------------------
ACKNOWLEDGEMENT OF RECEIPT BY ADMINISTRATOR. This Investment Form was received
by the Plan Administrator and will become effective on the date noted below.
- ----------------------------------- ----------
By: Date
<PAGE> 40
PROSPECTUS
INDEPENDENCE COMMUNITY BANK CORP.
(Proposed Holding Company for Independence Savings Bank)
Up to 58,564,815 Shares of Common Stock
Independence Community Bank Corp. (the "Company"), a Delaware
corporation, is offering up to 58,564,815 shares of its common stock, par value
$.01 per share (the "Common Stock"), in connection with the reorganization of
Independence Savings Bank (the "Bank") and the mutual holding company parent of
the Bank (the "Mutual Holding Company") to the stock form of organization
pursuant to the Bank's and the Mutual Holding Company's Plan of Conversion (the
"Plan" or "Plan of Conversion"). The simultaneous conversion of the Mutual
Holding Company to stock form, the cancellation of the shares owned by the
Mutual Holding Company in the Bank, the issuance of the Bank's common stock to
the Company and the offer and sale of the Common Stock by the Company are
collectively referred to herein as "Conversion." Under certain circumstances,
the Company may increase the amount of Common Stock offered hereby to up to
67,349,537 shares. (See Footnote 4 to the table below.)
(cover continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" AT PAGE 19.
---------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, THE SUPERINTENDENT OF
BANKS OF THE STATE OF NEW YORK, THE NEW YORK STATE BANKING
BOARD, THE NEW YORK STATE BANKING DEPARTMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER FEDERAL OR STATE
AGENCY OR STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, SUPERINTENDENT, BOARD, DEPARTMENT, CORPORATION OR
ANY STATE SECURITIES COMMISSIONER OR OTHER AGENCY PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE
BIF INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY THE
COMPANY OR THE BANK. THE COMMON STOCK IS SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
INVESTED.
<PAGE> 41
<TABLE>
<CAPTION>
==============================================================================================
Estimated
Underwriting Estimated
Subscription Fees and Conversion Net
Price(1) Expenses(2) Proceeds(3)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share $10.00 $0.29 $9.74
- ---------------------------------------------------------------------------------------------
Midpoint Per Share $10.00 $0.25 $9.75
- ---------------------------------------------------------------------------------------------
Maximum Per Share $10.00 $0.23 $9.77
- ---------------------------------------------------------------------------------------------
Maximum Per Share, as adjusted $10.00 $0.22 $9.78
- ---------------------------------------------------------------------------------------------
Total Minimum(1) $432,870,370 $11,390,162 $421,480,208
- ---------------------------------------------------------------------------------------------
Total Midpoint(1) $509,259,260 $12,532,176 $496,727,084
- ---------------------------------------------------------------------------------------------
Total Maximum(1) $585,648,150 $13,674,190 $571,973,960
- ---------------------------------------------------------------------------------------------
Total Maximum, as adjusted(4) $673,495,370 $14,987,506 $658,507,864
=============================================================================================
</TABLE>
- ------------
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC. ("RP Financial") dated as of August 8, 1997, which
states that the estimated pro forma market value of the Common Stock
being offered for sale in the Conversion ranged from $432.9 million to
$585.6 million with a midpoint of $509.3 million taking into account
the contribution to the Independence Community Foundation of an amount
of Common Stock equal to 8% of the Common Stock sold in the Conversion
(the "Valuation Range"). The independent appraisal of RP Financial is
based upon estimates and projections that are subject to change and
the valuation must not be construed as a recommendation as to the
advisability of purchasing the Common Stock nor an assurance that a
purchaser of Common Stock will thereafter be able to sell the Common
Stock at prices within the Valuation Range. Based on the Valuation
Range, the Boards of Directors of the Bank and the Company established
an estimated price range of the Common Stock being offered for sale in
the Conversion within the Valuation Range of $432.9 million to $585.6
million (the "Estimated Price Range") or between 43,287,037 and
58,564,815 shares of Common Stock issued at the $10.00 per share price
(the "Purchase Price") to be paid for each share of Common Stock
subscribed or purchased in the Offerings. See "The Conversion--Stock
Pricing."
(2) Consists of the estimated costs to the Bank and the Company to be
incurred in connection with the Conversion, including estimated fixed
expenses of approximately $5.0 million and marketing fees to be paid
to Sandler O'Neill and Partners, L.P. ("Sandler O'Neill" or the
"Agent") in connection with the Offerings, which fees are estimated to
be between $6.4 million and $8.7 million based on the minimum and the
maximum of the Estimated Price Range, respectively. See "The
Conversion - Marketing Arrangements." The actual fees and expenses
may vary from the estimates. Such fees paid to Sandler O'Neill may be
deemed to be underwriting fees. See "Pro Forma Data."
(3) Actual net proceeds may vary substantially from estimated amounts
depending on the number of shares sold in the Offerings and other
factors. Gives effect to the purchase of shares of Common Stock by
the Employee Stock Ownership Plan (the "ESOP"), which initially will
be deducted from the Company's stockholders' equity. For the effects
of such purchases, see "Capitalization," "Use of Proceeds" and "Pro
Forma Data."
(4) As adjusted to reflect the sale of up to an additional 15% of the
Common Stock which may be offered at the Purchase Price, without
resolicitation of subscribers or any right of cancellation, due to
regulatory considerations or changes in market or general financial
and economic conditions. See "Pro Forma Data" and "The
Conversion--Stock Pricing." For a discussion of the distribution and
allocation of the additional shares, if any , see "The
Conversion--Subscription Offering," "-Community Offering" and "
-Limitations on Common Stock Purchases."
SANDLER O'NEILL & PARTNERS, L.P.
The date of this Prospectus is __________, 1997.
<PAGE> 42
Non-transferable rights to subscribe for the Common Stock in a
subscription offering (the "Subscription Offering") have been granted in the
following order of priority to: (1) the Bank's Eligible Account Holders
(defined as holders of deposit accounts totaling $100 or more as of March 31,
1996); (2) the Company's and the Bank's ESOP, which intends to subscribe for up
to 8% of the Common Stock issued in connection with the Conversion (excluding
any shares contributed to the Foundation (as hereinafter defined); and (3) the
Bank's Supplemental Eligible Account Holders (defined as holders of deposit
accounts totaling $100 or more as of _______, 1997). Subscription rights are
non-transferable. Persons found to be transferring subscription rights will be
subject to forfeiture of such rights and possible further sanctions and
penalties imposed by the New York State Banking Department ("Department").
Certificates representing shares of Common Stock purchased in the Subscription
Offering must be registered in the name of the Eligible Account or Supplemental
Eligible Account Holders, as the case may be. Upon completion of the
Subscription Offering, and subject to the other limitations described herein,
the Company will offer any shares of Common Stock not subscribed for in the
Subscription Offering for sale in a community offering (the "Community
Offering"). It is anticipated that shares of Common Stock not subscribed for
in the Subscription Offering and Community Offering, if any, will be offered by
the Company in a syndicated community offering through a syndicate of
registered broker-dealers to be formed (the "Syndicated Community Offering")
(the Subscription Offering, Community Offering and any Syndicated Community
Offering are referred to collectively as the "Offerings").
Except for the ESOP, no Eligible Account Holder or Supplemental
Eligible Account Holder may, in their respective capacities as such, purchase
in the Subscription Offering more than $500,000 of Common Stock; no person,
together with associates and persons acting in concert with such person, may
purchase in the Community Offering and Syndicated Community Offering more than
$500,000 of Common Stock; and no person, together with associates of and
persons acting in concert with such person, may purchase in the aggregate more
than the overall maximum purchase limitation of 1.0% of the total number of
shares of Common Stock offered in the Conversion (509,259 shares, based upon
the midpoint of the Valuation Range); provided, however, such overall purchase
limitation may be increased and the amount that may be subscribed for may be
increased or decreased at the sole discretion of the Bank and the Company
without further approval of subscribers or the Bank's depositors. The minimum
purchase is 25 shares. See "The Conversion -- Subscription Offering,"
"--Community Offering" and "-- Limitations on Common Stock Purchases."
The Bank and the Company have engaged Sandler O'Neill to consult with
and advise the Company and the Bank in the Offerings and Sandler O'Neill has
agreed to assist the Company and the Bank with the solicitation of
subscriptions and purchase orders for shares of Common Stock in the Offerings.
Sandler O'Neill is not obligated to take or purchase any shares of Common Stock
in the Offerings. The Bank and the Company will pay a fee to Sandler O'Neill
which will be based on the aggregate Purchase Price of the Common Stock sold in
the Offerings. The Company and the Bank have agreed to indemnify Sandler
O'Neill against certain liabilities arising under the Securities Act of 1933,
as amended (the "Securities Act"). See "The Conversion - Marketing
Arrangements."
ii
<PAGE> 43
Pursuant to the Plan, the Bank intends to establish the Independence
Community Foundation, a private charitable foundation (the "Foundation"), in
connection with the Conversion. The Plan provides that the Bank and the
Company will create the Foundation and fund it with shares of Common Stock
contributed by the Company from authorized but unissued shares in an amount
equal to 8.0% of the number of shares of Common Stock sold in the Offerings.
The Foundation is intended to complement the Bank's existing community
reinvestment activities and will be dedicated to the promotion of charitable
purposes including, among other things, health, education and welfare programs,
community development activities, cultural efforts, not-for-profit groups and
other charitable purposes within the communities served by the Bank. For a
discussion of the Foundation and its effects on the Conversion, see "Risk
Factors -- Establishment of the Foundation," "Pro Forma Data," "Comparison of
Valuation and Pro Forma Information with No Foundation" and "The Conversion --
Establishment of the Foundation."
THE SUBSCRIPTION OFFERING WILL TERMINATE AT 12:00 NOON, EASTERN TIME,
ON ______, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE BANK AND THE
COMPANY, WITH APPROVAL OF THE SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK
("SUPERINTENDENT") AND THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC"),
IF NECESSARY. THE COMMUNITY OFFERING AND/OR ANY SYNDICATED COMMUNITY OFFERING
MUST BE COMPLETED WITHIN 45 DAYS AFTER THE CLOSE OF THE SUBSCRIPTION OFFERING,
OR ______, 1997, UNLESS EXTENDED BY THE BANK AND THE COMPANY WITH THE APPROVAL
OF THE SUPERINTENDENT AND THE FDIC, IF NECESSARY. Orders submitted are
irrevocable until the completion of the Conversion; provided that, if the
Conversion is not completed within the 45-day period referred to above, unless
such period has been extended with the consent of the Department and the FDIC,
if necessary, all subscribers will have their funds returned promptly with
interest, and all withdrawal authorizations will be cancelled. The completion
of the Subscription Offering is subject to potential delay and subscribers will
have no access to funds used to subscribe for shares of Common Stock,
regardless of any such delay. In addition, orders for Common Stock submitted
by subscribers in the Subscription Offering or purchasers in the Community
Offering which aggregate $50,000 or more must be paid by official bank or
certified check or by a withdrawal authorization from a deposit account at the
Bank. See "The Conversion - The Offerings -Subscription Offering."
The consummation of the Conversion is subject to the receipt of
various regulatory approvals and the approval of Eligible Account Holders in
the manner set forth herein.
The Company has received approval from the National Association of
Securities Dealers, Inc. ("NASD"), conditioned on the consummation of the
Conversion, to have its Common Stock quoted on the Nasdaq National Market under
the symbol "ICBC." Prior to this offering there has not been a public market
for the Common Stock, and there can be no assurance that an active and liquid
trading market for the Common Stock will develop, or that resales of the Common
Stock can be made at or above the Purchase Price. To the extent an active and
liquid trading market does not develop, the liquidity and market value of the
Common Stock may be adversely affected. See "Risk Factors - Absence of Market
for Common Stock" and "Market for the Common Stock."
iii
<PAGE> 44
[MAP]
iv
<PAGE> 45
SUMMARY OVERVIEW
The following summary of the Conversion and the Offerings is qualified
in its entirety by the more detailed information appearing elsewhere in this
Prospectus.
Risk Factors . . . . . . . See "Risk Factors" for a discussion of
certain factors that should be considered by
prospective investors.
The Bank . . . . . . . . . Independence Savings Bank is a New York-
chartered savings bank.
The Company . . . . . . . . Independence Community Bank Corp. is a
Delaware corporation organized in June
1997 to become the savings and loan holding
company of the Bank. To date, the Company has
not engaged in any business.
The Conversion . . . . . . The Board of Directors of the Bank and the
Board of Trustees of the Mutual Holding
Company have adopted a Plan of Conversion.
The Company is offering shares of its Common
Stock in the Offerings in connection with the
reorganization of the Bank and the Mutual
Holding Company to the stock form of
organization.
The Independence Community
Foundation . . . . . . . The Plan of Conversion provides for the
establishment of a charitable foundation
in connection with the Conversion. The
Foundation, which will be incorporated under
Delaware law as a nonstock corporation, will
be funded with a contribution of Common Stock
by the Company in an amount equal to 8% of the
Common Stock sold in the Conversion. See "The
Conversion-Establishment of the Foundation."
Terms of the Offerings . . The shares of Common Stock to be sold in
connection with the Conversion are being
offered at the Purchase Price of $10.00 per
share in the Subscription Offering pursuant to
subscription rights in the following order of
priority: (i) Eligible Account Holders; (ii)
the Company's and the Bank's ESOP; and (iii)
Supplemental Eligible Account Holders. Upon
completion of the Subscription Offering, any
shares of
1
<PAGE> 46
Common Stock not subscribed for in the
Subscription Offering will be offered in
the Community Offering at $10.00 per share to
certain members of the general public to whom
a copy of this Prospectus is delivered.
Subscription rights will expire if not
exercised by 12:00 noon, Eastern Time,
___________, 1997 unless extended by the Bank
and the Company. See "The Conversion-The
Offerings-Subscription Offering" and "-The
Offerings-Community Offering."
Exercise of Subscription
Rights . . . . . . . . Persons desiring to subscribe for shares
must do so prior to the Expiration Date
by delivering to the Bank a properly executed
stock order and certification form together
with full payment. Once tendered,
subscription orders cannot be revoked or
modified without the consent of the Bank. See
"The Conversion - Procedure for Purchasing
Shares in the Offerings."
Payment for Shares . . . . Payment for subscriptions may be made (i) in
cash (if delivered in person); (ii) by
check or money order; or (iii) by
authorization of withdrawal from deposit
accounts maintained at the Bank. Orders for
Common Stock submitted by subscribers in the
Subscription Offering or by purchasers in the
Community Offering which aggregate $50,000 or
more must be paid by official bank or
certified check or by withdrawal authorization
from a deposit account at the Bank. See "The
Conversion - Procedure for Purchasing Shares
in the Offerings.
Nontransferability of
Subscription
Rights . . . . . . . . . The subscription rights of Eligible Account
Holders and Supplemental Eligible
Account Holders are nontransferable. See "The
Conversion - Restrictions on Transfer of
Subscription Rights and Shares."
Purchase Limitations . . . No Eligible Account Holder or Supplemental
Eligible Account Holder may purchase in
the Subscription Offering more than $500,000
of Common Stock. No person, together with
associates and persons acting in concert with
such person, may purchase in the Community
Offering and the Syndicated Community Offering
more than $500,000 of Common Stock.
2
<PAGE> 47
Except for the ESOP, no person, together
with associates or persons acting in concert
with such person, may purchase in the
aggregate more than 1% of the Common Stock
offered. The minimum purchase is 25 shares of
Common Stock.
Securities Offered and Purchase
Price . . . . . . . . . . The Company is offering between 43,287,037
and 58,564,815 shares of Common Stock at
a Purchase Price of $10.00 per share. The
maximum number of shares offered may be
increased under certain circumstances to up to
67,349,537 shares of Common Stock. See "The
Conversion - Stock Pricing and Number of
Shares to be Issued."
Appraisal . . . . . . . . . The Purchase Price per share has been fixed
at $10.00. The total number of shares
to be issued in the Conversion is based upon
an independent appraisal prepared by RP
Financial, dated as of August 8, 1997, which
states that the estimated pro forma market
value of the Common Stock ranged from $432.9
million to $585.6 million. The final
aggregate value will be determined at the time
of closing of the Offerings and is subject to
change due to changing market conditions and
other factors. See "The Conversion - Stock
Pricing and Number of Shares to be Issued."
Use of Proceeds . . . . . . The Company will use 50% of the net proceeds
of the Offering to purchase all the
outstanding common stock of the Bank to be
issued in the Conversion. A portion of net
proceeds retained by the Company will be used
for general activities, including a loan by
the Company to the ESOP to enable the ESOP to
purchase up to 8% of the stock sold in the
Conversion. The Company intends to initially
invest the remaining net proceeds primarily in
investment securities, mortgage-backed and
mortgage-related securities and equity
securities. The Bank intends to utilize net
proceeds for general business purposes. See
"Use of Proceeds."
Dividend Policy . . . . . . Upon Conversion, the Board of Directors of
the Company will have the authority to
declare dividends on the Common Stock, subject
to statutory and regulatory requirements.
In the future, the Board of
3
<PAGE> 48
Directors of the Company may consider a
policy of paying cash dividends on the
Common Stock. However, no decision has
been made with respect to such dividends, if
any. See "Dividend Policy."
Benefits of the Conversion to
Management . . . . . . . The Company's directors and executive
officers will receive certain additional
benefits as a result of the Conversion. See
"Management - Change in Control Agreements,"
"-Benefits - Employee Stock Ownership Plan,"
"-Stock Option Plan" and "- Recognition Plan.
Voting Control of Officers and
Directors . . . . . . . . Directors and executive officers of the Bank
and the Company expect to purchase
approximately 1.1% or .8% of shares of Common
Stock to be issued, based upon the minimum and
the maximum of the Estimated Price Range,
respectively. Assuming the implementation of
the ESOP, the Stock Option Plan and the
Management Recognition and Retention Plan
("Recognition Plan"), directors, executive
officers and employees have the potential to
control the voting of approximately 21.0% or
20.7% of the then outstanding shares of Common
Stock at the minimum and the maximum of the
Estimated Price Range, respectively.
Additionally, the Foundation will hold Common
Stock in an amount equal to 8% of the Common
Stock sold in the Conversion. If a waiver is
obtained from the FDIC of a condition expected
to be agreed to by the Foundation which
restricts the voting of Common Stock held by
the Foundation, such shares of Common Stock
may be voted as directed by the Board of
Directors of the Foundation, who are also
directors or officers of the Company and the
Bank. See "The Conversion-Establishment of
the Charitable Foundation, " "Management of
the Bank-Subscriptions by Executive Officers
and Directors," and "Restrictions on
Acquisition of the Company and the
Bank-Restrictions in the Company's Certificate
of Incorporation and Bylaws."
Expiration Date for the
Subscription
Offering . . . . . . . . The expiration date of the Subscription
Offering is 12:00 noon, Eastern Time on
________, 1997 unless extended by the Bank
and the Company. See "The Conversion - The
Offering -Subscription Offering."
4
<PAGE> 49
Expiration Date for the
Community
Offering . . . . . . . . The expiration date for the Community Offering
is 12:00 noon, Eastern Time on ______,
1997, unless extended by the Bank and the
Company. See "The Conversion - The
Offerings-Community Offering."
Market for Stock . . . . . The Company has received conditional approval
to have its Common Stock quoted on the
Nasdaq National Market under the symbol
"ICBC". See "Market for the Common Stock."
Board Recommendations . . . The Company's and the Bank's Boards of
Directors make no recommendation to
depositors or other potential investors
regarding suitability of investment in the
Common Stock. An investment in the Common
Stock must be made pursuant to each investor's
evaluation of his or her best interests.
Stock Conversion Center . . If you have any questions regarding the
Conversion, call the Stock Conversion Center
at (718) ___-____.
5
<PAGE> 50
SUMMARY
This summary is qualified in its entirety by the more detailed
information regarding the Bank and the Company and the Consolidated Financial
Statements of the Bank appearing elsewhere in this Prospectus.
INDEPENDENCE COMMUNITY BANK CORP.
Independence Community Bank Corp. is a Delaware corporation organized
by the Bank in June 1997 for the purpose of holding all of the capital stock of
the Bank and in order to facilitate the Conversion. The Company will purchase
all of the common stock of the Bank to be issued upon Conversion in exchange
for 50% of the net Conversion proceeds, with the remaining net proceeds to be
retained by the Company for general business purposes, including making a loan
to the ESOP. Upon completion of the Conversion, the only significant assets of
the Company will be all of the outstanding common stock of the Bank, the note
evidencing the Company's loan to the ESOP and the portion of the net proceeds
from the Offerings retained by the Company. The business of the Company will
initially consist of the business of the Bank. See "Business" and "Regulation
- -The Company."
INDEPENDENCE SAVINGS BANK
Independence Savings Bank is a New York-chartered savings bank that
was originally chartered as a mutual savings bank in 1850. In April 1992, the
Bank reorganized into the mutual holding company form of organization pursuant
to which the Bank became a wholly-owned stock savings bank subsidiary of the
Mutual Holding Company. The reorganization into the mutual holding company
form of organization was effected solely in order to acquire The Long Island
City Financial Corporation. At May 31, 1997, the Bank had total assets of
$3.82 billion, total liabilities of $3.50 billion, including $3.38 billion of
deposits, and total equity of $316.6 million. The Bank reported net income of
$4.6 million and $6.1 million during the two months ended May 31, 1997 and
1996, respectively, and net income of $17.2 million, $36.0 million and $34.9
million during the years ended March 31, 1997, 1996 and 1995, respectively.
The Bank is subject to regulation by the Department, as its chartering
authority, and by the FDIC as its primary federal banking regulator and as
insurer of the Bank's deposits up to applicable limits.
Headquartered in Brooklyn, New York, the Bank maintains 33 full
service offices located within the greater New York City metropolitan area of
which 27 are located in the boroughs of Brooklyn and Queens with the remaining
offices located in Manhattan, the Bronx, Staten Island and Nassau County. The
Bank's customer base, like the urban neighborhoods which it serves, is racially
and ethnically diverse and is comprised of mostly middle-income households and
to a lesser degree, low to moderate income households. The Bank has sought to
set itself apart from its many competitors by tailoring its products and
services to meet the needs of its customers, by emphasizing customer service
and convenience and by being actively involved in community affairs in the
neighborhoods and
6
<PAGE> 51
communities which it serves. For example, as part of the Bank's competitive
strategy to attract loyal deposit customers, the Bank has historically been a
low service fee provider of a variety of savings and checking account products.
In furtherance of its commitment to the communities which it serves, Bank
employees at all levels are encouraged and afforded the opportunity to
participate in community outreach programs. Perhaps most indicative of the
Bank's commitment to strengthen its bond with customers and the communities it
serves is the decision to form and fund the Independence Community Foundation.
The Bank believes that this commitment to customer and community service has
permitted it to build strong customer identification and loyalty which is
essential to the Bank's ability to compete effectively.
In recent years, the Bank has pursued a plan of controlled growth as
part of its strategy to achieve long-term financial strength. Because the
neighborhoods and communities served by the Bank are fully developed and
experiencing little population growth and are highly competitive banking
markets, the Bank's ability to grow has been largely dependent on the
acquisition of other financial institutions or branch offices of financial
institutions located within the strategic geographic areas which the Bank has
made a commitment to serve throughout its history. The Bank also has sought to
increase the amount and stability of its net interest income and noninterest
income while maintaining a high level of asset quality. In pursuit of these
goals, the Bank has adopted a business strategy which emphasizes residential
lending and the offering of traditional retail deposit products and services
which meet the needs of its customers.
Highlights of the Bank's strategy include the following:
-Emphasis on Controlled Growth. In recent years the Bank has sought
to increase its assets and expand its operations. These efforts have included
the acquisition of Bay Ridge Bancorp., Inc. and its wholly owned subsidiary,
Bay Ridge Federal Savings Bank (collectively "Bay Ridge"), in January 1996 with
aggregate assets of approximately $558.6 million, deposits of $445.2 million
and six branch offices located in the borough of Brooklyn. In addition, the
Bank has completed several branch purchase transactions, including the March
1996 acquisition of five branch offices located in Brooklyn and Staten Island
involving the assumption of $615.6 million of deposit liabilities. These
efforts have contributed to the growth in the Bank's assets, which increased by
59.7% from $2.39 billion at March 31, 1993 to $3.82 billion at May 31, 1997.
The net proceeds from the Offerings will enhance significantly the capital base
of the Company and the Bank and will thereby support further growth and
expansion of operations consistent with the Bank's business strategies.
-Emphasis on Residential Lending. Management believes that the Bank
is more likely to achieve its goals of long-term financial strength and
profitability by continuing to emphasize residential loan products and
services. Given the concentration of multi-family housing units in the New
York City metropolitan area, the Bank's primary lending emphasis is the
origination of loans secured by first liens on multi-family (five or more
units) residential properties, which consist primarily of mortgage loans
secured by apartment buildings. Such loans totaled $1.40 billion or 54.0% of
the total loan portfolio at May 31,
7
<PAGE> 52
1997. The Bank also emphasizes originations of single-family (one-to-four
units) residential mortgage loans, which totaled $551.1 million or 21.2% of the
total portfolio at May 31, 1997, and cooperative apartment loans to individuals
(loans secured by shares in a cooperative housing corporation), which totaled
$359.7 million or 13.8% of the total loan portfolio at May 31, 1997.
-Maintain Asset Quality. Management believes that high asset quality
is a key to long-term financial success and, as a result, the investments which
are emphasized by the Bank are intended to maintain a high level of asset
quality and moderate credit risk. At May 31, 1997, the Bank's non-performing
assets amounted to $17.4 million, or 0.46%, of total assets. At May 31, 1997,
the Bank's allowance for loan losses amounted to $28.8 million or 170.1% of the
Bank's non-performing loans.
Stable Source of Liquidity and Earnings. The Bank purchases short to
medium-term investment securities and mortgage-backed and mortgage-related
securities combining what management believes to be appropriate yield,
liquidity and credit quality in its efforts to achieve (1) a managed and
predictable source of liquidity to meet loan demand, (2) a stable source of
interest income and (3) diversification in the Bank's portfolio of
interest-earning assets. These portfolios, which totaled $899.2 million at May
31, 1997, are comprised primarily of obligations of the U.S. Government and
federal agencies totaling $702.4 million and mortgage-backed and
mortgage-related securities totaling $182.2 million.
-Emphasis on Retail Deposits and Customer Service. The Bank's
liability strategy emphasizes retail deposits obtained through its branch
offices, rather than institutional or wholesale deposits. This strategy is
facilitated by the Bank's extensive branch network, which has enabled the Bank
to emphasize more stable savings accounts, negotiable order of withdrawal
("NOW") accounts, money market accounts and non-interest-bearing checking
accounts, which in the aggregate amounted to $1.59 billion or 47.1% of the
Bank's total deposits at May 31, 1997. The Bank also emphasizes customer
service and being a low service fee provider of various deposit and other
products.
THE CONVERSION
On April 18, 1997, the Board of Directors of the Bank and the Board of
Trustees of the Mutual Holding Company adopted the Plan and in June 1997 the
Bank incorporated the Company under Delaware law for the purpose of holding all
of the capital stock of the Bank and in order to facilitate the Conversion.
Pursuant to the Plan, (i) the Mutual Holding Company will convert to the stock
form of organization and simultaneously will merge with and into the Bank and
all of the outstanding shares of Bank common stock held by the Mutual Holding
Company will be cancelled. Pursuant to the Plan, the Company is offering
shares of Common Stock in the Offering as part of the Conversion. Upon
consummation of the Offerings, the Company will purchase from the Bank all of
the Bank's common stock issued in the Conversion and the Bank will become a
wholly owned subsidiary of the Company operating under the name "Independence
Savings Bank."
8
<PAGE> 53
The increased capital resulting from the Offerings will support the
future expansion of the retail banking operations of the Bank and the Company,
through acquisitions or otherwise, as well as possible diversification into
other businesses. Although there are no current arrangements, understandings
or agreements regarding such opportunities, the Bank and the Company will be in
a position after the Conversion, subject to regulatory limitations and their
financial position, to take advantage of additional opportunities for such
expansion that may arise in the future. Furthermore, the additional capital
resulting from the Conversion will facilitate the Bank's ability to sustain its
continued growth and development over the long-term while maintaining its
status as a community-based, independent financial institution serving
Brooklyn, Queens and the greater New York City metropolitan area.
In accordance with Department and FDIC regulations, consummation of
the Conversion is conditioned upon the approval of the Plan by the
Superintendent and the non-objection of the FDIC, as well as (i) the approval
of the holders of at least 75% in amount of deposit liabilities of Eligible
Account Holders represented in person or by proxy at a special meeting of
Eligible Account Holders called for the purpose of submitting the Plan for
approval (the "Special Meeting"), and (ii) the approval of at least a majority
of the total votes eligible to be cast by Eligible Account Holders at the
Special Meeting.
THE OFFERINGS
Pursuant to the Plan and in connection with the Conversion, the
Company is offering up to 58,564,815 shares of Common Stock in the Offerings.
Common Stock is first being offered in the Subscription Offering with
nontransferable subscription rights being granted, in the following order of
priority, to (i) Eligible Account Holders; (ii) the ESOP; and (iii)
Supplemental Eligible Account Holders. Subscription rights will expire if not
exercised by 12:00 noon, Eastern Time, on ________, 1997, unless extended.
Subscription rights are non-transferable. Persons found to be
transferring subscription rights will be subject to forfeiture of such rights
and possible further sanctions and penalties imposed by the Department.
Certificates representing shares of Common Stock purchased in the Subscription
Offering must be registered in the name of the Eligible Account or Supplemental
Eligible Account Holders, as the case may be.
Upon completion of the Subscription Offering and subject to other
limitations described herein, any shares of Common Stock not subscribed for in
the Subscription Offering will be offered by the Company in the Community
Offering to certain members of the general public to whom a copy of this
Prospectus is delivered, with preference given to natural persons residing in
counties in which the Bank maintains branch offices. It is anticipated that
shares not subscribed for in the Subscription and Community Offerings will be
offered to certain members of the general public in a Syndicated Community
Offering. The Bank and the Company reserve the absolute right to reject or
accept any orders in the Community Offering or the Syndicated Community
Offering, in whole or in part, either at the time of receipt of an order or as
soon as practicable following the Expiration Date.
9
<PAGE> 54
The Bank and the Company have retained Sandler O'Neill as advisors in
connection with the Offerings and to assist in soliciting subscriptions in the
Offerings. Neither Sandler O'Neill nor any registered broker-dealer shall have
any obligation to take or purchase any shares of the Common Stock in the
Subscription Offering, Community Offering or Syndicated Community Offering.
However, Sandler O'Neill has agreed to use its best efforts in the sale of
shares of the Syndicated Community Offering. See "The Conversion - The
Offerings - Subscription Offering," "- Community Offering," "- Syndicated
Community Offering" and "- Marketing Arrangements."
PURCHASE LIMITATIONS
With the exception of the ESOP, which intends to purchase up to an
aggregate of 8.0% of the number of shares of Common Stock to be issued in the
Offerings, no Eligible Account Holder or Supplemental Eligible Account Holder
may purchase in their capacity as such in the Subscription Offering more than
$500,000 of Common Stock; no person, individually or together with associates
and persons acting in concert, may purchase in each of the Community Offering
and any Syndicated Community Offering more than $500,000 of Common Stock; and
no person, individually or together with associates of or persons acting in
concert with such person, may purchase in the Offerings more than 1% of the
total number of shares of Common Stock issued in the Conversion exclusive of
any shares issued pursuant to an increase in the Estimated Price Range of up to
15% (432,870 shares and 585,648 shares at the minimum and maximum of the
Estimated Price Range, respectively). At any time during the Offerings, and
without further approval by the Eligible Account Holders or a resolicitation of
subscribers, the Bank and the Company may in their sole discretion increase any
of the individual or aggregate purchase limitations to a percentage which does
not exceed 5.0% and may decrease the individual purchase limitation to as low
as 0.1% of the Common Stock issued in the Conversion. Under certain
circumstances, certain subscribers may be resolicited in the event of such an
increase. The minimum purchase is 25 shares. See "The Conversion -
Limitations on Common Stock Purchases." In the event of an oversubscription,
shares will be allocated in accordance with the Plan, as described under "The
Conversion - The Offerings - Subscription Offering," "- Community Offering,"
and "-Syndicated Community Offering."
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
New York State Banking Board ("Banking Board") regulations require the
aggregate Purchase Price of the Common Stock to be issued in the Conversion to
be consistent with an independent appraisal of the estimated pro forma market
value of the Common Stock. RP Financial's pro forma appraisal of the Common
Stock was $509.3 million at the midpoint of the Valuation Range as of August 8,
1997. In accordance with Banking Board regulations, the minimum and maximum of
the Valuation Range were set at 15% below and above the midpoint, respectively,
resulting in an offering of $432.9 million to $585.6 million. The full text of
the appraisal report of RP Financial describes the procedures followed, the
assumptions made, limitations on the review undertaken and matters considered.
The appraisal report has been filed as an exhibit to the Registration Statement
and the Application for Conversion of which this Prospectus is a part, and is
available in the manner
10
<PAGE> 55
set forth under "Additional Information." THIS APPRAISAL OF THE COMMON STOCK
IS NOT INTENDED AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS
TO THE ADVISABILITY OF PURCHASING SUCH STOCK. MOREOVER, BECAUSE SUCH VALUATION
IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL
OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT
PERSONS PURCHASING COMMON STOCK IN THE CONVERSION WILL THEREAFTER BE ABLE TO
SELL SUCH SHARES AT PRICES AT OR ABOVE THE PURCHASE PRICE OR IN THE RANGE OF THE
FOREGOING VALUATION OF THE PRO FORMA MARKET VALUE THEREOF.
All shares of Common Stock will be sold at the Purchase Price of
$10.00 per share, which was established by the Boards of Directors of the Bank
and the Company. The actual number of shares to be issued in the Offerings
will be determined by the Bank and the Company based upon the final updated
valuation of the estimated pro forma market value of the Common Stock at the
completion of the Offerings. The number of shares of Common Stock to be issued
is expected to range from a minimum of 43,287,037 shares to a maximum of
58,564,815 shares. Subject to approval of the Department and non-objection of
the FDIC, the Valuation Range may be increased or decreased to reflect market
and economic conditions prior to the completion of the Offerings, and under
such circumstances the Bank and the Company may increase or decrease the number
of shares of Common Stock. No resolicitation of subscribers will be made and
subscribers will not be permitted to modify or cancel their subscriptions
unless (i) the gross proceeds from the sale of the Common Stock are less than
the minimum or more than 15% above the maximum of the current Valuation Range
or (ii) the Offerings are extended beyond _____, 1997. See "Pro Forma Data,"
"Risk Factors - Possible Dilutive Effect of Issuance of Additional Shares" and
"The Conversion - Stock Pricing and Number of Shares to be Issued."
In connection with the Conversion, the Company and the Bank intend to
establish the Foundation, with the Company contributing an amount of shares
equal to 8% of the total number of shares of Common Stock sold in the
Conversion immediately following completion of the Conversion. The
establishment of the Foundation was taken into account in determining the
estimated pro forma market value of the Common stock. In the event the
Conversion did not include the Foundation, RP Financial has estimated that the
pro forma market value of the Common Stock would be $585.0 million at the
midpoint of the Estimated Price Range rather than $509.3 million. See "Risk
Factors - Establishment of the Foundation - Comparison of Valuation and Other
Factors Assuming the Foundation is Not Established as Part of the Conversion"
and "Comparison of Valuation and Pro Forma Information with No Foundation."
BENEFITS OF CONVERSION TO DIRECTORS AND OFFICERS
Stock Option Plan and Recognition Plan. The Company intends to adopt
certain stock benefit plans for the benefit of directors, officers and
employees of the Company and the Bank and to submit such plans to stockholders
for approval at an annual or special meeting of stockholders of the Company to
be held at least six months following the consummation of the Conversion. The
proposed benefit plans are as follows: (i) a Stock Option Plan, pursuant to
which a number of authorized but unissued shares of Common Stock equal to
11
<PAGE> 56
10% of the Stock to be sold in the Offerings (5,856,481 shares at the
maximum of the Estimated Price Range) will be reserved for issuance pursuant to
stock options and stock appreciation rights to directors, officers and
employees; and (ii) a Recognition Plan (the "Recognition Plan"), which will,
following the receipt of stockholder approval, purchase a number of shares of
Common Stock, with funds contributed by the Company, either from the Company or
in the open market equal to 4.0% of the Conversion Stock to be sold in the
Offerings (2,342,592 shares at the maximum of the Estimated Price Range) for
distribution to directors, officers and employees. Regulations of the New York
State Banking Board ("Banking Board") permit individual members of management to
receive up to 25% of the shares granted pursuant to any stock option or non-tax
qualified stock benefit plan and directors who are not employees to receive up
to 5% of such stock (or stock options) individually and up to 30% in the
aggregate under any such plan. In the event that the Recognition Plan purchases
shares of Common Stock in the open market with funds contributed by the Company,
the cost of such shares initially will be deducted from the Company's
stockholders' equity, but the number of outstanding shares of Common Stock will
not increase and stockholders accordingly will not experience dilution of their
ownership interest. In the event that the Recognition Plan purchases shares of
Common Stock from the Company with funds contributed by the Company, total
stockholders' equity would neither increase nor decrease, but under such
circumstances stockholders would experience dilution of their ownership
interests (by 3.8% at the maximum of the Estimated Price Range) and per share
stockholders' equity and per share net earnings would decrease as a result of an
increase in the number of outstanding shares of Common Stock. In either case,
the Company will incur operating expense and increases in stockholders' equity
as the shares held by the Recognition Plan are granted and issued in accordance
with the terms thereof. For a presentation of the effects of anticipated
purchases of Common Stock by the Recognition Plan, see "Pro Forma Data."
Upon receipt of stockholder approval of the Stock Option Plan, the
Company anticipates granting stock options for shares of Common Stock to
directors, executive officers and other key personnel. The Stock Option Plan
and the Recognition Plan will be administered by a committee of two or more
non-employee members of the Board of Directors of the Company who are
"disinterested" within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended ("Exchange Act"). It is anticipated that grants will
be made by such committee primarily based on performance, although the
committee will be able to consider other factors determined to be relevant in
its sole discretion. A total of 70% of the shares of Common Stock to be
reserved for issuance pursuant to the Stock Option Plan will be available for
the grant of stock options to executive officers and key employees of the Bank.
In addition, pursuant to the Stock Option Plan, 30% of the shares of Common
Stock to be reserved for issuance pursuant to the Stock Option Plan will be
available for the grant of compensatory stock options to outside directors of
the Company. It is currently expected that upon stockholder approval each
non-employee director would receive an option for the same number of shares
which would amount to options totalling 159,722 shares for each of the 11
non-employee directors assuming 5,856,481 shares are reserved for issuance
under the Stock Option Plan. All of the stock options will be granted at no
cost to the recipients, although the recipients will be required to pay the
applicable exercise price at the time of exercise in order to receive the
12
<PAGE> 57
underlying shares of Common Stock. Following receipt of stockholder approval of
the Recognition Plan, the Company intends to award shares of Common Stock
pursuant to such plan to certain directors, officers and employees. It is
expected that 70% of the shares of Common Stock to be held by the Recognition
Plan would be available for awards to officers and key employees of the Bank. In
addition, 30% of the shares held by the Recognition Plan would be available for
grant of awards to non-employee directors. It is currently expected that upon
stockholder approval, each of the 11 non-employee directors would receive
identical awards which would amount to 63,888 shares per non-employee director
assuming 2,342,592 shares are held by the Recognition Plan. No specific award
or option determinations have been made with respect to executive officers. See
"Management - Benefits" and "Risk Factors - Possible Dilutive Effect of Issuance
of Additional Shares."
ESOP. In addition, the ESOP intends to purchase 8.0% of the Common
Stock to be sold in the Offerings (4,685,185 shares or $46.9 million of Common
Stock at the maximum of the Estimated Price Range) with a loan funded by the
Company. See "Use of Proceeds." In the event that there are insufficient
shares available to fill the ESOP's order due to an oversubscription by
Eligible Account Holders, the Company may issue authorized but unissued shares
of Common Stock to the ESOP in an amount sufficient to fill the ESOP's order,
subject to approval of the FDIC and the Department, and/or the ESOP may
purchase such shares in the open market, if permitted. In the event that
additional shares of Common Stock are issued to the ESOP to fill its order,
stockholders would experience dilution of their ownership interests (by up to
7.4% at the maximum of the Estimated Price Range, assuming the ESOP purchased
no shares in the Offerings) and per share stockholders' equity and per share
net earnings would decrease as a result of an increase in the number of
outstanding shares of Common Stock. See "Management - Benefits" and "Risk
Factors - Possible Dilutive Effect of Issuance of Additional Shares."
Change in Control Agreements. In connection with the Conversion, the
Company and the Bank intend to enter into Change in Control Agreements with the
current President and Chief Executive Officer and five other senior executive
officers of the Company and the Bank. Such agreements provide for severance
payments if their respective employment is terminated in connection with a
Change in Control of the Company or the Bank. The Bank expects to enter into
similar agreements with 12 other officers of the Bank.
INDEPENDENCE COMMUNITY FOUNDATION
In furtherance of the Bank's commitment to the communities that it
serves, the Plan of Conversion provides for the establishment of a private
charitable foundation in connection with the Conversion. The Plan provides
that the Bank and the Company will create Independence Community Foundation,
which will be incorporated under Delaware law as a nonstock corporation, and
will fund the Foundation with shares of Common Stock contributed by the
Company, as further described below. The Company and the Bank believe that the
funding of the Foundation with Common Stock of the Company is a means of
establishing a common bond between the Bank and the communities that it serves
and thereby enable such communities to share in the potential growth and
success of the Company over the long term. By further enhancing the Bank's
visibility and reputation in
13
<PAGE> 58
the communities that it serves, the Bank believes that the Foundation will
enhance the long-term value of the Bank's community banking franchise. See "The
Conversion--Establishment of the Charitable Foundation--Structure of the
Foundation."
The authority for the affairs of the Foundation will be vested in the
Board of Directors of the Foundation, which will be comprised of members of the
Company's Board of Directors and certain other individuals chosen in light of
their commitment and service to charitable and community purposes. The
directors of the Foundation will be responsible for establishing the policies
of the Foundation with respect to grants or donations by the Foundation,
consistent with the purposes for which the Foundation was established, and will
also be responsible for directing the activities of the Foundation, including
matters related to ownership of the Common Stock held by the Foundation.
However, it is expected that establishment of the Foundation will be subject to
certain conditions, including, among others, a requirement that the Common
Stock of the Company held by the Foundation be voted in the same ratio as all
other shares of the Company's Common Stock on all proposals considered by
stockholders of the Company. See "The Conversion--Establishment of the
Charitable Foundation--Regulatory Conditions Imposed on the Foundation."
The Company proposes to fund the Foundation by contributing to the
Foundation immediately following the Conversion a number of shares of
authorized but unissued shares of Common Stock equal to 8.0% of the Common
Stock sold in the Offerings, or 3,462,962 and 4,685,185 shares at the minimum
and maximum of the Estimated Price Range, respectively. Such contribution,
once made, will not be recoverable by the Company or the Bank. Assuming the
sale of shares at the maximum of the Estimated Price Range and the issuance of
shares to the Foundation, the Company will have 63,250,000 shares issued and
outstanding, of which the Foundation will own 4,685,185 shares, or 7.4%. DUE
TO THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK TO THE FOUNDATION, PERSONS
PURCHASING SHARES IN THE CONVERSION WILL HAVE THEIR OWNERSHIP AND VOTING
INTERESTS IN THE COMPANY DILUTED BY 7.4%. SEE "PRO FORMA DATA."
As a result of the establishment of the Foundation, the Company will
recognize an expense of the full amount of the contribution, offset in part by
a corresponding tax benefit, during the quarter in which the contribution is
made, which is expected to be the third quarter of fiscal 1998. Such expense
will reduce earnings and have a material impact on the Company's earnings for
such quarter and for the year. Assuming a contribution of $46.9 million in
Common Stock in fiscal 1998, based on the maximum of the Estimated Price Range
and assuming a marginal tax rate of 47%, the Company estimates a net tax
effected expense of $24.8 million. In addition, the Bank does not anticipate
making future charitable contributions to the Foundation during the first five
years following the initial contribution to the Foundation. For further
discussion of the Foundation and its impact on purchasers in the Conversion,
see "Risk Factors--Establishment of the Foundation." "Pro Forma Data" and "The
Conversion--Establishment of the Foundation."
14
<PAGE> 59
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), no Prospectus will be mailed
any later than five days prior to such date or hand delivered any later than
two days prior to such date. Execution of the order form will confirm receipt
or delivery of the Prospectus in accordance with Rule 15c2-8. Order forms will
only be distributed with a Prospectus.
The Company and the Bank are not obligated to accept for processing
orders not submitted on original order forms. Order forms unaccompanied by an
executed certification form will not be accepted. Payment by check, money
order, cash or debit authorization to an existing account at the Bank must
accompany the order form. Orders for Common Stock submitted by subscribers in
the Subscription Offering or by purchasers in the Community Offering which
aggregate $50,000 or more must be paid by official bank or certified check or
by withdrawal authorization from a deposit account at the Bank.
In order to ensure that Eligible Account Holders and Supplemental
Eligible Account Holders are properly identified as to their stock purchase
priorities, depositors as of the close of business on the Eligibility Record
Date (March 31, 1996) or the Supplemental Eligibility Record Date (________,
1997), must list all accounts on the stock order form giving all names on each
account and the account numbers. See "The Conversion- Procedure for Purchasing
Shares in the Offerings."
USE OF PROCEEDS
Net proceeds from the sale of the Common Stock are estimated to be
between $421.5 million and $572.0 million ($658.5 million assuming an increase
in the Valuation Range by 15%). See "Pro Forma Data." The Company plans to
use 50% of the net proceeds from the Offerings to purchase all the outstanding
common stock of the Bank to be issued in the Conversion and retain the
remainder of the net proceeds. The Company intends to use a portion of the net
proceeds retained by it to make a loan directly to the ESOP to enable the ESOP
to purchase 8.0% of the Common Stock sold in the Offerings. The amount of the
loan is expected to be between $34.6 million and $46.9 million at the minimum
and maximum of the Valuation Range, respectively. It is anticipated that the
loan to the ESOP will have a term of not less than 20 years and a fixed
interest rate at the Bank's prime rate as of the date of the loan. See
"Management of the Bank - Stock Benefit Plans - Employee Stock Ownership Plan."
The Company intends initially to invest the net proceeds not used to fund the
ESOP loan in investment securities and mortgage-backed and mortgage-related
securities. Funds received by the Bank from the Company's purchase of its
common stock will be used for general purposes, including investment in
investment securities, mortgage-backed and mortgage-related securities and
loans. The net proceeds from the Offerings will be available to the Company
and the Bank to support the future expansion of retail banking operations or
diversification into other businesses, through acquisition or otherwise,
including the potential acquisition of other financial institutions and/or
branch offices. There are no current plans, arrangements, understandings or
agreements regarding such diversification or acquisitions. Subject to
applicable limitations and then-existing circumstances, such funds also may be
used by the Company in the future to repurchase shares of Common Stock. See
"The Conversion - Certain Restrictions on Purchases or Transfer of Shares after
the Conversion." See "Use of Proceeds."
15
<PAGE> 60
DIVIDEND POLICY
Following consummation of the Conversion, the Board of Directors of
the Company may consider a policy of paying cash dividends on the Common Stock.
However, no decision has been made as to the amount or timing of such
dividends, if any. See "Dividend Policy."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors.
16
<PAGE> 61
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data for the
five years ended March 31, 1997, is derived in part from the audited
consolidated financial statements of the Bank. The historical consolidated
financial data for the two months ended May 31, 1997 and 1996 is derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which management of the Bank considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the two months ended May 31, 1997 are not
necessarily indicative of the results that may be expected for any other
interim period or the entire year ending March 31, 1998. The selected
historical consolidated financial data set forth below should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of the Bank, including the related notes,
included elsewhere herein.
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------
At May 31,
1997 1997 1996 1995 1994 1993
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Financial Condition Data:
Total assets $3,820,595 $3,733,316 $3,869,782 $2,619,935 $2,549,180 $2,392,351
Cash and cash equivalents 130,993 374,636 103,192 110,394 37,667 66,366
Investment securities held to
maturity -- -- 39,995 29,427 355,886 372,088
Mortgage-backed and mortgage-
related securities held to maturity -- -- 120,702 305,545 376,704 423,506
Mortgage-backed and mortgage-
related securities available for sale 182,248 190,979 395,321 -- -- --
Investment securities available for
sale 716,943 357,487 683,828 61,818 -- --
Loans receivable, net 2,560,926 2,503,089 2,322,808 2,020,262 1,693,994 1,461,931
Intangible assets(1) 63,130 60,499 80,268 1,023 1,728 2,592
Deposit accounts 3,380,174 3,325,558 3,396,890 2,236,422 2,207,441 2,163,761
FHLB advances 14,550 14,550 56,045 67,462 60,489 3,375
Other borrowings 2,633 2,682 1,250 1,286 1,100 1,600
Total equity 316,576 309,114 289,819 259,197 220,690 178,445
</TABLE>
<TABLE>
<CAPTION>
For Two Months Ended
May 31, For the Year Ended March 31,
------------------------ ----------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------------------------ ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income $44,081 $43,695 $255,303 $213,100 $191,539 $179,697 $180,698
Interest expense 23,890 24,004 140,187 110,619 80,562 75,633 86,297
------ ------ ------- ------- ------- ------- -------
Net interest income 20,191 19,691 115,116 102,481 110,977 104,064 94,401
Provision for loan losses 1,450 600 7,960 3,679 3,841 5,014 4,462
----- ------ ------- ------- ------- ------- -------
Net interest income after
provision for loan losses 18,741 19,091 107,156 98,802 107,136 99,050 89,939
Net gain (loss) on sales of
loans and securities 3 (28) (3,347) 12,222 (3,952) 849 283
Other noninterest income 1,506 1,698 6,256 7,860 6,416 6,873 5,103
Amortization of intangible assets 1,484 1,546 8,278 1,842 905 864 859
Other noninterest expenses(2) 12,512 10,224 73,875 50,288 46,464 41,176 37,256
------ ------ ------ ------ ------ ------ ------
Income before income taxes 6,254 8,991 27,912 66,754 62,231 64,732 57,210
Income taxes 1,706 2,901 10,732 30,782 27,327 25,808 26,319
-------
Cumulative effect of
change in accounting
principle (3) -- -- -- -- -- 3,321 --
------ ------- -------- ------- -------- ------- -------
Net income $ 4,548 $ 6,090 $ 17,180 $ 35,972 $ 34,904 $ 42,245 $ 30,891
======= ======= ======== ======= ======== ======= =======
</TABLE>
17
<PAGE> 62
KEY OPERATING
RATIOS AND OTHER
DATA:
<TABLE>
<CAPTION>
At or For the Two Months
Ended May 31, At or For the Year Ended March 31,
----------------------- -------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---------- ----------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:(4)
Return on assets (2) 0.71% 0.97% 0.46% 1.27% 1.37% 1.71% 1.36%
Return on equity (2) 8.75 12.60 5.69 13.13 14.81 21.80 19.23
Interest-earning assets to
interest-bearing liabilities 109.14 106.37 105.80 109.28 110.55 107.97 106.89
Interest rate spread (5) 2.99 3.07 3.09 3.39 4.18 4.13 4.00
Net interest margin (5) 3.35 3.33 3.32 3.77 4.52 4.38 4.27
Noninterest expenses, exclusive
of amortization of intangible
assets, to total assets(2) 1.97 1.63 1.99 1.77 1.83 1.67 1.64
Efficiency ratio (6) 57.67 47.80 53.82 45.58 39.79 37.12 37.44
ASSET QUALITY RATIOS:
Non-performing loans as a
percent of total loans at end
of period 0.65 1.36 .73 1.24 .77 .79 1.06
Non-performing assets to total
assets at end of period(7) 0.46 0.89 0.51 0.78 0.67 0.61 0.85
Allowance for loan losses to
nonperforming loans at end of
period 170.05 64.86 144.92 70.55 75.01 64.92 40.83
Allowance for loan losses to
total loans at end of period 1.11 0.88 1.06 0.87 0.58 0.51 0.43
CAPITAL AND OTHER RATIOS (4):
Equity to assets at end of
period 8.29% 7.86% 8.28 7.49 9.89 8.66 7.46
Leverage capital 6.66 5.75 6.83 6.13 9.54 8.52 7.31
Tangible equity to risk-weighted
assets at end of period 10.44 9.76 10.05 9.82 13.76 13.85 12.57
Total capital to risk-weighted
assets at end of period 11.64 10.74 11.15 10.82 14.43 14.41 13.05
NUMBER OF FULL SERVICE OFFICES 33 33 32(8) 33 21 20 20
</TABLE>
(footnotes on following page)
18
<PAGE> 63
- ---------------------
(1) Represents the excess of cost over fair value of net assets acquired
which consists of goodwill and other intangibles which amounted to
$23.4 million and $39.7 million at May 31, 1997, respectively, and
$23.7 million and $36.8 million at March 31, 1997, respectively. The
reduction from March 31, 1996 to March 31, 1997 reflected, in addition
to the amortization of such intangible assets, certain adjustments
relating to the acquisition in 1996 of Bay Ridge as well as the
acquisition of five branch offices located in Brooklyn and Staten
Island (the "1996 Branch Acquisition"). The goodwill resulting from
the Bay Ridge acquisition decreased during fiscal 1997 due primarily
to the repayment of the Bay Ridge ESOP loan and the receipt of tax
refunds. The intangible related to the 1996 Branch Acquisition was
affected by the sale of the deposits related to one of the offices
acquired, resulting in a $5.3 million decrease in the remaining
premium related to this branch office. See "Management's Discussion
and Analysis of Financial Condition and Results of Operation - Recent
Acquisitions."
(2) At and for the year ended March 31, 1997, reflects the effects of a
special one-time assessment imposed on institutions which had deposits
insured by the Savings Association Insurance Fund ("SAIF"). The Bank,
as a result of the various acquisitions it has completed, is deemed to
have SAIF deposits. As a consequence, during fiscal 1997, it paid
$8.6 million in satisfaction of the special assessment. Had this
amount not been paid, for the year ended March 31, 1997, the Bank's
returns on assets and equity would have been .61% and 7.44%,
respectively, and the Bank's ratio of noninterest expenses, exclusive
of amortization of intangible assets, to total assets would have been
1.76%.
(3) Reflects adoption of Statement of Financial Accounting Standards
("SFAS") No. 109.
(4) With the exception of end of period ratios and the efficiency ratio,
all ratios are based on average daily balances during the respective
periods and are annualized where appropriate.
(5) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost
of interest-bearing liabilities; net interest margin represents net
interest income as a percentage of average interest-earning assets.
(6) Reflects adjusted operating expenses (net of amortization of
intangibles and the special SAIF assessment) as a percent of the
aggregate of net interest income and adjusted non-interest income
(excluding gains and losses on the sales of loans and securities).
(7) Non-performing assets consist of non-accrual loans, loans past due 90
days or more as to interest and accruing and other real estate
acquired through foreclosure or by deed-in-lieu thereof.
(8) Does not include a branch office location in Astoria, New York which
was acquired in April 1997.
19
<PAGE> 64
RISK FACTORS
The following risk factors, in addition to those discussed elsewhere
in this Prospectus, should be carefully considered by investors in deciding
whether to purchase the Common Stock offered hereby.
POTENTIAL LOW RETURN ON EQUITY FOLLOWING THE CONVERSION; UNCERTAINTY AS TO
FUTURE GROWTH OPPORTUNITIES
At May 31, 1997, the Bank's ratio of equity to assets was 8.29%. The
Company's equity position will be significantly increased as a result of the
Conversion. On a pro forma basis as of May 31, 1997, assuming the sale of
Common Stock at the maximum and 15% above the maximum of the Valuation Range,
the Company's ratio of equity to assets would be 19.3% and 20.8%. The
Company's ability to leverage this capital will be significantly affected by
industry competition for loans and deposits. The Company currently anticipates
that it will take time to prudently deploy such capital. As a result, the
Company's return on equity initially is expected to be below the industry
average after the Conversion.
In an effort to fully deploy post-Conversion capital, in addition to
attempting to increase its loans and deposits through internal growth, the
Company may seek to expand its operations through acquisitions, particularly
through acquisitions of other financial institutions or branch offices and
deposits in the Bank's market area. The Company's ability to grow through
selective acquisitions will be dependent on successfully identifying, acquiring
and integrating such acquisition candidates. There can be no assurance the
Company will be able to generate internal growth or to identify attractive
acquisition candidates, acquire such candidates on favorable terms or
successfully integrate them into the Company. In addition, given the premiums
being paid, and the competitive environment for acquisitions in the recent
past, no assurance can be given that any such acquisitions by the Company may
not, at least initially, be dilutive to earnings. Neither the Company nor the
Bank has any specific plans, arrangements or understandings regarding any such
expansions or acquisitions at this time.
MARKET AREA AND CUSTOMER SERVICE PHILOSOPHY
The Bank maintains its headquarters in Brooklyn, New York and has had
long-standing and extensive ties to the borough of Brooklyn since the Bank's
organization in 1850. The Bank's retail banking presence is concentrated in
Brooklyn and Queens, where 27 of its 33 branch offices are located with more
than 75% of the Bank's total deposits at May 31, 1997. The boroughs of
Brooklyn and Queens are racially and ethnically diverse and include significant
numbers of recent immigrants to the United States and low to moderate income
residents. The median household income for Brooklyn is below median household
incomes nationally, as well as for the State of New York, while the median
household income for Queens is slightly higher than national and New York State
median income levels. In addition, the unemployment rates in the markets
served by the Bank traditionally
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are higher than the surrounding suburbs and, in recent periods, the boroughs of
Brooklyn and Queens have had, with the exception of the Bronx, the highest
unemployment rates in New York City.
An integral part of the Bank's business and competitive strategy has
been to be a low-cost service provider in order to build a loyal and stable
customer base and to provide the banking services needed by the communities and
neighborhoods served by the Bank. Subsequent to the Conversion, the Bank
intends to maintain its headquarters in Brooklyn and to continue its strategy
of providing low-cost products and services to its customers in the boroughs of
Brooklyn and Queens as well as Manhattan, the Bronx, Staten Island and Nassau
County, New York. The Bank's commitment to maintain customer and community
service in its existing markets may result in the Bank incurring certain
increased operating costs which, in turn, may reduce profitability.
POTENTIAL INCREASED COMPENSATION EXPENSE AFTER THE CONVERSION
In November 1993, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position 93-6 entitled "Employers'
Accounting for Employee Stock Ownership Plans" ("SOP 93-6"). SOP 93-6 requires
an employer to record compensation expense in an amount equal to the fair value
of shares committed to be released to employees from an employee stock
ownership plan instead of an amount equal to the cost basis of such shares. If
the shares of Common Stock appreciate in value over time, SOP 93-6 will result
in increased compensation expense with respect to the ESOP as compared with
prior guidance which required the recognition of compensation expense based on
the cost of shares acquired by the ESOP. It is impossible to determine at this
time the extent of such impact on future net income. See "Pro Forma Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Recent Accounting Pronouncements." In addition, after
consummation of the Conversion, the Company intends to implement, subject to
stockholder approval (which approval cannot be obtained earlier than six months
subsequent to the Conversion), the Recognition Plan. Upon implementation, the
award of shares of Common Stock from the Recognition Plan will result in
significant additional compensation expense. See "Pro Forma Data" and
"Management - Benefits - Recognition Plan."
POTENTIAL EFFECTS OF CHANGES IN INTEREST RATES
The operating results of the Bank are substantially dependent on its
net interest income, which is the difference between the interest income earned
on its interest-earning assets and the interest expense paid on its
interest-bearing liabilities. Like most savings institutions, the Bank's
earnings are affected by changes in market interest rates and other economic
factors beyond its control. If an institution's interest-earning assets have
longer effective maturities than its interest-bearing liabilities, the yield on
the institution's interest-earning assets generally will adjust more slowly
than the cost of its interest-bearing liabilities and, as a result, the
institution's net interest income generally would be adversely affected
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by material and prolonged increases in interest rates and positively affected
by comparable declines in interest rates. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Asset and Liability
Management." At May 31, 1997, the Bank's interest-bearing liabilities which
were estimated to mature or reprice within one year and three years exceeded
the Bank's interest-earning assets with the same characteristics by $1.83
billion and $665.0 million, respectively, or 47.9% and 17.4%, respectively, of
the Bank's total assets.
In addition to affecting interest income and expense, changes in
interest rates also can affect the value of the Bank's interest-earning assets,
which are comprised of fixed and adjustable-rate instruments, and the ability
to realize gains from the sale of such assets. Generally, the value of
fixed-rate instruments fluctuates inversely with changes in interest rates. At
May 31, 1997, all of the Bank's $716.9 million of investment securities ($703.8
million of which had fixed-rates of interest) and all $182.2 million of its
mortgage-backed and mortgage-related securities ($176.7 million of which had
fixed-rates of interest) were classified as available for sale and the Bank had
$5.3 million of net unrealized gains with respect to such investment and
mortgage-backed and mortgage-related securities, which were included as a
separate component in the Bank's total equity, net of tax, as of such date.
Changes in interest rates also can affect the average life of loans
and mortgage-backed securities. Decreases in interest rates generally result
in increased prepayments of loans and mortgage-backed securities as borrowers
refinance to reduce borrowing costs, which may subject the Bank to reinvestment
risk to the extent that it is not able to reinvest such prepayments at rates
which are comparable to the rates on the maturing loans or securities. The
Bank's loan sale and servicing activity may also be adversely affected by a
declining interest rate environment to the extent such environment results in
increased loan prepayment activity of serviced loans. In this regard, at May
31, 1997, the Bank was servicing $309.9 million of loans for others.
See generally "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Asset and Liability Management" and
"Regulation - The Bank - Regulatory Capital Requirements."
IRREVOCABILITY OF ORDERS; POTENTIAL DELAY IN COMPLETION OF OFFERINGS
Orders submitted in the Subscription Offering, Community Offering
and/or any Syndicated Community Offering are irrevocable. Funds submitted in
connection with any purchase of Common Stock in the Offerings will be held by
the Company until the completion or termination of the Conversion, including
any extension of the Expiration Date. Because, among other factors, completion
of the Conversion will be subject to an update of the independent appraisal
prepared by RP Financial, there may be one or more delays in the completion of
the Conversion. Subscribers will have no access to subscription funds and/or
shares of Common Stock until the Conversion is completed or terminated.
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RISKS RELATED TO MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE LENDING
ACTIVITIES
In order to meet the needs of the various communities it serves, the
Bank has emphasized for many years the origination of multi-family residential
loans. In addition, the Bank also originates, to a lesser degree, commercial
real estate loans. At May 31, 1997, multi-family residential loans totaled
$1.40 billion or 54.0% of total loans and commercial real estate loans totaled
$163.1 million or 6.3% of total loans. In addition, at such date, the Bank had
commitments to fund multi-family residential and commercial and other real
estate loans totaling $161.2 million.
Multi-family residential and commercial real estate lending generally
is considered to involve a higher degree of risk than single-family residential
lending due to a variety of factors, including generally larger loan balances,
the dependency on successful operation of the project for repayment, and loan
terms which often do not require full amortization of the loan over its term
and, instead, provide for a balloon payment at stated maturity. There can be
no assurance that the Bank's multi-family residential and commercial real
estate lending activities will not be adversely affected by these and the other
risks related to such activities. At May 31, 1997, of the $16.9 million of the
Bank's non-performing loans, $12.1 million related to non-performing
multi-family residential and commercial real estate loans.
One consequence of the Bank's continued emphasis on and increased
investment in multi-family and commercial real estate loans has been that the
Bank has increased its allowance for loan losses. The Bank's allowance
increased from $20.5 million at March 31, 1996 to $28.8 million at May 31,
1997. Such growth has occurred through provisions for loan losses which reduce
the Company's net income. As a result, the Bank's continuing involvement in
multi-family and commercial real estate lending may result in additional or
increased provisions for loan losses which would adversely affect the Company's
net income.
CERTAIN ANTI-TAKEOVER PROVISIONS
PROVISIONS IN THE COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE LAW.
Certain provisions of the Company's Certificate of Incorporation and Bylaws, as
well as certain provisions in Delaware law, will assist the Company in
maintaining its status as an independent publicly-owned corporation.
Provisions in the Company's Certificate of Incorporation and Bylaws provide,
among other things, (i) that the Board of Directors of the Company shall be
divided into three classes; (ii) that special meetings of stockholders may only
be called by the Board of Directors of the Company; (iii) that stockholders
generally must provide the Company advance notice of stockholder proposals and
nominations for director and provide certain specified related information;
(iv) noncumulative voting for the election of directors; (v) that no person may
acquire more than 10% of the issued and outstanding shares of any class of
equity security of the Company; (vi) the authority to issue shares of
authorized but unissued Common Stock and preferred stock and to establish the
terms of any one or more series of Preferred Stock, including voting rights
(which may be waived by the Board of Directors under certain circumstances)
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and (vii) supermajority voting requirements with respect to certain business
transactions involving the Company. Provisions under Delaware law applicable to
the Company provide, among other things, that the Company may not engage in a
business combination with an "interested shareholder" (generally a holder of 15%
of a corporation's voting stock) during the three-year period after the
interested shareholder became such except under certain specified circumstances.
In addition, Department regulations prohibit, for a period of one year following
the date of Conversion, offers to acquire or the acquisition of beneficial
ownership of more than 10% of the outstanding voting stock of the Company. The
above provisions may discourage potential proxy contests and other potential
takeover attempts, particularly those which have not been negotiated with the
Board of Directors, and thus generally may serve to perpetuate current
management. See "Restrictions on Acquisition of the Company and the Bank."
VOTING POWER OF DIRECTORS AND EXECUTIVE OFFICERS. Directors and
executive officers of the Company expect to hold approximately 0.9% of the
shares of Common Stock outstanding upon consummation of the Conversion based
upon the midpoint of the Estimated Price Range. Executive officers of the
Company, as well as other eligible employees of the Company, also will hold
shares of Common Stock which are allocated to the accounts established for them
pursuant to the ESOP. The ESOP intends to purchase 8.0% of the Common Stock to
be issued in the Offerings (4,685,185 shares based on the maximum of the
Estimated Price Range). Under the terms of the ESOP, shares of Common Stock
which have not yet been allocated to the accounts of employee participants in
the ESOP will be voted by the trustees of the ESOP in the same ratio on any
matter as to those allocated shares for which instructions are given to the
trustees. In addition, the Foundation will be funded with a contribution by
the Company equal to 8.0% of the Common Stock sold in the Conversion, which
may, subject to receipt of a waiver from the FDIC of the voting restriction
expected to be imposed on such Common Stock, be voted as determined by the
directors of the Foundation, the substantial majority of whom will also be
directors and executive officers of the Company and the Bank. Management's
potential voting control could, together with additional stockholder support,
defeat stockholder proposals requiring 80% approval of stockholders. As a
result, this potential voting control may preclude takeover attempts that
certain stockholders deem to be in their best interest and may tend to
perpetuate existing management. See "Restrictions on Acquisition of the
Company and the Bank--Restrictions in the Company's Certificate of
Incorporation and Bylaws" and "The Conversion--Establishment of the
Foundation."
In addition, and subject to stockholder approval following the
consummation of the Conversion, the Company expects to acquire Common Stock on
behalf of the Recognition Plan, a non-tax qualified restricted stock plan, in
an amount equal to 4.0% of the Common Stock issued in the Offerings (2,342,592
shares based on the maximum of the Estimated Price Range). Under the terms of
the Recognition Plan, the trustees of such plan, who will also be directors of
the Company, will have discretionary authority to vote all shares held by such
plan. Subject to stockholder approval, the Company also intends to reserve
for future issuance pursuant to a Stock Option Plan ("Stock Option Plan") a
number of
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authorized shares of Common Stock equal to an aggregate of 10% of the Common
Stock issued in the Offerings (5,856,481 shares, based on the maximum of the
Estimated Price Range). See "Management - Benefits."
Management's potential voting power could, together with additional
stockholder support, preclude or make more difficult takeover attempts which do
not have the support of the Company's Board of Directors and may tend to
perpetuate existing management.
CHANGE IN CONTROL AGREEMENTS. The Bank and the Company expect to
enter into Change in Control Agreements with the current President and Chief
Executive Officer of the Company and the Bank and five other senior executive
officers of the Company and the Bank, which agreements provide for severance
payments if their respective employment is terminated in connection with a
change in control of the Company and/or the Bank. The Bank also expects to
enter into agreements similar to the Change in Control Agreements with 12 other
officers of the Bank. See "Restrictions on Acquisition of the Company and the
Bank" and "Management - Change in Control Agreements."
EFFECTS OF THE ESTABLISHMENT OF THE FOUNDATION
Pursuant to the Plan, the Company intends to voluntarily establish a
charitable foundation in connection with the Conversion. The Plan provides
that the Bank and the Company will establish the Foundation, which will be
incorporated under Delaware law as a nonstock corporation and will be funded
with shares of Common Stock contributed by the Company. The contribution of
Common Stock to the Foundation will be dilutive to the interests of
stockholders and will have an adverse impact on the reported earnings of the
Company in fiscal 1998, the year in which the Foundation will be or is to be
established.
Dilution of Stockholders' Interests. The Company proposes to fund the
Foundation with Common Stock of the Company in an amount equal to 8.0% of the
Common Stock to be sold in the Conversion. At the minimum, midpoint and
maximum of the Estimated Price Range, the contribution to the Foundation would
equal 3,462,962, 4,074,074 and 4,685,185 shares of Common Stock, with a value
of $34.6 million, $40.7 million and $46.9 million, respectively, based on the
Purchase Price. Assuming the sale of Common Stock at the maximum of the
Estimated Price Range, upon completion of the Conversion and establishment of
the Foundation, the Company will have 63,250,000 shares issued and outstanding
of which the Foundation will own 4,685,185 shares of Common Stock, or 7.4%. As
a result, persons purchasing shares of Common Stock in the Conversion will have
their ownership and voting interests in the Company diluted by 7.4%. See "Pro
Forma Data."
Impact on Earnings. The contribution of Common Stock to the
Foundation will have an adverse impact on the Company's earnings in the year in
which the contribution is made. The Company will recognize the full expense in
the amount of the contribution of Common Stock to the Foundation in the quarter
in which it occurs, which is expected to be the third quarter of fiscal 1998.
The amount of the contribution will range from $34.6 million to
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$46.9 million, based on the minimum and maximum of the Estimated Price Range,
respectively. The contribution expense will be partially offset by the tax
benefit related to the expense. The Company and the Bank have been advised by
their independent tax advisors that the contribution to the Foundation will be
tax deductible, subject to an annual limitation based on 10% of the Company's
annual taxable income. Assuming a contribution of $46.9 million in Common Stock
(based on the maximum of the Estimated Price Range), the Company estimates a net
tax effected expense of $24.8 million (based on a 47% marginal tax rate). If
the Foundation had been established at March 31, 1997, the Bank would have
reported a net loss of $7.60 million, rather than reporting net income of $17.2
million for the year ended March 31, 1997. Management cannot predict earnings
for fiscal 1998, but expects that the establishment and funding of the
Foundation will have an adverse impact on the Company's earnings for such year.
However, in light of the expected contribution to the Foundation, the Bank does
not expect in the future to make other than nominal charitable contributions
within the communities it serves. In addition, the Company and the Bank do not
currently anticipate making additional contributions to the Foundation within
the first five fiscal years following the initial contribution.
Tax Considerations. The Company and the Bank have been advised by
their independent tax advisor that an organization created for the
above-described purposes would qualify as a Section 501(c)(3) exempt
organization under the Internal Revenue Code of 1986, as amended (the "Code"),
and would be classified as a private foundation. The Foundation will submit a
request to the Internal Revenue Service ("IRS") to be recognized as an exempt
organization. The Company and the Bank have received an opinion of their
independent tax advisors that the Foundation would qualify as a Section
501(c)(3) exempt organization under the Code, except that such opinion does not
consider the impact of the condition expected to be required by regulatory
authorities that Common Stock issued to the Foundation be voted in the same
ratio as all other shares of the Company's Common Stock on all proposals
considered by stockholders of the Company. See "The Conversion--Establishment
of the Foundation--Regulatory Conditions Imposed on the Foundation."
Consistent with this condition, in the event that the Company or the Foundation
receives an opinion of its legal counsel that compliance with the voting
restriction would have the effect of causing the Foundation to lose its
tax-exempt status, or otherwise have a material and adverse tax consequence on
the Foundation or subject the Foundation to an excise tax under Section 4941 of
the Code, the FDIC shall waive such voting restriction upon submission of a
legal opinion by the Company or the Foundation that is satisfactory to the
FDIC. The independent tax advisor's opinion further provides that there is
substantial authority for the position that the Company's contribution of its
own stock to the Foundation would not constitute an act of self-dealing, and
that the Company would be entitled to a deduction in the amount of the fair
market value of the stock at the time of the contribution, subject to an annual
limitation based on 10% of the Company's annual taxable income. The Company,
however, would be able to carry forward any unused portion of the deduction
for five years following the contribution. Thus, while the Company would have
received a tax benefit of approximately $22.0 million in fiscal 1997 (based
upon the sale of stock at the maximum of the Estimated Price Range and a
contribution of $46.9
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million of Common Stock and the Bank's pre-tax income for fiscal 1997), the
Company is permitted under the Code to carry over the excess contribution in the
five following years. Assuming the sale of Common Stock at the maximum of the
Estimated Price Range, the Company estimates that for federal income tax
purposes, a substantial portion of the deduction should be deductible over the
six-year period. Although the Company and the Bank have received an opinion of
their independent tax advisor that the Company will be entitled to the deduction
of the charitable contribution, there can be no assurances that the IRS will
recognize the Foundation as a Section 501(c)(3) exempt organization or that the
deduction will be permitted. In such event, the Company's tax benefit related
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. The establishment of the Foundation
was taken into account by RP Financial in determining the estimated pro forma
market value of the Common Stock. The aggregate price of the shares of Common
Stock being offered in the Subscription and Community Offerings is based upon
the independent appraisal conducted by RP Financial of the estimated pro forma
market value of the Common Stock. The pro forma aggregate price of the Common
Stock being offered for sale in the Conversion is currently estimated to be
between $432.9 million and $585.6 million, with a midpoint of $509.3 million.
The pro forma price to book ratio and the pro forma price to earnings ratio, at
and for the two months ended May 31, 1997, are 71.3% and 13.9x, respectively,
at the midpoint of the Estimated Price Range. In the event that the Conversion
did not include the Foundation, RP Financial has estimated that the estimated
pro forma market value of the Common Stock would be $585.0 million at the
midpoint based on a pro forma price to book ratio and the pro forma price to
earnings ratio that are approximately the same as the independent appraisal at
71.5% and 13.9x, respectively. The amount of Common Stock that would be
offered in the Conversion at the midpoint of the Estimated Price Range is
approximately $75.7 million less than the estimated amount of Common Stock that
would be offered in the Conversion without the Foundation based on the estimate
provided by RP Financial. Accordingly, certain account holders of the Bank who
subscribe to purchase Common Stock in the Subscription Offering would receive
fewer shares depending on the size of a depositor's stock order and the amount
of his or her qualifying deposits in the Bank and the overall level of
subscriptions. See "Comparison of Valuation and Pro Forma Information with No
Foundation." This estimate by RP Financial 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 contribution of Common Stock to the Foundation will not have a
significant effect on the Company or the Bank's capital position. The Bank's
regulatory capital is in excess of its regulatory capital requirements and will
further exceed such requirements following the Conversion. The Bank's pro forma
leverage and total risk-based capital ratios at May 31, 1997 (assuming the
Offerings are completed at the midpoint of the Estimated Price Range)
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would be 11.4% and 19.9%, respectively. On a consolidated basis, the Company's
pro forma stockholders' equity would be $771.4 million, or approximately 18.0%
of pro forma consolidated assets, assuming the sale of shares at the midpoint of
the Estimated Price Range. Pro forma stockholders' equity per share and pro
forma net earnings per share would be $14.03 and $0.12, respectively at and for
the two months ended May 31, 1997 and $13.89 and $0.55, respectively at and for
the year ended March 31, 1997. If the Foundation was not being established in
the Conversion, based on the RP Financial estimate, the Company's pro forma
stockholders' equity at May 31, 1997 would be approximately $817.8 million, or
approximately 18.9% of pro forma consolidated assets at the midpoint of the
Estimated Price Range, and pro forma stockholders' equity per share and pro
forma net earnings per share would be substantially similar with the Foundation
as 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 7.4% of the total shares of the Common Stock
outstanding. Such shares will be owned solely by the Foundation; however,
pursuant to a condition expected to be required by regulatory authorities, it
is anticipated that the shares of Common Stock held by the Foundation will be
voted in the same ratio as all other shares of the Common Stock on all
proposals considered by the stockholders of the Company. As such, the Company
does not believe the Foundation will have an anti-takeover effect on the
Company. However, in the event that the FDIC were to waive this voting
restriction for the reasons described herein as provided in the condition, the
Foundation's Board of Directors would exercise sole voting power over such
shares and would no longer be subject to the restriction. See "The
Conversion--Establishment of the Foundation--Regulatory Conditions Imposed on
the Foundation." As a majority of the Foundation's Board of Directors will be
comprised of the members of the Board of Directors and officers of the Company
and the Bank, in the event the FDIC waived the voting restriction, management
of the Company and the Bank 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 the Company and the Bank.
Furthermore, in such an event, when the Foundation's shares are combined with
shares purchased directly by officers and directors of the Company, shares
expected to be held by the Recognition Plan, and shares held by the ESOP trust,
the aggregate of such shares will exceed 20% of the outstanding Common Stock,
which could enable management to defeat stockholder proposals requiring 80%
approval. Consequently, such potential voting control might preclude takeover
attempts that certain stockholders deem to be in their best interest, and might
tend to perpetuate management. However, since the ESOP shares are allocated to
all eligible employees of the Bank, and any unallocated shares will be voted by
the trustees in the same proportions as allocated shares are voted, and because
the Recognition Plan must first be approved by stockholders no sooner than six
months following completion of the Conversion, and awards under such proposed
plans may be granted to employees other than executive officers and directors,
management of the Company does not expect to have voting control of all shares
covered by the ESOP and other stock-based benefit plans. See"--Certain
Anti-Takeover
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Provisions--Voting Control of Directors and Executive Officers." Moreover, as
the Foundation sells its shares of Common Stock over time, its ownership
interest and voting power in the 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 institution to stock form. As such, the
Foundation and the Superintendent's approval and the FDIC's non-objection to
the Conversion may be subject to potential challenges notwithstanding that the
Boards of Directors of the Bank and the 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 the Bank
and the Company 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 the Bank and the Company. In addition, if the
Bank and the Company are forced to eliminate the Foundation, the Company may be
required to resolicit subscribers in the Offerings.
WEAKNESS IN THE LOCAL ECONOMY
During the late 1980s and the early 1990s, the New York City
metropolitan area experienced reduced employment as a result of layoffs in the
financial services industry, corporate relocations and the general decline of
the local, regional and national economies. Additionally, during that period
the area experienced a general weakening of real estate values and a decline in
residential construction. As a result, loan delinquencies increased and the
underlying values of properties securing non-performing loans made by lending
institutions generally declined resulting in substantial losses to some
institutions. While the economy of the Bank's primary market area has, to a
certain extent, stabilized, local real estate values generally remain below the
values experienced in the late 1980s. At May 31, 1997, substantially all of
the Bank's real estate secured loans were secured by properties located in the
New York City metropolitan area.
There can be no assurances, however, that conditions in the local
economy, national economy, or real estate market in general will not
deteriorate and adversely affect the financial condition and results of
operations of the Bank. Based on information available to management at this
time, management believes the current allowance for possible loan losses is
adequate. Although management of the Bank believes that the current allowance
for loan losses is adequate in light of current economic conditions many
factors may require additions to the allowance for loan losses in future
periods above those reasonably anticipated. Future adjustments to the
allowance also may be necessary if economic or other conditions differ
substantially from those underlying the assumptions used in making such
estimates. In addition, the Bank's plan to continue to increase the amount of
its loan
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originations can be expected to increase the overall level of credit risk
inherent in the Bank's loan portfolio. The greater risk associated with
increased loan originations may require the Bank to increase its provisions for
loan losses and to maintain an allowance for loan losses as a percentage of
total loans that is in excess of the allowance currently maintained by the
Bank. Such provisions are charged against income; thus increases would
adversely affect the Company's consolidated net income during the period in
which such provision is taken.
POSSIBLE DILUTIVE EFFECT OF ISSUANCE OF ADDITIONAL SHARES
Various possible and planned issuances of Common Stock could dilute
the interests of prospective stockholders of the Company following consummation
of the Conversion, as noted below.
The number of shares to be sold in the Conversion may be increased as
a result of an increase in the Estimated Price Range of up to 15% to reflect
changes in market and financial conditions following the commencement of the
Offerings. In the event that the Estimated Price Range is so increased, it is
expected that the Company will issue up to 67,349,537 shares of Common Stock at
the Purchase Price for an aggregate price of up to $673.5 million. An increase
in the number of shares will decrease net income per share and stockholders'
equity per share on a pro forma basis and will increase the Company's
consolidated stockholders' equity and net income. See "Capitalization" and
"Pro Forma Data."
The ESOP intends to purchase 8.0% of the Common Stock to be issued in
the Offerings. In the event that there are insufficient shares available to
fill the ESOP's order due to an oversubscription by Eligible Account Holders,
the Company may issue authorized but unissued shares of Common Stock to the
ESOP in an amount sufficient to fill the ESOP's order and/or the ESOP may
purchase such shares in the open market. In the event that additional shares
of Common Stock are issued to the ESOP to fill its order, stockholders would
experience dilution of their ownership interests (by up to 7.4% at the maximum
of the Estimated Price Range, assuming the ESOP purchased no shares in the
Offerings and excluding shares expected to be issued to the Foundation) and per
share stockholders' equity and per share net income would decrease as a result
of an increase in the number of outstanding shares of Common Stock. See
"Management - Benefits - Employee Stock Ownership Plan" and "The Conversion -
The Offerings - Subscription Offering."
If the Recognition Plan is approved by stockholders at an annual or
special meeting of the Company's stockholders held at least six months
following the consummation of the Conversion, the Recognition Plan intends to
acquire an amount of Common Stock equal to 4.0% of the shares of Common Stock
issued in the Offerings. Such shares of Common Stock may be acquired in the
open market with funds provided by the Company, if permissible, or from
authorized but unissued shares of Common Stock. The shares granted
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<PAGE> 75
under the Recognition Plan will be awarded at no cost to the recipients. In
the event that additional shares of Common Stock are issued to the Recognition
Plan, stockholders would experience dilution of their ownership interests (by
3.8% at the maximum of the Estimated Price Range) and per share stockholders'
equity and per share net income would decrease as a result of an increase in
the number of outstanding shares of Common Stock. See "Pro Forma Data" and
"Management - Benefits - Recognition Plan."
If the Company's Stock Option Plan is approved by stockholders at an
annual or special meeting of stockholders held more than six months after the
consummation of the Conversion, the Company will reserve for future issuance
pursuant to such plan a number of authorized shares of Common Stock equal to an
aggregate of 10% of the Common Stock issued in the Offerings (5,856,481 shares,
based on the maximum of the Estimated Price Range). See "Pro Forma Data" and
"Management - Benefits - Stock Option Plan."
REGULATORY OVERSIGHT AND LEGISLATION
The Bank is subject to extensive regulation, supervision and
examination by the Department, as its chartering authority and by the FDIC as
its primary federal regulator and insurer of its deposits up to applicable
limits. The Bank is a member of the Federal Home Loan Bank ("FHLB") System and
is subject to certain limited regulations promulgated by the Board of Governors
of the Federal Reserve System ("Federal Reserve Board"). As the holding
company of the Bank, the Company also will be subject to regulation and
oversight by the Office of Thrift Supervision ("OTS"). Regulatory authorities
have been granted extensive discretion in connection with their supervisory and
enforcement activities which are intended to strengthen the financial condition
of the banking and thrift industries, including the imposition of restrictions
on the operation of an institution, the classification of assets by the
institution and the adequacy of an institution's allowance for loan losses.
Any change in such regulation and oversight, whether by the Department, the
FDIC, the OTS or Congress, could have a material impact on the Company, the
Bank and their respective operations. See "Regulation."
On September 30, 1996, the Deposit Insurance Funds ("DIF") Act of 1996
was enacted into law. Among other things, the DIF Act authorized the FDIC to
impose a special one-time assessment on each depository institution with
SAIF-assessable deposits so that the SAIF may achieve its designated reserve
ratio. As a result of the various acquisitions completed by the Bank, it is
deemed to have SAIF-insured deposits and was subject to the special assessment.
The Bank's assessment was $8.6 million on a pre-tax basis. In addition, the
DIF Act provides for the merger of the Bank Insurance Fund ("BIF") and the SAIF
on January 1, 1999, but only if no insured depository institution is a savings
association on that date.
Various legislative proposals have been made in the past and there is
currently legislation that has been introduced in Congress that would (i) apply
the restrictions on activities applicable to "multiple savings and loan holding
companies" and bank holding
31
<PAGE> 76
companies to "unitary savings and loan holding companies" and (ii) eliminate
the savings association charter and require savings associations to become
banks and simultaneously abolish the OTS and its supervisory role over savings
and loan holding companies. The Bank and the Company cannot predict which, if
any, of the foregoing or other similar proposals, if any, will ultimately be
enacted or what the specific effect on the Bank and the Company would be.
LEGISLATION LIMITING DEDUCTION OF BAD DEBT RESERVES
Under Section 593 of the Code, thrift institutions such as the Bank,
which met certain definitional tests primarily relating to their assets and the
nature of their business, were permitted to establish a tax reserve for bad
debts and to make annual additions thereto, which additions could, within
specified limitations, be deducted in arriving at their taxable income. The
Bank's deduction with respect to "qualifying loans," which are generally loans
secured by certain interests in real property, prior to January 1, 1996 was
computed using an amount based on the Bank's actual loss experience (the
"experience method"), or a percentage equal to 8.0% of the Bank's taxable
income (the "percentage of taxable income method"), computed without regard to
this deduction and with additional modifications and reduced by the amount of
any permitted addition to the non-qualifying reserve. See "Business - Taxation
- - Federal - Bad Debt Reserves."
The Small Business Job Protection Act of 1996 provided for the repeal
of Section 593 of the Code. As a result, the Bank is permitted to deduct only
actual bad debts as they occur and cannot utilize the percentage of taxable
income method to make additions to its bad debt reserves in the future to
reduce its effective tax rate. In addition, the Bank is required to recapture
for tax purposes (i.e. take into income) over a six year period the excess of
the balance of its bad debt reserves as of December 31, 1995 over the balance
of such reserves as of December 31, 1987. The Bank's excess amounted to $3.6
million (for which deferred taxes have been provided). However, under the
legislation, such recapture requirements would be suspended for each of two
successive taxable years beginning January 1, 1996, in which the Bank
originates a minimum amount of certain residential loans based upon the average
of the principal amounts of such loans made by the Bank during its six taxable
years preceding 1996.
HIGHLY COMPETITIVE INDUSTRY AND GEOGRAPHIC AREA
The Bank faces significant competition both in making loans and in
attracting deposits. The New York City metropolitan area has a significant
concentration of financial institutions, many of which are branches of
significantly larger institutions which have greater financial resources than
the Bank. In addition, the boroughs of Brooklyn and Queens, in which the Bank
maintains its primary market presence, have experienced relatively stagnant
population growth in recent periods. Such stagnant population growth also has
been a factor in the increasing competition among financial institutions
operating in the Bank's market area. It is also reflected in the low deposit
growth experienced in the
32
<PAGE> 77
Bank's existing branch offices, with the Bank's deposit growth being primarily
the result of acquisitions. The Bank's competition for loans comes principally
from commercial banks, savings banks, savings and loan associations, credit
unions, mortgage banking companies and insurance companies. Its most direct
competition for deposits has historically come from commercial banks, savings
banks, savings and loan associations and credit unions. The Bank faces
additional competition for deposits from short-term money market funds, other
corporate and government securities funds and from other financial institutions
such as brokerage firms and insurance companies. In addition, the Bank may
face additional competition from commercial banks headquartered outside of the
State of New York as a result of the enactment of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994, which became fully effective on
June 1, 1997 and which generally allows banks and bank holding companies
headquartered outside of New York to enter the Bank's market through
acquisition, merger or de novo branching.
ABSENCE OF MARKET FOR COMMON STOCK
The Company, as a newly organized company, has never issued capital
stock and, consequently, there is no established market for its Common Stock at
this time. The Company has received approval to have its Common Stock quoted
on the Nasdaq National Market under the symbol "ICBC" conditioned on the
consummation of the Conversion. A public trading market having the desirable
characteristics of depth, liquidity and orderliness depends upon the existence
of willing buyers and sellers at any given time, the presence of which is
dependent upon the individual decisions of buyers and sellers over which
neither the Company nor any market maker has control. Accordingly, there can
be no assurance that an active and liquid trading market for the Common Stock
will develop or that, if developed, will continue, nor is there any assurance
that purchasers of the Common Stock will be able to sell their shares at or
above the Purchase Price. In the event a liquid market for the Common Stock
does not develop or market makers for the Common Stock discontinue their
activities, such occurrences may have an adverse impact on the liquidity of the
Common Stock and the market value of the Common Stock.
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
The Bank and the Company have received a letter from RP Financial
advising them of its belief that subscription rights granted to Eligible
Account Holders and Supplemental Eligible Account Holders have no value. This
letter is not binding on the IRS. If the subscription rights granted to
Eligible Account Holders and Supplemental Eligible Account Holders are deemed
to have an ascertainable value, receipt of such rights likely would be taxable
only to those Eligible Account Holders and Supplemental Eligible Account
Holders, who exercise the subscription rights (either as capital gain or
ordinary income) in an amount equal to such value. Whether subscription rights
are considered to have ascertainable value is an inherently factual
determination. See "The Conversion - Effects of the Conversion" and "- Tax
Aspects."
33
<PAGE> 78
ROLE OF THE MARKETING ADVISOR
The Bank and the Company have retained Sandler O'Neill as advisors and
Sandler O'Neill has agreed to assist the Bank and the Company in its
solicitation of subscriptions and purchase orders for Common Stock in the
Offerings. Sandler O'Neill has not prepared any report or opinion constituting
recommendations or advice to the Bank. In addition, Sandler O'Neill has
expressed no opinion as to the prices at which Common Stock to be issued in the
Offerings may trade. Furthermore, Sandler O'Neill has not verified the
accuracy or completeness of the information contained in the Prospectus. See
"The Conversion - Marketing Arrangements."
INDEPENDENCE COMMUNITY BANK CORP.
The Company was organized in June 1997 at the direction of the Board
of Directors of the Bank for the purpose of holding all of the capital stock of
the Bank and in order to facilitate the Conversion. The Company has applied
for the approval of the OTS to become a savings and loan holding company and as
such will be subject to regulation by the OTS. After completion of the
Conversion the Company will conduct business initially as a unitary savings and
loan holding company. See "Regulation - The Company." Upon consummation of
the Conversion, the Company will have no significant assets other than all of
the outstanding shares of common stock of the Bank, the portion of the net
proceeds from the Offerings retained by the Company and the Company's loan to
the ESOP, and the Company will have no significant liabilities. See "Use of
Proceeds." Initially, the management of the Company and the Bank will be
substantially identical and the Company will neither own nor lease any
property, but will instead use the premises, equipment and furniture of the
Bank. At the present time, the Company does not intend to employ any persons
other than officers who are also officers of the Bank, and the Company will
utilize the support staff of the Bank from time to time. Additional employees
will be hired as appropriate to the extent the Company expands or changes its
business in the future.
Management believes that the holding company structure will provide
the Company and the Bank with additional flexibility to diversify its business
activities through existing or newly-formed subsidiaries (which subsidiaries
could be financial institutions), or through acquisitions of other entities,
including potentially other financial institutions and financial services
related companies. Although there are no current arrangements, understandings
or agreements regarding any such opportunities or transactions, the Company
will be in a position after the Conversion, subject to regulatory limitations
and the Company's financial position, to take advantage of any such acquisition
and expansion opportunities that may arise. The initial activities of the
Company are anticipated to be funded by the proceeds to be retained by the
Company and earnings thereon, as well as dividends from the Bank. See
"Dividend Policy."
34
<PAGE> 79
The Company's principal executive office is located at the executive
office of the Bank at 195 Montague Street, Brooklyn, New York 11201 and its
telephone number is (718) 722-5300.
INDEPENDENCE SAVINGS BANK
The Bank is a New York-chartered savings bank which conducts business
through 33 full service offices located in the boroughs of Brooklyn, Queens,
Manhattan, the Bronx, and Staten Island as well as Nassau County, New York.
At May 31, 1997, the Bank had $3.82 billion of assets, $3.50 billion of
liabilities, including $3.38 billion of deposits, and $316.6 million of total
equity. The Bank was reorganized into a stock savings bank in April 1992 in
connection with the formation of the Mutual Holding Company.
The Bank has been in operation since 1850, originally serving the
borough of Brooklyn and later expanding its operations into the boroughs of
Queens, Manhattan, the Bronx and Staten Island as well as Nassau County. The
Bank's customer base, like the urban neighborhoods which it serves, is racially
and ethnically diverse and is comprised of mostly middle-income households and
to a lesser degree, low to moderate income households. The Bank is, and
intends to continue to be, a community-oriented savings institution whose
businesses primarily consist of accepting deposits from customers and investing
those funds primarily in residential loans, including those secured by
multi-family residential properties, cooperative apartment shares and
single-family residential properties. The increased capital resulting from the
Offerings will facilitate the Bank's ability to sustain its continued growth
and development over the long term while maintaining its status as a
community-based, independent financial institution serving Brooklyn, Queens and
the greater New York City metropolitan area.
The Bank has sought to set itself apart from its many competitors by
tailoring its products and services to meet the needs of its customers by
emphasizing customer service and convenience and by being actively involved in
community affairs in the neighborhoods and communities it serves. For example,
as part of the Bank's competitive strategy to attract loyal deposit customers,
the Bank has historically been a low service fee provider of a variety of
savings and checking account products. In furtherance of its commitment to the
communities which it serves, Bank employees at all levels are encouraged and
afforded the opportunity to participate in community outreach programs.
Perhaps most indicative of the Bank's commitment to strengthen its bond with
customers and the communities it serves is the decision to form and fund the
Foundation. The Bank believes that this commitment to customer and community
service has permitted it to build strong customer identification and loyalty
which is essential to the Bank's ability to compete effectively.
At May 31, 1997, the net loan portfolio amounted to $2.56 billion or
67.0% of the Bank's total assets. In addition, the Bank invests in investment
and mortgage-backed and mortgage-related securities consisting primarily of
U.S. Treasury notes and bills, mortgage-
35
<PAGE> 80
backed securities and collateralized mortgage obligations ("CMOs") issued by
government sponsored enterprises. At May 31, 1997, the Bank's investment and
mortgage-backed and mortgage-related securities portfolios (all of which are
classified available for sale) totaled $899.2 million or 23.5% of total assets.
The Bank is subject to examination and comprehensive regulation by the
Department, which is the Bank's chartering authority and regulator, and by the
FDIC, as its primary federal regulator and as the administrator of the BIF and
the SAIF which insure the Bank's deposits up to applicable limits. The Bank
also is subject to certain reserve requirements established by the Federal
Reserve Board and is a member of the FHLB of New York, which is one of the 12
regional banks comprising the FHLB System. See "Regulation - The Bank."
The Bank's executive offices are located at 195 Montague Street,
Brooklyn, New York 11201 and its telephone number is (718) 722-5300.
USE OF PROCEEDS
Net proceeds from the sale of the Common Stock are estimated to be
between $421.5 million and $572.0 million ($658.5 million assuming an increase
in the Estimated Price Range by 15%). See "Pro Forma Data" as to the
assumptions used to arrive at such amounts.
The Company plans to use 50% of the net proceeds from the Offerings to
purchase all the outstanding common stock of the Bank issued in the Conversion
and retain the remainder of the net proceeds. The net proceeds retained by the
Company will be initially used to invest primarily in investment securities and
mortgage-backed and mortgage-related securities. The Company intends to use a
portion of the net proceeds to make a loan directly to the ESOP to enable the
ESOP to purchase 8.0% of the Common Stock sold in the Offerings. Based upon
the issuance of 43,287,037 shares and 58,564,815 shares at the minimum and
maximum of the Estimated Price Range, respectively, the loan to the ESOP would
be $34.6 million and $46.9 million, respectively. It is anticipated that the
loan to the ESOP will have a term of not less than 20 years and a fixed
interest rate at the Bank's prime rate as of the date of the loan. See
"Management of the Bank - Stock Benefit Plans - Employee Stock Ownership Plan."
The net proceeds from the Offerings also may be used by the Company and the
Bank to support future expansion of retail banking operations or
diversification into other businesses, through acquisitions or otherwise,
including the potential acquisition of other financial institutions and/or
branch offices. There are no current plans, arrangements, understandings or
agreements regarding such diversification or acquisitions.
Subject to applicable regulatory limitations and then-existing
circumstances, the net proceeds also may be used by the Company to repurchase
shares of Common Stock,
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<PAGE> 81
although the Company currently has no plans of effecting any such transactions
following consummation of the Conversion. Pursuant to Department regulations,
the Company may not repurchase any Common Stock in the first year after
Conversion and, during each of the next two following years, may only
repurchase up to 5% of its outstanding capital stock during each 12 month
period. In addition, the FDIC prohibits an institution which has converted
from mutual to stock form of ownership from repurchasing its capital stock
within one year following the date of its conversion to stock form, except that
stock repurchases of no greater than 5% of a bank's outstanding capital stock
may be repurchased during this one-year period where compelling and valid
business reasons are established to the satisfaction of the FDIC. Based upon
facts and circumstances following the Conversion and subject to applicable
regulatory requirements, the Board of Directors may determine to repurchase
shares of Common Stock in the future. Such facts and circumstances may include
but are not limited to: (i) market and economic factors such as the price at
which the Common Stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and the
opportunity to improve the Company's return on equity; (ii) the avoidance of
dilution to stockholders by not having to issue additional shares to cover the
exercise of stock options or to fund employee stock benefit plans; and (iii)
any other circumstances in which repurchases would be in the best interests of
the Company and its stockholders. In the event the Company determines to
repurchase stock, such repurchases may be made at market prices which may be in
excess of the Purchase Price. To the extent that the Company repurchases stock
at market prices in excess of the Purchase Price, such repurchases may have a
dilutive effect upon the interests of existing stockholders. Any stock
repurchases will be subject to the determination of the Board of Directors that
the Bank will be capitalized in excess of all applicable regulatory
requirements after any such repurchases and that such capital will be adequate,
taking into account, among other things, the level of nonperforming and other
risk assets, the Company's and the Bank's current and projected results of
operations and asset/liability structure, the economic environment, tax and
other considerations. See "The Conversion - Certain Restrictions on Purchase
or Transfer of Shares after the Conversion." The portion of the net proceeds
contributed to the Bank will be used for general corporate purposes, including
investment in loans and investment and mortgage-backed securities.
DIVIDEND POLICY
Upon completion of the Conversion, the Board of Directors of the
Company will have the authority to declare dividends on the Common Stock,
subject to statutory and regulatory requirements. Following consummation of
the Conversion, the Board of Directors of the Company may consider a policy of
paying cash dividends on the Common Stock. However, no decision has been made
as to the amount or timing of such dividends. Declarations of dividends by the
Board of Directors will depend upon a number of factors, including the amount
of net proceeds from the Offerings retained by the Company,
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<PAGE> 82
investment opportunities available to the Company or the Bank, capital
requirements, regulatory limitations, the Company's and the Bank's financial
condition and results of operations, tax considerations, and general economic
conditions. Consequently, there can be no assurance 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.
Dividends from the Company will depend, in part, upon receipt of
dividends from the Bank, because the Company initially will have no source of
income other than dividends from the Bank and earnings from the investment of
the net Conversion proceeds retained by the Company.
Any payment of dividends by the Bank to the Company which would be
deemed to be a distribution from the Bank's bad debt reserves for federal
income tax purposes would require a payment of taxes at the then-current tax
rate by the Bank on the amount of earnings deemed to be removed from the
reserves for such distribution. The Bank has no current intention of making
any distribution that would create such a federal tax liability either before
or after the Conversion. See "Business - Taxation." Under the New York State
Banking Law ("New York Banking Law"), dividends may be declared and paid only
out of the net profits of the Bank. The approval of the Department is required
if the total of all dividends declared in any calendar year will exceed net
profits for that year plus the retained net profits of the preceding two years,
less any required transfer to surplus or a fund for the retirement of any
preferred stock. In addition, no dividends may be declared, credited or paid
if the effect thereof would cause the Bank's capital to be reduced below the
amount required by the Department or the FDIC. As of May 31, 1997, the Bank
had $61.7 million available for the payment of dividends without prior approval
of the Department. Subsequent to the Conversion, the availability of the
Bank's funds for the payment of dividends may be limited by the liquidation
account. See "The Conversion--Liquidation Rights." In addition, no dividends
can be declared by the Bank without the prior notice to and the non-objection
of the OTS.
Unlike the Bank, the Company is not subject to the aforementioned
regulatory restrictions on the payment of dividends to its stockholders,
although the source of such dividends will be, in part, dependent upon
dividends from the Bank in addition to the net proceeds retained by the Company
and earnings thereon. The Company is subject, however, to the requirements of
Delaware law which generally limit dividends to an amount equal to the excess
of the net assets of the Company (the amount by which total assets exceed total
liabilities) over its statutory capital, or if there is no such excess, to its
net profits for the current and/or immediately preceding fiscal year.
MARKET FOR COMMON STOCK
The Company has never issued capital stock (other than 100 shares
issued to the Bank, which will be cancelled upon consummation of the
Conversion). Consequently, there is no established market for the Common Stock
at this time. The Company has received
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<PAGE> 83
conditional approval to have its Common Stock quoted on the Nasdaq National
Market under the symbol "ICBC" subject to completion of the Conversion and
compliance with certain conditions including the presence of at least two
registered and active market makers. Although under no obligation to do so,
Sandler O'Neill has informed the Company that it intends, upon the completion
of the Conversion, to make a market in the Common Stock by maintaining bid and
ask quotations and trading in the Common Stock so long as the volume of trading
activity and certain other market making considerations justify it doing so.
The Company will seek to encourage and assist at least one other market maker
to make a market in the common stock in order to fulfill the requirement of
having two market makers in order to have the Common Stock quoted on the Nasdaq
National Market. Making a market involves maintaining bid and ask quotations
and being able, as principal, to effect transactions in reasonable quantities
at those quoted prices, subject to various securities laws and other regulatory
requirements. In addition, the development of a liquid public market depends
on the existence of willing buyers and sellers, the presence of which is not
within the control of the Company, the Bank or any market maker. Accordingly,
there can be no assurance that an active and liquid trading market for the
Common Stock will develop or that, if developed, it will continue. The absence
of an active and liquid trading market for the Common Stock could affect the
price and liquidity of the Common Stock. Furthermore, there can be no
assurance that persons purchasing shares of Common Stock will be able to sell
them at or above the Purchase Price.
REGULATORY CAPITAL REQUIREMENTS
Under FDIC regulations, depository institutions such as the Bank are
required to maintain a minimum ratio of qualifying total capital to total
assets and off-balance sheet instruments, as adjusted to reflect their relative
credit risks, of 8.0%. At least one-half of total capital is to be comprised
of common equity, retained earnings, non-cumulative perpetual preferred stock
and a limited amount of cumulative perpetual preferred stock, less goodwill
("Tier I capital"). The remainder of total capital may consist of a limited
amount of subordinated debt, other preferred stock, certain other instruments
and a limited amount of general reserves for loan losses ("Tier II capital").
The FDIC also has established an additional capital adequacy guideline
referred to as the Tier I leverage capital ratio, which measures the ratio of
Tier I capital to total assets less goodwill. Although the highest rated
depository institutions are required to maintain a minimum Tier I leverage
capital ratio of 3.0%, most depository institutions are required to maintain
Tier I leverage capital ratios of 4.0% to 5.0% or more. The actual required
ratio is based on the FDIC's assessment of the individual depository
institution's asset quality, earnings performance, interest-rate risk and
liquidity. Although the FDIC has not advised the Bank of a specific Tier I
leverage capital ratio requirement, management of the Bank believes that for
purposes of complying with applicable federal regulations, the required Tier I
leverage capital ratio for the Bank is 3.0%, based upon published regulatory
criteria for establishing such minimum. There can be no assurance that the
Bank will not be required by the FDIC to maintain a higher Tier I leverage
capital ratio. As a consequence, for purposes of the table below, the Bank has
assumed a 4.0% Tier I leverage capital requirement. See "Regulation - The Bank
- -Capital Requirements."
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<PAGE> 84
At May 31, 1997, the Bank exceeded all of the regulatory capital
requirements applicable to it. Set forth below is a summary of the Bank's
compliance with the applicable capital standards as of May 31, 1997 on a
historical basis and on a pro forma basis assuming that the indicated number of
shares were sold by the Company as of such date and receipt by the Bank of 50%
of net Conversion proceeds. Proceeds have been assumed to be initially
invested in interest-earning assets which have a 20% risk-weighting. For
purposes of the table below, the amount expected to be borrowed by the ESOP and
the cost of the shares expected to be acquired by the Recognition Plan are
deducted from pro forma capital.
<TABLE>
<CAPTION>
Pro Forma at May 31, 1997 Based on
-------------------------------------------------------------------------
43,287,037 50,925,926 58,564,815
Shares Shares Shares
Historical at (Minimum (Mid-point (Maximum
May 31, 1997 of Range) of Range) of Range)(1)
---------------------- ----------------------- ----------------------- ----------------------
Percent of Percent of Percent of Percent of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
-------- --------- --------- ---------- --------- ---------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital (3) $316,576 8.29% $491,741 12.20% $523,070 12.86% $554,399 13.50%
======= ==== ======= ===== ======= ===== ======= =====
Tier I risk-based
level:(4)(5) $249,355 10.44% $424,520 17.46% $455,849 18.69% $487,178 19.92%
Requirement 95,557 4.00 97,235 4.00 97,535 4.00 97,835 4.00
-------- ---- -------- ----- -------- ----- --------- -----
Excess $153,798 6.44% $ 327,285 13.46% $ 358,314 14.69% $389,343 15.92%
======= ==== ======== ===== ======== ===== ======= =====
Total risk-based
level:(1)(4)(5) $278,131 11.64% $453,296 18.65% $484,625 19.87% $515,954 21.09%
Requirement 191,114 8.00 194,471 8.00 195,070 8.00 195,669 8.00
-------- ----- -------- ----- -------- ----- -------- -----
Excess $ 87,017 3.64% $ 258,825 10.65% $ 289,555 11.87% $320,285 13.09%
======= ===== ======== ===== ======== ===== ======= =====
Tier I leverage
level:(4)(5)(6) $249,355 6.66% $424,520 10.74% $455,849 11.42% $487,178 12.09%
Requirement 149,776 4.00 158,168 4.00 159,666 4.00 161,164 4.00
-------- ----- -------- ----- -------- ----- -------- -----
Excess $ 99,579 2.66% $ 266,352 6.74% $ 296,183 7.42% $326,014 8.09%
======= ===== ======== ===== ========= ===== ======= =====
</TABLE>
- ---------------------
(1) In the event of an oversubscription for shares of Common Stock, the
Company and the Bank may increase the total number of shares offered
in the Conversion by up to 15%. Assuming a full increase in the
number of shares, the Bank's Tier I risk-based, total risk-based and
Tier I leverage capital ratios would be 21.3%, 22.5% and 12.9%,
respectively, at the maximum of the Estimated Price Range, as
adjusted. See generally, "Capitalization " and "Pro Forma Data."
(2) Adjusted or risk-weighted assets, as appropriate.
(3) The difference between capital under generally accepted accounting
principles ("GAAP") and regulatory capital is an adjustment to
decrease regulatory capital by the amount of the net unrealized gain,
if any, on available-for-sale securities recognized for GAAP purposes,
as well as adjustments related to core
(footnotes continued on following page)
40
<PAGE> 85
- ---------------------
intangibles arising from the deposit acquisitions of the Bank and the
goodwill resulting from the Bay Ridge acquisition. Regulatory total
risk-based capital reflects these adjustments plus the inclusion of
the allowance for loan losses.
(4) Pro forma capital levels assume receipt by the Bank of 50% of the net
proceeds from the shares of Common Stock sold at the minimum, midpoint
and maximum of the Estimated Price Range. These levels also assume
funding by the Bank of the Recognition Plan equal to 4% of the Common
Stock issued and repayment of the Company's loan to the ESOP. See
"Management - Benefits" for a discussion of the Recognition Plan and
ESOP. With respect to the Recognition Plan, such amounts are assumed
to be $17.3 million, $20.4 million and $23.4 million, at the minimum,
midpoint and maximum of the Estimated Price Range, respectively. With
respect to the ESOP loan, such amounts are assumed to be $34.6
million, $40.7 million and $46.9 million at the minimum, midpoint and
maximum of the Estimated Price Range.
(5) The pro forma Tier 1 risk-based, total risk-based and Tier 1 leverage
capital amounts reflect the $93,000 of net assets to be acquired by
the Bank upon the merger of the Mutual Holding Company with and into
the Bank.
(6) The current leverage capital requirement for savings banks is 3% of
total adjusted assets for savings banks that receive the highest
supervisory rating for safety and soundness and that are not
experiencing or anticipating significant growth. The current leverage
capital ratio applicable to all other savings banks is 4% to 5%. The
Company will not be subject to regulatory capital requirements.
41
<PAGE> 86
CAPITALIZATION
The following table presents the historical consolidated
capitalization of the Bank at May 31, 1997, and the pro forma consolidated
capitalization of the Company after giving effect to the Conversion and
Reorganization, based upon the sale of the number of shares shown below and the
other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
The Company - Pro Forma
Based Upon Sale at $10.00 Per Share
----------------------------------------------------------------------------
The 43,287,037 50,925,926 58,564,815 Shares 67,349,537 Shares(1)
Bank-Historical Shares Shares (Maximum of (15% above
Capitalization (Minimum of (Midpoint of Range) Maximum of Range)
Range) Range)
----------------- --------------- ---------------- -------------- ------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2) $3,380,174 $3,380,174 $3,380,174 $3,380,174 $3,380,174
Borrowings 17,183 17,383 17,383 17,383 17,383
---------- ---------- ---------- ---------- ----------
Total deposits and borrowings $3,397,357 $3,397,357 $3,397,357 $3,397,357 $3,397,357
========= ========= ========= ========= =========
Stockholders' equity:
Preferred Stock, $.01 par
value, 25,000,000 shares
authorized; none to
be issued $ -- $ -- $ -- $ -- $ --
Common Stock, $.01 par
value, 125,000,000 shares
authorized; shares issued
or to be issued as reflected(3) -- 468 550 633 727
Additional paid-in capital(3)(4) 52,670 455,643 536,918 618,194 711,660
Retained earnings(4)(5) 260,624 313,387 313,387 313,387 313,387
Net unrealized gain on
marketable securities 3,282 3,282 3,282 3,282 3,282
Less:
Expense of contribution to
Foundation, net(6) -- (18,354) (21,593) (24,831) (28,556)
Common Stock to be acquired
by the ESOP(7) -- (34,630) (40,741) (46,852) (53,880)
Common Stock to be
acquired by the Recognition
Plan(8) -- (17,315) (20,370) (23,426) (26,940)
------- ------- ------- ------- -------
Total stockholders' equity $316,576 $702,481 $771,433 $840,386 $919,680
======= ======= ======= ======= =======
</TABLE>
- --------------------------------
(1) As adjusted to give effect to an increase in the number of shares
which could occur due to an increase in the Valuation Price Range of
up to 15% to reflect changes in market and financial conditions
following the commencement of the Offerings.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Offerings. Such withdrawals would reduce pro
forma deposits by the amount of such withdrawals.
(3) Reflects the issuance of the shares of Common Stock to be sold in the
Offerings and the issuance of Common Stock to the Foundation at $10.00
per share. No effect has been given to the issuance of additional
shares of Common Stock pursuant to the proposed Stock Option Plan.
See "Pro Forma Data," "Management - Benefits - Stock Option Plan."
Additional paid-in capital has been adjusted to reflect the issuance
of additional shares of Common Stock to the Foundation at the Purchase
Price.
(footnotes continued on following page)
42
<PAGE> 87
- --------------
(4) The pro forma retained earnings reflects the $93,000 of net assets to
be acquired by the Company and the Bank upon the merger of the Mutual
Holding Company with and into the Bank. The pro forma additional
paid-in capital also reflects the addition of the Bank's historical
additional paid-in capital.
(5) The retained earnings of the Bank will be substantially restricted
after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion. See "The Conversion -
Liquidation Rights." In addition, certain distributions from the
Bank's retained earnings may be treated as being from its accumulated
bad debt reserve for tax purposes, which would cause the Bank to have
additional taxable income. See "Business - Taxation."
(6) Net of the tax effect of the contribution of Common Stock based upon a
47% marginal tax rate. The realization of the deferred tax benefit is
limited annually to 10% of the Company's annual taxable income,
subject to the ability of the Company to carry forward any unused
portion of the deduction for five years following the year in which
the contribution is made.
(7) Assumes that 8.0% of the Common Stock sold in the Offerings will be
purchased by the ESOP, which is reflected as a reduction of
stockholders' equity. The ESOP shares will be purchased with funds
loaned to the ESOP by the Company. See "Pro Forma Data" and
"Management - Benefits - Employee Stock Ownership Plan."
(8) The Company intends to adopt the Recognition Plan and to submit such
plan to stockholders at an annual or special meeting of stockholders
held at least six months following the consummation of the Conversion.
If the plan is approved by stockholders, the Company intends to
contribute sufficient funds to the trust created under the Recognition
Plan to enable the trust to purchase a number of shares of Common
Stock equal to 4.0% of the Common Stock sold in the Offerings.
Assumes that stockholder approval has been obtained and that the
shares have been purchased in the open market at the Purchase Price.
However, in the event the Company issues authorized but unissued
shares of Common Stock to the Recognition Plan in the amount of 4.0%
of the Common Stock sold in the Offerings, the voting interests of
existing stockholders would be diluted approximately 3.8%. The shares
are reflected as a reduction of stockholders' equity. See "Pro Forma
Data" and "Management - Benefits - Recognition Plan."
43
<PAGE> 88
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $421.5 million and $572.0 million (or $658.5
million in the event the Estimated Price Range is increased by 15%) based upon
the following assumptions: (i) all shares of Common Stock will be sold in the
Subscription Offering; (ii) no fees will be paid to the Sandler O'Neill on
shares purchased by (x) the ESOP and any other employee benefit plan of the
Company or the Bank, (y) officers, directors, employees and members of their
immediate families or (z) the Foundation; (iii) Sandler O'Neill will receive a
fee equal to 1.625% of the aggregate Purchase Price for sales in the
Subscription Offering (excluding the sale of shares to the ESOP, employee
benefit plans, officers, directors and their immediate families and the
Foundation); (iv) the Company will contribute to the Foundation an amount of
Common Stock equal to 8% of the Common Stock sold in the Conversion from
authorized but unissued shares; and (v) total expenses, including the marketing
fees paid to Sandler O'Neill, will be between $11.4 million and $13.7 million
(or $15.0 million in the event the Estimated Price Range is increased by 15%).
Actual expenses may vary from those estimated.
Pro forma consolidated net income and stockholders' equity of the
Company have been calculated for the two months ended May 31, 1997 and for the
year ended March 31, 1997 as if the Common Stock to be issued in the Offerings
had been sold at the beginning of the respective periods and the net proceeds
had been invested at 5.77% and 6.00%, which represent the yields on one-year
U.S. Government securities at May 31, 1997 and March 31, 1997, respectively
(which, in light of changes in interest rates in recent periods, are deemed by
the Company and the Bank to more accurately reflect pro forma reinvestment
rates than the arithmetic average method). The effect of withdrawals from
deposit accounts for the purchase of Conversion Stock has not been reflected.
A marginal tax rate of 47% has been assumed for each of the periods, resulting
in an after-tax yield of 3.06% for the two months ended May 31, 1997 and 3.18%
for the year ended March 31, 1997. Historical and pro forma per share amounts
have been calculated by dividing historical 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. See Note 3 to the tables below. No effect has been given in the
pro forma stockholders' equity calculations for the assumed earnings on the net
proceeds. As discussed under "Use of Proceeds," the Company intends to make a
loan to fund the purchase of 8.0% of the Common Stock by the ESOP and retain
50% of the net proceeds from the Offerings.
No effect has been given in the tables to the issuance of additional
shares of Common Stock pursuant to the proposed Stock Option Plan. See
"Management of the Company -Benefits - Stock Option Plan" and "Management of
the Bank - Stock Benefit Plans." The table below gives effect to the
Recognition Plan, which is expected to be adopted by the Company following the
Conversion and presented (together with the Stock Option Plan) to stockholders
for approval at an annual or special meeting of stockholders
44
<PAGE> 89
to be held at least six months following the consummation of the Conversion.
If the Recognition Plan is approved by stockholders, the Recognition Plan
intends to acquire an amount of Common Stock equal to 4.0% of the shares of
Common Stock issued in the Offerings, either through open market purchases or
from authorized but unissued shares of Common Stock. The table below assumes
that stockholder approval has been obtained, as to which there can be no
assurance, and that the shares acquired by the Recognition Plan are purchased
in the open market at the Purchase Price. No effect has been given to (i) the
Company's results of operations after the Conversion, (ii) the market price of
the Common Stock after the Conversion, or (iii) a less than 4.0% purchase by
the Recognition Plan. In addition, no effect has been given in the tables to
the effect on book value of the liquidation account to be established for the
benefit of Eligible Account Holders or in the event of liquidation of the Bank,
to the tax effect of the bad debt reserve and other factors.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma stockholders' equity represents the
difference between the stated amount of assets and liabilities of the Company
computed in accordance with GAAP. The pro forma stockholders' equity is not
intended to represent the fair market value of the Common Stock and may be
different than amounts that would be available for distribution to stockholders
in the event of liquidation.
THE FOLLOWING TABLE GIVES EFFECT TO THE ISSUANCE OF AUTHORIZED BUT
UNISSUED SHARES OF THE COMPANY'S COMMON STOCK TO THE FOUNDATION CONCURRENTLY
WITH THE COMPLETION OF THE CONVERSION. THE VALUATION RANGE, AS SET FORTH
HEREIN AND IN THE TABLE BELOW, TAKES INTO ACCOUNT THE DILUTIVE IMPACT OF THE
ISSUANCE OF SHARES TO THE FOUNDATION.
45
<PAGE> 90
<TABLE>
<CAPTION>
At or For the Two Months Ended May 31, 1997
------------------------------------------------------------
43,287,037 50,925,926 58,564,815 67,349,537
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 Per
Per Share Per Share Per Share Share (15%
(Minimum of (Midpoint (Maximum of above Maximum
Range) of Range) Range) of Range)(9)
------------- ------------- ------------ --------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $432,870 $509,259 $585,648 $673,495
Plus: Shares acquired by Foundation (equal to 8%
of the shares issued in the Conversion) 34,630 40,741 46,852 53,880
-------- -------- -------- --------
Pro forma market capitalization $467,500 $550,000 $632,500 $727,375
======= ======= ======= =======
Gross proceeds 432,870 509,259 585,648 673,495
Less: Offering expenses and commissions (11,390) (12,532) (13,674) (14,988)
---------- ---------- ---------- ----------
Estimated net proceeds $421,480 $496,727 $ 571,974 $ 658,507
Less: Shares purchased by the ESOP (34,630) (40,741) (46,852) (53,880)
Shares purchased by the
Recognition Plan (17,315) (20,370) (23,426) (26,940)
-------- -------- -------- --------
Total estimated net proceeds, as adjusted(1) $369,536 $435,616 $501,696 $577,688
======= ======= ======= =======
Net income (2):
Historical $4,548 $4,548 $4,548 $4,548
Pro forma income on net proceeds 1,883 2,220 2,557 2,944
Pro forma ESOP adjustment(3) (153) (180) (207) (238)
Pro forma Recognition Plan
adjustment(4) (306) (360) (414) (476)
--------- -------- ------ --------
Pro forma net income $ 5,972 $ 6,228 $ 6,484 $ 6,778
======== ======= ======== =======
Net income per share(2)(5):
Historical $0.11 $ 0.09 0.08 $ 0.07
Pro forma income on net proceeds 0.04 0.04 0.04 0.04
Pro forma ESOP adjustment(3) 0.00 0.00 0.00 0.00
Pro forma Recognition Plan
adjustment(4) (0.01) $ (0.01) (0.01) (0.01)
------- ------ ------ ----------
Pro forma net income per share(4)(6) $ 0.14 $ (0.12) $ 0.11 $ 0.10
======== ======= ======== ========
Offering price to pro forma net
income per share (5) 11.90x 13.89x 15.15x 16.67x
======= ======= ======= =======
Stockholders' equity:
Historical(7) $316,669 $316,669 $316,669 $316,669
Estimated net proceeds 421,480 496,727 571,974 658,507
Plus: Shares issued to Foundation 34,630 40,741 46,852 53,880
Less: Contribution to Foundation (34,630) (40,741) (46,852) (53,880)
Plus: Tax benefit of the contribution 16,276 19,148 22,020 25,323
to Foundation
Less: Common Stock acquired
by the ESOP(3) (34,630) (40,741) (46,852) (53,880)
Common Stock to be acquired by
the Recognition Plan(4) (17,315) (20,370) (23,426) (26,940)
-------- -------- -------- --------
Pro forma stockholders' equity(4)(6)(8) $702,481 $771,433 $840,386 $919,680
======= ======= ======= =======
Stockholders' equity per share(5):
Historical(7) $ 6.77 $ 5.76 $5.01 $4.35
Estimated net proceeds 9.02 9.03 9.04 9.05
Plus: Shares issued to Foundation 0.74 0.74 0.74 0.74
Less: Contribution to Foundation (0.74) (0.74) (0.74) (0.74)
Plus: Tax benefit of contribution to
Foundation 0.35 0.35 0.35 0.35
Less: Common Stock acquired
by the ESOP(3) (0.74) (0.74) (0.74) (0.74)
Common Stock to be acquired by
the Recognition Plan(4) (0.37) (0.37) (0.37) (0.37)
------- ------- ---------- ---------
Pro forma stockholders' equity
per share(4)(6)(8) $ 15.03 $ 14.03 $ 13.29 $ 12.64
======= ======= ======== =======
Offering price as a percentage of pro
forma stockholders' equity per share(5) 66.53% 71.28% 75.24% 79.11%
======== ===== ====== =====
Offering price as a percentage of pro forma
tangible stockholders' equity per share(5) 73.10% 77.64% 81.37% 84.96%
======= ===== ====== =====
</TABLE>
(Footnotes on following pages)
46
<PAGE> 91
<TABLE>
<CAPTION>
At or For the Year Ended March 31, 1997
------------------------------------------------------------
43,287,037 50,925,926 58,564,815 67,349,537
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 Per
Per Share Per Share Per Share Share (15%
(Minimum of (Midpoint (Maximum of above Maximum
Range) of Range) Range) of Range)(9)
----------- ---------- ----------- ---------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds $432,870 $509,259 $585,648 $673,495
Plus: Shares acquired by Foundation (equal to
8% of the shares issued in the Conversion) 34,630 40,741 46,852 53,880
------- ------- ------- -------
Pro forma market capitalization $467,500 $550,000 $632,500 $727,375
======= ======= ======= =======
Gross proceeds 432,870 509,259 585,648 673,495
Less: Offering expenses and commissions (11,390) (12,532) (13,674) (14,988)
--------- --------- --------- ---------
Estimated net proceeds $421,480 $496,727 $571,974 $658,507
Less: Shares purchased by the ESOP (34,630) (40,741) (46,852) (53,880)
Shares purchased by the
Recognition Plan (17,315) (20,370) (23,426) (26,940)
-------- -------- -------- --------
Total estimated net proceeds, as adjusted(1) $369,536 $435,616 $501,696 $577,688
======= ======= ======= =======
Net income (2):
Historical $17,180 $17,180 $17,180 $17,180
Pro forma income on net proceeds 11,751 13,853 15,954 18,370
Pro forma ESOP adjustment(3) (918) (1,080) (1,242) (1,428)
Pro forma Recognition Plan
adjustment(4) (1,835) (2,159) (2,483) (2,856)
-------- ------- -------- --------
Pro forma net income $ 26,178 $ 27,794 $ 29,409 $ 31,266
======= ======= ======= =======
Net income per share(2)(5):
Historical $0.40 $ 0.34 $ 0.29 $ 0.25
Pro forma income on net proceeds 0.27 0.27 0.27 0.27
Pro forma ESOP adjustment(3) (0.02) (0.02) (0.02) (0.02)
Pro forma Recognition Plan
adjustment(4) (0.04) (0.04) (0.04) (0.04)
-------- ------- ------- -------
Pro forma net income per share(4)(6) $ 0.61 $ 0.55 $ 0.50 $ 0.46
======= ======= ======= =======
Offering price to pro forma net
income per share (5) 16.39x 18.18x 20.00x 21.74x
======= ======= ======= =======
Stockholders' equity:
Historical(7) $309,207 $309,207 $309,207 $309,207
Estimated net proceeds 421,480 496,727 571,974 658,507
Plus: Shares issued to Foundation 34,630 40,741 46,852 53,880
Less: Contribution to Foundation (34,630) (40,741) (46,852) (53,880)
Plus: Tax benefit of the contribution 16,276 19,148 22,020 25,323
to Foundation
Less: Common Stock acquired
by the ESOP(3) (34,630) (40,741) (46,852) (53,880)
Common Stock to be acquired by
the Recognition Plan(4) (17,315) (20,370) (23,426) (26,940)
-------- -------- -------- --------
Pro forma stockholders' equity(4)(6)(8) $695,019 $763,971 $832,924 $912,218
======= ======= ======= =======
Stockholders' equity per share(5):
Historical(7) $6.61 $5.62 $4.89 $4.25
Estimated net proceeds 9.02 9.03 9.04 9.05
Plus: Shares issued to Foundation 0.74 0.74 0.74 0.74
Less: Contribution to Foundation (0.74) (0.74) (0.74) (0.74)
Plus: Tax benefit of contribution to
Foundation 0.35 0.35 0.35 0.35
Less: Common Stock acquired
by the ESOP(3) (0.74) (0.74) (0.74) (0.74)
Common Stock to be acquired by
the Recognition Plan(4) (0.37) (0.37) (0.37) (0.37)
------- ------- ------- -------
Pro forma stockholders' equity
per share(4)(6)(8) $ 14.87 $ 13.89 $ 13.17 $ 12.54
======= ======= ======= =======
Offering price as a percentage of pro
forma stockholders' equity per share(5) 67.25% 71.99% 75.93% 79.74%
======= ======= ======= =======
Offering price as a percentage of pro forma
tangible stockholders' equity per share(5) 73.64% 78.19% 81.90% 85.40%
======= ======= ======= =======
</TABLE>
(Footnotes on following pages)
47
<PAGE> 92
- -------------------
(1) Estimated net proceeds, as adjusted, consist of the estimated net
proceeds from the Offerings minus (i) the proceeds attributable to the
purchase by the ESOP and (ii) the value of the shares to be purchased
by the Recognition Plan, subject to stockholder approval, after the
Conversion at an assumed purchase price of $10.00 per share.
(2) Does not give effect to the non-recurring expense that will be
recognized in fiscal 1998 as a result of the establishment of the
Foundation. The Company will recognize an after-tax expense for the
amount of the contribution to the Foundation which is expected to be
$18.4 million, $21.6 million, $24.8 million and $28.6 million at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated
Price Range, respectively. Assuming the contribution to the
Foundation had been expensed during the two months ended May 31, 1997,
pro forma net earnings per share would be $(0.29), $(0.30), $(0.31)
and $(0.32) at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Price Range, respectively. Per share net
income for two months ended is based on 43,301,466, 50,942,901,
58,584,336 and 67,371,987 shares outstanding which represents the
shares sold in The Offerings, shares contributed to the Foundation and
shares to be allocated or distributed under the ESOP and Recognition
Plan for the two month period. Assuming the contribution to the
Foundation was expensed during the year ended March 31, 1997, pro
forma net earnings per share would be $0.18, $0.12, $0.08 and $0.04 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively. Per share net income data for
the year ended March 31, 1997 is based on 43,373,611, 51,027,778,
58,681,944 and 67,484,236 shares outstanding which represents shares
sold in the Offerings, shares contributed to the Foundation and shares
to be allocated or distributed under the ESOP and Recognition Plan for
each of the periods presented.
(3) It is assumed that 8.0% of the shares of Common Stock sold in the
Offerings (excluding any shares issued to the Foundation), will be
purchased by the ESOP with funds loaned by the Company. The Company
and the Bank intend to make annual contributions to the ESOP in an
amount at least equal to the principal and interest requirement of the
debt. The pro forma net earnings assumes (i) that the loan to the
ESOP is payable over 20 years, with the ESOP shares having an average
fair value of $10.00 per share in accordance with SOP 93-6, entitled
"Employers' Accounting for Employee Stock Ownership Plans," of the
AICPA, and (ii) the effective tax rate was 47% for each of the
periods. See "Management - Benefits - Employee Stock Ownership Plan."
(footnotes continued on following page)
48
<PAGE> 93
It is assumed that the Recognition Plan will purchase, following
stockholder approval of such plan, a number of shares of Common Stock
equal to 4.0% of the shares of Common Stock sold in the Offerings
(excluding any shares issued to the Foundation) for issuance to
directors, officers and employees. Funds used by the Recognition Plan
to purchase the shares initially will be contributed to the
Recognition Plan by the Company. It is further assumed that the
shares were acquired by the Recognition Plan at the beginning of the
period presented in open market purchases at the Purchase Price and
that 3.33% and 20.00% of the amount contributed was an amortized
expense during the two months ended May 31, 1997 and the year ended
March 31, 1997. The issuance of authorized but unissued shares of
Common Stock pursuant to the Recognition Plan in the amount of 4.0% of
the Common Stock issued in the Offerings would dilute the voting
interests of existing stockholders by approximately 3.8% and under
such circumstances (i) pro forma net earnings per share for the two
months ended May 31, 1997 would be $0.13, $0.12, $0.10 and $0.09 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively, and stockholders' equity per
share would be $14.85, $13.89, $13.18 and $12.56 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Price
Range, respectively, and (ii) pro forma net earnings per share for the
year ended March 31, 1997 would be $0.59, $0.53, $0.49 and $0.45, at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively, and stockholders' equity per
share at March 31, 1997 would be $14.70, $13.76, $13.06 and $12.46 at
the minimum, midpoint, maximum and 15% above the maximum of such
range, respectively. There can be no assurance that the actual
purchase price of shares purchased by or issued to the Recognition
Plan will be equal to the Purchase Price. See "Management - Benefits
- Recognition Plan."
(5) The per share calculations are determined by adding the number of
shares assumed to be issued in the Conversion as well as contributed
to the Foundation and, in accordance with SOP 93-6, subtracting 99.6%
and 97.5% of the ESOP shares which have not been committed for release
during the two months ended May 31, 1997 and the year ended March 31,
1997, respectively. Only ESOP shares committed to be released have
been considered outstanding for purposes of the net income per share
calculations. Thus, it is assumed at May 31, 1997 that 43,301,466,
50,942,901, 58,584,336 and 67,484,236 shares of Common Stock are
outstanding at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Price Range, respectively, and at March 31,
1997 that 43,373,611, 51,027,778, 58,681,944 and 67,371,987 shares of
Common Stock are outstanding at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Price Range, respectively.
Assuming the uncommitted ESOP shares were not subtracted from the
number of shares of Common Stock outstanding at May 31, 1997, the
offering price as a multiple of pro forma net earnings per share would
be 13.05x, 14.72x, 16.26x and 17.89x at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Price Range, respectively
and at March 31, 1997, the offering price as a multiple of pro forma
net earnings per share would be 17.86x, 19.79x, 12.51x and 23.26x at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively.
49
<PAGE> 94
- -------------------
(6) No effect has been given to the issuance of additional shares of
Common Stock pursuant to the Stock Option Plan, which will be adopted
by the Company following the Conversion and presented for approval by
stockholders at an annual or special meeting of stockholders of the
Company held at least six months following the consummation of the
Conversion. If the Stock Option Plan is approved by stockholders, an
amount equal to 10% of the Common Stock issued in the Offerings, or
4,328,703, 5,092,592, 5,856,481 and 6,734,953 shares at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Price
Range, respectively, will be reserved for future issuance upon the
exercise of options to be granted under the Option Plan. The issuance
of Common Stock pursuant to the exercise of options under the Stock
Option Plan will result in the dilution of existing stockholders'
interests. Assuming stockholder approval of the Stock Option Plan,
that all these options were exercised at the beginning of the period
at an exercise price of $10.00 per share and that the shares to fund
the Recognition Plan are acquired through open market purchases at the
Purchase Price, (i) pro forma net earnings per share for the two
months ended May 31, 1997 would be $0.13, $0.11, $0.10 and $0.09 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively and pro forma stockholders' equity
per share at May 31, 1997 would be $14.60, $13.68, $13.00 and $12.41
at the minimum, midpoint, maximum and 15% above the maximum of such
range, respectively, and (ii) pro forma net earnings per share for the
year ended March 31, 1997 would be $0.58, $0.53, $0.49 and $0.45 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively, and stockholders' equity per
share at March 31, 1997 would be $14.45, $13.56, $12.89 and $12.32 at
the minimum, midpoint, maximum and 15% above the maximum of such
range, respectively. See "Management - Benefits - Stock Option Plan."
(7) Includes the $93,000 of net assets of the Mutual Holding Company to be
acquired by the Company and the Bank upon consummation of the
Conversion.
(8) The retained earnings of the Bank will be substantially restricted
after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion. See "Dividend Policy"
and "The Conversion - Liquidation Rights." In addition, certain
distributions from the Bank's retained earnings may be treated as
being from its accumulated bad debt reserve for tax purposes, which
would cause the Bank to have additional taxable income. See "Taxation
- Federal Taxation." Pro forma stockholders' equity and pro forma
stockholders' equity per share do not give effect to the liquidation
account or the bad debt reserves established by the Bank for federal
income tax purposes in the event of a liquidation of the Bank.
(footnotes continued on the following page)
50
<PAGE> 95
- -------------------
(9) As adjusted to give effect to an increase in the number of shares
which could occur due to an increase in the Estimated Price Range of
up to 15% to reflect changes in market and financial conditions
following the commencement of the Offerings.
51
<PAGE> 96
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO FOUNDATION
In the event that the Foundation was not being established as part of
the Conversion, RP Financial has estimated that the pro forma aggregate market
capitalization of the Company would be approximately $585.0 million at the
midpoint, which is approximately $35.0 million greater than the pro forma
aggregate market capitalization of the Company if the Foundation is included,
and would result in approximately $75.7 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 the same under both the
current appraisal and the estimate of the value of the company without the
Foundation. Further, assuming the midpoint of the Estimated Price Range, pro
forma stockholders' equity per share and pro forma earnings per share would be
substantially the same at $14.03 and $0.12, respectively, and $13.98 and $0.12,
respectively, with the Foundation or without the Foundation. The pro forma
price to book ratio and the pro forma price to earnings ratio are substantially
the same with and without the Foundation at the midpoint at 71.3% and 71.5%,
respectively, and 13.9x and 13.9x, respectively. There is no assurance that in
the event the Foundation was not formed that the appraisals prepared at the
time would have concluded that the pro forma market value of the Company would
be the same as that estimated 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
maximum, as adjusted, of the Estimated Price Range, assuming the Conversion was
completed at May 31, 1997.
<TABLE>
<CAPTION>
At the Minimum At the Midpoint
------------------------------- ------------------------------
With No With No
Foundation Foundation Foundation Foundation
--------------- -------------- -------------- --------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Estimated offering amount . . . . . . . . $ 432,870 $ 497,250 $ 509,259 $ 585,000
Pro forma market capitalization . . . . . 467,500 497,250 550,000 585,000
Total assets . . . . . . . . . . . . . . 4,206,500 4,245,915 4,275,452 4,321,823
Total liabilities . . . . . . . . . . . . 3,504,019 3,504,019 3,504,019 3,504,019
Pro forma stockholders' equity . . . . . 702,481 741,896 771,433 817,804
Pro forma consolidated net earnings . . . 5,972 6,188 6,288 6,842
Pro forma stockholders' equity per share 15.03 14.92 14.03 13.98
Pro forma consolidated net earnings per
share . . . . . . . . . . . . . . . . . . 0.14 0.14 0.12 0.12
Pro forma pricing ratios:
Offering prices as a percentage of pro
forma stockholders' equity per share 66.53% 67.02% 71.28% 71.53%
Offering price to pro forma net earnings
per share . . . . . . . . . . . . . . 11.90x(1) 11.90x 13.89x(1) 13.89x
Pro forma market capitalization to
assets . . . . . . . . . . . . . . . 11.11% 11.71% 12.86% 13.54%
Pro forma financial ratios:
Return on assets . . . . . . . . . . . 0.85%(2) 0.87% 0.87%(2) 0.90%
Return on stockholders' equity . . . . 5.10%(3) 5.00% 4.84%(3) 4.76%
Stockholders' equity to assets . . . . 16.70% 17.47% 18.04% 18.92%
</TABLE>
<TABLE>
<CAPTION>
At the Maximum,
At the Maximum As Adjusted
------------------------------- ------------------------------
With No With No
Foundation Foundation Foundation Foundation
--------------- -------------- -------------- --------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Estimated offering amount . . . . . . . . $ 585,648 $ 672,750 $ 673,495 $ 773,663
Pro forma market capitalization . . . . . 632,500 672,750 727,375 773,663
Total assets . . . . . . . . . . . . . . 4,344,405 4,397,732 4,423,699 4,485,026
Total liabilities . . . . . . . . . . . . 3,504,019 3,504,019 3,504,019 3,504,019
Pro forma stockholders' equity . . . . . 840,386 893,713 919,680 981,007
Pro forma consolidated net earnings . . . 6,484 6,776 6,778 7,114
Pro forma stockholders' equity per share 13.29 13.29 12.64 12.68
Pro forma consolidated net earnings per
share . . . . . . . . . . . . . . . . . . 0.11 0.11 0.10 0.10
Pro forma pricing ratios:
Offering prices as a percentage of pro
forma stockholders' equity per share 75.24% 72.54% 79.11% 78.86%
Offering price to pro forma net earnings
per share . . . . . . . . . . . . . . 15.15x(1) 15.15x 16.67x(1) 16.67x
Pro forma market capitalization to
assets . . . . . . . . . . . . . . . 14.56% 15.30% 16.44% 17.25%
Pro forma financial ratios:
Return on assets . . . . . . . . . . . 0.90%(2) 0.92% 0.92%(2) 0.95%
Return on stockholders' equity . . . . 4.63%(3) 4.55% 4.42%(3) 4.35%
Stockholders' equity to assets . . . . 19.34% 20.32% 20.79% 21.87%
</TABLE>
- -----------------
(1) If the contribution to the Foundation had been expensed during the two
months ended May 31, 1997, the offering price to pro forma net
earnings per share would have been (35.0)x, (33.2)x, (31.9)x and
(31.0)x at the minimum, midpoint, maximum and maximum, as adjusted,
respectively.
(2) If the contribution to the Foundation had been expensed during the two
months ended May 31, 1997, return on assets would have been (1.8)%,
(2.2)%, (2.5)% and (3.0)% at the minimum, midpoint, maximum and
maximum, as adjusted, respectively.
(3) If the contribution to the Foundation had been expensed during the two
months ended May 31, 1997, return on stockholders' equity would have
been (10.6)%, (12.0)%, (13.1)% and (14.2)% at the minimum, midpoint,
maximum and maximum, as adjusted, respectively.
52
<PAGE> 97
INDEPENDENCE SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Set forth below are the consolidated statements of income of the Bank
and its subsidiaries for the periods indicated. The consolidated financial
statements of the Bank as of March 31, 1997, 1996 and 1995 and for the years
then ended were audited by Ernst & Young LLP, independent certified public
accountants. The consolidated statements of operations of the Bank for the two
months ended May 31, 1997 and 1996 were not audited by independent public
accountants but in the opinion of management reflect all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the results of operations for those periods. Operating results for the two
months ended May 31, 1997 are not necessarily indicative of the results that
may be expected for any other interim period or the entire year ending March
31, 1998.
<TABLE>
<CAPTION>
For the Two Months Ended For the Year Ended
May 31, March 31,
------------------------ -------------------------------------
1997 1996 1997 1996 1995
--------- --------- ------- ------ -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans:
Mortgage loans $27,704 $26,460 $161,638 $140,435 $128,008
Other loans 6,065 5,803 36,189 36,162 31,726
Investment securities 6,920 4,658 22,356 11,635 8,644
Mortgage-backed and mortgage-related securities 2,169 5,747 28,856 17,779 20,204
Other 1,223 1,027 6,264 7,089 2,957
----- ----- -------- -------- --------
Total interest income 44,081 43,695 255,303 213,100 191,539
------ ------ -------- -------- --------
Interest expense:
Deposits 23,691 23,684 138,840 106,379 76,443
Borrowings 199 320 1,347 4,240 4,119
------ ------ -------- -------- --------
Total interest expense 23,890 24,004 140,187 110,619 80,562
------- --------- -------- -------- --------
Net interest income 20,191 19,691 115,116 102,481 110,977
Provision for loan losses 1,450 600 7,960 3,679 3,841
----- ------ -------- -------- ---------
Net interest income after provision
for loan losses 18,741 19,091 107,156 98,802 107,136
------- --------- -------- -------- ---------
Other income:
Net gain (loss) on sales of loans and securities 3 (28) (3,347) 12,222 (3,952)
Service fees 1,201 926 5,708 4,086 4,103
Other 305 772 548 3,774 2,313
----- ------ -------- -------- ---------
Total other income 1,509 1,670 2,909 20,082 2,464
----- ------- -------- -------- ---------
Other expenses:
Compensation and employee benefits 5,076 4,595 26,879 22,311 20,155
Occupancy costs 1,850 1,791 10,981 7,656 5,948
Data processing fees 1,496 697 7,020 3,117 3,091
Advertising 633 450 3,625 3,229 2,175
FDIC insurance premiums 210 639 2,199 2,558 5,057
SAIF assessment -- -- 8,553 -- --
Amortization of intangible assets 1,484 1,546 8,278 1,842 905
Other 3,247 2,052 14,618 11,417 10,038
----- ----- -------- -------- --------
Total other expenses 13,996 11,770 82,153 52,130 47,369
------ ------ -------- -------- --------
Income before provision for income taxes 6,254 8,991 27,912 66,754 62,231
Provision for income tax 1,706 2,901 10,732 30,782 27,327
----- ----- -------- -------- --------
Net income $ 4,548 $ 6,090 $ 17,180 $ 35,972 $ 34,904
====== ====== ======== ======== ========
</TABLE>
53
<PAGE> 98
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Bank's results of operations depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, which principally consist of loans, mortgage-backed and
mortgage-related securities and investment securities, and interest expense on
interest-bearing liabilities, which principally consist of deposits and
borrowings. Net interest income is determined by an institution's interest
rate spread (i.e. the difference between the yields earned on its interest
earning assets and the rates paid on its interest-bearing liabilities) and the
relative amount of interest-earning assets and interest-bearing liabilities.
The Bank's results of operations also are affected by the provision
for loan losses, resulting from management's assessment of the adequacy of the
allowance for loan losses, the level of its non-interest income, including
service fees and related income, gains and losses from the sales of loans and
securities, the level of its non-interest expense, including compensation and
employee benefits, occupancy expense and FDIC insurance premiums, data
processing services and income tax expense.
The Bank is a community-oriented savings bank which emphasizes
customer service and convenience. As part of this strategy, the Bank offers
products and services designed to meet the needs of its customers. The Bank
generally has sought to achieve long-term financial strength and stability by
increasing the amount and stability of its net interest income and non-interest
income and by maintaining a high level of asset quality. In pursuit of these
goals, the Bank has adopted a business strategy emphasizing controlled growth,
residential lending, retail deposit products, customer service, maintaining
asset quality and a stable source of liquidity and earnings.
BUSINESS STRATEGY
Controlled Growth. In recent years, the Bank has sought to increase
its assets and expand its operations. The Bank purchased Bay Ridge in January
1996 as well as five branch offices located in Brooklyn and Staten Island in
March 1996 from a savings institution which was withdrawing from the market
area (the "1996 Branch Acquisition"). In addition, in earlier periods, the
Bank also completed several other acquisitions. These transactions have
contributed to the growth in the Bank's assets, which increased by $1.43
billion or 59.7% from $2.39 billion at March 31, 1993 to $3.82 billion at May
31, 1997. The net proceeds from the Offerings will significantly enhance the
capital base of the Company and the Bank and therefore support further growth
and expansion of the Bank's operations consistent with its business strategy.
54
<PAGE> 99
Emphasis on Residential Lending. Management believes that the Bank is
more likely to achieve its goals of long-term financial strength and
profitability by continuing to emphasize residential loan products and
services. Given the concentration of multi-family housing units in the New
York City metropolitan area, the Bank's primary lending emphasis is the
origination of loans secured by first liens on multi-family residential
properties, which consist primarily of mortgage loans secured by apartment
buildings. Such loans totaled $1.40 billion or 54.0% of the total loan
portfolio at May 31, 1997. The Bank also emphasizes single-family (one-to-four
units) residential mortgage loans, which totaled $551.1 million or 21.2% of the
total loan portfolio at May 31, 1997, and cooperative apartment loans (loans
secured by an individual's shares in a cooperative housing corporation), which
loans totaled $359.7 million or 13.8% of the total loan portfolio at May 31,
1997.
Maintain Asset Quality. Management believes that high asset quality
is a key to long-term financial success. Accordingly, the Bank has sought to
maintain a high level of asset quality and moderate credit risk by using
underwriting standards which management believes are conservative and by
generally limiting its origination of mortgage loans to its market area. Total
non-performing assets have remained relatively stable even as the Bank's assets
have grown significantly. The Bank's ratio of non-performing assets to total
assets at May 31, 1997 was 0.46% and its allowance for loan losses to
non-performing loans was 170.1%.
Stable Source of Liquidity and Earnings. The Bank purchases short to
medium-term investment securities and mortgage-backed and mortgage-related
securities combining what management believes to be appropriate yield,
liquidity and credit quality in its efforts to achieve (1) a managed and
predictable source of liquidity to meet loan demand, (2) a stable source of
interest income and (3) diversification in the Bank's portfolio of
interest-earning assets. These portfolios which totaled in the aggregate
$899.2 million at May 31, 1997 are comprised primarily of obligations of the
U.S. Government and federal agencies totaling $702.4 million (of which $649.9
million consists of U.S. Treasury notes and bills) and mortgage-backed and
mortgage-related securities totaling $182.2 million (of which $103.5 million
consists of mortgage-backed securities and $78.7 million of CMOs). In
accordance with the Bank's policy, investments purchased by the Bank generally
must be rated at least "investment grade" upon purchase.
Emphasis on Retail Deposits and Customer Service. The Bank, as a
traditional community-based savings bank, is largely dependent upon its base of
competitively priced core deposits to provide stable source of funding. The
Bank has retained many loyal customers over the years through a combination of
quality service, low service fees on various deposit and other products,
customer convenience, an experienced staff and a commitment to the communities
which it serves. Lower costing deposits totaled $1.59 billion or 47.1% of the
Bank's total deposits at May 31, 1997. In addition, the Bank does not accept
brokered deposits as a source of funds and has no plans to do so in the future.
55
<PAGE> 100
RECENT ACQUISITIONS
The Bank significantly increased its asset size during fiscal 1996
through two acquisitions. In January 1996, the Bank completed the acquisition
of Bay Ridge, acquiring $558.6 million of assets and six branch offices located
in Brooklyn with total deposits of $445.2 million. As a result of such
acquisition, the Bank recorded goodwill totaling $26.1 million, as adjusted
which is being amortized on a straight line basis over a 14 year period. The
amount of goodwill related to the Bay Ridge acquisition was adjusted downward
during fiscal 1997 by $4.8 million primarily as the result of the receipt of
proceeds from the repayment of the Bay Ridge ESOP loan and the receipt of tax
refunds, offset in part by an additional accrual related to a Bay Ridge
qualified retirement plan. As of May 31, 1997, the Bank had $23.4 million of
goodwill remaining related to this acquisition.
In March 1996, the Bank completed the 1996 Branch Acquisition,
providing the Bank with three additional branch offices in Brooklyn and two
branch offices in Staten Island. In connection with the transaction, the Bank
assumed approximately $615.6 million of deposits and other liabilities and
recorded $49.5 million of intangible assets. In consideration for the
assumption of deposits and other liabilities, the Bank received approximately
$557.9 million in cash and branch offices and other fixed assets valued at
approximately $8.1 million. In September 1996, the Bank discontinued
operations at one of the branch offices acquired in the 1996 Branch Acquisition
and sold deposits totaling $51.4 million for a premium of $3.6 million. The
remaining premium paid by the Bank which related to this branch office amounted
to $5.3 million at the time of disposition and was deducted from the $49.5
million of intangible assets recorded in the acquisition. In addition, the
Bank recognized a loss of $1.7 million on the sale of this branch office, which
loss was reflected in other income for fiscal 1997. The intangible related to
the 1996 Branch Acquisition, as adjusted, which totaled $35.7 million at May
31, 1997, is being amortized on a straight line basis over seven years.
In April 1997, the Bank continued its growth by completing another
branch acquisition (which will be reflected in the Bank's financial statements
at and for the year ended March 31, 1998). As a result, the Bank assumed $70.0
million of deposits, receiving $64.9 million in cash, an additional branch
office in Queens and other fixed assets with an aggregate value of
approximately $886,000. In connection with such acquisition, the Bank recorded
an intangible asset in the amount of $4.0 million which is being amortized on a
straight line basis over seven years. At May 31, 1997, the remaining
intangible resulting from the deposit acquisition amounted to $3.98 million.
CHANGES IN FINANCIAL CONDITION
GENERAL. Total assets increased by $87.3 million, or 2.3%, from $3.73
billion at March 31, 1997 to $3.82 billion at May 31, 1997. The major
component of the increase consisted of a $57.8 million increase in the net loan
portfolio, of which $44.0 million was accounted for by increases in
multi-family residence and commercial real estate loans. In
56
<PAGE> 101
addition, the restructuring of the Bank's investment securities and
mortgage-backed and mortgage-related securities portfolio which began in March
1997 was completed with the investment of the proceeds of the sales undertaken
in March. As a result, the Bank's investment securities increased from $357.5
million at March 31, 1997 to $716.9 million at May 31, 1997. Such increase was
accompanied by a $243.6 million decrease in cash and cash equivalents and a
$86.5 million decrease in accounts receivable as the funds received or to be
received from such sales were reinvested in investment securities, primarily
U.S. Treasury notes and bills. Total assets decreased by $136.5 million, or
3.5%, from $3.87 billion at March 31, 1996 to $3.73 billion at March 31, 1997.
Investment securities and mortgage-backed and mortgage-related securities
decreased substantially due to sales of $652.3 million of such securities
during fiscal 1997. Such sales related primarily to the Bank's decision to
restructure its investments and mortgage-backed and mortgage-related securities
portfolios to improve the yield thereon and to reduce interest rate risk. The
proceeds of the sales, which were undertaken in large part in March 1997 and
which resulted in a net loss of $3.9 million, were primarily invested in
short-term investments. Offsetting in part the decline in the investment and
mortgage-backed and mortgage-related securities portfolios was a $180.3 million
increase in the net loan portfolio, the majority of which was accounted for by
a $157.1 million increase in multi-family residential loans.
CASH, COMMERCIAL PAPER AND FEDERAL FUNDS SOLD (COLLECTIVELY "CASH AND
CASH EQUIVALENTS"). Cash and cash equivalents decreased from $374.6 million at
March 31, 1997 to $131.0 million at May 31, 1997 reflecting primarily the
investment in April of a portion of the proceeds from the sales of investment
and mortgage-backed and mortgage related securities effected in March 1997.
During fiscal 1997, cash and cash equivalents increased by $271.4 million, or
263.0%, to $374.6 million at March 31, 1997 from $103.2 million at March 31,
1996. Such increase in cash and cash equivalents was due in large part to the
proceeds from the sale of investment and mortgage-backed and mortgage-related
securities in March 1997, a substantial portion of which was not re-invested
until April 1997. Of the $374.6 million of cash and cash equivalents at March
31, 1997, approximately $270.0 million were proceeds from the sale of
securities settled on or prior to such date. In addition, at March 31, 1997,
the Bank had an account receivable totalling $107.6 million relating to
securities transactions executed in connection with the restructuring which had
not settled as of such date. Substantially all of these funds were invested in
early April 1997 primarily in U.S. Treasury notes and bills with maturities of
two years or less. The Bank's accounts receivable amounted to $21.1 million at
May 31, 1997 reflecting new securities transactions which had not settled as of
such date.
INVESTMENT SECURITIES AND MORTGAGE-BACKED AND MORTGAGE-RELATED
SECURITIES. The aggregate investment securities and mortgage-backed and
mortgage-related securities portfolios increased from $548.5 million at March
31, 1997 to $899.2 million at May 31, 1997 reflecting the investment of the
proceeds from the sales effected in connection with the restructuring of these
portfolios as described herein. The Bank's investment securities and
mortgage-backed and mortgage-related securities portfolios declined by $691.4
million from an aggregate of $1.24 billion at March 31, 1996 to an aggregate of
$548.5 million at March
57
<PAGE> 102
31, 1997. This decline was primarily the result of the Bank's determination to
restructure these portfolios in order to improve the overall yield and reduce
the exposure to interest rate risk. In connection with this restructuring, the
Bank sold approximately $397.3 million of its investment securities and
mortgage-backed and mortgage-related securities (including CMOs) in March 1997.
The Bank reinvested substantially all of the proceeds of the sales in U.S.
Treasury notes and bills, most of which have maturities of two years or less.
The weighted average yield, on a fully taxable basis, on the securities
purchased was approximately 60 basis points higher than the weighted average
yield on the securities sold.
As of May 31, 1997 and March 31, 1997, the Bank's investment
securities totaled $716.9 million and $357.5 million, respectively, all of
which were classified as available for sale. At March 31, 1996, the Bank's
investment securities totaled $723.8 million of which $683.8 million were
classified as available for sale. The Bank was required in fiscal 1995 to
classify its investment and mortgage-backed and mortgage-related securities
portfolios as either held to maturity or available for sale in accordance with
the provisions of SFAS No. 115. See "-Recent Accounting Pronouncements."
The Bank's mortgage-backed and mortgage-related securities, the
substantial majority of which at May 31, 1997 consisted of CMOs secured by
mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), decreased
from $516.0 million at March 31, 1996 to $191.0 million at March 31, 1997
primarily as a result of the restructuring, and decreased further to $182.2
million (all of which were classified as available for sale) at May 31, 1997.
The reduction from March 31, 1997 to May 31, 1997 reflected repayments and
prepayments. The bulk of the mortgage-backed and mortgage-related securities
sold consisted of CMOs, a portion of which were acquired in the acquisition of
Bay Ridge in fiscal 1996 and which did not conform to the Bank's investment
policy. At May 31, 1997, CMOs totaled $78.7 million, most of which are secured
by mortgage-backed securities issued by the FNMA or the FHLMC.
At May 31, 1997, the Bank had a $4.9 million net unrealized gain on
available-for sale investment and mortgage-backed and mortgage-related
securities in accordance with SFAS No. 115. See "Business-Investment
Activities."
LOANS RECEIVABLE, NET. Loans receivable, net, increased by $57.8
million or 2.3% from March 31, 1997 to May 31, 1997 and increased by $180.3
million, or 7.8%, from March 31, 1996 to March 31, 1997 due to the continued
emphasis by the Bank on the origination of multi-family residential mortgage
loans. Such loans increased 16.2% from $1.21 billion at March 31, 1996 to
$1.40 billion at May 31, 1997. See "Business - Lending Activities."
NON-PERFORMING ASSETS. The Bank's non-performing assets, which
primarily consist of non-accrual loans, loans past due 90 days or more as to
interest and accruing and other real estate owned acquired through foreclosure
or deed-in-lieu thereof decreased, $1.8 million or 9.4% from $19.2 million at
March 31, 1997 and further decreased $10.9 million
58
<PAGE> 103
or 36.2% from $30.1 million at March 31, 1996 to $19.2 million at March 31,
1997. The Bank's non-performing assets decreased during fiscal 1997 primarily
due to the return to performing status of a $5.0 million non-accrual loan as
well as the sale or satisfaction of an aggregate of $2.3 million of loans
acquired in the Bay Ridge acquisition and charge-offs totalling $1.6 million.
At March 31, 1997, the Bank's non-performing assets amounted to 0.51% of total
assets and consisted of $16.9 million of non-accrual loans, $1.9 million of
which were multi-family residential loans and $11.2 million of which were
commercial and other real estate loans, $1.7 million of loans past due 90 days
or more as to interest and accruing and $540,000 of other real estate owned.
See "Business - Asset Quality."
ALLOWANCE FOR LOAN LOSSES. The Bank's allowance for loan losses
amounted to $28.8 million at May 31, 1997 as compared to $27.0 million at March
31, 1997 and $20.5 million at March 31, 1996. It is management's policy to
maintain an allowance for estimated losses on loans based upon an assessment of
prior loss experience, the volume and type of lending conducted by the Bank,
industry standards, past due loans, general economic conditions and other
factors related to the collectibility of the loan portfolio. The Bank's
allowance increased during the two months ended May 31, 1997 as well as in
fiscal 1997 primarily due to a $1.5 million and an $8.0 million provision for
loan losses made in the two month period and in fiscal 1997, respectively. The
Bank increased its provision for loan losses in the two months ended May 31,
1997 and in fiscal 1997 as a result of, among other factors, the increased
investment in multi-family residential loans (all of which are secured by
properties in the New York City metropolitan area), the increased number of
larger multi-family and individual cooperative apartment loans and the
increased number of loans which exhibit risk characteristics which were
determined to require closer oversight. At May 31, 1997, the Bank's allowance
for loan losses amounted to 170.1% of total non-performing loans as compared to
144.9% and 70.6% of total non-performing loans at March 31, 1997 and 1996,
respectively. The Bank utilizes these percentages as only one of the factors
in assessing the adequacy of the allowance for loan losses at various points in
time. See "Business - Asset Quality."
INTANGIBLE ASSETS. The Bank's intangible assets consist of goodwill
and other intangibles resulting primarily from the Bay Ridge acquisition and
the 1996 Branch Acquisition. At May 31, 1997, intangibles totaled $63.1
million and were primarily comprised of $23.4 million related to the
acquisition of the Bay Ridge and $35.7 million related to the 1996 Branch
Acquisition. The Bank's intangible assets increased by $2.6 million to $63.1
million at May 31, 1997 from $60.5 million at March 31, 1997 as a result of the
completion of a branch purchase in April 1997. The intangible related to the
1996 Branch Acquisition was reduced during fiscal 1997 by $5.3 million due to
the transfer in September 1996 to another institution of $51.4 million of
deposits related to one of the branch offices acquired. Amortization expense
related to intangible assets amounted to $1.5 million and $8.3 million during
the two months ended May 31, 1997 and fiscal 1997, respectively. Amortization
of such intangibles will continue to reduce net income until such intangible
assets are fully amortized. See "-Recent Acquisitions."
59
<PAGE> 104
DEPOSITS. Deposits increased $54.6 million or 1.6% to $3.38 billion
at May 31, 1997 from $3.33 billion at March 31, 1997 primarily as a result of
the assumption of $70.0 million of deposits in the branch purchase completed in
April 1997, offset partially by $27.1 million of deposit outflows. Deposits
decreased by $71.3 million, or 2.1%, to $3.33 billion at March 31, 1997 from
$3.40 billion at March 31, 1996 reflecting deposit withdrawals and transfers
totaling $210.2 million. This decrease was primarily attributable to the
outflow or transfer of $146.0 million of deposits (primarily certificates of
deposit) acquired in the 1996 Branch Acquisition and $25.2 million of deposits
acquired in the Bay Ridge acquisition. A significant percentage of the higher
priced deposits assumed in the 1996 Branch Acquisition were not reinvested in
new certificates of deposit at the Bank.
BORROWINGS. The Bank has historically used borrowing only to a
limited extent although it may increase such use in the future. The Bank's
borrowings consist primarily of advances from the FHLB of New York. At May 31,
1997, FHLB advances totaled $14.6 million, the same as at March 31, 1997. FHLB
advances and other borrowings decreased by $40.0 million, or 69.9%, to $17.2
million at March 31, 1997 from $57.3 million at March 31, 1996. The Bank
prepaid a large portion of its FHLB advances in April 1996, which prepayments
did not result in any prepayment penalties.
EQUITY. At May 31, 1997, total equity equaled $316.6 million, compared
to $309.1 million and $289.8 million at March 31, 1997 and 1996, respectively.
This $7.5 million or 2.4% increase was primarily the result of net income of
$4.5 million for the two months ended May 31, 1997 combined with a $2.9 million
increase in the unrealized gain on securities available for sale, net of tax.
The $19.3 million or 6.7% increase in total equity from March 31, 1996 to March
31, 1997 was primarily the result of net income of $17.2 million for the year
ended March 31, 1997 combined with an increase in the Bank's unrealized gain on
marketable securities from a $1.7 million net unrealized loss, net of tax, at
March 31, 1996 to a $368,000 net unrealized gain, net of tax, at March 31,
1997 primarily as a result of the previously described securities
restructuring.
60
<PAGE> 105
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income of the Bank from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average rate; (iii) net interest income; (iv) interest rate spread; and (v) net
interest margin. Information is based on average daily balances during the
indicated periods.
<TABLE>
<CAPTION>
For the Two Months Ended May 31,
At May 31, -------------------------------------------------------------------------
1997 1997 1996
---------- ----------------------------------- --------------------------------
Average Average
Yield/ Average Yield/ Average Yield/
Cost Balance Interest Cost Balance Interest Cost
---- ------- -------- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Mortgage loans 7.94% 2,076,808 27,704 8.00% 1,907,101 26,460 8.32%
Other loans:
Cooperative apartment loans 7.20 352,765 4,285 7.29 339,211 4,260 7.54
Other (2) 9.58 118,161 1,780 9.04 106,680 1,543 8.68
------- ----- ------- -----
Total loans 7.91 2,547,734 33,769 7.95 2,352,992 32,263 8.23
Mortgage-backed and
mortgage-related
securities 6.33 175,283 2,169 7.42 549,785 5,747 6.27
Investment securities 6.05 734,507 6,920 5.65 526,195 4,658 5.31
Other interest-earning assets (3) 5.53 156,686 1,223 4.68 118,402 1,027 5.20
--------- ------ --------- -----
Total interest-earning assets 7.39 3,614,210 44,081 7.32 3,547,374 43,695 7.39
----- ------ ---- ------ ----
Non-interest-earning assets 194,143 211,539
--------- ---------
Total assets $3,808,353 $3,758,913
========= =========
Interest-bearing liabilities:
Deposits:
Demand deposits(4) 2.76 498,906 2,225 2.68 448,639 1,892 2.53
Savings deposits 2.88 1,024,335 4,928 2.89 1,110,132 5,544 3.00
Certificates of deposit 5.56 1,771,164 16,538 5.60 1,754,428 16,248 5.56
--------- ------ --------- ------
Total deposits 4.31 3,294,405 23,691 4.31 3,313,199 23,684 4.29
--------- ------ --------- ------
Total borrowings 7.36 17,218 199 6.93 21,814 320 8.80
------ --- ------ ---
Total interest-bearing
liabilities 4.33 3,311,623 23,890 4.33 3,335,013 24,004 4.32
----- ------ ---- ------ ----
Non-interest-bearing
liabilities(5) 185,810 134,717
--------- ---------
Total liabilities 3,497,433 3,469,730
Total equity 310,920 289,183
--------- ---------
Total liabilities and
equity $3,808,353 $3,758,913
========= =========
Net interest-earning assets $ 302,587 $ 212,361
========= =========
Net interest income/interest rate
spread 3.06% $20,191 (2.99)% $19,691 3.07%
==== ====== ==== ====== ====
Net interest margin (3.35)% 3.33%
==== ====
Ratio of average interest-earning 1.09x 1.06x
assets to average interest- ==== ====
bearing liabilities 1.08x
====
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------------
1997 1996
---------------------------------- --------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Mortgage loans $2,007,670 $ 161,638 8.05% $1,648,009 $140,435 8.52%
Other loans:
Cooperative apartment loans 361,011 26,687 7.39 352,440 26,389 7.49
Other (2) 108,608 9,502 8.75 108,661 9,773 8.99
----------- --------- ---------- -------
Total loans 2,477,289 197,827 7.99 2,109,110 176,597 8.37
Mortgage-backed and
mortgage-related
securities 475,967 28,856 6.06 286,317 17,779 6.21
Investment securities 395,677 22,356 5.65 204,862 11,635 5.68
Other interest-earning assets (3) 114,490 6,264 5.47 120,791 7,089 5.87
----------- --------- ---------- -------
Total interest-earning assets 3,463,423 255,303 7.37 2,721,080 213,100 7.83
--------- ---- ------- ----
Non-interest-earning assets 244,567 118,944
----------- ----------
Total assets $ 3,707,990 $2,840,024
========== =========
Interest-bearing liabilities:
Deposits:
Demand deposits(4) $ 469,833 $ 12,459 2.65 $ 350,395 $ 9,362 2.67
Savings deposits 1,055,807 30,728 2.91 834,374 25,097 3.01
Certificates of deposit 1,729,185 95,653 5.53 1,235,755 71,920 5.82
---------- --------- --------- -------
Total deposits 3,254,825 138,840 4.27 2,420,524 106,379 4.39
---------- -------- --------- -------
Total borrowings 18,581 1,347 7.25 69,402 4,240 6.11
---------- --------- --------- -------
Total interest-bearing
liabilities 3,273,406 140,187 4.28 2,489,926 110,619 4.44
--------- ---- ------- ----
Non-interest-bearing
liabilities(5) 132,807 76,075
---------- ---------
Total liabilities 3,406,213 2,566,001
Total equity 301,777 274,023
----------- ---------
Total liabilities and
equity $3,707,990 $2,840,024
========= =========
Net interest-earning assets $ 190,017 $ 231,154
========= =========
Net interest income/interest rate
spread $ 115,116 3.09% $102,481 3.39%
======= ==== ======= ====
Net interest margin 3.32% 3.77%
==== ====
Ratio of average interest-earning
assets to average interest-
bearing liabilities 1.06x 1.09x
==== ====
<CAPTION>
Year Ended March 31,
---------------------------------
1995
---------------------------------
Average
Average Yield/
Balance Interest Cost
------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Mortgage loans $1,447,776 $128,008 8.84%
Other loans:
Cooperative apartment loans 314,665 23,185 7.37
Other (2) 113,748 8,541 7.51
--------- -------
Total loans 1,876,189 159,734 8.51
Mortgage-backed and
mortgage-related
securities 335,128 20,204 6.03
Investment securities 196,928 8,644 4.39
Other interest-earning assets (3) 49,094 2,957 6.02
--------- -------
Total interest-earning assets 2,457,339 191,539 7.79
------- ----
Non-interest-earning assets 88,518
---------
Total assets $2,545,857
=========
Interest-bearing liabilities:
Deposits:
Demand deposits(4) $ 329,451 $ 7,776 2.36%
Savings deposits 957,017 27,985 2.92
Certificates of deposit 877,252 40,682 4.64
--------- -------
Total deposits 2,163,720 76,443 3.53
--------- -------
Total borrowings 70,176 4,119 5.87
--------- -------
Total interest-bearing
liabilities 2,233,896 80,562 3.61
------- ----
Non-interest-bearing
liabilities(5) 76,230
---------
Total liabilities 2,310,126
Total equity 235,731
---------
Total liabilities and
equity $2,545,857
=========
Net interest-earning assets $ 223,443
=========
Net interest income/interest rate
spread $110,977 4.18%
======= ====
Net interest margin 4.52%
====
Ratio of average interest-earning
assets to average interest-
bearing liabilities 1.10x
======
</TABLE>
- -------------------------
(1) The average balance of loans receivable includes non-performing loans,
interest on which is recognized on a cash basis.
(2) Includes home equity lines of credit and improvement loans, student
loans, automobile loans, passbook loans, credit card loans, personal
loans and commercial business loans.
(3) Includes federal funds sold, interest-earning bank deposits, FHLB
stock and overnight commercial paper.
(4) Includes NOW and money market accounts.
(5) Includes escrow accounts for the payment of taxes.
61
<PAGE> 106
RATE/VOLUME ANALYSIS
The following table sets forth the effects of changing rates and
volumes on net interest income of the Bank. Information is provided with
respect to (i) effects on interest income attributable to changes in volume
(changes in volume multiplied by prior rate) and (ii) effects on interest
income attributable to changes in rate (changes in rate multiplied by prior
volume). The combined effect of changes in both rate and volume has been
allocated proportionately to the change due to rate and the change due to
volume.
<TABLE>
<CAPTION>
Two Months Ended May 31, 1997 compared to
Two Months Ended May 31, 1996 Fiscal 1997 compared to Fiscal 1996
-------------------------------------- ------------------------------------------
Increase (decrease) due to Increase (decrease) due to
-------------------------------------- ------------------------------------------
Total Net Total Net
Increase Increase
Rate Volume (Decrease) Rate Volume (Decrease)
---- ------ ---------- ---------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Mortgage loans $(8,147) $9,391 $1,244 $(8,088) $29,291 $21,203
Other loans:
Cooperative apartment loans (916) 941 25 (349) 647 298
Other loans (1) 66 171 237 (266) (5) (271)
----- ------ ------ ----- --- -----
Total loans receivable (8,997) 10,503 1,506 (8,703) 29,933 21,230
Mortgage-backed and mortgage-related
securities 9,204 (12,782) (3,578) (439) 11,516 11,077
Investment securities 315 1,947 2,262 (61) 10,782 10,721
Other interest-earning assets (895) 1,091 196 (467) (358) (825)
----- ----- --- ----- ----- -----
Total net change in income on interest-
earning assets (373) 759 386 (9,670) 51,873 42,203
Interest-bearing liabilities:
Deposits:
Demand deposits 115 218 333 (70) 3,167 3,097
Savings deposits (198) (418) (616) (856) 6,487 5,631
Certificates of deposit 125 165 290 (3,739) 27,472 23,733
--- --- --- ------- ------ ------
Total deposits 42 (35) 7 (4,665) 37,126 32,461
Borrowings (61) (60) (121) 673 (3,566) (2,893)
---- ---- ----- ----- ------- -------
Total net change in expense on
interest-bearing liabilities (19) (95) (114) (3,992) 33,560 29,568
---- ---- ----- ------- ------- ------
Net change in net interest income $(354) $854 $500 $(5,678) $18,313 $12,635
===== === === ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1996 compared to Fiscal 1995
--------------------------------------------
Increase (decrease) due to
--------------------------------------------
Total Net
Increase
Rate Volume (Decrease)
---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Mortgage loans $(4,766) $17,193 $12,427
Other loans:
Cooperative apartment loans 383 2,821 3,204
Other loans (1) 1,627 (395) 1,232
----- ----- -----
Total loans receivable (2,756) 19,619 16,863
Mortgage-backed and mortgage-related
securities 589 (3,014) (2,425)
Investment securities 2,631 360 2,991
Other interest-earning assets (76) 4,208 4,132
---- ----- -----
Total net change in income on interest-
earning assets 388 21,173 21,561
Interest-bearing liabilities:
Deposits:
Demand deposits 1,069 517 1,586
Savings deposits 828 (3,716) (2,888)
Certificates of deposit 11,983 19,255 31,238
------ ------ ------
Total deposits 13,880 16,056 29,936
Borrowings 166 (45) 121
------ ------- ------
Total net change in expense on
interest-bearing liabilities 14,046 16,011 30,057
------ ------ ------
Net change in net interest income $(13,658) $5,162 $(8,496)
======== ===== =======
</TABLE>
- -------------
(1) Includes home equity lines of credit and loans, student loans,
automobile loans, passbook loans, personal loans, credit card loans
and commercial business loans.
62
<PAGE> 107
COMPARISON OF RESULTS OF OPERATIONS FOR THE TWO MONTHS ENDED MAY 31, 1997 AND
1996 AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
GENERAL. The Bank reported net income of $4.5 million and $6.1
million for the two months ended May 31, 1997 and 1996, respectively, and $17.2
million, $36.0 million and $34.9 million for the years ended March 31, 1997,
1996 and 1995, respectively. The $1.5 million or 25.3% decrease in net income
during the two months ended May 31, 1997 compared to the same period in the
prior year was primarily due to a $2.2 million increase in other expenses
combined with a $850,000 increase in the provision for loan losses partially
offset by a $500,000 increase in net interest income and a $1.2 million
decrease in the provision for income taxes. The primary component of the
increase in other expense was a $799,000 increase in data processing services
relating primarily to expenses incurred in connection with the conversion of
the Bank's data processing system. The increase in the provision for loan
losses in the 1997 period compared to the two months ended May 31, 1996
reflected the Bank's determination to increase its allowance for loan losses in
view of, among other things, continued emphasis on originating multi-family
residential loans as well as the increased number of larger multi-family
residential and individual cooperative apartment loans. Net income declined by
$18.8 million from fiscal 1996 to fiscal 1997 due primarily to the recognition
in fiscal 1996 of a $12.2 million net gain on the sale of securities and loans
as compared to a net loss on the sale of securities and loans totaling $3.3
million in fiscal 1997. The Bank sold $16.5 million of investment securities
in fiscal 1996, recording a gain of $12.1 million. Net income was also affected
by the $6.4 million increase in amortization of intangibles, reflecting a full
year of amortization of the intangible assets acquired from Bay Ridge and in
the 1996 Branch Acquisition. The decrease in net income in fiscal 1997 was
also the result, in part, of the increase in the Bank's provision for loan
losses from $3.7 million for the year ended March 31, 1996 to $8.0 million for
the year ended March 31, 1997 as the Bank increased its allowance for loan
losses primarily in light of its increased investment in multi-family
residential loans, the increased number of larger multi-family residential
loans and individual cooperative apartment loans and an increase in the number
of loans which exhibit risk characteristics which management determined would
require closer oversight. See "Business - Asset Quality." Net income was also
adversely effected by the $8.6 million special SAIF assessment. See "- Other
Expenses." Net income for fiscal 1997 was favorably affected by a reduction in
the provision for income taxes due to a reduction in the Bank's effective tax
rate for the fiscal year. The slight increase in net income from fiscal 1995
to fiscal 1996 reflected the effect of the aforementioned gain on sale of
securities and loans in fiscal 1996 offset in part by a decrease in net
interest income combined with increased other expenses.
NET INTEREST INCOME. Net interest income is determined by interest
rate spread (i.e., the difference between the yields earned on its
interest-earning assets and the rates paid on its interest-bearing liabilities)
and the relative amounts of interest-earning assets and interest-bearing
liabilities. The Bank's interest rate spread was 2.99% and 3.07% for the two
months ended May 31, 1997 and 1996, respectively, and was 3.09% for fiscal 1997
as compared to 3.39% and 4.18% for fiscal years 1996 and 1995, respectively.
The Bank's net
63
<PAGE> 108
interest margin was 3.35% and 3.33% for the two months ended May 31, 1997 and
1996, respectively, and was 3.32%, 3.77% and 4.52% for the years ended March
31, 1997, 1996 and 1995, respectively. Net interest income increased by
$500,000 or 2.5% to $20.2 million for the two months ended May 31, 1997 as
compared to the same period in the prior year. The increase was primarily due
to a $386,000 increase in interest income combined with a $114,000 decrease in
interest expense. Net interest income increased by $12.6 million or 12.3% to
$115.1 million in fiscal 1997 primarily due to a significant increase in the
Bank's average interest-earning assets as a result of the Bay Ridge acquisition
and the re-investment of the cash received in the 1996 Branch Acquisition
completed during the fourth quarter of fiscal 1996. The Bank's net interest
income declined in fiscal 1996 by $8.5 million or 7.7% compared to fiscal 1995
due primarily to a decline in the interest rate spread from 4.18% for fiscal
1995 to 3.39% for fiscal 1996. The decrease in the spread reflected in large
part the effects of increased rates paid on deposits with no corresponding
increase in the yields earned on interest-earning assets.
Interest income increased by $386,000 to $44.1 million for the two
months ended May 31, 1997 as compared to the same period in 1996 primarily due
to an increase in the average balance of the Bank's interest-earning assets,
offset in part by a decline in the weighted average yield earned thereon from
7.39% for the 1996 period to 7.32% for the 1997 period. The composition of the
Bank's interest income for the two months ended May 31, 1997 reflected the
changes in the Bank's asset structure effected during fiscal 1997. Interest
income earned on mortgage-backed and mortgage-related securities declined by
$3.6 million primarily as a result of the decline in the average balance of
such assets from $549.8 million during the 1996 period to $175.3 million for
the 1997 period. However, offsetting such decline were $2.3 million and $1.2
million increases in interest earned during the two months ended May 31, 1997
on investment securities and mortgage loans, respectively, reflecting the asset
restructuring effected in fiscal 1997 as well as the Bank's continued emphasis
on multi-family residential lending. Interest income increased by $42.2
million from fiscal 1996 to fiscal 1997 reflecting the increase in the average
balance of the Bank's interest-earning assets as a result of the completion of
the Bay Ridge acquisition and the 1996 Branch Acquisition. The average balance
of the loan portfolio increased by $368.2 million both as a result of the
acquisition of loans from Bay Ridge as well as the Bank's investment of a
portion of the funds received in the 1996 Branch Acquisition in new loans.
Offsetting in part the effects of the increase in the average balance of loans
was the 38 basis point decline in the average yield earned on the loan
portfolio reflecting in part the repricing downward of adjustable-rate loans as
well as general market conditions which resulted in loans with lower yields at
the time of origination. Investment of cash received in the 1996 Branch
Acquisition as well as investment securities and mortgage-backed and
mortgage-related securities acquired from Bay Ridge were responsible for the
significant increase in the aggregate average balance of investment securities
and mortgage-backed and mortgage-related securities which increased from $491.1
million in fiscal 1996 to $871.6 million in fiscal 1997. Partially offsetting
the increase in the average balances of these portfolios were declines in the
average yield earned from 5.99% to 5.88%. Interest income also increased for
the year ended March 31, 1996 as compared to the prior fiscal year,
64
<PAGE> 109
although at a more modest level, due primarily to growth in the Bank's
interest-earning assets, primarily loans. Average interest-earning assets
increased by $263.7 million or 10.7% during fiscal 1996 primarily as a result
of the Bay Ridge acquisition and the 1996 Branch Acquisition completed in the
fourth quarter of fiscal 1996. Also contributing to the increase, but to a
significantly lesser degree, was a 4 basis point increase in the average yield
earned on the Bank's interest-earning assets.
Interest expense declined slightly from $24.0 million for the two
months ended May 31, 1996 to $23.9 million for the two months ended May 31,
1997 with most of the decline due to a $121,000 decrease in interest paid on
borrowings. The Bank's average balance of deposits remained relatively stable
during the period, decreasing slightly to $3.29 billion for the 1997 period
from $3.31 billion for the 1996 period. Interest expense increased by $29.6
million or 26.7% to $140.2 million from fiscal 1996 to fiscal 1997 reflecting a
34.5% increase in the average balance of deposits, particularly certificates of
deposit, as a result of the Bay Ridge acquisition and the 1996 Branch
Acquisition. The growth in the average balance of deposits was offset in part
by the decline in average rates paid thereon from 4.39% to 4.27%. In
particular, the average rate paid on certificates of deposit decreased 29 basis
points to 5.53% for fiscal 1997. Such decline reflecting in part both the
effect of deposit outflows as certain higher costing deposits were not
reinvested with the Bank, as well as the transfer to another institution of
$51.4 million of deposits. Interest expense increased from fiscal 1995 to
fiscal 1996 by $30.1 million to $110.7 million or 37.3% due to the growth in
the average balance of deposits from $2.16 billion to $2.42 billion and an
increase in the average rate paid thereon from 3.53% to 4.39%. As in fiscal
1997, the bulk of the growth in interest-bearing liabilities occurred in
certificates of deposit, the average cost of which increased from 4.64% in
fiscal 1995 to 5.82% in fiscal 1996. The increase in the average rate
reflected both the effects of the higher interest rate environment existing in
fiscal 1996 as well as to the 1996 Branch Acquisition.
PROVISION FOR LOAN LOSSES. The Bank's provision for loan losses
increased by $850,000 or 141.7% from $600,000 for the two months ended May 31,
1996 to $1.5 million for the two months ended May 31, 1997. The increase in
the provision reflected the Bank's determination in fiscal 1997 to increase its
allowance for loan losses as described previously. The provision for loan
losses increased by $4.3 million to $8.0 million in fiscal 1997. At March 31,
1997, the allowance for loan losses represented 1.1% of total loans and 144.9%
of total non-performing loans as compared to 0.9% and 70.6%, respectively, at
March 31, 1996. In management's judgment it was prudent to increase the
allowance for loan losses based upon, among other factors, the Bank's
continuing emphasis on multi-family residential loans secured by properties
located in the New York City metropolitan area, the increased number of larger
multi-family residential loans and individual cooperative apartment loans and
an increased amount of loans which exhibit risk characteristics which require
increased management oversight. See "Business - Asset Quality." For the year
ended March 31, 1996, the provision amounted to $3.7 million as compared to
$3.8 million for the prior fiscal year. At March 31, 1996 and March 31, 1995,
the Bank's allowance for loan losses as a percentage of total non-performing
loans remained relatively constant at 70.6% and 75.0%, respectively.
65
<PAGE> 110
OTHER INCOME. Other income decreased $161,000 or 9.6% from $1.7
million for the two months ended May 31, 1996 to $1.5 million for the same
period in 1997. The decrease reflected the $467,000 decline in other other
income, partially offset by a $275,000 increase in service fees on deposit
accounts and other depositor and borrower services. The decrease in other
income reflected in large part a recognition portion of the loss incurred on
the sale of a branch office acquired in the 1996 Branch Acquisition. Other
income decreased by $17.2 million or 85.5% to $2.9 million from fiscal 1996 to
fiscal 1997. The decline reflected in large part the $12.2 million net gain in
fiscal 1996 on the sale of loans and investment securities and mortgage-backed
and mortgage-related securities as compared to a $3.3 million net loss incurred
in fiscal 1997. The net gain was primarily due to a $12.1 million gain on the
sale of $16.5 million of investment securities which were sold in fiscal 1996
in anticipation of the requirement to fund the SAIF special assessment
(discussed below) while the net loss incurred in fiscal 1997 resulted from a
$3.9 million net loss on the sale of $527.2 million of investment securities
and mortgage-backed and mortgage-related securities primarily as part of the
Bank's asset restructuring. The loss on loan and securities sales was
partially offset by an increase in service fees on deposit accounts and other
depositor and borrower services provided by the Bank from $4.1 million to $5.7
million. From fiscal 1995 to fiscal 1996, the Bank's other income increased
substantially due to the previously mentioned net gain on sale of investment
securities realized in fiscal 1996. In addition, during fiscal 1995 the Bank
incurred a $4.0 million loss primarily as the result of loan sales. During the
third quarter of fiscal 1995, the Bank securitized and sold $119.7 million of
multi-family loans to the FNMA in order to provide additional liquidity to
support its on-going lending activity. The Bank incurred a loss of $2.7
million on the sale, partially offset by the recognition of $1.5 million of
deferred loan origination fees related to these loans. In addition, during
fiscal 1995 the Bank sold approximately $11.6 million of long-term, fixed-rate
loans to the FHLMC, incurring a loss of $883,000. Other other income, ranged
from $548,000 for the year ended March 31, 1997 to $3.8 million for the year
ended March 31, 1996 to $2.3 million for the year ended March 31, 1995. The
decline from fiscal 1996 to fiscal 1997 reflected primarily the $1.7 million
loss incurred on the transfer of deposits related to a branch office acquired
in the 1996 Branch Acquisition. See "-Recent Acquisitions."
OTHER EXPENSES. Other expenses increased $2.2 millon or 18.9% to
$14.0 million for the two months ended May 31, 1997 from $11.8 million for the
same period in 1996. Such increase was primarily due to increased data
processing fees ($799,000), primarily due to costs incurred in connection with
the Bank's conversion of its data processing systems, increased compensation
and employee benefits expense ($481,000) reflecting the increase in the Bank's
work force resulting from the Bay Ridge acquisition and the 1996 Branch
Acquisition and increased other other expense ($1.2 million) primarily due to
expanded branch operations resulting from the purchase transactions completed
in fiscal 1996. Such increases were partially offset by a $429,000 decrease in
FDIC insurance premiums reflecting the lower premium rate assessed in the 1997
period. Other expenses increased substantially by $30.0 million or 57.6% to
$82.2 million from fiscal 1996 to fiscal 1997. This increase was primarily due
to the effects of the Bay Ridge acquisition and the 1996 Branch
66
<PAGE> 111
Acquisition (including amortization of intangible assets ($6.4 million)), the
imposition of the special SAIF assessment ($8.6 million) on that portion of the
Bank's deposits deemed to be SAIF-insured deposits and increased data
processing fees ($3.9 million) due, in part, to a data processing systems
conversion. As a result of the two acquisitions in 1996, the Bank added ten
offices to its branch network and increased its work force by approximately
20%. By comparison, the increase in other expenses from fiscal 1995 to fiscal
1996 was significantly less, only increasing by $4.8 million or 10.1% to $52.1
million in fiscal 1996. The increase during fiscal 1996 over fiscal 1995 was
accounted for in large part by increases in compensation and employee benefits
and occupancy costs. It is expected that other expenses will increase due to
the increased costs involved in operating as a public company as well as to the
expenses related to the various proposed stock benefit plans. See "Management
- - Benefits."
Compensation and employee benefits expense increased by $481,000 or
10.5% to $5.1 million during the two months ended May 31, 1997 as compared to
the same period in 1996. In addition, compensation and employee benefits
expense increased by $4.6 million or 20.5% to $26.9 million in fiscal 1997 from
$22.3 million in fiscal 1996. The increases in the two months ended May 31,
1997 and in fiscal 1997 reflected in large part the effects of the Bay Ridge
acquisition and the 1996 Branch Acquisition, resulting in an increase of
approximately 20% in the number of employees. The $2.2 million or 10.7%
increase in compensation and employee benefit expense experienced between
fiscal 1996 and 1995 primarily reflected normal increases in compensation and
employee benefit costs.
Occupancy costs increased modestly, only increasing $59,000 to $1.9
million for the two months ended May 31, 1997 from $1.8 million for the same
period in 1996. However, occupancy costs increased by $3.3 million or 43.4% to
$11.0 million in fiscal 1997 from fiscal 1996 primarily due to the addition of
ten additional branch offices as a result of the Bay Ridge acquisition and the
1996 Branch Acquisition. The increased cost also reflected expenses incurred
in connection with an on-going branch renovation and improvement program.
Occupancy costs totaled $7.7 million for fiscal 1996, a $1.7 million or 28.7%
increase from fiscal 1995, due primarily to the Bank's on going branch
renovation program.
Data processing service expenses increased by $799,000 or 114.6% to
$1.5 million during the two months ended May 31, 1997 as compared to the two
months ended May 31, 1996. The increase reflected in large part expenses being
incurred in connection with the conversion of the Bank's data processing
system. Such expenses amounted to $830,000 during the two months ended May 31,
1997. The Bank expects to incur additional costs in connection with the
conversion of the Bank's data processing system which is expected to be
completed in fiscal 1998. Such expenses also increased during fiscal 1997,
increasing 125.2% from $3.1 million for the year ended March 31, 1996 to $7.0
million for the year ended March 31, 1997. Once again, the primary reason for
the increase was the significant increase in the number of customer accounts at
the Bank as a result of the Bay Ridge acquisition and the 1996 Branch
Acquisition. In addition, during fiscal 1997, the Bank determined to convert
its data processing system. As a consequence, the Bank expensed
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<PAGE> 112
$2.6 million during fiscal 1997 in connection with such conversion. Between
fiscal 1996 and fiscal 1995, data processing service expenses remained
relatively stable, only increasing $26,000 or .8% to $3.1 million during the
year ended March 31, 1996.
The Bank's advertising expenses amounted to $633,000 and $450,000 for
the two months ended May 31, 1997 and 1996, respectively, and to $3.6 million,
$3.2 million and $2.2 million for the years ended March 31, 1997, 1996 and
1995, respectively. The increase in the two months ended May 31, 1997 and in
fiscal years 1997 and 1996 reflected the Bank's determination to increase its
market presence through, in part, increased advertising in print media and
radio.
FDIC insurance premiums declined in the two months ended May 31, 1997
and in fiscal years 1997 and 1996 from the level experienced in fiscal 1995
even though the level of insurable deposits increased substantially during
fiscal years 1996 and 1997. Such expenses decreased from $5.1 million during
fiscal 1995 to $2.2 million in fiscal 1997. For the two months ended May 31,
1997, such expenses amounted to $210,000 as compared to $639,000 for the same
period in the prior year. The decreases reflect the reduction in the rate paid
to the FDIC for deposit insurance premiums combined with a refund from the FDIC
in fiscal 1997 totaling $961,000 related to the recapitalization of the SAIF.
See "Regulation - The Bank - FDIC Insurance Premiums."
As a result of certain of its past acquisitions, the Bank is deemed to
have SAIF-insured deposits. During fiscal 1997, the FDIC imposed a one-time
special assessment in order to recapitalize the SAIF fund which, for
BIF-insured institutions like the Bank which also have deposits deemed to be
SAIF-insured, amounted to 65 basis points for each $100 of SAIF deposits as of
March 31, 1995. As a result, the Bank was assessed $8.6 million. The level of
deposit insurance expense for the Bank is and will remain higher than that of
an insured institution with a comparable amount of BIF only insured deposits
due to the significant amount of the Bank's deposits deemed to be SAIF-insured.
The Bank's deposits deemed SAIF-insured are assessed at a rate of 6.4 basis
points compared to 1.3 basis points for the Bank's BIF-insured deposits. At
May 31, 1997 and at March 31, 1997, $1.61 billion of the Bank's deposits were
deemed to be SAIF insured.
During the two months ended May 31, 1997, the amortization of
intangibles declined slightly by $62,000 or 4.0% from the same period in 1996.
The amortization of intangibles increased by $6.4 million to $8.3 million in
fiscal 1997 from fiscal 1996 reflecting a full year of amortization of the
intangibles recorded in the Bay Ridge acquisition and the 1996 Branch
Acquisition compared to amortization expense related to such intangibles only
during the fourth quarter of fiscal 1996. Amortization expense amounted to
$1.8 million in fiscal 1996. Amortization of intangibles amounted to $905,000
in fiscal 1995 and related to intangibles recorded in connection with branch
acquisitions completed in prior years.
Other other expenses, including miscellaneous other items such as
equipment expenses, office supplies, postage, telephone expenses, maintenance
and security services
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contracts, increased $1.2 million or 58.2% to $3.2 million from the two months
ended May 31, 1996 to the same period in 1997 and by $3.2 million or 28.0% to
$14.6 million in fiscal 1997 as compared to fiscal 1996 primarily as a result
of the significantly expanded branch operations resulting from the purchase
transactions completed in 1996. Once again, such expenses increased at a much
more modest rate from fiscal 1995 to fiscal 1996, only increasing $1.4 million
or 13.7% to $11.4 million in fiscal 1996.
INCOME TAXES. Income tax expense amounted to $1.7 million and $2.9
million for the two months ended May 31, 1997 and 1996, respectively, and $10.7
million, $30.8 million and $27.3 million during fiscal 1997, 1996 and 1995,
respectively. The decrease experienced from fiscal 1996 to fiscal 1997 and in
the two months ended May 31, 1997 as compared to the two months ended May 31,
1996 reflected in part the decrease in the Bank's income before income taxes.
In addition, the Bank's effective tax rate was substantially reduced due to the
establishment of a real estate investment trust, Independence Community Realty
Corp. ("ICRC" or the "REIT"), during fiscal 1997. See "Business - Subsidiary
Activities." The Bank's effective tax rates for the two months ended May 31,
1997 and for fiscal 1997, 1996 and 1995 were 27.3%, 38.4%, 46.1% and 43.9%,
respectively.
As of May 31, 1997, the Bank had a net deferred tax asset of $17.1
million. No valuation allowance was deemed necessary with respect to such
asset.
ASSET AND LIABILITY MANAGEMENT
The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap" provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when
the amount of interest-rates sensitive assets exceeds the amount of
interest-rate sensitive liabilities, and is considered negative when the amount
of interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets. Accordingly, during a period of rising interest rates, an
institution with a negative gap position would be in a worse position to invest
in higher yielding assets which, consequently, may result in the cost of its
interest-bearing liabilities increasing at a rate faster than its yield on
interest-earning assets than if it had a positive gap. During a period of
falling interest rates, an institution with a negative gap would tend to have
its interest-bearing liabilities repricing downward at a faster rate than its
interest-earning assets as compared to an institution with a positive gap
which, consequently, may tend to positively affect the growth of its net
interest income.
The Bank's asset and liability management strategy is established by
the Asset/Liability Committee of the Bank and reviewed by the Bank's Board of
Directors periodically. The Asset/Liability Committee meets monthly.
Currently, the Bank manages
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<PAGE> 114
the imbalance between its interest-earning assets and interest-bearing
liabilities within shorter maturities to ensure that such relationships are
within acceptable ranges given the Bank's business strategies and objectives
and its analysis of market and economic conditions.
The Bank's strategies to manage interest rate risk include (i)
increasing the interest sensitivity of its mortgage loan portfolio through the
use of adjustable-rate loans or relatively short-term (five to ten years)
balloon loans, (ii) selling most newly originated fixed-rate, single-family
residential mortgage loans with original terms to maturity of 15 years or more,
(iii) originating relatively short-term and adjustable-rate consumer and
commercial business loans, (iv) maintaining a high level of investment
securities and mortgage-backed and mortgage-related securities with maturities
or estimated average lives of less than five years, (v) promoting stable
savings, demand and other transaction accounts and (vi) maintaining a strong
capital position.
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<PAGE> 115
The following table summarizes the anticipated maturities or repricing
of the Bank's interest-earning assets and interest-bearing liabilities as of
May 31, 1997, based on the information and assumptions set forth in the notes
below.
<TABLE>
<CAPTION>
More Than
Three to More Than Three Years
Within Three Twelve One Year to to Five Over Five
Months Months Three Years Years Years Total
----------------- ------------ ---------------- ------------- ------------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets (1):
Loans receivable:
Single-family residential loans $23,196 $80,148 $219,898 $72,685 $114,987 $510,914
Multi-family residential 93,581 193,345 550,259 469,090 98,029 1,404,304
Commercial real estate and
mortgage loans: 21,611 23,160 65,389 41,898 11,078 163,136
Other loans:
Cooperative apartment loans 18,357 69,377 179,855 59,247 32,827 359,663
Other loans(2) 74,753 5,741 17,046 19,905 5,477 122,922
Mortgage-backed and mortgage-
related securities
11,234 28,028 73,567 44,117 25,302 182,248
Investment securities 123,719 118,038 446,324 14,232 1,509 703,822
Equity securities 13,121 -- -- -- -- 13,121
Other interest-earning assets 118,282 -- -- -- -- 118,282
----- ------- -------- -------- -----------
Total $ 497,854 $ 517,837 $1,552,338 $721,174 $289,209 $3,578,412
======== ======== ========= ======= ======= =========
Interest-bearing liabilities:
Deposits(3):
NOW accounts $272,848 $ -- $ -- $ -- $ -- $272,848
Savings accounts 1,027,028 -- -- -- -- 1,027,028
Money market deposit accounts 217,050 -- -- -- -- 217,050
Certificates of deposit 538,867 789,248 385,263 75,726 536 1,789,640
Other borrowings -- -- 2,700 8,082 6,400 17,182
------------ ------- ---------- --------- --------- ------------
Total $ 2,055,793 $ 789,248 $ 387,963 $ 83,808 $ 6,936 $ 3,323,748
========== ======== ======== ======== ======= ==========
Excess (deficiency) of interest-earning
assets over interest-bearing
liabilities $(1,557,939) $ (271,411) $1,164,375 $637,366 $282,273 $ 254,664
=========== ============ ========= ======= ======= ===========
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities $(1,557,939) $ (1,829,350) $(664,975) $(27,609) $254,664
=========== ============ ========= ======== =======
Cumulative excess (deficiency) of
interest-earning assets over
interest-bearing liabilities as a
percent of total assets (40.8)% (47.9)% (17.4)% (0.7)% 6.7%
====== ======= ======= ===== ====
</TABLE>
- ----------------------
(1) Adjustable-rate loans are included in the period in which interest
rates are next scheduled to adjust rather than in the period in which
they are due, and fixed-rate loans are included in the periods in
which they are scheduled to be repaid, based on scheduled
amortization, in each case as adjusted to take into account estimated
prepayments based on certain assumptions.
(2) Includes student loans, home equity lines of credit and improvement
loans, automobile loans, passbook loans, personal loans, credit card
loans and commercial business loans.
(3) Does not include non-interest-bearing deposit accounts.
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<PAGE> 116
Management believes that the assumptions utilized by it to evaluate
the vulnerability of the Bank's operations to changes in interest rates
approximate actual experience and considers them reasonable; however, the
interest rate sensitivity of the Bank's assets and liabilities in the above
table could vary substantially if different assumptions were used or actual
experience differs from the historical experience on which they are based.
Certain shortcomings are inherent in the method of analysis presented
in the table 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 both on a
short-term basis and over the life of the asset. Further, in the event of
changes in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in calculating the table. Finally,
the ability of many borrowers to service their adjustable-rate loans may
decrease in the event of an interest rate increase.
Although interest rate sensitivity gap is a useful measurement and
contributes toward effective asset and liability management, it is difficult to
predict the effect of changing interest rates based solely on that measure. An
alternative methodology is to estimate the change in the Bank's net portfolio
value ("NPV") over a range of interest rate scenarios. NPV is the present
value of expected cash flows from assets, liabilities, and off-balance sheet
contracts. The NPV ratio, under any interest rate scenario, is defined as the
NPV in that scenario divided by the market value of assets in the same
scenario. The model assumes estimated loan prepayment rates and reinvestment
rates similar to the assumptions utilized for the gap table set forth above.
The following sets forth the Bank's NPV as of May 31, 1997.
<TABLE>
<CAPTION>
NPV as % of
Change (in Basis Points) in Interest Portfolio
Rates Net Portfolio Value Value of Assets
------------------------------------ -------------------------------------------- ------------------
NPV
Amount $Change %Change Ratio %Change
---------- --------- --------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+400 $206,669 $(121,322) (36.99)% 5.95% (2.60)%
+300 242,102 ( 85,889) (26.19) 6.79 (1.76)
+200 274,218 ( 53,773) (16.39) 7.50 (1.05)
+100 302,240 ( 25,751) (7.85) 8.06 (0.49)
0 327,991 -- 0.00 8.55 0.00
-100 349,871 21,880 6.67 8.92 0.37
-200 378,570 50,579 15.42 9.44 0.89
-300 434,720 106,729 32.54 10.59 2.04
-400 519,698 191,707 58.45 12.35 3.80
</TABLE>
As in the case with the gap table, certain shortcomings are inherent
in the methodology used in the above interest rate risk measurements. Modeling
changes in NPV
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<PAGE> 117
require the making of certain assumptions which may or may not reflect the
manner in which actual yields and costs respond to changes in market interest
rates. In this regard, the NPV table presented assumes that the composition of
the Bank's interest sensitive assets and liabilities existing at the beginning
of a period remains constant over the period being measured and also assumes
that a particular change in interest rates is reflected uniformly across the
yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities. Accordingly, although the NPV table provides an
indication of the Bank's interest rate risk exposure at a particular point in
time, such measurements are not intended to and do not provide a precise
forecast of the effect of changes in market interest rates on the Bank's net
interest income and will differ from actual results.
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<PAGE> 118
REGULATORY CAPITAL REQUIREMENTS
The following table sets forth the Bank's compliance with applicable
regulatory capital requirements at May 31, 1997.
<TABLE>
<CAPTION>
Required Actual Excess
--------------------- -------------------- ------------------
Percent Amount Percent Amount Percent Amount
------- ------ ------- ------ ------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier I leverage capital
ratio(1) 4.0% $149,776 6.7% $249,355 2.7% $99,579
Risk-based capital
ratios:
Tier I 4.0 95,557 10.4 249,355 6.4 153,798
Total 8.0 191,114 11.6 278,131 3.6 87,017
</TABLE>
- ---------------
(1) Reflects the 4.0% requirement to be met in order for an institution to
be "adequately capitalized" under applicable laws and regulations.
For additional information about the Bank's regulatory capital, see
"Regulatory Capital," and "Regulation - The Bank - Capital Requirements."
LIQUIDITY AND COMMITMENTS
The Bank's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Bank's
primary sources of funds are deposits, the amortization, prepayment and
maturity of outstanding loans, mortgage-backed and mortgage-related securities,
the maturity of investment securities and other short-term investments and
funds provided from operations. While scheduled payments from the amortization
of loans, mortgage-backed and mortgage-related securities and maturing
investment securities and short-term investments are relatively predictable
sources of funds, deposit flows and loan prepayments are greatly influenced by
general interest rates, economic conditions and competition. In addition, the
Bank invests excess funds in federal funds sold and other short-term
interest-earning assets which provide liquidity to meet lending requirements.
The Bank has been able to generate sufficient cash through its deposits and has
only utilized borrowings, consisting primarily of advances from the FHLB of New
York, to a limited degree as a source of funds during the past five years.
Such advances have ranged from $67.5 million at March 31, 1995 to $14.6 million
at May 31, 1997. In addition, the net proceeds of the Offerings will initially
enhance the Company's liquidity.
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<PAGE> 119
Liquidity management is both a daily and long-term function of
business management. Excess liquidity is generally invested in short-term
investments such as federal funds sold or U.S. Treasury securities. On a
longer term basis, the Bank maintains a strategy of investing in various
lending products as described in greater detail under "Business - Lending
Activities." Most of such products have short-terms (five years or less). The
Bank uses its sources of funds primarily to meet its ongoing commitments, to
pay maturing certificates of deposit and savings withdrawals, fund loan
commitments and maintain a portfolio of mortgage-backed and mortgage-related
securities and investment securities. At May 31, 1997, there were outstanding
commitments and unused lines of credit by the Bank to originate or acquire
mortgage loans and other loans aggregating $134.5 million and $40.4 million,
respectively, consisting of fixed and adjustable-rate residential loans and
fixed-rate commercial real estate loans that are expected to close during the
year ended March 31, 1998. Certificates of deposit scheduled to mature in one
year or less at May 31, 1997, totaled $1.33 billion. Based on historical
experience, management believes that a significant portion of maturing deposits
will remain with the Bank. The Bank anticipates that it will continue to have
sufficient funds, together with borrowings, to meet its current commitments.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related financial data
presented herein have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes
in relative purchasing power over time due to inflation. Unlike most
industrial companies, virtually all of the Bank's assets and liabilities are
monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than does the
effect of inflation.
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<PAGE> 120
IMPACT OF ACCOUNTING PRONOUNCEMENTS
In May 1993, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." The
statement generally requires all creditors to account for impaired loans,
except those loans that are accounted for at fair value or at the lower of cost
or fair value, at the present value of the expected future cash flows
discounted at the loan's effective interest rate. In October 1994, the FASB
issued SFAS No. 118, "Accounting by Creditors for Impairment of a Loan Income
Recognition and Disclosures." This statement amended SFAS No. 114 to allow a
creditor to use existing methods for recognizing interest income on an impaired
loan. SFAS No. 118 did not change the provisions in SFAS No. 114 that require
a creditor to measure impairment based on the present value of expected future
cash flows discounted at the loan's effective interest rate, or at the market
price of the loan, or the fair value of the collateral if the loan is
collateral dependent. SFAS No. 114 and SFAS No. 118 were effective for fiscal
years beginning after December 15, 1994. The Bank adopted SFAS No. 114, as
amended, on April 1, 1995 which did not have a material effect on the Bank's
financial statements.
In May 1993, the FASB issued SFAS No. 115, which requires debt and
equity securities to be classified in one of three categories and to be
accounted for as follows: debt securities which the company has the positive
intent and ability to hold to maturity are classified as "securities held to
maturity" and reported at amortized cost; debt and equity securities that are
bought and held principally for the purpose of selling them in the near term
are classified as "trading securities" and reported at fair value with
unrealized gains and losses included in earnings; and debt and equity
securities not classified as either held to maturity or trading securities are
classified as "securities available for sale" and reported at fair value with
unrealized gains and losses, net of related tax effect, excluded from earnings
and reported as a separate component of shareholders' equity. The Bank adopted
SFAS No. 115 as of April 1, 1994. The cumulative effect of the adoption of
SFAS No. 115 was increase in total equity of $2.7 million as of April 1, 1994.
However, on November 15, 1995, the FASB issued a guide to implementation of
SFAS No. 115 which permitted institutions on a one time basis, to reclassify
securities from one category to another (i.e., from held to maturity to
available for sale) until December 31, 1995. Management of the Bank changed
the classification of $169.1 million of the Bank's securities in accordance
with this pronouncement, resulting in an unrealized loss of $3.5 million.
In November 1993, the AICPA issued SOP 93-6, "Employers' Accounting
for Employee Stock Ownership Plans," which is effective for years beginning
after December 15, 1993. SOP 93-6 requires the application of its guidance for
shares acquired by ESOPs after December 31, 1992 but not yet committed to be
released as of the beginning of the year SOP 93-6 is adopted. SOP 93-6 changes
the measure of compensation expense recorded by employers for leveraged ESOPs
from the cost of ESOP shares to the fair value of ESOP shares. The Company has
adopted an ESOP in connection with the Conversion, which is expected to
purchase 8% of the Common Stock sold in the Conversion. Under SOP 93-6, the
Company will recognize compensation cost equal to the fair value of the
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<PAGE> 121
ESOP shares during the periods in which they become committed to be released.
To the extent that the fair value of the Company's ESOP shares differ from the
cost of such shares, this differential will be charged or credited to equity.
Employers with internally leveraged ESOPs such as the Company will not report
the loan receivable from the ESOP as an asset and will not report the ESOP debt
from the employer as a liability. However, the effects of SOP 93-6 on future
operating results cannot be determined at this time.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used for long-lived assets and certain identifiable
intangibles to be disposed of. This statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use should be based on the fair value of the asset.
This statement does not apply to financial instruments, long-term customer
relationships of a financial institution (for example, core deposit
intangibles), mortgage and other servicing rights, deferred policy acquisition
costs, or deferred tax assets. The Bank adopted SFAS No. 121 on April 1, 1996.
The adoption of SFAS No. 121 did not have a material impact on the financial
statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," establishing financial accounting and reporting
standards for stock-based employee compensation plans. This statement
encourages all entities to adopt a new method of accounting to measure
compensation cost of all employee stock compensation plans based on the
estimated fair value of the award at the date it is granted. Companies are,
however, allowed to measure compensation cost of such plans using the intrinsic
value based method of accounting, which generally does not result in
compensation expense recognition for most plans. Companies that elect to
remain with the existing accounting are required to disclose in a footnote to
the financial statements pro forma net income and, if presented, earnings per
share, as if this statement had been adopted. The accounting requirements of
this statement are effective for transactions entered into during fiscal years
that begin after December 15, 1995; however, companies are required to disclose
information for awards granted in their first fiscal year beginning after
December 15, 1994. The Company has determined to continue to use the intrinsic
value based methodology provided by APB Opinion No. 25.
In June 1996, the FASB released SFAS No. 125, "Accounting for
Transfers and Extinguishment of Liabilities." SFAS No. 125 provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities. SFAS No. 125 requires a consistent application
of a financial-components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity is required to
recognize the financial and servicing assets it controls and the liabilities it
has incurred and
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<PAGE> 122
to derecognize financial assets when control has been surrendered in accordance
with criteria provided in SFAS No. 125. SFAS No. 125 applies to transfers and
extinguishments occurring after December 31, 1996. The adoption of SFAS No.
125 did not have a material impact on the financial condition or operations of
the Bank.
In February 1997, the FASB released SFAS No. 128, "Earnings Per
Share." SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and applies to entities with publicly held common
stock or potential common stock. SFAS No. 128 simplifies the standards for
computing earnings per share previously found in APB Opinion No. 15, Earnings
Per Share, and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
numerator and denominator of the diluted EPS computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity. Diluted EPS is computed similarly to fully diluted EPS
pursuant to APB Opinion No. 15. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted.
In March 1997, the FASB issued SFAS No. 129, "Disclosure of
Information About Capital Structure." SFAS No. 129 continues the existing
requirements to disclose the pertinent rights and privileges of all securities
other than ordinary common stock but expands the number of companies subject to
portions of its requirements. Specifically, the Statement requires all
entities to provide the capital structure disclosures previously required by
APB Opinion No. 15. Companies that were exempt from the provisions of APB
Opinion No. 15 will now need to make those disclosures.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes 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. SFAS No. 130 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. SFAS No. 130
requires that an enterprise (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.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. Management is in the process of determining
the impact, if any, this statement will have on the Bank.
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<PAGE> 123
BUSINESS
GENERAL
The Bank's principal business is gathering deposits from customers
within its market area and investing those deposits, primarily in multi-family
residential mortgage loans, single-family residential loans (including
cooperative apartment loans), commercial real estate mortgage loans, consumer
loans and mortgage-backed and mortgage-related securities and investment
securities. The Bank's revenues are derived principally from interest on its
loan and securities portfolios while its primary sources of funds are deposits,
loan amortization and prepayments and maturities of mortgage-backed and
mortgage-related and investment securities. The Bank offers a variety of loan
and deposit products to its customers. The Bank also makes available other
financial instruments, such as annuity products and mutual funds, through
arrangements with a third party.
MARKET AREA AND COMPETITION
The Bank has been, and intends to continue to be, a community-oriented
financial institution providing financial services and loans for housing within
its market area. The Bank oversees its 33 branch office network through its
headquarters in the Brooklyn Heights section of Brooklyn. The Bank operates 17
branch offices in the borough of Brooklyn and another 10 in the borough of
Queens with the remainder spread among Manhattan, the Bronx, Staten Island and
Nassau County. The Bank gathers deposits primarily from the communities and
neighborhoods in close proximity to its branches. Although the Bank lends
throughout the New York City metropolitan area, the substantial majority of its
real estate loans are secured by properties located in the boroughs of Brooklyn
and Queens and, to a lesser extent, Manhattan. The Bank's customer base, like
the urban neighborhoods which it serves, is racially and ethnically diverse and
is comprised of mostly middle-income households and to a lesser degree, low to
moderate income households. The Bank has sought to set itself apart from its
many competitors by tailoring its products and services to meet the needs of
its customers, by emphasizing customer service and convenience and by being
actively involved in community affairs in the neighborhoods and communities
which it serves. As part of the Bank's competitive strategy to attract loyal
deposit customers, the Bank has historically been a low service fee provider of
a variety of savings and checking account products. The Bank believes that its
commitment to customer and community service has permitted it to build strong
customer identification and loyalty which is essential to the Bank's ability to
compete effectively.
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In the past several years, the New York City metropolitan area has
benefitted from the resurgence and growth in employment and profitability
experienced by national securities and investment banking firms, many of which
are domiciled in Manhattan, as well as the growth and profitability of other
financial service companies, such as money center banks. The strength of the
national economy and of the United States equities markets has contributed
significantly to the recent growth and increased profitability of Wall Street
securities and investment banking firms. Historically, the metropolitan area
has also benefitted from being the corporate headquarters of many large
industrial and commercial companies which have, in turn, attracted many smaller
companies, particularly within the service industry. The metropolitan area
also offers well developed transportation and communication systems and a
highly skilled and educated work force. In spite of its size and diversity,
the New York City metropolitan area economy is affected by the level of
business activity and profitability within the securities and financial
services industries. During the late 1980s and early 1990s, the securities and
financial services industries experienced a significant decline in business
activity and profitability which, when combined with a period of weakness in
the national economy, resulted in higher levels of unemployment in the New York
City metropolitan area. These conditions and other factors contributed to an
overall decline in the value of commercial and residential real estate. While
real estate values have substantially recovered, no assurance can be given that
such conditions could not reoccur.
The Bank faces significant competition both in making loans and in
attracting deposits. There are a significant number of financial institutions
located within the Bank's market area, many of which have greater financial
resources than the Bank. The Bank's competition for loans comes principally
from commercial banks, savings banks, savings associations and mortgage-banking
companies. Management anticipates that competition for both multi-family
residential mortgage loans and single-family residential loans will continue to
increase in the future. Accordingly, no assurance can be given that the Bank
will be able to maintain the volume of originations of such loans at current
levels. The Bank's most direct competition for deposits has historically come
from savings associations, savings banks, commercial banks and credit unions.
The Bank faces additional competition for deposits from short-term money market
funds and other corporate and government securities funds, direct purchases of
government securities, and from other financial institutions such as brokerage
firms and insurance companies. Competition may also increase as a result of
the elimination of restrictions on interstate operations of financial
institutions.
LENDING ACTIVITIES
GENERAL. At May 31, 1997, the Bank's loan portfolio totaled $2.60
billion, which represented 68.1% of the Bank's $3.82 billion of total assets.
The single largest category of loans in the Bank's portfolio is multi-family
residential mortgage loans, which are secured primarily by apartment buildings
and which totaled $1.40 billion or 54.0% of the total loan portfolio at May 31,
1997. The second and third largest categories are single-family
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residential mortgage loans and cooperative apartment loans which totaled $551.1
million or 21.2% and $359.7 million or 13.8%, respectively, of the total loan
portfolio at such date. These three categories accounted for 89.0% of the
Bank's total loan portfolio at May 31, 1997. The remainder of the Bank's loan
portfolio was comprised primarily of $163.1 million of commercial and other
real estate loans, $44.4 million of student loans, $30.7 million of commercial
business loans and $19.1 million of home equity loans and lines of credit.
The types of loans that the Bank may originate are subject to federal
and state law and regulations. Interest rates charged by the Bank on loans are
affected principally by the demand for such loans and the supply of money
available for lending purposes and the rates offered by its competitors. These
factors are, in turn, affected by general and economic conditions, the monetary
policy of the federal government, including the Federal Reserve Board,
legislative tax policies and governmental budgetary matters.
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LOAN PORTFOLIO COMPOSITION. The following table sets forth
the composition of the Bank's loans at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
At May 31, -------------------------------------------------------------------
1997 1997 1996
---------------------------- --------------------------------- -------------------------------
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
------ -------- ------ ---------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential $ 551,124 21.2% $ 552,745 21.8% $ 534,539 22.7%
Multi-family residential (1) 1,404,304 54.0 1,365,124 53.7 1,208,039 51.3
Commercial and other real
estate 163,136 6.3 158,336 6.2 162,799 6.9
---------- ---- ----------- ------ ---------- ----
Total mortgage loans 2,118,564 81.5 2,076,205 81.7 1,905,377 80.9
Other loans:
Cooperative apartment
loans 359,663 13.8 348,029 13.7 340,507 14.4
Student loans 44,397 1.7 45,262 1.8 45,947 2.0
Home equity loans and
lines 19,069 0.6 19,545 0.8 23,458 1.0
Consumer and other loans 28,795 1.1 27,005 1.1 20,611 0.9
Commercial business loans 30,661 1.2 25,249 1.0 18,003 0.8
---------- ---- ----------- ------ ---------- ---
Total other loans 482,585 18.5 465,090 18.3 448,526 19.1
---------- ---- ----------- ------ ---------- -----
Total loans receivable 2,601,149 100.0% 2,541,295 100.0% 2,353,903 100.0%
---------- ----- ----------- ====== ---------- =====
Less:
Discount on loans
purchased and
deferred fees 11,446 11,182 10,567
Allowance for loan losses 28,777 27,024 20,528
--------- ----------- ----------
Loans receivable, net $2,560,926 $ 2,503,089 $2,322,808
========== =========== ==========
<CAPTION>
At March 31,
------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------------- ---------------------------- -----------------------------
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
------ --------- ------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential $ 376,047 18.4% $ 308,960 18.0% $ 315,219 21.3%
Multi-family residential (1) 1,076,969 52.7 896,605 52.3 651,488 44.1
Commercial and other real
estate 119,890 5.9 95,172 5.6 82,033 5.6
--------- ----- --------- ----- ---------- ---
Total mortgage loans 1,572,906 77.0 1,300,737 75.9 1,048,740 71.0
Other loans:
Cooperative apartment
loans 360,434 17.6 288,381 16.8 296,600 20.1
Student loans 47,823 2.3 47,609 2.8 47,853 3.2
Home equity loans and
lines 27,232 1.3 31,875 1.9 36,276 2.5
Consumer and other loans 18,151 0.9 28,100 1.6 30,953 2.1
Commercial business loans 16,866 0.8 17,694 1.0 16,900 1.1
---------- --- ---------- ----- ---------- ---
Total other loans 470,506 23.0 413,659 24.1 428,582 29.0
---------- ---- ---------- ----- ---------- ----
Total loans receivable 2,043,412 100.0% 1,714,396 100.0% 1,477,322 100.0%
---------- ===== ---------- ===== ---------- =====
Less:
Discount on loans
purchased and
deferred fees 11,301 11,632 8,976
Allowance for loan losses 11,849 8,770 6,415
---------- ---------- ----------
Loans receivable, net $2,020,262 $1,693,994 $1,461,931
========== ========== ==========
</TABLE>
- ---------------------
(1) Includes at May 31, 1997 and March 31, 1997, $306.5 million and $294.9
million, respectively, of loans secured by mixed use (combined
residential and commercial use) properties.
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CONTRACTUAL PRINCIPAL REPAYMENTS AND INTEREST RATES. The following
table sets forth scheduled contractual amortization of the Bank's loans at May
31, 1997, as well as the dollar amount of such loans which are scheduled to
mature after one year which have fixed or adjustable interest rates. Demand
loans, loans having no schedule of repayments and no stated maturity and
overdraft loans are reported as due in one year or less.
<TABLE>
<CAPTION>
Principal Repayments Contractually Due
in Year(s) Ended May 31,
Total at -------------------------------------------------------------
May 31,
1997 1998 1999 2000 2001
------------- ----------- ---------- ----------- ------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential (1) $ 510,914 $ 4,809 $ 703 $ 1,188 $ 1,125
Multi-family residential 1,404,304 89,742 123,204 160,233 270,826
Commercial and other
real estate 163,136 23,883 22,382 20,550 17,853
Other loans:
Cooperative apartment loans 359,663 180 174 183 379
Other (2) 122,922 83,251 5,270 6,887 5,485
---------- -------- -------- -------- ---------
Total(3) $2,560,939 $201,865 $151,733 $189,041 $ 295,668
========== ======== ======== ======== =========
<CAPTION>
Principal Repayments Contractually Due
in Year(s) Ended May 31,
-----------------------------------------
2002- 2008- There-
2007 2013 after
----------- ---------- --------
(In Thousands)
<S> <C> <C> <C>
Mortgage loans:
Single-family residential (1) $ 99,707 $126,324 $277,058
Multi-family residential 706,063 54,125 111
Commercial and other
real estate 66,628 5,460 6,380
Other loans:
Cooperative apartment loans 39,824 40,308 278,615
Other (2) 21,927 102 --
-------- -------- --------
Total(3) $934,149 $226,319 $562,164
======== ======== ========
</TABLE>
- -------------------
(1) Does not include $40.2 million of single-family residential loans
serviced by others.
(2) Includes student loans, home equity loans and lines of credit,
automobile loans, passbook loans, personal loans, credit card loans
and commercial business loans.
(3) Of the $2.36 billion of loan principal repayments contractually due
after May 31, 1998, $1.66 billion have fixed rates of interest and
$695.0 million have adjustable rates of interest.
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LOAN ORIGINATIONS, PURCHASES, SALES AND SERVICING. The Bank
originates both adjustable-rate mortgage loans and fixed-rate mortgage loans,
the volume of which is dependent upon customer demand and market rates of
interest. The Bank generally retains all adjustable-rate loans for its
portfolio. In the past, the Bank generally did not purchase whole mortgage
loans or loan participations. However, during the fourth quarter of fiscal
1996 the Bank entered into an agreement with a local mortgage-banking firm to
purchase conventional (loans not fully or partially guaranteed by the Federal
Housing Administration ("FHA") or the Department of Veterans' Affairs ("VA")),
single-family residential mortgage loans and cooperative apartment loans
originated by such mortgage banking firm on the Bank's behalf. During the two
months ended May 31, 1997, the Bank purchased $1.3 million and $3.2 million,
respectively, of conventional single-family residential mortgage loans and
cooperative loans from such mortgage banker while during fiscal 1997, the Bank
purchased $19.1 million and $11.7 million, respectively, of conventional
single-family residential mortgage loans and cooperative apartment loans
therefrom. See "-Single-Family Residential and Cooperative Apartment Lending."
In addition, as a result of the acquisition of Bay Ridge during fiscal 1996,
the Bank acquired $273.6 million of loans. In anticipation of the acquisition
of such loans from Bay Ridge and in order to maintain liquidity in light of the
need to fund the Bay Ridge acquisition, the Bank reduced the amount of its loan
originations during fiscal 1996.
The Bank generally sells (with servicing retained by the Bank) newly
originated fixed-rate, single-family residential mortgage loans with
contractual terms of 15 years or more in the secondary market to the FNMA and
the FHLMC. It has also, on occasion, sold cooperative apartment loans and
multi-family residential mortgage loans. During fiscal 1997, the Bank sold
$67.7 million of cooperative apartment loans with servicing retained. During
fiscal 1995, the Bank sold $119.7 million of multi-family residential mortgage
loans to the FNMA with servicing retained by the Bank. As a credit
enhancement, the Bank provided limited recourse for the loans sold to the FNMA,
pledging $7.8 million of U.S. Treasury bills as collateral for potential losses
incurred by the purchasers. The sales of cooperative apartment loans in fiscal
1997 and of multi-family residential mortgage loans in fiscal 1995 were
undertaken by the Bank in order to provide additional liquidity to support the
Bank's on-going lending efforts. The Bank generally retains fixed-rate
residential mortgage loans with contractual terms of less than 15 years and
adjustable-rate loans. As of May 31, 1997, the Bank was servicing $309.9
million of loans for others. The Bank is generally paid a fee equal to .25% to
.375% of the outstanding principal balance for servicing loans sold.
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ACTIVITY IN LOANS. The following table shows the activity in the
Bank's loans during the periods indicated.
<TABLE>
<CAPTION>
For the Two Months
Ended May 31, Year Ended March 31,
----------------------- -----------------------------------------------------
1997 1996 1997 1996 1995
---------- ---------- --------------- ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Total loans held at beginning of period $2,541,295 $2,353,903 $2,353,903 $2,043,412 $1,714,396
Originations of loans:
Single-family residential 8,984 34,255 106,688 31,296 201,877
Multi-family residential 68,022 45,622 225,906 144,560 359,343
Commercial and other real estate 2,245 -- 49,924 18,055 33,426
Other:
Cooperative apartment loans 18,771 15,357 115,685 23,862 116,588
Other (1) 11,536 4,062 43,009 41,195 52,791
------- ------- --------- --------- ----------
Total originations 109,558 99,296 541,212 258,968 764,025
Purchases of loans:
Single-family residential 1,320 173 19,097 171,108 --
Multi-family residential -- -- -- 31,126 --
Commercial and other real estate -- -- -- 67,084 --
Other loans:
Cooperative apartment loans 3,162 607 11,724 2,317 --
Other (1) -- -- -- 2,525 --
------- ------- --------- -------- ----------
Total purchases 4,482 780 30,821 274,160(2) --
------- ------- --------- -------- ----------
Total originations and 114,040 100,076 572,033 533,128 764,025
purchases
Loans sold:
Single-family residential 473 469 4,066 5,693 11,565
Multi-family residential -- -- -- -- 119,692
Commercial and other real estate 250 -- 1,494(3) -- --
Other loans:
Cooperative apartment loans 28 41 67,658 1,123 82
Other (1) -- -- -- -- --
------- -------- ----------- ---------- -----------
Total sold 751 510 73,218 6,816 131,339
Repayments (4) 53,435 45,239 311,423 215,821 303,670
------- ------- ----------- ---------- -----------
Net loan activity 59,854 54,327 187,392 310,491 329,016
------- ------- ----------- ---------- -----------
Total loans held at end of period $2,601,149 $2,408,230 $ 2,541,295 $2,353,903 $2,043,412
========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) Includes student loans, home equity loans and lines of credit,
automobile loans, passbook loans, personal loans, credit card loans
and commercial business loans.
(2) Includes $273.6 million of loans acquired in connection with the
acquisition of Bay Ridge in January 1996 and $531,000 of loans
acquired in the 1996 Branch Acquisition.
(3) Reflects sale of certain non-performing loans acquired in the Bay
Ridge acquisition.
(4) Includes loans charged off or transferred to other real estate owned.
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<PAGE> 130
MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE LENDING. The Bank
originates multi-family (five or more units) residential mortgage loans which
are secured primarily by apartment buildings, cooperative apartment buildings
and mixed-use (combined residential and commercial) properties located in the
Bank's market area. At May 31, 1997, the Bank had multi-family residential
mortgage loans totaling $1.40 billion in its portfolio, comprising 54.0% of the
total loan portfolio. Historically, the Bank has been an active multi-family
residential mortgage lender and this portion of the Bank's loan portfolio has
grown (through origination and by purchase) during the last several years,
reflecting the Bank's emphasis on such lending. The Bank intends to continue
to emphasize multi-family residential mortgage lending within its market area.
The main competitors for loans in this market tend to be other local banks and
savings institutions. Multi-family residential mortgage loans in the Bank's
portfolio generally range in amount from $100,000 to $3.0 million and have an
average size of approximately $900,000. The Bank's multi-family residential
mortgage loans are comprised primarily of middle-income housing located in the
boroughs of Brooklyn and Queens and, to a lesser extent, Manhattan.
When approving new multi-family residential mortgage loans, the Bank
follows a set of underwriting standards which it believes are conservative, and
which generally permit a maximum loan-to-value ratio of 75% based on an
appraisal performed by one of the Bank's in-house, state-certified appraisers,
and sufficient cash flow from the underlying property to adequately service the
debt. A minimum debt service ratio of 1.3 generally is required on multi-family
residential mortgage loans. The Bank also considers the financial resources of
the borrower, the borrower's experience in owning or managing similar
properties, the market value of the property and the Bank's lending experience
with the borrower. The Bank's current lending policy requires that loans in
excess of $300,000 be approved by two non-officer directors of the Mortgage and
Real Estate Committee of the Board of Directors.
The Bank's multi-family residential mortgage loans include loans
secured by cooperative apartment buildings. In underwriting these loans, the
Bank applies the normal underwriting criteria used with other multi-family
properties. In addition, the Bank generally will not make a loan on a
cooperative apartment building unless at least 65% of the total units in the
building are owner-occupied. At May 31, 1997, the Bank had $298.8 million of
loans secured by cooperative apartment buildings.
The Bank's typical multi-family residential mortgage loan is
originated with a term to maturity of 5 or 10 years (with principal due in full
at such time). These loans have a fixed-rate of interest and may be extended by
the borrower, upon payment of an additional fee, for five additional years at
an interest rate based on the 5-year FHLB of New York advance rate plus a
margin, which may not be below the initial interest rate of the loan. The Bank
recently has been offering loans which have fixed-rates for the first five
years then adjust at the end of the fifth year and again at the end of the
seventh or eighth year to pre-set rates established at the time of origination.
Under the terms of the Bank's multi-family
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residential mortgage loans, the principal balance generally is amortized at the
rate of 1% per year. Prepayment penalties are generally assessed on these
loans.
In addition to multi-family residential mortgage loans, the Bank
originates commercial real estate loans which, at May 31, 1997, amounted to
$163.1 million or 6.3% of total loans. This portfolio is comprised primarily
of loans secured by commercial and industrial properties, nursing homes,
funeral homes, churches and synagogues, schools and small shopping centers
located within the Bank's market area. The Bank's commercial real estate loans
generally range in amount from $50,000 to $1.5 million, and have an average
size of approximately $600,000. The Bank originates commercial real estate
loans following similar underwriting standards as applied to multi-family
residential mortgage loans. In addition, the Bank reviews rent or lease
income, rent rolls, business receipts, the borrower's credit history and
business experience, and comparable values when underwriting commercial real
estate loans.
Loans secured by apartment buildings and other multi-family
residential and commercial properties generally are larger and considered to
involve a greater degree of risk than single-family residential mortgage loans.
Payments on loans secured by multi-family residential and commercial properties
are often dependent on the successful operation or management of the properties
and are subject to a greater extent to adverse conditions in the real estate
market or the economy. The Bank seeks to minimize these risks through its
underwriting policies, which generally limit origination of such loans to the
Bank's market area and require such loans to be qualified on, among other
things, the basis of the property's income and debt service ratio. See "Risk
Factors--Risks Related to Multi-family Residential and Commercial Lending
Activities."
SINGLE-FAMILY RESIDENTIAL AND COOPERATIVE APARTMENT LENDING. The Bank
offers residential first mortgage loans secured primarily by owner-occupied,
single-family (one-to-four units) residences. The Bank also originates loans
to individuals secured by shares of individual cooperative apartments. At May
31, 1997, $551.1 million or 21.2% and $359.7 million or 13.8% of the Bank's
total loan portfolio consisted of single-family residential mortgage loans and
cooperative apartment loans, respectively. The substantial majority of these
loans are secured by properties located in the boroughs of Brooklyn, Queens and
Manhattan. The Bank offers conforming and non-conforming fixed-rate and
adjustable-rate loans with maturities of up to 30 years and a maximum loan
amount generally not exceeding $500,000. At May 31, 1997, adjustable-rate
loans represented $593.9 million of the aggregate total of single-family
residential mortgage loans and cooperative apartment loans. In an effort to
enhance its ability to originate greater volumes of loans without increasing
its staff, during the fourth quarter of fiscal 1996, the Bank entered into
agreements with a mortgage-banking firm and with a mortgage broker with respect
to the origination of single-family residential mortgage loans and cooperative
apartment loans for the Bank. Under the terms of the agreement with the
mortgage banker, the mortgage banker originates and sells loans to the Bank
while the broker originates loans on the Bank's behalf using the Bank's loan
documents. In both cases, the loans are originated and underwritten in
accordance
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<PAGE> 132
with the Bank's underwriting policies, and the Bank retains approval authority
with respect to loans it considers for its portfolio. The mortgage banker and
the broker receive a fee upon the purchase or funding of the loan, as the case
may be. During the two months ended May 31, 1997 and fiscal 1997, the Bank
purchased $1.3 million and $3.2 million and $19.1 million and $11.7 million,
respectively, of single-family residential mortgage loans and cooperative
apartment loans, respectively, from the mortgage-banking firm. During the same
periods, single-family residential mortgage loans and cooperative apartment
loans totaling $1.7 million and $10.7 million, respectively, and $17.6 million
and $62.3 million, respectively, were originated by the Bank under the terms of
the brokerage agreement. The substantial majority of the cooperative apartment
loans purchased or originated under these arrangements relate to properties
located in Manhattan.
The Bank's residential loan originations are generally obtained from
existing or past loan customers, depositors of the Bank, members of the local
community and referrals from attorneys, realtors and independent mortgage
brokers who refer members of the communities located in the Bank's market area.
The Bank also conducts extensive print and radio advertising, the majority of
which advertises its mortgage products. The Bank is a participating
seller/servicer with the FNMA and the FHLMC, and generally underwrites its
fixed-rate single-family residential mortgage loans to conform with standards
required by these agencies. Included in single-family residential loans is a
modest amount of loans partially or fully guaranteed by the FHA or the VA.
The Bank is an active lender in the cooperative apartment loan market.
Although the collateral for cooperative apartment loans is comprised of shares
in a cooperative housing corporation (a corporation whose primary asset is the
underlying real estate), cooperative apartment loans generally are treated as
single-family residential mortgage loans. At May 31, 1997, such loans amounted
to $359.7 million or 13.8% of the Bank's total portfolio. Although the Bank's
cooperative apartment loans have in the past related to properties located in
the boroughs of Manhattan, Brooklyn and Queens, in recent periods substantially
all of such loans have related to properties located in Manhattan, with a
significant number of such loans having original loan balances in excess of
$300,000.
The Bank's single-family residential mortgage loans and cooperative
apartment loans include adjustable-rate loans ("ARMs") and fixed-rate loans.
The Bank currently offers a variety of ARMs, all of which have a 30-year term
to maturity, certain of which can convert to fixed-rate loans. The Bank's ARMs
currently include loans which adjust every one, two or three years as well as
loans with an established rate for the initial four, five or seven years and
which adjust every three years thereafter. The interest rate on the Bank's
ARMs fluctuates based upon a spread above the average yield on United States
Treasury securities, adjusted to a constant maturity which corresponds to the
adjustment period of the loan (the "U.S. Treasury constant maturity index") as
published weekly by the Federal Reserve Board. In addition, ARMs generally are
subject to limitations on interest rate increases of 2% per adjustment period
and an interest rate cap during the life of the loan established at the time of
origination. For the two months ended May 31, 1997 and the year
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<PAGE> 133
ended March 31, 1997, the Bank originated $23.6 million and $148.0 million,
respectively, of ARMs.
The retention of ARMs in the Bank's loan portfolio helps reduce the
Bank's exposure to increases in interest rates. However, ARMs generally pose
credit risks different from the risks inherent in fixed-rate loans, primarily
because as interest rates rise, the underlying payments of the borrower rise,
thereby increasing the potential for defaults. At the same time, the
marketability of the underlying property may be adversely affected. In order
to minimize risks, ARM borrowers are qualified at the rate which would be in
effect after the first interest rate adjustment, if that rate is higher than
the initial rate. The Bank has not in the past, nor does it currently,
originate negative amortization ARMs.
The Bank's fixed-rate, single-family residential mortgage loans and
cooperative apartment loans have terms of up to 30 years. Interest rates
charged on fixed-rate loans are competitively priced based on market
conditions. The Bank generally originates fixed-rate loans with terms and in
amounts conforming to the maximum guidelines of the FNMA and the FHLMC,
currently $214,600 for one-family houses and $412,450 for four-family houses.
For the two months ended May 31, 1997 and the year ended March 31, 1997, the
Bank originated an aggregate of $6.9 million and $34.2 million, respectively,
of fixed-rate, single-family residential mortgage and cooperative apartment
loans.
The Bank generally sells its newly originated fixed-rate,
single-family residential mortgage loans with contractual terms of 15 years or
more in the secondary market to agencies such as the FNMA and the FHLMC. The
Bank generally retains the servicing rights on all such loans sold. For the
two months ended May 31, 1997 and the year ended March 31, 1997, the Bank sold
single-family residential mortgage loans totaling $473,000 and $4.1 million,
respectively.
Under the Bank's underwriting guidelines, ARMs can be originated with
loan-to-value ratios of up to 75%. Fixed-rate cooperative apartment loans can
be originated with loan-to-value ratios of up to 75% while fixed-rate,
single-family residential mortgage loans can be originated with loan-to-value
ratios of up to 90%, provided, however, that private mortgage insurance is
required for loans with loan-to-value ratios in excess of 80%.
In order to provide financing for low and moderate income home buyers,
the Bank participates in residential mortgage programs and products sponsored
by, among others, the State of New York Mortgage Authority, the Community
Preservation Corporation, Neighborhood Housing Services and the New York City
Co-op Pilot Program. Various programs sponsored by these groups provide low
and moderate income households with fixed-rate mortgage loans which are
generally below prevailing fixed-rate mortgages and which allow below market
down payments.
The Bank's mortgage loans generally include due-on-sale clauses which
provide the Bank with the contractual right to deem the loan immediately due
and payable in the event
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<PAGE> 134
that the borrower transfers ownership of the property without the Bank's
consent. It is the Bank's policy to enforce due-on-sale provisions within the
applicable regulations and guidelines imposed by New York law.
CONSUMER LENDING ACTIVITIES. The Bank offers a variety of consumer
loans including student loans, home equity loans and lines of credit,
automobile loans, passbook loans and credit card loans in order to provide a
full range of financial services to its customers. Such loans are obtained
primarily through existing and walk-in customers and direct advertising. At
May 31, 1997, $92.3 million or 3.5% of the Bank's total loan portfolio was
comprised of consumer loans.
The largest component of the Bank's consumer loan portfolio is student
loans. The Bank has been and continues to be an active originator of student
loans. Substantially, all of these loans are originated under the auspices of
the New York State Higher Education Services Corporation ("NYSHESC"). Under
the terms of these loans, no repayment is due until the student's graduation,
with 98% of the principal guaranteed by the NYSHESC. The terms and rates of
these loans are established by the NYSHESC. At May 31, 1997, such loans
amounted to $44.4 million or 1.7% of the total loan portfolio.
The second largest component of the Bank's consumer loan portfolio is
home equity loans and lines which consist primarily of home equity lines of
credit. Home equity lines of credit are a form of revolving credit and are
secured by the underlying equity in the borrower's primary or secondary
residence. The Bank's home equity lines of credit have interest rates that
adjust or float based on the Wall Street Journal Prime, loan-to-value ratios
of 75% or less, and are generally for amounts of less than $100,000 but can be
as high as $300,000. Interest only payments are made during the first five
years with repayment of principal and interest required during the final 15
years. The Bank also offers fixed-rate, fixed-term home improvement loans,
which are also secured by the underlying equity in the borrower's primary or
secondary residence. At May 31, 1997, home equity lines and loans amounted to
$19.1 million, or 0.7% of the Bank's total loan portfolio and the Bank had $4.1
million of unused commitments pursuant to such equity lines of credit.
At May 31, 1997, the remaining $28.8 million of the Bank's consumer
loan portfolio, which amounted to 1.1% of the Bank's total loan portfolio, was
comprised primarily of loans secured by new and used automobiles, passbook
loans and credit card loans (the Bank offers VISA cards on an issuer basis).
At May 31, 1997, the Bank had $13.5 million of automobile loans, most of which
financed the purchase of new automobiles. The terms of automobile loans cannot
exceed 60 months with a maximum loan amount of the lesser of $50,000 or 80% of
the value of the automobile. The Bank generally does not participate in
indirect automobile lending and substantially all of such loans are financed
directly with the Bank. Passbook loans, which are loans secured by the
borrower's deposits in the Bank, totaled $10.8 million at May 31, 1997, while
credit card loans amounted to $2.0 million at such date.
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<PAGE> 135
Consumer loans generally have shorter terms and higher interest rates
than residential mortgage loans but generally involve more credit risk than
residential mortgage loans because of the type and nature of the collateral
and, in certain cases, the absence of collateral. These risks are not as
prevalent in the case of the Bank's consumer loan portfolio, however, because a
high percentage of the portfolio is comprised of home equity loans and lines of
credit which are secured by real estate and underwritten in a manner such that
they result in a lending risk which is similar to single-family residential
mortgage loans.
COMMERCIAL BUSINESS LENDING ACTIVITIES. The Bank makes commercial
business loans directly to businesses located in its market area. The Bank
targets small and medium sized businesses with the bulk of the loans being less
than $750,000. Applications for commercial business loans are obtained
primarily from existing customers, branch referrals and direct inquiry. As of
May 31, 1997, commercial business loans totaled $30.7 million, or 1.2%, of the
Bank's total loan portfolio.
Commercial business loans originated by the Bank generally have terms
of five years or less and adjustable interest rates tied to the Wall Street
Journal Prime plus a margin. Such loans are generally secured by real estate,
receivables or inventory and are backed by the personal guarantees of the
principals of the borrower. Commercial business loans generally have shorter
terms to maturity and provide higher yields than residential mortgage loans.
Although commercial business loans generally are considered to involve greater
credit risk than certain other types of loans, management intends to continue
to offer commercial business loans to small and medium sized businesses in its
market area. Furthermore, the Bank intends to moderately expand its commercial
business lending program. In furtherance of such strategy, the Bank recently
increased advertising and direct mail solicitations with respect to commercial
business loans and is in the process of adding an additional commercial
business loan officer.
LOAN APPROVAL AUTHORITY AND UNDERWRITING. The Board of Directors
establishes lending authorities for individual officers as to its various types
of loan products. For multi-family residential mortgage loans, commercial real
estate loans, single-family residential mortgage loans and cooperative
apartment loans, the Executive Vice President and Mortgage Officer and a Vice
President have the authority to approve loans in amounts up to $300,000. Any
mortgage loan or cooperative apartment loan in excess of $300,000, however,
must also be approved by the President and at least two members of the Mortgage
and Real Estate Committee of the Board of Directors, which consists of various
directors, the composition of which is changed periodically. Consumer loans
and commercial business loans of less than $50,000 can be approved by an
individual loan officer, while loans between $50,000 and $300,000 must be
approved by a Vice President and an Executive Vice President. Any commercial
business loans in excess of $300,000 must also be approved by at least two
members of the Commercial Loan Committee of the Board of Directors, which
consists of various directors, the composition of which is changed
periodically.
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<PAGE> 136
The Bank's policy limits the amount of credit related to mortgage
loans and cooperative share loans that can be extended to any one borrower to
15% of the Bank's net worth. In addition, the Bank's policy limits the amount
of commercial business loans that can be extended to any one borrower to the
greatest of $2.0 million, 5% of the Bank's net worth or 10% of total commercial
business loans. With certain limited exceptions, a New York state-chartered
savings bank may not make loans or extend credit for commercial, corporate or
business purposes (including lease financing) to a single borrower, the
aggregate amount of which would be in excess of 15% of the bank's net worth if
the loan is unsecured, or 25% of net worth if the loan is secured.
For all single-family residential mortgage loans and cooperative
apartment loans originated by the Bank, upon receipt of a completed loan
application from a prospective borrower, a credit report is ordered, income,
assets and certain other information are verified by an independent credit
agency, and if necessary, additional financial information is required to be
submitted by the borrower. An appraisal of the real estate is required, which
is performed by an independent appraiser except with respect to multi-family
residential and commercial real estate loans for which the appraisals are
conducted by state-certified in-house appraisers. It is the Bank's policy to
require appropriate insurance protection, including title and hazard insurance,
on all mortgage loans prior to closing. Other than cooperative apartment
loans, borrowers generally are required to advance funds for certain items
such as real estate taxes, flood insurance and private mortgage insurance, when
applicable.
LOAN ORIGINATION AND LOAN FEES. In addition to interest earned on
loans, the Bank receives loan origination fees or "points" for many of the
loans it originates. Loan points are a percentage of the principal amount of
the mortgage loan and are charged to the borrower in connection with the
origination of the loan. The Bank currently offers a number of residential
loan products on which no points are charged.
In accordance with SFAS No. 91, which addresses the accounting for
non-refundable fees and costs associated with originating or acquiring loans,
the Bank's loan origination fees and certain related direct loan origination
costs are offset, and the resulting net amount is deferred and amortized as
interest income over the contractual life of the related loans as an adjustment
to the yield of such loans. At May 31, 1997, the Bank had $9.9 million of such
deferred loan fees.
ASSET QUALITY
With the exception of guaranteed student loans and FHA or VA loans,
the Bank, commencing in fiscal 1997, generally places loans on non-accrual
status when they are more than 90 days past due as to interest. Loans may be
placed on non-accrual status earlier if management believes that collection of
interest is doubtful. For periods prior to fiscal 1997, the Bank continued to
accrue interest on loans more than 90 days past due if, in management's
judgment, the full collection of interest was probable. When a loan is placed
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<PAGE> 137
on non-accrual status, previously accrued but unpaid interest is deducted from
interest income.
Real estate acquired by the Bank as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as other real estate owned until
sold. Pursuant to SOP 92-3, such assets are carried at the lower of fair value
minus estimated costs to sell the property, or cost (generally the balance of
the loan on the property at the date of acquisition). After the date of
acquisition, all costs incurred in maintaining the property are expensed and
costs incurred for the improvement or development of such property are
capitalized up to the extent of their net realizable value.
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<PAGE> 138
DELINQUENT LOANS. The following table sets forth delinquencies in the
Bank's loan portfolio as of the dates indicated:
<TABLE>
<CAPTION>
At May 31, 1997 At March 31, 1997
------------------------------------------- ---------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
--------------------- ------------------- ----------------------- ---------------------
Principal Principal
Number Balance Number Balance Number Balance Number Balance of
of Loans of Loans of Loans of Loans of Loans of Loans of Loans Loans
-------- ---------- -------- --------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential 20 $408 40 $2,607 13 $ 535 56 $ 3,311
Multi-family residential -- -- 4 1,645 -- -- 3 1,918
Commercial and Other
mortgage loans 1 139 5 9,054 -- -- 5 9,209
Other loans:
Cooperative apartment
loans 1 96 15 497 4 196 13 427
Other (1) 143 715 347 1,219 225 1,004 300 1,757
------- ----- --- ----- --- ------ --- -------
Total 165 $1,358 411 $15,022 242 $1,735 377 $16,622
=== ===== === ====== === ===== === ======
Delinquent loans to total
loans (3) 0.05% 0.58% .07% .65%
==== ==== === ===
<CAPTION>
At March 31, 1996 At March 31, 1995
--------------------------------------------- ---------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
---------------------- -------------------- --------------------- ---------------------
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance of
of Loans of Loans of Loans of Loans of Loans of Loans of Loans Loans
-------- ---------- -------- --------- -------- --------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential 19 $1,007 53 $ 3,504 15 $ 409 40 $ 4,761
Multi-family residential 4 486 4 3,379 -- -- 8 2,251
Commercial and Other
mortgage loans 1 200 15 19,277 -- -- 6 1,975
Other loans:
Cooperative apartment
loans 3 183 8 355 2 97 6 401
Other (1) 204 888 243 1,571 229 793 499 2,593
--- ----- --- ------ --- ------ --- -------
Total 231 $2,764 323 $28,086(2) 246 $1,229 559 $11,981
=== ===== === ====== === ===== === ======
Delinquent loans to total
loans (3) 0.12% 1.19% 0.06% 0.59%
==== ==== ==== ====
</TABLE>
- ------------------------
(1) Includes student loans, home equity loans and lines of credit, automobile
loans, passbook loans, personal loans, credit card loans and commercial
business loans.
(2) Includes $9.5 million of loans acquired in the Bay Ridge acquisition.
(3) Total loans includes loans receivable less deferred loan fees and
unamortized discounts, net.
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<PAGE> 139
NON-PERFORMING ASSETS. The following table sets forth information with
respect to non-performing assets identified by the Bank, including
non-performing loans and other real estate owned at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
At May 31, --------------------------------------------------------------
1997 1997 1996 1995 1994 1993
---------- ----------- ------------ ----------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans(1):
Mortgage loans:
Single-family residential . . . . . . . $ 2,292 $ 2,474 $ 2,890 $ 2,074 $ 2,438 $ 2,905
Multi-family residential . . . . . . . 1,062 1,918 3,379 2,018 2,095 1,953
Commercial and Other . . . . . . . . . 10,992 11,155 12,600 1,975 2,033 3,183
Other loans:
Cooperative apartment loans . . . . . . 407 427 355 451 606 1,068
Other (2) . . . . . . . . . . . . . . . 269 956 1,135 1,590 1,621 1,597
------- -------- ------- ------- ------- -------
Total non-accruing loans . . . . . 15,022 16,930 20,359(3) 8,108 8,793 10,706
Loans past due 90 days or more as to
interest and accruing . . . . . . . . . . 1,900 1,718 8,737 7,564 4,715 5,004
------- -------- ------- ------- ------- -------
Total non-performing loans . . . . . . . . 16,922 18,648 29,096 15,672 13,508 15,710
------- -------- ------- ------- ------- -------
Other real estate owned, net (4) . . . . . 484 540 973 1,691 2,024 4,534
------- -------- ------- ------- ------- -------
Total non-performing assets (5) . . . . . . $17,406 $ 19,188 $30,069 $17,363 $15,532 $20,244
====== ======= ====== ====== ====== ======
Allowance for loan losses as a
percent of total loans . . . . . . . . 1.11% 1.06% 0.87% 0.58% 0.51% 0.43%
Allowance for loan losses as a percent of
non-performing loans . . . . . . . . . 170.05 144.92 70.55 75.01 64.92 40.83
Non-performing loans as a percent of
total loans . . . . . . . . . . . . . 0.65 0.73 1.24 0.77 0.79 1.06
Non-performing assets as a percent of total
assets . . . . . . . . . . . . . . . . 0.46 0.51 0.78 0.67 0.61 0.85
</TABLE>
(1) At May 31, 1997 and March 31, 1997, does not include $11.9 million and
$14.4 million, respectively, of loans more than 90 days or more past
maturity which continue to make payments on a basis consistent with
the original repayment schedule.
(2) Consists primarily of commercial business loans and home equity lines
of credit.
(3) Includes $9.5 million of loans acquired in the Bay Ridge acquisition.
(4) Net of related loss allowances.
(5) Non-performing assets consist of non-performing loans and other real
estate owned. Non-performing loans consist of non-accrual loans and
loans 90 days or more past due as to interest and other loans which
have been identified by the Bank as presenting uncertainty with
respect to the collectibility of interest or principle.
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<PAGE> 140
At May 31, 1997, the Bank's non-performing assets totaled $17.4
million compared to $19.2 million, $30.1 million and $17.4 million at March 31,
1997, 1996 and 1995, respectively. The Bank's total non-performing assets as a
percentage of total assets was 0.46%, 0.51%, 0.78% and 0.67% at May 31, 1997
and at March 31, 1997, 1996 and 1995, respectively. A primary emphasis in the
Bank's underwriting practices is to maintain high asset quality in the
origination of loans.
The $10.9 million, or 36.2%, decline in non-performing assets from
March 31, 1996 to March 31, 1997 was due in large part to the return to
performing status of a $5.0 million loan to a partnership which owns the
building housing the Bank's executive offices (see "- Classified Assets"), the
sale or satisfaction of an aggregate of $2.3 million of non-performing loans
acquired in the Bay Ridge acquisition and aggregate charge-offs of $1.6
million. The Bank recognized an immaterial loss upon the sale of
non-performing loans acquired from Bay Ridge.
The Bank's total non-accruing loans amounted to $15.0 million at May
31, 1997 compared to $16.9 million at March 31, 1997 and $20.4 million at March
31, 1996. The primary reason for the $3.4 million decrease in total
non-accruing loans at March 31, 1997 compared to March 31, 1996 was the
aforementioned sales and charge-offs.
At May 31, 1997, the Bank had $11.0 million of non-accrual commercial
and other real estate mortgage loans. At such date, an aggregate of $8.7
million of the outstanding non-accrual commercial and other real estate loans
related to two projects sponsored by one Brooklyn-based real estate developer.
One of such projects, on which the Bank had two loans with an aggregate
outstanding balance of $6.7 million at May 31, 1997 is for the renovation and
improvement on an existing commercial property located in Brooklyn. The
initial loan, which was originated in September 1990 and had an original
maturity date of October 1995, was placed on non-accrual status in February
1997. In May 1994, the Bank extended a construction loan in order to renovate
the building to permit its use as a supermarket. In July 1993, a national
supermarket entered into lease with the borrower to occupy a portion of this
property upon completion of construction, which is expected to occur by July
31, 1997. The borrower has entered into a commitment with another lender to
refinance the entire project upon completion of construction. The other
project sponsored by such developer related to a $2.0 million non-accrual
commercial real estate loan originated by the Bank in August 1995 which was
placed on non-accrual status in February 1997. The loan is for the conversion
of an existing commercial property located in Brooklyn to a public school. The
local school board has entered into a lease with respect to the property,
subject to completion of construction, which is expected by August 1997. The
developer who is the sponsor for these two projects also is, together with
affiliates, the Bank's largest single borrower with outstanding loans totaling
approximately $45.3 million at May 31, 1997, of which $10.5 million is
considered non-performing and/or classified substandard and $16.6 million is
classified special mention. Such developer also is the general partner of the
partnership which owns the building in which the Bank's executive offices are
located. See "-Classified Assets."
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<PAGE> 141
At May 31, 1997, the Bank's non-accrual multi-family residential
mortgage loans amounted to $1.1 million and was comprised primarily of one loan
with an outstanding balance of $832,000. Such loan, which is secured by a
25-unit multi-family building located in Manhattan, New York, was originated by
the Bank in October 1987. At May 31, 1997, the loan was approximately 510 days
past due. In July 1997, the loan was satisfied with a payment of $917,000.
At May 31, 1997, the Bank's $2.3 million of non-accrual single-family
residential mortgage loans consisted of 18 loans which had an average balance
of $128,000. At such date, non-accrual loans also included 14 cooperative
apartment loans with an aggregate balance of $407,000 and four home equity
lines of credit with an aggregate balance of $140,000. In addition, at May 31,
1997, the Bank had three commercial business loans totaling $129,000 on
non-accrual.
The interest income that would have been recorded during the two
months ended May 31, 1997 and the year ended March 31, 1997, if all of the
Bank's non-performing loans at the end of such period had been current in
accordance with their terms during such periods was $271,000 and $1.7 million,
respectively. The actual amount of interest recorded as income on such loans
during the periods amounted to $27,000 and $224,000, respectively.
At May 31, 1997, the Bank's other real estate owned consisted of a
$484,000 investment in one single-family residential property, one commercial
real estate property and six individual cooperative apartment loans.
A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
FDIC and the Department, which can order the establishment of additional
general or specific loss allowances. The FDIC, in conjunction with the other
federal banking agencies, has adopted an interagency policy statement on the
allowance for loan and lease losses. The policy statement provides guidance
for financial institutions on both the responsibilities of management for the
assessment and establishment of adequate allowances and guidance for banking
agency examiners to use in determining the adequacy of general valuation
guidelines. Generally the policy statement recommends that institutions have
effective systems and controls to identify, monitor and address asset quality
problems; that management has analyzed all significant factors that affect the
collectibility of the portfolio in a reasonable manner; and that management has
established acceptable allowance evaluation processes that meet the objectives
set forth in the policy statement. While the Bank believes that it has
established an adequate allowance for possible loan losses, there can be no
assurance that the regulators, in reviewing the Bank's loan portfolio, will not
request the Bank to materially increase at that time its allowance for possible
loan losses, thereby negatively affecting the Bank's financial condition and
earnings at that time. Although management believes that adequate specific and
general loan loss allowances have been established, actual losses are dependent
upon future events and, as such, further additions to the allowances for loan
losses may become necessary. In addition, if the Bank's involvement in
multi-family
97
<PAGE> 142
residential and commercial real estate lending continues to increase,
additional provisions may be required due to the generally greater risk
engendered by such lending. See "-Asset Quality - Allowance for Loan Losses"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Changes in Financial Condition - Allowance for Loan Losses."
CLASSIFIED AND CRITICIZED ASSETS. Federal regulations require that
each insured institution classify its assets on a regular basis. Furthermore,
in connection with examinations of insured institutions, federal examiners have
authority to identify problem assets and, if appropriate, classify them. There
are three classifications for problem assets: "substandard," "doubtful" and
"loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that
the weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. Another category designated "special mention" also must be
established and maintained for assets which do not currently expose an insured
institution to a sufficient degree of risk to warrant classification as
substandard, doubtful or loss.
At May 31, 1997, the Bank had classified an aggregate of $24.8 million
of assets (a substantial portion of which were also considered non-performing
assets), including $10.8 million of loans acquired from Bay Ridge. In
addition, at such date the Bank had $46.3 million of assets which were
designated by the Bank as special mention. At May 31, 1997, a major component
of the Bank's assets deemed special mention was a $15.0 million loan to the
partnership which owns the building in which the Bank's executive offices are
located. A wholly owned subsidiary of the Bank, Wiljo Development Corporation
("Wiljo"), has a 17% limited partnership interest in the partnership. See
"-Subsidiaries." The general partner of the partnership, together with
affiliates, is the Bank's single largest borrower. See "-Non-Performing
Assets." The loan was originated in 1993 in the amount of $5.0 million to help
fund the partnership's purchase of the building. Due to a variety of factors,
there were delays in fully leasing out the building due in part, to the need to
effect extensive renovations and tenant improvements, including asbestos
removal. As a consequence, payments on the initial loan were not made and the
loan was placed on non-accrual status in fiscal 1996. The Bank refinanced the
loan in early 1997 and increased the principal balance to $15.0 million. The
$10.0 million of additional funds were used in part to repay advances (plus
interest) made to the partnership by Wiljo for construction costs and other
expenses. The Bank's executive offices and a branch office occupy
approximately 40% of the building. As of May 31, 1997, substantially all the
remaining space in the building was leased with lease terms generally of ten
years or more, and the new loan is performing in accordance with its terms.
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<PAGE> 143
ALLOWANCE FOR LOAN LOSSES. The Bank's allowance for loan losses
amounted to $28.8 million at May 31, 1997 as compared to $27.0 million at March
31, 1997. At May 31, 1997, the Bank's allowance amounted to 1.1% of total
loans and 170.1% of total non-performing loans. It is management's policy to
maintain an allowance for loan losses based upon total loans outstanding, the
volume of loan originations, the type, size and geographic concentration of
loans held by the Bank, general economic conditions, the level of past due and
non-accrual loans, and the number of loans requiring heightened management
oversight.
The Bank's allowance for loan losses increased $1.8 million from March
31, 1997 to May 31, 1997 while in fiscal 1997 the allowance increased by $6.5
million as compared to March 31, 1996 due to provisions relating to mortgage
loans of $8.4 million, partially offset by charge-offs, net of recoveries, of
$1.5 million. The increases during the two months ended May 31, 1997 and
fiscal 1997 were due to several factors, including the Bank's increased
investment in multi-family residential loans, all of which were concentrated in
the New York City metropolitan area, an increase in the number of larger
multi-family residential and individual cooperative apartment loans as compared
to prior years, and an increase in the number of loans, which, while not
delinquent, exhibit risk characteristics which require heightened management
oversight.
The Bank will continue to monitor and modify its allowance for
possible loan losses as conditions dictate. While management believes that,
based on information currently available, the Bank's allowance for possible
loan losses is sufficient to cover losses inherent in its loan portfolio at
this time, no assurances will be given that the Bank's level of allowance for
loan losses will be sufficient to absorb future possible loan losses incurred
by the Bank or that future adjustments to the allowance for possible loan
losses will not be necessary if economic and other conditions differ
substantially from the economic and other conditions used by management to
determine the current level of the allowance for possible loan losses.
Management may in the future further increase the level of its allowance for
loan losses as a percentage of total loans and non-performing loans in the
event the level of multi-family residential and commercial real estate loans
(which generally are considered to have a greater risk of loss than
single-family residential mortgage loans) as a percentage of its total loan
portfolio continues to increase. In addition, the FDIC and the Department as
an integral part of their examination process periodically review the Bank's
allowance for possible loan losses. Such agencies may require the Bank to make
additional provisions for estimated possible loan losses based upon judgments
different from those of management.
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<PAGE> 144
The following table sets forth the activity in the Bank's allowance
for loan losses during the periods indicated.
<TABLE>
<CAPTION>
Two Months Ended
May 31, Year Ended March 31,
----------------------- ------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- --------- --------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance at beginning of
period $27,024 $20,528 $20,528 $11,849 $ 8,770 $6,415 $6,374
------ ------ ------ ------ ------ ----- -----
Allowance from
acquisition(1) -- -- -- 6,910 -- -- --
Provision:
Mortgage loans(2) 1,100 550 8,425 3,300 3,300 3,075 1,925
Other loans(3) 350 50 (465)(4) 379 292 750 1,862
----- ----- ------- ------- ------ ------ ------
Total provision 1,450 600 7,960 3,679 3,592 3,825 3,787
Charge-offs:
Mortgage loans(2) 74 -- 1,636 1,634 842 1,049 2,371
Other loans(3) 4 1 509 751 220 1,259 2,066
---- ----- ------- ------- ------ ------ ------
Total charge-offs 78 1 2,145 2,385 1,062 2,308 4,437
----- ----- ------- ------- ------ ------ ------
Recoveries:
Mortgage loans(2) 305 25 545 176 294 28 41
Other loans 76 23 136 299 255 810 650
----- ----- ------- ------- ------ ------ ------
Total recoveries 381 48 681 475 549 838 691
---- ----- ------- ------- ------ ------ ------
Net loans (charged off)
recovered 303 47 (1,464) (1,910) (513) (1,470) (3,746)
Allowance at end of
period $28,777 $21,175 $27,024 $20,528 $11,849 $8,770 $6,415
====== ====== ====== ====== ====== ===== =====
Net loans charged off to
allowance for loan
losses (0.01)% 0.00% 0.06% 0.09% 0.03% 0.09% 0.27%
====== ====== ======= ======== ========= ======= =========
</TABLE>
- -------------------------
(1) Reflects allowance for loan losses acquired in the Bay Ridge
acquisition in January 1996.
(2) Includes individual cooperative apartment loans.
(3) Includes student loans, home equity loans and lines of credit,
automobile loans, secured and unsecured personal loans, and commercial
business loans.
(4) Reflects adjustment to allowance related to commercial business loans.
100
<PAGE> 145
The following table sets forth information concerning the allocation
of the Bank's allowance for loan losses by loan category at the dates
indicated.
<TABLE>
<CAPTION>
At May 31, At March 31,
----------------------- -----------------------------------------------------------------------
1997 1997 1996 1995
----------------------- --------------------- -------------------- --------------------
Percent of Percent of Percent of Percent of
Loans in Loans in Loans in Loans in
Each Each Each Each
Category Category Category Category
of to to to
Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans
------ ----------- ------ ---------- ------ ----------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans(1) $24,701 95.3% $23,370 95.4% $ 16,036 95.4% $ 7,284 94.6%
Other loans(2) . . 4,076 4.7 3,654 4.6 4,492 4.6 4,565 5.4
------- ----- ------- ----- ------- ----- ------- -----
Total . . . . $28,777 100.0% $27,024 100.0% $ 20,528 100.0% $11,849 100.0%
======= ===== ====== ===== ======= ===== ====== =====
<CAPTION>
At March 31,
----------------------------------------------
1994 1993
-------------------- ------------------------
Percent of Percent of
Loans in Loans in
Each Each
Category Category
to to
Total Total
Amount Loans Amount Loans
------ --------- ------ -----------
<S> <C> <C> <C> <C>
Mortgage loans(1) $4,532 92.7% $2,478 91.1%
Other loans(2) . . 4,238 7.3 3,937 8.9
----- --- ----- ---
Total . . . . $8,770 100.0% $6,415 100.0%
===== ===== ===== =====
</TABLE>
- -----------------
(1) Includes individual cooperative apartment loans.
(2) Includes student loans, home equity loans, lines of credit, automobile
loans, and secured and unsecured personal loans and commercial
business loans.
101
<PAGE> 146
ENVIRONMENTAL ISSUES
The Bank encounters certain environmental risks in its lending
activities. Under federal and state environmental laws, lenders may become
liable for costs of cleaning up hazardous materials found on property securing
their loans. In addition, the existence of hazardous materials may make it
unattractive for a lender to foreclose on such properties. Although
environmental risks are usually associated with loans secured by commercial
real estate, risks also may be substantial for loans secured by residential
real estate if environmental contamination makes security property unsuitable
for use. This could also have a negative effect on nearby property values.
The Bank attempts to control its risk by requiring a phase one environmental
assessment be completed as part of its underwriting review for all
non-residential mortgage applications.
The Bank believes its procedures regarding the assessment of
environmental risk are adequate and the Bank is unaware of any environmental
issues which would subject it to any material liability at this time. However,
no assurance can be given that the values of properties securing loans in the
Bank's portfolio will not be adversely affected by unforeseen environmental
risks.
INVESTMENT ACTIVITIES
INVESTMENT POLICIES. The investment policy of the Bank, which is
established by the Board of Directors, is designed to help the Bank achieve its
fundamental asset/liability management objectives. Generally, the policy calls
for the Bank to emphasize principal preservation, liquidity, diversification,
short maturities and/or repricing terms, and a favorable return on investment
when selecting new investments for the Bank's investment and mortgage-backed
and mortgage-related securities portfolios. In addition, the policy sets forth
objectives which are designed to limit new investments to those which further
the Bank's goals with respect to interest rate risk management. The Bank's
current securities investment policy permits investments in various types of
liquid assets including obligations of the U.S. Treasury and federal agencies,
investment grade corporate obligations, various types of mortgage-backed and
mortgage-related securities, including CMOs, commercial paper, and insured
certificates of deposit. As a New York-chartered savings bank, the Bank is
permitted to make certain investments in equity securities and stock mutual
funds. At May 31, 1997, these equity investments totaled $13.1 million and
were comprised primarily of mutual funds and common and preferred stocks of
publicly traded companies.
The Bank currently does not participate in hedging programs, interest
rate swaps, or other activities involving use of off-balance sheet derivative
financial instruments. Similarly, the Bank does not invest in mortgage-related
securities which are deemed to be "high risk," or purchase bonds which are not
rated investment grade.
MORTGAGE-BACKED AND MORTGAGE-RELATED SECURITIES. Mortgage-backed
securities (which also are known as mortgage participation certificates or
pass-through certificates)
102
<PAGE> 147
represent a participation interest in a pool of single-family or multi-family
mortgages, the principal and interest payments on which are passed from the
mortgage originators, through intermediaries (generally U.S. Government
agencies and government sponsored enterprises) that pool and repackage the
participation interests in the form of securities, to investors such as the
Bank. Such U.S. Government agencies and government sponsored enterprises,
which guarantee the payment of principal and interest to investors, primarily
include the FHLMC, the FNMA and the Government National Mortgage Association
("GNMA").
Mortgage-backed securities generally increase the quality of the
Bank's assets by virtue of the insurance or guarantees that back them, are more
liquid than individual mortgage loans and may be used to collateralize
borrowings or other obligations of the Bank. However, the existence of the
guarantees or insurance generally results in such securities bearing yields
which are less than the loans underlying such securities.
The FHLMC is a private corporation chartered by the U.S. Government.
The FHLMC issues participation certificates backed principally by conventional
mortgage loans. FHLMC guarantees the timely payment of interest and the
ultimate return of principal on participation certificates. The FNMA is a
private corporation chartered by the U.S. Congress with a mandate to establish
a secondary market for mortgage loans. The FNMA guarantees the timely payment
of principal and interest on FNMA securities. The FHLMC and FNMA securities
are not backed by the full faith and credit of the United States, but because
the FHLMC and the FNMA are U.S. Government-sponsored enterprises, these
securities are considered to be among the highest quality investments with
minimal credit risks. The GNMA is a government agency within the Department of
Housing and Urban Development which is intended to help finance
government-assisted housing programs. GNMA securities are backed by
FHA-insured and VA-guaranteed loans, and the timely payment of principal and
interest on GNMA securities are guaranteed by the GNMA and backed by the full
faith and credit of the U.S. Government. Because the FHLMC, the FNMA and the
GNMA were established to provide support for low-and middle-income housing,
there are limits to the maximum size of loan that qualify for these programs.
The Bank's mortgage-related securities consist of $78.7 million of
CMOs. CMOs have been developed in response to investor concerns regarding the
uncertainty of cash flow associated with the prepayment option of the
underlying mortgage and are typically issued by governmental agencies,
government-sponsored enterprises and special purpose entities, such as trusts,
corporations or partnerships, established by financial institutions or other
similar institutions. A CMO can be collaterized by loans or securities which
are insured or guaranteed by the FNMA, the FHLMC or the GNMA. In contrast to
pass-through mortgage-related securities, in which cash flow is received pro
rata by all security holders, the cash flow from the mortgages underlying a CMO
is segmented and paid in accordance with a predetermined priority to investors
holding various CMO classes. By allocating the principal and interest cash
flows from the underlying collateral among the separate CMO classes, different
classes of bonds are created, each with its own stated maturity, estimated
average life, coupon rate and prepayment characteristics. At May 31, 1997,
none of the
103
<PAGE> 148
CMOs held by the Bank were interest only or principal only CMOs, but were
primarily planned amortization CMOs.
The Bank adopted SFAS No. 115, as of April 1, 1994. In accordance
with this Statement, the Bank segregated its mortgage-backed and
mortgage-related investment securities into two categories: those held to
maturity and those available for sale. Held to maturity securities are
recorded at amortized cost and available-for sale securities are recorded at
fair value, with unrealized gains and losses, net of related tax effects,
excluded from earnings and reported as a separate component of stockholders'
equity. The effect of the adoption was to increase equity by $2.7 million at
April 1, 1994. In November 1995, the FASB issued a special report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" which allowed institutions to effect a one-time
reclassification of its securities from held to maturity to available for sale
without requiring that all securities held to maturity be reclassified to
available for sale. As a result, in December 1995 the Bank reclassified
$169.1 million of securities from held to maturity to available for sale,
resulting in net unrealized losses of $1.8 million in fiscal 1996. Upon
further consideration, the Bank determined during the fourth quarter of fiscal
1997 to reclassify the remainder of its mortgage-related and investment
securities held to maturity (which at the time totaled $131.0 million) as
available for sale. The Bank subsequently sold in March 1997 $397.3 million of
these securities at a net loss of $4.5 million in order to improve the yield on
and reduce the interest rate volatility of the Bank's investment securities and
mortgage-backed and mortgage-related securities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Changes in
Financial Condition - Investment Securities and Mortgage-Backed and
Mortgage-Related Securities." The Bank reinvested the proceeds primarily into
U.S. Treasury notes and bills with maturities of two years or less, resulting
in an increase in the yield of approximately 70 basis points by comparison to
the securities sold.
At May 31, 1997, the Bank's $182.2 million of mortgage-backed and
mortgage-related securities, representing 4.8% of the Bank's total assets, were
comprised of $103.5 million of mortgage-backed securities, which were issued or
guaranteed by the FHLMC, the FNMA or the GNMA, and $78.7 million of CMOs,
substantially all of which are secured by FNMA and FHLMC mortgage-backed
securities.
At May 31, 1997, the contractual maturity of approximately 44.7% of
the Bank's mortgage-backed and mortgage-related securities was in excess of ten
years. The actual maturity of a mortgage-related security is less than its
stated maturity due to prepayments of the underlying mortgages. Prepayments
that are different than anticipated will affect the yield to maturity. The
yield is based upon the interest income and the amortization of any premium or
discount related to the mortgage-backed security. In accordance with GAAP,
premiums and discounts are amortized over the estimated lives of the loans,
which decrease and increase interest income, respectively. The prepayment
assumptions used to determine the amortization period for premiums and
discounts can significantly affect the yield of the mortgage-backed security,
and these assumptions are reviewed periodically to reflect actual
104
<PAGE> 149
prepayments. If prepayments are faster than anticipated, the life of the
security may be shortened and may result in a loss of any premium paid, thus
reducing the net yield on such security. Although prepayments of underlying
mortgages depend on many factors, including the type of mortgages, the coupon
rate, the age of mortgages, the geographical location of the underlying real
estate collateralizing the mortgages and general levels of market interest
rates, the difference between the interest rates on the underlying mortgages
and the prevailing mortgage interest rates generally is the most significant
determinant of the rate of prepayments. During periods of falling mortgage
interest rates, if the coupon rate of the underlying mortgages exceeds the
prevailing market interest rates offered for mortgage loans, refinancing
generally increases and accelerates the prepayment of the underlying mortgages
and the related security. Under such circumstances, the Bank may be subject to
reinvestment risk because to the extent that the Bank's mortgage-backed and
mortgage-related securities amortize or prepay faster than anticipated, the
Bank may not be able to reinvest the proceeds of such repayments and
prepayments at a comparable rate.
105
<PAGE> 150
The following table sets forth the activity in the Bank's aggregate
mortgage-backed and mortgage-related securities portfolio during the periods
indicated.
<TABLE>
<CAPTION>
For the Two Months Ended May 31, Year Ended March 31,
---------------------------------- --------------------------------------------
1997 (1) 1996 1997 (1) 1996 1995 (2)
------------ --------------- ------------- --------------- ------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Mortgage-backed and
mortgage-related securities
at beginning of period $190,979 $516,023 $516,023 $305,545 $376,704
Purchases -- 105,266 132,587 276,777(3) --
Sales -- -- (310,252) -- (345)
Repayments and
prepayments (10,587) (28,251) (146,836) (60,920) (67,849)
Accretion of premium (122) (664) (4,307) (2,624) (3,160)
Amortization of discounts 34 82 385 189 195
Unrealized gains (losses) on
available-for-sale mortgage-
backed and mortgage-
related securities 1,944 255 3,379 (2,944) --
------- ------- -------- --------- --------
Mortgage-backed and
mortgage-related
securities at end of period $182,248 $592,711 $190,979 $516,023 $305,545
======= ======= ======= ======= =======
</TABLE>
- -----------------------------
(1) All mortgage-backed and mortgage-related securities at May 31, 1997 and
March 31, 1997 were classified available for sale.
(2) All mortgaged-backed and mortgage-related securities were classified held
to maturity at March 31, 1995 and were reflected at their carrying value.
(3) Includes $80.4 million of mortgage-backed and mortgage-related securities
acquired from Bay Ridge.
INVESTMENT SECURITIES. The Bank has the authority to invest in various
types of liquid assets, including United States Treasury obligations, securities
of various Federal agencies and of state and municipal governments, mutual
funds, equity securities and corporate obligations. At May 31, 1997, the Bank
had U.S. Government and federal agency obligations totaling $702.6 million or
18.4% of total assets at such date. Of such amount, $165.0 million consisted of
U.S. Treasury bills with a maturity of less than one year and $485.0 million
consisted of U.S. Treasury notes with maturities of five years or less (of which
$445.0 million had maturities of one year or less).
106
<PAGE> 151
The following table sets forth the activity in the Bank's aggregate
investment securities portfolio during the periods indicated.
<TABLE>
<CAPTION>
For the Two Months Ended May 31, Year Ended March 31,
-------------------------------- --------------------------------------------
1997 (1) 1996 1997 (1) 1996 1995
-------------- -------------- -------------- -------------- ------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Investment securities at beginning of period $357,487 $723,823 $723,823 $ 91,245 $355,886
Purchases 466,302 103,760 775,115 1,154,428(2) 62,364
Sales (49,753) (109,016) (335,340) (213,010) (242,057)
Maturities (62,150) (320,000) (825,002) (307,512) (92,471)
Accretion of premium (48) (19) (85) (25) (1,624)
Amortization of discounts 2,191 2,998 11,551 5,945 2,253
Unrealized gains (losses) on available-for-sale
investment securities 2,914 (3,842) 7,425 (7,248) 6,894
--------- --------- --------- ---------- --------
Investment securities at end of period $716,943 $397,704 $357,487 $723,823 $ 91,245
======= ======= ======= ======= ========
</TABLE>
- -----------------------------
(1) All investment securities at May 31, 1997 and March 31, 1997 were
deemed available for sale.
(2) Includes $179.9 million of investment securities acquired from Bay
Ridge.
107
<PAGE> 152
The following table sets forth information regarding the amortized
cost and market value of the Bank's investment and mortgage-backed and
mortgage-related securities at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
At May 31, ----------------------------------------------------------------------------
1997 1997 1996 1995
------------------ -------------------------- --------------------- ---------------------
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- ----- ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held to maturity:
Investment securities:
U.S. Government and federal
agency obligations $ -- $ -- $ -- $ -- $ 38,890 $38,803 $22,580 $ 21,718
Corporate securities -- -- -- -- 3,339 3,177
Municipal securities -- -- -- -- 1,105 1,128 1,106 1,127
Other -- -- -- -- -- -- 2,402 2,441
Mortgage-backed and
mortgage-related securities:
FNMA -- -- -- -- 5,492 5,486 6,463 6,322
GNMA -- -- -- -- 98,303 99,859 108,352 108,042
FHLMC -- -- -- -- 16,907 16,353 78,521 74,835
CMOs -- -- -- -- -- -- 112,209 108,187
------ ------ ---------- ---------- ---------- -------- -------- --------
Total -- -- $ -- $ -- $ 160,697 $161,629 $334,972 $325,849
====== ====== ========== ========== ========== ======== ======== ========
Available for sale:
Investment securities:
U.S. Government and
federal $700,572 $702,360 $ 345,229 $ 345,144 $ 670,224 $669,281 $ 7,433 $ 7,468
agency obligations
Corporate securities 362 358 363 358 3,220 3,685 5,000 5,000
Municipal securities 1,104 1,104 1,104 1,104 -- -- -- --
Stocks:
Preferred 281 282 281 280 450 445 19,500 19,500
Common 11,533 12,839 10,333 10,601 10,288 10,417 22,991 29,850
Mortgage-related
securities:
FNMA 6,441 6,536 7,319 7,175 3,108 3,091 -- --
GNMA 77,248 79,806 79,684 80,757 -- -- -- --
FHLMC 17,109 17,207 18,780 18,594 60,493 59,819 -- --
CMOs 79,071 78,699 84,761 84,453 334,664 332,411 -- --
------ ------ --------- --------- ---------- --------- --------- ---------
Total $893,721 $899,191 $ 547,854 $ 548,466 $1,082,447 $1,079,149 $ 54,924 $ 61,818
======= ======= ======== ======== ========= ========= ========= ========
</TABLE>
108
<PAGE> 153
The following table sets forth certain information regarding the
maturities of the Bank's investment and mortgage-backed and mortgage-related
securities at May 31, 1997, all of which were classified as available for sale.
<TABLE>
<CAPTION>
At May 31, 1997 Contractually Maturing
----------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Under 1 Average 1-5 Average 6-10 Average Over 10
Year Yield Years Yield Years Yield Years
---- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
U.S. Government
obligations $205,975 5.45% $ 443,975 6.35% $ 405 8.28% $ --
Agency securities 35,782 5.42 16,223 6.73 -- -- --
Corporate securities -- -- 358 9.00 -- -- --
Municipal securities -- -- -- -- 1,104 7.25 --
Mortgage-backed and
mortgage-related
securities:
FNMA -- -- 2,286 5.90 649 5.40 3,601
GNMA 2 8.50 3,026 5.55 13,788 5.69 62,990
FHLMC 3,514 5.40 2,025 5.71 4,716 5.34 6,952
CMOs -- -- 44,889 6.35 25,840 6.64 7,970
-------- -------- -------- -------
Total $245,273 $ 512,782 $ 46,502 $ 81,513
======= ======== ======= =======
<CAPTION>
At May 31, 1997 Contractually Maturing
--------------------------------------
Weighted
Average
Yield Total
-----
(Dollars in Thousands)
<S> <C> <C>
Investment Securities:
U.S. Government
obligations --% $650,355
Agency securities -- 52,005
Corporate securities -- 358
Municipal securities -- 1,104
Mortgage-backed and
mortgage-related
securities:
FNMA 5.44 6,536
GNMA 6.71 79,806
FHLMC 5.82 17,207
CMOs 5.76 78,699
--------
Total $886,070
=======
</TABLE>
109
<PAGE> 154
SOURCES OF FUNDS
GENERAL. Deposits are the primary source of the Bank's funds for
lending and other investment purposes. In addition to deposits, the Bank
derives funds from loan principal repayments and prepayments, advances from the
FHLB of New York and certain other borrowings. Loan repayments are a
relatively stable source of funds, while deposit inflows and outflows are
influenced by general interest rates and money market conditions. Borrowings
may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources. They may also be used on a longer
term basis for general business purposes.
DEPOSITS. The Bank's deposit products include NOW accounts (including
the "Active Management" NOW account), money market accounts,
non-interest-bearing checking accounts, passbook savings accounts and term
certificate accounts. Deposit account terms vary, with the principal
differences being the minimum balance required, the time periods the funds must
remain on deposit and the interest rate. See Note 11 of Notes to Consolidated
Financial Statements set forth elsewhere herein.
The Bank's deposits are obtained primarily from the areas in which its
branch offices are located, and management of the Bank estimates that only a
minimal amount of the Bank's deposits are obtained from customers residing
elsewhere. The Bank does not pay fees to brokers to solicit funds for deposit
with the Bank or actively solicit negotiable-rate certificates of deposit with
balances of $100,000 or more.
The Bank attracts deposits through a network of convenient office
locations by offering a variety of accounts and services, competitive interest
rates and convenient customer hours. Currently the offices of the Bank consist
of 33 traditional full-service offices. As part of its commitment to the
community, the Bank intends to establish one additional limited service office
in fiscal 1998 located in the Red Hook section of Brooklyn.
In addition to the Bank's extensive branch network, the Bank currently
maintains 38 automated teller machines ("ATM") in its branch offices and plans
to install an additional five ATMs in its offices by the end of fiscal 1998.
Deposit account terms offered by the Bank vary according to the
minimum balance required, the time periods the funds must remain on deposit and
the interest rate, among other factors. The Bank is not limited with respect
to the rates it may offer on deposit accounts. In determining the
Characteristics of its deposit accounts, consideration is given to the
profitability to the Bank, matching terms of the deposits with loan products,
the attractiveness to customers and the rates offered by the Bank's
competitors.
The Bank's focus on customer service has facilitated its retention of
lower-costing NOW accounts, money market account, non-interest bearing checking
accounts and savings accounts, which generally have rates substantially less
than certificates of deposit. At May
110
<PAGE> 155
31, 1997, these types of deposits amounted to $1.59 billion or 47.1% of the
Bank's total deposits. During the two months ended May 31, 1997 and fiscal
1997, the weighted average rate paid on the Bank's demand deposits and passbook
savings deposits amounted to 2.68% and 2.89%, respectively, and 2.65% and
2.91%, respectively, as compared to a weighted average rates of 5.60% and 5.53%
paid on the Bank's certificates of deposit during these periods.
The Bank's deposits increased from March 31, 1997 to May 31, 1997 by
$54.6 million due to the completion of a branch acquisition in April 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Recent Acquisitions." The Bank's deposits declined by $71.3
million from March 31, 1996 to March 31, 1997. The decline was due primarily
to the sale of $51.4 million of deposits in September 1996 which related to one
of the branch offices acquired in the 1996 Branch Acquisition combined with
outflows of deposits totaling approximately $94.6 million at the remaining
branch offices purchased in the 1996 Branch Acquisition as well as $25.2
million of deposits related to the Bay Ridge acquisition. A significant
portion of such deposits consisted of above market rate certificates of deposit
which were not reinvested at the Bank at maturity.
111
<PAGE> 156
The following table sets forth the activity in the Bank's deposits
during the periods indicated.
<TABLE>
<CAPTION>
Two Months Ended May 31, Year Ended March 31,
------------------------- --------------------------------------------
1997 1996 1997 1996 1995
---------- ---------- ----------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance $3,325,558 $3,396,890 $3,396,890 $2,236,422 $ 2,207,441
Increase due to acquisitions 69,997 -- -- 1,058,984 20,432
Decrease due to disposition -- -- (51,407)
Other net decrease
before interest credited (27,125) (66,779) (158,765) (4,895) (67,884)
Interest credited 11,744 12,348 138,840 106,379 76,433
--------- --------- ---------- ---------- ----------
Net increase (decrease)
in deposits 54,616 (54,431) (71,332) 1,160,468 28,981
--------- ---------- ----------- ---------- ----------
Ending balance $3,380,174 $3,342,459 $3,325,558 $3,396,890 $2,236,422
========= ========= ========= ========= =========
</TABLE>
The following table sets forth by various interest rate categories the
certificates of deposit with the Bank at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
At May 31, ---------------------------------------------
1997 1997 1996 1995
----------- ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
2.00% to 3.99% $ 5,159 $ 2,666 $ 6,775 $121,160
4.00% to 4.99% 140,338 215,992 413,348 216,568
5.00% to 5.99% 1,382,238 1,260,417 798,536 258,688
6.00% to 6.99% 169,712 174,972 457,039 403,209
7.00% to 8.99% 91,130 89,701 121,542 78,638
9.00% to 10.99% 1,063 8 8 94
---------- ---------- ---------- ----------
$1,789,640 $1,743,756 $1,797,248 $1,078,357
========= ========= ========= =========
</TABLE>
The following table sets forth the amount and remaining maturities of
the Bank's certificates of deposit at May 31, 1997.
<TABLE>
<CAPTION>
Over Six Months Over One Year Over Two Years
Six Months Through One Through Two Through Three Over Three
and Less Year Years Years Years Total
-------------- ------------- ------------ ------------- ------------ ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
2.00% to 3.99% $ 3,025 $ 1,967 $ 167 $ -- $ -- $ 5,159
4.00% to 4.99% 133,968 3,581 2,326 192 271 140,338
5.00% to 5.99% 741,372 351,049 235,203 19,184 35,430 1,382,238
6.00% to 6.99% 50,935 31,466 13,632 35,740 37,939 169,712
7.00% to 8.99% 5,629 5,043 5,403 72,433 2,622 91,130
9.00% to 10.99% 3 77 816 167 -- 1,063
-------- --------- -------- ---------- -------- ---------
Total $934,932 $ 393,183 $257,547 $ 127,716 $ 76,262 $1,789,640
======= ======== ======= ========= ======= =========
</TABLE>
112
<PAGE> 157
As of May 31, 1997, the aggregate amount of outstanding time
certificates of deposit in amounts greater than or equal to $100,000 was
approximately $198.2 million. The following table presents the maturity of
these time certificates of deposit at such date.
<TABLE>
<CAPTION>
Amount
------
(In Thousands)
<S> <C>
3 months or less . . . . . . . . . . . . . $ 58,927
Over 3 months through 6 months . . . . . . 38,358
Over 6 months through 12 months . . . . . 40,943
Over 12 months . . . . . . . . . . . . . . 60,010
------
$198,238
=======
</TABLE>
BORROWINGS. The Bank may obtain advances from the FHLB of New York
upon the security of the common stock it owns in that bank and certain of its
residential mortgage loans, provided certain standards related to
creditworthiness have been met. Such advances are made pursuant to several
credit programs, each of which has its own interest rate and range of
maturities. Such advances are generally available to meet seasonal and other
withdrawals of deposit accounts and to permit increased lending. At May 31,
1997, the Bank had $14.6 million of advances from the FHLB of New York with
maturities ranging between one year and seven years with the majority having a
maturity of less than five years. The other borrowings outstanding at May 31,
1997 consisted primarily of two mortgages extended to the Bank in connection
with the purchase of two of its branch offices.
EMPLOYEES
The Bank had 714 full-time employees and 179 part-time employees at
May 31, 1997. None of these employees are represented by a collective
bargaining agent and the Bank considers its relationship with its employees to
be good.
OFFICES AND PROPERTIES
At May 31, 1997, the Bank conducted its business from its executive
offices in Brooklyn and 33 full service offices including a branch office
located in Astoria, New York, purchased in April 1997. In addition, the Bank
has entered into a lease for space that its new branch in Red Hook will occupy.
113
<PAGE> 158
The following table sets forth certain information relating to the
Bank's offices at May 31, 1997.
<TABLE>
<CAPTION>
Net Book
Value of
Property and
Lease Leasehold
Owned or Expiration Improvements Deposits at
Location Leased Date at May 31, 1997 May 31, 1997
- --------------------------------------- ---------- --------------- ------------------ -------------
(In Thousands)
<S> <C> <C> <C> <C>
EXECUTIVE AND ADMINISTRATIVE OFFICES:
-------------------------------------
195 Montague Street Owned $17,245 $71,592
Brooklyn, New York 11201(1)
BRANCH OFFICES:
--------------
130 Court Street Owned 5,541 193,405
Brooklyn, New York 11201 (2)
6424-18th Avenue Owned 1,010 353,167
Brooklyn, New York 11204
23 Newkirk Plaza Owned 2,364 123,407
Brooklyn, New York 11226
443 Hillside Avenue Owned 2,236 203,107
Williston Park, New York 11596
23-56 Bell Boulevard Leased 9/30/1998(3) 369 209,994
Bayside, New York 11360
250 Lexington Avenue Leased 12/31/2001(4) 117 63,924
New York, New York 10016
1416 East Avenue Leased (5) 467 116,038
Bronx, New York 10462
1108 Northern Boulevard Leased month to month (6) 105 74,994
Manhasset, New York 11030
1769-86th Street Owned 1,606 167,548
Brooklyn, New York 11214
Pratt Institute Campus Leased (7) -- 3,812
200 Willoughby Avenue
Brooklyn, New York 11205
</TABLE>
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<PAGE> 159
<TABLE>
<CAPTION>
Net Book
Value of
Property and
Lease Leasehold
Owned or Expiration Improvements Deposits at
Location Leased Date at May 31, 1997 May 31, 1997
- --------------------------------------- ---------- --------------- ------------------ -------------
(In Thousands)
<S> <C> <C> <C> <C>
2357-59 86th Street Owned 2,004 83,325
Brooklyn, New York 11214
4514 16th Avenue Owned 2,017 124,783
Brooklyn, New York 11204
37-10 Broadway Owned 1,173 108,461
Long Island City, New York 11103
22-59 31st Street Owned 678 92,552
Long Island City, New York 11105
24-28 34th Avenue Leased 6/30/2007 324 67,236
Long Island City, New York 11106
51-12 31st Avenue Leased 10/31/1997 316 42,232
Woodside, New York 11377
83-20 Roosevelt Avenue Leased 1/31/2005 1,078 59,575
Jackson Heights, New York 11372
75-15 31st Avenue Leased 4/30/2004 378 78,582
Jackson Heights, New York 11370
89-01 Northern Boulevard Leased 7/31/2004 326 75,630
Jackson Heights, New York 11372
150-28 Union Turnpike Leased 5/31/2012 176 47,485
Flushing, New York 11367
234 Prospect Park West Owned 2,207 31,824
Brooklyn, New York 11215
7500 Fifth Avenue Owned 593 66,932
Brooklyn, New York 11209
440 Avenue P Owned 703 83,409
Brooklyn, New York 11223
4703 13th Avenue Owned 1,152 84,627
Brooklyn, New York 11219
</TABLE>
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<PAGE> 160
<TABLE>
<CAPTION>
Net Book
Value of
Property and
Lease Leasehold
Owned or Expiration Improvements Deposits at
Location Leased Date at May 31, 1997 May 31, 1997
- --------------------------------------- ---------- --------------- ------------------ -------------
(In Thousands)
<S> <C> <C> <C> <C>
301 Avenue U Owned 625 70,598
Brooklyn, New York 11223
8808 Fifth Avenue Owned 2,163 60,446
Brooklyn, New York 11209
1310 Kings Highway Owned 413 68,745
Brooklyn, New York 11229
4823 13th Avenue Owned 1,476 113,603
Brooklyn, New York 11219
1302 Avenue J Owned 792 110,696
Brooklyn, New York 11230
1550 Richmond Road Owned 1,097 138,296
Staten Island, New York 10304
1460 Forest Avenue Leased 8/27/2011 12 125,250
Staten Island, New York 10302
35-06 Broadway Leased 6/13/2002 864 64,899
Astoria, New York 11106
OTHER PROPERTY:
498 Columbia Street Leased 12/31/2002 15 --
Brooklyn, New York 11231(8)
-------- ----------
Totals $ 51,642 $3,380,174
======= =========
</TABLE>
- ---------------------------
(1) The Bank operates a full-service branch on the ground floor of the
building.
(2) Designated as the Bank's main office.
(3) The Bank has an option to extend this lease for an additional 10 year
term.
(4) The Bank has an option to extend this lease for two additional 10 year
terms.
(5) Consists of two leases. The original lease executed March 1972
expires in March 2002. In February 1987, the Bank entered into a lease
for additional space in the adjacent store which expires in November
2002.
(6) The Bank has entered into a lease for space in a building under
construction. Upon completion, the Bank will relocate the branch
office into the new building.
(footnotes continued on following page)
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<PAGE> 161
- ---------------------------
(7) The Bank executed a "Memorandum of Understanding" with the Pratt
Institute to occupy the space; no expiration date was stated in the
Memorandum.
(8) Consists of property leased for a new branch in the Red Hook area of
Brooklyn which is expected to open during fiscal 1998.
SAVINGS BANK LIFE INSURANCE
The Bank, through its Savings Bank Life Insurance ("SBLI") department,
engages in group life insurance coverage per individual under SBLI's Financial
Institution Group Life Insurance policy. The SBLI Department's activities are
segregated from the Bank and, while they do not directly affect the Bank's
earnings, management believes that offering SBLI is beneficial to the Bank's
relationship with its depositors and the general public. The SBLI Department
pays its own expenses and reimburses the Bank for expenses incurred on its
behalf. At May 31, 1997, the SBLI Department had policies totaling $411.6
million in force.
SUBSIDIARIES
At May 31, 1997, the Bank's two active subsidiaries were ICRC and
Wiljo.
INDEPENDENCE COMMUNITY REALTY CORP. ICRC was established in September
1996 as a real estate investment trust. On October 1, 1996, the Bank
transferred to ICRC real estate loans with a fair market value of approximately
$834.0 million in return for all 1,000 shares of ICRC's common stock and all
10,000 shares of ICRC's 8% junior preferred stock. In January 1997, 111
officers and employees of the Bank each received one share of 8% junior
preferred stock of ICRC. At May 31, 1997, ICRC held $812.2 million of loans.
WILJO DEVELOPMENT CORP. The assets of Wiljo consist primarily of the
office space in the building in which the Bank's executive offices are located
and its limited partnership interest in the partnership which owns the
remaining portion of the building. At May 31, 1997, Wiljo had total assets of
$8.1 million and the Bank's equity investment in Wiljo amounted to $7.3
million.
LEGAL PROCEEDINGS
The Bank is involved in routine legal proceedings occurring in the
ordinary course of business which in the opinion of management, in the
aggregate, will not have a material adverse effect on the consolidated
financial condition and results of operations of the Bank.
On May 17, 1995 and October 19, 1995, the purported class actions
captioned Simon v. Bay Ridge Bancorp., Inc., Dicunto, Ayoub, Christiansen,
Canade, Kasler, Mihailos, Apel and Cordano, and Pinkowitz v. Bay Ridge
Bancorp., Inc., Dicunto, Ayoub, Christansen, Canade, Kasler, Mihilos, Apel,
Cordano, Independence Community Bank Corp. and Hamm were filed in the Court of
Chancery of the State of Delaware in and for New Castle County. Such actions
allege, among other things, that the directors of Bay Ridge breached their
fiduciary duties in connection with the acquisition of Bay Ridge by the Mutual
Holding
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<PAGE> 162
Company. In addition, the Pinkowitz complaint alleges that the Mutual Holding
Company aided and abetted the breaches of fiduciary duty allegedly committed by
the directors of Bay Ridge. The plaintiffs did not specify or claim a
particular amount of damages in such actions. The Mutual Holding Company and
the Bank (as the successor to Bay Ridge) intend to vigorously defend against
the claims against the Mutual Holding Company. The Bank believes plaintiffs'
claims are without merit.
REGULATION
Set forth below is a brief description of certain laws and regulations
which are applicable to the Company and the Bank. The description of the laws
and regulations hereunder, as well as descriptions of laws and regulations
contained elsewhere herein, does not purport to be complete and is qualified in
its entirety by reference to applicable laws and regulations.
THE COMPANY
GENERAL. Upon consummation of the Conversion, the Company will become
subject to regulation as a savings and loan holding company under the Home
Owners' Loan Act, as amended ("HOLA"), instead of being subject to regulation
as a bank holding company under the Bank Holding Company Act of 1956 because
the Bank has made an election under Section 10(l) of HOLA to be treated as a
"savings association" for purposes of Section 10(e) of HOLA. As a result, the
Company will be required to register with the OTS and will be subject to OTS
regulations, examinations, supervision and reporting requirements relating to
savings and loan holding companies. The Company will also be required to file
certain reports with, and otherwise comply with the rules and regulations of,
the Department and the SEC. As a subsidiary of a savings and loan holding
company, the Bank will be subject to certain restrictions in its dealings with
the Company and affiliates thereof.
ACTIVITIES RESTRICTIONS. Upon consummation of the Conversion, the
Bank will be the sole savings association subsidiary of the Company. There are
generally no restrictions on the activities of a savings and loan holding
company which holds only one subsidiary savings institution. However, if the
Director of the OTS determines that there is reasonable cause to believe that
the continuation by a savings and loan holding company of an activity
constitutes a serious risk to the financial safety, soundness or stability of
its subsidiary savings institution, he may impose such restrictions as are
deemed necessary to address such risk, including limiting (i) payment of
dividends by the savings institution; (ii) transactions between the savings
institution and its affiliates; and (iii) any activities of the savings
institution that might create a serious risk that the liabilities of the
holding company and its affiliates may be imposed on the savings institution.
Notwithstanding the above rules as to permissible business activities of
unitary savings and loan holding companies, if the savings institution
subsidiary of such a holding company fails to meet the qualified thrift lender
("QTL") test, as discussed under "- Qualified Thrift Lender Test," then such
unitary holding company also shall become subject to the activities
restrictions applicable to multiple savings
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<PAGE> 163
and loan holding companies and, unless the savings institution requalifies as a
QTL within one year thereafter, shall register as, and become subject to the
restrictions applicable to, a bank holding company. See "- Qualified Thrift
Lender Test."
If the Company were to acquire control of another savings institution,
other than through merger or other business combination with the Bank, the
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 institution meets the QTL
test, as set forth below, the activities of the Company and any of its
subsidiaries (other than the Bank or other subsidiary savings institutions)
would thereafter be subject to further restrictions. Among other things, no
multiple savings and loan holding company or subsidiary thereof which is not a
savings institution shall commence or continue for a limited period of time
after becoming a multiple savings and loan holding company or subsidiary
thereof any business activity other than: (i) furnishing or performing
management services for a subsidiary savings institution; (ii) conducting an
insurance agency or escrow business; (iii) holding, managing, or liquidating
assets owned by or acquired from a subsidiary savings institution; (iv) holding
or managing properties used or occupied by a subsidiary savings institution;
(v) acting as trustee under deeds of trust; (vi) those activities authorized by
regulation as of March 5, 1987 to be engaged in by multiple savings and loan
holding companies; or (vii) unless the Director of the OTS by regulation
prohibits or limits such activities for savings and loan holding companies,
those activities authorized by the FRB as permissible for bank holding
companies. Those activities described in clause (vii) above also must be
approved by the Director of the OTS prior to being engaged in by a multiple
savings and loan holding company.
QUALIFIED THRIFT LENDER TEST. Under Section 2303 of the Economic
Growth and Regulatory Paperwork Reduction Act of 1996, a savings association
can comply with the QTL test by either meeting the QTL test set forth in the
HOLA and implementing regulations or qualifying as a domestic building and loan
association as defined in Section 7701(a)(19) of the Internal Revenue Code of
1986, as amended. A savings bank subsidiary of a savings and loan holding
company that does not comply with the QTL test must comply with the following
restrictions on its operations: (i) the institution may not engage in any new
activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national bank; (ii) the branching
powers of the institution shall be restricted to those of a national bank;
(iii) the institution shall not be eligible to obtain any advances from its
FHLB; and (iv) payment of dividends by the institution shall be subject to the
rules regarding payment of dividends by a national bank. Upon the expiration
of three years from the date the savings institution ceases to meet the QTL
test, it must cease any activity and not retain any investment not permissible
for a national bank and immediately repay any outstanding FHLB advances
(subject to safety and soundness considerations).
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<PAGE> 164
The QTL test set forth in the HOLA requires that qualified thrift
investments ("QTIs") represent 65% of portfolio assets of the savings
institution and its consolidated subsidiaries. Portfolio assets are defined as
total assets less intangibles, property used by a savings association in its
business and liquidity investments in an amount not exceeding 20% of assets.
Generally, QTIs are residential housing related assets. The 1996 amendments
allow small business loans, credit card loans, student loans and loans for
personal, family and household purposes to be included without limitation as
qualified investments. At May 31, 1997, approximately 69.8% of the Bank's
assets were invested in QTIs, which was in excess of the percentage required to
qualify the Bank under the QTL test in effect at that time.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings institution is any company
or entity which controls, is controlled by or is under common control with the
savings institution. In a holding company context, the parent holding company
of a savings institution (such as the Company) and any companies which are
controlled by such parent holding company are affiliates of the savings
institution. Generally, Sections 23A and 23B (i) limit the extent to which the
savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar transactions.
In addition, Sections 22(g) and (h) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires
that loans to directors, executive officers and principal stockholders be made
on terms substantially the same as offered in comparable transactions to other
persons unless the loans are made pursuant to a benefit or compensation program
that (i) is widely available to employees of the institution and (ii) does not
give preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution. Section 22(h) also requires prior board approval for certain
loans. In addition, the aggregate amount of extensions of credit by a savings
institution to all insiders cannot exceed the institution's unimpaired capital
and surplus. Furthermore, Section 22(g) places additional restrictions on
loans to executive officers. At May 31, 1997, the Bank was in compliance with
the above restrictions.
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<PAGE> 165
RESTRICTIONS ON ACQUISITIONS. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director, (i) control of any other savings institution or
savings and loan holding company or substantially all the assets thereof or
(ii) more than 5% of the voting shares of a savings institution or holding
company thereof which is not a subsidiary. Except with the prior approval of
the Director, no director or officer of a savings and loan holding company or
person owning or controlling by proxy or otherwise more than 25% of such
company's stock, may acquire control of any savings institution, other than a
subsidiary savings institution, or of any other savings and loan holding
company.
The Director may only approve acquisitions resulting in the formation
of a multiple savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home
or branch office located in the state of the institution to be acquired as of
March 5, 1987; (ii) the acquiror is authorized to acquire control of the
savings institution pursuant to the emergency acquisition provisions of the
Federal Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in
which the institution to be acquired is located specifically permit
institutions to be acquired by the state-chartered institutions or savings and
loan holding companies located in the state where the acquiring entity is
located (or by a holding company that controls such state-chartered savings
institutions).
FEDERAL SECURITIES LAWS. The Company has filed with the Securities
and Exchange Commission ("SEC") a registration statement under the Securities
Act, for the registration of the Common Stock to be issued pursuant to the
Conversion. Upon completion of the Conversion, the Company's Common Stock will
be registered with the SEC under Section 12(g) of the Exchange Act. The
Company will then be subject to the proxy and tender offer rules, insider
trading reporting requirements and restrictions, and certain other requirements
under the Exchange Act.
The registration under the Securities Act of shares of the Common
Stock to be issued in the Conversion does not cover the resale of such shares.
Shares of Common Stock purchased by persons who are not affiliates of the
Company may be sold without registration. Shares purchased by an affiliate of
the Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the
Company who complies with the other conditions of Rule 144 (including those
that require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i)
1% of the outstanding shares of the Company or (ii) the average weekly volume
of trading in such shares during the preceding four calendar weeks.
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<PAGE> 166
THE BANK
GENERAL. The Bank is subject to extensive regulation and examination
by the Department, as its chartering authority, and by the FDIC, as the insurer
of its deposits, and, upon Conversion, will be subject to certain requirements
established by the OTS as a result of the Company's savings and loan holding
company status. The federal and state laws and regulations which are
applicable to banks regulate, among other things, the scope of their business,
their investments, their reserves against deposits, the timing of the
availability of deposited funds and the nature and amount of and collateral for
certain loans. The Bank must file reports with the Department and the FDIC
concerning its activities and financial condition, in addition to obtaining
regulatory approvals prior to entering into certain transactions such as
establishing branches and mergers with, or acquisitions of, other depository
institutions. There are periodic examinations by the Department and the FDIC
to test the Bank's compliance with various regulatory requirements. This
regulation and supervision establishes a comprehensive framework of activities
in which an institution can engage and is intended primarily for the protection
of the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
regulation, whether by the Department, the FDIC or as a result of the enactment
of legislation, could have a material adverse impact on the Company, the Bank
and their operations.
CAPITAL REQUIREMENTS. The FDIC has promulgated regulations and
adopted a statement of policy regarding the capital adequacy of state-chartered
banks which, like the Bank, will not be members of the Federal Reserve System.
The FDIC's capital regulations establish a minimum 3.0% Tier 1
leverage capital requirement for the most highly-rated state-chartered,
non-member banks, with an additional cushion of at least 100 to 200 basis
points for all other state-chartered, non-member banks, which effectively will
increase the minimum Tier 1 leverage ratio for such other banks to 4.0% to 5.0%
or more. Under the FDIC's regulation, the highest-rated banks are those that
the FDIC determines are not anticipating or experiencing significant growth and
have well diversified risk, including no undue interest rate risk exposure,
excellent asset quality, high liquidity, good earnings and, in general, which
are considered a strong banking organization and are rated composite 1 under
the Uniform Financial Institutions Rating System. Leverage or core capital is
defined as the sum of common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, and
minority interests in consolidated subsidiaries, minus all intangible assets
other than certain qualifying supervisory goodwill and certain mortgage
servicing rights.
The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier 1 capital and
supplementary (Tier 2) capital) to risk-weighted
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<PAGE> 167
assets of 8%. In determining the amount of risk-weighted assets, all assets,
plus certain off-balance sheet assets, are multiplied by a risk-weight of 0% to
100%, based on the risks the FDIC believes are inherent in the type of asset or
item. The components of Tier 1 capital are equivalent to those discussed above
under the 3% leverage capital standard. The components of supplementary
capital include certain perpetual preferred stock, certain mandatory
convertible securities, certain subordinated debt and intermediate preferred
stock and general allowances for loan and lease losses. Allowance for loan and
lease losses includable in supplementary capital is limited to a maximum of
1.25% of risk-weighted assets. Overall, the amount of capital counted toward
supplementary capital cannot exceed 100% of core capital. At May 31, 1997, the
Bank met each of its capital requirements.
In August 1995, the FDIC, along with the other federal banking
agencies, adopted a regulation providing that the agencies will take account of
the exposure of a bank's capital and economic value to changes in interest rate
risk in assessing a bank's capital adequacy. According to the agencies,
applicable considerations include the quality of the bank's interest rate risk
management process, the overall financial condition of the bank and the level
of other risks at the bank for which capital is needed. Institutions with
significant interest rate risk may be required to hold additional capital.
The agencies recently issued a joint policy statement providing guidance on
interest rate risk management, including a discussion of the critical factors
affecting the agencies' evaluation of interest rate risk in connection with
capital adequacy. The agencies have determined not to proceed with a
previously issued proposal to develop a supervisory framework for measuring
interest rate risk and an explicit capital component for interest rate risk.
See "Regulatory Capital Requirements" for information with respect to
the Bank's historical leverage and risk-based capital at May 31, 1997 and pro
forma after giving effect to the issuance of shares in the Offerings.
ACTIVITIES AND INVESTMENTS OF NEW YORK-CHARTERED SAVINGS BANKS. The
Bank derives its lending, investment and other authority primarily from the
applicable provisions of New York State Banking Law and the regulations of the
Department, as limited by FDIC regulations and other federal laws and
regulations. See "--Activities and Investments of Insured State - Chartered
Banks." These New York laws and regulations authorize savings banks, including
the Bank, to invest in real estate mortgages, consumer and commercial loans,
certain types of debt securities, including certain corporate debt securities
and obligations of federal, State and local governments and agencies, certain
types of corporate equity securities and certain other assets. Under the
statutory authority for investing in equity securities, a savings bank may
directly invest up to 7.5% of its assets in certain corporate stock and may
also invest up to 7.5% of its assets in certain mutual fund securities.
Investment in stock of a single corporation is limited to the lesser of 2% of
the outstanding stock of such corporation or 1% of the savings bank's assets,
except as set forth below. Such equity securities must meet certain tests of
financial performance. A savings bank's lending powers are not subject to
percentage of asset limitations, although there are limits applicable to single
borrowers. A savings bank may also, pursuant to the "leeway"
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<PAGE> 168
authority, make investments not otherwise permitted under the New York State
Banking Law. This authority permits investments in otherwise impermissible
investments of up to 1% of the savings bank's assets in any single investment,
subject to certain restrictions and to an aggregate limit for all such
investments of up to 5% of assets. Additionally, in lieu of investing in such
securities in accordance with the reliance upon the specific investment
authority set forth in the New York State Bank Law, savings banks are
authorized to elect to invest under a "prudent person" standard in a wider
range of debt and equity securities as compared to the types of investments
permissible under such specific investment authority. However, in the event a
savings bank elects to utilize the "prudent person" standard, it will be unable
to avail itself of the other provisions of the New York State Banking Law and
regulations which set forth specific investment authority. A New
York-chartered stock savings bank may also exercise trust powers upon approval
of the Department.
Under recently enacted legislation, the Department has been granted
the authority to maintain the power of state-chartered banks reciprocal with
those of a national bank. Under the terms of the legislation, the Department
is granted such authority for only one year unless legislation is adopted
within such period which extends the effective period of such power. However,
any regulations adopted by the Department pursuant to the authority granted by
such legislation would be effective regardless of whether legislation is
enacted extending the effective period.
New York-chartered savings banks may also invest in subsidiaries under
their service corporation investment power. A savings bank may use this power
to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities which may be authorized by the
Department. Investment by a savings bank in the stock, capital notes and
debentures of its service corporations is limited to 3% of the bank's assets,
and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets.
With certain limited exceptions, a New York-chartered savings bank may
not make loans or extend credit for commercial, corporate or business purposes
(including lease financing) to a single borrower, the aggregate amount of which
would be in excess of 15% of the bank's net worth. The Bank currently complies
with all applicable loans-to-one-borrower limitations.
ACTIVITIES AND INVESTMENTS OF FDIC-INSURED STATE-CHARTERED BANKS. The
activities and equity investments of FDIC-insured, state-chartered banks are
generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally
may not directly or indirectly acquire or retain any equity investment of a
type, or in an amount, that is not permissible for a national bank. An insured
state bank is not prohibited from, among other things, (i) acquiring or
retaining a majority interest in a subsidiary, (ii) investing as a limited
partner in a partnership the sole purpose of which is direct or indirect
investment in the acquisition, rehabilitation or new
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<PAGE> 169
construction of a qualified housing project, provided that such limited
partnership investments may not exceed 2% of the bank's total assets, (iii)
acquiring up to 10% of the voting stock of a company that solely provides or
reinsures directors', trustees' and officers' liability insurance coverage or
bankers' blanket bond group insurance coverage for insured depository
institutions, and (iv) acquiring or retaining the voting shares of a depository
institution if certain requirements are met. In addition, an FDIC-insured
state-chartered bank may not directly, or indirectly through a subsidiary,
engage as "principal" in any activity that is not permissible for a national
bank unless the FDIC has determined that such activities would pose no risk to
the insurance fund of which it is a member and the bank is in compliance with
applicable regulatory capital requirements.
Excluded from the foregoing proscription is the provision of savings
bank life insurance by an FDIC-insured state-chartered bank that is located in
New York or certain other states and is otherwise authorized to sell such
insurance, provided that (i) the FDIC does not alter its determination pursuant
to the FDIA that such activities do not pose a significant risk to the
insurance fund of which the Bank is a member, (ii) the insurance underwriting
is conducted through a division of the bank that meets the definition of
"department" contained in FDIC regulations and (iii) the bank discloses to
purchasers of life insurance policies and other products that they are not
insured by the FDIC, among other things. At May 31, 1997, the Bank's SBLI
Department had $411.6 million of insurance in force.
Also excluded from the foregoing proscription is the investment by a
state-chartered FDIC-insured bank in common and preferred stock listed on a
national securities exchange and in shares of an investment company registered
under the Investment Company Act of 1940. In order to qualify for the
exception, a state-chartered FDIC-insured bank must (i) have held such types of
investments during the 14-month period from September 30, 1990 through November
26, 1992, (ii) be chartered in a state that authorized such investments as of
September 30, 1991 and (iii) file a one-time notice with the FDIC in the
required form and receive FDIC approval of such notice. In addition, the total
investment permitted under the exception may not exceed 100% of the bank's tier
one capital as calculated under FDIC regulations. The Bank received FDIC
approval of its notice to engage in this investment activity on February 26,
1993. As of May 31, 1997, the book value of the Bank's investments under this
exception was $11.6 million, which equaled 4.7% of its tier one capital. Such
grandfathering authority is subject to termination upon the FDIC's
determination that such investments pose a safety and soundness risk to the
Bank or in the event the Bank converts its charter or undergoes a change in
control.
REGULATORY ENFORCEMENT AUTHORITY. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties, as defined. In general, these enforcement actions may be initiated
for violations of laws and regulations and unsafe or unsound practices. Other
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<PAGE> 170
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with regulatory authorities.
Under the New York State Banking Law, the Department may issue an
order to a New York-chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. Upon a finding by the Department that
any director, trustee or officer of any banking organization has violated any
law, or has continued unauthorized or unsafe practices in conducting the
business of the banking organization after having been notified by the
Department to discontinue such practices, such director, trustee or officer may
be removed from office by the Department after notice and an opportunity to be
heard. The Bank does not know of any past or current practice, condition or
violation that might lead to any proceeding by the Department against the Bank
or any of its directors or officers. The Department also may take possession
of a banking organization under specified statutory criteria.
PROMPT CORRECTIVE ACTION. Section 38 of the Federal Deposit Insurance
Act ("FDIA") provides the federal banking regulators with broad power to take
"prompt corrective action" to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Under regulations adopted by the federal banking
regulators, an institution shall be deemed to be (i) "well capitalized" if it
has total risk-based capital ratio of 10.0% or more, has a Tier I risk-based
capital ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or
more and is not subject to specified requirements to meet and maintain a
specific capital level for any capital measure; (ii) "adequately capitalized"
if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized," (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is
less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances), (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is
less than 3.0%, and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. The
regulations also provide that a federal banking regulator may, after notice
and an opportunity for a hearing, reclassify a "well capitalized" institution
as "adequately capitalized" and may require an "adequately capitalized"
institution or an "undercapitalized" institution to comply with supervisory
actions as if it were in the next lower category if the institution is in an
unsafe or unsound condition or engaging in an unsafe or unsound practice. The
federal banking regulator may not, however, reclassify a "significantly
undercapitalized" institution as "critically undercapitalized."
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<PAGE> 171
An institution generally must file a written capital restoration plan
which meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with an appropriate federal banking
regulator within 45 days of the date that the institution receives notice or is
deemed to have notice that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Immediately upon becoming
undercapitalized, an institution becomes subject to statutory provisions which,
among other things, set forth various mandatory and discretionary restrictions
on the operations of such an institution.
At May 31, 1997, the Bank had capital levels which qualified it as a
"well-capitalized" institution.
FDIC INSURANCE PREMIUMS. The Bank is a member of the BIF administered
by the FDIC but has accounts insured by both the BIF and the SAIF. The
SAIF-insured accounts are held by the Bank as a result of certain acquisitions
and branch purchases and amounted to $1.61 billion as of May 31, 1997 and March
31, 1997. As insurer, the FDIC is authorized to conduct examinations of, and
to require reporting by, FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious threat to the FDIC.
The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances which would
result in termination of the Bank's deposit insurance.
On September 30, 1996, President Clinton signed into law legislation
to eliminate the premium differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's reserves to the required
ratio of 1.25% of insured deposits. The legislation provided that the holders
of SAIF-assessable deposits pay a one-time special assessment to recapitalize
the SAIF.
Effective October 8, 1996, the FDIC imposed a one-time special
assessment equal to 65.7 basis points for all SAIF-assessable deposits as of
March 31, 1995, which was collected on November 27, 1996. Certain BIF members,
including the Bank, qualified for a 20% reduction of its SAIF-assessable
deposits for purposes of calculating the one-time special assessment. The
Bank's one-time special assessment amounted to $8.6 million. Net of related
tax benefits, the one-time special assessment amounted to $5.3 million. The
payment of the special assessment reduced the Bank's capital by the amount of
the assessment.
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<PAGE> 172
Following the imposition of the one-time special assessment, the FDIC
lowered assessment rates for SAIF members to reduce the disparity in the
assessment rates paid by BIF and SAIF members. Beginning October 1, 1996,
effective SAIF rates range from zero basis points to 27 basis points which is
the same range of premiums as the BIF rates. From 1997 through 1999,
FDIC-insured institutions will pay 6.4 basis points of their SAIF-assessable
deposits and approximately 1.3 basis points of their BIF-assessable deposits to
fund the Financing Corporation. Based upon the $1.7 billion of BIF-assessable
deposits and $1.6 billion of SAIF-assessable deposits at March 31, 1997, the
Bank would expect to pay $308,000 in insurance premiums per quarter during
1997.
BROKERED DEPOSITS. The FDIA restricts the use of brokered deposits by
certain depository institutions. Under the FDIA and applicable regulations,
(i) a "well capitalized insured depository institution" may solicit and accept,
renew or roll over any brokered deposit without restriction, (ii) an
"adequately capitalized insured depository institution" may not accept, renew
or roll over any brokered deposit unless it has applied for and been granted a
waiver of this prohibition by the FDIC and (iii) an "undercapitalized insured
depository institution" may not (x) accept, renew or roll over any brokered
deposit or (y) solicit deposits by offering an effective yield that exceeds by
more than 75 basis points the prevailing effective yields on insured deposits
of comparable maturity in such institution's normal market area or in the
market area in which such deposits are being solicited. The term
"undercapitalized insured depository institution" is defined to mean any
insured depository institution that fails to meet the minimum regulatory
capital requirement prescribed by its appropriate federal banking agency. The
FDIC may, on a case-by-case basis and upon application by an adequately
capitalized insured depository institution, waive the restriction on brokered
deposits upon a finding that the acceptance of brokered deposits does not
constitute an unsafe or unsound practice with respect to such institution. The
Bank had no brokered deposits outstanding at May 31, 1997.
COMMUNITY INVESTMENT AND CONSUMER PROTECTION LAWS. In connection with
its lending activities, the Bank is subject to a variety of federal laws
designed to protect borrowers and promote lending to various sectors of the
economy and population. Included among these are the federal Home Mortgage
Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act,
Equal Credit Opportunity Act, Fair Credit Reporting Act and Community
Reinvestment Act ("CRA").
The CRA requires insured institutions to define the communities that
they serve, identify the credit needs of those communities and adopt and
implement a "Community Reinvestment Act Statement" pursuant to which they offer
credit products and take other actions that respond to the credit needs of the
community. The responsible federal banking regulator (in the case of the Bank,
the FDIC) must conduct regular CRA examinations of insured financial
institutions and assign to them a CRA rating of "outstanding," "satisfactory,"
"needs improvement" or "unsatisfactory." The Bank's current federal CRA rating
is "outstanding."
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<PAGE> 173
The Bank is also subject to provisions of the New York State Banking
Law which impose continuing and affirmative obligations upon banking
institutions organized in New York State to serve the credit needs of its local
community ("NYCRA"), which are similar to those imposed by the CRA. Pursuant
to the NYCRA, a bank must file an annual NYCRA report and copies of all federal
CRA reports with the Department. The NYCRA requires the Department to make an
annual written assessment of a bank's compliance with the NYCRA, utilizing a
four-tiered rating system, and make such assessment available to the public.
The NYCRA also requires the Department to consider a bank's NYCRA rating when
reviewing a bank's application to engage in certain transactions, including
mergers, asset purchases and the establishment of branch offices or automated
teller machines, and provides that such assessment may serve as a basis for the
denial of any such application. The Bank's latest NYCRA rating, received from
the Department was "satisfactory."
LIMITATIONS ON DIVIDENDS. The Company is a legal entity separate and
distinct from the Bank. The Company's principal source of revenue consists of
dividends from the Bank. The payment of dividends by the Bank is subject to
various regulatory requirements including a requirement, as a result of the
Company's savings and loan holding company status, that the Bank notify the
Director not less than 30 days in advance of any proposed declaration by its
directors of a dividend.
Under New York State Banking Law, a New York-chartered stock savings
bank may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Department is required if the total
of all dividends declared in a calendar year would exceed the total of its net
profits for that year combined with its retained net profits of the preceding
two years, subject to certain adjustments.
MISCELLANEOUS. The Bank is subject to certain restrictions on loans
to the Company or its non-bank subsidiaries, on investments in the stock or
securities thereof, on the taking of such stock or securities as collateral for
loans to any borrower, and on the issuance of a guarantee or letter of credit
on behalf of the Company or its non-bank subsidiaries. The Bank also is
subject to certain restrictions on most types of transactions with the Company
or its non-bank subsidiaries, requiring that the terms of such transactions be
substantially equivalent to terms of similar transactions with non-affiliated
firms.
FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB of
New York, which is one of 12 regional FHLBs that administers the home financing
credit function of savings institutions. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of
the FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB. The
Bank had $14.6 million of FHLB advances at May 31, 1997.
As a FHLB member, the Bank is required to purchase and maintain stock
in the FHLB of New York in an amount equal to at least 1% of its aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year
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<PAGE> 174
or 5% of its advances from the FHLB of New York, whichever is greater. At May
31, 1997, the Bank had approximately $25.8 million in FHLB stock, which
resulted in its compliance with this requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. These contributions
have adversely affected the level of FHLB dividends paid in the past and could
continue to do so in the future. These contributions also could have an
adverse effect on the value of FHLB stock in the future.
FEDERAL RESERVE SYSTEM. The FRB requires all depository institutions
to maintain reserves against their transaction accounts (primarily NOW and
Super NOW checking accounts) and non-personal time deposits. As of May 31,
1997, the Bank was in compliance with applicable requirements. However,
because required reserves must be maintained in the form of vault cash or a
noninterest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce an institution's earning assets.
TAXATION
FEDERAL TAXATION
GENERAL. The Company and the Bank will be subject to federal income
taxation in the same general manner as other corporations with some exceptions
discussed below. The following discussion of federal taxation is intended only
to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to the Bank. The Bank's
federal income tax returns have been audited or closed without audit by the
Internal Revenue Service through 1992.
METHOD OF ACCOUNTING. For federal income tax purposes, the Bank
currently reports its income and expenses on the accrual method of accounting
and uses a tax year ending December 31 for filing its consolidated federal
income tax returns. The Small Business Protection Act of 1996 (the "1996 Act")
eliminated the use of the reserve method of accounting for bad debt reserves by
savings institutions, effective tax taxable years beginning after 1995.
BAD DEBT RESERVES. Prior to the 1996 Act, the Bank was permitted to
establish a reserve for bad debts and to make annual additions to the reserve.
These additions could, within specified formula limits, be deducted in arriving
at the Bank's taxable income. As a result of the 1996 Act, the Bank must use
the specific chargeoff method in computing its bad debt deduction beginning
with its 1996 Federal tax return. In addition, the federal legislation
requires the recapture (over a six year period) of the excess of tax bad debt
reserves at December 31, 1995 over those established as of December 31, 1987.
The amount of such reserve subject to recapture as of December 31, 1996 is
approximately $3.6 million.
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<PAGE> 175
As discussed more fully below, the Bank and subsidiaries file combined
New York State Franchise and New York City Financial Corporation tax returns.
The basis of the determination of each tax is the greater of a tax on entire
net income (or on alternative entire net income) or a tax computed on taxable
assets. However, for state purposes, New York State enacted legislation in
1996, which among other things, decoupled the Federal and New York State tax
laws regarding thrift bad debt deductions and permits the continued use of the
bad debt reserve method under section 593. Thus, provided the Bank continues
to satisfy certain definitional tests and other conditions, for New York State
and City income tax purposes, the Bank is permitted to continue to use the
special reserve method for bad debt deductions. The deductible annual addition
to the state reserve may be computed using a specific formula based on the
Bank's loss history ("Experience Method") or a statutory percentage equal to
32% of the Bank's New York State or City taxable income ("Percentage Method").
TAXABLE DISTRIBUTIONS AND RECAPTURE. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into
taxable income should the Bank fail to meet certain thrift asset and
definitional tests. New federal legislation eliminated these thrift related
recapture rules. However, under current law, pre-1988 reserves remain subject
to recapture should the Bank make certain non-dividend distributions or cease
to maintain a bank charter.
At December 31, 1996 the Bank's total federal pre-1988 reserve was
approximately $30.0 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision
has been made.
MINIMUM TAX. The Code imposes an alternative minimum tax ("AMT") at a
rate of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. Net operating losses can
offset no more than 90% of AMTI. Certain payments of alternative minimum tax
may be used as credits against regular tax liabilities in future years. The
Bank has not been subject to the alternative minimum tax and has no such
amounts available as credits for carryover.
NET OPERATING LOSS CARRYOVERS. A financial institution may carry back
net operating losses to the preceding three taxable years and forward to the
succeeding 15 taxable years. This provision applies to losses incurred in
taxable years beginning after 1986. At December 31, 1996, the Bank had no net
operating loss carryforwards for federal income tax purposes.
CORPORATE DIVIDENDS-RECEIVED DEDUCTION. The Company may exclude from
its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction
is 80% in the case of dividends received from corporations with which a
corporate recipient does not file a consolidated tax return, and corporations
which own less than 20% of the stock of a corporation distributing a dividend
may deduct only 70% of dividends received or accrued on their behalf.
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STATE AND LOCAL TAXATION
NEW YORK STATE AND NEW YORK CITY TAXATION. The Company and the Bank
will report income on a combined calendar year basis to both New York State and
New York City. New York State Franchise Tax on corporations is imposed in an
amount equal to the greater of (a) 9% of "entire net income" allocable to New
York State (b) 3% of "alternative entire net income" allocable to New York
State (c) 0.01% of the average value of assets allocable to New York State or
(d) nominal minimum tax. Entire net income is based on federal taxable income,
subject to certain modifications. Alternative entire net income is equal to
entire net income without certain modifications. The New York City Corporation
Tax is imposed using similar alternative taxable income methods and rates.
A temporary Metropolitan Transportation Business Tax Surcharge on
Banking corporations doing business in the Metropolitan District has been
applied since 1982. The Bank transacts a significant portion of its business
within this District and is subject to this surcharge. For the tax year ended
December 31, 1996, the surcharge rate is 17% of the State franchise tax
liability. For 1996, an additional 2.5% tax surcharge on the New York State
Franchise Tax is also imposed on the Company. New York City does not impose
surcharges applicable to the Company.
Delaware State Taxation. As a Delaware holding company not earning
income in Delaware, the Company is exempt from Delaware corporate income tax
but is required to file an annual report with and pay an annual franchise tax
to the State of Delaware. The tax is imposed as a percentage of the capital
base of the Company with an annual maximum of $150,000.
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MANAGEMENT
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company is divided into three classes,
each of which contains approximately one-third of the Board. The directors
shall be elected by the stockholders of the Company for staggered three year
terms, or until their successors are elected and qualified. One class of
directors, consisting of Messrs. Catell, Desai, Gelfman, Hamm and Hand has a
term of office expiring at the first annual meeting of stockholders, a second
class, consisting of Messrs. Archie, Elliott and MacKay and Mrs. Luke has a
term of office expiring at the second annual meeting of stockholders and a
third class, consisting of Messrs. Edelstein, Kolowsky, Morgano and Ratcliff
has a term of office expiring at the third annual meeting of stockholders.
Their names and biographical information are set forth under "- Management of
the Bank."
The following individuals are executive officers of the Company and
hold the offices set forth below opposite their names.
<TABLE>
<CAPTION>
EXECUTIVE POSITION HELD WITH COMPANY
---------------------- ------------------------------------
<S> <C>
Charles J. Hamm Chairman of the Board, President and Chief
Executive Officer
Joseph S. Morgano Executive Vice President
Terence J. Mitchell Executive Vice President
John B. Zurell Executive Vice President - Chief
Financial Officer
Thomas J. Brady Senior Vice President and Treasurer
John K. Schnock Senior Vice President, Secretary and
Counsel
</TABLE>
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors.
Information concerning the principal occupations, employment and
compensation of the directors and officers of the Company during the past five
years is set forth under "- Management of the Bank" and "- Executive Officers
Who Are Not Directors." Directors of the Company initially will not be
compensated by the Company but will serve and be compensated by the Bank. It
is not anticipated that separate compensation will be paid to directors of the
Company until such time as such persons devote significant time to the separate
management of the Company's affairs, which is not expected to occur until the
Company becomes actively engaged in additional businesses other than holding
the stock of the Bank. The Company may determine that such compensation is
appropriate in the future.
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MANAGEMENT OF THE BANK
The following table sets forth certain information regarding the Board
of Directors of the Bank.
<TABLE>
<CAPTION>
Positions Held
With Director
Name Age(1) the Bank Since
- -------------------- -------- ---------------------------------- ----------
<S> <C> <C> <C>
Willard N. Archie 53 Director 1994
Robert B. Catell 60 Director 1984
Rohit M. Desai 58 Director 1992
Chaim Y. Edelstein 54 Director 1991
Donald H. Elliott 64 Director 1973
Robert W. Gelfman 65 Director 1988
Charles J. Hamm 59 Chairman of the Board, 1975
President and Chief
Executive Officer
Scott M. Hand 54 Director 1987
Donald E. Kolowsky 64 Director 1989
Janine Luke 58 Director 1976
Malcolm MacKay 56 Director 1977
Joseph S. Morgano 65 Director, Executive Vice 1996
President and Mortgage Officer
Wesley D. Ratcliff 54 Director 1994
</TABLE>
- ------------------------------
(1) As of May 31, 1997.
Set forth below is information with respect to the principal
occupations during at least the last five years for the directors of the Bank.
Willard N. Archie. Mr. Archie is a certified public accountant and
Vice Chairman and Managing Partner of Mitchell & Titus, LLP, an accounting and
management consulting firm in New York City.
Robert B. Catell. Mr. Catell has been Chairman and Chief Executive
Officer of the Brooklyn Union Gas Company in Brooklyn, New York since May 1996.
Previously, Mr. Catell was President and Chief Executive Officer of the
Brooklyn Union Gas Company. Mr. Catell also is a director of the Houston
Exploration Company.
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<PAGE> 179
Rohit M. Desai. Mr. Desai is Chairman and President of Desai Capital
Management, an investment management firm in New York City. Mr. Desai also
serves as a director of the Rouse Company, Sunglass Hut International and
Finlay Fine Jewelry.
Chaim Y. Edelstein. Mr. Edelstein has been self-employed as a retail
consultant since May 1995. Previously he served as a consultant to Federated
Department Stores from March 1994 through April 1995 and, from March 1992
through February 1994, as Chairman and Chief Executive Officer of A&S/Jordan
Marsh, a department store in Brooklyn, New York. Mr. Edelstein also is a
director of Hills Stores, Inc. and Carson Pirie Scott.
Donald H. Elliott. Mr. Elliott has been an attorney with, and of
counsel to, the law firm, Hollyer, Brady, Smith, Troxell, Barrett, Rocket,
Hines & Mone LLP, New York City, since September 1995. Previously, Mr. Elliott
was a partner with the law firm, Mudge Rose Guthrie Alexander & Ferdon LLP, New
York City. Mr. Elliott also is a director of the Brooklyn Union Gas Company.
Robert W. Gelfman. Mr. Gelfman is a partner with the law firm, Battle
Fowler LLP, a law firm in New York City.
Charles J. Hamm. Mr. Hamm has served as President of the Bank since
1985 and was elected Chief Executive Officer of the Bank in 1986. Mr. Hamm
also has served as Chairman of the Board of the Bank since 1996.
Scott M. Hand. Mr. Hand is President and a director of Inco Limited,
a mining company headquartered in Toronto, Canada.
Donald E. Kolowsky. Mr. Kolowsky has been retired since December
1991. Previously, Mr. Kolowsky was the President of the Special Chemicals
Group of Pfizer, Inc.
Janine Luke. Mrs. Luke has been a director of Windrove Service
Corporation, an investment advisory firm in New York City since January 1996.
Previously, until December 1995, Mrs. Luke was the President of Breecom Corp.,
an investment advisory firm.
Malcolm MacKay. Mr. MacKay is a Managing Director in Russell Reynolds
Associates, Inc., an executive placement firm in New York City. Mr. MacKay
also serves as a director of Empire Fidelity Life Insurance Company, Inc., a
subsidiary of Fidelity Investment Co.
Joseph S. Morgano. Mr. Morgano has served as Executive Vice President
and Mortgage Officer of the Bank since March 1993. Mr. Morgano has served in
various capacities in the mortgage area since joining the Bank in 1972.
Wesley D. Ratcliff. Mr. Ratcliff has been President and Chief
Executive Officer of Advanced Technological Solutions, Inc., an electronics
service provider located in Brooklyn,
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New York, since October 1993. Previously, Mr. Ratcliff served as a plant
manager for IBM Corporation.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is information with respect to the principal
occupations during the last five years for the four executive officers of the
Bank who do not serve as directors.
Terence J. Mitchell. Age 45 years. Mr. Mitchell has been Executive
Vice President-Director of Marketing and Retail Banking of the Bank since
February 1995. Previously, Mr. Mitchell served as a Senior Vice President of
the Bank for Marketing and Retail Banking.
John B. Zurell. Age 55 years. Mr. Zurell served as Executive Vice
President-Financial Systems and Director of Commercial and Consumer Lending
from February 1994 until July 1997. In July 1997, he was appointed Chief
Financial Officer. Prior to February 1994, he served as a Senior Vice
President of the Bank. He is also a certified public accountant.
Thomas J. Brady. Age 62 years. Mr. Brady has been Senior Vice
President of the Bank since March 1993 and Treasurer of the Bank since
September 1991. Previously, Mr. Brady served in various positions since
joining the Bank in 1971.
John K. Schnock. Age 53 years. Mr. Schnock has been Senior Vice
President, Secretary and Counsel of the Bank since February 1996. Previously,
Mr. Schnock served as a Vice President and then First Vice President since
joining the Bank's Secretary and Counsel department in June 1992. Prior
thereto, Mr. Schnock was an attorney with the law firm of Bleakley Platt Remsen
Millham & Curran, New York, New York, from April 1990 to June 1992.
DIRECTORS' COMPENSATION
Members of the Bank's Board of Directors, except for Messrs. Hamm and
Morgano, receive $1,500 per meeting attended of the Board and $850 per
committee meeting attended. Board fees are subject to periodic adjustment by
the Board of Directors. Commencing in fiscal 1998, members of the Board will
also receive an annual retainer of $10,000. In addition to fees paid to
directors for Board and committee meetings, the Bank's directors are expected
to participate in the Stock Option Plan and the Recognition Plan. See "-
Benefits - Stock Option Plan" and "- Recognition and Retention Plan."
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<PAGE> 181
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Determinations regarding compensation of the Bank's employees are made
by the Organization Committee of the Board of Directors. Mr. Hamm is a member
of the Organization Committee.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation paid by the Bank (including amounts deferred to
future periods by the officers) for services rendered in all capacities during
the fiscal year ended March 31, 1997 to the President and Chief Executive
Officer of the Bank and the four other most highly compensated officers of the
Bank.
<TABLE>
<CAPTION>
===================================================================================================================================
Annual Compensation Long Term Compensation
-------------------- ----------------------------
Other Awards Payouts
Name and Fiscal Annual ------------------------------------- All Other
Principal Position Year Salary(1) Bonus Compensation Securities LTIP Compensation
(2) Restricted Underlying Payouts
Stock Options
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles J. Hamm
Chairman, President
and Chief Executive
Officer 1997 $488,463 $139,195 -- -- -- $145,070(3) $4,700(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Joseph S. Morgano
Executive Vice
President and
Mortgage Officer 1997 238,500 66,278 -- -- -- 42,946(3) 4,700(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Terence J. Mitchell
Executive Vice
President-Director of
Marketing and Retail
Banking 1997 152,327 38,214 -- -- -- 23,242(3) 5,117(4)
- -----------------------------------------------------------------------------------------------------------------------------------
John B. Zurell
Executive Vice
President and Chief
Financial Officer 1997 193,646 46,746 -- -- -- 33,656(3) 4,868(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas J. Brady
Senior Vice President
and Treasurer 1997 111,308 30,010 -- -- -- 19,159(3) 4,841(4)
===================================================================================================================================
</TABLE>
- ---------------
(1) Does not include amounts deferred by an officer in prior years and
received by such officer in the current fiscal year.
(2) Does not include amounts attributable to miscellaneous benefits
received by the named executive officer. In the opinion of management
of the Bank, the costs to the Bank of providing such benefits to the
named executive officer during the year ended
(footnotes continued on following page)
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<PAGE> 182
- ------------------
March 31, 1997 did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for the individual.
(3) Amount reflects one-third of an award received in April 1997 pursuant
to the Bank's Executive Long-Term Incentive Plan ("ELTIP"), which plan
was established in 1994 and provided for awards based upon the
attainment of certain pre-established performance goals and criteria
during the period from November 1, 1994 through December 31, 1996. In
April 1997 the Board of Directors determined to exclude the effect of
the one-time special SAIF assessment for purposes of the ELTIP.
(4) Consists of contributions to the Bank's 401(k) profit sharing plan,
the receipt of $1,000 face amount of 8% junior preferred stock of the
REIT and reimbursement of certain tax payments made by the named
executive officers.
REPORT OF INDEPENDENT COMPENSATION CONSULTANT
Pursuant to regulations of the Department governing the Conversion,
the Bank must obtain the opinion of an independent compensation consultant as
to whether or not the total compensation for the executive officers and
directors of the Bank, viewed as a whole and on an individual basis, is
reasonable and proper in comparison to the compensation provided to executive
officers and directors of similar publicly-traded financial institutions. The
Bank has obtained an opinion from William M. Mercer, Incorporated, which
indicates that, based upon published professional survey data of similarly
situated publicly-traded financial institutions operating in the relevant
markets as of August 1, 1997, with respect to the total cash compensation (base
salary and annual incentive) for executive officers and total compensation for
directors of the Bank, such compensation, viewed as a whole and on an
individual basis, is reasonable and proper in comparison to the compensation
provided to similarly situated publicly-traded financial institutions, and
that, with respect to the amount of shares of Common Stock expected to be
reserved under the ESOP, the Recognition Plan and Stock Option Plan as a whole,
such amounts reserved for granting are reasonable in comparison to similar
publicly-traded financial institutions.
CHANGE IN CONTROL AGREEMENTS
The Company and the Bank collectively (the "Employers") will, upon
consummation of the Conversion, enter into Change in Control Agreements with
certain officers including Messrs. Hamm, Morgano, Mitchell, Zurell, Brady and
Schnock (the "Executives"). The Change in Control Agreements have terms of
three years, which term shall be extended each year for a successive additional
one-year period upon approval of the respective Board of Directors unless the
Executive elects, not less than 30 days prior to the annual anniversary date,
not to extend the term.
The Change in Control Agreements provide that if certain adverse
actions are taken with respect to the Executive's employment following a change
in control, as defined, of the
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<PAGE> 183
Company or the Bank, the Executive will be entitled to a cash severance amount
equal to three times the Executive's annual compensation. In addition, the
Executive will be entitled to a continuation of benefits similar to those he is
receiving at the time of such termination for the remaining term of the
agreement or until he obtains full-time employment with another employer.
A change in control is generally defined in the Change in Control
Agreements to include any change in control of the Company or the Bank required
to be reported under the federal securities laws, as well as (i) the
acquisition by any person of 25% or more of the Company's outstanding voting
securities and (ii) a change in a majority of the directors of the Company
during any two-year period without the approval of at least two-thirds of the
persons who were directors of the Company at the beginning of such period.
Each Change in Control Agreement with the Bank provides that if the
payments and benefits to be provided thereunder or otherwise upon termination
of employment are deemed to constitute a "parachute payment" within the meaning
of Section 280G of the Code, then the Executive would be reimbursed for any
excise tax liability pursuant to Sections 280G and 4999 of the Code and for any
additional income taxes imposed as a result of such reimbursement. Because the
amount of the payments and benefits that could constitute a parachute payment
is dependent upon the timing, price and structure of any change in control that
may occur in the future, it is not possible at this time to quantify the
severance benefits payable to an Executive under the employment agreements.
The Bank also anticipates entering into change in control agreements
("Bank Change in Control Agreements") with 12 First Vice Presidents, Vice
Presidents and Assistant Vice Presidents (the "Officers") which are
substantially similar to the Change in Control Agreements except that such
agreements will have terms of one or two years, provide for severance benefits
equal to one or two times the Officer's annual compensation (depending on the
terms of the specific agreement) and limit the amount of severance payable to
that amount which will not result in any portion of such payment being deemed
an excess parachute payment under Section 280G of the Code.
Although the above-described Change in Control Agreements and Bank
Change in Control Agreements could increase the cost of any acquisition of
control of the Company, management of the Company does not believe that the
terms thereof would have a significant anti-takeover effect.
BENEFITS
EMPLOYEE STOCK OWNERSHIP PLAN. The Company has established the ESOP
for employees of the Company and the Bank to become effective upon the
Conversion. Full-time employees of the Company and the Bank who have been
credited with at least 1,000 hours of service during a twelve month period are
eligible to participate in the ESOP.
As part of the Conversion, in order to fund the purchase of up to 8%
of the Common Stock to be issued in the Conversion, it is anticipated that the
ESOP will borrow funds from
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<PAGE> 184
the Company. It is anticipated that such loan will equal 100% of the aggregate
purchase price of the Common Stock acquired by the ESOP. The loan to the ESOP
will be repaid principally from the Company's and the Bank's contributions to
the ESOP over a period of 20 years, and the collateral for the loan will be the
Common Stock purchased by the ESOP. The interest rate for the ESOP loan is
expected to be at a fixed rate at the Bank's prime rate as of the date of the
loan. The Bank also intends to use matching contributions made with respect to
ESOP participants' 401(k) profit sharing plan contributions to satisfy the ESOP
loan obligation. The Company may, in any plan year, make additional
discretionary contributions for the benefit of plan participants in either cash
or shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders, upon the
original issuance of additional shares by the Company or upon the sale of
treasury shares by the Company. Such purchases, if made, would be funded
through additional borrowings by the ESOP or additional contributions from the
Company. The timing, amount and manner of future contributions to the ESOP
will be affected by various factors, including prevailing regulatory policies,
the requirements of applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be
held in a suspense account and released to participants on a pro rata basis as
debt service payments are made. Shares released from the ESOP will be
allocated to the accounts of ESOP participants pursuant to two methods. First,
for each eligible ESOP participant, a portion of the shares released for the
plan year will be allocated to a special "matching" account under the ESOP
equal in value to the amount matching the contribution, if any, that such
participant would be entitled to under the terms of the Bank's 401(k) profit
sharing plan for the plan year. Second, the remaining shares which have been
released for the plan year will be allocated to each eligible participant's
general ESOP account based on the ratio of each such participant's base
compensation to the total base compensation of all eligible ESOP participants.
Forfeitures will be reallocated among remaining participating employees and may
reduce any amount the Company might otherwise have contributed to the ESOP.
The account balances of participants within the ESOP will become 50% vested if
the participant has at least two but less than three years of service and will
become 100% vested upon the completion of three years of service. Credit is
given for years of service with the Bank prior to adoption of the ESOP. In the
case of a "change in control," as defined, however, participants will become
immediately fully vested in their account balances. Benefits may be payable
upon retirement or separation from service. The Company's contributions to the
ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.
__________________________ will serve as trustee of the ESOP. Under
the ESOP, the trustee must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees, and subject to
compliance with the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the trustee's fiduciary duties, the unallocated shares will be
voted in the same ratio on any matter as those allocated shares for which
instructions are given.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Impact Accounting Pronouncements" for a discussion of
SOP 93-6, which
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<PAGE> 185
addresses the measure of compensation expense recorded by employers for
leveraged ESOPs from the cost of ESOP shares to the fair value of ESOP shares.
GAAP requires that any third party borrowing by the ESOP be reflected
as a liability on the Company's statement of financial condition. Since the
ESOP is borrowing from the Company, such obligation is not treated as a
liability, but will be excluded from stockholders' equity. If the ESOP
purchases newly issued shares from the Company, total stockholders' equity
would neither increase nor decrease, but per share stockholders' equity and per
share net earnings would decrease as the newly issued shares are allocated to
the ESOP participants.
The ESOP will be subject to the requirements of the ERISA, and the
regulations of the IRS and the Department of Labor thereunder.
STOCK OPTION PLAN. Following consummation of the Conversion, the
Board of Directors of the Company intends to adopt a Stock Option Plan, which
will be designed to attract and retain qualified personnel in key positions,
provide directors, officers and key employees with a proprietary interest in
the Company as an incentive to contribute to the success of the Company and
reward key employees for outstanding performance. The Stock Option Plan will
provide for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Code ("incentive stock options"),
non-incentive or compensatory stock options, stock appreciation rights and
limited rights which will be exercisable only upon a change in control of the
Company or the Bank (collectively "Awards"). Awards may be granted to
directors and key employees of the Company and any subsidiaries. The Stock
Option Plan will be administered and interpreted by a committee of the Board of
Directors ("Committee"). Unless sooner terminated, the Stock Option Plan shall
continue in effect for a period of 10 years from the date the Stock Option Plan
is adopted by the Board of Directors. Subject to any applicable Department and
FDIC regulations, upon exercise of "Limited Rights" in the event of a change in
control, the employee will be entitled to receive a lump sum cash payment equal
to the difference between the exercise price of the related option and the fair
market value of the shares of common stock subject to the option on the date of
exercise of the right in lieu of purchasing the stock underlying the option.
Under the Stock Option Plan, the Committee will determine which
directors, officers and key employees will be granted Awards, whether options
will be incentive or compensatory options, the number of shares subject to each
Award, the exercise price of each option, whether options may be exercised by
delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of an incentive stock option must at
least equal the fair market value of a share of Common Stock on the date the
option is granted (110% of fair market value in the case of incentive stock
options granted to employees who are 5% stockholders). The granting or vesting
of stock options may be conditioned upon the achievement of individual or
company-wide performance goals, which could include goals such as the
achievement by the Company or the Bank of specified levels of net income, asset
growth, return on assets, return on equity or other specific performance goals.
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<PAGE> 186
At a meeting of stockholders of the Company following the Conversion,
which under applicable Department regulations may be held no earlier than six
months after the completion of the Conversion, the Board of Directors intends
to present the Stock Option Plan to stockholders for approval and to reserve an
amount equal to 10% of the shares of Common Stock issued in the Offerings (or
5,856,482 shares based upon the issuance of 58,564,815 shares), for issuance
under the Stock Option Plan. Department regulations provide that, in the event
such plan is implemented within the one year following the Conversion, no
individual officer or employee of the Bank may receive more than 25% of the
options granted under the Stock Option Plan and non-employee directors may not
receive more than 5% individually, or 30% in the aggregate of the options
granted under the Stock Option Plan. Department and FDIC regulations also
provide that exercise price of any options granted under any such plan must be
the fair market value of the Common Stock as of the date of grant. Each stock
option or portion thereof will be exercisable at any time on or after it vests
and will be exercisable until 10 years after its date of grant or for periods
of up to one year following the death, disability or other termination of the
optionee's employment or service as a director. However, failure to exercise
incentive stock options within three months after the date on which the
optionee's employment terminates may result in adverse tax consequences to the
optionee.
At the time an Award is granted pursuant to the Stock Option Plan, the
recipient will not be required to make any payment in consideration for such
grant. With respect to incentive or compensatory stock options, the optionee
will be required to pay the applicable exercise price at the time of exercise
in order to receive the underlying shares of Common Stock. The shares reserved
for issuance under the Stock Option Plan may be authorized but previously
unissued shares, treasury shares, or shares purchased by the Company on the
open market or from private sources. In the event of a stock split, reverse
stock split or stock dividend, the number of shares of Common Stock under the
Stock Option Plan, the number of shares to which any Award relates and the
exercise price per share under any option or stock appreciation right shall be
adjusted to reflect such increase or decrease in the total number of shares of
Common Stock outstanding. In the event the Company declares a special cash
dividend or return of capital following the implementation of the Stock Option
Plan in an amount per share which exceeds 10% of the fair market value of a
share of Common Stock as of the date of declaration, the per share exercise
price of all previously granted options which remain unexercised as of the date
of such declaration shall, subject to certain limitations, be proportionately
adjusted to give effect to such special cash dividend or return of capital as
of the date of payment of such special cash dividend or return of capital.
Under current provisions of the Code, the federal income tax treatment
of incentive stock options and compensatory stock options is different. As
regards incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Company at any time as a result of such grant or
exercise. With respect to compensatory stock options, the difference between
the fair market value on the date of exercise and the option exercise price
generally will be treated as compensation income upon exercise, and the Company
will be entitled to
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<PAGE> 187
a deduction in the amount of income so recognized by the optionee. Upon the
exercise of a stock appreciation right, the holder will realize income for
federal income tax purposes equal to the amount received by him, whether in
cash, shares of stock or both, and the Company will be entitled to a deduction
for federal income tax purposes in the same amount.
It is currently expected that 30% of the shares available under the
Stock Option Plan will be granted to non-employee directors, with each
non-employee director receiving an option for the same number of shares, in
which event options for a total of approximately 159,722 shares would be
granted to each of the eleven non-employee directors if the amount of Common
Stock sold in the Conversion is equal to the maximum of the Estimated Valuation
Range. In addition, the Stock Option Plan will provide that no individual
officer will be able to receive stock options for more than 25% of the shares
available under the Stock Option Plan, or 1,464,120 shares if the amount of
Common Stock sold in the Conversion is equal to the maximum of the Valuation
Range, vesting over a five-year period (or 292,824 shares per year based upon
the maximum of the Valuation Range).
RECOGNITION PLAN. Following consummation of the Conversion, the Board
of Directors of the Company intends to adopt a Recognition Plan for directors,
officers and employees. The objective of the Recognition Plan will be to
enable the Company to provide directors, officers and employees with a
proprietary interest in the Company as an incentive to contribute to its
success. The Company intends to present the Recognition Plan to stockholders
for their approval at a meeting of stockholders which, pursuant to applicable
Department regulations, may be held no earlier than six months subsequent to
completion of the Conversion.
The Recognition Plan will be administered by a committee of the Board
of Directors, which will have the responsibility to invest all funds
contributed to the trust created for the Recognition Plan (the "Trust"). The
Company will contribute sufficient funds to the Trust so that the Trust can
purchase, following the receipt of stockholder approval, a number of shares
equal to an aggregate of 4% of the Common Stock sold in the Conversion
(2,342,593 shares, based on the sale of 58,564,815 shares at the maximum of the
Valuation Range). Shares of Common Stock granted pursuant to the Recognition
Plan generally will be in the form of restricted stock vesting at the rate of
20% per year over the five years following the date of grant. Shares granted
pursuant to the Recognition Plan will be awarded at no cost to the recipients.
For accounting purposes, compensation expense in the amount of the fair market
value of the Common Stock at the date of the grant to the recipient will be
recognized pro rata over the period during which the shares are payable. A
recipient will be entitled to all voting and other stockholder rights, except
that the shares, while restricted, may not be sold, pledged or otherwise
disposed of and are required to be held in the Trust. Under the terms of the
Recognition Plan, recipients of awards will be entitled to instruct the trustee
of the Recognition Plan as to how the underlying shares should be voted, and
the trustee will be entitled to vote all unallocated shares in its discretion.
If a recipient's employment is terminated as a result of death or disability,
all restrictions will expire and all allocated shares will become unrestricted.
The Board of Directors of the Company can terminate the Recognition Plan at any
time, and if it does so, any shares not allocated will
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<PAGE> 188
revert to the Company. Recipients of grants under the Recognition Plan will
not be required to make any payment at the time of grant or when the underlying
shares of Common Stock become vested, other than payment of withholding taxes.
It is currently expected that 30% of the shares available under the
Recognition Plan will be granted to non-employee directors, with each
non-employee director receiving an award for the same number of shares, in
which event awards for a total of approximately 63,889 shares would be granted
to each of the eleven non-employee directors if the amount of Common Stock sold
in the Conversion is equal to the maximum of the Estimated Valuation Range. In
addition, the Recognition Plan will provide that no individual officer will be
able to receive an award for more than 25% of the shares available under the
Recognition Plan, or 585,648 shares if the amount of Common Stock sold in the
Conversion is equal to the maximum of the Valuation Range, vesting over a
five-year period (or 117,130 shares per year based upon the maximum of the
Valuation Range).
RETIREMENT PLAN. The Bank maintains a non-contributory, tax-qualified
defined benefit pension plan (the "Retirement Plan") for eligible employees.
All salaried employees at least age 21 who have completed at least one year of
service are eligible to participate in the Retirement Plan. The Retirement
Plan provides for a benefit for each participant, including executive officers
named in the Executive Compensation Table above, equal to 2% of the
participant's final average compensation (average W-2 compensation during the
highest 60 months of employment) multiplied by the participant's years (and any
fraction thereof) of eligible employment (up to a maximum of 30 years). A
participant is fully vested in his or her benefit under the Retirement Plan
after five years of service. The Retirement Plan is funded by the Bank on a
actuarial basis and all assets are held in trust by the Retirement Plan
trustee.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 (in single life annuity amounts with no offset for Social
Security benefits) at various levels of compensation and years of service under
the Retirement Plan and the Supplemental Executive Retirement Plan ("SERP")
maintained by the Bank.
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------------
Remuneration 15 20 25 30 35
------------ -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $37,500 $50,000 $62,500 $75,000 $75,000
150,000 45,000 60,000 75,000 90,000 90,000
175,000 52,500 70,000 87,500 105,000 105,000
200,000 60,000 80,000 100,000 120,000 120,000
225,000 67,500 90,000 112,500 135,000 135,000
250,000 75,000 100,000 125,000 150,000 150,000
300,000 90,000 120,000 150,000 180,000 180,000
400,000 120,000 160,000 200,000 240,000 240,000
450,000 135,000 180,000 225,000 270,000 270,000
500,000 150,000 200,000 250,000 300,000 300,000
600,000 180,000 240,000 300,000 360,000 360,000
</TABLE>
(footnotes continued on following page)
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- ---------------
(1) The annual retirement benefits shown in the table do not reflect a
deduction for Social Security benefits and there are no other offsets
to benefits.
(2) For the fiscal year of the Retirement Plan beginning on January 1,
1997, the average final compensation for computing benefits under the
Retirement Plan cannot exceed $160,000 (as adjusted for subsequent
years pursuant to Code provisions). Benefits in excess of the
limitation are provided through the SERP.
(3) For the fiscal year of the Retirement Plan beginning on January 1,
1997, the maximum annual benefit payable under the Retirement Plan
cannot exceed $125,000 (as adjusted for subsequent years pursuant to
Code provisions).
(4) The maximum years of service credited for benefit purposes is 30
years.
The following table sets forth the years of credited service and the
average annual earnings (as defined above) determined as of December 31, 1996,
the end of the 1996 plan year, for each of the individuals named in the
Executive Compensation Table.
<TABLE>
<CAPTION>
Years of Credited Average Annual
Service Earnings
----------------- --------------
<S> <C> <C>
Charles J. Hamm . . . . . . . . . . . . 12 years $473,475
Joseph S. Morgano . . . . . . . . . . . 24 years 236,354
Terence J. Mitchell . . . . . . . . . . 22 years 126,525
John B. Zurell . . . . . . . . . . . . 24 years 179,480
Thomas K. Brady . . . . . . . . . . . . 26 years 103,114
</TABLE>
401(k) PLAN. The Bank maintains the 401(k) Plan, which is a
tax-qualified defined contribution plan which permits salaried employees with
at least one year of service to make pre-tax salary deferrals under section
401(k) of the Code. Salary deferrals are made by the election and are limited
to 15% of compensation up to $9,500 (for 1996). The Bank generally makes
matching contributions equal to 100% of deferred amounts up to 6% of salary,
with an annual limit of $3,000. Employees are fully vested in their salary
deferrals, and become 50% vested in the Bank's contribution after two years of
employment and 100% vested after three years of employment. The 401(k) Plan
provides that employees select the investment of their accounts among several
options.
The Bank has amended the 401(k) Plan in connection with the Conversion
to provide for option to invest 401(k) Plan assets in Common Stock. In
addition, participating employees may elect to invest all or any part of their
401(k) Plan account balances in Common Stock. Common Stock held by the 401(k)
Plan may be newly issued or treasury shares acquired from the Company or
outstanding shares purchased on the open market or in privately negotiated
transactions. All Common Stock held by the 401(k) Plan will be held by an
independent trustee and allocated to the accounts of individual participants.
Participants will control the exercise of voting and tender rights relating to
the Common Stock held in their accounts.
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<PAGE> 190
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank has adopted the SERP
to provide for eligible employees benefits that would be due under its
Retirement Plan if such benefits were not limited under the Code. SERP
benefits provided with respect to the Retirement Plan are reflected in the
pension table. The Board of Directors of the Bank intends to adopt an
amendment to the SERP to provide eligible employees with benefits that would be
due under the ESOP if such benefits were not limited under the Code.
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<PAGE> 191
SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the number of shares of Common Stock
that the executive officers and directors, and their associates, propose to
purchase, assuming shares of Common Stock are issued at $10.00 per share at the
minimum ($432,870,370) and maximum ($585,648,150) of the Estimated Price Range
and that sufficient shares will be available to satisfy their subscriptions.
The table also sets forth the total expected beneficial ownership of Common
Stock as to all directors and executive officers as a group.
<TABLE>
<CAPTION>
At the Minimum of the At the Maximum of the
Estimated Price Range (1) Estimated Price Range (1)
--------------------------- -----------------------------
Number of As a Percent of Number of As a Percent of
Amount Shares Shares Offered Shares Shares Offered
------------ --------- --------------- --------- ---------------
Name
----
<S> <C> <C> <C> <C> <C>
Willard N. Archie . . . . . $ 50,000 5,000 0.01% 5,000 0.01%
Robert B. Catell . . . . . . 50,000 5,000 0.01% 5,000 0.01
Rohit M. Desai . . . . . . . 500,000 50,000 0.12 50,000 0.09
Chaim Y. Edelstein . . . . . 500,000 50,000 0.12 50,000 0.09
Donald H. Elliott . . . . . . 250,000 25,000 0.06 25,000 0.04
Robert W. Gelfman . . . . . . 300,000 30,000 0.07 30,000 0.05
Charles J. Hamm . . . . . . . 500,000 50,000 0.12 50,000 0.09
Scott M. Hand . . . . . . . . 50,000 5,000 0.01 5,000 0.01
Donald E. Kolowsky . . . . . 500,000 50,000 0.12 50,000 0.09
Janine Luke . . . . . . . . . 50,000 5,000 0.01 5,000 0.01
Malcolm Mackay . . . . . . . 500,000 50,000 0.12 50,000 0.09
Joseph S. Morgano . . . . . . 250,000 25,000 0.06 25,000 0.04
Wesley D. Ratcliff . . . . . 25,000 2,500 0.01 2,500 0.01
Terence J. Mitchell . . . . . 250,000 25,000 0.06 25,000 .04
John B. Zurell . . . . . . . 300,000 30,000 0.07 30,000 .05
Thomas J. Brady . . . . . . . 500,000 50,000 0.12 50,000 .09
John K. Schnock . . . . . . . 100,000 10,000 0.02 10,000 .02
-------- ------ ---- ------ ---
All directors and executive
officers as a group (17
persons) . . . . . . . . . . $4,675,000 467,500 1.08% 467,500 .80%
========= ======= ====== ======= ====
</TABLE>
- -----------------
(1) Includes proposed subscriptions, if any, by associates. Does not
include subscription orders by the ESOP. Intended purchases by the
ESOP are expected to be 8% of the shares issued in the Conversion.
Also does not include shares to be contributed to the Foundation equal
to 8% of the Common Stock sold or 3,462,962 shares and 4,685,185
shares at the minimum and the maximum, respectively of the Estimated
Price Range. Common Stock which may be awarded under the Recognition
Plan to be adopted equal to 4% of the Common Stock issued in the
Conversion (or 1,731,481 shares and 2,342,592 shares at the minimum
and the maximum, respectively, of the Estimated Price Range), and
Common Stock which may be purchased pursuant to options which may be
granted under the Stock Option Plan equal to 10% of the number of
shares of Common Stock issued in the Conversion (or 4,328,703 shares
or 5,856,481 shares at the minimum and the maximum, respectively, of
the Estimated Price Range).
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<PAGE> 192
THE CONVERSION
THE BOARD OF TRUSTEES OF THE MUTUAL HOLDING COMPANY AND THE BOARDS OF
DIRECTORS OF THE BANK AND THE COMPANY HAVE ADOPTED THE PLAN OF CONVERSION. THE
MUTUAL HOLDING COMPANY, AS THE SOLE SHAREHOLDER OF THE BANK, HAS ALSO APPROVED
THE PLAN. SUBJECT TO APPROVAL BY THE ELIGIBLE ACCOUNT HOLDERS AND THE
SATISFACTION OF CERTAIN OTHER CONDITIONS, THE DEPARTMENT HAS APPROVED THE PLAN.
THE APPROVAL BY THE DEPARTMENT HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN BY THE DEPARTMENT.
GENERAL
The Board of Trustees of the Mutual Holding Company and the Board of
Directors of the Bank unanimously adopted the Plan on April 18, 1997. The Plan
has been approved by the Department and the Bank and Mutual Holding Company
have received a notice of intent not to object to the Plan from the FDIC,
subject to, among other things, approval of the Plan by the Eligible Account
Holders and by the Mutual Holding Company, as the sole stockholder of the Bank.
The Special Meeting has been called for Eligible Account Holders' consideration
of the Plan on ________________, 1997.
The following is a brief summary of pertinent aspects of the Plan and
the Conversion. The summary is qualified in its entirety by reference to the
provisions of the Plan. A copy of the Plan is available from the Bank upon
written request and is available for inspection at the offices of the Bank and
at the offices of the Department. The Plan also is filed as an exhibit to the
Registration Statement of which this Prospectus is a part, copies of which may
be obtained from the SEC. See "Additional Information."
PURPOSES OF THE CONVERSION
The Mutual Holding Company, as a New York-chartered mutual holding
company, does not have stockholders and has no authority to issue capital
stock. As a result of the Conversion, the Company will be structured in the
form used by holding companies of commercial banks, most business entities and
a growing number of savings institutions. While the existing mutual holding
company organization provides greater structural flexibility than a mutual
saving association, the stock holding company form of organization will provide
the organization with the greater ability to diversify its business activities
through acquisitions or otherwise as well as diversification into other
businesses. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Company and the Bank will be
in a position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any such opportunities that
may arise.
The Conversion also will be important to the future growth and
performance of the holding company organization by providing a larger capital
base to support the operations of the Bank and to sustain its continued growth
and development over the long term while maintaining its status as a
community-based, independent financial institution serving Brooklyn, Queens and
the greater New York City metropolitan area. The Conversion will
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<PAGE> 193
also enhance the organization's future access to capital markets and its
ability to diversify into other financial service-related activities and to
provide services to the public. Although the Bank currently has the ability to
raise additional capital through the sale of shares of Bank common stock, that
ability is limited by the mutual holding company structure which, among other
things, requires that the Mutual Holding Company hold a majority of the
outstanding shares of Bank common stock.
The Conversion also will result in a larger number of outstanding
shares of Common Stock following the Conversion as compared to the number of
outstanding shares of Bank Common Stock that would be outstanding if the Bank
had determined to pursue a public offering of Bank Common Stock within the
mutual holding company structure. The larger number of outstanding shares will
increase the likelihood of the development of an active and liquid trading
market for the Common Stock. See "Market for Common Stock."
In furtherance of the Bank's commitment to the community which it
serves, the Plan provides for the establishment of the Foundation as part of
the Conversion. As is described in greater detail in the following section,
the Foundation is intended to complement the Bank's existing community
reinvestment activity and is a means of establishing a common bond between the
Bank and the communities that it serves and thereby enable such communities to
share in the growth and profitability of the Company over the long term.
Consistent with the Bank's goal, the Company intends to donate to the
Foundation immediately following the Conversion a number of shares of its
authorized, but unissued Common Stock, in an amount equal to 8% of the number
of shares of Common Stock issued in the Conversion.
In light of the foregoing, the Board of Directors of the Bank and the
Board of Trustees of the Mutual Holding Company believe that the Conversion is
in the best interests of such companies as well as in the best interests of the
Bank's depositors, employees, customers and the community historically served
by the Bank.
ESTABLISHMENT OF THE FOUNDATION
GENERAL. In furtherance of the Bank's commitment to the communities
that it serves, the Plan of Conversion provides for the establishment of a
charitable foundation in connection with the Conversion. The Plan provides
that the Bank and the Company will establish the Foundation, which will be
incorporated under Delaware law as a non-stock corporation, and will fund the
Foundation with Common Stock of the Company. The Company and the Bank believe
that the funding of the Foundation with Common Stock of the Company is a means
of establishing a common bond between the Bank and its community and thereby
enables the Bank's community to share in the growth and success of the Company
over the long term. By further enhancing the Bank's visibility and reputation
in the communities that it serves, the Bank believes that the Foundation will
enhance the long-term value of the Bank's community banking franchise. The
Foundation will be dedicated to charitable purposes within the communities
served by the Bank, including community development activities.
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PURPOSE OF THE FOUNDATION. The purpose of the Foundation is to
provide funding to support charitable causes and community development
activities. In recent years, the Bank has emphasized community lending and
community development activities within the communities that it serves. The
Foundation is being formed as a complement to the Bank's existing community
activities, not as a replacement for such activities. While the Bank intends
to continue to emphasize community lending and community development activities
following the Conversion, such activities are not the Bank's sole corporate
purpose. The Foundation, conversely, will be completely dedicated to community
activities and the promotion of charitable causes, and may be able to support
such activities in ways that are not currently available to the Bank. The Bank
believes that the Foundation will enable the Company and the Bank to assist
their local community in areas beyond community development and lending. The
Bank believes the establishment of the Foundation will enhance its current
activities under the CRA. In this regard, the Board of Directors believes the
establishment of a charitable foundation is consistent with the Bank's
commitment to community service. The Board further believes that the funding
of the Foundation with Common Stock of the Company is a means of enabling the
communities served by the Bank to share in the growth and success of the
Company long after completion of the Conversion. The Foundation will
accomplish that goal by providing for continued ties between the Foundation and
Bank, thereby forming a partnership with the Bank's community. The
establishment of the Foundation will also enable the Company and the Bank to
develop a unified charitable donation strategy and will centralize the
responsibility for administration and allocation of corporate charitable funds.
Charitable foundations have been formed by other financial institutions for
this purpose, among others. The Bank, however, does not expect the
contribution to the Foundation to take the place of the Bank's traditional
community lending activities.
STRUCTURE OF THE FOUNDATION. The Foundation will be incorporated
under Delaware law as a non-stock corporation. Pursuant to the Foundation's
Bylaws, the Foundation's initial Board of Directors will be comprised of
seventeen members, thirteen of whom are existing directors and officers of the
Company, and four other individuals chosen in light of their commitment and
service to charitable and community purposes. A Nominating Committee of the
Foundation's Board, which is to be comprised of a minimum of three members of
the Board, will nominate individuals eligible for election to the Board of
Directors. The members of the Foundation, who are comprised of its Board
members, will elect the directors at the annual meeting of the Foundation from
those nominated by the Nominating Committee. Only persons serving as directors
of the Foundation qualify as members of the Foundation, with voting authority.
Directors will be divided into three classes with each class appointed for
three-year terms. The certificate of incorporation of the Foundation provides
that the corporation is organized exclusively for charitable purposes,
including community development, as set forth in Section 501(c)(3) of the Code.
The Foundation's certificate of incorporation further provides that no part of
the net earnings of the Foundation will inure to the benefit of, or be
distributable to its directors, officers or members.
The authority for the affairs of the Foundation will be vested in the
Board of Directors of the Foundation. The Directors of the Foundation will be
responsible for
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establishing the policies of the Foundation will respect to grants or donations
by the Foundation, consistent with the purposes for which the Foundation was
established. Although no formal policy governing Foundation grants exists at
this time, the Foundation's Board of Directors will adopt such a policy upon
establishment of the Foundation. As directors of a 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 Company held by the Foundation. However,
it is expected that as a condition to receiving the non-objection of the FDIC
to the Bank's Conversion, that the Foundation will be required to commit to the
FDIC that all shares of Common Stock held by the Foundation will be voted in
the same ratio as all other shares of the Company's Common Stock on all
proposals considered by stockholders of the Company; provided, however, that,
consistent with the such expected condition, the FDIC 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 Delaware;
(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 FDIC
to waive such voting restriction, the Company's or the Foundation's legal
counsel would be required to render an opinion satisfactory to the FDIC that
compliance with the voting requirement would have the effect described in
clauses (i), (ii) or (iii) above. Under those circumstances, the FDIC would
grant a waiver of the voting restriction upon submission of such legal
opinions(s) by the Company or the Foundation that are satisfactory to the FDIC.
In the event that the FDIC 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 the Bank's
administrative offices and initially the Foundation is expected to have no
employees but will utilize the members of the staff of the Company or the Bank.
The Board of Directors of the Foundation will appoint such officers as may be
necessary to manage the operations of the Foundation. In this regard, it is
expected that the Bank will be required to provide the FDIC with a commitment
that, to the extent applicable, the Bank will comply with the affiliate
restrictions set forth in Sections 23A and 23B of the Federal Reserve Act with
respect to any transactions between the Bank and the Foundation.
The Company intends to capitalize the Foundation with Common Stock of
the Company in an amount equal to 8.0% of the total amount of the Common Stock
to be sold in connection with the Conversion. At the minimum, midpoint and
maximum of the Estimated Price Range, the contribution to the Foundation would
equal 3,462,962, 4,047,074 and 4,685,185 shares, which would have a market
value of $34.6 million, $40.7 million and $46.9 million, respectively, assuming
the Purchase Price of $10.00 per share. The Company and the Bank determined to
fund the Foundation with Common Stock rather than cash because it desired to
form a bond with the communities it serves in a manner that would
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allow them to share in the growth and success of the Company and the Bank over
the long term. The funding of the Foundation with stock also provides the
Foundation with a potentially larger endowment than if the Company contributed
cash to the Foundation since, as a stockholder, the Foundation will share in
the growth and success of the 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 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
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 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 Company would have
46,749,999, 54,973,000 and 63,250,000 shares issued and outstanding at the
minimum, midpoint and maximum of the Estimated Price Range. Because the
Company will have an increased number of shares outstanding, the voting and
ownership interests of shareholders in the Company's Common Stock would be
diluted by 7.4%, as compared to their interests in the Company if the
Foundation was not established. For additional discussion of the dilutive
effect, see "Pro Forma Data."
TAX CONSIDERATIONS. The Company and the Bank have been advised by
their independent tax advisors 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. This opinion presumes that the
Foundation will submit a timely request to the IRS to be recognized as an
exempt organization. As long as the Foundation files its application for
recognition of tax-exempt status within 15 months from the date of its
organization, and provided the IRS approves the application, the effective date
of the Foundation's status as a Section 501(c)(3) organization will be the date
of its organization. The Company's and the Bank's independent tax advisor,
however, has not rendered any advice on the condition to the contribution to be
agreed to by the Foundation which requires that all shares of Common Stock of
the Company held by the Foundation must be voted in the same ratio as all other
outstanding shares of Common Stock of the Company on all proposals considered
by stockholders of the Company. Consistent with the expected condition, in the
event that the Company or the Foundation receives an opinion of its legal
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counsel that compliance with this voting restriction would have the effect of
causing the Foundation to lose its tax-exempt status or otherwise have a
material and adverse tax consequence on the Foundation, or subject the
Foundation to an excise tax under Section 4941 of the Code, it is expected that
the FDIC would waive such voting restriction upon submission of a legal
opinion(s) by the Company or the Foundation satisfactory to the FDIC. See
"--Regulatory Conditions Imposed on the Foundation."
Under Delaware law, the Company is authorized by statute to make
charitable contributions and case law has recognized the benefits of such
contributions to a Delaware corporation. In this regard, Delaware case law
provides that a charitable gift must be within reasonable limits as to amount
and purpose to be valid. Under the Code, the Company is generally allowed a
deduction 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 Company in excess of the
annual deductible amount will be deductible over each of the five succeeding
taxable years, subject to certain limitations. The Company and the Bank
believe that the Conversion presents a unique opportunity to establish and fund
a charitable foundation given the substantial amount of additional capital
being raised in the Conversion. In making such a determination, the Company
and the Bank considered the dilutive impact of the contribution of Common Stock
to the Foundation on the amount of Common Stock available to be offered for
sale in the Conversion. Based on such consideration, the Company and Bank
believe that the contribution to the Foundation in excess of the 10% annual
deduction limitation is justified given the Bank's capital position and its
earnings, the substantial additional capital being raised in the Conversion and
the potential benefits of the Foundation to the communities served by the Bank.
In this regard, assuming the sale of the Common Stock at the midpoint of the
Estimated Price Range, the Company would have pro forma stockholders' equity of
$771.4 million or 18.0% of pro forma consolidated assets and the Bank's pro
forma leverage and total risk-based capital ratios would be 11.4% and 19.9%,
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 impact the financial
condition of the Company and the Bank and the Company and the Bank therefore
believe that the amount of the charitable contribution is reasonable given the
Company's and the Bank's pro forma capital positions. As such, the Company and
the Bank believe that the contribution does not raise safety and soundness
concerns.
The Company and the Bank have received an opinion of their independent
tax advisor that the Company's contribution of its own stock to the Foundation
would not constitute an act of self-dealing, and that the 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 Company, however, would be able to carry forward any
unused portion of the deduction for five years following the contribution,
subject to certain limitations. The Company's and the Bank's independent tax
advisor, however, has not rendered advice as to fair market value for purposes
of determining the amount of the tax deduction. If the Foundation would have
been established in fiscal 1997, the Company would have received a tax benefit
of approximately $19.1 million (based on the Bank's pre-tax income for fiscal
1997, an assumed marginal tax rate of 47% and a
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deduction for the contribution of Common Stock equal to $40.7 million). The
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 Price Range, the
Company estimates that all of the deduction should be deductible over the
six-year period. Neither the Company nor the Bank expect to make any further
contributions to the Foundation within the first five years following the
initial contribution. After that time, the Company and the Bank may consider
future contributions to the Foundation. Any such decisions would be based on
an assessment of, among other factors, the financial condition of the Company
and the Bank at that time, the interests of shareholders and depositors of the
Company and the Bank, and the financial condition and operations of the
Foundation.
Although the Company and the Bank have received an opinion of their
independent tax advisor that the Company is entitled to a deduction for the
charitable contribution, there can be no assurances that the IRS will recognize
the Foundation as a Section 501(c)(3) exempt organization or that a deduction
for the charitable contribution will be allowed. In such event, the 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 an annual report
with the Charities Bureau of the Office of the Attorney General of the State of
New York.
REGULATORY CONDITIONS IMPOSED ON THE FOUNDATION. Establishment of
the Foundation is expected to be subject to the following conditions being
agreed to by the Foundation in writing as a condition to receiving the FDIC's
non-objection of the Conversion: (i) the Foundation will be subject to
examination by the FDIC; (ii) the Foundation must comply with supervisory
directives imposed by the FDIC; (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
all proposals considered by stockholders of the Company; provided, however,
that, consistent with the condition, the FDIC would waive this voting
restriction under certain circumstances if compliance with the voting
restriction would: (a) cause a
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violation of the law of the State of Delaware; (b) would cause the Foundation
to lose its tax-exempt status or otherwise have a material and adverse tax
consequence on the Foundation; or (c) would cause the Foundation to be subject
to an excise tax under Section 4941 of the Code. In order for the FDIC to
waive such voting restriction, the Company's or the Foundation's legal counsel
would be required to render an opinion satisfactory to the FDIC. There can be
no assurances that a legal opinion addressing these issues could be rendered,
or if rendered, that the FDIC 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.
DESCRIPTION OF THE CONVERSION
On April 18, 1997, the Board of Directors of the Bank and the Board of
Trustees of the Mutual Holding Company adopted the Plan and in June 1997 the
Bank incorporated the Company under Delaware law for the purpose of holding all
of the capital stock of the Bank and in order to facilitate the Conversion.
Pursuant to the Plan, (i) the Mutual Holding Company will convert to the stock
form of organization and simultaneously will merge with and into the Bank and
all of the outstanding shares of Bank common stock held by the Mutual Holding
Company will be cancelled. Pursuant to the Plan, the Company is offering
shares of Common Stock in the Offering as part of the Conversion. Upon
consummation of the Offerings, the Company will purchase from the Bank all of
the Bank's common stock issued in the Conversion and the Bank will become a
wholly owned subsidiary of the Company operating under the name "Independence
Savings Bank."
In accordance with Department and FDIC regulations, consummation of
the Conversion (including the offering of Common Stock in the Offerings, as
described below) is conditioned upon the approval of the Plan by the Department
and the non-objection of the FDIC, as well as the approval of at least (1)
seventy-five percent (75%) in amount of deposit liabilities of Eligible Account
Holders represented in person or by proxy at the Special Meeting, and (2) a
majority of the total votes eligible to be cast by Eligible Account Holders at
the Special Meeting. The Mutual Holding Company, in its capacity as the sole
stockholder of the Bank, also has approved the Plan.
EFFECTS OF THE CONVERSION
GENERAL. Prior to the Conversion, each depositor in the Bank has both
a deposit account in the institution and a pro rata ownership interest in the
net worth of the Mutual Holding Company based upon the balance in his or her
account, which interest may only be realized in the event of a liquidation of
the Mutual Holding Company. However, this ownership interest is tied to the
depositor's account and has no tangible market value separate from such deposit
account. A depositor who reduces or closes his or her account receives a
portion or all of the balance in the account but nothing for his or her
ownership interest in the net worth of the Mutual Holding Company, which is
lost to the extent that the balance in the account is reduced.
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Consequently, the depositors of the Bank normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the Bank's depositors of record at that
time, as owners, would share pro rata in any residual surplus and reserves of
the Mutual Holding Company after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital
stock will be created to represent the ownership of the net worth of the
Company. The Common Stock is separate and apart from deposit accounts and
cannot be and is not insured by the FDIC or any other governmental agency.
Certificates are issued to evidence ownership of the permanent stock. The
stock certificates are transferable, and therefore the stock may be sold or
traded if a purchaser is available with no effect on any account the seller may
hold in the Bank.
No assets of the Mutual Holding Company or the Bank will be
distributed in connection with the Conversion other than pursuant to the
payment of expenses incurred by such entities in connection therewith.
CONTINUITY. While the Conversion is being accomplished, the normal
business of the Bank of accepting deposits and making loans will continue
without interruption. The Bank will continue to be subject to regulation by
the Department and the FDIC. After the Conversion, the Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Bank at the time of the Conversion
will continue to serve as directors and officers of the Bank after the
Conversion. The directors and officers of the Company consist of individuals
currently serving as trustees and officers of the Mutual Holding Company and
directors of the Bank, and they generally will retain their positions in the
Company after the Conversion.
EFFECT ON DEPOSIT ACCOUNTS. Under the Plan, each depositor in the
Bank at the time of the Conversion will automatically continue as a depositor
after the Conversion, and each such deposit account will remain the same with
respect to deposit balance, interest rate and other terms, except to the extent
that funds in the account are withdrawn to purchase Common Stock to be issued
in the Offerings. Each such account will be insured by the FDIC to the same
extent as before the Conversion. Depositors will continue to hold their
existing certificates, passbooks and other evidences of their accounts.
EFFECT ON LOANS. No loan outstanding from the Bank will be affected
by the Conversion, and the amount, interest rate, maturity and security for
each loan will remain as they were contractually fixed prior to the Conversion.
EFFECT ON VOTING RIGHTS OF DEPOSITORS. The voting rights and control
of the Mutual Holding Company are vested exclusively in its Board of Trustees
and the voting rights and control of the Bank are vested exclusively in its
Board of Directors, the members of which are elected by the Mutual Holding
Company, its sole stockholder. Upon completion of the
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Conversion, all voting rights in the Bank will be vested in the Company as the
sole stockholder of the Bank. Exclusive voting rights with respect to the
Company will be vested in the holders of Common Stock.
TAX EFFECTS. Consummation of the Conversion is conditioned on prior
receipt by the Company and the Bank of rulings or opinions with regard to
federal and New York income taxation which indicate that the adoption and
implementation of the Plan of Conversion set forth herein will not be taxable
for federal or New York state and city income tax purposes to the Company or
the Bank or the Eligible Account Holders or Supplemental Eligible Account
Holders, except as discussed below. See "- Tax Aspects" below.
EFFECT ON LIQUIDATION RIGHTS. Were the Mutual Holding Company to
liquidate, all claims of the Mutual Holding Company's creditors would be paid
first. Thereafter, if there were any assets remaining, depositors of the Bank
would receive such remaining assets, pro rata, based upon the deposit balances
in their deposit accounts at the Bank immediately prior to liquidation. In the
unlikely event that the Bank were to liquidate after the Conversion, all claims
of creditors (including those of depositors, to the extent of their deposit
balances) also would be paid first, followed by distribution of the
"liquidation account" to certain depositors (see "- Liquidation Rights" below),
with any assets remaining thereafter distributed to the Company as the holder
of the Bank's capital stock.
THE OFFERINGS
SUBSCRIPTION OFFERING. In accordance with the Plan of Conversion,
rights to subscribe for the purchase of Common Stock have been granted under
the Plan of Conversion to the following persons in the following order of
descending priority: (1) Eligible Account Holders; (2) the ESOP; and (3)
Supplemental Eligible Account Holders. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum and minimum purchase limitations set forth in the Plan of
Conversion and as described below under "- Limitations on Common Stock
Purchases." No person holding subscription rights may exceed any otherwise
applicable purchase limitation by submitting multiple orders for Common Stock
in the Offerings.
PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder
will receive, without payment therefor, first priority, nontransferable
subscription rights to subscribe for in the Subscription Offering up to the
amount permitted to be purchased in the Community Offering, currently $500,000
of Common Stock, subject to the overall purchase limitations. See "-
Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions, shares first will be allocated so as to permit each subscribing
Eligible Account Holder to purchase a number of shares sufficient to make his
or her total allocation equal to the lesser of the number of shares subscribed
for or 100 shares. Thereafter, unallocated shares will be allocated to
subscribing Eligible Account Holders whose subscriptions remain unfilled in the
proportion that the amounts of their respective eligible
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deposits bear to the total amount of eligible deposits of all subscribing
Eligible Account Holders whose subscriptions remain unfilled, provided that no
fractional shares shall be issued. The subscription rights of Eligible Account
Holders who are also trustees, directors or officers of the Mutual Holding
Company or the Bank and their associates will be subordinated to the
subscription rights of other Eligible Account Holders to the extent
attributable to increased deposits in the year preceding March 31, 1996.
PRIORITY 2: EMPLOYEE STOCK OWNERSHIP PLAN. The ESOP will receive,
without payment therefor, second priority, nontransferable subscription rights
to subscribe for Common Stock in the Subscription Offering. The ESOP intends
to purchase 8.0% of the shares of Common Stock, or 4,685,185 shares based on
the maximum of the Estimated Price Range. Subscriptions by the ESOP will not
be aggregated with shares of Common Stock purchased directly by or which are
otherwise attributable to any other participants in the Subscription and
Community Offerings, including subscriptions of any of the Bank's directors,
officers, employees or associates thereof. See "Management of the Company -
Benefits - Employee Stock Ownership Plan." In the event that the ESOP is
unable to purchase 8.0% of the Common Stock in the Subscription Offering, it is
anticipated that the ESOP will consider purchasing an amount of shares in the
open market sufficient to increase its ownership to 8% of the Common Stock sold
in the Conversion.
PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each Supplemental
Eligible Account Holder will receive, without payment therefor, third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the amount permitted to be purchased in the Community Offering,
currently $500,000 of Common Stock, subject to the overall purchase
limitations. See "- Limitations on Common Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions, shares first will be allocated so as to permit each subscribing
Supplemental Eligible Account Holder to purchase a number of shares sufficient
to make his or her total allocation equal to the lesser of the number of shares
subscribed for or 100 shares. Thereafter, unallocated shares will be allocated
to subscribing Supplemental Eligible Account Holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective eligible
deposits bear to the total amount of eligible deposits of all such subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled,
provided that no fractional shares shall be issued.
EXPIRATION DATE FOR THE SUBSCRIPTION OFFERING. The Subscription
Offering will expire at 12:00 noon, Eastern Time, on _________, 1997, unless
extended for up to 45 days or such additional periods by the Bank and the
Company with the approval of the Department and FDIC, if necessary. Such
extensions may not be extended beyond ________, 1999. Subscription rights
which have not been exercised prior to the Expiration Date will become void.
The Company and the Bank will not execute orders until at least the
minimum number of shares of Common Stock (43,287,037) have been subscribed for
or otherwise sold. If all shares have not been subscribed for or sold within
45 days after the Expiration Date,
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unless such period is extended with the consent of the Department and FDIC, if
necessary, all funds delivered to the Bank pursuant to the Subscription
Offering will be returned promptly to the subscribers with interest and all
withdrawal authorizations will be cancelled. If an extension beyond the 45-day
period following the Expiration Date is granted, the Company and the Bank will
notify subscribers of the extension of time and of any rights of subscribers to
modify or rescind their subscriptions.
The Plan of Conversion provides that the Company complete the sale of
the Common Stock within 45 days after the close of the Subscription Offering.
In the event that the Company is unable to complete the sale of Common Stock
and effect the Conversion within the 45-day time period, one or more extension,
with each such extension up to 60 days, may be granted but such extensions may
not go beyond _______, 1999 unless waived by the Department and FDIC, if
necessary. If an extension is granted, each subscriber will have the right to
affirm, increase, decrease or rescind the subscription at any time prior to 20
days before the end of the extension period or at any time prior to the date of
the commencement of the Community Offering or the Syndicated Community
Offering. No assurance can be given that an extension would be granted if
requested. If an extension is granted, the Company will notify subscribers of
such extension and of any rights of subscribers to modify or rescind their
subscriptions.
COMMUNITY OFFERING. Upon completion of the Subscription Offering, to
the extent that shares remain available for purchase after satisfaction of all
subscriptions of Eligible Account Holders, the ESOP and Supplemental Eligible
Account Holders, the Company and the Bank have determined to offer shares
pursuant to the Plan to certain members of the general public to whom a
Prospectus is delivered, with preference given to natural persons residing in
the counties in New York in which the Bank has a branch office (such natural
persons referred to as "Preferred Subscribers"). Such persons, together with
associates of and persons acting in concert with such persons, may purchase up
to $500,000 of Common Stock subject to the maximum purchase limitations. See
"- Limitations on Common Stock Purchases." WITHIN THE SOLE DISCRETION OF THE
COMPANY AND THE BANK, THIS AMOUNT MAY BE INCREASED UP TO 5% OF THE TOTAL
OFFERING OF SHARES IN THE SUBSCRIPTION OFFERING. THE OPPORTUNITY TO SUBSCRIBE
FOR SHARES OF COMMON STOCK ISSUED IN THE COMMUNITY OFFERING CATEGORY IS SUBJECT
TO THE RIGHT OF THE COMPANY AND THE BANK, IN THEIR SOLE DISCRETION, TO ACCEPT
OR REJECT ANY SUCH ORDERS IN WHOLE OR IN PART EITHER AT THE TIME OF RECEIPT OF
AN ORDER, WHICH MUST BE BY ____, 1997, UNLESS EXTENDED BY THE BANK AND THE
COMPANY WITH THE APPROVAL OF THE DEPARTMENT AND THE FDIC IF NECESSARY, OR AS
SOON AS PRACTICABLE FOLLOWING THE EXPIRATION DATE OF THE COMMUNITY OFFERING
WHICH MUST BE BY ______, 1997, UNLESS EXTENDED BY THE COMPANY AND THE BANK WITH
THE APPROVAL OF THE DEPARTMENT AND THE FDIC, IF NECESSARY.
If there are not sufficient shares available to fill the orders of
Preferred Subscribers after completion of the Subscription and Community
Offerings, such stock will be allocated first to each Preferred Subscriber
whose order is accepted by the Company and the Bank, in an amount equal to the
lesser of 100 shares or the number of shares subscribed for by each such
Preferred Subscriber, if possible. Thereafter, unallocated shares will be
allocated among the Preferred Subscribers whose orders remain unsatisfied on an
equal number of
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shares basis per order until all orders have been filled, provided that no
fractional shares shall be issued. If there are any shares remaining, shares
will be allocated to other members of the general public who subscribe in the
Community Offering applying the same allocation described above for Preferred
Subscribers.
SYNDICATED COMMUNITY OFFERING. The Plan provides that, if feasible,
all shares of Common Stock not purchased in the Subscription and Community
Offerings may be offered for sale to the general public in a Syndicated
Community Offering through a syndicate of registered broker-dealers to be
formed by Sandler O'Neill acting as agent for the Company and the Bank. No
person will be permitted to subscribe in the Syndicated Community Offering for
more than $500,000 of Common Stock, subject to the maximum purchase
limitations. This amount may be increased to up to 5% of the Common Stock
issued in the Conversion. If there is not sufficient shares available to fill
the orders of subscribers in the Syndicated Community Offering, such stock will
be allocated first to each subscriber whose order is accepted by the Company
and the Bank, in an amount equal to the lesser of 100 shares or the number of
shares subscribed for by each subscriber, if possible. Thereafter, any
remaining shares will be allocated on an equal number of shares basis per order
until all orders have been filled, provided that no fractional shares shall be
issued. The Company and the Bank have the right to reject orders in whole or
part in their sole discretion in the Syndicated Community Offering. Neither
Sandler O'Neill nor any registered broker-dealer shall have any obligation to
take or purchase any shares of Common Stock in the Syndicated Community
Offering; however, Sandler O'Neill has agreed to use its best efforts in the
sale of shares in the Syndicated Community Offering.
In addition to the foregoing, if a syndicate of broker-dealers
("selected dealers") is formed to assist in the Syndicated Community Offering,
a purchaser may pay for his or her shares with funds held by or deposited with
a selected dealer. If an order form is executed and forwarded to the selected
dealer or if the selected dealer is authorized to execute the order form on
behalf of a purchaser, the selected dealer is required to forward the order
form and funds to the Bank for deposit in a segregated account on or before
noon of the business day following receipt of the order form or execution of
the order form by the selected dealer. Alternatively, selected dealers may
solicit indications of interest from their customers to place orders for
shares. Such selected dealers shall subsequently contact their customers who
indicated an interest and seek their confirmation as to their intent to
purchase. The selected dealer will acknowledge receipt of the order to its
customer in writing on the following business day and will debit such
customer's account on the fifth business day after the customer has confirmed
his or her intent to purchase (the "debit date") and on or before noon of the
next business day following the debit date will send funds to the Bank for
deposit in a segregated account. If such alternative procedure is employed,
purchasers' funds are not required to be in their accounts with selected
dealers until the debit date.
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless extended by the Company and the Bank with
the approval of the Department and FDIC. See "- Stock Pricing and Number of
Shares to be Issued" below for a discussion of rights of subscribers, if any,
in the event an extension is granted.
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STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Plan of Conversion requires that the purchase price of the Common
Stock must be based on the appraised pro forma market value of the Common
Stock, as determined on the basis of an independent valuation. The Company and
the Bank have retained RP Financial to make such valuation. For its services
in making such appraisal and for the preparation of a business plan, RP
Financial will receive a maximum fee of $70,000 plus out of pocket expenses not
to exceed $10,000. The Company and the Bank have agreed to indemnify RP
Financial and its employees and affiliates against certain losses (including
any losses in connection with claims under the federal securities laws) arising
out of its services as appraiser, except where RP Financial's liability results
from its negligence or a failure to exercise due diligence or in circumstances
in which it had knowledge of certain material facts.
The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements. RP Financial also considered the following factors, among others:
the current and projected operating results and financial condition of the
Company and the Bank and the economic and demographic conditions in the Bank's
existing market area; certain historical, financial and other information
relating to the Bank; a comparative evaluation of the operating and financial
statistics of the Bank with those of other similarly situated publicly traded
companies located in New York and other regions of the United States; the
aggregate size of the offering of the Common Stock; the impact of the
Conversion on the Bank's equity and earnings potential; the proposed dividend
policy of the Company and the Bank; the trading market for the securities of
comparable companies and general conditions in the market for such securities.
On the basis of the foregoing, RP Financial has advised the Company
and the Bank in its opinion the estimated pro forma market value of the Common
Stock was $509.3 million as of August 8, 1997. The Boards of Directors of the
Bank and the Company determined that the Common Stock would be sold at $10.00
per share, resulting in a range of 43,287,037 to 58,564,815 shares of Common
Stock being offered. The Boards of Directors of the Bank and Company reviewed
RP Financial's appraisal report, including the methodology and the assumptions
used by RP Financial, and determined that the Valuation Range was reasonable
and adequate. The Valuation Range may be amended with the approval of the
Department and FDIC, if necessary, or if necessitated by subsequent
developments in the financial condition of the Company and the Bank or market
conditions generally. In the event the appraisal is updated to below $432.9
million or above $673.5 million (the maximum of the Valuation Range, as
adjusted by 15%), such appraisal will be filed with the SEC by post-effective
amendment.
Based upon current market and financial conditions and recent
practices and policies of the FDIC, in the event the Company receives orders
for Common Stock in excess of $585.7 million (the maximum of the Valuation
Range) and up to $673.5 million (the maximum of the Valuation Range, as
adjusted by 15%), the Company may be required by
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the Department and FDIC to accept all such orders. No assurances, however, can
be made that the Company will receive orders for Common Stock in excess of the
maximum of the Valuation Range or that, if such orders are received, that all
such orders will be accepted because the Company's final valuation and number
of shares to be issued are subject to the receipt of an updated appraisal from
RP Financial which reflects such an increase in the valuation and the approval
of such increase by the Department and FDIC. There is no obligation or
understanding on the part of management to take and/or pay for any shares of
Common Stock in order to complete the Offerings.
RP FINANCIAL'S VALUATION IS NOT INTENDED, AND MUST NOT BE CONSTRUED,
AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SUCH
SHARES. RP FINANCIAL DID NOT INDEPENDENTLY VERIFY THE CONSOLIDATED FINANCIAL
STATEMENTS AND OTHER INFORMATION PROVIDED BY THE BANK, NOR DID RP FINANCIAL
VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE BANK. THE VALUATION
CONSIDERS THE BANK AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN
INDICATION OF THE LIQUIDATION VALUE OF THE BANK. MOREOVER, BECAUSE SUCH
VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF
MATTERS, ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN
BE GIVEN THAT PERSONS PURCHASING COMMON STOCK IN THE CONVERSION WILL THEREAFTER
BE ABLE TO SELL SUCH SHARES AT PRICES AT OR ABOVE THE PURCHASE PRICE OR IN THE
RANGE OF THE FOREGOING VALUATION OF THE PRO FORMA MARKET VALUE THEREOF.
No sale of shares of Common Stock may be consummated unless prior to
such consummation RP Financial confirms that nothing of a material nature has
occurred which, taking into account all relevant factors, would cause it to
conclude that the Purchase Price is materially incompatible with the estimate
of the pro forma market value of a share of Common Stock upon consummation of
the Conversion. If such is not the case, a new Valuation Range may be set and
a new Subscription Offering, and/or Community Offering or Syndicated Community
Offering may be held or such other action may be taken as the Company and the
Bank shall determine and the Department and FDIC may permit or require.
Prior to the completion of the Conversion, the total number of shares
of Common Stock to be issued in the Offerings may be increased or decreased to
reflect changes in market or financial conditions without a resolicitation of
subscribers, provided that the product of the total number of shares times the
Purchase Price is not below the minimum or more than 15% above the maximum of
the Valuation Range. In the event market or financial conditions change so as
to cause the aggregate Purchase Price of the shares to be below the minimum of
the Valuation Range or more than 15% above the maximum of such range,
purchasers will be resolicited (i.e., permitted to continue their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest at the Bank's passbook rate of
interest, or be permitted to modify or rescind their subscriptions). Any
change in the Valuation Range must be approved by the Department and FDIC. If
the number of shares of Common Stock issued in the Offerings is increased due
to an increase of up to 15% in the Valuation Range to reflect changes in market
or financial conditions, persons who subscribed for the maximum numbers of
shares will be given the opportunity to subscribe for the adjusted maximum
number of shares. See "- Limitations on Common Stock Purchases."
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An increase in the number of shares of Common Stock, as a result of an
increase in the appraisal of the estimated pro forma market value (see "- The
Offerings - Subscription Offering"), would decrease both a subscriber's
ownership interest and the Company's pro forma net income and equity on a per
share basis while increasing pro forma net income and equity on an aggregate
basis. A decrease in the number of shares of Common Stock would increase both
a subscriber's ownership interest and the Company's pro forma net income and
equity on a per share basis while decreasing pro forma net income and equity on
an aggregate basis. See "Risk Factors - Possible Dilutive Effect of Issuance
of Additional Shares" and "Pro Forma Data."
The appraisal report of RP Financial has been filed as an exhibit to
the Registration Statement and the Application for Conversion of which this
Prospectus is a part and is available for inspection in the manner set forth
under "Additional Information."
PERSONS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES
The Company and the Bank will make reasonable efforts to comply with
the securities laws of all states in the United States in which persons
entitled to subscribe for stock pursuant to the Plan reside. However, the
Company and the Bank are not required to offer stock in the Subscription
Offering to any person who resides in a foreign country or resides in a state
of the United States with respect to which all of the following apply: (a) the
number of persons otherwise eligible to subscribe for shares under the Plan who
reside in such jurisdiction is small; (b) the granting of subscription rights
or the offer or sale of shares of Common Stock to such persons would require
the Company or the Bank or their officers, directors or employees, under the
laws of such jurisdiction, to register as a broker, dealer, salesman or selling
agent or to register or otherwise qualify its securities for sale in such
jurisdiction or to qualify as a foreign corporation or file a consent to
service of process in such jurisdiction; and (c) such registration,
qualification or filing in the judgment of the Company and the Bank would be
impracticable or unduly burdensome for reasons of costs or otherwise. Where
the number of persons eligible to subscribe for shares in one state is small,
the Company and the Bank will base their decision as to whether or not to offer
the Common Stock in such state on a number of factors, including but not
limited to the size of accounts held by account holders in the state, the cost
of registering or qualifying the shares or the need to register the Company,
its officers, directors or employees as brokers, dealers or salesmen.
LIMITATIONS ON COMMON STOCK PURCHASES
The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased:
(1) No less than 25 shares of Common Stock may be
purchased, to the extent such shares are available;
(2) Each Eligible Account Holder may subscribe for and
purchase in the Subscription Offering up to the amount permitted to be
purchased in the Community
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Offering, currently $500,000 of Common Stock, subject to the overall
limitation in clause (6) below;
(3) The ESOP intends to purchase 8.0% of the shares of
Common Stock to be issued in the Offerings, including any additional
shares issued in the event of an increase in the Valuation Price
Range;
(4) Each Supplemental Eligible Account Holder may
subscribe for and purchase in the Subscription Offering up to the
amount permitted to be purchased in the Community Offering, currently
$500,000 of Common Stock, subject to the overall limitation in clause
(6) below;
(5) Persons purchasing shares of Common Stock in the
Community Offering or the Syndicated Community Offering may subscribe
for and purchase in the respective Offering up to $500,000 of Common
Stock, subject to the overall limitation in clause (6) below;
(6) Eligible Account Holders and Supplemental Eligible
Account Holders may purchase stock in the Community Offering and
Syndicated Community Offering subject to the purchase limitations
described above, provided that, except for the ESOP, the maximum
number of shares of Common Stock subscribed for or purchased in all
categories by any person, together with associates of and groups of
persons acting in concert with such persons, shall not exceed the
number of shares of Common Stock that aggregate 1.0% of the Offerings;
and
(7) No more than 25% of the total number of shares issued
in the Conversion may be purchased by trustees, directors and officers
of the Company, Mutual Holding Company and the Bank and their
associates in the aggregate, excluding purchases by the ESOP.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Eligible
Account Holders or the Mutual Holding Company, as the sole stockholder of the
Bank, both the individual amount permitted to be subscribed for and the overall
purchase limitation may be increased up to a maximum of 5% and the individual
limit may be decreased to 0.1% of the total shares of Common Stock to be
issued in the Conversion at the sole discretion of the Company and the Bank.
The overall purchase limitation may not be decreased below the aggregate 1% of
the Offerings. If such amount is increased, subscribers for the maximum amount
will be, and certain other large subscribers, in the sole discretion of the
Company and the Bank, may be given the opportunity to increase their
subscriptions up to the then applicable limit.
In the event of an increase in the total number of shares of Common
Stock offered in the Conversion due to an increase in the Valuation Range of up
to 15% (the "Adjusted Maximum"), the additional shares will be allocated in the
following order of priority in accordance with the Plan: (i) to fill
unfulfilled subscriptions of Eligible Account Holders, inclusive of the
Adjusted Maximum; (ii) to fill the subscription of the ESOP; (iii) to fill
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unfulfilled subscriptions of Supplemental Eligible Account Holders, inclusive
of the Adjusted Maximum; (iv) to fill unfulfilled subscriptions by Preferred
Subscribers in the Community Offering to the extent possible, inclusive of the
Adjusted Maximum; and (v) to fill unfulfilled subscriptions in the Community
Offering other than from Preferred Subscribers, inclusive of the Adjusted
Maximum.
The term "associate" when used to indicate a relationship with a
person means (i) any corporation or organization (other than the Company or the
Bank or a majority-owned subsidiary of the Bank) of which such person is a
director, officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities; (ii) any trust or other
estate in which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar fiduciary capacity,
provided, however, that such term shall not include any tax-qualified or
non-tax-qualified employee stock benefit plan of the Company or the Bank in
which such person has a substantial beneficial interest or serves as a trustee
or in a similar fiduciary capacity; and (iii) any relative or spouse of such
person, or any relative of such spouse, who has the same home as such person or
who is a director or officer of the Company or the Bank or any of their
subsidiaries.
MARKETING ARRANGEMENTS
The Bank and the Company have engaged Sandler O'Neill as a
consultant and financial advisor in connection with the offering of the Common
Stock, and Sandler O'Neill has agreed to assist the Bank and the Company in the
solicitation of subscriptions and purchase orders for shares of Common Stock in
the Offerings. Sandler O'Neill will receive a fee equal to 1.625% of the
aggregate Purchase Price of all shares sold in the Offerings, excluding in each
case shares purchased by trustees, directors, officers and employees of the
Bank or the Company and any immediate family member thereof, the Foundation and
the Employee Plans, including the ESOP, for which Sandler O'Neill will not
receive a fee. In the event that a selected dealers' agreement is entered into
in connection with a Syndicated Community Offering, the Company and Bank will
pay a fee (to be negotiated at such time under such agreement) to such selected
dealers, any sponsoring dealers fees, and a management fee to Sandler O'Neill
of 1.5% for shares sold by a NASD member firm pursuant to a selected dealers'
agreement; provided, however, that the aggregate fees payable to Sandler
O'Neill for Common Stock sold by them pursuant to such a selected dealers'
agreement shall not exceed 1.625% of the aggregate Purchase Price and provided,
further, however, that the aggregate fees payable to Sandler O'Neill and the
selected dealers will not exceed 7.0% of the aggregate purchase price of the
Common Stock sold by selected dealers. Fees to Sandler O'Neill and to any
other broker-dealer may be deemed to be underwriting fees, and Sandler O'Neill
and such broker-dealers may be deemed to be underwriters. Sandler O'Neill will
also be reimbursed for its reasonable out-of-pocket expenses, including legal
fees. Notwithstanding the foregoing, in the event the Offerings are not
consummated or Sandler O'Neill ceases, under certain circumstances after the
subscription solicitation activities are commenced, to provide assistance to
the Company, Sandler O'Neill will be entitled to a fee for its management
advisory services in an amount to be agreed upon by the Bank and Sandler
O'Neill, and based upon the amount of services performed by Sandler O'Neill and
will also be reimbursed for its reasonable out-of-pocket
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expenses as described above. The Company and the Bank have agreed to indemnify
Sandler O'Neill for reasonable costs and expenses in connection with certain
claims or liabilities, including certain liabilities under the Securities Act.
Sandler O'Neill has received advances towards its marketing and financial
advisory service fees totaling $_____. Total marketing fees to Sandler O'Neill
are expected to be $6.4 million and $8.7 million at the minimum and the maximum
of the Estimated Price Range, respectively. See "Pro Forma Data" for the
assumptions used to arrive at these estimates.
Sandler O'Neill will also perform proxy solicitation services,
conversion agent services and records management services for the Bank in the
Conversion and will receive a fee for these services of $175,000, plus
reimbursement of reasonable out-of-pocket expenses.
Directors and executive officers of the Company and the Bank may
participate in the solicitation of offers to purchase Common Stock. Other
employees of the Bank may participate in the Offerings in ministerial
capacities or providing clerical work in effecting a sales transaction. Such
other employees have been instructed not to solicit offers to purchase Common
Stock or provide advice regarding the purchase of Common Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives. The Company will rely on Rule 3a4-1 under the Exchange Act,
and sales of Common Stock will be conducted within the requirements of Rule
3a4-1, so as to permit officers, directors and employees to participate in the
sale of Common Stock. No officer, director or employee of the Company and the
Bank will be compensated in connection with his or her solicitations or other
participation in the Offerings by the payment of commissions or other
remuneration based either directly or indirectly on transactions in the Common
Stock.
Sandler O'Neill has not prepared any report or opinion constituting
recommendations or advice to the Bank or the Company. In addition, Sandler
O'Neill has expressed no opinion as to the prices at which Common Stock to be
issued in the Offerings may trade. Furthermore, Sandler O'Neill has not
verified the accuracy or completeness of the information contained in the
Prospectus.
PROCEDURE FOR PURCHASING SHARES IN THE OFFERINGS
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
order form will confirm receipt or delivery of the Prospectus in accordance
with Rule 15c2-8. Order forms will only be distributed with a Prospectus.
To purchase shares in the Offerings, an executed order form with the
required payment for each share subscribed for, or with appropriate
authorization for withdrawal from a deposit account at the Bank (which may be
given by completing the appropriate blanks in the order form), must be received
by the Bank at any of its offices by 12:00 p.m., Eastern Time, on the
Expiration Date. In addition, the Company and the Bank will require
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a prospective purchaser to execute a certification in connection with any sale
of Common Stock and will not accept order forms unless such a certification is
executed. Any order form which is (i) not timely received, (ii) improperly
completed or executed, (iii) submitted by facsimile or is photocopied, (iv) not
accompanied by the proper payment (or authorization of withdrawal for payment)
or in the case of institutional investors in the Community Offering, not
accompanied by an irrevocable order together with a legally binding commitment
to pay the full amount of the purchase price prior to 48 hours before the
completion of the Offerings, or (v) submitted by a person whose representations
the Company and the Bank believe to be false or who they otherwise believe,
either alone, or acting in concert with others, is violating, evading or
circumventing, or intends to violate, evade or circumvent, the terms and
conditions of the Plan, are not required to be accepted. The Company and the
Bank have the right to waive or permit the correction of incomplete or
improperly executed forms, but do not represent that they will do so. Once
received, an executed order form may not be modified, amended or rescinded
without the consent of the Company and the Bank, unless the Offerings have not
been completed within 45 days after the end of the Subscription Offering,
unless such period has been extended.
In order to ensure that Eligible Account Holders and Supplemental
Eligible Account Holders are properly identified as to their stock purchase
priority, depositors as of the close of business on the Eligibility Record Date
(March 31, 1996) or the Supplemental Eligibility Record Date (_______, 1997)
must list on the order form all accounts in which they have an ownership
interest, giving all names in each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in
person at any office of the Bank, (ii) by check or money order or (iii) by
authorization of withdrawal from deposit accounts maintained with the Bank. No
wire transfers will be accepted. Orders submitted by subscribers in the
Subscription Offering and purchasers in the Community Offering aggregating
$50,000 or more must be paid by official bank or certified check or by
withdrawal authorization from a deposit account at the Bank. Funds will be
deposited in a segregated account at the Bank and interest will be paid on
funds made by cash, check or money order at the Bank's passbook rate of
interest from the date payment is received until completion or termination of
the Conversion. If payment is made by authorization of withdrawal from deposit
accounts, the funds authorized to be withdrawn from a deposit account will
continue to accrue interest at the contractual rates until completion or
termination of the Conversion, but a hold will be placed on such funds, thereby
making them unavailable to the depositor until completion or termination of the
Conversion.
If a subscriber authorizes the Bank to withdraw the aggregate amount
of the purchase price from a deposit account, the Bank will do so as of the
effective date of the Conversion. The Bank will waive any applicable penalties
for early withdrawal from certificate accounts. If the remaining balance in a
certificate account is reduced below the applicable minimum balance requirement
at the time that the funds actually are transferred under the authorization,
the certificate will be cancelled at the time of the withdrawal, without
penalty, and the remaining balance will earn interest at the passbook rate.
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The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but rather may pay for such shares of Common Stock
subscribed for by it at the Purchase Price upon consummation of the Offerings,
provided that there is in force from the time of its subscription until such
time, a loan commitment from an unrelated financial institution or the Company
to lend to the ESOP, at such time, the aggregate Purchase Price of the shares
for which it subscribed.
Owners of self-directed Individual Retirement Accounts ("IRAs") may
use the assets of such IRAs to purchase shares of Common Stock in the
Offerings, provided that such IRAs are not maintained at the Bank. In
addition, ERISA provisions and IRS regulations require that officers, directors
and 10% stockholders who use self-directed IRA funds to purchase shares of
Common Stock in the Subscription and Community Offerings make such purchases
for the exclusive benefit of the IRAs. Any interested parties wishing to use
IRA funds for stock purchases are advised to contact the Conversion Center for
additional information.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
Pursuant to the rules and regulations of the Department, no person
with subscription rights may transfer or enter 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. Department
regulations also prohibit any person from offering or making an announcement of
an offer or intent to make an offer to purchase such subscription rights or
shares of Common Stock prior to the completion of the Conversion.
THE COMPANY AND THE BANK WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS
AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.
LIQUIDATION RIGHTS
In the unlikely event of a complete liquidation of the Mutual Holding
Company, each depositor of the Bank would receive his or her pro rata share of
any assets of the Mutual Holding Company remaining after payment of claims of
all creditors. Each depositor's pro rata share of such remaining assets would
be in the same proportion as the value of his or her deposit account was to the
total value of all deposit accounts in the Bank at the time of liquidation.
After the Conversion, each depositor, in the event of a complete liquidation of
the Bank, would have a claim as a creditor of the same general priority as the
claims of all other general creditors of the Bank. However, except as
described below, his or her claim would be solely in the amount of the balance
in his or her deposit account plus accrued interest. He or she would not have
an interest in the value or assets of the Bank or the Company above that
amount.
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The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders in an amount equal to the Bank's total equity as reflected in
its latest balance sheet contained in the final Prospectus utilized in the
Offerings. Such liquidation account will not be reflected as an asset or
liability on the Company's or the Bank's financial statements subsequent to the
Conversion. Each Eligible Account Holder, if he or she were to continue to
maintain his or her deposit account at the Bank, would be entitled, upon a
complete liquidation of the Bank after the Conversion, to an interest in the
liquidation account prior to any payment to the Company as the sole stockholder
of the Bank. Each Eligible Account Holder would have an initial interest in
such liquidation account for each deposit account, including passbook accounts,
transaction accounts such as checking accounts, money market deposit accounts
and certificates of deposit, held in the Bank at the close of business on March
31, 1996. Each Eligible Account Holder will have a pro rata interest in the
total liquidation account for each of his or her deposit accounts based on the
proportion that the balance of each such deposit account on the March 31, 1996
Eligibility Record Date bore to the balance of all deposit accounts in the Bank
on such date.
If, however, at the close of business on the last day of any period
for which the Bank or the Company has prepared audited financial statements
subsequent to the effective date of the Conversion ("annual closing date"), the
amount in any deposit account is less than the amount in such deposit account
on March 31, 1996 or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is withdrawn or closed. In addition, no interest in the
liquidation account would ever be increased despite any subsequent increase in
the related deposit account. Any assets remaining after the above liquidation
rights of Eligible Account Holders are satisfied would be distributed to the
Company as the sole stockholder of the Bank.
TAX ASPECTS
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling from the IRS or an opinion of counsel with respect
to applicable federal tax laws, and either a ruling from the State of New York
or an opinion of counsel with respect to New York tax laws, to the effect that
consummation of the transactions contemplated hereby will not result in a
taxable reorganization under the provisions of the applicable tax codes or
otherwise result in any adverse tax consequences to the Mutual Holding Company,
the Bank, the Company or to account holders receiving subscription rights,
except to the extent, if any, that subscription rights are deemed to have fair
market value on the date such rights are issued. This condition may not be
waived by the Company and the Bank.
Prior to consummation of the Conversion, Elias, Matz, Tiernan &
Herrick L.L.P., Washington, D.C., will issue an opinion to the Company and the
Bank to the effect that, for federal income tax purposes: (1) the conversion
of the Mutual Holding Company to the stock form of organization and its
simultaneous merger with and into the Bank, with the Bank being the surviving
institution, will qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, (2) no gain or loss will be recognized by the Bank
upon
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the receipt of the assets of the converted Mutual Holding Company in such
merger, (3) the merger of the New York-chartered interim institution with and
into the Bank, with the Bank being the surviving institution, will be
disregarded for federal income tax purposes and, together with the Offerings,
will be treated as (i) the formation of the Company, (ii) the sale for cash by
the Company of common stock pursuant to the Offering, and (iii) the transfer by
the Company of an amount of the net proceeds received by the Company in the
Offerings ("Contributed Offering Proceeds") to the Bank in constructive
exchange for the Bank's common stock, (4) the Bank will recognize no gain or
loss upon the receipt of the Contributed Offering Proceeds from the Company in
constructive exchange for the Bank's common stock, (5) the Company will
recognize no gain or loss upon the receipt of cash in the Offerings for shares
of Common Stock, and (6) the Company will recognize no gain or loss upon the
transfer of the Contributed Offering Proceeds to the Bank in constructive
exchange for the Bank's Common Stock.
Prior to consummation of the Conversion, Ernst & Young, LLP, will
issue an opinion to the Company and the Bank to the effect that the income tax
consequences of the Conversion under New York law will be substantially the
same as the consequences for federal tax purposes.
In the view of RP Financial, which view is not binding on the IRS, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Common Stock
at a price equal to its estimated fair market value, which will be the same
price as the Purchase Price for the unsubscribed shares of Common Stock. If
the subscription rights granted to eligible subscribers are deemed to have an
ascertainable value, receipt of such rights likely would be taxable only to
those eligible subscribers who exercise the subscription rights (either as a
capital gain or ordinary income) in an amount equal to such value, and the
Company and the Bank could recognize gain on such distribution. Eligible
subscribers are encouraged to consult with their own tax advisor as to the tax
consequences in the event that such subscription rights are deemed to have an
ascertainable value.
Unlike private rulings, an opinion is not binding on the IRS and the
IRS could disagree with conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
DELIVERY OF CERTIFICATES
Certificates representing Common Stock issued in connection with the
Offering will be mailed by the Company's transfer agent for the Common Stock to
the persons entitled thereto at the addresses of such persons appearing on the
stock order form for Common Stock as soon as practicable following consummation
of the Conversion. Any certificates returned as undeliverable will be held by
the Company until claimed by persons legally entitled thereto or otherwise
disposed of in accordance with applicable law. Until certificates for Common
Stock are available and delivered to subscribers, subscribers may
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not be able to sell the shares of Common Stock for which they have subscribed,
even though trading of Common Stock may be commenced.
REQUIRED APPROVALS
Various approvals of the Department and the non-objection of the FDIC
are required in order to consummate the Conversion. The Department has
approved and the FDIC has issued a notice of intent not to object to the Plan
of Conversion, subject to approval by the Eligible Account Holders. In
addition, consummation of the Conversion is subject to OTS and Department
approval of the Company's application to acquire all of the to-be-outstanding
Bank common stock. Applications with respect to the merger of the Mutual
Holding Company (following its conversion to the stock form of organization)
into the Bank have been filed with the FDIC and the Department and are
currently pending. There can be no assurances that the requisite regulatory
approvals will be received in a timely manner, in which event the consummation
of the Conversion may be delayed beyond the expiration of the Offerings.
Pursuant to Department and FDIC regulations, the Plan of Conversion
also must be approved by (1) holders of at least seventy-five percent (75%) in
amount of the deposit liability of Eligible Account Holders represented in
person or by proxy at the Special Meeting, and (2) at least a majority of the
total number of votes eligible to be cast by Eligible Account Holders at the
Special Meeting.
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER THE CONVERSION
All shares of Common Stock purchased in connection with the Conversion
by a director or an executive officer of the Company and the Bank will be
subject to a restriction that the shares not be sold for a period of one year
following the Conversion, except in the event of the death of such director or
executive officer. Each certificate for restricted shares will bear a legend
giving notice of this restriction on transfer, and appropriate stop-transfer
instructions will be issued to the Company's transfer agent. Any shares of
Common Stock issued within this one-year period as a stock dividend, stock
split or otherwise with respect to such restricted stock will be subject to the
same restrictions. The directors and executive officers of the Company will
also be subject to the insider trading rules promulgated pursuant to the
Exchange Act.
Purchases of Common Stock by directors, executive officers and their
associates during the three-year period following completion of the Conversion
(or any person who was an officer, director or trustee at any time after the
date on which the Board of Directors of the Bank and the Board of Trustees of
the Mutual Holding Company adopted the Plan) may be made only through a broker
or dealer registered with the SEC, except with the prior written approval of
the Department. This restriction does not apply, however, to the purchase of
stock pursuant to any tax-qualified employee stock benefit plan, such as the
ESOP, or by any non-tax-qualified employee stock benefit plan following
stockholder approval of such plan.
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Pursuant to Department regulations, the Company will generally be
prohibited from repurchasing any shares of Common Stock within one year
following consummation of the Conversion. During the second and third years
following consummation of the Conversion, the Company may not repurchase any
shares of its Common Stock in excess of 5% of its outstanding capital stock
during a 12-month period, without the prior written approval of the Department.
RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE BANK
GENERAL
As described below, certain provisions in the Company's Certificate of
Incorporation and Bylaws and in the Company's and the Bank's benefit plans,
together with provisions of Delaware corporate law, may have anti-takeover
effects. In addition, regulatory restrictions may make it difficult for
persons or companies to acquire control of either the Company or the Bank.
Below is a summary of certain material restrictions on acquisitions of the
Company and the Bank.
RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
General. A number of provisions of the Company's Certificate of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of
certain provisions of the Company's Certificate of Incorporation and Bylaws
which might be deemed to have a potential "anti-takeover" effect. These
provisions may have the effect of discouraging a future takeover attempt which
is not approved by the Board of Directors but which individual Company
stockholders may deem to be in their best interests or in which stockholders
may receive a substantial premium for their shares over then current market
prices. As a result, stockholders who might desire to participate in such a
transaction may not have an opportunity to do so. Such provisions will also
render the removal of the current Board of Directors or management of the
Company more difficult. The following description of certain of the provisions
of the Certificate of Incorporation and Bylaws of the Company is necessarily
general and reference should be made in each case to such Certificate of
Incorporation and Bylaws, which are incorporated herein by reference. See
"Additional Information" as to how to obtain a copy of these documents.
Limitation on Voting Rights. Article 12.B. of the Company's
Certificate of Incorporation provides that no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of (i) more
than 10% of the issued and outstanding shares of any class of an equity
security of the Company, or (ii) any securities convertible into, or
exercisable for, any equity securities of the Company if, assuming conversion
or exercise by such person of all securities of which such person is the
beneficial owner which are convertible into, or exercisable for, such equity
securities (but of no securities convertible into, or exercisable for, such
equity securities of which such person is not the beneficial
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owner), such person would be the beneficial owner of more than 10% of any class
of an equity security of the Company. The terms "person" and "beneficial
ownership" are broadly defined to prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view
toward public resale made exclusively to the Company by underwriters or a
selling group acting on its behalf, (ii) any tax-qualified employee benefit
plan or arrangement established by the Company or the Bank and any trustee of
such a plan or arrangement, and (iii) any other offer or acquisition approved
in advance by the affirmative vote of two-thirds of the Company's entire Board
of Directors. In the event that shares are acquired in violation of Article
12.B., all shares beneficially owned by any person in excess of 10% shall be
considered "Excess Shares" and shall not be counted as shares entitled to vote
and shall not be voted by any person or counted as voting shares in connection
with any matters submitted to stockholders for a vote, and the Board of
Directors may cause such Excess Shares to be transferred to an independent
trustee for sale on the open market or otherwise, with the expenses of such
trustee to be paid out of the proceeds of sale. In addition, the Company may
refuse to recognize any transfer or attempted transfer of the Company's equity
securities which would result in the transferee becoming the beneficial owner
of Excess Shares.
Board of Directors. Article 7.A. of the Certificate of Incorporation
of the Company contains provisions relating to the Board of Directors and
provides, among other things, that the Board of Directors shall be divided into
three classes as nearly equal in number as possible, with the term of office of
one class expiring each year. See "Management - Management of the Company."
The classified Board is intended to provide for continuity of the Board of
Directors and to make it more difficult and time consuming for a stockholder
group to fully use its voting power to gain control of the Board of Directors
without the consent of the incumbent Board of Directors of the Company.
Cumulative voting in the election of directors is not permitted.
Directors may be removed only for cause at a duly constituted meeting
of stockholders called expressly for that purpose upon the vote of the holders
of at least 80% of the total votes eligible to be cast by stockholders. Cause
for removal shall exist only if the director whose removal is proposed has been
either declared incompetent by order of a court, convicted of a felony or of an
offense punishable by imprisonment for a term of more than one year by a court
of competent jurisdiction, or deemed liable by a court of competent
jurisdiction for gross negligence or misconduct in the performance of such
director's duties to the Company. Any vacancy occurring in the Board of
Directors for any reason (including an increase in the number of authorized
directors) may be filled by the affirmative vote of a majority of the remaining
directors, whether or not a quorum of the Board of Directors is present, or the
sole remaining director of the Company, and a director appointed to fill a
vacancy shall serve until the expiration of the term to which he was appointed.
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The Company's Bylaws govern nominations for election to the Board, and
requires all nominations for election to the Board of Directors other than
those made by the Board to be made by a stockholder eligible to vote at an
annual meeting of stockholders who has complied with the notice provisions in
that section. Written notice of a stockholder nomination must be delivered to,
or mailed to and received at, the principal executive offices of the Company
not later than 120 days prior to the anniversary date of the immediately
preceding annual meeting, provided that, with respect to the first scheduled
annual meeting following completion of the Conversion, notice must be received
no later than the close of business on February 26, 1998. Each such notice
shall set forth certain information as specified in Section 4.15 of the Bylaws,
including (a) as to each person whom the stockholder proposes to nominate as a
director, and as to the stockholder giving the notice, (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 Company's stock beneficially owned by such person; and (iv) such other
information regarding such person as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the SEC; and (b) the name
and address of any other stockholders supporting such nominees and/or those
affiliated with, controlling or under common control with such persons, and the
class and number of shares of the Company's stock beneficially owned by such
other stockholders.
The Company's Certificate of Incorporation provides that the personal
liability of the directors and officers of the Company for monetary damages
shall be eliminated to the fullest extent permitted by the General Corporation
Law of the State of Delaware as it exists on the effective date of the
Certificate of Incorporation or as such law may be thereafter in effect.
Section 102(b)(7) of the Delaware General Corporation Law currently provides
that directors (but not officers) of corporations that have adopted such a
provision will not be so liable, except (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for the payment of certain unlawful dividends and the
making of certain stock purchases or redemptions, or (iv) for any transaction
from which the director derived an improper personal benefit. This provision
would absolve directors of personal liability for negligence in the performance
of their duties, including gross negligence. It would not permit a director to
be exculpated, however, for liability for actions involving conflicts of
interest or breaches of the traditional "duty of loyalty" to the Company and
its stockholders, and it would not affect the availability of injunctive or
other equitable relief as a remedy.
The Company's Bylaws provide that the Company shall 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, by reason of the fact that such
person is or was a director, officer or employee of the Company or any
predecessor of the Company, or is or was serving at the request of the Company
or any predecessor of the Company as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including
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attorneys' fees), judgments, fines, excise taxes and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding to the fullest extent authorized by the General Corporation
Law of the State of Delaware, provided that the Company shall not be liable for
any amounts which may be due in connection with a settlement of any action,
suit or proceeding effected without its prior written consent or any action,
suit or proceeding initiated by any person seeking indemnification thereunder
without its prior written consent. The indemnification provisions also permit
the Company to pay reasonable expenses in advance of the final disposition of
any action, suit or proceeding as authorized by the Company's Board of
Directors, provided that the indemnified person undertakes to repay the Company
if it is ultimately determined that such person was not entitled to
indemnification. The rights of indemnification provided in the Company's
Certificate of Incorporation are not exclusive of any other rights which may be
available under the Company's Bylaws, any insurance or other agreement, by vote
of stockholders or directors (regardless of whether directors authorizing such
indemnification are beneficiaries thereof) or otherwise. In addition, the
Certificate of Incorporation authorizes the Company to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Company, whether or not the Company would have the power to provide
indemnification to such person. These provisions are designed to reduce, in
appropriate cases, the risks incident to serving as a director, officer,
employee or agent and to enable the Company to attract and retain the best
personnel available.
The provisions regarding director elections and other provisions in
the Certificate of Incorporation and Bylaws are generally designed to protect
the ability of the Board of Directors to negotiate with the proponent of an
unfriendly or unsolicited proposal to take over or restructure the Company by
making it more difficult and time-consuming to change majority control of the
Board, whether by proxy contest or otherwise. The general effect of these
provisions will be to generally require at least two (and possibly three)
annual stockholders' meetings, instead of one, to effect a change in control of
the Board of Directors of the Company even if holders of a majority of the
Company's capital stock believed that a change in the composition of the Board
of Directors was desirable. Because a majority of the directors at any given
time will have prior experience as directors, these requirements will help to
ensure continuity and stability of the Company's management and policies and
facilitate long-range planning for the Company's business. The provisions
relating to removal of directors and filling of vacancies are consistent with
and supportive of a classified board of directors.
The procedures regarding stockholder nominations will provide the
Board of Directors with sufficient time and information to evaluate a
stockholder nominee to the Board and other relevant information, such as
existing stockholder support for the nominee. The proposed procedures,
however, will provide incumbent directors advance notice of a dissident slate
of nominees for directors, and will make it easier for the Board to solicit
proxies resisting such nominees. This may make it easier for the incumbent
directors to retain their status as directors, even when certain stockholders
view the stockholder nominations as in the best interests of the Company or its
stockholders.
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Authorized Shares. Article 4 of the Certificate of Incorporation
authorizes the issuance of 125,000,000 shares of Common Stock and 25,000,000
shares of Preferred Stock. The shares of Common Stock and Preferred Stock were
authorized in an amount greater than that to be issued in the Conversion to
provide the Company's Board of Directors with as much flexibility as possible
to effect, among other transactions, financings, acquisitions, stock dividends,
stock splits and employee stock options. However, these additional authorized
shares may also be used by the Board of Directors consistent with its fiduciary
duty to deter future attempts to gain control of the Company. The Board of
Directors also has sole authority to determine the terms of any one or more
series of Preferred Stock, including voting rights, conversion rates, and
liquidation preferences. As a result of the ability to fix voting rights for a
series of Preferred Stock, the Board has the power, to the extent consistent
with its fiduciary duty, to issue a series of Preferred Stock to persons
friendly to management in order to attempt to block a post-tender offer merger
or other transaction by which a third party seeks control, and thereby assist
management to retain its position. The Company's Board currently has no plans
for the issuance of additional shares, other than the issuance of additional
shares pursuant to stock benefit plans and to the Foundation.
Meetings of Stockholders. The Company's Certificate of Incorporation
provides that any action required or permitted by the General Corporation Law
of the State of Delaware or the Certificate of Incorporation to be approved by
or consented to by the stockholders of the Company, must be effected at a duly
called annual or special meeting of stockholders and may not be effected by
written consent by stockholders in lieu of a meeting of stockholders. The
Certificate of Incorporation further provides that, with limited exceptions,
special meetings of stockholders may be called only by a three-fourths vote of
the Board of Directors.
Stockholder Proposals. The Company's Bylaws provide that only such
business as shall have been properly brought before an annual meeting of
stockholders shall be conducted at the annual meeting. In order to be properly
brought before an annual meeting following completion of the Conversion,
business must be (a) brought before the meeting by or at the direction of the
Board of Directors or (b) otherwise properly brought before the meeting by a
stockholder who has given timely and complete notice thereof in writing to the
Company. For stockholder proposals to be included in the Company's proxy
materials, the stockholder must comply with all the timing and informational
requirements of Rule 14a-8 of the Exchange Act. With respect to stockholder
proposals to be considered at the annual meeting of stockholders but not
included in the Company's proxy materials, the stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 120 days prior to the anniversary date of the immediately
preceding annual meeting; provided, however, that with respect to the first
scheduled annual meeting following completion of the Conversion, such written
notice must be received by the Company not later than the close of business on
February 26, 1998. A stockholder's notice shall set forth as to each matter
the stockholder proposes to bring before the annual meeting certain information
as specified in Section 2.14 of the Bylaws, including (a) a brief
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description of the proposal desired to be brought before the annual meeting,
(b) the name and address, as they appear on the Company's books, of the
stockholder proposing such business, and, to the extent known, any other
stockholders known by such stockholder to be supporting such proposal, (c) the
class and number of shares of the Company which are beneficially owned by the
stockholder; and, to the extent known, by any other stockholders known by such
stockholder to be supporting such proposal on the date of such stockholder
notice, (d) the identification of any person retained to make stockholder
solicitations or recommendations with respect to such proposal, and (e) any
material interest of the stockholder in such proposal. Any such proposal not
made in accordance with the Bylaws may be rejected.
The procedures regarding stockholder proposals are designed to provide
the Board with sufficient time and information to evaluate a stockholder
proposal and other relevant information, such as existing stockholder support
for the proposal. The proposed procedures, however, will give incumbent
directors advance notice of a stockholder proposal. This may make it easier
for the incumbent directors to defeat a stockholder proposal, even when certain
stockholders view such proposal as in the best interests of the Company or its
stockholders.
Evaluation of Offers. The Certificate of Incorporation of the Company
further provides that the Board of Directors of the Company, when evaluating
any offer to the Company from another party to (i) make a tender or exchange
offer for any equity security of the Company, (ii) merge or consolidate the
Company with another corporation or entity or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the Company,
may, consistent with the exercise of its fiduciary duties and in connection
with the exercise of its judgment in determining what is in the best interest
of the Company and the stockholders of the Company, give due consideration to
the extent permitted by law not only to the price or other consideration being
offered, but also to all other relevant factors, including, without limitation,
the financial and managerial resources and future prospects of the other party,
the possible effects on the business of the Company and its subsidiaries and on
the employees, customers, suppliers and creditors of the Company and its
subsidiaries, and the effects on the communities in which the Company's and its
subsidiaries' facilities are located. By having these standards in the
Certificate of Incorporation of the Company, the Board of Directors may be in a
stronger position to oppose such a transaction if the Board concludes that the
transaction would not be in the best interest of the Company, even if the price
offered is significantly greater than the then market price of any equity
security of the Company.
Stockholder Approval of Mergers and Certain Other Extraordinary
Transactions. Article 11 of the Company's Certificate of Incorporation
provides that any action taken by stockholders under Subchapter IX of the
Delaware General Corporation Law (which relates to merger or consolidation
transactions) and Subchapter X (which relates to sale of assets, dissolution
and winding up transactions) shall, with certain exceptions, generally require
the affirmative vote of at least 80% of the votes eligible to be cast by
stockholders. The
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supermajority 80% vote requirement of Article 11 of the Certificate of
Incorporation shall not be applicable to any transaction approved in advance by
at least two-thirds of the entire Board of Directors of the Company, in which
case the transaction will require only such stockholder approval as specified
under Delaware law. The Delaware General Corporation Law requires the approval
of the Board of Directors and the holders of a majority of the outstanding
stock of the Company entitled to vote thereon for mergers of consolidations,
and for sales, leases or exchanges of all substantially all of the Company's
assets. The Delaware General Corporation Law permits the Company to merge with
another corporation without obtaining the approval of the Company's
stockholders if: (i) the Company is the surviving corporation of the merger;
(ii) the merger agreement does not amend the Company's Certificate of
Incorporation; (iii) each share of the Company's stock outstanding immediately
prior to the effective date of the merger is to be an identical outstanding or
treasury share of the Company after the merger; and (iv) any authorized but
unissued shares or treasury shares of Common Stock to be issued or delivered
under the plan of merger plus those initially issuable upon conversion of any
other securities or obligations to be issued or delivered under such plan do
not exceed 20% of the shares of the Common Stock outstanding immediately prior
to the effective date of the merger.
Amendment of Certificate of Incorporation and Bylaws. Article 13 of
the Company's Certificate of Incorporation generally provides that any
amendment of the Certificate of Incorporation must be approved first by a
majority of the Board of Directors and then by the holders of 80% of the shares
of the Company entitled to vote in an election of directors, except that the
approval of only a majority of the shares of the Company entitled to vote in an
election of directors is required for any amendment previously approved by at
least two-thirds of the entire Board of Directors.
The Bylaws of the Company may be amended by a majority of the Board of
Directors or by the affirmative vote of a majority of the total shares entitled
to vote in an election of directors, except that the affirmative vote of at
least 80% of the total shares entitled to vote in an election of directors
shall be required to amend, adopt, alter, change or repeal any provision
inconsistent with certain specified provisions of the Bylaws.
DELAWARE CORPORATE LAW
In addition to the provisions contained in the Company's Certificate
of Incorporation, the Delaware General Corporation Law ("GCL") includes certain
provisions applicable to Delaware corporations, such as the Company, which may
be deemed to have an anti-takeover effect. Such provisions include
requirements relating to certain business combinations.
Section 203 of the GCL ("Section 203") imposes certain restrictions on
business combinations between the Company and large shareholders.
Specifically, Section 203 prohibits a "business combination" (as defined in
Section 203, generally including mergers, sales and leases of assets, issuances
of securities and similar transactions) between the
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Company or a subsidiary and an "interested shareholder" (as defined in Section
203, generally the beneficial owner of 15% or more of the Company Common Stock)
within three years after the person or entity becomes an interested
shareholder, unless (i) prior to the person or entity becoming an interested
shareholder, the business combination or the transaction pursuant to which such
person or entity became an interested shareholder shall have been approved by
the Company's Board of Directors, (ii) upon consummation of the transaction in
which the interested shareholder became such, the interested shareholder holds
at least 85% of the Company Common Stock (excluding shares held by persons who
are both officers and directors and shares held by certain employee benefit
plans), or (iii) the business combination is approved by the Company's Board of
Directors and by the holders of at least two-thirds of the outstanding Company
Common Stock, excluding shares owned by the interested shareholders.
One of the effects of Section 203 may be to prevent highly leveraged
takeovers, which depend upon getting access to the acquired corporation's
assets to support or repay acquisition indebtedness and certain coercive
acquisition tactics. By requiring approval of the holders of two-thirds of the
shares held by disinterested shareholders for business combinations involving
an interested shareholder, Section 203 may prevent any interested shareholder
from taking advantage of its position as a substantial, if not controlling,
shareholder and engaging in transactions with the Company that may not be fair
to the Company's other shareholders or that may otherwise not be in the best
interests of the Company, its shareholders and other constituencies.
For similar reasons, however, these provisions may make more difficult
or discourage an acquisition of the Company, or the acquisition of control of
the Company by a principal shareholder, and thus the removal of incumbent
management. In addition, to the extent that Section 203 discourages takeovers
that would result in the change of the Company's management, such a change may
be less likely to occur.
ANTI-TAKEOVER EFFECTS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS AND
MANAGEMENT REMUNERATION ADOPTED IN THE CONVERSION
The foregoing provisions of the Certificate of Incorporation and
Bylaws of the Company and Delaware law could have the effect of discouraging an
acquisition of the Company or stock purchases in furtherance of an acquisition,
and could accordingly, under certain circumstances, discourage transactions
which might otherwise have a favorable effect on the price of the Company's
Common Stock. In addition, such provisions may result in the Company being
deemed to be less attractive to a potential acquiror and/or might result in
stockholders receiving a lesser amount of consideration for their shares of
Common Stock than otherwise could have been available.
In addition, the Company and the Bank have also entered into
agreements with certain of their officers which provide such officers with
additional payments upon the officers' termination in connection with a change
in control of the Company or the Bank.
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See "Management - Management of the Bank" and "- Employment Agreements." The
foregoing provisions and limitations may make it more difficult for companies
or persons to acquire control of the Bank. Additionally, the provisions could
deter offers to the stockholders which might be viewed by such stockholders to
be in their best interests.
The Board of Directors believes that the provisions described above
are prudent and will reduce vulnerability to takeover attempts and certain
other transactions that are not negotiated with and approved by the Board of
Directors of the Company. The Board of Directors believes that these
provisions are in the best interests of the Company and its future
stockholders. In the Board of Directors' judgment, the Board of Directors is
in the best position to determine the true value of the Company and to
negotiate more effectively for what may be in the best interests of its
stockholders. Accordingly, the Board of Directors believes that it is in the
best interests of the Company and its future stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors and that
these provisions will encourage such negotiations and discourage hostile
takeover attempts. It is also the Board of Directors' view that these
provisions should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of the Company and where the
transaction is in the best interests of all stockholders.
Despite the Board of Directors' belief as to the benefits to the
Company's stockholders of the foregoing provisions, these provisions also may
have the effect of discouraging a future takeover attempt in which stockholders
might receive a substantial premium for their shares over then current market
prices and may tend to perpetuate existing management. As a result,
stockholders who might desire to participate in such a transaction may not have
an opportunity to do so. The Board of Directors, however, has concluded that
the potential benefits of these provisions outweigh their possible
disadvantages.
The Board of Directors of the Company and the Bank are not aware of
any effort that might be made to acquire control of the Bank or the Company.
REGULATORY RESTRICTIONS
Change in Bank Control Act. The Change in Bank Control Act provides
that no person, acting directly or indirectly or through or in concert with one
or more other persons, may acquire control of a savings and loan holding
company unless the OTS has been given 60 days' prior written notice. The HOLA
provides that no company may acquire "control" of a savings and loan holding
company without the prior approval of the OTS. Any company that acquires such
control becomes a savings and loan holding company subject to registration,
examination and regulation by the OTS. Pursuant to federal regulations,
control of a savings and loan holding company is conclusively deemed to have
been acquired by, among other things, the acquisition of more than 25% of any
class of voting stock of the institution or the ability to control the election
of a majority of the directors of an institution. Moreover, control is
presumed to have been acquired, subject to rebuttal, upon
180
<PAGE> 225
the acquisition of more than 10% of any class of voting stock, or of more than
25% of any class of stock, of a savings and loan holding company where certain
enumerated "control factors" are also present in the acquisition. The OTS may
prohibit an acquisition if (i) it would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or of the public to permit the acquisition of
control by such person. The foregoing restrictions do not apply to the
acquisition of a savings institution's capital stock by one or more
tax-qualified employee stock benefit plans, provided that the plan or plans do
not have beneficial ownership in the aggregate of more than 25% of any class of
equity security.
New York State Banking Board Conversion Regulations. Regulations of
the New York Banking Board prohibit any person, prior to the completion of the
Conversion, from transferring, or from entering into any agreement or
understanding to transfer, to the account of another, legal or beneficial
ownership of the subscription rights issued under the or the Common Stock to be
issued upon their exercise. The New York Banking Board regulations also
prohibit any person, prior to the completion of the Conversion, from offering,
or making an announcement of an offer or intent to make an offer, to purchase
such subscription rights or Common Stock. See "The Conversion--Restrictions on
Transfer of Subscription Rights and Shares."
For one year following the Conversion, the New York Banking Board
regulations prohibit any person from acquiring or making an offer to acquire
more than 10% of the stock of any converted savings institution, except with
the prior approval of the Superintendent.
New York State Bank Holding Company Law. Under the New York Banking
Law, the prior approval of the New York Banking Board is required before: (1)
any action is taken that causes any company to become a bank holding company;
(2) any action is taken that causes any banking institution to become or to be
merged or consolidated with a subsidiary of a bank holding company; (3) any
bank holding company acquires direct or indirect ownership or control of more
than 5% of the voting stock of a banking institution; (4) any bank holding
company or subsidiary thereof acquires all or substantially all of the assets
of a banking institution; or (5) any action is taken that causes any bank
holding company to merge or consolidate with another bank holding company. See
"Regulation-The Company-Restrictions on Acquisition."
New York State Change in Control Law. Prior approval of the New York
Banking Board is also required before any action is taken that causes any
company to acquire direct or indirect control of a banking institution.
Control is presumed to exist if any company directly or indirectly owns,
controls or holds with power to vote 10% or more of the voting stock of a
banking institution or of any company that owns, controls or holds with power
to vote 10% or more of the voting stock of a banking institution. Accordingly,
prior approval
181
<PAGE> 226
of the New York Banking Board would be required before any company could
acquire 10% or more of the Common Stock of the Company.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue 125,000,000 shares of Common Stock
having a par value of $0.01 per share and 25,000,000 shares of preferred stock
having a par value of $0.01 per share (the "Preferred Stock"). The Company
currently expects to issue up to a maximum of 58,564,815 shares (67,349,537
shares in the event that the maximum of the Valuation Range is increased by
15%) of Common Stock and no shares of Preferred Stock in the Conversion. Each
share of the Company's Common Stock will have the same relative rights as, and
will be identical in all respects with, each other share of Common Stock. Upon
payment of the Purchase Price for the Common Stock in accordance with the Plan
of Conversion, all such stock will be duly authorized, fully paid and
nonassessable. Presented below is a description of all aspects of the
Company's capital stock which are deemed material to an investment decision
with respect to the Conversion.
THE COMMON STOCK OF THE COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED
BY THE FDIC.
COMMON STOCK
Distributions. The Company can pay dividends if, as and when declared
by its Board of Directors, subject to compliance with limitations which are
imposed by law. See "Dividend Policy." The holders of Common Stock of the
Company will be entitled to receive and share equally in such dividends as may
be declared by the Board of Directors of the Company out of funds legally
available therefor. If the Company issues Preferred Stock, the holders thereof
may have a priority over the holders of the Common Stock with respect to
dividends.
Voting Rights. Upon Conversion, the holders of Common Stock of the
Company will possess exclusive voting rights in the Company. They will elect
the Company's Board of Directors and act on such other matters as are required
to be presented to them under Delaware law or the Company's Certificate of
Incorporation or as are otherwise presented
182
<PAGE> 227
to them by the Board of Directors. Each holder of Common Stock will be
entitled to one vote per share and will not have any right to cumulate votes in
the election of directors. Cumulative voting means that holders of stock of a
corporation are entitled, in the election of directors, to cast a number of
votes equal to the number of shares which they own multiplied by the number of
directors to be elected Because a stockholder entitled to cumulative voting
may cast all of his votes for one nominee or disperse his votes among nominees
as he chooses, cumulative voting is generally considered to increase the
ability of minority stockholders to elect nominees to a corporation's board of
directors. Under certain circumstances, shares in excess of 10.0% of the
issued and outstanding shares of Common Stock may be considered "Excess Shares"
and, accordingly, not be entitled to vote. See "Restrictions on Acquisition of
the Company and the Bank." If the Company issues Preferred Stock, holders of
the Preferred Stock may also possess voting rights.
Liquidation. In the event of any liquidation, dissolution or winding
up of the Bank, the Company, as holder of the Bank's capital stock, would be
entitled to receive, after payment or provision for payment of all debts and
liabilities of the Bank (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special liquidation
account to Eligible Account Holders and Supplemental Eligible Account Holders
(see "The Conversion - Liquidation Rights"), all assets of the Bank available
for distribution. In the event of liquidation, dissolution or winding up of
the Company, the holders of its Common Stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Company available for distribution. If Preferred Stock is
issued, the holders thereof may have a priority over the holders of the Common
Stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock of the Company will
not be entitled to preemptive rights with respect to any shares which may be
issued. The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without stockholder approval, issue preferred stock
with voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control. The Company
has no present plans to issue Preferred Stock.
183
<PAGE> 228
DESCRIPTION OF CAPITAL STOCK OF THE BANK
GENERAL
The Amended and Restated Organization Certificate of the Bank
authorizes the issuance of capital stock consisting of 100 shares of common
stock, par value $1.00 per share. Each share of common stock of the Bank will
have the same relative rights as, and will be identical in all respects with,
each other share of common stock. After the Conversion, the Board of Directors
will be authorized to approve the issuance of common stock up to the amount
authorized by the Amended and Restated Organization Certificate without the
approval of the Company's stockholders. Upon Conversion, all of the issued and
outstanding common stock of the Bank will be held by the Company as the Bank's
sole stockholder. The capital stock of the Bank will represent nonwithdrawable
capital, will not be an account of an insurable type, and will not be insured
by the FDIC. Presented below is a description of all aspects of the Bank's
capital stock which are deemed material to an investment decision with respect
to the Conversion.
DIVIDENDS
The holders of the Bank's common stock will be entitled to receive and
to share equally in such dividends as may be declared by the Board of Directors
of the Bank out of funds legally available therefore. See "Dividend Policy"
for certain restrictions on the payment of dividends.
VOTING RIGHTS
Immediately after the Conversion, the holders of the Bank's common
stock, which will consist solely of the Company, will possess exclusive voting
rights in the Bank. Each holder of shares of common stock will be entitled to
one vote for each share held and there shall be no right to cumulate votes.
LIQUIDATION
In the event of any liquidation, dissolution, or winding up of the
Bank, the holders of common stock will be entitled to receive, after payment of
all debts and liabilities of the Bank (including all deposit accounts and
accrued interest thereon), and distribution of the balance in the special
liquidation account to Eligible Account Holders and Supplemental Eligible
Account Holders, all assets of the Bank available for distribution in cash or
in kind. If additional preferred stock is issued subsequent to the Conversion,
the holders thereof may also have priority over the holders of common stock in
the event of liquidation or dissolution.
184
<PAGE> 229
PREEMPTIVE RIGHTS; REDEMPTION
Holders of the common stock of the Bank will not be entitled to
preemptive rights with respect to any shares of the Bank which may be issued.
The common stock will not be subject to redemption. Upon receipt by the Bank
of the full specified purchase price therefor, the common stock will be fully
paid and nonassessable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
_________________.
EXPERTS
The consolidated financial statements of the Bank as of March 31, 1997
and 1996, and for each of the years in the three-year period ended March 31,
1997, included in the Prospectus have been audited by Ernst & Young LLP,
independent certified public accountants, as stated in their report appearing
elsewhere herein, and have been so included in reliance upon the report of such
firm, given upon their authority as experts in accounting and auditing.
William M. Mercer, Incorporated has consented to the publication
herein of the summary of its opinion relating to compensation matters.
RP Financial has consented to the publication herein of the summary of
its report to the Bank and Company setting forth its opinion as to the
estimated pro forma market value of the Common Stock upon Conversion and its
opinion with respect to subscription rights.
LEGAL AND TAX OPINIONS
The legality of the Common Stock and the Federal income tax
consequences of the Conversion will be passed upon for the Bank and the Company
by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., special counsel to
the Bank and the Company. The New York income tax consequences of the
Conversion will be passed upon for the Bank and the Company by Ernst & Young
LLP. The federal income tax consequences of certain matters relating to
establishment of the Foundation will be passed upon for the Bank and the
Company by Potter Anderson & Corroon. Certain legal matters will be passed
upon for Sandler O'Neill by Muldoon, Murphy & Faucette, Washington, D.C.
185
<PAGE> 230
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted
by the rules and regulations of the SEC, this Prospectus does not contain all
the information set forth in the Registration Statement. Such information,
including the Conversion Valuation Appraisal Report which is an exhibit to the
Registration Statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of such material can be obtained from the SEC at prescribed
rates. In addition, the SEC maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC, including the
Company. The appraisal report of RP Financial may also be inspected at the
administrative offices of the Bank located at 195 Montague Street, Brooklyn,
New York during normal business hours. The statements contained in this
Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement are, of necessity, brief descriptions
thereof and are not necessarily complete.
The Bank has filed an Application for Conversion with the
Superintendent with respect to the Conversion. This Prospectus omits certain
information contained in that application. The Application may be examined at
the office of the Superintendent, Two Rector Street, New York, New York 10006.
The Company has filed with the Office of Thrift Supervision an
Application to Form a Holding Company. This Prospectus omits certain
information contained in such Application. Such Application may be inspected
at the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552.
In connection with the Conversion, the Company will register its
Common Stock with the SEC under Section 12(g) of the Exchange Act, and, upon
such registration, the Company and the holders of its stock will become subject
to the proxy solicitation rules, reporting requirements and restrictions on
stock purchases and sales by directors, officers and greater than 10%
stockholders, the annual and periodic reporting and certain other requirements
of the Exchange Act. Under the Plan, the Company has undertaken that it will
not terminate such registration for a period of at least three years following
the Conversion.
A copy of the Plan of Conversion and Certificate of Incorporation and
the Bylaws of the Company and the Amended and Restated Certificate of
Incorporation and Bylaws of the Bank are available without charge from the
Bank. Requests for such information should be directed to:
_______________________, Independence Savings Bank, 195 Montague Street,
Brooklyn, New York 11201.
186
<PAGE> 231
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Financial Condition at May 31, 1997 (unaudited)
and at March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the two months ended May 31, 1997 and 1996 (unaudited)
and for the years ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . 53
Consolidated Statements of Changes in Stockholders' Equity for the two months ended May 31,
1997 and 1996 (unaudited) and for the years ended March 31, 1997, 1996 and 1995 . . . . . . . F-4
Consolidated Statements of Cash Flows for the two months ended May 31, 1997 and 1996
(unaudited) and for the years ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
</TABLE>
All schedules are omitted as the required information is not applicable or the
information is presented in the Consolidated Financial Statements.
The Mutual Holding Company has limited assets other than its shares of Bank
Common Stock (which will be cancelled in connection with the Conversion);
accordingly, the financial statements of the Mutual Holding Company have been
omitted because of their immateriality.
The financial statements of Independence Community Bank Corp. have been omitted
because Independence Community Bank Corp. has only an initial capitalization of
$1,000, has no other assets or liabilities, and has not conducted any business
other than of an organizational nature.
F-1
<PAGE> 232
Report of Independent Auditors
The Board of Directors
Independence Savings Bank
We have audited the accompanying consolidated statements of financial condition
of Independence Savings Bank (the "Bank") as of March 31, 1997 and 1996, and
the related consolidated statements of income, changes in stockholder's equity
and cash flows for each of the three years in the period ended March 31, 1997.
These financial statements are the responsibility of the Bank's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Independence
Savings Bank at March 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.
May 29, 1997
F-2
<PAGE> 233
Independence Savings Bank
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
---------------------------------------------------
(UNAUDITED)
(In thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 50,887 $ 310,429 $ 44,410
Commercial paper 31,399 39,866 -
Federal funds sold 48,707 24,341 58,782
---------------------------------------------------
Total cash and cash equivalents 130,993 374,636 103,192
Investment securities, held-to-maturity (estimated
fair value of $39,931) - - 39,995
Mortgage-backed and mortgage related securities,
held-to-maturity (estimated fair value of $121,698) - - 120,702
Securities available-for-sale:
Debt and equity 716,943 357,487 683,828
Mortgage-backed and mortgage related 182,248 190,979 395,321
---------------------------------------------------
Total securities 899,191 548,466 1,239,846
Mortgage loans on real estate 2,107,284 2,065,153 1,894,926
Other loans 482,419 464,960 448,410
---------------------------------------------------
Total loans 2,589,703 2,530,113 2,343,336
Less: Allowance for possible loan losses (28,777) (27,024) (20,528)
---------------------------------------------------
Total loans, net 2,560,926 2,503,089 2,322,808
Premises, furniture and equipment, net 60,631 60,367 51,906
Accrued interest receivable 23,940 17,384 21,070
Intangible assets, net 63,130 60,499 80,268
Other assets 81,784 168,875 50,692
---------------------------------------------------
Total assets $3,820,595 $3,733,316 $3,869,782
===================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits:
Savings accounts $1,027,028 $1,018,199 $1,109,503
Money market accounts 217,050 218,230 215,545
Demand deposit accounts 346,456 345,373 274,594
Time deposit accounts 1,789,640 1,743,756 1,797,248
---------------------------------------------------
Total deposits 3,380,174 3,325,558 3,396,890
Due to banks - - 215
Borrowings 17,183 17,232 57,295
Escrow and other deposits 54,892 41,034 35,597
Accrued expenses and other liabilities 51,770 40,378 89,966
---------------------------------------------------
Total liabilities 3,504,019 3,424,202 3,579,963
Stockholder's equity:
Common stock ($1.00 par value, 100 shares
authorized, issued and outstanding) - - -
Contributed capital 52,670 52,670 52,670
Surplus 55,812 55,812 53,791
Undivided profits 204,812 200,264 185,105
Net unrealized gain (loss) on securities
available-for-sale, net of tax 3,282 368 (1,747)
---------------------------------------------------
Total stockholder's equity 316,576 309,114 289,819
---------------------------------------------------
Total liabilities and stockholder's equity $3,820,595 $3,733,316 $3,869,782
===================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 234
Independence Savings Bank
Consolidated Statements of Changes in Stockholder's Equity
Two months ended May 31, 1997 (unaudited) and
Years ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
NET UNREALIZED
GAINS (LOSSES) ON
COMMON CONTRIBUTED UNDIVIDED SECURITIES
STOCK (a) CAPITAL SURPLUS PROFITS AVAILABLE-FOR-SALE TOTAL
-----------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance--March 31, 1994 $ - $52,670 $46,704 $121,316 $ - $220,690
Unrealized net gain, net of tax, upon adoption of
SFAS 115 - - - - 2,718 2,718
Changes in net unrealized gains in securities
available-for-sale, net of tax - - - - 885 885
Net income for the year ending March 31, 1995 - - 3,490 31,414 - 34,904
-----------------------------------------------------------------------------
Balance--March 31, 1995 - 52,670 50,194 152,730 3,603 259,197
Net unrealized loss on securities transferred from
held-to-maturity to available-for-sale, net of tax - - - - (1,826) (1,826)
Changes in net unrealized losses in securities
available-for-sale, net of tax - - - - (3,524) (3,524)
Net income for the year ended March 31, 1996 - - 3,597 32,375 - 35,972
-----------------------------------------------------------------------------
Balance--March 31, 1996 - 52,670 53,791 185,105 (1,747) 289,819
Net unrealized gain on securities transferred from
held-to-maturity to available-for-sale, net of tax - - - - 269 269
Changes in net unrealized gains in securities
available-for-sale, net of tax - - - - 1,846 1,846
Net income for the year ended March 31, 1997 - - 2,021 15,159 - 17,180
-----------------------------------------------------------------------------
Balance--March 31, 1997 $ - $52,670 $55,812 $200,264 $ 368 $309,114
-----------------------------------------------------------------------------
Changes in net unrealized gains in securities
available-for-sale, net of tax (unaudited) - - - - 2,914 2,914
Net income for the two months ended May 31, 1997
(unaudited) - - - 4,548 - 4,548
-----------------------------------------------------------------------------
Balance--May 31, 1997 (unaudited) $ - $52,670 $55,812 $204,812 $ 3,282 $316,576
=============================================================================
</TABLE>
(a) $1.00 par value, 100 shares common stock authorized, issued and
outstanding.
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 235
Independence Savings Bank
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
TWO MONTHS ENDED MAY 31 YEARS ENDED MARCH 31
1997 1996 1997 1996 1995
------------------------------------------------------------------
(Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,548 $ 6,090 $ 17,180 $ 35,972 $ 34,904
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 1,450 600 7,960 3,679 3,692
Net loss (gain) on sale of loans and securities 3 (28) 3,347 (12,222) 3,952
Amortization of deferred income and premiums (2,404) (3,373) (11,164) (6,631) (2,888)
Amortization of intangibles 1,484 1,546 8,278 1,842 905
Depreciation and amortization 1,094 814 5,972 3,545 2,218
Deferred income tax benefit (1,157) (1,602) (7,137) (1,416) (1,946)
Change in assets and liabilities net of effects from
purchase of Bay Ridge Bancorp.
(Increase) decrease in accrued interest receivable (6,556) 38 3,687 (1,291) 2,318
Decrease (increase) in accounts receivable-securities
transactions 86,549 - (107,624) - -
Decrease in due to banks - (215) (215) (729) (5,183)
Increase (decrease) in accrued expenses and other liabilities 11,392 (35,237) (49,588) 62,732 (4,357)
Other, net (7,200) (747) (6,625) (858) 154
------------------------------------------------------------------
Net cash provided by (used in) operating activities 89,203 (32,114) (135,929) 84,623 33,669
------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (110,840) (86,660) (503,153) (232,485) (578,437)
Principal payments on loans 57,963 43,411 261,161 189,064 116,129
Proceeds from sale of loans 975 973 76,002 8,686 133,672
Proceeds from sale of available-for-sale securities 49,748 108,948 648,416 175,691 99,254
Proceeds from maturities of available-for-sale securities 62,150 320,000 823,825 302,966 62,100
Principal collected on available-for-sale securities 10,600 28,434 1,177 318 -
Purchases of securities available-for-sale (466,484) (205,269) (927,977) (1,178,896) (57,381)
Proceeds from sale of investment securities - - - - 142,742
Proceeds from maturities of investment securities - - - 4,000 21,562
Principal collected on investment securities - - - 228 8,809
Purchases of investment securities - - - - (4,983)
Principal collected on mortgage-backed and
mortgage related securities - - 146,836 60,920 67,849
Proceeds from sales of other real estate - 620 1,308 2,512 1,154
Purchases of Federal Home Loan Bank stock - - (3,579) - (2,460)
Net additions to premises, furniture and equipment (1,358) (2,453) (14,433) (6,242) (12,741)
Payment for purchase of Bay Ridge Bancorp, net of cash acquired - - - (74,731) -
------------------------------------------------------------------
Net cash (used in) provided by investing activities (397,246) 208,004 509,583 (747,969) (2,731)
------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits sold, net of premium - - (47,661) - -
Deposits purchased, net of premium 65,972 - - 560,948 20,432
Net (decrease) increase in demand and savings deposits (14,551) 21,163 2,276 (14,291) (225,558)
Net (decrease) increase in time deposits (830) (74,765) (22,199) 120,861 234,108
Net (decrease) increase in other borrowings (49) (39,205) (40,063) (11,453) 7,159
Net increase in escrow and other deposits 13,858 13,095 5,437 79 5,648
------------------------------------------------------------------
Net cash provided by (used in) financing activities 64,400 (79,712) (102,210) 656,144 41,789
------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (243,643) 96,178 271,444 (7,202) 72,727
Cash and cash equivalents at beginning of year 374,636 103,192 103,192 110,394 37,667
------------------------------------------------------------------
Cash and cash equivalents at end of period $ 130,993 $ 199,370 $ 374,636 $ 103,192 $ 110,394
==================================================================
Income taxes paid $ 2,000 $ 8,500 $ 25,200 $ 30,383 $ 31,394
==================================================================
Interest paid $ 12,009 $ 12,896 $ 138,823 $110,586 $ 76,483
==================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 236
Independence Savings Bank
Notes to Consolidated Financial Statements
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
1. GENERAL
Independence Savings Bank (the "Bank") is a New York State chartered stock form
savings bank which provides financial services primarily to individuals and
small businesses within the New York metropolitan area. The Bank is subject to
regulation by the Federal Deposit Insurance Corp. ("FDIC") and New York State
Banking Department. Independence Savings Bank is the wholly-owned, sole
subsidiary of Independence Community Bank Corp. ("ICBC").
2. ACQUISITIONS
On January 3, 1996, the Bank acquired, via a cash acquisition, the stock of Bay
Ridge Bancorp, Inc. and its thrift subsidiary, Bay Ridge Federal Savings Bank.
The purchase price paid was approximately $127.8 million, and as a result the
Bank acquired approximately $558.6 million in assets and $445.2 million in
liabilities, with the transaction recorded on a purchase accounting basis. The
cost in excess of the net assets acquired is being amortized on a straight-line
basis over approximately 14 years.
On March 15, 1996, the Bank assumed approximately $615.6 million of deposits
and acquired $8.1 million in assets from First Nationwide Bank ("FNB"). The
Bank also received approximately $557.9 million in cash from FNB to fund the
assumption of these deposit liabilities. The Bank subsequently sold, in
September of 1996, approximately $51.4 million of these deposits. The adjusted
cost in excess of the assets received and the deposits assumed is being
amortized on a straight-line basis over 7 years.
On April 25, 1997, the Bank assumed approximately $70.0 million of deposits and
acquired $1.1 million in assets from Apple Bank for Savings ("ABS"). The Bank
also received approximately $64.9 million in cash from ABS to fund the
assumption of these deposit liabilities. The adjusted cost in excess of the
assets received and the deposits assumed is being amortized on a straight-line
basis over 7 years.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the significant accounting policies of the
Bank and its subsidiaries. These policies conform to generally accepted
accounting principles.
F-6
<PAGE> 237
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Bank include all majority-owned
subsidiaries, after elimination of intercompany transactions and accounts.
RISKS AND UNCERTAINTIES
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 amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year's presentation.
INVESTMENT, MORTGAGE-BACKED AND MORTGAGE RELATED SECURITIES HELD-TO-MATURITY
Investment, mortgage-backed and mortgage related securities held-to-maturity
are stated at cost, adjusted for amortization of premiums and discounts which
are recognized as adjustments to interest income over the life of the security
so as to provide a level yield.
To the extent management determines a decline in value in an investment,
mortgage-backed or mortgage related security held-to-maturity to be other than
temporary the Bank will provide allowances and will reflect such provisions in
the consolidated statements of income.
Gains or losses on disposition of investment, mortgage-backed and mortgage
related securities held-to-maturity are based on the net proceeds, minus the
adjusted carrying amount of the securities sold, using the specific
identification method.
In March 1997, all remaining investment, mortgage-backed and mortgage related
securities classified as held-to-maturity were reclassified to
available-for-sale (see Notes 5 and 6).
F-7
<PAGE> 238
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale are carried at fair value. Unrealized gains or
losses on securities available-for-sale are included as a separate component of
stockholder's equity, net of tax. Gains or losses on such securities are
recognized using the specific identification method.
LOANS
Loans are stated at unpaid principal balances, net of deferred net loan
origination and commitment fees. Interest income on loans is credited as
earned. Accrual of interest income is discontinued and uncollected interest is
reversed for loans on which a default on interest has existed for a period in
excess of 90 days, or for loans which management believes, after giving
consideration to economic and business conditions and collection efforts,
collection of interest is doubtful.
Loan origination and commitment fees and certain direct costs incurred in
connection with loan originations are deferred and amortized to interest
income, using a method which approximates the interest method, over the life of
the related loans as an adjustment to yield.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is determined based upon management's evaluation
of the Bank's loan portfolios considering past loan loss experience, assessment
of current and prospective economic conditions, the size and composition of the
loan portfolios, and other relevant factors.
Assessing the adequacy of the allowance for loan losses is inherently
subjective as it requires making material estimates, including the amount and
timing of future cash flows expected to be received on impaired loans, that may
be susceptible to significant change. In the opinion of management, the
allowance, when taken as a whole, is adequate to absorb reasonable estimated
loan losses inherent in the Bank's loan portfolios.
F-8
<PAGE> 239
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREMISES, FURNITURE AND EQUIPMENT
Land is carried at cost. Buildings and improvements, leasehold improvements,
furniture, automobiles and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is computed on a straight-line
basis over the estimated useful lives of the assets. The estimated useful lives
of the assets are as follows:
<TABLE>
<S> <C>
Buildings 10 to 55 years
Furniture and equipment 3 to 10 years
Automobiles 3 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the lives of
the respective leases or the estimated useful lives of the improvements,
whichever is shorter.
INCOME TAXES
The Bank uses the liability method to account for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws expected to be in effect when the
differences are expected to reverse.
STOCKHOLDER'S EQUITY--SURPLUS
In accordance with the New York State Banking Law and New York State Banking
Board Regulations, the Bank credits 10% of quarterly net income to surplus and
is required to do so until such time as stockholder's equity is equal to 10% of
amounts due to depositors.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Bank defines
cash and cash equivalents as highly liquid investments with original maturities
of three months or less.
F-9
<PAGE> 240
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
On April 1, 1995, the Bank adopted Statement of Financial Accounting Standard
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" as amended
by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". Under SFAS No. 114, a loan is impaired when,
based on current information and events, it is probable that a creditor will be
unable to collect all amounts due according to the loan's contractual terms.
Impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. The adoption of SFAS No. 114 did not have a material impact on the
Bank's financial statements.
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS No. 121 is effective for fiscal
years beginning after December 15, 1995 and establishes accounting standards
for impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. This statement requires
that long-lived assets and certain identifiable intangibles, to be held and
used by an entity, be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability, the entity should
estimate the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows is less
than the carrying amount of the asset, an impairment loss should be recognized.
This statement requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. The Bank adopted SFAS No. 121 on April 1, 1996.
The adoption of SFAS No. 121 did not have an impact on the Bank's financial
statements.
In June 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which
provides accounting and reporting standards for sales, securitizations, and
servicing of receivables and other financial assets, secured borrowing and
collateral transactions, and the extinguishments of liabilities. The standard
requires an entity to recognize the financial and servicing assets it controls
and the liabilities it has incurred and to derecognize financial assets when
control has been surrendered in accordance with criteria provided in SFAS No.
125. SFAS No. 125 supersedes SFAS
F-10
<PAGE> 241
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
No. 122 "Accounting for Mortgage Servicing Rights" and is to be applied to
transactions occurring after December 31, 1996. The adoption of SFAS No. 125
did not have a material impact on the Bank's financial statements.
4. CASH AND DUE FROM BANKS
Cash and due from banks at March 31, 1997 includes $270,173,600 on deposit at
the Federal Home Loan Bank of New York (the "FHLB"). This primarily represents
cash received from the sale of securities that settled on or prior to March 31,
1997. These funds were invested by April 2, 1997 in U.S. Treasury notes.
5. INVESTMENT SECURITIES HELD-TO-MATURITY
In March 1997, investment securities held-to-maturity with an amortized cost of
$31,291,800 and a net unrealized loss of $608,300 were reclassified to
available-for-sale. In reassessing the classification designation for each
security the Bank determined it no longer had the intent to hold these
securities to maturity.
The carrying values and estimated fair values of investment securities
held-to-maturity are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
---------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. government and agencies $38,890 $283 $(370) $38,803
Municipals 1,105 23 - 1,128
---------------------------------------------------
Total $39,995 $306 $(370) $39,931
===================================================
</TABLE>
F-11
<PAGE> 242
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
5. INVESTMENT SECURITIES HELD-TO-MATURITY (CONTINUED)
The amortized cost and estimated fair value of investment securities by
contractual maturity are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
CARRYING FAIR
VALUE VALUE
----------------------------
(In thousands)
<S> <C> <C>
One year or less $ 6,034 $ 6,027
One year through five years 32,856 32,776
Five years through ten years 1,105 1,128
----------------------------
$ 39,995 $ 39,931
============================
</TABLE>
There were no sales from investment securities held-to-maturity for the periods
April 1, 1996 through March 31, 1997 or April 1, 1995 through March 31, 1996.
Proceeds from sales of investment securities held-to-maturity during the period
April 1, 1994 through March 31, 1995 were $142,742,000. Gross gains and losses
of $8,000 and $100,000, respectively, were realized on those sales.
The amortized cost of investment securities held-to-maturity sold during the
period April 1, 1994 through March 31, 1995, which were sold within three
months of maturity was $120,045,000, with gross gains of $8,000 and gross
losses of $41,000. The amortized cost of investment securities held-to-maturity
sold during the period April 1, 1994 through March 31, 1995, which were sold
within six months of maturity was $22,798,000, with gross losses of $59,000.
Based on an analysis performed by the Bank, interest rate risk had been
eliminated as a pricing factor on the above sales, and these securities were
considered in substance held-to-maturity.
6. MORTGAGE-BACKED AND MORTGAGE RELATED SECURITIES HELD-TO-MATURITY
In March 1997, mortgage-backed and mortgage related securities held-to-maturity
with an amortized cost of $98,045,300 and an unrealized net gain of $1,071,300
were reclassified to available-for-sale. In reassessing the classification
designation for each security the Bank determined it no longer had the intent
to hold these securities to maturity.
F-12
<PAGE> 243
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
6. MORTGAGE-BACKED AND MORTGAGE RELATED SECURITIES HELD-TO-MATURITY (CONTINUED)
The carrying values and estimated fair values of mortgage-backed and mortgage
related securities held-to-maturity are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
--------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Federal National Mortgage Assoc.
Pass Through Certificates $ 5,492 $ 70 $ (76) $ 5,486
Government National Mortgage Assoc.
Pass Through Certificates 98,303 2,967 (1,411) 99,859
Federal Home Loan Mortgage Corp.
Pass Through Certificates 16,907 145 (699) 16,353
--------------------------------------------------------
Total $ 120,702 $ 3,182 $ (2,186) $ 121,698
========================================================
</TABLE>
The amortized cost and estimated fair value of mortgage-backed and mortgage
related securities held-to-maturity by contractual maturity are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
CARRYING FAIR
VALUE VALUE
----------------------------
(In thousands)
<S> <C> <C>
One year through five years $ 108 $ 110
Five years through ten years 25,273 25,318
Over ten years 95,321 96,270
----------------------------
$ 120,702 $ 121,698
============================
</TABLE>
There were no sales of mortgage-backed and mortgage related securities
held-to-maturity for the three years ended March 31, 1997.
F-13
<PAGE> 244
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
7. SECURITIES AVAILABLE-FOR-SALE
The amortized cost and estimated fair value of securities available-for-sale
are as follows:
<TABLE>
<CAPTION>
MAY 31, 1997
------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Debt securities:
U.S. government and agencies $ 700,572 $ 2,007 $ (219) $ 702,360
Municipals 1,104 - - 1,104
Corporate 362 - (4) 358
------------------------------------------------------
Total debt securities 702,038 2,007 (223) 703,822
------------------------------------------------------
Equity securities:
Preferred 281 2 (1) 282
Common 11,533 1,675 (369) 12,839
------------------------------------------------------
Total equity securities 11,814 1,677 (370) 13,121
------------------------------------------------------
Mortgage-backed and mortgage related
securities:
Federal National Mortgage Assoc. Pass
Through Certificates 6,441 146 (51) 6,536
Government National Mortgage Assoc.
Pass Through Certificates 77,248 2,699 (141) 79,806
Federal Home Loan Mortgage Corp. Pass
Through Certificates 17,109 197 (99) 17,207
Collateralized Mortgage Obligation
Bonds 79,071 28 (400) 78,699
------------------------------------------------------
Total mortgage-backed and mortgage
related securities 179,869 3,070 (691) 182,248
------------------------------------------------------
Total securities available-for-sale $ 893,721 $ 6,754 $ (1,284) $ 899,191
======================================================
</TABLE>
F-14
<PAGE> 245
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
7. SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 1997
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Debt securities:
U.S. government and agencies $345,229 $ 346 $ (431) $345,144
Municipals 1,104 - - 1,104
Corporate 363 - (5) 358
------------------------------------------------------
Total debt securities 346,696 346 (436) 346,606
------------------------------------------------------
Equity securities:
Preferred 281 - (1) 280
Common 10,333 268 - 10,601
------------------------------------------------------
Total equity securities 10,614 268 (1) 10,881
------------------------------------------------------
Mortgage-backed and mortgage related
securities:
Federal National Mortgage Assoc. Pass
Through Certificates 7,319 18 (162) 7,175
Government National Mortgage Assoc.
Pass Through Certificates 79,684 1,433 (360) 80,757
Federal Home Loan Mortgage Corp. Pass
Through Certificates 18,780 90 (276) 18,594
Collateralized Mortgage Obligation
Bonds 84,761 22 (330) 84,453
------------------------------------------------------
Total mortgage-backed and mortgage
related securities 190,544 1,563 (1,128) 190,979
------------------------------------------------------
Total securities available-for-sale $547,854 $2,177 $(1,565) $548,466
======================================================
</TABLE>
F-15
<PAGE> 246
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
7. SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 1996
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Debt securities:
U.S. government and agencies $ 670,224 $ 35 $ (978) $ 669,281
Corporate 3,220 474 (9) 3,685
-------------------------------------------------------
Total debt securities 673,444 509 (987) 672,966
Equity securities:
Preferred 450 2 (7) 445
Common 10,288 282 (153) 10,417
-------------------------------------------------------
Total equity securities 10,738 284 (160) 10,862
-------------------------------------------------------
Mortgage-backed and mortgage related
securities:
Federal National Mortgage Assoc. Pass
Through Certificates 3,108 10 (27) 3,091
Federal Home Loan Mortgage Corp. Pass
Through Certificates 60,493 50 (724) 59,819
Collateralized Mortgage Obligation
Bonds 334,664 123 (2,376) 332,411
-------------------------------------------------------
Total mortgage-backed and mortgage
related securities 398,265 183 (3,127) 395,321
-------------------------------------------------------
Total securities available-for-sale $1,082,447 $976 $(4,274) $1,079,149
=======================================================
</TABLE>
Sales of securities available-for-sale are summarized as follows:
<TABLE>
<CAPTION>
TWO MONTHS ENDED MAY 31 YEAR ENDED MARCH 31
1997 1996 1997 1996 1995
----------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Proceeds from sales $ 49,748 $108,948 $ 648,416 $ 175,691 $ 99,254
Gross gains 124 43 1,042 12,681 -
Gross losses - 75 4,905 41 237
</TABLE>
F-16
<PAGE> 247
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
7. SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The amortized cost and estimated fair value of debt securities by contractual
maturity are as follows:
<TABLE>
<CAPTION>
MAY 31, 1997
CARRYING FAIR
VALUE VALUE
----------------------------
(In thousands)
<S> <C> <C>
One year or less $ 241,576 $ 241,757
One year through five years 458,953 460,556
Five years through ten years 1,509 1,509
----------------------------
$ 702,038 $ 703,822
============================
</TABLE>
The amortized cost and estimated fair value of mortgage-backed and mortgage
related securities by contractual maturity are as follows:
<TABLE>
<CAPTION>
MAY 31, 1997
CARRYING FAIR
VALUE VALUE
--------------------------------
(In thousands)
<S> <C> <C>
One year or less $ 3,524 $ 3,516
One year through five years 52,451 52,226
Five years through ten years 44,736 44,993
Over ten years 79,158 81,513
--------------------------------
$ 179,869 $ 182,248
================================
</TABLE>
Corporate debt securities includes an investment with carrying and fair values
of $2,690,000 and $3,164,000, respectively, at March 31, 1996. This carrying
value is net of a $1,950,000 reserve. The investment was sold during 1997.
On November 15, 1995, the Financial Accounting Standards Board issued a Special
Report, "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities". In accordance with provisions in
that Special Report, the Bank chose to reclassify securities from
held-to-maturity to available-for-sale. At the date of transfer (December,
1995) the amortized cost of those securities was $169,092,000 and the net
unrealized losses were $3,511,000.
F-17
<PAGE> 248
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
8. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
-----------------------------------------------------
(In thousands)
<S> <C> <C> <C>
MORTGAGE LOANS ON REAL ESTATE:
One-to-four family $ 551,124 $ 552,745 $ 534,539
Multi-family 1,404,304 1,365,124 1,208,039
Other 163,136 158,336 162,799
-----------------------------------------------------
2,118,564 2,076,205 1,905,377
Less net deferred fees 11,280 11,052 10,451
-----------------------------------------------------
Total mortgage loans on real estate 2,107,284 2,065,153 1,894,926
OTHER LOANS:
Cooperative apartment loans 359,663 348,029 340,507
Student loans (guaranteed) 44,397 45,262 45,947
Home equity and improvement loans 19,069 19,545 23,458
Commercial loans 30,661 25,249 18,003
Consumer loans 15,935 15,241 8,284
Passbook loans 10,837 9,710 9,995
Credit card loans 2,023 2,054 2,332
-----------------------------------------------------
482,585 465,090 448,526
Less unearned discount and deferred
fees 166 130 116
-----------------------------------------------------
Total other loans 482,419 464,960 448,410
Less allowance for loan losses (28,777) (27,024) (20,528)
-----------------------------------------------------
Total loans, net $ 2,560,926 $ 2,503,089 $ 2,322,808
=====================================================
</TABLE>
At May 31, 1997 and March 31, 1997, 1996 and 1995, the Bank was servicing loans
on behalf of others which are not included in the consolidated financial
statements of $309,872,200, $314,638,700, $275,306,400 and $287,319,000,
respectively.
At May 31, 1997 and March 31, 1997, 1996 and 1995 included in mortgage loans on
real estate are $14,346,400, $15,547,200, $18,869,000 and $6,066,000,
respectively, of nonaccrual loans. If interest on the nonaccrual loans had been
accrued, such income would have approximated $256,600 and $465,900 for the two
months ended May 31, 1997 and 1996 and $1,574,600, $730,300 and $504,000 for
the three years in the period ended March 31, 1997, respectively.
F-18
<PAGE> 249
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
8. LOANS (CONTINUED)
At May 31, 1997 and March 31, 1997, 1996, and 1995, included in other loans are
$676,200, $1,383,400, $1,365,300 and $1,095,000, respectively, of nonaccrual
loans. If interest on the nonaccrual loans had been accrued, such income would
have approximated $14,200 and $27,204 for the two months ended May 31, 1997 and
1996 and $117,800, $78,800 and $36,000 for the three years in the period ended
March 31, 1997, respectively.
A summary of the changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
TWO MONTHS ENDED MAY 31 YEAR ENDED MARCH 31
1997 1996 1997 1996 1995
------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 27,024 $20,528 $ 20,528 $11,849 $ 8,770
Allowance from acquisition - - - 6,910 -
Provision charged to operations 1,450 600 7,960 3,679 3,592
Charge-offs, net of recoveries 303 47 (1,464) (1,910) (513)
------------------------------------------------------------------
Balance at end of period $ 28,777 $21,175 $ 27,024 $20,528 $ 11,849
==================================================================
</TABLE>
The Bank's loan portfolios are primarily comprised of secured loans made to
individuals and small businesses located in the New York City Metropolitan
area.
In December, 1994 the Bank securitized and sold $119,971,000 of multi-family
loans. The Bank has pledged $7,800,000 of U.S. government securities as a
credit enhancement for the transaction.
F-19
<PAGE> 250
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
9. PREMISES, FURNITURE AND EQUIPMENT
A summary of premises, furniture and equipment, net of accumulated depreciation
and amortization is as follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
-------------------------------------------
(In thousands)
<S> <C> <C> <C>
Land $ 3,232 $ 3,303 $ 2,238
Buildings and improvements 44,812 44,284 38,863
Leasehold improvements 3,645 3,591 2,963
Furniture and equipment 8,942 9,189 7,842
-------------------------------------------
Total premises, furniture and equipment $ 60,631 $ 60,367 $ 51,906
===========================================
</TABLE>
Depreciation and amortization expense amounted to $1,094,000, $814,000,
$5,972,200, $3,545,200 and $2,218,000 for the two month periods ended May 31,
1997 and 1996 and the years ended March 31, 1997, 1996 and 1995, respectively.
10. OTHER ASSETS
A summary of other assets is as follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
-------------------------------------------
(In thousands)
<S> <C> <C> <C>
FHLB stock $ 25,752 $ 25,752 $ 22,173
Net deferred tax asset 17,116 17,830 12,727
Prepaid expenses 1,109 1,604 1,783
Other real estate 484 540 973
Accounts receivable-securities transactions 21,075 107,624 -
Other 16,248 15,525 13,036
-------------------------------------------
$ 81,784 $168,875 $ 50,692
===========================================
</TABLE>
F-20
<PAGE> 251
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
11. DEPOSITS
The amounts due to depositors and the weighted average interest rates are as
follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
---------------------------------------------------------------------------------
(In thousands)
DEPOSIT AVERAGE DEPOSIT AVERAGE DEPOSIT AVERAGE
LIABILITY RATE LIABILITY RATE LIABILITY RATE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Savings $1,027,028 2.80% $1,018,199 2.80% $1,109,503 3.00%
Money Market 217,050 3.00 218,230 3.00 215,545 3.11
NOW 272,848 2.73 268,681 2.49 218,317 2.13
Checking 73,608 - 76,692 - 56,277 -
Time Deposits 1,789,640 5.55 1,743,756 5.50 1,797,248 5.63
------------ ------------ ------------
$3,380,174 $3,325,558 $3,396,890
============ ============ ============
</TABLE>
Scheduled maturities of time deposits are as follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
----------------------------------------------------
(In thousands)
<S> <C> <C> <C>
One year $ 1,328,115 $1,333,075 $1,336,895
Two years 257,547 212,451 226,562
Three years 127,716 110,601 83,329
Four years 39,422 52,008 98,464
Thereafter 36,840 35,621 51,998
----------------------------------------------------
$ 1,789,640 $1,743,756 $1,797,248
====================================================
</TABLE>
Time deposit accounts in denominations of $100,000 or more totaled
approximately $198,238,200, $189,752,900 and $180,092,800 at May 31, 1997,
March 31, 1997 and March 31, 1996, respectively.
F-21
<PAGE> 252
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
12. BORROWINGS
A summary of borrowings is as follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
-------------------------------------------
(In thousands)
<S> <C> <C> <C>
FHLB borrowings $ 14,550 $14,550 $56,045
Other 2,633 2,682 1,250
-------------------------------------------
$ 17,183 $17,232 $57,295
===========================================
</TABLE>
Advances from the FHLB are made at fixed rates with maturities between one and
fifteen years, summarized as follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
----------------------------------------
(In thousands)
<S> <C> <C> <C>
After one year through five years $ 9,250 $ 8,350 $ 5,185
After five years through seven years 5,300 4,900 45,195
After seven years through fifteen years - 1,300 5,665
----------------------------------------
$ 14,550 $ 14,550 $ 56,045
========================================
</TABLE>
Advances from the FHLB are collateralized by all FHLB stock owned by the Bank
in addition to a blanket pledge of eligible assets in an amount required to be
maintained so that the estimated fair value of such eligible assets exceeds, at
all times, 110% of the outstanding advances (See Note 14).
The average cost of borrowing for the two month period ended May 31 1997 and
the years ended March 31, 1997 and March 31, 1996 was 7.4%, 7.6% and 6.2%,
respectively.
F-22
<PAGE> 253
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
13. BENEFIT PLANS
The Bank has a noncontributory defined benefit pension plan (the "Plan")
covering substantially all of its full-time employees and certain part-time
employees who qualify. The Bank makes annual contributions to the Plan equal to
the amount necessary to satisfy the funding requirements of ERISA.
The Bank also has a Supplemental Executive Retirement Plan (the "Supplemental
Plan"). The Supplemental Plan is a non-qualified, unfunded plan of deferred
compensation covering those senior officers of the Bank whose benefit under the
Plan would be limited by Internal Revenue Code Sections 415 and 401(a)(17).
The following table sets forth the defined benefit plans' funded status and net
periodic pension cost:
<TABLE>
<CAPTION>
MARCH 31
1997 1996
----------------------------------
(In thousands)
<S> <C> <C>
Accumulated benefit obligation (including vested
benefits of $18,146 and $21,252, respectively) $ (18,938) $ (22,107)
==================================
Projected benefit obligation for services rendered to
date $ (25,577) $ (27,625)
Plan assets, at fair value 24,547 24,649
----------------------------------
Plan assets less than projected benefit obligation (1,030) (2,976)
Unrecognized prior service cost 581 844
Unrecognized net (gain) or loss (1,230) 1,033
Unrecognized transition asset (1,823) (2,210)
----------------------------------
Accrued pension cost at December 31, 1996
and 1995 (3,502) (3,309)
Net adjustment (134) 1,650
----------------------------------
Accrued pension cost $ (3,636) $ (1,659)
==================================
</TABLE>
F-23
<PAGE> 254
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
13. BENEFIT PLANS (CONTINUED)
Net pension expense included the following components:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
1997 1996 1995
----------------------------------------------
(In thousands)
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 924 $ 759 $ 1,311
Interest cost on projected benefit obligation 1,818 1,483 1,499
Actual return on plan assets (2,530) (4,972) 659
Net amortization and deferral 328 3,405 (2,293)
Settlement gain (344) - -
----------------------------------------------
Net pension expense for the years ended December
31, 1996, 1995, and 1994 196 675 1,176
Net adjustment (63) (117) 73
----------------------------------------------
Net pension expense $ 133 $ 558 $ 1,249
==============================================
</TABLE>
At December 31, 1996 and 1995, the projected benefit obligation for the plans
was determined using an assumed discount rate of 7.75% and 7.00%, respectively,
and an assumed rate of compensation increase of 6% for the Plan and 7% for the
Supplemental Plan. At December 31, 1996 and 1995, the weighted average assumed
rate of return on plan assets was 9%. Plan assets consist mainly of investments
in U.S. government and agency obligations, mortgage-backed securities and
common stocks.
The Bank also sponsors an incentive savings plan (401(k) plan) whereby eligible
employees may make tax deferred contributions up to certain limits. The Bank
makes matching contributions up to the lesser of 6% of employee compensation,
or $3,000. The Bank may reduce or cease matching contributions if it is
determined that the current or accumulated net earnings or undivided profits of
the Bank are insufficient to pay the full amount of contributions in a plan
year. Contributions to the plan by the Bank aggregated approximately $508,400,
$459,000 and $423,000 for the years ended March 31, 1997, 1996 and 1995,
respectively.
F-24
<PAGE> 255
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
13. BENEFIT PLANS (CONTINUED)
Effective April 1, 1995, the Bank adopted SFAS No. 106, "Employer's Accounting
for Postretirement Benefits Other Than Pensions". In accordance with SFAS No.
106, the Bank elected to recognize the cumulative effect of this change in
accounting principle over future accounting periods.
Status of the plan is as follows:
<TABLE>
<CAPTION>
MARCH 31
1997 1996
-----------------------------------
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (3,266) $ (4,481)
Fully eligible active plan participants (2,972) (3,664)
Other active plan participants (2,605) (4,207)
-----------------------------------
Accumulated benefit obligation (8,843) (12,352)
Unrecognized transition obligation being recognized
over 20 years 4,817 7,786
Unrecognized net loss due to past experience
difference from assumptions made 1,409 2,595
Unrecognized prior service cost 30 956
-----------------------------------
Accrued postretirement benefit cost at
December 31, 1996 and 1995 (2,587) (1,015)
Net adjustment (393) (718)
-----------------------------------
Accrued postretirement benefit cost $ (2,980) $ (1,733)
===================================
</TABLE>
F-25
<PAGE> 256
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
13. BENEFIT PLANS (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
1997 1996
-----------------------------------
(In thousands)
<S> <C> <C>
Components of postretirement benefit cost:
Service cost-benefits earned during the period $ 457 $ 295
Interest cost on accumulated postretirement benefit
obligation 850 681
Net amortization 684 409
-----------------------------------
Postretirement benefit expense - years ended December
31, 1996 and 1995 1,991 1,385
Net adjustment 152 348
-----------------------------------
Net postretirement benefit expense $ 2,143 $ 1,733
===================================
</TABLE>
The assumptions used in arriving at the above include the initial rate of
increase in health care costs of 11% decreasing gradually to 6% by the year
2001. At December 31, 1996 and 1995, discount rates of 7.75% and 7.00%,
respectively, were used.
The health care cost trend rate assumption has a significant effect on the
amounts reported. A 1% increase in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996 by $1,098,300 and the
aggregate of the service and interest cost components of the net periodic
postretirement benefits expense for the year then ended by $177,100.
14. COMMITMENTS AND CONTINGENCIES
At May 31, 1997 and March 31, 1997, there were outstanding commitments and
unused lines of credit by the Bank to originate or acquire mortgage loans on
real estate aggregating $134,474,000 and $96,890,300, respectively, and other
loans aggregating $40,396,600 and $33,161,400, respectively, substantially all
of which were fixed and adjustable rate residential loans and fixed rate
commercial loans that are expected to close during the next twelve months. The
difference between the estimated fair value and the estimated book value of
commitments and unused lines of credit is not significant.
F-26
<PAGE> 257
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Bank has entered into noncancellable lease agreements with respect to Bank
premises. The minimum annual rental commitments under these operating leases,
exclusive of taxes and other charges, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31: AMOUNT
- ------------------ --------------
(In thousands)
<S> <C>
1998 $ 1,199
1999 1,268
2000 1,249
2001 1,231
2002 and thereafter 8,718
</TABLE>
The rent expense for the two month periods ended May 31, 1997 and May 31, 1996
and the years ended March 31, 1997, 1996 and 1995 was $170,800, $220,600,
$1,127,600, $980,300 and $984,000, respectively.
The Bank is a member of the FHLB, and owns FHLB stock with a carrying value of
$25,752,100, $25,752,100 and $22,173,300 at May 31, 1997, March 31, 1997 and
March 31, 1996, respectively. As a member, the Bank is able to borrow on a
secured basis up to twenty times the amount of its capital stock investment at
either fixed or variable interest rates for terms ranging from six months to
fifteen years (see Note 12). The borrowings are limited to 30% of total assets
except for borrowings to fund deposit outflows.
In the normal course of business, there are outstanding various legal
proceedings, claims, commitments and contingent liabilities. In the opinion of
management, the financial position of the Bank will not be affected materially
by the outcome of such legal proceedings and claims.
F-27
<PAGE> 258
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
15. INCOME TAXES
The components of deferred tax assets and liabilities are summarized as
follows:
<TABLE>
<CAPTION>
MAY 31 MARCH 31
1997 1997 1996
-------------------------------------------
(In thousands)
<S> <C> <C> <C>
Deferred tax assets:
Securities available-for-sale $ - $ - $ 1,788
Allowance for loan losses 12,340 11,271 9,297
Deferred loan fees 5,296 5,311 5,614
Amortization of intangible assets 3,341 3,088 1,539
Nonaccrual interest 1,330 1,330 1,466
Other 3,995 4,159 3,147
-------------------------------------------
Gross deferred tax asset 26,302 25,159 22,851
-------------------------------------------
Less valuation allowance - - -
-------------------------------------------
Deferred tax assets $ 26,302 $ 25,159 $ 22,851
-------------------------------------------
Deferred tax liabilities:
Securities available-for-sale $ 2,188 $ 245 $ -
Acquisition premium on mortgage-backed and
mortgage related securities 983 1,017 1,990
Acquisition premium on mortgages 3,351 3,414 3,068
Depreciation 703 698 1,560
Other 1,961 1,955 3,506
-------------------------------------------
Gross deferred tax liabilities 9,186 7,329 10,124
-------------------------------------------
Net deferred tax asset $ 17,116 $ 17,830 $ 12,727
===========================================
</TABLE>
The Bank has reported taxable income for Federal, state and local income tax
purposes in each of the past two years and in management's opinion, in view of
the Bank's previous, current and projected future earnings trend, such net
deferred tax asset will be fully realized. Accordingly, no valuation allowance
was deemed necessary for the net deferred tax asset at May 31, 1997, March 31,
1997 or March 31, 1996.
F-28
<PAGE> 259
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
15. INCOME TAXES (CONTINUED)
Significant components of the provision (benefit) for income taxes attributable
to continuing operations are as follows:
<TABLE>
<CAPTION>
TWO MONTHS ENDED YEAR ENDED
MAY 31 MARCH 31
1997 1996 1997 1996 1995
-------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Current:
Federal $ 2,757 $ 3,204 $ 14,832 $ 22,645 $ 19,701
State and local 106 1,299 3,037 9,553 9,572
-------------------------------------------------------------------------------------------------
2,863 4,503 17,869 32,198 29,273
-------------------------------------------------------------------------------------------------
Deferred:
Federal (412) (1,151) (4,873) (518) (1,174)
State and local (745) (451) (2,264) (898) (772)
-------------------------------------------------------------------------------------------------
(1,157) (1,602) (7,137) (1,416) (1,946)
-------------------------------------------------------------------------------------------------
Total $ 1,706 $ 2,901 $ 10,732 $ 30,782 $ 27,327
=================================================================================================
</TABLE>
The table below presents a reconciliation between the reported tax provision
and the tax provision computed by applying the statutory Federal income tax
rate to income before provision for income taxes:
<TABLE>
<CAPTION>
TWO MONTHS ENDED YEAR ENDED
MAY 31 MARCH 31
1997 1996 1997 1996 1995
-------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Federal income tax provision at
statutory rates $ 2,189 $ 3,147 $ 9,769 $23,364 $21,781
Increase (reduction) in tax
resulting from:
State and local taxes, net of
federal income tax effect (415) 551 502 5,626 5,720
Other (68) (797) 461 1,792 (174)
-------------------------------------------------------------------------
$ 1,706 $ 2,901 $10,732 $30,782 $27,327
=========================================================================
</TABLE>
F-29
<PAGE> 260
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
15. INCOME TAXES (CONTINUED)
The Bank is included in the consolidated Federal income tax return of ICBC,
which is filed on a calendar year basis. For Federal income tax purposes, prior
to 1996, if certain definitional tests and other conditions were met, the Bank
was allowed a special bad debt deduction in determining its taxable income. The
deduction was based on either specified experience formulas or a percentage of
taxable income. Federal tax legislation enacted during 1996 repealed the
special bad debt deduction provisions. As a result, a large thrift institution
such as the Bank is required to use the specific charge-off method in computing
its federal bad debt deduction for tax years beginning after December 31, 1995.
However, New York State enacted legislation which, among other things, would
permit a large thrift institution such as the Bank to continue to use the bad
debt reserve method for both New York State and New York City tax purposes.
The 1996 Federal tax legislation also provided that a large thrift institution
such as the Bank is required to recapture the excess of its tax bad debt
reserves at December 31, 1995 over the balance of such reserves as of December
31, 1987 (the "base year"), whether the additions were made under the
percentage of taxable income method or the experience method. The Bank will be
required to recapture its excess bad debt reserves, for which deferred taxes
have been recognized, over a six year period on a straight line basis beginning
in 1998. The base year reserve will remain subject to recapture in the case of
certain excess distributions to and redemptions of shareholders or if the Bank
ceases to be a bank. The New York State legislation provides that the recapture
of excess bad debt reserves is not required for either New York State or New
York City tax purposes.
At May 31, 1997 and March 31, 1997, the base year bad debt reserve for federal
income tax purposes was approximately $30 million, for which deferred taxes are
not required to be recognized. Bad debt reserves maintained for New York State
and New York City tax purposes as of May 31, 1997 and March 31, 1997, for which
deferred taxes are not required to be recognized, amounted to approximately $85
million. Accordingly, deferred tax liabilities of approximately $21 million
have not been recognized as of May 31, 1997 and March 31, 1997.
Consolidated current and deferred tax expenses are allocated to the Bank as if
the Bank filed consolidated or combined tax returns only with its subsidiaries.
F-30
<PAGE> 261
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
16. REGULATORY REQUIREMENT
As a New York State chartered stock form savings bank, the deposits of which
are insured by the FDIC, the Bank is subject to certain FDIC capital
requirements. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities and certain off-balance
sheet items as calculated under regulatory accounting practices. The Bank's
capital amounts and classifications are also subject to qualitative judgments
by the regulators about components, risk weightings and other factors.
Based on its regulatory capital ratios at May 31, 1997 and March 31, 1997 and
1996, the Bank is categorized as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as "well capitalized"
the Bank must maintain Tier I leverage, Tier I risk-based and minimum total
risk-based ratios as set forth in the table.
The Bank's actual capital amounts and ratios are presented in the tables below
as of May 31, 1997 and March 31, 1997 and 1996:
<TABLE>
<CAPTION>
FOR CAPITAL ADEQUACY TO BE WELL CAPITALIZED
ACTUALS PURPOSES UNDER FDIC GUIDELINES
AS OF 5/31/97 AT 5/31/97 AT 5/31/97
------------------------ ------------------------ -------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Leverage $249,355 6.66% $ 149,776 4.0% $187,220 5.0%
Tier 1 Risk-Based 249,355 10.44 95,557 4.0 143,336 6.0
Total Risk-Based 278,131 11.64 191,114 8.0 238,893 10.0
</TABLE>
F-31
<PAGE> 262
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
16. REGULATORY REQUIREMENT (CONTINUED)
<TABLE>
<CAPTION>
FOR CAPITAL ADEQUACY TO BE WELL CAPITALIZED
ACTUALS PURPOSES UNDER FDIC GUIDELINES
AS OF 3/31/97 AT 3/31/97 AT 3/31/97
------------------------ ------------------------ -------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Leverage $247,520 6.83% $145,064 4.0% $181,330 5.0%
Tier 1 Risk-Based 247,520 10.05% 98,525 4.0% 147,788 6.0%
Total Risk-Based 274,544 11.15% 197,050 8.0% 246,313 10.0%
</TABLE>
<TABLE>
<CAPTION>
FOR CAPITAL ADEQUACY TO BE WELL CAPITALIZED
ACTUALS PURPOSES UNDER FDIC GUIDELINES
AS OF 3/31/96 AT 3/31/96 AT 3/31/96
------------------------ ------------------------ -------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Leverage $201,693 6.13% $131,548 4.0% $164,436 5.0%
Tier 1 Risk-Based 201,693 9.82% 82,153 4.0% 123,229 6.0%
Total Risk-Based 222,221 10.82% 164,306 8.0% 205,382 10.0%
</TABLE>
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" requires
disclosure of fair value information about financial instruments, whether or
not recognized in the statements of financial condition, for which it is
practicable to estimate fair value. In cases where quoted market prices are
not available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. SFAS No. 107 requirements exclude
certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Additionally, tax consequences related to the
realization of the unrealized gains and losses can have a potential effect on
fair value estimates and have not been considered in the estimates.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Bank.
F-32
<PAGE> 263
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
17. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The book values and estimated fair values of the Bank's financial instruments
are summarized as follows:
<TABLE>
<CAPTION>
MAY 31, 1997 MARCH 31, 1997 MARCH 31, 1996
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
-----------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks $ 50,887 $ 50,887 $ 310,429 $ 310,429 $ 44,410 $ 44,410
Commercial paper 31,389 31,389 39,866 39,866 58,782 58,782
Federal funds sold 48,707 48,707 24,341 24,341 39,995 39,931
Securities
available-for-sale 899,191 899,191 548,466 548,466 120,702 121,698
Mortgage loans on real
estate 2,118,564 2,079,931 2,076,205 2,025,243 1,079,149 1,079,149
Other loans 482,585 477,586 465,090 466,757 1,905,377 1,926,882
Accrued interest
receivable 23,940 23,940 17,384 17,384 448,526 448,956
FHLB stock 25,752 25,752 25,752 25,752 22,173 22,173
FINANCIAL LIABILITIES
Deposits 1,645,426 1,645,426 1,622,836 1,622,836 1,635,239 1,635,239
Time deposit accounts 1,789,640 1,790,500 1,743,756 1,748,692 1,797,248 1,811,947
Borrowings 17,183 12,924 17,232 15,487 57,295 57,261
</TABLE>
The following methods and assumptions were used by the Bank in estimating the
fair values of financial instruments:
Cash and due from banks: Carrying amounts approximate fair value since these
instruments are payable on demand.
Commercial paper: Carrying amounts approximate fair value since these
instruments have short-term maturities.
Federal funds sold: Carrying amounts approximate fair value since these
instruments have short-term maturities.
Investment securities held-to-maturity: The estimated fair values are based
on independent dealer quotation and quoted market prices.
F-33
<PAGE> 264
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
17. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Mortgage-backed and mortgage related securities held-to-maturity: The
estimated fair values are based on quoted market prices.
Securities available-for-sale: The estimated fair values are based on quoted
market prices.
Mortgage loans on real estate: At March 31, 1997, the Bank changed its
methodology of calculating fair value on mortgage loans on real estate.
Management believes that this methodology is a more practical and accurate
approach to calculating fair value for mortgage loans.
At May 31, 1997 and March 31, 1997, the Bank's mortgage loans on real estate
were segregated into two categories, residential loans and commercial /
multi-family loans. These were stratified further based upon historical
delinquency and loan to value ratios. The fair value for each loan was then
calculated by discounting the projected mortgage cash flow to a yield target
equal to a spread, which is commensurate with the loan quality and type, over
the Treasury curve at the average life of the cash flow.
At March 31, 1996, the Bank's mortgage loans were segregated into 1-4 family,
multifamily and nonresidential mortgage loans. Each loan category was further
segmented into fixed and adjustable rate loans. At March 31, 1996, quoted
secondary market prices and discounted cash flows were used to value the
entire mortgage portfolio. Also the fair value of adjustable mortgage loans,
which reprice frequently, were assumed to approximate their carrying value.
Other loans: At March 31, 1997, the Bank changed its methodology of
calculating fair value on co-op loans. Management believes that this
methodology is a more practical and accurate approach to calculating fair
value for co-op loans.
At May 31, 1997 and March 31, 1997, the co-op loan portfolio was priced using
the same methodology as the mortgage loans on real estate. The fair value of
the remaining other loan category has been estimated to approximate its
carrying value. This is based on the short-term duration of these loans and
the fact that the majority of these loans reprice frequently.
F-34
<PAGE> 265
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
17. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
At March 31, 1996, quoted secondary market prices were used to value both the
fixed and variable rate co-op loan portfolios. The fair value of the
remaining other loan category has been estimated to approximate its carrying
value. This is based on the short-term duration of these loans and the fact
that the majority of these loans reprice frequently.
Accrued interest receivable: Carrying amount approximates fair value since
these instruments have short-term maturities.
FHLB stock: Carrying amount approximates fair value since it is redeemable at
cost, with the issuer only.
Deposits: The estimated fair values of deposits with no stated maturity such
as savings, money market, checking, NOW and escrow accounts approximate the
respective obligations.
Time deposit accounts: The estimated fair value for time deposits is based on
a discounted cash flow calculation that applies interest rates currently
being offered by the Bank to its current deposit portfolio.
Borrowings: The estimated fair value of Federal Home Loan Bank borrowings is
based on the discounted value of their contractual cash flows. The discount
rate used in the present value computation is estimated by comparison to the
current interest rates charged by the Federal Home Loan Bank for advances of
similar remaining maturities.
18. ASSET AND DIVIDEND RESTRICTIONS
The Bank is required to maintain a reserve balance with the Federal Reserve
Bank. The required reserve balance was $2,424,000, $1,461,000 and $14,972,000
at May 31, 1997, March 31, 1997 and March 31, 1996, respectively.
Limitations exist on the availability of the Bank's undistributed earnings for
the payment of dividends to ICBC without prior approval of the Bank's
regulatory authorities.
F-35
<PAGE> 266
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
19. CONVERSION
On April 18, 1997, the Board of Directors of the Bank and the Board of Trustees
of ICBC unanimously adopted a plan of Conversion (the "Plan" or "Plan of
Conversion") whereby ICBC would convert from the mutual to stock form and offer
shares of common stock in a subscription and community offering. As part of the
conversion, newly authorized shares of the new stock holding company,
Independence Community Bank Corp. (the "Company"), will be offered to the
Bank's depositors and employee benefit plans in accordance with applicable
state and federal regulations. The amount and pricing of the proposed stock
offering will be based upon an independent appraisal of the Bank. The Plan must
be approved by certain depositors of the Bank and the New York State Banking
Department and not objected to by the Federal Deposit Insurance Corporation. In
connection with the conversion, the costs of issuing the common stock will be
deferred and deducted from the sale proceeds. At May 31, 1997, no costs related
to the conversion had been recorded. In the event that consummation of the
conversion does not occur, any recorded costs will be expensed.
At the time of conversion, the Bank will establish a liquidation account in an
amount equal to its capital as of the date of the latest consolidated statement
of financial condition appearing in the final prospectus. The liquidation
account will be maintained for the benefit of eligible account holders who
continue to maintain their deposit accounts at the Bank after the conversion.
The liquidation account will be reduced annually to the extent that eligible
account holders have reduced their qualifying deposits as of each anniversary
date. Subsequent increases will not restore an eligible account holder's
interest in the liquidation account. In the event of a complete liquidation,
each eligible account holder will be entitled to receive balances for accounts
then held.
Pursuant to the Plan of Conversion, the Company intends to establish the
Independence Community Foundation, a private charitable foundation (the
"Foundation"), in connection with the conversion. The Plan provides that the
Bank and the Company will create the Foundation immediately following the
conversion by contributing Company common stock in an amount equal to 8.0% of
the total amount of common stock to be sold in the conversion. The Foundation
is being formed as a complement to the Bank's existing community activities and
will be dedicated to community activities and the promotion of charitable
causes.
F-36
<PAGE> 267
Independence Savings Bank
Notes to Consolidated Financial Statements (continued)
May 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
19. CONVERSION (CONTINUED)
The Foundation will submit a request to the Internal Revenue Service to be
recognized as a tax-exempt organization. A contribution of common stock to the
Foundation by the Company would be tax deductible, subject to certain
limitations. The Company, however, would be able to carry forward any unused
portion of the deduction for five years following the contribution. Upon
funding the Foundation, the Company will recognize an expense in the full
amount of the contribution, offset in part by the corresponding tax benefits,
during the quarter in which the contribution is made.
F-37
<PAGE> 268
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY INDEPENDENCE COMMUNITY BANK CORP., INDEPENDENCE SAVINGS BANK OR
SANDLER O'NEILL & PARTNERS, L.P. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF INDEPENDENCE
COMMUNITY BANK CORP. OR INDEPENDENCE SAVINGS BANK SINCE ANY OF THE DATES AS OF
WHICH INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Overview . . . . . . . . . . . . . 1
Summary . . . . . . . . . . . . . . . . . . 6
Selected Consolidated Financial
and other Data . . . . . . . . . . . . . 17
Risk Factors . . . . . . . . . . . . . . . 20
Independence Community Bank Corp. . . . . . 34
Independence Savings Bank . . . . . . . . . 35
Use of Proceeds . . . . . . . . . . . . . . 36
Dividend Policy . . . . . . . . . . . . . . 37
Market for the Common Stock . . . . . . . . 38
Regulatory Capital Requirements . . . . . . 39
Capitalization . . . . . . . . . . . . . . 42
Pro Forma Data . . . . . . . . . . . . . . 44
Comparison of Valuation and Pro Forma
Information with No Foundation . . . . . 52
Consolidated Statements of Income . . . . . 53
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . 54
Business of the Bank . . . . . . . . . . . 79
Regulation . . . . . . . . . . . . . . . . 118
Taxation . . . . . . . . . . . . . . . . . 130
Management . . . . . . . . . . . . . . . . 133
The Conversion . . . . . . . . . . . . . . 148
Restrictions on Acquisition of the
Company and the Bank . . . . . . . . . . 172
Description of Capital Stock
of the Company . . . . . . . . . . . . . 182
Description of Capital Stock
of the Bank . . . . . . . . . . . . . . . 184
Transfer Agent and Registrar . . . . . . . 185
Experts . . . . . . . . . . . . . . . . . . 185
Legal and Tax Opinions . . . . . . . . . . 185
Additional Information . . . . . . . . . . 186
Index to Consolidated Financial Statements F-1
</TABLE>
UNTIL ________ __, 1997, OR 25 DAYS AFTER COMMENCEMENT OF THE SYNDICATED
COMMUNITY OFFERING, IF ANY, WHICHEVER IS LATER, 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.
- --------------------------------------------------------------------------------
58,564,815 Shares
INDEPENDENCE COMMUNITY
BANK CORP.
(Proposed Holding Company for
Independence Savings Bank)
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
---------------------
PROSPECTUS
---------------------
-----------------------
________ __, 1997
SANDLER O'NEILL
& PARTNERS, L.P.
<PAGE> 269
[TO BE USED IN CONNECTION WITH THE SYNDICATED COMMUNITY OFFERING ONLY]
SYNDICATED PROSPECTUS SUPPLEMENT
INDEPENDENCE COMMUNITY BANK CORP.
(Proposed Holding Company for Independence Savings Bank)
Up to __________ Shares of Common Stock
Independence Community Bank Corp. (the "Company"), a Delaware
corporation, is offering for sale in a syndicated community offering (the
"Syndicated Community Offering") ____________ shares of its common stock, par
value $.01 per share (the "Common Stock"), in connection with the
reorganization of Independence Savings Bank (the "Bank") and the mutual holding
company parent of the Bank (the "Mutual Holding Company") to the stock form of
organization pursuant to the Bank's and the Mutual Holding Company's Plan of
Conversion (the "Plan" or "Plan of Conversion"). The remaining ________ shares
of the Common Stock have been subscribed for in subscription and community
offerings (the "Subscription and Community Offerings") by the Bank's holders of
deposit accounts with the Bank with a balance of $100 or more as of March 31,
1996, by the Company's Employee Stock Ownership Plan, (the "ESOP"), by holders
of deposit accounts with a balance of $100 or more as of _____________, 1997,
and by certain members of the general public. See "The Conversion - General."
Contained herein and incorporated by reference hereto is the Prospectus in the
form used in the Subscription and Community Offerings. The purchase price for
all shares purchased in the Syndicated Community Offering will be the same as
the price paid by subscribers in the Subscription and Community Offerings (the
"Purchase Price"). The Purchase Price of $10.00 per share is the amount to be
paid for each share at the time a purchase order is submitted. See the cover
page of the Prospectus and the table below for information as to the method by
which the range within which the number of shares offered may vary and the
method of subscribing for shares of the Common Stock.
Funds submitted to the Bank with purchase orders will earn interest at
the Bank's passbook rate of interest from the date of receipt until completion
or termination of the Conversion. The Syndicated community Offering will expire
no later than _____, 1997, unless extended by the Bank and the Company with the
approval of the New York State Department of Banking and the Federal Deposit
Insurance Corporation, if necessary. Such extensions may not go beyond
_________ 1999. If an extension of time has been granted, all purchasers will
be notified of such extension, and of their rights to confirm their purchase
orders, or to modify or rescind their purchase orders and have their funds
returned promptly with interest, and of the time period within which the
purchaser must notify the Bank of his intention to confirm, modify or rescind
his subscription. If an affirmative response to any resolicitation is not
received by the Bank and the Company from purchasers, such orders will be
rescinded and all funds will be returned promptly with interest. The minimum
number of shares which may be purchased is 25 shares. Except for the ESOP,
which may
<PAGE> 270
purchase up to 8% of the total number of shares of Common Stock issued in the
Conversion, no person, together with associates of and persons acting in
concert with such person, may purchase in the Community Offering and the
Syndicated Community Offering more than $500,000 of the aggregate value of
Common Stock offered in the Conversion. See "Plan of Conversion -Limitations on
Common Stock Purchases." The Company reserves the right, in its absolute
discretion, to accept or reject, in whole or in part, any or all subscriptions
in the Syndicated Community Offering.
The Company and the Bank have engaged Sandler O'Neill & Partners, L.P.
("Sandler O'Neill") to assist them in the sale of the Common Stock in the
Syndicated Community Offering. It is anticipated that Sandler O'Neill will use
the services of other registered broker-dealers ("Selected Dealers") and that
fees to Sandler O'Neill and such Selected Dealers will be an amount not to
exceed 7.0% of the aggregate Purchase Price of the shares sold in the
Syndicated Community Offering. Neither Sandler O'Neill nor any Selected Dealer
shall have any obligation to take or purchase any shares of Common Stock in the
Syndicated Community Offering.
The Company has received conditional approval from the National
Association of Securities Dealers ("NASD") to have its Common Stock quoted on
the Nasdaq National Market under the symbol "ICBC". Prior to this Offering,
there has not been a public market for the Common Stock, and there can be no
assurance that an active and liquid trading market for the Common Stock will
develop. To the extent an active and liquid market does not develop, the
liquidity and market value of the Common Stock may be adversely affected.
For a discussion of certain factors that should be considered by each
prospective investor, see "Risk Factors" at page 19 in the Prospectus.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, THE SUPERINTENDENT OF
BANKS OF THE STATE OF NEW YORK, THE NEW YORK STATE BANKING
BOARD, THE NEW YORK STATE BANKING DEPARTMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER FEDERAL OR STATE
AGENCY OR STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, SUPERINTENDENT, BOARD, DEPARTMENT, CORPORATION OR
ANY STATE SECURITIES COMMISSIONER OR OTHER AGENCY PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY ARE NOT GUARANTEED BY THE COMPANY
OR THE BANK. THE COMMON STOCK IS SUBJECT TO RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
INVESTED.
<PAGE> 271
<TABLE>
<CAPTION>
====================================================================================================================
Estimated Net
Proceeds of
Estimated Subscription,
Estimated Net Community and
Underwriting Proceeds of Syndicated
Syndicated Fees and Syndicated Community
Community Offering Conversion Common Offerings
Price Expenses(1) Stock (2)(3)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Minimum Per Share $10.00 $ $ $
- --------------------------------------------------------------------------------------------------------------------
Midpoint Per Share $10.00 $ $ $
- --------------------------------------------------------------------------------------------------------------------
Maximum Per Share $10.00 $ $ $
- --------------------------------------------------------------------------------------------------------------------
Maximum Per Share, as adjusted $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Total Minimum $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Total Midpoint $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Total Maximum $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Total Maximum, as adjusted(4) $ $ $ $
====================================================================================================================
</TABLE>
- ------------
(1) Consists of the pro rata allocation of the estimated costs to the Bank
and the Company to be incurred in connection with the Conversion
(including estimated and marketing fees to be paid to Sandler O'Neill
in connection with the Offerings) and estimated fees of Sandler
O'Neill and Selected Dealers in connection with the sale of the
remaining shares of Common Stock in the Syndicated Community Offering
which fees are estimated to be between $_____ and $_____ based on the
minimum and the maximum of the Estimated Price Range, respectively.
See "The Conversion - Marketing Arrangements." The actual fees and
expenses may vary from the estimates. Such fees paid to Sandler
O'Neill may be deemed to be underwriting fees. See "Pro Forma Data" in
the Prospectus.
(2) Actual net proceeds may vary substantially from estimated amounts
depending on the number of shares sold in the Offerings and other
factors. Gives effect to the purchase of shares of Common Stock by the
Employee Stock Ownership Plan (the "ESOP"), which initially will be
deducted from the Company's stockholders' equity. For the effects of
such purchases, see "Capitalization," "Use of Proceeds" and "Pro Forma
Data."
(3) The net proceeds of the Subscription and Community Offerings (based
upon the sale of the _________ shares subscribed for at a price of
$10.00 per share and after allocation of a pro rata portion of the
estimated expenses relating to the Conversion) are estimated to be
$____________.
(4) As adjusted to reflect the sale of up to an additional 15% of the
Common Stock which may be offered at the Purchase Price, without
resolicitation of subscribers or any right of cancellation, due to
regulatory considerations or changes in market or general financial
and economic conditions. See "Pro Forma Data" and "The
Conversion--Stock Pricing and Number of Shares to be Issued" for a
discussion of the distribution and allocation of the additional
shares, if any, see "The Conversion--The Offerings--Subscription
Offering," "-The Offerings-Community Offering" and " -Limitations on
Common Stock Purchases."
SANDLER O'NEILL & PARTNERS, L.P.
The date of this Prospectus Supplement is __________, 1997.
<PAGE> 272
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
ITEM 13.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1).
<S> <C>
SEC filing fees............................................................................... $ 220,417
NYBD filing fees.............................................................................. 5,000
OTS filing fees............................................................................... 2,000
NASD filing fees.............................................................................. 30,500
Nasdaq National Market listing fee............................................................ 50,000
Printing, postage and mailing ................................................................ 1,550,000
Legal fees.................................................................................... 1,100,000
Blue Sky and expenses......................................................................... 15,000
Marketing agent's fees and expenses........................................................... 9,990,000
Accounting fees............................................................................... 600,000
Appraiser's fees.............................................................................. 100,000
Proxy solicitation fees and expenses.......................................................... 50,000
Conversion agent fees and expenses............................................................ 200,000
Transfer agent fees and expenses.............................................................. 50,000
Conversion center telephone, temporary support staff and equipment............................ 1,000,000
Miscellaneous................................................................................. 24,583
-----------
TOTAL.........................................................................................$14,987,500
===========
</TABLE>
(1) Actual expense based upon the registration of 72,737,500 shares at
$10.00 per share. All other expenses are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their capacity
as such. The Certificate of Incorporation and the Bylaws of the Company provide
that the directors, officers, employees and agents of the Company shall be
indemnified to the full extent permitted by law. Such indemnity shall extend to
expenses, including attorney's fees, judgments, fines and amounts paid in the
settlement, prosecution or defense of the foregoing actions.
Article 10 of the Registrant's Certificate of Incorporation provides
as follows:
ARTICLE 10. INDEMNIFICATION. The Corporation shall indemnify its
directors, officers, employees, agents and former directors, officers,
employees and agents, and any other persons serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
association, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees, judgments, fines and amounts paid in
settlement)
II-1
<PAGE> 273
incurred in connection with any pending or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, with
respect to which such director, officer, employee, agent or other person
is a party, or is threatened to be made a party, to the full extent permitted
by the General Corporation Law of the State of Delaware, provided, however,
that the Corporation shall not be liable for any amounts which may be due to
any person in connection with a settlement of any action, suit or proceeding
effected without its prior written consent or any action, suit or proceeding
initiated by any person seeking indemnification hereunder without its prior
written consent. The indemnification provided herein (i) shall not be deemed
exclusive of any other right to which any person seeking indemnification may be
entitled under any bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and
as to action in any other capacity, and (ii) shall inure to the benefit of the
heirs, executors and administrators of any such person. The Corporation shall
have the power, but shall not be obligated, to purchase and maintain insurance
on behalf of any person or persons enumerated above against any liability
asserted against or incurred by them or any of them arising out of their status
as corporate directors, officers, employees, or agents whether or not the
Corporation would have the power to indemnify them against such liability under
the provisions of this Article 10.
Article VI of the Company's Bylaws provides as follows:
6.1 Indemnification. The Corporation shall provide indemnification to
its directors, officers, employees, agents and former directors, officers,
employees and agents and to others in accordance with the Corporation's
Certificate of Incorporation.
6.2 Advancement of Expenses. Reasonable expenses (including attorneys'
fees) incurred by a director, officer or employee of the Corporation in
defending any civil, criminal, administrative or investigative action, suit or
proceeding described in Section 6.1 may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as authorized by
the Board of Directors only upon receipt of an undertaking by or on behalf of
such person to repay such amount if it shall ultimately be determined that the
person is not entitled to be indemnified by the Corporation.
6.3 Other Rights and Remedies. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Corporation's Certificate of
Incorporation, any agreement, vote of stockholders or disinterested directors
or otherwise, both as to actions in their official capacity and as to actions
in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such person.
6.4 Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director,
II-2
<PAGE> 274
officer of employee of the Corporation, or is or was serving at the
request of the corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other 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 its
Certificate of Incorporation or this Article VI.
6.5 Modification. The duties of the Corporation to indemnify and to
advance expenses to a director, officer or employee provided in this Article VI
shall be in the nature of a contract between the Corporation and each such
person, and no amendment or repeal of any provision of this Article VI shall
alter, to the detriment of such person, the right of such person to the advance
of expenses or indemnification related to a claim based on an act or failure to
act which took place prior to such amendment or repeal.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) LIST OF EXHIBITS (filed herewith unless otherwise noted)
<TABLE>
<S> <C>
1.1* Engagement Letter with Sandler O'Neill & Partners, L.P.
1.2 Form of Agency Agreement with Sandler O'Neill & Partners, L.P.
2.0* Plan of Conversion
3.1* Certificate of Incorporation of Independence Community Bank Corp.
3.2* Bylaws of Independence Community Bank Corp.
4.0* Form of Stock Certificate of Independence Community Bank Corp.
5.0 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re: legality
8.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re: Federal tax
matters
8.2 Opinion of Ernst and Young LLP re: New York tax matters
8.3* Letter of RP Financial, LC. re: Subscription Rights
10.1* Form of Change of Control Agreement to be entered into among
Independence Community Bank Corp., Independence Savings Bank and
certain executive offices.
10.2 Form of ESOP Loan Commitment Letter
10.3 Form of Change of Control Agreement to be entered into between
Independence Savings Bank and certain officers of the Bank.
23.1* Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in
Exhibits 5.0 and 8.1, respectively)
</TABLE>
II-3
<PAGE> 275
<TABLE>
<S> <C>
23.2 Consent of Ernst & Young LLP.
23.3* Consent of RP Financial, LC.
23.4 Consent of Potter Anderson & Corroon
23.5 Consent of William M. Mercer, Incorporated.
24.0* Power of Attorney (included in Signature Page of this Registration
Statement)
99.1* Appraisal Report of RP Financial, LC.
99.2* Subscription Order Form and Instructions
99.3 Additional Solicitation Material
99.4 Form of the Independence Community Bank Foundation Gift Instrument
99.5 Updated Appraisal Report of RP Financial, LC.
</TABLE>
- ------------
* Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted as not applicable or not required
under the rules of Regulation S-X.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high and 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 20
percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
II-4
<PAGE> 276
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the Offering.
The undersigned Registrant hereby undertakes to furnish stock
certificates to or in accordance with the instructions of the respective
purchasers of the Common Stock, so as to make delivery to each purchaser
promptly following the closing under the Plan of Conversion.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 277
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Form S-1 Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the State of New
York on August 25, 1997.
INDEPENDENCE COMMUNITY BANK CORP.
By: /s/ Charles J. Hamm
------------------------------------------------
Charles J. Hamm
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby makes, constitutes and appoints Charles J. Hamm his true and
lawful attorney, with full power to sign for each person and in such person's
name and capacity indicated below, and with full power of substitution, any and
all amendments to this Registration Statement, hereby ratifying and confirming
such person's signature as it may be signed by said attorney to any and all
amendments.
<TABLE>
<CAPTION>
Name Title Date
- ----------------------------------- ---------------------------------- ---------------------------
<S> <C> <C>
/s/ Charles J. Hamm Chairman, President and August 25, 1997
- ----------------------------------- Chief Executive Officer
Charles J. Hamm (principal executive
officer)
/s/ Joseph S. Morgano Director, Executive Vice August 25, 1997
- ----------------------------------- President and Mortgage
Joseph S. Morgano Officer
/s/ John B. Zurell Executive Vice President- August 25, 1997
- ----------------------------------- Accounting and Financial Systems
John B. Zurell (principal financial and accounting
officer)
/s/ Willard N. Archie * Director August 25, 1997
- -----------------------------------
Willard N. Archie
</TABLE>
II-6
<PAGE> 278
<TABLE>
<CAPTION>
Name Title Date
- ----------------------------------- ---------------------------------- ---------------------------
<S> <C> <C>
Robert D. Catell *
- ----------------------------------- Director August 25, 1997
Robert D. Catell
/s/ Rohit M. Desai * Director August 25, 1997
- -----------------------------------
Rohit M. Desai
/s/ Chaim Y. Edelstein * Director August 25, 1997
- -----------------------------------
Chaim Y. Edelstein
/s/ Robert W. Gelfman * Director August 25, 1997
- -----------------------------------
Robert W. Gelfman
/s/ Scott M. Hand * Director August 25, 1997
- -----------------------------------
Scott M. Hand
/s/ Donald E. Kolowsky * Director August 25, 1997
- -----------------------------------
Donald E. Kolowsky
/s/ Janine Luke * Director August 25, 1997
- -----------------------------------
Janine Luke
/s/ Wesley D. Ratcliff * Director August 25, 1997
- -----------------------------------
Wesley D. Ratcliff
/s/ Donald H. Elliott * Director August 25, 1997
- -----------------------------------
Donald H. Elliott
/s/ Malcolm MacKay * Director August 25, 1997
- -----------------------------------
Malcolm MacKay
</TABLE>
* Signed by Charles J. Hamm pursuant to power of attorney granted thereto as
of July 3, 1997.
II-7
<PAGE> 1
EXHIBIT 1.2
50,578,704 Shares
(subject to increase up to 58,165,509 shares
in the event of an oversubscription)
INDEPENDENCE COMMUNITY BANK CORP.
(a Delaware corporation)
Common Stock
(par value $.01 per share)
AGENCY AGREEMENT
, 1997
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SANDLER O'NEILL & PARTNERS, L.P.
Two World Trade Center, 104th Floor
New York, New York 10048
Ladies and Gentlemen:
Independence Community Bank Corp., a Delaware corporation (the
"Company"), Independence Community Bank Corp., a mutual holding company
organized under the laws of the State of New York (the "MHC") and Independence
Savings Bank, a New York-chartered stock savings bank (the "Bank"), hereby
confirm their agreement with Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill" or the "Agent") with respect to the offer and sale by the Company of
50,578,704 shares (subject to increase up to 58,165,509 shares in the event of
an oversubscription) of the Company's Common Stock, par value $.01 per share
(the "Common Stock"). The shares of Common Stock to be sold by the Company are
hereinafter called the "Securities." In addition, as described herein, the
Company expects to contribute shares of Common Stock in an amount equal to 8%
of the shares of Common Stock sold in the Offerings (as hereinafter defined) to
the Independence Community Foundation (the "Foundation"), such shares
hereinafter being referred to as the "Foundation Shares".
The Securities are being offered for sale and the Foundation shares
are being contributed in accordance with the plan of conversion (the "Plan")
adopted by the Board of Directors of the Bank
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and the Board of Trustees of the MHC pursuant to which: (i) the MHC will
convert into a stock institution and will simultaneously combine with and into
the Bank, and the shares of common stock of the Bank currently outstanding will
be extinguished; (ii) the Company will sell the Securities in the Offerings (as
hereinafter defined); (iii) The Company will use a portion of the net proceeds
of the sale of the Securities to purchase all of the Capital Stock of the Bank;
and (iv) common stock of the Company held by the Bank will be canceled.
Pursuant to the Plan, the Company is offering to certain of the Bank's
depositors, and to the Bank's tax qualified employee benefit plans, including
the Employee Stock Ownership Plan (the "ESOP") rights to subscribe for the
Securities in a subscription offering (the "Subscription Offering"). To the
extent Securities are not subscribed for in the Subscription Offering, such
Securities may be offered to certain members of the general public, with first
preference given to natural persons residing in the counties in New York in
which the Bank has a branch office (the "Community Offering"). It is currently
anticipated by the Bank, the MHC and the Company that any Securities not
subscribed for in the Subscription Offering and Community Offering will be
offered, subject to Section 2 hereof, in a syndicated community offering (the
"Syndicated Community Offering"). The Subscription Offering, Community
Offering and the Syndicated Community Offering are hereinafter referred to
collectively as the "Offerings." The conversion of the MHC, the consolidation
of the MHC with and into the Bank, the acquisition of all of the Bank's capital
stock by the Company and the Offerings are hereinafter referred to collectively
as the "Conversion". It is acknowledged that the number of Securities to be
sold in the Offerings may be increased or decreased as described in the
Prospectus (as hereinafter defined). If the number of Securities is increased
or decreased in accordance with the Plan, the term "Securities" shall mean such
greater or lesser number, where applicable.
In connection with the Conversion and pursuant to the terms of the
Plan as described in the Prospectus, the Company has established the
Foundation. Immediately following the consummation of the Conversion, subject
to the approval of the establishment of the Foundation by the depositors of
Bank and compliance with certain conditions as may be imposed by regulatory
authorities, the Company will contribute newly issued shares of Common Stock in
a amount equal to 8% of the Securities sold in the Offering, or between
2,990,740 and 4,046,243 shares of Common Stock (subject to increase in certain
circumstances to 4,653,240 shares).
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on form S-1 (No. 333-_______) including
a prospectus for the registration of the Securities and the Foundation Shares
under the Securities Act of 1933, as amended, (the "1933 Act"), has filed such
amendments thereto, if any, and such amended prospectus as may have been
required to the date hereof by the Commission in order to declare such
registration statement effective, and will file such additional amendments
thereto and such amended prospectus and prospectus supplements as may hereafter
be required. Such registration statement (as amended to date, if applicable,
and as from time to time amended or supplemented hereafter) and the prospectus
constituting a part thereof (including in each case all documents incorporated
or deemed to be incorporated by reference therein, if any, and the information,
if any, deemed to be part thereof
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pursuant to the rules and regulations of the Commission under the 1933 Act, as
from time to time amended or supplemental pursuant to the 1933 Act or otherwise
(the "1933 Act Regulations")) are hereinafter referred to as the "Registration
Statement" and the "Prospectus", respectively, except that if any revised
prospectus that shall be used by the Company in connection with the
Subscription Offering, Community Offering or the Syndicated Community Offering
which differs from the Prospectus on file with the Commission at the time the
Registration Statement becomes effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of
the 1933 Act Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is provided to the Agent for such use.
Concurrently with the execution of this Agreement, the Company is
delivering to the Agent copies of the Prospectus of the Company to be used in
the Subscription Offering and the Community Offering. Such prospectus contains
information with respect to the Bank, the MHC, the Company and the Common
Stock.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company, the MHC and the Bank jointly and severally
represent and warrant to the Agent as of the date hereof as follows:
(i) The Registration Statement has been declared
effective by the Commission, no stop order has been issued with
respect thereto and no proceedings therefor have been initiated or, to
the knowledge of the Company, the MHC and the Bank, threatened by the
Commission. At the time the Registration Statement became effective
and at the Closing Time referred to in Section 2 hereof, the
Registration Statement complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
The Prospectus, at the date hereof does not and at the Closing Time
referred to in Section 2 hereof will not, include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that
the representations and warranties in this subsection shall not apply
to statements in or omissions from the Prospectus made in reliance
upon and in conformity with information with respect to the Agent
furnished to the Company in writing by the Agent expressly for use in
the Prospectus (the "Agent Information," which the Company, the MHC
and the Bank acknowledge appears only in the sections captioned
"Market for Common Stock" and the first two paragraphs of the section
captioned "The Conversion - Marketing Arrangements" of the
Prospectus).
(ii) The Company has filed with the Department of the
Treasury, Office of Thrift Supervision (the "OTS") the Company's
application for approval of its acquisition of the Bank (the "Holding
Company Application") on Form H-(e)1-S promulgated under the
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savings and loan holding company provisions of the Home Owners' Loan
Act, as amended, ("HOLA") and the regulations promulgated thereunder.
The Company has received written notice from the OTS of its approval
of the acquisition of the Bank, such approval remains in full force
and effect and no order has been issued by the OTS suspending or
revoking such approval and no proceedings therefor have been initiated
or, to the knowledge of the Company, the MHC or the Bank, threatened
by the OTS. At the date of such approval, the Holding Company
Application complied in all material respects with the applicable
provisions of HOLA and the regulations promulgated thereunder.
(iii) Pursuant to the General Regulations of the Banking
Board of the State of New York and the rules and regulations of the
Federal Deposit Insurance Corporation ("FDIC") governing the
conversion of New York State chartered mutual savings banks and mutual
holding companies to stock form (the "Conversion Regulations") , the
Bank has filed with the Superintendent of Banks of the State of New
York (the "Superintendent") an application for conversion on Form
86-AC, and filed with the FDIC a Notice of Conversion, including the
Form 86-AC, and has filed such amendments thereto and supplementary
materials as may be required to the date hereof (such application, as
amended to date, if applicable, and as from time to time amended or
supplemented hereafter, is hereinafter referred to as the "Conversion
Application"), including copies of the Bank's Proxy Statement, to be
dated__________, 1997, relating to the Conversion (the "Proxy
Statement"), and the Prospectus. The Superintendent has, by letter
dated _________, 1997, approved the Conversion Application, such
approval remains in full force and effect and no order has been issued
by the Superintendent suspending or revoking such approval and no
proceedings therefor have been initiated or, to the knowledge of the
Company, the MHC or the Bank, threatened by the Superintendent. At
the date of such approval and at the Closing Time referred to in
Section 2, the Conversion Application complied and will comply in all
material respects with the applicable provisions of the Conversion
Regulations. The FDIC has, by letter dated _________, 1997, approved
the Conversion Application, such approval remains in full force and
effect and no order has been issued by the FDIC suspending or revoking
such approval and no proceedings therefor have been initiated or, to
the knowledge of the Company, the MHC or the Bank, threatened by the
FDIC.
(iv) At the time of their use, the Proxy Statement and
any other proxy solicitation materials will comply in all material
respects with the applicable provisions of the Conversion Regulations
and will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The Company and the Bank will promptly file the
Prospectus and any supplemental sales literature with the Commission,
the Superintendent and the FDIC. The Prospectus and all supplemental
sales literature, as of the date the Registration Statement became
effective and at the Closing Time referred to in Section 2, complied
and will comply in all material respects with the applicable
requirements of the Conversion Regulations and, at or prior to the
time of their first use, will
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have received all required authorizations of the Superintendent and the
FDIC for use in final form.
(v) Neither the Commission, nor the Superintendent, nor
the FDIC has, by order or otherwise, prevented or suspended the use of
the Prospectus or any supplemental sales literature authorized by the
Company or the Bank for use in connection with the Offerings.
(vi) At the Closing Time referred to in Section 2, the
Company and the Bank will have completed the conditions precedent to
the Conversion and the establishment of the Foundation in accordance
with the Plan, the applicable Conversion Regulations and all other
applicable laws, regulations, decisions and orders, including all
material terms, conditions, requirements and provisions precedent to
the Conversion imposed upon the Company or the Bank by the OTS, the
Superintendent, the FDIC, or any other regulatory authority, other
than those which the regulatory authority permits to be completed
after the Conversion.
(vii) RP Financial, Inc., which prepared the valuation of
the Company and the Bank as part of the Conversion, has advised the
Company, the MHC and the Bank in writing that it satisfies all
requirements for an appraiser set forth in the Conversion Regulations
and any interpretations or guidelines issued by the Superintendent and
the FDIC with respect thereto. ___________ , which prepared the
opinion filed as Exhibit ___ of the Conversion Application as required
by the Conversion Regulations, satisfies all requirements for an
"independent executive compensation expert" within the meaning of the
Conversion Regulations.
(viii) The accountants who certified the consolidated
financial statements and supporting schedules of the Bank included in
the Registration Statement have advised the Company, the MHC and the
Bank in writing that they are independent public accountants within
the meaning of the Code of Ethics of the American Institute of
Certified Public Accountants, and that such accountants are, with
respect to the Company, the MHC and the Bank, independent certified
public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(ix) The only direct subsidiary of the MHC is the Bank.
The only subsidiaries (the "Subsidiaries") of the Bank are
Independence Community Realty Corporation and Wiljo Development Corp.
(x) The consolidated financial statements and the
related notes thereto included in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
MHC, the Bank and the Subsidiaries at the dates indicated and the
results of operations, retained earnings and cash flows for the
periods specified, and comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act Regulations and
the Conversion Regulations; except as otherwise stated in the
Registration Statement, said financial statements have been prepared
in conformity with generally
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accepted accounting principles applied on a consistent basis; and the
supporting schedules and tables included in the Registration Statement
present fairly the information required to be stated therein.
(xi) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
otherwise stated therein (A) there has been no material adverse change
in the financial condition, results of operations or business affairs
of the Company, the MHC, the Bank and the Subsidiaries taken as a
whole, whether or not arising in the ordinary course of business, and
(B) except for transactions specifically referred to or contemplated
in the Prospectus, there have been no transactions entered into by the
Company, the MHC, the Bank or the Subsidiaries other than those in the
ordinary course of business, which are material with respect to the
Company, the MHC, the Bank and the Subsidiaries taken as a whole.
(xii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware with corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus and to enter into and perform its obligations under
this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in the State
of New York and in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify would
not have a material adverse effect on the financial condition, results
of operations or business affairs of the Company, the Bank, and the
Subsidiaries, taken as a whole.
The MHC has been duly chartered and is validly existing as a
mutual holding company under the laws of the State of New York with
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under this Agreement; the MHC
is qualified to do business in any jurisdiction in which the failure
to so qualify would have a material adverse effect on the financial
condition, results of operations or business of the Company, the MHC,
the Bank and the Subsidiaries, taken as a whole; upon consummation of
the Conversion, the MHC will merge with and into the Bank, with the
Bank being the surviving institution.
(xiii) Upon consummation of the Conversion and the
contribution of the Foundation Shares as described in the Prospectus,
the authorized, issued and outstanding capital stock of the Company
will be as set forth in the Prospectus under "Capitalization" (except
for subsequent issuances, if any, pursuant to reservations, agreements
or employee benefit plans referred to in the Prospectus); no shares
of Common Stock have been or will be issued and outstanding prior to
the Closing Time referred to in Section 2; at the time of Conversion,
the Securities will have been duly authorized for issuance and, when
issued and delivered by the Company pursuant to the Plan against
payment of the consideration
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calculated as set forth in the Plan, will be duly and validly issued
and fully paid and non-assessable; the terms and provisions of the
Common Stock and the capital stock of the Company conform to all
statements relating thereto contained in the Prospectus; the
certificates representing the shares of Common Stock conform to the
requirements of applicable law and regulations; and the issuance of
the Securities is not subject to preemptive or other similar rights.
(xiv) The Bank, as of the date hereof, is a New York
State chartered savings bank in mutual form and upon consummation of
the Conversion will be a New York State chartered savings bank in
stock form, in both instances with full corporate power and authority
to own, lease and operate its properties and to conduct its business
as described in the Prospectus; the Company, the MHC, the Bank and the
Subsidiaries have obtained all licenses, permits and other
governmental authorizations currently required for the conduct of
their respective businesses or required for the conduct of their
respective businesses as contemplated by the Holding Company
Application and the Conversion Application, except where the failure
to obtain such licenses, permits or other governmental authorizations
would not have a material adverse effect on the financial condition,
results of operations or business affairs of the Company, the MHC, the
Bank and the Subsidiaries taken as a whole; all such licenses, permits
and other governmental authorizations are in full force and effect and
the Company, the MHC, the Bank and the Subsidiaries are in all
material respects in compliance therewith; neither the Company, the
MHC, the Bank nor any of the Subsidiaries has received notice of any
proceeding or action relating to the revocation or modification of any
such license, permit or other governmental authorization which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, might have a material adverse effect on the financial
condition, results of operations or business affairs of the Company,
the MHC, the Bank and the Subsidiaries, taken as a whole, and the Bank
is in good standing under the laws of the United States and is
qualified as a foreign corporation in any jurisdiction in which the
failure to so qualify would not have a material adverse effect on the
financial condition, results of operations or business affairs of the
Company, the MHC, the Bank and the Subsidiaries, taken as a whole.
(xv) The deposit accounts of the Bank are insured by the
FDIC up to the applicable limits and upon consummation of the
Conversion, the liquidation account for the benefit of eligible
account holders will be duly established in accordance with the
requirements of the Conversion Regulations. The Bank is a "qualified
thrift lender" within the meaning of 12 U.S.C. Section 1467a(m).
(xvi) Upon consummation of the Conversion, the authorized
capital stock of the Bank will be ____________ shares of commons
stock, par value $0.01 per share (the "Bank Common Stock") and
__________ shares of serial preferred stock, par value $0.01 per share
(the "Bank Preferred stock"), and the issued and outstanding capital
stock of the Bank will be 1,000 shares of Bank Common stock; ___
shares of Bank Common Stock and no shares of Bank Preferred Stock are
issued and outstanding as of the date hereof. No additional
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shares of Bank Common Stock and no shares of Bank Preferred Stock will
be issued prior to the Closing Time referred to in Section 2; the
issued and outstanding shares of Bank Common stock have been duly
authorized and validly issued, are fully paid and nonassessable, and
have been issued in compliance with all federal and state securities
laws and are owned by the MHC beneficially and of record free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity. The shares of Bank Common Stock to be issued to the
Company will have been duly authorized for issuance and, when issued
and delivered by the Bank pursuant to the Plan against payment of the
consideration calculated as set forth in the Plan and as described in
the Prospectus, will be duly and validly issued and fully paid and
nonassessable, and all such Bank Common Stock will be owned
beneficially and of record by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance or legal or
equitable claim; the terms and provisions of the Bank Common Stock and
the Bank Preferred Stock conform to all statements relating thereto
contained in the Prospectus, and the certificates representing the
shares of the Bank Common Stock will conform with the requirements of
applicable laws and regulations; and the issuance of the Bank Common
stock is not subject to preemptive or similar rights.
(xvii) The Foundation has been duly incorporated and is
validly existing as a non-stock corporation in good standing under the
laws of the State of Delaware with corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus; the Foundation will not be a savings and
loan holding company within the meaning of 12 C.F.R. Section 574.2(q)
as a result of the issuance of shares of Common Stock to it in
accordance with the terms of the Plan and in the amounts as described
in the Prospectus; no approvals are required to establish the
Foundation and to contribute the shares of Common Stock thereto as
described in the Prospectus other than those imposed by the
Superintendent and the FDIC; except as specifically disclosed in the
Prospectus and the Proxy Statement, there are no agreements and/or
understandings, written or oral, between the Company and/or the Bank
and the Foundation with respect to the control, directly or
indirectly, over the voting and the acquisition or disposition of the
Foundation Shares; at the time of the Conversion, the Foundation
Shares will have been duly authorized for issuance and, when issued
and contributed by the Company pursuant to the Plan, will be duly and
validly issued and fully paid and non-assessable; and the issuance of
the Foundation Shares is not subject to preemptive or similar rights.
(xviii) Each Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has full corporate power and
authority to own, lease and operate its properties and to conduct its
business as descried in the Registration Statement and Prospectus, is
duly qualified to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not have a
material adverse effect on the financial condition, results of
operations or business of the Company, the MHC, the Bank and the
Subsidiaries, taken as a whole; the activities of the Subsidiaries are
permitted to
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subsidiaries of a New York State chartered savings bank by the rules,
regulations, resolutions and practices of the Superintendent and the
FDIC; all of the issued and outstanding capital stock of the
Subsidiaries has ben duly authorized and validly issued, is fully paid
and nonassessable and is owned by the Bank directly, free and clear of
any security interest, mortgage, pledge, lien, encumbrance or legal or
equitable claim.
(xix) This Agreement has been duly executed and delivered
by, and is the valid and binding agreement of, the Company, the MHC
and the Bank, enforceable in accordance with its terms, except as may
be limited by bankruptcy, insolvency or other laws affecting the
enforceability of the rights of creditors generally and judicial
limitations on the right of specific performance and except as the
enforceability of indemnification and contribution provisions may be
limited by applicable securities laws.
(xx) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
and prior to the Closing Time, except as otherwise may be indicated or
contemplated therein, neither the Company, the MHC, the Bank nor the
Subsidiaries will have (A) issued any securities or incurred any
liability or obligation, direct or contingent, or borrowed money,
except borrowings in the ordinary course of business from the same or
similar sources and in similar amounts as indicated in the Prospectus,
or (B) entered into any transaction or series of transactions which is
material in light of the business of the Company and the Bank, taken
as a whole, excluding the origination, purchase and sale of loans or
the purchase or sale of investment securities or mortgage-backed
securities in the ordinary course of business.
(xxi) No approval of any regulatory or supervisory or
other public authority is required in connection with the execution
and delivery of this Agreement or the issuance of the Securities and
the Foundation Shares that has not been obtained and a copy of which
has been delivered to the Agent, except as may be required under the
securities laws of various jurisdictions.
(xxii) Neither the Company, the MHC, the Bank nor any of
the Subsidiaries is in violation of its certificate of incorporation,
organization certificate, articles of incorporation or charter as the
case may be, or bylaws; and neither the Company, the MHC, the Bank nor
any of the Subsidiaries is in default (nor has any event occurred
which, with notice or lapse of time or both, would constitute a
default) in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the
Company, the MHC, the Bank, or any of the Subsidiaries is a party or
by which it or any of them may be bound, or to which any of the
property or assets of the Company, the MHC, the Bank or any of the
Subsidiaries is subject, except for such defaults that would not,
individually or in the aggregate, have a material adverse effect on
the financial condition, results of operations or business of the
Company, the MHC, the Bank and the Subsidiaries, taken as a whole; and
there are no contracts or documents of the Company, the MHC, the Bank
or any of the Subsidiaries
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which are required to be filed as exhibits to the Registration
Statement or the Conversion Application which have not been so filed.
(xxiii) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein
have been duly authorized by all necessary corporate action and do not
and will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company, the MHC, the
Bank or any of the Subsidiaries pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the
Company, the MHC, the Bank or any of the Subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property
or assets of the Company, the MHC, the Bank or any of the Subsidiaries
is subject, except for such defaults that would not, individually or
in the aggregate, have a material adverse effect on the financial
condition, results of operations or business of the Company, the MHC,
the Bank and the Subsidiaries taken as a whole; nor will such action
result in any violation of the provisions of the certificate of
incorporation, organization certificate, articles of incorporation or
charter, as the case may be, or the by-laws of the Company, the MHC,
the Bank or any of the subsidiaries, or any applicable law,
administrative regulation or administrative or court decree to which
the Company, the MHC, the Bank or any of the Subsidiaries is subject
or by which any of their property or assets may be bound.
(xxiv) No labor dispute with the employees of the Company,
the MHC, the Bank or any of the Subsidiaries exists or, to the
knowledge of the Company, the MHC or the Bank, is threatened; and the
Company, the MHC and the Bank are not aware of any existing or
threatened labor disturbance by the employees of any of its principal
suppliers or contractors which might be expected to result in any
material adverse change in the financial condition, results of
operations or business of the Company, the MHC and the Bank, taken as
a whole
(xxv) Each of the Company, the MHC, the Bank and the
Subsidiaries has good and marketable title to all properties and
assets for which ownership is material to the business of the Company,
the MHC, the Bank or the Subsidiaries and to those properties and
assets described in the Prospectus as owned by them, free and clear of
all liens, charges, encumbrances or restrictions, except such as are
described in the Prospectus or are not material in relation to the
business of the Company, the MHC, the Bank and the Subsidiaries taken
as a whole; and all of the leases and subleases material to the
business of the Company, the MHC the Bank and the Subsidiaries, taken
as a whole under which the Company, the MHC, the Bank and any of the
Subsidiaries hold properties, including those described in the
Prospectus, are valid and binding agreements of the Company, the MHC,
the Bank and any of the Subsidiaries enforceable in accordance with
their terms.
(xxvi) Neither the Company, the MHC, the Bank nor any of
the Subsidiaries is in violation of any directive from the OTS, the
Superintendent or the FDIC to make any
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material change in the method of conducting their respective
businesses; the Bank and the Subsidiaries have conducted and are
conducting their businesses so as to comply with all applicable
statutes, regulations and administrative and court decrees (including,
without limitation, all regulations, decisions, directives and orders
of the Superintendent or the FDIC).
(xxvii) There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company, the MHC or the Bank,
threatened, against or affecting the Company, the MHC, the Bank or any
of the Subsidiaries which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might result in any material adverse change in the financial
condition, results of operations or business affairs of the Company,
the MHC, the Bank and the Subsidiaries, taken as a whole, or which
might materially and adversely affect the properties or assets thereof
or which might materially and adversely affect the consummation of the
Conversion; all pending legal or governmental proceedings to which the
Company, the MHC, the Bank or any of its Subsidiaries is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to their business, are considered in the
aggregate not material; and there are no contracts or documents of the
Company, the MHC, the Bank or any of the Subsidiaries which are
required to be filed as exhibits to the Registration Statement or the
Conversion Application which have not been so filed.
(xxviii) The Bank has obtained an opinion of its counsel,
Elias, Matz, Tiernan & Herrick L.L.P., with respect to the legality of
the Securities to be issued and the Foundation Shares and the federal
income tax consequences of the Conversion, copies of which are filed
as exhibits to the Registration Statement; the Bank has obtained the
opinion of Ernst & Young LLP with respect to the state and local
income tax consequences of the Conversion (including landing franchise
tax, sales or use tax, license fee on foreign corporations, stock
transfer tax, real property transfer gain tax and real estate transfer
tax) and the federal income tax consequences of the Foundation, copies
of which are filed as exhibits to the Registration Statement; all
material aspects of the aforesaid opinions are accurately summarized
in the Prospectus; the facts and representations upon which such
opinions are based are truthful, accurate and complete in all material
respects; and neither the Bank, the MHC nor the Company has taken or
will take any action inconsistent therewith.
(xxix) The Company is not required to be registered under
the Investment Company Act of 1940, as amended.
(xxx) All of the loans represented as assets on the most
recent consolidated financial statements or consolidated selected
financial information of the Bank included in the Prospectus meet or
are exempt from all requirements of federal, state or local law
pertaining to lending, including without limitation truth in lending
(including the requirements of
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<PAGE> 12
Regulation Z and 12 C.F.R. Part 226 and Section 560.210), real estate
settlement procedures, consumer credit protection, equal credit
opportunity and all disclosure laws applicable to such loans, except
for violations which, if asserted, would not result in a material
adverse effect on the financial condition, results of operations or
business of the Company, the MHC, the Bank and the Subsidiaries taken
as a whole.
(xxxi) To the knowledge of the Company, the MHC and the
Bank, with the exception of the intended loan to the Bank's ESOP by
the Company to enable the ESOP to purchase shares of Common Stock in
an amount of up to 8% of the Common Stock issued in the Conversion,
none of the Company, the Bank or any employee of the Bank has made any
payment of funds of the Company, the MHC or the Bank as a loan for the
purchase of the Common Stock or made any other payment of funds
prohibited by law, and no funds have been set aside to be used for any
payment prohibited by law.
(xxxii) The Company, the MHC, the Bank and the Subsidiaries
are in compliance in all material respects with the applicable
financial recordkeeping and reporting requirements of the Currency and
Foreign Transaction Reporting Act of 1970, as amended, and the rules
and regulations thereunder.
(xxxiii) Neither the Company, the MHC, the Bank nor any of
the Subsidiaries nor any properties owned or operated by the Company,
the MHC, the Bank or any of the Subsidiaries is in violation of or
liable under any Environmental Law (as defined below), except for such
violations or liabilities that, individually or in the aggregate,
would not have a material adverse effect on the financial condition,
results of operations or business of the Company, the MHC, the Bank
and the Subsidiaries, taken as a whole. There are no actions, suits
or proceedings, or demands, claims, notices or investigations
(including, without limitation, notices, demand letters or requests
for information from any environmental agency) instituted or pending,
or to the knowledge of the Company, the MHC or the Bank threatened,
relating to the liability of any property owned or operated by the
Company, the MHC, the Bank or any Subsidiary thereof, under any
Environmental Law. For purposes of this subsection, the term
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction
or agreement with any regulatory authority relating to (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water, vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal
life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of any substance
presently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, whether by
type or by quantity, including any material containing any such
substance as a component.
(xxxiv) The Company, the MHC, the Bank and the Subsidiaries
have filed all federal income and state and local franchise tax
returns required to be filed and have made
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<PAGE> 13
timely payments of all taxes shown as due and payable in respect of
such returns, and no deficiency has been asserted with respect thereto
by any taxing authority.
(xxxv) The Company has received approval, subject to
regulatory approval to consummate the Offerings and issuance, to have
the Securities quoted on the Nasdaq Stock Market (the "Nasdaq National
Market") effective at the Closing Time referred to in Section 2
hereof.
(b) Any certificate signed by any officer of the Company, the MHC
or the Bank and delivered to either of the Agent or counsel for the Agent shall
be deemed a representation and warranty by the Company, the MHC or the Bank to
each of the matters covered thereby.
SECTION 2. APPOINTMENT OF SANDLER O'NEILL; SALE AND DELIVERY
OF THE SECURITIES; CLOSING.
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company hereby
appoints Sandler O'Neill as its Agent to consult with and advise the Company,
and to assist the Company with the solicitation of subscriptions and purchase
orders for Securities, in connection with the Company's sale of Common Stock in
the Subscription Offering, Community Offering and the Syndicated Community
Offering. On the basis of the representations and warranties herein contained,
and subject to the terms and conditions herein set forth, Sandler O'Neill
accepts such appointment and agrees to use its best efforts to assist the
Company with its solicitation of subscriptions and purchase orders for
Securities in accordance with this Agreement; provided, however, that the Agent
shall not be obligated to take any action that is inconsistent with any
applicable laws, regulations, decisions or orders. The services to be rendered
by Sandler O'Neill pursuant to this appointment include the following: (i)
consulting as to the securities marketing implications of any aspect of the
Plan or related corporate documents; (ii) reviewing with the Bank's Board of
Directors the independent appraiser's appraisal of the common stock; (iii)
reviewing all offering documents, including the Prospectus, stock order forms
and related offering materials (it being understood that the preparation and
filing of such documents is the sole responsibility of the Company and the Bank
and their counsel); (iv) assisting in the design and implementation of a
marketing strategy for the Offerings; (v) assisting in obtaining all requisite
regulatory approvals; (vi) assisting in connection with listing the Company's
Common Stock on the Nasdaq Stock Market; (vii) assisting Bank management in
preparing for meetings with potential investors and broker-dealers; and (viii)
providing such other general advice and assistance as may be requested to
promote the successful completion of the Offerings.
The appointment of the Agent hereunder shall terminate upon the
earlier to occur of (a) forty-five (45) days after the last day of the
Subscription Offering or the Community Offering, unless the Company and the
Agent agree in writing to extend such period and the Superintendent agrees to
extend the period of time in which the Shares may be sold, or (b) the receipt
and acceptance of
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<PAGE> 14
subscriptions and purchase orders for all of the Securities or (c) the
completion of the Syndicated Community Offering.
If any of the Securities remain available after the expiration of the
Subscription Offering or the Community Offering, at the request of the Company
and the Bank, Sandler O'Neill will seek to form a syndicate of registered
brokers or dealers ("Selected Dealers") to assist in the solicitation of
purchase orders of such Securities on a best efforts basis, subject to the
terms and conditions set forth in a selected dealers' agreement (the "Selected
Dealers' Agreement"), substantially in the form set forth in Exhibit A to this
Agreement. Sandler O'Neill will endeavor to limit the aggregate fees to be
paid by the Company and the Bank under any such Selected Dealers' Agreement to
an amount competitive with gross underwriting discounts charged at such time
for underwritings of comparable amounts of stock sold at a comparable price per
share in a similar market environment; provided, however, that the aggregate
fees payable to Sander O'Neill and Selected Dealers shall not exceed 7% of the
aggregate Purchase Price of the Securities sold by such Selected Dealers.
Sander O'Neill will endeavor to distribute the Securities among the Selected
Dealers in a fashion which best meets the distribution objective of the Company
and the requirements of the Plan, which may result in limiting the allocation
of stock to certain Selected Dealers. It is understood that in no event shall
Sandler O'Neill be obligated to act as a Selected Dealer or to take or purchase
any Securities.
In the event the Company is unable to sell at least the total minimum
of the Securities, as set forth on the cover page of the Prospectus, within the
period herein provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Securities the full
amount which it may have received from them, together with interest as provided
in the Prospectus, and no party to this Agreement shall have any obligation to
the others hereunder, except for the obligations of the Company and the Bank as
set forth in Sections 4, 6(a) and 7 hereof and the obligations of the Agent as
provided in Sections 6(b) and 7 hereof. Appropriate arrangements for placing
the funds received from subscriptions for Securities or other offers to
purchase Securities in special interest-bearing accounts with the Bank until
all Securities are sold and paid for were made prior to the commencement of the
Subscription Offering, with provision for refund to the purchasers as set forth
above, or for delivery to the Company if all Securities are sold.
If at least the total minimum of Securities, as set forth on the cover
page of the Prospectus, are sold, the Company agrees to issue or have issued
the Securities sold and to release for delivery certificates for such
Securities at the Closing Time against payment therefor by release of funds
from the special interest-bearing accounts referred to above. The closing
shall be held at the office of Elias, Matz, Tiernan & Herrick L.L.P., at 10:00
a.m., local time, or at such other place and time as shall be agreed upon by
the parties hereto, on a business day to be agreed upon by the parties hereto.
The Company shall notify the Agent by telephone, confirmed in writing, when
funds shall have been received for all the Securities. Certificates for
Securities shall be delivered directly to the purchasers thereof in accordance
with their directions. Notwithstanding the foregoing, certificates for
Securities purchased through Selected Dealers shall be made available to the
Agent for inspection at least 48 hours prior to the Closing Time at such office
as the Agent shall designate. The hour and date upon
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<PAGE> 15
which the Company shall release for delivery all of the Securities, in
accordance with the terms hereof, is herein called the "Closing Time."
The Company will pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Securities.
In addition to reimbursement of the expenses specified in Section 4
hereof, the Agent will receive the following compensation for its services
hereunder:
(a) one and five eighths percent (1.625%) of the aggregate
Purchase Price (as defined in the Prospectus) of the Securities sold in the
Subscription Offering and in the Community Offering, excluding in each case
shares purchased by (i) any employee benefit plan of the Company or the Bank
established for the benefit of their respective directors, officers and
employees, (ii) any director, officer or employee of the Company or the Bank or
members of their immediate families (which term shall mean parents,
grandparents, spouse, siblings, children and grandchildren); and
(b) with respect to any Securities sold by an NASD member firm
(other than Sandler O'Neill) under the Selected Dealers' Agreement in the
Syndicated Community Offering, (i) the sales commission payable to Selected
Dealers under any Selected Dealers Agreement, (ii) any sponsoring dealer's fees
and (iii) a management fee to Sandler O'Neill of one and one-half percent
(1.5%) of the aggregate Purchase Price of such Securities sold under any such
agreement. Any fees payable to Sandler O'Neill for Securities under such
agreement shall be limited to an aggregate of one and five eighths percent
(1.625%) of the aggregate Purchase Price of such Securities.
If this Agreement is terminated by the Agent in accordance with the
provisions of Section 9(a) hereof or the Conversion is terminated by the
Company or the Bank, no fee shall be payable by the Company or the Bank to
Sandler O'Neill; however, the Company shall reimburse the Agent for all of its
reasonable out-of-pocket expenses incurred prior to termination, including the
reasonable fees and disbursements of counsel for the Agent in accordance with
the provisions of Section 4 hereof.
All fees payable to the Agent hereunder shall be payable in
immediately available funds at Closing Time, or upon the termination of this
Agreement, as the case may be. In recognition of the long lead times involved
in the conversion process, the Bank agrees to make advance payments to the
Agent in the aggregate amount of $50,000, $25,000 of which has been previously
paid and the remaining $25,000 of which shall be payable upon execution hereof,
which shall be credited against any fees or reimbursement of expenses payable
hereunder.
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<PAGE> 16
SECTION 3. COVENANTS OF THE COMPANY, THE MHC AND THE BANK.
The Company, the MHC and the Bank covenant with the Agent as follows:
(a) The Company, the MHC and the Bank will prepare and file such
amendments or supplements to the Registration Statement, the Prospectus, the
Conversion Application and the Proxy Statement as may hereafter be required by
the 1933 Act Regulations or the Conversion Regulations or as may hereafter be
requested by the Agent. Following completion of the Subscription Offering and
the Community Offering, in the event of a Syndicated Community Offering, the
Company and the Bank will (i) promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement relating to the results
of the Subscription Offering and the Community Offering, any additional
information with respect to the proposed plan of distribution and any revised
pricing information or (ii) if no such post-effective amendment is required,
file with, or mail for filing to, the Commission a prospectus or prospectus
supplement containing information relating to the results of the Subscription
Offering and the Community Offering and pricing information pursuant to Rule
424(c) of the 1933 Act Regulations, in either case in a form acceptable to the
Agent. The Company, the MHC and the Bank will notify the Agent immediately,
and confirm the notice in writing, (i) of the effectiveness of any
post-effective amendment of the Registration Statement, the filing of any
supplement to the Prospectus and the filing of any amendment to the Conversion
Application, (ii) of the receipt of any comments from the Superintendent, the
FDIC, the OTS or the Commission with respect to the transactions contemplated
by this Agreement or the Plan, (iii) of any request by the Commission, the
Superintendent, the FDIC or the OTS for any amendment to the Registration
Statement or the Conversion Application or any amendment or supplement to the
Prospectus or for additional information, (iv) of the issuance by the
Superintendent or the FDIC of any order suspending the Offerings or the use of
the Prospectus or the initiation of any proceedings for that purpose, (v) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose, and (vi) of the receipt of any notice with respect to the suspension
of any qualification of the Securities for offering or sale in any
jurisdiction. The Company, the MHC and the Bank will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company, the MHC and the Bank will give the Agent notice
of its intention to file or prepare any amendment to the Conversion Application
or Registration Statement (including any post-effective amendment) or any
amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use in connection with the Syndicated Community
Offering of the Securities which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether or
not such revised prospectus is required to be filed pursuant to Rule 424(b) of
the 1933 Act Regulations), will furnish the Agent with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Agent or counsel for the
Agent may object.
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<PAGE> 17
(c) The Company, the MHC and the Bank will deliver to the Agent as
many signed copies and as many conformed copies of the Conversion Application
and the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein) as the Agent may reasonably request, and from time to time such
number of copies of the Prospectus as the Agent may reasonably request.
(d) During the period when the Prospectus is required to be
delivered, the Company, the MHC and the Bank will comply, at their own expense,
with all requirements imposed upon them by the Superintendent and the FDIC, by
the applicable Conversion Regulations, as from time to time in force, and by
the 1933 Act, the 1933 Act Regulations, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations of the Commission
promulgated thereunder, including, without limitation, Regulation M under the
1934 Act, so far as necessary to permit the continuance of sales or dealing in
shares of Common Stock during such period in accordance with the provisions
hereof and the Prospectus.
(e) If any event or circumstance shall occur as a result of which
it is necessary, in the opinion of counsel for the Agent, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
the Company, the MHC and the Bank will forthwith amend or supplement the
Prospectus (in form and substance satisfactory to counsel for the Agent) so
that, as so amended or supplemented, the Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading, and the
Company, the MHC and the Bank will furnish to the Agent a reasonable number of
copies of such amendment or supplement. For the purpose of this subsection,
the Company, the MHC and the Bank will each furnish such information with
respect to itself as the Agent may from time to time reasonably request.
(f) The Company, the MHC and the Bank will take all necessary
action, in cooperation with the Agent, to qualify the Securities for offering
and sale under the applicable securities laws of such states of the United
States and other jurisdictions as the Conversion Regulations may require and as
the Agent and the Company have agreed; provided, however, that the Company ,
the MHC and the Bank shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any jurisdiction
in which it is not so qualified. In each jurisdiction in which the Securities
have been so qualified, the Company, and the Bank will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement.
(g) The Company authorizes Sandler O'Neill and any Selected
Dealers to act as agent of the Company in distributing the Prospectus to
persons entitled to receive subscription rights and other persons to be offered
Securities having record addresses in the states or jurisdictions set forth in
a survey of the securities or "blue sky" laws of the various jurisdictions in
which the Offerings will be made (the "Blue Sky Survey").
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<PAGE> 18
(h) The Company will make generally available to its security
holders as soon as practicable, but not later than 60 days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations) covering a twelve month
period beginning not later than the first day of the Company's fiscal quarter
next following the "effective date" (as defined in said Rule 158) of the
Registration Statement.
(i) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to its stockholders as
soon as practicable after the end of each such fiscal year in such period an
annual report (including consolidated statements of financial condition and
consolidated statements of income, stockholders' equity and cash flows of the
Company, the Bank and the Subsidiaries certified by independent public
accountants) and, will make available to stockholders as soon as practicable
after the end of each of the first three quarters of each fiscal year
(beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company, the Bank and the Subsidiaries for such quarter in reasonable detail.
In addition, such annual report and quarterly consolidated summary financial
information shall be made public through the issuance of appropriate press
releases at the same time or prior to the time of the furnishing thereof to
stockholders of the Company.
(j) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to the Agent (i) as soon
as publically available, a copy of each report or other document of the Company
furnished generally to stockholders of the Company or furnished to or filed
with the Commission under the 1934 Act or any national securities exchange or
system on which any class of securities of the Company is listed, and (ii) from
time to time, such other information concerning the Company as the Agent may
reasonably request.
(k) The Company, the MHC and the Bank will conduct the Conversion
(including the formation and operation of the Foundation) in all material
respects in accordance with the Plan, the Conversion Regulations and all other
applicable regulations, decisions and orders, including all applicable terms,
requirements and conditions precedent to the Conversion imposed upon the
Company or the Bank by the Superintendent, the FDIC or the OTS.
(l) Each of the Company and the Bank will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
(m) The Company will file with the Commission such reports on Form
SR as may be required pursuant to Rule 463 of the 1933 Act Regulations.
(n) The Company will file a registration statement for the Common
Stock under Section 12(g) of the 1934 Act prior to completion of the Offerings
and will request that such registration statement be effective upon completion
of the Conversion. The Company will maintain the effectiveness of such
registration for not less than three years. The Company will file with the
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<PAGE> 19
Nasdaq Stock Market all documents and notices required by the Nasdaq Stock
Market of companies that have issued securities that are listed on the Nasdaq
Stock Market.
(o) During the period beginning on the date hereof and ending on
the later of the third anniversary of the Closing Time or the date on which the
Agent receives full payment in satisfaction of any claim for indemnification or
contribution to which it may be entitled pursuant to Sections 6 or 7,
respectively, neither the Company nor the Bank shall, without the prior written
consent of the Agent, which consent shall not be unreasonably withheld, take or
permit to be taken any action that could result in the Bank Common Stock or
Bank Preferred Stock becoming subject to any security interest, mortgage,
pledge, lien or encumbrance; provided, however, that this covenant shall be
null and void if the Board of Governors of the Federal Reserve System, by
regulation, policy statement or interpretive release, or letter, permits
indemnification of the Agent by the Bank as contemplated by Section 6(a)
hereof.
(p) The Company and the Bank will take such actions and furnish
such information as are reasonably requested by the Agent in order for the
Agent to ensure compliance with the National Association of Securities Dealers,
Inc.'s "Interpretation Relating to Free-Riding and Withholding."
(q) Other than in connection with any employee benefit plan or
arrangement described in the Prospectus, the Company will not, without the
prior written consent of the Agent, sell or issue, contract to sell or
otherwise dispose of, any shares of Common Stock other than the Securities for
a period of 180 days following the Closing Time.
(r) The Company and the Bank will comply with the conditions
imposed by or agreed to with the OTS in connection with its approval of the
Holding Company Application and with the Superintendent or the FDIC in
connection with their approval of, or non-objection to, the Conversion
Application including those conditions relating to the establishment and the
operation of the Foundation; the Company and the Bank shall use their best
efforts to ensure that the Foundation submits within the time frames required
by applicable law a request to the Internal Revenue Service to be recognized as
a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"); the Company and the Bank will take no action
which will result in the possible loss of the Foundation's tax-exempt status;
and neither the Company nor the Bank will contribute any additional assets to
the Foundation until such time that such additional contributions will be
deductible for federal and state income tax purposes.
(s) During the period ending on the first anniversary of the
Closing Time, the Bank will comply with all applicable law and regulation
necessary for the Bank to continue to be a "qualified thrift lender" within the
meaning of 12 U.S.C. Section 1467a(m).
(t) The Company shall not deliver the Securities until the Company
and the Bank have satisfied each condition set forth in Section 5 hereof,
unless such condition is waived by the Agent,.
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<PAGE> 20
(u) The Company or the Bank will furnish to Sandler O'Neill as
early as practicable prior to the Closing Date, but no later than two (2) full
business days prior thereto, a copy of the latest available unaudited interim
consolidated financial statements of the Bank and the Subsidiaries which have
been read by Ernst & Young LLP, as stated in their letters to be furnished
pursuant to subsections (e) and (f) of Section 5 hereof.
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<PAGE> 21
SECTION 4. PAYMENT OF EXPENSES.
The Company and the Bank jointly and severally agree to pay all
expenses incident to the performance of their obligations under this Agreement,
including but not limited to (i) the cost of obtaining all securities and bank
regulatory approvals, (ii) the printing and filing of the Registration
Statement as originally filed and of each amendment thereto, (iii) the
preparation, issuance and delivery of the certificates for the Securities to
the purchasers in the Offerings, (iv) the fees and disbursements of the
Company's, the MHC's and the Bank's counsel, accountants, conversion agent,
appraiser and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the fees and disbursements of counsel in connection
therewith and in connection with the preparation of the Blue Sky Survey, (vi)
the printing and delivery to the Agent of copies of the Registration Statement
as originally filed and of each amendment thereto and the printing and delivery
of the Prospectus and any amendments or supplements thereto to the purchasers
in the Offerings and the Agent, (vii) the printing and delivery to the Agent of
copies of a Blue Sky Survey, and (viii) the fees and expenses incurred in
connection with the listing of the Securities on the Nasdaq Stock Market. In
the event the Agent incurs any such fees and expenses on behalf of the Bank,
the MHC or the Company, the Bank will reimburse the Agent for such fees and
expenses whether or not the Conversion is consummated; provided, however, that
the Agent shall not incur any substantial expenses on behalf of the Bank, the
MHC or the Company pursuant to this Section without the prior approval of the
Bank or the Company.
The Company and the Bank jointly and severally agree to pay certain
expenses incident to the performance of the Agent's obligations under this
Agreement, including (i) the filing fees paid or incurred by the Agent in
connection with all filings with the National Association of Securities
Dealers, Inc., and (ii) all reasonable out of pocket expenses incurred by the
Agent relating to the Offerings, including, without limitation, advertising,
promotional, syndication and travel expenses and fees and expenses of the
Agent's counsel. All fees and expenses to which the Agent is entitled to
reimbursement under this paragraph of this Section 4 shall be due and payable
upon receipt by the Company or the Bank of a written accounting therefor
setting forth in reasonable detail the expenses incurred by the Agent.
SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS.
The Company, the MHC, the Bank and the Agent agree that the issuance
and the sale of Securities and all obligations of the Agent hereunder are
subject to the accuracy of the representations and warranties of the Company,
the MHC and the Bank herein contained as of the date hereof and the Closing
Time, to the accuracy of the statements of officers and directors of the
Company, the MHC and the Bank made pursuant to the provisions hereof, to the
performance by the Company the MHC and the Bank of their obligations hereunder,
and to the following further conditions:
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<PAGE> 22
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, no order suspending the Offerings or
authorization for final use of the Prospectus shall have been issued or
proceedings therefor initiated or threatened by the Superintendent or the FDIC
and no order suspending the sale of the Securities in any jurisdiction shall
have been issued.
(b) At Closing Time, the Agent shall have received:
(1) The favorable opinion, dated as of Closing Time, of
Elias, Matz, Tiernan & Herrick L.L.P., counsel for the Company and the
Bank, in form and substance satisfactory to counsel for the Agent, to
the effect that:
(i) The Company has been duly incorporated and
is validly existing as a corporation in
good standing under the laws of the State
of Delaware.
(ii) The Company has full corporate power and
authority to own, lease and operate its
properties and to conduct its business as
described in the Registration Statement and
Prospectus and to enter into and perform
its obligations under this Agreement.
(iii) The Company is duly qualified as a foreign
corporation to transact business and is in
good standing in the State of New York, and
in each other jurisdiction in which such
qualification is required whether by reason
of the ownership or leasing of property or
the conduct of business, except where the
failure to be so qualified would not have a
material adverse effect upon the financial
condition, results of operation or business
of the Company, the Bank and the
Subsidiaries, taken as a whole.
(iv) Upon consummation of the Conversion, and
issuance of the Foundation Shares to the
Foundation immediately upon completion
thereof, the authorized, issued and
outstanding capital stock of the Company
will be within the range set forth in the
Prospectus under "Capitalization" and no
shares of Common Stock have been or will be
issued and remain outstanding prior to the
Closing Time.
(v) The Securities and the Foundation Shares
have been duly and validly authorized for
issuance and sale and, when issued and
delivered by the Company pursuant to the
Plan against payment of the consideration
calculated as set forth in the Plan, or
contributed by the Company pursuant to the
Plan in the case of the Foundation
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<PAGE> 23
Shares, will be duly and validly issued,
fully paid and non-assessable.
(vi) The issuance of the Securities and the
Foundation Shares is not subject to
preemptive or other similar rights arising
by operation of law or, to the best of such
counsel's knowledge, otherwise.
(vii) The MHC is validly existing and is in good
standing under the laws of the State of New
York as a mutual holding company, with full
corporate power and authority to own, lease
and operate its properties and to conduct
its business as described in the
Registration Statement and Prospectus and
is duly qualified as a foreign corporation
in each jurisdiction in which such
qualification is required, except where the
failure to so qualify would not have a
material adverse effect upon the financial
condition, results of operations or
business of the MHC.
(viii) The Bank has been at all times since the
date hereof and prior to the Closing Time
duly organized, and is validly existing in
good standing under the laws of the State
of New York as a New York State chartered
savings bank of stock form, with full
corporate power and authority to own, lease
and operate its properties and to conduct
its business as described in the
Registration Statement and the Prospectus;
and the Bank is duly qualified as a foreign
corporation in each jurisdiction in which
such qualification is required, whether by
reason of the ownership or leasing of
property or the conduct of business except
where the failure to so qualify would not
have a material adverse effect upon the
financial condition or results of
operations or business of the Bank.
(ix) The deposit accounts of the Bank are insured
by the FDIC up to the applicable limits.
(x) Each Subsidiary has been duly incorporated
and is validly existing as a corporation in
good standing under the laws of the
jurisdiction of its incorporation, has full
corporate power and authority to own, lease
and operate its properties and to conduct
its business as described in the
Registration Statement and the Prospectus
and is duly qualified as a foreign
corporation to transact business and is in
good standing in each jurisdiction in which
such qualification is required, whether by
reason of the ownership or leasing of
property or the conduct of business, except
where the failure to so qualify
23
<PAGE> 24
would not have a material adverse effect
upon the financial condition, results of
operation or business of the Company, the
Bank and the Subsidiaries, taken as a
whole, the activities of the Subsidiaries
as described in the Prospectus are
permitted to subsidiaries of a savings
association holding company and of a New
York State chartered savings bank by the
rules, regulations, resolutions and
practices of the OTS and the
Superintendent, as the case may be; all of
the issued and outstanding capital stock of
each of the Subsidiaries has been duly
authorized and validly issued, is fully
paid and non-assessable and is owned by the
Bank free and clear of any security
interest, mortgage, pledge, lien,
encumbrance or claim.
(xi) The Foundation has been duly incorporated
and is validly existing as a non-stock
corporation in good standing under the laws
of the State of Delaware with corporate
power and authority to own, lease and
operate its properties and to conduct its
business as described in the Prospectus;
the Foundation is not a savings and loan
holding company within the meaning of 12
C.F.R. Section 574.2(q) as a result of the
issuance of shares of Common Stock to it in
accordance with the terms of the Plan and
in the amounts as described in the
Prospectus; no approvals are required to
establish the Foundation and to contribute
the shares of Common Stock thereto as
described in the Prospectus other than
those set forth in any written notice or
order of approval or non-objection of the
Conversion, Conversion Application or the
Holding Company Application copies of which
were provided to the Agent prior to the
Closing Time.
(xii) Upon consummation of the Conversion, all of
the issued and outstanding capital stock of
the Bank when issued and delivered pursuant
to the Plan against payment of
consideration calculated as set forth in
the Plan will be duly authorized and
validly issued and fully paid and
nonassessable, and all such capital stock
will be owned beneficially and of record by
the Company free and clear of any security
interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(xiii) The OTS has approved the Holding Company
Application, the Superintendent has
approved the Conversion Application and the
FDIC has issued a letter of intent not to
object to the Conversion and no action is
pending, or to the best of such counsel's
knowledge, threatened respecting the
Holding Company
24
<PAGE> 25
Application or the Conversion Application
(including therewith the establishment of
the Foundation and the contribution of
shares of Common stock thereto) or the
acquisition by the Company of all of the
Bank's issued and outstanding capital
stock; the Holding Company Application
complies as to form in all material
respects with the applicable requirements
of the OTS, and the Conversion Application
complies as to form in all material
respects with the applicable requirements
of the Superintendent and the FDIC and
include all documents required to be filed
as exhibits thereto, excluding the
Prospectus and any related marketing
materials filed as a part of the Holding
Company Application or the Conversion
Application as to which no opinion need be
given; the Company is duly authorized to
become a savings and loan holding company
and is duly authorized to own all of the
issued and outstanding capital stock of the
Bank to be issued pursuant to the Plan.
(xiv) The execution and delivery of this
Agreement and the consummation of the
transactions contemplated hereby, including
the establishment of the Foundation and the
contribution thereto of the Foundation
Shares, (A) have been duly and validly
authorized by all necessary action on the
part of each of the Company, the MHC and
the Bank, and this Agreement constitutes
the legal, valid and binding agreement of
each of the Company, the MHC and the Bank,
enforceable in accordance with its terms,
except as rights to indemnity and
contribution hereunder may be limited under
applicable law (it being understood that
such counsel may avail itself of customary
exceptions concerning the effect of
bankruptcy, insolvency, and the
availability of equitable remedies), (B)
will not result in any violation of the
provisions of the certificate of
incorporation, organization certificate,
articles of incorporation or charter, as
the case may be, or by-laws of the Company,
the MHC, the Bank or any of its
Subsidiaries; and, (C) will not conflict
with or constitute a breach of, or default
under, and no event has occurred which,
with notice or lapse of time or both, would
constitute a default under, or result in
the creation or imposition of any lien,
charge or encumbrance upon any property or
assets of the Company, the MHC, the Bank
or the Subsidiaries pursuant to any
contract, indenture, mortgage, loan
agreement, note, lease or other instrument
to which the Company, the MHC, the Bank or
any of the Subsidiaries is a party or by
which any of them may be bound, or to which
any of the property or assets of the
Company, the MHC, the Bank or the
Subsidiaries is subject, that, individually
or in the aggregate, would have a material
adverse effect on the financial
25
<PAGE> 26
condition, results of operations or
business of the Company, the MHC, the Bank
and the Subsidiaries, taken as a whole.
(xv) The Prospectus has been duly authorized by
the Superintendent and the FDIC for final
use pursuant to the Conversion Regulations
and no action is pending, or to the best of
such counsel's knowledge, is threatened, by
the Superintendent or the FDIC to revoke
such authorization.
(xvi) The Registration Statement is effective
under the 1933 Act and no stop order
suspending the effectiveness of the
Registration Statement has been issued
under the 1933 Act or, to the best of such
counsel's knowledge, have proceedings
therefor been initiated or threatened by
the Commission.
(xvii) No further approval, authorization, consent
or other order of any public board or body
is required in connection with the
execution and delivery of this Agreement,
the issuance of the Securities and the
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.
(xviiii) At the time the Registration Statement
became effective, the Registration
Statement (other than the financial
statements the notes thereto, related
schedules and other financial, appraisal
and statistical data included therein, as
to which no opinion need be rendered)
complied as to form in all material
respects with the requirements of the 1933
Act and the 1933 Act Regulations and the
Conversion Regulations.
(xix) The Common Stock conforms to the
description thereof contained in the
Prospectus, and the form of certificate
used to evidence the Common Stock is in due
and proper form and complies with all
applicable statutory requirements.
(xx) There are no legal or governmental
proceedings pending or threatened against
or affecting the Company, the MHC, the Bank
any of the Subsidiaries, or the Foundation
which are required, individually or in the
aggregate, to be disclosed in the
Registration Statement and Prospectus,
other than those disclosed therein.
26
<PAGE> 27
(xxi) All pending legal or governmental
proceedings to which the Company, the MHC,
the Bank or any of the Subsidiaries is a
party or to which any of their property is
subject which are not described in the
Registration Statement, including ordinary
routine litigation incidental to the
business, are, considered in the aggregate,
not material.
(xxii) The information in the Prospectus under
"Risk Factors - Establishment of the
Charitable Foundation - Tax Consequences,"
"-Possible Payment of Financing Corporation
Bonds," "-Certain Anti-Takeover
Provisions," and "- Possible Adverse Income
Tax Consequences of the Distribution of
Subscription Rights," "Dividend Policy,"
"Business of the Bank - Legal Proceedings,"
"Federal and State Taxation," "Regulation,"
"The Conversion - Establishment of
Charitable Foundation," "- Effects of
Conversion," "-Liquidation Rights" and
"-Tax Aspects," "Restrictions on
Acquisition of the Company and the Bank,"
"Description of Capital Stock of the
Company" and "Description of Capital Stock
of the Bank" to the extent that it
constitutes matters of law, summaries of
legal matters, documents or proceedings, or
legal conclusions, has been reviewed by
them and is complete and accurate in all
material respects.
(xxiii) To the best of such counsel's knowledge,
there are no contracts, indentures,
mortgages, loan agreements, notes, leases
or other instruments required to be
described or referred to in the
Registration Statement or to be filed as
exhibits thereto other than those described
or referred to therein or filed as exhibits
thereto, and the descriptions thereof or
references thereto are correct.
(xxiv) The Plan has been duly authorized by the
Board of Trustees of the MHC and the Board
of Directors of the Company and the Board
of Directors of the Bank and the
Superintendent's and the FDIC's approvals
of the Plan remain in full force and
effect; the Bank's organization certificate
has been amended and restated, effective
upon consummation of the Conversion and the
filing of such amended and restated
organization certificate with the
Superintendent, to authorize the issuance
of permanent capital stock; to the best of
such counsel's knowledge, the Company, the
MHC and the Bank have conducted the
Conversion and the establishment and
funding of the Foundation in all material
respects in accordance with applicable
requirements of the Conversion Regulations,
the Plan and all other applicable
regulations, decisions
27
<PAGE> 28
and orders thereunder, including all
material applicable terms, conditions,
requirements and conditions precedent to
the Conversion imposed upon the Company or
the Bank by the Superintendent or the FDIC
and, no order has been issued by the
Superintendent or the FDIC to suspend the
Conversion or the Offerings and no action
for such purpose has been instituted or
threatened by the OTS; and, to the best of
such counsel's knowledge, no person has
sought to obtain review of the final action
of the Superintendent or the FDIC in
approving the Conversion Application (which
includes the Plan which provides for
establishment of the Foundation) or of the
OTS in approving the Holding Company
Application.
(xxv) To the best of such counsel's knowledge,
the Company, the MHC, the Bank and the
Subsidiaries have obtained all material
licenses, permits and other governmental
authorizations currently required for the
conduct of their respective businesses as
described in the Registration Statement and
Prospectus, and all such licenses, permits
and other governmental authorizations are
in full force and effect, and the Company,
the MHC, the Bank and the Subsidiaries are
in all material respects complying
therewith.
(xxvi) Neither the MHC, the Company, the Bank nor
any of the Subsidiaries is in violation of
its certificate of incorporation,
organization certificate, articles of
incorporation or charter, as the case may
be, or bylaws (and the Bank will not be in
violation of its organization certificate
and bylaws in stock form upon consummation
of the Conversion) or, to the best of such
counsel's knowledge, in default (nor has
any event occurred which, with notice or
lapse of time or both, would constitute a
default) in the performance or observance
of any obligation, agreement, covenant or
condition contained in any material
contract, indenture, mortgage, loan
agreement, note, lease or other instrument
to which the Company, the MHC, the Bank or
any of the Subsidiaries is a party or by
which the Company, the MHC, the Bank or any
of the Subsidiaries or any of their
property may be bound.
(xxvii) The Company is not required to be
registered as an investment company under
the Investment Company Act of 1940.
(2) The favorable opinion, dated as of Closing Time, of
Muldoon, Murphy & Faucette, counsel for the Agent, with respect to the
matters set forth in Section 5(b)(1)(i),
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<PAGE> 29
(iv), (v), (vi) (solely as to preemptive rights arising by operation
of law), (xvi) and (xvii) and such other matters as the Agent may
reasonably require.
(3) In giving their opinions required by subsections
(b)(l) and (b)(2), respectively, of this Section, Elias, Matz,
Tiernan, and Herrick L.L.P. and Muldoon, Murphy & Faucette shall each
additionally state that nothing has come to their attention that would
lead them to believe that the Registration Statement (except for the
appraisal, financial statements, notes thereto, related schedules and
other financial, statistical or appraisal data included therein, as to
which counsel need make no statement), at the time it became
effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus
(except for the appraisal, financial statements and schedules and
other financial, statistical or appraisal data included therein, as to
which counsel need make no statement), at the time the Registration
Statement became effective or at Closing Time, included an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In giving
their opinions Elias, Matz, Tiernan, & Herrick L.L.P. and Muldoon,
Murphy & Faucette may state that they have not independently verified
the information with respect to the Company and the Bank contained in
the Registration Statement, Conversion Application and the Prospectus.
In giving their opinions, Elias, Matz, Tiernan, & Herrick L.L.P. and
Muldoon, Murphy & Faucette may rely as to matters of fact on
certificates of officers and directors of the Company, the MHC and the
Bank and certificates of public officials, and as to certain matters
of New York law upon the opinion of _______________________________
and as to certain matters of Delaware law upon the opinion of
____________________________, which opinions shall be in form and
substance satisfactory to the Agent, and Muldoon, Murphy & Faucette
may also rely on the opinion of Elias, Matz, Tiernan, & Herrick L.L.P.
(c) At the Closing time referred to in Section 2, the Company, the
MHC and the Bank will have completed in all material respects
the conditions precedent to the Conversion in accordance with
the Plan, the applicable Conversion Regulations and all other
applicable laws, regulations, decisions and orders, including
all terms, conditions, requirements and provisions precedent
to the Conversion imposed upon the Company or the Bank by the
OTS, the Superintendent, the FDIC, or any other regulatory
authority other than those which the OTS, the Superintendent
or the FDIC permit to be completed after the Conversion.
(d) At Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change in the
financial condition, results of operations or business of the Company, the MHC,
the Bank and the Subsidiaries, taken as a whole, whether or not arising in the
ordinary course of business, and the Agent shall have received a certificate of
the Chief Executive
29
<PAGE> 30
Officer of the Company, of the MHC and of the Bank, and the chief financial or
chief accounting officer of the Company, of the MHC and of the Bank, dated as
of Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) there shall have been no material transaction entered into by the
Company, the MHC or the Bank from the latest date as of which the financial
condition of the Company, the MHC or the Bank is set forth in the Registration
Statement and the Prospectus other than transactions referred to or
contemplated therein and transactions in the ordinary cause of business, (iii)
neither the Company, the MHC nor the Bank has received from the Superintendent,
the FDIC or the OTS any direction (oral or written) to make any material change
in the method of conducting its business with which it has not complied (which
direction, if any, shall have been disclosed to the Agent) or which materially
and adversely would affect the business, financial condition or results of
operations of the Company, the MHC, the Bank and the Subsidiaries, taken as a
whole, (iv) the representations and warranties in Section 1 hereof are true and
correct with the same force and effect as though expressly made at and as of
the Closing Time, (v) the Company, the MHC and the Bank have complied with all
agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to Closing Time, (vi) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or threatened by the Commission and (vii)
no order suspending the Offerings or the authorization for final use of the
Prospectus has been issued and no proceedings for that purpose have been
initiated or threatened by the Superintendent or the FDIC and no person has
sought to obtain regulatory or judicial review of the action of the
Superintendent or the FDIC in approving the Plan in accordance with the
Conversion Regulations nor has any person sought to obtain regulatory or
judicial review of the action of the OTS in approving the Holding Company
Application.
(e) At the time of the execution of this Agreement, the Agent
shall have received from Ernst & Young LLP a letter dated such date, in form
and substance satisfactory to the Agent, to the effect that (i) they are
independent public accountants with respect to the Company, the MHC, the Bank
and the Subsidiaries within the meaning of the Code of Ethics of the American
Institute of Certified Public Accountants, the 1933 Act and the 1933 Act
Regulations and the Conversion Regulations; (ii) it is their opinion that the
consolidated financial statements and supporting schedules included in the
Registration Statement and covered by their opinions therein comply as to form
in all material respects with the applicable accounting requirements of the
1933 Act and the 1933 Act Regulations and the Conversion Regulations; (iii)
based upon limited procedures as agreed upon by the Agent and Ernst & Young LLP
set forth in detail in such letter, nothing has come to their attention which
causes them to believe that (A) the unaudited financial statements and
supporting schedules of the Bank and the Subsidiaries included in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, the 1933 Act
Regulations, and the Conversion Regulations or are not presented in conformity
with generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement and the Prospectus, (B) the unaudited amounts set forth
under "Selected Consolidated Financial Information and Other Data" and "Recent
Developments" in the Registration Statement and Prospectus do not agree with
the amounts set forth in unaudited consolidated financial statements as of and
for the dates and periods presented under such captions or such amounts were
not determined on a basis substantially
30
<PAGE> 31
consistent with that used in determining the corresponding amounts in the
audited financial statements included in the Registration Statement, (C) at a
specified date not more than five days prior to the date of this Agreement,
there has been any increase in the consolidated long term or short term debt of
the Bank and the Subsidiaries or any decrease in consolidated total assets, the
allowance for loan losses, total deposits or retained earnings of the Bank and
the Subsidiaries, in each case as compared with the amounts shown in the March
31, 1997 balance sheet included in the Registration Statement or, (D) during
the period from March 31, 1997 to a specified date not more than five days
prior to the date of this Agreement, there were any decreases, as compared with
the corresponding period in the preceding year, in total interest income, net
interest income, net interest income after provision for loan losses, income
before income tax expense or net income of the Bank and the Subsidiaries,
except in all instances for increases or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur; and (iv) in
addition to the examination referred to in their opinions and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in the
Registration Statement and Prospectus and which are specified by the Agent, and
have found such amounts, percentages and financial information to be in
agreement with the relevant accounting, financial and other records of the
Company, the MHC, the Bank and the Subsidiaries identified in such letter.
(f) At Closing Time, the Agent shall have received from Ernst &
Young LLP a letter, dated as of Closing Time, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (e) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Time.
(g) At Closing Time, the Securities shall have been approved for
listing on the Nasdaq Stock Market upon notice of issuance.
(h) At Closing Time, the Agent shall have received a letter from
RP Financial, Inc., dated as of the Closing Time, confirming its appraisal.
(i) At Closing Time, counsel for the Agent shall have been
furnished with such documents and opinions as they may require for the purpose
of enabling them to pass upon the issuance and sale of the Securities and the
Foundation Shares as herein contemplated and related proceedings, or in order
to evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
and Foundation Shares as herein contemplated shall be satisfactory in form and
substance to the Agent and counsel for the Agent.
(j) At any time prior to Closing Time, (i) there shall not have
occurred any material adverse change in the financial markets in the United
States or elsewhere or any outbreak of hostilities or escalation thereof or
other calamity or crisis the effect of which, in the judgment of the Agent, are
so material and adverse as to make it impracticable to market the Securities or
to enforce contracts, including subscriptions or orders, for the sale of the
Securities, and (ii) trading generally
31
<PAGE> 32
on either the American Stock Exchange or the New York Stock Exchange shall not
have been suspended, and minimum or maximum prices for trading shall not have
been fixed, or maximum ranges for prices for securities have been required, by
either of said Exchanges or by order of the Commission or any other
governmental authority, and a banking moratorium shall not have been declared
by either Federal or New York authorities.
SECTION 6. INDEMNIFICATION.
(a) The Company and the Bank, jointly and severally, agree to
indemnify and hold harmless the Agent, each person, if any, who controls the
Agent, within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act, and its respective partners, directors, officers, employees and
agents as follows:
(i) from and against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, related to or arising out
of the Conversion (including establishment of the Foundation and the
contribution of the Foundation Shares thereto by the Company) or any
action taken by the Agent where acting as agent of the Company or the
Bank or otherwise as described in Section 2 hereof;
(ii) from and against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, based upon or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto), or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Proxy Statement or
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(iii) from and against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever described in
clauses (i) or (ii) above, if such settlement is effected with the
written consent of the Company or the Bank, which consent shall not be
unreasonably withheld; and
(iv) from and against any and all expense whatsoever, as
incurred (including, subject to Section 6(c) hereof, the fees and
disbursements of counsel chosen by the Agent), reasonably incurred in
investigating, preparing for or defending against any litigation, or
any investigation, proceeding or inquiry by any governmental agency or
body, commenced or threatened, or any claim pending or threatened
whatsoever described in clauses (i) or (ii) above, to the extent that
any such expense is not paid under (i), (ii) or (iii) above;
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<PAGE> 33
provided, however, that the indemnification provided for in this paragraph (a)
shall not apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading which was made in reliance upon and in
conformity with the Agent Information. Notwithstanding the foregoing, the
indemnification provided for in this paragraph (a) shall not apply to the Bank
to the extent that such indemnification by the Bank would constitute an
impermissible covered transaction under Section 23A of the Federal Reserve Act.
(b) The Agent agrees to indemnify and hold harmless the Company,
the Bank, their directors and trustees, each of their officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, of a material fact made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with the Agent Information.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability which it may have otherwise than on account of this
indemnity agreement. An indemnifying party may participate at its own expense
in the defense of any such action. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to no
more than one local counsel in each separate jurisdiction in which any action
or proceeding is commenced) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances.
(d) The Company and the Bank also agree that the Agent shall not
have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Bank, the Company, its security holders or the Bank's or the
Company's creditors relating to or arising out of the engagement of the Agent
pursuant to, or the performance by the Agent of the services contemplated by,
this Agreement, except to the extent that any loss, claim, damage or liability
is found in a final judgment by a court of competent jurisdiction to have
resulted primarily from the Agent's bad faith, willful misconduct or gross
negligence.
(e) In addition to, and without limiting, the provisions of
Section (6)(a)(iv) hereof, in the event that any Agent, any person, if any, who
controls the Agent within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act or any of its partners, directors, officers, employees or
agents is requested or required to appear as a witness or otherwise gives
testimony in any action, proceeding, investigation or inquiry brought by or on
behalf of or against the Company, the MHC,
33
<PAGE> 34
the Bank, the Agent or any of its respective affiliates or any participant in
the transactions contemplated hereby in which the Agent or such person or agent
is not named as a defendant or subject of an investigation or inquiry, the
Company and the Bank jointly and severally agree to reimburse the Agent for all
reasonable and necessary out-of-pocket expenses incurred by it in connection
with preparing or appearing as a witness or otherwise giving testimony and to
compensate the Agent in an amount to be mutually agreed upon.
SECTION 7. CONTRIBUTION.
In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 6 hereof
is for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company, the Bank and the Agent
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred by the
Company or the Bank and the Agent, as incurred, in such proportions (i) that
the Agent is responsible for that portion represented by the percentage that
the maximum aggregate marketing fees appearing on the cover page of the
Prospectus bears to the maximum aggregate gross proceeds appearing thereon and
the Company, the MHC and the Bank are jointly and severally responsible for the
balance or (ii) if, but only if, the allocation provided for in clause (i) is
for any reason held unenforceable, in such proportion as is appropriate to
reflect not only the relative benefits to the Company and the Bank on the one
hand and the Agent on the other, as reflected in clause (i), but also the
relative fault of the Company and the Bank on the one hand and the Agent on the
other, as well as any other relevant equitable considerations; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section, each person, if any, who controls the Agent within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Agent, and each director of the
Company, each trustee of the Bank, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or
the Bank within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company and the
Bank. Notwithstanding anything to the contrary set forth herein, to the extent
permitted by applicable law, in no event shall the Agent be required to
contribute an aggregate amount in excess of the aggregate marketing fees to
which the Agent is entitled and actually paid pursuant to this Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY.
All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company, the MHC or
the Bank submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf
34
<PAGE> 35
of any Agent or controlling person, or by or on behalf of the Company, and
shall survive delivery of the Securities.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Agent may terminate this Agreement, by notice to the
Company, at any time at or prior to Closing Time (i) if there has been, since
the date of this Agreement or since the respective dates as of which
information is given in the Registration Statement, any material adverse change
in the financial condition, results of operations or business of the Company,
the MHC or the Bank, or the Company the MHC, the Bank and the Subsidiaries
taken as a whole, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or elsewhere or any outbreak of hostilities or escalation
thereof or other calamity or crisis the effect of which, in the judgment of the
Agent, are so material and adverse as to make it impracticable to market the
Securities or to enforce contracts, including subscriptions or orders, for the
sale of the Securities, (iii) if trading generally on the Nasdaq Stock Market,
the American Stock Exchange or the New York Stock Exchange has been suspended,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by such market or either of said
Exchanges or by order of the Commission or any other governmental authority, or
if a banking moratorium has been declared by either Federal or New York
authorities, (iv) if any condition specified in Section 5 shall not have been
fulfilled when and as required to be fulfilled; (v) if there shall have been
such material adverse change in the condition or prospects of the Company or
the Bank or the prospective market for the Company's securities as in the
Agent's good faith opinion would make it inadvisable to proceed with the
offering, sale or delivery of the Securities; (vi) if, in the Agent's good
faith opinion, the price for the Securities established by RP Financial, Inc.
is not reasonable or equitable under then prevailing market conditions, or
(vii) if the Conversion is not consummated on or prior to
_______________________.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except
as provided in Section 4 hereof relating to the reimbursement of expenses and
except that the provisions of Sections 6 and 7 hereof shall survive any
termination of this Agreement.
SECTION 10. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Agent shall be directed to
the Agent at Two World Trade Center, 104th Floor, New York, New York 10048,
attention of Catherine A. Lawton, Principal, with a copy to Douglas P.
Faucette, Esq., Muldoon, Murphy & Faucette, 5101 Wisconsin Avenue, N.W.,
Washington, D.C. 20016; notices to the Company and the Bank shall be directed
to either of them at Independence Savings Bank, 195
35
<PAGE> 36
Montague Street, 12th Floor, Brooklyn, New York 11201, attention of Charles J.
Hamm, President, with a copy to Phillip R. Bevan, Esq., Elias, Matz Tiernan &
Herrick L.L.P., 734 15th Street, N.W., 12th Floor, Washington, D.C. 20005.
SECTION 11. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the
Agent, the Company, the MHC and the Bank and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Agent, the
Company, the MHC. and the Bank and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein or
therein contained. This Agreement and all conditions and provisions hereof and
thereof are intended to be for the sole and exclusive benefit of the Agent, the
Company, the MHC and the Bank and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT.
This Agreement represents the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and supersedes
any and all other oral or written agreements heretofore made, except for
engagement letter dated March 4, 1997, by and between the Agent and the Company
and the Bank, relating to the Agent's providing conversion agent services to
the Company and the Bank in connection with the Conversion, which engagement
letter shall be governed solely by its terms. No waiver, amendment or other
modification of this Agreement shall be effective unless in writing and signed
by the parties hereto.
SECTION 13. GOVERNING LAW AND TIME.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State without regard to the conflicts of laws provisions
thereof. Specified times of day refer to Eastern time.
SECTION 14. SEVERABILITY.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting
36
<PAGE> 37
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
SECTION 15. HEADINGS.
Sections headings are not to be considered part of this Agreement, are
for convenience and reference only and are not to be deemed to be full or
accurate descriptions of the contents of any paragraph or subparagraph.
37
<PAGE> 38
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Agent, the Company, the MHC and the Bank in accordance
with its terms.
Very truly yours,
INDEPENDENCE COMMUNITY BANK CORP.
--------------------------------
By: Charles J. Hamm
Title: President
INDEPENDENCE COMMUNITY BANK CORP
(Mutual Holding Company)
--------------------------------
By: Charles J. Hamm
Title: President
CONFIRMED AND ACCEPTED, INDEPENDENCE SAVINGS BANK
as of the date first above written:
Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp., --------------------------------
the sole general partner By: Charles J. Hamm
Title: Chairman of the Board,
President and Chief
Executive Officer
- -------------------------------
By: Catherine A. Lawton
Vice President
38
<PAGE> 1
EXHIBIT 5.0
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
------------
TIMOTHY B. MATZ Telephone: (202) 347-0300 JEFFREY D. HAAS
STEPHEN M. EGE Facsimile: (202) 347-2172 KEVIN M. HOULIHAN
RAYMOND A. TIERNAN WWW.EMTH.COM KENNETH B. TABACH
W. MICHAEL HERRICK PATRICIA J. WOHL*
GERARD L. HAWKINS JEFFREY R. HOULE
NORMAN B. ANTIN DAVID N. PARDYS
JOHN P. SOUKENIK*
GERALD F. HEUPEL, JR. -----------
JEFFREY A. KOEPPEL
DANIEL P. WEITZEL
PHILIP ROSS BEVAN
HUGH T. WILKINSON OF COUNSEL
ALLIN P. BAXTER
JACK I. ELIAS
SHERYL JONES ALU
August 15, 1997
*NOT ADMITTED IN D.C. VIA EDGAR
Board of Directors
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
Ladies and Gentlemen:
We have acted as special counsel to Independence Community Bank Corp.
(the "Company") in connection with the preparation and filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of the Registration Statement on Form S-1 (the "Registration
Statement"), relating to the issuance of up to 72,737,499 shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), in
connection with the conversion of the parent mutual holding company ("Mutual
Holding Company") of Independence Savings Bank (the "Bank") from mutual to
stock form and the reorganization of the Bank as a subsidiary of the Company
(the "Conversion"). In this regard, we have examined the Certificate of
Incorporation and Bylaws of the Company, resolutions of the Board of Directors
of the Company, the Mutual Holding Company and the Bank, the Plan of Conversion
("Plan of Conversion"), and such other documents and matters of law as we
deemed appropriate for the purposes of this opinion.
Based upon the foregoing, we are of the opinion as of the date hereof
that the Common Stock has been duly and validly authorized, and when issued in
accordance with the terms of the Plan of Conversion and upon the receipt of the
consideration required thereby, will be legally issued, fully paid and
non-assessable.
<PAGE> 2
Board of Directors
August 15, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement and to the references to this firm under the
headings "The Conversion - Tax Aspects" and "Legal Matters" in the Prospectus
contained in the Registration Statement.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK
By:/s/Philip R. Bevan
------------------------------
Philip R. Bevan, a Partner
<PAGE> 1
EXHIBIT 8.1
LAW OFFICES
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
-----
TIMOTHY B. MATZ Telephone: (202) 347-0300 JEFFREY D. HAAS
STEPHEN M. EGE Facsimile: (202) 347-2172 KEVIN M. HOULIHAN
W. MICHAEL HERRICK KENNETH B. TABACH
GERARD L. HAWKINS PATRICIA J. WOHL
NORMAN B. ANTIN JEFFREY R. HOULE
JOHN P. SOUKENIK* DAVID N. PARDYS
GERALD F. HEUPEL, JR.
JEFFREY A. KOEPPEL ----------
DANIEL P. WEITZEL
PHILIP ROSS BEVAN OF COUNSEL
HUGH T. WILKINSON
ALLIN P. BAXTER
JACK I. ELIAS
SHERYL JONES ALU
JACQUELINE R. SCOTT
*NOT ADMITTED IN D.C.
VIA EDGAR
August 15, 1997
Boards of Directors
Independence Community Bank Corp. (Delaware-chartered stock corporation)
Independence Savings Bank
Board of Trustees
Independence Community Bank Corp. (mutual holding company)
195 Montague Street
Brooklyn, New York 11201
Lady and Gentlemen:
You have requested the opinion of this firm ("EMTH") regarding certain
federal income tax consequences which will result from the integrated
transactions described below (the "Conversion and Reorganization"). This
Opinion Letter is governed by, and should be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the American Bar Association Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord. Our opinions set
forth herein are limited to the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder (the "Subject Laws"). We
express no opinion as to other federal laws and regulations, or as to laws and
regulations of other jurisdictions, or as to factual or legal matters other
than as stated herein.
We have made such investigations as we have deemed relevant or
necessary for the purpose of this opinion. In our examination of documents, we
have assumed the authenticity of those documents submitted to us as certified,
conformed or reproduced copies. As to
<PAGE> 2
August 15, 1997
Page 2
matters of fact which are material to this opinion, we have relied upon the
accuracy of the factual matters set forth in the Plan of Conversion (the
"Plan") and the Registration Statement (the "Registration Statement"), which
contains the Prospectus (the "Prospectus"), filed by Independence Community
Bank Corp. (the "Company") with the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933, as amended.
Facts
Independence Community Bank Corp., a New York-chartered mutual holding
company (the "Mutual Holding Company"), and Independence Savings Bank, a New
York- chartered stock savings bank (the "Bank"), were created in a
reorganization of a New York- chartered mutual savings bank, also named
Independence Savings Bank (the "Mutual Bank"), in April 1992 (the "MHC
Reorganization"). In the MHC Reorganization, the Mutual Bank organized the
Mutual Holding Company and the Mutual Holding Company organized the Bank. In
connection with such organization, the Bank issued 100 shares of common stock,
$1.00 per value per share ("Bank Common Stock"). The Mutual Bank then merged
with and into the Bank under a plan of reorganization in which all of the
Mutual Bank's equity interests were exchanged for liquidation interests
in the Mutual Holding Company. In PLR 9215032, the Internal Revenue
Service (the "IRS") ruled that the MHC Reorganization satisfied significant
subissues to qualify as a reorganization under Section 368(a)(2)(D) of the
Code. No other Bank Common Stock was issued in connection with the MHC
Reorganization. The Mutual Holding Company will own 100 percent of the
outstanding Bank Common Stock immediately prior to the Conversion and
Reorganization.
The Board of Trustees of the Mutual Holding Company and the Board of
Directors of the Bank believe that a conversion of the Mutual Holding Company
to stock form and reorganization of the Bank pursuant to the Plan is in the
best interests of the Mutual Holding Company and the Bank, as well as in the
best interests of the Bank's depositors. To that end, the following
transactions will occur in the Conversion and Reorganization pursuant to the
Plan:
1. The Bank will incorporate the Company, a Delaware corporation, for
the purpose of holding all of the capital stock of the Bank and in order to
facilitate the Conversion and Reorganization.
2. Subscription rights ("Subscription Rights") to purchase shares of
the common stock of the Company ("Company Common Stock") will be issued without
payment therefor to Eligible Account Holders, Tax-Qualified Employee Plans, and
Supplemental Eligible Account Holders (as such persons are defined in the
Plan).
3. Upon the effective date of the Conversion and Reorganization (the
"Effective Date"), the Mutual Holding Company will convert into a stock
institution (the "Interim"), and the Interim will simultaneously merge with and
into the Bank pursuant to a plan of merger, with the Bank being the surviving
institution (the "MHC Merger"). As a result of
<PAGE> 3
August 15, 1997
Page 3
the MHC Merger, (a) the shares of Bank Common Stock currently held by the
Mutual Holding Company will be extinguished, and (b) the Eligible Account
Holders (as defined in the Plan) will be granted interests in a liquidation
account (the "Liquidation Account") to be established by the Bank pursuant to
the Plan.
4. Upon the Effective Date, the Company will sell shares of Company
Common Stock in a subscription offering (the "Subscription Offering") in
descending order of priority to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans and Supplemental Eligible Account Holders. Any
shares of Company Common Stock remaining unsold after the Subscription Offering
will be sold to the public through a Community Offering (as defined in the
Plan), a Syndicated Community Offering (as defined in the Plan), and/or Public
Offering (as defined in the Plan) as determined by the Boards of Directors of
the Company and the Bank in their sole discretion. Collectively, the
Subscription Offering, the Community Offering, the Syndicated Community
Offering and the Public Offering are referred to herein as the Offerings.
5. The Company will contribute to the Bank 50% of the net proceeds
received by the Company in the Offerings (the "Contributed Offering Proceeds")
in exchange for 100% of the Bank Common Stock.
The Liquidation Account will be established by the Bank for the benefit
of the Eligible Account Holders who maintain Deposit Accounts (as defined in
the Plan) in the Bank after the Conversion and Reorganization. The Liquidation
Account balance will initially be an amount equal to 100 percent of the Bank's
net worth as reflected in its latest statement of financial condition contained
in the final prospectus utilized in the Conversion and Reorganization. Each
Eligible Account Holder will have a related inchoate interest in a portion of
the Liquidation Account balance (referred to as a "subaccount balance"). The
interest of an Eligible Account Holder in the Liquidation Account will never
increase, but will, however, decrease to reflect subsequent withdrawals from
the Deposit Account of such Eligible Account Holders. In the sole event of a
complete liquidation of the Bank after the Conversion and Reorganization, each
Eligible Account Holder will be entitled to receive a liquidation distribution
from the Liquidation Account in the amount of their then current subaccount
balance before any liquidation distribution may be made with respect to the
capital stock of the Bank.
Each Deposit Account in the Bank at the time of consummation of the
Conversion and Reorganization will become a Deposit Account in the Bank
equivalent in withdrawable amount to the withdrawal value ( as adjusted to give
effect to any withdrawal made for the purchase of Company Common Stock
purchased in the Offerings) and subject to the same terms and conditions
(except as to liquidation rights) as such Deposit Account in the Bank
immediately preceding consummation of the Conversion and Reorganization.
<PAGE> 4
August 15, 1997
Page 4
Representations
You have made the following representations to EMTH with regard to the
Conversion and Reorganization. EMTH has not independently investigated these
representations, but, at your request, EMTH is relying on them as an integral
part of its opinions.
a. The merger of Interim into the Bank in the MHC Merger will be
effected pursuant to applicable state and/or federal banking laws.
b. The aggregate fair market value of the interest in the Liquidation
Account and the Subscription Rights received by each Eligible Account Holder
pursuant to the MHC Merger will be approximately equal to the fair market value
of the equity interest in the Mutual Holding Company surrendered by the
Eligible Account Holder in exchange therefor.
c. To the best of the knowledge of the management of the Mutual Holding
Company and the Bank, there is no plan or intention on the part of the Eligible
Account Holders to withdraw from their Deposit Accounts subsequent to the
Conversion and Reorganization such that the withdrawals would reduce their
aggregate interests in the Liquidation Account to an amount having a value at
the Effective Date of less than fifty percent of the value of the aggregate
interests which the Eligible Account Holders of the Mutual Holding Company will
have in the residual equity of the Mutual Holding Company immediately prior to
the Conversion and Reorganization.
d. The Bank has no plan or intention to reacquire any of the interests
in the Liquidation Account issued in the MHC Merger.
e. The liabilities of the Mutual Holding Company assumed by the Bank in
the MHC Merger and the liabilities to which the transferred assets of the
Mutual Holding Company are subject were incurred by the Mutual Holding Company
in the ordinary course of its business.
f. The Company, the Bank, the Mutual Holding Company, Interim and the
Eligible Account Holders will pay their respective expenses, if any, incurred
in connection with the Conversion and Reorganization, except that the Company,
the Bank, and the Mutual Holding Company may pay fees to brokers and investment
bankers for assisting Eligible Account Holders and Supplemental Eligible
Account Holders in completing and/or submitting Order Forms (as defined in the
Plan). These expenses for brokers and investment bankers to assist depositors
are solely and directly related to the Conversion and Reorganization and will
be paid by the Company, the Bank, and the Mutual Holding Company directly to
the brokers and investment bankers.
g. There is no intercorporate indebtedness existing (i) between the
Mutual Holding Company and the Bank, or (ii) between the Company and the Bank
that was issued, acquired, or will be settled at a discount in the Conversion
and Reorganization.
<PAGE> 5
August 15, 1997
Page 5
h. Neither the Company, the Bank, the Mutual Holding Company nor the
Interim are investment companies as defined in Sections 368(a)(2)(F)(iii) and
(iv) of the Code.
i. Neither the Mutual Holding Company nor the Bank are under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
j. The fair market value of the assets of the Mutual Holding Company
transferred to the Bank in the MHC Merger will equal or exceed the sum of the
liabilities assumed by the Bank plus the amount of liabilities, if any, to
which the transferred assets are subject.
k. The total adjusted basis of the assets of the Mutual Holding Company
transferred to the Bank in the MHC Merger will equal or exceed the sum of the
liabilities assumed by the Bank, plus the amount of liabilities, if any, to
which the transferred assets are subject.
l. The Bank has no plan or intention to issue additional shares of its
stock that would result in the Company owning less than all of the outstanding
stock of the Bank.
m. The Company has no plan or intention to liquidate the Bank; to merge
the Bank with or into another corporation; to sell or otherwise dispose of the
stock of the Bank except for transfers of stock to corporations controlled by
the Company; or to cause the Bank to sell or otherwise dispose of any of its
assets, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation controlled by the Bank.
n. The Company does not own, nor has it owned during any period of its
existence, any shares of stock of the Bank.
o. On the Effective Date, the fair market value of the assets of the
Bank will exceed the sum of its liabilities, plus the amount of liabilities, if
any, to which the assets are subject.
Analysis
Section 368(a)(1)(A) of the Code defines the term "reorganization" to
include a "statutory merger or consolidation" of corporations such as the MHC
Merger. Section 1.368- 2(b)(1) of the Treasury Regulations provides that, in
order to qualify as a reorganization under Section 368(a)(1)(A), a transaction
must be a merger or consolidation effected pursuant to the corporation laws of
the United States or a state. The Agreement provides that the MHC Merger the
will be accomplished in accordance with applicable state and federal law.
Treasury Regulations and case law require that, in addition to the
existence of statutory authority for a merger, certain other conditions must be
satisfied in order to qualify
<PAGE> 6
August 15, 1997
Page 6
a proposed transaction as a reorganization within the meaning of Section
368(a)(1)(A) of the Code. The "business purpose test," which requires a
proposed merger to have a bona fide business purpose, must be satisfied. See 26
C.F.R. Section 1.368-1(c). We believe that the Merger satisfies the business
purpose test for the reasons set forth in the Prospectus under the caption "The
Conversion and Reorganization - Purposes of the Conversion and Reorganization."
The "continuity of business enterprise test" requires an acquiring corporation
either to continue an acquired corporation's historic business or use a
significant portion of its historic assets in a business. See 26 C.F.R. Section
1.368-1(d). We believe that the continuity of business enterprise test is
satisfied since the Plan provides that the business conducted by the Bank prior
to the Merger will be unaffected by the transactions.
The "continuity of interest doctrine" requires that the continuing
stock interest of the former owners of an acquired corporation, considered in
the aggregate, represent a "substantial part" of the value of their former
interest, and provide them with a "definite and substantial interest" in the
affairs of the acquiring corporation or a corporation in control of the
acquiring corporation. Paulsen v. Comm'r., 469 U.S. 131 (1985); Helvering v.
Minnesota Tea Co., 296 U.S. 378 (1935); John A. Nelson Co. v. Helvering, 296
U.S. 374 (1935); Southwest Natural Gas Co. v. Comm'r., 189 F.2d 332 (5th Cir.
1951), cert. denied, 342 U.S. 860 (1951). We believe that the MHC Merger
satisfies the continuity of interest doctrine based upon the information set
forth in the Company's Registration Statement. Specifically, the IRS has ruled
in substantially identical transactions that the exchange of the members'
equity interests in the MHC for interests in a liquidation account established
at the Bank in the MHC Merger will not violate the continuity of interest
requirement of Section 1.368-1(b) of the Income Tax Regulations.
Section 362 of the Code provides that if property is acquired by a
corporation such as the Bank in connection with a reorganization, then the
basis of such property shall be the same as it would be in the hands of the
transferor immediately prior to the transfer. Section 1223(1) of the Code
states that where a corporation such as the Bank will have a carryover basis in
property received from another corporation which is a party to a
reorganization, the holding period of such assets in the hands of the acquiring
corporation shall include the period for which such assets were held by the
transferor. Section 1032 of the Code states that no gain or loss shall be
recognized to a corporation, such as the Company, on the receipt of property in
exchange for common stock.
Opinions
Based on the foregoing description of the Conversion and
Reorganization, and subject to the qualifications and limitations set forth in
this letter, we are of the opinion that, if the Conversion and Reorganization
were to be consummated as described above as of the date hereof, then:
1. The MHC Merger qualifies as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code.
<PAGE> 7
August 15, 1997
Page 7
2. No gain or loss will be recognized by the Bank upon the receipt of
the assets of the Mutual Holding Company in the MHC Merger. Section 1032 of the
Code.
3. The Company will recognize no gain or loss upon the receipt of cash
in the Offerings in exchange for shares of common stock of the Company. Section
1032 of the Code.
4. The Company will recognize no gain or loss upon the transfer of the
Contributed Offering Proceeds to the Bank in exchange for common stock of the
Bank. Section 351(a) of the Code.
5. The Bank will recognize no gain or loss upon the receipt of the
Contributed Offering Proceeds from the Company in exchange for common stock of
the Bank. Section 1032 of the Code.
Our opinions set forth herein are based upon the descriptions of the
Conversion and Reorganization as set forth in the Prospectus and upon the
factual matters set forth in the Plan. If the actual facts relating to any
aspect of the Conversion and Reorganization differ from such description in any
material respect, the opinions expressed herein may become inapplicable.
Further, our opinions are based on research of the Code, applicable Treasury
Regulations, current published administrative decisions of the IRS, and
existing judicial decisions as of the date hereof. We express no opinions other
than those stated immediately above as our opinions.
We hereby consent to the references to our firm in the Prospectus
contained in the Form 86-AC and Registration Statement on Form S-1 under the
caption "Legal and Tax Opinions."
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Philip Ross Bevan
--------------------------------------
Philip Ross Bevan, a Partner
<PAGE> 1
EXHIBIT 8.2
[ERNST & YOUNG LLP LETTERHEAD]
August 14, 1997
Boards of Directors,
Independence Community Bank Corp.
Independence Savings Bank
Board of Trustees
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
Lady and Gentlemen:
You have asked for our opinion regarding certain New York State and City bank
tax consequences of the proposed reorganization of Independence Savings Bank, a
New York chartered stock saving bank, ("the Bank") and Independence Community
Bank Corp., a New York chartered mutual holding company and parent of the Bank,
("the Mutual Holding Company") to a stock form of organization, pursuant to the
Bank's and Mutual Holding Company's Plan of Conversion (the "Plan").
We have relied upon the facts presented in the Prospectus which was included as
part of the Registration Statement filed with the Securities and Exchange
Commission by the Mutual Holding Company. We have also relied on the statement
of facts and management representations set forth in the opinion letter
prepared by Elias, Matz, Tiernan & Herrick LLP (hereafter, the "Opinion"). We
have made no independent determinations regarding the above facts and
representations and have relied upon them for purposes of this opinion.
Therefore, any changes to the above facts or representations may effect the
conclusions stated herein.
The following paragraphs outline the relevant facts with respect to the
proposed reorganization, which were obtained primarily from the Opinion,
outlining the Federal tax implications of the proposed reorganization. A copy
of the Opinion is attached hereto for reference.
Description of the Transactions:
The Bank will accomplish the reorganization through the use of a holding
company (the "Company") to purchase and hold the capital stock of the Bank. The
Company, a Delaware corporation, will offer for sale, through a subscription
offering and a syndicated community offering, shares of its common stock.
<PAGE> 2
August 14, 1997
Page 2
On the date of the reorganization the Mutual Holding Company will convert into
a stock institution and simultaneously merge into the Bank with the Bank being
the surviving institution (the "MHC Merger"). As a result of the MHC merger,
the Bank common stock, held by the Mutual Holding Company, will be
extinguished and the Bank will establish a liquidation account for the benefit
of eligible deposit account holders pursuant to the Plan.
The Plan provides that non-transferable rights to subscription for the common
stock of the Company will be granted, in order of priority: (i) to Eligible
Account Holders; (ii) Tax-Qualified Employee Stock Benefit Plans; and (iii)
Supplemental Eligible Account Holders. The Company will offer its shares of
common stock, remaining unsold after the subscription offering, for sale in a
community offering or, if necessary, in a syndicated community offering or
public offering at the discretion of the Board of Directors of the Company and
the Bank. The subscription offering, the community offering, the syndicated
community offering and the public offering will be referred to herein as the
Offering.
Fifty percent of the net proceeds received from the offering of the Company's
common stock will be contributed to the Bank in exchange for all of the Bank's
common stock.
The Bank will create a "liquidation account" for the benefit of eligible
account holders in an amount equal to its net worth as reported in the latest
financial statement reflected in the final prospectus used for the
reorganization. Pursuant to the Opinion, each eligible account holder, if they
were to continue to maintain their deposit accounts at the Bank, would be
entitled to receive a payment for their respective interest in the liquidation
account prior to any payment made to a stockholder upon a complete liquidation
of the Bank. Deposit accounts in the Bank will retain the same withdrawal
value, terms and conditions after the execution of the reorganization as they
did immediately preceding the reorganization.
It is assumed that, based upon the conclusions presented in the Opinion:
1. The proposed reorganization qualifies as a tax-free transaction for federal
income tax purposes pursuant to Section 368(a)(1)(A) of the Internal
Revenue Code ("IRC").
2. The Bank will recognize no gain or loss on the receipt of assets of the
Mutual Holding Company in the MHC Merger pursuant to Section 1032 of the
Internal Revenue Code.
3. No gain or loss will be recognized by the Company on the receipt of cash
from the Offerings in exchange for shares of common stock of the Company
pursuant to Section 1032 of the Internal Revenue Code.
<PAGE> 3
August 14, 1997
Page 3
4. No gain or loss will be recognized by the Company on the transfer of the
Contributed Offering Proceeds to the Bank in exchange for common stock of
the Bank pursuant to Section 351 (a) of the Internal Revenue Code.
5. No gain or loss will be recognized by the Bank on the receipt of the
Contributed Offering Proceeds from the Company in exchange for common stock
of the Bank pursuant to Section 1032 of the Internal Revenue Code.
New York State Bank Tax Consequences:
For purposes of Article 32 of the New York State Banking Law, Section 1451 of
the Tax Law imposes, annually, a franchise tax on every banking corporation for
the privilege of exercising its franchise or doing business in New York State
in a corporate or organized capacity.
Section 1451(a) of the Tax Law provides that the basic tax is nine percent of
the taxpayer's entire net income, or portion thereof allocated to New York
State, for the taxable year or part thereof.
Entire net income is defined in Section 1453(a) of the Tax Law as "total net
income from all sources which shall be the same as the entire taxable income
(but not alternative minimum taxable income)....which the taxpayer is required
to report to the United States Treasury Department....subject to the
modifications and adjustments hereinafter provided."
Section 1453(b) through (k) of the Tax Law and sections 18-2.3, 18-2.4 and
18-2.5 of the Franchise Tax on Banking Corporations Regulations, promulgated
thereunder, provide for the modifications and adjustments required by Section
1453(a). However, there are no modifications or adjustments applicable to a
transaction where, for federal income tax purposes, steps to a reorganization
are treated as exchanges pursuant to Sections 368(a)(1)(A), 351(a) and 1032 of
the Code and will result in no recognition of gain or loss for federal income
tax purposes. Therefore, for purposes of Section 1453 of the Tax Law, such
steps or exchanges would be treated the same as they are treated for federal
income tax purposes.
Accordingly, if the steps to the Reorganization described herein are treated as
tax-free exchanges under Sections 368(a)(1)(A), 351(a) and 1032 of the Code,
such exchanges would be tax-free for purposes of computing entire net income
under Section 1453 of Article 32 of the Tax Law.
<PAGE> 4
August 14, 1997
Page 4
New York City Bank Tax Consequences:
For purposes of Title 11, Chapter 6, of the New York City Banking Corporation
Tax Law, Section 11-639 imposes, annually, a tax on every banking corporation
for the privilege of doing business in New York City in a corporate or
organized capacity.
Section 11-643.5 of the Tax Law provides that the basic tax is nine percent of
the taxpayer's entire net income, or portion thereof allocated to New York
City, for the taxable year or part thereof.
Entire net income is defined in Section 11-641(a) of the Tax Law as "total net
income from all sources which shall be the same as the entire taxable income
(but not alternative minimum taxable income)....which the taxpayer is required
to report to the United States Treasury Department....subject to the
modifications and adjustments hereinafter provided."
Section 11-641(b) through (k) of the Tax Law and sections 3.03(b)(3),(4) and
(5) of the Tax on Banking Corporations Regulations, promulgated thereunder,
provide for the modifications and adjustments required by Section 11-641(a).
However, there are no modifications or adjustments applicable to a transaction
where, for federal income tax purposes, steps to a reorganization are treated
as exchanges pursuant to Sections 368(a)(1)(A), 351(a) and 1032 of the Code and
will result in no recognition of gain or loss for federal income tax purposes.
Therefore, for purposes of Section 11-641 of the Tax Law, such steps or
exchanges would be treated the same as they are treated for federal income tax
purposes.
Accordingly, if the steps to the Reorganization described herein are treated as
tax-free exchanges under Sections 368(a)(1)(A), 351(a) and 1032 of the Code, it
is our opinion that such exchanges would be tax-free for purposes of computing
entire net income under Section 11-641 of the New York City Banking Corporation
Tax Law.
Scope of Opinion:
The scope of this opinion is expressly limited to the New York State and City
bank tax consequences of the transactions in connection with the facts and
based upon the representations and assumptions stated above. Specifically, but
without limitations, our opinion has not been requested and none is provided,
with respect to the tax consequences of the transactions to any other party
involved in the transactions and with respect to any foreign, state, or local
consequence other than New York State and City bank taxes.
Our opinion, as stated above, is based upon our research and analysis of the
New York State and City tax laws and applicable regulations and the opinion of
counsel as to the federal tax consequences, all as of the date of issuance of
this opinion. The foregoing are
<PAGE> 5
August 14, 1997
Page 5
subject to change, and such change may be retroactively effective. If so, our
views as set forth above may be affected and may not be relied upon. We have
assumed no responsibility to update this opinion as a result of any such change
in law or rulings. Further, any variation or differences in the facts or
representations recited herein, for any reason, might affect our conclusions,
perhaps in an adverse manner, and make them inapplicable.
This letter represents our views as to the interpretation of existing law and,
accordingly, no assurance can be given that either the New York State
Department of Taxation and Finance or the New York City Department of Finance
will agree with the above analysis.
If you have any questions regarding this opinion, please call me at (212)
773-2223 or Victor Zammit at (212) 773-2864.
Very truly yours,
/s/ HOWARD A. RABINOWITZ
Howard A. Rabinowitz
Copy to: Anthony Burke
Robert Schirling
Victor Zammit
<PAGE> 1
EXHIBIT 10.2
[INDEPENDENCE COMMUNITY BANK CORP. LETTERHEAD]
______ __, 1997
Charles J. Hamm
President and Chief Executive Officer
Independence Savings Bank
195 Montague Street
Brooklyn, New York 11202
Dear Mr. Hamm:
This letter confirms Independence Community Bank Corp.'s commitment to
fund a leveraged ESOP in an amount up to $________. The commitment is subject
to the following terms and conditions:
1. Lender: Independence Community Bank Corp.
2. Borrower: Independence Community Bank Corp. Employee Stock Ownership
Plan.
3. Trustee: _____________________________________.
4. Security: Unallocated shares of stock of the Company held in the
Independence Community Bank Corp. Employee Stock Ownership Plan.
5. Maturity: Up to 20 years from funding.
6. Amortization: Equal principal payments on quarterly, semi-annual or
annual basis; specific amount to be set prior to funding upon
determination of total loan disbursements required.
<PAGE> 2
Charles J. Hamm
______ __, 1997
Page 2
7. Pricing:
a. [__%] or [THE PRIME RATE AS PUBLISHED IN THE WALL STREET
JOURNAL ON THE DATE OF THE LOAN transaction].
8. Interest Payments:
a. Quarterly, semi-annual or annual (on a 360 or 365 day
basis).
9. Funding: In full by ____________, unless such date is waived by
the Company.
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
Independence Savings Bank or the Company.
12. Closing Date: Not later than ______________, 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,
Joseph S. Morgano
Executive Vice President
Accepted on Behalf of
Independence Saving Bank
By: Date:
------------------------------ --------------------------
Charles J. Hamm
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.3
CHANGE IN CONTROL SEVERANCE AGREEMENT BETWEEN
INDEPENDENCE SAVINGS BANK AND _______________
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT is dated this ____ day of
_____ 1997, between Independence Savings Bank, a New York-chartered savings
bank (the "Bank" or the "Employer"), and _________ (the "Officer").
WITNESSETH
WHEREAS, the Officer is presently an officer of Employer;
WHEREAS, the Employer desires to be ensured of the Officer's continued
active participation in the business of the Employer; and
WHEREAS, in order to induce the Officer to remain in the employ of the
Employer and in consideration of the Officer's agreeing to remain in the employ
of the Employer, the parties desire to specify the severance benefits which
shall be due the Officer in the event that his employment with the Employer is
terminated under specified circumstances, including a change in control of
Independence Community Bank Corp., a Delaware corporation (the "Corporation"),
which is the holding company of the Bank;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. DEFINITIONS. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:
(a) ANNUAL COMPENSATION. The Officer's "Annual Compensation" for
purposes of this Agreement shall be deemed to mean the highest level of
aggregate base salary and cash incentive compensation paid to the Officer by
the Employer or any subsidiary thereof during the calendar year in which the
Date of Termination occurs (determined on an annualized basis) or either of the
two calendar years immediately preceding the calendar year in which the Date of
Termination occurs.
(b) CAUSE. Termination of the Officer's employment for "Cause" shall
mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order. For purposes of this paragraph, no act or failure to
act on the Officer's part shall be considered "willful" unless done, or omitted
to be done, by the Officer
<PAGE> 2
2
not in good faith and without reasonable belief that the Officer's action or
omission was in the best interests of the Employer.
(c) CHANGE IN CONTROL OF THE CORPORATION. "Change in Control of the
Corporation" shall mean the occurrence of any of the following: (i) the
acquisition of control of the Corporation as defined in 12 C.F.R. Section 574.4,
unless a presumption of control is successfully rebutted or unless the
transaction is exempted by 12 C.F.R. Section 574.3(c)(vii), or any successor to
such sections; (ii) an event that would be required to be reported in response
to Item 1(a) of Form 8-K or Item 6(e) of Schedule 14A of Regulation 14A
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act"),
or any successor thereto, whether or not any class of securities of the
Corporation is registered under the Exchange Act; (iii) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities; or (iv)
during any period of three consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the Corporation cease for
any reason to constitute at least a majority thereof unless the election, or
the nomination for election by stockholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(d) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Officer's employment is terminated for Cause, the date on which the Notice of
Termination is given, and (ii) if the Officer's employment is terminated for
any other reason, the date specified in the Notice of Termination.
(f) DISABILITY. Termination by the Employer of the Officer's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Officer for disability benefits under
the applicable long-term disability plan maintained by the Employer or any
subsidiary or, if no such plan applies, which would qualify the Officer for
disability benefits under the Federal Social Security System.
(g) GOOD REASON. Termination by the Officer of the Officer's
employment for "Good Reason" shall mean termination by the Officer following a
Change in Control of the Corporation based on:
(i) Without the Officer's express written consent, the
assignment by the Employer to the Officer of any
duties which are materially inconsistent with the
Officer's positions, duties, responsibilities and
status with the Employer immediately prior to a
Change in Control of the
<PAGE> 3
3
Corporation, or a material change in the Officer's
reporting responsibilities, titles or offices as an
employee and as in effect immediately prior to such
a Change in Control of the Corporation, or any
removal of the Officer from or any failure to
re-elect the Officer to any of such
responsibilities, titles or offices, except in
connection with the termination of the Officer's
employment for Cause, Disability or Retirement or as
a result of the Officer's death or by the Officer
other than for Good Reason;
(ii) Without the Officer's express written consent, a
reduction by either of the Employer in the Officer's
base salary as in effect immediately prior to the
date of the Change in Control of the Corporation or
as the same may be increased from time to time
thereafter or a reduction in the package of fringe
benefits provided to the Officer;
(iii) The principal executive office of the Employer is
relocated outside of the Brooklyn, New York area or,
without the Officer's express written consent,
Employer requires the Officer to be based anywhere
other than an area in which the Employer's principal
executive office is located, except for required
travel on business of the Employer to an extent
substantially consistent with the Officer's present
business travel obligations;
(iv) Any purported termination of the Officer's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (i) below;
or
(v) The failure by the Employer to obtain the assumption
of and agreement to perform this Agreement by any
successor as contemplated in Section 6 hereof.
(h) IRS. IRS shall mean the Internal Revenue Service.
(i) NOTICE OF TERMINATION. Any purported termination of the Officer's
employment by the Employer for any reason, including without limitation for
Cause, Disability or Retirement, or by the Officer for any reason, including
without limitation for Good Reason, shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a dated notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Officer's employment under the provision so indicated, (iii)
specifies a Date of Termination, which shall be not less than thirty (30) nor
more than ninety (90) days
<PAGE> 4
4
after such Notice of Termination is given, except in the case of the Employers'
termination of the Officer's employment for Cause, which shall be effective
immediately; and (iv) is given in the manner specified in Section 7 hereof.
(j) RETIREMENT. "Retirement" shall mean voluntary termination by the
Officer in accordance with the Employer's retirement policies, including early
retirement, generally applicable to their salaried employees.
2. BENEFITS UPON TERMINATION. If the Officer's employment by the
Employer shall be terminated subsequent to a Change in Control of the
Corporation by (i) the Employer for other than Cause, Disability, Retirement or
the Officer's death or (ii) the Officer for Good Reason, then the Employer
shall
(a) pay to the Officer, in either [TWELVE (12)/TWENTY-FOUR (24)] equal
monthly installments beginning with the first business day of the month
following the Date of Termination or in a lump sum as of the Date of
Termination (at the Officer's election), a cash severance amount equal to [ONE
(1)/TWO (2)] times the Officer's Annual Compensation; and
(b) maintain and provide for a period ending at the earlier of (i) the
expiration of the remaining term of this Agreement as of the Date of
Termination or (ii) the date of the Officer's full-time employment by another
employer (provided that the Officer is entitled under the terms of such
employment to benefits substantially similar to those described in this
subparagraph (b)), at no cost to the Officer, the Officer's continued
participation in all group insurance, life insurance, health and accident
insurance, disability insurance and other employee benefit plans, programs and
arrangements offered by the Employer in which the Officer was entitled to
participate immediately prior to the Date of Termination (excluding (y) stock
option and restricted stock plans of the Employer or the Corporation and (z)
cash incentive compensation included in Annual Compensation), provided that in
the event that the Officer's participation in any plan, program or arrangement
as provided in this subparagraph (b) is barred, or during such period any such
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced, the Employer shall arrange to provide the Officer with
benefits substantially similar to those which the Officer was entitled to
receive under such plans, programs and arrangements immediately prior to the
Date of Termination.
3. LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES. If the payments
and benefits pursuant to Section 2 hereof, either alone or together with other
payments and benefits which the Officer has the right to receive from the Bank,
would constitute a "parachute payment" under Section 280G of the Code, the
payments and benefits payable by the Bank pursuant to Section 2 hereof shall be
reduced, in the manner determined by the Officer, by the amount, if any, which
is the minimum necessary to result in no portion
<PAGE> 5
5
of the payments and benefits payable by the Bank under Section 2 being
non-deductible to the Bank pursuant to Section 280G of the Code and subject to
the excise tax imposed under Section 4999 of the Code. The parties hereto agree
that the present value of the payments and benefits payable pursuant to this
Agreement to the Officer upon termination shall be limited to three times the
Officer's Annual Compensation. The determination of any reduction in the
payments and benefits to be made pursuant to Section 2 shall be based upon the
opinion of independent counsel selected by the Bank's independent public
accountants and paid by the Bank. Such counsel shall be reasonably acceptable
to the Bank and the Officer; shall promptly prepare the foregoing opinion, but
in no event later than thirty (30) days from the Date of Termination; and may
use such actuaries as such counsel deems necessary or advisable for the
purpose. Nothing contained herein shall result in a reduction of any payments
or benefits to which the Officer may be entitled upon termination of employment
under any circumstances other than as specified in this Section 3, or a
reduction in the payments and benefits specified in Section 2 below zero.
4. MITIGATION; EXCLUSIVITY OF BENEFITS.
(a) The Officer shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Officer as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Officer upon a
termination of employment with the Employer pursuant to employee benefit plans
of the Employer or otherwise.
5. WITHHOLDING. All payments required to be made by the Employer
hereunder to the Officer shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employer may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
6. ASSIGNABILITY. The Employer may assign this Agreement and their
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Employer or the Corporation may
hereafter merge or consolidate or to which the Employer or the Corporation may
transfer all or substantially all of its respective assets, if in any such case
said corporation, bank or other entity shall by operation of law or expressly
in writing assume all obligations of the Employer hereunder as fully as if it
had been originally made a party hereto, but may not otherwise assign this
Agreement or their rights and obligations hereunder. The Officer may not assign
or transfer this Agreement or any rights or obligations hereunder.
<PAGE> 6
6
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Bank: Secretary
Independence Savings Bank
195 Montague Street, 12th Floor
Brooklyn, New York 11201
To the Officer:
8. AMENDMENT; WAIVER. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Officer and such officer or officers as may be
specifically designated by the Board of Directors of the Employer to sign on
their behalf. No waiver by any party hereto at any time of any breach by any
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
9. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United
States where applicable and otherwise by the substantive laws of the State of
New York.
10. NATURE OF EMPLOYMENT AND OBLIGATIONS.
(a) Nothing contained herein shall be deemed to create other than a
terminable at will employment relationship between the Employer and the
Officer, and the Employer may terminate the Officer's employment at any time,
subject to providing any payments specified herein in accordance with the terms
hereof.
(b) Nothing contained herein shall create or require the Employer to
create a trust of any kind to fund any benefits which may be payable hereunder,
and to the extent that the Officer acquires a right to receive benefits from
the Employer hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Employer.
11. TERM OF AGREEMENT. The term of this Agreement shall be for
[ONE/TWO YEARS,] commencing on the date of this Agreement and, upon approval of
the Board of Directors of the Employer, shall extend for an additional year on
each annual anniversary
<PAGE> 7
7
of the date of this Agreement such that at any time the remaining term of this
Agreement shall be [FROM ONE TO TWO YEARS] [ONE YEAR]. Prior to the first
annual anniversary of the date of this Agreement and each annual anniversary
thereafter, the Board of Directors of the Employer shall consider and review
(after taking into account all relevant factors, including the Officer's
performance) an extension of the term of this Agreement, and the term shall
continue to extend each year if the Board of Directors approves such extension
unless the Officer gives written notice to the Employer of the Officer's
election not to extend the term, with such written notice to be given not less
than thirty (30) days prior to any such anniversary date. If the Board of
Directors of the Employer elects not to extend the term, it shall give written
notice of such decision to the Officer not less than thirty (30) days prior to
any such anniversary date. If any party gives timely notice that the term will
not be extended as of any annual anniversary date, then this Agreement shall
terminate at the conclusion of its remaining term. References herein to the
term of this Agreement shall refer both to the initial term and successive
terms.
12. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15. REGULATORY PROHIBITION. Notwithstanding any other provision of
this Agreement to the contrary, any payments made to the Officer pursuant to
this Agreement, or otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C.
Section1828(k)) and the regulations promulgated thereunder, including 12 C.F.R.
Part 359.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the Employer and the Officer with respect to the matters agreed to
herein. All prior agreements between the Employer and the Officer with respect
to the matters agreed to herein are hereby superseded and shall have no force
or effect.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
<PAGE> 8
8
Attest: INDEPENDENCE SAVINGS BANK
- ------------------------------------ By:
John K. Schnock, Senior Vice President -------------------------------
and Counsel , Director
---------------------
OFFICER
By:
--------------------------------
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Consolidated Statements of Income" and to the use of our reports dated May 29,
1997 (with respect to the consolidated financial statements of Independence
Savings Bank) and October 8, 1996 (with respect to the financial statements of
Independence Savings Bank 401(k) Savings Plan, referred to in our report as the
Independence Savings Bank Incentive Savings Plan), included in Amendment No. 1
to the Registration Statement, related Prospectus and Prospectus Supplement of
Independence Community Bank Corp., dated August 26, 1997, for the registration
of up to 72,737,499 shares of its common stock, and the Application for
Conversion on Form 86-AC, dated August 26, 1997.
/s/ ERNST & YOUNG LLP
New York, New York
August 21, 1997
<PAGE> 1
EXHIBIT 23.4
[LETTERHEAD OF POTTER ANDERSON & CORROON]
August 25, 1997
Board of Directors
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
Ladies and Gentlemen:
We hereby consent to the references to this firm and our opinions in
the Registration Statement on Form S-1 filed by Independence Community Bank
Corp. (the "Company") and all amendments thereto, the Application for
Conversion on Form 86-AC filed by Independence Savings Bank, Brooklyn, New York
(the "Bank") and its mutual holding company parent, Independence Community Bank
Corp. (the "Mutual Holding Company") and all amendments thereto, and the Notice
and Application for Conversion for the Bank and the Mutual Holding Company
filed with the Federal Deposit Insurance Corporation and all amendments
thereto, relating to the conversion of the Mutual Holding Company from the
mutual to stock form, the concurrent issuance of the Bank's outstanding capital
stock to the Company, and the offering of the Company's common stock.
Very truly yours,
/s/Potter Anderson & Corroon
<PAGE> 1
Exhibit 23.5
CONSENT
We hereby consent to the reference to this firm and our opinion in the
Registration Statement on Form S-1 filed by Independence Community Bank Corp.,
Brooklyn, New York (the "Company"), and all amendments thereto; in the
Application for Conversion on Form 86-AC filed by Independence Savings Bank
(the "Bank") and Independence Community Bank Corp. (the "Mutual Holding
Company"), and all amendments thereto, and in the Notice and Application for
the Bank and the Mutual Holding Company filed with the Federal Deposit
Insurance Corporation and all amendments thereto; and references to our firm
under the heading "Experts," relating to the conversion of the Mutual Holding
Company from the mutual to stock form, the concurrent issuance of the Bank's
outstanding capital stock to the Company and the offering of the Company's
common stock.
/s/ William M. Mercer, Incorporated
WILLIAM M. MERCER, INCORPORATED
Philadelphia, Pennsylvania
Dated this 22 day of August 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 50,887
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 48,707
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 930,590
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,589,703
<ALLOWANCE> 28,777
<TOTAL-ASSETS> 3,820,595
<DEPOSITS> 3,380,174
<SHORT-TERM> 0
<LIABILITIES-OTHER> 106,662
<LONG-TERM> 17,183
0
0
<COMMON> 0
<OTHER-SE> 316,576
<TOTAL-LIABILITIES-AND-EQUITY> 3,820,595
<INTEREST-LOAN> 33,769
<INTEREST-INVEST> 9,089
<INTEREST-OTHER> 1,223
<INTEREST-TOTAL> 44,081
<INTEREST-DEPOSIT> 23,691
<INTEREST-EXPENSE> 23,890
<INTEREST-INCOME-NET> 20,191
<LOAN-LOSSES> 1,450
<SECURITIES-GAINS> 3
<EXPENSE-OTHER> 13,996
<INCOME-PRETAX> 6,254
<INCOME-PRE-EXTRAORDINARY> 6,254
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,548
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.39
<LOANS-NON> 15,022
<LOANS-PAST> 15,022
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 27,024
<CHARGE-OFFS> 78
<RECOVERIES> 381
<ALLOWANCE-CLOSE> 28,777
<ALLOWANCE-DOMESTIC> 28,777
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.3
[INDEPENDENCE COMMUNITY BANK CORP.]
Dear Eligible Account Holder:
Independence Community Bank Corp. is in the process of converting from the
mutual to stock form of organization. Independence Community Bank Corp., the
parent company of Independence Savings Bank, is converting so that it will be
structured in the form of ownership used by a growing number of financial
institutions and to allow Independence Savings Bank to become even stronger.
In addition, as part of the Conversion and in keeping with the Bank's
long-standing commitment to its local community, Independence Savings Bank
intends to establish a charitable foundation to be known as the Independence
Community Foundation. The Foundation will be dedicated to the promotion of
charitable purposes including, among other things, health, education and
welfare programs, community development activities, cultural efforts, not-for-
profit groups and other charitable purposes within the communities served by
the Bank.
TO ACCOMPLISH THE CONVERSION, YOUR PARTICIPATION IS EXTREMELY IMPORTANT. On
behalf of the Board, I ask that you help us meet our goal by reading the
enclosed materials and then casting your vote in favor of the Plan of
Conversion and mailing your signed proxy card immediately in the _______
postage-paid envelope provided. Should you choose to attend the Special Meeting
of Depositors and wish to vote in person, you may do so by revoking any
previously executed proxy. If you have an IRA or other Qualified Plan account
for which the Bank acts as trustee and we do not receive a proxy from you, the
Bank intends, as trustee for such account, to vote in favor of the Plan of
Conversion on your behalf.
If the Plan of Conversion is approved let me assure you that:
- Deposit accounts will continue to be federally insured to the same
extent they are today.
- Existing deposit accounts and loans will not undergo any change as a
result of the Conversion.
- Voting for approval will not obligate you to buy any shares of Common
Stock.
As an Eligible Account Holder, you may also take advantage of your
nontransferable rights to subscribe for shares of Independence Community Bank
Corp.'s Common Stock on a priority basis, before the stock is offered to the
general public. The enclosed Proxy Statement and Prospectus describes the stock
offering and the operations of Independence Savings Bank. If you wish to
purchase stock, please complete the stock order and certification form and
return it to one of our Conversion Customer Service Centers as listed in the
Prospectus, or mail it to Independence Savings Bank in the enclosed ________
postage-paid envelope marked "STOCK ORDER RETURN". Your order must be received
no later than 12:00 noon New York time on Day, Month X, 1997. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE MAKING AN INVESTMENT DECISION.
If you wish to use funds in your IRA or Qualified Plan at Independence Savings
Bank to subscribe for Common Stock, please be aware that applicable law
requires that such funds first be transferred to a self-directed retirement
account with a trustee other than Independence Savings Bank. The transfer of
such funds to a new trustee takes time, so please make arrangements as soon as
possible.
If you have any questions after reading the enclosed materials, please call our
Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the hours
of 10:00 a.m. to 4:00 p.m. Please note that the Conversion Center will be
closed from 12:00 noon Day, Month X, through 12:00 noon Day, Month X, in
observance of the ______________________ holiday.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#1
<PAGE> 2
[INDEPENDENCE COMMUNITY BANK CORP.]
Dear Eligible Account Holder:
Independence Community Bank Corp. is in the process of converting from the
mutual to stock form of organization. Independence Community Bank Corp., the
parent company of Independence Savings Bank, is converting so that it will be
structured in the form of ownership used by a growing number of financial
institutions and to allow Independence Savings Bank to become even stronger.
In addition, as part of the Conversion and in keeping with the Bank's
long-standing commitment to its local community, Independence Savings Bank
intends to establish a charitable foundation to be known as the Independence
Community Foundation. The Foundation will be dedicated to the promotion of
charitable purposes including, among other things, health, education and
welfare programs, community development activities, cultural efforts, not-for-
profit groups and other charitable purposes within the communities served by
the Bank.
TO ACCOMPLISH THE CONVERSION, YOUR PARTICIPATION IS EXTREMELY IMPORTANT. On
behalf of the Board, I ask that you help us meet our goal by reading the
enclosed materials and then casting your vote in favor of the Plan of
Conversion and mailing your signed proxy card immediately in the _______
postage-paid envelope provided. Should you choose to attend the Special Meeting
of Depositors and wish to vote in person, you may do so by revoking any
previously executed proxy. If you have an IRA or other Qualified Plan account
for which the Bank acts as trustee and we do not receive a proxy from you, the
Bank intends, as trustee for such account, to vote in favor of the Plan of
Conversion on your behalf.
If the Plan of Conversion is approved let me assure you that:
- Deposit accounts will continue to be federally insured to the same
extent they are today.
- Existing deposit accounts and loans will not undergo any change as a
result of the Conversion.
We regret that we are unable to offer you Common Stock in the Subscription
Offering, because the laws of your state or jurisdiction require us to register
either (1) the to-be-issued Common Stock of Independence Community Bank Corp.,
or (2) an agent of Independence to solicit the sale of such stock, and the
number of eligible subscribers in your state or jurisdiction does not justify
the expense of such registration.
If you have any questions after reading the enclosed materials, please call our
Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the hours
of 10:00 a.m. to 4:00 p.m. Please note that the Conversion Center will be
closed from 12:00 noon Day, Month X, through 12:00 noon Day, Month X, in
observance of the ______________________ holiday.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#2
<PAGE> 3
[INDEPENDENCE COMMUNITY BANK CORP.]
Dear Supplemental Eligible Account Holder:
Independence Community Bank Corp. is in the process of converting from the
mutual to stock form of organization. Independence Community Bank Corp., the
parent company of Independence Savings Bank, is converting so that it will be
structured in the form of ownership used by a growing number of financial
institutions and to allow Independence Savings Bank to become even stronger.
In addition, as part of the Conversion and in keeping with the Bank's
long-standing commitment to its local community, Independence Savings Bank
intends to establish a charitable foundation to be known as the Independence
Community Foundation. The Foundation will be dedicated to the promotion of
charitable purposes including, among other things, health, education and
welfare programs, community development activities, cultural efforts, not-for-
profit groups and other charitable purposes within the communities served by
the Bank.
As a Supplemental Eligible Account Holder, you may take advantage of your
nontransferable rights to subscribe for shares of Independence Community Bank
Corp.'s Common Stock on a priority basis, before the stock is offered to the
general public. The enclosed Prospectus describes the stock offering and the
operations of Independence Savings Bank. If you wish to purchase stock, please
complete the stock order and certification form and return it to one of our
Conversion Customer Service Centers as listed in the Prospectus, or mail it to
Independence Savings Bank in the enclosed _______ postage-paid envelope marked
"STOCK ORDER RETURN". Your order must be received no later than 12:00 noon New
York time on Day, Month X, 1997. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
MAKING AND INVESTMENT DECISION.
If you wish to use funds in your IRA or Qualified Plan at Independence Savings
Bank to subscribe for Common Stock, please be aware that applicable law
requires that such funds first be transferred to a self-directed retirement
account with a trustee other than Independence Savings Bank. The transfer of
such funds to a new trustee takes time, so please make arrangements as soon as
possible.
If you have any questions after reading the enclosed materials, please call our
Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the hours
of 10:00 a.m. to 4:00 p.m. Please note that the Conversion Center will be
closed from 12:00 noon Day, Month X, through 12:00 noon Day, Month X, in
observance of the ______________________ holiday.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#3
<PAGE> 4
[INDEPENDENCE COMMUNITY BANK CORP.]
Dear Potential Investor:
We are pleased to provide you with the enclosed material regarding the
conversion of Independence Community Bank Corp. from the mutual to stock form
of organization.
This information packet includes the following:
PROSPECTUS: This document provides detailed information about the
Independence Savings Bank's operations, the proposed stock offering by
Independence Community Bank Corp., a holding company formed by the Bank
to become its parent company upon completion of the Conversion, and the
establishment of a charitable foundation as part of the Conversion.
Please read it carefully prior to making an investment decision.
CONVERSION QUESTION AND ANSWER BROCHURE: This answers commonly asked
questions about the stock offering and establishment of the charitable
foundation.
STOCK ORDER AND CERTIFICATION FORMS: Use these forms to subscribe for
stock and return them together with your payment in the postage-paid
envelope provided. The deadline to subscribe for stock is 12:00 noon,
New York time on Day, Month X, 1997.
We are pleased to offer you this opportunity to become one of our charter
stockholders. If you have any questions regarding the Conversion or the
Prospectus, please call our Conversion Center at (XXX) XXX-XXXX, Monday through
Friday, between the hours of 10:00 a.m. to 4:00 p.m. Please note that the
Conversion Center will be closed from 12:00 noon Day, Month X, through 12:00
noon Day, Month X, in observance of the ___________ holiday.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
#4
<PAGE> 5
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]
Dear Customer of Independence Savings Bank:
At the request of Independence Community Bank Corp., the parent company for
Independence Savings Bank, we have enclosed material regarding the offering of
Common Stock in connection with the Conversion from the mutual to stock form of
organization. These materials include a Prospectus, stock order and
certification forms which offer you the opportunity to subscribe for shares of
Common Stock of Independence Community Bank Corp..
We recommend that you study this material carefully. If you decide to subscribe
for shares, you must return the properly completed stock order form and signed
certification form, along with full payment for the shares (or appropriate
instructions authorizing withdrawal from a deposit account at Independence
Savings Bank), no later than 12:00 noon, New York time on Day, Month X, 1997 in
the accompanying ______ postage-paid envelope. If you have any questions after
reading the enclosed material, please call the Conversion Center at (XXX)
XXX-XXXX, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m.,
and ask for a Sandler O'Neill representative. Please note that the Conversion
Center will be closed from 12:00 noon Day, Month X through 12:00 noon Day,
Month X, in observance of the ______________________ holiday.
We have been asked to forward these documents to you in view of certain
requirements of the securities laws of your jurisdiction. We should not be
understood as recommending or soliciting in any way any action by you with
regard to the enclosed materials.
Sincerely,
SANDLER O'NEILL & PARTNERS, L.P.
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Enclosure
#5
<PAGE> 6
[INDEPENDENCE COMMUNITY BANK CORP.]
P R O X Y R E Q U E S T
WE NEED YOUR VOTE!
DEAR CUSTOMER:
YOUR VOTE ON OUR PLAN OF CONVERSION HAS NOT YET BEEN RECEIVED. YOUR VOTE
IS VERY IMPORTANT TO US. PLEASE VOTE AND MAIL THE ENCLOSED PROXY TODAY.
REMEMBER: VOTING FOR THE PLAN OF CONVERSION DOES NOT
OBLIGATE YOU TO BUY STOCK. THE BOARD OF DIRECTORS OF
INDEPENDENCE SAVINGS BANK AND THE BOARD OF TRUSTEES OF
INDEPENDENCE COMMUNITY BANK CORP. HAVE UNANIMOUSLY
APPROVED THE PLAN OF CONVERSION, INCLUDING THE
ESTABLISHMENT OF THE CHARITABLE FOUNDATION, AND URGE YOU
TO VOTE IN FAVOR OF THE PLAN OF CONVERSION. YOUR
INDEPENDENCE SAVINGS BANK DEPOSIT ACCOUNTS OR LOANS WILL
NOT BE AFFECTED IN ANY WAY. DEPOSIT ACCOUNTS WILL CONTINUE
TO BE FEDERALLY INSURED.
A POSTAGE-PAID ENVELOPE IS ENCLOSED WITH THE PROXY FORM. IF YOU HAVE ANY
QUESTIONS, PLEASE CALL OUR CONVERSION CENTER AT (XXX) XXX-XXXX.
IF YOU HAVE MORE THAN ONE ACCOUNT YOU MAY RECEIVE MORE THAN ONE PROXY.
PLEASE VOTE TODAY BY RETURNING ALL PROXY FORMS RECEIVED.
SINCERELY,
INDEPENDENCE COMMUNITY BANK CORP.
#6
<PAGE> 7
QUESTIONS AND
ANSWERS
About Conversion
The Board of Directors of Independence Savings Bank and the Board of Trustees
of Independence Community Bank Corp. have unanimously adopted the Plan of
Conversion whereby the Bank will convert from being a wholly-owned subsidiary
of a mutual holding company, with no stockholders, to being a wholly-owned
subsidiary of Independence Community Bank Corp., a Delaware corporation formed
by Independence Savings Bank to acquire all the outstanding stock of the Bank.
As part of the Conversion, Independence Community Bank Corp. will be offering
its Common Stock for sale pursuant to the terms of the Plan of Conversion.
Independence is converting to stock ownership in order to be in the corporate
form used by a growing number of financial institutions and to allow the
Independence Savings Bank to become even stronger. In addition, as part of the
Conversion, the Bank intends to establish the Independence Community Foundation
which will be dedicated to charitable purposes within the Bank's local
communities.
It is necessary for Independence Savings Bank to receive the approval of: 1) at
least 75% of the votes cast by Eligible Account Holders in person or by proxy
at the Special Meeting; and 2) at least a majority of the votes eligible to be
cast at the Special Meeting, so YOUR VOTE IS VERY IMPORTANT. Please return your
proxy in the enclosed _______ postage-paid envelope. YOUR BOARD OF DIRECTORS OF
INDEPENDENCE SAVINGS BANK AND BOARD OF TRUSTEES OF INDEPENDENCE COMMUNITY BANK
CORP. URGE YOU TO VOTE "FOR" THE CONVERSION AND RETURN YOUR PROXY TODAY.
Effect on Deposits and Loans
Q. WILL THE CONVERSION AFFECT ANY OF MY DEPOSIT
ACCOUNTS OR LOANS?
A. No. The Conversion will have no effect on the
balance or terms of any deposit account or loan.
Your deposits will continue to be federally insured to
the fullest extent permissible.
7-1
<PAGE> 8
About Voting
Q. WHO IS ELIGIBLE TO VOTE ON THE CONVERSION?
A. Only depositors with accounts totalling $100 or more
on March 31, 1996 ("Eligible Account Holders") are
eligible to vote.
Q. AM I REQUIRED TO VOTE?
A. No. Eligible Account Holders are not required to
vote. However, because the Conversion will produce
a fundamental change in Independence's corporate
structure, all Eligible Account Holders are
encouraged to vote.
Q. WHY DID I RECEIVE SEVERAL PROXIES?
A. If you have more than one account you may have
received more than one proxy depending upon the ownership structure of
your accounts. Please vote, sign and return all proxy cards that you
received.
Q. HOW DO I VOTE?
A. You may vote by mailing your signed proxy card in the _______
postage-paid envelope provided. Should you choose to attend the
Special Meeting of Depositors and decide to change your vote, you may
do so by revoking any previously executed proxy.
Q. DOES MY VOTE FOR CONVERSION MEAN THAT I MUST
BUY COMMON STOCK OF INDEPENDENCE COMMUNITY
BANK CORP.?
A. No. Voting for the Plan of Conversion does not
obligate you to buy shares of Common Stock of
Independence Community Bank Corp.
Q. I HAVE A JOINT SAVINGS ACCOUNT. MUST BOTH PARTIES
SIGN THE PROXY CARD?
A. Only one signature is required, but both parties
should sign if possible.
7-2
<PAGE> 9
Q. WHO MUST SIGN FOR TRUST OR CUSTODIAN ACCOUNTS?
A. The trustee or custodian must sign such accounts, not
the beneficiary.
Q. I AM THE EXECUTOR (ADMINISTRATOR) FOR A DECEASED
DEPOSITOR. CAN I SIGN THE PROXY CARD?
A. Yes. Please indicate on the card the capacity in
which you are signing the card.
About The Foundation
Q. WHAT IS THE INDEPENDENCE COMMUNITY
FOUNDATION AND WHY IS IT BEING ESTABLISHED?
A. In keeping with the Independence Savings Bank's
long standing commitment to its local community, the Bank's Plan of
Conversion provides for the establishment of a charitable foundation
to be known as Independence Community Foundation. The Foundation will
be dedicated to the promotion of charitable purposes including, among
other things, health, education and welfare programs, community
development activities, cultural efforts, not-for-profit groups and
other charitable purposes within the communities served by the Bank.
Q. HOW WILL THE FOUNDATION BE FUNDED?
A. The Company will fund the Foundation with shares
of its Common Stock. Immediately following the Conversion a number of
shares of authorized but unissued Common Stock equal to ___% of the
Common Stock sold in the Offering, or XXX,XXX, XXX,XXX and XXX,XXX
shares at the minimum, midpoint and maximum of the Estimated Price
Range, respectively, will be contributed to the Foundation.
Q. WHAT IS THE IMPACT OF THE FOUNDATION ON THE
COMPANY'S STOCKHOLDERS' EQUITY AND EARNINGS?
A. The funding of the Foundation will impact the Company's stockholders'
equity and will have an adverse effect on the Company's earnings in
the period in which the Foundation is funded, which is expected to be
the _____ quarter of 199X.
7-3
<PAGE> 10
The establishment of the Foundation, however, was considered in the
independent appraisal of the aggregate pro forma market value of the
Company's Common Stock. In addition, there are certain tax effects,
regulatory considerations and other matters with respect to the
Foundation. A prospective stockholder should carefully review "Risk
Factors -- Establishment of the Foundation," and "The Conversion --
Establishment of the Foundation" in the Prospectus.
Q. IF I PURCHASE SHARES OF COMMON STOCK IN THE
CONVERSION, WILL MY INTEREST IN THE COMPANY BE
DILUTED AS A RESULT OF THE ESTABLISHMENT OF THE
FOUNDATION?
A. Yes. Upon completion of the Conversion and the
establishment of the Foundation, the Foundation will
receive an amount of Common Stock equal to ___%
of the Company's Common Stock sold in the
Offerings. As a result, persons purchasing shares in
the Conversion will have their ownership and voting
interests in the Company diluted by ___% upon
funding of the Foundation.
About The Stock
Investment in Common Stock involves certain risks. For a
discussion of the risks and other factors, investors are urged
to read the accompanying Prospectus.
Q. WHAT ARE THE PRIORITIES OF PURCHASING THE
COMMON STOCK?
A. The Common Stock of Independence Community
Bank Corp. will be offered in the following order to:
Independence Savings Bank's Eligible Account
Holders (depositors with accounts totaling $100 or
more as of March 31, 1996), the Bank's Employee
Plans and Supplemental Eligible Account Holders
(depositors with accounts totaling $100 or more as of
_________ XX, 1997) in a Subscription Offering.
Upon completion of the Subscription Offering,
Common Stock that is not sold in the Subscription
Offering will be offered to certain members of the
general public in a Community Offering and then to
the general public in a Syndicated Community
Offering.
7-4
<PAGE> 11
Q. WILL ANY ACCOUNT I HOLD WITH THE BANK BE
CONVERTED INTO STOCK?
A. No. All accounts remain as they were prior to the
Conversion. As an Eligible Account Holder or
Supplemental Eligible Account Holder, you receive
priority over the general public in exercising your
right to subscribe for shares of Common Stock.
Q. WILL I RECEIVE A DISCOUNT ON THE PRICE OF THE STOCK?
A. No. Conversion regulations require that the offering
price of the stock be the same for everyone:
customers, directors, officers, employees of the
Bank, and the general public.
Q. HOW MANY SHARES OF STOCK ARE BEING OFFERED, AND
AT WHAT PRICE?
A. Independence Community Bank Corp. is offering for
sale up to XX,XXX,XXX shares of Common Stock
at a subscription price of $10 per share. Under
certain circumstances, Independence Community
Bank Corp. may sell up to XX,XXX,XXX shares
(not including any shares contributed to the
Foundation).
Q. HOW MUCH STOCK CAN I PURCHASE?
A. The minimum purchase is 25 shares; the maximum
purchase by any person in the Subscription Offering is $XXX,XXX
(XX,XXX shares); in the Community Offering and Syndicated Community
Offering, if either is held, the maximum purchase by any person ,
including purchases by associates of such person or entity, is
$XXX,XXX (XX,XXX shares); and the maximum purchase by any person,
including purchases by associates of such person or entity in the
Subscription and Community Offerings is X% of the shares offered, or
XX,XXX shares.
Q. HOW DO I ORDER STOCK?
A. You may subscribe for shares of Common Stock by completing and
returning the stock order form and certification form, together with
your payment, either in person to one of our Conversion Customer
Service Centers as listed in the Prospectus, or by mail in the _______
postage-paid envelope that has been provided.
7-5
<PAGE> 12
Q. HOW CAN I PAY FOR MY SHARES OF STOCK?
A. You can pay for the Common Stock by check, cash,
money order or withdrawal from your deposit account at Independence
Savings Bank. Orders submitted by subscribers which aggregate $50,000
or more must be paid by official bank or certified check or by
withdrawal authorization from a deposit account at the Bank. If you
choose to pay by cash, you must deliver the stock order form and
payment in person to the main office of the Bank and it will be
converted to a bank check or a money order. PLEASE DO NOT SEND CASH IN
THE MAIL.
Q. WHEN IS THE DEADLINE TO SUBSCRIBE FOR STOCK?
A. An executed order form and certification form with
the required full payment must be received by 12:00 noon New York
time, on Day, Month Date, 1997.
Q. WHERE CAN I DELIVER MY STOCK ORDER FORM?
A. You may deliver your order form to any of the
specially designated Conversion Customer Service
Centers or return it in the _______________ postage-
paid envelope marked "STOCK ORDER RETURN."
Q. CAN I SUBSCRIBE FOR SHARES USING FUNDS IN MY
IRA/QUALIFIED PLAN AT INDEPENDENCE SAVINGS
BANK?
A. Applicable regulations do not permit the purchase of
Common Stock with your existing IRA or Qualified
Plan at Independence Savings Bank. To use such
funds to subscribe for Common Stock, you need to
establish a "self-directed" trust account with an
outside trustee. Please call our Conversion Center if
you require additional information. TRANSFER OF
SUCH FUNDS TAKES TIME, SO, PLEASE MAKE
ARRANGEMENTS AS SOON AS POSSIBLE.
Q. CAN I SUBSCRIBE FOR SHARES AND ADD SOMEONE ELSE
TO MY STOCK REGISTRATION?
A. No. Only the owner(s) of the qualifying account as
registered on the top of the stock order form may
subscribe for stock. Qualifying account holders who
are not registered on the top of stock order form may
not be added. Improperly executed order forms may
be deemed unacceptable.
7-6
<PAGE> 13
Q. WILL PAYMENTS FOR COMMON STOCK EARN INTEREST
UNTIL THE CONVERSION CLOSES?
A. Yes. Any payments made by cash, check or money
order will earn interest at the Bank's passbook rate
from the date of receipt to the completion or
termination of the Conversion. Withdrawals from a
deposit account or a certificate of deposit at the Bank
may be made without penalty. Depositors who elect
to pay for their Common Stock by withdrawal will
receive interest at the contract rate on the account
until the completion or termination of the
Conversion.
Q. WILL DIVIDENDS BE PAID ON THE STOCK?
A. No dividends are expected to be paid initially.
Following the Conversion, however, the Board of
Directors of Independence Community Bank Corp.
may consider a policy of paying cash dividends on
the Common Stock.
Q. WILL MY STOCK BE COVERED BY DEPOSIT INSURANCE?
A. No. The Common Stock cannot be insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the
FDIC or any other government agency nor is it insured or guaranteed by
Independence Savings Bank or Independence
Community Bank Corp.
Q. WHERE WILL THE STOCK BE TRADED?
A. Upon completion of the Conversion, Independence
Community Bank Corp. expects the stock to be
traded over-the-counter and to be quoted on the
Nasdaq National Market under the symbol "ICBC".
Q. CAN I CHANGE MY MIND AFTER I PLACE AN ORDER TO
SUBSCRIBE FOR STOCK?
A. No. After receipt, your order may not be modified or
withdrawn.
7-7
<PAGE> 14
Additional Information
Q. HOW CAN I RECEIVE ADDITIONAL INFORMATION ABOUT
THE CONVERSION AND THE FOUNDATION?
A. The Bank's Proxy Statement and Prospectus
describes the Conversion and the Foundation in
detail. Please read the Proxy Statement and
Prospectus carefully before voting. If you have any
questions after reading the enclosed material you
may call our Conversion Center at (XXX)
XXX-XXXX, Monday through Friday, between the
hours of 10:00 a.m. and 4:00 p.m. The Conversion
Center will be closed for the ____________ holiday,
from 12:00 noon Day, Month Date, through 12:00
noon Day, Month Date. TO ENSURE THAT EACH
PURCHASER RECEIVES A PROSPECTUS AT LEAST 48 HOURS
PRIOR TO THE EXPIRATION DATE OF ____________,
1997 IN ACCORDANCE WITH RULE 15c2-8 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, NO
PROSPECTUS WILL BE MAILED ANY LATER THAN FIVE DAYS
PRIOR TO SUCH DATE OR HAND DELIVERED ANY LATER
THAN TWO DAYS PRIOR TO SUCH DATE.
The shares of Common Stock offered in the Conversion are not savings
accounts or deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency nor is
the Common Stock insured or guaranteed by Independence Savings Bank or
Independence Community Bank Corp.
This is not an offer to sell or a solicitation of an offer to buy
Common Stock. The offer is made only by the Prospectus.
7-8
<PAGE> 15
[INDEPENDENCE COMMUNITY BANK CORP.]
If you would like to visit us, Independence Community Bank Corp. has
established Conversion Customer Service Centers at the following convenient
locations.
Independence Savings Bank
Street Address
City, State, Zip
Independence Savings Bank
Street Address
City, State, Zip
Independence Savings Bank
Street Address
City, State, Zip
If you would like to call us or speak with a representative of the
underwriters, Sandler O'Neill & Partners, L.P., please call our Conversion
Center at XXX-XXX-XXXX.
Stock Order Forms may be dropped off at any of our Conversion Customer Service
Centers or mailed in the enclosed blank postage-paid envelope to our Conversion
Center.
PLEASE NOTE THAT PROSPECTUSES AND STOCK ORDER FORMS CAN ONLY BE ACQUIRED
THROUGH THE CONVERSION CENTER.
#8
<PAGE> 16
[INDEPENDENCE COMMUNITY BANK CORP.]
____________________, 1997
Mr. John Smith
00-00 00 Drive
City, State 00000
Dear Mr. Smith:
We are pleased to announce that the Board of Directors of Independence Savings
Bank and the Board of Trustees of Independence Community Bank Corp. have
adopted a plan to convert from the mutual stock form of organization.
Independence Community Bank Corp., the parent company of Independence Savings
Bank is converting so that it will be structured in the form of ownership used
by a growing number of financial institutions and to allow our Bank to become
even stronger.
You are cordially invited to join members of our senior management team at an
informational meeting to be held on ____________ at 7:30 P.M. to learn more
about the Conversion and the stock offering.
A member of our staff will be calling to confirm your interest in attending the
meeting.
If you would like additional information regarding the meeting or our
Conversion, please call our Conversion Center number at (XXX) XXX-XXXX, Monday
through Friday between the hours of 10:00 a.m. to 4:00 p.m. Please note that
the Conversion Center will be closed from 12:00 noon Day, Month Date through
12:00 noon Day, Month Date, in observance of the ______________________
holiday.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
(Printed by Conversion Center)
#9
<PAGE> 17
[INDEPENDENCE COMMUNITY BANK CORP.]
____________________, 1997
Dear Subscriber:
We hereby acknowledge receipt of your order for shares of Common Stock in
Independence Community Bank Corp.
At this time, we cannot confirm the number of shares of Independence Community
Bank Corp. Common Stock that will be issued to you. Such allocation will be
made in accordance with the Plan of Conversion following completion of the
stock offering.
If you have any questions, please call our Conversion Center at (XXX) XXX-XXXX.
Sincerely,
INDEPENDENCE COMMUNITY BANK CORP.
CONVERSION CENTER
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Conversion Center)
#10
<PAGE> 18
[INDEPENDENCE COMMUNITY BANK CORP.]
____________________, 1997
[NAME]
[ADDRESS]
Dear Charter Shareholder:
Our Subscription Offering has been completed and we are pleased to confirm your
subscription for shares of Independence Community Bank Corp. Common Stock at a
price of $________ per share.
Trading in our stock has commenced on the Nasdaq National Market under the
symbol "ICBC". Your stock certificate will be mailed to you as soon as
possible. In addition, if your subscription was paid for by check, interest
will be mailed to you shortly.
On behalf of the directors and employees, we thank you for your interest in
Independence Community Bank Corp., and welcome you as a charter shareholder.
Sincerely,
INDEPENDENCE COMMUNITY BANK CORP.
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Conversion Center)
#11
<PAGE> 19
[INDEPENDENCE COMMUNITY BANK CORP.]
____________________, 1997
Welcome Shareholder:
We are pleased to enclose the stock certificate that represents your share of
ownership in Independence Community Bank Corp., the parent company of
Independence Savings Bank.
Please examine your stock certificate to be certain that it is properly
registered. If you have any questions about your certificate, you should
contact the Transfer Agent immediately at the following address:
Transfer Agent
Address
Telephone Number
Also, please remember that your certificate is a negotiable security which
should be stored in a secure place, such as a safe deposit box or on deposit
with your stockbroker.
On behalf of the Board of Directors of Independence Community Bank Corp. and
the employees of Independence Savings Bank, I would like to thank you for
supporting our offering.
Sincerely,
SIGNATURE
TITLE
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Conversion Center)
#12
<PAGE> 20
[INDEPENDENCE COMMUNITY BANK CORP.]
____________________, 1997
Dear Interested Investor:
We regret to inform you that Independence Savings Bank and Independence
Community Bank Corp., the parent company for Independence Savings Bank, have
decided not to accept your order for shares of Independence Community Bank
Corp. Common Stock in our Community Offering. This action is in accordance with
our Plan of Conversion which gives the Bank and the Holding Company, the
absolute right to reject the subscription of any Community Member, in whole or
in part, in the Community Offering.
Enclosed, therefore, is a check representing your subscription and interest
earned thereon.
Sincerely,
Independence Community Bank Corp.
(Printed by Conversion Center)
#13
<PAGE> 21
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]
____________________, 1997
To Our Friends:
We are enclosing the offering material for Independence Community Bank Corp.,
the parent company for Independence Savings Bank which is now in the process of
converting to stock form of organization.
Sandler O'Neill & Partners, L.P. is managing Independence's Subscription
Offering, which will conclude at 12:00 noon, _____________ time on , 1997.
Sandler O'Neill is also providing conversion agent and proxy solicitation
services. In the event that all the stock is not subscribed for in the
Subscription Offering (and Community Offering, if held), Sandler O'Neill will
form and manage a syndicate of broker/dealers to sell the remaining stock.
Members of the general public, other than residents of , are eligible to
participate. If you have any questions about this transaction, please do not
hesitate to call or write.
Sincerely,
SANDLER O'NEILL & PARTNERS, L.P.
The shares of Common Stock offered in the Conversion are not savings accounts
or deposits and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
(Printed by Sandler O'Neill)
#14
<PAGE> 1
EXHIBIT 99.4
GIFT INSTRUMENT
CHARITABLE GIFT TO THE INDEPENDENCE COMMUNITY BANK FOUNDATION
Independence Community Bank Corp., 195 Montague Street, Brooklyn, New
York (the "Company"), desires to make a gift of its common stock, par value
$.01 per share (the "Common Stock"), to the Independence Community Foundation
(the "Foundation"), a non-stock corporation organized under the laws of the
State of Delaware. The purpose of the donation is to establish a bond between
Independence Community Bank Corp. 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 _____ shares of
its Common Stock, for consideration of $.01 per share, or total consideration
of $_____, 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 Certificate 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; and
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
stockholders of the Company, provided, however, that if this Condition No. 3 is
waived by the Federal Deposit Insurance Corporation pursuant to Federal Deposit
Insurance Corporation Order No. ____, dated ________, 1997 (a copy of which is
attached hereto), then this Condition No. 3 shall become void and of no effect.
Dated:____________, 1997 Independence Community Bank Corp.
By:
----------------------------
Charles J. Hamm
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 1
EXHIBIT 99.5
CONVERSION VALUATION APPRAISAL
UPDATE REPORT
INDEPENDENCE COMMUNITY BANK CORP.
PROPOSED HOLDING COMPANY FOR
INDEPENDENCE SAVINGS BANK
Brooklyn, New York
Dated As of:
August 8, 1997
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE> 2
[RP FINANCIAL, LC. LETTERHEAD]
August 8, 1997
Board of Trustees
Independence Community Bank Corp. and
Board of Directors
Independence Savings Bank
195 Montague Street
Brooklyn, New York 11201-6297
Gentlemen:
RP Financial, LC. ("RP Financial") has completed and hereby provides
an updated independent appraisal of the estimated pro forma market value of the
common stock in connection with the mutual-to-stock conversion transaction
whereby Independence Community Bank Corp., a New York chartered mutual holding
company (the "Mutual Holding Company"), will be combined with Independence
Savings Bank (the "Bank") simultaneously with the Mutual Holding Company's
conversion to stock form and the reorganization of the Bank as a subsidiary of
a newly-formed Delaware stock corporation, to be known as Independence
Community Bank Corp. (the "Company). Newly-formed tax-qualified employee stock
benefit plans will be offered common stock of the Company in the conversion
offering, with purchases by the Employee Stock Ownership Plan ("ESOP") funded
by a loan from the Company. In addition, immediately following the conversion
the Company intends to donate to a charitable foundation authorized but
unissued shares of Company common stock equal to 8 percent of the shares issued
in the conversion.
This appraisal update is being furnished to the New York State
Department of Banking (the "Department") and the Federal Deposit Insurance
Corporation ("FDIC"), consistent with the valuation guidelines addressed at
length in the Original Appraisal. Our original appraisal report, dated June
20, 1997 (the "Original Appraisal"), is incorporated herein by reference. RP
Financial has prepared this appraisal update to reflect more recent financial
information for the Bank, as incorporated in the prospectus; changes in the
market for thrift stocks, including new issues; and, to the extent
publicly-available, updated financial and other information for the Peer Group.
As in the preparation of our Original Appraisal, we believe the data and
information used herein is reliable; however, we cannot guarantee the accuracy
and completeness of such information.
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change time to time, no assurance can be given that persons who purchase shares
of common stock in the Conversion will thereafter be able to buy or sell such
shares at prices related to the foregoing valuation of the estimated pro forma
market value thereof.
<PAGE> 3
Board of Trustees/Directors
August 8, 1997
Page 2
RP Financial's updated valuation was determined based on the financial
condition and operations of the Bank as of May 31, 1997, the date of the
financial data included in the Company's Prospectus. The de minimus balance of
Mutual Holding Company assets contributed to the Bank in conjunction with the
Conversion were considered in the estimated pro forma market value.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits RP Financial,
its principals or employees from purchasing stock of its client financial
institutions.
This valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things,
any developments or changes in the Bank's financial performance and condition,
management policies and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors
which impact value including, but not limited to: various changes in the
legislative and regulatory environment for financial institutions, the stock
market and the market for thrift stocks, and interest rates. Should any such
new developments or changes be material, in our opinion, to the valuation of
the shares, appropriate adjustments to the estimated pro forma market value
will be made. The reasons for any such adjustments will be explained in the
update at the date of the release of the update.
DISCUSSION OF RELEVANT CONSIDERATIONS
1. Financial Results
The Original Appraisal was based on the fiscal year March 31, 1997
financials contained in the original application and draft prospectus. With
the incorporation of May 31, 1997 "stub" financials in the application and
draft prospectus, RP Financial has included such financials in this appraisal
update. As described more fully below, some of the interim change in
financials through May 31, 1997 reflect the anticipated April 1997 reinvestment
of cash into securities following the March 1997 investment portfolio
restructuring and consummation of the pending branch purchase in April 1997.
Table 1 presents summary balance sheet data as of March 31, and May 31, 1997.
The trends are described more fully below.
<PAGE> 4
Board of Trustees/Directors
August 8, 1997
Page 3
Table 1
Independence Savings Bank
Recent Balance Sheet Data
<TABLE>
<CAPTION>
At March 31, 1997 At May 31, 1997
----------------- ---------------
% of % of
Amount Assets Amount(1) Assets
------ ------ --------- ------
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Selected Balance Sheet Items
- ----------------------------
Assets $3,733,316 100.00% $3,820,595 100.00%
Cash & Cash Equivalents 374,636(2) 10.03 130,993 3.43
Mortgage-Backed & Related Sec. 190,979 5.12 182,248 4.77
Investment Securities (AFS) 357,487 9.58 716,943 18.77
Loans Receivable (Net) 2,503,089 67.05 2,560,926 67.03
Intangible Assets (3) 60,499 1.62 63,130 1.65
Deposits 3,325,558 89.08 3,380,174 88.47
FHLB Advances 14,550 0.39 14,550 0.38
Other Borrowings 2,682 0.07 2,633 0.07
Stockholders' Equity 309,114 8.28 316,576 8.29
Tangible Stockholders' Equity 248,615 6.66 253,446 6.63
AFS Adjustment 368 0.01 3,282 0.09
Other Information
- -----------------
Loans Serviced for Others $314,639 $309,872
Int.-Earning Assets/Int.-Bearing Liab. 106% 109%
Non-Performing Assets/Total Assets 0.51% 0.46%
Loan Loss Allow./Gross Loans 1.06% 1.11%
Loan Loss Allow./Non-Performing Assets 144.92% 170.05%
</TABLE>
(1) Unaudited; includes a branch office located in Astoria, New York,
purchased in April 1997, which had $69.997 million of deposits at
March 31, 1997.
(2) Excludes $107.6 million of accounts receivable, or 2.88 percent of
assets, as a result of end- of-period investment securities sales.
Includes $270.2 million on deposit at the FHLB of New York, or 7.24
percent of assets, as a result of investment securities sales which
settled on or prior to March 31, 1997; these funds were subsequently
reinvested by April 2, 1997 in U.S. Treasury Securities.
(3) Includes goodwill and other intangibles of $23.7 and $36.8 million at
March 31, 1997, respectively, and $23.4 and $39.7 million at May 31,
1997, respectively.
Source: Audited and unaudited financial reports and offering documents.
<PAGE> 5
Board of Trustees/Directors
August 8, 1997
Page 4
Growth Trends
Independence's total assets increased by $87.3 million over the two
months ended May 31, 1997 to equal $3.821 billion, largely attributable to the
assets transferred (primarily cash) in the April 1997 branch purchase. The
portfolio of investment securities (all designated "available for sale")
increased from approximately $357.5 million as of March 31, 1997, to $716.9
million as of May 31, 1997, reflecting the April 1997 reinvestment of proceeds
from the March 1997 investment portfolio restructuring and cash from the April
1997 branch purchase. Accordingly, the cash balance diminished with the
redeployment of funds into investment securities. The loan portfolio also
increased from $2.503 billion as of March 31, 1997, to $2.561 billion as of May
31, 1997, with the ratio of loans/assets remaining relatively stable at
approximately 67 percent. The portfolio of loans serviced for others declined
through normal amortization and prepayment as loan sale activity during the two
months was minimal.
Deposits increased by approximately $54.6 million to equal $3.380
billion at May 31, 1997, less than the nearly $70 million of deposits acquired
in the April 1997 branch purchase, reflecting runoff at existing branches.
Borrowings remained constant during the interim period, reflecting primary
reliance on deposits for asset funding. As a result of the branch purchase,
Independence recorded a $2.6 million net increase to intangible assets;
intangible assets equaled $63.1 million as of May 31, 1997, equal to 1.65
percent of assets.
Loan Portfolio
Table 2 sets forth key characteristics of Independence's portfolio
as of March 31, 1997 and updated information as of May 31, 1997. The loan
portfolio schedule reflects that total loans have increased by approximately
$57.8 million over the two months ended May 31, 1997, to equal $2.561 billion
with portfolio composition undergoing small change. Multi-family loans,
comprising the largest segment of the loan portfolio at $1.404 billion, or 54.0
percent of total loans, as of May 31, 1997, demonstrated the largest dollar
growth of all loan categories. The balance of single-family mortgage loans
declined slightly, while commercial and other mortgage loans and cooperative
apartment loans increased modestly. As a result, the Bank's credit risk
profile increased somewhat during the two month period.
Investments and Mortgage-Backed Securities
Information regarding Independence's investment and mortgage-backed
securities portfolio as of March 31, 1997, is set forth in Table 3. The
balance of U.S. Government and agency securities increased from $345.1 million
to $702.4 million, reflecting the reinvestment of cash proceeds from the
investment portfolio restructuring and the branch purchase. The other
components of the investment and mortgage-backed securities portfolio showed
small change over the two months ended May 31, 1997. All of Independence's
investment securities and mortgage-backed securities continue to be classified
as "available for sale".
<PAGE> 6
Board of Trustees/Directors
August 8, 1997
Page 5
Table 2
Independence Savings Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
At March 31, 1997 At May 31, 1997
----------------- ---------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Mortgage Loans:
Single-Family Residential $552,745 21.8% $551,124 21.2%
Multi-Family Residential (1) 1,365,124 53.7 1,404,304 54.0
Commercial & Other Real Estate 158,336 6.2 163,136 6.3
------- --- ------- ---
Total Mortgage Loans $2,076,205 81.7% $2,118,564 81.5%
========== ===== ========== =====
Other Loans:
Coop. Apartment Loans $348,029 13.7% $359,663 13.8%
Student Loans 45,262 1.8 44,397 1.7
Home Equity & Improvement 19,545 0.8 19,069 0.6
Commercial Business Loans 25,249 1.1 30,661 1.2
Consumer & Other 27,005 1.0 28,795 1.1
------ --- ------ ---
Total Other Loans $465,090 18.3% $482,585 18.5%
======== ===== ======== =====
Total Loans Receivable $2,541,295 100.0% $2,601,149 100.0%
========== ====== ========== ======
Less:
Allowance for Loan Losses $27,024 $28,776
Unearned Disc. & Def. Fees 11,182 11,447
------ ------
Loans Receivable, Net $2,503,089 $2,560,926
========== ==========
</TABLE>
(1) Includes $294.9 and $306.5 million of loans secured by mixed use
properties (combined residential and commercial use) as of March 31,
1997 and May 31, 1997, respectively.
Source: Prospectus.
<PAGE> 7
Board of Trustees/Directors
August 8, 1997
Page 6
Table 3
Independence Savings Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
At At
March 31, May 31,
Type 1997 1997
---- ---- ----
($000) ($000)
<S> <C> <C>
U.S. Government & Agencies $345,144 $702,360
Municipal & Corporate Securities 1,462 1,462
Stocks 10,881 13,121
Mortgage-Backed Securities 190,979 182,248
------- -------
Total $548,466 $899,191
======== ========
</TABLE>
Source: Prospectus.
Funding
Deposit balances increased by $54.6 million, or by 1.6 percent, over
the two months ended May 31, 1997, to equal $3.380 billion, as the $70 million
of acquired deposits offset the $15.4 million net deposit outflow after
accounting for interest credited. As referenced earlier, recent growth of the
Bank's deposit base has primarily been the result of acquisition activity as
growth at existing offices has been limited. The use of borrowings continued
to be limited and the balance remained unchanged at $14.6 million.
As of May 31, 1997, the savings and transaction accounts amounted to
$1.59 billion, or 47.1 percent of total deposits, down from 47.6 percent at
March 31, 1997, largely reflecting the CD concentration at the acquired branch
in April 1997. The proportion of jumbo CDs relative to total deposits
increased slightly during the two months to nearly 5.9 percent.
Equity
After-tax earnings of $4.5 million during the two months ended May
31, 1997, coupled with the impact of a $2.9 million upward after-tax adjustment
on "available for sale" securities resulted in equity growth to $316.7 million.
As a result of interim asset growth attributable to the branch purchase, the
Bank's reported and tangible equity/assets ratios did not change significantly,
equaling 8.29 and 6.63 percent as of May 31, 1997, respectively. The Bank
maintained capital surpluses relative to all of its regulatory capital
requirements at May 31, 1997, as summarized below.
<PAGE> 8
Board of Trustees/Directors
August 8, 1997
Page 7
<TABLE>
<CAPTION>
Required Actual Excess
-------- ------ ------
% ($000) % ($000) % ($000)
- ------ - ------ - ------
<S> <C> <C> <C> <C> <C> <C>
Tier I leverage capital ratio 4 .0% $149,770 6.7% $249,335 2.7% $99,579
Risk-based capital ratios:
Tier I 4 .0 95,557 10.4 249,335 6.4 153,798
Total 8 .0 191,114 11.6 278,131 3.6 87,017
</TABLE>
Credit Risk Profile
As shown in Table 4, the Bank's level of non-performing assets
("NPAs") declined during the two month period from 0.51 to 0.46 percent of
assets, reflecting a $1.8 million decline in non-performing assets to $17.4
million and interim asset growth. Loan loss provisions during the two months
ended May 31, 1997 of $1.45 million and the reduction in non-performing loans
led to an improvement in the reserve coverage ratio from 145 percent to 170
percent. The ratio of allowance for loan losses to gross loans also showed
marginal improvement. At the same time, the Bank's risk-weighted assets ratio
decreased from 65.97 to 62.53 percent, reflecting a slightly lower level of
higher risk assets.
Table 4
Independence Savings Bank
Non-Performing Assets
<TABLE>
<CAPTION>
At At
March 31, May 31,
Type 1997 1997
---- ---- ----
($000) ($000)
<S> <C> <C>
Total Non-Performing Loans $18,648 $16,922
Real Estate Owned, Net (1) 540 484
--- ---
Total Non-Performing Assets $19,188 $17,406
======= =======
Allowance for Possible Loan Losses as a Percent
of Gross Loans 1.06% 1.11%
Allowance for Possible Loan Losses as a Percent
of Total Non-Performing Loans (2) 144.92% 170.05%
Non-Performing Loans as a Percent of Gross Loans 0.73% 0.65%
Non-Performing Assets as a Percent of Total Assets (2) 0.51% 0.46%
</TABLE>
(1) Real estate owned balances are shown net of related loss allowances.
(2) Non-performing assets consist of non-performing loans and REO.
Non-performing loans consist of non-accruing loans and all loans 90 days
or more past due and other loans which have been identified by the Bank as
presenting uncertainty with respect to the collectibility of interest or
principal.
Source: Prospectus.
<PAGE> 9
Board of Trustees/Directors
August 8, 1997
Page 8
Interest Rate Risk
The Bank continues to manage interest rate risk through the asset
side. As of March 31, 1997, the Bank's one and three year cumulative gap
ratios equaled negative 45.6 and 26.4 percent, respectively (based on
anticipated maturities and repricing). As of May 31, 1997, the one year
cumulative gap lengthened to negative 47.9 percent while the three year
cumulative gap improved to negative 17.4 percent. The change during the two
month period related primarily to the April reinvestment of cash proceeds from
the investment portfolio restructuring and branch purchase. The Bank's rate
shock analysis further reveals its interest rate exposure, as measured through
percent change in "net portfolio value" as of May 31, 1997, summarized below.
<TABLE>
<CAPTION>
Change in % Change in
Interest Rates Net Portfolio Value
-------------- -------------------
<S> <C>
+400 (36.99)%
+200 (16.39)
-200 15.42
-400 58.45
</TABLE>
Source: Prospectus.
Income and Expense Trends
The operating results analyzed below for the fiscal year ended March
31, 1997 and the trailing 12 month period ended May 31, 1997 reflect certain
non-operating and non-recurring items, thus requiring adjustments to estimate
core or recurring earnings. The two month stub period ended May 31, 1997 is an
indicator of core profitability as non-recurring items are minimal and since
the branch purchase, the March/April 1997 portfolio restructuring/reinvestment
and recent tax planning are more fully incorporated. At the same time, a two
month stub period is considered to be too short of a period to be relied upon
exclusively in reaching a valuation conclusion. The following discussion first
compares the two trailing 12 month periods and the two month stub period.
Net income declined for the 12 months ended May 31, 1997, relative
to fiscal 1997 levels, primarily as a result of higher operating expenses and,
to a lesser extent, a modest increase in loan loss provisions and slightly
lower non-interest operating income. Likewise, estimated core earnings
decreased by a similar amount as non-operating items did not change
significantly. For the 12 months ended May 31, 1997, net income equaled $15.6
million, or 0.42 percent of average assets, while estimated core earnings
equaled $24.1 million, equal to 0.64 percent of average assets (see Table 5 for
details). The two month stub period indicates annual earnings of $27.3
million, or 0.71 percent of average assets.
<PAGE> 10
Board of Trustees/Directors
August 8, 1997
Page 9
Table 5
Independence Savings Bank
Recent Income Statement Data
<TABLE>
<CAPTION>
12 Months Ended 12 Months Ended 2 Months Ended
March 31, 1997 May 31, 1997 May 31, 1997(2)
-------------- ------------ ---------------
Amount Pct.(1) Amount Pct.(1) Amount Pct.(1)
------ ------- ------ ------- ------ -------
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $255,303 6.84% $255,689 6.82% $44,081 6.94%
Interest Expense (140,187) (3.75) (140,073) (3.74) (23,890) (3.76)
------- ---- ------- ---- ------ ----
Net Interest Income $115,116 3.08% $115,616 3.09% $20,191 3.18%
Provision for Loan Losses (7,960) (0.21) (8,810) (0.24) (1,450) 0.23
------ ---- ------ ---- ------ ----
Net Interest Inc. After Provisions $107,156 2.87% $106,806 2.85% $18,741 2.95%
Other Operating Income 8,034 0.22 7,842 0.21 1,506 0.24
Goodwill Amortization (8,278) (0.22) (8,216) (0.22) (1,484) (0.23)
Operating Expense (65,322) (1.75) (67,610) (1.80) (12,512) (1.97)
------ ---- ------ ---- ------ ----
Net Operating Income $41,590 1.11% $38,822 1.04% $6,251 0.98%
Gain(Loss) on Sale of Loans & Sec. (3,347) (0.09) (3,316) (0.09) 3 0.00
Loss on Sale of Branch Deposits (1,778) (0.05) (1,778) (0.05) -- --
SAIF Special Assessment (8,553) (0.23) (8,553) (0.23) -- --
------ ---- ----- ---- -- --
Net Non-Operating Inc./Exp. $(13,678) (0.37)% $(13,647) (0.36)% $3 0.00%
Net Income Before Tax 27,912 0.75 25,175 0.67 6,254 0.98
Income Taxes (10,732) (0.29) (9,537) (0.25) (1,706) (0.27)
------ ---- ------ ---- -----
Net Income (Loss) $17,180 0.46% $15,638 0.42% $4,548 0.71%
Adjusted Earnings
- -----------------
Net Operating Income $41,590 1.11% $38,822 1.04% $6,251 0.98%
Tax Effect (3) (15,991) (0.43) (14,707) (0.39) (1,705) (0.27)
------ ---- ------ ---- ----- ----
Adjusted Earnings $25,599 0.69% $24,115 0.64% $4,546 0.71%
Memo:
Yield/Cost Spread 3.09% 3.08% 2.99%
Efficiency Ratio (4) 53.82% 54.76% 57.67%
Return on Equity (5) 5.69% 5.14% 8.75%
Effective Tax Rate 38.45% 37.88% 27.28%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Ratios are annualized.
(3) Based on effective tax rate for each year.
(4) Reflects operating expenses excluding SAIF assessment and amortization of
intangibles as a percent of the sum of other operating income and net
interest income.
(5) Excludes the special SAIF assessment on a tax-effected basis.
Source: Audited and unaudited financial reports and offering documents and RP
Financial calculations.
<PAGE> 11
Board of Trustees/Directors
August 8, 1997
Page 10
Independence's net interest income increased slightly for the most
recent trailing 12 month period, reflecting interim asset growth, while the
ratio as a percent of average assets remained essentially constant at 3.09
percent. The Bank's net interest income ratio for the two months ended May 31,
1997 annualized equaled 2.95 percent, which reflects a decline from a level of
3.09 percent reported for fiscal 1997, underscoring the previously referenced
trend of declining spreads, despite the 70 basis point yield pick-up from the
recent investment portfolio restructuring.
As discussed in the Original Appraisal, the Bank's adherence to a
traditional thrift operating strategy, limited level of diversification in the
products and services offered, and community service commitment as a low cost
provider of financial services have all limited other operating income to
modest levels. For the 12 months ended May 31, 1997, other operating income
equaled 0.21 percent of assets, a slight decline from the 0.22 percent of
assets reported for fiscal 1997. The other operating income ratio for the 2
months ended May 31, 1997 approximated 24 basis points on an annualized basis.
Independence's operating expenses increased to $67.6 million for the
12 months ended May 31, 1997, equal to 1.80 percent of average assets, versus
$65.3 million for fiscal 1997, or 1.75 percent of average assets (before
including the special SAIF assessment and goodwill amortization costs). The
factors leading to the increase include expenses incurred with respect to the
data processing conversion, an increase in compensation and employee benefits
expense resulting from the Bay Ridge acquisition and the 1996 and April 1997
branch purchases, partially offset by a reduction in FDIC insurance premiums
reflecting a lower assessment rate. For the two month May 31, 1997 stub
period, operating expenses before goodwill amortization are running at over $75
million annually, partially reflecting the additional operating expenses of the
purchased branch along with the costs of the data processing conversion. Data
processing costs reflected a $799,000 increase over the prior year stub period,
largely reflecting the conversion costs. Excluding such data processing
conversion costs indicates annual operating expenses of $70 million. However,
the Bank expects to continue to incur significant additional costs of the data
processing conversion through the end of fiscal 1998, so earnings will continue
to be adversely impacted. Notwithstanding the increase, the operating expense
ratio remains at relatively moderate levels in comparison to industry averages.
While the intangibles amortization expense remained substantially
unchanged, equaling 0.22 percent of average assets for the two trailing twelve
month periods, the expense in the most recent period edged approximately $0.7
million higher due to the $4 million premium paid to purchase the branch in
April 1997.
Independence's efficiency ratio (operating expenses before
intangibles amortization and the special SAIF assessment as a percent of the
sum of net interest income and other operating income) of approximately 54.76
percent for the most recent 12 months reflected a slight increase over the
fiscal 1997 ratio of 53.82 percent, largely due to the increase in operating
expenses. The efficiency ratio further deteriorated for the two month stub
period to 57.67 percent, again largely due to an increase in operating
expenses.
Provisions for loan losses increased to $8.8 million for the 12
months ended May 31, 1997 versus $8.0 million for the 12 months ended March 31,
1997. Loan loss provisions for the
<PAGE> 12
Board of Trustees/Directors
August 8, 1997
Page 11
two month period ended May 31, 1997 indicate an annual rate of $8.7 million.
The increase is attributable to the Bank's determination to increase the
allowance for loan losses in view of the continued emphasis on originating
multi-family mortgage loans as well as the increased volume of larger
multi-family mortgage and individual cooperative apartment loans.
Non-operating expenses for both trailing 12 month periods were
similar, comprised of three components: (1) losses on the sale of loans and
securities; (2) loss on the sale of branch deposits; and (3) special SAIF
assessment. As noted earlier, there were nominal non-recurring gains and
losses during the two months ended May 31, 1997.
2. Peer Group Financial Comparisons
Tables 6 through 10 present the financial characteristics and
operating results for Independence, the Peer Group and all publicly-traded
thrifts. Independence's financial information is based on the 12 month results
through May 31, 1997, while the trailing 12 month financial data for the Peer
Group is as of the latest date for which comprehensive data is publicly
available, either June 30, 1997 or March 31, 1997 (seven of the ten Peer Group
companies have reported June 30, 1997 results to date).
Financial Condition
In general, the comparative balance sheet ratios for the Bank and
the Peer Group did not vary significantly from the ratios exhibited in the
Original Appraisal (see Table 6). Relative to the Peer Group, the Bank's
interest-earning asset composition continued to reflect a higher level of loans
and cash and investments and a lower level of MBS.
The Peer Group continues to be better capitalized than the Bank on
both a reported and tangible capital basis. Specifically, the Bank's reported
and tangible capital ratios as of May 31, 1997, equaled 8.3 and 6.6 percent,
respectively, versus the Peer Group average of 11.1 and 10.4 percent,
respectively. On a post-conversion basis, the Bank's pro forma capital is
anticipated to exceed the Peer Group's average capitalization, both reported
and tangible capital levels. As discussed in the Original Appraisal, the
Bank's higher pro forma capital will provide greater leverage potential than
the Peer Group, although in the intermediate term the higher capital will lead
to a pronounced disadvantage in terms of ROE.
The Bank's interest-earning assets ("IEA") position (including cash
and equivalents) has increased to 94.0 percent which continues to compare
unfavorably to the Peer Group average of 96.6 percent. The Bank also continues
to maintain a higher ratio of interest-bearing liabilities ("IBL"), equal to
89.0 percent of assets as of May 31, 1997, relative to the Peer Group's ratio
of 86.9 percent, reflecting the Bank's lower capitalization. As a result of
the foregoing, the Peer Group continues to maintain greater balance sheet
strength and earnings power than the Bank, owing to the higher IEA/IBL ratio of
111.2 and 105.6 percent, respectively. The strengthened capital position from
the conversion, the partial withdrawal of funds to purchase conversion stock
and the reinvestment of proceeds in interest-earning assets should diminish the
Bank's comparative disadvantage and improve its earnings power.
<PAGE> 13
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 6
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of June 30, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY
- ------------------------------
May 31, 1997 22.2 67.0 4.8 88.5 0.5 0.0 8.3 1.7 6.6 0.0
SAIF-Insured Thrifts 18.0 67.4 11.3 71.2 14.5 0.2 12.7 0.2 12.5 0.0
All Public Companies 18.8 66.5 11.4 71.7 14.3 0.1 12.5 0.3 12.2 0.0
Comparable Group Average 18.0 61.6 17.0 74.3 12.6 0.0 11.1 0.7 10.4 0.0
Mid-Atlantic Companies 18.0 61.6 17.0 74.3 12.6 0.0 11.1 0.7 10.4 0.0
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
ALBK ALBANK Fin. Corp. of Albany NY 15.4 71.8 8.3 82.9 3.7 0.0 9.2 1.2 8.0 0.0
DIME Dime Community Bancorp of NY 21.2 56.3 17.9 73.3 10.6 0.0 14.5 2.0 12.5 0.0
FFIC Flushing Fin. Corp. of NY(1) 26.0 52.2 19.1 73.7 9.4 0.0 16.0 0.0 16.0 0.0
HAVN Haven Bancorp of Woodhaven NY 31.5 54.6 11.2 69.4 23.2 0.0 5.9 0.0 5.9 0.0
JSB JSB Financial, Inc. of NY(1) 40.1 57.0 0.0 74.5 0.0 0.0 22.2 0.0 22.2 0.0
PKPS Poughkeepsie Fin. Corp. of NY 5.0 73.3 17.4 68.2 22.0 0.0 8.4 0.0 8.4 0.0
PSBK Progressive Bank, Inc. of NY 15.3 66.8 14.2 90.8 0.0 0.0 8.6 0.9 7.6 0.0
QCSB Queens County Bancorp of NY 6.7 86.7 4.2 70.3 14.8 0.0 11.9 0.0 11.9 0.0
RELY Reliance Bancorp, Inc. of NY(1) 5.8 44.7 45.0 72.9 17.7 0.0 8.0 2.4 5.6 0.0
ROSE T R Financial Corp. of NY 13.5 52.3 32.7 67.5 24.2 0.0 6.2 0.0 6.2 0.0
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY
- ------------------------------
May 31, 1997 -1.09 2.16 -2.90 -0.42 -66.28 7.83 17.52 6.66 10.44 11.64
SAIF-Insured Thrifts 11.88 7.27 12.70 6.93 19.02 -0.36 -0.71 10.95 11.07 22.68
All Public Companies 12.24 7.41 12.88 7.21 17.75 1.24 0.78 10.90 10.92 22.29
Comparable Group Average 6.85 -6.80 14.83 4.69 27.41 0.57 1.12 8.49 8.32 17.07
Mid-Atlantic Companies 6.85 -6.80 14.83 4.69 27.41 0.57 1.12 8.49 8.32 17.07
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
ALBK ALBANK Fin. Corp. of Albany NY 8.32 -18.65 15.26 3.97 NM 4.67 3.56 7.23 7.23 12.80
DIME Dime Community Bancorp of NY -4.14 -47.64 24.38 1.40 NM -10.41 -10.86 9.86 9.87 19.99
FFIC Flushing Fin. Corp. of NY(1) 9.71 -14.38 24.29 5.48 NM -6.14 -6.14 11.74 11.74 26.57
HAVN Haven Bancorp of Woodhaven NY 14.92 1.77 21.96 10.24 33.27 12.61 12.87 6.71 6.71 14.69
JSB JSB Financial, Inc. of NY(1) -1.13 -11.18 9.48 -2.33 NM 0.42 0.42 NM NM NM
PKPS Poughkeepsie Fin. Corp. of NY 4.72 12.10 4.93 10.40 -9.01 3.77 3.77 6.89 6.89 11.95
PSBK Progressive Bank, Inc. of NY -2.54 -32.54 6.91 -2.91 NM 4.60 7.53 NM 7.58 14.79
QCSB Queens County Bancorp of NY 12.64 -3.72 14.17 5.53 NM -19.49 -19.49 NM 10.32 17.55
RELY Reliance Bancorp, Inc. of NY(1 10.46 30.15 10.82 4.42 53.63 0.22 4.14 NM NM NM
ROSE T R Financial Corp. of NY 15.56 16.06 16.12 10.67 31.75 15.41 15.41 NM 6.22 18.25
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 14
Board of Trustees/Directors
August 8, 1997
Page 13
Updated growth rates for the Bank and the Peer Group suggest little
change relative to the trends noted in the Original Appraisal (the Bank's
growth rates are annual rates for the 14 months ended May 31, 1997 while the
Peer Group's growth rates are for the most recently trailing 12 month period
for which data is publicly available). The Bank experienced slight shrinkage
in comparison to the Peer Group's nearly 7 percent asset growth, reflecting the
Bank's slight deposit shrinkage and partial repayment of borrowings. The
Bank's tangible equity continues to grow more quickly than the average of the
Peer Group, despite much lower profitability, given (a) the Bank's greater
amortization of intangible assets and (b) the various capital management
strategies employed by the Peer Group, particularly dividends and stock
repurchases.
Income and Expense Trends
The Bank's last 12 month profitability declined to 0.42 percent of
average assets from 0.46 percent for fiscal 1997, while the Peer Group's
earnings declined nominally to 0.95 percent of assets (see Table 7). As
described in the Original Appraisal, the Peer Group's earnings advantage was
largely attributable to higher net interest and non-interest income and lower
loan loss provisions and net non-operating losses, despite higher operating
expenses. On a core earnings basis, excluding net non-operating items
(including the special SAIF assessment) on an after-tax basis, the Peer Group
maintains its comparative advantage relative to the Bank, 1.04 and 0.64 percent
of average assets, respectively.
The Peer Group continued to maintain its net interest income ratio
advantage -- the net interest income equaled 3.09 percent and 3.60 percent of
assets for the Bank and Peer Group, respectively. The Bank's lower interest
income ratio reflected a lower level of interest-earning assets as well as
lower overall yields while the comparable interest expense ratio reflects a
similar core deposit mixture. Following the infusion of the conversion
proceeds, coupled with partial conversion proceeds funding by deposit
withdrawals, the Bank's net interest margin can be expected to improve
following the conversion.
The relative levels of loan loss provisions remained relatively
unchanged, with the Bank continuing to post higher provisions. Although the
Bank continues to maintain more favorable non-performing assets ratios relative
to the Peer Group (see Table 9), the Bank's greater loan portfolio risk profile
(see Table 8) and similar level of net loan chargeoffs (see Table 9) provide
support to the Bank's higher loan loss provisions.
As discussed earlier, operating expenses, before incorporating
intangibles amortization and the special SAIF assessment, increased for the
Bank. As a result, the updated operating expense ratio equaled 1.80 percent of
average assets, more closely approximating the Peer Group average of 1.98
percent of average assets. Since net interest and non-interest income changed
only nominally for the Bank and the Peer Group, the Bank's efficiency ratio
changed adversely relative to the Peer Group average (54.8 percent for the Bank
versus 51.2 percent for the Peer Group).
<PAGE> 15
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 7
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY
- ------------------------------
May 31, 1997 0.42 6.82 3.74 3.09 0.24 2.85 0.00 0.00 0.21 0.21
SAIF-Insured Thrifts 0.67 7.38 4.10 3.28 0.14 3.14 0.12 0.01 0.29 0.42
All Public Companies 0.74 7.39 4.06 3.34 0.15 3.19 0.12 0.00 0.29 0.41
Comparable Group Average 0.95 7.33 3.73 3.60 0.13 3.47 0.06 -0.02 0.23 0.27
Mid-Atlantic Companies 0.95 7.33 3.73 3.60 0.13 3.47 0.06 -0.02 0.23 0.27
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
ALBK ALBANK Fin. Corp. of Albany NY 0.84 7.34 3.61 3.73 0.19 3.54 0.05 -0.04 0.29 0.31
DIME Dime Community Bancorp of NY 0.96 6.98 3.26 3.72 0.33 3.39 0.05 -0.04 0.19 0.20
FFIC Flushing Fin. Corp. of NY(1) 0.90 7.35 3.52 3.84 0.04 3.80 0.08 -0.04 0.13 0.16
HAVN Haven Bancorp of Woodhaven NY 0.56 7.11 4.05 3.07 0.17 2.90 0.07 -0.01 0.53 0.58
JSB JSB Financial, Inc. of NY(1) 1.77 7.02 2.60 4.42 0.04 4.38 0.18 0.16 0.03 0.36
PKPS Poughkeepsie Fin. Corp. of NY 0.34 7.59 4.48 3.11 0.13 2.98 -0.02 -0.10 0.34 0.22
PSBK Progressive Bank, Inc. of NY 0.99 7.73 3.94 3.78 0.28 3.50 0.02 -0.07 0.37 0.32
QCSB Queens County Bancorp of NY 1.60 7.93 3.54 4.39 0.00 4.39 0.02 0.00 0.12 0.14
RELY Reliance Bancorp, Inc. of NY(1) 0.56 7.09 3.77 3.32 0.04 3.28 0.05 -0.03 0.13 0.15
ROSE T R Financial Corp. of NY 0.98 7.15 4.54 2.61 0.03 2.58 0.09 -0.01 0.17 0.25
</TABLE>
<TABLE>
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY
- ------------------------------
May 31, 1997 1.80 0.22 -0.36 0.00 7.36 4.28 3.08 5,057 37.88
SAIF-Insured Thrifts 2.19 0.02 -0.31 0.00 7.26 4.56 2.70 4,343 36.23
All Public Companies 2.20 0.03 -0.26 0.00 7.25 4.49 2.76 4,460 35.87
Comparable Group Average 1.98 0.06 -0.13 0.00 7.60 4.31 3.29 5,155 40.50
Mid-Atlantic Companies 1.98 0.06 -0.13 0.00 7.60 4.31 3.29 5,155 40.50
Comparable Group
- ----------------
Mid-Atlantic Companies
- ----------------------
ALBK ALBANK Fin. Corp. of Albany NY 2.16 0.10 -0.29 0.00 7.67 4.11 3.56 2,953 35.13
DIME Dime Community Bancorp of NY 1.78 0.19 -0.11 0.00 7.32 4.10 3.22 5,434 39.30
FFIC Flushing Fin. Corp. of NY(1) 2.36 0.00 -0.05 0.00 7.60 4.33 3.27 4,056 49.58
HAVN Haven Bancorp of Woodhaven NY 2.22 0.01 -0.41 0.00 7.30 4.39 2.91 3,257 33.29
JSB JSB Financial, Inc. of NY(1) 1.83 0.00 0.14 0.00 7.25 3.44 3.81 4,312 42.15
PKPS Poughkeepsie Fin. Corp. of NY 2.31 0.00 -0.31 0.00 7.96 4.97 2.99 3,178 40.58
PSBK Progressive Bank, Inc. of NY 2.20 0.16 0.02 0.00 8.05 4.34 3.71 3,150 33.12
QCSB Queens County Bancorp of NY 1.87 0.00 -0.03 0.00 8.13 4.30 3.83 12,224 41.42
RELY Reliance Bancorp, Inc. of NY(1) 1.70 0.19 -0.44 0.00 7.46 4.18 3.28 4,953 50.44
ROSE T R Financial Corp. of NY 1.34 0.00 0.15 0.00 7.27 4.96 2.31 8,036 39.98
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 16
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 8
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of June 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc.
Institution MBS Family & Land Comm RE Business Consumer
----------- ------ ------ ------ ------ ------ --------
(%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY 6.55 32.72 0.00 56.31 1.10 3.31
SAIF-Insured Thrifts 15.15 61.77 5.40 11.57 6.58 1.70
All Public Companies 15.02 60.77 4.91 13.00 6.17 1.97
Comparable Group Average 22.02 41.50 1.13 31.27 3.29 1.40
Comparable Group
----------------
ALBK ALBANK Fin. Corp. of Albany NY 8.63 68.05 0.83 5.86 8.53 8.42
DIME Dime Community Bancorp of NY 25.75 28.33 0.03 45.62 0.66 0.00
FFIC Flushing Fin. Corp. of NY(1) 28.62 43.85 0.00 27.49 0.32 0.00
HAVN Haven Bancorp of Woodhaven NY 26.69 48.42 0.89 20.75 3.29 0.04
JSB JSB Financial, Inc. of NY(1) 0.72 9.39 0.28 86.54 3.39 0.16
PKPS Poughkeepsie Fin. Corp. of NY 19.00 48.81 6.72 25.01 3.80 0.88
PSBK Progressive Bank, Inc. of NY 16.47 56.25 1.36 15.08 9.16 1.68
QCSB Queens County Bancorp of NY 6.65 22.95 0.11 70.32 0.06 0.00
RELY Reliance Bancorp, Inc. of NY(1) 50.02 38.85 0.67 7.23 3.29 0.08
ROSE T R Financial Corp. of NY 37.61 50.06 0.39 8.81 0.39 2.73
</TABLE>
<TABLE>
<CAPTION>
RWA/ Serviced Servicing
Institution Assets For Others Assets
----------- ------ ---------- ------
(%) ($000) ($000)
<S> <C> <C> <C>
Independence SB of Brooklyn NY 62.53 309,900 0
SAIF-Insured Thrifts 51.61 363,118 2,421
All Public Companies 52.04 439,787 3,008
Comparable Group Average 51.88 123,928 383
Comparable Group
----------------
ALBK ALBANK Fin. Corp. of Albany NY 61.17 273,434 570
DIME Dime Community Bancorp of NY 50.39 69,648 31
FFIC Flushing Fin. Corp. of NY(1) 45.29 46,272 0
HAVN Haven Bancorp of Woodhaven NY 49.12 178,785 0
JSB JSB Financial, Inc. of NY(1) 60.88 15,229 0
PKPS Poughkeepsie Fin. Corp. of NY 63.40 39,299 0
PSBK Progressive Bank, Inc. of NY 56.00 52,557 35
QCSB Queens County Bancorp of NY 59.27 0 0
RELY Reliance Bancorp, Inc. of NY(1) 37.23 424,129 3,046
ROSE T R Financial Corp. of NY 36.10 139,929 151
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 17
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 9
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of June 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY 0.01 0.46 0.59 1.12 191.57 165.37 2,222 0.09
SAIF-Insured Thrifts 0.28 0.81 0.88 0.82 170.78 130.14 319 0.12
All Public Companies 0.27 0.82 0.93 0.93 172.16 131.79 323 0.12
Comparable Group Average 0.21 1.12 1.26 1.06 125.80 102.57 295 0.08
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 0.09 0.91 0.85 0.99 116.56 78.77 1,050 0.16
DIME Dime Community Bancorp of NY 0.13 0.73 1.05 1.43 136.45 112.22 209 0.12
FFIC Flushing Fin. Corp. of NY(1) 0.03 0.32 0.52 1.15 223.21 200.33 232 0.00
HAVN Haven Bancorp of Woodhaven NY 0.08 0.74 1.19 1.15 96.49 86.28 885 0.37
JSB JSB Financial, Inc. of NY(1) 0.75 NA NA 0.62 NA NA 7 0.00
PKPS Poughkeepsie Fin. Corp. of NY 0.77 4.28 4.08 1.45 35.65 25.28 270 0.17
PSBK Progressive Bank, Inc. of NY 0.16 0.85 1.01 1.65 163.37 131.46 88 0.06
QCSB Queens County Bancorp of NY 0.00 0.68 0.55 0.74 134.79 95.23 1 -0.01
RELY Reliance Bancorp, Inc. of NY(1) 0.02 NA NA 0.57 NA NA 187 0.00
ROSE T R Financial Corp. of NY 0.02 0.46 0.80 0.80 99.87 90.99 19 -0.02
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 18
Board of Trustees/Directors
August 8, 1997
Page 17
The Bank's interest rate exposure, as measured by the quarterly change
in the net interest income ratio (see Table 10), continued to show greater
volatility than the Peer Group average, partially reflecting recent investment
portfolio restructuring. On a pro forma basis, the Bank's greater comparative
rate exposure should diminish through increased capitalization and investment
of proceeds.
3. Stock Market Conditions
Stock market conditions since the June 20, 1997 Original Appraisal
have continued to generally improve, even after absorbing the August 8, 1997
selloff triggered by renewed inflation fears. The thrift market, as measured
by the SNL Thrift Index, has generally outperformed the broader market indices,
as referenced below.
<TABLE>
<CAPTION>
6/20/97 8/8/97 % Change
------- ------ --------
<S> <C> <C> <C>
Dow Jones Industrials 7,796.5 8,031.2 3.0%
S&P 500 898.7 933.5 3.9
NASDAQ Composite 1,447.1 1,598.5 10.5
SNL Thrift Index 625.9 664.6 6.2
SNL Bank Index 344.8 357.2 3.6
</TABLE>
The renewed inflation fears has led to higher short-term interest
rates since the Original Appraisal, particularly rates on securities with terms
under one year.
<TABLE>
<CAPTION>
Basis Point
6/20/97 8/8/97 Change
------- ------ ------
<S> <C> <C> <C>
Prime Rate 8.50% 8.50% 0.00%
90 Day T-Bill 5.06 5.28 0.22
One Year T-Bill 5.63 5.57 (0.06)
30-Year T-Bond 6.66 6.63 (0.03)
</TABLE>
Some of the key economic reports announced since the Original
Appraisal are set forth below. The second quarter 1997 GDP growth was reported
at 2.2 percent, indicating slower economic growth than reported in the first
quarter of 1997. The annualized inflation rate was 2.3 percent for June 1997,
0.1 percent higher than the previous month. The unemployment rate for July
1997 was reported at 4.8 percent, a decline of 0.2 percent from the prior
month. The Fed left interest rates unchanged at its early July meeting.
Consistent with the SNL Thrift Index, the pricing ratios for New York
thrifts demonstrated similar pricing trends since the Original Appraisal, but
the Peer Group experience was less favorable.
<PAGE> 19
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 10
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of June 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Non-Earn. Quarterly Change in Net Interest Income
----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 06/30/97 03/31/97 12/31/96 09/30/96 06/30/96 03/31/96
- ----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY 6.6 105.6 6.0 53 -61 13 -7 12 49
SAIF-Insured Thrifts 12.1 111.2 3.2 1 1 -0 -2 8 7
All Public Companies 11.9 111.0 3.2 0 1 0 -1 8 6
Comparable Group Average 10.4 111.6 3.4 -2 0 10 4 -3 20
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 8.0 110.3 4.5 -0 11 -1 -8 -17 30
DIME Dime Community Bancorp of NY 12.5 113.8 4.6 -10 3 46 96 NA NA
FFIC Flushing Fin. Corp. of NY(1) 16.0 117.0 2.8 NA -1 0 9 4 48
HAVN Haven Bancorp of Woodhaven NY 5.9 105.2 2.7 5 -19 11 -9 10 11
JSB JSB Financial, Inc. of NY(1) 22.2 130.3 2.9 NA 1 0 4 7 2
PKPS Poughkeepsie Fin. Corp. of NY 8.4 106.2 4.3 -4 -2 20 9 -24 23
PSBK Progressive Bank, Inc. of NY 7.6 106.0 3.7 11 7 16 -33 12 4
QCSB Queens County Bancorp of NY 11.9 114.7 2.4 -8 2 4 -13 9 18
RELY Reliance Bancorp, Inc. of NY(1) 5.6 105.4 4.5 NA -2 1 -5 -33 37
ROSE T R Financial Corp. of NY 6.2 107.5 1.4 -5 4 -1 -10 6 11
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 20
Board of Trustees/Directors
August 8, 1997
Page 19
Median Pricing Characteristics (1)
<TABLE>
<CAPTION>
At At
6/20/97 8/8/97 % Change
------- ------ --------
<S> <C> <C> <C>
Peer Group
----------
Price/Core Earnings (x) 16.01x 16.69x 4.3%
Price/Tangible Book (%) 167.52% 157.85% (5.8)%
Price/Assets (%) 13.75% 13.32% (3.1)%
New York Thrifts
----------------
Price/Core Earnings (x) 17.82x 18.75x 5.2%
Price/Tangible Book (%) 134.92% 136.75% 1.4%
Price/Assets (%) 14.35% 14.70% 2.4%
</TABLE>
(1) Excludes mutual holding companies and companies subject to
acquisition.
The new issue market is separate and distinct from the market for
seasoned stock thrifts in that the pricing ratios for converting issues are
computed on a pro forma basis, specifically: (1) the numerator and denominator
are both impacted by the conversion offering amount, unlike existing stock
issues in which price change affects only the numerator; and (2) the pro forma
pricing ratio incorporates assumptions regarding source and use of proceeds,
effective tax rates, stock plan purchases, etc. which impact pro forma
financials, whereas pricing for existing issues are based on reported
financials. The distinction between pricing of converting and existing issues
is perhaps no clearer than in the case of the price/tangible book ("P/TB")
ratio in that the P/TB ratio of a converting thrift will typically always
result in a discount to tangible book value whereas in the current market for
existing thrifts the P/TB reflects a premium to tangible book value.
Therefore, it is appropriate to also consider the market for new issues, both
at the time of the conversion and in the aftermarket.
In general, the pace of conversion activity has slowed, but demand has
been heavy, resulting in heavy oversubscriptions and rapid aftermarket
appreciation despite near peak closing pricing ratios approximating 71 percent
of pro forma tangible book value and over 17 times pro forma earnings (see
Table 11).
<PAGE> 21
RP Financial, LC.
Table 11
RECENT CONVERSIONS PRICING:
LAST 3 MONTHS NATIONALLY AND LAST 3 YEARS IN NEW YORK
<TABLE>
<CAPTION>
Institutional Information Pre-Conversion Data
----------------------------------------
Financial Info. Asset Quality
- ---------------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res.
Institution State Date Ticker Assets Assets Assets Cov.
- ----------- ----- ---- ------ ------ ------ ------ ----
($Mil) (%) (%)(2) (%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LAST 3 MONTHS NATIONALLY
FirstSpartan Fin. Corp. SC * 07/09/97 FSPT $ 388 11.81% 0.75% 44%
GSB Financial Corp. NY 07/09/97 GOSB 96 12.68% 0.07% 188%
FirstBank Corp. ID * 07/02/97 FBNW 138 8.00% 0.99% 68%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 94 9.83% 0.91% 20%
Community First Bnkg.Corp. GA 07/01/97 CFBC 366 7.02% 1.68% 40%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 72 6.78% 0.63% 89%
Security Bancorp TN 06/30/97 P. Sheet 46 5.46% 0.06% NM
Sistersville Bancorp WV 06/26/97 P. Sheet 27 17.91% 0.31% 198%
SFB Bancorp TN 05/30/97 P. Sheet 47 10.04% 0.80% 82%
Rocky Ford Financial CO 05/22/97 P. Sheet 21 13.92% 0.00% NA
AVERAGES: $ 130 10.35% 0.62% 91%
AVERAGES, EXCLUDING 2ND STEPS: $ 133 10.40% 0.59% 101%
MEDIANS: $ 83 9.94% 0.69% 75%
MEDIANS, EXCLUDING 2ND STEPS: $ 72 10.04% 0.63% 82%
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB $ 96 12.68% 0.07% 188%
Roslyn Bancorp(1) NY 01/13/97 RSLN 1,973 11.55% 0.82% 137%
AFSALA Bancorp NY 10/01/96 AFED 137 6.08% 0.56% 105%
Dime Community Bancorp NY 06/26/96 DIME 1,094 7.46% 0.75% 77%
Catskill Financial Corp. NY 04/18/96 CATB 231 12.75% 0.70% 112%
Yonkers Financial Corp. NY 04/18/96 YFCB 210 7.72% 1.73% 23%
Peekskill Financial Corp. NY 12/29/95 PEEK 155 13.90% 1.30% 24%
Ambanc Holding Co. NY 12/27/95 AHCI 342 8.17% 3.52% 24%
Flushing Financial Corp. NY 11/21/95 FFIC 604 7.69% 1.08% 80%
Tappan Zee Financial NY 10/05/95 TPNZ 95 8.72% 2.40% 30%
SFS Bancorp NY 06/30/95 SFED 154 6.66% 1.41% 44%
Carver FSB NY 12/25/94 CARV 309 4.50% 0.93% 45%
Financial Bancorp NY 08/17/94 FIBC 158 6.51% 3.39% 18%
AVERAGES: $ 428 8.80% 1.44% 70%
MEDIANS: $ 210 7.72% 1.08% 45%
</TABLE>
<TABLE>
<CAPTION>
Institutional Information Offering Information Insider
Purchases
- ----------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
---------------
Conversion Gross % of Exp./ Recog.
Institution State Date Ticker Proc. Mid. Proc. ESOP Plans
- ----------- ----- ---- ------ ----- ---- ----- ---- -----
($Mil.) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LAST 3 MONTHS NATIONALLY
FirstSpartan Fin. Corp. SC * 07/09/97 FSPT $ 88.6 132% 1.6% 8.0% 4.0%
GSB Financial Corp. NY 07/09/97 GOSB 22.5 132% 4.1% 8.0% 4.0%
FirstBank Corp. ID * 07/02/97 FBNW 19.8 132% 3.5% 8.0% 4.0%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 11.9 132% 4.5% 8.0% 4.0%
Community First Bnkg.Corp. GA 07/01/97 CFBC 48.3 132% 2.9% 8.0% 4.0%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 8.6 132% 4.7% 8.0% 4.0%
Security Bancorp TN 06/30/97 P. Sheet 4.4 132% 6.9% 8.0% 4.0%
Sistersville Bancorp WV 06/26/97 P. Sheet 6.6 110% 6.8% 8.0% 4.0%
SFB Bancorp TN 05/30/97 P. Sheet 7.7 132% 3.2% 8.0% 4.0%
Rocky Ford Financial CO 05/22/97 P. Sheet 4.2 132% 8.3% 8.0% 4.0%
AVERAGES: $ 22.3 130% 4.7% 8.0% 4.0%
AVERAGES, EXCLUDING 2ND STEPS: $ 23.4 130% 4.7% 8.0% 4.0%
MEDIANS: $ 10.3 132% 4.3% 8.0% 4.0%
MEDIANS, EXCLUDING 2ND STEPS: $ 8.6 132% 4.1% 8.0% 4.0%
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB $ 22.5 132% 4.1% 8.0% 4.0%
Roslyn Bancorp(1) NY 01/13/97 RSLN 436.4 132% 2.1% 8.0% 4.0%
AFSALA Bancorp NY 10/01/96 AFED 14.5 132% 4.9% 8.0% 4.0%
Dime Community Bancorp NY 06/26/96 DIME 145.5 132% 2.5% 8.0% 4.0%
Catskill Financial Corp. NY 04/18/96 CATB 56.7 132% 3.3% 8.0% 4.0%
Yonkers Financial Corp. NY 04/18/96 YFCB 35.7 132% 2.7% 8.0% 4.0%
Peekskill Financial Corp. NY 12/29/95 PEEK 41.0 132% 2.4% 8.0% 4.0%
Ambanc Holding Co. NY 12/27/95 AHCI 54.2 132% 3.4% 8.0% 4.0%
Flushing Financial Corp. NY 11/21/95 FFIC 99.2 132% 2.3% 8.0% 4.0%
Tappan Zee Financial NY 10/05/95 TPNZ 16.2 132% 5.1% 8.0% 4.0%
SFS Bancorp NY 06/30/95 SFED 15.0 115% 4.7% 8.0% 4.0%
Carver FSB NY 12/25/94 CARV 23.1 132% 5.2% 8.0% 3.0%
Financial Bancorp NY 08/17/94 FIBC 21.9 175% 7.2% 7.0% 3.0%
AVERAGES: $ 75.5 134% 3.8% 7.9% 3.8%
MEDIANS: $ 35.7 132% 3.4% 8.0% 4.0%
</TABLE>
<TABLE>
<CAPTION>
Institutional Information Insider Pro Forma Data
Purchases ----------------------------------------
Pricing Ratios(4)
- ---------------------------------------------------------------------------------------------------------------------------------
Conversion Mgmt.& Core
Institution State Date Ticker Dirs. P/TB P/E(5) P/A
- ----------- ----- ---- ------ ----- ---- ------ ---
(%)(3) (%) (x) (%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LAST 3 MONTHS NATIONALLY
FirstSpartan Fin. Corp. SC * 07/09/97 FSPT 1.5% 72.4% 17.3x 19.1%
GSB Financial Corp. NY 07/09/97 GOSB 2.6% 72.5% 22.5 19.6%
FirstBank Corp. ID * 07/02/97 FBNW 8.2% 71.4% 22.8 12.9%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 4.6% 89.1% 24.1 16.0%
Community First Bnkg.Corp. GA 07/01/97 CFBC 1.0% 72.3% 24.5 11.9%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 9.8% 71.4% 16.7 10.9%
Security Bancorp TN 06/30/97 P. Sheet 2.0% 72.0% 14.1 8.8%
Sistersville Bancorp WV 06/26/97 P. Sheet 5.4% 65.0% 18.9 20.6%
SFB Bancorp TN 05/30/97 P. Sheet 5.3% 70.1% 13.9 14.5%
Rocky Ford Financial CO 05/22/97 P. Sheet 23.6% 67.9% 14.6 17.7%
AVERAGES: 6.4% 72.4% 18.9x 15.2%
AVERAGES, EXCLUDING 2ND STEPS: 6.6% 70.6% 18.4x 15.1%
MEDIANS: 5.0% 71.7% 18.1x 15.3%
MEDIANS, EXCLUDING 2ND STEPS: 5.3% 71.4% 17.3x 14.5%
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB 2.6% 72.5% 22.5x 19.6%
Roslyn Bancorp(1) NY 01/13/97 RSLN 1.3% 73.8% 15.3 18.6%
AFSALA Bancorp NY 10/01/96 AFED 4.7% 71.2% 16.3 9.7%
Dime Community Bancorp NY 06/26/96 DIME 2.7% 80.3% 17.3 11.9%
Catskill Financial Corp. NY 04/18/96 CATB 2.6% 73.2% 18.4 20.4%
Yonkers Financial Corp. NY 04/18/96 YFCB 3.7% 76.5% 15.1 14.8%
Peekskill Financial Corp. NY 12/29/95 PEEK 2.0% 72.4% 15.3 21.5%
Ambanc Holding Co. NY 12/27/95 AHCI 0.4% 73.5% 14.8 14.0%
Flushing Financial Corp. NY 11/21/95 FFIC 1.4% 75.4% 17.2 14.2%
Tappan Zee Financial NY 10/05/95 TPNZ 2.2% 74.7% 14.6 15.0%
SFS Bancorp NY 06/30/95 SFED 10.7% 65.8% 14.1 9.0%
Carver FSB NY 12/25/94 CARV 0.7% 73.9% 42.1 7.0%
Financial Bancorp NY 08/17/94 FIBC 5.6% 76.9% 13.8 12.2%
AVERAGES: 3.1% 73.9% 18.2x 14.5%
MEDIANS: 2.6% 73.8% 15.3x 14.2%
</TABLE>
<TABLE>
<CAPTION>
Institutional Information Pro Forma Data
----------------------------------
Financial Charac.
- -------------------------------------------------------------------------------------------------------
Conversion IPO
Institution State Date Ticker ROA TE/A ROE Price
- ----------- ----- ---- ------ --- ---- --- -----
(%) (%) (%) ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LAST 3 MONTHS NATIONALLY
FirstSpartan Fin. Corp. SC * 07/09/97 FSPT 1.1% 26.3% 4.2% $20.00
GSB Financial Corp. NY 07/09/97 GOSB 0.9% 27.1% 3.2% 10.00
FirstBank Corp. ID * 07/02/97 FBNW 0.6% 18.0% 3.1% 10.00
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 0.7% 17.9% 3.7% 10.00
Community First Bnkg.Corp. GA 07/01/97 CFBC 0.5% 16.4% 3.0% 20.00
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 0.7% 15.2% 4.3% 10.00
Security Bancorp TN 06/30/97 P. Sheet 0.6% 12.2% 5.1% 10.00
Sistersville Bancorp WV 06/26/97 P. Sheet 1.1% 31.6% 3.4% 10.00
SFB Bancorp TN 05/30/97 P. Sheet 1.0% 20.7% 5.0% 10.00
Rocky Ford Financial CO 05/22/97 P. Sheet 1.2% 26.1% 4.7% 10.00
AVERAGES: 0.8% 21.2% 4.0% $12.00
AVERAGES, EXCLUDING 2ND STEPS: 0.8% 21.5% 4.0% $12.22
MEDIANS: 0.8% 19.4% 3.9% $10.00
MEDIANS, EXCLUDING 2ND STEPS: 0.9% 20.7% 4.2% $10.00
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB 0.9% 27.1% 3.2% $10.00
Roslyn Bancorp(1) NY 01/13/97 RSLN 1.2% 25.2% 4.8% 10.00
AFSALA Bancorp NY 10/01/96 AFED 0.6% 13.7% 4.4% 10.00
Dime Community Bancorp NY 06/26/96 DIME 0.7% 16.9% 4.7% 10.00
Catskill Financial Corp. NY 04/18/96 CATB 1.1% 27.8% 4.0% 10.00
Yonkers Financial Corp. NY 04/18/96 YFCB 1.0% 19.4% 5.1% 10.00
Peekskill Financial Corp. NY 12/29/95 PEEK 1.4% 29.8% 4.7% 10.00
Ambanc Holding Co. NY 12/27/95 AHCI 0.9% 19.0% 5.0% 10.00
Flushing Financial Corp. NY 11/21/95 FFIC 0.8% 18.9% 4.4% 11.50
Tappan Zee Financial NY 10/05/95 TPNZ 1.0% 20.1% 5.1% 10.00
SFS Bancorp NY 06/30/95 SFED 0.6% 13.6% 4.7% 10.00
Carver FSB NY 12/25/94 CARV 0.2% 9.5% 1.8% 10.00
Financial Bancorp NY 08/17/94 FIBC 0.9% 15.9% 5.6% 10.00
AVERAGES: 0.9% 19.8% 4.4% $10.12
MEDIANS: 0.9% 19.0% 4.7% $10.00
</TABLE>
<TABLE>
<CAPTION>
Institutional Information Post-IPO Pricing Trends
------------------------------------------------------------
Closing Price:
- --------------------------------------------------------------------- ------------------------------------------------------------
First After
Conversion Trading % First %
Institution State Date Ticker Day Change Week(6) Change
- ----------- ----- ---- ------ --- ------ ------- ------
($) (%) ($) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LAST 3 MONTHS NATIONALLY
FirstSpartan Fin. Corp. SC * 07/09/97 FSPT $36.69 83.4% $36.62 83.1%
GSB Financial Corp. NY 07/09/97 GOSB 14.63 46.3% 14.75 47.5%
FirstBank Corp. ID * 07/02/97 FBNW 15.81 58.1% 15.56 55.6%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 11.13 11.2% 11.25 12.5%
Community First Bnkg.Corp. GA 07/01/97 CFBC 31.88 59.4% 33.00 65.0%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 14.50 45.0% 14.38 43.8%
Security Bancorp TN 06/30/97 P. Sheet 14.50 45.0% 15.00 50.0%
Sistersville Bancorp WV 06/26/97 P. Sheet 13.75 37.5% 13.88 38.8%
SFB Bancorp TN 05/30/97 P. Sheet 13.81 38.1% 13.38 33.8%
Rocky Ford Financial CO 05/22/97 P. Sheet 13.00 30.0% 13.13 31.3%
AVERAGES: $17.97 45.4% $18.10 46.1%
AVERAGES, EXCLUDING 2ND STEPS: $18.73 49.2% $18.86 49.9%
MEDIANS: $14.50 45.0% $14.57 45.7%
MEDIANS, EXCLUDING 2ND STEPS: $14.50 45.0% $14.75 47.5%
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB $14.63 46.3% $14.75 47.5%
Roslyn Bancorp(1) NY 01/13/97 RSLN 15.00 50.0% 15.88 58.8%
AFSALA Bancorp NY 10/01/96 AFED 11.38 13.8% 11.31 13.1%
Dime Community Bancorp NY 06/26/96 DIME 12.00 20.0% 12.00 20.0%
Catskill Financial Corp. NY 04/18/96 CATB 10.38 3.8% 10.50 5.0%
Yonkers Financial Corp. NY 04/18/96 YFCB 9.75 -2.5% 10.00 0.0%
Peekskill Financial Corp. NY 12/29/95 PEEK 12.125 21.2% 11.75 17.5%
Ambanc Holding Co. NY 12/27/95 AHCI 10.00 0.0% 10.31 3.1%
Flushing Financial Corp. NY 11/21/95 FFIC 13.88 20.7% 14.31 24.4%
Tappan Zee Financial NY 10/05/95 TPNZ 11.625 16.3% 11.50 15.0%
SFS Bancorp NY 06/30/95 SFED 11.50 15.0% 11.38 13.8%
Carver FSB NY 12/25/94 CARV 7.78 -22.2% 7.88 -21.2%
Financial Bancorp NY 08/17/94 FIBC 10.88 8.7% 10.94 9.4%
AVERAGES: $11.61 14.7% $11.73 15.9%
MEDIANS: $11.50 15.0% $11.38 13.8%
</TABLE>
<TABLE>
<CAPTION>
Institutional Information Post-IPO Pricing Trends
---------------------------
Closing Price:
- ---------------------------------------------------------------------------------------------------
After
Conversion First %
Institution State Date Ticker Month(7) Change
- ----------- ----- ---- ------ -------- -------
($) (%)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LAST 3 MONTHS NATIONALLY
FirstSpartan Fin. Corp. SC * 07/09/97 FSPT $35.63 78.1%
GSB Financial Corp. NY 07/09/97 GOSB 14.38 43.8%
FirstBank Corp. ID * 07/02/97 FBNW 17.88 78.8%
Montgomery Fin. Corp.(8) IN 07/01/97 MONT 11.75 17.5%
Community First Bnkg.Corp. GA 07/01/97 CFBC 34.25 71.3%
First Robinson Fin. Corp.(9) IL 06/30/97 FRFC 16.50 65.0%
Security Bancorp TN 06/30/97 P. Sheet 15.25 52.5%
Sistersville Bancorp WV 06/26/97 P. Sheet 14.00 40.0%
SFB Bancorp TN 05/30/97 P. Sheet 14.00 40.0%
Rocky Ford Financial CO 05/22/97 P. Sheet 13.50 35.0%
AVERAGES: $18.71 52.2%
AVERAGES, EXCLUDING 2ND STEPS: $19.49 56.1%
MEDIANS: $14.82 48.2%
MEDIANS, EXCLUDING 2ND STEPS: $15.25 52.5%
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB $14.38 43.8%
Roslyn Bancorp(1) NY 01/13/97 RSLN 16.00 60.0%
AFSALA Bancorp NY 10/01/96 AFED 12.13 21.2%
Dime Community Bancorp NY 06/26/96 DIME 11.87 18.7%
Catskill Financial Corp. NY 04/18/96 CATB 10.38 3.8%
Yonkers Financial Corp. NY 04/18/96 YFCB 9.94 -0.6%
Peekskill Financial Corp. NY 12/29/95 PEEK 11.25 12.5%
Ambanc Holding Co. NY 12/27/95 AHCI 9.87 -1.3%
Flushing Financial Corp. NY 11/21/95 FFIC 14.38 25.0%
Tappan Zee Financial NY 10/05/95 TPNZ 12.00 20.0%
SFS Bancorp NY 06/30/95 SFED 11.25 12.5%
Carver FSB NY 12/25/94 CARV 6.38 -36.2%
Financial Bancorp NY 08/17/94 FIBC 10.38 3.8%
AVERAGES: $11.55 14.1%
MEDIANS: $11.25 12.5%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded;
"NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrift.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
August 11, 1997
<PAGE> 22
Board of Trustees/Directors
August 8, 1997
Page 21
SUMMARY OF ADJUSTMENTS
In the Original Appraisal we applied various adjustments to the key
valuation parameters listed below. In this updated appraisal, we have revised
certain of these adjustments, as summarized below.
<TABLE>
<CAPTION>
Original Appraisal Updated Appraisal
------------------ -----------------
<S> <C> <C>
Financial Condition Slight Downward Slight Downward
Profitability, Growth & Viability of Earnings Moderate Downward Slight Downward
Asset Growth No Adjustment No Adjustment
Primary Market Area No Adjustment No Adjustment
Dividends No Adjustment No Adjustment
Liquidity of the Shares No Adjustment No Adjustment
Marketing of the Issue No Adjustment Moderate Upward
Management Slight Downward Slight Downward
Effect of Govt. Regulations & Regulatory Reform No Adjustment No Adjustment
</TABLE>
Based on the foregoing financial, comparative and market analyses, we
are revising the earnings adjustment to slight downward from moderate downward,
particularly with benefit of reviewing the May 31, 1997 stub earnings. The
Bank's valuation earnings base is still based on trailing 12 month earnings
since the Peer Group's are also based on trailing 12 months. However, we
considered the May 1997 stub period results in arriving at a conclusion on the
appropriate pro forma earnings multiple.
Following the date of the Original Appraisal, five standard
conversions that were subsequently publicly-traded completed their heavily
oversubscribed conversion offerings. The average first day price appreciation
of these thrifts approximated 58.5 percent, resulting in average price/tangible
book value ratios only modestly discounted to the market average and in a
premium earnings multiple (such pricing for certain of these thrifts limits the
capacity for stock repurchases given the apparent earnings dilution which would
occur). Since the aftermarket prices of these five conversions have stabilized
at such levels following their initial increases, we believe it is appropriate
to upgrade the "new issue market" component of the "marketing of the issue" key
valuation parameter.
After reviewing the other key valuation factors, no other revisions
were considered appropriate.
VALUATION ASSUMPTIONS
The only change in the valuation assumptions was updating the
reinvestment rate. The Original Appraisal reflected a 6.00 percent one-year
T-Bill rate as of March 31, 1997. This rate has been updated to 5.77 percent,
reflecting the reinvestment rate as of May 31, 1997.
<PAGE> 23
Board of Trustees/Directors
August 8, 1997
Page 22
VALUATION ANALYSIS
In view of the increased book value and assets valuation bases for the
Bank, recent demonstration of the Bank's improved core profitability and recent
strong new issue market, the latter two which led to upgrading two key
valuation parameters, coupled with generally increased Peer Group pricing, we
have increased our pro forma valuation of the Bank from $475 to $550 million.
As in the Original Appraisal, we have continued to utilize the three valuation
approaches: Price/Book (including the adjustment for intangible assets);
Price/Earnings (including the adjustment for core earnings); and Price/Assets.
These approaches are described more thoroughly below.
The Bank has adopted SOP 93-6, in which earnings per share
computations will be based on shares issued and outstanding excluding
unreleased ESOP shares. For purposes of preparing the pro forma pricing tables
and exhibits, we have reflected all ESOP shares to capture the full dilutive
effect. However, we have considered the impact of SOP 93-6 in the
determination of value.
1. Price/Book ("P/B"). As in the Original Appraisal, we
considered both reported and tangible book value in applying this approach,
utilizing the May 31, 1997 financial data. Based on the $550 million midpoint
valuation, the Bank's pro forma P/B and P/TB ratios are 71.30 and 77.68
percent, respectively. In comparison, the Peer Group's median P/B and P/TB
ratios as of August 8, 1997 were 146.95 and 157.85 percent, respectively. RP
Financial considered the Bank's P/B and P/TB relative discounts to be
appropriate in light of the previously referenced valuation adjustments, the
nature of the calculation of the pro forma P/B and P/TB ratios which
mathematically results in a discounted ratio to book value and tangible book
value, comparatively lower pro forma ROE and the resulting pricing ratios under
the earnings and assets approaches.
The Bank's updated pro forma P/TB ratio of 77.68 percent
at the midpoint compares to 74.13 percent in the Original Appraisal, an
increase of 4.8 percent. In comparison, the Peer Group's median P/TB declined
between these two dates by 5.8 percent.
2. Price/Earnings ("P/E"). As in the Original
Appraisal, we considered both reported and core earnings in applying this
approach, utilizing trailing 12 month earnings (see Table 5). We also
considered the Bank's implied annual earnings for the two month stub period.
Based on the Bank's reported and core earnings estimates, and incorporating the
previously referenced pro forma assumptions, the Bank's reported and core P/E
multiples at the $550 million midpoint value were 21.38 and 16.08 times,
respectively. In comparison, the Peer Group's median reported and core P/E
multiples are 17.34 and 16.69 times, respectively. The virtual elimination of
a core P/E discount at the midpoint was considered appropriate in view of the
stub period results and the strength of the new issue thrift market.
Accordingly, the upper end of the valuation range reflects a premium core P/E
multiple (17.70 and 19.40 times at the maximum and supermaximum, respectively)
relative to the Peer Group median of 16.69 times.
<PAGE> 24
Board of Trustees/Directors
August 8, 1997
Page 23
The Bank's updated pro forma core P/E ratio of 16.08
times at the midpoint compares to 13.67 times in the Original Appraisal, an
increase of 17.6 percent. In comparison, the Peer Group's median core P/E
multiple between these dates increased by 4.2 percent. The Bank's increased P/E
multiple conclusion took into account the reduced ROE implicit with the
increased value, as management has indicated that the Bank's operating strategy
is not expected to change with a higher pro forma equity position.
3. Price/Assets ("P/A"). At the $550 million midpoint
value, the Bank's P/A ratio of 12.86 percent reflects a small discount relative
to the Peer Group median of 13.32 percent. At the upper end of the valuation
range, the Bank's P/A ratios of 14.56 and 16.44 percent at the maximum and
supermaximum, respectively, reflects a premium to the Peer Group median. The
computation of the Bank's P/A ratios is assumed to be understated in that
deposit withdrawals are expected to be utilized to partially fund stock
purchases but such assumption is not reflected in the regulatory valuation
formulas.
The Bank's updated pro forma P/A ratio of 12.86 percent at
the midpoint compares to 11.51 percent in the Original Appraisal, an increase of
11.7 percent. In comparison, the Peer Group's median P/A ratio between the two
dates decreased by 3.1 percent.
COMPARISON TO RECENT CONVERSIONS
As in the Original Appraisal, we have considered the closing and
current market pricing of recent conversions, excluding second step
conversions), particularly the price/tangible book value ratios. The median
closing P/TB ratio for the nine recent standard conversions the last three
months was 71.4 percent (all but one oversubscribed) and 72.0 percent for the
five of these that were subsequently NASDAQ-listed (see Table 11). The Bank's
appraised midpoint P/TB ratio of 77.68 percent exceeds the closing P/TB of the
recent conversions by a considerable margin, implying a 25 percent higher
dollar value for the Bank than if valued at the closing P/TB of recent
conversions.
In comparison, these five conversions are now trading at a median P/TB
ratio of 122.92 percent (see Table 12). The Bank's P/TB at the midpoint value
is at a discount to the aftermarket P/TB ratio of recent conversions. As noted
earlier, the closing and aftermarket P/TB ratios are not directly comparable in
that the closing ratio reflects the pro forma impact of conversion on equity
whereas the aftermarket ratio reflects only price with no further impact on the
equity level.
VALUATION CONCLUSION
It is our opinion that, as of August 8, 1997, the estimated aggregate
pro forma market value of the shares to be issued immediately following the
conversion was $550 million. Based on this valuation, the Trustees and
Directors of the Company and the Bank have established the Initial Purchase
Price and the number of shares of Conversion Stock to be offered, including the
<PAGE> 25
RP FINANCIAL, LC.
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 12
Market Pricing Comparatives
Prices As of August 8, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 21.86 146.74 1.16 15.73 21.30 139.24 17.28 143.49 18.63
Special Selection Grouping(8) 22.82 65.60 0.66 18.86 27.63 118.45 24.96 118.45 28.26
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CFBC Community First Bnkg Co. of GA 34.00 82.08 0.82 27.66 NM 122.92 20.18 122.92 NM
FBNW FirstBank Corp of Clarkston WA 18.25 36.21 0.44 14.00 NM 130.36 23.51 130.36 NM
FSPT FirstSpartan Fin. Corp. of SC 35.62 157.80 1.16 27.63 NM 128.92 33.93 128.92 NM
GOSB GSB Financial Corp. of NY 14.37 32.30 0.44 13.78 27.63 104.28 28.22 104.28 NM
MONT Montgomery Financial Corp ofIN 11.87 19.62 0.42 11.22 NM 105.79 18.95 105.79 28.26
</TABLE>
<TABLE>
<CAPTION>
Financial Characteristics(6)
Dividends(4) -------------------------------------------------------
----------------------- Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- --------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------ ------- ------ ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.38 1.78 29.52 1,128 13.03 0.81 0.55 5.58 0.76 7.56
Special Selection Grouping(8) 0.00 0.00 0.00 249 21.51 1.95 0.67 3.02 0.74 3.45
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CFBC Community First Bnkg Co. of GA 0.00 0.00 0.00 407 16.42 NA 0.25 1.52 0.49 2.96
FBNW FirstBank Corp of Clarkston WA 0.00 0.00 0.00 154 18.04 1.95 0.70 3.86 0.57 3.14
FSPT FirstSpartan Fin. Corp. of SC 0.00 0.00 0.00 465 26.32 NA 0.95 3.62 1.11 4.20
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 114 27.06 NA 1.02 3.77 0.86 3.19
MONT Montgomery Financial Corp ofIN 0.00 0.00 0.00 104 17.91 NA 0.42 2.32 0.67 3.74
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS(estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Converted Last 3 Mths (no MHC);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 26
Board of Trustees/Directors
August 8, 1997
Page 25
range of value. Accordingly, the Boards have established a range of value of
15 percent above and below the appraised value of $550 million (or "midpoint"),
indicating a minimum value of $467.5 million and a maximum value of $632.50
million. Based on the $10.00 per share offering price determined by the
Boards, this valuation range equates to an offering of 46.75 million shares at
the minimum to 63.25 million shares at the maximum, and 55 million shares at
the midpoint. In the event that the appraised value is subject to an increase,
up to 72,737,500 shares may be sold at an issue price of $10.00 per share, for
an aggregate market value of $727,375,000, without a resolicitation.
Based on this valuation range, incorporating the 8 percent shares
issued to Foundation following consummation of the offering, the offering range
is as follows: $432,870,370 at the minimum, $509,259,260 at the midpoint,
$585,648,150 at the maximum and $673,495,370 at the supermaximum. Based on a
$10.00 per share offering price, the number of offering shares is as follows:
43,287,037 at the minimum, 50,925,926 at the midpoint, 58,564,815 at the
maximum and 67,349,537 at the supermaximum.
The comparative pro forma valuation ratios relative to the Peer Group
are shown in Table 13, and the key valuation assumptions are detailed in
Exhibit 3. The pro forma calculations for the range are detailed in Exhibit 4,
and pro forma regulatory capital levels are presented in Exhibit 5.
Respectfully submitted,
RP Financial, LC.
Ronald S. Riggins
President and Managing Director
<PAGE> 27
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 13
Public Market Pricing
Independence SB of Brooklyn NY and the Comparables
As of August 8, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------- Pricing Ratios(3)
------------------- Core Book ---------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
--------- ------- ------ ------ ------ ------ ------ ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY
- ------------------------------
Superrange 10.00 727.38 0.40 12.64 25.06 79.09 16.44 84.95 19.40
Range Maximum 10.00 632.50 0.43 13.29 23.21 75.26 14.56 81.41 17.70
Range Midpoint 10.00 550.00 0.47 14.03 21.38 71.30 12.86 77.68 16.08
Range Minimum 10.00 467.50 0.52 15.03 19.33 66.55 11.11 73.15 14.31
All Public Companies 22.33 178.25 1.23 15.72 19.94 142.56 17.09 147.10 18.25
All Non-MHC State of NY(7)
- --------------------------
Averages 26.28 414.12 1.37 17.64 21.40 143.50 17.48 153.36 19.08
Medians --- --- --- --- 23.11 129.90 14.70 136.75 18.75
Comparable Group Averages
- -------------------------
Averages 30.23 294.73 1.87 18.81 18.86 164.58 17.61 177.60 17.43
Medians --- --- --- --- 17.34 146.95 13.32 157.85 16.69
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 15.63 22.74 0.61 14.05 25.62 111.25 15.22 111.25 25.62
ALBK ALBANK Fin. Corp. of Albany NY 37.25 477.73 2.82 25.85 16.27 144.10 13.26 164.90 13.21
ALBC Albion Banc Corp. of Albion NY 23.62 5.91 0.93 23.62 NM 100.00 8.90 100.00 25.40
AHCI Ambanc Holding Co., Inc. of NY 16.00 70.27 -0.65 13.85 NM 115.52 14.70 115.52 NM
ASFC Astoria Financial Corp. of NY 47.12 988.48 2.80 28.59 24.04 164.81 12.90 196.25 16.83
CNY Carver Bancorp, Inc. of NY 12.37 28.62 0.01 14.93 NM 82.85 6.92 86.38 NM
CATB Catskill Fin. Corp. of NY 17.00 80.24 0.86 15.08 20.00 112.73 28.23 112.73 19.77
DME Dime Bancorp, Inc. of NY 19.56 2028.74 1.36 10.16 18.45 192.52 10.99 194.43 14.38
DIME Dime Community Bancorp of NY 18.94 247.98 1.01 14.58 20.15 129.90 18.86 150.80 18.75
FIBC Financial Bancorp, Inc. of NY 20.25 34.87 1.55 15.35 23.28 131.92 12.34 132.53 13.06
FFIC Flushing Fin. Corp. of NY 20.31 162.05 0.90 16.28 23.34 124.75 19.98 124.75 22.57
GOSB GSB Financial Corp. of NY 14.37 32.30 0.44 13.78 27.63 104.28 28.22 104.28 NM
GPT GreenPoint Fin. Corp. of NY 64.12 2888.22 3.09 30.44 20.23 210.64 21.72 NM 20.75
HAVN Haven Bancorp of Woodhaven NY 36.25 158.67 3.11 24.20 17.34 149.79 8.91 150.29 11.66
JSB JSB Financial, Inc. of NY 44.40 437.12 2.61 34.47 16.15 128.81 28.55 128.81 17.01
LISB Long Island Bancorp, Inc of NY 39.00 934.75 1.67 22.17 27.08 175.91 15.82 177.68 23.35
MBB MSB Bancorp of Middletown NY 23.50 66.67 1.02 19.72 24.74 119.17 8.22 277.12 23.04
NYB New York Bancorp, Inc. of NY 31.06 670.62 2.32 7.73 15.69 NM 20.42 NM 13.39
PEEK Peekskill Fin. Corp. of NY 16.00 51.09 0.81 14.63 25.40 109.36 27.98 109.36 19.75
PKPS Poughkeepsie Fin. Corp. of NY 8.00 100.76 0.37 5.85 NM 136.75 11.45 136.75 21.62
PSBK Progressive Bank, Inc. of NY 30.37 116.04 2.26 19.67 13.20 154.40 13.20 172.85 13.44
QCSB Queens County Bancorp of NY 51.00 519.23 2.18 17.08 23.72 298.59 35.40 298.59 23.39
RCSB RCSB Financial, Inc. of NY(7) 46.98 685.49 2.64 21.69 17.66 216.60 17.00 222.23 17.80
RELY Reliance Bancorp, Inc. of NY 28.75 252.31 1.77 17.65 24.78 162.89 13.09 232.42 16.24
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
-------------------------- -----------------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------ ----- -------- ------- ------ ------ ------ ----- ------ -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence SB of Brooklyn NY
- ------------------------------
Superrange 0.00 0.00 0.00 4,424 20.79 0.39 0.66 3.16 0.85 4.08
Range Maximum 0.00 0.00 0.00 4,344 19.34 0.40 0.63 3.24 0.82 4.25
Range Midpoint 0.00 0.00 0.00 4,275 18.04 0.41 0.60 3.33 0.80 4.43
Range Minimum 0.00 0.00 0.00 4,207 16.70 0.41 0.57 3.44 0.78 4.65
All Public Companies 0.40 1.79 29.35 1,293 12.76 0.82 0.71 6.47 0.89 8.13
All Non-MHC State of NY(7)
- --------------------------
Averages 0.45 1.63 30.49 2,510 12.42 1.09 0.70 6.43 0.86 7.98
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.60 1.84 31.42 1,775 11.09 1.12 0.95 8.70 1.04 9.80
Medians --- --- --- --- --- --- --- --- --- ---
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 0.16 1.02 26.23 149 13.68 NA 0.59 4.34 0.59 4.34
ALBK ALBANK Fin. Corp. of Albany NY 0.60 1.61 21.28 3,602 9.20 0.91 0.84 9.16 1.04 11.28
ALBC Albion Banc Corp. of Albion NY 0.32 1.35 34.41 66 8.90 NA 0.09 0.93 0.38 3.93
AHCI Ambanc Holding Co., Inc. of NY 0.20 1.25 NM 478 12.72 1.06 -0.62 -4.16 -0.62 -4.16
ASFC Astoria Financial Corp. of NY 0.60 1.27 21.43 7,665 7.83 0.51 0.56 7.09 0.79 10.12
CNY Carver Bancorp, Inc. of NY 0.20 1.62 NM 414 8.35 1.37 -0.44 -4.95 0.01 0.07
CATB Catskill Fin. Corp. of NY 0.28 1.65 32.56 284 25.04 0.47 1.43 5.21 1.45 5.27
DME Dime Bancorp, Inc. of NY 0.16 0.82 11.76 18,465 5.71 1.57 0.57 10.83 0.73 13.89
DIME Dime Community Bancorp of NY 0.18 0.95 17.82 1,315 14.52 0.73 0.96 5.96 1.04 6.41
FIBC Financial Bancorp, Inc. of NY 0.40 1.98 25.81 282 9.36 1.81 0.56 5.74 1.00 10.23
FFIC Flushing Fin. Corp. of NY 0.24 1.18 36.67 811 16.01 0.32 0.90 5.14 0.93 5.32
GOSB GSB Financial Corp. of NY 0.00 0.00 0.00 114 27.06 NA 1.02 3.77 0.86 3.19
GPT GreenPoint Fin. Corp. of NY 1.00 1.56 32.36 13,300 10.31 2.89 1.06 9.99 1.03 9.74
HAVN Haven Bancorp of Woodhaven NY 0.60 1.66 19.29 1,782 5.95 0.74 0.56 9.27 0.83 13.79
JSB JSB Financial, Inc. of NY 1.40 3.15 53.64 1,531 22.17 NA 1.77 8.09 1.68 7.68
LISB Long Island Bancorp, Inc of NY 0.60 1.54 35.93 5,909 8.99 1.03 0.61 6.58 0.71 7.63
MBB MSB Bancorp of Middletown NY 0.60 2.55 58.82 811 6.90 0.70 0.33 4.82 0.36 5.17
NYB New York Bancorp, Inc. of NY 0.60 1.93 25.86 3,284 5.08 1.22 1.38 26.83 1.62 31.44
PEEK Peekskill Fin. Corp. of NY 0.36 2.25 44.44 183 25.58 1.22 1.07 3.73 1.37 4.79
PKPS Poughkeepsie Fin. Corp. of NY 0.10 1.25 27.03 880 8.37 4.28 0.35 4.21 0.54 6.49
PSBK Progressive Bank, Inc. of NY 0.68 2.24 30.09 879 8.55 0.85 0.99 12.02 0.98 11.81
QCSB Queens County Bancorp of NY 1.00 1.96 45.87 1,467 11.85 0.68 1.60 10.80 1.63 10.95
RCSB RCSB Financial, Inc. of NY(7) 0.60 1.28 22.73 4,032 7.85 0.76 0.96 12.26 0.96 12.17
RELY Reliance Bancorp, Inc. of NY 0.64 2.23 36.16 1,927 8.04 NA 0.56 6.63 0.85 10.11
</TABLE>
<PAGE> 28
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Public Market Pricing
Independence SB of Brooklyn NY and the Comparables
As of August 8, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------- Pricing Ratios(3)
------------------- Core Book ---------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
--------- ------- ------ ------ ------ ------ ------ ------ ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RSLN Roslyn Bancorp, Inc. of NY 23.81 1039.12 0.93 14.08 NM 169.11 36.47 169.95 25.60
SFED SFS Bancorp of Schenectady NY 19.03 24.19 1.08 17.26 NM 110.25 14.33 110.25 17.62
ROSE T R Financial Corp. of NY 27.00 475.44 1.65 12.51 14.75 215.83 13.39 215.83 16.36
TPNZ Tappan Zee Fin., Inc. of NY 17.62 26.38 0.49 14.35 NM 122.79 22.01 122.79 NM
ESBK The Elmira SB FSB of Elmira NY 23.12 16.32 0.85 19.87 25.98 116.36 7.33 121.56 27.20
GRTR The Greater New York SB of NY(7) 22.12 303.42 0.74 11.75 16.03 188.26 11.80 188.26 29.89
YFCB Yonkers Fin. Corp. of NY 16.75 52.61 0.99 13.66 22.95 122.62 18.26 122.62 16.92
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 37.25 477.73 2.82 25.85 16.27 144.10 13.26 164.90 13.21
DIME Dime Community Bancorp of NY 18.94 247.98 1.01 14.58 20.15 129.90 18.86 150.80 18.75
FFIC Flushing Fin. Corp. of NY 20.31 162.05 0.90 16.28 23.34 124.75 19.98 124.75 22.57
HAVN Haven Bancorp of Woodhaven NY 36.25 158.67 3.11 24.20 17.34 149.79 8.91 150.29 11.66
JSB JSB Financial, Inc. of NY 44.40 437.12 2.61 34.47 16.15 128.81 28.55 128.81 17.01
PKPS Poughkeepsie Fin. Corp. of NY 8.00 100.76 0.37 5.85 NM 136.75 11.45 136.75 21.62
PSBK Progressive Bank, Inc. of NY 30.37 116.04 2.26 19.67 13.20 154.40 13.20 172.85 13.44
QCSB Queens County Bancorp of NY 51.00 519.23 2.18 17.08 23.72 298.59 35.40 298.59 23.39
RELY Reliance Bancorp, Inc. of NY 28.75 252.31 1.77 17.65 24.78 162.89 13.09 232.42 16.24
ROSE T R Financial Corp. of NY 27.00 475.44 1.65 12.51 14.75 215.83 13.39 215.83 16.36
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------- -----------------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------ ----- -------- ------- ------ ------ ------ ----- ------ -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RSLN Roslyn Bancorp, Inc. of NY 0.20 0.84 21.51 2,849 21.57 0.27 0.35 1.63 1.42 6.61
SFED SFS Bancorp of Schenectady NY 0.28 1.47 25.93 169 12.99 0.69 0.46 3.46 0.83 6.22
ROSE T R Financial Corp. of NY 0.60 2.22 36.36 3,552 6.20 0.46 0.98 15.72 0.88 14.18
TPNZ Tappan Zee Fin., Inc. of NY 0.28 1.59 57.14 120 17.92 NA 0.70 4.22 0.65 3.90
ESBK The Elmira SB FSB of Elmira NY 0.64 2.77 NM 223 6.30 0.83 0.28 4.48 0.27 4.28
GRTR The Greater New York SB of NY(7) 0.20 0.90 27.03 2,571 6.27 NA 0.74 12.34 0.40 6.62
YFCB Yonkers Fin. Corp. of NY 0.24 1.43 24.24 288 14.89 0.57 0.86 5.03 1.16 6.82
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 0.60 1.61 21.28 3,602 9.20 0.91 0.84 9.16 1.04 11.28
DIME Dime Community Bancorp of NY 0.18 0.95 17.82 1,315 14.52 0.73 0.96 5.96 1.04 6.41
FFIC Flushing Fin. Corp. of NY 0.24 1.18 26.67 811 16.01 0.32 0.90 5.14 0.93 5.32
HAVN Haven Bancorp of Woodhaven NY 0.60 1.66 19.29 1,782 5.95 0.74 0.56 9.27 0.83 13.79
JSB JSB Financial, Inc. of NY 1.40 3.15 53.64 1,531 22.17 NA 1.77 8.09 1.68 7.68
PKPS Poughkeepsie Fin. Corp. of NY 0.10 1.25 27.03 880 8.37 4.28 0.35 4.21 0.54 6.49
PSBK Progressive Bank, Inc. of NY 0.68 2.24 30.09 879 8.55 0.85 0.99 12.02 0.98 11.81
QCSB Queens County Bancorp of NY 1.00 1.96 45.87 1,467 11.85 0.68 1.60 10.80 1.63 10.95
RELY Reliance Bancorp, Inc. of NY 0.64 2.23 36.16 1,927 8.04 NA 0.56 6.63 0.85 10.11
ROSE T R Financial Corp. of NY 0.60 2.22 36.36 3,552 6.20 0.46 0.98 15.72 0.88 14.18
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted
to omit the impact of non-operating items (including the SAIF assessment)
on a tax effected basis, and is shown on a pro forma basis where
appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB
= Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual
or rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 29
EXHIBITS
<PAGE> 30
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
1 Stock Prices: As of August 8, 1997
2 Peer Group Core Earnings Analysis
3 Pro Forma Analysis Sheet
4 Pro Forma Effect of Conversion Proceeds
5 Pro Forma Regulatory Capital Levels
6 Firm Qualifications Statement
</TABLE>
<PAGE> 31
EXHIBIT 1
Stock Prices
As of August 8, 1997
<PAGE> 32
RP FINANCIAL, LC.
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(309) 21.82 5,375 153.1 22.81 14.89 21.87 0.12 192.86 26.12
NYSE Traded Companies(8) 39.76 38,507 1,741.8 42.22 24.83 41.09 -2.56 261.41 26.31
AMEX Traded Companies(17) 18.42 4,236 91.1 19.70 12.45 18.37 0.55 315.22 24.30
NASDAQ Listed OTC Companies(284) 21.49 4,454 109.3 22.42 14.73 21.50 0.17 181.58 26.22
California Companies(21) 26.14 18,886 739.9 27.68 16.15 26.72 -1.26 126.66 29.42
Florida Companies(6) 26.50 12,195 361.1 25.85 15.24 25.41 4.63 159.90 39.67
Mid-Atlantic Companies(61) 22.52 6,321 151.4 23.48 14.61 22.44 0.82 179.95 33.55
Mid-West Companies(149) 20.66 3,290 85.8 21.62 14.56 20.71 0.02 211.20 22.67
New England Companies(10) 24.72 4,651 142.4 25.03 15.64 24.22 2.68 340.10 33.12
North-West Companies(7) 23.13 12,610 339.0 23.87 16.52 23.02 0.76 163.81 22.93
South-East Companies(43) 21.74 3,379 72.0 23.13 15.65 21.99 -0.94 171.50 25.31
South-West Companies(6) 20.28 1,891 43.3 20.77 13.06 20.44 -0.47 -3.70 19.61
Western Companies (Excl CA)(6) 19.94 5,288 100.6 21.06 14.62 20.12 -0.99 282.74 18.16
Thrift Strategy(243) 20.85 3,518 81.7 21.76 14.49 20.81 0.31 167.96 25.06
Mortgage Banker Strategy(38) 26.69 12,847 468.6 28.03 17.16 27.08 -0.12 250.13 33.67
Real Estate Strategy(11) 22.73 7,505 198.1 23.94 14.37 23.36 -2.37 193.32 30.58
Diversified Strategy(12) 30.42 23,663 790.6 31.67 18.77 31.09 -1.66 220.07 24.10
Retail Banking Strategy(5) 15.67 3,214 54.8 17.37 11.62 15.62 0.35 369.25 17.40
Companies Issuing Dividends(259) 22.04 5,295 154.2 23.10 15.02 22.08 0.16 204.42 25.67
Companies Without Dividends(50) 20.56 5,825 146.6 21.19 14.13 20.68 -0.15 112.01 29.18
Equity/Assets Less Than 6%(22) 25.34 17,484 543.4 26.28 15.07 25.46 0.66 155.98 35.57
Equity/Assets 6-12%(150) 24.26 5,723 180.1 25.22 15.86 24.35 0.06 205.47 29.62
Equity/Assets Greather Than 12%(137) 18.76 3,121 64.2 19.81 13.87 18.76 0.09 161.75 20.52
Converted Last 3 Mths (no MHC)(6) 21.35 2,582 57.6 22.35 20.21 21.32 0.15 0.00 -8.69
Actively Traded Companies(43) 29.76 17,216 630.5 31.25 19.01 30.23 -0.88 210.98 32.95
Market Value Below $20 Million(60) 16.56 881 13.7 17.35 12.25 16.64 -0.23 229.45 20.98
Holding Company Structure(272) 21.86 5,232 153.4 22.91 15.03 21.92 0.04 175.04 24.75
Assets Over $1 Billion(62) 31.99 17,246 595.5 33.45 20.11 32.38 -0.68 222.76 30.21
Assets $500 Million-$1 Billion(50) 21.11 5,438 104.1 22.10 13.79 21.08 0.25 211.12 30.83
Assets $250-$500 Million(68) 22.05 2,544 53.2 22.91 15.08 21.96 0.66 172.92 29.19
Assets less than $250 Million(129) 17.46 1,467 24.3 18.31 12.88 17.45 0.16 134.13 20.66
Goodwill Companies(121) 25.31 8,949 261.6 26.38 16.34 25.44 -0.08 219.59 28.84
Non-Goodwill Companies(180) 19.69 3,116 85.5 20.65 14.03 19.69 0.22 151.80 24.08
Acquirors of FSLIC Cases(10) 33.37 33,585 1,457.8 35.01 21.21 34.43 -2.13 262.58 33.19
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(309) 0.88 1.18 15.94 15.45 155.56
NYSE Traded Companies(8) 2.00 2.76 21.56 20.66 382.34
AMEX Traded Companies(17) 0.61 0.93 13.87 13.68 110.43
NASDAQ Listed OTC Companies(284) 0.86 1.15 15.89 15.40 151.49
California Companies(21) 0.99 1.38 16.88 15.79 260.80
Florida Companies(6) 1.01 0.98 13.61 12.89 186.99
Mid-Atlantic Companies(61) 0.98 1.37 16.06 15.39 169.29
Mid-West Companies(149) 0.86 1.13 16.13 15.80 138.80
New England Companies(10) 0.84 1.30 16.28 15.26 214.85
North-West Companies(7) 0.92 1.21 14.21 13.67 140.09
South-East Companies(43) 0.77 1.04 14.94 14.66 121.80
South-West Companies(6) 0.61 1.15 16.67 15.85 228.93
Western Companies (Excl CA)(6) 0.88 1.05 16.06 15.35 105.31
Thrift Strategy(243) 0.81 1.12 16.11 15.67 140.02
Mortgage Banker Strategy(38) 1.26 1.58 16.18 15.24 236.09
Real Estate Strategy(11) 0.86 1.43 14.72 14.41 224.07
Diversified Strategy(12) 1.56 1.75 13.09 12.74 183.29
Retail Banking Strategy(5) 0.28 0.14 13.37 13.02 146.00
Companies Issuing Dividends(259) 0.94 1.25 16.00 15.49 152.83
Companies Without Dividends(50) 0.51 0.80 15.61 15.18 170.97
Equity/Assets Less Than 6%(22) 1.02 1.60 13.91 13.01 291.20
Equity/Assets 6-12%(150) 1.06 1.42 16.23 15.47 196.05
Equity/Assets Greather Than 12%(137) 0.67 0.88 15.96 15.81 92.91
Converted Last 3 Mths (no MHC)(6) 0.51 0.66 18.11 18.11 91.26
Actively Traded Companies(43) 1.47 1.98 17.50 16.87 235.56
Market Value Below $20 Million(60) 0.54 0.83 15.31 15.21 115.94
Holding Company Structure(272) 0.85 1.16 16.22 15.74 153.26
Assets Over $1 Billion(62) 1.45 1.92 18.13 16.83 257.68
Assets $500 Million-$1 Billion(50) 0.89 1.11 14.38 13.68 156.51
Assets $250-$500 Million(68) 0.86 1.22 16.64 16.15 166.31
Assets less than $250 Million(129) 0.63 0.87 15.21 15.16 104.53
Goodwill Companies(121) 1.11 1.47 16.47 15.33 205.70
Non-Goodwill Companies(180) 0.74 1.03 15.66 15.66 124.58
Acquirors of FSLIC Cases(10) 1.67 2.40 18.80 17.81 304.14
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 33
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(67) 24.80 10,054 350.6 25.80 15.48 24.93 -0.27 193.76 32.15
NYSE Traded Companies(3) 35.93 52,819 1,716.9 37.19 19.83 36.50 -1.17 265.22 37.20
AMEX Traded Companies(5) 22.37 4,239 89.3 23.35 13.77 22.69 -1.65 94.66 42.73
NASDAQ Listed OTC Companies(59) 24.38 8,070 294.7 25.36 15.39 24.46 -0.08 198.91 30.76
California Companies(3) 19.12 6,820 140.0 19.42 11.25 19.10 0.02 436.00 32.09
Mid-Atlantic Companies(18) 26.43 17,456 516.9 27.46 15.82 26.54 -0.16 131.12 32.39
Mid-West Companies(2) 12.50 942 11.8 12.50 9.12 12.00 4.17 0.00 23.52
New England Companies(35) 23.12 4,750 112.9 24.21 14.48 23.23 -0.40 204.50 32.21
North-West Companies(4) 31.20 36,749 2,134.9 33.09 18.25 32.47 -2.42 148.83 35.69
South-East Companies(5) 30.75 2,083 44.8 31.05 22.00 30.30 0.80 0.00 30.01
Thrift Strategy(43) 25.18 5,000 163.1 26.15 16.05 25.15 0.26 191.77 32.31
Mortgage Banker Strategy(10) 23.93 25,700 545.5 25.08 14.37 24.28 -1.67 215.55 33.58
Real Estate Strategy(6) 15.26 4,671 66.3 15.60 9.55 15.14 0.58 242.35 25.11
Diversified Strategy(6) 32.86 35,842 1,929.1 34.62 18.50 34.05 -2.91 168.32 37.27
Retail Banking Strategy(2) 23.12 706 16.3 23.75 14.75 23.75 -2.65 60.89 26.68
Companies Issuing Dividends(56) 26.08 10,777 390.9 27.18 16.37 26.25 -0.49 187.63 32.06
Companies Without Dividends(11) 16.81 5,540 98.8 17.16 9.90 16.63 1.07 259.20 32.66
Equity/Assets Less Than 6%(5) 27.40 49,456 2,080.6 29.37 15.00 28.62 -3.13 154.71 52.76
Equity/Assets 6-12%(46) 25.27 6,251 203.5 26.31 15.50 25.38 -0.27 204.28 31.08
Equity/Assets Greater Than 12%(16) 22.56 6,578 142.5 23.10 15.60 22.34 0.75 34.59 27.43
Actively Traded Companies(23) 26.19 17,482 674.9 27.58 16.13 26.66 -1.22 232.92 31.05
Market Value Below $20 Million(7) 16.77 892 14.7 17.20 11.94 16.98 -0.64 115.47 15.29
Holding Company Structure(44) 25.11 10,137 385.4 26.14 16.00 25.27 -0.29 192.69 30.79
Assets Over $1 Billion(18) 31.85 29,497 1,175.4 33.27 18.31 32.56 -1.95 197.00 35.89
Assets $500 Million-$1 Billion(16) 25.45 5,180 106.6 26.49 16.18 25.08 1.66 169.21 34.27
Assets $250-$500 Million(17) 20.31 3,013 57.0 21.11 12.76 20.29 0.40 238.40 28.68
Assets less than $250 Million(16) 21.34 1,734 27.6 22.06 14.54 21.48 -1.03 167.29 29.91
Goodwill Companies(30) 26.98 16,661 645.0 28.20 16.59 27.27 -0.84 189.40 33.53
Non-Goodwill Companies(34) 23.25 4,413 96.9 24.08 14.69 23.24 0.09 201.14 31.23
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(67) 1.52 1.53 15.77 14.94 159.91
NYSE Traded Companies(3) 1.93 1.93 19.05 14.57 234.73
AMEX Traded Companies(5) 1.23 1.19 15.11 14.74 143.63
NASDAQ Listed OTC Companies(59) 1.52 1.54 15.64 14.98 157.04
California Companies(3) 1.35 1.25 12.43 12.41 153.58
Mid-Atlantic Companies(18) 1.25 1.35 16.11 14.25 167.48
Mid-West Companies(2) 0.25 0.38 13.57 12.80 53.10
New England Companies(35) 1.81 1.74 14.46 13.89 168.41
North-West Companies(4) 1.14 1.43 13.62 13.09 176.48
South-East Companies(5) 1.24 1.29 26.73 26.73 98.07
Thrift Strategy(43) 1.53 1.51 16.93 15.95 150.28
Mortgage Banker Strategy(10) 1.45 1.56 14.25 13.87 183.37
Real Estate Strategy(6) 1.27 1.21 9.31 9.30 108.44
Diversified Strategy(6) 1.91 2.14 14.22 13.21 224.42
Retail Banking Strategy(2) 0.89 0.85 19.87 19.02 315.32
Companies Issuing Dividends(56) 1.55 1.57 16.37 15.43 167.25
Companies Without Dividends(11) 1.30 1.29 11.99 11.88 114.02
Equity/Assets Less Than 6%(5) 1.30 1.45 10.69 10.39 199.49
Equity/Assets 6-12%(46) 1.81 1.79 15.36 14.21 181.76
Equity/Assets Greater Than 12%(16) 0.76 0.85 18.73 18.59 84.88
Actively Traded Companies(23) 1.78 1.79 15.22 14.49 184.24
Market Value Below $20 Million(7) 0.79 0.84 15.14 14.53 136.12
Holding Company Structure(44) 1.42 1.46 16.07 15.36 147.77
Assets Over $1 Billion(18) 1.77 1.89 15.83 14.37 196.92
Assets $500 Million-$1 Billion(16) 1.88 1.82 16.43 15.07 182.71
Assets $250-$500 Million(17) 1.26 1.27 13.60 13.39 136.29
Assets less than $250 Million(16) 1.16 1.16 17.11 16.84 123.65
Goodwill Companies(30) 1.63 1.67 15.74 13.99 197.50
Non-Goodwill Companies(34) 1.46 1.45 15.87 15.87 129.64
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 34
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(21) 22.98 5,055 43.2 24.12 14.36 22.64 1.51 226.78 33.33
BIF-Insured Thrifts(2) 21.69 32,163 219.0 22.75 11.63 21.94 -0.87 258.96 46.28
NASDAQ Listed OTC Companies(23) 22.85 7,766 60.8 23.99 14.09 22.57 1.27 237.51 34.77
Florida Companies(3) 30.83 5,609 77.6 31.58 17.33 30.17 2.44 0.00 25.15
Mid-Atlantic Companies(10) 19.73 7,085 48.7 20.17 12.38 19.09 3.07 190.00 40.63
Mid-West Companies(7) 19.90 2,029 14.9 22.38 14.01 20.31 -1.62 263.57 26.22
New England Companies(1) 28.25 61,053 428.1 29.00 14.00 28.75 -1.74 258.96 46.75
South-East Companies(1) 39.25 1,505 27.7 40.25 20.25 38.50 1.95 0.00 61.86
Thrift Strategy(21) 22.56 4,962 41.5 23.72 14.09 22.25 1.43 226.78 34.06
Diversified Strategy(1) 28.25 61,053 428.1 29.00 14.00 28.75 -1.74 258.96 46.75
Companies Issuing Dividends(23) 22.85 7,766 60.8 23.99 14.09 22.57 1.27 237.51 34.77
Equity/Assets 6-12%(16) 22.89 9,631 74.5 24.25 14.18 22.78 0.43 237.51 31.67
Equity/Assets >12%(7) 22.75 3,415 28.9 23.38 13.87 22.08 3.25 0.00 42.81
Actively Traded Companies(1) 29.00 7,247 98.7 29.50 14.32 28.50 1.75 190.00 56.76
Holding Company Structure(1) 29.00 7,247 98.7 29.50 14.32 28.50 1.75 190.00 56.76
Assets Over $1 Billion(5) 28.77 21,574 163.3 29.40 15.51 28.42 1.24 224.48 38.70
Assets $500 Million-$1 Billion(4) 24.17 6,964 69.4 24.50 13.92 22.42 8.08 0.00 34.70
Assets $250-$500 Million(4) 21.41 2,541 19.2 24.50 15.17 21.94 -2.39 263.57 23.42
Assets less than $250 Million(10) 19.37 2,050 14.3 20.16 12.72 19.29 0.58 0.00 39.08
Goodwill Companies(9) 26.86 15,813 123.1 28.72 15.51 26.36 2.28 237.51 37.04
Non-Goodwill Companies(14) 20.18 2,402 19.2 20.83 13.14 20.05 0.60 0.00 32.94
MHC Institutions(23) 22.85 7,766 60.8 23.99 14.09 22.57 1.27 237.51 34.77
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(21) 0.67 1.00 12.88 12.56 124.63
BIF-Insured Thrifts(2) 0.78 0.74 9.52 9.50 99.08
NASDAQ Listed OTC Companies(23) 0.68 0.97 12.54 12.26 122.07
Florida Companies(3) 1.12 1.55 15.33 15.09 165.24
Mid-Atlantic Companies(10) 0.45 0.71 11.28 10.75 100.82
Mid-West Companies(7) 0.66 1.00 12.20 12.18 127.78
New England Companies(1) 1.33 1.06 10.39 10.37 123.47
South-East Companies(1) 1.00 1.41 19.69 19.69 148.17
Thrift Strategy(21) 0.65 0.97 12.65 12.36 122.00
Diversified Strategy(1) 1.33 1.06 10.39 10.37 123.47
Companies Issuing Dividends(23) 0.68 0.97 12.54 12.26 122.07
Equity/Assets 6-12%(16) 0.69 1.05 12.45 12.12 139.05
Equity/Assets >12%(7) 0.67 0.79 12.74 12.58 82.47
Actively Traded Companies(1) 0.69 1.22 13.00 11.52 141.40
Holding Company Structure(1) 0.69 1.22 13.00 11.52 141.40
Assets Over $1 Billion(5) 1.08 1.34 13.03 12.14 151.43
Assets $500 Million-$1 Billion(4) 0.72 0.91 12.97 12.61 113.62
Assets $250-$500 Million(4) 0.75 1.18 12.89 12.86 147.37
Assets less than $250 Million(10) 0.39 0.66 11.90 11.90 94.25
Goodwill Companies(9) 0.93 1.18 12.79 12.08 140.95
Non-Goodwill Companies(14) 0.52 0.84 12.37 12.37 109.49
MHC Institutions(23) 0.68 0.97 12.54 12.26 122.07
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 35
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 49.69 97,336 4,836.6 53.19 25.00 52.44 -5.24 165.01 52.89
CSA Coast Savings Financial of CA 45.81 18,616 852.8 48.75 30.25 48.00 -4.56 296.28 25.10
CFB Commercial Federal Corp. of NE 39.44 21,553 850.1 40.94 25.17 39.00 1.13 968.83 23.25
DME Dime Bancorp, Inc. of NY* 19.56 103,719 2,028.7 20.25 12.87 19.87 -1.56 94.43 32.61
DSL Downey Financial Corp. of CA 21.75 26,733 581.4 23.75 14.68 22.87 -4.90 100.28 16.37
FRC First Republic Bancorp of CA* 24.12 9,693 233.8 24.75 12.62 24.06 0.25 436.00 44.00
FED FirstFed Fin. Corp. of CA 33.37 10,575 352.9 34.62 17.75 34.00 -1.85 106.63 51.68
GLN Glendale Fed. Bk, FSB of CA 28.75 50,306 1,446.3 28.00 17.50 28.75 0.00 76.92 23.66
GDW Golden West Fin. Corp. of CA 79.06 56,739 4,485.8 84.62 55.00 83.56 -5.39 201.87 25.25
GPT GreenPoint Fin. Corp. of NY* 64.12 45,044 2,888.2 66.56 34.00 65.56 -2.20 N.A. 34.99
WES Westcorp Inc. of Orange CA 20.19 26,195 528.9 23.87 13.25 20.12 0.35 175.44 -7.72
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 21.88 2,731 59.8 22.25 12.00 21.62 1.20 N.A. 47.14
BKC American Bank of Waterbury CT* 37.87 2,306 87.3 39.00 25.87 38.00 -0.34 101.97 35.25
BFD BostonFed Bancorp of MA 19.62 5,947 116.7 19.94 11.75 19.75 -0.66 N.A. 33.02
CFX CFX Corp of NH* 19.00 13,144 249.7 21.00 12.50 19.94 -4.71 59.66 22.58
CBK Citizens First Fin.Corp. of IL 16.75 2,789 46.7 16.87 10.25 16.25 3.08 N.A. 16.56
ESX Essex Bancorp of VA(8) 1.56 1,055 1.6 2.37 1.00 1.56 0.00 -90.69 -28.77
FCB Falmouth Co-Op Bank of MA* 17.00 1,455 24.7 17.50 10.87 17.50 -2.86 N.A. 29.57
FAB FirstFed America Bancorp of MA 18.87 8,707 164.3 18.87 13.62 18.12 4.14 N.A. N.A.
GAF GA Financial Corp. of PA 17.00 7,985 135.7 19.50 11.50 17.87 -4.87 N.A. 12.43
KNK Kankakee Bancorp of IL 29.50 1,425 42.0 30.75 19.12 29.37 0.44 195.00 19.19
KYF Kentucky First Bancorp of KY 12.25 1,319 16.2 15.12 10.56 12.31 -0.49 N.A. 12.70
NYB New York Bancorp, Inc. of NY 31.06 21,591 670.6 32.00 14.12 31.12 -0.19 338.08 60.35
PDB Piedmont Bancorp of NC 11.12 2,751 30.6 19.12 9.25 10.94 1.65 N.A. 5.90
PLE Pinnacle Bank of AL 26.50 890 23.6 22.62 16.12 26.25 0.95 292.59 52.56
SSB Scotland Bancorp of NC 17.19 1,914 32.9 17.19 12.00 16.25 5.78 N.A. 21.74
SZB SouthFirst Bancshares of AL 17.00 821 14.0 17.25 12.25 16.75 1.49 N.A. 28.30
SRN Southern Banc Company of AL 15.75 1,230 19.4 15.75 12.25 15.75 0.00 N.A. 20.05
SSM Stone Street Bancorp of NC 21.31 1,898 40.4 27.25 16.50 21.88 -2.61 N.A. 3.95
TSH Teche Holding Company of LA 18.12 3,438 62.3 19.37 12.87 18.75 -3.36 N.A. 26.10
FTF Texarkana Fst. Fin. Corp of AR 22.37 1,790 40.0 23.00 13.62 21.25 5.27 N.A. 43.12
THR Three Rivers Fin. Corp. of MI 16.00 824 13.2 16.62 12.62 16.25 -1.54 N.A. 14.29
TBK Tolland Bank of CT* 16.12 1,560 25.1 17.00 7.59 16.37 -1.53 122.34 79.11
WSB Washington SB, FSB of MD 6.69 4,247 28.4 7.00 4.38 6.37 5.02 435.20 37.37
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 36.25 698 25.3 36.25 26.19 33.75 7.41 N.A. 27.19
AFED AFSALA Bancorp, Inc. of NY 15.63 1,455 22.7 15.87 11.31 15.25 2.49 N.A. 30.25
ALBK ALBANK Fin. Corp. of Albany NY 37.25 12,825 477.7 41.00 25.94 38.25 -2.61 60.22 18.74
AMFC AMB Financial Corp. of IN 15.00 964 14.5 15.00 10.25 15.00 0.00 N.A. 13.21
ASBP ASB Financial Corp. of OH 12.25 1,721 21.1 18.25 11.50 12.62 -2.93 N.A. -5.77
ABBK Abington Savings Bank of MA* 30.25 1,852 56.0 31.00 16.00 29.75 1.68 356.95 55.13
AABC Access Anytime Bancorp of NM 6.50 1,193 7.8 6.62 5.25 6.50 0.00 -3.70 18.18
AFBC Advance Fin. Bancorp of WV 15.25 1,084 16.5 16.00 12.75 15.25 0.00 N.A. N.A.
AADV Advantage Bancorp of WI 42.00 3,234 135.8 42.00 31.25 40.00 5.00 356.52 30.23
AFCB Affiliated Comm BC, Inc of MA 24.75 6,465 160.0 25.25 13.90 24.12 2.61 N.A. 44.74
ALBC Albion Banc Corp. of Albion NY 23.62 250 5.9 24.00 16.50 23.62 0.00 81.69 41.01
ABCL Allied Bancorp of IL 31.37 5,345 167.7 31.37 23.25 31.25 0.38 213.70 25.48
ATSB AmTrust Capital Corp. of IN 12.62 526 6.6 12.75 8.75 12.62 0.00 N.A. 26.20
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 1.98 3.16 20.35 17.34 488.33
CSA Coast Savings Financial of CA 0.99 2.48 24.06 23.76 488.97
CFB Commercial Federal Corp. of NE 2.05 2.89 19.77 17.53 329.27
DME Dime Bancorp, Inc. of NY* 1.06 1.36 10.16 10.06 178.03
DSL Downey Financial Corp. of CA 0.86 1.43 15.26 15.05 220.16
FRC First Republic Bancorp of CA* 1.56 1.33 16.56 16.55 230.89
FED FirstFed Fin. Corp. of CA 1.13 2.07 19.14 18.93 396.52
GLN Glendale Fed. Bk, FSB of CA 0.89 1.63 17.31 16.10 306.00
GDW Golden West Fin. Corp. of CA 6.74 8.22 43.90 43.90 689.03
GPT GreenPoint Fin. Corp. of NY* 3.17 3.09 30.44 17.11 295.27
WES Westcorp Inc. of Orange CA 1.36 0.22 12.71 12.67 140.42
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.29 0.30 17.24 17.24 96.80
BKC American Bank of Waterbury CT* 3.13 2.69 21.77 20.90 262.73
BFD BostonFed Bancorp of MA 0.64 0.88 14.08 13.60 158.23
CFX CFX Corp of NH* 1.10 1.31 10.52 9.84 141.44
CBK Citizens First Fin.Corp. of IL 0.25 0.53 14.26 14.26 97.39
ESX Essex Bancorp of VA(8) -7.54 -3.77 0.12 -0.08 170.55
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.49
FAB FirstFed America Bancorp of MA -0.28 0.44 14.03 14.03 112.52
GAF GA Financial Corp. of PA 0.80 1.02 14.25 14.10 93.89
KNK Kankakee Bancorp of IL 1.62 2.02 26.59 24.99 239.77
KYF Kentucky First Bancorp of KY 0.53 0.70 10.86 10.86 67.42
NYB New York Bancorp, Inc. of NY 1.98 2.32 7.73 7.73 152.08
PDB Piedmont Bancorp of NC -0.19 0.30 7.42 7.42 44.62
PLE Pinnacle Bank of AL 1.26 1.89 17.34 16.78 224.27
SSB Scotland Bancorp of NC 0.51 0.62 13.44 13.44 36.30
SZB SouthFirst Bancshares of AL 0.05 0.30 15.82 15.82 113.17
SRN Southern Banc Company of AL 0.13 0.44 14.42 14.27 85.35
SSM Stone Street Bancorp of NC 0.80 0.96 16.13 16.13 55.91
TSH Teche Holding Company of LA 0.80 1.10 15.23 15.23 114.47
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.62 15.03 15.03 95.73
THR Three Rivers Fin. Corp. of MI 0.61 0.88 15.22 15.22 110.64
TBK Tolland Bank of CT* 1.11 1.16 10.60 10.30 152.71
WSB Washington SB, FSB of MD 0.30 0.44 5.05 5.05 60.83
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.18 0.50 32.00 31.34 387.52
AFED AFSALA Bancorp, Inc. of NY 0.61 0.61 14.05 14.05 102.70
ALBK ALBANK Fin. Corp. of Albany NY 2.29 2.82 25.85 22.59 280.88
AMFC AMB Financial Corp. of IN 0.66 0.73 14.61 14.61 97.70
ASBP ASB Financial Corp. of OH 0.39 0.57 10.00 10.00 63.58
ABBK Abington Savings Bank of MA* 2.16 1.92 18.73 16.87 270.66
AABC Access Anytime Bancorp of NM -0.45 -0.11 6.53 6.53 87.72
AFBC Advance Fin. Bancorp of WV 0.35 0.71 14.76 14.76 95.55
AADV Advantage Bancorp of WI 1.27 2.81 29.05 27.16 315.25
AFCB Affiliated Comm BC, Inc of MA 1.44 1.66 15.94 15.84 163.19
ALBC Albion Banc Corp. of Albion NY 0.22 0.93 23.62 23.62 265.26
ABCL Allied Bancorp of IL 0.91 1.33 23.40 23.11 262.72
ATSB AmTrust Capital Corp. of IN 0.40 0.26 13.73 13.58 135.04
</TABLE>
<PAGE> 36
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* 16.00 4,392 70.3 16.62 9.62 16.00 0.00 N.A. 42.22
ASBI Ameriana Bancorp of IN 18.50 3,230 59.8 19.00 13.25 19.00 -2.63 100.43 15.63
AFFFZ America First Fin. Fund of CA(8) 39.31 6,011 236.3 39.56 28.00 39.50 -0.48 109.65 29.95
ANBK American Nat'l Bancorp of MD(8) 19.87 3,613 71.8 19.87 9.87 19.75 0.61 N.A. 63.94
ABCW Anchor Bancorp Wisconsin of WI 50.50 4,524 228.5 53.50 33.00 52.25 -3.35 71.94 41.26
ANDB Andover Bancorp, Inc. of MA* 30.12 5,148 155.1 32.25 20.00 30.87 -2.43 180.19 17.56
ASFC Astoria Financial Corp. of NY 47.12 20,978 988.5 48.75 26.12 48.75 -3.34 79.50 27.80
AVND Avondale Fin. Corp. of IL 14.75 3,495 51.6 18.50 12.75 14.37 2.64 N.A. -13.84
BKCT Bancorp Connecticut of CT* 27.25 2,534 69.1 28.75 21.25 27.75 -1.80 211.43 21.11
BPLS Bank Plus Corp. of CA 11.44 19,308 220.9 13.75 9.62 11.87 -3.62 N.A. -0.52
BWFC Bank West Fin. Corp. of MI 15.00 1,783 26.7 15.12 10.25 14.50 3.45 N.A. 41.24
BANC BankAtlantic Bancorp of FL 16.62 17,978 298.8 16.62 9.20 16.12 3.10 219.62 55.33
BKUNA BankUnited SA of FL 10.87 8,869 96.4 11.25 7.25 10.00 8.70 100.18 8.70
BKCO Bankers Corp. of NJ(8)* 28.75 12,392 356.3 30.12 17.75 29.00 -0.86 360.00 42.89
BVCC Bay View Capital Corp. of CA 25.75 12,979 334.2 28.62 17.50 26.37 -2.35 30.38 21.52
BFSB Bedford Bancshares of VA 24.25 1,142 27.7 25.25 16.50 24.75 -2.02 130.95 37.63
BFFC Big Foot Fin. Corp. of IL 17.50 2,513 44.0 17.50 12.31 17.37 0.75 N.A. 34.62
BSBC Branford SB of CT* 4.94 6,559 32.4 5.00 3.00 4.94 0.00 133.02 27.65
BYFC Broadway Fin. Corp. of CA 10.50 893 9.4 11.25 9.00 10.75 -2.33 N.A. 13.51
CBES CBES Bancorp of MO 17.69 1,025 18.1 17.87 12.62 17.50 1.09 N.A. 24.14
CCFH CCF Holding Company of GA 17.12 865 14.8 17.12 11.87 17.12 0.00 N.A. 16.07
CENF CENFED Financial Corp. of CA 34.38 5,729 197.0 35.00 20.23 33.75 1.87 119.26 29.30
CFSB CFSB Bancorp of Lansing MI 27.00 5,096 137.6 27.00 16.32 26.37 2.39 200.00 52.28
CKFB CKF Bancorp of Danville KY 20.00 927 18.5 20.75 17.50 20.00 0.00 N.A. -1.23
CNSB CNS Bancorp of MO 17.00 1,653 28.1 17.50 11.50 16.75 1.49 N.A. 12.43
CSBF CSB Financial Group Inc of IL* 12.50 942 11.8 12.50 9.12 12.00 4.17 N.A. 23.52
CBCI Calumet Bancorp of Chicago IL 41.37 2,111 87.3 41.37 27.75 40.87 1.22 104.30 24.42
CAFI Camco Fin. Corp. of OH 18.50 3,215 59.5 19.25 14.05 18.87 -1.96 N.A. 22.35
CMRN Cameron Fin. Corp. of MO 17.50 2,682 46.9 18.00 14.00 18.00 -2.78 N.A. 9.38
CAPS Capital Savings Bancorp of MO 16.00 1,892 30.3 18.25 9.62 16.50 -3.03 20.75 23.08
CFNC Carolina Fincorp of NC* 17.37 1,851 32.2 17.75 13.00 17.75 -2.14 N.A. 29.92
CNY Carver Bancorp, Inc. of NY 12.37 2,314 28.6 12.50 7.37 12.25 0.98 97.92 49.94
CASB Cascade SB of Everett WA(8) 14.00 2,568 36.0 16.80 10.40 12.50 12.00 9.38 8.53
CATB Catskill Fin. Corp. of NY* 17.00 4,720 80.2 17.00 10.50 16.25 4.62 N.A. 21.43
CNIT Cenit Bancorp of Norfolk VA 51.25 1,650 84.6 51.50 31.75 50.62 1.24 222.73 23.49
CEBK Central Co-Op. Bank of MA* 19.25 1,965 37.8 20.69 14.75 20.00 -3.75 266.67 10.00
CENB Century Bancshares of NC* 79.00 407 32.2 79.00 62.00 77.00 2.60 N.A. 21.54
CBSB Charter Financial Inc. of IL 21.44 4,150 89.0 21.50 11.00 21.44 0.00 N.A. 71.52
COFI Charter One Financial of OH 52.37 46,186 2,418.8 57.94 34.17 57.69 -9.22 199.26 24.69
CNBA Chester Bancorp of IL 14.75 2,182 32.2 15.37 12.62 14.75 0.00 N.A. 12.42
CVAL Chester Valley Bancorp of PA 24.00 2,054 49.3 24.00 14.10 22.87 4.94 111.83 62.16
CTZN CitFed Bancorp of Dayton OH 41.75 8,638 360.6 45.25 25.00 43.37 -3.74 363.89 26.52
CLAS Classic Bancshares of KY 14.75 1,320 19.5 15.00 11.25 14.25 3.51 N.A. 26.94
CMSB Cmnwealth Bancorp of PA 16.75 17,096 286.4 16.87 10.50 16.37 2.32 N.A. 11.67
COVB CoVest Bancshares of IL 22.00 3,018 66.4 19.00 16.25 21.75 1.15 230.33 27.54
CBSA Coastal Bancorp of Houston TX 30.25 4,972 150.4 30.87 17.62 30.50 -0.82 N.A. 32.27
CFCP Coastal Fin. Corp. of SC 25.50 4,637 118.2 27.75 14.25 26.00 -1.92 155.00 61.90
COFD Collective Bancorp Inc. of NJ(8) 52.00 20,484 1,065.2 52.00 23.87 52.00 0.00 582.41 48.06
CMSV Commty. Svgs, MHC of FL (48.5) 25.75 5,090 60.9 25.75 16.00 24.00 7.29 N.A. 25.61
CBNH Community Bankshares Inc of NH(8)* 39.12 2,489 97.4 40.25 18.50 39.87 -1.88 943.20 90.83
CFTP Community Fed. Bancorp of MS 17.75 4,629 82.2 20.00 13.00 17.75 0.00 N.A. 4.41
CFFC Community Fin. Corp. of VA 22.75 1,275 29.0 23.50 20.50 22.25 2.25 225.00 9.64
CFBC Community First Bnkg Co. of GA 34.00 2,414 82.1 34.87 31.87 34.00 0.00 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.25 949 14.5 15.25 10.00 14.50 5.17 N.A. 34.60
COOP Cooperative Bk.for Svgs. of NC 24.50 1,492 36.6 27.00 16.75 27.00 -9.26 145.00 20.99
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* -0.65 -0.65 13.85 13.85 108.86
ASBI Ameriana Bancorp of IN 0.75 1.05 13.49 13.48 123.14
AFFFZ America First Fin. Fund of CA(8) 5.51 6.76 30.76 30.38 364.44
ANBK American Nat'l Bancorp of MD(8) 0.19 0.68 12.33 12.33 134.69
ABCW Anchor Bancorp Wisconsin of WI 3.10 3.99 26.49 25.99 425.70
ANDB Andover Bancorp, Inc. of MA* 2.57 2.65 19.59 19.59 243.00
ASFC Astoria Financial Corp. of NY 1.96 2.80 28.59 24.01 365.36
AVND Avondale Fin. Corp. of IL -0.85 -2.63 15.85 15.85 173.75
BKCT Bancorp Connecticut of CT* 2.15 2.03 17.32 17.32 169.05
BPLS Bank Plus Corp. of CA -0.46 0.04 9.27 9.26 183.03
BWFC Bank West Fin. Corp. of MI 0.59 0.42 12.62 12.62 82.46
BANC BankAtlantic Bancorp of FL 1.15 0.88 8.49 6.91 154.25
BKUNA BankUnited SA of FL 0.29 0.48 7.59 6.15 203.77
BKCO Bankers Corp. of NJ(8)* 2.12 2.27 16.42 16.18 207.14
BVCC Bay View Capital Corp. of CA 0.97 1.58 15.12 12.69 238.56
BFSB Bedford Bancshares of VA 1.14 1.46 16.80 16.80 118.61
BFFC Big Foot Fin. Corp. of IL 0.04 0.35 14.34 14.34 84.46
BSBC Branford SB of CT* 0.32 0.32 2.64 2.64 28.44
BYFC Broadway Fin. Corp. of CA -0.33 0.16 14.26 14.26 131.13
CBES CBES Bancorp of MO 0.69 0.86 17.08 17.08 92.90
CCFH CCF Holding Company of GA 0.25 0.41 14.39 14.39 100.51
CENF CENFED Financial Corp. of CA 1.98 2.82 20.85 20.81 400.68
CFSB CFSB Bancorp of Lansing MI 1.37 1.73 12.65 12.65 165.90
CKFB CKF Bancorp of Danville KY 0.84 0.83 15.38 15.38 64.94
CNSB CNS Bancorp of MO 0.31 0.47 14.73 14.73 59.35
CSBF CSB Financial Group Inc of IL* 0.25 0.38 13.57 12.80 53.10
CBCI Calumet Bancorp of Chicago IL 2.72 3.45 36.46 36.46 235.23
CAFI Camco Fin. Corp. of OH 0.94 1.11 14.24 13.10 146.95
CMRN Cameron Fin. Corp. of MO 0.77 0.96 16.92 16.92 73.71
CAPS Capital Savings Bancorp of MO 0.77 1.10 10.89 10.89 125.75
CFNC Carolina Fincorp of NC* 0.65 0.61 13.92 13.92 58.71
CNY Carver Bancorp, Inc. of NY -0.74 0.01 14.93 14.32 178.81
CASB Cascade SB of Everett WA(8) 0.61 0.77 8.47 8.47 137.20
CATB Catskill Fin. Corp. of NY* 0.85 0.86 15.08 15.08 60.22
CNIT Cenit Bancorp of Norfolk VA 3.75 3.44 31.12 28.58 430.03
CEBK Central Co-Op. Bank of MA* 1.44 1.46 17.07 15.20 163.33
CENB Century Bancshares of NC* 4.31 4.36 73.51 73.51 245.57
CBSB Charter Financial Inc. of IL 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 2.98 3.73 21.15 19.80 315.35
CNBA Chester Bancorp of IL 0.71 0.71 14.50 14.50 65.30
CVAL Chester Valley Bancorp of PA 0.87 1.28 12.72 12.72 148.58
CTZN CitFed Bancorp of Dayton OH 1.94 2.73 22.83 20.57 358.59
CLAS Classic Bancshares of KY 0.45 0.62 14.67 12.38 99.66
CMSB Cmnwealth Bancorp of PA 0.69 0.88 12.89 10.08 133.89
COVB CoVest Bancshares of IL 0.31 0.85 16.36 15.59 183.09
CBSA Coastal Bancorp of Houston TX 1.45 2.52 19.85 16.50 596.15
CFCP Coastal Fin. Corp. of SC 0.89 0.98 6.37 6.37 104.51
COFD Collective Bancorp Inc. of NJ(8) 2.45 2.97 18.85 17.05 269.36
CMSV Commty. Svgs, MHC of FL (48.5) 0.81 1.22 15.05 15.05 134.05
CBNH Community Bankshares Inc of NH(8)* 2.17 1.73 17.31 17.31 247.44
CFTP Community Fed. Bancorp of MS 0.63 0.75 14.92 14.92 44.51
CFFC Community Fin. Corp. of VA 1.36 1.71 18.30 18.30 131.53
CFBC Community First Bnkg Co. of GA 0.42 0.82 27.66 27.66 168.47
CIBI Community Inv. Bancorp of OH 0.66 0.98 11.82 11.82 102.68
COOP Cooperative Bk.for Svgs. of NC -1.80 0.45 18.03 18.03 236.22
</TABLE>
<PAGE> 37
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CRZY Crazy Woman Creek Bncorp of WY 13.87 955 13.2 14.25 10.12 14.12 -1.77 N.A. 15.58
DNFC D&N Financial Corp. of MI 19.25 8,191 157.7 19.50 12.75 19.25 0.00 120.00 14.93
DFIN Damen Fin. Corp. of Chicago IL 14.67 3,247 47.6 15.00 11.00 14.75 -0.54 N.A. 33.36
DCBI Delphos Citizens Bancorp of OH 15.75 2,039 32.1 16.62 11.75 16.62 -5.23 N.A. 31.25
DIME Dime Community Bancorp of NY 18.94 13,093 248.0 20.00 12.31 19.25 -1.61 N.A. 28.41
DIBK Dime Financial Corp. of CT* 26.62 5,136 136.7 28.00 15.12 28.00 -4.93 153.52 54.32
EGLB Eagle BancGroup of IL 16.50 1,238 20.4 16.87 11.50 16.50 0.00 N.A. 10.96
EBSI Eagle Bancshares of Tucker GA 17.50 4,552 79.7 18.50 13.62 17.37 0.75 141.38 12.90
EGFC Eagle Financial Corp. of CT 33.31 6,279 209.2 34.50 24.00 33.25 0.18 280.69 9.21
ETFS East Texas Fin. Serv. of TX 18.53 1,025 19.0 18.75 14.50 18.53 0.00 N.A. 13.19
EMLD Emerald Financial Corp of OH 14.25 5,062 72.1 15.00 10.50 14.75 -3.39 N.A. 26.67
EIRE Emerald Island Bancorp, MA* 20.37 2,246 45.8 20.50 11.60 19.50 4.46 167.32 27.31
EFBC Empire Federal Bancorp of MT 15.12 2,592 39.2 15.50 12.50 14.75 2.51 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 20.50 2,011 41.2 20.50 12.75 19.75 3.80 N.A. 41.38
EQSB Equitable FSB of Wheaton MD 38.75 602 23.3 39.25 24.50 38.75 0.00 N.A. 37.17
FFFG F.F.O. Financial Group of FL(8) 5.50 8,430 46.4 5.50 2.62 4.75 15.79 -33.81 63.20
FCBF FCB Fin. Corp. of Neenah WI 27.00 2,464 66.5 27.50 17.00 26.75 0.93 N.A. 45.95
FFBS FFBS Bancorp of Columbus MS 24.00 1,557 37.4 26.00 19.75 24.00 0.00 N.A. 4.35
FFDF FFD Financial Corp. of OH 15.50 1,455 22.6 15.63 10.12 15.63 -0.83 N.A. 16.98
FFLC FFLC Bancorp of Leesburg FL 27.75 2,318 64.3 29.37 18.25 27.25 1.83 N.A. 29.07
FFFC FFVA Financial Corp. of VA 30.00 4,521 135.6 31.00 17.00 29.50 1.69 N.A. 46.34
FFWC FFW Corporation of Wabash IN 28.75 697 20.0 29.25 19.50 28.75 0.00 N.A. 31.40
FFYF FFY Financial Corp. of OH 27.50 4,145 114.0 27.50 23.87 26.00 5.77 N.A. 8.65
FMCO FMS Financial Corp. of NJ 26.00 2,388 62.1 31.50 15.50 26.00 0.00 188.89 42.47
FFHH FSF Financial Corp. of MN 17.75 3,033 53.8 18.25 11.50 17.75 0.00 N.A. 17.39
FOBC Fed One Bancorp of Wheeling WV 22.00 2,373 52.2 22.00 14.00 21.00 4.76 120.00 39.68
FBCI Fidelity Bancorp of Chicago IL 21.50 2,792 60.0 21.50 16.00 21.50 0.00 N.A. 26.47
FSBI Fidelity Bancorp, Inc. of PA 21.25 1,550 32.9 21.70 14.54 20.25 4.94 174.90 16.89
FFFL Fidelity FSB, MHC of FL (47.4) 22.25 6,766 70.9 23.25 12.25 22.50 -1.11 N.A. 25.35
FFED Fidelity Fed. Bancorp of IN 8.87 2,490 22.1 11.75 7.50 8.87 0.00 25.82 -9.03
FFOH Fidelity Financial of OH 15.63 5,594 87.4 16.37 9.62 15.63 0.00 N.A. 35.91
FIBC Financial Bancorp, Inc. of NY 20.25 1,722 34.9 21.00 14.00 19.75 2.53 N.A. 35.00
FBSI First Bancshares of MO 24.25 1,160 28.1 25.25 15.00 24.00 1.04 90.20 45.91
FBBC First Bell Bancorp of PA 16.37 6,511 106.6 17.37 13.12 16.62 -1.50 N.A. 23.55
FBER First Bergen Bancorp of NJ 19.25 3,015 58.0 19.50 9.50 16.62 15.82 N.A. 67.39
SKBO First Carnegie,MHC of PA(45.0) 13.87 2,300 14.4 14.75 11.62 13.75 0.87 N.A. N.A.
FCIT First Cit. Fin. Corp of MD(8) 34.50 2,951 101.8 36.50 16.12 35.50 -2.82 297.01 89.04
FSTC First Citizens Corp of GA 29.50 1,829 54.0 30.50 20.75 30.00 -1.67 136.00 16.83
FFBA First Colorado Bancorp of Co 17.75 16,561 294.0 20.12 13.50 18.06 -1.72 437.88 4.41
FDEF First Defiance Fin.Corp. of OH 15.06 9,341 140.7 15.50 10.12 15.50 -2.84 N.A. 21.75
FESX First Essex Bancorp of MA* 16.62 7,484 124.4 18.25 11.00 17.25 -3.65 177.00 26.68
FFES First FS&LA of E. Hartford CT 31.25 2,676 83.6 31.50 17.62 30.00 4.17 380.77 35.87
FFSX First FS&LA. MHC of IA (46.0) 24.25 2,828 21.0 35.00 20.75 25.50 -4.90 263.57 24.36
FFSW First Fed Fin. Serv. of OH 42.50 4,588 195.0 42.00 22.60 42.50 0.00 212.50 36.66
BDJI First Fed. Bancorp. of MN 21.00 701 14.7 21.25 13.75 20.62 1.84 N.A. 13.51
FFBH First Fed. Bancshares of AR 21.25 4,896 104.0 21.62 13.25 21.50 -1.16 N.A. 33.90
FTFC First Fed. Capital Corp. of WI 24.00 9,141 219.4 26.50 13.00 24.25 -1.03 220.00 53.16
FFKY First Fed. Fin. Corp. of KY 21.75 4,170 90.7 23.00 17.75 21.37 1.78 38.10 7.41
FFBZ First Federal Bancorp of OH 18.00 1,572 28.3 19.50 11.75 18.75 -4.00 80.00 12.50
FFCH First Fin. Holdings Inc. of SC 31.25 6,357 198.7 34.50 18.75 32.50 -3.85 155.10 38.89
FFBI First Financial Bancorp of IL 18.25 415 7.6 18.75 15.50 18.25 0.00 N.A. 15.00
FFHC First Financial Corp. of WI(8) 31.25 36,209 1,131.5 32.12 18.00 31.75 -1.57 98.41 27.55
FFHS First Franklin Corp. of OH 20.00 1,192 23.8 21.00 14.25 20.00 0.00 52.44 21.21
FGHC First Georgia Hold. Corp of GA 7.06 3,052 21.5 8.25 4.17 7.06 0.00 84.33 24.51
FSPG First Home Bancorp of NJ 19.87 2,708 53.8 20.12 13.31 19.00 4.58 231.17 43.26
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
CRZY Crazy Woman Creek Bncorp of WY 0.58 0.71 14.67 14.67 56.83
DNFC D&N Financial Corp. of MI 1.07 1.45 10.84 10.72 186.60
DFIN Damen Fin. Corp. of Chicago IL 0.51 0.64 14.12 14.12 70.03
DCBI Delphos Citizens Bancorp of OH 0.62 0.62 14.88 14.88 52.51
DIME Dime Community Bancorp of NY 0.94 1.01 14.58 12.56 100.44
DIBK Dime Financial Corp. of CT* 2.61 2.69 12.41 11.96 158.57
EGLB Eagle BancGroup of IL -0.12 0.27 16.69 16.69 140.80
EBSI Eagle Bancshares of Tucker GA 0.80 1.09 12.74 12.74 146.35
EGFC Eagle Financial Corp. of CT 1.34 1.79 16.61 12.51 240.81
ETFS East Texas Fin. Serv. of TX 0.34 0.70 19.97 19.97 109.95
EMLD Emerald Financial Corp of OH 0.75 0.96 8.73 8.58 116.28
EIRE Emerald Island Bancorp, MA* 1.52 1.60 13.39 13.39 189.23
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.75 0.82 15.52 15.50 122.52
EQSB Equitable FSB of Wheaton MD 2.20 3.52 24.92 24.92 491.70
FFFG F.F.O. Financial Group of FL(8) 0.19 0.31 2.41 2.41 37.60
FCBF FCB Fin. Corp. of Neenah WI 0.99 1.17 19.25 19.25 110.06
FFBS FFBS Bancorp of Columbus MS 0.96 1.21 16.05 16.05 82.64
FFDF FFD Financial Corp. of OH 0.44 0.61 14.50 14.50 58.62
FFLC FFLC Bancorp of Leesburg FL 1.06 1.53 22.51 22.51 167.00
FFFC FFVA Financial Corp. of VA 1.32 1.60 16.29 15.95 123.62
FFWC FFW Corporation of Wabash IN 1.98 2.46 22.75 22.75 227.32
FFYF FFY Financial Corp. of OH 1.28 1.82 19.82 19.82 144.57
FMCO FMS Financial Corp. of NJ 1.56 2.29 15.24 14.97 232.38
FFHH FSF Financial Corp. of MN 0.78 0.99 14.16 14.16 124.71
FOBC Fed One Bancorp of Wheeling WV 0.99 1.41 16.63 15.86 150.32
FBCI Fidelity Bancorp of Chicago IL 0.95 1.33 18.22 18.18 175.45
FSBI Fidelity Bancorp, Inc. of PA 1.08 1.72 15.83 15.83 234.39
FFFL Fidelity FSB, MHC of FL (47.4) 0.49 0.78 12.08 11.98 136.99
FFED Fidelity Fed. Bancorp of IN 0.17 0.30 5.17 5.17 100.52
FFOH Fidelity Financial of OH 0.40 0.64 12.03 10.57 91.72
FIBC Financial Bancorp, Inc. of NY 0.87 1.55 15.35 15.28 164.04
FBSI First Bancshares of MO 1.18 1.45 19.80 19.77 137.97
FBBC First Bell Bancorp of PA 1.06 1.23 10.78 10.78 109.72
FBER First Bergen Bancorp of NJ 0.35 0.63 13.76 13.76 83.68
SKBO First Carnegie,MHC of PA(45.0) 0.24 0.35 10.21 10.21 65.23
FCIT First Cit. Fin. Corp of MD(8) 1.20 1.78 14.95 14.95 234.41
FSTC First Citizens Corp of GA 2.52 2.11 13.18 10.37 140.67
FFBA First Colorado Bancorp of Co 1.03 1.02 13.08 12.91 91.42
FDEF First Defiance Fin.Corp. of OH 0.45 0.61 12.52 12.52 58.46
FESX First Essex Bancorp of MA* 1.27 1.11 11.20 9.65 153.24
FFES First FS&LA of E. Hartford CT 1.52 2.50 23.63 23.63 367.56
FFSX First FS&LA. MHC of IA (46.0) 0.68 1.17 13.31 13.20 163.66
FFSW First Fed Fin. Serv. of OH 2.37 1.59 14.35 12.12 237.17
BDJI First Fed. Bancorp. of MN 0.48 1.00 17.17 17.17 153.66
FFBH First Fed. Bancshares of AR 0.81 1.16 16.79 16.79 106.16
FTFC First Fed. Capital Corp. of WI 1.18 1.37 10.64 9.97 167.40
FFKY First Fed. Fin. Corp. of KY 1.14 1.36 12.40 11.68 90.50
FFBZ First Federal Bancorp of OH 0.88 1.23 9.66 9.65 128.03
FFCH First Fin. Holdings Inc. of SC 1.43 2.10 16.03 16.03 262.26
FFBI First Financial Bancorp of IL -0.05 1.05 17.52 17.52 224.47
FFHC First Financial Corp. of WI(8) 1.51 2.03 11.67 11.37 163.81
FFHS First Franklin Corp. of OH 0.36 1.21 17.17 17.06 190.39
FGHC First Georgia Hold. Corp of GA 0.47 0.28 4.09 3.73 48.20
FSPG First Home Bancorp of NJ 1.64 2.14 12.85 12.64 192.91
</TABLE>
<PAGE> 38
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFSL First Independence Corp. of KS 12.75 997 12.7 13.12 9.25 12.91 -1.24 N.A. 22.95
FISB First Indiana Corp. of IN 21.50 10,561 227.1 24.30 17.37 21.75 -1.15 59.26 0.47
FKFS First Keystone Fin. Corp of PA 26.37 1,228 32.4 26.37 16.75 26.19 0.69 N.A. 36.99
FLKY First Lancaster Bncshrs of KY 15.25 959 14.6 16.25 13.75 15.25 0.00 N.A. 4.31
FLFC First Liberty Fin. Corp. of GA 23.25 7,725 179.6 23.75 13.83 23.75 -2.11 357.68 26.57
CASH First Midwest Fin. Corp. of IA 17.37 2,734 47.5 17.87 14.50 17.12 1.46 N.A. 13.31
FMBD First Mutual Bancorp of IL 15.50 3,507 54.4 16.12 12.50 15.37 0.85 N.A. 3.33
FMSB First Mutual SB of Bellevue WA* 20.62 2,702 55.7 22.00 11.59 21.75 -5.20 166.06 29.60
FNGB First Northern Cap. Corp of WI 25.75 4,417 113.7 25.75 15.25 24.75 4.04 76.85 58.46
FFPB First Palm Beach Bancorp of FL 33.25 5,009 166.5 34.00 21.25 31.94 4.10 N.A. 40.77
FSLA First SB SLA MHC of NJ (47.5) 29.00 7,247 98.7 29.50 14.32 28.50 1.75 190.00 56.76
FSNJ First SB of NJ, MHC (45.9)(8) 32.75 3,064 46.0 34.00 14.00 31.62 3.57 N.A. 42.39
SOPN First SB, SSB, Moore Co. of NC 21.25 3,697 78.6 24.00 16.75 22.25 -4.49 N.A. 13.33
FWWB First Savings Bancorp of WA* 24.62 10,519 259.0 24.75 15.87 24.37 1.03 N.A. 34.02
SHEN First Shenango Bancorp of PA 28.50 2,072 59.1 29.25 20.25 29.25 -2.56 N.A. 26.67
FSFC First So.east Fin. Corp. of SC(8) 14.00 4,388 61.4 14.87 9.12 14.50 -3.45 N.A. 49.25
FBNW FirstBank Corp of Clarkston WA 18.25 1,984 36.2 19.00 15.50 17.75 2.82 N.A. N.A.
FSPT FirstSpartan Fin. Corp. of SC 35.62 4,430 157.8 37.00 35.00 35.75 -0.36 N.A. N.A.
FLAG Flag Financial Corp of GA 14.75 2,037 30.0 14.87 9.75 14.50 1.72 50.51 37.21
FFIC Flushing Fin. Corp. of NY* 20.31 7,979 162.1 23.50 17.37 20.62 -1.50 N.A. 12.09
FBHC Fort Bend Holding Corp. of TX 30.75 827 25.4 32.00 16.87 31.62 -2.75 N.A. 20.59
FTSB Fort Thomas Fin. Corp. of KY 11.00 1,495 16.4 14.75 9.25 10.50 4.76 N.A. -24.76
FKKY Frankfort First Bancorp of KY 9.25 3,385 31.3 12.25 8.00 9.12 1.43 N.A. -18.65
FTNB Fulton Bancorp of MO 19.75 1,719 34.0 20.37 12.50 19.87 -0.60 N.A. 28.50
GFSB GFS Bancorp of Grinnell IA 13.37 988 13.2 14.25 10.12 13.37 0.00 N.A. 25.89
GUPB GFSB Bancorp of Gallup NM 19.00 839 15.9 19.75 13.50 19.00 0.00 N.A. 19.72
GSLA GS Financial Corp. of LA 15.25 3,438 52.4 16.12 13.37 16.00 -4.69 N.A. N.A.
GOSB GSB Financial Corp. of NY 14.37 2,248 32.3 14.87 14.25 14.37 0.00 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 17.75 1,076 19.1 18.25 13.00 17.62 0.74 N.A. 24.56
GBCI Glacier Bancorp of MT 18.50 6,812 126.0 20.25 14.00 18.50 0.00 283.02 13.29
GFCO Glenway Financial Corp. of OH 27.00 1,144 30.9 27.00 18.25 24.50 10.20 N.A. 31.71
GTPS Great American Bancorp of IL 17.50 1,760 30.8 17.50 13.25 16.75 4.48 N.A. 18.16
GTFN Great Financial Corp. of KY 33.25 13,791 458.6 35.12 26.75 34.62 -3.96 N.A. 14.18
GSBC Great Southern Bancorp of MO 16.75 8,288 138.8 18.00 13.62 17.00 -1.47 473.63 -5.95
GDVS Greater DV SB,MHC of PA (19.9)* 15.12 3,272 9.8 16.50 9.25 15.12 0.00 N.A. 45.81
GSFC Green Street Fin. Corp. of NC 17.25 4,298 74.1 18.87 12.75 17.75 -2.82 N.A. 11.29
GSLC Guaranty Svgs & Loan FA of VA 12.25 1,499 18.4 11.00 7.25 12.25 0.00 N.A. 40.00
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 18.25 3,125 17.7 20.50 9.75 18.50 -1.35 N.A. 51.33
HCBB HCB Bancshares of AR 13.87 2,645 36.7 14.12 12.62 13.75 0.87 N.A. N.A.
HEMT HF Bancorp of Hemet CA 15.25 6,282 95.8 15.87 9.25 14.87 2.56 N.A. 37.14
HFFC HF Financial Corp. of SD 21.88 2,979 65.2 22.25 14.75 21.75 0.60 337.60 26.40
HFNC HFNC Financial Corp. of NC 16.25 17,192 279.4 22.06 14.87 16.00 1.56 N.A. -9.07
HMNF HMN Financial, Inc. of MN 24.75 4,212 104.2 25.75 15.25 25.75 -3.88 N.A. 36.59
HALL Hallmark Capital Corp. of WI 22.75 1,443 32.8 23.75 14.50 23.25 -2.15 N.A. 28.17
HARB Harbor FSB, MHC of FL (46.0) 44.50 4,970 101.0 45.75 23.75 44.00 1.14 N.A. 24.48
HRBF Harbor Federal Bancorp of MD 20.00 1,754 35.1 20.00 12.50 19.75 1.27 100.00 26.98
HFSA Hardin Bancorp of Hardin MO 16.75 859 14.4 16.75 11.25 16.75 0.00 N.A. 34.00
HARL Harleysville SA of PA 25.00 1,652 41.3 25.00 14.00 25.00 0.00 40.85 58.23
HARS Harris SB, MHC of PA (24.2) 24.75 11,223 67.2 24.75 14.75 23.25 6.45 N.A. 35.62
HFFB Harrodsburg 1st Fin Bcrp of KY 15.75 2,025 31.9 19.00 14.75 15.87 -0.76 N.A. -16.53
HHFC Harvest Home Fin. Corp. of OH 12.75 935 11.9 13.75 9.25 12.75 0.00 N.A. 30.77
HAVN Haven Bancorp of Woodhaven NY 36.25 4,377 158.7 38.37 25.56 36.50 -0.68 N.A. 26.66
HVFD Haverfield Corp. of OH(8) 26.75 1,906 51.0 27.37 17.00 27.00 -0.93 72.58 39.91
HTHR Hawthorne Fin. Corp. of CA 15.00 2,629 39.4 15.50 6.62 14.87 0.87 -45.45 84.50
HMLK Hemlock Fed. Fin. Corp. of IL 15.25 2,076 31.7 15.50 12.50 15.50 -1.61 N.A. N.A.
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFSL First Independence Corp. of KS 0.47 0.75 11.60 11.60 111.21
FISB First Indiana Corp. of IN 1.17 1.43 13.77 13.60 144.00
FKFS First Keystone Fin. Corp of PA 1.24 1.84 18.12 18.12 256.22
FLKY First Lancaster Bncshrs of KY 0.46 0.56 14.44 14.44 42.18
FLFC First Liberty Fin. Corp. of GA 1.76 1.42 11.87 10.62 161.56
CASH First Midwest Fin. Corp. of IA 0.99 1.29 15.70 13.89 135.40
FMBD First Mutual Bancorp of IL 0.10 0.32 15.30 11.59 119.10
FMSB First Mutual SB of Bellevue WA* 1.45 1.40 10.14 10.14 154.27
FNGB First Northern Cap. Corp of WI 0.87 1.26 16.28 16.28 144.38
FFPB First Palm Beach Bancorp of FL -0.02 0.15 21.04 20.50 311.09
FSLA First SB SLA MHC of NJ (47.5) 0.69 1.22 13.00 11.52 141.40
FSNJ First SB of NJ, MHC (45.9)(8) -0.70 0.47 16.18 16.18 188.83
SOPN First SB, SSB, Moore Co. of NC 0.99 1.19 18.04 18.04 73.34
FWWB First Savings Bancorp of WA* 0.89 0.84 14.13 13.00 95.79
SHEN First Shenango Bancorp of PA 1.69 2.20 21.75 21.75 198.56
FSFC First So.east Fin. Corp. of SC(8) 0.01 0.70 7.80 7.80 76.29
FBNW FirstBank Corp of Clarkston WA 0.54 0.44 14.00 14.00 77.62
FSPT FirstSpartan Fin. Corp. of SC 1.00 1.16 27.63 27.63 104.97
FLAG Flag Financial Corp of GA -0.07 0.15 10.25 10.25 109.02
FFIC Flushing Fin. Corp. of NY* 0.87 0.90 16.28 16.28 101.67
FBHC Fort Bend Holding Corp. of TX 0.74 1.71 23.24 21.64 385.33
FTSB Fort Thomas Fin. Corp. of KY 0.30 0.46 10.19 10.19 63.33
FKKY Frankfort First Bancorp of KY 0.24 0.36 9.93 9.93 37.91
FTNB Fulton Bancorp of MO 0.41 0.58 14.47 14.47 57.86
GFSB GFS Bancorp of Grinnell IA 0.85 1.09 10.32 10.32 89.22
GUPB GFSB Bancorp of Gallup NM 0.69 0.87 16.88 16.88 103.59
GSLA GS Financial Corp. of LA 0.34 0.34 16.36 16.36 35.85
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.53 0.74 15.95 15.95 61.16
GBCI Glacier Bancorp of MT 0.99 1.13 7.75 7.54 81.09
GFCO Glenway Financial Corp. of OH 0.92 1.67 23.46 23.10 245.47
GTPS Great American Bancorp of IL 0.36 0.43 16.68 16.68 77.83
GTFN Great Financial Corp. of KY 1.59 1.51 20.40 19.53 220.89
GSBC Great Southern Bancorp of MO 1.09 1.23 7.35 7.35 81.94
GDVS Greater DV SB,MHC of PA (19.9)* 0.23 0.42 8.64 8.64 74.69
GSFC Green Street Fin. Corp. of NC 0.56 0.68 14.73 14.73 40.62
GSLC Guaranty Svgs & Loan FA of VA 0.33 0.31 4.43 4.43 77.50
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.37 0.56 8.80 8.80 63.86
HCBB HCB Bancshares of AR -0.08 0.29 13.73 13.16 75.24
HEMT HF Bancorp of Hemet CA -0.36 -2.62 12.91 0.00 131.63
HFFC HF Financial Corp. of SD 1.23 1.67 17.78 17.78 188.54
HFNC HFNC Financial Corp. of NC 0.51 0.67 9.23 9.23 49.03
HMNF HMN Financial, Inc. of MN 0.94 1.17 19.42 19.42 134.58
HALL Hallmark Capital Corp. of WI 1.33 1.68 20.56 20.56 284.01
HARB Harbor FSB, MHC of FL (46.0) 2.05 2.64 18.85 18.23 224.69
HRBF Harbor Federal Bancorp of MD 0.51 0.82 16.09 16.09 125.12
HFSA Hardin Bancorp of Hardin MO 0.58 0.89 15.69 15.69 125.75
HARL Harleysville SA of PA 1.46 2.00 13.31 13.31 203.79
HARS Harris SB, MHC of PA (24.2) 0.79 0.99 14.59 12.76 182.15
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.17 0.44 11.12 11.12 89.47
HAVN Haven Bancorp of Woodhaven NY 2.09 3.11 24.20 24.12 407.02
HVFD Haverfield Corp. of OH(8) 1.02 1.94 15.52 15.52 181.61
HTHR Hawthorne Fin. Corp. of CA 1.15 1.16 12.37 12.37 318.74
HMLK Hemlock Fed. Fin. Corp. of IL 0.10 0.55 14.57 14.57 79.44
</TABLE>
<PAGE> 39
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HBNK Highland Federal Bank of CA 25.62 2,300 58.9 26.00 14.25 26.00 -1.46 N.A. 50.71
HIFS Hingham Inst. for Sav. of MA* 23.25 1,303 30.3 25.25 14.25 23.75 -2.11 409.87 24.00
HBEI Home Bancorp of Elgin IL 18.25 6,856 125.1 19.31 11.81 18.00 1.39 N.A. 35.19
HBFW Home Bancorp of Fort Wayne IN 21.25 2,525 53.7 21.62 15.75 21.00 1.19 N.A. 11.84
HBBI Home Building Bancorp of IN 20.50 312 6.4 22.00 17.00 20.50 0.00 N.A. 3.80
HCFC Home City Fin. Corp. of OH 15.00 952 14.3 15.00 12.00 14.50 3.45 N.A. 13.21
HOMF Home Fed Bancorp of Seymour IN 30.50 3,396 103.6 30.50 17.33 30.50 0.00 203.48 18.45
HWEN Home Financial Bancorp of IN 15.25 486 7.4 15.75 12.00 15.25 0.00 N.A. 19.61
HPBC Home Port Bancorp, Inc. of MA* 20.75 1,842 38.2 21.75 13.87 21.00 -1.19 159.38 25.76
HMCI Homecorp, Inc. of Rockford IL 14.25 1,693 24.1 15.25 11.83 15.25 -6.56 42.50 11.76
HZFS Horizon Fin'l. Services of IA 18.87 426 8.0 19.75 14.00 18.87 0.00 N.A. 24.80
HRZB Horizon Financial Corp. of WA* 15.37 7,417 114.0 16.50 10.65 15.25 0.79 34.59 30.92
IBSF IBS Financial Corp. of NJ 15.63 11,012 172.1 18.75 12.06 16.75 -6.69 N.A. 15.01
ISBF ISB Financial Corp. of LA 24.37 7,001 170.6 26.25 14.75 24.87 -2.01 N.A. 35.39
ITLA Imperial Thrift & Loan of CA* 18.12 7,829 141.9 18.25 13.00 18.00 0.67 N.A. 20.80
IFSB Independence FSB of DC 14.37 1,280 18.4 14.50 6.75 14.50 -0.90 618.50 79.62
INCB Indiana Comm. Bank, SB of IN 15.25 922 14.1 19.00 13.25 15.25 0.00 N.A. -6.15
INBI Industrial Bancorp of OH 14.50 5,277 76.5 14.69 10.12 14.25 1.75 N.A. 13.73
IWBK Interwest SB of Oak Harbor WA 39.62 8,036 318.4 40.12 24.75 39.75 -0.33 296.20 22.85
IPSW Ipswich SB of Ipswich MA* 22.25 1,188 26.4 25.00 9.75 23.25 -4.30 N.A. 85.42
JSB JSB Financial, Inc. of NY 44.40 9,845 437.1 46.50 32.87 44.50 -0.22 286.09 16.84
JXVL Jacksonville Bancorp of TX 16.62 2,490 41.4 16.62 10.62 16.50 0.73 N.A. 13.68
JXSB Jcksnville SB,MHC of IL (44.6) 16.62 1,272 9.4 18.00 11.50 16.62 0.00 N.A. 25.43
JSBA Jefferson Svgs Bancorp of MO 32.00 4,971 159.1 32.25 22.25 31.37 2.01 N.A. 23.08
JOAC Joachim Bancorp of MO 14.25 760 10.8 15.25 12.50 14.50 -1.72 N.A. -1.72
KSAV KS Bancorp of Kenly NC 18.50 885 16.4 19.12 13.59 18.50 0.00 N.A. 24.08
KSBK KSB Bancorp of Kingfield ME(8)* 14.37 1,238 17.8 16.00 6.82 13.50 6.44 N.A. 87.35
KFBI Klamath First Bancorp of OR 19.19 10,019 192.3 20.12 13.62 18.62 3.06 N.A. 21.84
LSBI LSB Fin. Corp. of Lafayette IN 21.25 945 20.1 21.25 14.76 20.75 2.41 N.A. 14.43
LVSB Lakeview SB of Paterson NJ 32.25 2,302 74.2 33.87 19.20 33.00 -2.27 N.A. 29.67
LARK Landmark Bancshares of KS 21.50 1,711 36.8 22.12 15.25 21.50 0.00 N.A. 19.44
LARL Laurel Capital Group of PA 21.37 1,498 32.0 22.50 14.75 21.00 1.76 66.95 29.52
LSBX Lawrence Savings Bank of MA* 11.87 4,274 50.7 12.87 5.87 11.62 2.15 245.06 46.00
LFED Leeds FSB, MHC of MD (36.2) 20.87 3,455 26.0 21.25 13.00 21.00 -0.62 N.A. 30.44
LXMO Lexington B&L Fin. Corp. of MO 16.12 1,088 17.5 16.62 9.87 16.00 0.75 N.A. 19.41
LIFB Life Bancorp of Norfolk VA 26.00 9,847 256.0 26.62 14.59 25.66 1.33 N.A. 44.44
LFBI Little Falls Bancorp of NJ 17.12 2,745 47.0 17.50 10.25 17.37 -1.44 N.A. 34.27
LOGN Logansport Fin. Corp. of IN 14.00 1,260 17.6 15.00 11.12 14.25 -1.75 N.A. 24.44
LONF London Financial Corp. of OH 15.63 515 8.0 17.50 10.00 15.63 0.00 N.A. 10.69
LISB Long Island Bancorp, Inc of NY 39.00 23,968 934.8 41.00 27.75 39.66 -1.66 N.A. 11.43
MAFB MAF Bancorp of IL 32.37 15,393 498.3 34.75 16.83 33.87 -4.43 280.82 39.71
MBLF MBLA Financial Corp. of MO 23.50 1,316 30.9 24.75 19.00 23.50 0.00 N.A. 23.68
MFBC MFB Corp. of Mishawaka IN 20.50 1,690 34.6 20.50 15.25 20.00 2.50 N.A. 23.35
MLBC ML Bancorp of Villanova PA 20.25 10,566 214.0 20.87 12.50 20.00 1.25 N.A. 43.41
MBB MSB Bancorp of Middletown NY* 23.50 2,837 66.7 23.87 15.50 22.12 6.24 135.00 19.78
MSBF MSB Financial Corp. of MI 13.00 624 8.1 15.00 8.37 14.12 -7.93 N.A. 36.84
MGNL Magna Bancorp of MS(8) 25.00 13,754 343.9 27.37 16.75 26.25 -4.76 400.00 42.86
MARN Marion Capital Holdings of IN 23.00 1,768 40.7 23.75 19.25 23.37 -1.58 N.A. 19.48
MRKF Market Fin. Corp. of OH 14.25 1,336 19.0 14.75 12.25 14.25 0.00 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 16.75 1,411 23.6 16.87 14.25 16.75 0.00 N.A. 12.64
MFSL Maryland Fed. Bancorp of MD 47.50 3,210 152.5 50.50 27.38 49.37 -3.79 352.38 36.69
MASB MassBank Corp. of Reading MA* 51.87 2,681 139.1 53.00 32.50 51.50 0.72 320.68 36.07
MFLR Mayflower Co-Op. Bank of MA* 18.00 890 16.0 19.75 14.75 19.50 -7.69 260.00 5.88
MECH Mechanics SB of Hartford CT* 21.75 5,290 115.1 21.75 11.87 20.75 4.82 N.A. 38.10
MDBK Medford Savings Bank of MA* 30.06 4,541 136.5 32.00 22.00 30.25 -0.63 329.43 16.74
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HBNK Highland Federal Bank of CA 0.96 1.41 16.39 16.39 219.30
HIFS Hingham Inst. for Sav. of MA* 1.86 1.86 15.62 15.62 166.99
HBEI Home Bancorp of Elgin IL 0.25 0.43 13.73 13.73 51.43
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 0.29 0.74 18.51 18.51 144.44
HCFC Home City Fin. Corp. of OH 0.51 0.77 14.77 14.77 71.68
HOMF Home Fed Bancorp of Seymour IN 2.02 2.35 17.05 16.53 201.06
HWEN Home Financial Bancorp of IN 0.45 0.64 15.12 15.12 81.16
HPBC Home Port Bancorp, Inc. of MA* 1.72 1.71 11.39 11.39 107.90
HMCI Homecorp, Inc. of Rockford IL 0.27 0.85 12.81 12.81 195.87
HZFS Horizon Fin'l. Services of IA 0.75 1.05 19.31 19.31 183.96
HRZB Horizon Financial Corp. of WA* 1.07 1.05 10.91 10.91 69.93
IBSF IBS Financial Corp. of NJ 0.35 0.60 11.45 11.45 67.20
ISBF ISB Financial Corp. of LA 0.75 1.01 16.28 13.74 132.73
ITLA Imperial Thrift & Loan of CA* 1.37 1.37 11.77 11.72 103.52
IFSB Independence FSB of DC 0.29 0.66 13.39 11.74 205.28
INCB Indiana Comm. Bank, SB of IN 0.16 0.50 12.27 12.27 99.06
INBI Industrial Bancorp of OH 0.45 0.88 11.63 11.63 65.68
IWBK Interwest SB of Oak Harbor WA 1.82 2.47 15.46 15.12 228.05
IPSW Ipswich SB of Ipswich MA* 1.68 1.32 9.11 9.11 159.41
JSB JSB Financial, Inc. of NY 2.75 2.61 34.47 34.47 155.50
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (44.6) 0.33 0.77 13.26 13.26 128.80
JSBA Jefferson Svgs Bancorp of MO 0.57 1.43 18.09 14.12 230.96
JOAC Joachim Bancorp of MO 0.24 0.37 13.60 13.60 46.92
KSAV KS Bancorp of Kenly NC 1.08 1.40 16.22 16.21 119.91
KSBK KSB Bancorp of Kingfield ME(8)* 2.75 2.74 21.90 20.27 320.90
KFBI Klamath First Bancorp of OR 0.58 0.86 13.95 13.95 68.25
LSBI LSB Fin. Corp. of Lafayette IN 0.94 0.79 18.06 18.06 198.97
LVSB Lakeview SB of Paterson NJ 2.78 1.93 19.91 15.92 209.23
LARK Landmark Bancshares of KS 1.04 1.29 19.14 19.14 130.80
LARL Laurel Capital Group of PA 1.50 1.92 14.51 14.51 139.24
LSBX Lawrence Savings Bank of MA* 1.40 1.38 7.45 7.45 85.71
LFED Leeds FSB, MHC of MD (36.2) 0.63 0.90 13.20 13.20 81.59
LXMO Lexington B&L Fin. Corp. of MO 0.56 0.56 15.17 15.17 54.92
LIFB Life Bancorp of Norfolk VA 0.96 1.18 15.42 14.94 142.97
LFBI Little Falls Bancorp of NJ 0.29 0.51 14.51 13.40 109.29
LOGN Logansport Fin. Corp. of IN 0.74 0.96 12.67 12.67 65.99
LONF London Financial Corp. of OH 0.54 0.79 14.63 14.63 73.66
LISB Long Island Bancorp, Inc of NY 1.44 1.67 22.17 21.95 246.53
MAFB MAF Bancorp of IL 1.51 2.10 16.57 14.39 210.25
MBLF MBLA Financial Corp. of MO 1.05 1.36 21.51 21.51 159.41
MFBC MFB Corp. of Mishawaka IN 0.72 1.10 20.11 20.11 138.63
MLBC ML Bancorp of Villanova PA 1.36 1.23 13.68 13.44 196.03
MBB MSB Bancorp of Middletown NY* 0.95 1.02 19.72 8.48 285.75
MSBF MSB Financial Corp. of MI 1.31 1.59 20.34 20.34 119.71
MGNL Magna Bancorp of MS(8) 1.35 1.49 10.06 9.79 98.39
MARN Marion Capital Holdings of IN 1.38 1.65 22.10 22.10 98.02
MRKF Market Fin. Corp. of OH 0.32 0.32 14.82 14.82 42.35
MFCX Marshalltown Fin. Corp. of IA(8) 0.30 0.65 14.23 14.23 90.38
MFSL Maryland Fed. Bancorp of MD 2.03 2.96 29.68 29.28 351.55
MASB MassBank Corp. of Reading MA* 3.64 3.45 35.92 35.92 337.72
MFLR Mayflower Co-Op. Bank of MA* 1.33 1.30 13.21 12.98 140.10
MECH Mechanics SB of Hartford CT* 2.76 2.76 15.93 15.93 155.69
MDBK Medford Savings Bank of MA* 2.45 2.29 21.24 19.79 236.19
</TABLE>
<PAGE> 40
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MERI Meritrust FSB of Thibodaux LA 40.50 774 31.3 41.50 30.75 41.00 -1.22 N.A. 28.08
MWBX Metro West of MA* 6.69 13,953 93.3 6.81 3.62 6.44 3.88 62.38 24.58
MCBS Mid Continent Bancshares of KS 29.25 1,958 57.3 31.75 17.87 30.25 -3.31 N.A. 25.16
MIFC Mid Iowa Financial Corp. of IA 9.62 1,676 16.1 9.62 6.00 9.50 1.26 92.40 51.02
MCBN Mid-Coast Bancorp of ME 25.00 231 5.8 25.00 18.00 25.00 0.00 337.83 31.58
MWBI Midwest Bancshares, Inc. of IA 35.00 348 12.2 35.00 24.50 34.75 0.72 250.00 32.08
MWFD Midwest Fed. Fin. Corp of WI 21.75 1,625 35.3 24.50 15.50 19.50 11.54 335.00 17.57
MFFC Milton Fed. Fin. Corp. of OH 13.62 2,310 31.5 16.00 12.12 14.12 -3.54 N.A. -6.07
MIVI Miss. View Hold. Co. of MN 15.12 819 12.4 15.75 10.87 15.00 0.80 N.A. 26.00
MBSP Mitchell Bancorp of NC* 16.75 931 15.6 16.75 10.87 16.37 2.32 N.A. 17.54
MBBC Monterey Bay Bancorp of CA 16.25 3,245 52.7 18.25 12.50 16.25 0.00 N.A. 10.17
MONT Montgomery Financial Corp ofIN 11.87 1,653 19.6 14.00 11.00 12.06 -1.58 N.A. -8.69
MSBK Mutual SB, FSB of Bay City MI 10.75 4,274 45.9 11.25 5.12 10.25 4.88 22.86 95.45
NHTB NH Thrift Bancshares of NH 16.31 2,041 33.3 16.75 9.87 16.25 0.37 253.03 29.24
NSLB NS&L Bancorp of Neosho MO 16.62 708 11.8 17.25 12.00 16.62 0.00 N.A. 22.03
NMSB Newmil Bancorp. of CT* 12.62 3,834 48.4 13.12 7.00 12.12 4.13 98.12 29.44
NASB North American SB of MO 50.00 2,257 112.9 55.00 29.94 53.00 -5.66 ***.** 45.99
NBSI North Bancshares of Chicago IL 22.25 997 22.2 22.25 15.75 21.50 3.49 N.A. 34.85
FFFD North Central Bancshares of IA 16.50 3,258 53.8 16.81 11.25 16.69 -1.14 N.A. 21.68
NBN Northeast Bancorp of ME* 14.75 1,275 18.8 14.94 12.75 14.75 0.00 25.53 5.36
NEIB Northeast Indiana Bncrp of IN 17.00 1,763 30.0 18.00 12.00 18.00 -5.56 N.A. 24.82
NWEQ Northwest Equity Corp. of WI 15.25 839 12.8 15.25 10.25 15.25 0.00 N.A. 25.83
NWSB Northwest SB, MHC of PA (29.9) 17.37 23,376 121.4 18.00 10.75 17.62 -1.42 N.A. 29.92
NSSY Norwalk Savings Society of CT* 34.62 2,404 83.2 36.50 20.87 32.00 8.19 N.A. 48.14
NSSB Norwich Financial Corp. of CT* 22.25 5,413 120.4 23.25 15.00 22.37 -0.54 217.86 13.40
NTMG Nutmeg FS&LA of CT 10.75 725 7.8 10.75 7.00 9.62 11.75 N.A. 43.33
OHSL OHSL Financial Corp. of OH 24.50 1,208 29.6 25.25 19.50 24.62 -0.49 N.A. 14.65
OCFC Ocean Fin. Corp. of NJ 34.50 9,059 312.5 35.75 21.00 34.87 -1.06 N.A. 35.29
OCN Ocwen Financial Corp. of FL 44.00 26,800 1,179.2 38.00 20.25 41.75 5.39 N.A. 64.49
OFCP Ottawa Financial Corp. of MI 25.62 4,913 125.9 25.62 16.00 25.25 1.47 N.A. 52.41
PFFB PFF Bancorp of Pomona CA 19.56 18,716 366.1 19.62 11.00 19.25 1.61 N.A. 31.54
PSFI PS Financial of Chicago IL 14.50 2,182 31.6 14.87 11.62 14.62 -0.82 N.A. 23.40
PVFC PVF Capital Corp. of OH 19.50 2,323 45.3 20.75 11.52 21.25 -8.24 343.18 36.17
PCCI Pacific Crest Capital of CA* 15.12 2,938 44.4 15.25 8.13 15.25 -0.85 N.A. 31.48
PALM Palfed, Inc. of Aiken SC 15.50 5,284 81.9 17.50 12.50 16.00 -3.13 0.85 10.71
PBCI Pamrapo Bancorp, Inc. of NJ 20.50 2,843 58.3 23.75 18.50 21.00 -2.38 264.12 2.50
PFED Park Bancorp of Chicago IL 16.62 2,431 40.4 16.75 10.19 16.37 1.53 N.A. 27.85
PVSA Parkvale Financial Corp of PA 28.00 4,055 113.5 29.50 20.80 28.00 0.00 238.16 7.69
PBIX Patriot Bank Corp. of PA 17.50 4,266 74.7 16.75 10.62 17.50 0.00 N.A. 29.63
PEEK Peekskill Fin. Corp. of NY 16.00 3,193 51.1 17.00 12.19 16.12 -0.74 N.A. 12.28
PFSB PennFed Fin. Services of NJ 29.81 4,822 143.7 30.50 16.75 29.87 -0.20 N.A. 47.21
PWBC PennFirst Bancorp of PA 16.37 4,302 70.4 16.59 12.27 16.25 0.74 105.14 32.12
PWBK Pennwood SB of PA* 15.50 610 9.5 15.50 9.38 15.50 0.00 N.A. 12.73
PBKB People's SB of Brockton MA* 16.75 3,595 60.2 17.37 9.75 16.50 1.52 181.99 57.72
PFDC Peoples Bancorp of Auburn IN 25.25 2,274 57.4 27.00 19.25 27.00 -6.48 44.29 24.69
PBCT Peoples Bank, MHC of CT (37.4)* 28.25 61,053 428.1 29.00 14.00 28.75 -1.74 258.96 46.75
PFFC Peoples Fin. Corp. of OH 17.37 1,491 25.9 17.37 10.87 16.87 2.96 N.A. 28.67
PHBK Peoples Heritage Fin Grp of ME* 38.87 27,371 1,063.9 40.25 20.62 40.25 -3.43 153.89 38.82
PHSB Peoples Home SB of PA 14.00 2,760 17.4 14.37 13.62 14.00 0.00 N.A. N.A.
PSFC Peoples Sidney Fin. Corp of OH 16.50 1,785 29.5 16.50 12.56 15.50 6.45 N.A. N.A.
PERM Permanent Bancorp of IN 25.25 2,052 51.8 26.50 15.75 25.75 -1.94 N.A. 24.69
PMFI Perpetual Midwest Fin. of IA 20.12 1,883 37.9 22.00 17.00 19.00 5.89 N.A. 4.52
PERT Perpetual of SC, MHC (46.8) 39.25 1,505 27.7 40.25 20.25 38.50 1.95 N.A. 61.86
PCBC Perry Co. Fin. Corp. of MO 20.50 808 16.6 22.25 15.50 21.37 -4.07 N.A. 20.59
PHFC Pittsburgh Home Fin. of PA 17.12 1,969 33.7 17.12 10.25 17.00 0.71 N.A. 28.05
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MERI Meritrust FSB of Thibodaux LA 1.99 3.10 24.22 24.22 295.20
MWBX Metro West of MA* 0.52 0.52 3.02 3.02 40.60
MCBS Mid Continent Bancshares of KS 1.87 2.12 19.59 19.59 208.68
MIFC Mid Iowa Financial Corp. of IA 0.64 0.84 6.71 6.70 73.73
MCBN Mid-Coast Bancorp of ME 1.05 1.63 21.97 21.97 255.09
MWBI Midwest Bancshares, Inc. of IA 1.84 3.04 27.71 27.71 399.44
MWFD Midwest Fed. Fin. Corp of WI 1.72 1.35 10.66 10.24 123.74
MFFC Milton Fed. Fin. Corp. of OH 0.39 0.54 11.37 11.37 86.53
MIVI Miss. View Hold. Co. of MN 0.58 0.86 15.55 15.55 85.17
MBSP Mitchell Bancorp of NC* 0.51 0.60 15.39 15.39 35.49
MBBC Monterey Bay Bancorp of CA 0.31 0.57 13.98 12.82 130.16
MONT Montgomery Financial Corp ofIN 0.26 0.42 11.22 11.22 62.63
MSBK Mutual SB, FSB of Bay City MI 0.18 0.07 9.57 9.57 157.56
NHTB NH Thrift Bancshares of NH 0.44 0.65 11.47 9.72 153.37
NSLB NS&L Bancorp of Neosho MO 0.41 0.62 16.35 16.35 82.05
NMSB Newmil Bancorp. of CT* 0.68 0.65 8.27 8.27 84.26
NASB North American SB of MO 3.85 3.74 24.35 23.56 305.38
NBSI North Bancshares of Chicago IL 0.58 0.81 16.95 16.95 119.95
FFFD North Central Bancshares of IA 1.02 1.18 14.81 14.81 65.34
NBN Northeast Bancorp of ME* 1.31 1.15 13.49 11.66 194.14
NEIB Northeast Indiana Bncrp of IN 0.94 1.11 14.87 14.87 98.06
NWEQ Northwest Equity Corp. of WI 0.85 1.08 12.94 12.94 113.35
NWSB Northwest SB, MHC of PA (29.9) 0.56 0.81 8.30 7.80 85.45
NSSY Norwalk Savings Society of CT* 2.42 2.77 20.69 19.95 256.81
NSSB Norwich Financial Corp. of CT* 1.42 1.35 14.70 13.27 131.66
NTMG Nutmeg FS&LA of CT 0.39 0.44 7.35 7.35 129.17
OHSL OHSL Financial Corp. of OH 1.08 1.54 21.00 21.00 190.24
OCFC Ocean Fin. Corp. of NJ -0.06 1.30 27.30 27.30 153.20
OCN Ocwen Financial Corp. of FL 2.59 1.88 8.40 8.40 98.86
OFCP Ottawa Financial Corp. of MI 0.82 1.32 15.31 12.28 175.32
PFFB PFF Bancorp of Pomona CA 0.21 0.61 14.51 14.36 140.60
PSFI PS Financial of Chicago IL 0.66 0.68 14.88 14.88 34.43
PVFC PVF Capital Corp. of OH 1.54 1.98 10.77 10.77 153.36
PCCI Pacific Crest Capital of CA* 1.11 1.04 8.95 8.95 126.32
PALM Palfed, Inc. of Aiken SC 0.13 0.76 10.37 10.37 125.83
PBCI Pamrapo Bancorp, Inc. of NJ 1.16 1.60 16.62 16.49 130.49
PFED Park Bancorp of Chicago IL 0.62 0.86 16.27 16.27 72.22
PVSA Parkvale Financial Corp of PA 1.72 2.54 18.54 18.40 244.45
PBIX Patriot Bank Corp. of PA 0.52 0.71 11.26 11.26 139.25
PEEK Peekskill Fin. Corp. of NY 0.63 0.81 14.63 14.63 57.19
PFSB PennFed Fin. Services of NJ 1.35 2.01 19.55 16.12 259.72
PWBC PennFirst Bancorp of PA 0.69 1.04 11.61 10.59 164.16
PWBK Pennwood SB of PA* 0.46 0.73 15.30 15.30 78.57
PBKB People's SB of Brockton MA* 1.16 0.69 8.56 8.20 152.65
PFDC Peoples Bancorp of Auburn IN 1.39 1.82 19.23 19.23 126.46
PBCT Peoples Bank, MHC of CT (37.4)* 1.33 1.06 10.39 10.37 123.47
PFFC Peoples Fin. Corp. of OH 0.52 0.52 16.18 16.18 60.15
PHBK Peoples Heritage Fin Grp of ME* 2.36 2.39 15.77 13.29 204.27
PHSB Peoples Home SB of PA 0.32 0.67 14.36 14.36 82.97
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.73 14.09 14.09 60.57
PERM Permanent Bancorp of IN 0.64 1.21 19.05 18.89 206.48
PMFI Perpetual Midwest Fin. of IA 0.25 0.61 18.00 18.00 210.96
PERT Perpetual of SC, MHC (46.8) 1.00 1.41 19.69 19.69 148.17
PCBC Perry Co. Fin. Corp. of MO 0.77 1.02 18.07 18.07 98.66
PHFC Pittsburgh Home Fin. of PA 0.69 0.88 14.21 14.06 130.15
</TABLE>
<PAGE> 41
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PFSL Pocahnts Fed, MHC of AR (46.4) 22.25 1,632 16.8 22.50 14.25 22.00 1.14 N.A. 27.14
POBS Portsmouth Bank Shrs Inc of NH(8)* 17.25 5,907 101.9 18.50 12.38 17.87 -3.47 65.71 25.73
PTRS Potters Financial Corp of OH 24.12 487 11.7 24.75 15.50 24.50 -1.55 N.A. 20.60
PKPS Poughkeepsie Fin. Corp. of NY 8.00 12,595 100.8 8.13 4.75 7.94 0.76 3.23 52.38
PRBC Prestige Bancorp of PA 16.00 915 14.6 16.50 10.25 15.87 0.82 N.A. 18.52
PETE Primary Bank of NH(8)* 25.50 2,089 53.3 26.75 11.19 26.00 -1.92 N.A. 67.32
PFNC Progress Financial Corp. of PA 13.25 3,814 50.5 14.00 6.00 12.06 9.87 20.35 58.30
PSBK Progressive Bank, Inc. of NY* 30.37 3,821 116.0 32.00 19.33 29.75 2.08 127.15 33.49
PROV Provident Fin. Holdings of CA 19.00 4,920 93.5 20.12 10.69 19.37 -1.91 N.A. 35.71
PULB Pulaski SB, MHC of MO (29.0) 20.50 2,094 12.3 22.00 12.37 22.00 -6.82 N.A. 41.38
PLSK Pulaski SB, MHC of NJ (46.0) 13.87 2,070 13.2 13.87 11.50 13.44 3.20 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 20.50 3,071 63.0 21.00 15.50 20.12 1.89 65.72 30.16
QCFB QCF Bancorp of Virginia MN 23.50 1,426 33.5 25.00 14.75 25.00 -6.00 N.A. 28.77
QCBC Quaker City Bancorp of CA 20.00 4,703 94.1 20.50 11.40 20.00 0.00 166.67 31.58
QCSB Queens County Bancorp of NY* 51.00 10,181 519.2 51.87 23.50 51.25 -0.49 N.A. 61.49
RCSB RCSB Financial, Inc. of NY(8)* 46.98 14,591 685.5 51.75 24.37 51.25 -8.33 281.64 62.00
RARB Raritan Bancorp. of Raritan NJ* 24.00 2,412 57.9 25.50 13.67 23.00 4.35 272.67 54.84
REDF RedFed Bancorp of Redlands CA 16.12 7,164 115.5 16.87 9.00 16.50 -2.30 N.A. 19.41
RELY Reliance Bancorp, Inc. of NY 28.75 8,776 252.3 29.62 16.87 28.87 -0.42 N.A. 47.44
RELI Reliance Bancshares Inc of WI(8)* 8.44 2,528 21.3 10.12 6.50 8.50 -0.71 N.A. 25.04
RIVR River Valley Bancorp of IN 15.50 1,190 18.4 16.12 13.25 15.50 0.00 N.A. 12.73
RSLN Roslyn Bancorp, Inc. of NY* 23.81 43,642 1,039.1 24.31 15.00 23.75 0.25 N.A. N.A.
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 25.50 2,416 23.4 27.50 13.18 27.50 -7.27 N.A. 60.28
SCCB S. Carolina Comm. Bnshrs of SC 22.50 704 15.8 25.25 15.00 25.25 -10.89 N.A. 50.00
SBFL SB Fngr Lakes MHC of NY (33.1) 18.25 1,785 10.8 18.37 12.75 18.37 -0.65 N.A. 32.73
SFED SFS Bancorp of Schenectady NY 19.03 1,271 24.2 19.25 12.50 18.75 1.49 N.A. 29.02
SGVB SGV Bancorp of W. Covina CA 15.37 2,342 36.0 15.50 8.56 14.87 3.36 N.A. 36.62
SISB SIS Bancorp Inc of MA* 30.37 5,577 169.4 30.37 18.25 29.25 3.83 N.A. 32.79
SWCB Sandwich Co-Op. Bank of MA* 33.75 1,906 64.3 34.25 20.25 33.75 0.00 291.53 13.45
SECP Security Capital Corp. of WI(8) 99.00 9,208 911.6 99.37 60.50 97.25 1.80 N.A. 34.24
SFSL Security First Corp. of OH 16.00 5,003 80.0 16.50 8.83 16.50 -3.03 53.85 32.45
SMFC Sho-Me Fin. Corp. of MO(8) 38.00 1,499 57.0 40.25 16.75 38.25 -0.65 N.A. 74.71
SOBI Sobieski Bancorp of S. Bend IN 16.37 760 12.4 16.50 11.75 16.37 0.00 N.A. 12.90
SOSA Somerset Savings Bank of MA(8)* 3.97 16,652 66.1 3.97 1.44 3.53 12.46 -22.46 101.52
SSFC South Street Fin. Corp. of NC* 18.75 4,496 84.3 19.50 12.12 18.75 0.00 N.A. 33.93
SCBS Southern Commun. Bncshrs of AL 15.50 1,137 17.6 15.87 13.00 15.75 -1.59 N.A. 16.98
SMBC Southern Missouri Bncrp of MO 17.25 1,638 28.3 18.00 13.50 17.25 0.00 N.A. 15.00
SWBI Southwest Bancshares of IL 20.75 2,652 55.0 21.75 17.83 20.75 0.00 107.50 13.70
SVRN Sovereign Bancorp of PA 15.56 70,010 1,089.4 16.50 8.33 16.06 -3.11 248.10 42.23
STFR St. Francis Cap. Corp. of WI 35.00 5,308 185.8 38.75 25.00 36.00 -2.78 N.A. 34.62
SPBC St. Paul Bancorp, Inc. of IL 22.37 33,988 760.3 24.37 12.60 23.75 -5.81 100.99 42.76
STND Standard Fin. of Chicago IL(8) 25.25 16,210 409.3 25.62 16.12 25.62 -1.44 N.A. 28.70
SFFC StateFed Financial Corp. of IA 21.75 784 17.1 22.75 15.50 21.75 0.00 N.A. 31.82
SFIN Statewide Fin. Corp. of NJ 19.12 4,771 91.2 19.12 11.87 18.00 6.22 N.A. 33.05
STSA Sterling Financial Corp. of WA 18.25 5,567 101.6 19.25 13.00 19.00 -3.95 100.77 29.25
SFSB SuburbFed Fin. Corp. of IL 27.50 1,262 34.7 27.50 16.25 26.87 2.34 312.29 44.74
ROSE T R Financial Corp. of NY* 27.00 17,609 475.4 28.25 13.75 28.19 -4.22 N.A. 52.11
THRD TF Financial Corp. of PA 19.12 4,083 78.1 20.50 14.12 19.50 -1.95 N.A. 17.66
TPNZ Tappan Zee Fin., Inc. of NY 17.62 1,497 26.4 17.62 12.00 16.62 6.02 N.A. 29.37
ESBK The Elmira SB FSB of Elmira NY* 23.12 706 16.3 23.75 14.75 23.75 -2.65 60.89 26.68
GRTR The Greater New York SB of NY(8)* 22.12 13,717 303.4 22.94 11.25 22.94 -3.57 137.59 62.41
TSBS Trenton SB, FSB MHC of NJ(35.0 24.50 9,037 76.4 24.50 13.50 20.75 18.07 N.A. 53.13
TRIC Tri-County Bancorp of WY 22.75 609 13.9 24.25 18.00 23.19 -1.90 N.A. 26.39
TWIN Twin City Bancorp of TN 19.50 853 16.6 20.50 16.25 20.06 -2.79 N.A. 13.04
UFRM United FS&LA of Rocky Mount NC 12.25 3,074 37.7 12.50 7.00 12.25 0.00 276.92 44.12
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PFSL Pocahnts Fed, MHC of AR (46.4) 1.39 1.93 14.76 14.76 232.05
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.03 0.91 11.39 11.39 43.92
PTRS Potters Financial Corp of OH 1.16 2.06 21.97 21.97 248.85
PKPS Poughkeepsie Fin. Corp. of NY 0.24 0.37 5.85 5.85 69.88
PRBC Prestige Bancorp of PA 0.47 0.83 16.51 16.51 148.33
PETE Primary Bank of NH(8)* 1.68 1.66 13.81 13.78 208.58
PFNC Progress Financial Corp. of PA 0.54 0.65 5.78 5.10 109.77
PSBK Progressive Bank, Inc. of NY* 2.30 2.26 19.67 17.57 230.00
PROV Provident Fin. Holdings of CA 0.39 0.34 17.37 17.37 125.10
PULB Pulaski SB, MHC of MO (29.0) 0.79 0.74 11.04 11.04 84.92
PLSK Pulaski SB, MHC of NJ (46.0) -0.14 0.47 10.20 10.20 85.68
PULS Pulse Bancorp of S. River NJ 1.20 1.80 13.63 13.63 169.39
QCFB QCF Bancorp of Virginia MN 1.32 1.32 18.35 18.35 104.01
QCBC Quaker City Bancorp of CA 0.50 0.91 14.79 14.77 166.03
QCSB Queens County Bancorp of NY* 2.15 2.18 17.08 17.08 144.08
RCSB RCSB Financial, Inc. of NY(8)* 2.66 2.64 21.69 21.14 276.36
RARB Raritan Bancorp. of Raritan NJ* 1.46 1.55 12.48 12.27 157.31
REDF RedFed Bancorp of Redlands CA 0.15 0.57 10.37 10.36 126.84
RELY Reliance Bancorp, Inc. of NY 1.16 1.77 17.65 12.37 219.55
RELI Reliance Bancshares Inc of WI(8)* 0.25 0.25 11.59 11.59 18.98
RIVR River Valley Bancorp of IN 1.15 0.70 14.37 14.15 116.24
RSLN Roslyn Bancorp, Inc. of NY* 0.23 0.93 14.08 14.01 65.29
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 0.83 1.06 10.36 9.39 92.87
SCCB S. Carolina Comm. Bnshrs of SC 0.52 0.70 17.11 17.11 65.93
SBFL SB Fngr Lakes MHC of NY (33.1) 0.15 0.51 11.63 11.63 121.40
SFED SFS Bancorp of Schenectady NY 0.60 1.08 17.26 17.26 132.84
SGVB SGV Bancorp of W. Covina CA 0.31 0.75 12.77 12.56 174.78
SISB SIS Bancorp Inc of MA* 3.31 3.29 18.52 18.52 257.23
SWCB Sandwich Co-Op. Bank of MA* 2.24 2.27 20.55 19.59 249.34
SECP Security Capital Corp. of WI(8) 4.40 5.26 62.79 62.79 396.07
SFSL Security First Corp. of OH 1.28 1.62 11.88 11.67 126.88
SMFC Sho-Me Fin. Corp. of MO(8) 2.08 2.35 19.81 19.81 219.35
SOBI Sobieski Bancorp of S. Bend IN 0.30 0.60 16.03 16.03 104.05
SOSA Somerset Savings Bank of MA(8)* 0.25 0.24 1.96 1.96 30.90
SSFC South Street Fin. Corp. of NC* 0.45 0.57 13.58 13.58 53.77
SCBS Southern Commun. Bncshrs of AL 0.40 0.71 13.30 13.30 64.05
SMBC Southern Missouri Bncrp of MO 1.02 1.00 15.85 15.85 101.15
SWBI Southwest Bancshares of IL 1.05 1.44 15.69 15.69 142.66
SVRN Sovereign Bancorp of PA 0.62 0.96 6.25 4.71 155.67
STFR St. Francis Cap. Corp. of WI 1.77 1.95 24.43 21.59 310.01
SPBC St. Paul Bancorp, Inc. of IL 0.93 1.34 11.67 11.64 135.68
STND Standard Fin. of Chicago IL(8) 0.68 1.02 16.73 16.71 153.54
SFFC StateFed Financial Corp. of IA 1.17 1.42 19.43 19.43 109.28
SFIN Statewide Fin. Corp. of NJ 0.70 1.22 13.21 13.18 141.98
STSA Sterling Financial Corp. of WA 0.28 0.90 12.41 10.82 302.93
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.92 21.84 338.12
ROSE T R Financial Corp. of NY* 1.83 1.65 12.51 12.51 201.70
THRD TF Financial Corp. of PA 0.84 1.13 17.44 15.30 156.93
TPNZ Tappan Zee Fin., Inc. of NY 0.53 0.49 14.35 14.35 80.07
ESBK The Elmira SB FSB of Elmira NY* 0.89 0.85 19.87 19.02 315.32
GRTR The Greater New York SB of NY(8)* 1.38 0.74 11.75 11.75 187.40
TSBS Trenton SB, FSB MHC of NJ(35.0 0.86 0.73 11.79 10.81 69.82
TRIC Tri-County Bancorp of WY 1.10 1.40 22.50 22.50 146.89
TWIN Twin City Bancorp of TN 0.66 0.93 16.18 16.18 125.84
UFRM United FS&LA of Rocky Mount NC 0.19 0.33 6.70 6.70 89.63
</TABLE>
<PAGE> 42
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
UBMT United Fin. Corp. of MT 23.87 1,223 29.2 24.00 18.00 23.75 0.51 127.33 24.00
VABF Va. Beach Fed. Fin. Corp of VA 14.00 4,976 69.7 15.00 7.50 13.50 3.70 198.51 48.31
VFFC Virginia First Savings of VA(8) 23.75 5,805 137.9 23.87 11.75 23.62 0.55 ***.** 86.27
WHGB WHG Bancshares of MD 15.12 1,462 22.1 15.50 11.00 15.37 -1.63 N.A. 15.24
WSFS WSFS Financial Corp. of DE* 14.25 12,421 177.0 15.12 7.75 15.00 -5.00 96.55 39.84
WVFC WVS Financial Corp. of PA* 26.87 1,747 46.9 27.75 20.37 27.50 -2.29 N.A. 9.14
WRNB Warren Bancorp of Peabody MA* 17.75 3,781 67.1 19.00 12.00 18.00 -1.39 426.71 18.33
WFSL Washington FS&LA of Seattle WA 28.37 47,462 1,346.5 29.25 19.77 28.25 0.42 94.45 17.77
WAMU Washington Mutual Inc. of WA* 64.19 126,357 8,110.9 69.12 34.87 68.50 -6.29 245.85 48.21
WYNE Wayne Bancorp of NJ 21.62 2,120 45.8 22.75 12.37 19.75 9.47 N.A. 41.77
WAYN Wayne S&L Co. MHC of OH (47.8) 18.25 2,248 13.1 19.25 12.67 19.25 -5.19 N.A. 11.76
WCFB Wbstr Cty FSB MHC of IA (45.2) 17.50 2,100 16.6 17.50 12.50 16.50 6.06 N.A. 27.27
WBST Webster Financial Corp. of CT 51.75 11,985 620.2 51.87 29.37 50.87 1.73 448.20 40.82
WEFC Wells Fin. Corp. of Wells MN 16.00 1,959 31.3 16.50 11.75 16.00 0.00 N.A. 21.95
WCBI WestCo Bancorp of IL 26.00 2,476 64.4 26.75 20.00 25.75 0.97 160.00 20.93
WSTR WesterFed Fin. Corp. of MT 22.87 5,565 127.3 23.50 14.12 23.12 -1.08 N.A. 25.32
WOFC Western Ohio Fin. Corp. of OH 23.25 2,312 53.8 23.25 19.62 22.50 3.33 N.A. 6.90
WWFC Westwood Fin. Corp. of NJ 20.00 645 12.9 22.00 10.37 21.44 -6.72 N.A. 21.21
WEHO Westwood Hmstd Fin Corp of OH 15.37 2,795 43.0 16.00 10.37 15.50 -0.84 N.A. 26.82
WFCO Winton Financial Corp. of OH 15.50 1,986 30.8 16.75 11.25 15.50 0.00 N.A. 34.78
FFWD Wood Bancorp of OH 16.50 1,493 24.6 16.50 8.73 15.00 10.00 N.A. 45.63
YFCB Yonkers Fin. Corp. of NY 16.75 3,141 52.6 17.62 10.25 17.12 -2.16 N.A. 30.15
YFED York Financial Corp. of PA 25.50 7,008 178.7 26.75 14.54 22.50 13.33 169.84 56.92
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
UBMT United Fin. Corp. of MT 0.94 1.16 19.95 19.95 88.08
VABF Va. Beach Fed. Fin. Corp of VA 0.26 0.58 8.50 8.50 124.16
VFFC Virginia First Savings of VA(8) 1.81 1.66 11.35 10.96 140.79
WHGB WHG Bancshares of MD 0.54 0.54 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.47 1.48 6.32 6.27 121.45
WVFC WVS Financial Corp. of PA* 1.69 2.11 18.83 18.83 168.69
WRNB Warren Bancorp of Peabody MA* 2.01 1.71 9.82 9.82 94.69
WFSL Washington FS&LA of Seattle WA 1.94 2.14 14.66 13.39 121.37
WAMU Washington Mutual Inc. of WA* 1.14 2.42 19.30 18.32 385.92
WYNE Wayne Bancorp of NJ 0.50 0.50 16.44 16.44 123.13
WAYN Wayne S&L Co. MHC of OH (47.8) 0.32 0.73 10.28 10.28 112.18
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.48 0.64 10.53 10.53 45.09
WBST Webster Financial Corp. of CT 1.26 2.42 23.66 19.91 465.88
WEFC Wells Fin. Corp. of Wells MN 0.73 1.08 14.64 14.64 103.13
WCBI WestCo Bancorp of IL 1.41 1.78 19.18 19.18 125.85
WSTR WesterFed Fin. Corp. of MT 0.65 0.90 18.39 14.53 167.55
WOFC Western Ohio Fin. Corp. of OH 0.48 0.69 23.21 21.87 173.04
WWFC Westwood Fin. Corp. of NJ 0.67 1.24 15.43 13.67 167.41
WEHO Westwood Hmstd Fin Corp of OH 0.30 0.45 14.17 14.17 48.18
WFCO Winton Financial Corp. of OH 0.84 1.07 10.49 10.23 147.15
FFWD Wood Bancorp of OH 1.02 1.26 13.91 13.91 109.51
YFCB Yonkers Fin. Corp. of NY 0.73 0.99 13.66 13.66 91.72
YFED York Financial Corp. of PA 1.01 1.29 14.28 14.28 165.87
</TABLE>
<PAGE> 43
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(309) 13.05 12.79 0.65 5.63 3.71 0.86 7.56 0.83 127.16 0.82
NYSE Traded Companies(8) 5.99 5.75 0.54 8.68 4.63 0.66 11.77 1.28 77.06 1.33
AMEX Traded Companies(17) 15.00 14.90 0.58 4.61 2.99 0.92 7.42 0.71 115.46 0.73
NASDAQ Listed OTC Companies(284) 13.15 12.87 0.66 5.60 3.73 0.86 7.44 0.82 129.60 0.81
California Companies(21) 7.50 6.83 0.30 4.66 2.69 0.37 6.65 2.40 63.75 1.38
Florida Companies(6) 7.59 7.21 0.91 11.16 3.85 0.81 9.87 1.50 64.74 0.79
Mid-Atlantic Companies(61) 10.93 10.58 0.63 6.40 4.10 0.87 8.95 0.84 100.28 0.93
Mid-West Companies(149) 14.29 14.11 0.69 5.46 3.92 0.90 7.13 0.62 152.32 0.69
New England Companies(10) 8.50 8.10 0.42 5.02 3.33 0.64 8.43 0.58 115.43 1.01
North-West Companies(7) 16.05 15.77 0.84 6.62 3.54 1.05 8.85 0.80 90.77 0.61
South-East Companies(43) 15.74 15.56 0.72 5.26 3.19 0.96 7.00 0.91 118.26 0.87
South-West Companies(6) 11.03 10.87 0.34 2.33 1.86 0.61 5.85 0.61 110.31 0.73
Western Companies (Excl CA)(6) 16.44 15.98 1.00 6.72 4.49 1.19 7.88 0.31 126.07 0.72
Thrift Strategy(243) 14.36 14.10 0.67 5.07 3.65 0.90 6.99 0.74 132.36 0.74
Mortgage Banker Strategy(38) 7.42 7.00 0.54 7.55 4.04 0.66 9.64 1.09 95.73 1.01
Real Estate Strategy(11) 7.37 7.17 0.51 6.40 3.87 0.77 10.30 1.55 107.51 1.37
Diversified Strategy(12) 7.77 7.63 1.10 13.60 5.18 1.12 14.34 1.28 120.71 1.28
Retail Banking Strategy(5) 11.21 11.04 0.31 2.81 1.54 0.25 2.50 1.26 133.80 1.60
Companies Issuing Dividends(259) 13.30 13.03 0.70 6.04 4.02 0.92 7.96 0.70 128.33 0.78
Companies Without Dividends(50) 11.68 11.39 0.37 3.32 1.97 0.51 5.29 1.68 119.11 1.07
Equity/Assets <6%(22) 4.91 4.61 0.41 8.08 3.81 0.59 11.82 1.74 90.53 1.13
Equity/Assets 6-12%(150) 8.60 8.21 0.58 6.78 3.97 0.75 8.90 0.96 120.43 0.93
Equity/Assets >12%(137) 18.88 18.75 0.77 4.07 3.43 1.01 5.52 0.53 141.48 0.65
Converted Last 3 Mths (no MHC)(6) 20.51 20.51 0.62 2.89 2.52 0.75 3.65 1.95 27.73 0.74
Actively Traded Companies(43) 8.69 8.44 0.73 8.77 4.70 0.95 11.84 1.34 98.68 0.98
Market Value Below $20 Million(60) 15.45 15.37 0.56 3.54 3.15 0.81 5.45 0.73 112.22 0.68
Holding Company Structure(272) 13.57 13.31 0.65 5.39 3.66 0.86 7.31 0.82 122.25 0.81
Assets Over $1 Billion(62) 7.81 7.27 0.67 8.81 4.35 0.83 11.28 0.99 93.88 1.00
Assets $500 Million-$1 Billion(50) 10.27 9.80 0.60 5.98 3.79 0.78 7.84 1.14 164.41 1.05
Assets $250-$500 Million(68) 11.16 10.84 0.59 5.46 3.66 0.83 7.75 0.73 135.13 0.77
Assets less than $250 Million(129) 17.38 17.33 0.69 4.17 3.43 0.92 5.71 0.68 123.96 0.68
Goodwill Companies(121) 8.96 8.36 0.62 7.10 4.19 0.80 9.30 0.85 113.51 0.90
Non-Goodwill Companies(180) 15.61 15.61 0.68 4.73 3.43 0.92 6.62 0.81 136.80 0.77
Acquirors of FSLIC Cases(10) 7.20 6.83 0.58 7.87 4.28 0.81 11.61 1.50 55.99 0.90
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(309) 21.14 136.47 16.79 140.59 18.36 0.36 1.70 35.43
NYSE Traded Companies(8) 20.96 182.00 10.63 192.90 15.20 0.29 0.81 16.41
AMEX Traded Companies(17) 21.90 124.69 19.52 125.99 18.02 0.38 2.13 45.19
NASDAQ Listed OTC Companies(284) 21.10 135.77 16.81 139.83 18.47 0.36 1.71 35.65
California Companies(21) 21.13 147.79 10.49 155.09 17.97 0.15 0.54 12.20
Florida Companies(6) 19.21 155.07 17.58 175.69 20.77 0.24 0.85 13.93
Mid-Atlantic Companies(61) 21.04 139.50 14.68 144.35 17.13 0.38 1.67 35.94
Mid-West Companies(149) 21.10 129.01 17.27 130.91 18.43 0.36 1.82 36.24
New England Companies(10) 23.27 149.41 12.18 163.25 20.02 0.43 1.60 41.30
North-West Companies(7) 18.20 161.20 22.36 168.82 17.97 0.35 1.38 26.42
South-East Companies(43) 21.29 147.51 21.73 151.68 19.53 0.42 2.01 42.60
South-West Companies(6) 22.29 118.71 12.33 125.50 18.48 0.33 1.51 51.90
Western Companies (Excl CA)(6) 21.18 135.68 20.48 142.59 19.26 0.56 2.77 56.48
Thrift Strategy(243) 21.58 128.72 17.71 131.99 18.68 0.37 1.83 38.12
Mortgage Banker Strategy(38) 19.64 169.64 12.13 180.18 17.44 0.33 1.22 27.15
Real Estate Strategy(11) 19.56 150.43 10.72 153.23 15.30 0.13 0.78 14.52
Diversified Strategy(12) 18.89 210.26 19.32 215.60 16.59 0.44 1.61 30.50
Retail Banking Strategy(5) 19.38 120.79 12.76 124.21 18.61 0.20 1.31 26.25
Companies Issuing Dividends(259) 21.16 138.29 17.15 142.73 18.20 0.43 2.01 41.89
Companies Without Dividends(50) 20.92 126.06 14.76 128.20 19.60 0.00 0.00 0.00
Equity/Assets <6%(22) 20.48 179.86 9.42 190.15 17.27 0.23 0.86 16.46
Equity/Assets 6-12%(150) 20.06 148.44 12.87 154.84 16.89 0.38 1.58 34.86
Equity/Assets >12%(137) 22.69 117.94 21.95 119.42 20.30 0.36 1.96 40.02
Converted Last 3 Mths (no MHC)(6) 27.63 114.96 23.61 114.96 24.58 0.00 0.00 0.00
Actively Traded Companies(43) 19.60 170.31 14.25 175.87 16.11 0.49 1.73 31.92
Market Value Below $20 Million(60) 23.07 109.09 16.67 110.03 19.95 0.32 1.94 41.87
Holding Company Structure(272) 21.51 133.70 17.19 137.21 18.64 0.37 1.75 36.85
Assets Over $1 Billion(62) 20.28 173.91 13.83 185.79 17.19 0.45 1.41 30.57
Assets $500 Million-$1 Billion(50) 19.48 148.03 14.98 153.18 18.12 0.34 1.54 37.62
Assets $250-$500 Million(68) 20.75 134.85 14.99 140.26 16.85 0.35 1.71 32.99
Assets less than $250 Million(129) 22.48 116.81 19.68 117.41 19.80 0.34 1.89 38.73
Goodwill Companies(121) 20.00 154.87 13.30 165.52 17.39 0.40 1.59 33.16
Non-Goodwill Companies(180) 22.05 124.64 18.97 124.64 19.03 0.34 1.80 37.01
Acquirors of FSLIC Cases(10) 20.11 169.75 11.91 181.58 16.46 0.38 1.38 23.87
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 44
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(67) 11.69 11.31 1.04 11.00 6.24 1.06 11.03 0.86 141.24 1.46
NYSE Traded Companies(3) 7.73 6.20 0.78 10.64 5.61 0.79 11.03 1.88 43.17 1.03
AMEX Traded Companies(5) 12.87 12.67 0.82 8.88 5.06 0.82 8.97 1.05 244.27 1.38
NASDAQ Listed OTC Companies(59) 11.81 11.48 1.08 11.23 6.40 1.10 11.23 0.78 136.33 1.49
California Companies(3) 8.54 8.52 1.07 12.47 7.12 1.01 11.65 1.42 74.68 1.41
Mid-Atlantic Companies(18) 11.66 11.00 0.79 8.35 4.58 0.91 9.14 0.90 124.32 1.39
Mid-West Companies(2) 25.56 24.11 0.54 2.08 2.00 0.82 3.16 0.74 41.29 0.53
New England Companies(35) 9.00 8.69 1.17 13.79 7.82 1.13 13.22 0.91 161.44 1.69
North-West Companies(4) 10.48 10.12 1.00 9.59 4.85 1.06 11.24 0.38 152.10 1.07
South-East Companies(5) 28.01 28.01 1.10 4.19 3.19 1.19 4.52 0.36 132.78 0.77
Thrift Strategy(43) 13.27 12.82 1.06 10.12 6.00 1.07 9.93 0.84 148.58 1.39
Mortgage Banker Strategy(10) 9.06 8.87 0.78 10.91 5.91 0.96 11.93 0.71 135.17 1.41
Real Estate Strategy(6) 9.04 9.03 1.33 14.70 8.03 1.26 14.00 1.21 109.09 1.81
Diversified Strategy(6) 6.49 5.98 1.07 15.68 7.34 1.12 16.92 0.90 140.82 1.87
Retail Banking Strategy(2) 6.30 6.03 0.28 4.48 3.85 0.27 4.28 0.83 76.33 0.80
Companies Issuing Dividends(56) 11.19 10.78 1.00 10.62 6.02 1.03 10.67 0.82 144.41 1.43
Companies Without Dividends(11) 14.83 14.64 1.26 13.35 7.65 1.31 13.23 1.16 120.44 1.61
Equity/Assets <6%(5) 5.45 5.33 0.85 15.23 6.40 0.85 15.36 1.28 74.02 1.47
Equity/Assets 6-12%(46) 8.62 8.14 1.12 13.00 7.42 1.11 12.79 0.93 132.66 1.56
Equity/Assets >12%(16) 22.48 22.28 0.87 3.89 2.91 1.02 4.56 0.49 194.98 1.16
Actively Traded Companies(23) 8.72 8.34 1.13 13.27 7.39 1.11 13.13 0.86 141.05 1.58
Market Value Below $20 Million(7) 18.51 18.04 0.75 5.63 4.69 0.88 6.02 1.02 68.50 1.04
Holding Company Structure(44) 13.07 12.70 1.06 10.23 5.81 1.10 10.46 0.72 144.09 1.50
Assets Over $1 Billion(18) 8.97 8.33 0.98 12.15 6.11 1.08 12.98 0.93 126.97 1.49
Assets $500 Million-$1 Billion(16) 9.61 9.06 1.17 12.91 7.39 1.14 12.35 0.96 136.06 1.59
Assets $250-$500 Million(17) 10.94 10.83 0.99 10.69 6.21 0.98 10.54 0.72 158.96 1.59
Assets less than $250 Million(16) 17.05 16.85 1.01 8.34 5.33 1.05 8.29 0.83 146.52 1.17
Goodwill Companies(30) 8.60 7.84 0.92 11.43 6.41 0.95 11.66 1.09 122.03 1.53
Non-Goodwill Companies(34) 14.01 14.01 1.16 10.90 6.23 1.17 10.72 0.66 164.30 1.42
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(67) 15.28 160.14 17.43 166.62 16.41 0.48 1.81 28.48
NYSE Traded Companies(3) 18.05 182.94 14.38 170.09 17.76 0.39 0.79 15.55
AMEX Traded Companies(5) 14.63 148.79 17.47 153.62 14.16 0.62 2.50 34.16
NASDAQ Listed OTC Companies(59) 15.13 159.90 17.61 167.81 16.46 0.47 1.80 28.96
California Companies(3) 14.10 156.18 13.31 156.43 15.30 0.00 0.00 0.00
Mid-Atlantic Companies(18) 18.87 166.09 18.15 176.44 18.97 0.48 1.74 38.53
Mid-West Companies(2) 0.00 92.11 23.54 97.66 0.00 0.00 0.00 0.00
New England Companies(35) 13.06 165.04 14.38 171.80 13.74 0.52 2.16 28.08
North-West Companies(4) 18.75 172.82 19.42 177.87 21.30 0.49 1.60 27.55
South-East Companies(5) 22.53 121.21 33.29 121.21 24.84 0.60 1.54 27.78
Thrift Strategy(43) 15.72 154.44 18.73 160.77 16.71 0.52 1.93 31.87
Mortgage Banker Strategy(10) 15.19 172.36 15.47 177.09 16.35 0.36 1.55 14.77
Real Estate Strategy(6) 12.90 168.58 15.27 168.71 13.26 0.18 1.18 13.86
Diversified Strategy(6) 12.11 196.08 14.01 213.99 15.32 0.58 1.67 21.73
Retail Banking Strategy(2) 25.98 116.36 7.33 121.56 27.20 0.64 2.77 71.91
Companies Issuing Dividends(56) 15.82 161.98 17.22 169.41 16.73 0.56 2.10 33.66
Companies Without Dividends(11) 11.39 148.85 18.78 149.86 14.28 0.00 0.00 0.00
Equity/Assets <6%(5) 13.96 214.48 12.86 217.55 18.33 0.38 1.24 16.83
Equity/Assets 6-12%(46) 14.42 167.25 14.46 176.10 14.62 0.53 2.03 28.77
Equity/Assets >12%(16) 21.74 124.79 27.36 126.33 23.07 0.37 1.40 32.07
Actively Traded Companies(23) 13.51 165.70 14.60 174.34 14.92 0.54 1.99 27.12
Market Value Below $20 Million(7) 16.92 110.70 19.71 115.76 20.60 0.31 1.72 35.17
Holding Company Structure(44) 15.87 158.56 19.31 167.93 17.08 0.50 1.86 28.53
Assets Over $1 Billion(18) 16.15 190.49 17.51 197.59 17.57 0.56 1.75 25.01
Assets $500 Million-$1 Billion(16) 14.61 161.42 15.03 178.66 15.41 0.50 1.84 27.83
Assets $250-$500 Million(17) 14.21 152.97 15.84 154.77 14.15 0.42 1.83 27.40
Assets less than $250 Million(16) 16.36 137.29 21.08 139.61 18.37 0.43 1.83 33.03
Goodwill Companies(30) 15.71 165.76 14.49 180.29 16.93 0.53 1.94 29.67
Non-Goodwill Companies(34) 14.84 157.53 19.88 157.53 15.86 0.45 1.75 28.48
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 45
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(21) 11.62 11.37 0.58 5.15 2.71 0.85 7.76 0.48 174.16 0.75
BIF-Insured Thrifts(2) 9.99 9.98 0.71 8.18 3.11 0.73 7.91 1.85 82.27 1.77
NASDAQ Listed OTC Companies(23) 11.46 11.23 0.60 5.45 2.75 0.84 7.78 0.63 163.95 0.86
Florida Companies(3) 9.48 9.36 0.66 7.02 3.32 0.93 9.86 0.44 122.12 0.77
Mid-Atlantic Companies(10) 12.08 11.63 0.50 3.95 2.04 0.77 6.41 0.84 178.84 0.95
Mid-West Companies(7) 11.72 11.71 0.60 5.39 3.23 0.86 8.06 0.35 172.11 0.62
New England Companies(1) 8.41 8.40 1.10 13.64 4.71 0.88 10.87 0.90 121.39 1.60
South-East Companies(1) 13.29 13.29 0.75 6.48 2.55 1.06 9.13 0.00 0.00 1.01
Thrift Strategy(21) 11.62 11.38 0.57 5.02 2.65 0.84 7.62 0.61 166.45 0.81
Diversified Strategy(1) 8.41 8.40 1.10 13.64 4.71 0.88 10.87 0.90 121.39 1.60
Companies Issuing Dividends(23) 11.46 11.23 0.60 5.45 2.75 0.84 7.78 0.63 163.95 0.86
Equity/Assets 6-12%(16) 9.34 9.12 0.48 5.43 2.68 0.76 8.34 0.69 129.16 0.97
Equity/Assets >12%(7) 16.39 16.16 0.87 5.50 2.90 1.03 6.46 0.45 254.39 0.61
Actively Traded Companies(1) 9.19 8.15 0.51 5.44 2.38 0.90 9.61 0.61 88.82 1.05
Holding Company Structure(1) 9.19 8.15 0.51 5.44 2.38 0.90 9.61 0.61 88.82 1.05
Assets Over $1 Billion(5) 8.74 8.16 0.75 8.65 3.62 0.92 10.50 0.67 117.58 1.17
Assets $500 Million-$1 Billion(4) 12.31 11.82 0.79 5.69 2.95 0.90 7.04 0.53 66.53 0.54
Assets $250-$500 Million(4) 9.96 9.94 0.53 5.74 3.46 0.84 9.16 0.25 419.95 0.59
Assets less than $250 Million(10) 13.58 13.58 0.46 3.22 1.77 0.77 5.66 0.86 80.63 0.92
Goodwill Companies(9) 9.69 9.14 0.74 7.51 3.33 0.89 9.29 0.56 132.93 0.92
Non-Goodwill Companies(14) 12.63 12.63 0.50 4.08 2.36 0.81 6.77 0.68 188.77 0.81
MHC Institutions(23) 11.46 11.23 0.60 5.45 2.75 0.84 7.78 0.63 163.95 0.86
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(21) 23.04 176.39 20.33 181.74 23.41 0.68 2.92 63.49
BIF-Insured Thrifts(2) 21.24 223.45 21.56 223.71 26.65 0.52 2.39 51.13
NASDAQ Listed OTC Companies(23) 22.68 181.10 20.45 185.94 23.61 0.66 2.86 61.95
Florida Companies(3) 21.71 197.12 18.42 200.31 22.16 1.03 3.41 68.29
Mid-Atlantic Companies(10) 28.49 174.63 20.87 184.10 24.58 0.43 2.20 60.21
Mid-West Companies(7) 20.98 164.61 19.42 164.87 22.31 0.70 3.55 67.67
New England Companies(1) 21.24 271.90 22.88 272.42 26.65 0.68 2.41 51.13
South-East Companies(1) 0.00 199.34 26.49 199.34 27.84 1.40 3.57 0.00
Thrift Strategy(21) 23.04 176.32 20.32 181.39 23.41 0.66 2.89 63.49
Diversified Strategy(1) 21.24 271.90 22.88 272.42 26.65 0.68 2.41 51.13
Companies Issuing Dividends(23) 22.68 181.10 20.45 185.94 23.61 0.66 2.86 61.95
Equity/Assets 6-12%(16) 19.65 183.50 16.97 189.07 22.64 0.62 2.65 64.98
Equity/Assets >12%(7) 27.22 175.50 28.56 178.64 26.52 0.77 3.37 40.70
Actively Traded Companies(1) 0.00 223.08 20.51 251.74 23.77 0.48 1.66 69.57
Holding Company Structure(1) 0.00 223.08 20.51 251.74 23.77 0.48 1.66 69.57
Assets Over $1 Billion(5) 21.47 221.99 19.42 236.98 22.74 0.69 2.28 63.91
Assets $500 Million-$1 Billion(4) 28.49 187.70 23.51 194.49 24.82 0.68 2.84 40.70
Assets $250-$500 Million(4) 16.01 167.14 16.56 167.52 20.11 0.69 3.27 67.67
Assets less than $250 Million(10) 25.95 160.04 21.88 160.04 26.80 0.62 3.04 0.00
Goodwill Companies(9) 23.81 210.52 20.41 222.62 23.28 0.64 2.30 61.55
Non-Goodwill Companies(14) 20.98 161.48 20.48 161.48 23.87 0.68 3.24 64.75
MHC Institutions(23) 22.68 181.10 20.45 185.94 23.61 0.66 2.86 61.95
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 46
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 4.17 3.55 0.39 9.68 3.98 0.62 15.44 1.90 42.90 1.25
CSA Coast Savings Financial of CA 4.92 4.86 0.21 4.28 2.16 0.53 10.73 1.40 65.70 1.37
CFB Commercial Federal Corp. of NE 6.00 5.32 0.65 11.03 5.20 0.91 15.55 0.89 76.24 0.91
DME Dime Bancorp, Inc. of NY* 5.71 5.65 0.57 10.83 5.42 0.73 13.89 1.57 31.98 0.85
DSL Downey Financial Corp. of CA 6.93 6.84 0.44 5.82 3.95 0.73 9.68 0.95 55.76 0.58
FRC First Republic Bancorp of CA* 7.17 7.17 0.70 11.10 6.47 0.60 9.46 1.19 69.68 0.94
FED FirstFed Fin. Corp. of CA 4.83 4.77 0.29 6.19 3.39 0.53 11.34 1.39 134.39 2.46
GLN Glendale Fed. Bk, FSB of CA 5.66 5.26 0.30 5.47 3.10 0.55 10.01 1.66 64.79 1.45
GDW Golden West Fin. Corp. of CA 6.37 6.37 1.02 16.09 8.53 1.24 19.62 1.31 42.43 0.68
GPT GreenPoint Fin. Corp. of NY* 10.31 5.79 1.06 9.99 4.94 1.03 9.74 2.89 27.84 1.30
WES Westcorp Inc. of Orange CA 9.05 9.02 1.01 10.91 6.74 0.16 1.77 0.74 134.25 1.95
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.81 17.81 0.31 2.70 1.33 0.33 2.79 0.51 192.62 1.37
BKC American Bank of Waterbury CT* 8.29 7.95 1.27 15.35 8.27 1.10 13.19 1.81 48.13 1.45
BFD BostonFed Bancorp of MA 8.90 8.60 0.47 4.33 3.26 0.65 5.95 NA NA 0.74
CFX CFX Corp of NH* 7.44 6.96 0.94 11.53 5.79 1.12 13.73 0.72 120.07 1.23
CBK Citizens First Fin.Corp. of IL 14.64 14.64 0.27 1.97 1.49 0.58 4.18 0.54 35.90 0.24
ESX Essex Bancorp of VA(8) 0.07 -0.05 -3.47 NM NM -1.73 NM 3.23 40.63 1.50
FCB Falmouth Co-Op Bank of MA* 23.88 23.88 0.84 3.43 3.06 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.47 12.47 -0.27 -4.61 -1.48 0.42 7.25 NA NA 1.06
GAF GA Financial Corp. of PA 15.18 15.02 1.00 5.26 4.71 1.27 6.71 0.12 132.49 0.43
KNK Kankakee Bancorp of IL 11.09 10.42 0.66 6.35 5.49 0.82 7.92 0.94 67.06 0.92
KYF Kentucky First Bancorp of KY 16.11 16.11 0.80 3.99 4.33 1.06 5.27 0.14 295.31 0.77
NYB New York Bancorp, Inc. of NY 5.08 5.08 1.38 26.83 6.37 1.62 31.44 1.22 48.76 0.97
PDB Piedmont Bancorp of NC 16.63 16.63 -0.42 -1.94 -1.71 0.66 3.07 0.91 71.58 0.79
PLE Pinnacle Bank of AL 7.73 7.48 0.58 7.39 4.75 0.88 11.08 1.53 39.16 0.87
SSB Scotland Bancorp of NC 37.02 37.02 1.41 3.88 2.97 1.72 4.72 NA NA 0.50
SZB SouthFirst Bancshares of AL 13.98 13.98 0.05 0.31 0.29 0.27 1.89 0.64 44.97 0.40
SRN Southern Banc Company of AL 16.90 16.72 0.15 0.82 0.83 0.51 2.77 NA NA NA
SSM Stone Street Bancorp of NC 28.85 28.85 1.43 4.18 3.75 1.71 5.02 0.27 187.50 0.62
TSH Teche Holding Company of LA 13.30 13.30 0.73 5.04 4.42 1.01 6.94 0.27 303.33 0.97
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.86 1.74 10.38 0.46 145.12 0.79
THR Three Rivers Fin. Corp. of MI 13.76 13.76 0.57 3.94 3.81 0.82 5.68 1.21 44.02 0.80
TBK Tolland Bank of CT* 6.94 6.74 0.75 11.37 6.89 0.78 11.89 2.13 54.09 1.87
WSB Washington SB, FSB of MD 8.30 8.30 0.50 6.00 4.48 0.73 8.80 NA NA 0.92
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.26 8.09 0.31 3.80 3.26 0.13 1.61 0.94 45.77 0.66
AFED AFSALA Bancorp, Inc. of NY 13.68 13.68 0.59 4.34 3.90 0.59 4.34 NA NA NA
ALBK ALBANK Fin. Corp. of Albany NY 9.20 8.04 0.84 9.16 6.15 1.04 11.28 0.91 78.77 0.99
AMFC AMB Financial Corp. of IN 14.95 14.95 0.73 4.14 4.40 0.81 4.57 0.81 49.41 0.53
ASBP ASB Financial Corp. of OH 15.73 15.73 0.60 3.01 3.18 0.88 4.40 1.58 50.98 1.22
ABBK Abington Savings Bank of MA* 6.92 6.23 0.82 12.05 7.14 0.73 10.71 0.20 211.97 0.69
AABC Access Anytime Bancorp of NM 7.44 7.44 -0.50 -8.75 -6.92 -0.12 -2.14 1.60 29.31 0.92
AFBC Advance Fin. Bancorp of WV 15.45 15.45 0.39 4.31 2.30 0.79 8.74 0.37 89.84 0.40
AADV Advantage Bancorp of WI 9.21 8.62 0.40 4.49 3.02 0.89 9.94 0.44 128.03 1.01
AFCB Affiliated Comm BC, Inc of MA 9.77 9.71 0.93 9.39 5.82 1.07 10.83 0.39 191.75 1.20
ALBC Albion Banc Corp. of Albion NY 8.90 8.90 0.09 0.93 0.93 0.38 3.93 NA NA 0.65
ABCL Allied Bancorp of IL 8.91 8.80 0.52 5.86 2.90 0.76 8.56 0.15 257.09 0.53
ATSB AmTrust Capital Corp. of IN 10.17 10.06 0.29 2.88 3.17 0.19 1.87 2.84 23.48 0.93
AHCI Ambanc Holding Co., Inc. of NY* 12.72 12.72 -0.62 -4.16 -4.06 -0.62 -4.16 1.06 72.94 1.47
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 25.10 244.18 10.18 286.56 15.72 0.88 1.77 44.44
CSA Coast Savings Financial of CA NM 190.40 9.37 192.80 18.47 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 19.24 199.49 11.98 224.99 13.65 0.28 0.71 13.66
DME Dime Bancorp, Inc. of NY* 18.45 192.52 10.99 194.43 14.38 0.16 0.82 15.09
DSL Downey Financial Corp. of CA 25.29 142.53 9.88 144.52 15.21 0.32 1.47 37.21
FRC First Republic Bancorp of CA* 15.46 145.65 10.45 145.74 18.14 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 29.53 174.35 8.42 176.28 16.12 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA NM 166.09 9.40 178.57 17.64 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 11.73 180.09 11.47 180.09 9.62 0.44 0.56 6.53
GPT GreenPoint Fin. Corp. of NY* 20.23 210.64 21.72 NM 20.75 1.00 1.56 31.55
WES Westcorp Inc. of Orange CA 14.85 158.85 14.38 159.35 NM 0.40 1.98 29.41
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 126.91 22.60 126.91 NM 0.36 1.65 NM
BKC American Bank of Waterbury CT* 12.10 173.95 14.41 181.20 14.08 1.44 3.80 46.01
BFD BostonFed Bancorp of MA NM 139.35 12.40 144.26 22.30 0.28 1.43 43.75
CFX CFX Corp of NH* 17.27 180.61 13.43 193.09 14.50 0.88 4.63 NM
CBK Citizens First Fin.Corp. of IL NM 117.46 17.20 117.46 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 0.91 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 110.39 26.36 110.39 NM 0.20 1.18 38.46
FAB FirstFed America Bancorp of MA NM 134.50 16.77 134.50 NM 0.00 0.00 NM
GAF GA Financial Corp. of PA 21.25 119.30 18.11 120.57 16.67 0.48 2.82 60.00
KNK Kankakee Bancorp of IL 18.21 110.94 12.30 118.05 14.60 0.48 1.63 29.63
KYF Kentucky First Bancorp of KY 23.11 112.80 18.17 112.80 17.50 0.50 4.08 NM
NYB New York Bancorp, Inc. of NY 15.69 NM 20.42 NM 13.39 0.60 1.93 30.30
PDB Piedmont Bancorp of NC NM 149.87 24.92 149.87 NM 0.40 3.60 NM
PLE Pinnacle Bank of AL 21.03 152.83 11.82 157.93 14.02 0.80 3.02 63.49
SSB Scotland Bancorp of NC NM 127.90 47.36 127.90 27.73 0.30 1.75 58.82
SZB SouthFirst Bancshares of AL NM 107.46 15.02 107.46 NM 0.50 2.94 NM
SRN Southern Banc Company of AL NM 109.22 18.45 110.37 NM 0.35 2.22 NM
SSM Stone Street Bancorp of NC 26.64 132.11 38.11 132.11 22.20 0.45 2.11 56.25
TSH Teche Holding Company of LA 22.65 118.98 15.83 118.98 16.47 0.50 2.76 62.50
FTF Texarkana Fst. Fin. Corp of AR 17.08 148.84 23.37 148.84 13.81 0.56 2.50 42.75
THR Three Rivers Fin. Corp. of MI 26.23 105.12 14.46 105.12 18.18 0.36 2.25 59.02
TBK Tolland Bank of CT* 14.52 152.08 10.56 156.50 13.90 0.20 1.24 18.02
WSB Washington SB, FSB of MD 22.30 132.48 11.00 132.48 15.20 0.10 1.49 33.33
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN NM 113.28 9.35 115.67 NM 0.40 1.10 33.90
AFED AFSALA Bancorp, Inc. of NY 25.62 111.25 15.22 111.25 25.62 0.16 1.02 26.23
ALBK ALBANK Fin. Corp. of Albany NY 16.27 144.10 13.26 164.90 13.21 0.60 1.61 26.20
AMFC AMB Financial Corp. of IN 22.73 102.67 15.35 102.67 20.55 0.24 1.60 36.36
ASBP ASB Financial Corp. of OH NM 122.50 19.27 122.50 21.49 0.40 3.27 NM
ABBK Abington Savings Bank of MA* 14.00 161.51 11.18 179.31 15.76 0.40 1.32 18.52
AABC Access Anytime Bancorp of NM NM 99.54 7.41 99.54 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 103.32 15.96 103.32 21.48 0.32 2.10 NM
AADV Advantage Bancorp of WI NM 144.58 13.32 154.64 14.95 0.40 0.95 31.50
AFCB Affiliated Comm BC, Inc of MA 17.19 155.27 15.17 156.25 14.91 0.48 1.94 33.33
ALBC Albion Banc Corp. of Albion NY NM 100.00 8.90 100.00 25.40 0.32 1.35 NM
ABCL Allied Bancorp of IL NM 134.06 11.94 135.74 23.59 0.65 2.07 71.43
ATSB AmTrust Capital Corp. of IN NM 91.92 9.35 92.93 NM 0.20 1.58 50.00
AHCI Ambanc Holding Co., Inc. of NY* NM 115.52 14.70 115.52 NM 0.20 1.25 NM
</TABLE>
<PAGE> 47
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ASBI Ameriana Bancorp of IN 10.96 10.95 0.61 5.52 4.05 0.85 7.73 0.40 71.19 0.38
AFFFZ America First Fin. Fund of CA(8) 8.44 8.34 1.49 19.31 14.02 1.83 23.69 0.40 81.55 0.49
ANBK American Nat'l Bancorp of MD(8) 9.15 9.15 0.15 1.44 0.96 0.54 5.14 0.74 102.82 1.17
ABCW Anchor Bancorp Wisconsin of WI 6.22 6.11 0.75 12.06 6.14 0.96 15.53 0.92 126.05 1.48
ANDB Andover Bancorp, Inc. of MA* 8.06 8.06 1.10 13.91 8.53 1.13 14.34 1.01 99.08 1.41
ASFC Astoria Financial Corp. of NY 7.83 6.57 0.56 7.09 4.16 0.79 10.12 0.51 37.96 0.48
AVND Avondale Fin. Corp. of IL 9.12 9.12 -0.49 -5.19 -5.76 -1.51 -16.06 3.18 96.19 5.33
BKCT Bancorp Connecticut of CT* 10.25 10.25 1.32 12.60 7.89 1.24 11.90 1.19 100.82 1.98
BPLS Bank Plus Corp. of CA 5.06 5.06 -0.26 -5.31 -4.02 0.02 0.46 2.88 58.99 2.11
BWFC Bank West Fin. Corp. of MI 15.30 15.30 0.74 4.25 3.93 0.53 3.03 0.03 458.70 0.20
BANC BankAtlantic Bancorp of FL 5.50 4.48 0.93 14.39 6.92 0.71 11.01 NA NA 1.39
BKUNA BankUnited SA of FL 3.72 3.02 0.21 4.55 2.67 0.34 7.54 0.60 28.73 0.21
BKCO Bankers Corp. of NJ(8)* 7.93 7.81 1.08 13.59 7.37 1.16 14.55 1.14 26.36 0.50
BVCC Bay View Capital Corp. of CA 6.34 5.32 0.39 6.37 3.77 0.63 10.37 NA NA 1.51
BFSB Bedford Bancshares of VA 14.16 14.16 1.01 6.98 4.70 1.29 8.94 0.60 79.85 0.56
BFFC Big Foot Fin. Corp. of IL 16.98 16.98 0.05 0.28 0.23 0.42 2.45 0.09 151.52 0.34
BSBC Branford SB of CT* 9.28 9.28 1.16 12.75 6.48 1.16 12.75 1.42 141.26 3.06
BYFC Broadway Fin. Corp. of CA 10.87 10.87 -0.25 -2.58 -3.14 0.12 1.25 2.42 41.50 1.19
CBES CBES Bancorp of MO 18.39 18.39 0.77 5.22 3.90 0.96 6.51 0.77 54.05 0.46
CCFH CCF Holding Company of GA 14.32 14.32 0.26 1.47 1.46 0.43 2.41 0.34 189.90 0.79
CENF CENFED Financial Corp. of CA 5.20 5.19 0.51 10.04 5.76 0.73 14.30 1.28 58.93 1.10
CFSB CFSB Bancorp of Lansing MI 7.63 7.63 0.85 10.96 5.07 1.07 13.84 0.17 308.01 0.61
CKFB CKF Bancorp of Danville KY 23.68 23.68 1.31 5.12 4.20 1.29 5.05 1.48 12.02 0.20
CNSB CNS Bancorp of MO 24.82 24.82 0.53 2.41 1.82 0.81 3.66 0.45 80.36 0.57
CSBF CSB Financial Group Inc of IL* 25.56 24.11 0.54 2.08 2.00 0.82 3.16 0.74 41.29 0.53
CBCI Calumet Bancorp of Chicago IL 15.50 15.50 1.15 7.22 6.57 1.46 9.16 1.16 102.51 1.57
CAFI Camco Fin. Corp. of OH 9.69 8.91 0.75 8.51 5.08 0.88 10.05 0.68 38.86 0.32
CMRN Cameron Fin. Corp. of MO 22.95 22.95 1.12 4.46 4.40 1.39 5.56 0.60 135.41 0.95
CAPS Capital Savings Bancorp of MO 8.66 8.66 0.65 7.16 4.81 0.92 10.23 0.26 116.53 0.38
CFNC Carolina Fincorp of NC* 23.71 23.71 1.11 4.65 3.74 1.05 4.36 0.28 133.67 0.54
CNY Carver Bancorp, Inc. of NY 8.35 8.01 -0.44 -4.95 -5.98 0.01 0.07 1.37 42.60 1.02
CASB Cascade SB of Everett WA(8) 6.17 6.17 0.46 7.48 4.36 0.58 9.45 0.59 142.60 1.02
CATB Catskill Fin. Corp. of NY* 25.04 25.04 1.43 5.21 5.00 1.45 5.27 0.47 140.85 1.48
CNIT Cenit Bancorp of Norfolk VA 7.24 6.65 0.87 12.05 7.32 0.80 11.05 0.51 103.23 0.76
CEBK Central Co-Op. Bank of MA* 10.45 9.31 0.88 8.78 7.48 0.90 8.90 NA NA 1.23
CENB Century Bancshares of NC* 29.93 29.93 1.76 5.86 5.46 1.78 5.93 0.39 139.39 0.91
CBSB Charter Financial Inc. of IL 14.47 12.80 1.13 7.49 4.90 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 6.71 6.28 0.98 14.64 5.69 1.23 18.32 0.27 164.80 0.73
CNBA Chester Bancorp of IL 22.21 22.21 1.09 4.90 4.81 1.09 4.90 0.25 107.12 0.70
CVAL Chester Valley Bancorp of PA 8.56 8.56 0.63 7.00 3.63 0.92 10.30 0.47 187.15 1.10
CTZN CitFed Bancorp of Dayton OH 6.37 5.74 0.58 9.12 4.65 0.82 12.83 0.41 143.79 0.95
CLAS Classic Bancshares of KY 14.72 12.42 0.56 3.08 3.05 0.77 4.25 0.82 74.44 0.97
CMSB Cmnwealth Bancorp of PA 9.63 7.53 0.55 5.26 4.12 0.70 6.71 0.50 86.54 0.79
COVB CoVest Bancshares of IL 8.94 8.51 0.16 1.78 1.41 0.43 4.89 0.23 118.11 0.43
CBSA Coastal Bancorp of Houston TX 3.33 2.77 0.25 7.57 4.79 0.44 13.16 0.58 39.81 0.51
CFCP Coastal Fin. Corp. of SC 6.10 6.10 0.90 14.66 3.49 0.99 16.14 0.26 350.59 1.14
COFD Collective Bancorp Inc. of NJ(8) 7.00 6.33 0.95 13.58 4.71 1.15 16.46 0.43 55.58 0.45
CMSV Commty. Svgs, MHC of FL (48.5) 11.23 11.23 0.63 5.46 3.15 0.96 8.22 0.57 66.20 0.64
CBNH Community Bankshares Inc of NH(8)* 7.00 7.00 0.95 13.33 5.55 0.76 10.63 0.49 141.22 1.01
CFTP Community Fed. Bancorp of MS 33.52 33.52 1.43 4.32 3.55 1.70 5.14 0.35 79.45 0.47
CFFC Community Fin. Corp. of VA 13.91 13.91 1.07 7.68 5.98 1.34 9.66 0.39 NA NA
CFBC Community First Bnkg Co. of GA 16.42 16.42 0.25 1.52 1.24 0.49 2.96 NA NA 0.87
CIBI Community Inv. Bancorp of OH 11.51 11.51 0.67 5.51 4.33 1.00 8.19 0.72 65.53 0.62
COOP Cooperative Bk.for Svgs. of NC 7.63 7.63 -0.80 -10.08 -7.35 0.20 2.52 0.46 50.09 0.29
CRZY Crazy Woman Creek Bncorp of WY 25.81 25.81 1.06 3.69 4.18 1.30 4.52 0.39 136.15 1.04
DNFC D&N Financial Corp. of MI 5.81 5.74 0.63 10.92 5.56 0.85 14.80 0.34 198.09 0.93
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ASBI Ameriana Bancorp of IN 24.67 137.14 15.02 137.24 17.62 0.60 3.24 NM
AFFFZ America First Fin. Fund of CA(8) 7.13 127.80 10.79 129.39 5.82 1.60 4.07 29.04
ANBK American Nat'l Bancorp of MD(8) NM 161.15 14.75 161.15 29.22 0.12 0.60 63.16
ABCW Anchor Bancorp Wisconsin of WI 16.29 190.64 11.86 194.31 12.66 0.64 1.27 20.65
ANDB Andover Bancorp, Inc. of MA* 11.72 153.75 12.40 153.75 11.37 0.68 2.26 26.46
ASFC Astoria Financial Corp. of NY 24.04 164.81 12.90 196.25 16.83 0.60 1.27 30.61
AVND Avondale Fin. Corp. of IL NM 93.06 8.49 93.06 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 12.67 157.33 16.12 157.33 13.42 1.00 3.67 46.51
BPLS Bank Plus Corp. of CA NM 123.41 6.25 123.54 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI 25.42 118.86 18.19 118.86 NM 0.28 1.87 47.46
BANC BankAtlantic Bancorp of FL 14.45 195.76 10.77 240.52 18.89 0.12 0.72 10.43
BKUNA BankUnited SA of FL NM 143.21 5.33 176.75 22.65 0.00 0.00 0.00
BKCO Bankers Corp. of NJ(8)* 13.56 175.09 13.88 177.69 12.67 0.64 2.23 30.19
BVCC Bay View Capital Corp. of CA 26.55 170.30 10.79 202.92 16.30 0.32 1.24 32.99
BFSB Bedford Bancshares of VA 21.27 144.35 20.45 144.35 16.61 0.56 2.31 49.12
BFFC Big Foot Fin. Corp. of IL NM 122.04 20.72 122.04 NM 0.00 0.00 0.00
BSBC Branford SB of CT* 15.44 187.12 17.37 187.12 15.44 0.08 1.62 25.00
BYFC Broadway Fin. Corp. of CA NM 73.63 8.01 73.63 NM 0.20 1.90 NM
CBES CBES Bancorp of MO 25.64 103.57 19.04 103.57 20.57 0.40 2.26 57.97
CCFH CCF Holding Company of GA NM 118.97 17.03 118.97 NM 0.55 3.21 NM
CENF CENFED Financial Corp. of CA 17.36 164.89 8.58 165.21 12.19 0.36 1.05 18.18
CFSB CFSB Bancorp of Lansing MI 19.71 213.44 16.27 213.44 15.61 0.60 2.22 43.80
CKFB CKF Bancorp of Danville KY 23.81 130.04 30.80 130.04 24.10 0.50 2.50 59.52
CNSB CNS Bancorp of MO NM 115.41 28.64 115.41 NM 0.20 1.18 64.52
CSBF CSB Financial Group Inc of IL* NM 92.11 23.54 97.66 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 15.21 113.47 17.59 113.47 11.99 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 19.68 129.92 12.59 141.22 16.67 0.49 2.65 52.13
CMRN Cameron Fin. Corp. of MO 22.73 103.43 23.74 103.43 18.23 0.28 1.60 36.36
CAPS Capital Savings Bancorp of MO 20.78 146.92 12.72 146.92 14.55 0.24 1.50 31.17
CFNC Carolina Fincorp of NC* 26.72 124.78 29.59 124.78 28.48 0.24 1.38 36.92
CNY Carver Bancorp, Inc. of NY NM 82.85 6.92 86.38 NM 0.20 1.62 NM
CASB Cascade SB of Everett WA(8) 22.95 165.29 10.20 165.29 18.18 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.00 112.73 28.23 112.73 19.77 0.28 1.65 32.94
CNIT Cenit Bancorp of Norfolk VA 13.67 164.69 11.92 179.32 14.90 1.00 1.95 26.67
CEBK Central Co-Op. Bank of MA* 13.37 112.77 11.79 126.64 13.18 0.32 1.66 22.22
CENB Century Bancshares of NC* 18.33 107.47 32.17 107.47 18.12 2.00 2.53 46.40
CBSB Charter Financial Inc. of IL 20.42 156.38 22.63 176.75 14.59 0.32 1.49 30.48
COFI Charter One Financial of OH 17.57 247.61 16.61 264.49 14.04 1.00 1.91 33.56
CNBA Chester Bancorp of IL 20.77 101.72 22.59 101.72 20.77 0.24 1.63 33.80
CVAL Chester Valley Bancorp of PA 27.59 188.68 16.15 188.68 18.75 0.44 1.83 50.57
CTZN CitFed Bancorp of Dayton OH 21.52 182.87 11.64 202.97 15.29 0.36 0.86 18.56
CLAS Classic Bancshares of KY NM 100.55 14.80 119.14 23.79 0.28 1.90 62.22
CMSB Cmnwealth Bancorp of PA 24.28 129.95 12.51 166.17 19.03 0.28 1.67 40.58
COVB CoVest Bancshares of IL NM 134.47 12.02 141.12 25.88 0.40 1.82 NM
CBSA Coastal Bancorp of Houston TX 20.86 152.39 5.07 183.33 12.00 0.48 1.59 33.10
CFCP Coastal Fin. Corp. of SC 28.65 NM 24.40 NM 26.02 0.36 1.41 40.45
COFD Collective Bancorp Inc. of NJ(8) 21.22 275.86 19.31 NM 17.51 1.00 1.92 40.82
CMSV Commty. Svgs, MHC of FL (48.5) NM 171.10 19.21 171.10 21.11 0.90 3.50 NM
CBNH Community Bankshares Inc of NH(8)* 18.03 226.00 15.81 226.00 22.61 0.64 1.64 29.49
CFTP Community Fed. Bancorp of MS 28.17 118.97 39.88 118.97 23.67 0.30 1.69 47.62
CFFC Community Fin. Corp. of VA 16.73 124.32 17.30 124.32 13.30 0.56 2.46 41.18
CFBC Community First Bnkg Co. of GA NM 122.92 20.18 122.92 NM 0.00 0.00 0.00
CIBI Community Inv. Bancorp of OH 23.11 129.02 14.85 129.02 15.56 0.32 2.10 48.48
COOP Cooperative Bk.for Svgs. of NC NM 135.88 10.37 135.88 NM 0.00 0.00 NM
CRZY Crazy Woman Creek Bncorp of WY 23.91 94.55 24.41 94.55 19.54 0.40 2.88 68.97
DNFC D&N Financial Corp. of MI 17.99 177.58 10.32 179.57 13.28 0.20 1.04 18.69
</TABLE>
<PAGE> 48
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DFIN Damen Fin. Corp. of Chicago IL 20.16 20.16 0.71 3.13 3.48 0.89 3.93 0.20 76.94 0.38
DCBI Delphos Citizens Bancorp of OH 28.34 28.34 1.27 7.59 3.94 1.27 7.59 0.10 93.46 0.13
DIME Dime Community Bancorp of NY 14.52 12.50 0.96 5.96 4.96 1.04 6.41 0.73 112.22 1.43
DIBK Dime Financial Corp. of CT* 7.83 7.54 1.85 22.66 9.80 1.91 23.35 0.46 337.58 3.23
EGLB Eagle BancGroup of IL 11.85 11.85 -0.09 -0.77 -0.73 0.20 1.73 1.48 35.83 0.76
EBSI Eagle Bancshares of Tucker GA 8.71 8.71 0.59 6.82 4.57 0.80 9.29 0.88 65.80 0.84
EGFC Eagle Financial Corp. of CT 6.90 5.19 0.58 8.17 4.02 0.78 10.91 0.44 110.50 0.86
ETFS East Texas Fin. Serv. of TX 18.16 18.16 0.31 1.65 1.83 0.63 3.40 0.17 141.97 0.50
EMLD Emerald Financial Corp of OH 7.51 7.38 0.69 8.89 5.26 0.89 11.37 NA NA 0.35
EIRE Emerald Island Bancorp, MA* 7.08 7.08 0.85 12.35 7.46 0.89 13.00 0.40 151.40 0.89
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.31 1.09 3.12 NA NA 0.47
EFBI Enterprise Fed. Bancorp of OH 12.67 12.65 0.68 4.72 3.66 0.75 5.16 0.01 NA 0.28
EQSB Equitable FSB of Wheaton MD 5.07 5.07 0.48 9.33 5.68 0.76 14.93 1.07 19.82 0.31
FFFG F.F.O. Financial Group of FL(8) 6.41 6.41 0.52 8.41 3.45 0.85 13.72 3.17 55.02 2.47
FCBF FCB Fin. Corp. of Neenah WI 17.49 17.49 0.92 5.19 3.67 1.08 6.14 0.15 347.77 0.62
FFBS FFBS Bancorp of Columbus MS 19.42 19.42 1.19 6.07 4.00 1.49 7.65 0.42 109.44 0.66
FFDF FFD Financial Corp. of OH 24.74 24.74 0.78 3.42 2.84 1.08 4.74 NA NA 0.27
FFLC FFLC Bancorp of Leesburg FL 13.48 13.48 0.70 4.57 3.82 1.01 6.60 0.19 163.65 0.44
FFFC FFVA Financial Corp. of VA 13.18 12.90 1.11 7.86 4.40 1.34 9.52 0.18 318.63 0.98
FFWC FFW Corporation of Wabash IN 10.01 10.01 0.90 8.74 6.89 1.11 10.86 0.22 150.42 0.48
FFYF FFY Financial Corp. of OH 13.71 13.71 0.90 5.84 4.65 1.27 8.31 0.67 74.18 0.64
FMCO FMS Financial Corp. of NJ 6.56 6.44 0.69 10.76 6.00 1.02 15.79 1.06 48.60 0.92
FFHH FSF Financial Corp. of MN 11.35 11.35 0.66 5.22 4.39 0.84 6.63 0.03 636.64 0.34
FOBC Fed One Bancorp of Wheeling WV 11.06 10.55 0.68 5.85 4.50 0.97 8.33 0.40 101.18 0.93
FBCI Fidelity Bancorp of Chicago IL 10.38 10.36 0.55 5.34 4.42 0.78 7.48 0.80 21.76 0.22
FSBI Fidelity Bancorp, Inc. of PA 6.75 6.75 0.51 7.35 5.08 0.81 11.71 0.44 112.57 1.01
FFFL Fidelity FSB, MHC of FL (47.4) 8.82 8.75 0.39 4.09 2.20 0.62 6.51 0.30 77.48 0.31
FFED Fidelity Fed. Bancorp of IN 5.14 5.14 0.16 3.18 1.92 0.28 5.62 0.16 455.75 0.85
FFOH Fidelity Financial of OH 13.12 11.52 0.63 3.90 2.56 1.01 6.24 0.18 174.34 0.38
FIBC Financial Bancorp, Inc. of NY 9.36 9.31 0.56 5.74 4.30 1.00 10.23 1.81 26.91 0.89
FBSI First Bancshares of MO 14.35 14.33 0.91 5.88 4.87 1.11 7.22 0.32 88.44 0.35
FBBC First Bell Bancorp of PA 9.83 9.83 1.07 7.64 6.48 1.24 8.87 0.07 147.42 0.13
FBER First Bergen Bancorp of NJ 16.44 16.44 0.42 2.50 1.82 0.75 4.50 0.74 161.82 2.41
SKBO First Carnegie,MHC of PA(45.0) 15.65 15.65 0.37 2.35 1.73 0.54 3.43 0.74 33.56 0.66
FCIT First Cit. Fin. Corp of MD(8) 6.38 6.38 0.52 8.53 3.48 0.78 12.66 0.92 97.73 1.20
FSTC First Citizens Corp of GA 9.37 7.37 1.79 19.12 8.54 1.50 16.01 NA NA 1.50
FFBA First Colorado Bancorp of Co 14.31 14.12 1.13 7.87 5.80 1.12 7.80 0.23 121.82 0.38
FDEF First Defiance Fin.Corp. of OH 21.42 21.42 0.79 3.42 2.99 1.07 4.63 0.45 96.96 0.57
FESX First Essex Bancorp of MA* 7.31 6.30 1.01 13.37 7.64 0.88 11.68 0.62 143.10 1.42
FFES First FS&LA of E. Hartford CT 6.43 6.43 0.42 6.80 4.86 0.70 11.19 0.37 71.33 1.42
FFSX First FS&LA. MHC of IA (46.0) 8.13 8.07 0.43 5.19 2.80 0.73 8.94 0.11 342.10 0.52
FFSW First Fed Fin. Serv. of OH 6.05 5.11 1.02 18.11 5.58 0.69 12.15 0.38 73.66 0.40
BDJI First Fed. Bancorp. of MN 11.17 11.17 0.32 2.58 2.29 0.66 5.38 0.31 127.79 0.82
FFBH First Fed. Bancshares of AR 15.82 15.82 0.79 5.42 3.81 1.13 7.76 0.19 127.62 0.31
FTFC First Fed. Capital Corp. of WI 6.36 5.96 0.74 11.34 4.92 0.86 13.16 NA NA NA
FFKY First Fed. Fin. Corp. of KY 13.70 12.91 1.30 9.44 5.24 1.55 11.27 0.64 71.13 0.52
FFBZ First Federal Bancorp of OH 7.55 7.54 0.73 9.58 4.89 1.02 13.38 0.53 163.59 1.01
FFCH First Fin. Holdings Inc. of SC 6.11 6.11 0.57 9.30 4.58 0.84 13.65 1.66 41.99 0.84
FFBI First Financial Bancorp of IL 7.81 7.81 -0.02 -0.27 -0.27 0.47 5.76 0.27 200.40 0.69
FFHC First Financial Corp. of WI(8) 7.12 6.94 0.96 13.35 4.83 1.28 17.95 0.26 148.86 0.64
FFHS First Franklin Corp. of OH 9.02 8.96 0.19 2.14 1.80 0.65 7.20 0.52 82.31 0.62
FGHC First Georgia Hold. Corp of GA 8.49 7.74 0.96 11.69 6.66 0.57 6.97 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.66 6.55 0.89 13.61 8.25 1.16 17.76 0.64 114.23 1.39
FFSL First Independence Corp. of KS 10.43 10.43 0.43 3.84 3.69 0.69 6.12 0.87 69.37 0.91
FISB First Indiana Corp. of IN 9.56 9.44 0.83 8.86 5.44 1.01 10.83 1.50 91.12 1.62
FKFS First Keystone Fin. Corp of PA 7.07 7.07 0.51 6.65 4.70 0.76 9.86 2.46 34.36 1.46
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DFIN Damen Fin. Corp. of Chicago IL 28.76 103.90 20.95 103.90 22.92 0.24 1.64 47.06
DCBI Delphos Citizens Bancorp of OH 25.40 105.85 29.99 105.85 25.40 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 20.15 129.90 18.86 150.80 18.75 0.18 0.95 19.15
DIBK Dime Financial Corp. of CT* 10.20 214.50 16.79 222.58 9.90 0.40 1.50 15.33
EGLB Eagle BancGroup of IL NM 98.86 11.72 98.86 NM 0.00 0.00 NM
EBSI Eagle Bancshares of Tucker GA 21.88 137.36 11.96 137.36 16.06 0.60 3.43 75.00
EGFC Eagle Financial Corp. of CT 24.86 200.54 13.83 266.27 18.61 1.00 3.00 74.63
ETFS East Texas Fin. Serv. of TX NM 92.79 16.85 92.79 26.47 0.20 1.08 58.82
EMLD Emerald Financial Corp of OH 19.00 163.23 12.25 166.08 14.84 0.24 1.68 32.00
EIRE Emerald Island Bancorp, MA* 13.40 152.13 10.76 152.13 12.73 0.28 1.37 18.42
EFBC Empire Federal Bancorp of MT NM 102.44 35.74 102.44 NM 0.30 1.98 NM
EFBI Enterprise Fed. Bancorp of OH 27.33 132.09 16.73 132.26 25.00 1.00 4.88 NM
EQSB Equitable FSB of Wheaton MD 17.61 155.50 7.88 155.50 11.01 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL(8) 28.95 228.22 14.63 228.22 17.74 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 27.27 140.26 24.53 140.26 23.08 0.72 2.67 72.73
FFBS FFBS Bancorp of Columbus MS 25.00 149.53 29.04 149.53 19.83 0.50 2.08 52.08
FFDF FFD Financial Corp. of OH NM 106.90 26.44 106.90 25.41 0.30 1.94 68.18
FFLC FFLC Bancorp of Leesburg FL 26.18 123.28 16.62 123.28 18.14 0.48 1.73 45.28
FFFC FFVA Financial Corp. of VA 22.73 184.16 24.27 188.09 18.75 0.48 1.60 36.36
FFWC FFW Corporation of Wabash IN 14.52 126.37 12.65 126.37 11.69 0.72 2.50 36.36
FFYF FFY Financial Corp. of OH 21.48 138.75 19.02 138.75 15.11 0.70 2.55 54.69
FMCO FMS Financial Corp. of NJ 16.67 170.60 11.19 173.68 11.35 0.20 0.77 12.82
FFHH FSF Financial Corp. of MN 22.76 125.35 14.23 125.35 17.93 0.50 2.82 64.10
FOBC Fed One Bancorp of Wheeling WV 22.22 132.29 14.64 138.71 15.60 0.58 2.64 58.59
FBCI Fidelity Bancorp of Chicago IL 22.63 118.00 12.25 118.26 16.17 0.32 1.49 33.68
FSBI Fidelity Bancorp, Inc. of PA 19.68 134.24 9.07 134.24 12.35 0.36 1.69 33.33
FFFL Fidelity FSB, MHC of FL (47.4) NM 184.19 16.24 185.73 28.53 0.80 3.60 NM
FFED Fidelity Fed. Bancorp of IN NM 171.57 8.82 171.57 29.57 0.40 4.51 NM
FFOH Fidelity Financial of OH NM 129.93 17.04 147.87 24.42 0.28 1.79 70.00
FIBC Financial Bancorp, Inc. of NY 23.28 131.92 12.34 132.53 13.06 0.40 1.98 45.98
FBSI First Bancshares of MO 20.55 122.47 17.58 122.66 16.72 0.20 0.82 16.95
FBBC First Bell Bancorp of PA 15.44 151.86 14.92 151.86 13.31 0.40 2.44 37.74
FBER First Bergen Bancorp of NJ NM 139.90 23.00 139.90 NM 0.12 0.62 34.29
SKBO First Carnegie,MHC of PA(45.0) NM 135.85 21.26 135.85 NM 0.30 2.16 NM
FCIT First Cit. Fin. Corp of MD(8) 28.75 230.77 14.72 230.77 19.38 0.00 0.00 0.00
FSTC First Citizens Corp of GA 11.71 223.82 20.97 284.47 13.98 0.44 1.49 17.46
FFBA First Colorado Bancorp of Co 17.23 135.70 19.42 137.49 17.40 0.44 2.48 42.72
FDEF First Defiance Fin.Corp. of OH NM 120.29 25.76 120.29 24.69 0.32 2.12 71.11
FESX First Essex Bancorp of MA* 13.09 148.39 10.85 172.23 14.97 0.48 2.89 37.80
FFES First FS&LA of E. Hartford CT 20.56 132.25 8.50 132.25 12.50 0.60 1.92 39.47
FFSX First FS&LA. MHC of IA (46.0) NM 182.19 14.82 183.71 20.73 0.48 1.98 70.59
FFSW First Fed Fin. Serv. of OH 17.93 296.17 17.92 NM 26.73 0.44 1.04 18.57
BDJI First Fed. Bancorp. of MN NM 122.31 13.67 122.31 21.00 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 26.23 126.56 20.02 126.56 18.32 0.20 0.94 24.69
FTFC First Fed. Capital Corp. of WI 20.34 225.56 14.34 240.72 17.52 0.48 2.00 40.68
FFKY First Fed. Fin. Corp. of KY 19.08 175.40 24.03 186.22 15.99 0.52 2.39 45.61
FFBZ First Federal Bancorp of OH 20.45 186.34 14.06 186.53 14.63 0.24 1.33 27.27
FFCH First Fin. Holdings Inc. of SC 21.85 194.95 11.92 194.95 14.88 0.72 2.30 50.35
FFBI First Financial Bancorp of IL NM 104.17 8.13 104.17 17.38 0.00 0.00 NM
FFHC First Financial Corp. of WI(8) 20.70 267.78 19.08 274.85 15.39 0.60 1.92 39.74
FFHS First Franklin Corp. of OH NM 116.48 10.50 117.23 16.53 0.32 1.60 NM
FGHC First Georgia Hold. Corp of GA 15.02 172.62 14.65 189.28 25.21 0.05 0.71 10.64
FSPG First Home Bancorp of NJ 12.12 154.63 10.30 157.20 9.29 0.40 2.01 24.39
FFSL First Independence Corp. of KS 27.13 109.91 11.46 109.91 17.00 0.25 1.96 53.19
FISB First Indiana Corp. of IN 18.38 156.14 14.93 158.09 15.03 0.48 2.23 41.03
FKFS First Keystone Fin. Corp of PA 21.27 145.53 10.29 145.53 14.33 0.20 0.76 16.13
</TABLE>
<PAGE> 49
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FLKY First Lancaster Bncshrs of KY 34.23 34.23 1.15 3.72 3.02 1.40 4.52 0.75 32.89 0.29
FLFC First Liberty Fin. Corp. of GA 7.35 6.57 1.09 14.83 7.57 0.88 11.96 0.82 105.31 1.23
CASH First Midwest Fin. Corp. of IA 11.60 10.26 0.76 6.52 5.70 0.99 8.49 0.85 75.48 0.93
FMBD First Mutual Bancorp of IL 12.85 9.73 0.10 0.57 0.65 0.31 1.84 0.18 187.34 0.46
FMSB First Mutual SB of Bellevue WA* 6.57 6.57 1.01 15.33 7.03 0.98 14.80 0.01 NA 1.27
FNGB First Northern Cap. Corp of WI 11.28 11.28 0.63 5.44 3.38 0.91 7.88 0.06 798.69 0.53
FFPB First Palm Beach Bancorp of FL 6.76 6.59 -0.01 -0.09 -0.06 0.05 0.69 1.09 46.69 0.74
FSLA First SB SLA MHC of NJ (47.5) 9.19 8.15 0.51 5.44 2.38 0.90 9.61 0.61 88.82 1.05
FSNJ First SB of NJ, MHC (45.9)(8) 8.57 8.57 -0.34 -4.31 -2.14 0.23 2.89 0.87 58.25 1.21
SOPN First SB, SSB, Moore Co. of NC 24.60 24.60 1.39 5.48 4.66 1.67 6.58 0.08 274.55 0.32
FWWB First Savings Bancorp of WA* 14.75 13.57 1.05 6.25 3.61 1.00 5.90 0.32 210.94 1.03
SHEN First Shenango Bancorp of PA 10.95 10.95 0.89 7.82 5.93 1.16 10.18 0.54 135.75 1.15
FSFC First So.east Fin. Corp. of SC(8) 10.22 10.22 0.01 0.11 0.07 0.92 7.48 0.11 362.15 0.50
FBNW FirstBank Corp of Clarkston WA 18.04 18.04 0.70 3.86 2.96 0.57 3.14 1.95 27.73 0.74
FSPT FirstSpartan Fin. Corp. of SC 26.32 26.32 0.95 3.62 2.81 1.11 4.20 NA NA 0.49
FLAG Flag Financial Corp of GA 9.40 9.40 -0.06 -0.68 -0.47 0.14 1.45 4.52 44.14 2.91
FFIC Flushing Fin. Corp. of NY* 16.01 16.01 0.90 5.14 4.28 0.93 5.32 0.32 200.33 1.15
FBHC Fort Bend Holding Corp. of TX 6.03 5.62 0.19 3.18 2.41 0.44 7.36 0.37 141.08 1.03
FTSB Fort Thomas Fin. Corp. of KY 16.09 16.09 0.50 2.50 2.73 0.76 3.83 2.02 25.00 0.57
FKKY Frankfort First Bancorp of KY 26.19 26.19 0.62 2.19 2.59 0.93 3.29 0.06 138.89 0.08
FTNB Fulton Bancorp of MO 25.01 25.01 0.74 3.81 2.08 1.05 5.39 0.81 106.69 1.01
GFSB GFS Bancorp of Grinnell IA 11.57 11.57 0.99 8.43 6.36 1.27 10.81 1.54 45.77 0.81
GUPB GFSB Bancorp of Gallup NM 16.30 16.30 0.74 3.86 3.63 0.93 4.86 0.18 199.36 0.69
GSLA GS Financial Corp. of LA 45.63 45.63 1.08 3.63 2.23 1.08 3.63 0.12 265.07 0.84
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.62 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 26.08 26.08 0.82 3.25 2.99 1.15 4.54 0.78 15.82 0.40
GBCI Glacier Bancorp of MT 9.56 9.30 1.38 14.56 5.35 1.58 16.62 0.27 229.89 0.85
GFCO Glenway Financial Corp. of OH 9.56 9.41 0.38 3.95 3.41 0.68 7.17 0.32 83.26 0.32
GTPS Great American Bancorp of IL 21.43 21.43 0.46 2.16 2.06 0.55 2.59 0.23 140.69 0.44
GTFN Great Financial Corp. of KY 9.24 8.84 0.75 7.89 4.78 0.71 7.50 3.06 15.68 0.72
GSBC Great Southern Bancorp of MO 8.97 8.97 1.36 14.03 6.51 1.53 15.83 1.83 124.20 2.60
GDVS Greater DV SB,MHC of PA (19.9)* 11.57 11.57 0.32 2.71 1.52 0.58 4.95 2.79 43.15 1.93
GSFC Green Street Fin. Corp. of NC 36.26 36.26 1.37 3.84 3.25 1.66 4.66 0.16 83.63 0.18
GSLC Guaranty Svgs & Loan FA of VA 5.72 5.72 0.46 7.73 2.69 0.43 7.26 NA NA 1.00
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.78 13.78 0.61 4.30 2.03 0.92 6.51 0.50 216.62 1.36
HCBB HCB Bancshares of AR 18.25 17.49 -0.11 -0.58 -0.58 0.39 2.11 NA NA 1.47
HEMT HF Bancorp of Hemet CA 9.81 0.00 -0.31 -2.63 -2.36 -2.27 -19.11 NA NA NA
HFFC HF Financial Corp. of SD 9.43 9.43 0.66 7.12 5.62 0.89 9.66 0.33 244.25 1.01
HFNC HFNC Financial Corp. of NC 18.83 18.83 1.07 3.82 3.14 1.41 5.01 0.99 94.51 1.26
HMNF HMN Financial, Inc. of MN 14.43 14.43 0.71 4.79 3.80 0.88 5.96 0.08 531.97 0.71
HALL Hallmark Capital Corp. of WI 7.24 7.24 0.48 6.83 5.85 0.61 8.62 0.16 273.18 0.64
HARB Harbor FSB, MHC of FL (46.0) 8.39 8.11 0.95 11.52 4.61 1.23 14.84 0.46 222.68 1.37
HRBF Harbor Federal Bancorp of MD 12.86 12.86 0.43 3.20 2.55 0.68 5.15 0.13 131.49 0.26
HFSA Hardin Bancorp of Hardin MO 12.48 12.48 0.52 3.53 3.46 0.79 5.41 0.09 179.21 0.32
HARL Harleysville SA of PA 6.53 6.53 0.75 11.71 5.84 1.03 16.04 0.03 NA 0.77
HARS Harris SB, MHC of PA (24.2) 8.01 7.01 0.49 5.78 3.19 0.62 7.24 0.65 64.15 0.97
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.49 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.43 12.43 0.21 1.35 1.33 0.54 3.49 0.15 90.48 0.26
HAVN Haven Bancorp of Woodhaven NY 5.95 5.93 0.56 9.27 5.77 0.83 13.79 0.74 86.28 1.15
HVFD Haverfield Corp. of OH(8) 8.55 8.55 0.57 6.82 3.81 1.08 12.97 1.04 82.48 0.99
HTHR Hawthorne Fin. Corp. of CA 3.88 3.88 0.36 9.30 7.67 0.36 9.38 12.66 12.87 1.92
HMLK Hemlock Fed. Fin. Corp. of IL 18.34 18.34 0.13 0.99 0.66 0.73 5.45 NA NA 1.30
HBNK Highland Federal Bank of CA 7.47 7.47 0.46 6.25 3.75 0.68 9.17 3.09 55.00 2.13
HIFS Hingham Inst. for Sav. of MA* 9.35 9.35 1.21 12.60 8.00 1.21 12.60 0.41 165.13 0.89
HBEI Home Bancorp of Elgin IL 26.70 26.70 0.49 1.99 1.37 0.85 3.42 0.41 NA NA
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 3.39 0.89 6.27 0.05 835.54 0.51
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FLKY First Lancaster Bncshrs of KY NM 105.61 36.15 105.61 27.23 0.50 3.28 NM
FLFC First Liberty Fin. Corp. of GA 13.21 195.87 14.39 218.93 16.37 0.40 1.72 22.73
CASH First Midwest Fin. Corp. of IA 17.55 110.64 12.83 125.05 13.47 0.36 2.07 36.36
FMBD First Mutual Bancorp of IL NM 101.31 13.01 133.74 NM 0.32 2.06 NM
FMSB First Mutual SB of Bellevue WA* 14.22 203.35 13.37 203.35 14.73 0.20 0.97 13.79
FNGB First Northern Cap. Corp of WI 29.60 158.17 17.83 158.17 20.44 0.64 2.49 73.56
FFPB First Palm Beach Bancorp of FL NM 158.03 10.69 162.20 NM 0.60 1.80 NM
FSLA First SB SLA MHC of NJ (47.5) NM 223.08 20.51 251.74 23.77 0.48 1.66 69.57
FSNJ First SB of NJ, MHC (45.9)(8) NM 202.41 17.34 202.41 NM 0.50 1.53 NM
SOPN First SB, SSB, Moore Co. of NC 21.46 117.79 28.97 117.79 17.86 0.80 3.76 NM
FWWB First Savings Bancorp of WA* 27.66 174.24 25.70 189.38 29.31 0.28 1.14 31.46
SHEN First Shenango Bancorp of PA 16.86 131.03 14.35 131.03 12.95 0.60 2.11 35.50
FSFC First So.east Fin. Corp. of SC(8) NM 179.49 18.35 179.49 20.00 0.24 1.71 NM
FBNW FirstBank Corp of Clarkston WA NM 130.36 23.51 130.36 NM 0.00 0.00 0.00
FSPT FirstSpartan Fin. Corp. of SC NM 128.92 33.93 128.92 NM 0.00 0.00 0.00
FLAG Flag Financial Corp of GA NM 143.90 13.53 143.90 NM 0.34 2.31 NM
FFIC Flushing Fin. Corp. of NY* 23.34 124.75 19.98 124.75 22.57 0.24 1.18 27.59
FBHC Fort Bend Holding Corp. of TX NM 132.31 7.98 142.10 17.98 0.40 1.30 54.05
FTSB Fort Thomas Fin. Corp. of KY NM 107.95 17.37 107.95 23.91 0.25 2.27 NM
FKKY Frankfort First Bancorp of KY NM 93.15 24.40 93.15 25.69 0.36 3.89 NM
FTNB Fulton Bancorp of MO NM 136.49 34.13 136.49 NM 0.20 1.01 48.78
GFSB GFS Bancorp of Grinnell IA 15.73 129.55 14.99 129.55 12.27 0.26 1.94 30.59
GUPB GFSB Bancorp of Gallup NM 27.54 112.56 18.34 112.56 21.84 0.40 2.11 57.97
GSLA GS Financial Corp. of LA NM 93.22 42.54 93.22 NM 0.28 1.84 NM
GOSB GSB Financial Corp. of NY 27.63 104.28 28.22 104.28 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 111.29 29.02 111.29 23.99 0.40 2.25 NM
GBCI Glacier Bancorp of MT 18.69 238.71 22.81 245.36 16.37 0.48 2.59 48.48
GFCO Glenway Financial Corp. of OH 29.35 115.09 11.00 116.88 16.17 0.80 2.96 NM
GTPS Great American Bancorp of IL NM 104.92 22.48 104.92 NM 0.40 2.29 NM
GTFN Great Financial Corp. of KY 20.91 162.99 15.05 170.25 22.02 0.60 1.80 37.74
GSBC Great Southern Bancorp of MO 15.37 227.89 20.44 227.89 13.62 0.40 2.39 36.70
GDVS Greater DV SB,MHC of PA (19.9)* NM 175.00 20.24 175.00 NM 0.36 2.38 NM
GSFC Green Street Fin. Corp. of NC NM 117.11 42.47 117.11 25.37 0.44 2.55 NM
GSLC Guaranty Svgs & Loan FA of VA NM 276.52 15.81 276.52 NM 0.10 0.82 30.30
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 207.39 28.58 207.39 NM 0.40 2.19 NM
HCBB HCB Bancshares of AR NM 101.02 18.43 105.40 NM 0.00 0.00 NM
HEMT HF Bancorp of Hemet CA NM 118.13 11.59 NM NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 17.79 123.06 11.60 123.06 13.10 0.42 1.92 34.15
HFNC HFNC Financial Corp. of NC NM 176.06 33.14 176.06 24.25 0.28 1.72 54.90
HMNF HMN Financial, Inc. of MN 26.33 127.45 18.39 127.45 21.15 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 17.11 110.65 8.01 110.65 13.54 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.0) 21.71 236.07 19.81 244.10 16.86 1.40 3.15 68.29
HRBF Harbor Federal Bancorp of MD NM 124.30 15.98 124.30 24.39 0.40 2.00 NM
HFSA Hardin Bancorp of Hardin MO 28.88 106.76 13.32 106.76 18.82 0.48 2.87 NM
HARL Harleysville SA of PA 17.12 187.83 12.27 187.83 12.50 0.40 1.60 27.40
HARS Harris SB, MHC of PA (24.2) NM 169.64 13.59 193.97 25.00 0.58 2.34 73.42
HFFB Harrodsburg 1st Fin Bcrp of KY 28.64 108.70 29.28 108.70 21.58 0.40 2.54 72.73
HHFC Harvest Home Fin. Corp. of OH NM 114.66 14.25 114.66 28.98 0.40 3.14 NM
HAVN Haven Bancorp of Woodhaven NY 17.34 149.79 8.91 150.29 11.66 0.60 1.66 28.71
HVFD Haverfield Corp. of OH(8) 26.23 172.36 14.73 172.36 13.79 0.56 2.09 54.90
HTHR Hawthorne Fin. Corp. of CA 13.04 121.26 4.71 121.26 12.93 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 104.67 19.20 104.67 27.73 0.00 0.00 0.00
HBNK Highland Federal Bank of CA 26.69 156.31 11.68 156.31 18.17 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 12.50 148.85 13.92 148.85 12.50 0.48 2.06 25.81
HBEI Home Bancorp of Elgin IL NM 132.92 35.49 132.92 NM 0.40 2.19 NM
HBFW Home Bancorp of Fort Wayne IN 29.51 120.60 16.02 120.60 18.48 0.20 0.94 27.78
</TABLE>
<PAGE> 50
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HBBI Home Building Bancorp of IN 12.82 12.82 0.20 1.59 1.41 0.52 4.05 0.38 47.98 0.29
HCFC Home City Fin. Corp. of OH 20.61 20.61 0.78 6.27 3.40 1.17 9.46 0.62 110.38 0.87
HOMF Home Fed Bancorp of Seymour IN 8.48 8.22 1.05 12.65 6.62 1.22 14.72 0.46 117.33 0.62
HWEN Home Financial Bancorp of IN 18.63 18.63 0.57 3.68 2.95 0.82 5.23 NA NA 0.63
HPBC Home Port Bancorp, Inc. of MA* 10.56 10.56 1.67 15.78 8.29 1.66 15.69 0.08 NA 1.56
HMCI Homecorp, Inc. of Rockford IL 6.54 6.54 0.14 2.17 1.89 0.43 6.83 3.35 14.24 0.59
HZFS Horizon Fin'l. Services of IA 10.50 10.50 0.43 3.87 3.97 0.60 5.42 1.02 36.63 0.56
HRZB Horizon Financial Corp. of WA* 15.60 15.60 1.57 9.99 6.96 1.54 9.80 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.04 17.04 0.52 2.73 2.24 0.88 4.68 0.08 171.10 0.52
ISBF ISB Financial Corp. of LA 12.27 10.35 0.74 4.49 3.08 1.00 6.05 NA NA 0.79
ITLA Imperial Thrift & Loan of CA* 11.37 11.32 1.46 13.06 7.56 1.46 13.06 1.78 75.09 1.63
IFSB Independence FSB of DC 6.52 5.72 0.14 2.19 2.02 0.33 4.98 NA NA 0.34
INCB Indiana Comm. Bank, SB of IN 12.39 12.39 0.16 1.24 1.05 0.51 3.88 NA NA 0.71
INBI Industrial Bancorp of OH 17.71 17.71 0.72 3.87 3.10 1.42 7.57 0.30 156.98 0.55
IWBK Interwest SB of Oak Harbor WA 6.78 6.63 0.87 12.91 4.59 1.18 17.52 0.64 73.79 0.78
IPSW Ipswich SB of Ipswich MA* 5.71 5.71 1.21 20.41 7.55 0.95 16.04 1.52 56.87 1.18
JSB JSB Financial, Inc. of NY 22.17 22.17 1.77 8.09 6.19 1.68 7.68 NA NA 0.62
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 5.42 1.34 8.46 0.78 NA NA
JXSB Jcksnville SB,MHC of IL (44.6) 10.30 10.30 0.29 2.50 1.99 0.67 5.84 0.39 125.08 0.63
JSBA Jefferson Svgs Bancorp of MO 7.83 6.11 0.25 3.41 1.78 0.63 8.56 0.52 117.45 0.82
JOAC Joachim Bancorp of MO 28.99 28.99 0.51 1.71 1.68 0.78 2.64 0.68 30.45 0.31
KSAV KS Bancorp of Kenly NC 13.53 13.52 0.96 6.86 5.84 1.25 8.89 0.35 80.53 0.33
KSBK KSB Bancorp of Kingfield ME(8)* 6.82 6.32 0.88 13.36 19.14 0.88 13.31 NA NA 1.03
KFBI Klamath First Bancorp of OR 20.44 20.44 0.89 3.75 3.02 1.32 5.56 0.08 213.23 0.23
LSBI LSB Fin. Corp. of Lafayette IN 9.08 9.08 0.50 5.26 4.42 0.42 4.42 1.34 68.99 1.07
LVSB Lakeview SB of Paterson NJ 9.52 7.61 1.37 13.73 8.62 0.95 9.53 0.98 66.74 1.50
LARK Landmark Bancshares of KS 14.63 14.63 0.84 5.42 4.84 1.05 6.72 NA NA NA
LARL Laurel Capital Group of PA 10.42 10.42 1.12 10.59 7.02 1.43 13.55 0.51 181.26 1.31
LSBX Lawrence Savings Bank of MA* 8.69 8.69 1.75 20.90 11.79 1.73 20.60 0.30 328.94 2.29
LFED Leeds FSB, MHC of MD (36.2) 16.18 16.18 0.79 4.89 3.02 1.13 6.98 0.02 977.36 0.30
LXMO Lexington B&L Fin. Corp. of MO 27.62 27.62 1.02 3.69 3.47 1.02 3.69 0.63 58.31 0.49
LIFB Life Bancorp of Norfolk VA 10.79 10.45 0.71 6.30 3.69 0.87 7.74 NA NA 1.48
LFBI Little Falls Bancorp of NJ 13.28 12.26 0.27 1.94 1.69 0.48 3.41 NA NA 0.81
LOGN Logansport Fin. Corp. of IN 19.20 19.20 1.17 5.64 5.29 1.52 7.31 0.61 44.88 0.38
LONF London Financial Corp. of OH 19.86 19.86 0.74 3.55 3.45 1.09 5.19 0.79 62.54 0.64
LISB Long Island Bancorp, Inc of NY 8.99 8.90 0.61 6.58 3.69 0.71 7.63 1.03 55.02 0.92
MAFB MAF Bancorp of IL 7.88 6.84 0.79 10.57 4.66 1.10 14.70 0.46 119.42 0.71
MBLF MBLA Financial Corp. of MO 13.49 13.49 0.66 4.90 4.47 0.86 6.34 0.25 111.87 0.49
MFBC MFB Corp. of Mishawaka IN 14.51 14.51 0.56 3.33 3.51 0.85 5.09 NA NA 0.19
MLBC ML Bancorp of Villanova PA 6.98 6.86 0.74 10.26 6.72 0.67 9.28 0.46 163.34 1.71
MBB MSB Bancorp of Middletown NY* 6.90 2.97 0.33 4.82 4.04 0.36 5.17 0.70 36.62 0.60
MSBF MSB Financial Corp. of MI 16.99 16.99 1.20 6.47 10.08 1.46 7.86 0.66 61.34 0.44
MGNL Magna Bancorp of MS(8) 10.22 9.95 1.39 14.23 5.40 1.53 15.70 2.92 26.42 1.11
MARN Marion Capital Holdings of IN 22.55 22.55 1.39 6.09 6.00 1.67 7.28 0.81 144.01 1.35
MRKF Market Fin. Corp. of OH 34.99 34.99 0.84 3.14 2.25 0.84 3.14 0.75 12.24 0.20
MFCX Marshalltown Fin. Corp. of IA(8) 15.74 15.74 0.34 2.15 1.79 0.73 4.66 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.44 8.33 0.58 6.97 4.27 0.84 10.17 NA NA 0.46
MASB MassBank Corp. of Reading MA* 10.64 10.64 1.10 10.79 7.02 1.04 10.23 0.16 149.80 0.87
MFLR Mayflower Co-Op. Bank of MA* 9.43 9.26 1.00 10.42 7.39 0.98 10.18 1.03 90.08 1.56
MECH Mechanics SB of Hartford CT* 10.23 10.23 1.92 19.45 12.69 1.92 19.45 1.13 152.02 2.58
MDBK Medford Savings Bank of MA* 8.99 8.38 1.08 12.07 8.15 1.01 11.29 0.37 176.45 1.22
MERI Meritrust FSB of Thibodaux LA 8.20 8.20 0.67 8.71 4.91 1.05 13.56 0.37 83.87 0.58
MWBX Metro West of MA* 7.44 7.44 1.38 18.37 7.77 1.38 18.37 0.91 126.64 1.48
MCBS Mid Continent Bancshares of KS 9.39 9.39 1.02 9.79 6.39 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.10 9.09 0.91 9.88 6.65 1.19 12.96 NA NA NA
MCBN Mid-Coast Bancorp of ME 8.61 8.61 0.43 4.88 4.20 0.67 7.57 0.40 124.47 0.60
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HBBI Home Building Bancorp of IN NM 110.75 14.19 110.75 27.70 0.30 1.46 NM
HCFC Home City Fin. Corp. of OH 29.41 101.56 20.93 101.56 19.48 0.32 2.13 62.75
HOMF Home Fed Bancorp of Seymour IN 15.10 178.89 15.17 184.51 12.98 0.50 1.64 24.75
HWEN Home Financial Bancorp of IN NM 100.86 18.79 100.86 23.83 0.20 1.31 44.44
HPBC Home Port Bancorp, Inc. of MA* 12.06 182.18 19.23 182.18 12.13 0.80 3.86 46.51
HMCI Homecorp, Inc. of Rockford IL NM 111.24 7.28 111.24 16.76 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 25.16 97.72 10.26 97.72 17.97 0.32 1.70 42.67
HRZB Horizon Financial Corp. of WA* 14.36 140.88 21.98 140.88 14.64 0.40 2.60 37.38
IBSF IBS Financial Corp. of NJ NM 136.51 23.26 136.51 26.05 0.40 2.56 NM
ISBF ISB Financial Corp. of LA NM 149.69 18.36 177.37 24.13 0.40 1.64 53.33
ITLA Imperial Thrift & Loan of CA* 13.23 153.95 17.50 154.61 13.23 0.00 0.00 0.00
IFSB Independence FSB of DC NM 107.32 7.00 122.40 21.77 0.22 1.53 NM
INCB Indiana Comm. Bank, SB of IN NM 124.29 15.39 124.29 NM 0.36 2.36 NM
INBI Industrial Bancorp of OH NM 124.68 22.08 124.68 16.48 0.48 3.31 NM
IWBK Interwest SB of Oak Harbor WA 21.77 256.27 17.37 262.04 16.04 0.60 1.51 32.97
IPSW Ipswich SB of Ipswich MA* 13.24 244.24 13.96 244.24 16.86 0.24 1.08 14.29
JSB JSB Financial, Inc. of NY 16.15 128.81 28.55 128.81 17.01 1.40 3.15 50.91
JXVL Jacksonville Bancorp of TX 18.47 122.66 18.30 122.66 14.08 0.50 3.01 55.56
JXSB Jcksnville SB,MHC of IL (44.6) NM 125.34 12.90 125.34 21.58 0.40 2.41 NM
JSBA Jefferson Svgs Bancorp of MO NM 176.89 13.86 226.63 22.38 0.40 1.25 70.18
JOAC Joachim Bancorp of MO NM 104.78 30.37 104.78 NM 0.50 3.51 NM
KSAV KS Bancorp of Kenly NC 17.13 114.06 15.43 114.13 13.21 0.60 3.24 55.56
KSBK KSB Bancorp of Kingfield ME(8)* 5.23 65.62 4.48 70.89 5.24 0.08 0.56 2.91
KFBI Klamath First Bancorp of OR NM 137.56 28.12 137.56 22.31 0.30 1.56 51.72
LSBI LSB Fin. Corp. of Lafayette IN 22.61 117.66 10.68 117.66 26.90 0.34 1.60 36.17
LVSB Lakeview SB of Paterson NJ 11.60 161.98 15.41 202.58 16.71 0.25 0.78 8.99
LARK Landmark Bancshares of KS 20.67 112.33 16.44 112.33 16.67 0.40 1.86 38.46
LARL Laurel Capital Group of PA 14.25 147.28 15.35 147.28 11.13 0.52 2.43 34.67
LSBX Lawrence Savings Bank of MA* 8.48 159.33 13.85 159.33 8.60 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.2) NM 158.11 25.58 158.11 23.19 0.76 3.64 NM
LXMO Lexington B&L Fin. Corp. of MO 28.79 106.26 29.35 106.26 28.79 0.30 1.86 53.57
LIFB Life Bancorp of Norfolk VA 27.08 168.61 18.19 174.03 22.03 0.48 1.85 50.00
LFBI Little Falls Bancorp of NJ NM 117.99 15.66 127.76 NM 0.20 1.17 68.97
LOGN Logansport Fin. Corp. of IN 18.92 110.50 21.22 110.50 14.58 0.40 2.86 54.05
LONF London Financial Corp. of OH 28.94 106.84 21.22 106.84 19.78 0.24 1.54 44.44
LISB Long Island Bancorp, Inc of NY 27.08 175.91 15.82 177.68 23.35 0.60 1.54 41.67
MAFB MAF Bancorp of IL 21.44 195.35 15.40 224.95 15.41 0.28 0.86 18.54
MBLF MBLA Financial Corp. of MO 22.38 109.25 14.74 109.25 17.28 0.40 1.70 38.10
MFBC MFB Corp. of Mishawaka IN 28.47 101.94 14.79 101.94 18.64 0.32 1.56 44.44
MLBC ML Bancorp of Villanova PA 14.89 148.03 10.33 150.67 16.46 0.40 1.98 29.41
MBB MSB Bancorp of Middletown NY* 24.74 119.17 8.22 277.12 23.04 0.60 2.55 63.16
MSBF MSB Financial Corp. of MI 9.92 63.91 10.86 63.91 8.18 0.28 2.15 21.37
MGNL Magna Bancorp of MS(8) 18.52 248.51 25.41 255.36 16.78 0.60 2.40 44.44
MARN Marion Capital Holdings of IN 16.67 104.07 23.46 104.07 13.94 0.88 3.83 63.77
MRKF Market Fin. Corp. of OH NM 96.15 33.65 96.15 NM 0.28 1.96 NM
MFCX Marshalltown Fin. Corp. of IA(8) NM 117.71 18.53 117.71 25.77 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 23.40 160.04 13.51 162.23 16.05 0.80 1.68 39.41
MASB MassBank Corp. of Reading MA* 14.25 144.40 15.36 144.40 15.03 1.28 2.47 35.16
MFLR Mayflower Co-Op. Bank of MA* 13.53 136.26 12.85 138.67 13.85 0.60 3.33 45.11
MECH Mechanics SB of Hartford CT* 7.88 136.53 13.97 136.53 7.88 0.00 0.00 0.00
MDBK Medford Savings Bank of MA* 12.27 141.53 12.73 151.89 13.13 0.72 2.40 29.39
MERI Meritrust FSB of Thibodaux LA 20.35 167.22 13.72 167.22 13.06 0.70 1.73 35.18
MWBX Metro West of MA* 12.87 221.52 16.48 221.52 12.87 0.12 1.79 23.08
MCBS Mid Continent Bancshares of KS 15.64 149.31 14.02 149.31 13.80 0.40 1.37 21.39
MIFC Mid Iowa Financial Corp. of IA 15.03 143.37 13.05 143.58 11.45 0.08 0.83 12.50
MCBN Mid-Coast Bancorp of ME 23.81 113.79 9.80 113.79 15.34 0.52 2.08 49.52
</TABLE>
<PAGE> 51
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MWBI Midwest Bancshares, Inc. of IA 6.94 6.94 0.46 6.80 5.26 0.77 11.24 0.82 61.28 0.84
MWFD Midwest Fed. Fin. Corp of WI 8.61 8.28 1.39 16.14 7.91 1.09 12.66 0.14 543.01 1.01
MFFC Milton Fed. Fin. Corp. of OH 13.14 13.14 0.49 3.07 2.86 0.68 4.25 0.32 86.42 0.46
MIVI Miss. View Hold. Co. of MN 18.26 18.26 0.68 3.67 3.84 1.01 5.44 0.25 488.70 1.93
MBSP Mitchell Bancorp of NC* 43.36 43.36 1.40 3.24 3.04 1.64 3.81 NA NA 0.62
MBBC Monterey Bay Bancorp of CA 10.74 9.85 0.28 2.17 1.91 0.51 3.99 0.36 94.16 0.61
MONT Montgomery Financial Corp ofIN 17.91 17.91 0.42 2.32 2.19 0.67 3.74 NA NA 0.20
MSBK Mutual SB, FSB of Bay City MI 6.07 6.07 0.11 1.93 1.67 0.04 0.75 0.11 272.91 0.67
NHTB NH Thrift Bancshares of NH 7.48 6.34 0.33 4.46 2.70 0.49 6.59 1.03 91.05 1.14
NSLB NS&L Bancorp of Neosho MO 19.93 19.93 0.49 2.30 2.47 0.74 3.47 0.06 127.27 0.13
NMSB Newmil Bancorp. of CT* 9.81 9.81 0.83 8.14 5.39 0.79 7.78 1.11 152.08 3.18
NASB North American SB of MO 7.97 7.71 1.23 16.83 7.70 1.19 16.35 3.34 26.40 1.00
NBSI North Bancshares of Chicago IL 14.13 14.13 0.49 3.27 2.61 0.68 4.57 NA NA 0.27
FFFD North Central Bancshares of IA 22.67 22.67 1.64 6.41 6.18 1.90 7.41 0.12 823.53 1.20
NBN Northeast Bancorp of ME* 6.95 6.01 0.67 9.71 8.88 0.59 8.52 1.37 77.15 1.32
NEIB Northeast Indiana Bncrp of IN 15.16 15.16 1.04 5.98 5.53 1.23 7.07 NA NA 0.71
NWEQ Northwest Equity Corp. of WI 11.42 11.42 0.77 6.16 5.57 0.97 7.83 NA NA 0.59
NWSB Northwest SB, MHC of PA (29.9) 9.71 9.13 0.69 6.88 3.22 1.00 9.95 0.72 90.87 0.88
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.51 6.99 1.11 14.32 2.09 56.84 1.70
NSSB Norwich Financial Corp. of CT* 11.17 10.08 1.09 10.08 6.38 1.04 9.58 1.29 151.12 2.83
NTMG Nutmeg FS&LA of CT 5.69 5.69 0.31 5.46 3.63 0.35 6.16 NA NA 0.60
OHSL OHSL Financial Corp. of OH 11.04 11.04 0.61 5.15 4.41 0.86 7.34 0.33 68.18 0.31
OCFC Ocean Fin. Corp. of NJ 17.82 17.82 -0.04 -0.29 -0.17 0.95 6.33 0.64 69.12 0.88
OCN Ocwen Financial Corp. of FL 8.50 8.50 2.70 32.38 5.89 1.96 23.50 4.10 19.90 1.19
OFCP Ottawa Financial Corp. of MI 8.73 7.00 0.48 5.25 3.20 0.78 8.45 0.32 112.76 0.42
PFFB PFF Bancorp of Pomona CA 10.32 10.21 0.16 1.41 1.07 0.46 4.09 1.76 59.73 1.46
PSFI PS Financial of Chicago IL 43.22 43.22 1.92 4.46 4.55 1.98 4.59 0.43 57.23 0.52
PVFC PVF Capital Corp. of OH 7.02 7.02 1.05 15.54 7.90 1.35 19.98 1.20 61.53 0.79
PCCI Pacific Crest Capital of CA* 7.09 7.09 1.04 13.26 7.34 0.97 12.43 1.29 79.26 1.67
PALM Palfed, Inc. of Aiken SC 8.24 8.24 0.10 1.29 0.84 0.61 7.54 2.12 51.22 1.32
PBCI Pamrapo Bancorp, Inc. of NJ 12.74 12.64 0.90 6.37 5.66 1.24 8.78 2.77 26.10 1.29
PFED Park Bancorp of Chicago IL 22.53 22.53 0.87 4.19 3.73 1.21 5.81 0.21 134.41 0.73
PVSA Parkvale Financial Corp of PA 7.58 7.53 0.73 9.76 6.14 1.08 14.42 0.27 537.53 1.97
PBIX Patriot Bank Corp. of PA 8.09 8.09 0.47 4.26 2.97 0.65 5.81 0.13 242.39 0.65
PEEK Peekskill Fin. Corp. of NY 25.58 25.58 1.07 3.73 3.94 1.37 4.79 1.22 27.97 1.35
PFSB PennFed Fin. Services of NJ 7.53 6.21 0.57 7.10 4.53 0.85 10.57 NA NA 0.28
PWBC PennFirst Bancorp of PA 7.07 6.45 0.43 5.88 4.22 0.64 8.87 0.58 86.14 1.57
PWBK Pennwood SB of PA* 19.47 19.47 0.61 3.89 2.97 0.97 6.17 1.13 57.64 1.40
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.41 6.93 0.47 8.57 0.82 91.19 1.57
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.12 7.33 5.50 1.47 9.59 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (37.4)* 8.41 8.40 1.10 13.64 4.71 0.88 10.87 0.90 121.39 1.60
PFFC Peoples Fin. Corp. of OH 26.90 26.90 0.86 3.21 2.99 0.86 3.21 0.01 NA 0.41
PHBK Peoples Heritage Fin Grp of ME* 7.72 6.51 1.28 15.68 6.07 1.29 15.88 0.91 126.66 1.66
PHSB Peoples Home SB of PA 17.31 17.31 0.39 2.23 2.29 0.81 4.67 NA NA 1.40
PSFC Peoples Sidney Fin. Corp of OH 23.26 23.26 0.92 3.97 3.39 1.21 5.18 1.00 42.00 0.45
PERM Permanent Bancorp of IN 9.23 9.15 0.32 3.27 2.53 0.60 6.18 1.11 45.38 1.00
PMFI Perpetual Midwest Fin. of IA 8.53 8.53 0.12 1.38 1.24 0.29 3.36 0.40 185.58 0.95
PERT Perpetual of SC, MHC (46.8) 13.29 13.29 0.75 6.48 2.55 1.06 9.13 NA NA 1.01
PCBC Perry Co. Fin. Corp. of MO 18.32 18.32 0.78 4.11 3.76 1.03 5.45 0.05 64.10 0.20
PHFC Pittsburgh Home Fin. of PA 10.92 10.80 0.62 4.71 4.03 0.79 6.00 1.60 32.18 0.76
PFSL Pocahnts Fed, MHC of AR (46.4) 6.36 6.36 0.60 9.75 6.25 0.84 13.54 0.15 308.72 1.12
POBS Portsmouth Bank Shrs Inc of NH(8)* 25.93 25.93 2.29 9.13 5.97 2.02 8.07 0.50 53.09 0.76
PTRS Potters Financial Corp of OH 8.83 8.83 0.48 5.37 4.81 0.85 9.54 0.50 350.66 2.78
PKPS Poughkeepsie Fin. Corp. of NY 8.37 8.37 0.35 4.21 3.00 0.54 6.49 4.28 25.28 1.45
PRBC Prestige Bancorp of PA 11.13 11.13 0.37 2.84 2.94 0.65 5.01 0.30 85.33 0.38
PETE Primary Bank of NH(8)* 6.62 6.61 0.84 13.15 6.59 0.83 12.99 0.80 77.36 1.08
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MWBI Midwest Bancshares, Inc. of IA 19.02 126.31 8.76 126.31 11.51 0.60 1.71 32.61
MWFD Midwest Fed. Fin. Corp of WI 12.65 204.03 17.58 212.40 16.11 0.34 1.56 19.77
MFFC Milton Fed. Fin. Corp. of OH NM 119.79 15.74 119.79 25.22 0.60 4.41 NM
MIVI Miss. View Hold. Co. of MN 26.07 97.23 17.75 97.23 17.58 0.16 1.06 27.59
MBSP Mitchell Bancorp of NC* NM 108.84 47.20 108.84 27.92 0.00 0.00 0.00
MBBC Monterey Bay Bancorp of CA NM 116.24 12.48 126.76 28.51 0.12 0.74 38.71
MONT Montgomery Financial Corp ofIN NM 105.79 18.95 105.79 28.26 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI NM 112.33 6.82 112.33 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH NM 142.20 10.63 167.80 25.09 0.50 3.07 NM
NSLB NS&L Bancorp of Neosho MO NM 101.65 20.26 101.65 26.81 0.50 3.01 NM
NMSB Newmil Bancorp. of CT* 18.56 152.60 14.98 152.60 19.42 0.24 1.90 35.29
NASB North American SB of MO 12.99 205.34 16.37 212.22 13.37 0.80 1.60 20.78
NBSI North Bancshares of Chicago IL NM 131.27 18.55 131.27 27.47 0.48 2.16 NM
FFFD North Central Bancshares of IA 16.18 111.41 25.25 111.41 13.98 0.25 1.52 24.51
NBN Northeast Bancorp of ME* 11.26 109.34 7.60 126.50 12.83 0.32 2.17 24.43
NEIB Northeast Indiana Bncrp of IN 18.09 114.32 17.34 114.32 15.32 0.32 1.88 34.04
NWEQ Northwest Equity Corp. of WI 17.94 117.85 13.45 117.85 14.12 0.52 3.41 61.18
NWSB Northwest SB, MHC of PA (29.9) NM 209.28 20.33 222.69 21.44 0.32 1.84 57.14
NSSY Norwalk Savings Society of CT* 14.31 167.33 13.48 173.53 12.50 0.40 1.16 16.53
NSSB Norwich Financial Corp. of CT* 15.67 151.36 16.90 167.67 16.48 0.56 2.52 39.44
NTMG Nutmeg FS&LA of CT 27.56 146.26 8.32 146.26 24.43 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 22.69 116.67 12.88 116.67 15.91 0.88 3.59 NM
OCFC Ocean Fin. Corp. of NJ NM 126.37 22.52 126.37 26.54 0.80 2.32 NM
OCN Ocwen Financial Corp. of FL 16.99 NM 44.51 NM 23.40 0.00 0.00 0.00
OFCP Ottawa Financial Corp. of MI NM 167.34 14.61 208.63 19.41 0.40 1.56 48.78
PFFB PFF Bancorp of Pomona CA NM 134.80 13.91 136.21 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 21.97 97.45 42.11 97.45 21.32 0.32 2.21 48.48
PVFC PVF Capital Corp. of OH 12.66 181.06 12.72 181.06 9.85 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 13.62 168.94 11.97 168.94 14.54 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC NM 149.47 12.32 149.47 20.39 0.12 0.77 NM
PBCI Pamrapo Bancorp, Inc. of NJ 17.67 123.35 15.71 124.32 12.81 1.00 4.88 NM
PFED Park Bancorp of Chicago IL 26.81 102.15 23.01 102.15 19.33 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 16.28 151.02 11.45 152.17 11.02 0.52 1.86 30.23
PBIX Patriot Bank Corp. of PA NM 155.42 12.57 155.42 24.65 0.35 2.00 67.31
PEEK Peekskill Fin. Corp. of NY 25.40 109.36 27.98 109.36 19.75 0.36 2.25 57.14
PFSB PennFed Fin. Services of NJ 22.08 152.48 11.48 184.93 14.83 0.28 0.94 20.74
PWBC PennFirst Bancorp of PA 23.72 141.00 9.97 154.58 15.74 0.33 2.02 47.83
PWBK Pennwood SB of PA* NM 101.31 19.73 101.31 21.23 0.32 2.06 69.57
PBKB People's SB of Brockton MA* 14.44 195.68 10.97 204.27 24.28 0.44 2.63 37.93
PFDC Peoples Bancorp of Auburn IN 18.17 131.31 19.97 131.31 13.87 0.60 2.38 43.17
PBCT Peoples Bank, MHC of CT (37.4)* 21.24 271.90 22.88 272.42 26.65 0.68 2.41 51.13
PFFC Peoples Fin. Corp. of OH NM 107.35 28.88 107.35 NM 0.50 2.88 NM
PHBK Peoples Heritage Fin Grp of ME* 16.47 246.48 19.03 292.48 16.26 0.76 1.96 32.20
PHSB Peoples Home SB of PA NM 97.49 16.87 97.49 20.90 0.00 0.00 0.00
PSFC Peoples Sidney Fin. Corp of OH 29.46 117.10 27.24 117.10 22.60 0.20 1.21 35.71
PERM Permanent Bancorp of IN NM 132.55 12.23 133.67 20.87 0.40 1.58 62.50
PMFI Perpetual Midwest Fin. of IA NM 111.78 9.54 111.78 NM 0.30 1.49 NM
PERT Perpetual of SC, MHC (46.8) NM 199.34 26.49 199.34 27.84 1.40 3.57 NM
PCBC Perry Co. Fin. Corp. of MO 26.62 113.45 20.78 113.45 20.10 0.40 1.95 51.95
PHFC Pittsburgh Home Fin. of PA 24.81 120.48 13.15 121.76 19.45 0.24 1.40 34.78
PFSL Pocahnts Fed, MHC of AR (46.4) 16.01 150.75 9.59 150.75 11.53 0.90 4.04 64.75
POBS Portsmouth Bank Shrs Inc of NH(8)* 16.75 151.45 39.28 151.45 18.96 0.60 3.48 58.25
PTRS Potters Financial Corp of OH 20.79 109.79 9.69 109.79 11.71 0.36 1.49 31.03
PKPS Poughkeepsie Fin. Corp. of NY NM 136.75 11.45 136.75 21.62 0.10 1.25 41.67
PRBC Prestige Bancorp of PA NM 96.91 10.79 96.91 19.28 0.12 0.75 25.53
PETE Primary Bank of NH(8)* 15.18 184.65 12.23 185.05 15.36 0.00 0.00 0.00
</TABLE>
<PAGE> 52
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PFNC Progress Financial Corp. of PA 5.27 4.65 0.54 10.19 4.08 0.65 12.26 1.46 51.92 1.08
PSBK Progressive Bank, Inc. of NY* 8.55 7.64 0.99 12.02 7.57 0.98 11.81 0.85 131.46 1.65
PROV Provident Fin. Holdings of CA 13.88 13.88 0.32 2.24 2.05 0.28 1.95 NA NA 1.31
PULB Pulaski SB, MHC of MO (29.0) 13.00 13.00 0.93 7.16 3.85 0.87 6.70 0.49 52.28 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.90 11.90 -0.16 -1.37 -1.01 0.55 4.61 0.65 NA NA
PULS Pulse Bancorp of S. River NJ 8.05 8.05 0.72 9.24 5.85 1.08 13.86 0.69 65.20 1.93
QCFB QCF Bancorp of Virginia MN 17.64 17.64 1.24 6.25 5.62 1.24 6.25 NA NA NA
QCBC Quaker City Bancorp of CA 8.91 8.90 0.32 3.45 2.50 0.58 6.28 1.31 NA NA
QCSB Queens County Bancorp of NY* 11.85 11.85 1.60 10.80 4.22 1.63 10.95 0.68 95.23 0.74
RCSB RCSB Financial, Inc. of NY(8)* 7.85 7.65 0.96 12.26 5.66 0.96 12.17 0.76 83.90 1.18
RARB Raritan Bancorp. of Raritan NJ* 7.93 7.80 0.96 12.55 6.08 1.02 13.33 0.29 297.45 1.29
REDF RedFed Bancorp of Redlands CA 8.18 8.17 0.12 1.71 0.93 0.47 6.50 3.26 34.86 1.33
RELY Reliance Bancorp, Inc. of NY 8.04 5.63 0.56 6.63 4.03 0.85 10.11 NA NA 0.57
RELI Reliance Bancshares Inc of WI(8)* 61.06 61.06 1.32 2.16 2.96 1.32 2.16 NA NA 0.52
RIVR River Valley Bancorp of IN 12.36 12.17 0.99 8.00 7.42 0.60 4.87 0.12 700.00 1.06
RSLN Roslyn Bancorp, Inc. of NY* 21.57 21.46 0.35 1.63 0.97 1.42 6.61 0.27 278.21 3.46
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) 11.16 10.11 0.92 8.38 3.25 1.17 10.71 0.10 372.65 0.54
SCCB S. Carolina Comm. Bnshrs of SC 25.95 25.95 0.82 2.99 2.31 1.10 4.03 1.78 35.52 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.58 9.58 0.13 1.32 0.82 0.44 4.49 0.69 76.89 1.16
SFED SFS Bancorp of Schenectady NY 12.99 12.99 0.46 3.46 3.15 0.83 6.22 0.69 58.23 0.57
SGVB SGV Bancorp of W. Covina CA 7.31 7.19 0.20 2.37 2.02 0.47 5.74 NA NA 0.44
SISB SIS Bancorp Inc of MA* 7.20 7.20 1.38 18.82 10.90 1.37 18.70 0.47 244.29 2.48
SWCB Sandwich Co-Op. Bank of MA* 8.24 7.86 0.94 11.30 6.64 0.95 11.45 1.28 62.63 1.13
SECP Security Capital Corp. of WI(8) 15.85 15.85 1.15 7.17 4.44 1.38 8.57 0.12 918.65 1.44
SFSL Security First Corp. of OH 9.36 9.20 1.10 11.88 8.00 1.39 15.04 0.26 301.46 0.87
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.04 10.44 5.47 1.17 11.79 0.14 425.11 0.66
SOBI Sobieski Bancorp of S. Bend IN 15.41 15.41 0.29 1.67 1.83 0.58 3.35 0.25 102.04 0.35
SOSA Somerset Savings Bank of MA(8)* 6.34 6.34 0.81 13.81 6.30 0.78 13.26 6.28 22.01 1.81
SSFC South Street Fin. Corp. of NC* 25.26 25.26 0.92 4.51 2.40 1.17 5.71 0.27 65.44 0.39
SCBS Southern Commun. Bncshrs of AL 20.77 20.77 0.62 3.01 2.58 1.11 5.34 2.28 50.34 2.02
SMBC Southern Missouri Bncrp of MO 15.67 15.67 1.03 6.46 5.91 1.01 6.33 1.10 37.60 0.64
SWBI Southwest Bancshares of IL 11.00 11.00 0.75 6.94 5.06 1.02 9.52 0.30 67.34 0.28
SVRN Sovereign Bancorp of PA 4.01 3.03 0.44 11.07 3.98 0.68 17.14 0.57 78.85 0.72
STFR St. Francis Cap. Corp. of WI 7.88 6.96 0.64 7.35 5.06 0.70 8.09 0.19 181.58 0.80
SPBC St. Paul Bancorp, Inc. of IL 8.60 8.58 0.72 8.22 4.16 1.03 11.84 0.32 232.75 1.09
STND Standard Fin. of Chicago IL(8) 10.90 10.88 0.47 4.12 2.69 0.71 6.18 NA NA 0.49
SFFC StateFed Financial Corp. of IA 17.78 17.78 1.11 6.16 5.38 1.35 7.47 NA NA NA
SFIN Statewide Fin. Corp. of NJ 9.30 9.28 0.51 5.01 3.66 0.89 8.74 0.49 80.61 0.81
STSA Sterling Financial Corp. of WA 4.10 3.57 0.10 2.46 1.53 0.32 7.91 0.61 79.43 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.87 4.47 0.56 8.55 0.48 41.27 0.31
ROSE T R Financial Corp. of NY* 6.20 6.20 0.98 15.72 6.78 0.88 14.18 0.46 90.99 0.80
THRD TF Financial Corp. of PA 11.11 9.75 0.55 4.76 4.39 0.74 6.40 0.33 92.84 0.62
TPNZ Tappan Zee Fin., Inc. of NY 17.92 17.92 0.70 4.22 3.01 0.65 3.90 NA NA 1.18
ESBK The Elmira SB FSB of Elmira NY* 6.30 6.03 0.28 4.48 3.85 0.27 4.28 0.83 76.33 0.80
GRTR The Greater New York SB of NY(8)* 6.27 6.27 0.74 12.34 6.24 0.40 6.62 NA NA 1.71
TSBS Trenton SB, FSB MHC of NJ(35.0 16.89 15.48 1.34 7.53 3.51 1.14 6.39 0.73 55.92 0.67
TRIC Tri-County Bancorp of WY 15.32 15.32 0.80 5.14 4.84 1.02 6.55 NA NA 1.11
TWIN Twin City Bancorp of TN 12.86 12.86 0.53 4.13 3.38 0.75 5.82 0.16 130.95 0.29
UFRM United FS&LA of Rocky Mount NC 7.48 7.48 0.22 2.87 1.55 0.38 4.98 0.58 135.44 0.98
UBMT United Fin. Corp. of MT 22.65 22.65 1.09 4.70 3.94 1.34 5.80 0.42 16.41 0.21
VABF Va. Beach Fed. Fin. Corp of VA 6.85 6.85 0.21 3.15 1.86 0.47 7.02 1.26 56.59 0.93
VFFC Virginia First Savings of VA(8) 8.06 7.78 1.36 17.14 7.62 1.25 15.72 2.29 47.29 1.19
WHGB WHG Bancshares of MD 20.65 20.65 0.79 3.74 3.57 0.79 3.74 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.20 5.16 1.31 23.71 10.32 1.32 23.87 1.70 96.79 2.65
WVFC WVS Financial Corp. of PA* 11.16 11.16 1.07 8.59 6.29 1.34 10.72 0.30 230.13 1.25
WRNB Warren Bancorp of Peabody MA* 10.37 10.37 2.13 22.09 11.32 1.81 18.79 1.15 98.45 1.79
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
PFNC Progress Financial Corp. of PA 24.54 229.24 12.07 259.80 20.38 0.12 0.91 22.22
PSBK Progressive Bank, Inc. of NY* 13.20 154.40 13.20 172.85 13.44 0.68 2.24 29.57
PROV Provident Fin. Holdings of CA NM 109.38 15.19 109.38 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.0) 25.95 185.69 24.14 185.69 27.70 1.00 4.88 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 135.98 16.19 135.98 29.51 0.30 2.16 NM
PULS Pulse Bancorp of S. River NJ 17.08 150.40 12.10 150.40 11.39 0.70 3.41 58.33
QCFB QCF Bancorp of Virginia MN 17.80 128.07 22.59 128.07 17.80 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA NM 135.23 12.05 135.41 21.98 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 23.72 298.59 35.40 298.59 23.39 1.00 1.96 46.51
RCSB RCSB Financial, Inc. of NY(8)* 17.66 216.60 17.00 222.23 17.80 0.60 1.28 22.56
RARB Raritan Bancorp. of Raritan NJ* 16.44 192.31 15.26 195.60 15.48 0.48 2.00 32.88
REDF RedFed Bancorp of Redlands CA NM 155.45 12.71 155.60 28.28 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 24.78 162.89 13.09 232.42 16.24 0.64 2.23 55.17
RELI Reliance Bancshares Inc of WI(8)* NM 72.82 44.47 72.82 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN 13.48 107.86 13.33 109.54 22.14 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* NM 169.11 36.47 169.95 25.60 0.20 0.84 NM
RVSB Rvrview SB,FSB MHC of WA(41.7)(8) NM 246.14 27.46 271.57 24.06 0.24 0.94 28.92
SCCB S. Carolina Comm. Bnshrs of SC NM 131.50 34.13 131.50 NM 0.60 2.67 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 156.92 15.03 156.92 NM 0.40 2.19 NM
SFED SFS Bancorp of Schenectady NY NM 110.25 14.33 110.25 17.62 0.28 1.47 46.67
SGVB SGV Bancorp of W. Covina CA NM 120.36 8.79 122.37 20.49 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 9.18 163.98 11.81 163.98 9.23 0.56 1.84 16.92
SWCB Sandwich Co-Op. Bank of MA* 15.07 164.23 13.54 172.28 14.87 1.20 3.56 53.57
SECP Security Capital Corp. of WI(8) 22.50 157.67 25.00 157.67 18.82 1.20 1.21 27.27
SFSL Security First Corp. of OH 12.50 134.68 12.61 137.10 9.88 0.32 2.00 25.00
SMFC Sho-Me Fin. Corp. of MO(8) 18.27 191.82 17.32 191.82 16.17 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 102.12 15.73 102.12 27.28 0.28 1.71 NM
SOSA Somerset Savings Bank of MA(8)* 15.88 202.55 12.85 202.55 16.54 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 138.07 34.87 138.07 NM 0.40 2.13 NM
SCBS Southern Commun. Bncshrs of AL NM 116.54 24.20 116.54 21.83 0.30 1.94 75.00
SMBC Southern Missouri Bncrp of MO 16.91 108.83 17.05 108.83 17.25 0.50 2.90 49.02
SWBI Southwest Bancshares of IL 19.76 132.25 14.55 132.25 14.41 0.76 3.66 72.38
SVRN Sovereign Bancorp of PA 25.10 248.96 10.00 NM 16.21 0.08 0.51 12.90
STFR St. Francis Cap. Corp. of WI 19.77 143.27 11.29 162.11 17.95 0.48 1.37 27.12
SPBC St. Paul Bancorp, Inc. of IL 24.05 191.69 16.49 192.18 16.69 0.40 1.79 43.01
STND Standard Fin. of Chicago IL(8) NM 150.93 16.45 151.11 24.75 0.40 1.58 58.82
SFFC StateFed Financial Corp. of IA 18.59 111.94 19.90 111.94 15.32 0.40 1.84 34.19
SFIN Statewide Fin. Corp. of NJ 27.31 144.74 13.47 145.07 15.67 0.40 2.09 57.14
STSA Sterling Financial Corp. of WA NM 147.06 6.02 168.67 20.28 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 22.36 125.46 8.13 125.92 15.36 0.32 1.16 26.02
ROSE T R Financial Corp. of NY* 14.75 215.83 13.39 215.83 16.36 0.60 2.22 32.79
THRD TF Financial Corp. of PA 22.76 109.63 12.18 124.97 16.92 0.40 2.09 47.62
TPNZ Tappan Zee Fin., Inc. of NY NM 122.79 22.01 122.79 NM 0.28 1.59 52.83
ESBK The Elmira SB FSB of Elmira NY* 25.98 116.36 7.33 121.56 27.20 0.64 2.77 71.91
GRTR The Greater New York SB of NY(8)* 16.03 188.26 11.80 188.26 29.89 0.20 0.90 14.49
TSBS Trenton SB, FSB MHC of NJ(35.0 28.49 207.80 35.09 226.64 NM 0.35 1.43 40.70
TRIC Tri-County Bancorp of WY 20.68 101.11 15.49 101.11 16.25 0.60 2.64 54.55
TWIN Twin City Bancorp of TN 29.55 120.52 15.50 120.52 20.97 0.64 3.28 NM
UFRM United FS&LA of Rocky Mount NC NM 182.84 13.67 182.84 NM 0.24 1.96 NM
UBMT United Fin. Corp. of MT 25.39 119.65 27.10 119.65 20.58 0.98 4.11 NM
VABF Va. Beach Fed. Fin. Corp of VA NM 164.71 11.28 164.71 24.14 0.20 1.43 NM
VFFC Virginia First Savings of VA(8) 13.12 209.25 16.87 216.70 14.31 0.10 0.42 5.52
WHGB WHG Bancshares of MD 28.00 106.78 22.05 106.78 28.00 0.20 1.32 37.04
WSFS WSFS Financial Corp. of DE* 9.69 225.47 11.73 227.27 9.63 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.90 142.70 15.93 142.70 12.73 0.80 2.98 47.34
WRNB Warren Bancorp of Peabody MA* 8.83 180.75 18.75 180.75 10.38 0.52 2.93 25.87
</TABLE>
<PAGE> 53
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of August 8, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WFSL Washington FS&LA of Seattle WA 12.08 11.03 1.67 14.37 6.84 1.84 15.85 0.73 59.65 0.60
WAMU Washington Mutual Inc. of WA* 5.00 4.75 0.35 6.81 1.78 0.74 14.45 0.81 93.26 1.12
WYNE Wayne Bancorp of NJ 13.35 13.35 0.44 2.94 2.31 0.44 2.94 0.91 83.50 1.15
WAYN Wayne S&L Co. MHC of OH (47.8) 9.16 9.16 0.29 3.14 1.75 0.66 7.16 0.70 51.61 0.43
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.35 23.35 1.06 4.61 2.74 1.42 6.15 0.26 152.85 0.69
WBST Webster Financial Corp. of CT 5.08 4.27 0.36 7.02 2.43 0.69 13.47 0.85 103.47 1.45
WEFC Wells Fin. Corp. of Wells MN 14.20 14.20 0.72 5.07 4.56 1.06 7.49 NA NA NA
WCBI WestCo Bancorp of IL 15.24 15.24 1.12 7.29 5.42 1.42 9.20 0.60 47.07 0.38
WSTR WesterFed Fin. Corp. of MT 10.98 8.67 0.56 4.34 2.84 0.78 6.01 0.25 NA NA
WOFC Western Ohio Fin. Corp. of OH 13.41 12.64 0.31 2.02 2.06 0.44 2.90 0.96 45.88 0.59
WWFC Westwood Fin. Corp. of NJ 9.22 8.17 0.43 5.55 3.35 0.80 10.27 0.14 146.31 0.54
WEHO Westwood Hmstd Fin Corp of OH 29.41 29.41 0.70 2.41 1.95 1.04 3.62 0.06 255.81 0.21
WFCO Winton Financial Corp. of OH 7.13 6.95 0.66 8.78 5.42 0.84 11.18 NA NA 0.33
FFWD Wood Bancorp of OH 12.70 12.70 1.00 7.48 6.18 1.24 9.24 0.10 346.50 0.41
YFCB Yonkers Fin. Corp. of NY 14.89 14.89 0.86 5.03 4.36 1.16 6.82 0.57 65.11 1.02
YFED York Financial Corp. of PA 8.61 8.61 0.62 7.41 3.96 0.79 9.46 2.39 23.05 0.64
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WFSL Washington FS&LA of Seattle WA 14.62 193.52 23.37 211.87 13.26 0.92 3.24 47.42
WAMU Washington Mutual Inc. of WA* NM NM 16.63 NM 26.52 1.08 1.68 NM
WYNE Wayne Bancorp of NJ NM 131.51 17.56 131.51 NM 0.20 0.93 40.00
WAYN Wayne S&L Co. MHC of OH (47.8) NM 177.53 16.27 177.53 25.00 0.62 3.40 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 166.19 38.81 166.19 27.34 0.80 4.57 NM
WBST Webster Financial Corp. of CT NM 218.72 11.11 259.92 21.38 0.80 1.55 63.49
WEFC Wells Fin. Corp. of Wells MN 21.92 109.29 15.51 109.29 14.81 0.48 3.00 65.75
WCBI WestCo Bancorp of IL 18.44 135.56 20.66 135.56 14.61 0.60 2.31 42.55
WSTR WesterFed Fin. Corp. of MT NM 124.36 13.65 157.40 25.41 0.44 1.92 67.69
WOFC Western Ohio Fin. Corp. of OH NM 100.17 13.44 106.31 NM 1.00 4.30 NM
WWFC Westwood Fin. Corp. of NJ 29.85 129.62 11.95 146.31 16.13 0.20 1.00 29.85
WEHO Westwood Hmstd Fin Corp of OH NM 108.47 31.90 108.47 NM 0.28 1.82 NM
WFCO Winton Financial Corp. of OH 18.45 147.76 10.53 151.52 14.49 0.46 2.97 54.76
FFWD Wood Bancorp of OH 16.18 118.62 15.07 118.62 13.10 0.40 2.42 39.22
YFCB Yonkers Fin. Corp. of NY 22.95 122.62 18.26 122.62 16.92 0.24 1.43 32.88
YFED York Financial Corp. of PA 25.25 178.57 15.37 178.57 19.77 0.60 2.35 59.41
</TABLE>
<PAGE> 54
EXHIBIT 2
Core Earnings Analysis
<PAGE> 55
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended June 30, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ---------- ---------- -------
($000) ($000) $000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 29,419 10,167 -3,457 0 36,129 12,825 2.82
DIME Dime Community Bancorp of NY 12,316 1,404 -477 0 13,243 13,093 1.01
FFIC Flushing Fin. Corp. of NY(1) 6,942 355 -121 0 7,176 7,979 0.90
HAVN Haven Bancorp of Woodhaven NY 9,146 6,775 -2,304 0 13,618 4,377 3.11
JSB JSB Financial, Inc. of NY(1) 27,095 -2,069 703 0 25,729 9,845 2.61
PKPS Poughkeepsie Fin. Corp. of NY 2,962 2,630 -894 0 4,698 12,595 0.37
PSBK Progressive Bank, Inc. of NY 8,780 -207 70 0 8,643 3,821 2.26
QCSB Queens County Bancorp of NY 21,888 420 -143 0 22,165 10,181 2.18
RELY Reliance Bancorp, Inc. of NY(1) 10,197 8,078 -2,747 0 15,528 8,776 1.77
ROSE T R Financial Corp. of NY 32,295 -4,889 1,662 0 29,068 17,609 1.65
</TABLE>
(1) Financial information is for the quarter ending March 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE> 56
EXHIBIT 3
Pro Forma Analysis Sheet
<PAGE> 57
EXHIBIT 3
PRO FORMA ANALYSIS SHEET
Independence Savings Bank
Prices as of August 8, 1997
<TABLE>
<CAPTION>
All Savings
Peer Group New York Companies Institutions
--------------------- --------------------------- ----------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean
- -------------- ------ ----------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 21.x8 18.86x 17.34x 21.40x 23.11x 19.94x
Price-book ratio = P/B 71.30% 164.58% 146.95% 143.50% 129.90% 142.56%
Price-assets ratio = P/A 12.86% 17.61% 13.32% 17.48% 14.70% 17.09%
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $15,638,000 ESOP Stock Purchases (E) 8.00 (5)
Pre-Conversion Book Value (B) $316,669,000 Cost of ESOP Borrowings (S) 0.00 (4)
Pre-Conv. Tang. Book Value (B) $253,256,000 ESOP Amortization (T) 20.00 years
Pre-Conversion Assets (A) $3,820,703,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.06% RRP Vesting (N) 5.00 years (5)
Est. Conversion Expenses (3)(X) 2.46% Foundation (F) 8.00%
Tax rate (TAX) 47.00% Tax Benefit (Z) 19,148,148
Percentage Sold (PCT) 100.00%
</TABLE>
<TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
<S> <C>
1. V= P/E * (Y) V= $550,000,000
-------------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * (B+Z) V= $550,000,000
--------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $550,000,000
--------------------------
1 - P/A * PCT * (1-X-E-M-F)
</TABLE>
<TABLE>
<CAPTION>
Shares Aggregate
Shares Sold to Price Per Gross Offering Issued To Total Shares Market Value
Conclusion Public Share Proceeds Foundation Issued of Stock Issued
- ---------- ------ ----- -------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Minimum 43,287,037 10.00 $432,870,370 3,462,963 46,750,000 467,500,000
Midpoint 50,925,926 10.00 509,259,260 4,074,074 55,000,000 550,000,000
Maximum 58,564,815 10.00 585,648,150 4,685,185 63,250,000 632,500,000
Supermaximum 67,349,537 10.00 673,495,370 5,387,963 72,737,500 727,375,000
</TABLE>
- ---------------------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.77 percent, and a tax rate of
47.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 20 years and 5 years, respectively; amortization
expenses tax effected at 47.00 percent.
<PAGE> 58
EXHIBIT 4
Pro Forma Effect of Conversion Proceeds
<PAGE> 59
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Minimum
<TABLE>
<S> <C> <C> <C>
1. Offering Proceeds $432,870,370
Less: Estimated Offering Expenses 11,390,162
----------
Net Conversion Proceeds $421,480,208
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $421,480,208
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 51,944,444
----------
Net Proceeds Reinvested $369,535,764
Estimated net incremental rate of return 3.06%
-----
Earnings Increase $11,300,773
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 917,685
Less: Recognition Plan Vesting (4) 1,835,370
---------
Net Earnings Increase $8,547,718
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
12 Months ended May 31, 1997 (reported) $15,638,000 $8,547,718 $24,185,718
12 Months ended May 31, 1997 (core) $24,115,000 $8,547,718 $32,662,718
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $316,669,000 $369,535,764 $16,275,926 $702,480,690
May 31, 1997 (Tangible) $253,256,000 $369,535,764 $16,275,926 $639,067,690
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $3,820,703,000 $369,535,764 $16,275,926 $4,206,514,690
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 20 years, amortization expense is
tax-effected at a 47.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
47.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE> 60
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Midpoint
<TABLE>
<S> <C> <C> <C>
1. Offering Proceeds $509,259,260
Less: Estimated Offering Expenses 12,532,176
----------
Net Conversion Proceeds $496,727,084
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $496,727,084
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 61,111,111
----------
Net Proceeds Reinvested $435,615,973
Estimated net incremental rate of return 3.06%
-----
Earnings Increase $13,321,572
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,079,630
Less: Recognition Plan Vesting (4) 2,159,259
---------
Net Earnings Increase $10,082,683
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
----------- -------- ----------
12 Months ended May 31, 1997 (reported) $15,638,000 $10,082,683 $25,720,683
12 Months ended May 31, 1997 (core) $24,115,000 $10,082,683 $34,197,683
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $316,669,000 $435,615,973 $19,148,148 $771,433,121
May 31, 1997 (Tangible) $253,256,000 $435,615,973 $19,148,148 $708,020,121
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $3,820,703,000 $435,615,973 $19,148,148 $4,275,467,121
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of
the offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 20 years, amortization expense is
tax-effected at a 47.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense
is tax effected at 47.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE> 61
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Maximum
<TABLE>
<S> <C> <C> <C>
1. Offering Proceeds $585,648,150
Less: Estimated Offering Expenses 13,674,190
----------
Net Conversion Proceeds $571,973,960
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $571,973,960
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 70,277,778
----------
Net Proceeds Reinvested $501,696,182
Estimated net incremental rate of return 3.06%
-----
Earnings Increase $15,342,371
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,241,574
Less: Recognition Plan Vesting (4) 2,483,148
---------
Net Earnings Increase $11,617,649
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
12 Months ended May 31, 1997 (reported) $15,638,000 $11,617,649 $27,255,649
12 Months ended May 31, 1997 (core) $24,115,000 $11,617,649 $35,732,649
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $316,669,000 $501,696,182 $22,020,370 $840,385,553
May 31, 1997 (Tangible) $253,256,000 $501,696,182 $22,020,370 $776,972,553
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $3,820,703,000 $501,696,182 $22,020,370 $4,344,419,553
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 20 years, amortization expense is
tax-effected at a 47.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
47.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE> 62
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Supermaximum Value
<TABLE>
<S> <C> <C> <C>
1. Offering Proceeds $673,495,370
Less: Estimated Offering Expenses 14,987,506
----------
Net Conversion Proceeds $658,507,864
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $658,507,864
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 80,819,444
----------
Net Proceeds Reinvested $577,688,419
Estimated net incremental rate of return 3.06%
-----
Earnings Increase $17,666,290
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,427,810
Less: Recognition Plan Vesting (4) 2,855,620
---------
Net Earnings Increase $13,382,859
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
-------- ---------- ----------
12 Months ended May 31, 1997 (reported) $15,638,000 $13,382,859 $29,020,859
12 Months ended May 31, 1997 (core) $24,115,000 $13,382,859 $37,497,859
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $316,669,000 $577,688,419 $25,323,426 $919,680,845
May 31, 1997 (Tangible) $253,256,000 $577,688,419 $25,323,426 $856,267,845
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
May 31, 1997 $3,820,703,000 $577,688,419 $25,323,426 $4,423,714,845
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 20 years, amortization expense is
tax-effected at a 47.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected
at 47.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE> 63
EXHIBIT 5
Pro Forma Regulatory Capital Levels
<PAGE> 64
<TABLE>
<CAPTION>
Pro Forma at May 31, 1997
Actual, As of -----------------------------------------------
May 31, 1997 Minimum Midpoint
------------------- ------------------- --------------------
Percent Percent Percent
Amount of Assets Amount of Assets Amount of Assets
-------- --------- -------- --------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital and Retained
Earnings Under
Generally Accepted . . . . . . . . .
Accounting Principles . . . . . . . $316,576 8.29% $491,741 12.20% $523,070 12.86%
======== ===== ======== ===== ======== =====
Tier 1 Risk Based $249,355 10.44% $424,520 17.46% $455,849 18.69%
Requirement. . . . . . . . . . . . . . 95,557 4.00% 97,237 4.00% 97,537 4.00%
-------- ----- -------- ----- -------- -----
Excess . . . . . . . . . . . . . . . . $153,798 6.44% $327,283 13.46% $358,312 14.69%
======== ===== ======== ===== ======== =====
Total Risk-Based . . . . . . . . . . . $278,131 11.64% $453,296 18.65% $484,625 19.87%
Risk-Based Requirement . . . . . . . . 191,114 8.00% 194,474 8.00% 195,073 8.00%
-------- ----- -------- ----- -------- -----
Excess . . . . . . . . . . . . . . . . $ 87,017 3.64% $258,821 10.65% $289,551 11.87%
======== ===== ======== ===== ======== =====
Tier I Leverage. . . . . . . . . . . . $249,355 6.66% $424,520 10.74% $455,849 11.42%
Requirement. . . . . . . . . . . . . . 149,776 4.00% 158,177 4.00% 159,674 4.00%
-------- ----- -------- ----- -------- -----
Excess . . . . . . . . . . . . . . . . $ 99,579 2.66% $266,343 6.74% $296,174 7.42%
======== ===== ======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
Pro Forma at May 31, 1997
-----------------------------------------------
Maximum Maximum As Adjusted
------------------- --------------------
Percent Percent
Amount of Assets Amount of Assets
-------- --------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Capital and Retained
Earnings Under
Generally Accepted . . . . . . . . .
Accounting Principles . . . . . . . $554,399 13.50% $590,427 14.23%
======== ===== ======== =====
Tier 1 Risk Based $487,178 19.92% $523,206 21.32%
Requirement. . . . . . . . . . . . . . 97,836 4.00% 98,181 4.00%
-------- ----- -------- -----
Excess . . . . . . . . . . . . . . . . $389,341 15.92% $425,025 17.32%
======== ===== ======== =====
Total Risk-Based . . . . . . . . . . . $515,954 21.09% $551,982 22.49%
Risk-Based Requirement . . . . . . . . 195,672 8.00% 196,361 8.00%
-------- ----- -------- -----
Excess . . . . . . . . . . . . . . . . $320,281 13.09% $355,620 14.49%
======== ===== ======== =====
Tier I Leverage. . . . . . . . . . . . $487,178 12.09% $523,206 12.85%
Requirement. . . . . . . . . . . . . . 161,172 4.00% 162,894 4.00%
-------- ----- -------- -----
Excess . . . . . . . . . . . . . . . . $326,006 8.09% $360,311 8.85%
======== ===== ======== =====
</TABLE>
<PAGE> 65
EXHIBIT 6
Firm Qualifications Statement
<PAGE> 66
[RP FINANCIAL, L.C. LETTERHEAD]
FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation
services to the financial services industry nationwide, particularly
federally-insured financial institutions. RP Financial establishes long-term
client relationships through its wide array of services, emphasis on quality
and timeliness, hands-on involvement by our principals and senior consulting
staff, and careful structuring of strategic plans and transactions. RP
Financial's staff draws from backgrounds in consulting, regulatory agencies and
investment banking, thereby providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes
the following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions
and assisting in implementing post-acquisition strategies. Through our
financial simulations, comprehensive in-house data bases, valuation expertise
and regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety
of purposes including mergers and acquisitions, mutual-to-stock conversions,
ESOPs, subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock
conversions of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and
conversion services to financial institutions which are more cost effective and
less disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (12)
James J. Oren, Vice President (10)
Timothy M. Biddle, Vice President (8)
