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As filed with the Securities and Exchange Commission on November 5, 1997
Registration No.333-30757
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
PRE-EFFECTIVE
AMENDMENT NO. 2
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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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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Common Stock, $.01 par
value per share (1) 76,043,750 shares $10.00 $760,437,500(2) $230,436(3)
================================================================================================================================
Participation interests 1,233,450 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 $220,417.00 was previously paid in connection with
the prior 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
(1,233,450 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
1,233,450 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 20 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
COMMON STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL INVESTED.
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...................................................... 13
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.................................................... 18
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 1,233,450 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 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 ____________,
199_. The Investment Form should be returned to the Bank by no later than
12:00 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 or Supplemental Eligible Account Holder 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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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 designations 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 months 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; and
(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 to each
Participant then actively participating in the Profit Sharing Plan.
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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) of the
Code ($90,000 for 1997), (2) one of the ten employees having annual
compensation greater than the under Section 415 (c)(1)(A) amount ($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.
-8-
<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.
No more than once a 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 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.
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.
-9-
<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> <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
investments in Common Stock made on and after the effective date of the
Conversion. Each Participant's proportionate undivided beneficial interest in
the Employer Stock Fund is measured in units. Each day, a unit value will be
calculated by determining the market value of the shares of Common Stock
actually held and adding to that any cash held by the Trustee. This total will
be divided by the number of units outstanding to determine the unit value of the
Employer Stock Fund.
On the occasion of the payment of a cash dividend, the unit value will
be determined before the dividend is distributed. The Trustee will use the
dividend to purchase additional shares of the Common Stock. The total of the
Employer Stock Fund will increase, as will the value of each unit. 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 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.
Any brokerage commissions, transfer fees and other expenses incurred
in the sale and purchase of Common Stock for the Employer Stock Fund will be
paid out of a cash account managed by the Trustee. Therefore, although
Participants' accounts will not be directly adjusted for such fees, the market
value of their accounts will be reduced.
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 20 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 each of his or her Accounts 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 who terminates services as of his or her
retirement day may elect to receive benefits in the form of 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.
-12-
<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
-14-
<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 ERISA 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,
1996 and 1995 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
Financial Statements
and Supplemental Schedules
Independence Savings Bank
401(k) Savings Plan in RSI Retirement Trust
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
<PAGE> 23
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
YEARS ENDED DECEMBER 31, 1996 AND 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................ F-2
Financial Statements
Statements of Net Assets Available for Plan Benefits.................................. F-3
Statements of Changes in Net Assets Available for Plan Benefits....................... F-4
Notes to Financial Statements......................................................... F-5
Supplemental Schedules
Schedule of Investments............................................................... S-1
Schedule of Reportable Transactions................................................... S-2
</TABLE>
Note: A schedule of party-in-interest transactions has not been presented
because there were no party-in-interest transactions which are prohibited by the
Employee Retirement Income Security Act of 1974, Section 406, and for which
there is not a statutory or an administrative exemption.
F-1
<PAGE> 24
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 401(k) Savings Plan in RSI
Retirement Trust (the "Plan") as of December 31, 1996 and 1995, 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial status of the Plan at December 31, 1996
and 1995, and the changes in its financial status for the years then ended, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of investments as of December 31, 1996, and reportable transactions for the year
then ended, are presented for purposes 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 basic
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.
July 31, 1997
F-2
<PAGE> 25
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
Loans to participants............................................ $ 873,570 $ 821,325
Investments at fair value........................................ 11,470,937 8,911,188
Net assets available for plan benefits........................... $12,344,507 $9,732,513
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 26
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1996 1995
------------ -----------
<S> <C> <C>
ADDITIONS
Contributions by:
Participating employees........................................ $ 961,327 $ 648,855
Employer....................................................... 521,202 435,022
Interest on loans................................................ 68,227 51,743
Transfers from former trustee.................................... 2,248,519 --
Net realized and unrealized appreciation in fair value of 1,206,437 1,231,108
investments....................................................
DEDUCTIONS
Distributions and withdrawals.................................... 2,393,718 693,928
----------- ----------
Net increase..................................................... 2,611,994 1,672,800
Net assets available for plan benefits at:
Beginning of year.............................................. 9,732,513 8,059,713
----------- ----------
End of year.................................................... $ 12,344,507 $ 9,732,513
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 27
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. DESCRIPTION OF THE PLAN
The following description of the Independence Savings Bank 401(k) Savings
Plan in RSI Retirement Trust (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 the
trustees of the 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 make basic contributions of 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 $9,500 and $9,240 in 1996 and 1995, respectively. The supplemental
contributions are not matched by the Bank.
A Participant may elect to direct the contributions to any of the Plan's
investment funds in multiples of whole percentage points in accordance with any
of the seven investment options. Under the trust agreement with the Trustee, a
Participant may change investment direction once in any calendar quarter,
providing that such election has been filed at least ten days in advance.
Transfers are limited to once in any calendar quarter, 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 this interest in the Plan which is not vested. Under the trust
agreement with the Trustee, forfeitures are treated as matching contributions
and applied to reduce the amount of subsequent matching contributions required
to be made by the Bank. For the years ended December 31, 1996 and 1995,
cumulative forfeitures were $802 and $6,002 respectively.
F-5
<PAGE> 28
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 fund is a stock fund that invests in a broadly
diversified group of large, high quality, competitively strong companies that,
in the view of the investment manager, exhibit sustainable growth in earnings
and dividends. It offers investors the potential for long-term capital
appreciation, with income as a secondary goal.
Emerging Growth Equity Fund: This fund is a 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.
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.
Intermediate-Term Bond Fund: This fund invests in high quality fixed
income securities that mature within ten years, or have expected average lives
of ten 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 of 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-6
<PAGE> 29
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS -- (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 13 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 three times within a 12-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 12 months.
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.
Plan Amendments
On June 26, 1995 a definitive agreement (the "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 and BRFSB who are
employed by ICBC or the Bank are entitled to full credit for each year of
service with BRFSB for purposes of determining eligibility for
F-7
<PAGE> 30
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 BRB or BRFSB prior to
acquisition who became an employee of ICBC or the Bank immediately following the
acquisition (each a "New Employee") was entitled, as an employee of ICBC or the
Bank, to participate in such employee benefit plans as are 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 are 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
consisting of $2,248,519 in cash were transferred from the BRFSB 401(k) plan to
the Plan's Short-term Investment Fund during the 1996 Plan year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on an 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 officers 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.
Risk 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 reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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>
DECEMBER 31
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Core Equity Fund.................................... $3,496,458 $2,388,715
Emerging Growth Fund................................ 1,098,291 590,164
Short-Term Investment Fund.......................... 4,865,294 4,430,232
Actively Managed Bond Fund.......................... 746,079 702,582
Value Equity Fund................................... 725,623 436,611
Loans to Participants............................... 873,570 821,325
</TABLE>
F-8
<PAGE> 31
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 subsequently 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.
6. FUND ACTIVITY
Fund activity for the year ended December 31, 1996
<TABLE>
<CAPTION>
ACTIVELY
CORE EMERGING VALUE INTERNATIONAL SHORT-TERM INTERMEDIATE- MANAGED
LOANS EQUITY GROWTH EQUITY EQUITY FUND INVESTMENT TERM BOND BOND TOTAL
-------- ---------- ---------- -------- ------------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1995.......... $821,325 $2,388,715 $ 590,164 $436,611 $ 27,204 $4,430,232 $ 335,680 $ 702,582 $ 9,732,513
Additions:
Employee
contributions... -- 266,386 131,590 89,770 32,048 299,418 53,476 88,639 961,327
Employer
contributions... -- 142,803 63,170 44,299 8,872 189,683 25,810 46,565 521,202
Interest on
loans........... -- 19,527 5,529 5,237 2,340 26,556 3,146 5,892 68,227
Net realized gains
and unrealized
appreciation in
fair value of
investments..... -- 588,130 187,279 138,034 4,507 247,217 17,725 23,545 1,206,437
-------- ---------- ---------- -------- -------- ---------- -------- --------- -----------
Total additions..... -- 1,016,846 387,568 277,340 47,767 762,874 100,157 164,641 2,757,193
Distributions:
Payments to
participants.... -- (195,712) (56,424) (59,351) (28,517) (1,901,768) (49,001) (102,945) (2,393,718)
-------- ---------- ---------- -------- -------- ---------- -------- --------- -----------
Total
distributions..... -- (195,712) (56,424) (59,351) (28,517) (1,901,768) (49,001) (102,945) (2,393,718)
Transfers:
Transfers from
former
trustee......... -- -- -- -- -- 2,248,519 -- -- 2,248,519
Transfers between
funds........... 52,245 286,609 176,983 71,023 43,316 (674,563) 62,586 (18,199) --
-------- ---------- ---------- -------- -------- ---------- -------- --------- -----------
Total transfers..... 52,245 286,609 176,983 71,023 43,316 1,573,956 62,586 (18,199) 2,248,519
-------- ---------- ---------- -------- -------- ---------- -------- --------- -----------
Balances at December
31, 1996.......... $873,570 $3,496,458 $1,098,291 $725,623 $ 89,770 $4,865,294 $ 449,422 $ 746,079 $12,344,507
======== ========= ========= ======== ========== ========= ========== ========= ==========
</TABLE>
F-9
<PAGE> 32
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fund activity for the year ended December 31, 1995
<TABLE>
<CAPTION>
ACTIVELY
CORE EMERGING VALUE INTERNATIONAL SHORT-TERM INTERMEDIATE- MANAGED
LOANS EQUITY GROWTH EQUITY EQUITY FUND INVESTMENT TERM BOND BOND TOTAL
-------- ---------- -------- -------- ------------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1994............. $731,798 $1,494,529 $303,013 $259,821 $ -- $4,321,176 $ 313,271 $ 636,105 $8,059,713
Additions:
Employee
contributions...... -- 174,006 62,940 55,853 3,507 261,578 30,063 60,908 648,855
Employer
contributions...... -- 112,755 36,281 33,052 1,504 188,506 20,783 42,141 435,022
Interest on loans.... -- 15,178 2,839 2,692 209 24,256 2,150 4,419 51,743
Net realized gains
and unrealized
appreciation in
fair value of
investments........ -- 609,541 151,685 101,602 1,333 226,060 39,441 101,446 1,231,108
-------- ---------- -------- -------- ------- ---------- -------- -------- ----------
Total additions........ -- 911,480 253,745 193,199 6,553 700,400 92,437 208,914 2,366,728
Distributions:
Payments to
participants....... -- (73,000) (17,171) (13,610) -- (413,823) (57,477) (118,847) (693,928)
-------- ---------- -------- -------- ------- ---------- -------- -------- ----------
Total distributions.... -- (73,000) (17,171) (13,610) -- (413,823) (57,477) (118,847) (693,928)
Transfers between
funds................ 89,527 55,706 50,577 (2,799) 20,651 (177,521) (12,551) (23,590) --
-------- ---------- -------- -------- ------- ---------- -------- -------- ----------
Balances at December
31, 1995............. $821,325 $2,388,715 $590,164 $436,611 $27,204 $4,430,232 $ 335,680 $ 702,582 $9,732,513
======== ========== ======== ======== ======= ========== ======== ======== ==========
</TABLE>
7. SUBSEQUENT EVENTS
On April 18, 1997, the Board of Directors of the Bank and of ICBC
unanimously adopted a plan to convert ICBC from a New York State chartered
mutual holding company to a New York State chartered stock institution which
shall concurrently merge with the Bank and reorganize the Bank into the stock
holding company form of organization (the "Conversion").
Pursuant to the Conversion, the Bank will issue all of its capital stock to
a new holding company, which will offer and sell shares of its common stock. In
addition, the Bank and ICBC will have amended the Plan to provide that
participants of the Plan be able to direct the Trustee of the Plan to purchase
common stock attributed to the Conversion with amounts in the Plan attributable
to such participants.
The registration statement pertaining to the Conversion was filed with the
Securities and Exchange Commission on July 3, 1997.
F-10
<PAGE> 33
SUPPLEMENTAL SCHEDULES
<PAGE> 34
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHARES COST FAIR VALUE
------- ---------- -----------
<S> <C> <C> <C>
Core Equity Fund........................................ 57,898 $2,162,597 $ 3,496,458
Emerging Growth Fund.................................... 16,247 715,437 1,098,291
Value Equity Fund....................................... 16,548 494,764 725,623
International Equity Fund............................... 1,958 86,257 89,770
Short-Term Investment Fund.............................. 237,563 4,226,587 4,865,294
Intermediate-Term Bond Fund............................. 14,981 379,238 449,422
Actively Managed Bond Fund.............................. 23,491 587,294 746,079
Loans to participants maturing less than five years..... -- -- 819,303
Loans to participants maturing greater than five years.. -- -- 54,267
---------- -----------
Total investments............................. $8,652,174 $12,344,507
========== ===========
</TABLE>
S-1
<PAGE> 35
INDEPENDENCE SAVINGS BANK
401(k) SAVINGS PLAN IN RSI RETIREMENT TRUST
REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL NUMBER TOTAL
NUMBER OF PURCHASE OF SELLING
SECURITY OR PARTY INVOLVED DESCRIPTION OF ASSETS PURCHASES PRICE SALES PRICE
- ----------------------------------- -------------------------- --------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Category (i) -- A single
transaction in excess of 5% of
the current value of plan assets: Short-term Investment Fund 1 $1,589,055 1 $ 758,270
1 659,460 -- --
Category (ii) -- A series of
transactions with or in
conjunction 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
securities of the same issue
which amount in the aggregate to
more than 5% of the current value
of total plan assets: Short-term Investment Fund 86 698,157 129 2,016,355
Core Equity Fund 98 873,407 -- --
Category (iv) -- Any transaction
with respect to securities with
or in conjunction with a person
if a prior subsequent single
transaction has occurred with
respect to securities with or in
conjunction with that same person
in an amount in excess of 5% of
the current value of plan assets: N/A
</TABLE>
S-2
<PAGE> 36
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, 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 authorize the Plan
Administrator to direct the Trustee to sell the units currently credited to my
Basic Contribution Account, Matching Contribution Account and Rollover Account
and to purchase units in the Employer Stock Fund. Transfers of units from
existing investment accounts must be in multiples of 5% (i.e. 5, 15, 35, 100).
Purchases of units in the Employer Stock Fund will always be 100%.
<TABLE>
<CAPTION>
================================================================================
SELL UNITS FROM Purchase Units in Employer Stock Fund
<S> <C>
--------------------------------------------------------------------------------
Sell ____% of A -- Core Equity ____%
--------------------------------------------------------------------------------
Sell ____% of B -- Emerging Growth Equity ____%
--------------------------------------------------------------------------------
Sell ____% of C -- Value Equity ____%
--------------------------------------------------------------------------------
Sell ____% of D -- Intermediate Term Bond ____%
--------------------------------------------------------------------------------
Sell ____% of E -- Actively Managed Bond ____%
--------------------------------------------------------------------------------
Sell ____% of F -- International Equity ____%
--------------------------------------------------------------------------------
Sell ____% of G -- Short Term ____%
================================================================================
</TABLE>
3. PURCHASER INFORMATION. The ability of participants in the
Profit Sharing Plan to purchase Common Stock in the Conversion and to direct
their current balances into the Employer Stock Fund is based upon the
participant's status as an Eligible Account Holder and/or Supplemental Eligible
Account Holder. Please indicate your status.
a. [] Eligible Account Holder-Check here if you were a
depositor with $100.00 or more on deposit with
Independence Savings Bank as of March 31, 1996.
b. [] Supplemental Eligible Account Holder-Check here if you
were a depositor with $100.00 or more on deposit with
Independence Savings Bank as of ______, 1997, but are
not an Eligible Account Holder.
4. 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> 37
PROSPECTUS
INDEPENDENCE COMMUNITY BANK CORP.
(Proposed Holding Company for Independence Savings Bank)
Up to 61,226,852 Shares of Common Stock
Independence Community Bank Corp. (the "Company"), a Delaware
corporation, is offering up to 61,226,852 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
70,410,880 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 20.
---------------------------------------
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> 38
<TABLE>
<CAPTION>
=====================================================================================================
Estimated
Underwriting
Fees and Estimated
Subscription Conversion Net
Price(1) Expenses(2) Proceeds(3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share $10.00 $0.28 $9.72
- -----------------------------------------------------------------------------------------------------
Midpoint Per Share $10.00 $0.26 $9.74
- -----------------------------------------------------------------------------------------------------
Maximum Per Share $10.00 $0.25 $9.75
- -----------------------------------------------------------------------------------------------------
Maximum Per Share, as adjusted $10.00 $0.23 $9.77
- -----------------------------------------------------------------------------------------------------
Total Minimum(1) $452,546,300 $12,689,598 $439,856,702
- -----------------------------------------------------------------------------------------------------
Total Midpoint(1) $532,407,410 $13,883,522 $518,523,888
- -----------------------------------------------------------------------------------------------------
Total Maximum(1) $612,268,520 $15,077,446 $597,191,074
- -----------------------------------------------------------------------------------------------------
Total Maximum, as adjusted(4) $704,108,800 $16,450,458 $687,658,342
=====================================================================================================
</TABLE>
- ------------
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC. ("RP Financial") dated as of June 20, 1997, as most
recently updated as of October 29, 1997, which states that the
estimated pro forma market value of the Common Stock being offered for
sale in the Conversion ranged from $452.5 million to $612.3 million
with a midpoint of $532.4 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 $452.5 million to $612.3 million (the
"Estimated Price Range") or between 45,254,630 and 61,226,852 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 $6.0 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 $6.7 million and $9.1 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> 39
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 (532,407 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 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."
Pursuant to the Plan, the Bank intends to establish the Independence
Community Foundation, a private charitable foundation (the "Foundation"), in
connection with the
ii
<PAGE> 40
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 ______, 1998 (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 ______, 1998, 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> 41
[MAP]
iv
<PAGE> 42
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.
<TABLE>
<S> <C>
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 immediately upon completion of
the Conversion 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
</TABLE>
1
<PAGE> 43
<TABLE>
<S> <C>
completion of the Subscription Offering, any shares of 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, ___________, 1998 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
</TABLE>
2
<PAGE> 44
<TABLE>
<S> <C>
Offering more than $500,000 of Common Stock. 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 45,254,630 and 61,226,852 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 70,410,880 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 June 20, 1997, as most recently updated as of October 29, 1997,
which states that the estimated pro forma market value of the Common Stock issued in the
Offerings ranged from $452.5 million to $612.3 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."
</TABLE>
3
<PAGE> 45
<TABLE>
<S> <C>
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 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 1.0% 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 20.9% 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 the FDIC and the Department grant waivers of a
condition agreed to by the Foundation which requires the Common Stock held by the
Foundation to be voted in the same ratio as all other shares of Common Stock, 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."
</TABLE>
4
<PAGE> 46
<TABLE>
<S> <C>
Expiration Date for the Subscription
Offering . . . . . . . . . . . . . The expiration date of the Subscription Offering is 12:00 noon, Eastern Time on
________, 1998 unless extended by the Bank and the Company. See "The Conversion - The
Offering -Subscription 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) ___-____.
</TABLE>
5
<PAGE> 47
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 in order to acquire The Long Island City
Financial Corporation. At August 31, 1997, the Bank had total assets of $3.79
billion, total liabilities of $3.47 billion, including $3.37 billion of
deposits, and total equity of $324.8 million. The Bank reported net income of
$11.0 million and $11.8 million during the five months ended August 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> 48
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
58.6% from $2.39 billion at March 31, 1993 to $3.79 billion at August 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 $1.49 billion or 54.7% of
the total loan portfolio at August 31,
7
<PAGE> 49
1997. The Bank also emphasizes originations of single-family (one-to-four
units) residential mortgage loans, which totaled $552.4 million or 20.3% of the
total portfolio at August 31, 1997, and cooperative apartment loans to
individuals (loans secured by shares in a cooperative housing corporation),
which totaled $392.8 million or 14.4% of the total loan portfolio at August 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 August 31, 1997, the Bank's
non-performing assets amounted to $26.3 million, or 0.69%, of total assets. At
August 31, 1997, the Bank's allowance for loan losses amounted to $31.1 million
or 119.8% of the Bank's non-performing loans.
Stable Source of Liquidity. The Bank purchases short to medium-term
investment securities and mortgage-backed and mortgage-related securities
combining what management believes to be appropriate liquidity, yield and
credit quality in its effort primarily to achieve a managed and predictable
source of liquidity to meet loan demand, and, in addition, to a lesser degree,
a stable source of interest income. These portfolios, which totaled $721.1
million at August 31, 1997, are comprised primarily of obligations of the U.S.
Government and federal agencies totaling $536.1 million and mortgage-backed and
mortgage-related securities totaling $167.3 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 $1.58 billion or 46.9% of the
Bank's total deposits at August 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> 50
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 61,226,852 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 ________, 1998, 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. Joint stock registration will be
allowed only if the qualifying deposit account is so registered.
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> 51
The Bank and the Company have retained Sandler O'Neill as its advisor
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% (452,546 shares and 612,268 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% of the Common Stock issued in the Conversion. The overall
purchase limitation may not be decreased below 1% of the Offerings. 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 $532.4 million at the midpoint of the Valuation Range as most
recently appraised as of October 29, 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 $452.5
million to $612.3 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
10
<PAGE> 52
part, and is available in the manner 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 45,254,630 shares to a maximum of
61,226,852 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 _____, 1998. 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
amount of Common Stock offered would be $610.0 million at the midpoint of the
Estimated Price Range rather than $532.4 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> 53
10% of the Stock to be sold in the Offerings (6,122,685 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
(2,449,074 shares at the maximum of the Estimated Price Range) for distribution
to directors, officers and employees, which shares will be distributed at no
cost to the recipients. 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 approximately 3.8% 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 aggregating 1,836,805 shares for the 11
non-employee directors assuming 6,122,685 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
underlying
12
<PAGE> 54
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, the 11 non-employee directors would receive identical
awards which would amount in the aggregate to 734,722 shares assuming 2,449,074
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 (4,898,148 shares or $49.0 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 ESOP may purchase such shares in the open market,
if permitted. 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. See "Management -
Change in Control Agreements."
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 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
13
<PAGE> 55
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, the
establishment of the Foundation is 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 3,620,370 and 4,898,148 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 66,125,000 shares issued and
outstanding, of which the Foundation will own 4,898,148 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 $49.0 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 $26.0 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."
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.
14
<PAGE> 56
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 $439.9 million and $597.2 million ($687.7 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 $36.2 million and $49.0 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."
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
15
<PAGE> 57
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors.
16
<PAGE> 58
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 five months ended August 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 five months ended August 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 August 31,
1997 1997 1996 1995 1994 1993
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets $3,794,207 $3,733,316 $3,869,782 $2,619,935 $2,549,180 $2,392,351
Cash and cash equivalents 185,529 374,636 103,192 110,394 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 167,339 190,979 395,321 -- -- --
Investment securities available for
sale 553,774 357,487 683,828 61,818 -- --
Loans receivable, net 2,677,406 2,503,089 2,322,808 2,020,262 1,693,994 1,461,931
Intangible assets(1) 60,935 60,499 80,268 1,023 1,728 2,592
Deposit accounts 3,371,956 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 2,559 2,682 1,250 1,286 1,100 1,600
Total equity 324,769 309,114 289,819 259,197 220,690 178,445
</TABLE>
<TABLE>
<CAPTION>
For the Five Months Ended
August 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 $111,795 $108,525 $255,303 $213,100 $191,539 $179,697 $180,698
Interest expense 59,835 58,919 140,187 110,619 80,562 75,633 86,297
------- ------- -------- -------- -------- -------- --------
Net interest income 51,960 49,606 115,116 102,481 110,977 104,064 94,401
Provision for loan losses 4,577 1,560 7,960 3,679 3,592 5,014 4,462
------- ------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 47,383 48,046 107,156 98,802 107,385 99,050 89,939
Net gain (loss) on sales of
loans and securities 13 (282) (3,347) 12,222 (3,952) 849 283
Other non-interest income 3,689 3,493 6,256 7,860 6,416 6,873 5,103
Amortization of intangible assets 3,678 3,901 8,278 1,842 905 864 859
Other non-interest expenses(2) 31,220 26,301 73,875 50,288 46,713 41,176 37,256
------- ------- -------- -------- -------- -------- -------
Income before income taxes 16,187 21,055 27,912 66,754 62,231 64,732 57,210
Income taxes 5,206 9,234 10,732 30,782 27,327 25,808 26,319
-------
Cumulative effect of
change in accounting
principle (3) -- -- -- -- -- 3,321 --
------- ------- -------- ------- -------- ------- -------
Net income $ 10,981 $ 11,821 $ 17,180 $ 35,972 $ 34,904 $ 42,245 $ 30,891
======= ======= ======== ======= ======== ======= =======
</TABLE>
17
<PAGE> 59
KEY
OPERATING
RATIOS AND
OTHER DATA:
<TABLE>
<CAPTION>
At or For the Five Months
Ended August 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) 0.69% 0.77% 0.46% 1.27% 1.37% 1.71% 1.36%
Return on equity (2) 8.28 9.58 5.69 13.13 14.81 21.80 19.23
Interest-earning assets to
interest-bearing liabilities 108.88 106.09 105.80 109.28 110.55 107.97 106.89
Interest rate spread (5) 3.09 3.15 3.09 3.39 4.18 4.13 4.00
Net interest margin (5) 3.45 3.39 3.32 3.77 4.52 4.38 4.27
Noninterest expenses, exclusive
of amortization of intangible
assets, to total assets(2) 1.96 1.72 1.99 1.77 1.83 1.67 1.64
Efficiency ratio (6) 56.10 49.53 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 0.96% 1.50% 1.07% 1.51% 1.04% 1.23% 1.47%
Non-performing assets to total
assets at end of period(7) 0.69 1.04 0.74 0.94 0.88 0.90 1.10
Allowance for loan losses to
non-performing loans at end of
period 119.75 56.09 99.76 57.81 55.73 41.68 29.57
Allowance for loan losses to
total loans at end of period 1.14 0.84 1.06 0.87 0.58 0.51 0.43
CAPITAL AND OTHER RATIOS (4):
Equity to assets at end of
period 8.56% 8.14% 8.28 7.49 9.89 8.66 7.46
Leverage capital 6.91 6.26 6.83 6.13 9.54 8.52 7.31
Tangible equity to risk-weighted
assets at end of period 10.13 9.80 10.05 9.82 13.76 13.85 12.57
Total capital to risk-weighted
assets at end of period 11.35 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> 60
- -------------------
(1) Represents the excess of cost over fair value of net assets acquired
which consists of goodwill and other intangibles which amounted to
$22.9 million and $38.0 million, respectively, at August 31, 1997 and
$23.7 million and $36.8 million, respectively,at March 31, 1997. 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 or principal repayment 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.
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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 August 31, 1997, the Bank's ratio of equity to assets was 8.56%.
The Company's equity position will be significantly increased as a result of
the Conversion. On a pro forma basis as of August 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 20.1% and 21.6%. 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 August 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 are higher than the surrounding suburbs and,
in recent periods, the boroughs
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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 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 August 31,
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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 $2.0 billion and $757.5 million,
respectively, or 51.8% and 20.2%, 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
August 31, 1997, all of the Bank's $553.8 million of investment securities
($535.5 million of which had fixed-rates of interest) and all $167.3 million of
its mortgage-backed and mortgage-related securities ($162.1 million of which
had fixed-rates of interest) were classified as available for sale and the Bank
had $8.3 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
August 31, 1997, the Bank was servicing $297.2 million of loans for others.
See "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.
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 August 31, 1997,
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multi-family residential loans totaled $1.49 billion or 54.7% of total loans
and commercial real estate loans totaled $163.5 million or 6.0% 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 $59.8 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 August 31, 1997, of the $26.0 million of
the Bank's non-performing loans, $19.9 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 $31.1 million at August 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) 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
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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 (4,898,148 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 waivers from the FDIC and the Department of the
voting restriction imposed on such Common Stock, be voted as determined by the
directors of the Foundation, the substantial majority of whom initially 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 (2,449,074
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 authorized shares of Common Stock equal to an aggregate of 10% of the Common
Stock issued in the Offerings (6,122,685 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.
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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 expected
to be established.
Dilution of Stockholders' Ownership and Voting 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 3,620,370, 4,259,259 and 4,898,148 shares of Common
Stock, with a value of $36.2 million, $42.6 million and $49.0 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 66,125,000 shares
issued and outstanding of which the Foundation will own 4,898,148 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 fourth quarter of fiscal 1998.
The amount of the contribution will range from $36.2 million to $49.0 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 $49.0 million in Common Stock (based on the
maximum of the Estimated Price Range), the Company estimates a net tax effected
expense of $26.0 million (based on a 47% marginal tax rate). If the Foundation
had been established at March 31, 1997, the Bank
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would have reported a net loss of $8.8 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 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 and the Department shall waive such voting restriction upon submission of
a legal opinion by the Company or the Foundation that is satisfactory to the
FDIC and the Department. The independent tax advisor's opinion further
provides 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 $23.0 million in fiscal 1997 (based upon the sale of stock at the
maximum of the Estimated Price Range and a contribution of $49.0 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.
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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 $452.5 million and $612.3 million, with a midpoint of $532.4 million.
The pro forma price to book ratio and the pro forma price to earnings ratio, at
and for the five months ended August 31, 1997, are 71.9% and 14.9x,
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 $610.0
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 72.1% and 14.9x, respectively. The amount of Common
Stock that would be offered in the Conversion at the midpoint of the Estimated
Price Range is approximately $77.6 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 August 31, 1997 (assuming
the Offerings are completed at the midpoint of the Estimated Price Range) would
be 11.9% and 19.4%, respectively. On a consolidated basis, the Company's pro
forma stockholders' equity would be $799.5 million, or approximately 18.7% 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 $13.64 and $.28, respectively at and for
the five months ended August 31, 1997 and $13.91 and $0.53, 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 August 31, 1997 would be approximately $846.6 million,
or approximately 19.6% 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."
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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 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 and the Department 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 and the Department 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 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
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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. Although the economy of the Bank's primary market area has, to a
certain extent, stabilized and local residential real estate values have
stabilized and begun to improve, commercial real estate values have only
recently begun to stabilize and generally remain below the values experienced
in the late 1980s. At August 31, 1997, substantially all of the Bank's real
estate secured loans were secured by properties located in the New York City
metropolitan area. See "Business - Market Area and Competition."
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 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
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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 70,410,880 shares of Common Stock at the Purchase Price for an
aggregate price of up to $704.1 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 ESOP may purchase such shares in the open market. 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 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
approximately 3.8% 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 (6,122,685 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
30
<PAGE> 72
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 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
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<PAGE> 73
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 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.
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<PAGE> 74
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."
ROLE OF THE MARKETING ADVISOR
The Bank and the Company have retained Sandler O'Neill as advisor and
Sandler O'Neill has agreed to use its best efforts to assist the Bank and the
Company in its solicitation of subscriptions and purchase orders for Common
Stock in the Offerings. Sandler O'Neill is not obligated to take or purchase
any shares of 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.
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<PAGE> 75
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."
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 August 31, 1997, the Bank had $3.79 billion of assets, $3.47 billion of
liabilities, including $3.37 billion of deposits, and $324.8 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
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<PAGE> 76
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 August 31, 1997, the net loan portfolio amounted to $2.68 billion
or 70.6% 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-backed securities and
collateralized mortgage obligations ("CMOs") issued by government sponsored
enterprises. At August 31, 1997, the Bank's investment and mortgage-backed and
mortgage-related securities portfolios (all of which are classified available
for sale) totaled $721.1 million or 19.0% 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 $439.9 million and $597.2 million ($687.6 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 45,254,630 shares and 61,226,852 shares at the minimum and
maximum of the Estimated Price Range, respectively, the loan to the ESOP would
be $36.2 million and $49.0 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
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<PAGE> 77
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, 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.
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<PAGE> 78
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, 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. Special cash dividends, stock dividends or
returns of capital may be paid in addition to, or in lieu of, regular cash
dividends (however, the Company and the Bank have committed to the FDIC that
they will take no action with respect to any return of capital during the
one-year period following consummation of the Conversion).
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 August 31, 1997, the Bank
had $67.8 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
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<PAGE> 79
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 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
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<PAGE> 80
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."
At August 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 August 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 August 31, 1997 Based on
-----------------------------------------------------------------------------
45,254,630 53,240,741 61,226,852
Shares Shares Shares
Historical at (Minimum (Mid-point (Maximum
August 31, 1997 of Range) of Range) of Range)(1)
------------------------ ------------------------ ----------------------- ------------------------
Percent Percent Percent Percent
Amount of Assets(2) Amount of Assets(2) Amount of Assets(2) Amount of Assets(2)
--------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital (3) $324,769 8.56% $507,499 12.65% $540,252 13.33% $573,006 14.00%
======= ==== ======= ===== ======= ===== ======= =====
Tier I risk-based
level:(4)(5) $258,319 10.13% $441,049 17.01% $473,802 18.22% $506,556 19.42%
Requirement 101,980 4.00 103,732 4.00 104,045 4.00 104,358 4.00
------- ---- -------- ----- -------- ----- -------- -----
Excess $156,339 6.13% $ 337,317 13.01% $369,757 14.22% $402,198 15.42%
======= ==== ======== ===== ======= ===== ======= =====
Total risk-based
level:(1)(4)(5) $289,434 11.35% $472,164 18.21% $504,917 19.41% $537,671 20.61%
Requirement 203,961 8.00 207,464 8.00 208,090 8.00 208,717 8.00
-------- ----- -------- ----- -------- ----- -------- -----
Excess $ 85,473 3.35% $ 264,700 10.21% $296,827 11.41% $ 328,954 12.61%
======= ===== ======== ===== ======= ===== ======== =====
Tier I leverage
level:(4)(5)(6) $258,319 6.91% $441,049 11.15% $473,802 11.86% $506,556 12.55%
Requirement 149,520 4.00 158,278 4.00 159,844 4.00 161,409 4.00
-------- ----- -------- ----- ------- ---- -------- -----
Excess $108,799 2.91% $ 282,771 7.15% $313,959 7.86% $345,147 8.55%
======= ===== ======== ===== ======= ==== ======= =====
</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 20.8%, 22.0% and 13.3%,
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.
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<PAGE> 81
(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> 82
- ----------------------
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 $18.1 million, $21.3 million and $24.5 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 $36.2
million, $42.6 million and $49.0 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 $92,000 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> 83
CAPITALIZATION
The following table presents the historical consolidated
capitalization of the Bank at August 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 45,254,630 53,240,741 61,226,852 70,410,880
Bank-Historical Shares Shares Shares Shares(1)
Capitalization (Minimum of (Midpoint of (Maximum of (15% above
Range) Range) Range) Maximum of Range)
---------- -------------- ------------- ------------- -----------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2) $3,371,956 $3,371,956 $3,371,956 $3,371,956 $3,371,956
Borrowings 17,109 17,109 17,109 17,109 17,109
--------- --------- ---------- ---------- ----------
Total deposits and borrowings $3,389,065 $3,389,065 $3,389,065 $3,389,065 $3,389,065
========= ========= ========= ========= =========
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) -- 489 575 661 760
Additional paid-in capital(3)(4) 52,670 475,571 560,541 645,512 743,227
Retained earnings(4)(5) 267,057 319,819 319,819 319,819 319,819
Net unrealized gain on
marketable securities 5,042 5,042 5,042 5,042 5,042
Less:
Expense of contribution to
Foundation, net(6) -- (19,188) (22,574) (25,960) (29,854)
Common Stock to be acquired
by the ESOP(7) -- (36,204) (42,593) (48,981) (56,329)
Common Stock to be
acquired by the Recognition
Plan(8) -- (18,102) (21,296) (24,491) (28,164)
------- -------- -------- -------- --------
Total stockholders' equity $324,769 $727,427 $799,514 $871,602 $954,501
======= ======= ======= ======= =======
</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 or 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> 84
- --------------------
(4) The pro forma retained earnings reflects the $92,000 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 by approximately 3.8%. The shares are
reflected as a reduction of stockholders' equity. See "Pro Forma
Data" and "Management - Benefits - Recognition Plan."
43
<PAGE> 85
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 $439.9 million and $597.2 million (or $687.7
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 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, from authorized but unissued shares,
an amount of Common Stock equal to 8% of the Common Stock sold in the
Conversion; and (v) total expenses, including the marketing fees paid to
Sandler O'Neill, will be between $12.7 million and $15.1 million (or $16.5
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 five months ended August 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 5.56% and 6.00%, which represent the yields on
one-year U.S. Government securities at August 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 2.95% for the five months ended
August 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
44
<PAGE> 86
Option Plan) to stockholders for approval at an annual or special meeting of
stockholders 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> 87
<TABLE>
<CAPTION>
At or For the Five Months Ended August 31, 1997
--------------------------------------------------------------
45,254,630 53,240,741 61,226,852 70,410,880
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 $452,546 $532,407 $612,269 $704,109
Plus: Shares acquired by Foundation (equal to
8% of the shares issued in the Conversion) 36,204 42,593 48,981 56,329
------- ------- ------- -------
Pro forma market capitalization $488,750 $575,000 $661,250 $760,438
======= ======= ======= =======
Gross proceeds 452,546 532,407 612,269 704,109
Less: Offering expenses and commissions 12,690 13,884 15,077 16,450
------- ------- ------- -------
Estimated net proceeds $439,856 $518,523 $597,192 $687,659
Less: Shares purchased by the ESOP (36,204) (42,593) (48,981) (56,329)
Shares purchased by the
Recognition Plan (18,102) (21,296) (24,491) (28,164)
------- ------- ------- -------
Total estimated net proceeds, as adjusted(1) $385,550 $454,634 $523,720 $603,166
======= ======= ======= =======
Net income (2):
Historical $10,981 $10,981 $10,981 $10,981
Pro forma income on net proceeds 4,734 5,582 6,430 7,406
Pro forma ESOP adjustment(3) (400) (470) (541) (622)
Pro forma Recognition Plan
adjustment(4) (799) (941) (1,082) (1,244)
------- ------- ------- -------
Pro forma net income $ 14,516 $ 15,152 $ 15,788 $ 16,521
======== ======= ======= =======
Net income per share(2)(5):
Historical $.24 $.21 $.18 $.16
Pro forma income on net proceeds .10 .10 .10 .11
Pro forma ESOP adjustment(3) (.01) (.01) (.01) (.01)
Pro forma Recognition Plan
adjustment(4) (.02) (.02) (.02) (.02)
------- ------- ------- -------
Pro forma net income per share(4)(6) $ .31 $ .28 $ .25 $ .24
======= ======= ======== ========
Offering price to pro forma net
income per share (5) 13.44x 14.88x 16.67x 17.36x
======== ======== ======== ========
Stockholders' equity:
Historical(7) $324,861 $324,861 $324,861 $324,861
Estimated net proceeds 439,856 518,523 597,192 687,659
Plus: Shares issued to Foundation 36,204 42,593 48,981 56,329
Less: Contribution to Foundation (36,204) (42,593) (48,981) (53,329)
Plus: Tax benefit of the contribution
to Foundation 17,016 20,019 23,021 26,474
Less: Common Stock acquired
by the ESOP(3) (36,204) (42,593) (48,981) (56,329)
Common Stock to be acquired by
the Recognition Plan(4) (18,102) (21,296) (24,491) (28,164)
------- ------- ------- -------
Pro forma stockholders' equity(4)(6)(8) $727,427 $799,514 $871,602 $954,501
======= ======= ======= =======
Stockholders' equity per share(5):
Historical(7) $6.65 $5.65 $4.91 $4.27
Estimated net proceeds 9.00 9.02 9.03 9.04
Plus: Shares issued to Foundation .74 .74 .74 .74
Less: Contribution to Foundation (.74) (.74) (.74) (.74)
Plus: Tax benefit of contribution to
Foundation .35 .35 .35 .35
Less: Common Stock acquired
by the ESOP(3) (.74) (.74) (.74) (.74)
Common Stock to be acquired by
the Recognition Plan(4) (.37) (.37) (.37) (.37)
------- ------- ------- -------
Pro forma stockholders' equity
per share(4)(6)(8) $ 14.89 $ 13.91 $ 13.18 $ 12.55
======= ======= ======= =======
Offering price as a percentage of pro
forma stockholders' equity per share(5) 67.16% 71.89% 75.87% 79.68%
======== ======= ======= ======
Offering price as a percentage of pro forma
tangible stockholders' equity per share(5) 73.31% 77.82% 81.57% 85.11%
======== ======= ======= ======
</TABLE>
(footnotes on following pages)
46
<PAGE> 88
<TABLE>
<CAPTION>
At or For the Year Ended March 31, 1997
-------------------------------------------------------------
45,254,630 53,240,741 61,226,852 70,410,880
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 $452,546 $532,407 $612,269 $704,109
Plus: Shares acquired by Foundation (equal to
8% of the shares issued in the Conversion) 36,204 42,593 48,981 56,329
-------- -------- -------- --------
Pro forma market capitalization $488,750 $575,000 $661,250 $760,437
======= ======= ======= =======
Gross proceeds 452,546 532,407 612,269 704,109
Less: Offering expenses and commissions 12,690 13,884 15,077 16,450
-------- -------- -------- --------
Estimated net proceeds $439,856 $518,523 $597,192 $687,659
Less: Shares purchased by the ESOP (36,204) (42,593) (48,981) (56,329)
Shares purchased by the
Recognition Plan (18,102) (21,296) (23,491) (28,164)
-------- -------- -------- --------
Total estimated net proceeds, as adjusted(1) $385,550 $454,634 $523,720 $603,166
======= ======= ======= =======
Net income (2):
Historical $17,180 $17,180 $17,180 $17,180
Pro forma income on net proceeds 12,261 14,457 16,654 19,181
Pro forma ESOP adjustment(3) (959) (1,129) (1,298) (1,493)
Pro forma Recognition Plan
adjustment(4) (1,919) (2,257) (2,596) (2,985)
-------- ------- -------- --------
Pro forma net income $ 26,563 $ 28,251 $ 29,940 $ 31,883
======= ======= ======= =======
Net income per share(2)(5):
Historical $.38 $ .32 $ .28 $ .24
Pro forma income on net proceeds .27 .27 .27 .27
Pro forma ESOP adjustment(3) (.02) (.02) (.02) (.02)
Pro forma Recognition Plan
adjustment(4) (.04) (.04) (.04) (.04)
------- ------ ------ ------
Pro forma net income per share(4)(6) $ .59 $ .53 $ .49 $ .45
====== ====== ====== ======
Offering price to pro forma net
income per share (5) 16.95x 18.87x 20.41x 22.22x
======= ======= ======= =======
Stockholders' equity:
Historical(7) $309,206 $309,206 $309,206 $309,206
Estimated net proceeds 439,856 518,523 597,192 687,659
Plus: Shares issued to Foundation 36,204 42,593 48,981 56,329
Less: Contribution to Foundation (36,204) (42,593) (48,981) (56,329)
Plus: Tax benefit of the contribution 20,019 23,021 26,474
to Foundation 17,016
Less: Common Stock acquired
by the ESOP(3) (36,204) (42,593) (48,981) (56,329)
Common Stock to be acquired by
the Recognition Plan(4) (18,102) (21,296) (24,491) (28,164)
-------- -------- -------- --------
Pro forma stockholders' equity(4)(6)(8) $711,772 $783,859 $855,947 $938,846
======= ======= ======= =======
Stockholders' equity per share(5):
Historical(7) $6.33 $5.38 $4.68 $4.07
Estimated net proceeds 9.00 9.02 9.03 9.04
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) $ 14.57 $ 13.64 $ 12.95 $ 12.35
======= ======= ======= =======
Offering price as a percentage of pro
forma stockholders' equity per share(5) 68.63% 73.31% 77.22% 80.97%
======= ======= ======= =======
Offering price as a percentage of pro forma
tangible stockholders' equity per share(5) 75.02% 79.43% 83.06% 86.58%
======= ======= ======= =======
</TABLE>
(footnotes on following pages)
47
<PAGE> 89
- ----------------------
(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
$19.2 million, $22.6 million, $26.0 million and $29.9 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 five months ended August 31,
1997, pro forma net earnings per share would be $(0.10), $(0.14),
$(0.17) and $(0.19) at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Price Range, respectively. Per share net
income for five months ended is based on 45,292,342, 53,285,108,
61,277,874 and 70,469,555 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 five 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 $0.16, $0.11, $0.06 and $0.03 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 45,345,139, 53,347,222,
61,349,306 and 70,551,701 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> 90
- ------------------------
(4) 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 8.33% and 20.00% of the amount contributed was an amortized
expense during the five months ended August 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 five
months ended August 31, 1997 would be $0.31, $0.28, $0.25 and $0.23 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively, and stockholders' equity per
share would be $14.72, $13.77, $13.08 and $12.47 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 $0.57, $0.52, $0.48 and $0.44, 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 $14.41, $13.51, $12.85 and $12.27 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 99.0%
and 97.5% of the ESOP shares which have not been committed for release
during the five months ended August 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 August 31, 1997 that
45,292,342, 53,285,108, 61,277,874 and 70,469,555 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 45,345,139, 53,347,222, 61,349,306 and 70,551,701 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 August 31, 1997, the
offering price as a multiple of pro forma net earnings per share would
be 14.0x, 15.81x, 17.45x and 19.18x 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 18.40x, 20.35x, 22.09x and 23.85x at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively.
(footnotes continued on following page)
49
<PAGE> 91
- -------------------
(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
4,525,463, 5,324,074, 6,122,685 and 7,041,088 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 five
months ended August 31, 1997 would be $0.30, $0.27, $0.24 and $0.22 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Price Range, respectively and pro forma stockholders' equity
per share at August 31, 1997 would be $14.46, $13.57, $12.91 and
$12.33 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 $0.55, $0.51, $0.47 and
$0.44 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 $14.17, $13.32, $12.69 and $12.14 at
the minimum, midpoint, maximum and 15% above the maximum of such
range, respectively. See "Management - Benefits - Stock Option Plan."
(7) Includes the $92,000 at August 31, 1997 and $93,000 at March 31, 1997
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 following page)
50
<PAGE> 92
- -----------------
(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> 93
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 $610.0 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 $77.6 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 $13.91 and $13.88, respectively, and $0.28 and $0.28,
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 71.9% and 72.1%,
respectively, and 14.9x and 14.9x, 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 August 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 . . . . . . . $ 452,546 $518,500 $ 532,407 $610,000
Pro forma market capitalization . . . . 488,750 518,500 575,000 610,000
Total assets . . . . . . . . . . . . . 4,196,878 4,236,916 4,268,965 4,316,068
Total liabilities . . . . . . . . . . . 3,469,451 3,469,451 3,469,451 3,469,451
Pro forma stockholders' equity . . . . 727,427 767,465 799,514 846,617
Pro forma consolidated net earnings . . 14,516 15,041 15,152 15,770
Pro forma stockholders' equity
per share . . . . . . . . . . . . . . 14.89 14.81 13.91 13.88
Pro forma consolidated net
earnings per share . . . . . . . . . . .31 .31 .28 .28
Pro forma pricing ratios:
Offering prices as a percentage
of pro forma stockholders' equity
per share . . . . . . . . . . . . . 67.16% 67.52% 71.89% 72.05%
Offering price to pro forma
net earnings per share . . . . . . . 13.44x(1) 13.44x 14.88x(1) 14.88x
Pro forma market capitalization to
assets . . . . . . . . . . . . . . . 11.65% 12.24% 13.47% 14.13%
Pro forma financial ratios:
Return on assets . . . . . . . . . . .83%(2) .85% .85%(2) .88%
Return on stockholders' equity . . . 4.79%(3) 4.70% 4.55%(3) 4.47%
Stockholders' equity to assets . . . 17.33% 18.11% 18.73% 19.62%
<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> <C>
Estimated offering amount . . . . . . . $612,269 $701,500 $704,109 $806,725
Pro forma market capitalization . . . . 661,250 701,500 760,437 806,725
Total assets . . . . . . . . . . . . . 4,341,053 4,395,221 4,423,952 4,486,245
Total liabilities . . . . . . . . . . . 3,469,451 3,469,451 3,469,451 3,469,451
Pro forma stockholders' equity . . . . 871,602 925,770 954,501 1,016,794
Pro forma consolidated net earnings . . 15,788 16,500 16,521 17,339
Pro forma stockholders' equity
per share . . . . . . . . . . . . . . 13.18 13.20 12.55 12.61
Pro forma consolidated net
earnings per share . . . . . . . . . . .25 .25 .24 .23
Pro forma pricing ratios:
Offering prices as a percentage
of pro forma stockholders' equity
per share . . . . . . . . . . . . . 75.87% 75.76% 79.68% 79.30%
Offering price to pro forma
net earnings per share . . . . . . . 16.67x(1) 16.67x 17.36x(1) 18.12x
Pro forma market capitalization to
assets . . . . . . . . . . . . . . . 15.23% 15.96% 17.19% 17.98%
Pro forma financial ratios:
Return on assets . . . . . . . . . . .87%(2) 0.90% 0.90%(2) 0.93%
Return on stockholders' equity . . . 4.35%(3) 4.28% 4.15%(3) 4.09%
Stockholders' equity to assets . . . 20.08% 21.06% 21.58% 22.66%
</TABLE>
- -----------------
(1) If the contribution to the Foundation had been expensed during the five
months ended August 31, 1997, the offering price to pro forma net earnings
per share would have been (96.9)x, (71.8)x, (60.2)x and (52.9)x at the
minimum, midpoint, maximum and maximum, as adjusted, respectively.
(2) If the contribution to the Foundation had been expensed during the five
months ended August 31, 1997, return on assets would have been (0.27%,
(0.42)%, (0.56)% and (0.72)% at the minimum, midpoint, maximum and
maximum, as adjusted, respectively.
(3) If the contribution to the Foundation had been expensed during the five
months ended August 31, 1997, return on stockholders' equity would have
been (1.54)%, (2.23)%, (2.80)% and (3.35)% at the minimum, midpoint,
maximum and maximum, as adjusted, respectively.
52
<PAGE> 94
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
five months ended August 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 five
months ended August 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 Five Months For the Year Ended
Ended August 31, March 31,
---------------------- ------------------------------------
1997 1996 1997 1996 1995
---------- --------- ----------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans:
Mortgage loans $70,910 $67,180 $161,638 $140,435 $128,008
Other loans 15,898 15,091 36,189 36,162 31,726
Investment securities 16,363 9,494 22,356 11,635 8,644
Mortgage-backed and mortgage-related securities 5,258 14,239 28,856 17,779 20,204
Other 3,366 2,521 6,264 7,089 2,957
----- ----- -------- -------- --------
Total interest income 111,795 108,525 255,303 213,100 191,539
------- ------- -------- -------- --------
Interest expense:
Deposits 59,334 58,291 138,840 106,379 76,443
Borrowings 501 628 1,347 4,240 4,119
------ ------ -------- -------- --------
Total interest expense 59,835 58,919 140,187 110,619 80,562
------ -------- -------- -------- --------
Net interest income 51,960 49,606 115,116 102,481 110,977
Provision for loan losses 4,577 1,560 7,960 3,679 3,592
----- -------- -------- -------- ---------
Net interest income after provision
for loan losses 47,383 48,046 107,156 98,802 107,385
------- -------- -------- -------- --------
Non-interest income:
Net gain (loss) on sales of loans and securities 13 (282) (3,347) 12,222 (3,952)
Service fees 2,909 2,406 5,708 4,086 4,103
Other 780 1,087 548 3,774 2,313
----- ------ -------- -------- ---------
Total non-interest income 3,702 3,211 2,909 20,082 2,464
----- ------ -------- -------- ---------
Non-interest expense:
Compensation and employee benefits 12,424 11,566 26,879 22,311 20,155
Occupancy costs 5,075 4,456 10,981 7,656 5,948
Data processing fees 4,688 2,122 7,020 3,117 3,091
Advertising 1,583 1,125 3,625 3,229 2,175
FDIC insurance premiums 519 1,587 2,199 2,558 5,057
SAIF assessment -- -- 8,553 -- --
Amortization of intangible assets 3,678 3,901 8,278 1,842 905
Other 6,931 5,445 14,618 11,417 10,287
----- ----- -------- -------- --------
Total non-interest expense 34,898 30,202 82,153 52,130 47,618
------ ------ -------- -------- --------
Income before provision for income taxes 16,187 21,055 27,912 66,754 62,231
Provision for income tax 5,206 9,234 10,732 30,782 27,327
----- ----- -------- -------- --------
Net income $10,981 $11,821 $ 17,180 $ 35,972 $ 34,904
====== ====== ======== ======== ========
</TABLE>
53
<PAGE> 95
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 $1.40
billion or 58.6% from $2.39 billion at March 31, 1993 to $3.79 billion at
August 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> 96
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 $1.49 billion or 54.7% of the total loan
portfolio at August 31, 1997. The Bank also emphasizes single-family
(one-to-four units) residential mortgage loans, which totaled $552.4 million or
20.3% of the total loan portfolio at August 31, 1997, and cooperative apartment
loans (loans secured by an individual's shares in a cooperative housing
corporation), which loans totaled $392.8 million or 14.4% of the total loan
portfolio at August 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 August 31, 1997 was 0.69% and its allowance for loan losses to
non-performing loans was 119.8%.
Stable Source of Liquidity. The Bank purchases short to medium-term
investment securities and mortgage-backed and mortgage-related securities
combining what management believes to be appropriate, liquidity, yield and
credit quality in order to primarily achieve a managed and predictable source
of liquidity to meet loan demand and, to a lesser extent, a stable source of
interest income. These portfolios which totaled in the aggregate $721.1
million at August 31, 1997 are comprised primarily of obligations of the U.S.
Government and federal agencies totaling $536.1 million (of which $513.5
million consists of U.S. Treasury notes and bills) and mortgage-backed and
mortgage-related securities totaling $167.3 million (of which $96.6 million
consists of mortgage-backed securities and $70.7 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 $1.58 billion or 46.9% of the
Bank's total deposits at August 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> 97
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 August 31, 1997, the Bank had $22.9 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
was reflected in other income for fiscal 1997. The intangible related to the
1996 Branch Acquisition, as adjusted, which totaled $34.2 million at August 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. 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 August 31, 1997, the remaining intangible resulting from the
deposit acquisition amounted to $3.8 million.
CHANGES IN FINANCIAL CONDITION
GENERAL. Total assets increased by $60.9 million, or 1.6%, from $3.73
billion at March 31, 1997 to $3.79 billion at August 31, 1997. The major
component of the increase consisted of a $174.3 million increase in the net
loan portfolio, of which $134.1 million was accounted for by increases in
multi-family residential and commercial real estate loans. In 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
56
<PAGE> 98
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
$553.8 million at August 31, 1997. Such increase was accompanied by a $189.1
million decrease in cash and cash equivalents and a $107.2 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. The growth in the Company's assets was funded
primarily by a $46.4 million increase in deposits resulting in large part from
the branch acquisitions completed in April 1997. See " - Recent Acquisitions."
CASH, CERTIFICATES OF DEPOSIT, 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 $185.5 million at August 31,
1997 reflecting primarily the investment in April of a substantial portion of
the remaining proceeds received 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 totaling $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.
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 $721.1 million at August 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 31, 1997. This decline was primarily the result of the
Bank's determination to
57
<PAGE> 99
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 August 31, 1997 and March 31, 1997, the Bank's investment
securities totaled $553.8 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, a
substantial portion of which at August 31, 1997 consisted of CMOs secured by
mortgage-backed securities issued by the Fannie Mae ("FNMA") or Freddie Mac
("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 $167.3 million (all of which were classified as available for sale)
at August 31, 1997. The reduction from March 31, 1997 to August 31, 1997
reflected repayments and prepayments. The bulk of the mortgage-backed and
mortgage-related securities sold during fiscal 1997 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 August 31, 1997,
CMOs totaled $70.7 million, most of which are secured by mortgage-backed
securities issued by the FNMA or the FHLMC.
At August 31, 1997, the Bank had a $8.3 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 $174.3
million or 7.0% from March 31, 1997 to August 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 23.1% from $1.21 billion at March 31, 1996 to
$1.49 billion at August 31, 1997. See "Business - Lending Activities."
NON-PERFORMING ASSETS. The Bank's non-performing assets, which
consist of non-accrual loans, loans past due 90 days or more as to interest or
principal and accruing and other real estate owned acquired through foreclosure
or deed-in-lieu thereof decreased by $1.4 million or 4.9% to $26.3 million at
August 31, 1997 from $27.6 million at March 31, 1997 and decreased $8.9 million
or 24.3% from $36.5 million at March 31, 1996 to $27.6
58
<PAGE> 100
million at March 31, 1997. The decrease in non-performing assets from March
31, 1997 to August 31, 1997 was primarily due to the repayment in full of two
non-accrual commercial real estate loans aggregating $6.7 million. As a
result, non-accrual commercial real estate loans declined to $6.0 million at
August 31, 1997. However, offsetting such decrease was a $5.5 million increase
to $14.0 million in loans contractually past due maturity but which are
continuing to pay in accordance with their original repayment schedule. 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 totaling $1.6 million. Such decrease was
offset by a $2.0 million increase to $8.4 million in loans past due as to
maturity but continuing to make payments on a basis consistent with the
contractual terms of the loan. At August 31, 1997, the Bank's non-performing
assets amounted to 0.69% of total assets and consisted of $10.1 million of
non-accrual loans ($479,000 of which were multi-family residential loans and
$6.0 million of which were commercial and other real estate loans), $1.9 million
of loans past due 90 days or more as to interest and accruing, $14.0 million of
loans past due 90 days or more as to principal and accruing ($9.6 million of
which were multi-family loans and $3.8 million of which were commercial and
other real estate loans) and $279,000 of other real estate owned. See
"Business - Asset Quality."
ALLOWANCE FOR LOAN LOSSES. The Bank's allowance for loan losses
amounted to $31.1 million at August 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 (as to either interest or principal),
general economic conditions and other factors related to the collectibility of
the loan portfolio. The Bank's allowance increased during the five months
ended August 31, 1997 as well as in fiscal 1997 primarily due to a $4.6 million
and an $8.0 million provision for loan losses made in the five month period and
in fiscal 1997, respectively. The Bank increased its provision for loan losses
in the five months ended August 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) and, 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
(including the amount of loans which were 90 days or more past due as to
principal). At August 31, 1997, the Bank's allowance for loan losses amounted
to 119.8% of total non-performing loans as compared to 99.8% and 57.8% 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 August 31, 1997, intangibles totaled $60.9
million and were primarily comprised of $22.9 million related to the
acquisition of Bay Ridge and $34.2 million
59
<PAGE> 101
primarily related to the 1996 Branch Acquisition. The Bank's intangible assets
increased by $436,000 to $60.9 million at August 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 $3.7
million and $8.3 million during the five months ended August 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."
DEPOSITS. Deposits increased $46.4 million or 1.4% to $3.37 billion
at August 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 combined with interest credited of $46.9 million, offset
partially by $70.7 million of deposit outflows. The deposit outflows reflect
disintermediation as a result of the continued strong performance of the
equities markets during the five month period. 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 August
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 August 31, 1997, total equity equaled $324.8 million,
compared to $309.1 million and $289.8 million at March 31, 1997 and 1996,
respectively. This $15.7 million or 5.1% increase was primarily the result of
net income of $11.0 million for the five months ended August 31, 1997 combined
with a $4.7 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> 102
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 and is annualized where appropriate.
<TABLE>
<CAPTION>
For the Five Months Ended August 31,
At August 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 8.09% 2,132,133 70,910 7.98% 1,958,295 67,180 8.23%
Other loans:
Cooperative apartment loans 7.24 369,926 11,210 7.27 359,564 11,235 7.50
Consumer and commercial business
loans (2) 8.57 120,673 4,688 9.32 106,542 3,856 8.69
------- ----- ------- -----
Total loans 7.99 2,622,732 86,808 7.94 2,424,401 82,271 8.14
Mortgage-backed and mortgage-related
securities 7.45 176,522 5,258 7.15 549,270 14,239 6.22
Investment securities 6.24 659,213 16,363 5.96 430,163 9,494 5.30
Other interest-earning assets (3) 5.42 160,717 3,366 5.03 106,740 2,521 5.67
--------- ------ --------- -----
Total interest-earning assets 7.58 3,619,184 111,795 7.41 3,510,574 108,525 7.42
---- ------- ---- ------- ----
Non-interest-earning assets 181,023 -- 129,235
--------- ---------
Total assets $3,800,207 $111,795 $3,639,809 $108,525
========= ======= ========= =======
Interest-bearing liabilities:
Deposits:
Demand deposits(4) 2.78 499,702 5,528 2.66 454,239 4,917 2.60
Savings deposits 2.88 1,023,211 12,266 2.88 1,096,046 13,479 2.95
Certificates of deposit 5.61 1,783,996 41,540 5.59 1,739,196 39,895 5.51
--------- ------ --------- ------
Total deposits 4.34 3,306,909 59,334 4.31 3,289,481 58,291 4.25
--------- ------ --------- ------
Total borrowings 7.37 17,167 501 7.00 19,482 628 7.74
------ --- ------ ---
Total interest-bearing
liabilities 4.36 3,324,076 59,835 4.32 3,308,963 58,919 4.27
----- ------ ---- ------ ----
Non-interest-bearing
liabilities(5) 159,818 36,456
--------- --------
Total liabilities 3,483,894 3,345,419
Total equity 316,313 294,390
--------- ---------
Total liabilities and equity $3,800,207 $3,639,809
========= =========
Net interest-earning assets $ 295,108 $ 201,611
========= =========
Net interest income/interest rate
spread 3.22% $51,960 3.09% $49,606 3.15%
==== ====== ==== ====== ====
Net interest margin 3.45% 3.39%
==== ====
Ratio of average interest-earning 1.09x 1.06x
assets to average interest-bearing ====== ====
liabilities 1.09x
======
<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
Consumer and commercial business
loans (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 475,967 28,856 6.06 286,317 17,779 6.21
securities
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
------- -------- ----
<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
Consumer and commercial business
loans (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 1.10x
liabilities =====
</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, overnight commercial paper and certificates of deposit.
(4) Includes NOW and money market accounts.
(5) Includes escrow accounts for the payment of taxes.
61
<PAGE> 103
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>
Five Months Ended August 31, 1997
compared to Five Months Ended August
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 $(6,344) $10,074 $3,730 $(8,088) $29,291 $21,203
Other loans:
Cooperative apartment loans (814) 789 (25) (349) 647 298
Consumer and commercial
business loans (1) 294 538 832 (266) (5) (271)
----- ------ ------ ----- --- -----
Total loans receivable (6,834) 11,401 4,537 (8,703) 29,933 21,230
Mortgage-backed and mortgage-related
securities 6,750 (15,731) (8,981) (439) 11,516 11,077
Investment securities 1,302 5,567 6,869 (61) 10,782 10,721
Other interest-earning assets (963) 1,808 845 (467) (358) (825)
----- ----- --- ----- ----- -----
Total net change in income on interest-
earning assets 225 3,045 3,270 (9,670) 51,873 42,203
Interest-bearing liabilities:
Deposits:
Demand deposits 115 496 611 (70) 3,167 3,097
Savings deposits (319) (894) (1,213) (856) 6,487 5,631
Certificates of deposit 593 1,052 1,645 (3,739) 27,472 23,733
--- ----- ----- ------- ------ ------
Total deposits 389 654 1,043 (4,665) 37,126 32,461
Borrowings (57) (70) (127) 673 (3,566) (2,893)
---- ---- ----- ----- ------- -------
Total net change in expense on
interest-bearing liabilities 332 584 916 (3,992) 33,560 29,568
--- --- --- ------- ------- ------
Net change in net interest income $(107) $2,461 $2,354 $(5,678) $18,313 $12,635
===== ===== ===== ======= ====== ======
<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
Consumer and commercial
business 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> 104
COMPARISON OF RESULTS OF OPERATIONS FOR THE FIVE MONTHS ENDED AUGUST 31, 1997
AND 1996 AND THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
GENERAL. The Bank reported net income of $11.0 million and $11.8
million for the five months ended August 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 $840,000 or 7.1% decrease in net income
during the five months ended August 31, 1997 compared to the same period in the
prior year was primarily due to a $4.7 million increase in non-interest
expenses combined with a $3.0 million increase in the provision for loan losses
partially offset by a $491,000 increase in non-interest income, and a $2.4
million increase in net interest income and a $4.0 million decrease in the
provision for income taxes. The primary component of the increase in non-
interest expense was a $2.6 million increase in data processing services
relating primarily to expenses incurred in connection with the conversion of the
Bank's data processing systems. The increase in the provision for loan losses
in the 1997 period compared to the five months ended August 31, 1996 reflected
the Bank's determination to increase its allowance for loan losses in view of,
among other things, increased emphasis on originating multi-family residential
loans, the increased number of larger multi-family residential and individual
cooperative apartment loans as well as the increased amount of loans
contractually past due 90 days or more as to principal (but which continue to
pay in accordance with their terms), the substantial majority of which consisted
of multi-family residential and commercial real estate 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 $16.8 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 affected by the $8.6 million special SAIF assessment.
See "- Non-interest 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 non-interest
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
63
<PAGE> 105
interest-bearing liabilities. The Bank's interest rate spread was 3.09% and
3.15% for the five months ended August 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 interest margin was 3.45% and 3.39% for the
five months ended August 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 $2.4 million or 4.7% to $52.0 million for the five
months ended August 31, 1997 as compared to the same period in the prior year.
The increase was primarily due to a $3.3 million increase in interest income
offset partially by a $916,000 increase in interest expense. The increase in
net interest income reflected the continued growth in the Bank's interest
earning assets, in particular, loans, and the improved yield on its investment
securities. 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 $3.3 million to $111.8 million for the
five months ended August 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 slightly by a decline in the weighted average
yield earned thereon from 7.42% for the 1996 period to 7.41% for the 1997
period. The composition of the Bank's interest income for the five months
ended August 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 $9.0 million primarily as a result of
the decline in the average balance of such assets from $549.3 million during
the 1996 period to $176.5 million for the 1997 period. However, offsetting
such decline were $6.9 million and $3.7 million increases in interest earned
during the five months ended August 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
64
<PAGE> 106
increase in the aggregate average balance of investment securities and
mortgage-backed and mortgage-related securities which increased from $491.2
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, 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 increased modestly by 1.6% from $58.9 million for the
five months ended August 31, 1996 to $59.8 million for the five months ended
August 31, 1997 with the increase due to a $1.0 million increase in interest
paid on deposits offset partially by a $127,000 decrease in borrowing costs.
The Bank's average balance of deposits remained relatively stable during the
period, increasing slightly to $3.31 billion for the 1997 period from $3.29
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 $3.0 million or 193.4% from $1.6 million for the five months ended
August 31, 1996 to $4.6 million for the five months ended August 31, 1997. The
increase in the provision primarily 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 August 31, 1997, the allowance for loan losses represented
1.1% of total loans and 119.8% of total non-performing loans as compared to
1.1% and 99.8%, respectively, at March 31, 1997 and 0.9% and 57.8%,
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
65
<PAGE> 107
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 (including loans
contractually past due maturity). See "Business - Asset Quality." For the
year ended March 31, 1996, the provision amounted to $3.7 million as compared
to $3.6 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 57.8% and 55.7%,
respectively.
NON-INTEREST INCOME. Non-interest income increased $491,000 or 15.3%
from $3.2 million for the five months ended August 31, 1996 to $3.7 million for
the same period in 1997. The increase reflected a $503,000 increase in service
fees on deposit accounts and other depositor and borrower services and a $13,000
gain received on the sale of loans and securities offset in part by a $307,000
decrease in other non-interest income. The increase in service fees reflect
primarily the increased volume of deposits resulting from the 1996 Branch
Acquisition combined with increased fees. Non-interest 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 non-interest 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 non-interest 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."
NON-INTEREST EXPENSES. Non-interest expenses increased $4.7 million or
15.5% to $34.9 million for the five months ended August 31, 1997 from $30.2
million for the same period
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<PAGE> 108
in 1996. Such increase was primarily due to increased data processing fees
($2.6 million), primarily due to costs incurred in connection with the Bank's
conversion of its data processing systems, increased compensation and employee
benefits expense ($858,000) reflecting the increase in the Bank's work force
resulting from the Bay Ridge acquisition and the 1996 Branch Acquisition,
increased other non-interest expense ($1.5 million) primarily due to expanded
branch operations resulting from the purchase transactions completed in fiscal
1996 and increased occupancy expense ($619,000) due to the Bank's expanded
branch operations resulting primarily from the Bay Ridge acquisition and the
1996 Branch Acquisition. Such increases were partially offset by a $1.1
million decrease in FDIC insurance premiums reflecting the lower premium rate
assessed during the 1997 period. Non-interest 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 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 non-interest 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 non-interest 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 $858,000 or
7.4% to $12.4 million during the five months ended August 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 five months ended August
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 $619,000 to $5.1 million for the five months
ended August 31, 1997 from $4.5 million for the same period in 1996 due to both
the expanded branch network resulting from the acquisitions effect in fiscal
1996 combined with the Bank's on-going branch renovation and improvement
program. However, occupancy costs increased by $3.3 million or 43.4% to $11.0
million in fiscal 1997 from fiscal 1996 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
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<PAGE> 109
or 28.7% increase from fiscal 1995, due primarily to the Bank's on going branch
renovation program.
Data processing service expenses increased by $2.6 million or 120.9%
to $4.7 million during the five months ended August 31, 1997 as compared to the
five months ended August 31, 1996. The increase reflected primarily expenses
being incurred in connection with the conversion of the Bank's data processing
systems. Such expenses amounted to $2.8 million during the five months ended
August 31, 1997. The Bank expects to incur additional costs in connection with
the first phase of the conversion of the Bank's data processing systems which
is expected to be completed in fiscal 1998 as well as the final phase which is
not expected to be completed until fiscal 1999. 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. The primary
reason for the increase was the determination by the Bank to convert its data
processing systems. As a consequence, the Bank expensed $2.6 million during
fiscal 1997 in connection with such conversion. In addition, such expense was
affected by 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.
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 $1.6 million and $1.1
million for the five months ended August 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 five months ended
August 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 five months ended August 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 five months ended August
31, 1997, such expenses amounted to $519,000 as compared to $1.6 million 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 on the balance 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
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<PAGE> 110
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 August
31, 1997 and at March 31, 1997, $1.61 billion of the Bank's deposits were
deemed to be SAIF insured.
During the five months ended August 31, 1997, the amortization of
intangibles declined by $223,000 or 5.7% 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 non-interest expenses, including miscellaneous items such as
equipment expenses, office supplies, postage, telephone expenses, maintenance
and security services contracts and professional fees, increased $1.5 million
or 27.3% to $6.9 million for the five months ended August 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.
Such expenses increased at a much more modest rate from fiscal 1995 to fiscal
1996, only increasing $1.1 million or 11.0% to $11.4 million in fiscal 1996.
INCOME TAXES. Income tax expense amounted to $5.2 million and $9.2
million for the five months ended August 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 five months ended August 31, 1997 as compared to the five months
ended August 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 five months ended August 31, 1997 and for fiscal 1997, 1996 and
1995 were 32.2%, 38.4%, 46.1% and 43.9%, respectively.
As of August 31, 1997, the Bank had a net deferred tax asset of $16.6
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
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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 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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The following table summarizes the anticipated maturities or repricing
of the Bank's interest-earning assets and interest-bearing liabilities as of
August 31, 1997, based on the information and assumptions set forth in the
notes below.
<TABLE>
<CAPTION>
More Than
Within Three to More Than Three Years
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> <C>
Interest-earning assets (1):
Loans receivable:
Single-family residential loans $23,490 $101,598 $195,934 $ 79,079 $114,287 $514,388
Multi-family residential 83,971 216,609 575,556 489,914 121,353 1,487,403
Commercial real estate and
mortgage loans
21,298 27,376 65,658 44,663 11,208 170,203
Other loans:
Cooperative apartment loans 20,568 74,513 190,231 69,415 38,072 392,799
Commercial and commercial
business loans(2) 74,230 5,772 17,376 20,690 5,762 123,830
Mortgage-backed and mortgage-
related securities 16,251 39,534 72,531 26,418 12,605 167,339
Investment securities 2,012 82,338 438,481 13,365 1,332 537,528
Equity securities 16,246 -- -- -- -- 16,246
Other interest-earning assets 102,351 -- -- -- -- 102,351
----- --------- -------- -------- ---------
Total $ 360,417 $547,740 $1,555,767 $743,544 $304,619 $3,512,087
========= ======= ========= ======= ======= =========
Interest-bearing liabilities:
Deposits(3):
NOW accounts $277,003 $ -- $ -- $ -- $ -- $ 277,003
Savings accounts 1,017,793 -- -- -- -- 1,017,793
Money market deposit accounts 216,543 -- -- -- -- 216,543
Certificates of deposit 457,497 908,972 350,975 72,284 486 1,790,214
Other borrowings -- -- 2,690 8,019 6,400 17,109
---------- ------- --------- --------- -------- ---------
Total $1,968,836 $908,972 $ 353,665 $ 80,303 $ 6,886 $3,318,662
========= ======= ======== ======== ======== =========
Excess (deficiency) of interest-earning
assets over interest-bearing liabilities $ (1,608,419) $ (361,232) $1,202,102 $663,241 $297,733 $ 193,425
============ ============ ========= ======= ======= =========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities $ (1,608,419) $ (1,969,651) $(767,549) $(104,308) $193,425
============ ============ ========= ========= =======
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities as a percent of
total assets (42.32)% (51.82)% (20.19)% (2.74)% 5.09%
======== ======== ======== ======== ======
</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> 113
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 August 31, 1997.
<TABLE>
<CAPTION>
NPV as % of
Change (in Basis Points) in Interest Portfolio
Rates Net Portfolio Value Value of Assets
-------------------------------------- ------------------------------------------ ------------------------
NPV Change
Amount $Change %Change Ratio in NPV Ratio
---------- ------------ ----------- -------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+400 $226,086 $(125,941) (35.78)% 6.54% (2.63)%
+300 263,893 (88,134) (25.04) 7.42 (1.75)
+200 299,757 (52,270) (14.85) 8.20 (0.97)
+100 325,983 (26,044) (7.40) 8.70 (0.47)
0 352,027 -- 0.00 9.17 0.00
-100 370,228 18,201 5.17 9.42 0.25
-200 393,822 41,795 11.87 9.80 0.63
-300 456,909 104,882 29.79 11.09 1.92
-400 545,942 193,915 55.09 12.92 3.75
</TABLE>
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<PAGE> 114
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 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> 115
REGULATORY CAPITAL REQUIREMENTS
The following table sets forth the Bank's compliance with applicable
regulatory capital requirements at August 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% $149,520 6.9% $258,319 2.9% $108,799
Risk-based capital
ratios:
Tier I 4.0 101,980 10.1 258,319 6.1 156,339
Total 8.0 203,961 11.3 289,434 3.3 85,473
</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
August 31, 1997. In addition, the net proceeds of the Offerings will initially
enhance the Company's liquidity.
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<PAGE> 116
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 August 31, 1997, there were
outstanding commitments and unused lines of credit by the Bank to originate or
acquire mortgage loans and other loans aggregating $75.1 million and $21.8
million, respectively, consisting primarily of fixed and adjustable-rate
residential loans and fixed-rate commercial real estate loans that are expected
to close during the twelve-months ended August 31, 1998. Certificates of
deposit scheduled to mature in one year or less at August 31, 1997, totaled
$1.37 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> 117
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> 118
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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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.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131 requires
disclosures for each segment
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that are similar to those required under current standards with the addition of
quarterly disclosure requirements and a finer partitioning of geographic
disclosures. It requires limited segment data on a quarterly basis. It also
requires geographic data by country, as opposed to broader geographic regions
as permitted under current standards. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997 with earlier application permitted.
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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
benefited 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 benefited 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 August 31, 1997, the Bank's net loan portfolio totaled
$2.68 billion, which represented 70.6% of the Bank's $3.79 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 $1.49 billion or 54.7% of the total loan
portfolio at August 31, 1997. The second and third largest categories are
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single-family residential mortgage loans and cooperative apartment loans which
totaled $552.4 million or 20.3% and $392.8 million or 14.4%, respectively, of
the total loan portfolio at such date. These three categories accounted for
89.4% of the Bank's total loan portfolio at August 31, 1997. The remainder of
the Bank's loan portfolio was comprised primarily of $163.5 million of
commercial and other real estate loans, $43.7 million of student loans, $32.2
million of commercial business loans and $17.5 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 August 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 $ 552,426 20.3% $ 552,745 21.8% $ 534,539 22.7%
Multi-family residential (1) 1,487,403 54.7 1,365,124 53.7 1,208,039 51.3
Commercial and other real
estate 163,533 6.0 158,336 6.2 162,799 6.9
--------- ---- ---------- ------ ---------- ----
Total mortgage loans 2,203,362 81.0 2,076,205 81.7 1,905,377 80.9
Other loans:
Cooperative apartment
loans 392,799 14.4 348,029 13.7 340,507 14.4
Student loans 43,728 1.6 45,262 1.8 45,947 2.0
Home equity loans and
lines 17,500 0.7 19,545 0.8 23,458 1.0
Consumer and other loans 30,403 1.1 27,005 1.1 20,611 0.9
Commercial business loans 32,199 1.2 25,249 1.0 18,003 0.8
--------- ---- ---------- ------ ---------- ---
Total other loans 516,629 19.0 465,090 18.3 448,526 19.1
--------- ---- ---------- ------ ---------- -----
Total loans receivable 2,719,991 100.0% 2,541,295 100.0% 2,353,903 100.0%
--------- ----- ---------- ====== ---------- =====
Less:
Discount on loans
purchased and
deferred fees 11,470 11,182 10,567
Allowance for loan losses 31,115 27,024 20,528
--------- ----------- ----------
Loans receivable, net $2,677,406 $ 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 17.7 288,381 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 August 31, 1997 and March 31, 1997, $326.4 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
August 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 August 31,
-----------------------------------------------------------------------
Total at
August 31, 2002- 2008- There-
1997 1998 1999 2000 2001 2007 2013 after
----------- --------- -------- --------- --------- --------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential (1) $ 514,388 $ 3,612 $ 611 $ 1,361 $ 1,678 $ 98,445 $121,404 $287,277
Multi-family residential 1,487,403 90,782 118,442 165,713 353,040 727,082 32,233 111
Commercial and other
real estate 163,533 20,557 22,803 18,589 15,529 76,737 3,572 5,746
Other loans:
Cooperative apartment loans 392,799 260 28 235 411 38,208 40,529 313,128
Consumer and commercial
business loans (2) 123,830 81,023 5,488 7,237 6,689 23,059 334 --
---------- -------- -------- --------- --------- --------- -------- --------
Total(3) $2,681,953 $196,234 $147,372 $193,135 $ 377,347 $963,531 $198,072 $606,262
========== ======== ======== ========= ========= ========= ======== ========
</TABLE>
- ------------
(1) Does not include $38.0 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 $2.49 billion of loan principal repayments contractually due
after August 31, 1998, $1.77 billion have fixed rates of interest and
$719.0 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 five
months ended August 31, 1997, the Bank purchased $11.2 million and $10.0
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 more than 15 years 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 15 years or less and
adjustable-rate loans. As of August 31, 1997, the Bank was servicing $297.2
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 Five Months
Ended August 31, Year Ended March 31,
------------------------ --------------------------------------------
1997 1996 1997 1996 1995
---------- ----------- ----------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Total loans held at beginning of $2,541,295 $2,353,903 $2,353,903 $2,043,412 $1,714,396
period
Originations of loans:
Single-family residential 26,144 71,634 106,688 31,296 201,877
Multi-family residential 195,287 136,989 225,906 144,560 359,343
Commercial and other real estate 12,720 11,148 49,924 18,055 33,426
Other:
Cooperative apartment loans 57,589 70,907 115,685 23,862 116,588
Consumer and commercial business
loans (1) 19,970 13,621 43,009 41,195 52,791
------ ------- --------- ---------- ----------
Total originations 311,710 304,299 541,212 258,968 764,025
Purchases of loans:
Single-family residential 11,186 9,835 19,097 171,108 --
Multi-family residential -- -- -- 31,126 --
Commercial and other real estate -- -- -- 67,084 --
Other loans:
Cooperative apartment loans 9,998 8,298 11,724 2,317 --
Consumer and commerical
business loans (1) -- -- -- 2,525 --
------- -------- --------- --------- ----------
Total purchases 21,184 18,133 30,821 274,160(2) --
------- -------- --------- --------- ----------
Total originations and 332,894 322,432 572,033 533,128 764,025
purchases
Loans sold:
Single-family residential 4,301 1,217 4,066 5,693 11,565
Multi-family residential -- -- -- -- 119,692
Commercial and other real estate -- -- 1,494(3) -- --
Other loans:
Cooperative apartment loans 234 41 67,658 1,123 82
Consumer and commerical business
loans (1) -- -- -- -- --
-------- -------- ---------- ---------- ----------
Total sold 4,535 1,258 73,218 6,816 131,339
Repayments (4) 149,663 124,701 311,423 215,821 303,670
--------- --------- ---------- ---------- ----------
Net loan activity 185,366 196,473 187,392 310,491 329,016
--------- --------- ---------- ---------- ----------
Total loans held at end of period $2,719,991 $2,550,376 $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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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 August 31, 1997, the Bank had multi-family residential
mortgage loans totaling $1.49 billion in its portfolio, comprising 54.7% 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 as well as insurance companies. Multi-family residential
mortgage loans in the Bank's portfolio generally range in amount from $500,000
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, licensed and 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 August 31, 1997, the Bank had $345.5 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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<PAGE> 129
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 August 31, 1997, amounted to
$163.5 million or 6.0% 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. Such loans
account for 25.0% of total non-performing loans at August 31, 1997. See "Risk
Factors--Risks Related to Multi-family Residential and Commercial Lending
Activities" and "-Asset Quality."
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
August 31, 1997, $552.4 million or 20.3% and $392.8 million or 14.4% 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 August 31, 1997, adjustable-rate
loans represented $642.7 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
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loan documents. In both cases, the loans are originated and underwritten in
accordance 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 five months ended August 31, 1997 and fiscal
1997, the Bank purchased $11.2 million and $19.1 million and $10.0 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 $6.6 million and $10.7 million,
respectively, and $34.4 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 August 31, 1997, such loans
amounted to $392.8 million or 14.4% 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 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
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of origination. For the five months ended August 31, 1997 and the year ended
March 31, 1997, the Bank originated or purchased $87.8 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 five months ended August 31, 1997 and the year ended March 31, 1997,
the Bank originated or purchased an aggregate of $17.1 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 more than 15
years 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
five months ended August 31, 1997 and the year ended March 31, 1997, the Bank
sold single-family residential mortgage loans totaling $4.3 million and $4.1
million, respectively.
Under the Bank's underwriting guidelines, ARMs can be originated with
loan-to-value ratios of up to 80%. 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.
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Substantially all of the Bank's mortgage loans include due-on-sale
clauses which provide the Bank with the contractual right to deem the loan
immediately due and payable in the event 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
August 31, 1997, $91.6 million or 3.4% 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 August 31, 1997, such loans
amounted to $43.7 million or 1.6% 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 August 31, 1997, home equity lines and loans amounted
to $17.5 million, or 0.7% of the Bank's total loan portfolio and the Bank had
$3.6 million of unused commitments pursuant to such equity lines of credit.
At August 31, 1997, the remaining $30.4 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
August 31, 1997, the Bank had $14.9 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
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in the Bank, totaled $10.3 million at August 31, 1997, while credit card loans
amounted to $1.9 million at such date.
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
August 31, 1997, commercial business loans totaled $32.2 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 expand moderately 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 increasing the number of
commercial business loan officers.
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
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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.
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 licensed and certified in-house appraisers. In addition,
appraisals conducted by independent appraisers are also reviewed by the Bank's
in-house licensed and certified 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 August 31, 1997, the Bank had $10.0 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
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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 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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DELINQUENT LOANS. The following table sets forth delinquencies in the
Bank's loan portfolio as of the dates indicated:
<TABLE>
<CAPTION>
At August 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 Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
-------- --------- --------- --------- --------- --------- ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential 17 $417 40 $2,772 13 $ 535 56 $ 3,311
Multi-family residential 1 13 2 479 -- -- 3 1,918
Commercial and other
mortgage loans __ __ 6 4,535 -- -- 5 9,209
Other loans:
Cooperative apartment
loans 2 50 12 363 4 196 13 427
Consumer and commercial
business loans (1) 165 510 353 1,656 225 1,004 300 1,757
--- ----- --- ----- --- ------ --- --------
Total 185 $ 990 413 $9,805 242 $1,735 377 $16,622
=== ==== === ===== === ===== === ======
Delinquent loans to total
loans (3) 0.04% 0.36 % .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
Consumer and commercial
business loans (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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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 August 31, --------------------------------------------------------------
1997 1997 1996 1995 1994 1993
-------------- --------- --------- ---------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans:
Mortgage loans:
Single-family residential . . . . . . $2,650 $ 2,474 $ 2,890 $ 2,074 $ 2,438 $ 2,905
Multi-family residential . . . . . . 479 1,918 3,379 2,018 2,095 1,953
Commercial and Other . . . . . . . . 6,029(1) 11,155 12,600 1,975 2,033 3,183
Other loans:
Cooperative apartment loans . . . . . 363 427 355 451 606 1,068
Consumer and commercial business
loans (1) . . . . . . . . . . . . . 570 956 1,135 1,590 1,621 1,597
------- -------- ------- ------- ------- -------
Total non-accruing loans . . . . 10,091 16,930 20,359(2) 8,108 8,793 10,706
Loans past due 90 days or more as to:
Interest and accruing . . . . . . . . 1,909 1,718 8,737 7,564 4,715 5,004
Principal and accruing (3) . . . . . . . 13,984 8,442 6,413 5,591 7,535 5,981
------ -------- ----- ----- ----- -----
Total past due loans and accruing 15,893 10,160 15,150 13,155 12,250 10,985
------- -------- ------ ------ ------ ------
Total non-performing loans . . . 25,984 27,090 35,509 21,263 21,043 21,691
------- -------- ------- ------- ------- -------
Other real estate owned, net (4) . . . . . . 279 540 973 1,691 2,024 4,534
-------- --------- ------- ------- ------- -------
Total non-performing assets (5) . . . . . . . $ 26,263 $ 27,630 $36,482 $22,954 $23,607 $26,225
======= ======= ====== ====== ====== ======
Allowance for loan losses as a
percent of total loans . . . . . . . . . . 1.14% 1.06% 0.87% 0.58% 0.51% 0.43%
Allowance for loan losses as a percent of
non-performing loans . . . . . . . . . . . 119.75 99.76 57.81 55.73 41.68 29.57
Non-performing loans as a percent of
total loans . . . . . . . . . . . . . . . 0.96 1.07 1.51 1.04 1.23 1.47
Non-performing assets as a percent of total
assets . . . . . . . . . . . . . . . . . . 0.69 0.74 0.94 0.88 0.90 1.10
</TABLE>
- ----------
(1) Consists primarily of commercial business loans and home equity lines
of credit.
(2) Includes $9.5 million of loans acquired in the Bay Ridge acquisition.
(3) Reflects loans more than 90 days or more past maturity which
continue to make payments on a basis consistent with the original
repayment schedule.
(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 principal.
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At August 31, 1997, the Bank's non-performing assets totaled $26.3
million compared to $27.6 million, $36.5 million and $23.0 million at March 31,
1997, 1996 and 1995, respectively. The Bank's total non-performing assets as a
percentage of total assets were .69%, 0.74%, 0.94% and 0.88% at August 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 $8.9 million, or 24.3%, 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 decline in non-performing
assets from March 31, 1996 to March 31, 1997 was partially offset by a $2.0
million increase in loans past due 90 days or more as to principal.
The Bank's total non-accruing loans amounted to $10.1 million at
August 31, 1997 compared to $16.9 million at March 31, 1997 and $20.4 million
at March 31, 1996. The primary reason for the decline from March 31, 1997 to
August 31, 1997 was the repayment of two non-accrual commercial loans
aggregating $6.7 million extended to one borrower. 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 August 31, 1997, the Bank had $6.0 million of non-accrual
commercial and other real estate mortgage loans. At such date, $2.0 million of
the outstanding non-accrual commercial and other real estate loans related to
one loan to one Brooklyn-based real estate developer 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 New York Board of Education has entered into a lease with
respect to the property, subject to completion of construction (which has
occurred). However, as of the date hereof, the lease has not been entered
into. 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 $38.5 million at August 31, 1997, of which $4.2
million is considered non-performing and/or classified substandard and $15.9
million is classified special mention. As a result of the satisfaction by the
borrower of these loans extended thereto, the amount of non-performing loans
extended to this borrower deemed non-performing declined to $_____ million.
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."
At August 31, 1997, the Bank's non-accrual multi-family residential
mortgage loans amounted to $479,000 and was comprised of two loans.
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At August 31, 1997, the Bank's $2.7 million of non-accrual
single-family residential mortgage loans consisted of 31 loans which had an
average balance of $85,000. At such date, non-accrual loans also included 12
cooperative apartment loans with an aggregate balance of $363,000 and six home
equity lines of credit with an aggregate balance of $424,000. In addition, at
August 31, 1997, the Bank had three commercial business loans totaling $122,000
on non-accrual.
At August 31, 1997, the Bank's $14.0 million of loans past due 90 days
or more as to principal consists of loans which are contractually past due
their maturity but which continue to make payments on a basis consistent with
the loans' original amortization schedule. The amount of such loans increased
by $5.5 million from $8.4 million at March 31, 1997. Such loans consisted
primarily of $9.6 million of multi-family residential loans and $3.8 million of
commercial real estate loans. At such date, the $9.6 million of contractually
past due maturity multi-family residential loans consisted of 38 loans with an
average principal balance of approximately $253,000 while the $3.8 million of
commercial real estate loans consisted of 14 loans with an average principal
balance of approximately $269,000. The Bank's multi-family residential and
commercial real estate loans are generally structured as a five or ten year
balloon loan with the ability of the borrower to extend the term of the loan
for an additional five years. See "- Lending Activities - Multi-family
Residential and Commercial Real Estate Lending." At the contractual maturity
date of these particular loans, the borrowers have failed to repay in full the
principal due. The borrowers, however, have continued to make payments on the
loans consistent with the loans' payment terms based on the original
amortization schedule. Although the Bank has contacted the borrowers
requesting that they refinance their loans, the borrowers have not yet taken
such step. The majority of such loans bear interest rates which are above
those charged currently on newly originated multi-family residential and
commercial real estate loans. Furthermore, the Bank inspects each of such
properties at least annually. In addition, in many cases, based on current
financial information provided to the Bank, the properties are producing
sufficient cash flow to service the debt. Based upon management's review of
these credits, the Bank does not believe that any material losses will be
incurred with respect to such properties. However, such loans' delinquency has
been and continues to be considered in establishing the level of the Bank's
allowance for loan losses. The Bank is increasing its efforts to have such
loans either be refinanced or have the term extended.
The interest income that would have been recorded during the five
months ended August 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 $457,000 and $1.7 million,
respectively. The actual amount of interest recorded as income on such loans
during the periods amounted to $118,000 and $224,000, respectively.
At August 31, 1997, the Bank's other real estate owned consisted of a
$279,000 investment in and five individual cooperative apartment loans.
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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 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 August 31, 1997, the Bank had classified an aggregate of $16.2
million of assets (a substantial portion of which were also considered
non-performing assets) including $2.0 million of loans acquired from Bay
Ridge. In addition, at such date the Bank had
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$68.5 million of assets which were designated by the Bank as special mention.
At August 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 August 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. Also included in assets deemed special mention were
$12.7 million of loans which were 90 days or more past due maturity which
continued to make payments on a basis consistent with the original repayment
schedule.
ALLOWANCE FOR LOAN LOSSES. The Bank's allowance for loan losses
amounted to $31.1 million at August 31, 1997 as compared to $27.0 million at
March 31, 1997. At August 31, 1997, the Bank's allowance amounted to 1.1% of
total loans and 119.8% 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 $4.1 million from March
31, 1997 to August 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 five months ended August
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, including loans which are contractually past due maturity
90 days or more.
100
<PAGE> 142
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.
The following table sets forth the activity in the Bank's allowance
for loan losses during the periods indicated.
<TABLE>
<CAPTION>
Five Months Ended
August 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) 3,694 1,375 8,425 3,300 3,300 3,075 1,925
Consumer and
Commercial business
loans(3) 884 185 (465)(4) 379 292 750 1,862
----- ------ ------- ------- ------ ------ ------
Total provision 4,578 1,560 7,960 3,679 3,592 3,825 3,787
Charge-offs:
Mortgage loans(2) 876 940 1,636 1,634 842 1,049 2,371
Consumer and
Commercial business
loans(3) 54 93 509 751 220 1,259 2,066
----- ------ ------- ------- ------ ------ ------
Total charge-offs 930 1,033 2,145 2,385 1,062 2,308 4,437
------ ------- ------- ------- ------ ------ ------
Recoveries:
Mortgage loans(2) 300 377 545 176 294 28 41
Consumer and
Commercial business
loans 144 48 136 299 255 810 650
----- ----- ------- ------- ------ ------ ------
Total recoveries 444 425 681 475 549 838 691
---- ------ ------- ------- ------ ------ ------
Net loans (charged off)
recovered 486 (608) (1,464) (1,910) (513) (1,470) (3,746)
------ ------ ------- ------- ----- ------- -------
Allowance at end of
period $31,115 $21,480 $27,024 $20,528 $11,849 $8,770 $6,415
====== ====== ====== ====== ====== ===== =====
Net loans charged off to
allowance for loan losses 0.02% 0.03% 0.06% 0.09% 0.03% 0.09% 0.27%
Allowance for possible
loan losses as a percent
of gross loans 1.14% 0.84% 1.06% 0.87% 0.58% 0.51% 0.43%
Allowance for possible
loan losses as a percent
of total non-performing
loans 119.75% 56.09% 99.76% 57.81% 55.73% 41.68% 29.57%
====== ====== ======= ====== ======= ======= ======
</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.
(5) Non-performing loans consist of non-accrual loans and loans 90 days or
more past due as to interest or principal and other loans which have
been identified by the
101
<PAGE> 143
Bank as presenting uncertainty with respect to the collectibility of interest
or principal.
102
<PAGE> 144
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 August 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) $26,487 95.5% $23,370 95.4% $ 16,036 95.4% $ 7,284 94.6%
Consumer and
commercial business
loans(2) . . . . . 4,628 4.5 3,654 4.6 4,492 4.6 4,565 5.4
------- ----- ------- ----- ------- ----- ------- -----
Total . . . . $31,115 100.0% $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
----- ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage loans(1) $4,532 92.7% $2,478 91.1%
Consumer and
commercial business
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.
103
<PAGE> 145
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 August 31, 1997, these equity investments totaled $16.2 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)
104
<PAGE> 146
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 publicly traded 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 $70.7 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
105
<PAGE> 147
average life, coupon rate and prepayment characteristics. At August 31, 1997,
none of the 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 August 31, 1997, the Bank's $167.3 million of mortgage-backed and
mortgage-related securities, representing 4.4% of the Bank's total assets, were
comprised of $96.6 million of mortgage-backed securities, which were issued or
guaranteed by the FHLMC, the FNMA or the GNMA, and $70.7 million of CMOs,
substantially all of which are secured by FNMA and FHLMC mortgage-backed
securities.
At August 31, 1997, the contractual maturity of approximately 18.7% 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
106
<PAGE> 148
mortgage-backed security, and these assumptions are reviewed periodically to
reflect actual 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.
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 Five Months Ended
August 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 -- (75,647) (310,252) -- (345)
Repayments and
prepayments (26,020) (72,335) (146,836) (60,920) (67,849)
Accretion of premium (279) (1,514) (4,307) (2,624) (3,160)
Amortization of discounts 84 166 385 189 195
Unrealized gains (losses) on
available-for-sale mortgage-
backed and mortgage-
related securities 2,575 (566) 3,379 (2,944) --
------- -------- ------- -------- -------
Mortgage-backed and
mortgage-related
securities at end of period $167,339 $471,393 $190,979 $516,023 $305,545
======= ======= ======= ======= =======
</TABLE>
- -----------------------------
(1) All mortgage-backed and mortgage-related securities at August 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.
107
<PAGE> 149
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 August 31, 1997,
the Bank had U.S. Government and federal agency obligations totaling $536.1
million or 14.1% of total assets at such date. Of such amount, $27.2 million
consisted of U.S. Treasury bills with a maturity of less than one year and
$486.3 million consisted of U.S. Treasury notes with maturities of three years
or less (of which $50.0 million had maturities of one year or less).
The following table sets forth the activity in the Bank's aggregate
investment securities portfolio during the periods indicated.
<TABLE>
<CAPTION>
For the Five Months Ended
August 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 468,098 381,369 785,334 1,154,428(2) 62,364
Sales (178,568) (169,079) (339,842) (213,010) (242,057)
Maturities (102,150) (570,000) (823,825) (307,512) (92,471)
Accretion of premium (194) 12 (85) (25) (1,624)
Amortization of discounts 3,972 5,551 11,551 5,945 2,253
Unrealized gains (losses) on
available-for-sale investment
securities 5,129 431 531 (7,248) 6,894
------- ------- ------- -------- --------
Investment securities at end of
period $553,774 $372,107 $357,487 $723,823 $ 91,245
======= ======= ======= ======= ========
</TABLE>
- ------------------------------
(1) All investment securities at August 31, 1997 and March 31, 1997 were
deemed available for sale.
(2) Includes $179.9 million of investment securities acquired from Bay
Ridge.
108
<PAGE> 150
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 August 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
agency obligations $533,454 $536,131 $ 345,229 $ 345,144 $ 670,224 $669,281 $ 7,433 $ 7,468
Corporate securities 296 293 363 358 3,220 3,685 5,000 5,000
Municipal securities 1,104 1,104 1,104 1,104 -- -- -- --
Stocks:
Preferred 281 285 281 280 450 445 19,500 19,500
Common 13,333 15,961 10,333 10,601 10,288 10,417 22,991 29,850
Mortgage-related securities:
FNMA 5,965 6,064 7,319 7,175 3,108 3,091 -- --
GNMA 73,116 76,072 79,684 80,757 -- -- -- --
FHLMC 14,339 14,502 18,780 18,594 60,493 59,819 -- --
CMOs 70,909 70,701 84,761 84,453 334,664 332,411 -- --
------- ------- -------- --------- ---------- --------- ---------- --------
Total $712,797 $721,113 $ 547,854 $ 548,466 $1,082,447 $1,079,149 $ 54,924 $ 61,818
======= ======= ======== ======== ========= ========= ========== =======
</TABLE>
109
<PAGE> 151
The following table sets forth certain information regarding the
maturities of the Bank's investment and mortgage-backed and mortgage-related
securities at August 31, 1997, all of which were classified as available for
sale.
<TABLE>
<CAPTION>
At August 31, 1997 Contractually Maturing
-----------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Under 1 Average 1-5 Average 6-10 Average Over 10 Average
Year Yield Years Yield Years Yield Years Yield Total
---- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
U.S. Government obligations $77,253 5.56% $ 436,366 6.35% $ 228 8.27% $ -- --% $513,847
Agency securities 6,987 5.53 15,297 6.66 -- -- -- -- 22,284
Corporate securities 110 8.22 183 8.22 -- -- -- -- 293
Municipal securities -- -- -- -- 1,104 7.25 -- -- 1,104
Mortgage-backed and
mortgage-related securities:
FNMA 4,052 6.97 1,727 6.33 215 8.31 70 8.96 6,064
GNMA 4,078 8.25 19,793 8.27 26,229 8.41 25,972 8.57 76,072
FHLMC 5,559 6.72 3,747 8.21 2,485 8.42 2,711 8.33 14,502
CMOs 14,208 6.38 51,152 6.48 2,885 5.96 2,456 5.85 70,701
------- -------- ------- ------- -------
Total $112,247 $ 528,265 $ 33,146 $ 31,209 $704,867
======= ======== ======= ======= =======
</TABLE>
110
<PAGE> 152
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 accounts, non-interest bearing
checking accounts and savings accounts, which generally have rates
substantially less than certificates of deposit. At August
111
<PAGE> 153
31, 1997, these types of deposits amounted to $1.58 billion or 46.9% of the
Bank's total deposits. During the five months ended August 31, 1997 and fiscal
1997, the weighted average rate paid on the Bank's demand deposits and passbook
savings deposits amounted to 2.66% and 2.88%, respectively, and 2.65% and
2.91%, respectively, as compared to a weighted average rates of 5.59% and 5.53%
paid on the Bank's certificates of deposit during these periods.
The Bank's deposits increased from March 31, 1997 to August 31, 1997
by $46.4 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.
112
<PAGE> 154
The following table sets forth the activity in the Bank's deposits
during the periods indicated.
<TABLE>
<CAPTION>
Five Months Ended August 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 (70,742) (131,126) (158,765) (4,895) (67,884)
Interest credited 46,873 46,552 138,840 106,379 76,433
--------- --------- --------- --------- ---------
Net increase (decrease)
in deposits 46,398 (84,574) (71,332) 1,160,468 28,981
--------- --------- --------- --------- ---------
Ending balance $3,371,956 $3,312,316 $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 August 31, ------------------------------------------------
1997 1997 1996 1995
--------------- ----------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
2.00% to 3.99% $ 3,035 $ 2,666 $ 6,775 $121,160
4.00% to 4.99% 94,268 215,992 413,348 216,568
5.00% to 5.99% 1,443,325 1,260,417 798,536 258,688
6.00% to 6.99% 157,106 174,972 457,039 403,209
7.00% to 8.99% 89,688 89,701 121,542 78,638
9.00% to 10.99% 2,792 8 8 94
---------- ---------- ---------- ----------
$1,790,214 $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 August 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% $ 2,801 $ 234 $ -- $ -- $ -- $ 3,035
4.00% to 4.99% 88,375 3,674 2,184 23 12 94,268
5.00% to 5.99% 670,064 535,556 185,120 20,180 32,405 1,443,325
6.00% to 6.99% 41,346 13,978 20,468 41,551 39,763 157,106
7.00% to 8.99% 7,275 1,367 5,541 74,915 590 89,688
9.00% to 10.99% 1,242 557 993 -- -- 2,792
----------- ------------ ---------- ------------ ---------- ---------
Total $811,103 $ 555,366 $214,306 $ 136,669 $ 72,770 $1,790,214
======= ======== ======= ========= ======= =========
</TABLE>
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<PAGE> 155
As of August 31, 1997, the aggregate amount of outstanding time
certificates of deposit in amounts greater than or equal to $100,000 was
approximately $206.2 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 . . . . . . . . . . . . . $ 50,177
Over 3 months through 6 months . . . . . . 37,578
Over 6 months through 12 months . . . . . 59,338
Over 12 months . . . . . . . . . . . . . . 59,064
------
$206,157
=======
</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 August 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 August
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 707 full-time employees and 163 part-time employees at
August 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 August 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 the Red Hook section
of Brooklyn will occupy.
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<PAGE> 156
The following table sets forth certain information relating to the
Bank's offices at August 31, 1997.
<TABLE>
<CAPTION>
Net Book Value of
Property and
Lease Leasehold Deposits at
Owned or Expiration Improvements at August 31,
Location Leased Date August 31, 1997 1997
- ---------------------------------------- ----------- ---------------- -------------------- -------------
(In Thousands)
<S> <C> <C> <C> <C>
EXECUTIVE AND ADMINISTRATIVE OFFICES:
-------------------------------------
195 Montague Street Owned $17,109 $72,293
Brooklyn, New York 11201(1)
BRANCH OFFICES:
--------------
130 Court Street Owned 5,300 186,445
Brooklyn, New York 11201 (2)
6424-18th Avenue Owned 1,004 349,482
Brooklyn, New York 11204
23 Newkirk Plaza Owned 2,350 122,096
Brooklyn, New York 11226
443 Hillside Avenue Owned 2,214 203,755
Williston Park, New York 11596
23-56 Bell Boulevard Leased 9/30/1998(3) 325 208,633
Bayside, New York 11360
250 Lexington Avenue Leased 12/31/2001(4) 108 63,962
New York, New York 10016
1416 East Avenue Leased (5) 446 116,342
Bronx, New York 10462
1108 Northern Boulevard Leased month to month (6) 196 74,977
Manhasset, New York 11030
1769-86th Street Owned 1,603 166,754
Brooklyn, New York 11214
Pratt Institute Campus Leased (7) -- 4,221
200 Willoughby Avenue
Brooklyn, New York 11205
</TABLE>
115
<PAGE> 157
<TABLE>
<CAPTION>
Net Book Value of
Property and
Lease Leasehold Deposits at
Owned or Expiration Improvements at August 31,
Location Leased Date August 31, 1997 1997
- ---------------------------------------- ----------- ---------------- -------------------- -------------
(In Thousands)
<S> <C> <C> <C> <C>
2357-59 86th Street Owned 1,981 83,680
Brooklyn, New York 11214
4514 16th Avenue Owned 1,994 126,267
Brooklyn, New York 11204
37-10 Broadway Owned 1,163 113,084
Long Island City, New York 11103
22-59 31st Street Owned 671 94,262
Long Island City, New York 11105
24-28 34th Avenue Leased 6/30/2007 321 67,270
Long Island City, New York 11106
51-12 31st Avenue Leased 10/31/1997 314 41,739
Woodside, New York 11377
83-20 Roosevelt Avenue Leased 1/31/2005 1,068 59,380
Jackson Heights, New York 11372
75-15 31st Avenue Leased 4/30/2004 374 79,758
Jackson Heights, New York 11370
89-01 Northern Boulevard Leased 7/31/2004 323 75,742
Jackson Heights, New York 11372
150-28 Union Turnpike Leased 5/31/2012 202 48,067
Flushing, New York 11367
234 Prospect Park West Owned 2,653 32,766
Brooklyn, New York 11215
7500 Fifth Avenue Owned 591 67,381
Brooklyn, New York 11209
440 Avenue P Owned 700 84,141
Brooklyn, New York 11223
4703 13th Avenue Owned 1,143 85,603
Brooklyn, New York 11219
</TABLE>
116
<PAGE> 158
<TABLE>
<CAPTION>
Net Book Value of
Property and
Lease Leasehold Deposits at
Owned or Expiration Improvements at August 31,
Location Leased Date August 31, 1997 1997
- ---------------------------------------- ----------- ---------------- -------------------- -------------
(In Thousands)
<S> <C> <C> <C> <C>
Owned 596 71,694
301 Avenue U
Brooklyn, New York 11223
8808 Fifth Avenue Owned 2,158 60,711
Brooklyn, New York 11209
1310 Kings Highway Owned 412 69,603
Brooklyn, New York 11229
4823 13th Avenue Owned 1,487 112,618
Brooklyn, New York 11219
1302 Avenue J Owned 790 111,220
Brooklyn, New York 11230
1550 Richmond Road Owned 1,094 136,593
Staten Island, New York 10304
1460 Forest Avenue Leased 8/27/2011 14 125,458
Staten Island, New York 10302
35-06 Broadway Leased 6/13/2002 811 55,959
Astoria, New York 11106
OTHER PROPERTY:
498 Columbia Street Leased 12/31/2002 45 --
Brooklyn, New York 11231(8)
------- ---------
Totals $ 51,560 $3,371,956
======= =========
</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> 159
- -------------------
(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 August 31, 1997, the SBLI Department had policies totaling $414.0
million in force.
SUBSIDIARIES
At August 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 August 31, 1997, ICRC held $799.5 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 August 31, 1997, Wiljo had total assets
of $7.8 million and the Bank's equity investment in Wiljo amounted to $6.9
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
118
<PAGE> 160
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> 161
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).
120
<PAGE> 162
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 August 31, 1997, approximately 68.4% 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 August 31, 1997, the Bank was in compliance
with the above restrictions.
121
<PAGE> 163
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.
122
<PAGE> 164
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
123
<PAGE> 165
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 August 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 August 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> 166
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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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 August 31, 1997, the Bank's SBLI
Department had $414.0 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, 1991, (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 August 31, 1997, the book value of the Bank's investments under
this exception was $13.4 million, which equaled 5.2% 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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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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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 August 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 August 31, 1997 and
June 30, 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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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 $1.80 billion of BIF-assessable
deposits and $1.61 billion of SAIF-assessable deposits at June 30, 1997, the
Bank would expect to pay $309,000 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 August 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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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 August 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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or 5% of its advances from the FHLB of New York, whichever is greater. At
August 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 August 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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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 54 Director 1994
Robert B. Catell 60 Director 1984
Rohit M. Desai 58 Director 1992
Chaim Y. Edelstein 54 Director 1991
Donald H. Elliott 65 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 59 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 August 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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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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<PAGE> 178
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 46 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 63 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> 179
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
-----------------------------------------------------------------------------
Awards Payouts
Other -----------------------------------
Name and Fiscal Annual Securities All Other
Principal Position Year Salary(1) Bonus Compensation(2) Restricted Underlying LTIP Compensation
Stock Options Payouts
- --------------------------------------------------------------------------------------------------------------------------------
<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)
138
<PAGE> 180
- -------------
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> 181
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
140
<PAGE> 182
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
141
<PAGE> 183
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> 184
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
6,122,685 shares based upon the issuance of 61,226,852 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> 185
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 166,982 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 1,530,671 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 306,134 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
(2,449,074 shares, based on the sale of 61,226,852 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> 186
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 equal awards totaling approximately 734,722 shares would be granted
to 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 612,268 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 122,453 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 on following page)
145
<PAGE> 187
- ---------
(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 Average Annual
Credited 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> 188
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> 189
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 0.11 50,000 0.08
Chaim Y. Edelstein . . . . . . . 500,000 50,000 0.11 50,000 0.08
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 0.11 50,000 0.08
Scott M. Hand . . . . . . . . . . 50,000 5,000 0.01 5,000 0.01
Donald E. Kolowsky . . . . . . . 500,000 50,000 0.11 50,000 0.08
Janine Luke . . . . . . . . . . . 50,000 5,000 0.01 5,000 0.01
Malcolm Mackay . . . . . . . . . 500,000 50,000 0.11 50,000 0.08
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 0.11 50,000 .08
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 1.02% 467,500 .74%
========= ======= ====== ======= ====
</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 3,620,370 shares and 4,898,148
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 1,810,185 shares and 2,449,074 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 4,525,463 shares
or 6,122,685 shares at the minimum and the maximum, respectively, of
the Estimated Price Range).
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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
was subsequently amended on November 5, 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
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<PAGE> 191
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 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
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<PAGE> 192
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.
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
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<PAGE> 193
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 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, as a condition to receiving the non-objection of the
FDIC and the Department and the Superintendent's approval to the Bank's
Conversion, the Foundation has been required to commit to the FDIC and the
Department 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 condition, the FDIC and the Department 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 and the Department 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 and the Department that compliance with the
voting requirement would have the effect described in clauses (i), (ii) or
(iii) above. Under those circumstances, the FDIC and the Department would
grant waivers of the voting restriction upon submission of such legal
opinions(s) by the Company or the Foundation that are satisfactory to the FDIC
and the Department. In the event that the FDIC and the Department 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
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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 3,620,370, 4,259,259 and 4,898,148 shares, which would have a market
value of $36.2 million, $42.6 million and $49.0 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 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
48,875,000, 57,500,000 and 66,125,000 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
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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 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 condition, in the event that
the Company or the Foundation receives an opinion of its legal 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 and the
Department 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
$799.5 million or 18.7% of pro forma consolidated assets and the Bank's pro
forma leverage and total risk-based capital ratios would be 11.9% and 19.4%,
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
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<PAGE> 196
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 $20.0 million (based on the Bank's pre-tax income for fiscal
1997, an assumed marginal tax rate of 47% and a deduction for the contribution
of Common Stock equal to $42.6 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
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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 subject to the following conditions agreed to by the
Foundation in writing as a condition to receiving the FDIC's non-objection to
and Superintendent's approval of the Conversion: (i) the Foundation will be
subject to examination by the FDIC and the Department; (ii) the Foundation must
comply with supervisory directives imposed by the FDIC and the Department;
(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 and the Department would waive this voting restriction
under certain circumstances if compliance with the voting restriction would:
(a) cause a 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 and the Department 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 and the Department. There can be no assurances that a legal
opinion addressing these issues could be rendered, or if rendered, that the
FDIC and the Department would grant unconditional waivers 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)
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<PAGE> 198
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.
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.
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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 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.
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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 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 4,898,148 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.
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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 _________, 1998, 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, 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
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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 ____, 1998, 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 ______, 1998, 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 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, together with associates of and persons acting in concert with such
persons, 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
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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.
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 fee of $70,000 for the initial appraisal, $10,000 for
each updated appraisal and $15,000 for the business plan, 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
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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 $532.4 million as of June 20, 1997, as most recently updated as of
October 29, 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 45,254,630 to 61,226,852 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 $452.5 million or above $704.1
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 $612.2 million (the maximum of the Valuation
Range) and up to $704.1 million (the maximum of the Valuation Range, as
adjusted by 15%), the Company may be required by 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.
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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."
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
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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 Offering, currently $500,000 of Common
Stock, subject to the overall limitation in clause (6) below;
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(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% of the total shares
of Common Stock issued in the Conversion in 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
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
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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 use its best efforts 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 is not obligated
to take or purchase any 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 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,
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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
$6.7 million and $9.1 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 noon, Eastern Time, on the
Expiration Date. In addition, the Company and the Bank will require 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
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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. Joint
stock registration will be allowed only if the qualifying deposit account is so
registered.
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.
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
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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 but will only be a memorandum account. 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
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Section 368(a)(1)(A) of the Code, (2) no gain or loss will be recognized by the
Bank upon the receipt of the assets of the converted Mutual Holding Company in
such merger, (3) 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, (4) the Company will recognize no gain or loss upon
the receipt of cash in the Offerings for shares of Common Stock, and (5) 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 not be able
to sell the shares of Common Stock for which they have subscribed, even though
trading of Common Stock may be commenced.
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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 or judicial
declaration of incompetence of such director or executive officer or pursuant
to a merger or similar transaction approved by the Department. 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.
Pursuant to Department regulations, the Company will generally be
prohibited from repurchasing any shares of Common Stock within one year
following consummation of the
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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 owner), such
person would be the beneficial owner of more than 10% of any class of an
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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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<PAGE> 221
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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<PAGE> 222
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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<PAGE> 223
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
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<PAGE> 224
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
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<PAGE> 225
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 61,226,852 shares (70,410,880
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
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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.
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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.
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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 (including, among other things, the
qualification of the Foundation as a charitable organization and the
deductibility of the contribution thereto for income tax purposes) 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.
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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.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Financial Condition at August 31, 1997 (unaudited) and at March 31,
1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income for the five months ended August 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 August 31,
1997 and 1996 (unaudited) and for the years ended March 31, 1997, 1996 and 1995 . . . . . . . . 4
Consolidated Statements of Cash Flows for the five months ended August 31, 1997 and 1996
(unaudited) and for the years ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 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> 231
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
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<PAGE> 232
Independence Savings Bank
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
AUGUST 31 MARCH 31
1997 1997 1996
-----------------------------------------------------
(UNAUDITED)
(In thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 39,893 $ 310,429 $ 44,410
Certificates of deposit 72,659 - -
Commercial paper - 39,866 -
Federal funds sold 72,977 24,341 58,782
-----------------------------------------------------
Total cash and cash equivalents 185,529 374,636 103,192
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 553,774 357,487 683,828
Mortgage-backed and mortgage related 167,339 190,979 395,321
-----------------------------------------------------
Total securities 721,113 548,466 1,239,846
Mortgage loans on real estate 2,192,115 2,065,153 1,894,926
Other loans 516,406 464,960 448,410
-----------------------------------------------------
Total loans 2,708,521 2,530,113 2,343,336
Less allowance for possible loan losses (31,115) (27,024) (20,528)
-----------------------------------------------------
Total loans, net 2,677,406 2,503,089 2,322,808
Premises, furniture and equipment, net 61,057 60,367 51,906
Accrued interest receivable 25,863 17,384 21,070
Intangible assets, net 60,935 60,499 80,268
Other assets 62,304 168,875 50,692
-----------------------------------------------------
Total assets $ 3,794,207 $ 3,733,316 $ 3,869,782
=====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
AUGUST 31 MARCH 31
1997 1997 1996
-----------------------------------------------------
(UNAUDITED)
(In thousands)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Deposits:
Savings accounts $ 1,017,793 $ 1,018,199 $ 1,109,503
Money market accounts 216,543 218,230 215,545
Demand deposit accounts 347,406 345,373 274,594
Time deposit accounts 1,790,214 1,743,756 1,797,248
-----------------------------------------------------
Total deposits 3,371,956 3,325,558 3,396,890
Due to banks - - 215
Borrowings 17,109 17,232 57,295
Escrow and other deposits 34,804 41,034 35,597
Accrued expenses and other liabilities 45,569 40,378 89,966
-----------------------------------------------------
Total liabilities 3,469,438 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 56,158 55,812 53,791
Undivided profits 210,899 200,264 185,105
Net unrealized gain (loss) on securities available-
for-sale, net of tax 5,042 368 (1,747)
-----------------------------------------------------
Total stockholder's equity 324,769 309,114 289,819
-----------------------------------------------------
Total liabilities and stockholder's equity $ 3,794,207 $ 3,733,316 $ 3,869,782
=====================================================
</TABLE>
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This Page Intentionally Left Blank
3
<PAGE> 234
Independence Savings Bank
Consolidated Statements of Changes in Stockholder's Equity
Five months ended August 31, 1997 (unaudited) and
Years ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
COMMON CONTRIBUTED
STOCK (a) CAPITAL SURPLUS
--------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance--March 31, 1994 $ - $ 52,670 $ 46,704
Unrealized net gain, net of tax, upon adoption of SFAS 115 - - -
Changes in net unrealized gains in securities available-for-
sale, net of tax - - -
Net income for the year ending March 31, 1995 - - 3,490
--------------------------------------------------
Balance--March 31, 1995 - 52,670 50,194
Net unrealized loss on securities transferred from held-to-
maturity to available-for-sale, net of tax - - -
Changes in net unrealized losses in securities available-for-
sale, net of tax - - -
Net income for the year ended March 31, 1996 - - 3,597
--------------------------------------------------
Balance--March 31, 1996 - 52,670 53,791
Net unrealized gain on securities transferred from held-to-
maturity to available-for-sale, net of tax - - -
Changes in net unrealized gains in securities available-for-
sale, net of tax - - -
Net income for the year ended March 31, 1997 - - 2,021
--------------------------------------------------
Balance--March 31, 1997 - 52,670 55,812
--------------------------------------------------
Changes in net unrealized gains in securities available-for-
sale, net of tax (unaudited) - - -
Net income for the five months ended August 31, 1997
(unaudited) - - 346
--------------------------------------------------
Balance--August 31, 1997 (unaudited) $ - $ 52,670 $ 56,158
==================================================
<CAPTION>
NET UNREALIZED
GAINS (LOSSES) ON
UNDIVIDED SECURITIES AVAILABLE-
PROFITS FOR-SALE TOTAL
----------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance--March 31, 1994 $ 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 31,414 - 34,904
-----------------------------------------------------
Balance--March 31, 1995 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 32,375 - 35,972
----------------------------------------------------
Balance--March 31, 1996 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 15,159 - 17,180
----------------------------------------------------
Balance--March 31, 1997 200,264 368 309,114
----------------------------------------------------
Changes in net unrealized gains in securities available-for-
sale, net of tax (unaudited) - 4,674 4,674
Net income for the five months ended August 31, 1997
(unaudited) 10,635 - 10,981
--------------------------------------------------
Balance--August 31, 1997 (unaudited) $ 210,899 $ 5,042 $ 324,769
==================================================
</TABLE>
(a) $1.00 par value, 100 shares common stock authorized, issued and
outstanding.
See accompanying notes to consolidated financial statements.
4
<PAGE> 235
Independence Savings Bank
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
AUGUST 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 $ 10,981 $ 11,821 $ 17,180 $ 35,972 $ 34,904
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 4,577 1,560 7,960 3,679 3,592
Net (gain) loss on sale of loans and securities (13) 282 3,347 (12,222) 3,952
Amortization of deferred income and premiums (3,905) (5,791) (11,164) (6,631) (2,888)
Amortization of intangibles 3,678 3,901 8,278 1,842 905
Depreciation and amortization 2,777 2,227 5,972 3,545 2,218
Deferred income tax benefit (1,753) 2,786 (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 (8,479) (1,166) 3,687 (1,291) 2,318
Decrease (increase) in accounts receivable-securities
transactions 107,244 - (107,624) - -
Decrease in due to banks - (215) (215) (729) (5,183)
Increase (decrease) in accrued expenses and other
liabilities 5,191 (45,554) (49,588) 62,732 (4,357)
Other, net (1,192) 1,326 (6,625) (858) 154
------------------------------------------------------------------------
Net cash provided by (used in) operating activities 119,106 (28,723) (135,929) 84,623 33,669
------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (332,894) (309,566) (503,153) (232,485) (578,437)
Principal payments on loans 148,700 110,554 261,161 189,064 116,129
Proceeds from sale of loans 4,545 2,947 76,002 8,686 133,672
Proceeds from sale of securities available-for-sale 178,591 241,633 648,416 175,691 99,254
Proceeds from maturities of securities available-for-sale 104,284 570,000 823,825 302,966 62,100
Principal collected on securities available-for-sale 23,886 285 1,177 318 -
Purchases of securities available-for-sale (468,098) (486,635) (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 - 69,903 146,836 60,920 67,849
Proceeds from sales of other real estate 220 725 1,308 2,512 1,154
Purchases of Federal Home Loan Bank stock - - (3,579) - (2,460)
Net additions to premises, furniture and equipment (3,467) (6,801) (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 344,233 193,045 509,583 (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 (23,343) (20,125) 2,276 (14,291) (225,558)
Net (decrease) increase in time deposits (256) (64,449) (22,199) 120,861 234,108
Net (decrease) increase in other borrowings (123) (38,243) (40,063) (11,453) 7,159
Net (decrease) increase in escrow and other deposits (6,230) (6,862) 5,437 79 5,648
------------------------------------------------------------------------
Net cash provided by (used in) financing activities 36,020 (130,679) (102,210) 656,144 41,789
------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (189,107) 33,643 271,444 (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 $ 185,529 $ 136,835 $ 374,636 $ 103,192 $ 110,394
========================================================================
Income taxes paid $ 6,000 $ 18,200 $ 25,200 $ 30,383 $ 31,394
========================================================================
Interest paid $ 48,132 $ 47,465 $ 138,823 $ 110,586 $ 76,483
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 236
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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.
6
<PAGE> 237
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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.
7
<PAGE> 238
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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).
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.
8
<PAGE> 239
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
9
<PAGE> 240
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
10
<PAGE> 241
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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.
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.
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 requires disclosures for each
segment that are similar to those required under current standards with the
addition of quarterly disclosure requirements and a finer partitioning of
geographic disclosures. It requires limited segment data on a quarterly basis.
It also requires geographic data by country, as opposed to broader geographic
regions as permitted under current standards. SFAS No. 131 is effective for
fiscal year beginning after December 15, 1997 with earlier application
permitted.
11
<PAGE> 242
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
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>
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>
12
<PAGE> 243
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
5. INVESTMENT SECURITIES HELD-TO-MATURITY (CONTINUED)
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.
13
<PAGE> 244
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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.
14
<PAGE> 245
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AUGUST 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 $ 533,454 $ 2,771 $ (94) $ 536,131
Municipals 1,104 - - 1,104
Corporate 246 - (3) 293
--------------------------------------------------------------------
Total debt securities 534,854 2,771 (97) 537,528
--------------------------------------------------------------------
Equity securities:
Preferred 281 4 285
Common 13,333 2,772 (144) 15,961
--------------------------------------------------------------------
Total equity securities 13,614 2,776 (144) 16,246
--------------------------------------------------------------------
Mortgage-backed and mortgage related
securities:
Federal National Mortgage Assoc.
Pass Through Certificates 5,965 125 (26) 6,064
Government National Mortgage Assoc. Pass Through
Certificates 73,116 2,998 (42) 76,072
Federal Home Loan Mortgage Corp. Pass Through
Certificates 14,339 219 (56) 14,502
Collateralized Mortgage
Obligation Bonds 70,909 33 (241) 70,701
--------------------------------------------------------------------
Total mortgage-backed and
mortgage related securities 164,329 3,375 (365) 167,339
====================================================================
Total securities available-for-sale $ 712,797 $ 8,922 $ (606) $ 721,113
====================================================================
</TABLE>
15
<PAGE> 246
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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
------------------------------------------------------------------
<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>
16
<PAGE> 247
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
FIVE MONTHS ENDED
AUGUST 31 YEAR ENDED MARCH 31
1997 1996 1997 1996 1995
-----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Proceeds from sales $ 178,591 $241,633 $648,416 $175,691 $99,254
Gross gains 30 85 1,042 12,681 -
Gross losses 6 345 4,905 41 237
</TABLE>
17
<PAGE> 248
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AUGUST 31, 1997
CARRYING FAIR
VALUE VALUE
----------------------------------------
(In thousands)
<S> <C> <C>
One year or less $ 84,369 $ 84,350
One year through five years 449,153 451,846
Five years through ten years 1,332 1,332
---------------------------------------
$534,854 $537,528
=======================================
</TABLE>
The amortized cost and estimated fair value of mortgage-backed and mortgage
related securities by contractual maturity are as follows:
<TABLE>
<CAPTION>
AUGUST 31, 1997
CARRYING FAIR
VALUE VALUE
---------------------------------------
(In thousands)
<S> <C> <C>
One year or less $ 27,686 $ 27,897
One year through five years 75,854 76,419
Five years through ten years 30,673 31,814
Over ten years 30,116 31,209
---------------------------------------
$164,329 $167,339
=======================================
</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.
18
<PAGE> 249
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
8. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
AUGUST 31 MARCH 31
1997 1997 1996
-------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
MORTGAGE LOANS ON REAL ESTATE
One-to-four family $ 552,426 $ 552,745 $ 534,539
Multi-family 1,487,403 1,365,124 1,208,039
Other 163,533 158,336 162,799
-------------------------------------------------------
2,203,362 2,076,205 1,905,377
Less net deferred fees 11,247 11,052 10,451
-------------------------------------------------------
Total mortgage loans on real estate 2,192,115 2,065,153 1,894,926
OTHER LOANS
Cooperative apartment loans 392,799 348,029 340,507
Student loans (guaranteed) 43,728 45,262 45,947
Home equity and improvement loans 17,500 19,545 23,458
Commercial loans 32,199 25,249 18,003
Consumer loans 18,110 15,241 8,284
Passbook loans 10,345 9,710 9,995
Credit card loans 1,948 2,054 2,332
-------------------------------------------------------
516,629 465,090 448,526
Less unearned discount and deferred fees 223 130 116
-------------------------------------------------------
Total other loans 516,406 464,960 448,410
Less allowance for loan losses (31,115) (27,024) (20,528)
=======================================================
Total loans, net $ 2,677,406 $ 2,503,089 $ 2,322,808
=======================================================
</TABLE>
At August 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 $297,204,500, $314,638,700, $275,306,400 and $287,319,000,
respectively.
At August 31, 1997 and March 31, 1997, 1996 and 1995 included in mortgage loans
on real estate are $9,158,100, $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 $417,000 and $1,186,800 for the
five months ended August 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.
19
<PAGE> 250
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
8. LOANS (CONTINUED)
At August 31, 1997 and March 31, 1997, 1996, and 1995, included in other loans
are $932,900, $1,383,400, $1,490,000 and $2,041,000, respectively, of nonaccrual
loans. If interest on the nonaccrual loans had been accrued, such income would
have approximated $40,500 and $50,800 for the five months ended August 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>
FIVE MONTHS ENDED
AUGUST 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 4,577 1,560 7,960 3,679 3,592
Charge-offs, net of recoveries (486) (608) (1,464) (1,910) (513)
--------------------------------------------------------------------------
Balance at end of period $31,115 $21,480 $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.
20
<PAGE> 251
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AUGUST 31 MARCH 31
1997 1997 1996
-------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Land $ 3,232 $ 3,303 $ 2,238
Buildings and improvements 43,873 44,284 38,863
Leasehold improvements 4,456 3,591 2,963
Furniture and equipment 9,496 9,189 7,842
-------------------------------------------------
Total premises, furniture and equipment $ 61,057 $ 60,367 $ 51,906
=================================================
</TABLE>
Depreciation and amortization expense amounted to $2,777,400, $2,227,000,
$5,972,200, $3,545,200 and $2,218,000 for the five month periods ended August
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>
AUGUST 31 MARCH 31
1997 1997 1996
-------------------------------------------------
(In thousands)
<S> <C> <C> <C>
FHLB stock $ 25,752 $ 25,752 $ 22,173
Net deferred tax asset 16,554 17,830 12,727
Prepaid expenses 1,470 1,604 1,783
Other real estate 279 540 973
Accounts receivable-securities transactions 380 107,624 -
Other 17,869 15,525 13,036
-------------------------------------------------
$ 62,304 $168,875 $ 50,692
=================================================
</TABLE>
21
<PAGE> 252
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AUGUST 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 $1,017,793 2.80% $1,018,199 2.80% $1,109,503 3.00%
Money Market 216,543 3.00 218,230 3.00 215,545 3.11
NOW 277,003 2.56 268,681 2.49 218,317 2.13
Checking 70,403 - 76,692 - 56,277 -
Time Deposits 1,790,214 5.61 1,743,756 5.50 1,797,248 5.63
---------- ---------- ----------
$3,371,956 $3,325,558 $3,396,890
========== ========== ==========
</TABLE>
Scheduled maturities of time deposits are as follows:
<TABLE>
<CAPTION>
AUGUST 31 MARCH 31
1997 1997 1996
------------------------------------------
(In thousands)
<S> <C> <C> <C>
One year $ 1,366,469 $1,333,075 $1,336,895
Two years 214,306 212,451 226,562
Three years 136,669 110,601 83,329
Four years 31,102 52,008 98,464
Thereafter 41,668 35,621 51,998
------------------------------------------
$ 1,790,214 $1,743,756 $1,797,248
==========================================
</TABLE>
Time deposit accounts in denominations of $100,000 or more totaled approximately
$206,156,800, $189,752,900 and $180,092,800 at August 31, 1997, March 31, 1997
and March 31, 1996, respectively.
22
<PAGE> 253
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
12. BORROWINGS
A summary of borrowings is as follows:
<TABLE>
<CAPTION>
AUGUST 31 MARCH 31
1997 1997 1996
------------------------------------------
(In thousands)
<S> <C> <C> <C>
FHLB borrowings $ 14,550 $14,550 $56,045
Other 2,559 2,682 1,250
------------------------------------------
$ 17,109 $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>
AUGUST 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 five month period ended August 31 1997 and
the years ended March 31, 1997 and March 31, 1996 was 7.4%, 7.6% and 6.2%,
respectively.
23
<PAGE> 254
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 nonqualified, 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>
24
<PAGE> 255
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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.
25
<PAGE> 256
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
26
<PAGE> 257
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 August 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 $75,107,400 and $96,890,300, respectively, and other
loans aggregating $21,833,300 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.
27
<PAGE> 258
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AMOUNT
---------------
(In thousands)
<S> <C>
Year ended August 31:
1998 $ 1,432
1999 1,314
2000 1,321
2001 1,287
2002 and thereafter 8,804
</TABLE>
The rent expense for the five month periods ended August 31, 1997 and August 31,
1996 and the years ended March 31, 1997, 1996 and 1995 was $498,100, $528,900,
$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 August 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.
28
<PAGE> 259
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AUGUST 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 13,409 11,271 9,297
Deferred loan fees 5,122 5,311 5,614
Amortization of intangible assets 3,702 3,088 1,539
Nonaccrual interest 1,328 1,330 1,466
Employee benefits 3,567 3,367 1,791
Other 776 792 1,356
------------------------------------------------
Gross deferred tax asset 27,904 25,159 22,851
------------------------------------------------
Less valuation allowance - - -
------------------------------------------------
Deferred tax assets $ 27,904 $ 25,159 $ 22,851
------------------------------------------------
Deferred tax liabilities:
Securities available-for-sale $ 3,274 $ 245 $ -
Acquisition premium on mortgage-backed
and mortgage related securities 1,332 1,017 1,990
Acquisition premium on mortgages 3,216 3,414 3,068
Depreciation 699 698 1,560
Other 2,829 1,955 3,506
------------------------------------------------
Gross deferred tax liabilities 11,350 7,329 10,124
------------------------------------------------
Net deferred tax asset $ 16,554 $ 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 August 31, 1997, March
31, 1997 or March 31, 1996.
29
<PAGE> 260
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
FIVE MONTHS ENDED
AUGUST 31 YEAR ENDED MARCH 31
1997 1996 1997 1996 1995
------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Current:
Federal $ 6,284 $ 8,551 $ 14,832 $ 22,645 $ 19,701
State and local 675 3,469 3,037 9,553 9,572
------------------------------------------------------------------
6,959 12,020 17,869 32,198 29,273
------------------------------------------------------------------
Deferred:
Federal (1,303) (1,885) (4,873) (518) (1,174)
State and local (450) (901) (2,264) (898) (772)
------------------------------------------------------------------
(1,753) (2,786) (7,137) (1,416) (1,946)
------------------------------------------------------------------
Total $ 5,206 $ 9,234 $ 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>
FIVE MONTHS ENDED
AUGUST 31 YEAR ENDED MARCH 31
1997 1996 1997 1996 1995
---------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Federal income tax provision at
statutory rates $ 5,665 $ 7,369 $ 9,769 $23,364 $21,781
Increase (reduction) in tax
resulting from:
State and local taxes, net of
federal income tax effect 146 1,669 502 5,626 5,720
Other (605) 196 461 1,792 (174)
---------------------------------------------------------------------------
$ 5,206 $ 9,234 $10,732 $30,782 $27,327
===========================================================================
</TABLE>
30
<PAGE> 261
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 August 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 August 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 August 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.
31
<PAGE> 262
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 August 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 August 31, 1997 and March 31, 1997 and 1996:
<TABLE>
<CAPTION>
ACTUALS FOR CAPITAL ADEQUACY PURPOSES TO BE WELL CAPITALIZED UNDER
AS OF 8/31/97 AT 8/31/97 FDIC GUIDELINES AT 8/31/97
------------------------- -------------------------------- -----------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Leverage $ 258,319 6.91% $ 149,520 4.0% $ 186,900 5.0%
Tier 1 Risk-Based 258,319 10.13 101,980 4.0 152,971 6.0
Total Risk-Based 289,434 11.35 203,961 8.0 254,951 10.0
</TABLE>
32
<PAGE> 263
Independence Savings Bank
Notes to Consolidated Financial Statements
August 31, 1997 and 1996 (Unaudited) and
March 31, 1997, 1996 and 1995
16. REGULATORY REQUIREMENT (CONTINUED)
<TABLE>
<CAPTION>
ACTUALS FOR CAPITAL ADEQUACY PURPOSES TO BE WELL CAPITALIZED UNDER
AS OF 3/31/97 AT 3/31/97 FDIC GUIDELINES 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>
ACTUALS FOR CAPITAL ADEQUACY PURPOSES TO BE WELL CAPITALIZED UNDER
AS OF 3/31/96 AT 3/31/96 FDIC GUIDELINES 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.
33
<PAGE> 264
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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>
AUGUST 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 $ 39,893 $ 39,893 $ 310,429 $ 310,429 $ 44,410 $ 44,410
Commercial paper 72,659 72,659 39,866 39,866 - -
Federal funds sold 72,977 72,977 24,341 24,341 58,782 58,782
Investment securities, held to
maturity - - - - 39,995 39,931
Mortgage-backed and mortgage
related securities, held to
maturity - - - - 120,702 121,698
Securities available-for-sale 721,113 721,113 548,466 548,466 1,079,149 1,079,149
Mortgage loans on real estate 2,203,362 2,184,235 2,076,205 2,025,243 1,905,377 1,926,882
Other loans 516,629 513,642 465,090 466,757 448,526 448,956
Accrued interest receivable 25,863 25,863 17,384 17,384 21,070 21,070
FHLB stock 25,752 25,752 25,752 25,752 22,173 22,173
FINANCIAL LIABILITIES
Deposits and escrow 1,616,546 1,616,546 1,622,836 1,622,836 1,635,239 1,635,239
Time deposit accounts 1,770,214 1,793,932 1,743,756 1,748,692 1,797,248 1,811,947
Borrowings 17,109 15,015 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.
34
<PAGE> 265
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 August 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 August 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.
35
<PAGE> 266
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 $1,300,000, $1,461,000 and $14,972,000 at
August 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.
36
<PAGE> 267
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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 August 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.
37
<PAGE> 268
Independence Savings Bank
Notes to Consolidated Financial Statements
August 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.
38
<PAGE> 269
<TABLE>
<S> <C>
- --------------------------------------------------------- ------------------------------------------
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 61,226,852 Shares
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 INDEPENDENCE COMMUNITY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION BANK CORP.
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 (Proposed Holding Company for
MAKE SUCH OFFER OR SOLICITATION IN SUCH Independence Savings Bank)
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 COMMON STOCK
FURNISHED HEREIN OR SINCE THE DATE HEREOF. (PAR VALUE $0.01 PER SHARE)
---------------------
TABLE OF CONTENTS
--------------------- ---------------------
PAGE PROSPECTUS
----
Summary Overview . . . . . . . . . . . . ---------------------
Summary . . . . . . . . . . . . . . . . . .
Selected Consolidated Financial
and Other Data . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . .
Independence Community Bank Corp. . . . . . ------------------------
Independence Savings Bank . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . .
Dividend Policy . . . . . . . . . . . . . .
Market for the Common Stock . . . . . . . .
Regulatory Capital Requirements . . . . . .
Capitalization . . . . . . . . . . . . . .
Pro Forma Data . . . . . . . . . . . . . . ________ __, 1997
Comparison of Valuation and Pro Forma
Information with No Foundation . . . . .
Consolidated Statements of Income . . . . .
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . .
Regulation . . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . .
The Conversion . . . . . . . . . . . . . .
Restrictions on Acquisition of the
Company and the Bank . . . . . . . . . .
Description of Capital Stock
of the Company . . . . . . . . . . . . .
Description of Capital Stock
of the Bank . . . . . . . . . . . . . . .
Transfer Agent and Registrar . . . . . . .
Experts . . . . . . . . . . . . . . . . . .
Legal and Tax Opinions . . . . . . . . . .
Additional Information . . . . . . . . . .
Index to Consolidated Financial Statements F-1
UNTIL ________ __, 1997, OR 25 DAYS AFTER SANDLER O'NEILL
COMMENCEMENT OF THE SYNDICATED COMMUNITY OFFERING, & PARTNERS, L.P.
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.
</TABLE>
<PAGE> 270
[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> 271
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> 272
<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> 273
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
ITEM 13.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1).
<S> <C>
SEC filing fees............................................................................... $ 230,436
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 ................................................................ 2,250,000
Legal fees.................................................................................... 1,100,000
Blue Sky and expenses......................................................................... 15,000
Marketing agent's fees and expenses........................................................... 10,500,000
Accounting fees............................................................................... 800,000
Appraiser's fees.............................................................................. 120,000
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................................................................................. 47,064
-----------
TOTAL.........................................................................................$16,450,000
===========
</TABLE>
(1) Actual expense based upon the registration of 76,043,750 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> 274
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> 275
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, as amended
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> 276
<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)
27.0 Financial Data Schedule
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 dated as of August 8, 1997 of RP Financial, LC.
99.6 Updated Appraisal Report dated as of October 29, 1997 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> 277
(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> 278
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 November 5, 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 November 5, 1997
- ----------------------------------- Chief Executive Officer
Charles J. Hamm (principal executive
officer)
/s/ Joseph S. Morgano Director, Executive Vice November 5, 1997
- ----------------------------------- President and Mortgage
Joseph S. Morgano Officer
/s/ John B. Zurell Executive Vice President- November 5, 1997
- ----------------------------------- Accounting and Financial Systems
John B. Zurell (principal financial and accounting
officer)
/s/ Willard N. Archie * Director November 5, 1997
- -----------------------------------
Willard N. Archie
</TABLE>
II-6
<PAGE> 279
<TABLE>
<CAPTION>
Name Title Date
- ----------------------------------- ---------------------------------- ---------------------------
<S> <C> <C>
Robert D. Catell *
- ----------------------------------- Director November 5, 1997
Robert D. Catell
/s/ Rohit M. Desai * Director November 5, 1997
- -----------------------------------
Rohit M. Desai
/s/ Chaim Y. Edelstein * Director November 5, 1997
- -----------------------------------
Chaim Y. Edelstein
/s/ Robert W. Gelfman * Director November 5, 1997
- -----------------------------------
Robert W. Gelfman
/s/ Scott M. Hand * Director November 5, 1997
- -----------------------------------
Scott M. Hand
/s/ Donald E. Kolowsky * Director November 5, 1997
- -----------------------------------
Donald E. Kolowsky
/s/ Janine Luke * Director November 5, 1997
- -----------------------------------
Janine Luke
/s/ Wesley D. Ratcliff * Director November 5, 1997
- -----------------------------------
Wesley D. Ratcliff
/s/ Donald H. Elliott * Director November 5, 1997
- -----------------------------------
Donald H. Elliott
/s/ Malcolm MacKay * Director November 5, 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 2.0
PLAN OF CONVERSION,
AS AMENDED
OF
INDEPENDENCE COMMUNITY BANK CORP.
AND
INDEPENDENCE SAVINGS BANK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
NUMBER PAGE
------ ----
<S> <C> <C>
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. General Procedure for Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Total Number of Shares and Purchase Price of
Conversion Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. Purchase by the Holding Company of the Stock of the Bank . . . . . . . . . . . . . 9
6. Subscription Rights of Eligible Account Holders . . . . . . . . . . . . . . . . . . . 10
7. Subscription Rights of Tax-Qualified Employee Stock
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8. Subscription Rights of Supplemental Eligible Account Holders . . . . . . . . . . . . 11
9. Community Offering, Syndicated Community Offering, Public
Offering and Other Offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. Limitations on Subscriptions and Purchases of Conversion Stock . . . . . . . . . . . 13
11. Timing of Subscription Offering, Manner of Exercising
Subscription Rights and Order Forms . . . . . . . . . . . . . . . . . . . . . . . . 15
12. Payment for Conversion Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. Account Holders in Nonqualified States or Foreign Countries . . . . . . . . . . . . . 18
14. Voting Rights of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15. Liquidation Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
16. Transfer of Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. Requirements Following Conversion for
Registration, Market Making and Stock Exchange Listing . . . . . . . . . . . . . . . 20
18. Directors and Officers of the Bank . . . . . . . . . . . . . . . . . . . . . . . . . 20
19. Requirements for Stock Purchases by Directors
and Officers Following the Conversion . . . . . . . . . . . . . . . . . . . . . . . 21
20. Restrictions on Transfer of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 21
21. Restrictions on Acquisition of Stock of the Holding Company . . . . . . . . . . . . . 22
22. Tax Rulings or Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
23. Stock Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
24. Dividend and Repurchase Restrictions on Stock . . . . . . . . . . . . . . . . . . . . 23
25. Payment of Fees to Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
26. Establishment and Funding of Charitable Foundation . . . . . . . . . . . . . . . . . 24
27. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
28. Amendment or Termination of the Plan . . . . . . . . . . . . . . . . . . . . . . . . 25
29. Interpretation of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
<PAGE> 3
1. INTRODUCTION.
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section 2 except as otherwise defined herein.
Independence Savings Bank, headquartered in Brooklyn, New York, is a New
York-chartered stock savings bank (the Bank") which operates as a locally
based, wholly owned subsidiary of Independence Community Bank Corp., a New
York-chartered mutual holding company (the "Mutual Holding Company"). The Bank
organized the Mutual Holding Company in April 1992 in order to facilitate the
acquisition of The Long Island City Financial Corporation.
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 pursuant to this Plan of Conversion 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, employees, customers and the communities historically
served by the Bank. The Conversion will result in the Bank being wholly owned
by a stock holding company, which is a more common structure and form of
ownership for financial institutions than a mutual holding company. In
addition, the Conversion will result in the raising of additional capital which
will provide the Bank, through the holding company structure, greater
organizational and operational flexibility, including greater flexibility for
effecting mergers and acquisitions of financial institutions.
In connection with the Conversion, for tax and other corporate purposes,
the Mutual Holding Company will be combined with the Bank simultaneously with
the Mutual Holding Company's conversion to stock form and a newly formed
Delaware stock corporation to be known as "Independence Community Bank Corp."
will become the holding company of the Bank (the "Holding Company"). The Bank
and the Holding Company will offer shares of Holding Company Common Stock (the
"Conversion Stock") in a Subscription Offering to Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans and Supplemental Eligible Account
Holders. Any shares of Conversion Stock remaining unsold after the
Subscription Offering will be offered for sale to the public through a
Community Offering, a Syndicated Community Offering and/or Public Offering, as
determined by the Boards of Directors of the Holding Company and the Bank in
their sole discretion.
The Conversion is intended to provide a larger capital base to support
the Bank's lending and investment activities and thereby enhance the Bank's
capabilities to serve the borrowing and other financial needs of the
communities it serves. The use of the Holding Company will provide greater
organizational flexibility and possible diversification and will facilitate
growth through acquisitions. In furtherance of the Bank's commitment to the
communities which it serves, this Plan provides for the establishment of a
charitable foundation (the "Foundation") as part of the Conversion. The
Foundation is intended to complement the Bank's existing community reinvestment
activities in a manner that will allow the Bank's local community to share in
the growth and profitability of the Holding Company and the Bank and to support
such charitable purposes as determined by the Board
1
<PAGE> 4
of Directors of the Foundation. Consistent with the Bank's goal, the Holding
Company intends to donate to the Foundation immediately following the
Conversion a number of shares of its authorized but unissued Holding Company
Common Stock in an amount not to exceed 10% of the number of shares of
Conversion Stock issued in the Conversion.
This Plan was adopted by the Board of Trustees of the Mutual Holding
Company and the Board of Directors of the Bank on April 18, 1997 and amended on
November 5, 1997.
This Plan is subject to the approval of the New York State Banking
Department (the "Department") and the non-objection of the Federal Deposit
Insurance Corporation (the "FDIC") and must be adopted by Eligible Account
Holders in the manner set forth herein. The Mutual Holding Company, as the
sole stockholder of the Bank, shall vote to approve this Plan.
After the Conversion, the Bank will continue to be regulated by the
Department, as its chartering authority, and by the FDIC, which insures the
Bank's deposits. In addition, the Bank will continue to be a member of the
Federal Home Loan Bank System and all insured savings deposits will continue to
be insured by the FDIC up to the maximum provided by law. The Holding Company
will be registered as a thrift holding company under the Home Owners Loan Act
("HOLA") and will be regulated by the Office of Thrift Supervision (the "OTS")
and the Department.
2. DEFINITIONS.
As used in this Plan, the terms set forth below have the following
meaning:
2.1 Actual Purchase Price means the price per share at which the
Conversion Stock is ultimately sold by the Holding Company in the Offerings in
accordance with the terms hereof.
2.2 Affiliate means a Person who, directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified.
2.3 Application for Conversion shall have the meaning set forth in
Section 3(a) hereof.
2.4 Associate when used to indicate a relationship with any Person,
means (i) a corporation or organization (other than the Mutual Holding Company,
the Bank, a majority-owned subsidiary of the Bank or the Holding Company) of
which such Person is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 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 Employee Stock Benefit Plan or any Non-Tax-Qualified
Employee Stock Benefit Plan of the Holding 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
2
<PAGE> 5
Person, or any relative of such spouse, who has the same home as such Person or
who is a director or officer of the Holding Company or the Bank or any of the
subsidiaries of the foregoing.
2.5 Bank means Independence Savings Bank.
2.6 Bank Benefit Plans includes, but is not limited to, Tax-Qualified
Employee Stock Benefit Plans and Non-Tax-Qualified Stock Benefit Plans.
2.7 Bank Common Stock means the common stock of the Bank, par value
$1.00 per share.
2.8 Banking Law means the Banking Law of the State of New York
including the codes, rules and regulations promulgated thereunder.
2.9 Banking Board means the Banking Board of the State of New York.
2.10 Code means the Internal Revenue Code of 1986, as amended.
2.11 Community Offering means the offering for sale by the Holding
Company of any shares of Conversion Stock not subscribed for in the
Subscription Offering to (i) natural persons residing in the counties in New
York in which the Bank has branch offices, and (ii) such other Persons within
or without the State of New York as may be selected by the Holding Company and
the Bank within their sole discretion.
2.12 Control (including the terms "controlling," "controlled by," and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
2.13 Conversion means (i) the combination, by merger or otherwise, of
the Mutual Holding Company with and into the Bank, pursuant to which the Mutual
Holding Company will cease to exist and, in connection therewith, each share of
Bank Common Stock outstanding immediately prior to the effective time thereof
shall automatically be cancelled, (ii) the issuance of Conversion Stock by the
Holding Company in the Offerings as provided herein and (iii) the issuance to
the Holding Company of Bank Common Stock to be outstanding upon consummation of
the Conversion in exchange for a portion of the net proceeds received by the
Holding Company from the sale of the Conversion Stock and, in connection
therewith, the cancellation of each share of Holding Company Common Stock held
by the Bank.
2.14 Conversion Regulations means Parts 86 and 111 of the General
Regulations of the Banking Board and the regulations of the FDIC set forth at
12 C.F.R. Sections 303.15 and 333.4.
3
<PAGE> 6
2.15 Conversion Stock means the Holding Company Common Stock to be
issued and sold in the Offerings pursuant to the Plan of Conversion and shall
not include shares issued to the charitable foundation pursuant to Section 26
hereof.
2.16 Department means the New York State Banking Department, the head
of which is the Superintendent and of which the Banking Board is a part
thereof.
2.17 Deposit Account means all deposits of the Bank as defined in
Section 9019 of the Banking Law, and includes without limitation, savings and
demand accounts, including passbook accounts, money market deposit accounts and
negotiable order of withdrawal accounts, certificates of deposit and other
authorized accounts of the Bank.
2.18 Director, Trustee, Officer and Employee means the terms as
applied respectively to any person who is a director, trustee, officer or
employee of the Mutual Holding Company, the Bank or any subsidiary thereof.
2.19 Eligible Account Holder means any Person holding a Qualifying
Deposit on the Eligibility Record Date for purposes of determining Subscription
Rights and establishing subaccount balances in the liquidation account to be
established pursuant to Section 15 hereof.
2.20 Eligibility Record Date means the date for determining Qualifying
Deposits of Eligible Account Holders and is the close of business on March 31,
1996.
2.21 Estimated Price Range means the range of the estimated aggregate
pro forma market value of the total number of shares of Conversion Stock to be
issued in the Offerings, as determined by the Independent Appraiser in
accordance with Section 4 hereof.
2.22 FDIC means the Federal Deposit Insurance Corporation or any
successor thereto.
2.23 Holding Company means Independence Community Bank Corp. (or such
other name as may be selected by the incorporator(s)), a corporation to be
organized as a wholly owned direct or indirect subsidiary of the Bank under the
laws of the State of Delaware with the purpose of becoming the holding company
of the Bank upon consummation of the Conversion. Upon completion of the
Conversion, the Holding Company shall hold all of the outstanding capital stock
of the Bank.
2.24 Holding Company Common Stock means the common stock of the
Holding Company.
2.25 Independent Appraiser means the independent investment banking or
financial consulting firm retained by the Holding Company and the Bank to
prepare an appraisal of the estimated pro forma market value of the Conversion
Stock.
4
<PAGE> 7
2.26 Initial Purchase Price means the price per share to be paid
initially by Participants for shares of Conversion Stock subscribed for in the
Subscription Offering and by Persons for shares of Conversion Stock ordered in
the Community Offering and/or the Syndicated Community Offering.
2.27 MHC Combination means the combination of the Mutual Holding
Company with the Bank.
2.28 Mutual Holding Company means Independence Community Bank Corp.
2.29 Offerings means the Subscription Offering, the Community Offering
and the Syndicated Community Offering or Public Offering.
2.30 Officer means the president, executive vice president, senior
vice president, vice president, secretary, treasurer or principal financial
officer, comptroller or principal accounting officer and any other person
performing similar functions with respect to any organization whether
incorporated or unincorporated.
2.31 Order Form means the form or forms provided by the Holding
Company and the Bank, containing all such terms and provisions as set forth in
Section 11 hereof, to a Participant or other Person by which Conversion Stock
may be ordered in the Offerings.
2.32 OTS means the Office of Thrift Supervision.
2.33 Participant means any Eligible Account Holder, Tax-Qualified
Employee Stock Benefit Plan and Supplemental Eligible Account Holder.
2.34 Person means an individual, a corporation, a partnership, an
association, a joint stock company, a trust (including individual retirement
accounts and Keogh accounts), an unincorporated organization or a government or
any political subdivision thereof or any other entity.
2.35 Plan and Plan of Conversion mean this Plan of Conversion as
adopted by the Board of Trustees of the Mutual Holding Company and the Board of
Directors of the Bank and any amendment hereto approved as provided herein.
The Board of Directors of the Holding Company shall adopt this Plan as soon as
practicable following its organization.
2.36 Primary Parties mean the Mutual Holding Company, the Bank and the
Holding Company.
2.37 Prospectus means the one or more documents to be used in offering
the Conversion Stock in the Offerings.
2.38 Public Offering means an underwritten firm commitment offering to
the public through one or more underwriters.
5
<PAGE> 8
2.39 Qualifying Deposits means the aggregate balance of all Deposit
Accounts in the Bank with an aggregate balance of $100 or more of (i) an
Eligible Account Holder at the close of business on the Eligibility Record Date
and (ii) a Supplemental Eligible Account Holder at the close of business on the
Supplemental Eligibility Record Date.
2.40 SEC means the Securities and Exchange Commission.
2.41 Special Meeting means the Special Meeting of Eligible Account
Holders called for the purpose of submitting this Plan to the Eligible Account
Holders for their approval, including any adjournments of such meeting.
2.42 Subscription Offering means the offering of the Conversion Stock
to Participants.
2.43 Subscription Rights means nontransferable rights to subscribe for
Conversion Stock granted to Participants pursuant to the terms of this Plan.
2.44 Superintendent means the Superintendent of Banks of the State of
New York.
2.45 Supplemental Eligible Account Holder means any Person, except
Directors, Trustees and Officers of the Bank and the Mutual Holding Company and
their Associates, holding a Qualifying Deposit at the close of business on the
Supplemental Eligibility Record Date.
2.46 Supplemental Eligibility Record Date, if applicable, means the
date for determining Qualifying Deposits of Supplemental Eligible Account
Holders and shall be required if the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for
Conversion filed by the Mutual Holding Company and the Bank prior to approval
of such application by the Department. If applicable, the Supplemental
Eligibility Record Date shall be the last day of the calendar quarter preceding
the Department approval of the Application for Conversion submitted by the
Mutual Holding Company and the Bank pursuant to this Plan of Conversion.
2.47 Syndicated Community Offering means the offering for sale by a
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Community Offering.
2.48 Tax-Qualified Employee Stock Benefit Plan means any defined
benefit plan or defined contribution plan, including an employee stock
ownership plan ("ESOP"), stock bonus plan, profit-sharing plan or other plan,
which is established for the benefit of the employees of the Holding Company
and the Bank and which, with its related trust, meets the requirements to be
"qualified" under Section 401 of the Code as from time to time in effect. A
"Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or
defined contribution stock benefit plan which is not so qualified.
6
<PAGE> 9
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION.
(a) An application for the Conversion, including the Plan and
all other requisite material (the "Application for Conversion"), shall be
submitted to the Department for approval or waiver and shall be submitted to
the FDIC for non-objection. The Mutual Holding Company and the Bank also will
cause notice of the adoption of the Plan by the Board of Trustees of the Mutual
Holding Company and the Board of Directors of the Bank to be given by (i)
publication in a newspaper having general circulation in each community in
which an office of the Bank is located, (ii) conspicuously posting notice of
such adoption at the Bank's and the Mutual Holding Company's principal offices
and at each of the Bank's branch offices and (iii) issuing a press release
containing the material terms of the Conversion.
(b) Following receipt of all required governmental approvals
and consents, the Plan will be submitted to a vote of the Eligible Account
Holders at the Special Meeting called for that purpose. The Special Meeting
shall be held upon written notice given no less than 20 days nor more than 45
days from the last date on which such Notice is mailed to Eligible Account
Holders. The notice of the Special Meeting, proxy card and proxy statement
(which may be a short-form proxy statement in accordance with applicable laws
and regulations) shall be sent to each Eligible Account Holder who also shall
be given the opportunity to request a copy of the Plan and the Restated
Organization Certificate and proposed Bylaws of the Bank. Readily
distinguishable postage-paid envelopes shall be provided for the return of
proxy cards. At the Special Meeting, each Eligible Account Holder shall be
entitled to cast one vote in person or by proxy for every $100 such Eligible
Account Holder had on deposit with the Bank as of the Eligibility Record Date;
provided, however, that no Eligible Account Holder shall be eligible to cast
more than 1,000 votes. The Superintendent shall be notified of the results of
the Special Meeting within five days after the conclusion of the Special
Meeting by a certificate signed by the Chief Executive Officer and the
Secretary of the Bank. The Plan must be approved by: (i) the affirmative vote
of at least seventy five percent (75%) in amount of deposit liabilities of
Eligible Account Holders represented in person or by proxy at such Special
Meeting; and (ii) the affirmative vote of at least a majority of the total
number of votes entitled to be cast by Eligible Account Holders at such Special
Meeting.
(c) Subscription Rights to purchase shares of Conversion Stock
will be issued without payment therefor to Eligible Account Holders,
Tax-Qualified Employee Plans and Supplemental Eligible Account Holders, if any,
as set forth in Sections 6, 7 and 8 hereof. Such Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans and Supplemental Eligible Account
Holders shall be provided with a Prospectus and Order Form to the extent
required by law or regulation.
(d) The Mutual Holding Company, in its capacity as the sole
stockholder of the Bank has adopted this Plan and will adopt such other
documents as may be necessary to effect the Conversion or any part thereof,
including without limitation, the MHC Combination.
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<PAGE> 10
(e) The Holding Company shall submit or cause to be submitted
(i) an application to the OTS for the Company to acquire the Bank and become a
thrift holding company and (ii) an application to the Department for approval
of the same. Applications also will be filed with the Department and the FDIC
for approval of the MHC Combination. All notices required to be published in
connection with such applications shall be published at the times required.
(f) The Holding Company shall file a Registration Statement
with the SEC to register the Conversion Stock to be issued in the Conversion
under the Securities Act of 1933, as amended, and, subject to the terms of the
Plan, shall register such stock under any applicable state securities laws.
Upon registration and after the receipt of all required regulatory approvals,
the Conversion Stock shall be first offered for sale in a Subscription Offering
to Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders, if any. Any shares of Conversion Stock
remaining unsold after the Subscription Offering will be sold through a
Community Offering, a Syndicated Community Offering and/or a Public Offering.
The purchase price per share for the Conversion Stock shall be a uniform price
determined in accordance with Section 4 hereof.
(g) The effective date of the Conversion shall be the date set
forth in Section 27 hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert into a
stock institution and shall simultaneously combine with and into the Bank in
the MHC Combination, with the Bank being the surviving institution. As a
result of the MHC Combination, (x) the shares of Bank Common Stock currently
held by the Mutual Holding Company shall be extinguished and (y) Eligible
Account Holders of the Bank will be granted interests in the liquidation
account to be established by the Bank pursuant to Section 15 hereof.
(ii) The Holding Company shall sell the Conversion Stock
in the Offerings, as provided herein and use a portion of the net proceeds
thereof to purchase all of the capital stock of the Bank to be outstanding upon
consummation of the Conversion as provided in Section 5 hereof. The Holding
Company Common Stock held by the Bank shall be cancelled.
(h) The Primary Parties may retain and pay for the services of
financial and other advisors and investment bankers to assist in connection
with any or all aspects of the Conversion, including in connection with the
Offerings, the payment of fees to brokers and investment bankers for assisting
Persons in completing and/or submitting Order Forms. All fees, expenses,
retainers and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK.
(a) The aggregate price at which shares of Conversion Stock
shall be sold in the Offerings shall be based on a pro forma valuation of the
aggregate market value of the Conversion Stock prepared by the Independent
Appraiser. The valuation shall be based on
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<PAGE> 11
financial information relating to the Primary Parties, market, financial and
economic conditions, a comparison of the Primary Parties with selected publicly
held financial institutions and holding companies and with comparable financial
institutions and holding companies and such other factors as the Independent
Appraiser may deem to be appropriate. The valuation shall be stated in terms
of an Estimated Price Range, the maximum of which shall generally be no more
than 15% above the average of the minimum and maximum of such price range and
the minimum of which shall generally be no more than 15% below such average.
The valuation shall be updated during the Offerings as market and financial
conditions warrant and as may be required by the Department and the FDIC.
(b) Based upon the independent valuation, the Boards of
Directors of the Holding Company and the Bank shall fix the Initial Purchase
Price and the number (or range) of shares of Conversion Stock to be offered in
the Subscription Offering, Community Offering and/or Syndicated Community
Offering or Public Offering. The Actual Purchase Price and the total number of
shares of Conversion Stock to be issued in the Offerings shall be determined by
the Boards of Trustees and Directors, as the case may be, of the Primary
Parties upon conclusion of the Offerings in consultation with the Independent
Appraiser and any financial advisor or investment banker retained by the
Primary Parties in connection therewith.
(c) Subject to the receipt of any required regulatory approval
or consent, the Estimated Price Range may be increased or decreased to reflect
market, financial and economic conditions prior to completion of the
Conversion, and under such circumstances the Primary Parties may increase or
decrease the total number of shares of Conversion Stock to be issued in the
Conversion to reflect any such change. Notwithstanding anything to the
contrary contained in this Plan, no resolicitation of subscribers shall be
required and subscribers shall not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Conversion Stock
issued in the Conversion are less than the minimum or more than 15% above the
maximum of the Estimated Price Range set forth in the Prospectus. In the event
of an increase in the total number of shares offered in the Conversion due to
an increase in the Estimated Price Range, the priority of share allocation
shall be as set forth in this Plan.
5. PURCHASE BY THE HOLDING COMPANY OF THE STOCK OF THE BANK.
Upon the consummation of the sale of all of the Conversion Stock, the
Holding Company will purchase from the Bank all of the capital stock of the
Bank to be issued by the Bank in the Conversion (which shall consist solely of
Bank Common Stock) in exchange for such amount of the net proceeds from the
sale of the Conversion Stock in the Offerings that are not to be retained by
the Holding Company. The Holding Company will retain 50% of the net proceeds
of the Conversion or such lesser percentage as may be deemed acceptable in the
judgment of the Board of Directors.
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<PAGE> 12
6. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS.
(a) Each Eligible Account Holder shall receive, without
payment, Subscription Rights to purchase up to the amount permitted to
be purchased in the Community Offering pursuant to the provisions of Section 9
hereof, but which amount may be increased to 5.0% of the total offering of
shares of Conversion Stock, subject to (i) any regulatory approval but without
the further approval of Eligible Account Holders or resolicitation of
subscribers, and (ii) the maximum and minimum purchase limitations specified by
Section 10 hereof.
(b) In the event of an oversubscription for shares of
Conversion Stock pursuant to Section 6(a), available shares shall be allocated
among subscribing Eligible Account Holders so as to permit each such Eligible
Account Holder, to the extent possible, to purchase a number of shares which
will make his or her total allocation equal to the lesser of the number of
shares subscribed for or 100 shares. Any available shares remaining after each
subscribing Eligible Account Holder has been allocated the lesser of the number
subscribed for or 100 shares shall be allocated among the subscribing Eligible
Account Holders in the proportion which the Qualifying Deposit of each such
subscribing Eligible Account Holder bears to the total Qualifying Deposits of
all such subscribing Eligible Account Holders, provided that no fractional
shares shall be issued. Subscription Rights of Eligible Account Holders who
are also Directors, Trustees or Officers and their Associates shall be
subordinated to those of other Eligible Account Holders to the extent that they
are attributable to increased deposits during the one-year period preceding the
Eligibility Record Date.
7. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS.
Notwithstanding the purchase limitations discussed below, Tax-Qualified
Employee Stock Benefit Plans of the Holding Company and the Bank shall receive,
without payment, Subscription Rights to purchase in the aggregate up to 10% of
the total offering of shares of Conversion Stock. Shares of Conversion Stock
purchased by any individual participant ("Plan Participant") in a Tax-Qualified
Employee Stock Benefit Plan using funds therein pursuant to the exercise of
subscription rights granted to such Participant in his individual capacity as
an Eligible Account Holder and/or Supplemental Eligible Account Holder and/or
purchases by such Plan Participant in the Community Offering shall not be
deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for
purposes of calculating the maximum amount of Conversion Stock that
Tax-Qualified Stock Benefit Plans may purchase pursuant to the immediately
preceding sentence (if the individual Plan Participant controls or directs the
investment authority with respect to such account or subaccount). The maximum
number of shares of Conversion Stock which may be purchased in the Conversion
by the ESOP to be established by the Company and the Bank shall not exceed 8%
of the total number of shares sold in the Conversion including any shares which
may be issued in the event of an increase with the maximum of the Estimated
Price Range. Consistent with applicable laws and regulations and policies and
practices of the Department and the FDIC, Tax-Qualified Employee Stock Benefit
Plans may use funds contributed by
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<PAGE> 13
the Holding Company or the Bank and/or borrowed from an independent financial
institution to exercise such Subscription Rights, and the Holding Company and
the Bank may make scheduled discretionary contributions thereto, provided that
such contributions do not cause the Holding Company or the Bank to fail to meet
any applicable regulatory capital requirement.
8. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS.
(a) In the event that the Eligibility Record Date is more than
15 months prior to the date of the latest amendment to the Application for
Conversion filed prior to Department approval, then, and only in that event, a
Supplemental Eligibility Record Date shall be set and each Supplemental
Eligible Account Holder shall receive, without payment, Subscription Rights to
purchase up to the same amount permitted to be subscribed for in the Community
Offering pursuant to the provisions of Section 9, but which amount may be
increased to 5.0% of the total offering of shares of Conversion Stock, subject
to (i) any required regulatory approval but without the further approval of
Eligible Account Holders or resolicitation of subscribers, and (ii) (A) the
maximum and minimum purchase limitations specified by Section 10 hereof and (B)
the availability of shares of Conversion Stock for purchase after taking into
account the shares of Conversion Stock purchased by Eligible Account Holders
and Tax-Qualified Employee Stock Benefit Plans through the exercise of
Subscription Rights granted under Sections 6 and 7 hereof.
(b) In the event of an oversubscription for shares of
Conversion Stock pursuant to Section 8(a), available shares shall be allocated
among subscribing Supplemental Eligible Account Holders so as to permit each
such Supplemental Eligible Account Holder, to the extent possible, to purchase
a number of shares which will make his or her total allocation (including the
number of shares, if any, allocated in accordance with Section 6(a)) equal to
the lesser of the number of shares subscribed for or 100 shares. Any available
shares remaining after each subscribing Supplemental Eligible Account Holder
has been allocated the lesser of the number subscribed for or 100 shares shall
be allocated among the subscribing Supplemental Eligible Account Holders in the
proportion which the Qualifying Deposit of each such subscribing Supplemental
Eligible Account Holder bears to the total Qualifying Deposits of all such
subscribing Supplemental Eligible Account Holders, provided that no fractional
shares shall be issued.
9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING, PUBLIC OFFERING AND
OTHER OFFERINGS.
(a) If less than the total number of shares of Conversion
Stock are sold in the Subscription Offering, it is anticipated that all
remaining shares of Conversion Stock shall, if practicable, be sold in a
Community Offering and/or a Syndicated Community Offering. Subject to the
requirements set forth herein, the manner in which the Conversion Stock is sold
in the Community Offering and/or the Syndicated Community Offering shall have
as an objective the achievement of a broad distribution of such stock.
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<PAGE> 14
(b) In the event of a Community Offering, all shares of
Conversion Stock which are not subscribed for in the Subscription Offering
shall be offered for sale by means of a direct community marketing program,
which may provide for the use of brokers, dealers or investment banking firms
experienced in the sale of financial institution securities. Any available
shares in excess of those not subscribed for in the Subscription Offering will
be available for purchase by members of the general public to whom a Prospectus
is delivered by the Holding Company or on its behalf, with preference given to
natural persons residing in the counties in New York in which the Bank has a
branch office ("Preferred Subscribers").
(c) A Prospectus and Order Form shall be furnished to such
Persons as the Primary Parties may select in connection with the Community
Offering, and each order for Conversion Stock in the Community Offering shall
be subject to the absolute right of the Primary Parties to accept or reject any
such order in whole or in part either at the time of receipt of an order or as
soon as practicable following completion of the Community Offering. Available
shares will be allocated first to each Preferred Subscriber whose order is
accepted 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 shall be allocated among the Preferred Subscribers whose
accepted orders remain unsatisfied on an equal number of shares basis per order
until all orders have been filled, provided that no fractional shares shall be
issued. If there are any shares remaining after all accepted orders by
Preferred Subscribers have been satisfied, any remaining shares shall be
allocated to other members of the general public who purchase in the Community
Offering, applying the same allocation described above for Preferred
Subscribers.
(d) The amount of Conversion Stock that any Person may
purchase in the Community Offering shall not exceed $500,000 of the Conversion
Stock offered, provided, however, that this amount may be increased to up to 5%
of the total offering of shares of Conversion Stock subject to (i) any required
regulatory approval but without the further approval of Eligible Account
Holders or the resolicitation of subscribers and (ii) the maximum and minimum
purchase limitations specified by Section 10 hereof. The Primary Parties may
commence the Community Offering concurrently with, at any time during, or as
soon as practicable after the end of, the Subscription Offering, and the
Community Offering must be completed within 45 days after the completion of the
Subscription Offering, unless extended by the Primary Parties with any required
regulatory approval.
(e) Subject to such terms, conditions and procedures as may be
determined by the Primary Parties, all shares of Conversion Stock not
subscribed for in the Subscription Offering or ordered in the Community
Offering may be sold by a syndicate of broker-dealers to the general public in
a Syndicated Community Offering. Each order for Conversion Stock in the
Syndicated Community Offering shall be subject to the absolute right of the
Primary Parties to accept or reject any such order in whole or in part either
at the time of receipt of an order or as soon as practicable after completion
of the Syndicated Community Offering. The amount of Conversion Stock that any
Person may purchase in the Syndicated Community Offering shall not exceed
$500,000 of the Conversion Stock offered, provided, however, that this amount
may be increased to up to 5% of the total offering of shares of Conversion
Stock,
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<PAGE> 15
subject to (i) any required regulatory approval but without the further
approval of Eligible Account Holders or the resolicitation of subscribers and
(ii) the maximum and minimum purchase limitations specified by Section 10
hereof. Available shares will be allocated first to each purchaser in the
Syndicated Community Offering whose order is accepted in an amount equal to the
lesser of 100 shares or the number of shares ordered by each such purchaser.
Thereafter, shares shall be allocated on an equal number of shares basis per
order until all orders have been filled, provided that no fractional shares
will be issued. The Primary Parties may commence the Syndicated Community
Offering concurrently with, at any time during, or as soon as practicable after
the end of, the Subscription Offering and/or the Community Offering, and the
Syndicated Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Primary Parties
with any required regulatory approval.
(f) The Holding Company and the Bank may sell any shares of
Conversion Stock remaining following the Subscription Offering, Community
Offering and/or the Syndicated Community Offering in a Public Offering. The
provisions of Section 10 hereof shall not be applicable to the sales to
underwriters for purposes of the Public Offering but shall be applicable to
sales by the underwriters to the public. The price to be paid by the
underwriters in such an offering shall be equal to the Actual Purchase Price
less an underwriting discount to be negotiated among such underwriters and the
Bank and the Holding Company, subject to any required regulatory approval or
consent.
(g) If for any reason a Syndicated Community Offering or a
Public Offering of any shares of Conversion Stock not sold in the Subscription
Offering and the Community Offering cannot be effected, or in the event that
any insignificant residue of shares of Conversion Stock not exceeding 1% is not
sold in the Subscription Offering, Community Offering or Syndicated Community
Offering, the Primary Parties shall use their best efforts to obtain other
purchasers for such shares in such manner and upon such conditions as may be
satisfactory to the Department and the FDIC.
10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION STOCK.
(a) The maximum number of shares of Conversion Stock which may
be purchased in the Conversion by Tax-Qualified Employee Stock Benefit Plans
shall not exceed 10% of the total number of shares of Conversion Stock sold in
the Offerings, including any shares which may be issued in the event of an
increase in the maximum of the Estimated Price Range to reflect changes in
market, financial and economic conditions after commencement of the
Subscription Offering and prior to completion of the Offerings; provided;
however, that purchases of Conversion Stock which are made by Plan Participants
pursuant to the exercise of subscription rights granted to such Participant in
his individual capacity as an Eligible Account Holder or Supplemental Eligible
Account Holder or purchases by a Plan Participant in the Community Offering
using the funds thereof held in Tax-Qualified Employee Stock Benefit Plans
shall not, be deemed to be purchases by a Tax-Qualified Employee Stock Benefit
Plan for purposes of this Section 10(a).
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<PAGE> 16
(b) Except in the case of Tax-Qualified Employee Stock Benefit
Plans in the aggregate, as set forth in Section 10(a) hereof, and in addition
to the other restrictions and limitations set forth herein, the maximum number
of shares of Conversion Stock which any Person together with any Associate or
group of Persons acting in concert may, directly or indirectly, subscribe for
or purchase in the Conversion shall not exceed 1% of the Conversion Stock. The
purchase limitation set forth herein shall not apply to the Holding Company
Common Stock contributed to the charitable foundation in accordance with
Section 26 hereof nor shall such shares be deemed Conversion Stock.
(c) The number of shares of Conversion Stock which Directors,
Trustees and Officers and their Associates may purchase in the aggregate in the
Offerings shall not exceed 25% of the total number of shares of Conversion
Stock sold in the Offerings, including any shares which may be issued in the
event of an increase in the maximum of the Estimated Price Range to reflect
changes in market, financial and economic conditions after commencement of the
Subscription Offering and prior to completion of the Offerings.
(d) No Person may purchase fewer than 25 shares of Conversion
Stock in the Offerings, to the extent such shares are available; provided,
however, that if the Actual Purchase Price is greater than $20.00 per share,
such minimum number of shares shall be adjusted so that the aggregate Actual
Purchase Price for such minimum shares will not exceed $500.00.
(e) For purposes of the foregoing limitations and the
determination of Subscription Rights, (i) Directors, Trustees, Officers and
Employees shall not be deemed to be Associates or a group acting in concert
solely as a result of their capacities as such, (ii) shares purchased by
Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the
individual trustees or beneficiaries of any such plan for purposes of
determining compliance with the limitations set forth in Section 10(b) hereof
and (iii) shares purchased by Tax-Qualified Employee Stock Benefit Plans shall
not be attributable to the individual trustees or beneficiaries of any such
plan for purposes of determining compliance with the limitation set forth in
Section 10(c) hereof.
(f) 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 resolicitation of subscribers,
the Primary Parties may increase any of the individual or aggregate purchase
limitations set forth herein to a percentage which does not exceed 5% of the
total offering of shares of Conversion Stock whether prior to, during or after
the Subscription Offering, Community Offering, Syndicated Community Offering
and/or Public Offering. In the event that an individual purchase limitation is
increased after commencement of the Subscription Offering or any other
Offering, the Primary Parties shall permit any Person who subscribed for the
maximum number of shares of Conversion Stock to purchase an additional number
of shares, so that such Person shall be permitted to subscribe for the then
maximum number of shares permitted to be subscribed for by such Person, subject
to the rights and preferences of any Person who has priority Subscription
Rights.
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<PAGE> 17
(g) The Primary Parties shall have the right to take all such
action as they may, in their sole discretion, deem necessary, appropriate or
advisable in order to monitor and enforce the terms, conditions, limitations
and restrictions contained in this Section 10 and elsewhere in this Plan and
the terms, conditions and representations contained in the Order Form,
including, but not limited to, the absolute right (subject only to any
necessary regulatory approvals or concurrences) to reject, limit or revoke
acceptance of any subscription or order and to delay, terminate or refuse to
consummate any sale of Conversion Stock which they believe might violate, or is
designed to, or is any part of a plan to, evade or circumvent such terms,
conditions, limitations, restrictions and representations. Any such action
shall be final, conclusive and binding on all persons, and the Primary Parties
and their respective Boards shall be free from any liability to any Person on
account of any such action.
11. TIMING OF SUBSCRIPTION OFFERING, MANNER OF EXERCISING SUBSCRIPTION
RIGHTS AND ORDER FORMS.
(a) The Subscription Offering may be commenced concurrently
with or at any time after the mailing to the Eligible Account Holders of the
Bank of the proxy statement to be used in connection with the Special Meeting,
provided, however that the Subscription Offering may not be closed earlier than
five days after the Special Meeting unless otherwise approved by the Primary
Parties subject to the receipt of any required regulatory approval or consent.
The offer and sale of the Conversion Stock shall be conditioned upon the
approval of the Plan by the Eligible Account Holders of the Bank at the Special
Meeting and the Mutual Holding Company as the sole stockholder of the Bank.
(b) The exact timing of the commencement of the Subscription
Offering shall be determined by the Primary Parties in consultation with the
Independent Appraiser and any financial or advisory or investment banking firm
retained by them in connection with the Conversion. The Primary Parties may
consider a number of factors, including, but not limited to, their current and
projected future earnings, local and national economic conditions, and the
prevailing market for stocks in general and stocks of financial institutions in
particular. The Primary Parties shall have the right to withdraw, terminate,
suspend, delay, revoke or modify any such Subscription Offering, at any time
and from time to time, as they in their sole discretion may determine, without
liability to any Person, subject to compliance with applicable securities laws
and any necessary regulatory approval or concurrence.
(c) The Primary Parties shall, promptly after the SEC has
declared the Registration Statement (which includes the Prospectus) effective
and all required regulatory approvals have been obtained, distribute or make
available the Prospectus, together with Order Forms for the purchase of
Conversion Stock, to all Participants for the purpose of enabling them to
exercise their respective Subscription Rights, subject to Section 13 hereof.
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<PAGE> 18
(d) A single Order Form for all Deposit Accounts maintained
with the Bank by an Eligible Account Holder and any Supplemental Eligible
Account Holder may be furnished, irrespective of the number of Deposit Accounts
maintained with the Bank on the Eligibility Record Date and Supplemental
Eligibility Record Date, respectively. No person holding a subscription right
may exceed any otherwise applicable purchase limitation by submitting multiple
orders for Conversion Stock. Multiple orders are subject to adjustment, in the
manner deemed appropriate by the Holding Company and the Bank, in order to
allocate shares in the event of an oversubscription.
(e) The recipient of an Order Form shall have no less than 20
days and no more than 45 days from the date of mailing of the Order Form (with
the exact termination date to be set forth on the Order Form) to properly
complete and execute the Order Form and deliver it to the Primary Parties,
provided, however, such period shall not end less than five days following the
Special Meeting, unless otherwise approved by the Primary Parties, subject to
the receipt of any required approval or consent. The Primary Parties may
extend such period by such amount of time as they determine is appropriate.
Failure of any Participant to deliver a properly executed Order Form to the
Primary Parties, along with payment (or authorization for payment by
withdrawal) for the shares of Conversion Stock subscribed for, within the time
limits prescribed, shall be deemed a waiver and release by such person of any
rights to subscribe for shares of Conversion Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
Person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan.
(f) The Primary Parties shall have the absolute right, in
their sole discretion and without liability to any Participant or other Person,
to reject any Order Form, including, but not limited to, any Order Form that is
(i) improperly completed or executed; (ii) not timely received; (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 Primary Parties 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. Furthermore, in the event
Order Forms (i) are not delivered and are returned to the Primary Parties by
the United States Postal Service or the Primary Parties are unable to locate
the addressee, or (ii) are not mailed pursuant to a "no mail" order placed in
effect by the account holder, the subscription rights of the person to which
such rights have been granted will lapse as though such person failed to return
the contemplated Order Form within the time period specified thereon. The
Primary Parties may, but will not be required to, waive any irregularity on any
Order Form or may require the submission of corrected Order Forms or the
remittance of full payment for shares of Conversion Stock by such date as they
may specify. The interpretation of the Primary Parties of the terms and
conditions of the Plan and the Order Forms shall be final and conclusive,
subject to the authority of the Department and the FDIC.
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12. PAYMENT FOR CONVERSION STOCK.
(a) Payment for shares of Conversion Stock subscribed for by
Participants in the Subscription Offering and payment for shares of Conversion
Stock ordered by Persons in the Community Offering shall be equal to the
Initial Purchase Price multiplied by the number of shares which are being
subscribed for or ordered, respectively. Such payment may be made in cash, if
delivered in person, or by check or money order at the time the Order Form is
delivered to the Primary Parties. The Primary Parties also may elect to accept
payment for shares of Conversion Stock by wire transfer. The Primary Parties
may elect to provide Participants and/or other Persons who have a Deposit
Account with the Bank the opportunity to pay for shares of Conversion Stock by
authorizing the Bank to withdraw from such Deposit Account an amount equal to
the aggregate Initial Purchase Price of such shares. The Primary Parties in
their discretion, may require that payment other than by withdrawal from a
Deposit Account or by cash be by certified or bank check. Payment may also be
made by a Participant using funds held for such Participant's benefit by a Bank
Benefit Plan, to the extent that such plan allows Participants or any related
trust established for the benefit of such Participants to direct that some or
all of their individual accounts or sub-accounts be invested in Conversion
Stock. If the Actual Purchase Price is less than the Initial Purchase Price,
the Primary Parties shall refund the difference to all Participants and other
Persons, unless the Primary Parties choose to provide Participants and other
Persons the opportunity on the Order Form to elect to have such difference
applied to the purchase of additional whole shares of Conversion Stock. If the
Actual Purchase Price is more than the Initial Purchase Price, the Primary
Parties shall reduce the number of shares of Conversion Stock ordered by
Participants and other Persons and refund any remaining amount which is
attributable to a fractional share interest, unless the Primary Parties choose
to provide Participants and other Persons the opportunity to increase the
Actual Purchase Price submitted to them.
(b) Consistent with applicable laws and regulations and
policies and practices of the Department and the FDIC, payment for shares of
Conversion Stock subscribed for by Tax-Qualified Employee Stock Benefit Plans
may be made with funds contributed by the Holding Company and/or the Bank
and/or funds obtained pursuant to a loan from an unrelated financial
institution pursuant to a loan commitment which is in force from the time that
any such plan submits an Order Form until the closing of the transactions
contemplated hereby, which funds shall not be required to be delivered at the
time of subscription but upon the consummation of the Conversion.
(c) If a Participant or other Person authorizes the Bank to
withdraw the amount of the Initial Purchase Price from his or her Deposit
Account, the Bank shall have the right to make such withdrawal or to freeze
funds equal to the aggregate Initial Purchase Price upon receipt of the Order
Form. Notwithstanding any regulatory provisions regarding penalties for early
withdrawals from certificate accounts, the Bank may allow payment by means of
withdrawal from certificate accounts without the assessment of such penalties.
In the case of an early withdrawal of only a portion of such account, the
certificate evidencing
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<PAGE> 20
such account shall be cancelled if any applicable minimum balance requirement
ceases to be met. In such case, the remaining balance will earn interest at
the regular passbook rate. However, where any applicable minimum balance is
maintained in such certificate account, the rate of return on the balance of
the certificate account shall remain the same as prior to such early
withdrawal. This waiver of the early withdrawal penalty applies only to
withdrawals made in connection with the purchase of Conversion Stock and is
entirely within the discretion of the Primary Parties.
(d) The Bank shall pay interest, at not less than the passbook
rate, for all amounts paid in cash, by check or money order to purchase shares
of Conversion Stock in the Subscription Offering and the Community Offering
from the date payment is received until the date the Conversion is completed or
terminated.
(e) The Bank shall not knowingly loan funds or otherwise
extend credit to any Participant or other Person to purchase Conversion Stock.
(f) Each share of Conversion Stock shall be non-assessable
upon payment in full of the Actual Purchase Price.
13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion
Stock under the Plan if such Participant resides in a foreign country or
resides in a jurisdiction of the United States with respect to which all of the
following apply: (a) there are few Participants otherwise eligible to
subscribe for shares under this Plan who reside in such jurisdiction; (b) the
granting of Subscription Rights or the offer or sale of shares of Conversion
Stock to such Participants would require any of the Primary Parties or their
respective Directors, Trustees and Officers, under the laws of such
jurisdiction, to register as a broker-dealer, salesman or selling agent or to
register or otherwise qualify the Conversion Stock for sale in such
jurisdiction, or any of the Primary Parties would be required 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 Primary Parties would be impracticable or unduly burdensome for
reasons of cost or otherwise.
14. VOTING RIGHTS OF STOCKHOLDERS.
Following consummation of the Conversion, voting rights with respect to
the Bank shall be held and exercised exclusively by the Holding Company as
holder of all of the Bank's outstanding voting capital stock, and voting rights
with respect to the Holding Company shall be held and exercised exclusively by
the holders of the Holding Company's outstanding voting capital stock. No
person shall have any rights as a stockholder of the Holding Company unless and
until the Conversion Stock has been issued to such person.
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<PAGE> 21
15. LIQUIDATION ACCOUNT.
(a) At the time of the MHC Combination, the Bank shall
establish a liquidation account in an amount equal to 100% of the Bank's total
net worth (determined in accordance with generally accepted accounting
principles) as reflected in its latest statement of financial condition
contained in, incorporated into or accompanying the proxy statement distributed
to Eligible Account Holders in connection with the Conversion and
Reorganization. The function of the liquidation account will be to preserve
the rights of Eligible Account Holders who maintain their Deposit Accounts in
the Bank following the Conversion to a priority with respect to the receipt of
to distributions in the unlikely event of a liquidation of the Bank subsequent
to the Conversion.
(b) The liquidation account shall be maintained for the
benefit of Eligible Account Holders who maintain their Deposit Accounts in the
Bank after the Conversion. Each such account holder will, with respect to each
Deposit Account held, have a related inchoate interest in a portion of the
liquidation account balance, which interest will be referred to in this Section
15 as the "subaccount balance."
(c) In the event of a complete liquidation of the Bank
subsequent to the Conversion (and only in such event), each Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current subaccount balances for
Deposit Accounts then held (adjusted as described below) before any liquidation
distribution may be made with respect to the capital stock of the Bank. No
merger, consolidation, sale of bulk assets or similar combination transaction
with another FDIC-insured institution in which the Bank is not the surviving
entity shall be considered a complete liquidation for this purpose. In any
merger or consolidation transaction, the liquidation account shall be assumed
by the surviving entity.
(d) The initial subaccount balance for a Deposit Account held
by an Eligible Account Holder shall be determined by multiplying the opening
balance in the liquidation account by a fraction, of which the numerator is the
amount of the Qualifying Deposits of such account holder and the denominator is
the total amount of Qualifying Deposits of all Eligible Account Holders.
Initial subaccount balances shall not be increased, and shall be subject to
downward adjustment as provided below.
(e) If, at the close of business on the last day of any period
for which the Bank or the Holding Company, as the case may be, has prepared
audited financial statements subsequent to the effective date of the
Conversion, the deposit balance in the Deposit Account of an Eligible Account
Holder is less than the lesser of (i) the balance in the Deposit Account at the
close of business on the last day of any period for which the Bank or the
Holding Company, as the case may be, has prepared audited financial statements
subsequent to the Eligibility Record Date, or (ii) the amount in such Deposit
Account as of the Eligibility Record Date, the subaccount balance for such
Deposit Account(s) shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction and that such Person received a
Prospectus.
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<PAGE> 22
in such deposit balance. In the event of such a downward adjustment, the
subaccount balance shall not be subsequently increased, notwithstanding any
subsequent increase in the deposit balance of the related Deposit Account(s).
The subaccount balance of an Eligible Account Holder will be reduced to zero if
the Account Holder ceases to maintain a Deposit Account at the Bank.
(f) Subsequent to the Conversion, the Bank may not pay cash
dividends generally on capital stock of the Bank, or repurchase any of the
capital stock of the Bank, if such dividend or repurchase would reduce the
Bank's regulatory capital below the aggregate amount of the then current
subaccount balances for Deposit Accounts then held; otherwise, the existence of
the liquidation account shall not operate to restrict the use or application of
any of the net worth accounts of the Bank.
16. TRANSFER OF DEPOSIT ACCOUNTS.
Each Deposit Account in the Bank at the time of the consummation of the
Conversion shall become, without further action by the holder, 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
Conversion Stock), 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. Holders of Deposit Accounts in the Bank shall
not, as such holders, have any voting rights.
17. REQUIREMENTS FOLLOWING CONVERSION AND REORGANIZATION FOR REGISTRATION,
MARKET MAKING AND STOCK EXCHANGE LISTING.
In connection with the Conversion, the Holding Company shall register
the Holding Company Common Stock pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister such
stock for a period of three years thereafter. The Holding Company also shall
use its best efforts to (i) encourage and assist a market maker to establish
and maintain a market for the Holding Company Common Stock and (ii) list the
Holding Company Common Stock on a national or regional securities exchange or
to have quotations for such stock disseminated on the Nasdaq Stock Market.
18. DIRECTORS AND OFFICERS OF THE BANK.
Each person serving as a Director or Officer of the Bank at the time of
the Conversion shall continue to serve as a Director or Officer of the Bank for
the balance of the term for which the person was elected prior to the
Conversion, and until a successor is elected and qualified.
20
<PAGE> 23
19. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
CONVERSION AND REORGANIZATION.
For a period of three years following the Conversion, the Directors and
Officers of the Holding Company and the Bank (or any person who was an Officer
or 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) and their Associates may not purchase, without the prior
written approval of the Superintendent, Holding Company Common Stock except
from a broker-dealer registered with the SEC. This prohibition shall not
apply, however, to (i) purchases of stock made by and held by any Tax-Qualified
Employee Stock Benefit Plan (and purchases of stock made by and held by any
Non-Tax-Qualified Employee Stock Benefit Plan following the receipt of
stockholder approval of such plan) which may be attributable to individual
Officers or Directors or (ii) the exercise of any options pursuant to any stock
benefit plan of the Holding Company.
The foregoing restriction on purchases of Holding Company Common Stock
shall be in addition to any restrictions that may be imposed by federal and
state securities laws.
20. RESTRICTIONS ON TRANSFER OF STOCK.
All shares of the Conversion Stock which are purchased by Persons other
than Directors and Officers of the Holding Company and the Bank shall be
transferable without restriction, except in connection with a transaction
proscribed by Section 21 of this Plan. Shares of Conversion Stock purchased by
Directors and Officers of the Holding Company and the Bank on original issue
from the Holding Company (by subscription or otherwise) shall be subject to the
restriction that such shares shall not be sold or otherwise disposed of for
value for a period of one year following the date of purchase, except for any
disposition of such shares following the death or judicial declaration of
incompetence of the original purchaser or pursuant to any merger or similar
transaction approved by the Department. The shares of Conversion Stock issued
by the Holding Company to Directors and Officers shall bear the following
legend giving appropriate notice of such one-year restriction:
The shares of stock evidenced by this Certificate are restricted
as to transfer for a period of one year from the date of this
Certificate. These shares may not be transferred during such
one-year period without a legal opinion of counsel for the
Company that said transfer is permissible under the provisions of
applicable law and regulation. This restrictive legend shall be
deemed null and void after one year from the date of this
Certificate.
In addition, the Holding Company shall give appropriate instructions to
the transfer agent for the Holding Company Common Stock with respect to the
applicable restrictions
21
<PAGE> 24
relating to the transfer of restricted stock. Any shares issued at a later
date as a stock dividend, stock split or otherwise with respect to any such
restricted stock shall be subject to the same holding period restrictions as
may then be applicable to such restricted stock.
The foregoing restriction on transfer shall be in addition to any
restrictions on transfer that may be imposed by federal and state securities
laws.
21. RESTRICTIONS ON ACQUISITION OF STOCK OF THE HOLDING COMPANY.
The certificate of incorporation of the Holding Company may prohibit any
Person together with Associates or group of Persons acting in concert from
offering to acquire or acquiring, directly or indirectly, beneficial ownership
of more than 10% of any class of equity securities of the Holding Company, or
of securities convertible into more than 10% of any such class, for such period
of time following completion of the Conversion as may be determined by the
Board of Directors of the Holding Company. The certificate of incorporation of
the Holding Company also may provide that all equity securities beneficially
owned by any Person in excess of 10% of any class of equity securities shall be
considered "excess shares," and that excess shares 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 the stockholders for
a vote. The foregoing restrictions shall not apply to (i) any offer with a
view toward public resale made exclusively to the Holding Company by
underwriters or a selling group acting on its behalf, (ii) the purchase of
shares by a Tax-Qualified Employee Stock Benefit Plan established for the
benefit of the employees of the Holding Company and its subsidiaries and (iii)
any offer or acquisition approved in advance by a specified affirmative vote of
the entire Board of Directors of the Holding Company. Directors, Officers or
Employees of the Holding Company or the Bank or any subsidiary thereof shall
not be deemed to be Associates or a group acting in concert with respect to
their individual acquisitions of any class of equity securities of the Holding
Company solely as a result of their capacities as such.
22. TAX RULINGS OR OPINIONS.
Consummation of the Conversion is conditioned upon prior receipt by the
Primary Parties of either a ruling or an opinion of counsel with respect to
federal tax laws, and either a ruling 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 codes or otherwise result in any adverse tax
consequences to the Primary Parties or to account holders receiving
Subscription Rights before or after the Conversion, except in each case to the
extent, if any, that Subscription Rights are deemed to have fair market value
on the date such rights are issued.
22
<PAGE> 25
23. STOCK COMPENSATION PLANS
(a) The Holding Company and the Bank are authorized to adopt
Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion,
including without limitation an ESOP.
(b) The Holding Company and the Bank also are authorized to
adopt stock option plans, restricted stock grant plans and other
Non-Tax-Qualified Employee Stock Benefit Plans, provided that no stock options
shall be granted, and no shares of Conversion Stock shall be purchased,
pursuant to any of such plans prior to the earlier of (i) the one year
anniversary of the consummation of the Conversion or (ii) the receipt of
stockholder approval of such plans at either an annual or special meeting of
stockholders of the Holding Company to be held not earlier than six months
after the completion of the Conversion. The Holding Company and the Bank also
currently plan to adopt a stock option plan for the benefit of Directors,
Trustees, Officers and Employees and to reserve for issuance pursuant to such
plan from authorized but unissued shares an amount of Holding Company Common
Stock equal to 10% of the number of shares issued in connection with the
Conversion. The Holding Company and the Bank currently anticipate adopting a
restricted stock plan for the benefit of Directors, Trustees, Officers and
Employees to acquire through such plan in open market purchases or from
authorized but unissued shares an amount of Holding Company Common Stock equal
to 4% of the number of shares issued in connection with the Conversion.
(c) Existing as well as any newly created Tax-Qualified
Employee Stock Benefit Plans may purchase shares of Conversion Stock in the
Offerings, to the extent permitted by the terms of such benefit plans and this
Plan.
(d) The Holding Company and the Bank are authorized to enter
into employment or severance agreements with their executive officers.
24. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK.
(a) Following consummation of the Conversion, any repurchases
of shares of capital stock by the Holding Company will be made in accordance
with then applicable laws and regulations.
(b) The Bank may not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause the
regulatory capital of the Bank to be reduced below the amount required for the
liquidation account.
23
<PAGE> 26
25. PAYMENT OF FEES TO BROKERS.
The Primary Parties may elect to offer to pay fees on a per share basis
to securities brokers who assist purchasers of Conversion Stock in the
Offerings.
26. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION
As part of the Conversion, the Holding Company and the Bank intend to
establish a Foundation that will qualify as an exempt organization under
Section 501(c)(3) of the Code and to donate to the Foundation from authorized
but unissued shares of Holding Company Common Stock a number of shares of
Holding Company Common Stock in an amount not to exceed 10% of the number of
shares of Conversion Stock issued in the Conversion (provided, however, that
such amount may be reduced by the Holding Company and the Bank), subject to the
receipt of any required regulatory approval or consent. The Foundation is
being formed in connection with the Conversion in order to complement the
Bank's existing community reinvestment activities and to share with the Bank's
local community a part of the Bank's financial success as a locally
headquartered, community minded, financial services institution and to support
such charitable purposes as determined by the Board of Directors of the
Foundation and permissible to a Section 501(c)(3) exempt charitable
organization. The funding of the Foundation with Holding Company Common
Stock accomplishes this goal as it enables the community to share in the growth
and profitability of the Holding Company and the Bank.
The Foundation will be dedicated to the promotion of charitable purposes
including, among other things, community development, grants, or donations to
support housing assistance and affordable housing programs, not-for-profit
community groups and any other type of charitable organization or endeavor
permissible to a Section 501(c)(3) organization. In order to serve the
purposes for which it was formed and maintain its qualification under Section
501(c)(3) of the Code, the Foundation may sell, on an annual basis, a limited
portion of the Holding Company Common Stock contributed to it by the Holding
Company.
The Board of Directors of the Foundation may be comprised of individuals
who are Officers and/or Directors of the Bank or the Holding Company. The
Board of Directors of the Foundation will be responsible for establishing the
polices of the Foundation with respect to grants or donations, consistent with
the stated purposes of the Foundation.
The establishment and funding of the Foundation as part of the
Conversion and Reorganization is subject to the receipt of any required
regulatory approval or consent.
27. EFFECTIVE DATE.
The effective date of the Conversion shall be the date upon which the
closing of the issuance of the shares of Conversion Stock in the Offerings
occurs. The closing of the
24
<PAGE> 27
issuance of shares of Conversion Stock in the Offerings shall not occur until
all requisite regulatory, depositor and stockholder approvals have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received and the
MHC Combination has been completed. It is intended that the closing of the MHC
Combination and the sale of shares of Conversion Stock in the Offerings shall
occur consecutively and substantially simultaneously.
28. AMENDMENT OR TERMINATION OF THE PLAN.
If deemed necessary or desirable by the Boards of Directors or Trustees,
as the case may be, of the Primary Parties, this Plan may be substantively
amended, as a result of comments from regulatory authorities or otherwise, at
any time prior to the solicitation of proxies from Eligible Account Holders to
vote on the Plan and at any time thereafter upon receipt of any required
regulatory approval or consent. Any amendment to this Plan made after approval
by the Eligible Account Holders upon receipt of any required regulatory
approval or consent shall not necessitate further approval by the Eligible
Account Holders unless otherwise required by applicable regulatory authority.
This Plan shall terminate if the sale of all shares of Conversion Stock is not
completed within 24 months from the date of the approval of the Plan by the
Department, unless a longer period is permitted by applicable laws and
regulations. Prior to the Special Meeting, this Plan may be terminated by the
Boards of Directors or Trustees, as the case may be, of the Primary Parties
without any regulatory approval or consent; after the Special Meeting, the
Boards of Directors or Trustees, as the case may be, may terminate this Plan
only upon receipt of any required regulatory approval or consent.
29. INTERPRETATION OF THE PLAN.
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors or
Trustees, as the case may be, of the Primary Parties shall be final, subject to
the authority of the Department and the FDIC.
25
<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 the Registration Statement on Form S-1 under
the captions "The Conversion-Tax Aspects" and "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.
We hereby consent to the references to our firm in the Prospectus contained in
the form 86-AC and the Registration Statement on Form S-1 under the caption
"The Conversion - Tax Aspects."
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 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts,"
"Consolidated Statements of Income" and "The Conversion - Tax Aspects" and to
the use of our reports dated May 29, 1997 (with respect to the consolidated
financial statements of Independence Savings Bank) and July 31, 1997 (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 the Registration Statement, related Prospectus and
Prospectus Supplement of Independence Community Bank Corp., for the
registration of up to 76,043,750 shares of its common stock, and the
Application for Conversion on Form 86-AC.
/s/ ERNST & YOUNG LLP
New York, New York
October 31, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 39,893
<INT-BEARING-DEPOSITS> 72,659
<FED-FUNDS-SOLD> 72,977
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 721,113
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,708,521
<ALLOWANCE> 31,115
<TOTAL-ASSETS> 3,794,207
<DEPOSITS> 3,371,956
<SHORT-TERM> 0
<LIABILITIES-OTHER> 80,373
<LONG-TERM> 17,109
0
0
<COMMON> 0
<OTHER-SE> 324,769
<TOTAL-LIABILITIES-AND-EQUITY> 3,794,207
<INTEREST-LOAN> 86,808
<INTEREST-INVEST> 21,621
<INTEREST-OTHER> 3,366
<INTEREST-TOTAL> 111,795
<INTEREST-DEPOSIT> 59,334
<INTEREST-EXPENSE> 59,835
<INTEREST-INCOME-NET> 51,960
<LOAN-LOSSES> 4,577
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 34,898
<INCOME-PRETAX> 16,187
<INCOME-PRE-EXTRAORDINARY> 16,187
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,981
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.58
<LOANS-NON> 10,091
<LOANS-PAST> 15,893
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 27,024
<CHARGE-OFFS> 930
<RECOVERIES> 443
<ALLOWANCE-CLOSE> 31,115
<ALLOWANCE-DOMESTIC> 31,115
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.6
----------------------------------------------------
CONVERSION VALUATION APPRAISAL
UPDATE REPORT
INDEPENDENCE COMMUNITY BANK CORP.
PROPOSED HOLDING COMPANY FOR
INDEPENDENCE SAVINGS BANK
BROOKLYN, NEW YORK
DATED AS OF:
OCTOBER 29, 1997
----------------------------------------------------
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE> 2
[RP FINANCIAL, LC. LETTERHEAD]
October 29, 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"), and first updated appraisal, dated August
8, 1997 ("First Update"), are incorporated herein by reference. RP Financial
has prepared this appraisal update ("Second 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 and First Update, 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
October 29, 1997
Page 2
The Second Update incorporates the financial condition and operations
of the Bank as of August 31, 1997, the date of the financial data included in
the Company's amended conversion application and draft prospectus. The de
minimus balance of Mutual Holding Company assets contributed to the Bank in
conjunction with the Conversion have been 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.
The Bank's valuation is subject to updating, as provided for in the
conversion regulations and guidelines, taking into account, among other things,
developments or changes in the Bank's financial performance and condition,
management policies and 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 while the
First Update was based on May 31, 1997 financials included in the amended
application and draft prospectus. Subsequently, August 31, 1997 "stub"
financials have been incorporated in the application and draft prospectus, thus
RP Financial incorporated such financials in this appraisal update. As
described more fully below, some of the interim change in financials reflect
the (1) anticipated April 1997 reinvestment of cash into securities following
the March 1997 investment portfolio restructuring, (2) consummation of the
pending branch purchase in April 1997 and (3) the pro forma impact of prior tax
planning. Table 1 presents summary balance sheet data as of March 31, May 31
and August 31, 1997. The trends are described more fully below.
<PAGE> 4
Board of Trustees/Directors
October 29, 1997
Page 3
Table 1
Independence Savings Bank
Recent Balance Sheet Data
<TABLE>
<CAPTION>
At March 31, 1997 At May 31, 1997 At August 31, 1997
----------------- --------------- ------------------
% of % of % of
Amount Assets Amount(1) Assets Amount(1) Assets
------ ------ --------- ------ --------- ------
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET ITEMS
- ----------------------------
Assets $3,733,316 100.00% $3,820,595 100.00% $3,794,209 100.00%
Cash & Cash Equivalents 374,636(2) 10.03 130,993 3.43 185,529 4.89
Mortgage-Backed & Related Sec. (AFS) 190,979 5.12 182,248 4.77 167,339 4.41
Investment Securities (AFS) 357,487 9.58 716,943 18.77 553,774 14.60
Loans Receivable (Net) 2,503,089 67.05 2,560,926 67.03 2,677,406 70.57
Intangible Assets (3) 60,499 1.62 63,130 1.65 60,935 1.61
Deposits 3,325,558 89.08 3,380,174 88.47 3,371,956 88.87
FHLB Advances 14,550 0.39 14,550 0.38 14,550 0.38
Other Borrowings 2,682 0.07 2,633 0.07 2,559 0.07
Stockholders' Equity 309,114 8.28 316,576 8.29 324,769 8.56
Tangible Stockholders' Equity 248,615 6.66 253,446 6.63 263,834 6.95
AFS Adjustment 368 0.01 3,282 0.09 5,042 0.13
OTHER INFORMATION
- -----------------
Loans Serviced for Others $314,639 $309,872 $297,205
Avg. Int.-Earning Assets/Int.-Bearing Liab. 106% 109% 109%
Non-Performing Loans/Total Loans (4) 1.07% 1.11% 0.96%
Non-Performing Assets/Total Assets (4) 0.74% 0.77% 0.69%
Loan Loss Allow./Gross Loans 1.06% 1.11% 1.14%
Loan Loss Allow./Non-Performing Loans 99.76% 98.19% 119.75%
</TABLE>
(1) Unaudited; reflects 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, $23.4 and $39.7 million at May 31, 1997,
respectively, and $22.9 and $38.0 million at August 31, 1997,
respectively.
(4) Includes loans 90 days or more past maturity which continue to make
payments on a basis consistent with the original repayment schedule.
Source: Audited and unaudited financial reports and offering documents.
<PAGE> 5
Board of Trustees/Directors
October 29, 1997
Page 4
Growth Trends
Independence's total assets decreased slightly by $26.4 million over
the last three months to equal $3.794 billion, partially attributable to
funding interim net deposit withdrawals. The Bank's purchase of a $70 million
branch in April 1997 has led to a larger asset size (with the receipt of cash
and fixed assets) than at the March 31, 1997 fiscal year end, despite the
recent deposit shrinkage. The deposit shrinkage is largely attributable to
disintermediation, despite the Bank's competitive offering rates on deposits.
The portfolio of investment securities (all designated as "available for sale"
or "AFS") decreased over the last three months by $163.2 million to $553.8
million, largely reflecting the redeployment of funds into loans and, to a
lesser extent, cash and equivalents. Consistent with earlier trends, the
balance of mortgage-backed and related securities ("MBS") continued to decline
through repayments and prepayments, as there were no sales or purchases. The
portfolio of loans receivable (net) demonstrated modest growth of $116.5
million to $2.677 billion at August 31, 1997, which, coupled with slight asset
shrinkage, led to an increase in the loans/assets ratio to 70.57 from 67.03
percent at May 31, 1997. The portfolio of loans serviced for others continued
to decline during the last three months to $297.2 million, reflecting a higher
rate of repayments and prepayments than the relatively small balance of loans
sold on a servicing retained basis.
Deposits declined during the last three months by $8.2 million to
equal $3.372 billion at August 31, 1997. Since March 31, 1997, however,
deposits increased $46 million, as the deposits from the purchased branch
(equal $70 million) offset the impact of continuing disintermediation.
Borrowings remained constant during the interim period, with continuing primary
reliance on deposits for asset funding.
As a result of the April 1997 branch purchase, Independence recorded a
$2.6 million net increase to intangible assets during the two months ended May
31, 1997. Subsequently, intangible assets declined by $2.2 million to equal
$60.9 million as of August 31, 1997, or 1.61 percent of assets, as a result of
normal amortization.
Loan Portfolio
Table 2 sets forth key characteristics of Independence's portfolio as
of March 31, May 31 and August 31, 1997. The loan portfolio schedule reflects
that total loans have increased by approximately $118.8 million (or 4.6
percent) over the three months ended August 31, 1997, to equal $2.720 billion,
with portfolio composition showing growth primarily in the higher credit risk
categories. Multi-family loans, comprising the largest segment of the loan
portfolio at $1.487 billion, or 54.7 percent of total loans, as of August 31,
1997, demonstrated the largest dollar growth of all loan categories, $83.1
million (or 5.9 percent), followed by cooperative apartment loans which grew by
$33.1 million to $392.8 million (or 9.2 percent). The growth in multi-family
and cooperative apartment loans represented nearly 98 percent of the loan
growth during the last three months. The growth in consumer and commercial
loans largely offset the decline in student, home equity and home improvement
loans. The single family portfolio grew slightly over the last three months
but continued to decline as a percent of total loans. As a result, the Bank's
credit risk profile continued to increase.
<PAGE> 6
Board of Trustees/Directors
October 29, 1997
Page 5
Table 2
Independence Savings Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
At March 31, 1997 At May 31, 1997 At August 31, 1997
----------------- --------------- ------------------
% of % of % of
Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ -----
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
Single-Family Residential $552,745 21.8% $551,124 21.2% $552,426 20.3%
Multi-Family Residential (1) 1,365,124 53.7 1,404,304 54.0 1,487,403 54.7
Commercial & Other Real Estate 158,336 6.2 163,136 6.3 163,533 6.0
------- --- ------- --- ------- ---
Total Mortgage Loans $2,076,205 81.7% $2,118,564 81.5% $2,203,362 81.0%
========== ===== ========== ===== ========== =====
OTHER LOANS:
Cooperative Apartment Loans $348,029 13.7% $359,663 13.8% $392,799 14.4%
Student Loans 45,262 1.8 44,397 1.7 43,728 1.6
Home Equity & Improvement 19,545 0.8 19,069 0.6 17,500 0.6
Commercial Business Loans 25,249 1.1 30,661 1.2 32,199 1.2
Consumer, Passbook, Credit Cards 27,005 1.0 28,795 1.1 30,403 1.1
------ --- ------ --- ------ ---
Total Other Loans $465,090 18.3% $482,585 18.5% $516,629 19.0%
======== ===== ======== ===== ======== =====
Total Loans $2,541,295 100.0% $2,601,149 100.0% $2,719,991 100.0%
========== ====== ========== ====== ========== ======
Less:
Allowance for Loan Losses $27,024 $28,776 $31,115
Unearned Disc. & Def. Fees 11,182 11,447 11,470
------ ------ ------
Loans Receivable, Net $2,503,089 $2,560,926 $2,677,406
========== ========== ==========
</TABLE>
(1) Includes $294.9, $306.5 and $326.4 million of loans secured by mixed
use properties (combined residential and commercial use) as of March
31, May 31 and August 31, 1997, respectively.
Source: Prospectus and audited and unaudited financial statements.
Investments and Mortgage-Backed Securities
Information regarding Independence's investment and mortgage-backed
securities portfolio as of March 31, May 31 and August 31, 1997, is set forth
in Table 3. The balance of U.S. Government and agency securities decreased
from $702.4 million to $536.1 million, while the balance of MBS declined from
$182.2 million to $167.3 million between May 31 and August 31, 1997,
respectively, reflecting the Bank's emphasis in loan growth. The other
components of the investment securities portfolio remained small as of August
31, 1997. All of Independence's investment securities and MBS continue to be
classified as "available for sale".
<PAGE> 7
Board of Trustees/Directors
October 29, 1997
Page 6
Table 3
Independence Savings Bank
Investment Portfolio Composition (1)
<TABLE>
<CAPTION>
At At At
March 31, May 31, August 31,
Type 1997 1997 1997
---- ---- ---- ----
($000) ($000) ($000)
<S> <C> <C> <C>
U.S. Government & Agencies $345,144 $702,360 $536,131
Municipal & Corporate Securities 1,462 1,462 1,397
Stocks 10,881 13,121 16,246
Mortgage-Backed Securities 190,979 182,248 167,339
------- ------- -------
Total $548,466 $899,191 $721,113
======== ======== ========
</TABLE>
(1) All investments designated as available for sale at each period.
Source: Prospectus.
Funding
Deposit balances decreased by $8.2 million, or by 0.2 percent, over
the three months ended August 31, 1997, to equal $3.372 billion. The $70
million of deposits acquired in the April 1997 branch purchase offset the $23.6
million net deposit outflow for the first five months of fiscal 1998 after
accounting for interest credited. Such trends are consistent with the Bank's
history, as recent deposit growth 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 relatively unchanged from
three months ago.
As of August 31, 1997, the balance of savings and transaction accounts
amounted to $1.582 billion, or 46.9 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. Short-term CDs (with remaining maturities less
than one year) continue to represent the majority of the total CD balance,
approximating 76.3 percent at August 31, 1997. The proportion of jumbo CDs
relative to total deposits increased slightly during the three months to over
6.1 percent.
Equity
After-tax earnings of $6.434 million during the three months ended
August 31, 1997, coupled with the increased impact of the after-tax adjustment
on AFS securities ($5.0 million at August 31, 1997 versus $3.3 million at May
31, 1997) resulted in equity growth to $324.8 million. As a result of slight
interim asset shrinkage and interim equity growth, the Bank's reported and
tangible equity/assets ratios increased to 8.56 and 6.95 percent as of August
31, 1997, respectively. The Bank maintained capital surpluses relative to all
of its regulatory capital
<PAGE> 8
Board of Trustees/Directors
October 29, 1997
Page 7
requirements at August 31, 1997, as summarized below, as it has at the last two
fiscal year end periods. By FDICIA standards, the Bank was considered
well-capitalized at August 31, 1997, as it has at the last two fiscal year end
periods.
<TABLE>
<CAPTION>
Required Actual Excess
-------- ------ ------
% ($000) % ($000) % ($000)
- ------ - ------ - ------
<S> <C> <C> <C> <C> <C> <C>
FOR CAPITAL ADEQUACY PURPOSES
-----------------------------
Tier I leverage capital ratio 4.0% $149,520 6.9% $258,319 2.9% $108,799
Risk-based capital ratios
Tier I 4.0 101,980 10.1 258,319 6.1 156,339
Total 8.0 203,961 11.4 289,434 3.4 85,473
</TABLE>
Credit Risk Profile
As shown in Table 4, the Bank's level of non-performing assets
("NPAs"), which includes loans more than 90 days past maturity which continue
to make payments on a basis consistent with the original repayment schedule,
declined during the three two month period from 0.77 to 0.69 percent of assets,
reflecting a $3.0 million decline in non-performing assets to $26.3 million.
Loan loss provisions during the last three months and the reduction in
non-performing loans led to an improvement in the reserve coverage ratio from
98 percent to 120 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 increased from 62.53 to 67.65 percent during the
last three months, given the increase in the loans/assets ratio and the growth
of higher risk weight loans.
<PAGE> 9
Board of Trustees/Directors
October 29, 1997
Page 8
Table 4
Independence Savings Bank
Non-Performing Assets
<TABLE>
<CAPTION>
At At At
March 31, May 31, August 31,
Type 1997 1997 1997
---- ---- ---- ----
($000) ($000) ($000)
<S> <C> <C> <C>
Total Non-Performing Loans (1) $27,090 $28,822 $25,984
Real Estate Owned, Net 540 484 279
--- --- ---
Total Non-Performing Assets $27,630 $29,306 $26,263
======= ======= =======
Allowance for Possible Loan Losses as a %
of Gross Loans 1.06% 1.11% 1.14%
Allowance for Possible Loan Losses as a %
of Total Non-Performing Loans 99.76% 98.19% 119.75%
Non-Performing Loans as a % of Total Loans 1.07% 1.11% 0.96%
Non-Performing Assets as a % of Total Assets 0.74% 0.77% 0.69%
</TABLE>
(1) Includes loans more than 90 days past maturity which continue to make
payments on a basis consistent with the original repayment schedule.
Source: Prospectus and audited and unaudited financial statements.
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. As of August 31, 1997, the
one and three year gap positions showed further deterioration with ratios of
negative 51.8 percent and 20.2 percent, respectively. The adverse change
during the two and five month periods 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 (or
"NPV") as of May 31 and August 31, 1997, as summarized below.
<PAGE> 10
Board of Trustees/Directors
October 29, 1997
Page 9
<TABLE>
<CAPTION>
Change in % Change in
Interest Rates Net Portfolio Value
-------------- -------------------
May 31, August 31,
1997 1997
---- ----
<S> <C> <C>
+400 (36.99)% (35.78)%
+200 (16.39) (14.85)
-200 15.42 11.87
-400 58.45 55.09
</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 periods ended May 31 and August 31, 1997
reflect certain non-operating and non-recurring items, thus requiring
adjustments to estimate core or recurring earnings. The two and five month
stub periods ended May 31 and August 31, 1997 appear to be better indicators of
core profitability as non-recurring items are minimal and since the April 1997
branch purchase, the March/April 1997 portfolio restructuring/reinvestment and
recent tax planning are more fully incorporated. At the same time, two and
five month stub periods are considered to be too short of a period to be relied
upon exclusively in reaching a valuation conclusion. The following discussion
first compares the trailing 12 month periods and then the stub periods.
Net income declined for the 12 months ended August 31, 1997 to $16.340
million, relative to fiscal 1997 levels ($17.180 million), primarily as a
result of higher non-interest expense. Net income before tax for the most
recent trailing 12 month period had declined by nearly $4.9 million to $23.0
million from the fiscal 1997 pre-tax earnings level; lower income taxes for the
most recent 12 month period assisted the Bank in a less severe decline in net
income than pre-tax income. For the 12 months ended August 31, 1997,
profitability approximated 0.43 percent of average assets versus 0.46 percent
for fiscal 1997. Adjusting earnings for the trailing 12 months ended August
31, 1997 for net non-operating items on a tax-effected basis resulted in
estimated core earnings of $25.8 million, equal to 0.68 percent of average
assets (see Table 5 for details), as compared to $25.6 million for fiscal 1997
or 0.69 percent. The five month stub period, with nominal net non-operating
income, indicates annual earnings of $26.4 million, or 0.69 percent of average
assets. Core earnings for the five month stub period annualized indicates
annual earnings of $26.3 million, or 0.69 percent of average assets.
<PAGE> 11
Board of Trustees/Directors
October 29, 1997
Page 10
Table 5
Independence Savings Bank
Recent Income Statement Data
<TABLE>
<CAPTION>
12 Months Ended 12 Months Ended 12 Months Ended
March 31, 1997 May 31, 1997 August 31, 1997
------------------------ ------------------------- ------------------------
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% $ 258,573 6.82%
Interest Expense (140,187) -3.75% (140,073) -3.74% (141,103) -3.72%
---------- ------ ---------- ------ ---------- ------
Net Interest Income $ 115,116 3.08% $ 115,616 3.09% $ 117,470 3.10%
Provision for Loan Losses (7,960) -0.21% (8,810) -0.24% (10,977) -0.29%
---------- ------ ---------- ------ ---------- ------
Net Interest Inc. After Provisions $ 107,156 2.87% $ 106,806 2.85% $ 106,493 2.81%
Non-Interest Income 8,034 0.22% 7,842 0.21% 8,230 0.22%
Goodwill Amortization (8,278) -0.22% (8,216) -0.22% (8,055) -0.21%
Non-Interest Expense (65,322) -1.75% (67,610) -1.80% (70,241) -1.85%
---------- ------ ---------- ------ ---------- ------
Net Operating Income $ 41,590 1.11% $ 38,822 1.04% $ 36,427 0.96%
Gain(Loss) on Sale of Loans & Sec. (3,347) -0.09% (3,316) -0.09% (3,052) -0.08%
Loss on Sale of Branch Deposits (1,778) -0.05% (1,778) -0.05% (1,778) -0.05%
SAIF Special Assessment (8,553) -0.23% (8,553) -0.23% (8,553) -0.23%
---------- ------ ---------- ------ ---------- ------
Net Non-Operating Inc./Exp. $ (13,678) -0.37% $ (13,647) -0.36% $ (13,383) -0.35%
Net Income Before Tax 27,912 0.75% 25,175 0.67% 23,044 0.61%
Income Taxes (10,732) -0.29% (9,537) -0.25% (6,704) -0.18%
---------- ------ ---------- ------ ---------- ------
Net Income (Loss) $ 17,180 0.46% $ 15,638 0.42% $ 16,340 0.43%
Adjusted Earnings
- -----------------
Net Operating Income $ 41,590 1.11% $ 38,822 1.04% $ 36,427 0.96%
Tax Effect (3) (15,991) -0.43% (14,707) -0.39% (10,597) -0.28%
---------- ------ ---------- ------ ---------- ------
Adjusted Earnings $ 25,599 0.69% $ 24,115 0.64% $ 25,830 0.68%
Memo:
Yield/Cost Spread 3.09% 3.08% 3.09%
Efficiency Ratio (4) 53.82% 54.76% 55.88%
Return on Equity (5) 5.69% 5.14% 5.41%
Effective Tax Rate 38.45% 37.88% 29.09%
<CAPTION>
2 Months Ended 5 Months Ended
May 31, 1997(2) August 31, 1997(2)
---------------------- -----------------------
Amount Pct.(1) Amount Pct.(1)
------ ------- ------ -------
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Interest Income $ 44,081 6.94% $ 111,795 7.02%
Interest Expense (23,890) -3.76% (59,835) -3.76%
--------- ------ ---------- ------
Net Interest Income $ 20,191 3.18% $ 51,960 3.26%
Provision for Loan Losses (1,450) -0.23% (4,577) -0.29%
--------- ------ ---------- ------
Net Interest Inc. After Provisions $ 18,741 2.95% $ 47,383 2.98%
Non-Interest Income 1,506 0.24% 3,689 0.23%
Goodwill Amortization (1,484) -0.23% (3,678) -0.23%
Non-Interest Expense (12,512) -1.97% (31,220) -1.96%
--------- ------ ---------- ------
Net Operating Income $ 6,251 0.98% $ 16,174 1.02%
Gain(Loss) on Sale of Loans & Sec. 3 0.00% 13 0.00%
Loss on Sale of Branch Deposits - 0.00% - 0.00%
SAIF Special Assessment - 0.00% - 0.00%
--------- ------ ---------- ------
Net Non-Operating Inc./Exp. $ 3 0.00% $ 13 0.00%
Net Income Before Tax 6,254 0.98% 16,187 1.02%
Income Taxes (1,706) -0.27% (5,206) -0.33%
--------- ------ ---------- ------
Net Income (Loss) $ 4,548 0.71% $ 10,981 0.69%
Adjusted Earnings
- -----------------
Net Operating Income $ 6,251 0.98% $ 16,174 1.02%
Tax Effect (3) (1,705) -0.27% (5,202) -0.33%
--------- ------ ---------- ------
Adjusted Earnings $ 4,546 0.71% $ 10,972 0.69%
Memo:
Yield/Cost Spread 2.99% 3.09%
Efficiency Ratio (4) 57.67% 56.10%
Return on Equity (5) 8.75% 8.28%
Effective Tax Rate 27.28% 32.16%
</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 non-interest expenses excluding SAIF assessment and amortization
of intangibles as a percent of the sum of non-interest 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> 12
Board of Trustees/Directors
October 29, 1997
Page 11
Independence's net interest income increased slightly for the most
recent trailing 12 month period, reflecting interim average asset growth and
slightly higher yields given the increased risk profile. The Bank's net
interest income ratio for the five months ended August 31, 1997 annualized
equaled 3.26 percent, which reflects an increased credit risk profile and the
yield pick-up from the recent investment portfolio restructuring.
The Bank's traditional thrift operating strategy and resulting limited
level of diversification in the products and services offered, coupled with its
community service commitment as a low cost provider of financial services, have
limited other operating income to modest levels. For the 12 months ended
August 31, 1997, non-interest income equaled 0.22 percent of assets, matching
the 0.22 percent ratio reported for fiscal 1997. The other operating income
ratio for the 5 months ended August 31, 1997 approximated 23 basis points on an
annualized basis, with such growth largely reflecting a higher fee structure.
Independence's non-interest expense increased to $70.2 million for the
12 months ended August 31, 1997, equal to 1.85 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 five month August 31, 1997 stub
period, operating expenses before goodwill amortization are running at roughly
$74.9 million annually, partially reflecting the additional operating expenses
of the purchased branch along with the costs of the data processing conversion.
Excluding the data processing conversion costs, annual operating expenses are
currently approximating $68 million. However, the Bank expects to continue to
incur significant additional costs of the data processing conversion through
fiscal 1999, so earnings will continue to be adversely impacted.
Notwithstanding the increase, the non-interest expense ratio remains at
relatively moderate levels in comparison to industry averages (before the
amortization of intangibles).
While the intangibles amortization expense remained substantially
unchanged, equaling 0.22 and 0.21 percent of average assets for fiscal 1997 the
most recent trailing twelve month period, the annualized expense in the five
month period through August 31, 1997, edged approximately $0.77 million higher
due to the $4 million premium paid to purchase the branch in April 1997.
Independence's efficiency ratio (non-interest expense before
intangibles amortization and the special SAIF assessment as a percent of the
sum of net interest income and non-interest income) of approximately 55.9
percent for the most recent 12 months reflected an increase over the fiscal
1997 ratio of 53.8 percent, largely due to the increase in operating expenses.
The efficiency ratio shows similar deterioration for the five month stub period
to 56.1 percent, again largely due to an increase in operating expenses.
Provisions for loan losses increased to nearly $11 million for the 12
months ended August 31, 1997 versus $8.0 million for the 12 months ended March
31, 1997. Loan loss provisions for the five month period ended August 31, 1997
indicate a continuation of the $11
<PAGE> 13
Board of Trustees/Directors
October 29, 1997
Page 12
million annual rate. The increase over fiscal 1997 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 the most recent trailing 12 month period
increased slightly from fiscal 1997 levels, and were 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-operating items during the five months ended August 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 August 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.
Since the First Update was prepared, one of the Peer Group members,
Poughkeepsie Financial Corp. ("Poughkeepsie"), became subject to an acquisition
by Hubco, thus distorting its pricing ratios. As a result, we have excluded
Poughkeepsie from all averages in preparing this Second Update.
Financial Condition
In general, the comparative balance sheet ratios for the Bank and the
Peer Group did not vary significantly from the First Update (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 August 31, 1997, equaled 8.6 and 7.0 percent,
respectively, versus the Peer Group average of 11.4 and 10.7 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. 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 94.5 percent which continues to compare
unfavorably to the Peer Group average of 96.7 percent. The Bank also continues
to maintain a higher ratio of interest-bearing liabilities ("IBL"), equal to
89.4 percent of assets as of August 31, 1997, relative to the Peer Group's
ratio of 86.5 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
111.8 and 105.7 percent, respectively. The strengthened capital position from
the conversion, the partial withdrawal of funds to purchase conversion
<PAGE> 14
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 Savings Bank
-------------------------
August 31, 1997 19.5 70.6 4.4 88.7 0.5 0.0 8.6 1.6 6.9 0.0
SAIF-Insured Thrifts 18.1 67.3 11.4 70.7 14.6 0.2 12.7 0.2 12.5 0.0
All Public Companies 18.9 66.4 11.4 71.3 14.3 0.1 12.6 0.3 12.3 0.0
State of NY 24.4 54.3 17.9 73.2 12.5 0.0 11.6 0.6 11.0 0.1
Comparable Group Average 18.6 60.8 17.3 74.4 12.1 0.0 11.4 0.7 10.7 0.0
Mid-Atlantic Companies 18.6 60.8 17.3 74.4 12.1 0.0 11.4 0.7 10.7 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 20.6 54.7 22.3 68.7 14.7 0.0 15.5 0.0 15.5 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 38.3 58.5 0.3 74.0 0.0 0.0 22.9 0.0 22.9 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 5.2 46.0 44.6 72.6 17.8 0.0 8.2 2.3 5.9 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
<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 Savings Bank
-------------------------
August 31, 1997 -1.38 -7.66 0.15 -0.52 -60.15 8.31 17.40 6.91 6.91 11.35
SAIF-Insured Thrifts 12.35 8.88 13.17 8.17 18.35 0.95 0.34 11.34 11.39 23.97
All Public Companies 12.60 8.77 13.23 8.28 18.20 2.30 1.65 11.36 11.38 23.83
State of NY 9.78 -3.24 12.14 6.33 7.84 -0.04 0.40 9.86 9.63 23.91
Comparable Group Average 7.57 -13.02 17.59 4.12 32.41 1.66 2.57 8.22 8.17 16.79
Mid-Atlantic Companies 7.57 -13.02 17.59 4.12 32.41 1.66 2.57 8.22 8.17 16.79
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 6.40 6.40 11.70
DIME Dime Community Bancorp of NY -4.14 -47.64 24.38 1.40 NM -10.41 -10.86 9.62 9.62 19.44
FFIC Flushing Fin. Corp. of NY 12.18 -32.61 38.76 4.17 NM -3.52 -3.52 10.17 10.17 21.05
HAVN Haven Bancorp of Woodhaven NY 14.92 1.77 21.96 10.24 33.27 12.61 12.87 6.67 6.67 14.46
JSB JSB Financial, Inc. of NY 0.33 -9.48 8.42 -2.73 NM 5.16 5.16 NM NM NM
PSBK Progressive Bank, Inc. of NY -2.54 -32.54 6.91 -2.91 NM 4.60 7.47 NM 7.75 15.34
QCSB Queens County Bancorp of NY 12.64 -3.72 14.17 5.53 NM -19.49 -19.49 NM 10.32 16.99
RELY Reliance Bancorp, Inc. of NY 10.90 9.66 12.33 6.72 32.22 5.89 12.49 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 6.27 18.56
</TABLE>
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> 15
Board of Trustees/Directors
October 29, 1997
Page 14
stock and the reinvestment of proceeds in interest-earning assets should
diminish the Bank's comparative disadvantage and improve its earnings power.
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 17 months ended August 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 asset
shrinkage in comparison to the Peer Group's in excess of 7 percent growth,
reflecting the Bank's slight deposit shrinkage and partial repayment of
borrowings. While not apparent in the table, the Bank's decline in MBS funded
the loan growth over this period of nearly 10.5 percent - in contrast, the Peer
Group's loans and MBS increased over 17.5 percent for the last 12 months,
partially funded by a reduction in cash and investments. 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 of 0.43 percent of average
assets remains well below the Peer Group average of 1.07 percent (see Table 7).
The Peer Group's earnings advantage was largely attributable to higher net
interest income and lower loan loss provisions and net non-operating losses.
While the Bank had marginally lower other operating income, the Bank also had
marginally lower 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,
1.10 and 0.68 percent of average assets, respectively.
The Peer Group continued to maintain its net interest income ratio
advantage -- the net interest income the last 12 months equaled 3.10 percent
and 3.65 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 funding liabilities composition. Following the
infusion of the conversion proceeds, coupled with partial conversion proceeds
funding by deposit withdrawals, the Bank's net interest income ratio can be
expected to improve following the conversion.
The Bank is continuing to post higher loan loss provisions, given the
fast growth in higher risk weight lending. Although the Bank has similar
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 non-interest expense ratio equaled 1.85 percent
of average assets, marginally below the Peer Group average of 1.92 percent of
average assets. The Bank's efficiency ratio (operating expenses excluding the
special SAIF assessment as a percent of the sum of net interest income before
provisions plus
<PAGE> 16
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 Savings Bank
-------------------------
August 31, 1997 0.43 6.82 3.72 3.10 0.29 2.81 0.00 0.00 0.22 0.22
SAIF-Insured Thrifts 0.65 7.38 4.09 3.29 0.13 3.16 0.12 0.01 0.29 0.42
All Public Companies 0.73 7.39 4.04 3.35 0.14 3.21 0.11 0.00 0.30 0.41
State of NY 0.74 7.13 3.70 3.43 0.19 3.24 0.06 -0.03 0.25 0.29
Comparable Group Average 1.03 7.31 3.66 3.65 0.12 3.52 0.07 -0.01 0.22 0.27
Mid-Atlantic Companies 1.03 7.31 3.66 3.65 0.12 3.52 0.07 -0.01 0.22 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 0.93 7.43 3.61 3.82 0.02 3.80 0.06 -0.03 0.15 0.18
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 1.80 7.04 2.60 4.44 0.04 4.40 0.20 0.11 0.03 0.34
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 0.58 7.09 3.81 3.28 0.05 3.23 0.04 -0.02 0.14 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
<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 Savings Bank
-------------------------
August 31, 1997 1.85 0.21 -0.35 0.00 7.37 4.30 3.07 4,812 29.09
SAIF-Insured Thrifts 2.22 0.02 -0.31 0.00 7.44 4.67 2.77 4,460 37.09
All Public Companies 2.23 0.03 -0.26 0.00 7.49 4.63 2.86 4,397 36.66
State of NY 2.12 0.06 -0.18 0.00 7.37 4.30 3.07 4,706 36.92
Comparable Group Average 1.92 0.07 -0.11 0.00 7.57 4.25 3.31 4,600 39.94
Mid-Atlantic Companies 1.92 0.07 -0.11 0.00 7.57 4.25 3.31 4,600 39.94
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 2,945 35.13
DIME Dime Community Bancorp of NY 1.78 0.19 -0.11 0.00 7.32 4.10 3.22 5,303 39.30
FFIC Flushing Fin. Corp. of NY 2.23 0.00 -0.06 0.00 7.66 4.41 3.25 4,943 47.83
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 1.83 0.00 0.14 0.00 7.26 3.46 3.80 3,504 41.30
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 5,183 41.42
RELY Reliance Bancorp, Inc. of NY 1.65 0.18 -0.43 0.00 7.45 4.22 3.22 5,082 48.11
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>
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 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. RWA/ Serviced
Institution MBS Family & Land Comm RE Business Consumer Assets For Others
----------- ------ ------ ------ ------ ------ -------- ------ ----------
(%) (%) (%) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independence Savings Bank 5.88 33.23 0.00 58.03 1.13 3.22 67.65 0
SAIF-Insured Thrifts 15.06 61.83 5.27 11.74 6.54 1.70 52.32 388,475
All Public Companies 14.92 60.81 4.84 13.11 6.17 1.98 52.68 387,790
State of NY 26.25 49.05 1.33 16.55 5.70 1.54 45.86 638,251
Comparable Group Average 22.35 40.68 0.51 31.97 3.23 1.46 50.80 134,093
Comparable Group
----------------
ALBK ALBANK Fin. Corp. of Albany NY 8.63 68.05 0.83 5.86 8.53 8.42 61.76 278,311
DIME Dime Community Bancorp of NY 25.75 28.33 0.03 45.62 0.66 0.00 50.39 69,648
FFIC Flushing Fin. Corp. of NY 28.62 43.85 0.00 27.49 0.32 0.00 44.46 45,423
HAVN Haven Bancorp of Woodhaven NY 26.69 48.42 0.89 20.75 3.29 0.04 49.12 178,785
JSB JSB Financial, Inc. of NY 0.72 9.39 0.28 86.54 3.39 0.16 62.41 15,229
PSBK Progressive Bank, Inc. of NY 16.47 56.25 1.36 15.08 9.16 1.68 56.00 52,557
QCSB Queens County Bancorp of NY 6.65 22.95 0.11 70.32 0.06 0.00 59.27 16,653
RELY Reliance Bancorp, Inc. of NY 50.02 38.85 0.67 7.23 3.29 0.08 37.73 410,299
ROSE T R Financial Corp. of NY 37.61 50.06 0.39 8.81 0.39 2.73 36.10 139,929
<CAPTION>
Servicing
Institution Assets
----------- ------
($000)
<S> <C>
Independence Savings Bank 0
SAIF-Insured Thrifts 3,184
All Public Companies 3,240
State of NY 6,333
Comparable Group Average 408
Comparable Group
----------------
ALBK ALBANK Fin. Corp. of Albany NY 545
DIME Dime Community Bancorp of NY 31
FFIC Flushing Fin. Corp. of NY 0
HAVN Haven Bancorp of Woodhaven NY 0
JSB JSB Financial, Inc. of NY 0
PSBK Progressive Bank, Inc. of NY 35
QCSB Queens County Bancorp of NY 0
RELY Reliance Bancorp, Inc. of NY 2,907
ROSE T R Financial Corp. of NY 151
</TABLE>
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
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 Savings Bank 0.01 0.69 0.96 1.14 119.75 118.47 1,248 0.05
SAIF-Insured Thrifts 0.26 0.71 0.78 0.80 176.29 131.62 380 0.09
All Public Companies 0.24 0.72 0.83 0.90 180.43 137.38 373 0.10
State of NY 0.15 0.85 1.23 1.04 106.36 83.82 580 0.07
Comparable Group Average 0.14 0.66 0.89 0.99 98.22 99.67 342 0.05
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 0.08 0.94 0.88 0.97 111.13 75.89 1,302 0.20
DIME Dime Community Bancorp of NY 0.08 NA NA 1.39 NA NA 101 0.05
FFIC Flushing Fin. Corp. of NY 0.04 0.39 NA 1.12 NA 172.71 64 0.00
HAVN Haven Bancorp of Woodhaven NY 0.07 0.76 NA 1.12 NA 85.80 885 0.00
JSB JSB Financial, Inc. of NY 0.70 NA NA 0.61 NA NA 23 0.00
PSBK Progressive Bank, Inc. of NY 0.06 NA NA 1.65 NA NA 88 0.00
QCSB Queens County Bancorp of NY 0.09 0.69 NA 0.69 NA 88.97 0 0.00
RELY Reliance Bancorp, Inc. of NY 0.09 NA NA 0.62 NA NA 431 0.19
ROSE T R Financial Corp. of NY 0.02 0.54 0.89 0.76 85.30 74.97 181 0.04
</TABLE>
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> 19
Board of Trustees/Directors
October 29, 1997
Page 18
other operating income) of 55.9 percent continues to compare unfavorably to the
Peer Group's ratio of 49.0 percent, largely reflecting the Bank's net interest
income ratio disadvantage.
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 August 8, 1997 First Update have
been rather volatile, in concert with international stock markets, reflecting a
recent selloff from peak levels. In this regard, global selling pressure was
led by the decline in the Hong Kong stock market, as the DJIA posted a two-day
loss approximating 320 points on October 23 and 24. The sell-off in the world
financial markets turned into a rout on the following Monday, with a 5.8
percent decline in the Hong Kong stock market fueling the largest ever point
decline in the DJIA. On October 24, the DJIA declined 554 points or 7.2
percent. While the selling was broad based, technology stocks sensitive to
Asian demand experienced some of the sharpest declines. The turmoil in the
stock market provided for a sharp rally in bond prices, reflecting a flight to
quality by skittish investors. The stock market recovered strongly the day
after the record breaking point decline, as the DJIA surged a record breaking
337 points on October 29. Bond prices declined sharply as investors pulled out
of the Treasury market to reinvest into the stock market. On October 29, 1997,
the DJIA closed at 7506.7, a decline of 6.5 percent since the date of the First
Update.
The thrift market, as measured by the SNL Thrift Index, has generally
outperformed the broader market indices, as referenced below. In contrast to
the overall stock market, thrift prices rallied strongly during the first half
of September 1997. Stable interest rates and acquisition news sustained the
positive market for thrift issues. The decline in interest rates following the
release of the August consumer price index in mid-September served to further
the rally in thrift prices. During late-September and early-October,
interest-rate sensitive issues in general benefited from the declining interest
rate environment and expectations of strong third quarter earnings. Prices of
thrift and bank stocks also continued to be positively influenced by industry
consolidation and rising acquisition multiples being paid for thrift and bank
franchises. The upward trend in thrift prices stalled in mid-October, as
interest rates moved higher following warnings by the Federal Reserve Chairman
of inflation creeping back into the economy due to the tight labor markets.
Thrift stocks gyrated in conjunction with the overall market in late-October,
with the SNL index declining by 5.2 percent on October 27 and increasing by 2.4
percent on October 28, and an additional 1.4 percent on October 29. On October
29, 1997, the SNL Index for all publicly-traded thrifts closed at 756.2, an
increase of 13.8 percent since the date of the First Update.
<PAGE> 20
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.
Equity/ IEA/ Assets/
Institution Assets IBL Assets
- ----------- ------ ------ ------
(%) (%) (%)
<S> <C> <C> <C>
Independence Savings Bank 6.9 105.9 5.5
SAIF-Insured Thrifts 12.4 113.7 3.3
All Public Companies 12.3 113.4 3.3
State of NY 10.6 109.8 3.3
Comparable Group Average 10.7 112.4 3.2
Market Interest Rates
- ---------------------
1 Year Treasury Bill -- -- --
30 Year Treasury Bond -- -- --
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 8.0 110.3 4.5
DIME Dime Community Bancorp of NY 12.5 113.8 4.6
FFIC Flushing Fin. Corp. of NY 15.5 117.2 2.4
HAVN Haven Bancorp of Woodhaven NY 5.9 105.2 2.7
JSB JSB Financial, Inc. of NY 22.9 131.2 2.9
PSBK Progressive Bank, Inc. of NY 7.6 106.0 3.7
QCSB Queens County Bancorp of NY 11.9 114.7 2.4
RELY Reliance Bancorp, Inc. of NY 5.9 105.9 4.2
ROSE T R Financial Corp. of NY 6.2 107.5 1.4
<CAPTION>
Quarterly Change in Net Interest Income
----------------------------------------------------------
Institution 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>
Independence Savings Bank 53 -61 13 -7 12 49
SAIF-Insured Thrifts 1 0 -0 -1 8 7
All Public Companies 1 1 1 -0 8 6
State of NY -5 1 4 1 8 14
Comparable Group Average -2 1 8 3 -0 20
Market Interest Rates
- ---------------------
1 Year Treasury Bill 12 13 14 15 16 17
30 Year Treasury Bond 22 23 24 25 26 27
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY -0 11 -1 -8 -17 30
DIME Dime Community Bancorp of NY -10 3 46 96 NA NA
FFIC Flushing Fin. Corp. of NY -5 -1 0 9 4 48
HAVN Haven Bancorp of Woodhaven NY 5 -19 11 -9 10 11
JSB JSB Financial, Inc. of NY 1 1 0 4 7 2
PSBK Progressive Bank, Inc. of NY 11 7 16 -33 12 4
QCSB Queens County Bancorp of NY -8 2 4 -13 9 18
RELY Reliance Bancorp, Inc. of NY -10 -2 1 -5 -33 37
ROSE T R Financial Corp. of NY -5 4 -1 -10 6 11
</TABLE>
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> 21
Board of Trustees/Directors
October 29, 1997
Page 20
<TABLE>
<CAPTION>
8/8/97 10/29/97 % Change
------ -------- --------
<S> <C> <C> <C>
Dow Jones Industrials 8031.2 7506.7 (6.5)%
S&P 500 933.5 919.6 (1.5)
NASDAQ Composite 1,598.5 1,602.8 0.3
SNL Thrift Index 664.6 756.2 13.8
SNL Bank Index 357.2 381.6 6.8
</TABLE>
Since the First Update interest rates have generally declined, with
long-term rates declining more than short-term rates.
<TABLE>
<CAPTION>
Basis Point
8/8/97 10/29/97 Change
------ -------- ------
<S> <C> <C> <C>
Prime Rate 8.50% 8.50% 0.00%
90 Day T-Bill 5.28 5.14 (0.14)
One Year T-Bill 5.57 5.30 (0.27)
30-Year T-Bond 6.63 6.20 (0.43)
</TABLE>
Key economic reports reflect that the economy continues to perform
strongly but inflation remains moderate. The annualized inflation rate
continues to be in the range of 2 to 3 percent and the unemployment rate for
August 1997 was 4.8 percent, which is stable relative to the level reported in
July. Additionally, some economists speculate that inflationary pressures may
be easing in the U.S. given the impact of the weakened economies in the
emerging markets, particularly in Asia and Latin America.
Consistent with the SNL Thrift Index, the pricing ratios for New York
thrifts and the Peer Group reflect a favorable trend.
Median Pricing Characteristics (1)
<TABLE>
<CAPTION>
At At
8/8/97 10/29/97 % Change
------ -------- --------
<S> <C> <C> <C>
Peer Group(2)
-------------
Price/Core Earnings (x) 16.36x 18.30x 11.9%
Price/Tangible Book (%) 164.90% 193.95% 17.6%
Price/Assets (%) 13.39% 16.35% 22.1%
New York Thrifts(2)
-------------------
Price/Core Earnings (x) 18.19x 20.29x 11.5%
Price/Tangible Book (%) 130.67% 148.41% 13.6%
Price/Assets (%) 14.96% 17.09% 14.2%
</TABLE>
(1) Excludes mutual holding companies and companies subject to
acquisition.
(2) Adjusted to exclude Poughkeepsie Financial Corp.
<PAGE> 22
Board of Trustees/Directors
October 29, 1997
Page 21
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.
The pace of conversion activity has slowed, but demand has been heavy
for the limited number of small offerings consummated over the last three
months. In general, the recent offerings have been oversubscribed and have
appreciated in the aftermarket, notwithstanding their relatively high closing
pricing ratios approximating 73 percent of pro forma tangible book value and 16
times pro forma earnings (see Table 11).
Typically, we consider the performance of recent offerings in
determining the appropriate pro forma value of a converting institution.
However, we believe the relevance of the recent conversions to Independence's
pro forma value has been diminished due to several factors. First, the level
of conversion activity over the last three months has been low; only two
companies which were subsequently publicly traded have converted over this
period, excluding the two second step mutual holding company transactions.
Second, all the recent transactions were much smaller than Independence's
transaction. Third, there have been no transactions consummated following the
extreme market volatility in recent days. Typically, high market volatility
impacts new issues to a greater extent than existing issues.
<PAGE> 23
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.
- -------------------------------------------------------------------------------------------------------------
Conversion Equity/
Institution State Date Ticker Assets Assets
- ----------- ----- ---- ------ ------ ------
($Mil) (%)
- -------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC $ 220 10.08%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 230 11.24%
SHS Bancorp, Inc. PA 10/01/97 SHSB 83 5.52%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 34 14.45%
Citizens Bancorp IN 09/19/97 P. Sheet 46 12.28%
WSB Holding Company PA 08/29/97 P. Sheet 33 6.04%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 577 8.33%
AVERAGES: $ 175 9.71%
AVERAGES, EXCLUDING 2ND STEPS: $ 83 9.67%
MEDIANS: $ 83 10.08%
MEDIANS, EXCLUDING 2ND STEPS: $ 46 10.08%
LAST 3 YEARS IN NEW YORK
- ------------------------
GSB Financial Corp. NY 07/09/97 GOSB $ 96 12.68%
Roslyn Bancorp(1) NY 01/13/97 RSLN 1,973 11.55%
AFSALA Bancorp NY 10/01/96 AFED 137 6.08%
Dime Community Bancorp NY 06/26/96 DIME 1,094 7.46%
Catskill Financial Corp. NY 04/18/96 CATB 231 12.75%
Yonkers Financial Corp. NY 04/18/96 YFCB 210 7.72%
Peekskill Financial Corp. NY 12/29/95 PEEK 155 13.90%
Ambanc Holding Co. NY 12/27/95 AHCI 342 8.17%
Flushing Financial Corp. NY 11/21/95 FFIC 604 7.69%
Tappan Zee Financial NY 10/05/95 TPNZ 95 8.72%
SFS Bancorp NY 06/30/95 SFED 154 6.66%
Carver FSB NY 12/25/94 CARV 309 4.50%
Financial Bancorp NY 08/17/94 FIBC 158 6.51%
AVERAGES: $ 428 8.80%
MEDIANS: $ 210 7.72%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data
-----------------------------------
Asset Quality
- ----------------------------------------------------------------------------------------------------------------
Conversion NPAs/ Res.
Institution State Date Ticker Assets Cov.
- ----------- ----- ---- ------ ------ ----
(%)(2) (%)
- ----------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC 0.12% 280%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 0.14% 245%
SHS Bancorp, Inc. PA 10/01/97 SHSB 1.41% 36%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 0.47% 86%
Citizens Bancorp IN 09/19/97 P. Sheet 0.45% 84%
WSB Holding Company PA 08/29/97 P. Sheet 2.34% 26%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 0.81% 53%
AVERAGES: 0.82% 116%
AVERAGES, EXCLUDING 2ND STEPS: 0.96% 102%
MEDIANS: 0.47% 84%
MEDIANS, EXCLUDING 2ND STEPS: 0.47% 84%
LAST 3 YEARS IN NEW YORK
- ------------------------
GSB Financial Corp. NY 07/09/97 GOSB 0.07% 188%
Roslyn Bancorp(1) NY 01/13/97 RSLN 0.82% 137%
AFSALA Bancorp NY 10/01/96 AFED 0.56% 105%
Dime Community Bancorp NY 06/26/96 DIME 0.75% 77%
Catskill Financial Corp. NY 04/18/96 CATB 0.70% 112%
Yonkers Financial Corp. NY 04/18/96 YFCB 1.73% 23%
Peekskill Financial Corp. NY 12/29/95 PEEK 1.30% 24%
Ambanc Holding Co. NY 12/27/95 AHCI 3.52% 24%
Flushing Financial Corp. NY 11/21/95 FFIC 1.08% 80%
Tappan Zee Financial NY 10/05/95 TPNZ 2.40% 30%
SFS Bancorp NY 06/30/95 SFED 1.41% 44%
Carver FSB NY 12/25/94 CARV 0.93% 45%
Financial Bancorp NY 08/17/94 FIBC 3.39% 18%
AVERAGES: 1.44% 70%
MEDIANS: 1.08% 45%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Information Offering Information
- ---------------------------------------------------------------------------------------------------------------------------------
Conversion Gross % of Exp./
Institution State Date Ticker Proc. Mid. Proc.
- ----------- ----- ---- ------ ----- ---- -----
($Mil.) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC $ 46.9 132% 2.3%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 35.7 132% 2.8%
SHS Bancorp, Inc. PA 10/01/97 SHSB 8.2 132% 5.7%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 6.3 94% 5.7%
Citizens Bancorp IN 09/19/97 P. Sheet 10.6 132% 4.6%
WSB Holding Company PA 08/29/97 P. Sheet 3.3 132% 8.5%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 48.7 132% 3.8%
AVERAGES: $ 22.8 127% 4.8%
AVERAGES, EXCLUDING 2ND STEPS: $ 15.1 124% 5.4%
MEDIANS: $ 10.6 132% 4.6%
MEDIANS, EXCLUDING 2ND STEPS: $ 8.2 132% 5.7%
LAST 3 YEARS IN NEW YORK
- ------------------------
GSB Financial Corp. NY 07/09/97 GOSB $ 22.5 132% 4.1%
Roslyn Bancorp(1) NY 01/13/97 RSLN 436.4 132% 2.1%
AFSALA Bancorp NY 10/01/96 AFED 14.5 132% 4.9%
Dime Community Bancorp NY 06/26/96 DIME 145.5 132% 2.5%
Catskill Financial Corp. NY 04/18/96 CATB 56.7 132% 3.3%
Yonkers Financial Corp. NY 04/18/96 YFCB 35.7 132% 2.7%
Peekskill Financial Corp. NY 12/29/95 PEEK 41.0 132% 2.4%
Ambanc Holding Co. NY 12/27/95 AHCI 54.2 132% 3.4%
Flushing Financial Corp. NY 11/21/95 FFIC 99.2 132% 2.3%
Tappan Zee Financial NY 10/05/95 TPNZ 16.2 132% 5.1%
SFS Bancorp NY 06/30/95 SFED 15.0 115% 4.7%
Carver FSB NY 12/25/94 CARV 23.1 132% 5.2%
Financial Bancorp NY 08/17/94 FIBC 21.9 175% 7.2%
AVERAGES: $ 75.5 134% 3.8%
MEDIANS: $ 35.7 132% 3.4%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Institutional Information Insider Purchases
- ----------------------------------------------------------------------------------------------------------------------------
Benefit Plans
-------------
Conversion Recog. Mgmt.&
Institution State Date Ticker ESOP Plans Dirs.
- ----------- ----- ---- ------ ---- ----- -----
(%) (%) (%)(3)
- ----------------------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC 8.0% 4.0% 3.9%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 8.0% 4.0% 2.9%
SHS Bancorp, Inc. PA 10/01/97 SHSB 8.0% 4.0% 5.2%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 8.0% 4.0% 8.3%
Citizens Bancorp IN 09/19/97 P. Sheet 8.0% 4.0% 16.1%
WSB Holding Company PA 08/29/97 P. Sheet 8.0% 4.0% 31.0%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 8.0% 4.0% 10.0%
AVERAGES: 8.0% 4.0% 11.1%
AVERAGES, EXCLUDING 2ND STEPS: 8.0% 4.0% 12.9%
MEDIANS: 8.0% 4.0% 8.3%
MEDIANS, EXCLUDING 2ND STEPS: 8.0% 4.0% 8.3%
LAST 3 YEARS IN NEW YORK
- ------------------------
GSB Financial Corp. NY 07/09/97 GOSB 8.0% 4.0% 2.6%
Roslyn Bancorp(1) NY 01/13/97 RSLN 8.0% 4.0% 1.3%
AFSALA Bancorp NY 10/01/96 AFED 8.0% 4.0% 4.7%
Dime Community Bancorp NY 06/26/96 DIME 8.0% 4.0% 2.7%
Catskill Financial Corp. NY 04/18/96 CATB 8.0% 4.0% 2.6%
Yonkers Financial Corp. NY 04/18/96 YFCB 8.0% 4.0% 3.7%
Peekskill Financial Corp. NY 12/29/95 PEEK 8.0% 4.0% 2.0%
Ambanc Holding Co. NY 12/27/95 AHCI 8.0% 4.0% 0.4%
Flushing Financial Corp. NY 11/21/95 FFIC 8.0% 4.0% 1.4%
Tappan Zee Financial NY 10/05/95 TPNZ 8.0% 4.0% 2.2%
SFS Bancorp NY 06/30/95 SFED 8.0% 4.0% 10.7%
Carver FSB NY 12/25/94 CARV 8.0% 3.0% 0.7%
Financial Bancorp NY 08/17/94 FIBC 7.0% 3.0% 5.6%
AVERAGES: 7.9% 3.8% 3.1%
MEDIANS: 8.0% 4.0% 2.6%
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data
---------------------------------
Pricing Ratios(4)
- ---------------------------------------------------------------------------------------------------------------
Conversion Core
Institution State Date Ticker P/TB P/E(5) P/A
- ----------- ----- ---- ------ ---- ------ ---
(%) (x) (%)
- ---------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC 75.3% 13.6x 18.1%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 109.0% 17.7 23.6%
SHS Bancorp, Inc. PA 10/01/97 SHSB 72.3% 24.5 9.1%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 62.3% 13.4 16.0%
Citizens Bancorp IN 09/19/97 P. Sheet 72.9% 14.8 14.8%
WSB Holding Company PA 08/29/97 P. Sheet 71.4% 16.6 9.2%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 100.9% N.M. 14.6%
AVERAGES: 80.6% 16.8X 15.1%
AVERAGES, EXCLUDING 2ND STEPS: 70.8% 16.6X 13.4%
MEDIANS: 72.9% 15.7X 14.8%
MEDIANS, EXCLUDING 2ND STEPS: 72.3% 14.8X 14.8%
LAST 3 YEARS IN NEW YORK
- ------------------------
GSB Financial Corp. NY 07/09/97 GOSB 72.5% 22.5x 19.6%
Roslyn Bancorp(1) NY 01/13/97 RSLN 73.8% 15.3 18.6%
AFSALA Bancorp NY 10/01/96 AFED 71.2% 16.3 9.7%
Dime Community Bancorp NY 06/26/96 DIME 80.3% 17.3 11.9%
Catskill Financial Corp. NY 04/18/96 CATB 73.2% 18.4 20.4%
Yonkers Financial Corp. NY 04/18/96 YFCB 76.5% 15.1 14.8%
Peekskill Financial Corp. NY 12/29/95 PEEK 72.4% 15.3 21.5%
Ambanc Holding Co. NY 12/27/95 AHCI 73.5% 14.8 14.0%
Flushing Financial Corp. NY 11/21/95 FFIC 75.4% 17.2 14.2%
Tappan Zee Financial NY 10/05/95 TPNZ 74.7% 14.6 15.0%
SFS Bancorp NY 06/30/95 SFED 65.8% 14.1 9.0%
Carver FSB NY 12/25/94 CARV 73.9% 42.1 7.0%
Financial Bancorp NY 08/17/94 FIBC 76.9% 13.8 12.2%
AVERAGES: 73.9% 18.2X 14.5%
MEDIANS: 73.8% 15.3X 14.2%
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data
-------------------------------------
Financial Charac.
- ---------------------------------------------------------------------------------------------------------------------
Conversion IPO
Institution State Date Ticker ROA TE/A ROE Price
- ----------- ----- ---- ------ --- ---- --- -----
(%) (%) (%) ($)
- -------------------------------------------------------------------------------------------- -------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC 1.0% 20.7% 5.1% $ 10.00
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 1.3% 21.6% 6.2% 10.00
SHS Bancorp, Inc. PA 10/01/97 SHSB 0.4% 12.6% 3.0% 10.00
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 1.2% 25.7% 4.6% 10.00
Citizens Bancorp IN 09/19/97 P. Sheet 1.1% 46.3% 2.4% 10.00
WSB Holding Company PA 08/29/97 P. Sheet 0.6% 12.9% 4.3% 10.00
Bayonne Bancshares(8) NJ 08/22/97 FSNJ N.M. 14.4% N.M. 10.00
AVERAGES: 0.9% 22.0% 4.3% $ 10.00
AVERAGES, EXCLUDING 2ND STEPS: 0.9% 23.6% 3.9% $ 10.00
MEDIANS: 1.1% 20.7% 4.5% $ 10.00
MEDIANS, EXCLUDING 2ND STEPS: 1.0% 20.7% 4.3% $ 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
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
-------------------------------
Closing Price:
- --------------------------------------------------------------------------------------------------------------
First
Conversion Trading %
Institution State Date Ticker Day Change
- ----------- ----- ---- ------ --- ------
($) (%)
- ----------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
- ------------------------
<S> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC $ 16.75 67.5%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 13.25 32.5%
SHS Bancorp, Inc. PA 10/01/97 SHSB 14.75 47.5%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 15.50 55.0%
Citizens Bancorp IN 09/19/97 P. Sheet 14.00 40.0%
WSB Holding Company PA 08/29/97 P. Sheet 13.50 35.0%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 11.75 17.5%
AVERAGES: $ 14.21 42.1%
AVERAGES, EXCLUDING 2ND STEPS: $ 14.90 49.0%
MEDIANS: $ 14.00 40.0%
MEDIANS, EXCLUDING 2ND STEPS: $ 14.75 47.5%
LAST 3 YEARS IN NEW YORK
- ------------------------
GSB Financial Corp. NY 07/09/97 GOSB $ 14.63 46.3%
Roslyn Bancorp(1) NY 01/13/97 RSLN 15.00 50.0%
AFSALA Bancorp NY 10/01/96 AFED 11.38 13.8%
Dime Community Bancorp NY 06/26/96 DIME 12.00 20.0%
Catskill Financial Corp. NY 04/18/96 CATB 10.38 3.8%
Yonkers Financial Corp. NY 04/18/96 YFCB 9.75 -2.5%
Peekskill Financial Corp. NY 12/29/95 PEEK 12.125 21.2%
Ambanc Holding Co. NY 12/27/95 AHCI 10.00 0.0%
Flushing Financial Corp. NY 11/21/95 FFIC 13.88 20.7%
Tappan Zee Financial NY 10/05/95 TPNZ 11.625 16.3%
SFS Bancorp NY 06/30/95 SFED 11.50 15.0%
Carver FSB NY 12/25/94 CARV 7.78 -22.2%
Financial Bancorp NY 08/17/94 FIBC 10.88 8.7%
AVERAGES: $ 11.61 14.7%
MEDIANS: $ 11.50 15.0%
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
---------------------------------------------------
Closing Price:
- ------------------------------------------------------------------------------------------------------------------------------
After After
Conversion First % First %
Institution State Date Ticker Week(6) Change Month(7) Change
- ----------- ----- ---- ------ ------- ------ -------- ------
($) (%) ($) (%)
- --------------------------------------------------------------------------------------------------------------------------------
LAST 3 MONTHS NATIONALLY
<S> <C> <C> <C> <C> <C> <C>
Oregon Trail Financial Corp. OR 10/06/97 OTFC $ 16.75 67.5% $ 16.19 61.9%
Riverview Bancorp, Inc.(8) WA* 10/01/97 RVSB 13.63 36.3% 13.31 33.1%
SHS Bancorp, Inc. PA 10/01/97 SHSB 16.25 62.5% 16.00 60.0%
Ohio State Financial Serv. OH* 09/29/97 P. Sheet 15.50 55.0% 14.97 49.7%
Citizens Bancorp IN 09/19/97 P. Sheet 14.00 40.0% 15.38 53.8%
WSB Holding Company PA 08/29/97 P. Sheet 14.50 45.0% 13.75 37.5%
Bayonne Bancshares(8) NJ 08/22/97 FSNJ 11.88 18.8% 12.38 23.8%
AVERAGES: $ 14.64 46.4% $ 14.57 45.7%
AVERAGES, EXCLUDING 2ND STEPS: $ 15.40 54.0% $ 15.26 52.6%
MEDIANS: $ 14.50 45.0% $ 14.97 49.7%
MEDIANS, EXCLUDING 2ND STEPS: $ 15.50 55.0% $ 15.38 53.8%
LAST 3 YEARS IN NEW YORK
GSB Financial Corp. NY 07/09/97 GOSB $ 14.75 47.5% $ 14.38 43.8%
Roslyn Bancorp(1) NY 01/13/97 RSLN 15.88 58.8% 16.00 60.0%
AFSALA Bancorp NY 10/01/96 AFED 11.31 13.1% 12.13 21.2%
Dime Community Bancorp NY 06/26/96 DIME 12.00 20.0% 11.87 18.7%
Catskill Financial Corp. NY 04/18/96 CATB 10.50 5.0% 10.38 3.8%
Yonkers Financial Corp. NY 04/18/96 YFCB 10.00 0.0% 9.94 -0.6%
Peekskill Financial Corp. NY 12/29/95 PEEK 11.75 17.5% 11.25 12.5%
Ambanc Holding Co. NY 12/27/95 AHCI 10.31 3.1% 9.87 -1.3%
Flushing Financial Corp. NY 11/21/95 FFIC 14.31 24.4% 14.38 25.0%
Tappan Zee Financial NY 10/05/95 TPNZ 11.50 15.0% 12.00 20.0%
SFS Bancorp NY 06/30/95 SFED 11.38 13.8% 11.25 12.5%
Carver FSB NY 12/25/94 CARV 7.88 -21.2% 6.38 -36.2%
Financial Bancorp NY 08/17/94 FIBC 10.94 9.4% 10.38 3.8%
AVERAGES: $ 11.73 15.9% $ 11.55 14.1%
MEDIANS: $ 11.38 13.8% $ 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.
October 29, 1997
<PAGE> 24
Board of Trustees/Directors
October 29, 1997
Page 23
SUMMARY OF ADJUSTMENTS
In the First Update we applied various adjustments to the key
valuation parameters listed below. In this updated appraisal, we have revised
one of these adjustments, as summarized below.
<TABLE>
<CAPTION>
First Update Second Update
------------ -------------
<S> <C> <C>
Financial Condition Slight Downward Slight Downward
Profitability, Growth & Viability of Earnings Slight 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 Moderate Upward No Adjustment
Management Slight Downward Slight Downward
Effect of Govt. Regulations & Regulatory Reform No Adjustment No Adjustment
</TABLE>
Following the date of the First Update, the number of new issues has
been limited, and there have been no new thrift issues since the first week of
October. Second, the extreme market volatility dramatically impacts the new
issue market to a greater extent than the market for seasoned companies. Given
the limited level of new issues and the general tentativeness of the new issue
market, we believe it is appropriate to eliminate the moderate upward
adjustment for 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 First Update reflected a 5.77 percent one-year T-Bill
rate as of May 31, 1997. This rate has been updated to 5.56 percent,
reflecting the updated rate as of August 31, 1997.
VALUATION ANALYSIS
The general increase in the valuation bases for the Bank with the
updated financial statements, coupled with the increase in the prices of the
Peer Group, warrants an increase in the pro forma valuation of the Bank. The
increase is tempered by the downgrade of the valuation parameter "Marketing of
the Issue" in response to the current volatile market conditions. Accordingly,
we have increased our pro forma valuation of the Bank from $550 million to $575
million, incorporating the impact of the shares to be issued to the Foundation
immediately
<PAGE> 25
Board of Trustees/Directors
October 29, 1997
Page 24
following the conversion. As in the Original Appraisal and First Update, 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
August 31, 1997 financial data. Based on the $575 million midpoint valuation,
the Bank's pro forma P/B and P/TB ratios are 71.93 and 77.86 percent,
respectively. In comparison, the Peer Group's median P/B and P/TB ratios as of
October 29, 1997 were 173.38 and 193.95 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 77.86 percent at the
midpoint reflects a marginal increase over the 77.68 percent ratio in the First
Update. We believe this is appropriate in view of the increase in the Peer
Group pricing offset by the downgrade in the adjustment for marketing of the
issue.
2. Price/Earnings ("P/E"). As in the Original Appraisal and First
Update, 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 five 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 $575 million midpoint value were 21.82 and 16.04 times,
respectively. In comparison, the Peer Group's median reported and core P/E
multiples are 20.93 and 18.30 times, respectively. The updated reported and
core P/E multiples for the Bank compare closely to the 21.38 times and 16.08
times reported and core earnings multiples in the First Update.
3. Price/Assets ("P/A"). At the $575 million midpoint value, the
Bank's P/A ratio of 13.47 percent continues to reflect a modest discount. At
the upper end of the valuation range, the Bank's P/A ratios of 17.19 percent at
the supermaximum 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.
<PAGE> 26
Board of Trustees/Directors
October 29, 1997
Page 25
The Bank's updated pro forma P/A ratio of 13.47 percent at the
midpoint compares to 12.86 percent in the First Update. The increase is the
result of both the increase in price and a reduction in the Bank's total
assets. The Peer Group's median P/A ratio also increased since the date of the
First Update.
COMPARISON TO RECENT CONVERSIONS
As in the Original Appraisal and First Update, 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 five recent standard conversions the last three
months was 72.3 percent (all but one oversubscribed). The Bank's appraised
midpoint P/TB ratio of 77.86 percent exceeds the closing P/TB of the recent
conversions by a considerable margin, implying a 20 percent higher dollar value
for the Bank than if valued at the closing P/TB of recent conversions.
As reflected in Table 12, both the recently converted companies which
completed standard conversion offerings and which were subsequently publicly
traded are trading above their IPO prices. However, we believe trends with
respect to new conversions have been rendered less meaningful in the Bank's
valuation given the limited number of recent transactions, their comparatively
smaller offering sizes, and since none have issued stock during the current
volatile trading environment.
VALUATION CONCLUSION
It is our opinion that, as of October 29, 1997, the estimated
aggregate pro forma market value incorporating the impact of the shares to be
issued to the Foundation immediately upon completion of the conversion was $575
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 range of value.
Accordingly, the Boards have established a range of value of 15 percent above
and below the appraised value of $575 million (or "midpoint"), indicating a
minimum value of $488.75 million and a maximum value of $661.25 million. Based
on the $10.00 per share offering price determined by the Boards, this valuation
range equates to an offering of 48.875 million shares at the minimum to 66.125
million shares at the maximum, and 575 million shares at the midpoint. In the
event that the appraised value is subject to an increase, up to 76,043,750
shares may be sold at an issue price of $10.00 per share, for an aggregate
market value of $760,437,500, without a resolicitation.
Based on this pro forma valuation range, the offering range excluding
the shares to be issued to the Foundation is as follows: $452,546,300 at the
minimum, $532,407,410 at the midpoint, $612,268,520 at the maximum and
$704,108,800 at the supermaximum. Based on a $10.00 per share offering price,
the number of offering shares is as follows: 45,254,630 at the
<PAGE> 27
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 12
Market Pricing Comparatives
Prices As of October 29, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ---------------- Pricing Ratios(3) Dividends(4)
--------------- Core Book --------------------------------------- --------------
Price/ Market 12-Mth Value/ Amount/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 24.20 173.49 1.14 15.59 22.53 153.99 18.90 158.82 19.59 0.38 1.64
All Public Companies 24.59 184.04 1.20 15.52 21.25 158.99 19.15 164.09 19.24 0.40 1.64
Special Selection Grouping(8) 14.48 70.58 0.38 11.55 25.66 126.99 23.34 126.99 25.66 0.04 0.34
State of NY 29.30 431.48 1.35 17.77 22.70 162.79 19.34 173.11 20.13 0.45 1.44
Comparable Group
----------------
Special Comparative Group(8)
----------------------------
FSNJ Bayonne Banchsares of NJ 12.37 111.24 -0.04 9.91 NM 124.82 18.00 124.82 NM 0.17 1.37
OTFC Oregon Trail Fin. Corp of OR 16.19 76.01 0.59 13.29 27.44 121.82 29.26 121.82 27.44 0.00 0.00
RVSBD Riverview Bancorp of WA 13.37 81.93 0.56 9.18 23.88 145.64 31.50 145.64 23.88 0.00 0.00
SHSB SHS Bancorp, Inc. of PA 16.00 13.12 0.41 13.83 NM 115.69 14.62 115.69 NM 0.00 0.00
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------- -------------------------------------------------------
Reported Core
Payout Total Equity/ NPAs/ ---------------- ---------------
Financial Institution Ratio(5) Assets Assets Assets ROA ROE ROA ROE
--------------------- -------- ------ ------- ------- ------- ------- ------- -------
(%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 30.99 1,154 12.99 0.71 0.64 5.50 0.85 7.48
All Public Companies 30.90 1,191 12.83 0.72 0.72 6.37 0.90 8.01
Special Selection Grouping(8) 0.00 307 18.18 0.73 0.60 2.77 0.68 3.28
State of NY 29.33 2,480 12.38 0.85 0.73 6.57 0.86 7.95
Comparable Group
----------------
Special Comparative Group(8)
----------------------------
FSNJ Bayonne Banchsares of NJ NM 618 14.42 1.22 -0.35 -2.42 -0.06 -0.40
OTFC Oregon Trail Fin. Corp of OR 0.00 260 24.02 0.10 1.07 4.44 1.07 4.44
RVSBD Riverview Bancorp of WA 0.00 260 21.63 0.14 1.32 6.10 1.32 6.10
SHSB SHS Bancorp, Inc. of PA 0.00 90 12.64 1.44 0.37 2.96 0.37 2.96
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(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> 28
Board of Trustees/Directors
October 29, 1997
Page 27
minimum, 53,240,740 at the midpoint, 61,226,852 at the maximum and 70,410,880
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> 29
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 Savings Bank and the Comparables
As of October 29, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ----------------
------------------ Core Book Pricing Ratios(3)
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 Savings Bank
- -------------------------
Superrange 10.00 760.44 0.39 12.55 25.66 79.67 17.19 85.11 19.44
Range Maximum 10.00 661.25 0.42 13.18 23.72 75.87 15.23 81.58 17.70
Range Midpoint 10.00 575.00 0.46 13.90 21.82 71.93 13.47 77.86 16.04
Range Minimum 10.00 488.75 0.51 14.88 19.69 67.20 11.65 73.34 14.24
BIF-Insured Thrifts(7)
- ----------------------
Averages 26.73 242.17 1.51 15.31 16.85 184.48 20.09 191.57 17.70
Medians --- --- --- --- 16.41 174.35 17.07 189.19 17.34
All Non-MHC State of NY(7)
- --------------------------
Averages 29.52 460.94 1.40 18.21 22.68 158.12 19.02 169.06 19.87
Medians --- --- --- --- 22.94 145.07 17.09 148.41 20.29
Comparable Group Averages
- -------------------------
Averages 34.89 355.64 1.98 19.93 20.62 185.92 20.07 201.16 18.55
Medians --- --- --- --- 20.93 173.38 16.35 193.95 18.30
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 19.50 28.37 0.82 14.74 23.78 132.29 17.82 132.29 23.78
ALBK ALBANK Fin. Corp. of Albany NY 45.75 588.89 2.81 25.75 19.98 177.67 16.35 203.24 16.28
ALBC Albion Banc Corp. of Albion NY 29.25 7.31 0.96 23.96 NM 122.08 10.66 122.08 NM
AHCI Ambanc Holding Co., Inc. of NY 15.75 69.17 -0.67 14.29 NM 110.22 14.26 110.22 NM
ASFC Astoria Financial Corp. of NY 52.12 1077.11 2.84 29.02 26.19 179.60 14.05 213.87 18.35
CNY Carver Bancorp, Inc. of NY 12.62 29.20 0.01 14.93 NM 84.53 7.06 88.13 NM
CATB Catskill Fin. Corp of NY 17.87 84.35 0.86 15.08 21.02 118.50 29.67 118.50 20.78
DME Dime Bancorp, Inc. of NY 24.50 2486.55 1.36 10.44 22.90 234.67 12.38 246.23 18.01
DIME Dime Community Bancorp of NY 21.62 272.95 1.05 15.12 22.06 142.99 20.76 165.92 20.59
FIBC Financial Bancorp, Inc. of NY 22.75 38.90 1.56 15.46 25.85 147.15 13.77 147.82 14.58
FFIC Flushing Fin. Corp. of NY 21.37 170.60 0.97 16.67 22.98 128.19 19.84 128.19 22.03
GOSB GSB Financial Corp. of NY 15.00 33.72 0.44 13.78 28.85 108.85 29.46 108.85 NM
GPT GreenPoint Fin. Corp. of NY 65.75 2815.81 3.25 32.02 19.74 205.34 21.17 NM 20.23
HAVN Haven Bancorp of Woodhaven NY 43.75 191.89 3.10 24.15 20.93 181.16 10.77 181.76 14.11
JSB JSB Financial, Inc. of NY 48.12 476.29 2.63 35.35 17.37 136.12 31.11 136.12 18.30
LISB Long Island Bancorp, Inc of NY 45.12 1083.92 1.67 22.12 NM 203.98 18.34 206.03 27.02
MBB MSB Bancorp of Middletown NY 27.62 78.55 0.52 21.15 NM 130.59 9.65 266.09 NM
NYB New York Bancorp, Inc. of NY 34.44 734.23 2.35 7.83 17.22 NM 22.36 NM 14.66
PEEK Peekskill Fin. Corp. of NY 17.00 54.28 0.75 14.71 29.82 115.57 29.73 115.57 22.67
PKPS Poughkeepsie Fin. Corp. of NY(7) 10.00 125.95 0.37 5.85 NM 170.94 14.31 170.94 27.03
PSBK Progressive Bank, Inc. of NY 34.00 130.15 2.26 19.63 14.85 173.20 14.81 193.95 15.04
QCSB Queens County Bancorp of NY 36.50 551.44 1.47 11.51 25.17 317.12 37.59 317.12 24.83
RELY Reliance Bancorp, Inc. of NY 32.37 282.01 1.87 18.67 25.69 173.38 14.27 240.67 17.31
RSLN Roslyn Bancorp, Inc. of NY 21.62 943.54 0.93 14.58 NM 148.29 29.87 149.00 23.25
</TABLE>
<TABLE>
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------------- ----------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ -------------- -------------
Share Yield Ratio(5) Assets Assets Assets ROA REO ROA ROE
-------- ------- -------- ------ ------ ------ ----- ----- ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence Savings Bank
- -------------------------
Superrange 0.00 0.00 0.00 4,424 21.57 0.59 0.67 3.11 0.88 4.10
Range Maximum 0.00 0.00 0.00 4,341 20.08 0.60 0.64 3.20 0.86 4.29
Range Midpoint 0.00 0.00 0.00 4,269 18.73 0.62 0.62 3.30 0.84 4.48
Range Minimum 0.00 0.00 0.00 4,197 17.33 0.63 0.59 3.41 0.82 4.72
BIF-Insured Thrifts(7)
- ----------------------
Averages 0.49 1.69 31.00 1,414 11.81 0.81 1.11 10.91 1.12 10.73
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of NY(7)
- --------------------------
Averages 0.46 1.45 29.94 2,642 12.50 0.86 0.74 6.65 0.87 8.06
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.66 1.82 33.70 1,885 11.43 0.66 1.03 9.31 1.10 18.27
Medians --- --- --- --- --- --- --- --- --- ---
State of NY
- -----------
AFED AFSALA Bancorp, Inc. of NY 0.16 0.82 19.51 159 13.47 0.45 0.79 6.46 0.79 6.46
ALBK ALBANK Fin. Corp. of Albany NY 0.72 1.57 25.62 3,602 9.20 0.94 0.85 9.19 1.04 11.28
ALBC Albion Banc Corp. of Albion NY 0.32 1.09 33.33 69 8.73 0.72 0.11 1.14 0.38 4.07
AHCI Ambanc Holding Co., Inc. of NY 0.20 1.27 NM 485 12.94 0.63 -0.59 -4.26 -0.62 -4.45
ASFC Astoria Financial Corp. of NY 0.60 1.15 21.13 7,664 7.82 0.47 0.56 7.09 0.79 10.12
CNY Carver Bancorp, Inc. of NY 0.00 0.00 0.00 414 8.35 1.37 -0.44 -4.95 0.01 0.07
CATB Catskill Fin. Corp of NY 0.28 1.57 32.56 284 25.04 0.47 1.43 5.21 1.45 5.27
DME Dime Bancorp, Inc. of NY 0.16 0.65 11.76 20,087 5.27 1.02 0.56 10.54 0.71 13.40
DIME Dime Community Bancorp of NY 0.24 1.11 22.86 1,315 14.52 NA 0.97 6.00 1.04 6.43
FIBC Financial Bancorp, Inc. of NY 0.40 1.76 25.64 282 9.36 NA 0.56 5.77 1.00 10.23
FFIC Flushing Fin. Corp. of NY 0.24 1.12 24.74 860 15.47 0.39 0.93 5.55 0.97 5.79
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 1.52 30.77 13,300 10.31 2.88 1.06 9.98 1.03 9.74
HAVN Haven Bancorp of Woodhaven NY 0.60 1.37 19.35 1,782 5.95 0.76 0.56 9.29 0.83 13.78
JSB JSB Financial, Inc. of NY 1.40 2.91 53.23 1,531 22.85 NA 1.80 8.14 1.71 7.72
LISB Long Island Bancorp, Inc of NY 0.60 1.33 35.93 5,909 8.99 0.92 0.62 6.60 0.71 7.65
MBB MSB Bancorp of Middletown NY 0.60 2.17 NM 814 7.39 0.71 0.17 2.40 0.18 2.55
NYB New York Bancorp, Inc. of NY 0.60 1.74 25.53 3,284 5.08 NA 1.38 26.74 1.62 31.42
PEEK Peekskill Fin. Corp. of NY 0.36 2.12 48.00 183 25.73 1.22 0.98 3.54 1.29 4.65
PKPS Poughkeepsie Fin. Corp. of NY(7) 0.10 1.00 27.03 880 8.37 NA 0.35 4.21 0.54 6.49
PSBK Progressive Bank, Inc. of NY 0.68 2.00 30.09 879 8.55 NA 0.99 11.99 0.98 11.83
QCSB Queens County Bancorp of NY 0.80 2.19 54.42 1,467 11.85 0.69 1.60 10.80 1.63 10.95
RELY Reliance Bancorp, Inc. of NY 0.64 1.98 34.22 1,977 8.23 NA 0.58 7.07 0.87 10.49
RSLN Roslyn Bancorp, Inc. of NY 0.24 1.11 25.81 3,159 20.14 0.27 0.86 4.12 1.35 6.49
</TABLE>
<PAGE> 30
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 Savings Bank and the Comparables
As of October 29, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ----------------
------------------ Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ------------------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------ ----- ----- ----- ----- ----- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFED SFS Bancorp of Schenectady NY 22.03 27.23 1.07 17.44 NM 126.32 15.75 126.32 20.59
ROSE T R Financial Corp. of NY 30.50 536.56 1.65 12.53 16.58 243.42 15.11 243.42 18.48
TPNZ Tappan Zee Fin., Inc. of NY 20.25 30.13 0.49 14.35 NM 141.11 25.29 141.11 NM
ESBK The Elmira SB FSB of Elmira NY 28.50 20.12 1.10 20.32 25.22 140.26 8.83 146.30 25.91
YFCB Yonkers Fin. Corp. of NY 20.75 63.00 1.02 14.14 27.30 146.75 21.87 146.75 20.34
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 45.74 588.89 2.81 25.75 19.98 177.67 16.35 203.24 16.28
DIME Dime Community Bancorp of NY 21.62 272.95 1.05 15.12 22.06 142.99 20.76 165.92 20.59
FFIC Flushing Fin. Corp. of NY 21.37 170.60 0.97 16.67 22.98 128.19 19.84 128.19 22.03
HAVN Haven Bancorp of Woodhaven NY 43.75 191.89 3.10 24.15 20.93 181.16 10.77 181.76 14.11
JSB JSB Financial, Inc. of NY 48.12 476.29 2.63 35.35 17.37 136.12 31.11 136.12 18.30
PSBK Progressive Bank, Inc. of NY 34.00 130.15 2.26 19.63 14.85 173.20 14.81 193.95 15.04
QCSB Queens County Bancorp of NY 36.50 551.44 1.47 11.51 25.17 317.12 37.59 317.12 24.83
RELY Reliance Bancorp, Inc. of NY 32.37 282.01 1.87 18.67 25.69 173.38 14.27 240.67 17.31
ROSE T R Financial Corp. of NY 30.50 536.56 1.65 12.53 16.58 243.42 15.11 243.42 18.48
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------------- ----------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ -------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
-------- ------- -------- ------ ------ ------ ----- ----- ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFED SFS Bancorp of Schenectady NY 0.28 1.27 26.17 173 12.47 0.73 0.44 3.41 0.79 6.09
ROSE T R Financial Corp. of NY 0.64 2.10 38.79 3,552 6.21 0.54 0.99 15.79 0.88 14.16
TPNZ Tappan Zee Fin., Inc. of NY 0.28 1.38 57.14 119 17.92 1.68 0.70 4.22 0.65 3.90
ESBK The Elmira SB FSB of Elmira NY 0.64 2.25 58.18 228 6.30 0.66 0.36 5.66 0.35 5.51
YFCB Yonkers Fin. Corp. of NY 0.24 1.16 23.53 288 14.90 0.57 0.86 5.06 1.16 6.79
Comparable Group
- ----------------
ALBK ALBANK Fin. Corp. of Albany NY 0.72 1.57 25.62 3,602 9.20 0.94 0.85 9.19 1.04 11.28
DIME Dime Community Bancorp of NY 0.24 1.11 22.86 1,315 14.52 NA 0.97 6.00 1.04 6.43
FFIC Flushing Fin. Corp. of NY 0.24 1.12 24.74 860 15.47 0.39 0.93 5.55 0.97 5.79
HAVN Haven Bancorp of Woodhaven NY 0.60 1.37 19.35 1,782 5.95 0.76 0.56 9.29 0.83 13.78
JSB JSB Financial, Inc. of NY 1.40 2.91 53.23 1,531 22.85 NA 1.80 8.14 1.71 7.72
PSBK Progressive Bank, Inc. of NY 0.68 2.00 30.09 879 8.55 NA 0.99 11.99 0.98 11.83
QCSB Queens County Bancorp of NY 0.80 2.19 54.42 1,467 11.85 0.69 1.60 10.80 1.63 10.95
RELY Reliance Bancorp, Inc. of NY 0.64 1.98 34.22 1,977 8.23 NA 0.58 7.07 0.87 10.49
ROSE T R Financial Corp. of NY 0.64 2.10 38.79 3,552 6.21 0.54 0.99 15.79 0.88 14.16
</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 Rinancial, 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> 31
EXHIBITS
<PAGE> 32
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
1 Stock Prices: As of October 29, 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> 33
EXHIBIT 1
Stock Prices
As of October 29, 1997
<PAGE> 34
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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(302) 23.93 5,670 179.4 25.66 15.71 23.67 1.16 235.37 40.97
NYSE Traded Companies(10) 45.36 33,668 1,733.9 47.64 26.97 44.71 1.99 330.91 48.27
AMEX Traded Companies(16) 17.35 3,142 55.0 20.16 12.39 17.28 0.27 273.54 27.17
NASDAQ Listed OTC Companies(276) 23.48 4,728 126.2 25.13 15.46 23.22 1.18 222.78 41.47
California Companies(21) 30.03 18,712 848.3 31.85 17.95 29.69 1.31 159.20 47.75
Florida Companies(5) 31.33 13,749 476.5 32.95 17.22 31.24 1.19 189.00 54.35
Mid-Atlantic Companies(60) 24.96 6,996 184.0 26.52 15.83 24.56 1.58 213.57 49.78
Mid-West Companies(144) 22.43 3,454 97.0 24.00 15.02 22.28 0.83 261.68 37.29
New England Companies(9) 30.92 5,158 198.9 32.42 17.70 30.40 1.23 444.76 58.80
North-West Companies(8) 23.26 11,774 332.5 25.29 17.10 22.94 1.26 177.27 35.42
South-East Companies(42) 23.15 3,347 73.9 25.74 16.42 22.65 1.97 204.79 33.36
South-West Companies(7) 19.86 1,900 42.5 21.68 12.95 19.82 0.19 25.93 41.94
Western Companies (Excl CA)(6) 21.87 5,273 110.2 23.48 15.88 21.85 0.17 315.63 29.64
Thrift Strategy(240) 22.92 3,600 91.9 24.54 15.30 22.65 1.13 216.70 39.59
Mortgage Banker Strategy(37) 28.37 15,311 600.9 30.69 17.75 28.17 1.52 293.08 49.15
Real Estate Strategy(10) 26.52 7,818 242.7 27.94 15.61 26.30 0.90 227.40 50.04
Diversified Strategy(11) 35.96 26,485 1,045.6 39.00 21.15 35.63 0.89 203.41 43.64
Retail Banking Strategy(4) 17.73 3,486 74.2 19.47 12.25 17.45 1.24 387.36 28.54
Companies Issuing Dividends(257) 24.09 5,487 176.2 25.90 15.95 23.81 1.22 248.33 39.64
Companies Without Dividends(45) 22.91 6,807 199.7 24.18 14.17 22.78 0.74 150.60 50.41
Equity/Assets less than 6%(23) 28.89 19,603 667.7 30.45 16.65 28.36 2.07 201.21 51.67
Equity/Assets 6-12%(141) 27.01 5,904 211.5 28.82 16.82 26.78 0.93 252.32 47.93
Equity/Assets greater than 12%(138) 20.27 3,182 70.2 21.96 14.52 20.02 1.21 183.53 31.92
Converted Last 3 Mths (no MHC)(3) 14.85 4,836 66.8 15.35 11.99 14.54 2.56 0.00 57.78
Actively Traded Companies(41) 34.36 18,723 770.6 36.31 20.81 33.85 1.86 263.81 52.08
Market Value Below $20 Million(51) 18.45 844 14.3 19.57 12.88 18.42 0.37 273.10 35.53
Holding Company Structure(267) 23.99 5,473 178.8 25.76 15.88 23.74 1.13 221.37 39.66
Assets Over $1 Billion(60) 35.25 18,673 713.3 37.55 21.46 34.73 1.64 270.81 46.66
Assets $500 Million-$1 Billion(50) 23.45 5,548 116.4 25.29 14.66 23.09 1.45 263.56 47.65
Assets $250-$500 Million(65) 23.99 2,641 59.3 25.59 15.74 23.77 1.08 219.93 46.38
Assets less than $250 Million(127) 19.07 1,449 26.0 20.58 13.53 18.94 0.87 148.49 32.83
Goodwill Companies(124) 27.85 9,512 314.6 29.79 17.34 27.48 1.35 260.39 45.90
Non-Goodwill Companies(177) 21.28 3,072 88.1 22.86 14.61 21.08 1.04 195.86 37.34
Acquirors of FSLIC Cases(10) 42.34 35,626 1,868.5 44.42 25.12 41.80 2.03 349.42 50.49
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(302) 0.85 1.16 15.78 15.33 152.99
NYSE Traded Companies(10) 2.05 2.77 21.66 20.86 339.55
AMEX Traded Companies(16) 0.40 0.73 14.33 14.12 107.09
NASDAQ Listed OTC Companies(276) 0.83 1.12 15.64 15.18 148.41
California Companies(21) 0.95 1.44 17.07 16.46 262.62
Florida Companies(5) 0.92 0.85 13.38 12.67 183.36
Mid-Atlantic Companies(60) 0.96 1.35 16.19 15.58 167.16
Mid-West Companies(144) 0.83 1.09 15.75 15.43 135.24
New England Companies(9) 0.79 1.36 17.21 16.06 236.79
North-West Companies(8) 0.86 1.08 13.64 13.24 117.10
South-East Companies(42) 0.79 1.02 15.06 14.73 118.44
South-West Companies(7) 0.62 1.08 14.76 13.99 192.26
Western Companies (Excl CA)(6) 0.90 1.06 16.12 15.43 107.39
Thrift Strategy(240) 0.80 1.10 16.00 15.62 138.76
Mortgage Banker Strategy(37) 1.16 1.51 15.45 14.45 226.19
Real Estate Strategy(10) 0.90 1.39 14.36 14.06 220.82
Diversified Strategy(11) 1.54 1.80 13.68 13.15 194.48
Retail Banking Strategy(4) 0.18 0.00 13.12 12.68 168.91
Companies Issuing Dividends(257) 0.92 1.22 15.91 15.42 149.59
Companies Without Dividends(45) 0.46 0.77 15.00 14.76 174.24
Equity/Assets less than 6%(23) 0.94 1.53 13.37 12.56 276.84
Equity/Assets 6-12%(141) 1.04 1.40 16.20 15.49 195.06
Equity/Assets greater than 12%(138) 0.67 0.87 15.79 15.62 93.86
Converted Last 3 Mths (no MHC)(3) 0.25 0.32 12.34 12.34 77.83
Actively Traded Companies(41) 1.48 2.01 17.41 16.78 232.59
Market Value Below $20 Million(51) 0.52 0.83 15.26 15.21 122.37
Holding Company Structure(267) 0.83 1.13 16.04 15.60 150.27
Assets Over $1 Billion(60) 1.32 1.84 17.68 16.39 251.28
Assets $500 Million-$1 Billion(50) 0.92 1.11 14.19 13.68 153.33
Assets $250-$500 Million(65) 0.87 1.20 16.49 16.03 160.18
Assets less than $250 Million(127) 0.62 0.86 15.20 15.13 105.83
Goodwill Companies(124) 1.06 1.41 16.25 15.12 198.61
Non-Goodwill Companies(177) 0.71 0.99 15.48 15.48 122.30
Acquirors of FSLIC Cases(10) 1.83 2.66 20.35 19.16 333.35
</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
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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(62) 26.59 8,242 239.9 28.19 16.38 26.34 0.91 239.29 50.55
NYSE Traded Companies(2) 45.13 72,159 2,651.2 46.28 30.00 43.16 3.73 143.54 52.26
AMEX Traded Companies(6) 26.12 5,813 149.7 27.27 15.38 26.02 0.46 138.04 58.91
NASDAQ Listed OTC Companies(54) 25.86 5,833 148.8 27.53 15.93 25.67 0.85 258.55 49.38
California Companies(2) 18.22 5,393 102.1 19.50 11.75 18.13 0.66 0.00 38.29
Mid-Atlantic Companies(15) 28.06 17,488 549.4 29.76 17.29 27.60 1.09 175.68 50.36
Mid-West Companies(2) 12.50 942 11.8 12.75 9.62 12.37 1.05 0.00 23.52
New England Companies(34) 26.39 5,111 139.9 28.03 15.68 26.21 0.79 263.95 55.83
North-West Companies(4) 22.62 6,882 150.6 24.87 13.54 22.64 0.13 146.44 47.64
South-East Companies(5) 31.90 2,083 45.2 32.92 22.60 31.60 1.60 0.00 32.50
Thrift Strategy(44) 26.83 4,926 164.2 28.43 16.68 26.57 0.97 239.19 49.88
Mortgage Banker Strategy(7) 27.69 29,804 724.4 29.43 16.31 27.70 -0.02 224.35 60.40
Real Estate Strategy(6) 18.81 4,861 93.4 20.12 12.08 18.83 0.03 493.47 36.64
Diversified Strategy(5) 28.22 13,256 417.1 29.88 16.55 27.53 2.35 180.14 55.65
Companies Issuing Dividends(52) 27.99 8,713 261.4 29.59 17.28 27.72 0.91 240.27 50.03
Companies Without Dividends(10) 16.97 5,015 91.9 18.55 10.22 16.87 0.90 225.01 54.03
Equity/Assets less than 6%) 18.47 29,977 701.2 19.72 9.80 18.30 0.51 170.22 82.15
Equity/Assets 6-12%(42) 28.64 6,523 228.7 30.38 17.11 28.34 1.05 254.18 53.05
Equity/Assets greater than 12%(15) 23.49 6,576 137.5 24.82 16.33 23.37 0.65 44.48 33.71
Actively Traded Companies(18) 28.19 11,778 322.7 30.23 17.03 27.90 1.27 277.76 49.93
Market Value Below $20 Million(5) 15.69 953 14.4 16.38 10.06 15.53 1.00 0.00 40.48
Holding Company Structure(41) 25.93 7,007 184.3 27.61 16.13 25.69 1.07 225.13 48.47
Assets Over $1 Billion(14) 31.76 24,452 785.0 33.42 19.40 31.06 1.84 205.84 53.80
Assets $500 Million-$1 Billion(16) 28.15 5,027 117.0 30.15 17.42 28.22 0.02 217.82 49.57
Assets $250-$500 Million(15) 22.47 3,027 63.1 24.05 13.30 22.10 1.70 283.48 50.47
Assets less than $250 Million(17) 23.95 1,479 29.4 25.07 15.32 23.88 0.26 262.64 48.87
Goodwill Companies(29) 28.47 12,361 385.6 30.03 17.46 28.15 0.95 225.05 52.71
Non-Goodwill Companies(33) 24.91 4,550 109.2 26.53 15.41 24.72 0.87 265.17 48.68
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(62) 1.56 1.55 15.57 14.72 152.66
NYSE Traded Companies(2) 2.20 2.31 21.23 13.98 254.24
AMEX Traded Companies(6) 1.05 1.01 15.22 13.17 156.45
NASDAQ Listed OTC Companies(54) 1.60 1.59 15.38 14.95 147.85
California Companies(2) 1.28 1.24 10.43 10.40 117.32
Mid-Atlantic Companies(15) 1.23 1.32 16.06 14.16 168.67
Mid-West Companies(2) 0.21 0.32 12.77 12.04 50.95
New England Companies(34) 1.89 1.82 14.22 13.65 164.23
North-West Companies(4) 1.17 1.14 11.97 11.60 108.36
South-East Companies(5) 1.29 1.33 26.77 26.77 98.52
Thrift Strategy(44) 1.53 1.52 16.52 15.57 149.98
Mortgage Banker Strategy(7) 1.42 1.52 13.33 12.87 170.14
Real Estate Strategy(6) 1.52 1.39 10.21 10.19 109.63
Diversified Strategy(5) 2.11 2.08 13.02 12.01 186.81
Companies Issuing Dividends(52) 1.52 1.51 16.31 15.35 159.08
Companies Without Dividends(10) 1.84 1.83 10.52 10.40 108.58
Equity/Assets less than 6%) 1.14 1.05 7.47 7.24 137.87
Equity/Assets 6-12%(42) 1.89 1.86 15.24 14.05 179.30
Equity/Assets greater than 12%(15) 0.82 0.88 18.77 18.63 86.48
Actively Traded Companies(18) 1.89 1.84 15.22 14.40 176.54
Market Value Below $20 Million(5) 1.45 1.55 13.39 13.21 71.19
Holding Company Structure(41) 1.47 1.47 15.61 14.92 137.20
Assets Over $1 Billion(14) 1.79 1.80 14.91 13.25 175.35
Assets $500 Million-$1 Billion(16) 1.85 1.78 16.32 15.02 183.71
Assets $250-$500 Million(15) 1.17 1.17 13.16 12.86 129.17
Assets less than $250 Million(17) 1.42 1.43 17.63 17.48 120.12
Goodwill Companies(29) 1.60 1.58 15.54 13.73 184.68
Non-Goodwill Companies(33) 1.53 1.53 15.61 15.61 123.95
</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.
(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> 36
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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(20) 29.34 5,158 61.5 32.42 13.99 29.35 0.40 340.50 99.21
BIF-Insured Thrifts(3) 29.21 22,105 284.7 31.96 11.54 29.50 -1.21 322.49 140.70
NASDAQ Listed OTC Companies(23) 29.31 7,983 98.7 32.35 13.59 29.37 0.13 334.50 107.50
Florida Companies(3) 30.28 5,933 84.6 36.13 16.56 31.13 -2.78 0.00 57.58
Mid-Atlantic Companies(11) 29.70 6,015 66.9 32.64 12.30 29.92 -0.24 290.00 147.80
Mid-West Companies(7) 27.37 2,110 25.1 29.25 14.38 26.90 1.75 391.00 78.02
New England Companies(1) 33.25 61,126 813.1 37.37 16.50 32.75 1.53 322.49 72.73
Thrift Strategy(22) 29.08 4,857 56.7 32.05 13.41 29.18 0.05 340.50 109.99
Diversified Strategy(1) 33.25 61,126 813.1 37.37 16.50 32.75 1.53 322.49 72.73
Companies Issuing Dividends(22) 30.02 8,290 103.3 33.09 13.58 30.06 0.26 334.50 107.50
Companies Without Dividends(1) 17.37 2,760 21.6 19.75 13.62 17.75 -2.14 0.00 0.00
Equity/Assets 6-12%(17) 30.46 9,553 119.9 33.92 13.74 30.63 -0.30 334.50 113.04
Equity/Assets greater than 12%(6) 25.31 2,487 24.5 26.84 13.03 24.97 1.61 0.00 85.34
Actively Traded Companies(1) 39.00 7,990 132.8 47.50 14.26 47.00 -17.02 290.00 131.87
Holding Company Structure(2) 31.81 4,954 77.2 37.50 11.51 37.25 -13.75 290.00 147.17
Assets Over $1 Billion(5) 40.28 25,929 331.5 44.66 14.47 40.72 -0.47 306.25 138.39
Assets $500 Million-$1 Billion(3) 30.28 5,933 84.6 36.13 16.56 31.13 -2.78 0.00 57.58
Assets $250-$500 Million(5) 30.71 2,846 37.4 31.75 15.97 29.67 3.72 391.00 78.52
Assets less than $250 Million(10) 23.76 2,174 18.9 26.24 11.74 23.85 -0.16 0.00 118.05
Goodwill Companies(8) 36.67 18,887 242.1 41.02 15.83 36.98 -0.46 334.50 111.44
Non-Goodwill Companies(15) 25.64 2,531 27.0 28.01 12.46 25.57 0.42 0.00 104.88
MHC Institutions(23) 29.31 7,983 98.7 32.35 13.59 29.37 0.13 334.50 107.50
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 0.51 0.79 11.87 11.61 110.71
BIF-Insured Thrifts(3) 0.89 0.80 10.41 10.41 101.01
NASDAQ Listed OTC Companies(23) 0.57 0.80 11.62 11.41 109.10
Florida Companies(3) 0.62 0.94 13.90 13.86 142.47
Mid-Atlantic Companies(11) 0.51 0.72 11.12 10.75 101.26
Mid-West Companies(7) 0.51 0.85 11.87 11.85 107.49
New England Companies(1) 1.39 1.03 10.92 10.91 128.75
Thrift Strategy(22) 0.52 0.78 11.67 11.44 107.94
Diversified Strategy(1) 1.39 1.03 10.92 10.91 128.75
Companies Issuing Dividends(22) 0.58 0.81 11.74 11.51 110.64
Companies Without Dividends(1) 0.36 0.54 9.71 9.71 82.81
Equity/Assets 6-12%(17) 0.58 0.82 11.67 11.40 120.39
Equity/Assets greater than 12%(6) 0.54 0.71 11.45 11.45 69.55
Actively Traded Companies(1) 0.72 1.14 12.18 10.86 129.26
Holding Company Structure(2) 0.89 1.05 11.93 11.27 114.42
Assets Over $1 Billion(5) 0.87 1.00 11.55 10.63 132.41
Assets $500 Million-$1 Billion(3) 0.62 0.94 13.90 13.86 142.47
Assets $250-$500 Million(5) 0.57 0.96 12.56 12.52 120.47
Assets less than $250 Million(10) 0.43 0.62 10.84 10.84 87.53
Goodwill Companies(8) 0.78 0.99 12.04 11.40 140.43
Non-Goodwill Companies(15) 0.47 0.70 11.42 11.42 93.43
MHC Institutions(23) 0.57 0.80 11.62 11.41 109.10
</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> 37
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 60.56 94,411 5,717.5 61.19 30.12 60.94 -0.62 222.99 86.34
CSA Coast Savings Financial of CA 59.81 18,644 1,115.1 60.44 31.75 59.69 0.20 417.39 63.33
CFB Commercial Federal Corp. of NE 47.81 21,582 1,031.8 51.19 27.92 48.06 -0.52 ***.** 49.41
DME Dime Bancorp, Inc. of NY* 24.50 101,492 2,486.6 26.00 14.62 24.06 1.83 143.54 66.10
DSL Downey Financial Corp. of CA 26.62 26,754 712.2 26.62 16.19 24.44 8.92 145.12 42.43
FED FirstFed Fin. Corp. of CA 36.00 10,585 381.1 38.25 20.50 35.69 0.87 122.91 63.64
GSB Glendale Fed. Bk, FSB of CA 35.00 50,456 1,766.0 36.12 17.50 33.62 4.10 115.38 50.54
GDW Golden West Fin. Corp. of CA 86.56 56,770 4,914.0 93.81 59.87 85.81 0.87 230.51 37.14
GPT GreenPoint Fin. Corp. of NY* 65.75 42,826 2,815.8 66.56 45.37 62.25 5.62 N.A. 38.42
JSB JSB Financial, Inc. of NY 48.12 9,898 476.3 49.56 35.87 47.00 2.38 318.43 26.63
NYB New York Bancorp, Inc. of NY 34.44 21,319 734.2 35.37 16.75 33.00 4.36 385.75 77.80
WES Westcorp Inc. of Orange CA 18.69 26,256 490.7 23.87 13.25 18.81 -0.64 154.98 -14.58
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 22.75 2,731 62.1 24.75 13.75 22.25 2.25 N.A. 52.99
ANE Alliance Bancorp of New Englan* 16.62 1,560 25.9 18.00 8.72 16.62 0.00 129.24 84.67
BKC American Bank of Waterbury CT* 44.37 2,313 102.6 45.00 27.37 44.50 -0.29 136.64 58.46
BFD BostonFed Bancorp of MA 20.62 5,650 116.5 22.31 13.50 20.62 0.00 N.A. 39.80
CFX CFX Corp of NH* 25.00 23,977 599.4 25.00 13.81 24.87 0.52 110.08 61.29
CNY Carver Bancorp, Inc. of NY 12.62 2,314 29.2 13.37 7.37 12.50 0.96 101.92 52.97
CBK Citizens First Fin.Corp. of IL 18.94 2,594 49.1 19.50 11.62 18.75 1.01 N.A. 31.80
ESX Essex Bancorp of VA(8) 5.56 1,057 5.9 7.94 1.00 5.25 5.90 -66.81 153.88
FCB Falmouth Co-Op Bank of MA* 20.37 1,455 29.6 22.00 12.37 20.50 -0.63 N.A. 55.26
FAB FirstFed America Bancorp of MA 19.87 8,707 173.0 22.12 13.62 19.62 1.27 N.A. N.A.
GAF GA Financial Corp. of PA 18.87 7,973 150.5 19.62 13.25 18.62 1.34 N.A. 24.80
KNK Kankakee Bancorp of IL 31.87 1,425 45.4 34.62 22.37 31.50 1.17 218.70 28.77
KYF Kentucky First Bancorp of KY 13.50 1,319 17.8 15.12 10.56 13.50 0.00 N.A. 24.20
MBB MSB Bancorp of Middletown NY* 27.62 2,844 78.6 28.87 16.25 27.37 0.91 176.20 40.77
PDB Piedmont Bancorp of NC 11.00 2,751 30.3 19.12 9.25 11.00 0.00 N.A. 4.76
SSB Scotland Bancorp of NC 10.62 1,914 20.3 19.25 10.62 10.62 0.00 N.A. -24.79
SZB SouthFirst Bancshares of AL 19.25 848 16.3 20.87 12.25 19.37 -0.62 N.A. 45.28
SRN Southern Banc Company of AL 17.25 1,230 21.2 17.37 12.25 17.25 0.00 N.A. 31.48
SSM Stone Street Bancorp of NC 20.25 1,898 38.4 27.25 18.87 20.25 0.00 N.A. -1.22
TSH Teche Holding Company of LA 20.25 3,438 69.6 23.50 13.00 20.00 1.25 N.A. 40.92
FTF Texarkana Fst. Fin. Corp of AR 26.00 1,790 46.5 27.00 13.62 24.87 4.54 N.A. 66.35
THR Three Rivers Fin. Corp. of MI 17.87 824 14.7 20.12 12.87 18.00 -0.72 N.A. 27.64
WSB Washington SB, FSB of MD 7.50 4,247 31.9 8.25 4.38 7.62 -1.57 500.00 54.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 35.50 692 24.6 41.00 27.14 38.50 -7.79 N.A. 24.56
AFED AFSALA Bancorp, Inc. of NY 19.50 1,455 28.4 19.50 11.37 18.75 4.00 N.A. 62.50
ALBK ALBANK Fin. Corp. of Albany NY 45.75 12,872 588.9 47.75 27.75 45.50 0.55 96.77 45.84
AMFC AMB Financial Corp. of IN 16.75 964 16.1 17.75 12.50 16.75 0.00 N.A. 26.42
ASBP ASB Financial Corp. of OH 13.37 1,721 23.0 18.25 11.50 13.37 0.00 N.A. 2.85
ABBK Abington Savings Bank of MA* 32.25 1,852 59.7 33.50 18.25 32.50 -0.77 387.16 65.38
AABC Access Anytime Bancorp of NM 8.50 1,193 10.1 8.87 5.25 8.50 0.00 25.93 54.55
AFBC Advance Fin. Bancorp of WV 17.50 1,084 19.0 17.87 12.75 17.50 0.00 N.A. N.A.
AADV Advantage Bancorp of WI 55.00 3,234 177.9 58.00 31.25 55.00 0.00 497.83 70.54
AFCB Affiliated Comm BC, Inc of MA 29.12 6,493 189.1 32.12 16.20 28.50 2.18 N.A. 70.29
ALBC Albion Banc Corp. of Albion NY 29.25 250 7.3 30.50 16.50 29.00 0.86 125.00 74.63
ABCL Allied Bancorp of IL 25.62 8,020 205.5 28.37 15.50 24.87 3.02 284.11 53.69
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 2.04 3.26 20.98 17.88 503.46
CSA Coast Savings Financial of CA 0.99 2.48 24.03 23.72 488.24
CFB Commercial Federal Corp. of NE 2.04 2.89 19.74 17.51 328.82
DME Dime Bancorp, Inc. of NY* 1.07 1.36 10.44 9.95 197.92
DSL Downey Financial Corp. of CA 0.86 1.43 15.25 15.04 219.99
FED FirstFed Fin. Corp. of CA 1.13 2.07 19.13 18.91 396.15
GSB Glendale Fed. Bk, FSB of CA 0.79 1.85 17.77 15.80 321.43
GDW Golden West Fin. Corp. of CA 6.74 8.21 43.88 43.88 688.66
GPT GreenPoint Fin. Corp. of NY* 3.33 3.25 32.02 18.00 310.56
JSB JSB Financial, Inc. of NY 2.77 2.63 35.35 35.35 154.69
NYB New York Bancorp, Inc. of NY 2.00 2.35 7.83 7.83 154.02
WES Westcorp Inc. of Orange CA 1.11 0.55 12.68 12.64 140.09
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.47 0.47 16.70 16.70 95.82
ANE Alliance Bancorp of New Englan* 1.11 1.16 10.60 10.30 152.71
BKC American Bank of Waterbury CT* 3.13 2.68 21.70 20.83 261.94
BFD BostonFed Bancorp of MA 0.78 1.01 15.18 14.67 172.73
CFX CFX Corp of NH* 0.60 0.72 5.77 5.40 77.53
CNY Carver Bancorp, Inc. of NY -0.74 0.01 14.93 14.32 178.81
CBK Citizens First Fin.Corp. of IL 0.30 0.59 14.74 14.74 104.69
ESX Essex Bancorp of VA(8) -0.05 0.05 0.49 0.31 179.83
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.49
FAB FirstFed America Bancorp of MA -0.21 0.50 14.26 14.26 117.25
GAF GA Financial Corp. of PA 0.80 1.02 14.27 14.12 94.04
KNK Kankakee Bancorp of IL 1.62 2.02 26.59 24.99 239.77
KYF Kentucky First Bancorp of KY 0.58 0.75 11.17 11.17 67.37
MBB MSB Bancorp of Middletown NY* 0.49 0.52 21.15 10.38 286.18
PDB Piedmont Bancorp of NC -0.19 0.30 7.42 7.42 44.62
SSB Scotland Bancorp of NC 0.51 0.62 13.44 13.44 36.30
SZB SouthFirst Bancshares of AL -0.03 0.25 16.06 16.06 114.72
SRN Southern Banc Company of AL 0.12 0.43 14.58 14.43 85.72
SSM Stone Street Bancorp of NC 0.80 0.96 16.13 16.13 55.91
TSH Teche Holding Company of LA 0.78 1.08 15.53 15.53 118.17
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.62 15.03 15.03 95.73
THR Three Rivers Fin. Corp. of MI 0.62 0.90 15.54 15.48 115.45
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 1.19 0.51 32.27 31.61 390.88
AFED AFSALA Bancorp, Inc. of NY 0.82 0.82 14.74 14.74 109.40
ALBK ALBANK Fin. Corp. of Albany NY 2.29 2.81 25.75 22.51 279.85
AMFC AMB Financial Corp. of IN 0.66 0.73 14.61 14.61 97.70
ASBP ASB Financial Corp. of OH 0.39 0.56 10.29 10.29 65.35
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 0.51 0.77 14.88 14.88 96.46
AADV Advantage Bancorp of WI 1.27 2.81 29.05 27.16 315.25
AFCB Affiliated Comm BC, Inc of MA 1.52 1.74 16.42 16.33 167.94
ALBC Albion Banc Corp. of Albion NY 0.27 0.96 23.96 23.96 274.51
ABCL Allied Bancorp of IL 0.61 0.89 15.60 15.40 175.10
</TABLE>
<PAGE> 38
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ATSB AmTrust Capital Corp. of IN 13.87 526 7.3 14.25 9.75 13.75 0.87 N.A. 38.70
AHCI Ambanc Holding Co., Inc. of NY* 15.75 4,392 69.2 17.37 10.00 16.44 -4.20 N.A. 40.00
ASBI Ameriana Bancorp of IN 19.75 3,230 63.8 22.00 14.00 18.75 5.33 113.98 23.44
AFFFZ America First Fin. Fund of CA(8) 43.25 6,011 260.0 44.12 28.00 43.00 0.58 130.67 42.98
ANBK American Nat'l Bancorp of MD(8) 20.12 3,613 72.7 20.50 11.37 19.87 1.26 N.A. 66.01
ABCW Anchor Bancorp Wisconsin of WI 28.87 9,054 261.4 32.25 17.31 28.25 2.19 96.53 61.56
ANDB Andover Bancorp, Inc. of MA* 35.75 5,149 184.1 37.50 22.75 35.50 0.70 232.56 39.54
ASFC Astoria Financial Corp. of NY 52.12 20,666 1,077.1 56.62 33.62 50.81 2.58 98.55 41.36
AVND Avondale Fin. Corp. of IL 17.25 3,495 60.3 18.87 12.75 17.12 0.76 N.A. 0.76
BKCT Bancorp Connecticut of CT* 38.25 2,543 97.3 38.25 21.25 36.75 4.08 337.14 70.00
BPLS Bank Plus Corp. of CA 12.25 19,308 236.5 13.75 9.62 12.37 -0.97 N.A. 6.52
BWFC Bank West Fin. Corp. of MI 20.50 1,753 35.9 21.25 10.25 20.50 0.00 N.A. 93.03
BANC BankAtlantic Bancorp of FL 13.94 22,276 310.5 17.12 12.12 13.50 3.26 235.10 4.26
BKUNA BankUnited SA of FL 13.19 8,869 117.0 13.75 8.00 12.87 2.49 142.91 31.90
BVCC Bay View Capital Corp. of CA 30.12 12,421 374.1 30.12 19.50 29.87 0.84 52.51 42.14
FSNJ Bayonne Banchsares of NJ 12.37 8,993 111.2 13.06 5.46 11.62 6.45 N.A. 57.78
BFSB Bedford Bancshares of VA 24.50 1,142 28.0 25.25 17.50 23.00 6.52 133.33 39.05
BFFC Big Foot Fin. Corp. of IL 18.12 2,513 45.5 19.62 12.31 17.75 2.08 N.A. 39.38
BSBC Branford SB of CT(8)* 5.50 6,559 36.1 6.31 3.19 5.25 4.76 159.43 42.12
BYFC Broadway Fin. Corp. of CA 13.00 835 10.9 13.00 9.00 12.62 3.01 N.A. 40.54
CBES CBES Bancorp of MO 19.62 1,025 20.1 22.37 13.25 19.12 2.62 N.A. 37.68
CCFH CCF Holding Company of GA 19.62 820 16.1 21.00 13.75 19.87 -1.26 N.A. 33.02
CENF CENFED Financial Corp. of CA 40.63 5,959 242.1 42.25 23.30 40.37 0.64 159.12 52.80
CFSB CFSB Bancorp of Lansing MI 31.12 5,087 158.3 32.50 16.36 30.62 1.63 245.78 75.52
CKFB CKF Bancorp of Danville KY 17.75 925 16.4 20.50 17.50 19.00 -6.58 N.A. -12.35
CNSB CNS Bancorp of MO 18.00 1,653 29.8 20.00 13.37 17.25 4.35 N.A. 19.05
CSBF CSB Financial Group Inc of IL* 12.50 942 11.8 12.75 9.62 12.37 1.05 N.A. 23.52
CBCI Calumet Bancorp of Chicago IL 50.00 2,111 105.6 51.00 28.25 50.50 -0.99 146.91 50.38
CAFI Camco Fin. Corp. of OH 23.00 3,214 73.9 23.75 14.05 22.50 2.22 N.A. 52.12
CMRN Cameron Fin. Corp. of MO 19.25 2,627 50.6 19.50 14.50 18.12 6.24 N.A. 20.31
CAPS Capital Savings Bancorp of MO 18.25 1,892 34.5 19.25 12.12 17.25 5.80 37.74 40.38
CFNC Carolina Fincorp of NC* 17.12 1,851 31.7 17.87 13.00 17.00 0.71 N.A. 28.05
CASB Cascade SB of Everett WA(8) 13.00 2,570 33.4 16.80 10.40 12.50 4.00 1.56 0.78
CATB Catskill Fin. Corp. of NY* 17.87 4,720 84.3 19.12 12.62 17.50 2.11 N.A. 27.64
CNIT Cenit Bancorp of Norfolk VA 65.00 1,650 107.3 67.87 38.50 61.25 6.12 309.32 56.63
CEBK Central Co-Op. Bank of MA* 23.00 1,965 45.2 24.87 15.12 22.50 2.22 338.10 31.43
CENB Century Bancshares of NC* 84.00 407 34.2 84.00 62.00 84.00 0.00 N.A. 29.23
CBSB Charter Financial Inc. of IL 21.06 4,150 87.4 21.56 12.50 21.00 0.29 N.A. 68.48
COFI Charter One Financial of OH 59.25 49,563 2,936.6 61.91 36.91 58.75 0.85 238.57 48.12
CVAL Chester Valley Bancorp of PA 26.00 2,189 56.9 26.00 13.90 26.00 0.00 129.48 84.40
CTZN CitFed Bancorp of Dayton OH 48.50 8,656 419.8 55.50 28.25 49.50 -2.02 438.89 46.97
CLAS Classic Bancshares of KY 15.69 1,305 20.5 17.12 11.25 15.50 1.23 N.A. 35.03
CMSB Cmnwealth Bancorp of PA 18.00 16,243 292.4 19.50 12.62 17.37 3.63 N.A. 20.00
CBSA Coastal Bancorp of Houston TX 29.50 4,992 147.3 33.25 21.50 29.37 0.44 N.A. 28.99
CFCP Coastal Fin. Corp. of SC 24.50 4,641 113.7 27.75 14.44 24.50 0.00 145.00 55.56
CMSV Commty. Svgs, MHC of FL (48.5) 34.44 5,095 85.1 39.75 16.75 35.25 -2.30 N.A. 68.00
CFTP Community Fed. Bancorp of MS 17.25 4,629 79.9 20.00 14.94 16.37 5.38 N.A. 1.47
CFFC Community Fin. Corp. of VA 22.25 1,275 28.4 23.50 20.50 21.75 2.30 217.86 7.23
CFBC Community First Bnkg Co. of GA 36.31 2,414 87.7 40.00 31.87 36.00 0.86 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.00 916 13.7 16.00 10.33 15.00 0.00 N.A. 32.39
COOP Cooperative Bk.for Svgs. of NC 16.00 2,983 47.7 17.00 9.38 16.00 0.00 220.00 58.10
CRZY Crazy Woman Creek Bncorp of WY 15.00 955 14.3 15.50 11.25 14.75 1.69 N.A. 25.00
DNFC D&N Financial Corp. of MI 24.87 8,244 205.0 24.87 14.12 23.87 4.19 184.23 48.48
DCBI Delphos Citizens Bancorp of OH 17.75 1,960 34.8 18.25 11.75 17.50 1.43 N.A. 47.92
DIME Dime Community Bancorp of NY 21.62 12,625 273.0 23.12 13.25 20.75 4.19 N.A. 46.58
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
ATSB AmTrust Capital Corp. of IN 0.25 0.41 14.19 14.05 137.35
AHCI Ambanc Holding Co., Inc. of NY* -0.64 -0.67 14.29 14.29 110.42
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) 0.37 0.86 12.54 12.54 139.86
ABCW Anchor Bancorp Wisconsin of WI 1.55 1.99 13.24 12.99 212.71
ANDB Andover Bancorp, Inc. of MA* 2.57 2.65 19.58 19.58 242.95
ASFC Astoria Financial Corp. of NY 1.99 2.84 29.02 24.37 370.87
AVND Avondale Fin. Corp. of IL -0.85 -2.63 15.85 15.85 173.75
BKCT Bancorp Connecticut of CT* 2.15 2.02 17.26 17.26 168.45
BPLS Bank Plus Corp. of CA -0.46 0.04 9.27 9.26 183.03
BWFC Bank West Fin. Corp. of MI 0.53 0.47 12.89 12.89 88.80
BANC BankAtlantic Bancorp of FL 0.98 0.72 6.89 5.66 122.57
BKUNA BankUnited SA of FL 0.29 0.48 7.59 6.15 203.77
BVCC Bay View Capital Corp. of CA 1.01 1.65 15.80 13.26 249.27
FSNJ Bayonne Banchsares of NJ -0.24 -0.04 9.91 9.91 68.72
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(8)* 0.32 0.32 2.64 2.64 28.44
BYFC Broadway Fin. Corp. of CA -0.19 0.29 14.65 14.65 146.40
CBES CBES Bancorp of MO 0.84 1.03 17.34 17.34 98.61
CCFH CCF Holding Company of GA 0.05 0.07 14.36 14.36 122.93
CENF CENFED Financial Corp. of CA 1.90 2.71 20.04 20.01 385.22
CFSB CFSB Bancorp of Lansing MI 1.37 1.73 12.67 12.67 166.20
CKFB CKF Bancorp of Danville KY 1.17 0.86 15.75 15.75 65.74
CNSB CNS Bancorp of MO 0.25 0.46 14.84 14.84 59.50
CSBF CSB Financial Group Inc of IL* 0.21 0.32 12.77 12.04 50.95
CBCI Calumet Bancorp of Chicago IL 2.72 3.45 36.46 36.46 235.23
CAFI Camco Fin. Corp. of OH 1.11 1.24 14.58 13.45 152.41
CMRN Cameron Fin. Corp. of MO 0.78 0.97 17.18 17.18 79.22
CAPS Capital Savings Bancorp of MO 0.82 1.15 11.28 11.28 128.18
CFNC Carolina Fincorp of NC* 0.68 0.65 13.75 13.75 60.24
CASB Cascade SB of Everett WA(8) 0.47 0.71 8.78 8.78 143.24
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* 4.33 4.36 74.45 74.45 247.27
CBSB Charter Financial Inc. of IL 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 2.78 3.48 19.70 18.45 293.86
CVAL Chester Valley Bancorp of PA 0.88 1.25 12.36 12.36 147.86
CTZN CitFed Bancorp of Dayton OH 1.94 2.73 22.79 20.52 357.85
CLAS Classic Bancshares of KY 0.45 0.63 14.84 12.52 100.81
CMSB Cmnwealth Bancorp of PA 0.73 0.93 13.57 10.61 140.92
CBSA Coastal Bancorp of Houston TX 1.44 2.51 19.77 16.44 593.77
CFCP Coastal Fin. Corp. of SC 0.95 1.04 6.68 6.68 108.33
CMSV Commty. Svgs, MHC of FL (48.5) 0.73 1.09 15.44 15.44 137.35
CFTP Community Fed. Bancorp of MS 0.59 0.72 12.40 12.40 45.16
CFFC Community Fin. Corp. of VA 1.32 1.67 18.86 18.86 137.58
CFBC Community First Bnkg Co. of GA 1.05 1.06 28.74 28.35 186.68
CIBI Community Inv. Bancorp of OH 0.64 0.98 12.13 12.13 100.77
COOP Cooperative Bk.for Svgs. of NC -0.90 0.22 9.02 9.02 118.15
CRZY Crazy Woman Creek Bncorp of WY 0.58 0.71 14.67 14.67 56.83
DNFC D&N Financial Corp. of MI 1.09 1.44 10.88 10.77 195.15
DCBI Delphos Citizens Bancorp of OH 0.75 0.75 15.53 15.53 54.68
DIME Dime Community Bancorp of NY 0.98 1.05 15.12 13.03 104.16
</TABLE>
<PAGE> 39
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIBK Dime Financial Corp. of CT* 29.62 5,162 152.9 32.00 16.50 31.00 -4.45 182.10 71.71
EGLB Eagle BancGroup of IL 18.50 1,198 22.2 19.50 13.25 18.50 0.00 N.A. 24.41
EBSI Eagle Bancshares of Tucker GA 17.75 5,660 100.5 20.94 13.62 18.06 -1.72 144.83 14.52
EGFC Eagle Financial Corp. of CT 50.19 6,316 317.0 50.19 26.50 48.37 3.76 473.60 64.56
ETFS East Texas Fin. Serv. of TX 19.87 1,025 20.4 21.50 14.75 19.12 3.92 N.A. 21.38
EMLD Emerald Financial Corp of OH 17.25 5,072 87.5 19.00 10.50 17.75 -2.82 N.A. 53.33
EIRE Emerald Island Bancorp, MA(8)* 31.75 2,250 71.4 31.87 12.60 31.50 0.79 316.67 98.44
EFBC Empire Federal Bancorp of MT 16.50 2,592 42.8 18.25 12.50 15.87 3.97 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 26.25 1,985 52.1 27.37 14.12 26.25 0.00 N.A. 81.03
EQSB Equitable FSB of Wheaton MD 44.50 602 26.8 45.75 26.25 43.87 1.44 N.A. 57.52
FCBF FCB Fin. Corp. of Neenah WI 26.87 4,073 109.4 28.13 18.25 27.00 -0.48 N.A. 45.24
FFBS FFBS Bancorp of Columbus MS 22.06 1,557 34.3 26.00 21.00 22.06 0.00 N.A. -4.09
FFDF FFD Financial Corp. of OH 19.25 1,455 28.0 19.50 12.06 18.50 4.05 N.A. 45.28
FFLC FFLC Bancorp of Leesburg FL 35.50 2,301 81.7 36.75 18.25 35.00 1.43 N.A. 65.12
FFFC FFVA Financial Corp. of VA 35.12 4,521 158.8 35.12 18.25 31.62 11.07 N.A. 71.32
FFWC FFW Corporation of Wabash IN 31.25 711 22.2 32.50 20.75 31.25 0.00 N.A. 42.82
FFYF FFY Financial Corp. of OH 29.50 4,122 121.6 29.75 24.25 28.50 3.51 N.A. 16.55
FMCO FMS Financial Corp. of NJ 28.50 2,388 68.1 31.50 16.66 28.50 0.00 216.67 56.16
FFHH FSF Financial Corp. of MN 19.00 3,010 57.2 21.00 13.62 19.12 -0.63 N.A. 25.66
FOBC Fed One Bancorp of Wheeling WV 24.75 2,373 58.7 27.00 15.37 24.00 3.13 147.50 57.14
FBCI Fidelity Bancorp of Chicago IL 24.12 2,795 67.4 25.75 16.87 23.50 2.64 N.A. 41.88
FSBI Fidelity Bancorp, Inc. of PA 24.00 1,550 37.2 25.00 16.82 24.00 0.00 210.48 32.01
FFFL Fidelity FSB, MHC of FL (47.7) 26.12 6,771 84.2 32.50 16.37 27.00 -3.26 N.A. 47.15
FFED Fidelity Fed. Bancorp of IN 9.75 2,487 24.2 11.25 7.50 9.25 5.41 38.30 0.00
FFOH Fidelity Financial of OH 15.50 5,580 86.5 16.37 10.12 15.50 0.00 N.A. 34.78
FIBC Financial Bancorp, Inc. of NY 22.75 1,710 38.9 24.00 14.00 22.50 1.11 N.A. 51.67
FBSI First Bancshares of MO 24.62 1,093 26.9 25.50 15.25 24.62 0.00 93.10 48.13
FBBC First Bell Bancorp of PA 17.25 6,511 112.3 18.37 13.12 17.12 0.76 N.A. 30.19
FBER First Bergen Bancorp of NJ 18.25 3,000 54.8 19.50 11.37 18.25 0.00 N.A. 58.70
SKBO First Carnegie,MHC of PA(45.0) 18.75 2,300 19.4 19.87 11.62 17.87 4.92 N.A. N.A.
FSTC First Citizens Corp of GA 38.50 1,833 70.6 39.37 21.25 38.00 1.32 208.00 52.48
FCME First Coastal Corp. of ME* 13.75 1,359 18.7 15.75 7.00 13.75 0.00 N.A. 77.42
FFBA First Colorado Bancorp of Co 19.94 16,485 328.7 21.50 15.44 19.87 0.35 504.24 17.29
FDEF First Defiance Fin.Corp. of OH 15.50 8,957 138.8 16.00 11.00 15.75 -1.59 N.A. 25.30
FESX First Essex Bancorp of MA* 20.12 7,527 151.4 20.50 11.75 19.50 3.18 235.33 53.35
FFES First FS&LA of E. Hartford CT 35.62 2,682 95.5 37.12 18.75 35.00 1.77 448.00 54.87
FFSX First FS&LA. MHC of IA (46.1) 32.75 2,833 42.7 35.00 20.75 32.00 2.34 391.00 67.95
BDJI First Fed. Bancorp. of MN 24.62 683 16.8 25.50 16.00 24.62 0.00 N.A. 33.08
FFBH First Fed. Bancshares of AR 20.50 4,896 100.4 21.75 15.75 20.50 0.00 N.A. 29.17
FTFC First Fed. Capital Corp. of WI 26.62 9,165 244.0 29.00 15.17 27.25 -2.31 254.93 69.88
FFKY First Fed. Fin. Corp. of KY 21.75 4,159 90.5 23.50 17.75 22.00 -1.14 38.10 7.41
FFBZ First Federal Bancorp of OH 19.62 1,572 30.8 20.50 13.25 19.62 0.00 96.20 22.63
FFCH First Fin. Holdings Inc. of SC 36.75 6,357 233.6 39.25 19.50 35.75 2.80 200.00 63.33
FFBI First Financial Bancorp of IL 19.25 415 8.0 20.00 15.50 19.25 0.00 N.A. 21.30
FFHC First Financial Corp. of WI(8) 39.50 36,305 1,434.0 39.50 21.70 37.12 6.41 150.79 61.22
FFHS First Franklin Corp. of OH 23.00 1,192 27.4 24.50 14.50 23.00 0.00 75.30 39.39
FGHC First Georgia Hold. Corp of GA 8.13 3,052 24.8 9.50 4.17 8.13 0.00 112.27 43.39
FSPG First Home Bancorp of NJ 23.25 2,708 63.0 23.62 13.50 22.50 3.33 287.50 67.63
FFSL First Independence Corp. of KS 14.75 997 14.7 14.75 9.81 14.62 0.89 N.A. 42.24
FISB First Indiana Corp. of IN 24.00 10,561 253.5 26.00 17.37 24.37 -1.52 77.78 12.15
FKFS First Keystone Fin. Corp of PA 29.37 1,228 36.1 33.25 19.00 29.25 0.41 N.A. 52.57
FLKY First Lancaster Bncshrs of KY 15.75 959 15.1 16.37 14.50 15.75 0.00 N.A. 7.73
FLFC First Liberty Fin. Corp. of GA 23.75 7,725 183.5 25.50 17.25 23.25 2.15 367.52 29.29
CASH First Midwest Fin. Corp. of IA 20.25 2,734 55.4 20.75 15.00 19.62 3.21 N.A. 32.09
FMBD First Mutual Bancorp of IL 19.25 3,507 67.5 21.50 13.50 19.00 1.32 N.A. 28.33
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
DIBK Dime Financial Corp. of CT* 2.81 2.82 13.48 13.04 169.29
EGLB Eagle BancGroup of IL -0.12 0.28 17.25 17.25 145.50
EBSI Eagle Bancshares of Tucker GA 0.64 0.87 12.45 12.45 149.91
EGFC Eagle Financial Corp. of CT 0.19 1.08 21.89 17.09 318.77
ETFS East Texas Fin. Serv. of TX 0.34 0.70 19.97 19.97 109.95
EMLD Emerald Financial Corp of OH 0.81 1.00 9.01 8.87 118.90
EIRE Emerald Island Bancorp, MA(8)* 1.52 1.59 13.36 13.36 188.90
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.82 0.92 15.94 15.92 129.32
EQSB Equitable FSB of Wheaton MD 2.20 3.51 25.80 25.80 511.96
FCBF FCB Fin. Corp. of Neenah WI 0.60 0.71 11.65 11.65 66.58
FFBS FFBS Bancorp of Columbus MS 0.95 1.20 16.15 16.15 83.98
FFDF FFD Financial Corp. of OH 0.98 0.55 14.76 14.76 60.48
FFLC FFLC Bancorp of Leesburg FL 1.07 1.54 22.68 22.68 168.23
FFFC FFVA Financial Corp. of VA 1.32 1.60 16.29 15.95 123.62
FFWC FFW Corporation of Wabash IN 1.89 2.36 24.11 21.72 253.24
FFYF FFY Financial Corp. of OH 1.29 1.83 19.94 19.94 145.38
FMCO FMS Financial Corp. of NJ 1.56 2.29 15.24 14.97 232.38
FFHH FSF Financial Corp. of MN 0.79 1.00 14.26 14.26 125.66
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 18.20 18.16 175.26
FSBI Fidelity Bancorp, Inc. of PA 1.08 1.72 15.83 15.83 234.39
FFFL Fidelity FSB, MHC of FL (47.7) 0.50 0.79 12.36 12.27 147.58
FFED Fidelity Fed. Bancorp of IN 0.05 0.31 5.20 5.20 96.50
FFOH Fidelity Financial of OH 0.51 0.75 12.17 10.74 94.04
FIBC Financial Bancorp, Inc. of NY 0.88 1.56 15.46 15.39 165.20
FBSI First Bancshares of MO 1.29 1.57 20.32 20.29 150.02
FBBC First Bell Bancorp of PA 1.06 1.23 10.78 10.78 109.72
FBER First Bergen Bancorp of NJ 0.38 0.66 13.47 13.47 94.92
SKBO First Carnegie,MHC of PA(45.0) 0.33 0.33 10.52 10.52 63.97
FSTC First Citizens Corp of GA 2.86 2.82 17.99 13.99 184.86
FCME First Coastal Corp. of ME* 4.50 4.36 10.35 10.35 112.13
FFBA First Colorado Bancorp of Co 0.79 0.78 11.81 11.65 91.59
FDEF First Defiance Fin.Corp. of OH 0.45 0.61 13.15 13.15 61.65
FESX First Essex Bancorp of MA* 1.32 1.15 11.54 10.02 165.46
FFES First FS&LA of E. Hartford CT 1.52 2.50 23.58 23.58 366.74
FFSX First FS&LA. MHC of IA (46.1) 0.68 1.19 13.72 13.60 165.40
BDJI First Fed. Bancorp. of MN 0.47 1.00 17.60 17.60 161.92
FFBH First Fed. Bancshares of AR 0.81 1.11 16.36 16.36 109.31
FTFC First Fed. Capital Corp. of WI 1.17 1.37 10.61 9.95 166.97
FFKY First Fed. Fin. Corp. of KY 1.15 1.36 12.42 11.70 90.74
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 -0.85 0.94 17.63 17.63 203.69
FFHC First Financial Corp. of WI(8) 1.50 2.03 11.64 11.34 163.38
FFHS First Franklin Corp. of OH 0.36 1.21 17.17 17.06 190.39
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ 1.64 2.14 12.85 12.64 192.91
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 1.35 1.93 19.09 19.09 261.24
FLKY First Lancaster Bncshrs of KY 0.47 0.57 14.71 14.71 44.64
FLFC First Liberty Fin. Corp. of GA 1.32 1.08 12.30 11.09 166.85
CASH First Midwest Fin. Corp. of IA 1.00 1.27 15.62 13.84 137.10
FMBD First Mutual Bancorp of IL 0.10 0.32 15.30 11.59 119.10
</TABLE>
<PAGE> 40
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FMSB First Mutual SB of Bellevue WA* 27.00 2,711 73.2 30.25 13.41 27.50 -1.82 248.39 69.70
FNGB First Northern Cap. Corp of WI 13.75 8,840 121.6 14.00 8.00 13.50 1.85 89.39 69.13
FFPB First Palm Beach Bancorp of FL 38.50 5,048 194.3 40.56 22.75 38.25 0.65 N.A. 63.00
FSLA First SB SLA MHC of NJ (47.5) 39.00 7,990 132.8 47.50 14.26 47.00 -17.02 290.00 131.87
SOPN First SB, SSB, Moore Co. of NC 22.75 3,679 83.7 25.00 17.75 23.50 -3.19 N.A. 21.33
FWWB First Savings Bancorp of WA* 24.37 10,519 256.3 26.37 16.56 24.12 1.04 N.A. 32.66
SHEN First Shenango Bancorp of PA 34.25 2,069 70.9 34.25 21.12 34.25 0.00 N.A. 52.22
FSFC First So.east Fin. Corp. of SC(8) 16.00 4,388 70.2 16.75 9.25 15.87 0.82 N.A. 70.58
FBNW FirstBank Corp of Clarkston WA 16.62 1,984 33.0 19.00 15.50 16.37 1.53 N.A. N.A.
FFDB FirstFed Bancorp of AL 22.37 1,148 25.7 22.75 12.50 22.75 -1.67 N.A. 78.96
FSPT FirstSpartan Fin. Corp. of SC 35.75 4,430 158.4 39.00 35.00 35.00 2.14 N.A. N.A.
FLAG Flag Financial Corp of GA 16.75 2,037 34.1 18.00 10.25 16.75 0.00 70.92 55.81
FLGS Flagstar Bancorp, Inc of MI 19.50 13,670 266.6 21.75 13.00 19.50 0.00 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 21.37 7,983 170.6 24.00 17.37 21.12 1.18 N.A. 17.94
FBHC Fort Bend Holding Corp. of TX 19.25 1,654 31.8 24.00 9.75 19.25 0.00 N.A. 50.98
FTSB Fort Thomas Fin. Corp. of KY 13.37 1,495 20.0 14.75 9.25 13.37 0.00 N.A. -8.55
FKKY Frankfort First Bancorp of KY 9.62 3,280 31.6 12.25 8.00 9.62 0.00 N.A. -15.39
FTNB Fulton Bancorp of MO 20.12 1,719 34.6 26.50 13.50 19.25 4.52 N.A. 30.90
GFSB GFS Bancorp of Grinnell IA 17.00 988 16.8 17.37 10.12 17.12 -0.70 N.A. 60.08
GUPB GFSB Bancorp of Gallup NM 21.25 801 17.0 22.25 14.31 21.25 0.00 N.A. 33.90
GSLA GS Financial Corp. of LA 17.12 3,438 58.9 18.75 13.37 17.25 -0.75 N.A. N.A.
GOSB GSB Financial Corp. of NY 15.00 2,248 33.7 16.75 14.25 15.00 0.00 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 18.87 1,076 20.3 19.25 13.75 18.87 0.00 N.A. 32.42
GBCI Glacier Bancorp of MT 20.00 6,812 136.2 22.50 15.33 20.00 0.00 314.08 22.47
GFCO Glenway Financial Corp. of OH 30.62 1,140 34.9 32.50 18.50 30.62 0.00 N.A. 49.37
GTPS Great American Bancorp of IL 19.00 1,697 32.2 19.50 14.25 19.00 0.00 N.A. 28.29
GTFN Great Financial Corp. of KY(8) 45.37 13,823 627.1 45.94 28.62 43.50 4.30 N.A. 55.80
GSBC Great Southern Bancorp of MO 20.37 8,105 165.1 22.00 16.00 20.12 1.24 597.60 14.37
GDVS Greater DV SB,MHC of PA (19.9)* 29.75 3,272 19.3 31.00 9.38 28.25 5.31 N.A. 186.89
GSFC Green Street Fin. Corp. of NC 18.00 4,298 77.4 20.75 15.00 18.00 0.00 N.A. 16.13
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 22.75 3,125 22.0 27.87 10.50 22.50 1.11 N.A. 88.64
HCBB HCB Bancshares of AR 13.75 2,645 36.4 14.25 12.62 13.25 3.77 N.A. N.A.
HEMT HF Bancorp of Hemet CA 15.63 6,282 98.2 17.12 10.62 15.81 -1.14 N.A. 40.56
HFFC HF Financial Corp. of SD 25.25 2,983 75.3 27.00 16.00 25.50 -0.98 405.00 45.87
HFNC HFNC Financial Corp. of NC 14.87 17,192 255.6 22.06 14.50 14.87 0.00 N.A. -16.79
HMNF HMN Financial, Inc. of MN 24.50 4,212 103.2 25.75 17.00 24.25 1.03 N.A. 35.21
HALL Hallmark Capital Corp. of WI 29.00 1,443 41.8 30.75 17.00 28.48 1.83 N.A. 63.38
HARB Harbor FSB, MHC of FL (46.6)(8) 64.12 4,973 148.5 69.75 30.12 62.50 2.59 N.A. 79.36
HRBF Harbor Federal Bancorp of MD 20.00 1,693 33.9 23.50 15.00 20.75 -3.61 100.00 26.98
HFSA Hardin Bancorp of Hardin MO 18.00 859 15.5 18.62 12.00 17.62 2.16 N.A. 44.00
HARL Harleysville SA of PA 29.25 1,652 48.3 29.25 14.20 29.25 0.00 64.79 85.13
HFGI Harrington Fin. Group of IN 12.25 3,257 39.9 13.75 9.75 12.62 -2.93 N.A. 13.95
HARS Harris SB, MHC of PA (24.3) 57.87 11,223 157.6 61.00 15.25 54.00 7.17 N.A. 217.10
HFFB Harrodsburg 1st Fin Bcrp of KY 16.00 2,025 32.4 19.00 14.75 16.00 0.00 N.A. -15.21
HHFC Harvest Home Fin. Corp. of OH 14.75 915 13.5 14.75 9.25 14.75 0.00 N.A. 51.28
HAVN Haven Bancorp of Woodhaven NY 43.75 4,386 191.9 45.37 26.62 42.12 3.87 N.A. 52.87
HTHR Hawthorne Fin. Corp. of CA 17.50 3,088 54.0 20.12 7.25 17.50 0.00 -36.36 115.25
HMLK Hemlock Fed. Fin. Corp. of IL 17.00 2,076 35.3 17.50 12.50 17.00 0.00 N.A. N.A.
HBNK Highland Federal Bank of CA 32.25 2,300 74.2 32.25 16.00 32.00 0.78 N.A. 89.71
HIFS Hingham Inst. for Sav. of MA* 28.50 1,303 37.1 29.00 15.50 28.50 0.00 525.00 52.00
HBEI Home Bancorp of Elgin IL 17.50 6,856 120.0 19.31 12.25 16.75 4.48 N.A. 29.63
HBFW Home Bancorp of Fort Wayne IN 24.00 2,525 60.6 24.75 17.25 24.31 -1.28 N.A. 26.32
HBBI Home Building Bancorp of IN 21.62 312 6.7 23.75 17.50 21.62 0.00 N.A. 9.47
HCFC Home City Fin. Corp. of OH 15.50 952 14.8 16.25 12.00 15.50 0.00 N.A. 16.98
HOMF Home Fed Bancorp of Seymour IN 36.25 3,396 123.1 36.50 20.67 35.00 3.57 260.70 40.78
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
FMSB First Mutual SB of Bellevue WA* 1.55 1.52 10.88 10.88 159.36
FNGB First Northern Cap. Corp of WI 0.44 0.63 8.13 8.13 72.14
FFPB First Palm Beach Bancorp of FL -0.09 0.08 21.69 21.16 330.11
FSLA First SB SLA MHC of NJ (47.5) 0.72 1.14 12.18 10.86 129.26
SOPN First SB, SSB, Moore Co. of NC 1.06 1.27 18.26 18.26 79.97
FWWB First Savings Bancorp of WA* 0.89 0.84 14.13 13.00 95.79
SHEN First Shenango Bancorp of PA 1.70 2.20 21.78 21.78 198.85
FSFC First So.east Fin. Corp. of SC(8) 0.53 0.80 7.99 7.99 79.43
FBNW FirstBank Corp of Clarkston WA 0.54 0.44 14.00 14.00 77.62
FFDB FirstFed Bancorp of AL 0.95 1.45 14.48 13.20 153.77
FSPT FirstSpartan Fin. Corp. of SC 1.00 1.16 27.63 27.63 104.97
FLAG Flag Financial Corp of GA -0.03 0.17 10.44 10.44 108.95
FLGS Flagstar Bancorp, Inc of MI 0.00 0.00 6.07 6.07 111.13
FFIC Flushing Fin. Corp. of NY* 0.93 0.97 16.67 16.67 107.73
FBHC Fort Bend Holding Corp. of TX 0.37 0.86 11.62 10.82 192.67
FTSB Fort Thomas Fin. Corp. of KY 0.33 0.50 10.40 10.40 64.84
FKKY Frankfort First Bancorp of KY -0.11 0.22 6.81 6.81 40.26
FTNB Fulton Bancorp of MO 0.51 0.61 14.69 14.69 58.50
GFSB GFS Bancorp of Grinnell IA 0.88 1.08 10.66 10.66 93.18
GUPB GFSB Bancorp of Gallup NM 0.79 1.00 17.41 17.41 117.09
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) 0.52 0.72 16.04 16.04 59.32
GBCI Glacier Bancorp of MT 1.10 1.23 8.12 7.90 83.33
GFCO Glenway Financial Corp. of OH 1.06 1.78 23.89 23.57 251.83
GTPS Great American Bancorp of IL 0.20 0.25 17.30 17.30 80.72
GTFN Great Financial Corp. of KY(8) 1.58 1.51 20.35 19.49 220.37
GSBC Great Southern Bancorp of MO 1.15 1.30 7.45 7.45 87.33
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
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.37 0.56 8.80 8.80 63.83
HCBB HCB Bancshares of AR 0.09 0.10 14.27 13.73 75.75
HEMT HF Bancorp of Hemet CA -0.66 -2.68 12.90 10.59 156.76
HFFC HF Financial Corp. of SD 1.23 1.67 17.76 17.76 188.29
HFNC HFNC Financial Corp. of NC 0.43 0.59 9.37 9.37 51.94
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 (46.6)(8) 2.05 2.64 18.84 18.22 224.56
HRBF Harbor Federal Bancorp of MD 0.58 0.90 16.48 16.48 127.80
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
HFGI Harrington Fin. Group of IN 0.61 0.51 7.67 7.67 137.18
HARS Harris SB, MHC of PA (24.3) 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 0.23 0.50 11.35 11.35 90.82
HAVN Haven Bancorp of Woodhaven NY 2.09 3.10 24.15 24.07 406.19
HTHR Hawthorne Fin. Corp. of CA 0.63 1.36 12.85 12.85 279.50
HMLK Hemlock Fed. Fin. Corp. of IL 0.10 0.55 14.88 14.88 79.26
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 0.61 0.80 15.00 15.00 73.49
HOMF Home Fed Bancorp of Seymour IN 2.02 2.35 17.05 16.53 201.06
</TABLE>
<PAGE> 41
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HWEN Home Financial Bancorp of IN 16.37 470 7.7 17.25 12.12 16.37 0.00 N.A. 28.39
HPBC Home Port Bancorp, Inc. of MA* 23.25 1,842 42.8 25.00 15.75 23.25 0.00 190.63 40.91
HMCI Homecorp, Inc. of Rockford IL(8) 20.25 1,708 34.6 20.75 11.83 20.25 0.00 102.50 58.82
HZFS Horizon Fin'l. Services of IA 22.25 426 9.5 26.00 14.50 22.50 -1.11 N.A. 47.16
HRZB Horizon Financial Corp. of WA* 16.50 7,417 122.4 18.00 10.65 16.31 1.16 44.48 40.55
IBSF IBS Financial Corp. of NJ 15.87 11,012 174.8 18.75 12.94 16.00 -0.81 N.A. 16.78
ISBF ISB Financial Corp. of LA 24.87 6,901 171.6 28.00 16.25 24.25 2.56 N.A. 38.17
ITLA Imperial Thrift & Loan of CA* 19.81 7,847 155.4 21.25 14.00 20.00 -0.95 N.A. 32.07
IFSB Independence FSB of DC 13.81 1,281 17.7 15.12 7.37 13.81 0.00 590.50 72.63
INCB Indiana Comm. Bank, SB of IN 15.00 922 13.8 19.00 14.75 15.00 0.00 N.A. -7.69
INBI Industrial Bancorp of OH 18.25 5,173 94.4 18.25 12.00 17.25 5.80 N.A. 43.14
IWBK Interwest SB of Oak Harbor WA 38.75 8,050 311.9 43.25 27.62 37.37 3.69 287.50 20.16
IPSW Ipswich SB of Ipswich MA* 12.50 2,378 29.7 14.12 5.25 13.00 -3.85 N.A. 108.33
JXVL Jacksonville Bancorp of TX 18.25 2,490 45.4 19.12 12.62 18.50 -1.35 N.A. 24.83
JXSB Jcksnville SB,MHC of IL (45.6) 26.50 1,272 15.4 29.50 11.50 26.50 0.00 N.A. 100.00
JSBA Jefferson Svgs Bancorp of MO 41.50 5,005 207.7 43.00 22.25 40.00 3.75 N.A. 59.62
JOAC Joachim Bancorp of MO 14.87 722 10.7 15.63 14.00 14.87 0.00 N.A. 2.55
KSAV KS Bancorp of Kenly NC 21.50 885 19.0 25.50 14.06 21.50 0.00 N.A. 44.20
KSBK KSB Bancorp of Kingfield ME(8)* 14.00 1,238 17.3 16.00 7.08 14.00 0.00 N.A. 82.53
KFBI Klamath First Bancorp of OR 22.62 10,019 226.6 24.25 13.94 22.62 0.00 N.A. 43.62
LSBI LSB Fin. Corp. of Lafayette IN 23.87 932 22.2 27.37 16.43 25.50 -6.39 N.A. 28.54
LVSB Lakeview SB of Paterson NJ 24.37 4,509 109.9 26.00 11.25 24.06 1.29 N.A. 95.90
LARK Landmark Bancshares of KS 24.75 1,711 42.3 27.25 16.25 24.00 3.13 N.A. 37.50
LARL Laurel Capital Group of PA 25.75 1,443 37.2 26.00 15.63 25.75 0.00 101.17 56.06
LSBX Lawrence Savings Bank of MA* 14.00 4,284 60.0 16.37 6.88 13.37 4.71 306.98 72.20
LFED Leeds FSB, MHC of MD (36.3) 32.12 3,455 40.3 33.00 14.00 31.50 1.97 N.A. 100.75
LXMO Lexington B&L Fin. Corp. of MO 16.50 1,138 18.8 17.00 11.50 16.37 0.79 N.A. 22.22
LIFB Life Bancorp of Norfolk VA(8) 25.37 9,847 249.8 26.62 16.75 23.62 7.41 N.A. 40.94
LFBI Little Falls Bancorp of NJ 17.50 2,745 48.0 18.75 11.50 17.50 0.00 N.A. 37.25
LOGN Logansport Fin. Corp. of IN 15.75 1,261 19.9 16.00 11.12 15.00 5.00 N.A. 40.00
LONF London Financial Corp. of OH 20.37 515 10.5 21.00 11.50 20.37 0.00 N.A. 44.26
LISB Long Island Bancorp, Inc of NY 45.12 24,023 1,083.9 47.50 29.19 43.75 3.13 N.A. 28.91
MAFB MAF Bancorp of IL 32.25 15,249 491.8 34.75 20.17 30.50 5.74 279.41 39.19
MBLF MBLA Financial Corp. of MO 25.75 1,298 33.4 27.00 19.00 25.75 0.00 N.A. 35.53
MFBC MFB Corp. of Mishawaka IN 22.75 1,651 37.6 23.75 15.50 22.75 0.00 N.A. 36.88
MLBC ML Bancorp of Villanova PA(8) 28.13 11,293 317.7 29.06 13.75 27.62 1.85 N.A. 99.22
MSBF MSB Financial Corp. of MI 17.62 1,249 22.0 18.50 9.12 17.62 0.00 N.A. 85.47
MGNL Magna Bancorp of MS(8) 31.50 13,754 433.3 32.37 16.75 30.50 3.28 530.00 80.00
MARN Marion Capital Holdings of IN 26.50 1,768 46.9 28.13 19.25 27.00 -1.85 N.A. 37.66
MRKF Market Fin. Corp. of OH 15.00 1,336 20.0 15.75 12.25 15.00 0.00 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 17.06 1,411 24.1 17.25 14.25 17.06 0.00 N.A. 14.73
MFSL Maryland Fed. Bancorp of MD 46.25 3,234 149.6 50.50 30.71 45.50 1.65 340.48 33.09
MASB MassBank Corp. of Reading MA* 42.50 3,561 151.3 47.75 24.94 43.50 -2.30 331.03 48.65
MFLR Mayflower Co-Op. Bank of MA* 23.50 890 20.9 24.50 14.75 23.50 0.00 370.00 38.24
MECH Mechanics SB of Hartford CT* 24.50 5,293 129.7 27.25 15.37 24.87 -1.49 N.A. 55.56
MDBK Medford Bank of Medford, MA* 36.00 4,541 163.5 38.50 24.50 35.00 2.86 414.29 39.81
MERI Meritrust FSB of Thibodaux LA 47.75 774 37.0 49.75 31.00 47.75 0.00 N.A. 51.01
MWBX MetroWest Bank of MA* 8.37 13,956 116.8 9.00 4.00 8.25 1.45 103.16 55.87
MCBS Mid Continent Bancshares of KS(8) 39.12 1,958 76.6 43.25 18.75 38.00 2.95 N.A. 67.39
MIFC Mid Iowa Financial Corp. of IA 10.69 1,676 17.9 11.00 6.25 10.75 -0.56 113.80 67.82
MCBN Mid-Coast Bancorp of ME 28.03 233 6.5 28.03 18.50 28.03 0.00 390.89 47.53
MWBI Midwest Bancshares, Inc. of IA 49.25 339 16.7 51.00 26.00 51.00 -3.43 392.50 85.85
MWFD Midwest Fed. Fin. Corp of WI 26.00 1,628 42.3 26.75 16.75 24.00 8.33 420.00 40.54
MFFC Milton Fed. Fin. Corp. of OH 15.12 2,310 34.9 15.94 12.75 15.25 -0.85 N.A. 4.28
MIVI Miss. View Hold. Co. of MN 17.50 819 14.3 19.75 11.75 18.00 -2.78 N.A. 45.83
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
HWEN Home Financial Bancorp of IN 0.54 0.68 15.31 15.31 90.44
HPBC Home Port Bancorp, Inc. of MA* 1.72 1.71 11.39 11.39 107.90
HMCI Homecorp, Inc. of Rockford IL(8) 0.27 0.85 12.70 12.70 194.15
HZFS Horizon Fin'l. Services of IA 0.65 1.04 19.75 19.75 201.81
HRZB Horizon Financial Corp. of WA* 1.07 1.05 10.91 10.91 69.93
IBSF IBS Financial Corp. of NJ 0.33 0.58 11.59 11.59 66.59
ISBF ISB Financial Corp. of LA 0.77 1.04 16.58 14.06 136.06
ITLA Imperial Thrift & Loan of CA* 1.44 1.44 11.91 11.86 108.35
IFSB Independence FSB of DC 0.29 0.66 13.38 11.73 205.12
INCB Indiana Comm. Bank, SB of IN 0.19 0.53 12.37 12.37 101.63
INBI Industrial Bancorp of OH 0.46 0.90 11.86 11.86 67.00
IWBK Interwest SB of Oak Harbor WA 1.82 2.47 15.43 15.10 227.65
IPSW Ipswich SB of Ipswich MA* 0.84 0.66 4.55 4.55 79.64
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (45.6) 0.36 0.79 13.43 13.43 127.94
JSBA Jefferson Svgs Bancorp of MO 0.69 1.63 21.24 16.18 259.13
JOAC Joachim Bancorp of MO 0.23 0.38 13.63 13.63 48.39
KSAV KS Bancorp of Kenly NC 1.08 1.40 16.22 16.21 119.91
KSBK KSB Bancorp of Kingfield ME(8)* 1.08 1.10 8.46 8.00 117.84
KFBI Klamath First Bancorp of OR 0.55 0.83 14.20 14.20 72.65
LSBI LSB Fin. Corp. of Lafayette IN 1.51 1.33 18.44 18.44 208.28
LVSB Lakeview SB of Paterson NJ 1.34 0.97 13.71 11.74 112.19
LARK Landmark Bancshares of KS 1.13 1.33 18.38 18.38 133.31
LARL Laurel Capital Group of PA 1.61 2.03 14.73 14.73 146.91
LSBX Lawrence Savings Bank of MA* 1.39 1.38 7.43 7.43 85.51
LFED Leeds FSB, MHC of MD (36.3) 0.68 0.95 13.53 13.53 83.07
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA(8) 1.01 1.23 15.94 15.49 151.14
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 12.66 12.66 65.94
LONF London Financial Corp. of OH 0.48 0.73 14.60 14.60 74.25
LISB Long Island Bancorp, Inc of NY 1.44 1.67 22.12 21.90 245.96
MAFB MAF Bancorp of IL 1.85 2.45 16.94 14.81 217.82
MBLF MBLA Financial Corp. of MO 1.11 1.42 21.98 21.98 180.91
MFBC MFB Corp. of Mishawaka IN 0.79 1.19 20.53 20.53 150.36
MLBC ML Bancorp of Villanova PA(8) 1.27 1.15 12.70 12.48 183.32
MSBF MSB Financial Corp. of MI 0.65 0.80 10.16 10.16 59.81
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 2.16 3.12 30.00 29.62 357.90
MASB MassBank Corp. of Reading MA* 2.74 2.60 27.05 27.05 254.26
MFLR Mayflower Co-Op. Bank of MA* 1.39 1.31 13.67 13.44 141.20
MECH Mechanics SB of Hartford CT* 2.76 2.76 15.92 15.92 155.60
MDBK Medford Bank of Medford, MA* 2.45 2.29 21.24 19.79 236.19
MERI Meritrust FSB of Thibodaux LA 1.99 3.10 24.22 24.22 295.20
MWBX MetroWest Bank of MA* 0.52 0.52 3.02 3.02 40.59
MCBS Mid Continent Bancshares of KS(8) 1.87 2.12 19.59 19.59 208.68
MIFC Mid Iowa Financial Corp. of IA 0.71 1.00 7.00 7.00 74.91
MCBN Mid-Coast Bancorp of ME 1.06 1.66 22.06 22.06 256.39
MWBI Midwest Bancshares, Inc. of IA 1.86 3.09 29.86 29.86 432.28
MWFD Midwest Fed. Fin. Corp of WI 1.79 1.37 11.21 10.81 127.18
MFFC Milton Fed. Fin. Corp. of OH 0.39 0.54 11.37 11.37 86.68
MIVI Miss. View Hold. Co. of MN 0.59 0.88 16.08 16.08 85.20
</TABLE>
<PAGE> 42
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MBSP Mitchell Bancorp of NC* 17.50 931 16.3 18.00 12.12 17.00 2.94 N.A. 22.81
MBBC Monterey Bay Bancorp of CA 19.25 3,242 62.4 20.50 14.62 18.25 5.48 N.A. 30.51
MONT Montgomery Fin. Corp. of IN 12.75 1,653 21.1 14.00 11.00 12.25 4.08 N.A. -1.92
MSBK Mutual SB, FSB of Bay City MI 13.00 4,279 55.6 14.62 5.12 12.25 6.12 48.57 136.36
NHTB NH Thrift Bancshares of NH 21.00 2,048 43.0 22.00 11.62 22.00 -4.55 354.55 66.40
NSLB NS&L Bancorp of Neosho MO 18.25 707 12.9 19.50 13.00 18.25 0.00 N.A. 33.99
NMSB Newmil Bancorp. of CT* 13.00 3,835 49.9 14.25 7.75 12.25 6.12 104.08 33.33
NASB North American SB of MO 49.75 2,229 110.9 55.00 30.75 49.75 0.00 ***.** 45.26
NBSI North Bancshares of Chicago IL 26.00 962 25.0 26.12 15.75 26.00 0.00 N.A. 57.58
FFFD North Central Bancshares of IA 18.12 3,258 59.0 19.25 12.50 17.62 2.84 N.A. 33.63
NBN Northeast Bancorp of ME* 23.62 1,275 30.1 25.62 13.00 23.50 0.51 101.02 68.71
NEIB Northeast Indiana Bncrp of IN 20.25 1,763 35.7 20.25 12.87 18.37 10.23 N.A. 48.68
NWEQ Northwest Equity Corp. of WI 17.50 839 14.7 17.50 11.25 17.50 0.00 N.A. 44.39
NWSB Northwest SB, MHC of PA (30.7) 31.00 23,377 222.5 32.75 11.87 29.12 6.46 N.A. 131.86
NSSY Norwalk Savings Society of CT* 35.00 2,410 84.3 37.00 22.94 36.25 -3.45 N.A. 49.76
NSSB Norwich Financial Corp. of CT* 29.12 5,432 158.2 31.62 18.00 29.00 0.41 316.00 48.42
NTMG Nutmeg FS&LA of CT 11.87 738 8.8 11.87 7.00 11.50 3.22 N.A. 58.27
OHSL OHSL Financial Corp. of OH 27.12 1,196 32.4 28.25 20.00 26.50 2.34 N.A. 26.91
OCFC Ocean Fin. Corp. of NJ 37.75 8,606 324.9 38.37 24.37 37.00 2.03 N.A. 48.04
OCN Ocwen Financial Corp. of FL 55.50 30,253 1,679.0 56.56 25.00 56.56 -1.87 N.A. 107.48
OTFC Oregon Trail Fin. Corp of OR 16.19 4,695 76.0 16.75 15.75 16.25 -0.37 N.A. N.A.
PBHC OswegoCity SB, MHC of NY (46.)* 24.62 1,917 21.7 27.50 8.75 27.50 -10.47 N.A. 162.47
OFCP Ottawa Financial Corp. of MI 26.75 5,353 143.2 28.00 14.66 26.62 0.49 N.A. 74.95
PFFB PFF Bancorp of Pomona CA 19.37 17,903 346.8 21.50 12.62 19.12 1.31 N.A. 30.26
PSFI PS Financial of Chicago IL 17.06 2,182 37.2 18.00 11.62 17.12 -0.35 N.A. 45.19
PVFC PVF Capital Corp. of OH 20.00 2,556 51.1 21.75 13.18 20.00 0.00 354.55 39.66
PCCI Pacific Crest Capital of CA* 16.62 2,939 48.8 17.75 9.50 16.25 2.28 N.A. 44.52
PALM Palfed, Inc. of Aiken SC(8) 24.75 5,299 131.2 26.50 13.00 25.12 -1.47 61.03 76.79
PBCI Pamrapo Bancorp, Inc. of NJ 23.50 2,843 66.8 26.75 18.50 22.62 3.89 317.41 17.50
PFED Park Bancorp of Chicago IL 17.50 2,431 42.5 18.12 11.62 17.75 -1.41 N.A. 34.62
PVSA Parkvale Financial Corp of PA 28.50 5,106 145.5 29.50 19.60 28.75 -0.87 244.20 37.02
PEEK Peekskill Fin. Corp. of NY 17.00 3,193 54.3 17.50 13.37 16.75 1.49 N.A. 19.30
PFSB PennFed Fin. Services of NJ 30.25 4,823 145.9 33.50 19.00 29.81 1.48 N.A. 49.38
PWBC PennFirst Bancorp of PA 17.87 5,306 94.8 19.50 12.27 17.87 0.00 123.93 44.23
PWBK Pennwood SB of PA* 19.00 580 11.0 19.00 11.50 19.00 0.00 N.A. 38.18
PBKB People's SB of Brockton MA* 19.25 3,595 69.2 20.00 10.12 18.62 3.38 224.07 81.26
PFDC Peoples Bancorp of Auburn IN 34.50 2,274 78.5 36.00 19.50 31.50 9.52 97.14 70.37
PBCT Peoples Bank, MHC of CT (40.1)* 33.25 61,126 813.1 37.37 16.50 32.75 1.53 322.49 72.73
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 35.00 9,037 113.6 39.12 14.00 33.00 6.06 N.A. 118.75
PFFC Peoples Fin. Corp. of OH 13.50 1,491 20.1 19.00 12.00 13.50 0.00 N.A. 0.00
PHBK Peoples Heritage Fin Grp of ME* 40.12 27,475 1,102.3 43.25 22.87 39.25 2.22 162.05 43.29
PSFC Peoples Sidney Fin. Corp of OH 17.50 1,785 31.2 18.50 12.56 17.50 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 25.00 2,011 50.3 27.37 17.50 25.00 0.00 N.A. 23.46
PMFI Perpetual Midwest Fin. of IA 24.25 1,873 45.4 25.25 18.50 24.00 1.04 N.A. 25.97
PERT Perpetual of SC, MHC (46.8)(8) 51.00 1,505 36.0 58.00 20.25 51.00 0.00 N.A. 110.31
PCBC Perry Co. Fin. Corp. of MO 21.50 828 17.8 22.25 17.00 20.50 4.88 N.A. 26.47
PHFC Pittsburgh Home Fin. of PA 18.75 1,969 36.9 19.87 11.75 18.75 0.00 N.A. 40.24
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 36.50 1,632 28.1 37.12 14.25 34.75 5.04 N.A. 108.57
PTRS Potters Financial Corp of OH 26.87 487 13.1 28.50 17.50 26.87 0.00 N.A. 34.35
PKPS Poughkeepsie Fin. Corp. of NY(8) 10.00 12,595 126.0 10.56 5.00 9.94 0.60 29.03 90.48
PHSB Ppls Home SB, MHC of PA (45.0) 17.37 2,760 21.6 19.75 13.62 17.75 -2.14 N.A. N.A.
PRBC Prestige Bancorp of PA 18.25 915 16.7 19.37 12.00 18.25 0.00 N.A. 35.19
PETE Primary Bank of NH(8)* 28.62 2,089 59.8 29.00 12.26 26.87 6.51 N.A. 87.80
PFNC Progress Financial Corp. of PA 15.12 4,010 60.6 16.37 7.14 13.87 9.01 37.33 89.47
PSBK Progressive Bank, Inc. of NY* 34.00 3,828 130.2 38.00 22.50 34.00 0.00 154.30 49.45
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
MBSP Mitchell Bancorp of NC* 0.51 0.60 15.39 15.39 35.49
MBBC Monterey Bay Bancorp of CA 0.29 0.55 14.43 13.30 127.33
MONT Montgomery Fin. Corp. of IN 0.36 0.36 11.72 11.72 62.55
MSBK Mutual SB, FSB of Bay City MI 0.18 0.07 9.56 9.56 157.37
NHTB NH Thrift Bancshares of NH 0.54 0.80 11.78 10.03 153.95
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.68 0.65 8.27 8.27 84.24
NASB North American SB of MO 4.10 3.86 25.37 24.52 330.46
NBSI North Bancshares of Chicago IL 0.60 0.84 17.58 17.58 124.31
FFFD North Central Bancshares of IA 1.02 1.18 14.81 14.81 65.34
NBN Northeast Bancorp of ME* 1.10 1.06 14.04 12.30 205.33
NEIB Northeast Indiana Bncrp of IN 0.98 1.15 15.19 15.19 100.01
NWEQ Northwest Equity Corp. of WI 0.88 1.11 13.22 13.22 115.48
NWSB Northwest SB, MHC of PA (30.7) 0.58 0.82 8.49 8.00 89.46
NSSY Norwalk Savings Society of CT* 2.42 2.76 20.64 19.90 256.17
NSSB Norwich Financial Corp. of CT* 1.42 1.34 14.65 13.23 131.20
NTMG Nutmeg FS&LA of CT 0.33 0.45 7.72 7.72 138.80
OHSL OHSL Financial Corp. of OH 1.12 1.57 21.21 21.21 192.34
OCFC Ocean Fin. Corp. of NJ 0.04 1.49 27.35 27.35 168.27
OCN Ocwen Financial Corp. of FL 2.35 1.42 8.06 7.70 92.12
OTFC Oregon Trail Fin. Corp of OR 0.59 0.59 13.29 13.29 55.34
PBHC OswegoCity SB, MHC of NY (46.)* 1.06 0.95 11.68 11.68 99.58
OFCP Ottawa Financial Corp. of MI 0.75 1.21 14.05 11.27 160.91
PFFB PFF Bancorp of Pomona CA 0.22 0.64 15.17 15.01 146.98
PSFI PS Financial of Chicago IL 0.70 0.71 14.66 14.66 37.88
PVFC PVF Capital Corp. of OH 1.43 1.83 10.28 10.28 145.96
PCCI Pacific Crest Capital of CA* 1.11 1.04 8.94 8.94 126.28
PALM Palfed, Inc. of Aiken SC(8) 0.13 0.75 10.34 10.34 125.47
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 1.37 2.02 14.72 14.62 194.13
PEEK Peekskill Fin. Corp. of NY 0.57 0.75 14.71 14.71 57.18
PFSB PennFed Fin. Services of NJ 1.43 2.09 20.17 16.87 274.05
PWBC PennFirst Bancorp of PA 0.63 0.91 12.44 11.63 153.97
PWBK Pennwood SB of PA* 0.57 0.92 15.04 15.04 86.17
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 (40.1)* 1.39 1.03 10.92 10.91 128.75
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 0.86 0.73 11.79 10.81 69.82
PFFC Peoples Fin. Corp. of OH 0.53 0.53 15.78 15.78 58.01
PHBK Peoples Heritage Fin Grp of ME* 2.35 2.38 15.71 13.24 203.50
PSFC Peoples Sidney Fin. Corp of OH 0.32 0.48 14.40 14.40 57.78
PERM Permanent Bancorp of IN 0.72 1.30 19.74 19.45 215.43
PMFI Perpetual Midwest Fin. of IA 0.25 0.61 18.09 18.09 212.08
PERT Perpetual of SC, MHC (46.8)(8) 1.17 1.58 20.13 20.13 170.24
PCBC Perry Co. Fin. Corp. of MO 0.90 1.04 18.80 18.80 97.95
PHFC Pittsburgh Home Fin. of PA 0.69 0.88 14.21 14.06 130.15
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.39 1.93 14.76 14.76 232.05
PTRS Potters Financial Corp of OH 1.16 2.06 21.97 21.97 248.85
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.24 0.37 5.85 5.85 69.88
PHSB Ppls Home SB, MHC of PA (45.0) 0.36 0.54 9.71 9.71 82.81
PRBC Prestige Bancorp of PA 0.47 0.83 16.51 16.51 148.33
PETE Primary Bank of NH(8)* 1.24 1.47 14.33 14.31 206.65
PFNC Progress Financial Corp. of PA 0.52 0.62 5.49 4.85 104.40
PSBK Progressive Bank, Inc. of NY* 2.29 2.26 19.63 17.53 229.58
</TABLE>
<PAGE> 43
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROV Provident Fin. Holdings of CA 19.56 4,836 94.6 21.12 12.69 20.12 -2.78 N.A. 39.71
PULB Pulaski SB, MHC of MO (29.8) 29.37 2,094 18.3 32.50 13.75 29.50 -0.44 N.A. 102.55
PLSK Pulaski SB, MHC of NJ (46.0) 18.50 2,070 17.6 24.50 11.50 18.25 1.37 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 25.00 3,081 77.0 29.75 15.50 26.12 -4.29 102.10 58.73
QCFB QCF Bancorp of Virginia MN 28.50 1,426 40.6 28.50 15.75 28.50 0.00 N.A. 56.16
QCBC Quaker City Bancorp of CA 20.00 4,673 93.5 24.56 13.00 20.00 0.00 166.67 31.58
QCSB Queens County Bancorp of NY* 36.50 15,108 551.4 37.75 19.05 35.75 2.10 N.A. 73.40
RARB Raritan Bancorp. of Raritan NJ* 28.25 2,412 68.1 28.62 15.33 27.75 1.80 338.66 82.26
REDF RedFed Bancorp of Redlands CA 19.50 7,179 140.0 21.12 11.50 18.75 4.00 N.A. 44.44
RELY Reliance Bancorp, Inc. of NY 32.37 8,712 282.0 33.44 17.50 30.50 6.13 N.A. 66.00
RELI Reliance Bancshares Inc of WI(8)* 8.50 2,528 21.5 10.12 6.50 8.75 -2.86 N.A. 25.93
RIVR River Valley Bancorp of IN 16.50 1,190 19.6 17.50 13.25 16.25 1.54 N.A. 20.00
RVSBD Riverview Bancorp of WA 13.37 6,128 81.9 14.25 5.83 13.37 0.00 N.A. 113.24
RSLN Roslyn Bancorp, Inc. of NY* 21.62 43,642 943.5 24.31 15.00 21.75 -0.60 N.A. N.A.
SCCB S. Carolina Comm. Bnshrs of SC 22.62 700 15.8 25.25 15.00 21.50 5.21 N.A. 50.80
SBFL SB Fngr Lakes MHC of NY (33.1) 28.00 1,785 16.5 29.50 12.75 28.00 0.00 N.A. 103.64
SFED SFS Bancorp of Schenectady NY 22.03 1,236 27.2 24.50 14.75 21.50 2.47 N.A. 49.36
SGVB SGV Bancorp of W. Covina CA 18.25 2,342 42.7 19.37 10.12 18.00 1.39 N.A. 62.22
SHSB SHS Bancorp, Inc. of PA 16.00 820 13.1 16.25 14.75 15.75 1.59 N.A. N.A.
SISB SIS Bancorp Inc of MA* 35.00 5,581 195.3 37.00 22.37 33.87 3.34 N.A. 53.04
SWCB Sandwich Co-Op. Bank of MA* 38.00 1,919 72.9 39.00 23.00 36.00 5.56 340.84 27.73
SFSL Security First Corp. of OH 18.25 7,574 138.2 19.25 10.17 17.87 2.13 75.48 51.08
SFNB Security First Netwrk Bk of GA(8) 8.37 8,620 72.1 16.00 5.50 7.87 6.35 N.A. -18.34
SMFC Sho-Me Fin. Corp. of MO(8) 44.00 1,499 66.0 48.00 20.25 45.25 -2.76 N.A. 102.30
SOBI Sobieski Bancorp of S. Bend IN 18.00 760 13.7 19.25 13.00 18.25 -1.37 N.A. 24.14
SOSA Somerset Savings Bank of MA(8)* 5.19 16,652 86.4 5.94 1.94 5.12 1.37 1.37 163.45
SSFC South Street Fin. Corp. of NC* 18.12 4,496 81.5 20.00 12.12 17.75 2.08 N.A. 29.43
SCBS Southern Commun. Bncshrs of AL 18.50 1,137 21.0 18.50 13.00 18.00 2.78 N.A. 39.62
SMBC Southern Missouri Bncrp of MO 17.94 1,633 29.3 19.50 14.00 17.75 1.07 N.A. 19.60
SWBI Southwest Bancshares of IL 24.62 2,657 65.4 26.00 18.00 25.75 -4.39 146.20 34.90
SVRN Sovereign Bancorp of PA 18.12 112,838 2,044.6 19.00 9.79 17.56 3.19 305.37 65.63
STFR St. Francis Cap. Corp. of WI 37.00 5,308 196.4 41.25 25.00 38.50 -3.90 N.A. 42.31
SPBC St. Paul Bancorp, Inc. of IL 23.75 34,133 810.7 28.50 14.07 24.19 -1.82 113.39 51.56
SFFC StateFed Financial Corp. of IA 27.12 784 21.3 28.25 16.50 27.00 0.44 N.A. 64.36
SFIN Statewide Fin. Corp. of NJ 20.50 4,710 96.6 22.62 12.62 19.50 5.13 N.A. 42.66
STSA Sterling Financial Corp. of WA 21.00 7,567 158.9 22.25 13.00 21.00 0.00 131.02 48.73
SFSB SuburbFed Fin. Corp. of IL 33.75 1,263 42.6 33.75 19.00 33.75 0.00 406.00 77.63
ROSE T R Financial Corp. of NY* 30.50 17,592 536.6 33.00 14.37 30.37 0.43 N.A. 71.83
THRD TF Financial Corp. of PA 24.25 4,088 99.1 25.69 15.50 24.00 1.04 N.A. 49.23
TPNZ Tappan Zee Fin., Inc. of NY 20.25 1,488 30.1 22.62 13.00 20.50 -1.22 N.A. 48.68
ESBK The Elmira SB FSB of Elmira NY* 28.50 706 20.1 31.00 14.75 28.13 1.32 98.33 56.16
TRIC Tri-County Bancorp of WY 27.75 584 16.2 29.00 18.00 27.75 0.00 N.A. 54.17
TWIN Twin City Bancorp of TN 14.50 1,272 18.4 14.50 11.33 13.75 5.45 N.A. 26.09
UFRM United FS&LA of Rocky Mount NC 11.62 3,074 35.7 12.75 7.50 11.37 2.20 257.54 36.71
UBMT United Fin. Corp. of MT 24.00 1,223 29.4 25.37 18.50 24.00 0.00 128.57 24.68
VABF Va. Beach Fed. Fin. Corp of VA 17.62 4,976 87.7 17.62 8.62 15.12 16.53 275.69 86.65
VFFC Virginia First Savings of VA(8) 24.12 5,810 140.1 24.50 12.37 24.25 -0.54 ***.** 89.18
WHGB WHG Bancshares of MD 15.12 1,462 22.1 16.50 12.62 15.12 0.00 N.A. 15.24
WSFS WSFS Financial Corp. of DE* 17.62 12,442 219.2 18.75 9.19 17.50 0.69 143.03 72.91
WVFC WVS Financial Corp. of PA* 32.00 1,747 55.9 34.00 21.50 31.00 3.23 N.A. 29.98
WRNB Warren Bancorp of Peabody MA* 20.00 3,798 76.0 21.37 12.75 20.25 -1.23 493.47 33.33
WFSL Washington FS&LA of Seattle WA 31.12 47,509 1,478.5 33.31 21.36 31.12 0.00 113.30 29.18
WAMU Washington Mutual Inc. of WA(8)* 68.62 257,176 17,647.4 72.37 38.62 68.12 0.73 269.72 58.44
WYNE Wayne Bancorp of NJ 22.50 2,014 45.3 24.87 13.69 22.50 0.00 N.A. 47.54
WAYN Wayne S&L Co. MHC of OH (47.8) 27.25 2,251 29.3 27.25 13.17 25.50 6.86 N.A. 66.87
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
PROV Provident Fin. Holdings of CA 0.40 0.35 17.67 17.67 127.27
PULB Pulaski SB, MHC of MO (29.8) 0.68 0.90 11.23 11.23 86.07
PLSK Pulaski SB, MHC of NJ (46.0) 0.21 0.51 10.20 10.20 85.68
PULS Pulse Bancorp of S. River NJ 1.19 1.79 13.59 13.59 168.84
QCFB QCF Bancorp of Virginia MN 1.41 1.41 19.23 19.23 109.91
QCBC Quaker City Bancorp of CA 0.60 0.99 15.03 15.02 171.50
QCSB Queens County Bancorp of NY* 1.45 1.47 11.51 11.51 97.09
RARB Raritan Bancorp. of Raritan NJ* 1.46 1.55 12.48 12.27 157.31
REDF RedFed Bancorp of Redlands CA 0.31 0.80 10.75 10.70 127.07
RELY Reliance Bancorp, Inc. of NY 1.26 1.87 18.67 13.45 226.90
RELI Reliance Bancshares Inc of WI(8)* 0.16 0.17 9.08 9.08 18.60
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
RVSBD Riverview Bancorp of WA 0.56 0.56 9.18 9.18 42.44
RSLN Roslyn Bancorp, Inc. of NY* 0.59 0.93 14.58 14.51 72.39
SCCB S. Carolina Comm. Bnshrs of SC 0.60 0.79 17.09 17.09 66.57
SBFL SB Fngr Lakes MHC of NY (33.1) 0.15 0.50 11.63 11.63 121.93
SFED SFS Bancorp of Schenectady NY 0.60 1.07 17.44 17.44 139.85
SGVB SGV Bancorp of W. Covina CA 0.31 0.75 12.77 12.56 174.78
SHSB SHS Bancorp, Inc. of PA 0.41 0.41 13.83 13.83 109.44
SISB SIS Bancorp Inc of MA* 3.31 3.29 18.50 18.50 257.04
SWCB Sandwich Co-Op. Bank of MA* 2.34 2.38 20.79 19.90 261.54
SFSL Security First Corp. of OH 0.88 1.10 8.13 7.99 86.25
SFNB Security First Netwrk Bk of GA(8) -3.30 -3.38 3.02 2.97 9.12
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 0.32 0.62 16.26 16.26 107.54
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 0.19 0.47 13.54 13.54 61.66
SMBC Southern Missouri Bncrp of MO 0.65 0.63 16.17 16.17 98.22
SWBI Southwest Bancshares of IL 1.04 1.44 15.66 15.66 142.39
SVRN Sovereign Bancorp of PA 0.39 0.60 3.88 2.92 96.59
STFR St. Francis Cap. Corp. of WI 1.77 1.95 24.43 21.59 310.01
SPBC St. Paul Bancorp, Inc. of IL 0.92 1.33 11.62 11.59 135.10
SFFC StateFed Financial Corp. of IA 1.17 1.42 19.43 19.43 109.28
SFIN Statewide Fin. Corp. of NJ 0.76 1.29 13.90 13.88 142.93
STSA Sterling Financial Corp. of WA 0.21 0.66 9.13 7.96 222.86
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.90 21.82 337.85
ROSE T R Financial Corp. of NY* 1.84 1.65 12.53 12.53 201.90
THRD TF Financial Corp. of PA 0.83 1.13 17.42 15.28 156.74
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* 1.13 1.10 20.32 19.48 322.70
TRIC Tri-County Bancorp of WY 1.15 1.46 23.46 23.46 153.18
TWIN Twin City Bancorp of TN 0.44 0.63 10.85 10.85 84.39
UFRM United FS&LA of Rocky Mount NC 0.19 0.33 6.70 6.70 89.63
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) 0.88 0.76 11.44 11.06 147.75
WHGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.47 1.48 6.31 6.26 121.25
WVFC WVS Financial Corp. of PA* 1.69 2.12 18.83 18.83 168.69
WRNB Warren Bancorp of Peabody MA* 2.01 1.70 9.77 9.77 94.27
WFSL Washington FS&LA of Seattle WA 1.93 2.14 14.65 13.38 121.25
WAMU Washington Mutual Inc. of WA(8)* 0.56 1.19 9.48 9.00 189.61
WYNE Wayne Bancorp of NJ 0.52 0.52 17.31 17.31 129.61
WAYN Wayne S&L Co. MHC of OH (47.8) 0.35 0.74 10.44 10.44 112.94
</TABLE>
<PAGE> 44
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of October 29, 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) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WCFB Wbstr Cty FSB MHC of IA (45.2) 21.00 2,100 20.0 22.00 12.75 21.00 0.00 N.A. 52.73
WBST Webster Financial Corp. of CT 62.00 13,554 840.3 66.00 33.62 59.94 3.44 556.78 68.71
WEFC Wells Fin. Corp. of Wells MN 17.00 1,959 33.3 18.37 12.50 17.00 0.00 N.A. 29.57
WCBI WestCo Bancorp of IL 27.75 2,474 68.7 29.25 20.00 26.50 4.72 177.50 29.07
WSTR WesterFed Fin. Corp. of MT 24.50 5,577 136.6 27.00 16.75 24.75 -1.01 N.A. 34.25
WOFC Western Ohio Fin. Corp. of OH 24.75 2,339 57.9 29.25 20.00 24.50 1.02 N.A. 13.79
WWFC Westwood Fin. Corp. of NJ(8) 27.50 645 17.7 28.00 13.25 27.50 0.00 N.A. 66.67
WEHO Westwood Hmstd Fin Corp of OH 16.00 2,782 44.5 18.00 10.50 15.87 0.82 N.A. 32.01
WFI Winton Financial Corp. of OH 19.87 1,986 39.5 20.50 11.25 19.50 1.90 N.A. 72.78
FFWD Wood Bancorp of OH 17.25 2,119 36.6 18.75 10.50 17.50 -1.43 N.A. 52.25
YFCB Yonkers Fin. Corp. of NY 20.75 3,036 63.0 22.00 12.12 18.75 10.67 N.A. 61.23
YFED York Financial Corp. of PA 26.50 7,008 185.7 27.37 16.00 26.12 1.45 180.42 63.08
<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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
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 1.42 2.53 22.03 18.82 438.52
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 19.20 19.20 125.96
WSTR WesterFed Fin. Corp. of MT 0.81 1.02 18.69 14.96 171.35
WOFC Western Ohio Fin. Corp. of OH 0.52 0.72 23.38 21.79 169.51
WWFC Westwood Fin. Corp. of NJ(8) 0.78 1.34 15.76 14.04 172.70
WEHO Westwood Hmstd Fin Corp of OH 0.30 0.45 14.23 14.23 48.40
WFI Winton Financial Corp. of OH 1.60 1.34 11.36 11.12 159.81
FFWD Wood Bancorp of OH 0.79 0.94 9.52 9.52 77.36
YFCB Yonkers Fin. Corp. of NY 0.76 1.02 14.14 14.14 94.89
YFED York Financial Corp. of PA 1.01 1.29 14.28 14.28 165.87
</TABLE>
<PAGE> 45
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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(302) 13.05 12.81 0.65 5.55 3.28 0.86 7.50 0.72 131.64 0.80
NYSE Traded Companies(10) 7.57 7.36 0.73 10.18 4.32 0.89 13.71 1.18 81.87 1.19
AMEX Traded Companies(16) 15.64 15.53 0.47 2.52 2.06 0.82 5.04 0.63 159.36 0.70
NASDAQ Listed OTC Companies(276) 13.11 12.86 0.66 5.55 3.31 0.86 7.40 0.70 132.08 0.79
California Companies(21) 7.44 7.18 0.29 4.38 2.18 0.43 7.00 1.44 73.11 1.31
Florida Companies(5) 7.63 7.18 0.92 11.44 3.25 0.75 9.15 0.58 120.24 0.82
Mid-Atlantic Companies(60) 11.16 10.82 0.62 6.31 3.55 0.85 8.76 0.79 97.56 0.91
Mid-West Companies(144) 14.14 13.95 0.69 5.43 3.47 0.90 7.11 0.58 152.57 0.69
New England Companies(9) 7.87 7.46 0.36 4.81 2.67 0.63 8.56 0.60 126.67 1.01
North-West Companies(8) 17.06 16.82 0.86 6.30 3.33 1.04 8.22 0.58 149.53 0.58
South-East Companies(42) 16.28 16.08 0.72 5.03 2.93 0.97 6.82 0.87 128.40 0.82
South-West Companies(7) 10.60 10.34 0.38 2.96 2.30 0.66 6.49 0.65 112.80 0.70
Western Companies (Excl CA)(6) 16.22 15.78 0.98 6.63 4.12 1.15 7.69 0.29 169.19 0.63
Thrift Strategy(240) 14.31 14.09 0.67 5.04 3.26 0.89 6.95 0.65 131.40 0.74
Mortgage Banker Strategy(37) 7.38 6.92 0.51 7.31 3.37 0.66 9.77 0.99 132.57 1.02
Real Estate Strategy(10) 7.34 7.14 0.55 6.98 3.55 0.76 10.26 1.32 102.39 1.33
Diversified Strategy(11) 7.66 7.42 1.06 13.45 4.39 1.08 14.26 0.75 131.45 1.06
Retail Banking Strategy(4) 8.35 8.13 0.11 2.30 0.71 0.04 1.83 0.90 204.06 0.92
Companies Issuing Dividends(257) 13.40 13.14 0.70 5.97 3.60 0.92 7.91 0.68 129.66 0.77
Companies Without Dividends(45) 10.89 10.76 0.34 2.91 1.25 0.48 4.99 0.97 144.59 1.02
Equity/Assets less than 6%(23) 4.96 4.66 0.37 7.44 3.01 0.56 11.42 1.11 101.26 1.04
Equity/Assets 6-12%(141) 8.62 8.28 0.57 6.71 3.48 0.76 8.96 0.78 130.15 0.90
Equity/Assets greater than 12%(138) 18.48 18.33 0.77 4.17 3.14 0.99 5.51 0.59 137.51 0.67
Converted Last 3 Mths (no MHC)(3) 17.02 17.02 0.36 1.66 1.42 0.46 2.33 0.92 112.16 0.84
Actively Traded Companies(41) 8.67 8.42 0.74 8.81 4.06 0.96 12.12 0.77 137.72 0.95
Market Value Below $20 Million(51) 14.60 14.58 0.54 3.39 2.71 0.79 5.44 0.75 118.46 0.68
Holding Company Structure(267) 13.54 13.32 0.64 5.29 3.21 0.86 7.23 0.70 126.94 0.79
Assets Over $1 Billion(60) 7.77 7.24 0.62 8.15 3.56 0.81 11.02 0.86 109.60 0.97
Assets $500 Million-$1 Billion(50) 10.37 10.04 0.65 6.59 3.49 0.80 8.08 0.68 174.99 0.97
Assets $250-$500 Million(65) 11.54 11.24 0.61 5.41 3.34 0.84 7.59 0.66 121.40 0.72
Assets less than $250 Million(127) 17.14 17.09 0.68 4.08 3.04 0.91 5.68 0.69 129.61 0.69
Goodwill Companies(124) 9.10 8.50 0.62 7.11 3.65 0.79 9.20 0.80 113.09 0.88
Non-Goodwill Companies(177) 15.72 15.72 0.66 4.50 3.03 0.90 6.36 0.66 144.10 0.74
Acquirors of FSLIC Cases(10) 7.05 6.62 0.60 8.18 3.85 0.85 12.30 1.17 56.89 0.81
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(302) 22.53 150.65 18.42 156.28 19.55 0.37 1.62 36.08
NYSE Traded Companies(10) 19.57 202.25 15.03 214.89 17.52 0.43 1.05 21.72
AMEX Traded Companies(16) 24.32 123.07 18.63 124.34 18.51 0.32 1.90 44.73
NASDAQ Listed OTC Companies(276) 22.54 150.45 18.54 156.09 19.69 0.37 1.63 36.42
California Companies(21) 23.06 166.97 11.63 175.09 18.93 0.15 0.47 12.64
Florida Companies(5) 18.92 177.53 22.17 199.81 23.30 0.24 0.77 14.53
Mid-Atlantic Companies(60) 22.94 150.65 16.47 157.40 18.53 0.39 1.52 36.79
Mid-West Companies(144) 22.23 145.36 19.07 148.91 19.63 0.36 1.72 36.16
New England Companies(9) 23.87 174.82 13.22 191.40 20.77 0.50 1.59 46.81
North-West Companies(8) 21.62 172.17 24.70 180.66 21.23 0.35 1.36 32.14
South-East Companies(42) 22.68 151.79 22.76 156.28 20.15 0.46 2.07 46.66
South-West Companies(7) 22.80 136.54 13.64 144.75 19.11 0.33 1.50 50.84
Western Companies (Excl CA)(6) 23.79 147.84 21.97 154.82 21.11 0.57 2.60 56.47
Thrift Strategy(240) 22.84 143.09 19.32 147.42 19.72 0.39 1.74 38.63
Mortgage Banker Strategy(37) 21.76 183.17 13.32 198.88 19.08 0.31 1.12 29.03
Real Estate Strategy(10) 16.85 180.29 12.94 183.63 17.86 0.13 0.65 12.64
Diversified Strategy(11) 21.82 225.17 22.16 233.50 17.21 0.47 1.48 31.63
Retail Banking Strategy(4) 22.82 140.47 11.04 144.69 22.17 0.20 1.20 18.35
Companies Issuing Dividends(257) 22.46 151.12 18.83 157.04 19.48 0.43 1.88 41.89
Companies Without Dividends(45) 23.35 147.70 15.85 151.47 20.28 0.00 0.00 0.00
Equity/Assets less than 6%(23) 22.17 205.52 11.23 221.34 19.03 0.23 0.82 19.26
Equity/Assets 6-12%(141) 21.85 165.44 14.43 173.59 17.78 0.39 1.44 34.06
Equity/Assets greater than 12%(138) 23.46 129.05 23.28 130.86 21.50 0.38 1.91 41.95
Converted Last 3 Mths (no MHC)(3) 27.44 120.78 20.63 120.78 27.44 0.06 0.46 0.00
Actively Traded Companies(41) 22.18 196.59 16.47 206.27 17.60 0.50 1.59 32.55
Market Value Below $20 Million(51) 23.67 121.28 17.40 121.64 21.68 0.34 1.86 43.48
Holding Company Structure(267) 23.03 148.27 18.86 153.43 19.71 0.38 1.67 37.32
Assets Over $1 Billion(60) 21.60 194.30 15.65 211.60 18.65 0.43 1.22 30.20
Assets $500 Million-$1 Billion(50) 22.05 165.07 16.85 171.18 19.16 0.35 1.47 36.14
Assets $250-$500 Million(65) 22.73 150.27 16.89 155.63 18.66 0.38 1.61 34.79
Assets less than $250 Million(127) 23.15 127.28 20.99 127.97 20.64 0.35 1.86 40.44
Goodwill Companies(124) 21.83 169.55 15.20 183.51 18.66 0.39 1.44 33.04
Non-Goodwill Companies(177) 23.11 137.88 20.57 137.88 20.24 0.36 1.75 38.63
Acquirors of FSLIC Cases(10) 21.68 201.18 13.65 217.39 17.95 0.41 1.28 21.18
</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
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(62) 11.87 11.48 1.13 11.04 5.99 1.13 10.89 0.77 168.87 1.41
NYSE Traded Companies(2) 7.79 5.41 0.81 10.26 4.72 0.87 11.57 1.95 40.15 1.04
AMEX Traded Companies(6) 11.89 11.10 0.74 7.96 3.75 0.74 8.05 0.94 219.74 1.24
NASDAQ Listed OTC Companies(54) 12.04 11.79 1.19 11.47 6.33 1.20 11.23 0.68 167.51 1.45
California Companies(2) 9.04 9.01 1.25 12.98 6.97 1.21 12.56 1.06 88.91 1.57
Mid-Atlantic Companies(15) 11.42 10.75 0.83 8.45 4.10 0.92 9.05 0.78 164.09 1.30
Mid-West Companies(2) 25.06 23.63 0.43 1.59 1.68 0.66 2.42 0.56 57.14 0.57
New England Companies(34) 9.05 8.74 1.29 13.86 7.57 1.24 13.22 0.85 176.33 1.64
North-West Companies(4) 12.39 12.00 1.21 10.51 5.29 1.18 10.24 0.18 215.39 1.04
South-East Companies(5) 27.80 27.80 1.14 4.44 3.32 1.23 4.76 0.63 179.97 0.75
Thrift Strategy(44) 12.92 12.50 1.12 9.98 5.85 1.13 9.77 0.81 167.04 1.34
Mortgage Banker Strategy(7) 9.11 8.86 0.88 11.23 4.85 1.01 12.29 0.48 161.50 1.31
Real Estate Strategy(6) 9.48 9.46 1.55 16.05 8.00 1.41 14.63 1.06 88.91 1.62
Diversified Strategy(5) 6.77 6.23 1.23 17.82 7.55 1.21 17.47 0.80 259.29 2.08
Companies Issuing Dividends(52) 12.01 11.59 1.04 10.51 5.24 1.05 10.34 0.72 177.51 1.35
Companies Without Dividends(10) 10.93 10.71 1.73 15.26 11.13 1.74 15.26 1.09 103.21 1.88
Equity/Assets less than 6%(5) 5.45 5.32 0.97 17.28 6.36 0.87 15.48 0.99 93.78 1.54
Equity/Assets 6-12%(42) 8.70 8.21 1.22 13.02 7.08 1.20 12.82 0.85 159.83 1.53
Equity/Assets greater than 12%(15) 22.10 21.90 0.92 4.15 2.98 1.03 4.63 0.52 210.07 1.05
Actively Traded Companies(18) 8.96 8.52 1.21 13.86 6.86 1.16 13.27 0.72 146.17 1.52
Market Value Below $20 Million(5) 23.78 23.42 1.68 2.96 10.08 1.88 4.26 1.40 56.62 1.19
Holding Company Structure(41) 13.19 12.83 1.17 10.26 5.89 1.19 10.26 0.72 170.65 1.48
Assets Over $1 Billion(14) 9.24 8.53 1.09 12.79 5.57 1.13 13.07 0.81 158.28 1.46
Assets $500 Million-$1 Billion(16) 9.48 8.95 1.16 12.71 6.52 1.12 12.15 0.73 153.76 1.45
Assets $250-$500 Million(15) 11.14 10.98 1.00 10.39 5.18 0.98 10.14 0.68 195.95 1.66
Assets less than $250 Million(17) 17.55 17.41 1.26 8.01 6.55 1.30 8.01 0.85 164.22 1.09
Goodwill Companies(29) 9.34 8.52 0.94 11.24 5.50 0.96 11.16 0.90 138.50 1.46
Non-Goodwill Companies(33) 14.14 14.14 1.29 10.85 6.42 1.30 10.64 0.67 195.28 1.36
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(62) 16.55 178.81 19.54 186.19 17.53 0.49 1.70 29.54
NYSE Traded Companies(2) 21.32 220.01 16.78 246.23 19.12 0.58 1.09 22.49
AMEX Traded Companies(6) 14.57 152.07 20.84 181.79 15.44 0.61 2.12 34.16
NASDAQ Listed OTC Companies(54) 16.41 179.91 19.50 185.38 17.55 0.47 1.67 29.54
California Companies(2) 14.36 176.12 15.72 176.47 14.87 0.00 0.00 0.00
Mid-Atlantic Companies(15) 19.88 183.44 19.11 194.79 19.57 0.50 1.67 36.98
Mid-West Companies(2) 0.00 97.89 24.53 103.82 0.00 0.00 0.00 0.00
New England Companies(34) 14.54 187.91 17.14 195.59 15.55 0.53 1.85 28.56
North-West Companies(4) 20.07 190.62 21.99 195.62 20.83 0.31 1.52 28.50
South-East Companies(5) 22.29 124.14 33.83 124.14 24.92 0.68 1.97 40.74
Thrift Strategy(44) 17.12 171.79 20.10 178.50 18.15 0.53 1.80 32.94
Mortgage Banker Strategy(7) 17.29 197.18 19.68 203.43 17.86 0.43 1.53 22.70
Real Estate Strategy(6) 12.89 185.65 17.55 185.88 13.83 0.17 0.87 8.62
Diversified Strategy(5) 13.72 224.54 15.01 243.62 14.22 0.47 1.52 22.26
Companies Issuing Dividends(52) 17.49 179.82 20.00 188.14 18.51 0.56 1.94 34.46
Companies Without Dividends(10) 10.45 172.08 16.41 173.34 10.64 0.00 0.00 0.00
Equity/Assets less than 6%(5) 16.59 253.38 13.80 259.30 19.19 0.18 0.97 16.79
Equity/Assets 6-12%(42) 15.63 189.90 17.02 200.09 15.95 0.56 1.84 29.49
Equity/Assets greater than 12%(15) 21.90 129.01 27.86 130.55 22.91 0.40 1.53 34.81
Actively Traded Companies(18) 15.30 189.66 16.56 201.05 16.11 0.57 1.94 29.72
Market Value Below $20 Million(5) 3.06 117.69 27.04 119.18 17.66 0.18 0.99 18.71
Holding Company Structure(41) 16.81 173.28 21.13 182.64 17.72 0.51 1.77 30.27
Assets Over $1 Billion(14) 17.75 214.29 20.29 225.65 18.33 0.56 1.71 29.33
Assets $500 Million-$1 Billion(16) 15.35 180.67 16.57 196.51 16.43 0.54 1.78 27.76
Assets $250-$500 Million(15) 16.92 174.63 18.16 178.04 16.97 0.40 1.62 29.13
Assets less than $250 Million(17) 16.49 150.29 23.32 151.68 18.60 0.46 1.67 32.19
Goodwill Companies(29) 17.23 183.12 16.90 199.58 18.17 0.52 1.71 28.75
Non-Goodwill Companies(33) 15.90 175.10 21.92 175.10 16.94 0.46 1.69 30.29
</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> 47
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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(20) 11.79 11.61 0.52 4.52 1.74 0.79 7.08 0.52 131.13 0.72
BIF-Insured Thrifts(3) 10.59 10.59 0.84 8.63 3.09 0.79 7.86 1.78 94.70 1.42
NASDAQ Listed OTC Companies(23) 11.59 11.44 0.57 5.20 1.96 0.79 7.21 0.69 126.27 0.85
Florida Companies(3) 9.81 9.78 0.47 4.51 2.02 0.72 6.92 0.34 62.82 0.29
Mid-Atlantic Companies(11) 11.61 11.35 0.53 4.88 1.78 0.74 6.93 0.84 147.72 0.98
Mid-West Companies(7) 12.89 12.87 0.58 4.42 1.86 0.91 7.31 0.50 100.65 0.52
New England Companies(1) 8.48 8.47 1.13 13.74 4.18 0.83 10.18 0.76 146.25 1.66
Thrift Strategy(22) 11.77 11.62 0.54 4.70 1.83 0.79 7.04 0.68 124.84 0.80
Diversified Strategy(1) 8.48 8.47 1.13 13.74 4.18 0.83 10.18 0.76 146.25 1.66
Companies Issuing Dividends(22) 11.58 11.42 0.58 5.29 1.96 0.80 7.31 0.71 124.71 0.81
Companies Without Dividends(1) 11.73 11.73 0.43 3.71 2.07 0.65 5.56 0.45 148.08 1.37
Equity/Assets 6-12%(17) 9.97 9.77 0.51 5.23 1.92 0.72 7.41 0.78 90.89 0.95
Equity/Assets greater than 12%(6) 17.28 17.28 0.81 5.11 2.12 1.04 6.51 0.31 267.78 0.50
Actively Traded Companies(1) 9.42 8.40 0.58 6.17 1.85 0.91 9.77 0.68 83.02 1.06
Holding Company Structure(2) 10.58 10.07 0.83 7.80 3.08 0.94 9.11 0.68 83.02 0.87
Assets Over $1 Billion(5) 8.85 8.21 0.72 8.18 2.32 0.84 9.29 0.72 94.83 1.14
Assets $500 Million-$1 Billion(3) 9.81 9.78 0.47 4.51 2.02 0.72 6.92 0.34 62.82 0.29
Assets $250-$500 Million(5) 11.28 11.25 0.53 4.59 1.83 0.86 7.83 0.33 281.71 0.43
Assets less than $250 Million(10) 13.31 13.31 0.54 4.23 1.84 0.77 6.15 0.88 86.69 0.92
Goodwill Companies(8) 8.68 8.23 0.61 7.00 2.21 0.78 8.78 0.57 104.54 0.90
Non-Goodwill Companies(15) 13.05 13.05 0.55 4.30 1.84 0.80 6.43 0.77 140.76 0.82
MHC Institutions(23) 11.59 11.44 0.57 5.20 1.96 0.79 7.21 0.69 126.27 0.85
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 0.00 225.33 27.88 217.72 27.52 0.56 1.95 48.11
BIF-Insured Thrifts(3) 23.57 286.53 30.13 286.63 25.92 0.47 1.54 40.55
NASDAQ Listed OTC Companies(23) 23.57 236.80 28.26 231.50 26.72 0.55 1.88 45.59
Florida Companies(3) 0.00 217.19 21.39 217.97 0.00 0.90 3.03 0.00
Mid-Atlantic Companies(11) 23.23 236.50 29.47 224.54 25.92 0.39 1.28 37.06
Mid-West Companies(7) 0.00 231.60 29.07 232.02 27.52 0.68 2.56 70.59
New England Companies(1) 23.92 304.49 25.83 304.77 0.00 0.76 2.29 54.68
Thrift Strategy(22) 23.23 232.29 28.40 226.27 26.72 0.53 1.86 43.77
Diversified Strategy(1) 23.92 304.49 25.83 304.77 0.00 0.76 2.29 54.68
Companies Issuing Dividends(22) 23.57 240.66 28.68 235.26 26.72 0.58 2.00 54.70
Companies Without Dividends(1) 0.00 178.89 20.98 178.89 0.00 0.00 0.00 0.00
Equity/Assets 6-12%(17) 23.57 242.69 25.71 236.00 26.72 0.49 1.60 45.59
Equity/Assets greater than 12%(6) 0.00 219.15 37.17 219.15 0.00 0.74 2.88 0.00
Actively Traded Companies(1) 0.00 320.20 30.17 0.00 0.00 0.48 1.23 66.67
Holding Company Structure(2) 23.23 265.49 27.45 210.79 25.92 0.38 1.18 46.54
Assets Over $1 Billion(5) 23.92 312.34 30.60 304.77 0.00 0.55 1.42 58.84
Assets $500 Million-$1 Billion(3) 0.00 217.19 21.39 217.97 0.00 0.90 3.03 0.00
Assets $250-$500 Million(5) 0.00 245.71 27.53 246.41 27.52 0.62 2.04 70.59
Assets less than $250 Million(10) 23.23 221.41 28.98 221.41 25.92 0.44 1.78 13.21
Goodwill Companies(8) 23.92 268.68 26.65 252.82 27.52 0.60 1.77 61.78
Non-Goodwill Companies(15) 23.23 226.18 29.06 226.18 25.92 0.52 1.94 13.21
MHC Institutions(23) 23.57 236.80 28.26 231.50 26.72 0.55 1.88 45.59
</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> 48
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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 9.67 3.37 0.63 15.46 1.86 43.81 1.22
CSA Coast Savings Financial of CA 4.92 4.86 0.21 4.29 1.66 0.53 10.75 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.00 5.33 0.64 10.99 4.27 0.91 15.57 0.88 75.40 0.90
DME Dime Bancorp, Inc. of NY* 5.27 5.03 0.56 10.54 4.37 0.71 13.40 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 6.93 6.84 0.44 5.82 3.23 0.73 9.68 0.95 55.50 0.58
FED FirstFed Fin. Corp. of CA 4.83 4.77 0.29 6.20 3.14 0.53 11.35 1.20 164.50 2.50
GSB Glendale Fed. Bk, FSB of CA 5.53 4.92 0.26 4.72 2.26 0.61 11.06 1.36 70.96 1.30
GDW Golden West Fin. Corp. of CA 6.37 6.37 1.02 16.09 7.79 1.24 19.60 1.18 47.96 0.67
GPT GreenPoint Fin. Corp. of NY* 10.31 5.80 1.06 9.98 5.06 1.03 9.74 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 22.85 22.85 1.80 8.14 5.76 1.71 7.72 NA NA 0.61
NYB New York Bancorp, Inc. of NY 5.08 5.08 1.38 26.74 5.81 1.62 31.42 NA NA 0.92
WES Westcorp Inc. of Orange CA 9.05 9.02 0.88 9.12 5.94 0.43 4.52 0.76 121.54 1.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.43 17.43 0.50 3.67 2.07 0.50 3.67 0.52 190.96 1.35
ANE Alliance Bancorp of New Englan* 6.94 6.74 0.75 11.37 6.68 0.78 11.89 2.13 54.09 1.87
BKC American Bank of Waterbury CT* 8.28 7.95 1.28 15.40 7.05 1.09 13.18 1.77 48.58 1.48
BFD BostonFed Bancorp of MA 8.79 8.49 0.51 5.08 3.78 0.66 6.58 NA NA 0.76
CFX CFX Corp of NH* 7.44 6.97 0.93 11.47 2.40 1.12 13.77 0.42 179.69 1.10
CNY Carver Bancorp, Inc. of NY 8.35 8.01 -0.44 -4.95 -5.86 0.01 0.07 1.37 42.60 1.02
CBK Citizens First Fin.Corp. of IL 14.08 14.08 0.29 1.95 1.58 0.58 3.84 0.59 37.65 0.26
ESX Essex Bancorp of VA(8) 0.27 0.17 -0.03 -16.67 -0.90 0.03 16.67 2.63 42.63 1.34
FCB Falmouth Co-Op Bank of MA* 23.88 23.88 0.84 3.43 2.55 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.16 12.16 -0.20 -2.35 -1.06 0.47 5.61 0.39 259.57 1.16
GAF GA Financial Corp. of PA 15.17 15.01 0.99 5.25 4.24 1.27 6.70 0.24 63.36 0.41
KNK Kankakee Bancorp of IL 11.09 10.42 0.66 6.35 5.08 0.82 7.92 0.94 67.06 0.92
KYF Kentucky First Bancorp of KY 16.58 16.58 0.87 4.64 4.30 1.12 6.00 0.07 630.51 0.75
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.17 2.40 1.77 0.18 2.55 0.71 38.66 0.63
PDB Piedmont Bancorp of NC 16.63 16.63 -0.42 -1.94 -1.73 0.66 3.07 0.89 75.98 0.81
SSB Scotland Bancorp of NC 37.02 37.02 1.41 3.88 4.80 1.72 4.72 NA NA 0.50
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.16 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.70 0.50 2.84 NA NA 0.21
SSM Stone Street Bancorp of NC 28.85 28.85 1.43 4.18 3.95 1.71 5.02 0.27 187.50 0.62
TSH Teche Holding Company of LA 13.14 13.14 0.69 5.03 3.85 0.96 6.96 0.27 304.97 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.04 1.74 10.38 0.46 145.12 0.79
THR Three Rivers Fin. Corp. of MI 13.46 13.41 0.57 4.02 3.47 0.82 5.83 1.15 44.56 0.78
WSB Washington SB, FSB of MD 8.30 8.30 0.50 6.00 4.00 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 3.35 0.13 1.63 1.30 34.59 0.65
AFED AFSALA Bancorp, Inc. of NY 13.47 13.47 0.79 6.46 4.21 0.79 6.46 0.45 150.77 1.43
ALBK ALBANK Fin. Corp. of Albany NY 9.20 8.04 0.85 9.19 5.01 1.04 11.28 0.94 75.89 0.97
AMFC AMB Financial Corp. of IN 14.95 14.95 0.73 4.14 3.94 0.81 4.57 0.81 49.41 0.53
ASBP ASB Financial Corp. of OH 15.75 15.75 0.60 3.24 2.92 0.86 4.66 1.02 71.62 1.09
ABBK Abington Savings Bank of MA* 6.92 6.23 0.82 12.05 6.70 0.73 10.71 0.20 211.97 0.69
AABC Access Anytime Bancorp of NM 7.44 7.44 -0.50 -8.75 -5.29 -0.12 -2.14 1.60 29.31 0.92
AFBC Advance Fin. Bancorp of WV 15.43 15.43 0.56 4.60 2.91 0.85 6.94 0.58 60.53 0.43
AADV Advantage Bancorp of WI 9.21 8.62 0.40 4.49 2.31 0.89 9.94 0.44 128.03 1.01
AFCB Affiliated Comm BC, Inc of MA 9.78 9.72 0.96 9.75 5.22 1.09 11.16 0.34 218.65 1.18
ALBC Albion Banc Corp. of Albion NY 8.73 8.73 0.11 1.14 0.92 0.38 4.07 0.72 53.94 0.54
ABCL Allied Bancorp of IL 8.91 8.79 0.52 5.89 2.38 0.76 8.60 0.21 187.41 0.54
ATSB AmTrust Capital Corp. of IN 10.33 10.23 0.18 1.81 1.80 0.30 2.96 2.20 33.49 1.03
<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 29.69 288.66 12.03 338.70 18.58 0.88 1.45 43.14
CSA Coast Savings Financial of CA NM 248.90 12.25 252.15 24.12 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 23.44 242.20 14.54 273.04 16.54 0.28 0.59 13.73
DME Dime Bancorp, Inc. of NY* 22.90 234.67 12.38 246.23 18.01 0.16 0.65 14.95
DSL Downey Financial Corp. of CA NM 174.56 12.10 176.99 18.62 0.32 1.20 37.21
FED FirstFed Fin. Corp. of CA NM 188.19 9.09 190.38 17.39 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA NM 196.96 10.89 221.52 18.92 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 12.84 197.27 12.57 197.27 10.54 0.44 0.51 6.53
GPT GreenPoint Fin. Corp. of NY* 19.74 205.34 21.17 NM 20.23 1.00 1.52 30.03
JSB JSB Financial, Inc. of NY 17.37 136.12 31.11 136.12 18.30 1.40 2.91 50.54
NYB New York Bancorp, Inc. of NY 17.22 NM 22.36 NM 14.66 0.60 1.74 30.00
WES Westcorp Inc. of Orange CA 16.84 147.40 13.34 147.86 NM 0.40 2.14 36.04
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 136.23 23.74 136.23 NM 0.36 1.58 NM
ANE Alliance Bancorp of New Englan* 14.97 156.79 10.88 161.36 14.33 0.20 1.20 18.02
BKC American Bank of Waterbury CT* 14.18 204.47 16.94 213.01 16.56 1.44 3.25 46.01
BFD BostonFed Bancorp of MA 26.44 135.84 11.94 140.56 20.42 0.28 1.36 35.90
CFX CFX Corp of NH* NM NM 32.25 NM NM 0.88 3.52 NM
CNY Carver Bancorp, Inc. of NY NM 84.53 7.06 88.13 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL NM 128.49 18.09 128.49 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 3.09 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 132.27 31.59 132.27 NM 0.20 0.98 38.46
FAB FirstFed America Bancorp of MA NM 139.34 16.95 139.34 NM 0.00 0.00 NM
GAF GA Financial Corp. of PA 23.59 132.24 20.07 133.64 18.50 0.48 2.54 60.00
KNK Kankakee Bancorp of IL 19.67 119.86 13.29 127.53 15.78 0.48 1.51 29.63
KYF Kentucky First Bancorp of KY 23.28 120.86 20.04 120.86 18.00 0.50 3.70 NM
MBB MSB Bancorp of Middletown NY* NM 130.59 9.65 266.09 NM 0.60 2.17 NM
PDB Piedmont Bancorp of NC NM 148.25 24.65 148.25 NM 0.40 3.64 NM
SSB Scotland Bancorp of NC 20.82 79.02 29.26 79.02 17.13 0.30 2.82 58.82
SZB SouthFirst Bancshares of AL NM 119.86 16.78 119.86 NM 0.50 2.60 NM
SRN Southern Banc Company of AL NM 118.31 20.12 119.54 NM 0.35 2.03 NM
SSM Stone Street Bancorp of NC 25.31 125.54 36.22 125.54 21.09 0.45 2.22 56.25
TSH Teche Holding Company of LA 25.96 130.39 17.14 130.39 18.75 0.50 2.47 64.10
FTF Texarkana Fst. Fin. Corp of AR 19.85 172.99 27.16 172.99 16.05 0.56 2.15 42.75
THR Three Rivers Fin. Corp. of MI 28.82 114.99 15.48 115.44 19.86 0.40 2.24 64.52
WSB Washington SB, FSB of MD 25.00 148.51 12.33 148.51 17.05 0.10 1.33 33.33
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 29.83 110.01 9.08 112.31 NM 0.40 1.13 33.61
AFED AFSALA Bancorp, Inc. of NY 23.78 132.29 17.82 132.29 23.78 0.16 0.82 19.51
ALBK ALBANK Fin. Corp. of Albany NY 19.98 177.67 16.35 203.24 16.28 0.72 1.57 31.44
AMFC AMB Financial Corp. of IN 25.38 114.65 17.14 114.65 22.95 0.28 1.67 42.42
ASBP ASB Financial Corp. of OH NM 129.93 20.46 129.93 23.88 0.40 2.99 NM
ABBK Abington Savings Bank of MA* 14.93 172.18 11.92 191.17 16.80 0.40 1.24 18.52
AABC Access Anytime Bancorp of NM NM 130.17 9.69 130.17 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 117.61 18.14 117.61 22.73 0.32 1.83 62.75
AADV Advantage Bancorp of WI NM 189.33 17.45 202.50 19.57 0.40 0.73 31.50
AFCB Affiliated Comm BC, Inc of MA 19.16 177.34 17.34 178.32 16.74 0.60 2.06 39.47
ALBC Albion Banc Corp. of Albion NY NM 122.08 10.66 122.08 NM 0.32 1.09 NM
ABCL Allied Bancorp of IL NM 164.23 14.63 166.36 28.79 0.44 1.72 72.13
ATSB AmTrust Capital Corp. of IN NM 97.74 10.10 98.72 NM 0.20 1.44 NM
</TABLE>
<PAGE> 49
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.26 -4.06 -0.62 -4.45 0.63 124.04 1.40
ASBI Ameriana Bancorp of IN 10.96 10.95 0.61 5.52 3.80 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 12.74 1.83 23.69 0.40 81.55 0.49
ANBK American Nat'l Bancorp of MD(8) 8.97 8.97 0.28 2.90 1.84 0.65 6.74 0.74 102.82 1.17
ABCW Anchor Bancorp Wisconsin of WI 6.22 6.11 0.75 12.07 5.37 0.96 15.50 NA NA 1.44
ANDB Andover Bancorp, Inc. of MA* 8.06 8.06 1.10 13.91 7.19 1.13 14.35 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.82 6.57 0.56 7.09 3.82 0.79 10.12 0.47 38.97 0.43
AVND Avondale Fin. Corp. of IL 9.12 9.12 -0.49 -5.19 -4.93 -1.51 -16.06 1.11 86.78 1.65
BKCT Bancorp Connecticut of CT* 10.25 10.25 1.32 12.65 5.62 1.24 11.88 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 5.06 5.06 -0.26 -5.31 -3.76 0.02 0.46 2.88 58.99 2.11
BWFC Bank West Fin. Corp. of MI 14.52 14.52 0.64 3.91 2.59 0.57 3.47 0.28 51.72 0.20
BANC BankAtlantic Bancorp of FL 5.62 4.62 0.89 14.85 7.03 0.65 10.91 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.72 3.02 0.21 4.55 2.20 0.34 7.54 0.66 26.19 0.21
BVCC Bay View Capital Corp. of CA 6.34 5.32 0.39 6.35 3.35 0.63 10.37 NA NA 1.62
FSNJ Bayonne Banchsares of NJ 14.42 14.42 -0.35 -2.42 -1.94 -0.06 -0.40 1.22 43.59 1.36
BFSB Bedford Bancshares of VA 14.16 14.16 1.01 6.98 4.65 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 0.22 0.42 2.45 0.09 151.52 0.34
BSBC Branford SB of CT(8)* 9.28 9.28 1.16 12.75 5.82 1.16 12.75 1.42 141.26 3.06
BYFC Broadway Fin. Corp. of CA 10.01 10.01 -0.14 -1.23 -1.46 0.21 1.88 2.06 39.74 1.01
CBES CBES Bancorp of MO 17.58 17.58 0.91 5.54 4.28 1.11 6.80 1.14 37.68 0.48
CCFH CCF Holding Company of GA 11.68 11.68 0.05 0.30 0.25 0.07 0.42 0.18 325.68 0.72
CENF CENFED Financial Corp. of CA 5.20 5.19 0.51 10.02 4.68 0.73 14.29 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.62 7.62 0.85 10.94 4.40 1.07 13.82 0.17 325.61 0.61
CKFB CKF Bancorp of Danville KY 23.96 23.96 1.81 7.25 6.59 1.33 5.33 1.26 14.79 0.20
CNSB CNS Bancorp of MO 24.94 24.94 0.42 1.70 1.39 0.77 3.13 0.53 72.14 0.58
CSBF CSB Financial Group Inc of IL* 25.06 23.63 0.43 1.59 1.68 0.66 2.42 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 15.50 15.50 1.15 7.22 5.44 1.46 9.16 1.27 96.64 1.55
CAFI Camco Fin. Corp. of OH 9.57 8.82 0.82 9.11 4.83 0.92 10.18 0.49 54.74 0.32
CMRN Cameron Fin. Corp. of MO 21.69 21.69 1.07 4.43 4.05 1.33 5.51 0.73 111.82 0.97
CAPS Capital Savings Bancorp of MO 8.80 8.80 0.67 7.61 4.49 0.93 10.68 0.31 97.62 0.39
CFNC Carolina Fincorp of NC* 22.83 22.83 1.14 4.92 3.97 1.09 4.70 0.18 194.17 0.51
CASB Cascade SB of Everett WA(8) 6.13 6.13 0.35 5.65 3.62 0.52 8.53 0.41 191.64 0.94
CATB Catskill Fin. Corp. of NY* 25.04 25.04 1.43 5.21 4.76 1.45 5.27 0.47 140.85 1.48
CNIT Cenit Bancorp of Norfolk VA 7.24 6.65 0.87 12.05 5.77 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 6.26 0.90 8.90 0.85 97.49 1.21
CENB Century Bancshares of NC* 30.11 30.11 1.76 5.85 5.15 1.77 5.89 0.13 423.08 0.87
CBSB Charter Financial Inc. of IL 14.47 12.80 1.13 7.49 4.99 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 6.70 6.28 0.98 14.65 4.69 1.23 18.34 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.36 8.36 0.65 7.43 3.38 0.93 10.56 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.37 5.73 0.58 9.14 4.00 0.82 12.87 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.72 12.42 0.55 3.05 2.87 0.77 4.27 0.94 65.45 0.93
CMSB Cmnwealth Bancorp of PA 9.63 7.53 0.55 5.29 4.06 0.70 6.73 0.47 85.01 0.71
CBSA Coastal Bancorp of Houston TX 3.33 2.77 0.25 7.55 4.88 0.44 13.16 NA NA 0.54
CFCP Coastal Fin. Corp. of SC 6.17 6.17 0.94 15.22 3.88 1.03 16.67 0.21 436.85 1.15
CMSV Commty. Svgs, MHC of FL (48.5) 11.24 11.24 0.56 4.87 2.12 0.84 7.28 NA NA NA
CFTP Community Fed. Bancorp of MS 27.46 27.46 1.33 4.15 3.42 1.62 5.07 0.30 91.63 0.46
CFFC Community Fin. Corp. of VA 13.71 13.71 1.01 7.32 5.93 1.28 9.26 0.39 148.67 0.65
CFBC Community First Bnkg Co. of GA 15.40 15.19 0.56 3.65 2.89 0.57 3.69 2.02 26.10 0.83
CIBI Community Inv. Bancorp of OH 12.04 12.04 0.62 5.23 4.27 0.95 8.01 0.53 94.97 0.59
COOP Cooperative Bk.for Svgs. of NC 7.63 7.63 -0.80 -10.08 -5.63 0.19 2.46 0.21 109.36 0.29
CRZY Crazy Woman Creek Bncorp of WY 25.81 25.81 1.06 3.69 3.87 1.30 4.52 0.39 136.15 1.04
DNFC D&N Financial Corp. of MI 5.58 5.52 0.61 10.65 4.38 0.80 14.08 0.35 178.16 0.83
DCBI Delphos Citizens Bancorp of OH 28.40 28.40 1.46 6.46 4.23 1.46 6.46 NA NA NA
DIME Dime Community Bancorp of NY 14.52 12.51 0.97 6.00 4.53 1.04 6.43 NA NA 1.39
DIBK Dime Financial Corp. of CT* 7.96 7.70 1.90 23.26 9.49 1.91 23.34 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.86 11.86 -0.09 -0.74 -0.65 0.20 1.74 NA NA 0.73
<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)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* NM 110.22 14.26 110.22 NM 0.20 1.27 NM
ASBI Ameriana Bancorp of IN 26.33 146.40 16.04 146.51 18.81 0.64 3.24 NM
AFFFZ America First Fin. Fund of CA(8) 7.85 140.60 11.87 142.36 6.40 1.60 3.70 29.04
ANBK American Nat'l Bancorp of MD(8) NM 160.45 14.39 160.45 23.40 0.12 0.60 32.43
ABCW Anchor Bancorp Wisconsin of WI 18.63 218.05 13.57 222.25 14.51 0.32 1.11 20.65
ANDB Andover Bancorp, Inc. of MA* 13.91 182.58 14.71 182.58 13.49 0.68 1.90 26.46
ASFC Astoria Financial Corp. of NY 26.19 179.60 14.05 213.87 18.35 0.60 1.15 30.15
AVND Avondale Fin. Corp. of IL NM 108.83 9.93 108.83 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 17.79 221.61 22.71 221.61 18.94 1.00 2.61 46.51
BPLS Bank Plus Corp. of CA NM 132.15 6.69 132.29 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI NM 159.04 23.09 159.04 NM 0.32 1.56 60.38
BANC BankAtlantic Bancorp of FL 14.22 202.32 11.37 246.29 19.36 0.13 0.93 13.27
BKUNA BankUnited SA of FL NM 173.78 6.47 214.47 27.48 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 29.82 190.63 12.08 227.15 18.25 0.32 1.06 31.68
FSNJ Bayonne Banchsares of NJ NM 124.82 18.00 124.82 NM 0.17 1.37 NM
BFSB Bedford Bancshares of VA 21.49 145.83 20.66 145.83 16.78 0.56 2.29 49.12
BFFC Big Foot Fin. Corp. of IL NM 126.36 21.45 126.36 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 17.19 208.33 19.34 208.33 17.19 0.08 1.45 25.00
BYFC Broadway Fin. Corp. of CA NM 88.74 8.88 88.74 NM 0.20 1.54 NM
CBES CBES Bancorp of MO 23.36 113.15 19.90 113.15 19.05 0.40 2.04 47.62
CCFH CCF Holding Company of GA NM 136.63 15.96 136.63 NM 0.55 2.80 NM
CENF CENFED Financial Corp. of CA 21.38 202.74 10.55 203.05 14.99 0.36 0.89 18.95
CFSB CFSB Bancorp of Lansing MI 22.72 245.62 18.72 245.62 17.99 0.68 2.19 49.64
CKFB CKF Bancorp of Danville KY 15.17 112.70 27.00 112.70 20.64 0.50 2.82 42.74
CNSB CNS Bancorp of MO NM 121.29 30.25 121.29 NM 0.24 1.33 NM
CSBF CSB Financial Group Inc of IL* NM 97.89 24.53 103.82 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 18.38 137.14 21.26 137.14 14.49 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 20.72 157.75 15.09 171.00 18.55 0.52 2.26 46.85
CMRN Cameron Fin. Corp. of MO 24.68 112.05 24.30 112.05 19.85 0.28 1.45 35.90
CAPS Capital Savings Bancorp of MO 22.26 161.79 14.24 161.79 15.87 0.24 1.32 29.27
CFNC Carolina Fincorp of NC* 25.18 124.51 28.42 124.51 26.34 0.24 1.40 35.29
CASB Cascade SB of Everett WA(8) 27.66 148.06 9.08 148.06 18.31 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 21.02 118.50 29.67 118.50 20.78 0.28 1.57 32.94
CNIT Cenit Bancorp of Norfolk VA 17.33 208.87 15.12 227.43 18.90 1.00 1.54 26.67
CEBK Central Co-Op. Bank of MA* 15.97 134.74 14.08 151.32 15.75 0.32 1.39 22.22
CENB Century Bancshares of NC* 19.40 112.83 33.97 112.83 19.27 2.00 2.38 46.19
CBSB Charter Financial Inc. of IL 20.06 153.61 22.22 173.62 14.33 0.32 1.52 30.48
COFI Charter One Financial of OH 21.31 300.76 20.16 321.14 17.03 1.00 1.69 35.97
CVAL Chester Valley Bancorp of PA 29.55 210.36 17.58 210.36 20.80 0.42 1.62 47.73
CTZN CitFed Bancorp of Dayton OH 25.00 212.81 13.55 236.35 17.77 0.36 0.74 18.56
CLAS Classic Bancshares of KY NM 105.73 15.56 125.32 24.90 0.28 1.78 62.22
CMSB Cmnwealth Bancorp of PA 24.66 132.65 12.77 169.65 19.35 0.28 1.56 38.36
CBSA Coastal Bancorp of Houston TX 20.49 149.22 4.97 179.44 11.75 0.48 1.63 33.33
CFCP Coastal Fin. Corp. of SC 25.79 NM 22.62 NM 23.56 0.36 1.47 37.89
CMSV Commty. Svgs, MHC of FL (48.5) NM 223.06 25.07 223.06 NM 0.90 2.61 NM
CFTP Community Fed. Bancorp of MS 29.24 139.11 38.20 139.11 23.96 0.30 1.74 50.85
CFFC Community Fin. Corp. of VA 16.86 117.97 16.17 117.97 13.32 0.56 2.52 42.42
CFBC Community First Bnkg Co. of GA NM 126.34 19.45 128.08 NM 0.60 1.65 57.14
CIBI Community Inv. Bancorp of OH 23.44 123.66 14.89 123.66 15.31 0.32 2.13 50.00
COOP Cooperative Bk.for Svgs. of NC NM 177.38 13.54 177.38 NM 0.00 0.00 NM
CRZY Crazy Woman Creek Bncorp of WY 25.86 102.25 26.39 102.25 21.13 0.40 2.67 68.97
DNFC D&N Financial Corp. of MI 22.82 228.58 12.74 230.92 17.27 0.20 0.80 18.35
DCBI Delphos Citizens Bancorp of OH 23.67 114.29 32.46 114.29 23.67 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 22.06 142.99 20.76 165.92 20.59 0.24 1.11 24.49
DIBK Dime Financial Corp. of CT* 10.54 219.73 17.50 227.15 10.50 0.44 1.49 15.66
EGLB Eagle BancGroup of IL NM 107.25 12.71 107.25 NM 0.00 0.00 NM
</TABLE>
<PAGE> 50
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
EBSI Eagle Bancshares of Tucker GA 8.30 8.30 0.43 5.14 3.61 0.58 6.99 1.07 63.66 0.95
EGFC Eagle Financial Corp. of CT 6.87 5.36 0.08 1.09 0.38 0.44 6.19 0.53 87.77 0.86
ETFS East Texas Fin. Serv. of TX 18.16 18.16 0.31 1.65 1.71 0.63 3.40 0.17 141.97 0.50
EMLD Emerald Financial Corp of OH 7.58 7.46 0.73 9.44 4.70 0.90 11.66 0.24 116.43 0.36
EIRE Emerald Island Bancorp, MA(8)* 7.07 7.07 0.85 12.37 4.79 0.89 12.94 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.12 1.09 3.12 0.06 312.50 0.46
EFBI Enterprise Fed. Bancorp of OH 12.33 12.31 0.70 5.12 3.12 0.79 5.74 NA NA 0.28
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 4.94 0.74 14.50 0.49 36.72 0.26
FCBF FCB Fin. Corp. of Neenah WI 17.50 17.50 0.92 5.20 2.23 1.09 6.16 0.15 412.16 0.82
FFBS FFBS Bancorp of Columbus MS 19.23 19.23 1.16 5.96 4.31 1.47 7.53 0.37 118.76 0.62
FFDF FFD Financial Corp. of OH 24.40 24.40 1.68 6.68 5.09 0.94 3.75 0.07 421.88 0.48
FFLC FFLC Bancorp of Leesburg FL 13.48 13.48 0.70 4.58 3.01 1.01 6.60 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA 13.18 12.90 1.11 7.86 3.76 1.34 9.52 0.18 318.63 0.98
FFWC FFW Corporation of Wabash IN 9.52 8.58 0.84 8.39 6.05 1.05 10.48 0.16 203.56 0.50
FFYF FFY Financial Corp. of OH 13.72 13.72 0.90 5.86 4.37 1.27 8.31 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.56 6.44 0.69 10.76 5.47 1.02 15.79 1.06 48.50 0.92
FFHH FSF Financial Corp. of MN 11.35 11.35 0.66 5.25 4.16 0.84 6.65 0.15 NA NA
FOBC Fed One Bancorp of Wheeling WV 11.06 10.55 0.68 5.85 4.00 0.97 8.33 0.45 91.97 0.88
FBCI Fidelity Bancorp of Chicago IL 10.38 10.36 0.55 5.35 3.94 0.78 7.48 0.41 22.74 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.75 6.75 0.51 7.35 4.50 0.81 11.71 0.43 115.46 1.01
FFFL Fidelity FSB, MHC of FL (47.7) 8.38 8.31 0.38 4.15 1.91 0.60 6.56 0.34 62.82 0.29
FFED Fidelity Fed. Bancorp of IN 5.39 5.39 0.05 0.95 0.51 0.30 5.90 0.14 519.24 0.87
FFOH Fidelity Financial of OH 12.94 11.42 0.70 4.68 3.29 1.02 6.89 0.29 106.38 0.37
FIBC Financial Bancorp, Inc. of NY 9.36 9.32 0.56 5.77 3.87 1.00 10.23 NA NA NA
FBSI First Bancshares of MO 13.54 13.52 0.90 6.14 5.24 1.10 7.47 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 9.83 9.83 1.07 7.64 6.14 1.24 8.87 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 14.19 14.19 0.44 2.73 2.08 0.77 4.74 0.83 129.82 2.50
SKBO First Carnegie,MHC of PA(45.0) 16.45 16.45 0.52 4.42 1.76 0.52 4.42 NA NA 0.68
FSTC First Citizens Corp of GA 9.73 7.57 1.96 20.06 7.43 1.93 19.78 1.10 102.20 1.47
FCME First Coastal Corp. of ME* 9.23 9.23 4.21 NM 32.73 4.08 NM 2.01 85.72 2.52
FFBA First Colorado Bancorp of Co 12.89 12.72 0.86 6.07 3.96 0.85 5.99 0.20 141.52 0.39
FDEF First Defiance Fin.Corp. of OH 21.33 21.33 0.75 3.37 2.90 1.02 4.57 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 6.97 6.06 0.96 13.04 6.56 0.84 11.36 NA NA 1.43
FFES First FS&LA of E. Hartford CT 6.43 6.43 0.42 6.82 4.27 0.70 11.21 0.31 87.85 1.44
FFSX First FS&LA. MHC of IA (46.1) 8.30 8.22 0.42 5.14 2.08 0.74 9.00 0.22 185.09 0.53
BDJI First Fed. Bancorp. of MN 10.87 10.87 0.30 2.56 1.91 0.63 5.44 0.27 137.04 0.76
FFBH First Fed. Bancshares of AR 14.97 14.97 0.77 4.84 3.95 1.06 6.63 0.19 119.50 0.30
FTFC First Fed. Capital Corp. of WI 6.35 5.96 0.74 11.27 4.40 0.86 13.20 0.13 403.99 0.64
FFKY First Fed. Fin. Corp. of KY 13.69 12.89 1.31 9.50 5.29 1.55 11.24 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.55 7.54 0.73 9.58 4.49 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 3.89 0.84 13.65 1.66 41.99 0.84
FFBI First Financial Bancorp of IL 8.66 8.66 -0.38 -4.73 -4.42 0.42 5.23 0.41 142.00 0.91
FFHC First Financial Corp. of WI(8) 7.12 6.94 0.95 13.30 3.80 1.29 18.00 0.26 146.20 0.63
FFHS First Franklin Corp. of OH 9.02 8.96 0.19 2.14 1.57 0.65 7.20 0.47 90.77 0.64
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 3.94 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.66 6.55 0.89 13.61 7.05 1.16 17.76 0.64 114.23 1.39
FFSL First Independence Corp. of KS 10.43 10.43 0.43 3.84 3.19 0.69 6.12 0.87 69.37 0.91
FISB First Indiana Corp. of IN 9.56 9.44 0.83 8.86 4.88 1.01 10.83 NA NA 1.70
FKFS First Keystone Fin. Corp of PA 7.31 7.31 0.54 7.21 4.60 0.77 10.30 1.60 30.58 0.84
FLKY First Lancaster Bncshrs of KY 32.95 32.95 1.13 3.29 2.98 1.38 3.99 1.93 15.10 0.33
FLFC First Liberty Fin. Corp. of GA 7.37 6.65 0.88 12.11 5.56 0.72 9.91 0.81 110.00 1.29
CASH First Midwest Fin. Corp. of IA 11.39 10.09 0.74 6.46 4.94 0.94 8.21 0.85 75.48 0.93
FMBD First Mutual Bancorp of IL 12.85 9.73 0.10 0.57 0.52 0.31 1.84 NA NA NA
FMSB First Mutual SB of Bellevue WA* 6.83 6.83 1.02 15.30 5.74 1.00 15.00 0.06 NA 1.31
FNGB First Northern Cap. Corp of WI 11.27 11.27 0.64 5.50 3.20 0.91 7.88 0.08 574.86 0.53
FFPB First Palm Beach Bancorp of FL 6.57 6.41 -0.03 -0.42 -0.23 0.03 0.37 0.57 NA NA
<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)
- ---------------------------------------
EBSI Eagle Bancshares of Tucker GA 27.73 142.57 11.84 142.57 20.40 0.60 3.38 NM
EGFC Eagle Financial Corp. of CT NM 229.28 15.74 293.68 NM 1.00 1.99 NM
ETFS East Texas Fin. Serv. of TX NM 99.50 18.07 99.50 28.39 0.20 1.01 58.82
EMLD Emerald Financial Corp of OH 21.30 191.45 14.51 194.48 17.25 0.24 1.39 29.63
EIRE Emerald Island Bancorp, MA(8)* 20.89 237.65 16.81 237.65 19.97 0.28 0.88 18.42
EFBC Empire Federal Bancorp of MT NM 111.79 39.01 111.79 NM 0.30 1.82 NM
EFBI Enterprise Fed. Bancorp of OH NM 164.68 20.30 164.89 28.53 1.00 3.81 NM
EQSB Equitable FSB of Wheaton MD 20.23 172.48 8.69 172.48 12.68 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 230.64 40.36 230.64 NM 0.80 2.98 NM
FFBS FFBS Bancorp of Columbus MS 23.22 136.59 26.27 136.59 18.38 0.50 2.27 52.63
FFDF FFD Financial Corp. of OH 19.64 130.42 31.83 130.42 NM 0.30 1.56 30.61
FFLC FFLC Bancorp of Leesburg FL NM 156.53 21.10 156.53 23.05 0.48 1.35 44.86
FFFC FFVA Financial Corp. of VA 26.61 215.59 28.41 220.19 21.95 0.48 1.37 36.36
FFWC FFW Corporation of Wabash IN 16.53 129.61 12.34 143.88 13.24 0.72 2.30 38.10
FFYF FFY Financial Corp. of OH 22.87 147.94 20.29 147.94 16.12 0.80 2.71 62.02
FMCO FMS Financial Corp. of NJ 18.27 187.01 12.26 190.38 12.45 0.28 0.98 17.95
FFHH FSF Financial Corp. of MN 24.05 133.24 15.12 133.24 19.00 0.50 2.63 63.29
FOBC Fed One Bancorp of Wheeling WV 25.00 148.83 16.46 156.05 17.55 0.62 2.51 62.63
FBCI Fidelity Bancorp of Chicago IL 25.39 132.53 13.76 132.82 18.14 0.32 1.33 33.68
FSBI Fidelity Bancorp, Inc. of PA 22.22 151.61 10.24 151.61 13.95 0.36 1.50 33.33
FFFL Fidelity FSB, MHC of FL (47.7) NM 211.33 17.70 212.88 NM 0.90 3.45 NM
FFED Fidelity Fed. Bancorp of IN NM 187.50 10.10 187.50 NM 0.40 4.10 NM
FFOH Fidelity Financial of OH NM 127.36 16.48 144.32 20.67 0.28 1.81 54.90
FIBC Financial Bancorp, Inc. of NY 25.85 147.15 13.77 147.82 14.58 0.40 1.76 45.45
FBSI First Bancshares of MO 19.09 121.16 16.41 121.34 15.68 0.20 0.81 15.50
FBBC First Bell Bancorp of PA 16.27 160.02 15.72 160.02 14.02 0.40 2.32 37.74
FBER First Bergen Bancorp of NJ NM 135.49 19.23 135.49 27.65 0.20 1.10 52.63
SKBO First Carnegie,MHC of PA(45.0) NM 178.23 29.31 178.23 NM 0.30 1.60 NM
FSTC First Citizens Corp of GA 13.46 214.01 20.83 275.20 13.65 0.44 1.14 15.38
FCME First Coastal Corp. of ME* 3.06 132.85 12.26 132.85 3.15 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 25.24 168.84 21.77 171.16 25.56 0.48 2.41 60.76
FDEF First Defiance Fin.Corp. of OH NM 117.87 25.14 117.87 25.41 0.32 2.06 71.11
FESX First Essex Bancorp of MA* 15.24 174.35 12.16 200.80 17.50 0.48 2.39 36.36
FFES First FS&LA of E. Hartford CT 23.43 151.06 9.71 151.06 14.25 0.60 1.68 39.47
FFSX First FS&LA. MHC of IA (46.1) NM 238.70 19.80 240.81 27.52 0.48 1.47 70.59
BDJI First Fed. Bancorp. of MN NM 139.89 15.21 139.89 24.62 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 25.31 125.31 18.75 125.31 18.47 0.24 1.17 29.63
FTFC First Fed. Capital Corp. of WI 22.75 250.90 15.94 267.54 19.43 0.48 1.80 41.03
FFKY First Fed. Fin. Corp. of KY 18.91 175.12 23.97 185.90 15.99 0.56 2.57 48.70
FFBZ First Federal Bancorp of OH 22.30 203.11 15.32 203.32 15.95 0.24 1.22 27.27
FFCH First Fin. Holdings Inc. of SC 25.70 229.26 14.01 229.26 17.50 0.84 2.29 58.74
FFBI First Financial Bancorp of IL NM 109.19 9.45 109.19 20.48 0.00 0.00 NM
FFHC First Financial Corp. of WI(8) 26.33 339.35 24.18 348.32 19.46 0.60 1.52 40.00
FFHS First Franklin Corp. of OH NM 133.95 12.08 134.82 19.01 0.40 1.74 NM
FGHC First Georgia Hold. Corp of GA 25.41 193.11 15.87 210.62 NM 0.05 0.62 15.63
FSPG First Home Bancorp of NJ 14.18 180.93 12.05 183.94 10.86 0.40 1.72 24.39
FFSL First Independence Corp. of KS NM 127.16 13.26 127.16 19.67 0.25 1.69 53.19
FISB First Indiana Corp. of IN 20.51 174.29 16.67 176.47 16.78 0.48 2.00 41.03
FKFS First Keystone Fin. Corp of PA 21.76 153.85 11.24 153.85 15.22 0.20 0.68 14.81
FLKY First Lancaster Bncshrs of KY NM 107.07 35.28 107.07 27.63 0.50 3.17 NM
FLFC First Liberty Fin. Corp. of GA 17.99 193.09 14.23 214.16 21.99 0.40 1.68 30.30
CASH First Midwest Fin. Corp. of IA 20.25 129.64 14.77 146.32 15.94 0.36 1.78 36.00
FMBD First Mutual Bancorp of IL NM 125.82 16.16 166.09 NM 0.32 1.66 NM
FMSB First Mutual SB of Bellevue WA* 17.42 248.16 16.94 248.16 17.76 0.20 0.74 12.90
FNGB First Northern Cap. Corp of WI NM 169.13 19.06 169.13 21.83 0.32 2.33 72.73
FFPB First Palm Beach Bancorp of FL NM 177.50 11.66 181.95 NM 0.60 1.56 NM
</TABLE>
<PAGE> 51
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
FSLA First SB SLA MHC of NJ (47.5) 9.42 8.40 0.58 6.17 1.85 0.91 9.77 0.68 83.02 1.06
SOPN First SB, SSB, Moore Co. of NC 22.83 22.83 1.44 5.83 4.66 1.73 6.99 0.08 241.60 0.31
FWWB First Savings Bancorp of WA* 14.75 13.57 1.05 6.25 3.65 1.00 5.90 0.30 215.39 0.97
SHEN First Shenango Bancorp of PA 10.95 10.95 0.89 7.85 4.96 1.15 10.16 0.51 149.56 1.17
FSFC First So.east Fin. Corp. of SC(8) 10.06 10.06 0.70 6.85 3.31 1.05 10.34 0.24 164.77 0.50
FBNW FirstBank Corp of Clarkston WA 18.04 18.04 0.70 3.86 3.25 0.57 3.14 2.07 31.12 0.78
FFDB FirstFed Bancorp of AL 9.42 8.58 0.62 6.31 4.25 0.94 9.63 0.84 49.36 0.59
FSPT FirstSpartan Fin. Corp. of SC 26.32 26.32 0.95 3.62 2.80 1.11 4.20 0.69 56.19 0.49
FLAG Flag Financial Corp of GA 9.58 9.58 -0.03 -0.29 -0.18 0.15 1.65 4.27 47.62 2.91
FLGS Flagstar Bancorp, Inc of MI 5.46 5.46 0.00 0.00 0.00 0.00 0.00 3.41 8.26 0.32
FFIC Flushing Fin. Corp. of NY* 15.47 15.47 0.93 5.55 4.35 0.97 5.79 0.39 172.71 1.12
FBHC Fort Bend Holding Corp. of TX 6.03 5.62 0.19 3.18 1.92 0.45 7.40 0.37 141.08 1.03
FTSB Fort Thomas Fin. Corp. of KY 16.04 16.04 0.54 2.94 2.47 0.81 4.45 1.48 32.73 0.54
FKKY Frankfort First Bancorp of KY 16.92 16.92 -0.28 -1.14 -1.14 0.56 2.28 0.09 86.21 0.08
FTNB Fulton Bancorp of MO 25.11 25.11 0.89 4.03 2.53 1.07 4.83 0.81 112.62 1.03
GFSB GFS Bancorp of Grinnell IA 11.44 11.44 1.00 8.59 5.18 1.22 10.55 NA NA 0.78
GUPB GFSB Bancorp of Gallup NM 14.87 14.87 0.76 4.35 3.72 0.96 5.50 0.15 247.45 0.65
GSLA GS Financial Corp. of LA 45.63 45.63 1.08 3.63 1.99 1.08 3.63 0.11 293.18 0.84
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.47 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.04 27.04 0.83 3.23 2.76 1.15 4.47 0.90 14.14 0.38
GBCI Glacier Bancorp of MT 9.74 9.48 1.44 15.09 5.50 1.61 16.87 0.27 229.89 0.85
GFCO Glenway Financial Corp. of OH 9.49 9.36 0.43 4.51 3.46 0.72 7.57 0.31 91.62 0.34
GTPS Great American Bancorp of IL 21.43 21.43 0.26 1.10 1.05 0.33 1.38 0.26 126.83 0.42
GTFN Great Financial Corp. of KY(8) 9.23 8.84 0.75 7.86 3.48 0.72 7.51 3.11 16.32 0.74
GSBC Great Southern Bancorp of MO 8.53 8.53 1.38 14.76 5.65 1.56 16.69 1.91 114.73 2.59
GDVS Greater DV SB,MHC of PA (19.9)* 11.57 11.57 0.32 2.71 0.77 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 3.11 1.66 4.66 0.16 83.63 0.18
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.79 13.79 0.61 4.30 1.63 0.92 6.51 0.74 148.40 1.36
HCBB HCB Bancshares of AR 18.84 18.13 0.13 0.92 0.65 0.14 1.02 0.43 173.49 1.49
HEMT HF Bancorp of Hemet CA 8.23 6.76 -0.43 -5.13 -4.22 -1.75 -20.84 NA NA NA
HFFC HF Financial Corp. of SD 9.43 9.43 0.66 7.13 4.87 0.89 9.68 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.04 18.04 0.87 3.47 2.89 1.19 4.76 0.88 97.22 1.14
HMNF HMN Financial, Inc. of MN 14.43 14.43 0.71 4.79 3.84 0.88 5.96 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.24 7.24 0.48 6.83 4.59 0.61 8.62 0.12 366.09 0.67
HARB Harbor FSB, MHC of FL (46.6)(8) 8.39 8.11 0.95 11.53 3.20 1.23 14.85 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 12.90 12.90 0.46 3.52 2.90 0.71 5.46 0.05 379.63 0.28
HFSA Hardin Bancorp of Hardin MO 12.48 12.48 0.52 3.53 3.22 0.79 5.41 NA NA NA
HARL Harleysville SA of PA 6.53 6.53 0.75 11.71 4.99 1.03 16.04 0.03 NA 0.77
HFGI Harrington Fin. Group of IN 5.59 5.59 0.39 8.22 4.98 0.33 6.87 0.20 20.13 0.21
HARS Harris SB, MHC of PA (24.3) 8.01 7.01 0.49 5.78 1.37 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 3.44 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.87 1.56 0.58 4.07 0.11 117.00 0.26
HAVN Haven Bancorp of Woodhaven NY 5.95 5.93 0.56 9.29 4.78 0.83 13.78 0.76 85.80 1.12
HTHR Hawthorne Fin. Corp. of CA 4.60 4.60 0.24 5.33 3.60 0.51 11.51 NA NA 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 18.77 18.77 0.13 0.98 0.59 0.73 5.40 NA NA 1.22
HBNK Highland Federal Bank of CA 7.47 7.47 0.46 6.25 2.98 0.68 9.17 2.52 63.92 2.00
HIFS Hingham Inst. for Sav. of MA* 9.35 9.35 1.21 12.60 6.53 1.21 12.60 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 26.70 26.70 0.49 1.99 1.43 0.85 3.42 0.35 85.96 0.35
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 3.00 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 12.82 12.82 0.20 1.59 1.34 0.52 4.05 0.38 47.98 0.29
HCFC Home City Fin. Corp. of OH 20.41 20.41 0.91 5.48 3.94 1.19 7.18 0.59 106.97 0.79
HOMF Home Fed Bancorp of Seymour IN 8.48 8.22 1.05 12.65 5.57 1.22 14.72 0.46 117.33 0.62
HWEN Home Financial Bancorp of IN 16.93 16.93 0.64 3.78 3.30 0.80 4.76 1.76 30.84 0.67
HPBC Home Port Bancorp, Inc. of MA* 10.56 10.56 1.67 15.78 7.40 1.66 15.69 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.54 6.54 0.14 2.19 1.33 0.43 6.89 NA NA 0.61
HZFS Horizon Fin'l. Services of IA 9.79 9.79 0.36 3.35 2.92 0.57 5.36 NA NA NA
<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) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FSLA First SB SLA MHC of NJ (47.5) NM 320.20 30.17 NM NM 0.48 1.23 66.67
SOPN First SB, SSB, Moore Co. of NC 21.46 124.59 28.45 124.59 17.91 0.88 3.87 NM
FWWB First Savings Bancorp of WA* 27.38 172.47 25.44 187.46 29.01 0.28 1.15 31.46
SHEN First Shenango Bancorp of PA 20.15 157.25 17.22 157.25 15.57 0.60 1.75 35.29
FSFC First So.east Fin. Corp. of SC(8) NM 200.25 20.14 200.25 20.00 0.24 1.50 45.28
FBNW FirstBank Corp of Clarkston WA NM 118.71 21.41 118.71 NM 0.28 1.68 51.85
FFDB FirstFed Bancorp of AL 23.55 154.49 14.55 169.47 15.43 0.50 2.24 52.63
FSPT FirstSpartan Fin. Corp. of SC NM 129.39 34.06 129.39 NM 0.60 1.68 60.00
FLAG Flag Financial Corp of GA NM 160.44 15.37 160.44 NM 0.34 2.03 NM
FLGS Flagstar Bancorp, Inc of MI NM 321.25 17.55 321.25 NM 0.00 0.00 NM
FFIC Flushing Fin. Corp. of NY* 22.98 128.19 19.84 128.19 22.03 0.24 1.12 25.81
FBHC Fort Bend Holding Corp. of TX NM 165.66 9.99 177.91 22.38 0.20 1.04 54.05
FTSB Fort Thomas Fin. Corp. of KY NM 128.56 20.62 128.56 26.74 0.25 1.87 NM
FKKY Frankfort First Bancorp of KY NM 141.26 23.89 141.26 NM 0.36 3.74 NM
FTNB Fulton Bancorp of MO NM 136.96 34.39 136.96 NM 0.20 0.99 39.22
GFSB GFS Bancorp of Grinnell IA 19.32 159.47 18.24 159.47 15.74 0.26 1.53 29.55
GUPB GFSB Bancorp of Gallup NM 26.90 122.06 18.15 122.06 21.25 0.40 1.88 50.63
GSLA GS Financial Corp. of LA NM 104.65 47.75 104.65 NM 0.28 1.64 NM
GOSB GSB Financial Corp. of NY 28.85 108.85 29.46 108.85 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 117.64 31.81 117.64 26.21 0.40 2.12 NM
GBCI Glacier Bancorp of MT 18.18 246.31 24.00 253.16 16.26 0.48 2.40 43.64
GFCO Glenway Financial Corp. of OH 28.89 128.17 12.16 129.91 17.20 0.80 2.61 NM
GTPS Great American Bancorp of IL NM 109.83 23.54 109.83 NM 0.40 2.11 NM
GTFN Great Financial Corp. of KY(8) 28.72 222.95 20.59 232.79 NM 0.60 1.32 37.97
GSBC Great Southern Bancorp of MO 17.71 273.42 23.33 273.42 15.67 0.44 2.16 38.26
GDVS Greater DV SB,MHC of PA (19.9)* NM 344.33 39.83 344.33 NM 0.36 1.21 NM
GSFC Green Street Fin. Corp. of NC NM 122.20 44.31 122.20 26.47 0.44 2.44 NM
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 258.52 35.64 258.52 NM 0.44 1.93 NM
HCBB HCB Bancshares of AR NM 96.36 18.15 100.15 NM 0.00 0.00 0.00
HEMT HF Bancorp of Hemet CA NM 121.16 9.97 147.59 NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 20.53 142.17 13.41 142.17 15.12 0.42 1.66 34.15
HFNC HFNC Financial Corp. of NC NM 158.70 28.63 158.70 25.20 0.28 1.88 65.12
HMNF HMN Financial, Inc. of MN 26.06 126.16 18.20 126.16 20.94 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 21.80 141.05 10.21 141.05 17.26 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) NM 340.34 28.55 NM 24.29 1.40 2.18 68.29
HRBF Harbor Federal Bancorp of MD NM 121.36 15.65 121.36 22.22 0.48 2.40 NM
HFSA Hardin Bancorp of Hardin MO NM 114.72 14.31 114.72 20.22 0.48 2.67 NM
HARL Harleysville SA of PA 20.03 219.76 14.35 219.76 14.63 0.44 1.50 30.14
HFGI Harrington Fin. Group of IN 20.08 159.71 8.93 159.71 24.02 0.12 0.98 19.67
HARS Harris SB, MHC of PA (24.3) NM NM 31.77 NM NM 0.66 1.14 NM
HFFB Harrodsburg 1st Fin Bcrp of KY 29.09 110.42 29.74 110.42 21.92 0.40 2.50 72.73
HHFC Harvest Home Fin. Corp. of OH NM 129.96 16.24 129.96 29.50 0.44 2.98 NM
HAVN Haven Bancorp of Woodhaven NY 20.93 181.16 10.77 181.76 14.11 0.60 1.37 28.71
HTHR Hawthorne Fin. Corp. of CA 27.78 136.19 6.26 136.19 12.87 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 114.25 21.45 114.25 NM 0.24 1.41 NM
HBNK Highland Federal Bank of CA NM 196.77 14.71 196.77 22.87 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 15.32 182.46 17.07 182.46 15.32 0.48 1.68 25.81
HBEI Home Bancorp of Elgin IL NM 127.46 34.03 127.46 NM 0.40 2.29 NM
HBFW Home Bancorp of Fort Wayne IN NM 136.21 18.10 136.21 20.87 0.20 0.83 27.78
HBBI Home Building Bancorp of IN NM 116.80 14.97 116.80 29.22 0.30 1.39 NM
HCFC Home City Fin. Corp. of OH 25.41 103.33 21.09 103.33 19.38 0.32 2.06 52.46
HOMF Home Fed Bancorp of Seymour IN 17.95 212.61 18.03 219.30 15.43 0.50 1.38 24.75
HWEN Home Financial Bancorp of IN NM 106.92 18.10 106.92 24.07 0.20 1.22 37.04
HPBC Home Port Bancorp, Inc. of MA* 13.52 204.13 21.55 204.13 13.60 0.80 3.44 46.51
HMCI Homecorp, Inc. of Rockford IL(8) NM 159.45 10.43 159.45 23.82 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA NM 112.66 11.03 112.66 21.39 0.36 1.62 55.38
</TABLE>
<PAGE> 52
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
HRZB Horizon Financial Corp. of WA* 15.60 15.60 1.57 9.99 6.48 1.54 9.80 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.41 17.41 0.49 2.68 2.08 0.86 4.71 0.08 171.10 0.52
ISBF ISB Financial Corp. of LA 12.19 10.33 0.69 4.59 3.10 0.93 6.20 NA NA 0.80
ITLA Imperial Thrift & Loan of CA* 10.99 10.95 1.46 12.69 7.27 1.46 12.69 NA NA 1.45
IFSB Independence FSB of DC 6.52 5.72 0.14 2.19 2.10 0.33 4.98 2.02 9.82 0.32
INCB Indiana Comm. Bank, SB of IN 12.17 12.17 0.19 1.55 1.27 0.54 4.31 0.13 541.46 0.90
INBI Industrial Bancorp of OH 17.70 17.70 0.73 3.88 2.52 1.42 7.59 0.25 193.84 0.54
IWBK Interwest SB of Oak Harbor WA 6.78 6.63 0.87 12.94 4.70 1.18 17.56 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.71 5.71 1.21 20.44 6.72 0.95 16.06 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 4.93 1.34 8.46 0.78 67.63 0.70
JXSB Jcksnville SB,MHC of IL (45.6) 10.50 10.50 0.30 2.72 1.36 0.66 5.97 0.66 72.96 0.61
JSBA Jefferson Svgs Bancorp of MO 8.20 6.24 0.30 3.91 1.66 0.70 9.25 0.46 140.15 0.84
JOAC Joachim Bancorp of MO 28.17 28.17 0.47 1.59 1.55 0.77 2.62 0.20 109.86 0.32
KSAV KS Bancorp of Kenly NC 13.53 13.52 0.96 6.86 5.02 1.25 8.89 NA NA NA
KSBK KSB Bancorp of Kingfield ME(8)* 7.18 6.79 0.97 13.74 7.71 0.99 13.99 1.78 43.20 1.03
KFBI Klamath First Bancorp of OR 19.55 19.55 0.81 3.67 2.43 1.23 5.54 0.08 213.23 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.85 8.85 0.77 8.34 6.33 0.68 7.35 1.17 63.71 0.84
LVSB Lakeview SB of Paterson NJ 12.22 10.46 1.26 12.10 5.50 0.92 8.76 1.13 59.43 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.89 5.95 4.57 1.05 7.01 0.31 123.70 0.57
LARL Laurel Capital Group of PA 10.03 10.03 1.14 10.88 6.25 1.43 13.72 0.43 212.35 1.31
LSBX Lawrence Savings Bank of MA* 8.69 8.69 1.74 20.78 9.93 1.73 20.63 0.70 149.27 2.35
LFED Leeds FSB, MHC of MD (36.3) 16.29 16.29 0.84 5.20 2.12 1.18 7.27 0.03 609.09 0.31
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.33 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA(8) 10.55 10.25 0.71 6.60 3.98 0.87 8.03 0.39 166.43 1.48
LFBI Little Falls Bancorp of NJ 13.28 12.26 0.27 1.94 1.66 0.48 3.41 1.04 33.93 0.82
LOGN Logansport Fin. Corp. of IN 19.20 19.20 1.18 5.64 4.70 1.52 7.32 0.49 55.66 0.39
LONF London Financial Corp. of OH 19.66 19.66 0.66 3.18 2.36 1.00 4.83 0.80 61.11 0.63
LISB Long Island Bancorp, Inc of NY 8.99 8.90 0.62 6.60 3.19 0.71 7.65 0.92 62.10 0.92
MAFB MAF Bancorp of IL 7.78 6.80 0.88 11.30 5.74 1.16 14.97 0.42 128.75 0.69
MBLF MBLA Financial Corp. of MO 12.15 12.15 0.67 5.10 4.31 0.85 6.52 0.25 109.19 0.50
MFBC MFB Corp. of Mishawaka IN 13.65 13.65 0.57 3.67 3.47 0.86 5.53 NA NA 0.18
MLBC ML Bancorp of Villanova PA(8) 6.93 6.81 0.74 10.25 4.51 0.67 9.28 0.46 163.34 1.71
MSBF MSB Financial Corp. of MI 16.99 16.99 1.19 6.43 3.69 1.47 7.91 0.66 61.34 0.44
MGNL Magna Bancorp of MS(8) 10.22 9.95 1.39 14.23 4.29 1.53 15.70 2.92 26.42 1.11
MARN Marion Capital Holdings of IN 22.55 22.55 1.39 6.09 5.21 1.67 7.28 0.81 144.01 1.35
MRKF Market Fin. Corp. of OH 34.99 34.99 0.84 3.14 2.13 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 1.76 0.73 4.66 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.38 8.28 0.62 7.43 4.67 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.64 10.64 1.10 10.79 6.45 1.04 10.24 0.16 155.13 0.84
MFLR Mayflower Co-Op. Bank of MA* 9.68 9.52 1.03 10.64 5.91 0.97 10.03 0.96 92.14 1.52
MECH Mechanics SB of Hartford CT* 10.23 10.23 1.92 19.46 11.27 1.92 19.46 0.91 NA NA
MDBK Medford Bank of Medford, MA* 8.99 8.38 1.08 12.07 6.81 1.01 11.29 0.27 219.01 1.12
MERI Meritrust FSB of Thibodaux LA 8.20 8.20 0.67 8.71 4.17 1.05 13.56 0.39 70.30 0.52
MWBX MetroWest Bank of MA* 7.44 7.44 1.38 18.37 6.21 1.38 18.37 NA NA 1.55
MCBS Mid Continent Bancshares of KS(8) 9.39 9.39 1.02 9.79 4.78 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.34 9.34 1.00 10.76 6.64 1.40 15.15 0.02 NA 0.45
MCBN Mid-Coast Bancorp of ME 8.60 8.60 0.43 4.92 3.78 0.67 7.71 0.64 82.14 0.64
MWBI Midwest Bancshares, Inc. of IA 6.91 6.91 0.45 6.61 3.78 0.75 10.98 0.81 59.23 0.79
MWFD Midwest Fed. Fin. Corp of WI 8.81 8.50 1.43 16.39 6.88 1.09 12.55 0.12 658.13 1.05
MFFC Milton Fed. Fin. Corp. of OH 13.12 13.12 0.49 3.07 2.58 0.68 4.25 0.32 86.42 0.46
MIVI Miss. View Hold. Co. of MN 18.87 18.87 0.69 3.74 3.37 1.03 5.57 0.33 370.39 1.91
MBSP Mitchell Bancorp of NC* 43.36 43.36 1.40 3.24 2.91 1.64 3.81 2.03 26.19 0.62
MBBC Monterey Bay Bancorp of CA 11.33 10.45 0.25 2.04 1.51 0.47 3.87 0.33 111.47 0.60
MONT Montgomery Fin. Corp. of IN 18.74 18.74 0.60 4.17 2.82 0.60 4.17 0.59 29.46 0.21
MSBK Mutual SB, FSB of Bay City MI 6.07 6.07 0.11 1.93 1.38 0.04 0.75 0.05 650.66 0.64
NHTB NH Thrift Bancshares of NH 7.65 6.52 0.39 5.25 2.57 0.58 7.77 0.70 125.20 1.05
<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)
- ---------------------------------------
HRZB Horizon Financial Corp. of WA* 15.42 151.24 23.60 151.24 15.71 0.44 2.67 41.12
IBSF IBS Financial Corp. of NJ NM 136.93 23.83 136.93 27.36 0.40 2.52 NM
ISBF ISB Financial Corp. of LA NM 150.00 18.28 176.88 23.91 0.50 2.01 64.94
ITLA Imperial Thrift & Loan of CA* 13.76 166.33 18.28 167.03 13.76 0.00 0.00 0.00
IFSB Independence FSB of DC NM 103.21 6.73 117.73 20.92 0.22 1.59 NM
INCB Indiana Comm. Bank, SB of IN NM 121.26 14.76 121.26 28.30 0.36 2.40 NM
INBI Industrial Bancorp of OH NM 153.88 27.24 153.88 20.28 0.56 3.07 NM
IWBK Interwest SB of Oak Harbor WA 21.29 251.13 17.02 256.62 15.69 0.64 1.65 35.16
IPSW Ipswich SB of Ipswich MA* 14.88 274.73 15.70 274.73 18.94 0.12 0.96 14.29
JXVL Jacksonville Bancorp of TX 20.28 134.69 20.09 134.69 15.47 0.50 2.74 55.56
JXSB Jcksnville SB,MHC of IL (45.6) NM 197.32 20.71 197.32 NM 0.40 1.51 NM
JSBA Jefferson Svgs Bancorp of MO NM 195.39 16.02 256.49 25.46 0.40 0.96 57.97
JOAC Joachim Bancorp of MO NM 109.10 30.73 109.10 NM 0.50 3.36 NM
KSAV KS Bancorp of Kenly NC 19.91 132.55 17.93 132.63 15.36 0.60 2.79 55.56
KSBK KSB Bancorp of Kingfield ME(8)* 12.96 165.48 11.88 175.00 12.73 0.08 0.57 7.41
KFBI Klamath First Bancorp of OR NM 159.30 31.14 159.30 27.25 0.32 1.41 58.18
LSBI LSB Fin. Corp. of Lafayette IN 15.81 129.45 11.46 129.45 17.95 0.34 1.42 22.52
LVSB Lakeview SB of Paterson NJ 18.19 177.75 21.72 207.58 25.12 0.13 0.53 9.70
LARK Landmark Bancshares of KS 21.90 134.66 18.57 134.66 18.61 0.40 1.62 35.40
LARL Laurel Capital Group of PA 15.99 174.81 17.53 174.81 12.68 0.52 2.02 32.30
LSBX Lawrence Savings Bank of MA* 10.07 188.43 16.37 188.43 10.14 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 237.40 38.67 237.40 NM 0.76 2.37 NM
LXMO Lexington B&L Fin. Corp. of MO 30.00 111.94 31.70 111.94 23.24 0.30 1.82 54.55
LIFB Life Bancorp of Norfolk VA(8) 25.12 159.16 16.79 163.78 20.63 0.48 1.89 47.52
LFBI Little Falls Bancorp of NJ NM 120.61 16.01 130.60 NM 0.20 1.14 68.97
LOGN Logansport Fin. Corp. of IN 21.28 124.41 23.89 124.41 16.41 0.40 2.54 54.05
LONF London Financial Corp. of OH NM 139.52 27.43 139.52 27.90 0.24 1.18 50.00
LISB Long Island Bancorp, Inc of NY NM 203.98 18.34 206.03 27.02 0.60 1.33 41.67
MAFB MAF Bancorp of IL 17.43 190.38 14.81 217.76 13.16 0.28 0.87 15.14
MBLF MBLA Financial Corp. of MO 23.20 117.15 14.23 117.15 18.13 0.40 1.55 36.04
MFBC MFB Corp. of Mishawaka IN 28.80 110.81 15.13 110.81 19.12 0.32 1.41 40.51
MLBC ML Bancorp of Villanova PA(8) 22.15 221.50 15.34 225.40 24.46 0.40 1.42 31.50
MSBF MSB Financial Corp. of MI 27.11 173.43 29.46 173.43 22.03 0.28 1.59 43.08
MGNL Magna Bancorp of MS(8) 23.33 313.12 32.02 321.76 21.14 0.60 1.90 44.44
MARN Marion Capital Holdings of IN 19.20 119.91 27.04 119.91 16.06 0.88 3.32 63.77
MRKF Market Fin. Corp. of OH NM 101.21 35.42 101.21 NM 0.28 1.87 NM
MFCX Marshalltown Fin. Corp. of IA(8) NM 119.89 18.88 119.89 26.25 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 21.41 154.17 12.92 156.14 14.82 0.84 1.82 38.89
MASB MassBank Corp. of Reading MA* 15.51 157.12 16.72 157.12 16.35 0.96 2.26 35.04
MFLR Mayflower Co-Op. Bank of MA* 16.91 171.91 16.64 174.85 17.94 0.68 2.89 48.92
MECH Mechanics SB of Hartford CT* 8.88 153.89 15.75 153.89 8.88 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 14.69 169.49 15.24 181.91 15.72 0.72 2.00 29.39
MERI Meritrust FSB of Thibodaux LA 23.99 197.15 16.18 197.15 15.40 0.70 1.47 35.18
MWBX MetroWest Bank of MA* 16.10 277.15 20.62 277.15 16.10 0.12 1.43 23.08
MCBS Mid Continent Bancshares of KS(8) 20.92 199.69 18.75 199.69 18.45 0.40 1.02 21.39
MIFC Mid Iowa Financial Corp. of IA 15.06 152.71 14.27 152.71 10.69 0.08 0.75 11.27
MCBN Mid-Coast Bancorp of ME 26.44 127.06 10.93 127.06 16.89 0.52 1.86 49.06
MWBI Midwest Bancshares, Inc. of IA 26.48 164.94 11.39 164.94 15.94 0.72 1.46 38.71
MWFD Midwest Fed. Fin. Corp of WI 14.53 231.94 20.44 240.52 18.98 0.34 1.31 18.99
MFFC Milton Fed. Fin. Corp. of OH NM 132.98 17.44 132.98 28.00 0.60 3.97 NM
MIVI Miss. View Hold. Co. of MN 29.66 108.83 20.54 108.83 19.89 0.16 0.91 27.12
MBSP Mitchell Bancorp of NC* NM 113.71 49.31 113.71 29.17 0.40 2.29 NM
MBBC Monterey Bay Bancorp of CA NM 133.40 15.12 144.74 NM 0.12 0.62 41.38
MONT Montgomery Fin. Corp. of IN NM 108.79 20.38 108.79 NM 0.22 1.73 61.11
MSBK Mutual SB, FSB of Bay City MI NM 135.98 8.26 135.98 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH NM 178.27 13.64 209.37 26.25 0.50 2.38 NM
</TABLE>
<PAGE> 53
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.25 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 9.82 9.82 0.83 8.14 5.23 0.80 7.78 1.36 128.18 3.26
NASB North American SB of MO 7.68 7.42 1.26 17.18 8.24 1.19 16.18 3.11 27.16 0.98
NBSI North Bancshares of Chicago IL 14.14 14.14 0.49 3.26 2.31 0.68 4.57 NA NA 0.27
FFFD North Central Bancshares of IA 22.67 22.67 1.64 6.41 5.63 1.90 7.41 0.22 449.68 1.15
NBN Northeast Bancorp of ME* 6.84 5.99 0.58 8.14 4.66 0.56 7.84 1.11 86.32 1.22
NEIB Northeast Indiana Bncrp of IN 15.19 15.19 1.04 6.33 4.84 1.22 7.42 NA NA 0.67
NWEQ Northwest Equity Corp. of WI 11.45 11.45 0.78 6.47 5.03 0.98 8.16 1.26 38.04 0.59
NWSB Northwest SB, MHC of PA (30.7) 9.49 8.94 0.69 7.05 1.87 0.98 9.96 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.53 6.91 1.11 14.29 NA NA 1.54
NSSB Norwich Financial Corp. of CT* 11.17 10.08 1.09 10.11 4.88 1.03 9.54 1.20 158.13 2.71
NTMG Nutmeg FS&LA of CT 5.56 5.56 0.26 4.60 2.78 0.35 6.28 1.19 40.69 0.55
OHSL OHSL Financial Corp. of OH 11.03 11.03 0.61 5.29 4.13 0.85 7.42 NA NA NA
OCFC Ocean Fin. Corp. of NJ 16.25 16.25 0.03 0.16 0.11 0.98 5.97 0.55 79.68 0.87
OCN Ocwen Financial Corp. of FL 8.75 8.36 2.81 33.62 4.23 1.70 20.31 NA NA 1.13
OTFC Oregon Trail Fin. Corp of OR 24.02 24.02 1.07 4.44 3.64 1.07 4.44 0.10 257.62 0.41
PBHC OswegoCity SB, MHC of NY (46.)* 11.73 11.73 1.07 9.44 4.31 0.96 8.46 NA NA 0.67
OFCP Ottawa Financial Corp. of MI 8.73 7.00 0.48 5.23 2.80 0.78 8.44 0.35 106.11 0.43
PFFB PFF Bancorp of Pomona CA 10.32 10.21 0.16 1.41 1.14 0.46 4.11 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 38.70 38.70 1.94 4.74 4.10 1.96 4.81 0.79 28.66 0.51
PVFC PVF Capital Corp. of OH 7.04 7.04 1.04 15.23 7.15 1.33 19.49 1.24 57.99 0.78
PCCI Pacific Crest Capital of CA* 7.08 7.08 1.04 13.28 6.68 0.97 12.44 1.06 88.91 1.68
PALM Palfed, Inc. of Aiken SC(8) 8.24 8.24 0.10 1.29 0.53 0.61 7.46 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.74 12.64 0.90 6.37 4.94 1.24 8.78 2.39 28.43 1.21
PFED Park Bancorp of Chicago IL 22.53 22.53 0.87 4.19 3.54 1.21 5.81 0.25 115.74 0.73
PVSA Parkvale Financial Corp of PA 7.58 7.53 0.74 9.79 4.81 1.09 14.44 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 25.73 25.73 0.98 3.54 3.35 1.29 4.65 1.22 27.98 1.35
PFSB PennFed Fin. Services of NJ 7.36 6.16 0.57 7.43 4.73 0.84 10.86 NA NA 0.28
PWBC PennFirst Bancorp of PA 8.08 7.55 0.46 6.31 3.53 0.67 9.12 0.65 93.15 1.49
PWBK Pennwood SB of PA* 17.45 17.45 0.70 4.05 3.00 1.12 6.54 0.98 57.43 1.03
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.41 6.03 0.47 8.57 0.82 91.19 1.57
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.12 7.33 4.03 1.47 9.59 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 8.48 8.47 1.13 13.74 4.18 0.83 10.18 0.76 146.25 1.66
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 16.89 15.48 1.34 7.53 2.46 1.14 6.39 NA NA NA
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.93 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.72 6.51 1.28 15.68 5.86 1.29 15.88 NA NA 1.55
PSFC Peoples Sidney Fin. Corp of OH 24.92 24.92 0.61 4.54 1.83 0.92 6.81 0.84 45.79 0.44
PERM Permanent Bancorp of IN 9.16 9.03 0.34 3.64 2.88 0.62 6.57 1.09 45.43 0.99
PMFI Perpetual Midwest Fin. of IA 8.53 8.53 0.12 1.37 1.03 0.29 3.35 NA NA 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.82 11.82 0.78 6.37 2.29 1.05 8.60 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 4.19 1.07 5.70 0.03 104.17 0.19
PHFC Pittsburgh Home Fin. of PA 10.92 10.80 0.62 4.71 3.68 0.79 6.00 1.60 32.18 0.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.36 6.36 0.60 9.75 3.81 0.84 13.54 0.15 308.72 1.12
PTRS Potters Financial Corp of OH 8.83 8.83 0.48 5.37 4.32 0.85 9.54 0.69 252.21 2.78
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.37 8.37 0.35 4.21 2.40 0.54 6.49 NA NA 1.34
PHSB Ppls Home SB, MHC of PA (45.0) 11.73 11.73 0.43 3.71 2.07 0.65 5.56 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.13 11.13 0.37 2.84 2.58 0.65 5.01 0.33 82.34 0.40
PETE Primary Bank of NH(8)* 6.93 6.92 0.61 9.35 4.33 0.73 11.09 0.82 75.47 1.08
PFNC Progress Financial Corp. of PA 5.26 4.65 0.54 10.32 3.44 0.65 12.30 NA NA 1.12
PSBK Progressive Bank, Inc. of NY* 8.55 7.64 0.99 11.99 6.74 0.98 11.83 NA NA 1.65
PROV Provident Fin. Holdings of CA 13.88 13.88 0.32 2.25 2.04 0.28 1.97 NA NA 0.98
PULB Pulaski SB, MHC of MO (29.8) 13.05 13.05 0.80 6.20 2.32 1.06 8.20 0.64 41.41 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.90 11.90 0.25 2.97 1.14 0.61 7.21 0.65 71.47 0.81
PULS Pulse Bancorp of S. River NJ 8.05 8.05 0.72 9.19 4.76 1.08 13.82 NA NA 1.82
QCFB QCF Bancorp of Virginia MN 17.50 17.50 1.34 7.33 4.95 1.34 7.33 0.17 499.62 2.10
QCBC Quaker City Bancorp of CA 8.76 8.76 0.37 4.10 3.00 0.61 6.76 1.35 67.38 1.15
<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)
- ---------------------------------------
NSLB NS&L Bancorp of Neosho MO NM 110.47 21.61 110.47 28.52 0.50 2.74 NM
NMSB Newmil Bancorp. of CT* 19.12 157.19 15.43 157.19 20.00 0.32 2.46 47.06
NASB North American SB of MO 12.13 196.10 15.05 202.90 12.89 0.80 1.61 19.51
NBSI North Bancshares of Chicago IL NM 147.90 20.92 147.90 NM 0.48 1.85 NM
FFFD North Central Bancshares of IA 17.76 122.35 27.73 122.35 15.36 0.25 1.38 24.51
NBN Northeast Bancorp of ME* 21.47 168.23 11.50 192.03 22.28 0.32 1.35 29.09
NEIB Northeast Indiana Bncrp of IN 20.66 133.31 20.25 133.31 17.61 0.34 1.68 34.69
NWEQ Northwest Equity Corp. of WI 19.89 132.38 15.15 132.38 15.77 0.52 2.97 59.09
NWSB Northwest SB, MHC of PA (30.7) NM NM 34.65 NM NM 0.32 1.03 55.17
NSSY Norwalk Savings Society of CT* 14.46 169.57 13.66 175.88 12.68 0.40 1.14 16.53
NSSB Norwich Financial Corp. of CT* 20.51 198.77 22.20 220.11 21.73 0.56 1.92 39.44
NTMG Nutmeg FS&LA of CT NM 153.76 8.55 153.76 26.38 0.20 1.68 60.61
OHSL OHSL Financial Corp. of OH 24.21 127.86 14.10 127.86 17.27 0.88 3.24 NM
OCFC Ocean Fin. Corp. of NJ NM 138.03 22.43 138.03 25.34 0.80 2.12 NM
OCN Ocwen Financial Corp. of FL 23.62 NM 60.25 NM NM 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 27.44 121.82 29.26 121.82 27.44 0.00 0.00 0.00
PBHC OswegoCity SB, MHC of NY (46.)* 23.23 210.79 24.72 210.79 25.92 0.28 1.14 26.42
OFCP Ottawa Financial Corp. of MI NM 190.39 16.62 237.36 22.11 0.36 1.35 48.00
PFFB PFF Bancorp of Pomona CA NM 127.69 13.18 129.05 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 24.37 116.37 45.04 116.37 24.03 0.48 2.81 68.57
PVFC PVF Capital Corp. of OH 13.99 194.55 13.70 194.55 10.93 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 14.97 185.91 13.16 185.91 15.98 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 239.36 19.73 239.36 NM 0.12 0.48 NM
PBCI Pamrapo Bancorp, Inc. of NJ 20.26 141.40 18.01 142.51 14.69 1.00 4.26 NM
PFED Park Bancorp of Chicago IL 28.23 107.56 24.23 107.56 20.35 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 20.80 193.61 14.68 194.94 14.11 0.52 1.82 37.96
PEEK Peekskill Fin. Corp. of NY 29.82 115.57 29.73 115.57 22.67 0.36 2.12 63.16
PFSB PennFed Fin. Services of NJ 21.15 149.98 11.04 179.31 14.47 0.28 0.93 19.58
PWBC PennFirst Bancorp of PA 28.37 143.65 11.61 153.65 19.64 0.36 2.01 57.14
PWBK Pennwood SB of PA* NM 126.33 22.05 126.33 20.65 0.32 1.68 56.14
PBKB People's SB of Brockton MA* 16.59 224.88 12.61 234.76 27.90 0.44 2.29 37.93
PFDC Peoples Bancorp of Auburn IN 24.82 179.41 27.28 179.41 18.96 0.64 1.86 46.04
PBCT Peoples Bank, MHC of CT (40.1)* 23.92 304.49 25.83 304.77 NM 0.76 2.29 54.68
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM 296.86 50.13 323.77 NM 0.35 1.00 40.70
PFFC Peoples Fin. Corp. of OH 25.47 85.55 23.27 85.55 25.47 0.50 3.70 NM
PHBK Peoples Heritage Fin Grp of ME* 17.07 255.38 19.71 303.02 16.86 0.84 2.09 35.74
PSFC Peoples Sidney Fin. Corp of OH NM 121.53 30.29 121.53 NM 0.28 1.60 NM
PERM Permanent Bancorp of IN NM 126.65 11.60 128.53 19.23 0.40 1.60 55.56
PMFI Perpetual Midwest Fin. of IA NM 134.05 11.43 134.05 NM 0.30 1.24 NM
PERT Perpetual of SC, MHC (46.8)(8) NM 253.35 29.96 253.35 NM 1.40 2.75 NM
PCBC Perry Co. Fin. Corp. of MO 23.89 114.36 21.95 114.36 20.67 0.40 1.86 44.44
PHFC Pittsburgh Home Fin. of PA 27.17 131.95 14.41 133.36 21.31 0.24 1.28 34.78
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 26.26 247.29 15.73 247.29 18.91 0.90 2.47 64.75
PTRS Potters Financial Corp of OH 23.16 122.30 10.80 122.30 13.04 0.40 1.49 34.48
PKPS Poughkeepsie Fin. Corp. of NY(8) NM 170.94 14.31 170.94 27.03 0.10 1.00 41.67
PHSB Ppls Home SB, MHC of PA (45.0) NM 178.89 20.98 178.89 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA NM 110.54 12.30 110.54 21.99 0.12 0.66 25.53
PETE Primary Bank of NH(8)* 23.08 199.72 13.85 200.00 19.47 0.00 0.00 0.00
PFNC Progress Financial Corp. of PA 29.08 275.41 14.48 311.75 24.39 0.12 0.79 23.08
PSBK Progressive Bank, Inc. of NY* 14.85 173.20 14.81 193.95 15.04 0.68 2.00 29.69
PROV Provident Fin. Holdings of CA NM 110.70 15.37 110.70 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 261.53 34.12 261.53 NM 1.10 3.75 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 181.37 21.59 181.37 NM 0.30 1.62 NM
PULS Pulse Bancorp of S. River NJ 21.01 183.96 14.81 183.96 13.97 0.70 2.80 58.82
QCFB QCF Bancorp of Virginia MN 20.21 148.21 25.93 148.21 20.21 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA NM 133.07 11.66 133.16 20.20 0.00 0.00 0.00
</TABLE>
<PAGE> 54
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
QCSB Queens County Bancorp of NY* 11.85 11.85 1.60 10.80 3.97 1.63 10.95 0.69 88.97 0.69
RARB Raritan Bancorp. of Raritan NJ* 7.93 7.80 0.96 12.55 5.17 1.02 13.33 0.29 297.45 1.29
REDF RedFed Bancorp of Redlands CA 8.46 8.42 0.25 3.25 1.59 0.65 8.38 1.81 NA NA
RELY Reliance Bancorp, Inc. of NY 8.23 5.93 0.58 7.07 3.89 0.87 10.49 NA NA 0.62
RELI Reliance Bancshares Inc of WI(8)* 48.82 48.82 0.86 1.78 1.88 0.92 1.89 NA NA 0.53
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.79 0.62 5.72 0.49 170.62 1.03
RVSBD Riverview Bancorp of WA 21.63 21.63 1.32 6.10 4.19 1.32 6.10 0.14 278.46 0.56
RSLN Roslyn Bancorp, Inc. of NY* 20.14 20.04 0.86 4.12 2.73 1.35 6.49 0.27 257.00 2.60
SCCB S. Carolina Comm. Bnshrs of SC 25.67 25.67 0.93 3.47 2.65 1.22 4.56 1.06 59.43 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.54 9.54 0.13 1.32 0.54 0.44 4.40 0.69 76.89 1.16
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.44 3.41 2.72 0.79 6.09 0.73 57.17 0.57
SGVB SGV Bancorp of W. Covina CA 7.31 7.19 0.20 2.37 1.70 0.47 5.74 0.88 34.89 0.44
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.56 0.37 2.96 1.44 35.26 0.75
SISB SIS Bancorp Inc of MA* 7.20 7.20 1.38 18.83 9.46 1.37 18.71 0.33 383.59 2.67
SWCB Sandwich Co-Op. Bank of MA* 7.95 7.61 0.95 11.67 6.16 0.97 11.87 NA NA 1.06
SFSL Security First Corp. of OH 9.43 9.26 1.07 11.49 4.82 1.34 14.36 0.28 273.91 0.85
SFNB Security First Netwrk Bk of GA(8) 33.11 32.57 -29.36 NM NM -30.07 NM NA NA 1.28
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.04 10.44 4.73 1.17 11.79 0.14 425.11 0.66
SOBI Sobieski Bancorp of S. Bend IN 15.12 15.12 0.30 1.83 1.78 0.59 3.55 0.17 145.99 0.33
SOSA Somerset Savings Bank of MA(8)* 6.34 6.34 0.81 13.81 4.82 0.78 13.26 5.91 24.16 1.87
SSFC South Street Fin. Corp. of NC* 25.26 25.26 0.92 4.51 2.48 1.17 5.71 0.27 65.44 0.39
SCBS Southern Commun. Bncshrs of AL 21.96 21.96 0.32 2.52 1.03 0.79 6.23 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 16.46 16.46 0.66 4.10 3.62 0.64 3.97 0.89 49.20 0.65
SWBI Southwest Bancshares of IL 11.00 11.00 0.74 6.89 4.22 1.03 9.54 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.02 3.02 0.45 11.21 2.15 0.69 17.24 NA NA 0.92
STFR St. Francis Cap. Corp. of WI 7.88 6.96 0.64 7.35 4.78 0.70 8.09 0.19 181.58 0.80
SPBC St. Paul Bancorp, Inc. of IL 8.60 8.58 0.71 8.16 3.87 1.03 11.80 0.34 222.51 1.10
SFFC StateFed Financial Corp. of IA 17.78 17.78 1.11 6.16 4.31 1.35 7.47 1.55 16.68 0.32
SFIN Statewide Fin. Corp. of NJ 9.73 9.71 0.54 5.46 3.71 0.91 9.26 0.43 95.58 0.83
STSA Sterling Financial Corp. of WA 4.10 3.57 0.10 2.51 1.00 0.32 7.89 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.88 3.64 0.56 8.56 NA NA 0.30
ROSE T R Financial Corp. of NY* 6.21 6.21 0.99 15.79 6.03 0.88 14.16 0.54 74.97 0.76
THRD TF Financial Corp. of PA 11.11 9.75 0.54 4.71 3.42 0.74 6.41 0.27 128.49 0.82
TPNZ Tappan Zee Fin., Inc. of NY 17.92 17.92 0.70 4.22 2.62 0.65 3.90 1.68 32.54 1.17
ESBK The Elmira SB FSB of Elmira NY* 6.30 6.04 0.36 5.66 3.96 0.35 5.51 0.66 96.75 0.85
TRIC Tri-County Bancorp of WY 15.32 15.32 0.80 5.16 4.14 1.02 6.55 NA NA NA
TWIN Twin City Bancorp of TN 12.86 12.86 0.53 4.10 3.03 0.76 5.88 0.16 88.17 0.20
UFRM United FS&LA of Rocky Mount NC 7.48 7.48 0.22 2.87 1.64 0.38 4.98 0.58 135.44 0.98
UBMT United Fin. Corp. of MT 22.65 22.65 1.09 4.70 3.92 1.34 5.80 NA NA 0.22
VABF Va. Beach Fed. Fin. Corp of VA 6.85 6.85 0.21 3.15 1.48 0.47 7.02 1.26 56.59 0.93
VFFC Virginia First Savings of VA(8) 7.74 7.49 0.64 8.04 3.65 0.55 6.94 2.30 47.12 1.19
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.25 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.20 5.16 1.31 23.75 8.34 1.32 23.91 1.27 134.99 2.68
WVFC WVS Financial Corp. of PA* 11.16 11.16 1.07 8.59 5.28 1.35 10.77 0.09 733.21 1.25
WRNB Warren Bancorp of Peabody MA* 10.36 10.36 2.14 22.19 10.05 1.81 18.76 NA NA 1.73
WFSL Washington FS&LA of Seattle WA 12.08 11.04 1.66 14.31 6.20 1.84 15.86 0.69 62.10 0.58
WAMU Washington Mutual Inc. of WA(8)* 5.00 4.75 0.35 6.80 0.82 0.74 14.46 NA NA 0.98
WYNE Wayne Bancorp of NJ 13.36 13.36 0.44 2.91 2.31 0.44 2.91 0.90 82.20 1.11
WAYN Wayne S&L Co. MHC of OH (47.8) 9.24 9.24 0.31 3.42 1.28 0.66 7.23 0.73 50.94 0.45
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.35 23.35 1.06 4.61 2.29 1.42 6.15 0.26 152.85 0.69
WBST Webster Financial Corp. of CT 5.02 4.29 0.41 8.17 2.29 0.74 14.56 0.72 111.52 1.43
WEFC Wells Fin. Corp. of Wells MN 14.20 14.20 0.72 5.07 4.29 1.06 7.49 NA NA NA
WCBI WestCo Bancorp of IL 15.24 15.24 1.12 7.28 5.08 1.42 9.19 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.91 8.73 0.63 5.10 3.31 0.79 6.42 NA NA NA
WOFC Western Ohio Fin. Corp. of OH 13.79 12.85 0.33 2.24 2.10 0.45 3.10 NA NA 0.58
WWFC Westwood Fin. Corp. of NJ(8) 9.13 8.13 0.49 5.12 2.84 0.85 8.80 0.13 159.15 0.55
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
QCSB Queens County Bancorp of NY* 25.17 317.12 37.59 317.12 24.83 0.80 2.19 55.17
RARB Raritan Bancorp. of Raritan NJ* 19.35 226.36 17.96 230.24 18.23 0.48 1.70 32.88
REDF RedFed Bancorp of Redlands CA NM 181.40 15.35 182.24 24.38 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 25.69 173.38 14.27 240.67 17.31 0.64 1.98 50.79
RELI Reliance Bancshares Inc of WI(8)* NM 93.61 45.70 93.61 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 112.78 13.98 114.50 26.61 0.16 0.97 34.78
RVSBD Riverview Bancorp of WA 23.88 145.64 31.50 145.64 23.88 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* NM 148.29 29.87 149.00 23.25 0.24 1.11 40.68
SCCB S. Carolina Comm. Bnshrs of SC NM 132.36 33.98 132.36 28.63 0.60 2.65 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 240.76 22.96 240.76 NM 0.40 1.43 NM
SFED SFS Bancorp of Schenectady NY NM 126.32 15.75 126.32 20.59 0.28 1.27 46.67
SGVB SGV Bancorp of W. Covina CA NM 142.91 10.44 145.30 24.33 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 115.69 14.62 115.69 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 10.57 189.19 13.62 189.19 10.64 0.56 1.60 16.92
SWCB Sandwich Co-Op. Bank of MA* 16.24 182.78 14.53 190.95 15.97 1.40 3.68 59.83
SFSL Security First Corp. of OH 20.74 224.48 21.16 228.41 16.59 0.32 1.75 36.36
SFNB Security First Netwrk Bk of GA(8) NM 277.15 91.78 281.82 NM 0.00 0.00 NM
SMFC Sho-Me Fin. Corp. of MO(8) 21.15 222.11 20.06 222.11 18.72 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 110.70 16.74 110.70 29.03 0.32 1.78 NM
SOSA Somerset Savings Bank of MA(8)* 20.76 264.80 16.80 264.80 21.63 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 133.43 33.70 133.43 NM 0.40 2.21 NM
SCBS Southern Commun. Bncshrs of AL NM 136.63 30.00 136.63 NM 0.30 1.62 NM
SMBC Southern Missouri Bncrp of MO 27.60 110.95 18.27 110.95 28.48 0.50 2.79 NM
SWBI Southwest Bancshares of IL 23.67 157.22 17.29 157.22 17.10 0.76 3.09 73.08
SVRN Sovereign Bancorp of PA NM NM 18.76 NM NM 0.08 0.44 20.51
STFR St. Francis Cap. Corp. of WI 20.90 151.45 11.94 171.38 18.97 0.48 1.30 27.12
SPBC St. Paul Bancorp, Inc. of IL 25.82 204.39 17.58 204.92 17.86 0.40 1.68 43.48
SFFC StateFed Financial Corp. of IA 23.18 139.58 24.82 139.58 19.10 0.40 1.47 34.19
SFIN Statewide Fin. Corp. of NJ 26.97 147.48 14.34 147.69 15.89 0.44 2.15 57.89
STSA Sterling Financial Corp. of WA NM 230.01 9.42 263.82 NM 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 27.44 154.11 9.99 154.67 18.85 0.32 0.95 26.02
ROSE T R Financial Corp. of NY* 16.58 243.42 15.11 243.42 18.48 0.64 2.10 34.78
THRD TF Financial Corp. of PA 29.22 139.21 15.47 158.70 21.46 0.40 1.65 48.19
TPNZ Tappan Zee Fin., Inc. of NY NM 141.11 25.29 141.11 NM 0.28 1.38 52.83
ESBK The Elmira SB FSB of Elmira NY* 25.22 140.26 8.83 146.30 25.91 0.64 2.25 56.64
TRIC Tri-County Bancorp of WY 24.13 118.29 18.12 118.29 19.01 0.60 2.16 52.17
TWIN Twin City Bancorp of TN NM 133.64 17.18 133.64 23.02 0.40 2.76 NM
UFRM United FS&LA of Rocky Mount NC NM 173.43 12.96 173.43 NM 0.24 2.07 NM
UBMT United Fin. Corp. of MT 25.53 120.30 27.25 120.30 20.69 0.98 4.08 NM
VABF Va. Beach Fed. Fin. Corp of VA NM 207.29 14.19 207.29 NM 0.20 1.14 NM
VFFC Virginia First Savings of VA(8) 27.41 210.84 16.32 218.08 NM 0.10 0.41 11.36
WHGB WHG Bancshares of MD NM 106.78 22.05 106.78 NM 0.32 2.12 NM
WSFS WSFS Financial Corp. of DE* 11.99 279.24 14.53 281.47 11.91 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 18.93 169.94 18.97 169.94 15.09 1.20 3.75 71.01
WRNB Warren Bancorp of Peabody MA* 9.95 204.71 21.22 204.71 11.76 0.52 2.60 25.87
WFSL Washington FS&LA of Seattle WA 16.12 212.42 25.67 232.59 14.54 0.92 2.96 47.67
WAMU Washington Mutual Inc. of WA(8)* NM NM 36.19 NM NM 1.12 1.63 NM
WYNE Wayne Bancorp of NJ NM 129.98 17.36 129.98 NM 0.20 0.89 38.46
WAYN Wayne S&L Co. MHC of OH (47.8) NM 261.02 24.13 261.02 NM 0.62 2.28 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 199.43 46.57 199.43 NM 0.80 3.81 NM
WBST Webster Financial Corp. of CT NM 281.43 14.14 329.44 24.51 0.80 1.29 56.34
WEFC Wells Fin. Corp. of Wells MN 23.29 116.12 16.48 116.12 15.74 0.48 2.82 65.75
WCBI WestCo Bancorp of IL 19.68 144.53 22.03 144.53 15.59 0.60 2.16 42.55
WSTR WesterFed Fin. Corp. of MT NM 131.09 14.30 163.77 24.02 0.46 1.88 56.79
WOFC Western Ohio Fin. Corp. of OH NM 105.86 14.60 113.58 NM 1.00 4.04 NM
WWFC Westwood Fin. Corp. of NJ(8) NM 174.49 15.92 195.87 20.52 0.20 0.73 25.64
</TABLE>
<PAGE> 55
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of October 29, 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)
- ---------------------------------------
WEHO Westwood Hmstd Fin Corp of OH 29.40 29.40 0.69 2.40 1.88 1.04 3.61 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 1.00 14.08 8.05 0.84 11.80 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.31 12.31 1.07 8.25 4.58 1.27 9.81 0.24 143.64 0.44
YFCB Yonkers Fin. Corp. of NY 14.90 14.90 0.86 5.06 3.66 1.16 6.79 0.57 65.19 1.02
YFED York Financial Corp. of PA 8.61 8.61 0.62 7.41 3.81 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)
- ---------------------------------------
WEHO Westwood Hmstd Fin Corp of OH NM 112.44 33.06 112.44 NM 0.28 1.75 NM
WFI Winton Financial Corp. of OH 12.42 174.91 12.43 178.69 14.83 0.46 2.32 28.75
FFWD Wood Bancorp of OH 21.84 181.20 22.30 181.20 18.35 0.40 2.32 50.63
YFCB Yonkers Fin. Corp. of NY 27.30 146.75 21.87 146.75 20.34 0.24 1.16 31.58
YFED York Financial Corp. of PA 26.24 185.57 15.98 185.57 20.54 0.60 2.26 59.41
</TABLE>
<PAGE> 56
EXHIBIT 2
Core Earnings Analysis
<PAGE> 57
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 12,872 2.81
DIME Dime Community Bancorp of NY 12,316 1,404 -477 0 13,243 12,625 1.05
FFIC Flushing Fin. Corp. of NY 7,414 512 -174 0 7,752 7,983 0.97
HAVN Haven Bancorp of Woodhaven NY 9,146 6,775 -2,304 0 13,618 4,386 3.10
JSB JSB Financial, Inc. of NY 27,406 -2,062 701 0 26,045 9,898 2.63
PSBK Progressive Bank, Inc. of NY 8,780 -207 70 0 8,643 3,828 2.26
QCSB Queens County Bancorp of NY 21,888 420 -143 0 22,165 15,108 1.47
RELY Reliance Bancorp, Inc. of NY 10,935 8,078 -2,747 0 16,266 8,712 1.87
ROSE T R Financial Corp. of NY 32,295 -4,889 1,662 0 29,068 17,592 1.65
</TABLE>
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> 58
EXHIBIT 3
Pro Forma Analysis Sheet
<PAGE> 59
EXHIBIT 3
PRO FORMA ANALYSIS SHEET
Independence Savings Bank
Prices as of October 29, 1997
<TABLE>
<CAPTION>
New York All Savings
Peer Group 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 21.82x 20.62x 20.93x 22.68x 22.94x 21.25x
Price-book ratio = P/B 71.93% 185.92% 173.38% 158.12% 145.07% 158.99%
Price-assets ratio = P/A 13.47% 20.07% 16.35% 19.02% 17.09% 19.15%
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $16,340,000 ESOP Stock Purchases (E) 8.00% (5)
Pre-Conversion Book Value (B) $324,789,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv. Tang. Book Value (B) $263,854,000 ESOP Amortization (T) 20.00 years
Pre-Conversion Assets (A) $3,794,312,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 2.95% RRP Vesting (N) 5.00 years (5)
Est. Conversion Expenses (3)(X) 2.61% Foundation (F) 8.00%
Tax rate (TAX) 47.00% Tax Benefit (Z) 20,018,519
Percentage Sold (PCT) 100.00%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
<S> <C> <C>
1. V = P/E * (Y) V = $575,000,000
-------------------------------------------------------------
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 = $575,000,000
--------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V = P/A * (A+Z) V = $575,000,000
--------------------------
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 45,254,630 10.00 $452,546,296 3,620,370 48,875,000 488,750,000
Midpoint 53,240,741 10.00 532,407,408 4,259,259 57,500,000 575,000,000
Maximum 61,226,852 10.00 612,268,521 4,898,148 66,125,000 661,250,000
Supermaximum 70,410,880 10.00 704,108,796 5,632,870 76,043,750 760,437,500
</TABLE>
- ---------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.56 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> 60
EXHIBIT 4
Pro Forma Effect of Conversion Proceeds
<PAGE> 61
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Minimum
<TABLE>
<S> <C>
1. Offering Proceeds $452,546,296
Less: Estimated Offering Expenses 12,689,598
----------
Net Conversion Proceeds $439,856,698
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $439,856,698
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 54,305,556
----------
Net Proceeds Reinvested $385,551,143
Estimated net incremental rate of return 2.95%
----
Earnings Increase $11,361,421
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 959,398
Less: Recognition Plan Vesting (4) 1,918,796
---------
Net Earnings Increase $8,483,227
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended August 31, 1997 (reported) $16,340,000 $8,483,227 $24,823,227
12 Months ended August 31, 1997 (core) $25,830,000 $8,483,227 $34,313,227
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $324,789,000 $385,551,143 $17,015,741 $727,355,883
August 31, 1997 (Tangible) $263,854,000 $385,551,143 $17,015,741 $666,420,883
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $3,794,312,000 $385,551,143 $17,015,741 $4,196,878,883
</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 Midpoint
<TABLE>
<CAPTION>
<S> <C>
1. Offering Proceeds $532,407,408
Less: Estimated Offering Expenses 13,883,522
----------
Net Conversion Proceeds $518,523,886
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $518,523,886
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 63,888,889
----------
Net Proceeds Reinvested $454,634,997
Estimated net incremental rate of return 2.95%
-----
Earnings Increase $13,397,184
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,128,704
Less: Recognition Plan Vesting (4) 2,257,407
---------
Net Earnings Increase $10,011,073
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended August 31, 1997 (reported) $16,340,000 $10,011,073 $26,351,073
12 Months ended August 31, 1997 (core) $25,830,000 $10,011,073 $35,841,073
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $324,789,000 $454,634,997 $20,018,519 $799,442,516
August 31, 1997 (Tangible) $263,854,000 $454,634,997 $20,018,519 $738,507,516
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $3,794,312,000 $454,634,997 $20,018,519 $4,268,965,516
</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 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Maximum
<TABLE>
<CAPTION>
<S> <C>
1. Offering Proceeds $612,268,521
Less: Estimated Offering Expenses 15,077,446
----------
Net Conversion Proceeds $597,191,075
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $597,191,075
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 73,472,222
----------
Net Proceeds Reinvested $523,718,852
Estimated net incremental rate of return 2.95%
-----
Earnings Increase $15,432,947
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,298,009
Less: Recognition Plan Vesting (4) 2,596,019
---------
Net Earnings Increase $11,538,919
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended August 31, 1997 (reported) $16,340,000 $11,538,919 $27,878,919
12 Months ended August 31, 1997 (core) $25,830,000 $11,538,919 $37,368,919
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $324,789,000 $523,718,852 $23,021,296 $871,529,149
August 31, 1997 (Tangible) $263,854,000 $523,718,852 $23,021,296 $810,594,149
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $3,794,312,000 $523,718,852 $23,021,296 $4,341,052,149
</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> 64
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Independence Savings Bank
At the Supermaximum Value
<TABLE>
<S> <C>
1. Offering Proceeds $704,108,796
Less: Estimated Offering Expenses 16,450,458
----------
Net Conversion Proceeds $687,658,338
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $687,658,338
Less: Proceeds Invested in Non-Earning Fixed Assets 0
Less: Non-Cash Stock Purchases (1) 84,493,055
----------
Net Proceeds Reinvested $603,165,282
Estimated net incremental rate of return 2.95%
-----
Earnings Increase $17,774,075
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,492,711
Less: Recognition Plan Vesting (4) 2,985,421
---------
Net Earnings Increase $13,295,943
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended August 31, 1997 (reported) $16,340,000 $13,295,943 $29,635,943
12 Months ended August 31, 1997 (core) $25,830,000 $13,295,943 $39,125,943
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $324,789,000 $603,165,282 $26,474,491 $954,428,773
August 31, 1997 (Tangible) $263,854,000 $603,165,282 $26,474,491 $893,493,773
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
August 31, 1997 $3,794,312,000 $603,165,282 $26,474,491 $4,423,951,773
</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> 65
EXHIBIT 5
Pro Forma Regulatory Capital Levels
<PAGE> 66
<TABLE>
<CAPTION>
Pro Forma at August 31, 1997 Based on
---------------------------------------------------------------------------
43,287,037 50,925,926 58,564,815
Shares Shares Shares
Historical at (Minimum (Mid-point (Maximum
August 31, 1997 of Range) of Range) of Range)(1)
---------------------- ----------------------- ---------------------- -----------------------
Percent Percent Percent Percent
Amount of Assets(2) Amount of Assets(2) Amount of Assets(2) Amount of Assets(2)
-------- ------------ -------- ------------ -------- ------------ -------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital(3) $324,769 8.56% $507,499 12.65% $540,252 13.33% $573,006 14.00%
======= ==== ======= ===== ======= ===== ======= =====
Tier I risk-based
level:(4)(5) $258,319 10.13% $441,049 17.01% $473,802 18.22% $506,556 19.42%
Requirement 101,980 4.00 103,732 4.00 104,045 4.00 104,358 4.00
------- ---- ------- ---- ------- ---- ------- ----
Excess $156,339 6.13% $337,317 13.01% $369,757 14.22% $402,198 15.42%
======= ==== ======= ===== ======= ===== ======= =====
Total risk-based
level:(1)(4)(5) $289,434 11.35% $472,164 18.21% $504,917 19.41% $537,671 20.61%
Requirement 203,961 8.00 207,464 8.00 208,090 8.00 208,717 8.00
------- ---- ------- ---- ------- ---- ------- ----
Excess $ 85,473 3.35% $264,700 10.21% $296,827 11.41% $328,954 12.61%
======= ==== ======= ===== ======= ===== ======= =====
Tier I leverage
level:(4)(5)(6) $258,319 6.91% $441,049 11.15% $473,802 11.86% $506,556 12.55%
Requirement 149,520 4.00 158,278 4.00 159,844 4.00 161,409 4.00
------- ---- ------- ---- ------- ---- ------- ----
Excess $108,799 2.91% $282,771 7.15% $313,959 7.86% $345,147 8.55%
======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
<PAGE> 67
EXHIBIT 6
Firm Qualifications Statement
<PAGE> 68
[RP FINANCIAL, LC. 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)
