-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qyk0tMuc80AsaAILq8IbBXPGXMVY6OYXWmjJvYso2LbuptZCvjQj3N+mxNbh7VVk 9sLYgw10TQ2hxdb4DqNz6w== 0000950109-97-007408.txt : 19971211 0000950109-97-007408.hdr.sgml : 19971211 ACCESSION NUMBER: 0000950109-97-007408 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 7 REFERENCES 429: 333-30215 FILED AS OF DATE: 19971210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOPFED BANCORP INC CENTRAL INDEX KEY: 0001041550 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 561995728 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-41885 FILM NUMBER: 97735585 BUSINESS ADDRESS: STREET 1: 2700 FORT CAMPBELL BLVD CITY: HOPKINSVILLE STATE: KY ZIP: 72240 BUSINESS PHONE: 5028851171 MAIL ADDRESS: STREET 1: 2700 FORT CAMPBELL BLVD CITY: HOPKINSVILLE STATE: KY ZIP: 72240 S-1 1 POST EFFECTIVE AMENDMENT NO.1 TO FORM S-1 As filed with the Securities and Exchange Commission on December 10, 1997 Registration No. 333-__________ and Registration No. 333-30215 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- REGISTRATION STATEMENT ON FORM S-1 AND POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------- HOPFED BANCORP, INC. (Exact Name of Registrant as Specified in its Charter)
Delaware 6035 61-0229082 (State or other Jurisdiction (Primary Standard industrial (I.R.S. Employer of Incorporation or Organization) Classification Code Number) Identification Number)
2700 Fort Campbell Boulevard Hopkinsville, Kentucky 42240 (502)885-1171 (Address and telephone number of principal executive offices and principal place of business) Bruce Thomas, President HopFed Bancorp, Inc. 2700 Fort Campbell Boulevard Hopkinsville, Kentucky 42240 (502)885-1171 (Name, address, and telephone number of agent for service) Please send copies of all communications to: Edward B. Crosland, Jr., Esquire Paul D. Borja, Esquire Kutak Rock 1101 Connecticut Avenue, N.W., Suite 1000 Washington, D.C. 20036 Phone: (202)828-2400 Fax: (202)828-2488 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securitites being registered on this form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]
CALCULATION OF REGISTRATION FEE =================================================================================================================================== Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of Securities to be Registered Registered (1) Offering Price Per Share (1) Aggregate Offering Price (1) Registration Fee (2) - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $.01 per share 4,033,625 (3) $ 10.00 $ 40,336,250 $ 12,181.55 (3) ===================================================================================================================================
- -------------------------------- (1) Estimated soley for the purpose of calculating the Registration Fee. (2) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as amended. (3) Includes 3,504,625 shares of Common Stock previously registered on Form S-1 pursuant to Registration Statement No. 333-30215, to which the Registration Statement constitutes a post-effective amendment and which is being carried forward pursuant to Rule 429 under the Securities Act of 1933. The Registrant previously paid an aggregate fee of $12,181.55, of which $10,621 was paid with respect to Registration Statement No. 333-30215. This Prospectus included herein is a combined prospectus. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SUPPLEMENT TO PROSPECTUS [LOGO] DATED OCTOBER 10, 1997 HOPFED BANCORP, INC. (PROPOSED HOLDING COMPANY FOR HOPKINSVILLE FEDERAL SAVINGS BANK) UP TO 3,507,500 SHARES OF THE COMMON STOCK $10.00 PER SHARE HopFed Bancorp, Inc. (the "Company") is offering up to 3,507,500 shares, subject to adjustment, of its common stock, par value $.01 per share (the "Common Stock"), in connection with the conversion of Hopkinsville Federal Savings Bank (the "Bank") from a federal mutual savings bank to a federal stock savings bank and the issuance of the Bank's capital stock to the Company pursuant to the Plan of Conversion (the "Plan") of the Bank. The conversion of the Bank, the acquisition of all the outstanding capital stock of the Bank by the Company and the issuance and sale of the Common Stock are collectively referred to herein as the "Conversion." The Company's Prospectus dated October 10, 1997 (the "Prospectus") initially offered 3,047,500 shares of the Common Stock, subject to adjustment, at an offering price of $10.00 per share in a subscription offering ("Subscription Offering") and a community offering ("Community Offering"). The amount of Common Stock offered in the Subscription and Community Offerings was based on an independent appraisal of the pro forma aggregate market value of the Common Stock to be issued in the Conversion. The initial Subscription and Community Offerings terminated on November 18, 1997, except as extended hereby. Subsequent to termination of the Subscription and Community Offerings, an updated appraisal was prepared in accordance with the Plan and federal regulations. Based upon the improvement in the condition of the general stock market, the results of the Subscription and Community Offerings, the Bank's September 30, 1997 results of operations and financial condition and current market pricing for thrift institutions, the updated appraisal reflects an increase in the pro forma aggregate market value of the Common Stock to be offered in the Conversion from a range of $22,525,000 to $30,475,000 (the "Estimated Valuation Range") to a range of $25,925,000 to $35,075,000 (the "Amended Valuation Range"). The Bank has received approval of such an increase from the Office of Thrift Supervision ("OTS"). Accordingly, the Company and the Bank have determined to offer up to 3,507,500 shares of Common Stock, subject to adjustment, at the original purchase price per share of $10.00 (the "Purchase Price") in a resolicitation of all subscribers in the Subscription and Community Offerings (the "Resolicitation"). (continued on following page) ------------------------ FOR ANSWERS TO QUESTIONS REGARDING HOW TO INCREASE, DECREASE, CONTINUE OR CANCEL YOUR ORDER, PLEASE CALL THE STOCK INFORMATION CENTER AT (502) 881-4001. PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER THE DISCUSSIONS UNDER "RISK FACTORS" IN THE PROSPECTUS AND "ADDITIONAL RISK FACTORS" IN THIS PROSPECTUS SUPPLEMENT. ------------------------ THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR CORPORATION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------
==================================================================================================================================== ESTIMATED NET PURCHASE PRICE (1) ESTIMATED FEES AND EXPENSES (2) PROCEEDS (3) - ------------------------------------------------------------------------------------------------------------------------------------ Per Share (4).................................. $ 10.00 $ 0.25 $ 9.75 - ------------------------------------------------------------------------------------------------------------------------------------ Total Minimum.................................. $ 25,925,000 $ 750,000 $ 25,175,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total Midpoint................................. $ 30,500,000 $ 750,000 $ 29,750,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total Maximum.................................. $ 35,075,000 $ 750,000 $ 34,325,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total Maximum, as adjusted (5)................. $ 40,336,250 $ 750,000 $ 39,586,250 ===================================================================================================================================
(footnotes on following page) INVESTMENT BANK SERVICES, INC. FRIEDMAN, BILLINGS, RAMSEY & CO., INC. The date of this Prospectus Supplement is December __, 1997 In the Resolicitation, each subscriber in the Subscription and Community Offerings is being given the opportunity to increase, decrease, cancel or confirm his or her present order by returning a completed Supplemental Stock Order Form, accompanied by an additional payment or withdrawal authorization, if applicable, to any office of the Bank. The Resolicitation will terminate at 4:00 p.m., Local Time, on January __, 1998, unless extended with the approval of the OTS. ALL SUBSCRIBERS WHO DO NOT RETURN THEIR SUPPLEMENTAL STOCK ORDER FORMS TO THE BANK BEFORE THE EXPIRATION OF THE RESOLICITATION WILL HAVE THEIR ORDERS CANCELED AND ALL FUNDS PROMPTLY RETURNED WITH INTEREST. With the exception of the ESOP, which intends to purchase 8% of the total number of shares of the Common Stock issued in the Conversion, no Eligible Account Holder, Other Member, Supplemental Eligible Account Holder or Other Member nor person in the Community Offering may purchase more than $250,000 of the shares of the Common Stock issued in the Conversion. In addition, no person (together with associates and persons acting in concert therewith) may purchase in the aggregate more than $500,000 of the shares of the Common Stock issued in the Conversion. The maximum overall purchase limitation and the amount permitted to be subscribed for may be increased or decreased under certain circumstances in the sole discretion of the Company. The minimum purchase is 25 shares. See "Limitations on Purchases of Common Stock" herein and "The Conversion -- Limitations on Purchases of Shares" in the Prospectus. THE RESOLICITATION WILL EXPIRE AT 4:00 P.M., LOCAL TIME, ON JANUARY __, 1998. An executed Supplemental Stock Order Form, once received by the Bank, may not be modified, amended or rescinded without the consent of the Bank. Subscriptions paid by check, cash or money order are being held in a separate account at the Bank established specifically for this purpose, and interest is being paid at the Bank's passbook rate from the date of receipt of payment until the Conversion is completed or terminated. In the case of payments to be made through withdrawal from deposit accounts at the Bank, all sums authorized for withdrawal will generally continue to earn interest at the contract rate until the date of the completion of the Conversion. -------------------------- (footnotes from preceding table) (1) The estimated aggregate value of the Common Stock is based on an updated independent appraisal by National Capital Companies, LLC ("National Capital") as of November 18, 1997. See "Amended Valuation Range." Based on such appraisal, the Company has determined to offer up to 3,507,500 shares, subject to adjustment. The final aggregate value will be determined at the time of closing of the Conversion and is subject to change due to changing market conditions and other factors. If a change in the final valuation is required, an appropriate adjustment will be made in the number of shares being offered within a range of 2,592,500 shares at the minimum of the Amended Valuation Range to 3,507,500 shares at the maximum of the Amended Valuation Range and, with OTS approval, to 4,033,625 shares at approximately 15% above the maximum of the Amended Valuation Range. (2) Includes estimated printing, postage, legal, accounting and miscellaneous expenses which will be incurred in connection with the Conversion. Also includes estimated fees, sales commissions and reimbursable expenses to be paid to the Agents of $225,000. The actual fees and expenses may vary from the estimates. See "Pro Forma Data" for the assumptions underlying these estimates. The Agents may each be deemed to be underwriters, and certain amounts to be paid to the Agents may be deemed to be underwriting compensation. (3) Includes the ESOP's expected purchase of 8% of the shares sold in the Conversion with funds borrowed from the Company. Does not reflect a possible purchase after the Conversion by a management recognition plan of a number of shares equal to up to 4% of the shares to be issued in the Conversion with funds contributed by the Bank. See "Capitalization" and "Pro Forma Data." (4) Based on the midpoint of the Amended Valuation Range. At the minimum, maximum and 15% above the maximum of the Amended Valuation Range, the estimated fees and expenses, including underwriting discounts and commissions, per share are expected to be $0.29, $0.21 and $0.19, respectively, and the estimated net proceeds per share are expected to be $9.71, $9.79 and $9.81, respectively. (5) Gives effect to an increase in the number of shares of up to 15% above the maximum of the Amended Valuation Range which could occur without a resolicitation of subscribers or any right of cancellation and which would be due to an increase in the Amended Valuation Range to reflect changes in market and financial conditions. See "The Conversion -- Stock Pricing and Number of Shares to be Issued," in the Prospectus. 2 THIS PROSPECTUS SUPPLEMENT SUPPLEMENTS AND AMENDS THE PROSPECTUS, WHICH IS INCORPORATED HEREIN BY REFERENCE, AND SHOULD BE READ IN CONJUNCTION HEREWITH. ANY INFORMATION PRESENTED HEREIN SUPERSEDES ANY INFORMATION PRESENTED IN THE PROSPECTUS. EXCEPT AS SPECIFICALLY SET FORTH TO THE CONTRARY HEREIN, CAPITALIZED TERMS USED HEREIN SHALL HAVE THE SAME MEANINGS AS IN THE PROSPECTUS. SEE "EXTENSION OF TIME PERIOD TO COMPLETE THE CONVERSION" HEREIN FOR INFORMATION ON HOW A SUBSCRIBER MAY OBTAIN AN ADDITIONAL COPY OF THE PROSPECTUS. THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS SUPPLEMENT ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY. RESULTS OF THE SPECIAL MEETING OF MEMBERS AND THE SUBSCRIPTION AND COMMUNITY OFFERINGS At the Special Meeting of Members of the Bank held on November 19, 1997, 958,650 votes, or 59.2% of the 1,619,832 total votes eligible to be cast, were voted in favor of the Plan. Accordingly, the Plan was approved by more than the required majority of the total votes entitled to be cast at the Special Meeting, and no further vote is necessary to approve the Plan. The Bank originally offered 3,047,500 shares of Common Stock in the Subscription and Community Offerings. The Bank received orders in the Subscription and Community Offerings to purchase approximately 16,287,000 shares of Common Stock (excluding the ESOP). Eligible Account Holders subscribed for approximately 15,586,000 shares. AMENDED VALUATION RANGE As required by applicable regulations, upon conclusion of the initial Subscription and Community Offerings, National Capital submitted an updated appraisal of the pro forma market value of the Common Stock to the Bank and the OTS. The updated appraisal of National Capital dated November 18, 1997 set forth an estimated Amended Valuation Range of the Common Stock to be sold in the Conversion of $25,925,000 at the minimum and $35,075,000 at the maximum, with a midpoint of $30,500,000, which constitutes a 15.1% increase from the midpoint of the Estimated Valuation Range established by the appraisal report dated August 29, 1997, which was set forth in the Prospectus. The increased valuation set forth in National Capital's updated appraisal was based on the improvement in the condition of the general stock market, the results of the Subscription and Community Offerings, the Bank's September 30, 1997 results of operations and financial condition and current market pricing for thrift institutions. In determining the reasonableness and adequacy of National Capital's updated appraisal, the Board of Directors reviewed with National Capital the methodology and the appropriateness of the assumptions used in the updated appraisal. Copies of National Capital's appraisal report are available for inspection at the main office of the Bank and are otherwise publicly available. See "Additional Information" herein. Based on the Amended Valuation Range and the $10.00 per share Purchase Price, the number of shares being offered in the Conversion ranges from 2,592,500 shares to 3,507,500 shares. In the event the Company receives orders for Common Stock in excess of $35,075,000 million (the maximum of the Amended Valuation Range), the final valuation may be increased by National Capital to a maximum of $40,336,250 (the maximum of the Amended Valuation Range, as adjusted by 15%) and the Company may at that time accept orders for up to 4,033,625 shares of Common Stock without an additional resolicitation of subscribers or any right of cancellation. Subscribers should note that the change in the estimated pro forma market value has an impact on the pro forma data presented in this Prospectus Supplement when compared to the values presented in the Prospectus. Assuming consummation of the Conversion at the maximum of the Amended Valuation Range, pro forma net income per share and stockholders' equity per share at or for the nine months ended September 30, 1997 would be 3 $0.56 and $13.93, respectively, while the ratio of the offering price to pro forma net income per share would be 13.4x and the offering price as a percentage of pro forma stockholders' equity per share would be 71.8%. Assuming 4,033,625 shares of Common Stock are sold in the Conversion, based upon the maximum, as adjusted, of the Amended Valuation Range, the ratio of the offering price to pro forma net income per share would be 15.0x and the offering price as a percentage of pro forma stockholders' equity per share would be 75.4%. See "Additional Risk Factors -- Possible Adverse Effect of Amended Valuation Range." THE NUMBER OF SHARES ULTIMATELY SOLD IN THE CONVERSION WITHIN THE AMENDED VALUATION RANGE WILL DEPEND UPON MARKET DEMAND FOR THE COMMON STOCK AS WELL AS MARKET AND FINANCIAL CONDITIONS FOLLOWING THE CONCLUSION OF THE RESOLICITATION, AND WILL AFFECT THE PRICE TO BOOK VALUE RATIO, PRICE TO EARNINGS RATIO, STOCKHOLDERS' EQUITY PER SHARE AND NET INCOME PER SHARE OF THE COMMON STOCK. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THE INCREASED VALUATION REFLECTED IN THE AMENDED VALUATION RANGE MAY RESULT IN LESS FAVORABLE AFTER- MARKET PRICE PERFORMANCE OF THE COMMON STOCK THAN MIGHT HAVE OCCURRED IF THE ESTIMATED VALUATION RANGE HAD NOT BEEN INCREASED. SEE "ADDITIONAL RISK FACTORS," "CAPITALIZATION" AND "PRO FORMA DATA" HEREIN. In view of the appraisal update, all persons who subscribed for shares of Common Stock are being offered in the Resolicitation the opportunity to (i) rescind their subscription, which will result in a return of all of their funds submitted, plus interest earned, or a cancellation of their withdrawal authorizations; (ii) continue their order for the same dollar amount of Common Stock originally subscribed for; (iii) decrease the total dollar amount of their subscription, which will result in an adjustment of the withdrawal authorization or a refund of the overpayment, plus interest earned; or (iv) subject to applicable purchase limitations, increase the total dollar amount of their subscription, which will require the submission of additional funds or an increase in the withdrawal authorization. IN ORDER TO CONFIRM YOUR ORDER FOR SHARES OF COMMON STOCK, YOU MUST COMPLETE AND RETURN THE ENCLOSED SUPPLEMENTAL STOCK ORDER FORM TO THE BANK, ACCOMPANIED, IF APPLICABLE, BY PAYMENT OR A WITHDRAWAL AUTHORIZATION, SO THAT IT IS RECEIVED NO LATER THAN 4:00 P.M., LOCAL TIME, ON JANUARY __, 1998. FAILURE TO RETURN A SUPPLEMENTAL STOCK ORDER FORM WILL RESULT IN YOUR ORDER BEING RESCINDED, A RETURN OF ALL YOUR FUNDS SUBMITTED, PLUS INTEREST EARNED, OR A CANCELLATION OF YOUR WITHDRAWAL AUTHORIZATION. As a result of the Resolicitation, the number of shares of Common Stock set forth under "Results of the Special Meeting of Members and the Subscription Offering" herein which were subscribed for may change. ADDITIONAL RISK FACTORS Prospective investors should consider carefully the maters presented below and in the "Risk Factors" section of the Prospectus in addition to the other information contained herein and in the Prospectus. The discussion in this Prospectus Supplement contains certain forward- looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere herein or in the documents incorporated by reference herein. 4 POSSIBLE ADVERSE EFFECT OF AMENDED VALUATION RANGE The increase in the number of shares offered pursuant to the updated appraisal and Amended Valuation Range will result in a decrease in pro forma stockholders' equity per share and pro forma net income per share and an increase in the ratio of the offering price to pro forma stockholders' equity per share and pro forma net income per share. Assuming consummation of the Conversion at the maximum of the Amended Valuation Range, pro forma net income per share and stockholders' equity per share at or for the year ended December 31, 1996 would be $0.25 and $13.38, respectively, compared to $0.26 and $14.09, respectively, at the maximum of the previous Estimated Valuation Range. At the maximum of the Amended Valuation Range and at December 31, 1996, the ratio of the offering price to pro forma stockholders' equity per share and pro forma net income per share would be 74.7% and 40.0x, respectively, compared to 71.0% and 38.5x, respectively, at the maximum of the previous Estimated Valuation Range. See "Pro Forma Data" herein and "Pro Forma Data" in the Prospectus. The increased valuation reflected in the Amended Valuation Range may have the effect of weakening the market demand for the Common Stock following the Conversion. There can be no assurance that the market price at which the shares of Common Stock trade following the Conversion will equal or exceed the Purchase Price of $10.00 per share. See "Amended Valuation Range" herein. The additional increase in equity resulting from the Amended Valuation Range also may further prevent the Company from maintaining a return on equity at the levels historically maintained by the Bank. See "Risk Factors -- Anticipated Low Return on Equity Following Conversion" in the Prospectus. BASIS OF UPDATED APPRAISAL The updated appraisal of National Capital is based upon the improvement in the condition of the general stock market, the results of the Subscription and Community Offerings, the Bank's September 30, 1997 results of operations and financial condition and current market pricing for thrift institutions. Among other factors, acquisition activity for financial institutions has generally resulted in higher bank and thrift stock prices as investors speculate that industry consolidation will continue. No assurance can be given that such speculative activity and market pricing will continue or, if they continue, that they will have any significant effect on the market price of the Common Stock. POTENTIAL COST OF STOCK BENEFIT PLANS The Company's adoption of the ESOP, the MRP and the Option Plan as part of the Conversion will generate significant compensation expenses after the Conversion that could depress the earnings of the Company for a number of years. It is anticipated that the ESOP will purchase 8% of the Common Stock sold in the Conversion with funds borrowed from the Company. The cost of acquiring the ESOP shares will be $2,074,000, $2,440,000, $2,806,000 and $3,226,900 at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, respectively, compared to $1,802,000, $2,120,000, $2,438,000 and $2,803,700 at the minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation Range, respectively. Further, under American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 93-6, "Employers' Accounting for Employee Stock Ownership Plans," an employer is required to record compensation expense in an amount equal to the fair value of shares committed to be released to employees from an ESOP. If shares of Common Stock appreciate in value over time, the adoption of SOP 93-6 may increase compensation expense relating to the ESOP to be established in connection with the Conversion, as compared with prior accounting guidance which required the recognition of compensation expense based on the cost of shares acquired by the ESOP. For an example of the effect that SOP 93-6 may have on the Company's net income, see "Pro Forma Data" herein. In addition, following the Conversion, and subject to regulatory and stockholder approval, the Company intends to implement the MRP, under which employees and directors could be awarded (at no cost to them) an 5 aggregate amount of the Common Stock equal to 4% of the shares issued in the Conversion. Assuming the sale in the Conversion of the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, and assuming the shares of Common Stock to be awarded under the MRP have a cost equal to the Purchase Price of $10.00 per share, the reduction to stockholders' equity of funding the MRP would be $1,037,000, $1,220,000, $1,403,000 and $1,613,450, respectively, compared to $901,000, $1,060,000, $1,219,000 and $1,401,850, respectively, under the Estimated Valuation Range. Such amount would be in addition to the compensation expense that would be incurred by the Company as the shares of Common Stock awarded under the MRP vest to the recipients. For further information regarding the MRP, see "Management of the Bank -- Certain Benefit Plans and Agreements --Management Recognition Plan" in the Prospectus. EXTENSION OF TIME PERIOD TO COMPLETE THE CONVERSION OTS regulations provide that the sale of the Common Stock must be completed within 45 days following the termination of the subscription period, unless such period is extended by the OTS. As a result of the need to resolicit all persons who previously subscribed for shares of Common Stock in the Subscription and Community Offerings, the Resolicitation will terminate at 4:00 p.m., Local Time, on January __, 1998, unless extended by the Bank and the Company, with approval of the OTS, if necessary. Any Community Offering or Syndicated Community Offering must be completed within 45 days after the close of the Resolicitation , unless extended by the Bank and the Company with the approval of the OTS, if necessary. As a result of the increase in the Estimated Valuation Range, all subscribers must confirm their orders for the dollar amount of shares subscribed for, and also have the right to increase, decrease or rescind their subscriptions. See "Amended Valuation Range." If the Subscription and Community Offerings are not completed by February __, 1998, either all funds received will be returned with interest and withdrawal authorizations canceled or, if the OTS has granted an extension of such period, all subscribers will again be given the opportunity to continue their orders for the dollar amount of shares subscribed for, or to increase, decrease or rescind their subscriptions at any time prior to 20 days before the end of the extension period. ANY SUBSCRIBER WHO REQUIRES AN ADDITIONAL COPY OF THE PROSPECTUS PREVIOUSLY PROVIDED BY THE COMPANY MAY OBTAIN ONE BY CONTACTING THE STOCK INFORMATION CENTER AT (502) 881-4001. SINCE THE RESOLICITATION ENDS ON JANUARY __, 1998, ANY SUBSCRIBER WHO DESIRES TO OBTAIN A COPY OF THE PROSPECTUS SHOULD REQUEST ONE PROMPTLY. SUBSCRIPTION BY THE ESOP The Plan provides that the ESOP may subscribe for up to 8% of the Common Stock to be issued in the Conversion. Based on the Amended Valuation Range, the ESOP intends to purchase in the Conversion an amount of Common Stock equal to 8% of the total number of shares of Common Stock issued in the Conversion, or 207,400 shares and 280,600 shares of Common Stock at the minimum and maximum of the Amended Valuation Range, respectively (322,690 shares at the maximum, as adjusted). LIMITATIONS ON PURCHASES OF COMMON STOCK Purchases of shares of Common Stock are subject to limitations as set forth in the Plan. All shares are offered to persons subscribing in the Subscription Offering, and shares are only offered to persons in the Community Offering and Syndicated Community Offering, if any, to the extent available after filling subscriptions in the Subscription Offering. Within the Subscription Offering, the maximum purchases by subscribers are limited under the Plan. Eligible Account Holders may only subscribe up to an amount equal to the greater (i) $250,000, (ii) one-tenth of one percent of the total offering of shares of Common Stock, or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock to be issued by a fraction of which the numerator is the amount of the Qualifying Deposit of the Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders in the Bank in each case on 6 the Eligibility Record Date (i.e., March 31, 1996). Supplemental Eligible Account Holders may only subscribe up to an amount equal to the greater of (i) $250,000, (ii) one-tenth of one percent of the total offering of shares of Common Stock, or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock to be issued by a fraction of which the numerator is the amount of the Qualifying Deposit of the Supplemental Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders in the Bank in each case on the Supplemental Eligibility Record Date (i.e., June 30, 1997). The Plan further provides that no person (together with associates and persons acting in concert therewith) may purchase in the aggregate more than $500,000 of the aggregate value of shares of Common Stock in the Conversion. The Plan provides for certain additional limitations to be placed upon the purchase of shares by eligible subscribers and others in the Conversion. Each subscriber must subscribe for a minimum of 25 shares. The ESOP may purchase up to an aggregate of 10% of the shares of Common Stock to be issued in the Conversion under OTS regulations but is only expected to purchase 8% of such shares. No person, including associates (as defined below) of and persons "acting in concert" (as defined below) with such person (other than the ESOP), may purchase in the Subscription or Community Offerings more than $500,000, or 50,000 shares, of the Common Stock. Shares purchased by the ESOP and attributable to a participant thereunder shall not be aggregated with shares purchased by such participant or any other purchaser of the Common Stock in the Conversion. Officers and directors and their associates may not purchase, in the aggregate, more than 31% of the shares to be issued in the Conversion. For purposes of the Plan, the directors of the Company and the Bank are not deemed to be associates or a group "acting in concert" solely by reason of their Board membership. The term "acting in concert" is defined in the Plan to mean (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal, whether or not pursuant to an express agreement, or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. The Company and the Bank may presume that certain persons are acting in concert based upon, among other things, joint account relationships and the fact that such persons have filed joint Schedules 13D with the SEC with respect to other companies. The term "associate" of a person is defined in the Plan to mean: (i) any corporation or organization (other than the Bank, the Company, or a majority-owned subsidiary of the Bank or the Company) of which such person is an officer or partner or is directly or indirectly the beneficial owner of 10% or more of any equity securities; (ii) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as a trustee or in a similar fiduciary capacity, provided, however, such term shall not include any employee stock benefit plan of 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 either has the same home as such person or who is a director of the Bank or the Company or any of their subsidiaries. Directors are not treated as associates solely because of their Board membership. Relatives who are neither officers nor directors of the Bank or the Company and who do not reside in the same home are not deemed to be associates or a group acting in concert solely as a result of their relationships. Subject to any required regulatory approval and the requirements of applicable laws and regulations, but without further approval of the Bank's members, purchase limitations may be increased or decreased at the sole discretion of the Company and the Bank at any time. If such amount is increased, subscribers for the maximum amount will be given the opportunity to increase their subscriptions up to the then applicable limit, subject to the rights and preferences of any person who has priority Subscription Rights. In the event that the purchase limitation is decreased after commencement of the Subscription and Community Offerings, the orders of any person who subscribed for the maximum number of shares of Common Stock shall be decreased by the minimum amount necessary so that such person shall be in compliance with the then maximum number of shares permitted to be subscribed for by such person. EACH PERSON PURCHASING COMMON STOCK IN THE CONVERSION SHALL BE DEEMED TO CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS UNDER THE PLAN OR OTHERWISE IMPOSED BY LAW, RULE OR REGULATION. IN THE EVENT THAT SUCH PURCHASE LIMITATIONS ARE VIOLATED BY ANY PERSON (INCLUDING ANY ASSOCIATE OR GROUP OF PERSONS AFFILIATED OR OTHERWISE ACTING IN CONCERT WITH SUCH PERSON), THE COMPANY SHALL HAVE THE 7 RIGHT TO PURCHASE FROM SUCH PERSON AT THE AGGREGATE OF THE PURCHASE PRICE ALL SHARES ACQUIRED BY SUCH PERSON IN EXCESS OF SUCH PURCHASE LIMITATIONS OR, IF SUCH EXCESS SHARES HAVE BEEN SOLD BY SUCH PERSON, TO RECEIVE THE DIFFERENCE BETWEEN THE AGGREGATE OF THE PURCHASE PRICE PAID FOR SUCH EXCESS SHARES AND THE PRICE AT WHICH SUCH EXCESS SHARES WERE SOLD BY SUCH PERSON. THIS RIGHT OF THE COMPANY TO PURCHASE SUCH EXCESS SHARES OR RECEIVE THE EXCESS PURCHASE PRICE SHALL BE ASSIGNABLE BY THE COMPANY. IN ADDITION, PERSONS WHO VIOLATE THE PURCHASE LIMITATIONS MAY BE SUBJECT TO SANCTIONS AND PENALTIES IMPOSED BY THE OTS. Stock purchased pursuant to the Conversion will be freely transferable, except for shares purchased by directors and officers of the Bank and the Company. In addition, under guidelines of the NASD, members of the NASD and their associates are subject to certain restrictions on the transfer of securities purchased in accordance with subscription rights and to certain reporting requirements upon purchase of such securities. Depending upon market conditions, the Boards of Directors of the Company and the Bank, with the approval of the OTS, may increase or decrease any of the above purchase limitations. In the event of such an increase or decrease, no further approval of members of the Bank would be required. USE OF PROCEEDS The amount of proceeds from the sale of the Common Stock will depend upon the total number of shares actually sold in the Conversion and the actual expenses of the Conversion. As a result, the actual net proceeds from the sale of the Common Stock cannot be determined until the Conversion is completed. Based on the sale of $30,500,000 of the Common Stock at the midpoint of the Amended Valuation Range, the net proceeds from the sale of the Common Stock are estimated to be approximately $29,750,000. The Company has received regulatory approval from the OTS to purchase all of the capital stock of the Bank to be issued in the Conversion in exchange for at least 50% of the net proceeds. Based on the foregoing assumption and the purchase of 8% of the shares to be issued in the Conversion by the ESOP, the Bank would receive approximately $14,875,000 in cash, and the Company would retain approximately $12,435,000 in cash and $2,440,000 in the form of a note receivable from the ESOP. The ESOP note receivable will be for an eight-year term and carry a variable interest rate, which adjusts annually, equal to the prime rate as published in The Wall -------- Street Journal plus 1%. - -------------- The proceeds retained by the Company, after funding the ESOP, initially will be invested in short-term and intermediate-term securities including cash and cash equivalents and U.S. government and agency obligations. Such proceeds will be available for a variety of corporate purposes, including funding the MRP, if implemented, future acquisitions and diversification of business, additional capital contributions, dividends to stockholders and future repurchases of the Common Stock to the extent permitted by applicable regulations. The Company currently has no specific plans, intentions, arrangements or understandings regarding acquisitions, capital contributions, or repurchases. Due to the limited nature of the Company's business activities, the Company believes that the net proceeds retained after the Conversion, earnings on such proceeds and payments on the ESOP note receivable will be adequate to meet the Company's financial needs until dividends are paid by the Bank. However, no assurance can be given that the Company will not have a need for additional funds in the future. For additional information, see "Regulation - -- Depository Institution Regulation -- Dividend Restrictions" in the Prospectus. The proceeds contributed to the Bank will ultimately become part of the Bank's general corporate funds to be used for its business activities, including making loans and investments. Initially it is expected that the proceeds will be invested in short-term and intermediate-term securities including cash and cash equivalents and U.S. government and agency obligations. The additional capital will also provide the Bank with additional liquidity to improve the Bank's interest rate risk position and "cushion" the effect of a significant increase in interest rates. The Bank ultimately plans to use such proceeds primarily to originate loans in the ordinary course of business. 8 Following the six-month anniversary of the completion of the Conversion (to the extent permitted by the OTS), and based upon then-existing facts and circumstances, the Company's Board of Directors may determine to repurchase shares of Common Stock, subject to any applicable statutory and regulatory requirements. Such facts and circumstances may include, but are not limited to: (i) market and economic factors such as the price at which the 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 an improvement in 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. Any stock repurchases will be subject to the determination of the Company's Board of Directors that the Company and the Bank will be capitalized in excess of all applicable regulatory requirements after any such repurchases. The payment of dividends or repurchasing of stock, however, would be prohibited if stockholders' equity would be reduced below the amount required for the liquidation account. See "Dividend Policy" and "The Conversion -- Certain Restrictions on Purchase or Transfer of Shares After the Conversion" in the Prospectus. Set forth below are the estimated investable net proceeds from the Conversion, assuming the sale of the Common Stock at the minimum, midpoint, maximum and maximum, as adjusted, of the Amended Valuation Range and assuming that the ESOP purchases 8% of the shares issued in the Conversion and the MRP purchases 4% of the shares issued in the Conversion.
Minimum of Midpoint of Maximum of Maximum, as adjusted, 2,592,500 shares 3,050,000 shares 3,507,500 shares at of 4,033,625 shares at $10.00 per share at $10.00 per share $10.00 per share at $10.00 per share ------------------- ------------------- ---------------- ------------------- (In thousands) Gross offering proceeds............... $ 25,925 $ 30,500 $ 35,075 $ 40,336 Estimated offering expenses........... (750) (750) (750) (750) --------- --------- --------- --------- Estimated net offering proceeds..... 25,175 29,750 34,325 39,586 ESOP funded by the Company............ (2,074) (2,440) (2,806) (3,227) MRP................................... (1,037) (1,220) (1,403) (1,613) --------- --------- --------- --------- Estimated investable net proceeds... $ 22,064 $ 26,090 $ 30,116 $ 34,746 ========= ========= ========= =========
9 CAPITALIZATION The following table sets forth information regarding the historical capitalization, including deposits, of the Bank at September 30, 1997 and the pro forma capitalization of the Company giving effect to the sale of the Common Stock at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range based upon the assumptions set forth under "Use of Proceeds" and below. For additional financial information regarding the Bank, see the Financial Statements and related Notes appearing elsewhere herein and in the Prospectus. Depending on market and financial conditions, the total number of shares to be issued in the Conversion may be significantly increased or decreased above or below the midpoint of the Amended Valuation Range. No resolicitation of subscribers and other purchasers will be made unless the aggregate purchase price of the Common Stock sold in the Conversion is below the minimum of the Amended Valuation Range or is above 15% above the maximum of the Amended Valuation Range. A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION MAY MATERIALLY AFFECT THE COMPANY'S PRO FORMA CAPITALIZATION. SEE "PRO FORMA DATA" HEREIN AND "THE CONVERSION -- STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED" IN THE PROSPECTUS.
Pro Forma Consolidated Capitalization of the Company at September 30, 1997 Based on the Sale of: ---------------------------------------------------------------------------------- Capitalization of the Bank at September 30, 2,592,500 shares 3,050,000 shares 3,507,500 shares 4,033,625 shares 1997 at $10.00 per share at $10.00 per share at $10.00 per share at $10.00 per share --- ------------------- ------------------- ------------------- ------------------- (Dollars in thousands) Deposits(1)................... $ 180,749 $ 180,749 $ 180,749 $ 180,749 $ 180,749 FHLB advances................. -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total deposits and borrowed funds........................ $ 180,749 $ 180,749 $ 180,749 $ 180,749 $ 180,749 =========== =========== =========== =========== =========== Capital stock: Preferred stock, par value $.01 per share; authorized - 500,000 shares; assumed outstanding - none.......... -- -- -- -- -- Common Stock, par value $.01 per share; authorized - 7,500,000 shares; shares to be outstanding - as shown (2)(3)...................... -- 26 31 35 40 Paid-in capital(2)(3)........ -- 25,149 29,719 34,290 39,546 Retained earnings(5)......... 15,938 15,938 15,938 15,938 15,938 Unrealized gain on securities available for sale........................ 2,794 2,794 2,794 2,794 2,794 Common Stock acquired by ESOP(4)...................... -- (2,074) (2,440) (2,806) (3,227) Common Stock acquired by MRP(3)....................... -- (1,037) (1,220) (1,403) (1,613) ----------- ----------- ----------- ----------- ----------- Total stockholders' equity(6). $ 18,732 $ 40,796 $ 44,822 $ 48,848 $ 53,478 =========== =========== =========== =========== ===========
(Footnotes on following page) 10 - ----------------- (1) Does not reflect withdrawals from savings accounts for the purchase of the Common Stock in the Conversion; any withdrawals will reduce pro forma capitalization by the amount of such withdrawals. (2) Does not reflect additional shares of Common Stock that possibly could be purchased by participants in the Option Plan, if implemented, under which directors, executive officers and other employees could be granted options to purchase an aggregate amount of the Common Stock equal to 10% of the shares issued in the Conversion (305,000 shares at the midpoint of the Estimated Valuation Range) at exercise prices equal to the market price of the Common Stock on the date of grant. Implementation of the Option Plan will require regulatory and stockholder approval. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Stock Option and Incentive Plan" and "Risk Factors -- Possible Dilutive Effect of MRP and Stock Options" in the Prospectus. (3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock to be sold in the Conversion will be purchased by the MRP through open market purchases. The dollar amount of the Common Stock to be purchased by the MRP is based on the $10.00 per share Purchase Price in the Conversion, represents unearned compensation and is reflected as a reduction of capital. Such amount does not reflect possible increases or decreases in the value of such stock relative to the Purchase Price in the Conversion. As the Bank accrues compensation expense to reflect the vesting of such shares pursuant to the MRP, the charge against capital will be reduced accordingly. Implementation of the MRP will require regulatory and stockholder approval. If the shares to fund the MRP are assumed to come from authorized but unissued shares purchased by the MRP from the Company at the Purchase Price within the year following the Conversion, at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, the number of outstanding shares would be 2,696,200 shares, 3,172,000 shares, 3,647,800 shares and 4,194,970 shares, respectively, and total stockholders' equity would be $41,834,000, $46,043,000, $50,252,000 and $55,092,000, respectively. If the MRP acquires authorized but unissued shares from the Company, stockholders' ownership in the Company would be diluted by approximately 3.85%. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Management Recognition Plan" and "Risk Factors -- Possible Dilutive Effect of MRP and Stock Options in the Prospectus and "Pro Forma Data" herein. (4) Assumes 8% of the shares of Common Stock to be sold in the Conversion are purchased by the ESOP, and that the funds used to purchase such shares are borrowed from the Company out of net proceeds. Although repayment of such debt will be secured solely by the shares purchased by the ESOP, the Bank or the Company expects to make discretionary contributions to the ESOP in an amount at least equal to the principal and interest payments on the ESOP debt. The approximate amount expected to be borrowed by the ESOP is not reflected in this table as borrowed funds but is reflected as a reduction of capital. As the Bank accrues compensation expense to reflect the allocation of such shares pursuant to the ESOP, the charge against capital will be reduced accordingly. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan" in the Prospectus. (5) The retained earnings of the Bank are substantially restricted. All capital distributions by the Bank are subject to regulatory restrictions tied to its regulatory capital level. In addition, after the Conversion, the Bank will be prohibited from paying any dividend that would reduce its regulatory capital below the amount in the liquidation account to be provided for the benefit of the Bank's Eligible Account Holders and Supplemental Eligible Account Holders at the time of the Conversion and adjusted downward thereafter. See "Regulation -- Depository Institution Regulation -- Dividend Restrictions" and "The Conversion -- Effect of Conversion to Stock Form on Depositors and Borrowers of the Bank -- Liquidation Account" in the Prospectus. (6) Pro forma stockholders' equity information is not intended to represent the fair market value of the Common Stock, the current value of the Bank's assets or liabilities or the amounts, if any, that would be available for distribution to stockholders in the event of liquidation. Such pro forma data may be materially affected by a change in the number of shares to be sold in the Conversion and by other factors. See "Pro Forma Data" herein. 11 HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE The table below presents the Bank's historical and pro forma capital position relative to its various minimum statutory and regulatory capital requirements at September 30, 1997 at the minimum, midpoint, maximum and maximum, as adjusted, of the Amended Valuation Range. For a discussion of the assumptions underlying the pro forma capital calculations presented below, see "Use of Proceeds," "Capitalization," "Pro Forma Data" and the financial statements and related notes appearing elsewhere herein. For a detailed description of the regulatory capital requirements applicable to the Bank, see "Regulation -- Regulation of the Bank -- Regulatory Capital Requirements" in the Prospectus.
Pro Forma at September 30, 1997(1) Assuming Issuance of: ----------------------------------------------------------------------- Historical at 2,592,500 shares 3,050,000 shares 3,507,500 shares September 30, 1997 at $10.00 per share at $10.00 per share at $10.00 per share ------------------ ------------------- ------------------- ------------------- Percent of Percent of Percent of Percent of Amount Assets (2) Amount Assets (2) Amount Assets (2) Amount Assets (2) ------ ---------- ------ ---------- ------ ---------- ------ ---------- (Dollars in thousands) Capital and retained earnings under generally accepted accounting principles.............. $ 18,732 9.27% $ 28,209 13.15% $ 29,948 13.81% $ 31,686 14.46% ========= ========== ========= ========== ========= ========== ========= ========== Tangible capital.......... $ 15,938 7.98% $ 25,415 12.00% $ 27,153 12.68% $ 28,892 13.35% Tangible capital requirement............. 2,997 1.50% 3,177 1.50% 3,211 1.50% 3,246 1.50% --------- ---------- --------- ---------- --------- ---------- --------- ---------- Excess.................. $ 12,941 6.48% $ 22,238 10.50% $ 23,942 11.18% $ 25,646 11.85% ========= ========== ========= ========== ========= ========== ========= ========== Core capital.............. $ 15,938 7.98% $ 25,415 12.00% $ 27,153 12.68% $ 28,892 13.35% Core capital requirement(3).......... 5,994 3.00% 6,354 3.00% 6,423 3.00% 6,491 3.00% --------- ---------- --------- ---------- --------- ---------- --------- ---------- Excess.................. $ 9,944 4.98% $ 19,061 9.00% $ 20,730 9.68% $ 22,401 10.35% ========= ========== ========= ========== ========= ========== ========= ========== Risk-based capital........ $ 16,170 21.95% $ 25,642 34.81% $ 27,381 37.17% $ 29,119 39.53% Risk-based capital requirement.............. 5,894 8.00% 5,894 8.00% 5,894 8.00% 5,894 8.00% --------- ---------- --------- ---------- --------- ---------- --------- ---------- Excess................... $ 10,276 13.95% $ 19,748 26.81% $ 21,487 29.17% $ 23,225 31.53% ========= ========== ========= ========== ========= ========== ========= ========== 4,033,625 shares at $10.00 per share ------------------- Percent of Amount Assets (2) ------ ---------- Capital and retained earnings under generally accepted accounting principles.............. $ 33,685 15.19% ========= ========== Tangible capital.......... $ 30,891 14.11% Tangible capital requirement............. 3,285 1.50% --------- ---------- Excess.................. $ 27,606 12.61% ========= ========== Core capital.............. $ 30,891 14.11% Core capital requirement(3).......... 6,570 3.00% --------- ---------- Excess.................. $ 24,321 11.11% ========= ========== Risk-based capital........ $ 31,118 42.24% Risk-based capital requirement.............. 5,894 8.00% --------- ---------- Excess................... $ 25,224 34.24% ========= ==========
12 - ---------------- (1) Assumes that the Company will purchase all of the capital stock of the Bank to be issued upon Conversion in exchange for at least 50% of the net Conversion proceeds. Also assumes net proceeds distributed to the Bank are initially invested in short term U.S. government securities. Further assumes that 8% of the Common Stock to be sold in the Conversion is acquired by the ESOP, and that the funds used to acquire such shares are borrowed from the Company. In accordance with generally accepted accounting principles, the amount of the Common Stock to be purchased by the ESOP represents unearned compensation and is reflected in this table as a reduction of capital. Although repayment of such debt will be secured solely by the Common Stock purchased by the ESOP, the Bank expects to make discretionary contributions to the ESOP in an amount at least equal to the principal and interest payments on the ESOP debt. As the Bank makes contributions to the ESOP for simultaneous payment in an equal amount on the ESOP debt, there will be a corresponding reduction in the charge against capital. See "Management of the Bank --Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan" in the Prospectus. Also assumes that the MRP will purchase in the open market Common Stock in an amount equal to 4% of the Common Stock issued in the Conversion. The implementation of the MRP is subject to regulatory and stockholder approvals. For purposes of this table, the dollar amount of the Common Stock to be purchased by the MRP is assumed to be equal to the $10.00 price per share being offered in the Conversion. Such price may increase or decrease between the date of consummation of the Conversion and the date that, following receipt of regulatory and stockholder approvals, the shares are actually purchased by the MRP. The purchase of shares of Common Stock by the MRP following receipt of such approvals may be from authorized but unissued shares of Common Stock or in the open market. In accordance with generally accepted accounting principles, the amount of the Common Stock to be purchased by the MRP represents unearned compensation and is reflected in this table as a reduction of capital. As the Bank accrues compensation expense over the five year period following such purchase in accordance with generally accepted accounting principles to reflect the vesting of such shares of Common Stock pursuant to the MRP, there will be a corresponding reduction in the charge against capital. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Management Recognition Plan" in the Prospectus. (2) Based on the Bank's adjusted total assets for the purpose of the tangible and core capital requirements and risk-weighted assets for the purpose of the risk-based capital requirement. See "Regulation -- Regulation of the Bank -- Regulatory Capital" in the Prospectus. (3) Does not reflect potential increases in the Bank's core capital requirement to between 4% and 5% of adjusted total assets in the event the OTS amends its capital requirements to conform to the more stringent leverage ratio adopted by the Office of the Comptroller of the Currency for national banks as described in "Regulation" in the Prospectus. 13 PRO FORMA DATA The following table sets forth the actual and, after giving effect to the Conversion for the periods and at the dates indicated, pro forma consolidated income, stockholders' equity and other data of the Bank prior to the Conversion and of the Company following the Conversion. Unaudited pro forma consolidated income and related data have been calculated for the nine months ended September 30, 1997 and the year ended December 31, 1996 as if the Common Stock had been sold at the beginning of such periods, and the estimated net proceeds had been invested at 5.18% and 5.22% at the beginning of the respective periods. The foregoing yields represent the average one-year Treasury bill rate during such periods. The pro forma after-tax yields for the Company and the Bank are assumed to be 3.42% and 3.45% for the nine months ended September 30, 1997 and for the year ended December 31, 1996, respectively, based on the effective tax rate of 34% in each of the respective periods. Unaudited pro forma consolidated stockholders' equity and related data have been calculated as if the Common Stock had been sold and was outstanding at the end of the periods, without any adjustment of historical or pro forma equity to reflect assumed earnings on estimated net proceeds. Per share amounts have been computed as if the Common Stock had been outstanding at the beginning of the period or at the dates shown, but without any adjustment of historical or pro forma stockholders' equity to reflect the earnings on estimated net proceeds. The pro forma data set forth below do not reflect withdrawals from deposit accounts to purchase shares or increases in capital and, in the case of newly issued shares, outstanding Common Stock upon the exercise of options by participants in the Option Plan, under which an aggregate amount of the Common Stock equal to 10% of the shares issued in the Conversion (305,000 shares at the midpoint of the Amended Valuation Range) are expected to be reserved for issuance to directors, executive officers and employees upon the exercise of stock options at exercise prices equal to the market price of the Common Stock on the date of grant. See "Management of the Bank -- Certain Benefit Plans and Agreements" in the Prospectus. The estimated net proceeds to the Company, as set forth in the following tables, assume the sale of the Common Stock at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range. The actual net proceeds from the sale of the Common Stock cannot be determined until the Conversion is completed. However, net proceeds set forth on the following tables are estimated based upon the following assumptions: (i) 100% of the shares of Common Stock will be sold in the Conversion as follows: (a) 8% will be sold to the ESOP and (b) the remaining shares will be sold to others in the Subscription Offering; and (ii) total Conversion expenses will be approximately $750,000. The foregoing assumptions regarding estimated purchases in the Subscription and Community Offerings are based on reasonable market assumptions, market conditions, consultations between the Bank and the Agents and planned purchases by the ESOP. Actual expenses may vary from those estimated. The stockholders' equity and related data presented herein are not intended to represent the fair market value of the Common Stock, the current value of assets or liabilities, or the amounts, if any, that would be available for distribution to stockholders in the event of liquidation. For additional information regarding the liquidation account, see "The Conversion -- Effect of Conversion to Stock Form on Depositors and Borrowers of the Bank -- Liquidation Account" in the Prospectus. The pro forma income and related data derived from the assumptions set forth above should not be considered indicative of the actual results of operations of the Bank and the Company for any period. Such pro forma data may be materially affected by a change in the number of shares to be issued in the Conversion and other factors. See "The Conversion -- Stock Pricing and Number of Shares to be Issued" in the Prospectus. 14
At or for the Nine Months Ended September 30, 1997 ------------------------------------------------------------------------------------ 2,592,500 shares at 3,050,000 shares at 3,507,500 shares at 4,033,625 shares at $10.00 per share $10.00 per share $10.00 per share $10.00 per share ---------------- ---------------- ---------------- ---------------- (Dollars in thousands, except per share amounts) Gross offering proceeds......................... $ 25,925 $ 30,500 $ 35,075 $ 40,336 Estimated offering expenses..................... (750) (750) (750) (750) ---------- ---------- ---------- ---------- Estimated net proceeds.......................... 25,175 29,750 34,325 39,586 ESOP funded by the Company...................... (2,074) (2,440) (2,806) (3,227) MRP............................................. (1,037) (1,220) (1,403) (1,613) ---------- ---------- ---------- ---------- Estimated investable net proceeds............... $ 22,064 $ 26,090 $ 30,116 $ 34,746 ========== ========== ========== ========== Net income: Historical net income.......................... $ 1,347 $ 1,347 $ 1,347 $ 1,347 Pro forma income on investable net proceeds.... 566 669 772 891 Pro forma ESOP adjustment (1).................. (128) (151) (174) (200) Pro forma MRP adjustment (2)................... (103) (121) (138) (160) ---------- ---------- ---------- ---------- Pro forma net income.......................... $ 1,682 $ 1,744 $ 1,807 $ 1,878 ========== ========== ========== ========== Net income per share: Historical net income.......................... $ 0.56 $ 0.48 $ 0.42 $ 0.36 Pro forma income on investable net proceeds.... 0.23 0.23 0.23 0.23 Pro forma ESOP adjustment (1).................. (0.05) (0.05) (0.05) (0.05) Pro forma MRP adjustment (2)................... (0.04) (0.04) (0.04) (0.04) ---------- ---------- ---------- ---------- Pro forma net income per share................ $ 0.70 $ 0.62 $ 0.56 $ 0.50 ========== ========== ========== ========== Weighted average number of shares outstanding for earnings per share calculations............ 2,404,544 2,828,875 3,253,206 3,741,187 Stockholders' equity: (3) Historical...................................... $ 18,732 $ 18,732 $ 18,732 $ 18,732 Estimated net proceeds.......................... 25,175 29,750 34,325 39,586 Common Stock acquired by ESOP (1)............... (2,074) (2,440) (2,806) (3,227) Common Stock acquired by MRP (2)................ (1,037) (1,220) (1,403) (1,613) ---------- ---------- ---------- ---------- Pro forma stockholders' equity.................. $ 40,796 $ 44,822 $ 48,848 $ 53,478 ========== ========== ========== ========== Stockholders' equity per share: (3) Historical..................................... $ 7.23 $ 6.14 $ 5.34 $ 4.65 Estimated net proceeds......................... 9.71 9.76 9.79 9.81 Common Stock acquired by ESOP (1)............ (0.80) (0.80) (0.80) (0.80) Common Stock acquired by MRP (2)............... (0.40) (0.40) (0.40) (0.40) ---------- ---------- ---------- ---------- Pro forma stockholders' equity per share....... $ 15.74 $ 14.70 $ 13.93 $ 13.26 ========== ========== ========== ========== Weighted average number of shares outstanding for stockholders' equity per share calculations (4)............................... 2,592,500 3,050,000 3,507,500 4,033,625 Offering price as a percentage of pro forma stockholders' equity per share (5)........... 63.5% 68.0% 71.8% 75.4% ========== ========== ========== ========== Ratio of offering price to pro forma annualized 10.7x 12.1x 13.4x 15.0x net income per share........................... ========== ========== ========== ==========
(Footnotes on following page) 15 - ----------- (1) Assumes 8% of the shares to be sold in the Conversion are purchased by the ESOP under all circumstances, and that the funds used to purchase such shares are borrowed from the Company. The approximate amount expected to be borrowed by the ESOP is not reflected as a liability but is reflected as a reduction of capital. Although repayment of such debt will be secured solely by the shares purchased by the ESOP, the Bank expects to make discretionary contributions to the ESOP in an amount at least equal to the principal and interest payments on the ESOP debt. Pro forma net income has been adjusted to give effect to such contributions, based upon a fully amortizing debt with an eight -year term. Because the Company will be providing the ESOP loan, only principal payments on the ESOP loan are reflected as employee compensation and benefits expense. For purposes of this table the Purchase Price of $10.00 was utilized to calculate the ESOP expense. The Bank intends to record compensation expense related to the ESOP in accordance with American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") No. 93-6. As a result, to the extent the value of the Common Stock appreciates over time, compensation expense related to the ESOP will increase. SOP 93-6 also changes the earnings per share computations for leveraged ESOPs to include as outstanding only shares that have been committed to be released to participants. For purposes of the preceding table, it was assumed that 9.38% of the ESOP shares purchased in the Conversion were committed to be released at September 30, 1997. If it is assumed that 100% of the ESOP shares were committed to be released at September 30, 1997, the application of SOP 93-6 would result in net income per share of $0.65, $0.57, $0.52 and $0.47 respectively, and a ratio of offering price to pro forma annualized net income per share of 11.5 times, 13.2 times, 14.4 times and 16.0 times, respectively, based on the sale of shares at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan" in the Prospectus. (2) Assumes a number of shares of Common Stock equal to 4% of the Common Stock to be sold in the Conversion will be purchased by the MRP in the open market in the year following the Conversion. The dollar amount of the Common Stock to be purchased by the MRP is based on the Purchase Price of $10.00 in the Conversion and represents unearned compensation and is reflected as a reduction of capital. Such amount does not reflect possible increases or decreases in the value of such stock relative to the Purchase Price in the Conversion. As the Bank accrues compensation expense to reflect the vesting of such shares pursuant to the MRP, the charge against capital will be reduced accordingly. MRP adjustment is based on MRP expenses for the first year following the Conversion calculated in accordance with generally accepted accounting principles. MRP expenses are expected to be lower in subsequent years. Implementation of the MRP would require stockholder approval at a meeting of the Company's stockholders to be held within one year but no earlier than six months after the Conversion. For purposes of this table, it is assumed that the MRP will be adopted by the Bank's Board of Directors and approved by the Company's stockholders, and that the MRP will purchase the shares of Common Stock in the open market within the year following the Conversion. If the shares to be purchased by the MRP are assumed to be newly issued shares purchased from the Company by the MRP at the Purchase Price, at the minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation Range, the offering price as a percentage of pro forma stockholders' equity per share would be 64.5%, 68.9%, 72.6% and 76.1%, respectively, and pro forma net income per share would be $0.67, $0.59, $0.53 and $0.48, respectively. As a result of the MRP, stockholders' interests will be diluted by approximately 3.85%. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Management Recognition Plan" and "Risk Factors -- Possible Dilutive Effect of MRP and Stock Options" in the Prospectus. (3) Consolidated stockholders' equity represents the excess of the carrying value of the assets of the Company over its liabilities. The amounts shown do not reflect the federal income tax consequences of the potential restoration to income of the bad debt reserves for income tax purposes, which would be required in the event of liquidation. The amounts shown also do not reflect the amounts required to be distributed in the event of liquidation to eligible depositors from the liquidation account which will be established upon the consummation of the Conversion. Pro forma stockholders' equity information is not intended to represent the fair market value of the Common Stock, the current value of the Bank's assets or liabilities or the amounts, if any, that would be available for distribution to stockholders in the event of liquidation. Such pro forma data may be materially affected by a change in the number of shares to be sold in the Conversion and by other factors. (4) Assumes that all shares of Common Stock held by the ESOP were committed to be released. (5) It is expected that following the consummation of the Conversion the Company will adopt the Option Plan, which would be subject to stockholder approval, and that such plan would be considered and voted upon at a meeting of the Company's stockholders to be held within one year but no earlier than six months after the Conversion. Upon adoption of the Option Plan, employees and directors could be granted options to purchase an aggregate amount of the Common Stock equal to 10% of the shares issued in the Conversion at exercise prices equal to the market price of the Common Stock on the date of grant. In the event the shares issued under the Option Plan consist of newly issued shares of Common Stock and all options available for award under the Option Plan were awarded, the interests of existing stockholders would be diluted. At the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, if all shares under the Option Plan were newly issued and the exercise price for the option shares were equal to the Purchase Price in the Conversion, net income per share would be $0.63, $0.56, $0.50 and $0.45, respectively, and the stockholders' equity per share would be $15.21, $14.27, $13.57 and $12.96, respectively. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Stock Option Plan" in the Prospectus. 16
At or for the Year Ended December 31, 1996 ------------------------------------------------------------------------------------ 2,592,500 shares at 3,050,000 shares at 3,507,500 shares at 4,033,625 shares at $10.00 per share $10.00 per share $10.00 per share $10.00 per share ---------------- ---------------- ---------------- ---------------- (Dollars in thousands, except per share amounts) Gross offering proceeds......................... $ 25,925 $ 30,500 $ 35,075 $ 40,336 Estimated offering expenses..................... (750) (750) (750) (750) ---------- ---------- ---------- ---------- Estimated net proceeds.......................... 25,175 29,750 34,325 39,586 ESOP funded by the Company...................... (2,074) (2,440) (2,806) (3,227) MRP............................................. (1,037) (1,220) (1,403) (1,613) ---------- ---------- ---------- ---------- Estimated investable net proceeds............... $ 22,064 $ 26,090 $ 30,116 $ 34,746 ========== ========== ========== ========== Net income: Historical net income (1)...................... $ 195 $ 195 $ 195 $ 195 Pro forma income on investable net proceeds...................................... 760 898 1,037 1,196 Pro forma ESOP adjustment (2).................. (171) (201) (232) (266) Pro forma MRP adjustment (3)................... (137) (161) (185) (213) ---------- ---------- ---------- ---------- Pro forma net income.......................... $ 647 $ 731 $ 815 $ 912 ========== ========== ========== ========== Net income per share: Historical net income (1)...................... $ 0.08 $ 0.07 0.06 $ 0.05 Pro forma income on investable net proceeds...................................... 0.32 0.32 0.32 0.32 Pro forma ESOP adjustment (2).................. (0.07) (0.07) (0.07) (0.07) Pro forma MRP adjustment (3)................... (0.06) (0.06) (0.06) (0.06) ---------- ---------- ---------- ---------- Pro forma net income per share................ $ 0.27 $ 0.26 $ 0.25 $ 0.24 ========== ========== ========== ========== Weighted average number of shares outstanding for earnings per share calculations............ 2,411,025 2,836,500 3,261,975 3,751,271 Stockholders' equity: (4) Historical..................................... $ 16,824 $ 16,824 $ 16,824 $ 16,824 Estimated net proceeds......................... 25,175 29,750 34,325 39,586 Common Stock acquired by ESOP (2).............. (2,074) (2,440) (2,806) (3,227) Common Stock acquired by MRP (3)............... (1,037) (1,220) (1,403) (1,613) ---------- ---------- ---------- ---------- Pro forma stockholders' equity................. $ 38,888 $ 42,914 $ 46,940 $ 51,570 ========== ========== ========== ========== Stockholders' equity per share: (4) Historical..................................... $ 6.49 $ 5.52 $ 4.80 4.17 Estimated net proceeds......................... 9.71 9.75 9.78 9.81 Common Stock acquired by ESOP (2).............. (0.80) (0.80) (0.80) (0.80) Common Stock acquired by MRP (3)............... (0.40) (0.40) (0.40) (0.40) ---------- ---------- ---------- ---------- Pro forma stockholders' equity per share....... $ 15.00 $ 14.07 $ 13.38 $ 12.78 ========== ========== ========== ========== Weighted average number of shares outstanding for stockholders' equity per share calculations (5)............................... 2,592,500 3,050,000 3,507,500 4,033,625 Offering price as a percentage of pro forma stockholders' equity per share (6)........... 66.7% 71.1% 74.7% 78.2% ========== ========== ========== ========== Ratio of offering price to pro forma net income per share...................................... 37.0x 38.5x 40.0x 41.7x ========== ========== ========== ==========
(Footnotes on following page) 17 - --------- (1) Historical net income and historical net income per share include an after- tax charge of $812,000 taken during the year ended December 31, 1996 representing a one-time special assessment of 65.7 basis points on the Bank's deposits held as of March 31, 1995 pursuant to legislation enacted to recapitalize the SAIF. If the one-time special assessment had been excluded, at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, pro forma net income per share would have been $0.60, $0.54, $0.50 and $0.46, respectively. See Note 13 of Notes to Financial Statements in the Prospectus. At the midpoint of the Estimated Valuation Range, and excluding the effect of the one-time SAIF assessment, the Company's offering price as a percentage of pro forma stockholders' equity would have been 69.8%, and its pro forma ratio of offering price to pro forma net income per share would have been 18.5 times. (2) Assumes 8% of the shares to be sold in the Conversion are purchased by the ESOP under all circumstances, and that the funds used to purchase such shares are borrowed from the Company. The approximate amount expected to be borrowed by the ESOP is not reflected as a liability but is reflected as a reduction of capital. Although repayment of such debt will be secured solely by the shares purchased by the ESOP, the Bank expects to make discretionary contributions to the ESOP in an amount at least equal to the principal and interest payments on the ESOP debt. Pro forma net income has been adjusted to give effect to such contributions, based upon a fully amortizing debt with an eight-year term. Because the Company will be providing the ESOP loan, only principal payments on the ESOP loan are reflected as employee compensation and benefits expense. For purposes of this table the Purchase Price of $10.00 was utilized to calculate the ESOP expense. The Bank intends to record compensation expense related to the ESOP in accordance with SOP No. 93-6. As a result, to the extent the value of the Common Stock appreciates over time, compensation expense related to the ESOP will increase. SOP 93-6 also changes the earnings per share computations for leveraged ESOPs to include as outstanding only shares that have been committed to be released to participants. For purposes of the preceding table, it was assumed that 12.5% of the ESOP shares purchased in the Conversion were committed to be released at December 31, 1996. If it is assumed that 100% of the ESOP shares were committed to be released at December 31, 1996, the application of SOP 93-6 would result in net income per share of $0.25, $0.24, $0.23 and $0.22, respectively, and a ratio of offering price to pro forma net income per share of 40.0 times, 41.7 times, 43.5 times and 45.5 times, respectively, based on the sale of shares at the minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation Range. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan" in the Prospectus. (3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock to be sold in the Conversion will be purchased by the MRP in the open market in the year following the Conversion. The dollar amount of the Common Stock to be purchased by the MRP is based on the Purchase Price in the Conversion and represents unearned compensation and is reflected as a reduction of capital. Such amount does not reflect possible increases or decreases in the value of such stock relative to the Purchase Price in the Conversion. As the Bank accrues compensation expense to reflect the vesting of such shares pursuant to the MRP, the charge against capital will be reduced accordingly. MRP adjustment is based on MRP expenses for the first year following the Conversion calculated in accordance with generally accepted accounting principles. MRP expenses are expected to be lower in subsequent years. Implementation of the MRP would require stockholder approval at a meeting of the Company's stockholders to be held within one year but no earlier than six months after the Conversion. For purposes of this table, it is assumed that the MRP will be adopted by the Bank's Board of Directors and approved by the Company's stockholders, and that the MRP will purchase the shares of Common Stock in the open market within the year following the Conversion. If the shares to be purchased by the MRP are assumed to be newly issued shares purchased from the Company by the MRP at the Purchase Price, at the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, the offering price as a percentage of pro forma stockholders' equity per share would be 67.5%, 71.9%, 75.5% and 78.9%, respectively, and pro forma net income per share would be $0.26, $0.25 and $0.24, and $0.23, respectively. As a result of the MRP, stockholders' interests will be diluted by approximately 3.85%. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Management Recognition Plan" and "Risk Factors -- Possible Dilutive Effect of MRP and Stock Options" in the Prospectus. (4) Consolidated stockholders' equity represents the excess of the carrying value of the assets of the Company over its liabilities. The amounts shown do not reflect the federal income tax consequences of the potential restoration to income of the bad debt reserves for income tax purposes, which would be required in the event of liquidation. The amounts shown also do not reflect the amounts required to be distributed in the event of liquidation to eligible depositors from the liquidation account which will be established upon the consummation of the Conversion. Pro forma stockholders' equity information is not intended to represent the fair market value of the Common Stock, the current value of the Bank's assets or liabilities or the amounts, if any, that would be available for distribution to stockholders in the event of liquidation. Such pro forma data may be materially affected by a change in the number of shares to be sold in the Conversion and by other factors. (5) Assumes that all shares of Common Stock held by the ESOP were committed to be released. (6) It is expected that following the consummation of the Conversion the Company will adopt the Option Plan, which would be subject to stockholder approval, and that such plan would be considered and voted upon at a meeting of the Company's stockholders to be held within one year but no earlier than six months after the Conversion. Upon adoption of the Option Plan, employees and directors could be granted options to purchase an aggregate amount of the Common Stock equal to 10% of the shares issued in the Conversion at exercise prices equal to the market price of the Common Stock on the date of grant. In the event the shares issued under the Option Plan consist of newly issued shares of Common Stock and all options available for award under the Option Plan were awarded, the interests of existing stockholders would be diluted. At the minimum, midpoint, maximum and 15% above the maximum of the Amended Valuation Range, if all shares under the Option Plan were newly issued and the exercise price for the option shares were equal to the Purchase Price in the Conversion, net income per share would be $0.24, 0.23, $0.22 and $0.21 respectively, and the stockholders' equity per share would be $14.55, $13.70, $13.08 and $12.53, respectively. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Stock Option Plan" in the Prospectus. 18 PROPOSED MANAGEMENT PURCHASES The following table sets forth information, based on orders received in the Subscription and Community Offerings, regarding the approximate number of shares of Common Stock intended to be purchased by each of the directors and officers of the Bank and by all directors and executive officers as a group, including their associates. For purposes of the following table, it has been assumed that 3,050,000 shares of Common Stock (i.e., the midpoint of the Amended Valuation Range) will be sold at $10.00 per share (see " The Conversion-- Stock Pricing and Number of Shares to be Issued" in the Prospectus) and that sufficient shares will be available to satisfy subscriptions in all categories.
Aggregate Purchase Price Name and Position Total Shares Percent of Total of Proposed Purchases - ------------------------------------------------- ----------------- ------------------- ---------------------------- WD Kelly 50,000 1.64% $ 500,000 Chairman of the Board Bruce Thomas 50,000 1.64% 500,000 Director, President and Chief Executive Officer Peggy R. Noel 50,000 1.64% 500,000 Director, Executive Vice President and Chief Financial Officer Boyd M. Clark 50,000 1.64% 500,000 Director and Senior Vice President -- Loan Administration Clifton H. Cochran 22,500 0.74% 225,000 Director Drury R. Embry 4,500 0.15% 45,000 Director Walton G. Ezell 50,000 1.64% 500,000 Director John Noble Hall, Jr. 20,000 0.66% 200,000 Director Chester K. Wood 10,000 0.33% 100,000 Director ------- ----- ---------- All directors and executive officers, as a group (9 persons) and their associates 307,000 10.08% 3,070,000 ESOP (1) 244,000 8.00% 2,440,000 MRP (2) 122,000 4.00% 1,220,000 ------- ----- ---------- Total (3) 673,000 22.08% $6,730,000 ======= ===== ==========
(Footnotes on following page) 19 - ------- (1) Consists of shares that could be allocated to participants in the ESOP, under which executive officers and other employees would be allocated in the aggregate 8.0% of the Common Stock issued in the Conversion. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan" in the Prospectus. (2) Consists of shares that are expected to be awarded to participants in the MRP, if implemented, under which directors, executive officers and other employees would be awarded an aggregate number of shares equal to 4.0% of the Common Stock sold in the Conversion. The dollar amount of the Common Stock to be purchased by the MRP is based on the Purchase Price in the Conversion and does not reflect possible increases or decreases in the value of such Stock relative to the Purchase Price per share in the Conversion. Implementation of the MRP would require stockholder approval. See "Management of the Bank -- Certain Benefit Plans and Agreements --Management Recognition Plan" in the Prospectus. Such shares could be newly issued shares or shares purchased in the open market following implementation of the MRP, in the sole discretion of the Company's Board of Directors. The percentage shown assumes the shares are purchased in the open market. If all shares acquired by the MRP are newly issued shares, the percentage of the outstanding Common Stock owned by the MRP would be 3.85%. Any sale of newly issued shares to the MRP would be dilutive to existing stockholders. See "Risk Factors -- Potential Benefits of Conversion to Management" in the Prospectus. (3) Does not include shares that possibly would be purchased by participants in an Option Plan intended to be implemented following the Conversion, under which directors, executive officers and other employees would be granted options to purchase an aggregate amount of the Common Stock equal to 10% of the shares issued in the Conversion at exercise prices equal to the market price of the Common Stock on the date of grant. Shares issued pursuant to the exercise of options could be from treasury stock or newly issued shares. Implementation of the Option Plan would require regulatory and stockholder approval. See "Management of the Bank -- Certain Benefit Plans and Agreements -- Stock Option Plan" in the Prospectus. MARKET FOR THE COMMON STOCK The Company has never issued capital stock to the public. Consequently, there is no established market for the Common Stock. The Common Stock has been approved for quotation on the Nasdaq Stock Market ("Nasdaq") under the symbol "HFBC." 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 persons purchasing shares of Common Stock will be able to sell them at or above the Purchase Price. The development and maintenance 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 or the Bank. The number of active buyers and sellers of the Common Stock at any particular time may be limited. Under such circumstances, investors in the Common Stock could have difficulty disposing of their shares and therefore should not view the Common Stock as a short-term investment. Friedman, Billings, Ramsey & Co. has indicated its intention to act as a market maker in the Common Stock following consummation of the Conversion, depending on trading volume and subject to compliance with applicable laws and regulatory requirements. 20 RECENT SELECTED FINANCIAL INFORMATION AND OTHER DATA The following summary of selected financial information and other data does not purport to be complete and is qualified in its entirety by reference to the detailed information and Financial Statements and accompanying Notes appearing elsewhere in this Prospectus Supplement and in the Prospectus. The selected financial and other data as of and for the nine months ended September 30, 1997 and 1996 are unaudited and are derived from the Bank's internal financial statements which, in the opinion of management, contain all adjustments (consisting only of normal recurring adjustments) which are necessary for a fair presentation of the results for such periods.
FINANCIAL DATA: At September 30, 1997 At December 31, 1996 --------------------------- --------------------------- Total amount of: (Dollars in thousands) Assets............................... $ 202,009 $ 204,398 Loans receivable, net................ 100,675 95,496 Cash and due from banks.............. 1,012 1,452 Time deposits and interest-bearing deposits in FHLB........................ 2,378 2,000 Federal funds sold................... 8,295 500 Securities available for sale........ 14,045 5,125 Securities held to maturity: FHLB securities................... 50,981 77,962 Mortgage-backed securities........ 20,786 17,984 Deposits............................. 180,749 183,827 FHLB advances........................ -- 1,317 Total equity......................... 18,732 16,824
OPERATING DATA: Nine Months Ended September 30, -------------------------------------------------------- 1997 1996 ---- ---- Interest income....................... $10,011 $ 9,905 Interest expense...................... 6,642 7,473 ------- ------- Net interest income before provision for loan losses........... 3,369 2,432 Provision for loan losses............. 15 -- ------- ------- Net interest income................... 3,354 2,432 Non-interest income................... 404 465 Non-interest expense.................. 1,725 3,001(1) ------- ------- Income (loss) before income taxes..... 2,033 (104) Provision for income taxes............ 686 (43) ------- ------- Net income............................ $ 1,347 $ (61)(1) ======= =======
- -------------------- (1) Includes payment to the SAIF of a one-time deposit insurance special assessment of $1.2 million ($812,000 net of tax) pursuant to legislation enacted to recapitalize SAIF. Excluding the effect of the SAIF assessment, the Bank's net income for the nine months ended September 30, 1996 would have been $751,000. 21
KEY OPERATING RATIOS: At or for the Nine Months Ended September 30, (1) ------------------------------------------------------------ 1997 1996 -------------------------- --------------------------- Performance Ratios: Return on average assets (net income divided by average total assets).................................................. 0.88% (0.04)%(2) Return on average equity (net income divided by average total equity).......................................... 10.12% (0.50)%(2) Interest rate spread (combined weighted average interest rate earned less combined weighted average interest rate cost)...... 1.84% 1.21% Ratio of average interest-earning assets to average interest-bearing liabilities................................... 109.59% 107.47% Ratio of non-interest expense to average total assets........... 1.13% 2.84% Ratio of net interest income after provision for loan losses to non-interest expense........................ 194.55% 81.01% Efficiency ratio (noninterest expense divided by sum of net interest income plus noninterest income)....................... 45.88% 103.63% ASSET QUALITY RATIOS: Nonperforming assets to total assets at end of period........... 0.12% 0.08% Nonperforming loans to total loans at end of period............. 0.25% 0.17% Allowance for loan losses to total loans at end of period....... 0.23% 0.12% Allowance for loan losses to nonperforming loans at end of period.................................................. 93.93% 71.78% Provision for loan losses to total loans receivable, net........ 0.01% N/A(3) Net charge-offs to average loans outstanding.................... N/A(3) 0.006% CAPITAL RATIOS: Total equity to total assets at end of period................... 9.27% 7.72% Average total equity to average assets.......................... 8.74% 7.64%
- -------------- (1) Annualized as appropriate. (2) Includes the effect of the payment of the Bank in 1996 of a one-time deposit insurance special assessment of $1.2 million to the SAIF. Excluding the effect of the SAIF assessment, the Bank's return on average assets would have been 0.47% and its return on average equity would have been 6.20%. (3) Ratio is not applicable because the Bank did not have any provision for loan losses or net charge-offs for this period.
REGULATORY CAPITAL RATIOS: September 30, 1997 ---------------------------------- (Dollars in thousands) Tangible capital.............................................. $15,938 7.98% Less: Tangible capital requirement.......................... 2,997 1.50 ------- ----- Excess....................................................... $12,941 6.48% ======= ===== Core capital.................................................. $15,938 7.98% Less: Core capital requirement............................... 5,994 3.00 ------- ----- Excess....................................................... $ 9,944 4.98% ======= ===== Total risk-based capital...................................... $16,170 21.95% Less: Risk-based capital requirement......................... 5,894 8.00 ------- ----- Excess....................................................... $10,276 13.95% ======= =====
22 HOPKINSVILLE FEDERAL SAVINGS BANK Statements of Financial Condition
September 30, December 31, ASSETS 1997 1996 ------------- ------------ (Unaudited) (In thousands) Cash and due from banks............................... $ 1,012 $ 1,452 Time deposits......................................... 2,000 2,000 Interest-bearing deposits in Federal Home Loan Bank...................................... 378 0 Federal funds sold.................................... 8,295 500 Investment securities available for sale.............. 14,045 5,125 Investment securities held to maturity (Estimated market values of $75,099 and $95,762 at September 30, 1997 and December 31, 1996, respectively)................... 71,767 95,947 Loans receivable, net................................. 100,675 95,496 Accrued interest receivable........................... 1,032 1,290 Premises and equipment, net........................... 2,418 2,333 Foreclosed real estate................................ -- -- Other assets.......................................... 387 255 -------- -------- Total assets................................ $202,009 $204,398 ======== ======== LIABILITIES AND RETAINED EARNINGS Liabilities: Deposits............................................ $180,749 $183,827 Deferred Federal income taxes....................... 1,938 1,659 Advances from Federal Home Loan Bank................ 0 1,317 Other liabilities................................... 590 771 -------- -------- Total liabilities 183,277 187,574 -------- -------- Retained earnings: Retained earnings, substantially restricted......... 15,938 14,591 Net unrealized appreciation on investment securities available for sale..................... 2,794 2,233 -------- -------- Total retained earnings..................... 18,732 16,824 -------- -------- Total liabilities and retained earnings.. $202,009 $204,398 ======== ========
See accompanying Notes to Financial Statements. 23 HOPKINSVILLE FEDERAL SAVINGS BANK STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 1997 1996 1997 1996 --------- ---------- --------- ---------- (In thousands) Interest income: Interest on loans.............................. 1,915 1,766 $ 5,616 $4,988 Interest and dividends on investments.......... 1,270 1,420 3,910 4,351 Time deposit interest income................... 183 155 485 566 ------ ------ ------- ------ Total interest income........................ 3,368 3,341 10,011 9,905 ------ ------ ------- ------ Interest expense: Interest on deposits........................... 2,216 2,421 6,633 7,450 Other Funds.................................... 0 0 9 23 ------ ------ ------- ------ Total interest expense....................... 2,216 2,421 6,642 7,473 ------ ------ ------- ------ Net interest income............................... 1,152 920 3,369 2,432 Provision for loan losses......................... 5 0 15 0 ------ ------ ------- ------ Net interest income after provision for loan losses................................ 1,147 920 3,354 2,432 ------ ------ ------- ------ Other income: Loan and other service fees.................... 122 137 353 422 Other, net..................................... 12 10 51 43 ------ ------ ------- ------ Total other income......................... 134 147 404 465 ------ ------ ------- ------ Net expenses: Salaries and benefits.......................... 342 309 1,064 921 Federal insurance premium...................... 29 1,356 92 1,577 Occupancy expense, net......................... 49 48 148 160 Data processing................................ 36 32 85 62 Other operating expenses....................... 106 93 336 281 ------ ------ ------- ------ Total other expenses......................... 562 1,838 1,725 3,001 ------ ------ ------- ------ Income (loss) before income taxes and cumulative effect of change in accounting principle.......... 719 (771) 2,033 (104) Provision for income taxes........................ 242 (265) 686 (43) ------ ------ ------- ------ Net income (loss)................................. $ 477 $ (506) $ 1,347 $ (61) ====== ====== ======= ======
See accompanying Notes to Financial Statements. 24 HOPKINSVILLE FEDERAL SAVINGS BANK STATEMENTS OF EQUITY (UNAUDITED)
Net Unrealized Appreciation On Retained Available-For-Sale Earnings Securities Total Equity --------------- ---------------------- ------------------ (in thousands) BALANCE, DECEMBER 31, 1995 $ 14,396 $ 1,606 $ 16,002 Net loss (61) -- (61) Net changes in unrealized appreciation on available-for-sale securities, net of taxes of $24 -- 46 46 --------- -------- --------- BALANCE, SEPTEMBER 30, 1996 $ 14,335 $ 1,652 $ 15,987 ========= ======== ========= BALANCE, DECEMBER 31, 1996 $ 14,591 $ 2,233 $ 16,824 Net income 1,347 -- 1,347 Net changes in unrealized appreciation on available-for-sale securities, net of taxes of $290 -- 561 561 --------- -------- --------- BALANCE, SEPTEMBER 30, 1997 $ 15,938 $ 2,794 $ 18,732 ========= ======== =========
25 HOPKINSVILLE FEDERAL SAVINGS BANK Statements of Cash Flows (UNAUDITED)
For the Nine Months Ended September 30, ------------------- 1997 1996 -------- --------- (In thousands) Cash flows from operating activities: Net income (loss)........................................... $ 1,347 $ (61) Adjustments to reconcile net income to net cash provided by operating activities: Deferred income to....................................... (10) 25 Provision for loan losses................................ 15 100 Gain on sale of equipment................................ 0 (8) Provision for depreciation............................... 75 86 FHLB stock dividend...................................... (88) (80) Accretion of investment security discounts............... (28) (4) (Increase) decrease in Accrued interest receivable.............................. 258 (101) Other assets............................................. (132) (520) Increase (decrease) in other liabilities................. (360) 1,460 ------- -------- Net cash provided by operating activities................ 1,077 897 ------- -------- Cash flows from investing activities: Net (increase) decrease in time deposits................. 0 5,000 Net (increase) decrease in interest earning deposits in FHLB........................................... (378) 5,519 Net (increase) decrease in federal funds sold............ (7,795) 5,077 Proceeds from maturities of held-to-maturity securities.. 30,127 41,614 Purchases of held-to-maturity securities................. (5,933) (41,012) Purchases of available for sale securities............... (7,967) (15) Net increase in loans.................................... (5,194) (9,799) Purchases of premises/equipment.......................... (173) (91) Proceeds from sale of equipment.......................... 13 14 ------- -------- Net cash provided by investing activities................ 2,700 6,307 ------- -------- Cash flows from financing activities: Net increase (decrease) in demand deposits, NOW accounts and savings accounts...................... 542 1,805 Net increase (decrease) in time deposits................. (3,621) (9,107) Increase (decrease) in advance payments by borrowers for taxes and insurance...................... 179 237 Net increase (decrease) in other borrowed funds.......... (1,317) 0 ------- -------- Net cash used in financing activities.................. (4,217) (7,065) ------- -------- Increase (decrease) in cash and cash equivalents....... (440) 139 Cash and cash equivalents, beginning of period........... 1,452 1,303 ------- -------- Cash and cash equivalents, end of period................. $ 1,012 $ 1,442 ======= ======== Supplemental disclosures of cash flow information............. Cash paid for income taxes............................... $ 550 $ 282 ======= ======== Cash paid for interest................................... $ 6,903 $ 7,330 ======= ========
See accompanying Notes to Financial Statements. 26 HOPKINSVILLE FEDERAL SAVINGS BANK NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Presentation HopFed Bancorp, Inc. (the "Company") is a Delaware corporation organized by Hopkinsville Federal Savings Bank (the "Bank") in connection with the conversion of the Bank from a federally chartered mutual savings bank to a federally chartered stock savings bank. For purposes of this Prospectus Supplement the financial statements of the Company have been omitted because as of September 30, 1997, the Company had not yet issued any stock, had no assets (other than advance subscription proceeds) and no liabilities, and had not yet conducted any business other than of an organizational nature. Alternatively, the unaudited financial statements and the Management's Discussion and Analysis of Financial Condition and Results of the Operations presented herein are for the Bank as a predecessor entity to the Company. No pro forma effect has been given to the sale of the Company's common stock in the Conversion. The accompanying financial statements are unaudited and were prepared consistent with instructions to a Quarterly Report on Form 10-Q and therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. All normal, recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the presentation of the financial statements have been included. The results of operations for the three and nine months ended September 30, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997. These interim financial statements should be read in conjunction with the Bank's audited financial statements and note disclosures contained in the Company's Prospectus dated October 10, 1997. 2. LOAN PORTFOLIO COMPOSITION The following table sets forth the composition of the Bank's loans at the dates indicated. At September 30, 1997, the Bank had no concentrations of loans exceeding 10% of total loans other than as described below. 27
At September 30, 1997 At December 31, 1996 ----------------------------------------- ---------------------------------------- Amount Percent Amount Percent ------------------ ------------------- ----------------- ------------------ (Dollars in thousands) Type of Loan: - ------------ Real estate loans: One-to-four family residential........ $ 80,461 77.9% $77,318 79.6% Multi-family residential.............. 1,843 1.8% 1,466 1.5% Construction.......................... 5,514 5.3% 5,389 5.6% Non-residential....................... 6,847 6.6% 5,467 5.6% -------- ---- ------- ----- Total real estate loans.............. 94,665 91.6% 89,640 92.3% ======== ==== ======= ===== Consumer loans: Secured by deposits................... 3,275 3.2% 3,484 3.6% Other consumer loans.................. 5,383 5.2% 4,004 4.1% -------- ---- ------- ----- Total consumer loans................. 8,658 8.4% 7,488 7.7% ======== ==== ======= ===== 103,323 100% 97,128 100.0% ==== ===== Less: Loans in process................ 2,416 1,415 Allowance for loan losses........... 232 217 -------- ------- Total................................. $100,675 $95,496 ======== =======
3. NON-PERFORMING ASSETS The following table sets forth information with respect to non- performing assets identified by the Bank. No loans were recorded as restructional loans within the meaning of SFAS No. 15 at the dates indicated. In addition, the Bank had no real estate acquired as a result of foreclosures.
At At September 30, 1997 December 31, 1996 ---------------------------- ----------------------- (Dollars in thousands) Accruing loans which are contractually past due 90 days or more: Residential real estate....................... $ 247 $ 266 Consumer...................................... -- -- -------------- -------------- Total........................................ $ 247 $ 266 -------------- -------------- Total nonperforming loans....................................... $ 247 $ 266 ============== ============== Percentage of total loans...................... 0.25% 0.28% ============== ==============
At September 30, 1997, the Bank had no loans accounted for on a nonaccrual basis, no other non-performing assets and no real estate owned. 28 4. ALLOWANCE FOR LOAN LOSSES The following table sets forth the activity in the Bank's allowance for loan losses during the periods indicated.
Nine Months Ended Year Ended September 30, December 31, --------------------------------- ------------ 1997 1996 1996 ---- ---- ---- (Dollars in thousands) Balance at beginning of period........... $ 217 $ 122 $ 122 Loans charged off: Real estate mortgage: Residential............................. -- (5) (5) ----- ------ ------- Total charge-offs........................ -- (5) (5) ----- ------ ------- Recoveries............................... -- -- -- ----- ------ ------- Net loans charged off.................... -- (5) (5) ----- ------ ------- Provision for loan losses................ 15 -- 100 ----- ------ ------- Balance at end of period................. $ 232 $ 117 $ 217 ===== ====== ======= Ratio of net charge-offs to average loans outstanding during the period........... 0% 0.006% 0.0053% ===== ====== =======
5. INVESTMENT SECURITIES The following table sets forth the carrying value of the Bank's investment securities at the dates indicated.
At September 30, At December 31, 1997 1996 ---------------- --------------- (In thousands) Securities available for sale: FHLB and FHLMC stock........................... $ 6,048 $ 5,110 U.S. government and agency securities.......... 5,002 - Mortgage-backed securities..................... 2,980 - Other.......................................... 15 15 Securities held to maturity: U.S. government and agency securities.................................... 50,981 77,962 Mortgage-backed securities..................... 20,786 17,984 ------- -------- Total investment securities................... $85,812 $101,071 ======= ========
29 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 The Bank's total assets decreased by $2.4 million, from $204.4 million at December 31, 1996 to $202.0 million at September 30, 1997. Securities held to maturity declined $24.2 million due to various issues maturing. Of such funds, $7.8 million was reinvested in Federal funds sold, which increased from $500,000 at December 31, 1996 to $8.3 million at September 30, 1997. In addition, $1.3 million in maturing securities was utilized to repay Federal Home Loan Bank advances, resulting in no borrowed funds at September 30, 1997. The decrease in assets was also due to a decrease in assets funded by deposits as the Bank continued to price its deposits less aggressively in 1997 in an effort to reduce its overall cost of funds. At September 30, 1997 deposits decreased to $180.7 million, from $183.8 million at December 31, 1996, a net decrease of $3.1 million. Deposits decreased as depositors sought higher returns than those available on accounts being offered by the Bank. The Bank's average cost of deposits for the nine months ended September 30, 1997 was 4.90%, compared to 5.13% for the year ended December 31, 1996. Management intends to continually evaluate the investment alternatives available to the Bank's customers, and adjusts the pricing on its deposit products to more actively manage its funding costs while remaining competitive in its market area. The Bank's loan portfolio increased by $5.2 million during the nine months ended September 30, 1997. Net loans totaled $100.7 million and $95.5 million at September 30, 1997 and December 31, 1996, respectively. The increase in the loan activity during the nine months ended September 30, 1997 was primarily due to the Bank's efforts to increase its loan originations using funds currently held in investment securities. For the nine months ended September 30, 1997, the Bank's average yield on loans was 7.64%, compared to 7.41% for the year ended December 31, 1996. At September 30, 1997, the Bank's investments classified as "held to maturity" were carried at amortized cost of $71.8 million and had an estimated fair market value of $75.1 million, and its equity securities classified as "available for sale" had an estimated fair market value of $14.0 million, including Federal Home Loan Mortgage Corporation stock with an estimated fair market value of $4.4 million. The allowance for loan losses totaled $232,000 at September 30, 1997, an increase of $15,000 from the allowance of $217,000 at December 31, 1996. At each September 30, 1997 and December 31, 1997, the ratio of the allowance for loan losses to loans was 0.23%. Also at September 30, 1997, the Bank's non- performing loans were $247,000, or 0.25% of total loans, compared to $266,000, or 0.28% of total loans, at December 31, 1996, and the Bank's ratio of allowance for loan losses to non-performing loans at September 30, 1997 and December 31, 1996 was 93.93% and 81.58%, respectively. The determination of the allowance for loan losses is based on management's analysis, performed on a quarterly basis. Various factors are considered, including the market value of the underlying collateral, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to outstanding loans, historical loss experience, delinquency trends and prevailing economic conditions. Although management believes its allowance for loan losses is adequate, there can be no assurance that additional allowances will not be required or that losses on loans will not be incurred. The Bank has had minimal losses on loans in prior years. COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 NET INCOME. The Bank's net income for the nine months ended September 30, 1997 was $1,347,000, compared to a net loss of $(61,000) for the nine months ended September 30, 1996. The increase in net earnings for the nine months resulted primarily from an improvement in the Bank's net yield on interest- earning assets, offset in part by a slight increase in non-interest expense and income taxes. In addition, in 1996 the Bank paid the Federal Deposit Insurance Corporation a special assessment of $1.2 million before taxes ($812,000 net of tax) to recapitalize the Savings Association Insurance Fund. 30 NET INTEREST INCOME. Net interest income for the nine months ended September 30, 1997 was $3.4 million, compared to $2.4 million for the nine months ended September 30, 1996. The increase in net interest income for the nine months ended September 30, 1997 was primarily due to a lower cost of funds and a higher yield on interest-earning assets. For the nine months ended September 30, 1997, the Bank's average yield on total interest-earning assets was 6.74%, compared to 6.40% for the nine months ended September 30, 1996, and its average cost of interest-bearing liabilities was 4.90% for the nine months ended September 30, 1997, compared to 5.19% for the nine months ended September 30, 1996. As a result, the Bank's interest rate spread for the nine months ended September 30, 1997 was 1.84%, compared to 1.21% for the nine months ended September 30, 1996, and its net yield on interest-earning assets was 2.27% for the nine months ended September 30, 1997, compared to 1.57% for the nine months ended September 30, 1996. INTEREST INCOME. Interest income increased by $100,000, from $9.9 million to $10.0 million, or by 1.0%, during the nine months ended September 30, 1997 compared to the same period in 1996. This increase primarily resulted from a continued strategic shift from investment securities to higher-yielding loans. The average balance of securities held to maturity declined $17.6 million, from $98.8 million at September 30, 1996 to $81.2 million at September 30, 1997. In addition, average time deposits and other interest-earning cash deposits declined $3.0 million, from $14.0 million at September 30, 1996 to $11.0 million at September 30, 1997. Overall, average total interest-earning assets declined $8.3 million, or 4.0%, from September 30, 1996 to September 30, 1997. However, the strategic repositioning of the balance sheet into higher-yielding assets resulted in an increase in the average yield on interest-earning assets from 6.40% at September 30, 1996 to 6.74% at September 30, 1997. In addition, the ratio of average interest-earning assets to average interest-bearing liabilities increased from 107.47% for the nine months ended September 30, 1996 to 109.59% for the nine months ended September 30, 1997. INTEREST EXPENSE. Interest expense decreased $831,000, or 11.0%, to $6.6 million for the nine months ended September 30, 1997, compared to $7.5 million for the same period in 1996. The decrease was attributable to the combined effect of a lower cost of funds and a $6.7 million decline in the average balance of interest-bearing liabilities. The average cost of average interest- bearing deposits declined from 5.19% at September 30, 1996 to 4.90% at September 30, 1997. Over the same period, the average balance of deposits decreased $10.9 million, from $191.3 million at September 30, 1996 to $180.4 million at September 30, 1997, or 5.7%. PROVISION FOR LOAN LOSSES. The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in its loan portfolio and the general economy. Such evaluation considers numerous factors including, general economic conditions, loan portfolio composition, prior loss experience, the estimated fair value of the underlying collateral and other factors that warrant recognition in providing for an adequate loan loss allowance. The Bank determined that an additional $15,000 provision for loan loss was required for the nine months ended September 30, 1997. NON-INTEREST EXPENSE. There was a $1.3 million decline in total non- interest expense in the nine months ended September 30, 1997 compared to the same period in 1996. This was primarily attributable to an approximately $1.5 million decrease in deposit insurance premiums. In addition, most other non- interest expenses were also slightly higher. INCOME TAXES. The Bank's effective tax rate for the nine months ended September 30, 1997 was 33.7%, compared to 41.3% for the same period in 1996. The increase in income tax expense of $729,000 in the nine month period compared to the same period in 1996 was due to a significant increase in income and a year to date loss at the same time last year. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 NET INCOME. The Bank's net income for the three months ended September 30, 1997 was $477,000, compared to a net loss $(506,000) for the three months ended September 30, 1996. The increase in net earnings for the three months resulted primarily from an improvement in the Bank's net yield on interest-earning assets, as well as a significantly lower deposit insurance premium. 31 NET INTEREST INCOME. Net interest income for the three months ended September 30, 1997 was $1.1 million, compared to $920,000 for the three months ended September 30, 1996. The increase in net interest income for the three months ended September 30, 1997 was primarily due to a lower cost of funds and a higher yield on interest-earning assets. For the three months ended September 30, 1997, the Bank's average yield on total interest-earning assets was 6.83%, compared to 6.56% for the three months ended September 30, 1996 and its average cost of interest-bearing liabilities was 4.95% for the three months ended September 30, 1997, compared to 5.14% for the three months ended September 30, 1996. As a result, the Bank's interest rate spread for the three months ended September 30, 1997 was 1.88%, compared to 1.42% for the three months ended September 30, 1996 and its net yield on interest-earning assets was 2.34% for the three months ended September 30, 1997, compared to 1.81% for the three months ended September 30, 1996. INTEREST INCOME. Interest income increased by $27,000, from $3.34 million to $3.37 million, or by .8%, during the three months ended September 30, 1997 compared to the same period in 1996. This increase primarily resulted from a continued strategic shift from investment securities to higher-yielding loans. The average balance of securities held to maturity declined $19.6 million, from $95.3 million at September 30, 1996, to $75.7 million at September 30, 1997. Overall, average total interest-earning assets declined $6.7 million, or 3.3%, from September 30, 1996 to September 30, 1997. However, the strategic repositioning of the balance sheet into higher-yielding assets resulted in an increase in the average yield on interest-earning assets from 6.56% at September 30, 1996 to 6.83% at September 30, 1997. In addition, the ratio of average interest-earning assets to average interest-bearing liabilities increased from 108.14% for the three months ended September 30, 1996 to 110.04% for the three months ended September 30, 1997. INTEREST EXPENSE. Interest expense decreased $205,000, or 8.5%, to $2.2 million for the three months ended September 30, 1997, compared to $2.4 million for the same period in 1996. The decrease was attributable to the combined effect of a lower cost of funds and a $9.3 million decline in the average balance of interest-bearing liabilities. The average cost of average interest- bearing deposits declined from 5.14% at September 30, 1996 to 4.95% at September 30, 1997. Over the same period, the average balance of deposits decreased $9.3 million, from $188.5 million at September 30, 1996 to $179.2 million at September 30, 1997, or 4.9%. PROVISION FOR LOAN LOSSES. The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in its loan portfolio and the general economy. Such evaluation considers numerous factors including, general economic conditions, loan portfolio composition, prior loss experience, the estimated fair value of the underlying collateral and other factors that warrant recognition in providing for an adequate loan loss allowance. The Bank determined that an additional $5,000 provision for loan loss was required for the three months ended September 30, 1997. NON-INTEREST EXPENSE. There was a $1.3 million decline in total non- interest expense in the three months ended September 30, 1997 compared to the same period in 1996. This was primarily attributable to a $1.3 million decrease in deposit insurance premiums. In addition, most other non-interest expenses were also slightly higher. INCOME TAXES. The Bank's effective tax rate for the three months ended September 30, 1997 was 33.7%, compared to 34.4% for the same period in 1996. The increase in income tax expense of $506,320 in the three month period compared to the same period in 1996 was due to a significant increase in income and a year to date loss at the same time last year. LIQUIDITY AND CAPITAL RESOURCES. The Bank's principal sources of funds for operations are deposits from its primary market areas, principal and interest payments on loans and proceeds from maturing investment securities. The principal uses of funds by the Bank include the origination of mortgage and consumer loans and the purchase of investment securities. The Bank is required by current OTS regulations to maintain specified liquid assets of at least 5% of its net withdrawable accounts plus short-term borrowings. Short-term liquid assets (those maturing in one year or less) may not be less than 1% of the Bank's liquidity base. At September 30, 1997, the Bank met all regulatory liquidity requirements, and management believes that the liquidity levels maintained are adequate to meet potential deposit outflows, loan demand and normal operations. 32 The Bank must satisfy three capital standards, as set by the Office of Thrift Supervision (the "OTS"). These standards include a ratio of core capital to adjusted total assets of 3.0%, a tangible capital standard expressed as 1.5% of total adjusted assets, and a combination of core and "supplementary" capital equal to 8.0% of risk-weighted assets. The risk-based capital standard currently addresses only the credit risk inherent in the assets in a thrift's portfolio and does not address other risks that thrifts face, such as operating, liquidity and interest rate risks. The OTS recently finalized regulations that add an interest rate risk component to capital requirements under certain circumstances. The Bank does not believe that this new regulation will require additional capital. In addition, the OTS has recently adopted regulations that impose certain restrictions on savings associations that have a total risk-based capital ratio that is less than 8.0%, a ratio of Tier 1 capital (or core capital) to risk-weighted assets of less than 4.0%, or a ratio of Tier 1 capital to adjusted total assets of less than 4.0% (or 3.0% if the institution has the highest rating ("1") under the OTS examination rating system). At September 30, 1997, the Bank exceeded all regulatory capital requirements. The table below presents certain information relating to the Bank's capital compliance at September 30, 1997 and December 31, 1996.
At September 30, 1997 At December 31, 1996 ---------------------- --------------------- Amount Percent Amount Percent ---------- --------- --------- ---------- (Dollars in thousands) Tangible Capital......... $15,938 8.0% $14,591 7.2% Core Capital............. 15,938 8.0 14,591 7.2 Risk-Based Capital....... 16,170 22.0 14,808 20.3
At September 30, 1997, the Bank had outstanding commitments to originate loans totaling $1.3 million. Management believes that the Bank's sources of funds are sufficient to fund all of its outstanding commitments. Certificates of deposits which are scheduled to mature in one year or less from September 30, 1997 totaled $83.6 million. Management believes that a significant percentage of such deposits will remain with the Bank. AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES The following table sets forth certain information relating to the Bank's average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the periods and at the date indicated. Such yields and costs are derived by dividing income or expense by the average monthly balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from month-end balances. Management does not believe that the use of month-end balances instead of daily balances has caused any material difference in the information presented. 33 The table also presents information for the periods and at the date indicated with respect to the difference between the average yield earned on interest-earning assets and average rate paid on interest-bearing liabilities, or "interest rate spread," which savings institutions have traditionally used as an indicator of profitability. Another indicator of an institution's net interest income is its "net yield on interest-earning assets," which is its net interest income divided by the average balance of interest-earning assets. Net interest income is affected by the interest rate spread and by the relative amounts of interest-earning assets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.
Nine Months Ended September 30, At September 30, -------------------------------------- 1997 1997 --------------------------- -------------------------------------- Weighted Average Average Average Yield/ Balance Yield/Cost Balance Interest Cost(1) ------- ---------- ------- -------- ---- (Dollars in thousands) Interest-earning assets: Loans receivable, net................. $100,675 7.76% $ 98,040 $ 5,616 7.64% Securities available for sale......... 14,045 4.65% 7,582 125 2.20% Securities held to maturity........... 71,767 6.17% 81,242 3,785 6.21% Time deposits and other interest- bearing cash deposits.............. 10,673 5.62% 11,032 485 5.86% -------- -------- ------- Total interest-earning assets...... 197,160 6.84% 197,896 10,011 6.74% -------- ------- -------- Non-interest-earning assets............ 4,849 5,094 ======== ======== Total assets.......................... $202,009 $202,990 ======== ======== Interest-bearing liabilities: Deposits.............................. $180,749 4.89% $180,357 $ 6,633 4.90% Borrowings............................ -- -- 216 9 5.56% -------- -------- ------- Total interest-bearing liabilities........................ 180,749 4.89% 180,573 6,642 4.90% -------- ------- -------- Non-interest-bearing liabilities....... 2,528 4,674 -------- -------- Total liabilities.................. 183,277 185,247 Retained earnings...................... 15,938 15,235 Unrealized gain on securities available for sale.................... $ 2,794 $ 2,508 ======== ======== Total liabilities and retained earnings......................... $202,009 $202,990 ======== ======== Net interest income.................... $ 3,369 ======= Interest rate spread................... 1.95% 1.84% -------- -------- Net yield on interest-earning assets... 2.27% -------- Ratio of interest-earning assets interest-bearing liabilities.......... 109.08% 109.59% ======== ======== Nine Months Ended September 30, -------------------------------------- 1996 -------------------------------------- Average Average Yield/ Balance Interest Cost(1) ------- -------- ---- (Dollars in thousands) Interest-earning assets: Loans receivable, net................. $ 89,377 $ 4,988 7.44% Securities available for sale......... 4,119 111 3.59% Securities held to maturity........... 98,775 4,240 5.72% Time deposits and other interest- bearing cash deposits.............. 13,953 566 5.41% -------- ------- Total interest-earning assets...... 206,224 9,905 6.40% ------- ------- Non-interest-earning assets............ 5,175 -------- Total assets.......................... $211,399 ======== Interest-bearing liabilities: Deposits.............................. $191,328 $ 7,450 5.19% Borrowings............................ 557 23 5.51% -------- ------- Total interest-bearing liabilities........................ 191,885 7,473 5.19% ------- ------- Non-interest-bearing liabilities....... 3,356 -------- Total liabilities.................. 195,241 Retained earnings...................... 14,529 Unrealized gain on securities available for sale..................... $ 1,629 -------- Total liabilities and retained earnings......................... $211,399 -------- Net interest income.................... $ 2,432 ------- Interest rate spread................... 1.21% ------- Net yield on interest-earning assets... 1.57% ------- Ratio of interest-earning assets interest-bearing liabilities.......... 107.47% =======
34 RATE/VOLUME ANALYSIS The following table sets forth certain information regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to: (i) changes in volume (changes in volume from year to year multiplied by the average rate for the prior year) and (ii) change in rate (changes in the average rate from year to year multiplied by the prior year's volume).
Nine Months Ended Year Ended December 31, September 30, ------------------------------------------ ------------------------------------------ 1997 vs. 1996 1996 vs. 1995 ------------------------------------------ ------------------------------------------ Increase Increase (Decrease) due to (Decrease) due to -------------------------- -------------------------- Total Total Increase Increase Rate Volume (Decrease) Rate Volume (Decrease) ---- ------ ---------- ---- ------ ---------- (In thousands) Interest-earning assets: Loans receivable............. $ 145 $ 483 $ 628 $ 284 $ 700 $ 984 Securities available for sale........................ (79) 93 14 (11) 27 16 Securities held to maturity.................... 297 (752) (455) 594 666 1,260 Other interest-earning assets...................... 38 (119) (81) 53 (1,565) (1,512) ----- ----- ----- ------ ------- ------- Total interest- earning assets............. $ 401 $(295) $ 106 $ 920 $ (172) $ 748 ----- ----- ----- ------ ------- ------- Interest-bearing liabilities: Deposits..................... $(390) $(427) $(817) $ (146) $ (131) $ (277) Borrowings................... -- (14) (14) -- 25 25 ----- ----- ----- ------ ------- ------- Total interest- bearing liabilities........ $(390) $(441) $(831) $ (146) $ (106) $ (252) ----- ----- ----- ------ ------- ------- Increase (decrease) in net interest income.............. $ 791 $ 146 $ 937 $1,066 $ (66) $ 1,000 ===== ===== ===== ====== ======= ======= Year Ended December 31, ------------------------------------------- 1995 vs. 1994 ------------------------------------------- Increase (Decrease) due to -------------------------- Total Increase Rate Volume (Decrease) ---- ------ ---------- (In thousands) Interest-earning assets: Loans receivable............. $ 33 $ 560 $ 593 Securities available for sale........................ (1) 27 26 Securities held to maturity.................... 553 491 1,044 Other interest-earning assets...................... 650 (275) 375 ------ ------ ------ Total interest- earning assets............. $1,235 $ 803 $2,038 ------ ------ ------ Interest-bearing liabilities: Deposits..................... $1,731 $ 538 $2,269 Borrowings................... -- -- -- ------ ------ ------ Total interest- bearing liabilities........ $1,731 $ 538 $2,269 ------ ------ ------ Increase (decrease) in net interest income.............. $ (496) $ 265 $ (231) ====== ====== ======
ADDITIONAL INFORMATION The Company has filed with the SEC a Registration Statement with respect to Common Stock offered hereby. This Prospectus Supplement does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. Such information may be inspected at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies may be obtained at prescribed rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains an Internet address ("Web site") that contains reports, proxy and information statements and other information regarding registrants, including the Company, that file electronically with the SEC. The address for this Web site is "http://www.sec.gov." The Bank has filed with the OTS an Application for Conversion. This document omits certain information contained in such application. The Application for Conversion can be inspected, without charge, at the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the office of the OTS Regional Director, Central Regional Office, at 200 West Madison Street, Suite 1300, Chicago, Illinois 60606. 35 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 information shall not be relied upon as having been authorized by the Company, the Bank or Investment Bank Services, Inc. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful. 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 the Company or the Bank since any of the dates as of which information is furnished herein or since the date hereof. --------------- TABLE OF CONTENTS
Page ---- Results of the Special Meeting of Members and the Subscription and Community Offerings...................... 3 Amended Valuation Range..................................... 3 Additional Risk Factors..................................... 4 Extension of Time Period to Complete the Conversion............................................ 6 Subscription by the ESOP.................................... 6 Limitations on Purchases of Common Stock.................... 6 Use of Proceeds............................................. 8 Capitalization.............................................. 10 Historical and Pro Forma Regulatory Capital Compliance........................................ 12 Pro Forma Data.............................................. 14 Proposed Management Purchases............................... 19 Market for the Common Stock................................. 20 Recent Selected Financial Information and Other Data........ 21 Statements of Financial Condition as of September 30, 1997 (unaudited) and December 31, 1996......................... 23 Statements of Income for the Three and Nine Months Ended September 30, 1997 AND 1996 (unaudited)................... 24 Statements of Equity for the Nine Months Ended September 30, 1997 AND 1996 (unaudited)................... 25 Statements of Cash Flows for the Nine Months Ended September 30, 1997 AND 1996 (unaudited)................... 26 Notes to Financial Statements (unaudited)................... 27 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 30
Until _________, 1998 (90 days after the date of this Prospectus Supplement), 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. HOPFED BANCORP, INC. (Proposed Holding Company for Hopkinsville Federal Savings Bank) (LOGO) Up to 3,507,500 Shares COMMON STOCK --------------------- PROSPECTUS SUPPLEMENT --------------------- Investment Bank Services, Inc. Friedman, Billings, Ramsey & Co., Inc. December __, 1997 PART II: INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. The following table sets forth the expenses in connection with the sale and distribution of the securities being registered hereby, including underwriting discounts and commissions. All such expenses are to be paid by the Registrant. Underwriting fees and expenses.......... $ 225,000 Legal fees and expenses................. 125,000 Printing, postage and mailing........... 95,000* Accounting fees and expenses............ 115,000* Appraisal and business plan fees and expenses........................... 40,000* Blue Sky filing fees and expenses (including legal counsel).......... 10,000* Filing fees (OTS, SEC and NASD)......... 42,000* Conversion Agent fees................... 15,000* Stock certificates...................... 5,000* Transfer Agent.......................... 10,000* Other expenses.......................... 68,000* ---------- Total.............................. $ 750,000 ==========
- ------------- * Estimated Item 14. Indemnification of Directors and Officers. Directors, officers and employees of the Company and/or the Bank may be entitled to benefit from the indemnification provisions contained in the Delaware General Corporation Law (the "DGCL"), the Company's Certificate of Incorporation and federal regulations applicable to the Bank. The general effect of these provisions is summarized below: Delaware General Corporation Law - -------------------------------- Section 145 of the DGCL permits a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any proceeding of any type (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, may not, of itself, create a presumption that these standards have not been met. A Delaware corporation may also indemnify any person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the corporation by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. However, no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought determines upon application that such person is fairly and reasonably entitled to be indemnified. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any proceeding described above, indemnification against expenses (including attorneys' fees) actually and reasonably incurred by him is mandatory. Any determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct noted above must be made by a majority of the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or if such a quorum is not obtainable, or, even if obtainable and a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or by the stockholders. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section is not exclusive. In addition, a corporation shall have power to purchase and maintain insurance against any liability of individuals whom the corporation is required to indemnify. Article XV of the Certificate of Incorporation of the Company - ------------------------------------------------------------- In addition to the statutory provision described above, Article XV of the Company's Certificate of Incorporation also provides for indemnification. With certain exceptions, the indemnification provided for by Article XV is identical to the statutory provision. Article XV states explicitly, however, that the indemnification provided by the Article shall be deemed to be a contract between the Company and the persons entitled to indemnification thereunder and further provides the indemnification and advance payment of expenses provided thereunder continues even after the individual ceases to hold a position with the Company and inures to the benefit of his or her heirs, executors and administrators. Federal Regulations Providing for Indemnification of Directors and Officers of - ------------------------------------------------------------------------------ Hopkinsville Federal Savings Bank - --------------------------------- Federal regulations require that Hopkinsville Federal Savings Bank (the "Bank") indemnify any person against whom an action is brought by reason of that person's role as a director or officer of the Bank for (i) any judgments resulting from the action; (ii) reasonable costs and expenses (including attorney's fees) incurred in connection with the defense or settlement of such action; and (iii) reasonable costs and expenses (including attorney's fees) incurred in connection with enforcing the individual's indemnification rights against the Bank, assuming a final judgment is obtained in his favor. The mandatory indemnification provided for by federal regulations is limited to (i) actions where a final judgment on the merits is in favor of the officer or director and (ii) in the case of a settlement, final judgment against the director or officer or final judgment not on the merits, except as to where the director or officer is found negligent or to have committed misconduct in the performance of his or her duties, where a majority of the Board of Directors of the Bank determines that the director or officer was acting in good faith within what he was reasonably entitled to believe was the scope of his or her employment or authority for a purpose that was in the best interests of the Bank or its members or stockholders. In addition, the Bank has a director' and officers' liability policy providing for insurance against certain liabilities incurred by directors and officers of the Bank while serving in their capacities as such. Item 15. Recent Sales of Unregistered Securities. None. Item 16. Exhibits and Financial Statement Schedules. The following is the list of exhibits filed as part of this Registration Statement and also serves as the Exhibit Schedule.
Exhibit Number Description -------------- ----------- * 1.1 Engagement Letter with Investment Bank Services, Inc. * 1.2 Agency Agreement * 2 Plan of Conversion of Hopkinsville Federal Savings Bank * 3.1 Certificate of Incorporation of HopFed Bancorp, Inc. * 3.2 Bylaws of HopFed Bancorp, Inc. * 4 Form of Stock Certificate of HopFed Bancorp, Inc. 5 Opinion of Kutak Rock * 8.1 Federal Tax Opinion * 8.2 State Tax Opinion * 8.3 Opinion of National Capital Companies, LLC, as to the value of subscription rights for tax purposes * 10.1 Proposed Employment Agreements by and between Hopkinsville Federal Savings Bank and Bruce Thomas, Peggy Noel and Boyd Clark * 10.2 Proposed Employment Agreements by and between HopFed Bancorp, Inc. and Bruce Thomas, Peggy Noel and Boyd Clark 23.1 Consent of Kutak Rock (in opinions filed as Exhibits 5 and 8.1) 23.2 Consent of York, Neel & Co. -- Hopkinsville, LLP 23.3 Consent of National Capital Companies, LLC 24 Power of Attorney (reference is made to the signature page) * 99.1 Proposed Stock Order Form and Form of Certification * 99.2 Proxy Statement for Special Meeting of Members of Hopkinsville Federal Savings Bank; Form of Proxy * 99.3 Miscellaneous Solicitation and Marketing Material * 99.4 Appraisal Report 99.5 Proposed Supplemental Stock Order Form and Form of Supplemental Certification 99.6 Appraisal Report Update 99.7 Additional Solicitation and Marketing Material
- ---------------- * Previously filed (File No. 333-30215) Item 17. Undertakings. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement: (i) Including any prospectus required by Section 10(a)(3) of the Securities Act of 1933 ("Securities Act"). (ii) Reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) 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. (2) That, for determining any liability under the Securities Act, 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 file a post-effective amendment to remove from registration any of the securities being registered that remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities 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 whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hopkinsville, Commonwealth of Kentucky, on the 10th day of December, 1997. HOPFED BANCORP, INC. By /s/ Bruce Thomas -------------------------------------------- Bruce Thomas President and Chief Executive Officer (Duly Authorized Representative) Each person whose signature appears below hereby appoints Bruce Thomas his or her true and lawful attorney-in-fact, with power to act with full power of substitution, in any and all capacities, to sign any or all amendments (including post-effective amendments) to the Registration Statement and file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or their substitutes, may lawfully cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ Bruce Thomas Director, President and December 10, 1997 - ------------------------ Chief Executive Officer Bruce Thomas (Principle Executive Officer) /s/ WD Kelley Chairman of the Board December 10, 1997 - ------------------------ WD Kelly /s/ Peggy R. Noel Director, Vice President, December 10, 1997 - ------------------------ Chief Financial Officer Peggy R. Noel and Treasurer (Principal Financial and Accounting Officer) /s/ Boyd M. Clark Director and Senior Vice December 10, 1997 - ------------------------ President - Loan Administration Boyd M. Clark /s/ Clifton H. Cochran Director December 10, 1997 - ------------------------ Clifton H. Cochran /s/ Drury R. Embry Director December 10, 1997 - ------------------------ Drury R. Embry /s/ Walton G. Ezell Director December 10, 1997 - ------------------------ Walton G. Ezell /s/ John Noble Hall, Jr. Director December 10, 1997 - ------------------------ John Noble Hall, Jr. /s/ Chester K. Wood Director December 10, 1997 - ------------------------ Chester K. Wood EX-5 2 EXHIBIT 5 -- OPINION OF KUTAK ROCK Exhibit 5 KUTAK ROCK 1101 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 828-2400 December 10, 1997 Board of Directors HopFed Bancorp, Inc. 2700 Fort Campbell Boulevard Hopkinsville, Kentucky 42240 RE: Registration Statement on Form S-1 Ladies and Gentlemen: You have requested our opinion as special counsel to HopFed Bancorp, Inc. (the "Corporation") in connection with the Registration Statement on Form S-1 and Post-Effective Amendment No. 1 to the Form S-1 Registration Statement (Registration No. 30215) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (collectively, the "Registration Statement"). The Registration Statement relates to up to 4,033,625 shares of common stock of the Corporation (the "Common Stock") to be issued in connection with the simultaneous conversion of Hopkinsville Federal Savings Bank from mutual to stock form and reorganization into a holding company form ownership as a wholly owned subsidiary of the Corporation. In rendering this opinion, we understand that the Common Stock will be offered and sold in the manner described in the Prospectus dated October 10, 1997 and the Prospectus Supplement which are a part of the Registration Statement. We have examined such records and documents and made such examination as we have deemed relevant in connection with this opinion. Based upon the foregoing, it is our opinion that the shares of Common Stock will, when issued and sold as contemplated by the Registration Statement, be legally issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us in the Prospectus dated October 10, 1997 under the heading "Legal Opinions." Very Truly Yours, /s/ KUTAK ROCK EX-23.2 3 EXHIBIT 23.2 -- CONSENT OF YORK, NEEL & CO. Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the use of our report on the financial statements of Hopkinsville Federal Savings Bank in the Form AC Application for Approval of Conversion (the "Form AC") filed by HopFed Bancorp, Inc. with the Office of Thrift Supervision and in the Registration Statement on Form S-1 and the Post- Effective Amendment No. 1 to the Form S-1 Registration Statement (Registration No. 333-30215) (collectively, the "Registration Statement") filed by HopFed Bancorp, Inc. with the Securities and Exchange Commission and to the reference to our firm under the heading "Experts" in the Prospectus constituting part of the Form AC and Registration Statement. December 10, 1997 /s/ York Neel & Co. - Hopkinsville, LLP --------------------------------------- EX-23.3 4 EXHIBIT 23.3 -- CONSENT OF NAT'L CAPITAL COMPANIES Exhibit 23.3 CONSENT ------- We hereby consent to the use of our firm's name and to the references to our Independent Appraisal of the Estimated Proforma Fair Market Value under the headings "Prospectus Summary -- Stock Pricing and Number of Shares to be Issued," "The Conversion -- Stock Pricing and Number of Shares to be Issued" and "Amended Valuation Range," and to the reference to our opinion regarding the value of Subscription Rights under the heading "The Conversion -- Effect of Conversion to Stock Form on Depositors of the Bank -- Tax Effects" in the Application for Approval of Conversion filed by Hopkinsville Federal Savings Bank with the Office of Thrift Supervision, and in Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 333-30215) and the Registration Statement on Form S-1 filed by HopFed Bancorp, Inc. with the Securities and Exchange Commission. /s/ Steve Clinton ----------------------------------------------- Steve Clinton, President NATIONAL CAPITAL COMPANIES, L.L.C. December 10, 1997 EX-99.5 5 EXHIBIT 99.5 -- PROPOSED SUPPLEMENT STOCK SUPPLEMENTAL STOCK ORDER FORM I previously ordered shares of Common Stock in the Subscription Offering and/or the Community Offering in connection with the pending conversion of Hopkinsville Federal Savings Bank (the "Bank") from mutual to stock form as a wholly owned subsidiary of HopFed Bancorp, Inc. (the "Company"). I HEREBY ACKNOWLEDGE THAT I HAVE RECEIVED THE COMPANY'S PROSPECTUS SUPPLEMENT DATED _____________, 1997 AND THAT, IN ORDER TO MAINTAIN IN ANY CAPACITY AN ORDER FOR THE COMMON STOCK OF THE COMPANY IN THE SUBSCRIPTION OFFERING AND/OR COMMUNITY OFFERING, I MUST COMPLETE, EXECUTE AND RETURN THIS SUPPLEMENTAL STOCK ORDER FORM TO THE COMPANY BEFORE THE EXPIRATION OF THE RESOLICITATION. I hereby elect to do the following: (Please check ONE box only) [_] MAINTAIN SUBSCRIPTION BASED ON PREVIOUS ORDER -- NO ADDITIONAL FUNDS REQUIRED. I desire to have the dollar amount which I previously submitted or authorized for withdrawal to be applied in full to purchase the number of shares previously ordered. I understand that no Eligible Account Holder, Other Member or person in the Community Offering may purchase more than $250,000 of the shares of Common Stock issued in the Conversion. In addition, no person (together with associates and persons acting in concert therewith) may purchase in the aggregate more than $500,000 of the shares of Common Stock issued in the Conversion. [_] PURCHASE ADDITIONAL SHARES -- Additional Funds Required. Increase my order to a total of ________ shares at the original purchase price of $10.00 per share for a total investment of ______ shares. I have enclosed my check in the amount of $ ________ for the balance due (_______ additional shares x $10.00 per share) or hereby authorize the Bank to withdraw the additional amount from my savings account at the Bank (Account Number __________). The ability to purchase additional shares is subject to the maximum purchase limitation, described above. [_] REDUCE ORDER. Reduce my order to a total of ______ shares (not fewer than 25) at the original purchase price of $10.00 per share, and adjust my withdrawal authorization or refund the overpayment, with interest, to the name and address shown on this form. [_] CANCEL. Cancel my subscription entirely, void any authorization for withdrawal, and refund any cash or check(s) previously remitted, with interest, to the name and address shown on this form. I hereby affirm the representations made and the information provided in the Stock Order Form previously submitted. --------------------------------------------- Name --------------------------------------------- Signature(s) as shown on your original Stock Order Form --------------------------------------------- Address Dated: --------------------------------------- NOTE: In order to be effective, this Supplemental Stock Order Form must be properly completed and accompanied by any required additional payment or withdrawal authorization and must be returned to the Bank so that it is received before the expiration of the resolicitation. The resolicitation will expire at 4:00 p.m., Local Time, on January _____, 1998, unless extended. A postage- prepaid self-addressed envelope accompanies this Supplemental Stock Order Form. PRIOR ORDERS AS TO WHICH NO SUPPLEMENTAL STOCK ORDER FORM IS RECEIVED WILL BE DEEMED CANCELED. YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK FORM OF SUPPLEMENTAL CERTIFICATION I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY HOPKINSVILLE FEDERAL SAVINGS BANK OR BY THE FEDERAL GOVERNMENT. If anyone asserts that this security is federally insured or guaranteed, or is as safe as in insured deposit, I/we should call the Office of Thrift Supervision Regional Director Ronald Karr at (312) 917-5000. I/We further certify that, before purchasing the common stock, par value $.01 per share, of HopFed Bancorp, Inc., the proposed holding company for Hopkinsville Federal, I/we received a Prospectus Supplement dated , 1997 (the "Prospectus Supplement"). The Prospectus Supplement that I/we received contains disclosure concerning the nature of the security being offered and describes additional risks involved in the investment, including but not limited to:
PAGE ------ 1. Possible Adverse Effect of Amended Valuation Range 5 2. Basis of Updated Appraisal 5 3. Potential Cost of Stock Benefit Plans 5
Signature(s): ------------------------------ -------------------------- Date: --------------------------------- -------------------------- Name(s) (Please Print): -------------------- -------------------------- EX-99.6 6 EXHIBIT 99.6 -- APPRAISAL REPORT UPDATE National Capital Companies, LLC Appraisal Update of the Estimated Proforma Fair Market Value Prepared for Hopkinsville Federal Savings Bank Hopkinsville, Kentucky November 18, 1997 [LOGO OF NATIONAL CAPITAL COMPANIES, LLC APPEARS HERE] Stephen Clinton President November 18, 1997 Board of Directors Hopkinsville Federal Savings Bank 2700 Fort Campbell Boulevard Hopkinsville, Kentucky 41192 Ladies and Gentlemen: We have prepared an independent appraisal report update (the "November update") of the estimated proforma fair market value of the to-be-issued common shares of HopFed Bancorp, Inc. (the "Company"), which is the newly formed holding company for Hopkinsville Federal Savings Bank ("Hopkinsville Federal" or the "Bank"). The common shares are to be issued in connection with the Bank's conversion from a federally-chartered mutual savings bank to a federally-chartered stock savings bank (the "Conversion"), where all of the common stock of the Bank will be acquired by the Company in exchange for approximately 50% of the net conversion proceeds. Our original report of the estimated proforma fair market value of Hopkinsville Federal was dated May 29, 1997, (the "original valuation") and an update (the "updated valuation") of the original valuation was prepared as of August 29, 1997. This November update of our original valuation and updated valuation considers changes in Hopkinsville Federal's financial condition and operating performance as of September 30, 1997, as well as changes in the overall stock market conditions and changes in the market for publicly-traded thrift institutions as of November 18, 1997. The original valuation and the updated valuation are incorporated herein by reference. In preparing this November update, we performed an analysis of the Bank that included interviews with the Bank's management, inquiries with the Bank's independent accountants, York, Neel & Company, LLP, and its investment banker, Investment Bank Services, Inc., and discussions with special legal counsel, representatives of the firm of Kutak Rock. We have analyzed, among other factors, the economic conditions in the Bank's primary market area and have compared the Bank's financial performance and condition with that of other savings institutions and with that of selected publicly-traded savings institutions. We reviewed conditions in the securities market in general and the market for savings institution securities, specifically, and we analyzed the competitive environment within the Bank's primary market area. Our valuation is based upon the Bank's representations that the documents provided to us and the information obtained through interviews with the Bank's management, inquiries with the Bank's independent accountants, York, Neel & Company, LLP, and its investment banker, Investment Bank Services, Inc., and discussions with special legal counsel, representatives of the firm of Kutak Rock as of November 18, 1997, are complete and accurate. In addition, we used information from publicly-available published sources that we believe is reliable. However, we have not examined or otherwise tested this P.O. Box 147, Dover, Ohio 44622 (330) 364-3345 FAX (330) 364-3199 Board of Directors November 18, 1997 Page 2 publicly-available information and therefore we cannot and do not express an opinion as to the accuracy of this information. This valuation considers the Bank as a going concern and should not be considered an indication of the liquidation value of the Bank. We did not independently value the assets or liabilities of the Bank nor did we independently verify, and have relied on and assumed that, the allowance for loan losses set forth in the balance sheet of Hopkinsville Federal at September 30, 1997, was adequate and complied fully with applicable law, regulatory policy and sound banking practice as of the date of such financial statements. Since August 29, 1997, the general market for common stocks has increased. The Dow Jones Industrial Average has increased approximately .37% from the date of our updated valuation to the date of this November update. The Standard and Poors 500 index has increased approximately 4.31% over the same period. Thrift market prices have increased since the date of our updated valuation. As evidenced by the thrift stock market index calculated by SNL Securities, L.P., --------------------- the market values for all publicly traded thrift stocks have increased from August 29, 1997, through November 18, 1997, by approximately 13.83%. The average tangible price-to-book ("P/B") value of the thrift industry has increased 7.76% from August 29, 1997, to November 18, 1997. This compares to an increase in the average price-to-assets ("P/A") multiple for the industry of 7.36%. The price-to-earnings ("P/E") multiple for the thrift industry has increased over the period from August 29, 1997, to November 18, 1997. The average last twelve months ("LTM") P/E multiple, adjusted to exclude the SAIF assessment where applicable, increased 10.23% from the date of our updated appraisal to the date of this November update. The Company completed its Subscription and Community Offering on November 18, 1997, and received subscriptions for shares as shown below:
Orders by Amount Shares Values Category 1: Eligible Account Holders 15,574,085 $155,740,850 Category 2: ESOP 280,370 2,803,700 Category 3: Supplemental Eligible Account Holders 280,442 2,804,420 Category 4: Other Eligible Member 197,965 1,979,650 Category 5: Local Community 45,225 452,250 Category 6: Other Community 192,300 1,923,000 ------- --------- TOTAL 16,570,387 $165,703,870
The Bank received 318 orders totaling the $250,000 maximum. Board of Directors November 18, 1997 Page 3
Orders by Number and Average Amount Number Average Amount(1) Category 1: Eligible Account Holders 2,569 $60,623 Category 2: ESOP 1 2,803,700 Category 3: Supplemental Eligible Account Holders 93 30,155 Category 4: Other Eligible Member 124 15,965 Category 5: Local Community 12 37,688 Category 6: Other Community 37 51,973 -- ------ TOTAL 2,836 $57,460 (1) Total average excludes the ESOP order.
Based on an analysis of the total orders received, it is estimated that professional investors (those investors who do not reside in the Bank's market area) were responsible for approximately 923 orders totaling $75.4 million, which is 46.3% of the total amount of subscriptions. The major portion of those professional orders were received from the eligible depositor category. Insider subscriptions totaled $3,210,000, which includes the subscriptions placed by the Bank's senior management and its Board of Directors. Our estimate of the fair market value of the Company has been determined to be $30,500,000, which is an increase of 15.09% from the midpoint value of $26,500,000 determined in our updated valuation. The November valuation of the Company results in a price-to-earnings ("P/E") multiple of 13.46x, a tangible price-to-book ("P/B") multiple of 67.97%, and a price-to-assets ("P/A") multiple of 13.37 for Hopkinsville Federal as of November 18, 1997. Exhibit V-4 details the valuation discounts applied to the comparable group in determining the value of Hopkinsville Federal as of November 18, 1997. The discount from the comparable group P/B multiple average is 51.93%. The discount in the P/E multiple average is 24.71% and the discount in the P/A multiple average is 22.32%. The valuation range in this November update will be from a minimum of $25,925,000 to a maximum of $35,075,000 with a super maximum of $40,336,250. In our opinion, the improvement in the conditions of the general stock market, the results of the offering, Hopkinsville Federal's September 30, 1997, financials and current market pricing for thrifts all warrant an increase in the valuation of the to-be-issued common stock of HopFed Bancorp, Inc. to $30,500,000 as of November 18, 1997. Yours truly, NATIONAL CAPITAL COMPANIES, LLC /s/ Stephen Clinton Stephen Clinton President National Capital Companies, LLC LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- I-1 Market Data - For Selected Publicly-Held Thrifts I-1a Market Data - For Selected Publicly-Held Thrifts I-1b Selected Financial and Market Statistics - Selected Publicly-Held Thrifts Located in Kentucky I-1c 1997 Announced Merger and Acquisition Activity for Kentucky I-1d Recent Conversion Activity II Index Values III Selected Financial Data - Hopkinsville Federal Savings Bank and the Comparables IV-1 Selected Publicly-Traded Stock Detail IV-2 Comparative Group - Selected Financial and Market Statistics IV-2a Comparative Group - Selected Financial and Market Statistics V-1 Standard Conversion Valuation Analysis V-2 Proforma Effect of Standard Conversion V-3 Proforma Effect of Standard Conversion V-4 Proforma Effect of Standard Conversion
National Capital Companies, LLC INTRODUCTION - ------------ National Capital Companies, LLC ("National Capital") prepared an independent appraisal for Hopkinsville Federal Savings Bank ("Hopkinsville Federal" or the "Bank") dated May 29, 1997, to determine the estimated proforma fair market value (the "original valuation") of the to-be-issued common stock pursuant to a plan by which Hopkinsville Federal would convert from the mutual to the stock form of organization. The original valuation used financial information through the period ended March 31, 1997,, including the results of operations for the years ended December 31, 1992, 1993, 1994, 1995 and 1996. An updated valuation was prepared as of August 29, 1997, (the "updated valuation") incorporating the financial results of the Bank through June 30, 1997. This valuation update (the "November update") incorporates the financial results of the Bank through September 30, 1997. Our original valuation dated May 29, 1997, and updated valuation dated August 29, 1997, are incorporated herein by reference. Our updated valuation common stock prices for selected comparable publicly-traded thrifts as of August 29, 1997, and this November update incorporates the market performance of those companies and thrift stock pricing multiples as of November 18, 1997. As in our updated valuation, our valuation methodology will estimate the proforma fair market value of Hopkinsville Federal under a scenario by which the Bank will conduct a standard stock conversion and include the proforma income resulting from the net proceeds of the Offering. STOCK MARKET PERFORMANCE - ------------------------ Our updated valuation utilized the closing stock market prices as of August 29, 1997. Since August 29, 1997, the general market for common stocks has increased. The Dow Jones Industrial Average has increased approximately .37% from the date of our updated valuation to the date of this November update. The Standard and Poors 500 index has increased approximately 4.31% over the same period. Thrift market prices have increased since the date of our updated valuation. As evidenced by the thrift stock market index calculated by SNL Securities, L.P., --------------------- the market values for all publicly-traded thrift stocks have increased from August 29, 1997, through November 18, 1997, by approximately 13.83%. The average tangible price-to-book ("P/B") value of the thrift industry has increased 7.76% from August 29, 1997, to November 18, 1997. This compares to an increase in the average price-to-assets ("P/A") multiple for the industry of 7.36%. The price-to-earnings ("P/E") multiple for the thrift industry has increased over the period from August 29, 1997, to November 18, 1997. The average last twelve months ("LTM") P/E multiple, adjusted to exclude the SAIF assessment where applicable, increased 10.23% from the date of our updated appraisal to the date of this November update. A review of Exhibit I-1 which evaluates those thrifts with assets of less than $500 million, shows that the market pricing multiples have increased less from August 29, 1997, through November 18, 1997, for overcapitalized thrifts (those with 10% and greater equity ratios) than for less capitalized thrifts. The increase in the average P/B multiple for the overcapitalized group was only 10.21% for that period compared to 15.77% for those with capital ratios between 7% and 10%, and 33.62% for thrifts with less than a 7% capital ratio. A review of Exhibit I-1a shows that the market pricing multiples have increased less from August 29, 1997, through November 18, 1997, for Midwestern thrifts than for the thrift industry in general. The increase in Page 1 National Capital Companies, LLC the average P/E multiple was 7.78% for that period for the Midwestern thrifts compared to 10.33% for the district average. The continued strong market for thrift stock is further evidenced by the after-market pricing of thrifts which have completed conversions from the mutual to stock form. In 1995, there were 71 completed conversions and 55 thrifts completed conversions in 1996. Since June 30, 1997, there have been eight standard conversions completed where data was available. The capital markets are receptive to thrifts choosing the public form of ownership. The average increase in stock price from their initial public offering price for those eight thrifts that converted was 66.4% as of November 18, 1997, as shown in Exhibit I-1d. This is significantly higher than the after-market results for 1995 and 1996 conversions. Most of these conversions were sold at the "super-max" which further demonstrates the market receptiveness of conversions. The limited number of conversions which have also been smaller in size than in prior years has created a limited supply of conversion stock for the large number of investors (including a myriad of mutual funds which focus on the thrift conversion sector for their investment activities) who have profited from purchasing conversion stock during their offerings or in the after-market. This supply-demand imbalance has contributed to the strong after-issuance market performance of recent conversions. COMPARABLE GROUP MARKET PERFORMANCE UPDATE - ------------------------------------------ A group of ten publicly-held savings institutions (the "comparables") was selected for comparison purposes in our original valuation. The selection process used to identify the comparables was designed to develop market pricing applicable to Hopkinsville Federal to develop an estimate of the Bank's estimated proforma fair market value. Our selection process limited the universe of publicly-traded thrift stocks to those of less than $500 million in assets. Our selection criteria sought comparables with historical profitability and strong capital positions which operate in non-metropolitan markets. Our selection process eliminated thrifts which were involved in announced mergers or acquisitions that significantly impacted their market prices. The comparables were re-evaluated for inclusion in this update and there did not appear to be any reason to eliminate any of the companies. Our original valuation included a financial analysis of the comparables through March 31, 1997, and our updated valuation evaluated their financial results as of June 30, 1997. Since September 30, 1997, financial information is now available for the comparables, we have evaluated this updated financial information compared to Hopkinsville Federal's September 30, 1997, financial condition to consider the appropriateness of the market value adjustments used in the original valuation. A detailed analysis of the Bank and the comparables financial results for the quarter ended September 30, 1997, compared to June 30, 1997, is provided in Exhibits III-1 through Exhibits III-1j. A summary of the comparable group and Hopkinsville Federal as of September 30, 1997, is provided below to evaluate the appropriateness of market value adjustments including: level and stability of earnings, asset quality and credit risk, taxation, dividend payments, management, market area, liquidity and placement of the issue and prevailing stock market conditions. Level and Stability of Earnings - ------------------------------- The level and quality of Hopkinsville Federal's profitability is a function of the amount and stability of the Bank's net interest margin, the level of noninterest income, amount of operating expenses and income tax level. Components impacting these variables include asset composition, asset-liability structure, interest rate risk structure, management, staffing, operating efficiency, actions of competitors and other factors. Page 2 National Capital Companies, LLC Hopkinsville Federal recorded a decrease in net income for the quarter ended September 30, 1997, resulting primarily from a decline in the Bank's net yield on interest-earning assets, an increase in non-interest expenses offset by a higher level of non-interest income, lower loan loss provisions and a lower income tax expense. The Bank's interest margin for the three months ended September 30, 1997, was 2.21% compared to 2.34 for the quarter ended June 30, 1997. Hopkinsville Federal has a conservative asset structure primarily composed of one-to-four family mortgages and liquid investments with a portfolio yield below that of the comparables. The Bank's cost of funds is higher than the comparables. The result is that the Bank's net interest margin is lower than the comparables. For the quarter ended September 30, 1997,, the Bank recorded a 5.73% decrease in net interest income and the Bank's net interest margin remains significantly lower than the comparables and the thrift industry in general. The following schedule provides an analysis of the comparables' net interest income for the quarters ended June 30, 1997, and September 30, 1997. As the schedule shows, the comparables net interest income has not been as significantly impacted in the quarter ended September 30, 1997, as Hopkinsville Federal's net interest income ratio was for the quarter.
- ------------------------------------------------------------------------------------------------------ Net Interest Income Analysis - ------------------------------------------------------------------------------------------------------ Quarter Ended Quarter Ended Comparable June 30, 1997, Sept 30, 1997, % Change Ameriana Bancorp 3.03% 3.02% -0.33% First Bancshares, Inc. 3.35% 3.32% -0.90% FFW Corporation 3.15% 3.19% 1.27% Wood Bancorp, Inc. 4.11% 4.18% 1.70% Industrial Bancorp, Inc. 4.02% 3.90% -2.99% Landmark Bancshares, Inc. 3.08% 3.10% 0.65% MBLA Financial Corp. 2.17% 2.11% -2.76% MFB Corp. 3.15% 3.20% 1.59% Milton Federal Financial Corp. 2.99% 2.80% -6.35% Midwest Bancshares Inc. 2.83% 2.75% -2.83% Average 3.19% 3.16% -0.97% Hopkinsville Federal Savings Bank 2.34% 2.21% -5.56% Source: SNL Securities, L.C. and Unaudited Bank Financial Statements - ------------------------------------------------------------------------------------------------------
Hopkinsville Federal's noninterest income has made a similar contribution to the Bank's profitability as that of the comparables. For the quarter ended September 30, 1997,, noninterest income to average assets totaled .33%. This is slightly higher than the .29% recorded for the quarter ended June 30, 1997. This level of noninterest income is similar to the comparables' average of .40% for the quarter ended September 30, 1997. Hopkinsville Federal's ratio of operating expenses to assets increased 2.83% for the quarter ended September 30, 1997. Operating expenses for the quarter ended September 30, 1997, were 1.11% of assets compared to 1.08% for the quarter ended June 30, 1997, (annualized). Hopkinsville continues to operate with a relatively low operating expense ratio which provides the Bank additional profitability. Page 3 National Capital Companies, LLC The following schedule provides an analysis of Hopkinsville Federal's most recent quarterly profit performance compared to the comparables.
=================================================================================================== Return on Average Assets Analysis - --------------------------------------------------------------------------------------------------- Quarter Ended Quarter Ended Company June 30, 1997, Sept 30, 1997, % Change Ameriana Bancorp 0.89% 1.01% 13.48% First Bancshares, Inc. 1.02% 1.27% 24.51% FFW Corporation 0.94% 1.04% 10.64% Wood Bancorp, Inc. 1.44% 1.48% 2.78% Industrial Bancorp, Inc. 1.51% 1.40% -7.28 Landmark Bancshares, Inc. 1.11% 1.04% -6.31 MBLA Financial Corp. 0.79% 0.89% 12.66% MFB Corp. 0.84% 0.79% -5.95 Milton Federal Financial Corp. 0.74% 0.68% -8.11 Midwest Bancshares Inc. 0.81% 1.13% 39.51% Average 1.01% 1.07% 6.34% Hopkinsville Federal Savings Bank 1.01% 0.94% -6.93 - --------------------------------------------------------------------------------------------------
Source: SNL Securities, L.C. In the quarter ended September 30, 1997, the Bank recorded a return on average assets equal to approximately 87% of the comparable average. The Bank's profitability declined 6.93% for the quarter while the comparables profitability improved 6.34%. The following schedule provides an analysis of the return on average equity for the comparables for the quarter ended September 30, 1997, compared to the quarter ended June 30, 1997. The schedule compares the actual return on average equity recorded by the comparables to the proforma post-conversion results for the Bank upon completion on the conversion. Page 4 National Capital Companies, LLC
================================================================================================ Return on Average Equity Analysis - ------------------------------------------------------------------------------------------------ Quarter Ended Quarter Ended Company June 30, 1997, Sept 30, 1997, Ameriana Bancorp 8.16% 9.07% First Bancshares, Inc. 7.35% 9.48% FFW Corporation 9.50% 10.77% Wood Bancorp, Inc. 11.53% 11.98% Industrial Bancorp, Inc. 8.43% 8.06% Landmark Bancshares, Inc. 7.81% 7.46% MBLA Financial Corp. 6.21% 7.13% MFB Corp. 5.99% 5.89% Milton Federal Financial Corp. 5.44% 5.29% Midwest Bancshares Inc. 11.75% 16.37% Average 8.22% 9.15% Hopkinsville Federal Savings Bank ** 4.66% 4.66% - ------------------------------------------------------------------------------------------------
* Adjusted to exclude the SAIF assessment ** Proforma - Please refer to the super-max in Exhibit V-3 Source: SNL Securities, L.C. As shown, the Bank is anticipated to record a lower return on average equity post-conversion than the comparables. The variance between the Bank and the comparables has increased as the comparables profitability has increased from the June quarter to the September quarter. The Bank, at the super-max, is projected to have a net worth ratio of over 22.5%, which is significantly higher than the comparables average of 12.3%. The high level of capitalization projected for the Bank contributes to the lower level of proforma return on average equity compared to the comparables. The Bank, due to the limited market growth opportunities, may require some time to leverage its capital position to bring its return on average equity to that of the comparables. Based upon the foregoing, we continue to apply a discount to the comparables market pricing related to level and stability of earnings. Accordingly, a downward adjustment to the pricing multiples of the comparables is warranted to reflect the Bank's lower proforma earnings prospects relative to the comparable group, and our update will continue to apply a discount to the comparables market pricing multiples. Asset Quality and Credit Risk - ----------------------------- As mentioned in our original valuation and updated valuation, we believe that Hopkinsville Federal's asset quality is superior to the comparables. The following provides an analysis of nonperforming assets for Hopkinsville Federal and the comparables as of September 30, 1997: Our analysis of Hopkinsville Federal related to asset quality and credit risk is that the Bank's risk related to credit losses is lower than the comparable group. Both the Bank and the comparables have experienced a slight increase in their levels of nonperforming assets in the quarter ended September 30, 1997, but their Page 5 National Capital Companies, LLC levels remain at acceptable levels. As a result we will continue to apply an upward adjustment to the comparables market pricing multiples concerning asset quality and credit risk. Taxation - -------- Our inquiries with the Bank's accountants and management did not disclose any reason for a tax rate different than the comparables. Our expectation is that the future tax rates for the comparables and Hopkinsville Federal will be similar. The differences that exist among the comparables and Hopkinsville Federal's are minimal. Hence, no adjustment in the Bank's estimated proforma fair market value will be made for taxation. Dividend Payments - ----------------- Hopkinsville Federal has indicated that it intends to establish a policy of paying dividends initially at an annual rate of 3% of the purchase price of the stock beginning with the first full quarter following the conversion. The Bank will consider such factors including capital requirements, financial performance, tax considerations and general economic conditions in determining future dividend adjustments. Thrift stock historically has not traded on the basis of current or potential dividend yields. However, the rise in industry profitability and the improved level of capitalization has enabled many thrifts the ability to pay out modest dividends. This trend is evident in the comparable group. All of the ten selected members of the comparable group are paying regular dividends. Because Hopkinsville Federal has stated that it will pay a dividend on the common stock, no adjustment will be made to the proforma fair market value in consideration of dividends, which was also the case in the original valuation. Management - ---------- Hopkinsville Federal's management has responded well in this era of uncertainty and constant change related to the thrift industry. The Bank has remained profitable, improved its net interest margin, held operating expenses under control, increased its franchise value and maintained asset quality. The Bank has also developed an alternative investment strategy of investments and mortgage-backed securities to offset the lower level of loan production available in the current market. Hopkinsville Federal's management understands their deposit and lending markets, responds well to competition and has initiated the organizational and structural changes necessary to remain competitive, including the pursuit of a conversion. The most important measure of management is their ability to earn a profit. Management has done this consistently, due in part to the reasons mentioned above. Based upon our analysis of the comparables, we believe that they also possess quality management. The best indication of the comparables' management capabilities is the consistent level of earnings recorded by the group. Based upon this assessment, we believe that no market adjustment is necessary for the quality of management. Market Area - ----------- As discussed in our original valuation, Hopkinsville Federal's primary deposit area encompasses the southwestern area of Kentucky. The Bank's lending activities are also concentrated in this same market. The local economy is stable, however, the economic prospects for the Bank's primary market area are lower than for the state of Kentucky and for the nation as a whole. Page 6 National Capital Companies, LLC As discussed in the original valuation, the markets of the comparable group were chosen to reflect non-metropolitan areas. Upon specific consideration of competitive factors and economic conditions between the comparables and Hopkinsville Federal's market area, there does appear to be a difference between the composite of the comparables and Hopkinsville Federal in the economic conditions prevailing in the local markets. Therefore, a downward valuation adjustment will be made regarding market area. Liquidity and Placement of the Issue - ------------------------------------ The Bank has received a high level of interest in its subscription offering. There are several factors which have resulted in the large amount of orders received. . The Bank choose an unusually high individual maximum order level of $250,000 which could be increased to $500,000 for joint accounts. . Local financial institutions have made prime rate loans available to subscribers up to 100% of the subscription amount which has increased the "purchase power" of the Bank's subscribers. The Bank estimates that these loans have totaled over $30 million. . The Bank announced plans for the conversion in January 1997. Several delays in undertaking the subscription offering has provided a longer than typical time period for investors to evaluate and consider a purchase of the Company's stock. . A local investment banking firm, Hilliard Lyons, has actively promoted the Bank's offering. They have reportedly encouraged their clients to participate in the subscription offering, and have actively sought retirement accounts needing a third party to accomplish the investment of 401K and other self-directed retirement plans. . The Bank's plan of conversion utilized a tier one depositor qualification date of March 31, 1996. This date is more recent than the date typically used in conversions, however, the Bank was unable to use an older date due to data processing problems with older account records. . There appears to be a high number of "professional investors" who held subscription rights and have placed orders. . As previously mentioned, the limited number of conversions being undertaken has created a supply-demand imbalance which has resulted in thrift conversion investors heavily participating in the Bank's subscription offering. . The high level of interest in the Bank's subscription offering has resulted in large orders being placed with the expectation that these orders will be prorated and that by ordering a larger amount, investors believed they were likely to receive a larger prorated order amount. . Local thrift investors experienced a substantial return on their investment in First Federal Savings Bank, a thrift located in Hopkinsville which sold in 1993 to Liberty National Bank which subsequently sold to Banc One in 1994. Through the mergers, First Federal shareholders received a substantial gain on their original investment. Local investors have indicated that they experienced a gain of approximately eight times their original investment as a result of the "double dip". These investors, and others who know about their gains on their First Federal investment, recognize the potential exists for similar returns through an investment in the Bank. Many investors in the subscription offering expressed their reason for making an investment was simply the hope in duplicating the financial success experienced by investors in First Federal. Accordingly, we do not believe that the high level of investor interest in the Bank's offering is a major indication of the value of the Bank. We believe that many investors have been influenced by the "hype" of the offering. We further believe that the large amount of orders reflects the limited availability of new conversion stock in the market. Professional investors have profited substantially in the past by purchasing Page 7 National Capital Companies, LLC conversion issues, and today, they appear to be highly liquid and are capable of causing most new conversions to be substantially oversubscribed. Prevailing Stock Market Conditions - ---------------------------------- The performance of stock prices for thrifts has been exceptional since late 1990, not unlike the conditions which have prevailed for common stock in general. There are several factors for this unusually advantageous market opportunity. The level of interest rates has made thrift issues attractive because of the thrift profitability that current market conditions provide. Second, the rise in the stock market in general has helped buoy thrift equity including new conversion issues. Third, the strength of the savings and loan business, after the resolution of the troubled institutions by the RTC, has resulted in a high appreciation for the remaining industry and its profit potential. Fourth, many previously converted thrift issues are being considered potential takeover candidates as financial services participants rapidly pursue intrastate and interstate financial service expansion opportunities. (Exhibit I-1c provides information on 1997, thrift merger activity in Kentucky, which has been moderate.) New conversions continue to experience a high level of interest from subscription rights holders as well as other investors. A vast majority of the conversions receive orders in excess of the maximum valuation level. This is favorable for three reasons. First, the expense is considerably less than if underwritten issues were required to accomplish the conversion. Second, the shares are usually bought in small blocks by friendly local investors (which may reduce the potential for subsequent unfriendly takeovers). Third, the loyalty of the local market for future retail savings deposit and lending activities should strengthen. It is our opinion that no adjustment is warranted in our preparation of an estimate of the proforma fair market value of the Company's common stock related to prevailing stock market conditions. Summary of Market Value Adjustments - ----------------------------------- We concluded in our original valuation and the valuation update that Hopkinsville Federal warranted a downward adjustment for level and stability of earnings and market area and an upward adjustment for asset quality and credit risk. Our analysis found that the Bank did not significantly differ in any of the other market value adjustment criteria. It should be noted that Hopkinsville Federal may have several other positive and negative factors, but in relation to the comparable group these conditions are not materially different. The preparation of this November update included a review of the market value adjustments discussed above. Our assessment of the market factors is the same as in our original valuation. We believe that the following market value adjustments are appropriate upon the application of the comparables' market pricing multiples for Hopkinsville Federal: Page 8 National Capital Companies, LLC
------------------------------------------------------------ Summary of Market Value Adjustments ------------------------------------------------------------ Market Factor Adjustment Level and Stability of Earnings Downward Asset Quality and Credit Risk Upward Taxation None Dividend Payments None Management None Market Area Downward Liquidity and Placement of the Issue None Prevailing Stock Market Conditions None ------------------------------------------------------------
MARKET PERFORMANCE - ------------------ The market valuation of total equity for the comparables increased 7.94% from August 29, 1997, the market date for our updated valuation, to November 18, 1997, the date of this November update. As shown below, the performance of individual companies varied widely. All of the comparables experienced an increase in market value except one. The percentage change in the market value for the comparables ranged from a decline of 3.27% to an increase of 40.65%. Of particular interest was the dramatic increase in stock price of Midwest Bancshares, Inc. Midwest's stock price was positively impacted by its strong quarterly earnings as well as the announced sale of Valley Financial Corporation which is also headquartered in Burlington, Iowa. Valley's shareholders are to receive a cash price equal to approximately two time book. Since Midwest's stock price has dramatically outperformed the other members of the peer group, our focus was on median price changes rather than average price changes which minimizes the "distortion" caused by Midwest's price change since August 29, 1997. The median change in the comparables market value of equity was 8.52%.
----------------------------------------------------------------------------------------------------- Market Value of Equity ----------------------------------------------------------------------------------------------------- Company November 18, 1997, August 29, 1997, % Change Ameriana Bancorp $64.6 $63.8 1.25% First Bancshares, Inc. 28.7 26.6 7.89% FFW Corporation 25.0 20.8 20.19% Wood Bancorp, Inc. 39.5 35.2 12.22% Industrial Bancorp, Inc. 89.2 77.8 14.65% Landmark Bancshares, Inc. 41.1 41.5 -0.96% MBLA Financial Corp. 32.0 30.8 3.90% MFB Corp. 38.4 39.7 -3.27% Milton Federal Financial Corp. 34.6 31.7 9.15% Midwest Bancshares Inc. 17.3 12.3 40.65% Total 410.4 380.2 7.94% Source: Quarterly Financial Statements, SNL Securities, L.P. and National Capital Calculations Dollars shown in thousands -----------------------------------------------------------------------------------------------------
Exhibit IV-2 details the P/E, P/B and P/A multiples of the comparables as of November 18, 1997. The average percentage change of the market multiples from August 29, 1997, is shown below. The comparable group recorded changes in their P/E multiple ranging from -6.77% to 25.37%. The comparable P/E Page 9 National Capital Companies, LLC average was 17.86x as of November 18, 1997, compared to the average of 17.26x adjusted to exclude the SAIF assessment as appropriate. This 3.5% increase compares to a 10.23% increase in the average P/E multiple for all publicly- traded thrifts. The average P/B multiple for the comparable group increased 9.15% as compared to a 7.76% increase in the average P/B multiple for all publicly-traded thrifts. The median P/A multiple increased for the comparable group a total of 7.87% while the average P/A multiple for all publicly-traded thrifts increased 7.36% from August 29, 1997, to November 18, 1997. Additional information on these multiples for the industry is provided in Exhibit I-1 and Exhibit I-1a. In recognition of the general improvement in stock market conditions, the enhanced market pricing of the comparables and the thrift industry in general, the strong level of subscriptions received, as well as other factors, our estimate of the fair market value of the Company has been increased from the value estimate determined in our updated valuation.
------------------------------------------------------------------------------------------------------------ P/E Multiple * ------------------------------------------------------------------------------------------------------------ Company November 18, 1997, August 29, 1997, % Change Ameriana Bancorp 17.68 17.75 -0.39% First Bancshares, Inc. 15.44 15.30 0.92% FFW Corporation 14.23 12.06 17.99% Wood Bancorp, Inc. 18.44 17.80 3.60% Industrial Bancorp, Inc. 17.08 17.59 -2.90% Landmark Bancshares, Inc. 17.46 17.46 0.00% MBLA Financial Corp. 18.84 18.16 3.74% MFB Corp. 20.39 21.87 -6.77% Milton Federal Financial Corp. 23.81 22.43 6.15% Midwest Bancshares Inc. 15.27 12.18 25.37% Average 17.86 17.26 3.50% * Adjusted to exclude the SAIF assessment where applicable Source: SNL Securities, L.P. and National Capital Calculations ------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------ P/B Multiples ------------------------------------------------------------------------------------------------------------ Company November 18, 1997, August 29, 1997, % Change Ameriana Bancorp 146.87 146.51 0.25% First Bancshares, Inc. 126.57 119.81 5.64% FFW Corporation 156.53 134.61 16.28% Wood Bancorp, Inc. 190.63 174.63 9.16% Industrial Bancorp, Inc. 146.68 126.83 15.65% Landmark Bancshares, Inc. 130.51 131.87 -1.03% MBLA Financial Corp. 112.98 108.05 4.56% MFB Corp. 114.48 117.21 -2.33% Milton Federal Financial Corp. 121.85 112.15 8.65% Midwest Bancshares Inc. 166.94 123.88 34.76% Average 141.40 129.56 9.15% Source: SNL Securities, L.P. and National Capital Calculations -----------------------------------------------------------------------------------------------------------
Page 10 National Capital Companies, LLC
------------------------------------------------------------------------------------------------------------ P/A Multiple ------------------------------------------------------------------------------------------------------------ Company November 18, 1997, August 29, 1997, % Change Ameriana Bancorp 16.44 16.04 2.49% First Bancshares, Inc. 17.62 16.20 8.77% FFW Corporation 13.79 11.55 19.39% Wood Bancorp, Inc. 23.70 21.49 10.28% Industrial Bancorp, Inc. 25.20 22.46 12.20% Landmark Bancshares, Inc. 18.00 18.19 -1.04% MBLA Financial Corp. 14.30 13.13 8.91% MFB Corp. 15.00 16.00 -6.25% Milton Federal Financial Corp. 16.47 15.89 3.65% Midwest Bancshares Inc. 11.55 8.56 34.93% Average 17.21 15.95 7.87% Source: SNL Securities, L.P. and National Capital Calculations ------------------------------------------------------------------------------------------------------------
As detailed in our original valuation, we believe that the P/E method is the most direct and appropriate method of determining Hopkinsville Federal's estimated proforma fair market value of the to-be-issued common shares. Our updated valuation used Hopkinsville Federal's trailing LTM earnings as of June 30, 1997, of $1.426 million adjusted to exclude the SAIF assessment to apply to the market P/E multiple. The LTM earnings for the Bank as of September 30, 1997, were approximately $1.591 million. VALUATION METHODOLOGY - --------------------- The market pricing multiples of the comparable group members are presented in Exhibit IV-2 and 2a. All three valuation methodologies (P/E, P/B, and P/A) used in the updated valuation were updated based upon Hopkinsville Federal's September 30, 1997, financial information and using the stock prices of publicly-traded thrift institutions as of November 18, 1997. The central valuation method will be the P/E method. Since Hopkinsville Federal and all of the comparable group members have been consistently profitable, the P/E method is the most direct and appropriate method of valuation. Investors consider earnings an important factor for the determination of the value of a newly converted thrift. Hopkinsville Federal's LTM earnings will provide the basis for calculation of proforma values for the Bank. Hopkinsville Federal's LTM earnings as of September 30, 1997, totaled approximately $1.591 million, which is $170 thousand higher than the Bank's June 30, 1997, LTM earnings adjusted to exclude the SAIF assessment. The P/B and the P/A methods will be applied as secondary measures of Hopkinsville Federal's estimated proforma fair market value. These methods are more appropriately employed in situations where the P/E method would not be appropriate. These methods have limitations caused by historical cost accounting, goodwill and the inability to distinguish the affects these factors have on the subject and comparable group. P/E Multiple Calculation - ------------------------- As indicated in Exhibit IV-2, the adjusted P/E market multiples for the comparable group range from 14.23x to 23.81x. The average and median for the comparables' P/E multiples are 17.88x and 17.66x, respectively. In order to derive a multiple to apply to Hopkinsville Federal's LTM earnings, adjustments to these multiples were made as detailed in the updated valuation. The proforma P/E for our November updated estimate of value, $30,500,000 was 13.46x. Page 11 National Capital Companies, LLC P/B Multiple Calculation - ------------------------- The P/B value method considers a company's financial condition, but does not as readily evaluate the future operating results. Accordingly, this valuation method is less meaningful than the P/E method. The P/B method must be considered, however, because it is a method which many investors and analysts use in evaluating the value of thrift common stock. As indicated in Exhibit IV-2 the P/B market multiples for the comparable group range from 112.98% to 190.63%. The comparables' average and median P/B multiples are 141.40% and 138.60%, respectively. In order to derive a multiple to apply to Hopkinsville Federal's net worth, adjustments to these multiples were made as detailed in the updated valuation. Our November estimate of value of $30,500,000 results in a proforma P/B of 67.97% as shown in Exhibit V-3. P/A Multiple Calculation - ------------------------ The third method of valuation considered is the P/A method. This method is generally the least desirable of the valuation methods considered. This method fails to consider either the financial strength or the earnings capacity of a financial institution. This method is generally reserved for circumstances where core earnings are nonexistent or where a financial institution holds a minimal level of capital. As indicated in Table IV-2, the P/A market multiples for the comparables range from 11.55% to 25.20%. The average and median comparables' P/A multiples are 17.21% and 16.46%, respectively. In order to derive a multiple to apply to Hopkinsville Federal's assets, adjustments to these multiples were made as detailed in the updated valuation. Our November estimate of value of $30,500,000 results in a proforma P/A of 13.37% as shown in Exhibit V-3. VALUATION ANALYSIS - ------------------ Based upon the analysis performed, our estimate of the fair market value of the Company has been determined to be $30,500,000. This higher valuation takes into consideration the general increase in stock market conditions since the updated valuation was prepared, the high amount of orders received by the Bank in its subscription offering and the general increase in thrift pricing since the updated valuation was prepared, among other factors. Based upon the value determined in our updated valuation of $26,500,000 as of August 29, 1997, this indicates an increase in the value of the Company of 15.09% from August 29, 1997, to November 18, 1997. This conclusion is based on the P/E method with secondary consideration of the P/B and P/A calculations as included in Exhibits V-1 through V-4. As stated previously, we believe that the P/E method is the most appropriate methodology based upon the conditions and characteristics analyzed throughout this valuation. Also included are proforma calculations for return on assets and tangible net worth to assets. Page 12 Exhibit I-1 Hopkinsville Federal Savings Bank Hopkinsville, Kentucky Market Data for Selected Publicly-Traded Thrift Institutions * Selected Groups Excluding Mutual Holding Companies As of November 18, 1997
------------------------------------------------------ Price to Price to Price to Book LTM EPS ** Assets (%) (x) (%) ------------------------------------------------------ Segment Description: All Thrift - Medians 150.17 18.25 16.63 All Thrift - Averages 165.69 20.91 18.52 Thrifts with Assets greater than $500 million Medians 189.28 17.42 15.40 Averages 201.14 20.03 16.11 Thrifts with Assets less than $500 million Medians 131.20 18.88 18.00 Averages 143.39 21.53 20.06 Equity-to-Asset Groups* Over 10% Medians 127.43 20.05 20.66 Averages 136.14 22.85 22.69 From 7% to 10% Medians 172.98 16.47 16.16 Averages 178.42 17.58 15.79 Under 7% Medians 219.46 17.18 12.23 Averages 222.69 20.83 12.69
* Selected publicly traded companies include those with assets less than $500 million. ** Adjusted to exclude SAIF assessment where applicable Source: SNL Securities, L.P. and National Capital calculations Exhibit I-1a Hopkinsville Federal Savings Bank Hopkinsville, Kentucky Market Data for Selected Publicly-Traded Thrift Institutions * Excluding Mutual Holding Companies Geographic Regional Averages As of November 18, 1997
------------------------------------------------------- Price to Price to Price to Book LTM EPS ** Assets (%) (x) (%) ------------------------------------------------------- Mid-Atlantic 175.27 19.56 16.41 Midwestern 148.57 21.20 19.18 Northeastern 193.80 17.49 15.86 Southeastern 169.52 25.05 23.31 Southwestern 153.37 18.37 18.08 Western 180.96 22.04 16.16 District Average 170.25 20.62 18.17
* Selected publicly traded thrifts with assets less than $500 million. ** Reflects adjustment to exclude SAIF assessment where applicable. Source: SNL Securities, L.P. and National Capital calculations Exhibit I - 1b SELECTED FINANCIAL AND MARKET STATISTICS Selected Publicly Traded Thrifts Located in Kentucky As of November 18, 1997
- ------------------------------------------------------------------------------------------------------------------------------- Current * Current Current Total Stock Price/ Price/ Tang Price/ Assets Price LTM EPS Book Value Assets ($000) Ticker Short Name City IPO Date ($) (x) (%) (%) Mst RctQ - ------------------------------------------------------------------------------------------------------------------------------- CKFB CKF Bancorp Inc. Danville 01/04/95 18.375 14.70 108.66 27.72 59,868 CLAS Classic Bancshares Inc. Ashland 12/29/95 16.750 19.25 130.35 16.47 132,186 FFKY First Federal Financial Corp. Elizabethtown 07/15/87 21.750 14.90 182.93 23.64 382,585 FKKY Frankfort First Bancorp Inc. Frankfort 07/10/95 9.750 NM 142.54 24.00 133,255 FLKY First Lancaster Bancshares Lancaster 07/01/96 15.969 29.03 109.23 32.20 47,184 FTSB Fort Thomas Financial Corp. Fort Thomas 06/28/95 13.750 17.41 130.21 21.01 97,843 GWBC Gateway Bancorp Inc. Catlettsburg 01/18/95 19.125 32.42 118.42 32.86 62,609 HFFB Harrodsburg First Fin Bancorp Harrodsburg 10/04/95 16.875 23.25 107.62 31.36 108,949 KYF Kentucky First Bancorp Inc. Cynthiana 08/29/95 14.125 17.66 125.11 20.89 88,089 ---------------------------------------------------------------------- AVERAGE 16.27 21.08 128.34 25.57 123,619 MEDIAN 16.75 18.46 125.11 24.00 97,843 ----------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Tangible Equity/ NPAs/ Return on Return on Current Tang Assets Assets Avg Assets Avg Equity Dividend (%) (%) (%) (%) Yield Ticker Short Name City IPO Date Mst RctQ Mst RctQ LTM LTM (%) - ----------------------------------------------------------------------------------------------------------------------------------- CKFB CKF Bancorp Inc. Danville 01/04/95 23.67 0.70 1.82 7.51 2.721 CLAS Classic Bancshares Inc. Ashland 12/29/95 12.92 0.43 0.81 5.53 1.672 FFKY First Federal Financial Corp. Elizabethtown 07/15/87 13.03 0.08 1.64 11.99 2.575 FKKY Frankfort First Bancorp Inc. Frankfort 07/10/95 16.83 0.00 0.09 0.37 3.692 FLKY First Lancaster Bancshares Lancaster 07/01/96 29.47 2.28 1.24 3.64 3.131 FTSB Fort Thomas Financial Corp. Fort Thomas 06/28/95 16.13 1.91 1.22 7.18 1.818 GWBC Gateway Bancorp Inc. Catlettsburg 01/18/95 27.74 0.76 0.94 3.60 2.092 HFFB Harrodsburg First Fin Bancorp Harrodsburg 10/04/95 26.92 0.00 1.03 3.80 2.370 KYF Kentucky First Bancorp Inc. Cynthiana 08/29/95 16.70 0.04 1.15 6.64 3.540 -------------------------------------------------------------------------- AVERAGE 20.38 0.69 1.10 5.58 2.62 MEDIAN 16.83 0.43 1.15 5.53 2.58 --------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------- 1 Month Avg Weekly Vol/ Three Month Shares Out Price Change Ticker Short Name City IPO Date (%) (%) - -------------------------------------------------------------------------------------------------------- CKFB CKF Bancorp Inc. Danville 01/04/95 0.84 (4.55) CLAS Classic Bancshares Inc. Ashland 12/29/95 0.93 15.52 FFKY First Federal Financial Corp. Elizabethtown 07/15/87 0.26 1.16 FKKY Frankfort First Bancorp Inc. Frankfort 07/10/95 1.78 2.63 FLKY First Lancaster Bancshares Lancaster 07/01/96 0.23 4.71 FTSB Fort Thomas Financial Corp. Fort Thomas 06/28/95 0.78 25.00 GWBC Gateway Bancorp Inc. Catlettsburg 01/18/95 0.37 8.51 HFFB Harrodsburg First Fin Bancorp Harrodsburg 10/04/95 1.09 12.50 KYF Kentucky First Bancorp Inc. Cynthiana 08/29/95 0.58 15.31 ----------------------------------------------- AVERAGE 0.76 8.98 MEDIAN 0.78 8.51 -----------------------------------------------
* Reflects adjustment for SAIF special assessment where appropriate Source: SNL Securities, L.P. National Capital Companies, LLC Page 1 Exhibit I -1c 1997 Announced Kentucky Thrift Merger and Acquisition Activity As of November 18, 1997
- ------------------------------------------------------------------------------------------------------------------------------------ Buyer: Seller: Seller: Seller: 1:Total 1:Total 1:Total 1:Tang Bank/ Bank/ Assets Assets Deposits Eqty/ Buyer ST Thrift Seller City ST Thrift ($000) ($000) ($000) Assets (%) - ------------------------------------------------------------------------------------------------------------------------------------ Star Banc Corp OH Bank Great Financial Corp Louisville KY Thrift 10,753,098 3,046,227 1,893,545 8.88 Peoples Bancorp OH Bank Gateway Bancorp Catlettsburg KY Thrift 616,635 66,439 49,195 25.63 - ------------------------------------------------------------------------------------------------------------------------------------ Seller: Seller: Seller: 1:YTD 1:YTD 1:NPAs/ Bank/ Bank/ ROAA* ROAE* Assets Announce Buyer ST Thrift Seller City ST Thrift (%) (%) (%) Date Status - ----------------------------------------------------------------------------------------------------------------------------------- Star Banc Corp OH Bank Great Financial Corp Louisville KY Thrift 1.05 11.03 0.36 09/15/97 Pending Peoples Bancorp OH Bank Gateway Bancorp Catlettsburg KY Thrift 0.75 2.99 0.12 04/25/97 Pending - ------------------------------------------------------------------------------------------------------------------------------------ Ann'd Ann'd Completed/ Deal Pr/ Deal Pr/ Bank/ Bank/ Terminated Consider Tg Bk 4-Qtr Buyer ST Thrift Seller City ST Thrift Date Type (%) EPS (x) - ---------------------------------------------------------------------------------------------------------------------------------- Star Banc Corp OH Bank Great Financial Corp Louisville KY Thrift NA Mixture 225.18 28.21 Peoples Bancorp OH Bank Gateway Bancorp Catlettsburg KY Thrift NA Mixture 118.45 39.06
Source: SNL Securities, L.P. National Capital Companies, Page 1 Exhibit I - 1d Recent Conversion Activity Selected Publicly Traded Thrifts Original Offering Statistics and Current Market Pricing As of November 18, 1997
- --------------------------------------------------------------------------------------------------------------------------------- Current Total Stock Shares IPO Price Price Increase Ticker Short Name City State IPO Date Issued ($) ($) (%) - --------------------------------------------------------------------------------------------------------------------------------- CFBC Community First Banking Co. Carrollton GA 07/01/97 2,413,562 20.000 38.125 90.63% FBNW FirstBank Corp. Lewiston ID 07/02/97 1,983,750 10.000 17.000 70.00% FSFF First SecurityFed Financial Chicago IL 10/31/97 6,408,000 10.000 15.375 53.75% FSPT FirstSpartan Financial Corp. Spartanburg SC 07/09/97 4,430,375 20.000 37.750 88.75% GOSB GSB Financial Corp. Goshen NY 07/09/97 2,248,250 10.000 15.625 56.25% OSFS Ohio State Financial Services Bridgeport OH 09/29/97 633,168 10.000 15.250 52.50% OTFC Oregon Trail Financial Corp. Baker City OR 10/06/97 4,694,875 10.000 15.688 56.88% SHSB SHS Bancorp Inc. Pittsburgh PA 10/01/97 819,950 10.000 16.250 62.50% -------------------------------------------------------------------------- AVERAGE 2,953,991 12.500 21.383 66.41% MEDIAN 2,330,906 10.000 15.969 59.69% -------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ Price/ Price/ Price/ Gross Pro-Forma Pro-Forma Adjusted Conversion Proceeds Tang. Book Earnings Assets Assets Ticker Short Name City State IPO Date ($000) (%) (%) (x) ($000) - ------------------------------------------------------------------------------------------------------------------------------------ CFBC Community First Banking Co. Carrollton GA 07/01/97 48,271 72.744 36.1 12.0 352,532 FBNW FirstBank Corp. Lewiston ID 07/02/97 19,838 71.934 19.2 13.0 133,194 FSFF First SecurityFed Financial Chicago IL 10/31/97 64,080 73.443 21.3 19.8 260,002 FSPT FirstSpartan Financial Corp. Spartanburg SC 07/09/97 88,608 72.984 26.0 19.1 375,526 GOSB GSB Financial Corp. Goshen NY 07/09/97 22,483 73.442 23.2 18.9 96,323 OSFS Ohio State Financial Services Bridgeport OH 09/29/97 6,332 63.331 17.0 15.7 33,929 OTFC Oregon Trail Financial Corp. Baker City OR 10/06/97 46,949 76.631 18.5 18.7 204,213 SHSB SHS Bancorp Inc. Pittsburgh PA 10/01/97 8,200 70.731 13.9 9.1 81,688 ----------------------------------------------------------------------------- AVERAGE 38,095 71.91 21.90 15.79 192,176 MEDIAN 34,716 72.86 20.25 17.20 168,704 -----------------------------------------------------------------------------
Source: SNL Securities, L.P. National Capital Companies, LLC National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit II Thrift Index Values
Price Change (%) Value ---------------- Index 10/31/97 1 Month YTD LTM - ----- -------- ------- --- --- All Publicly Traded 752.4 2.03 55.58 64.74 Thrifts SAIF Thrifts 689.6 3.00 57.00 66.37 BIF Thrifts 949.6 0.40 53.96 62.74 Stock Exchange Indices AMEX Thrifts 225.8 5.09 44.56 52.05 NYSE Thrifts 464.0 4.82 67.36 74.55 OTC Thrifts 855.8 0.99 50.21 60.55 Geographic Indices Mid-Atlantic Thrifts 1,533.7 4.62 58.01 68.20 Midwestern Thrifts 1,645.0 3.13 41.89 51.56 New England Thrifts 684.3 1.93 59.55 77.02 Southeastern Thrifts 718.1 7.15 60.57 65.50 Southwestern Thrifts 455.4 -4.89 44.18 52.71 Western Thrifts 759.8 -0.19 60.06 66.97 Asset Size Indices Less than $250M 795.7 -0.66 35.65 39.46 $250M to $500M 1,188.6 3.14 50.49 61.02 $500M to $1B 763.2 0.31 46.27 56.06 $1B to $5B 867.3 5.01 58.84 70.44 More than $5B 480.8 1.21 57.23 65.60 Comparative Indices Dow Jones Industrials 7,442.1 -6.33 15.41 23.43 S&P 500 914.6 -3.45 23.47 29.68
All SNL indices are market-value weighted; i.e., an institution's effect on an index is proportional to that institution's market capitalization. All SNL thrift indices began at 100 on March 30, 1984. On that date, the S&P 500 closed at 159.2 and the Dow Jones Industrials closed at 1,164.9. Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR Midwest: IA, IL, IN, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI New England: CT, ME, MA, NH, RI, VT Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV Southwest: CO, LA, NM, TX, UT West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY Source: SNL Monthly Market Report National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1 SELECTED FINANCIAL DATA Hopkinsville Federal Savings Bank Hopkinsville, Kentucky
- -------------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - -------------------------------------------------------------------------------------------------------------- Interest Income $3,372 $3,335 ($37) -1.10% Interest Expense 2,186 2,217 31 1.42% ----- ----- -- ----- Net Interest Income 1,186 1,118 -68 -5.73% Operating Expenses 547 561 14 2.56% Noninterest Income 145 167 22 15.17% Provision for Loan Losses 10 5 -5 NA Income Taxes 263 242 -21 -7.98% --- --- --- ------ Net Income $511 $477 ($34) -6.65% ==== ==== ==== ====== Other Financial Information and Ratios Average Assets $202,777 $202,252 ($525) -0.26% Average Equity 17,751 18,498 747 4.21% Return on Average Assets * 1.01% 0.94% -0.06% -6.41% Return on Average Equity * 11.51% 10.31% -1.20% -10.42% Operating Expenses to Average Assets * 1.08% 1.11% 0.03% 2.83% Interest Income to Average Assets * 6.65% 6.60% -0.05% -0.00% Interest Expense to Average Assets * 4.31% 4.38% 0.07% 0.01% Net Interest Income to Average Assets * 2.34% 2.21% -0.13% -0.05% Noninterest Income to Average Assets * 0.29% 0.33% 0.04% 0.15%
* Annualized Dollars in thousands Source: Unaudited Financial Statements and National Capital calculations National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1a SELECTED FINANCIAL DATA Ameriana Bancorp New Castle, Indiana
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $7,413 $7,330 ($83) -1.12% Interest Expense 4,384 4,343 -41 -0.94% ----- ----- --- ------ Net Interest Income 3,029 2,987 -42 -1.39% Operating Expenses 2,216 2,168 -48 -2.17% Noninterest Income 639 754 115 18.00% Noninterest Expense 3 8 5 166.67% Provision for Loan 51 60 9 17.65% Losses Income Taxes 509 511 2 0.39% --- --- - ----- Net Income $889 $994 $105 11.81% ==== ==== ==== ====== Other Financial Information and Ratios Average Assets $399,947 $395,379 ($4,568) -1.14% Average Equity 43,601 43,813 212 0.49% Return on Average Assets * 0.89% 1.01% 0.12% 13.10% Return on Average Equity * 8.16% 9.07% 0.92% 11.27% Operating Expenses to Average Assets * 2.22% 2.19% -0.02% -1.04% Interest Income to Average Assets * 7.41% 7.42% 0.00% 0.00% Interest Expense to Average Assets * 4.38% 4.39% 0.00% 0.00% Net Interest Income to Average Assets * 3.03% 3.02% -0.00% -0.00% Noninterest Income to Average Assets * 0.64% 0.76% 0.12% 0.19%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations National Capital Companies, LLC Exhibit III-1b SELECTED FINANCIAL DATA First Bancshares Inc. Mountain Grove, Missouri
- -------------------------------------------------------------------------------------------------------------- Three Months Three Months Ended Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - -------------------------------------------------------------------------------------------------------------- Interest Income $3,054 $3,161 $107 3.50% Interest Expense 1,710 1,793 83 4.85% ----- ----- -- ----- Net Interest Income 1,344 1,368 24 1.79% Operating Expenses 835 767 -68 -8.14% Other Noninterest Expenses 7 -30 -37 -528.57% Noninterest Income 165 207 42 25.45% Nonrecurring Income 0 0 0 0.00% Provision for Loan Losses 21 19 -2 -9.52% Income Taxes 238 298 60 25.21% --- --- -- ------ Net Income $408 $521 $113 27.70% ==== ==== ==== ====== Other Financial Information and Ratios Average Assets $160,314 $164,596 $4,282 2.67% Average Equity 22,217 21,973 (244) -1.10% Return on Average Assets * 1.02% 1.27% 0.25% 24.37% Return on Average Equity * 7.35% 9.48% 2.14% 29.11% Operating Expenses to Average Assets * 2.08% 1.86% -0.22% -10.53% Interest Income to Average Assets * 7.62% 7.68% 0.06% 0.00% Interest Expense to Average Assets * 4.27% 4.36% 0.09% 0.02% Net Interest Income to Average Assets * 3.35% 3.32% -0.02% -0.00% Noninterest Income to Average Assets * 0.41% 0.50% 0.09% 0.22%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations National Capital Companies, LLC Exhibit III-1c SELECTED FINANCIAL DATA FFW Corp. Wabash, Indiana
- ------------------------------------------------------------------------------------------------------------- Three Months Three Months Ended Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ------------------------------------------------------------------------------------------------------------- Interest Income $3,197 $3,506 $309 9.67% Interest Expense 1,886 2,062 176 9.33% ----- ----- --- ----- Net Interest Income 1,311 1,444 133 10.14% Operating Expenses 854 910 56 6.56% Noninterest Income 198 234 36 18.18% Nonrecurring Income 0 0 0 0.00% Provision for Loan Losses 50 200 150 300.00% Income Taxes 215 98 -117 -54.42% --- -- ---- ------- Net Income $390 $470 $80 20.51% ==== ==== === ====== Other Financial Information and Ratios Average Assets $166,242 $181,257 $15,015 9.03% Average Equity 16,470 17,464 994 6.04% Return on Average Assets * 0.94% 1.04% 0.09% 10.53% Return on Average Equity * 9.47% 10.77% 1.29% 13.65% Operating Expenses to Average Assets * 2.05% 2.01% -0.04% -2.27% Interest Income to Average Assets * 7.69% 7.74% 0.04% 0.00% Interest Expense to Average Assets * 4.54% 4.55% 0.01% 0.00% Net Interest Income to Average Assets * 3.15% 3.19% 0.03% 0.01% Noninterest Income to Average Assets * 0.48% 0.52% 0.04% 0.08%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations National Capital Companies, LLC Exhibit III-1d SELECTED FINANCIAL DATA Wood Bancorp, Inc. Bowling Green, Ohio
- ------------------------------------------------------------------------------------------------------------- Three Months Three Months Ended Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ------------------------------------------------------------------------------------------------------------- Interest Income $3,311 $3,389 $78 2.36% Interest Expense 1,628 1,661 33 2.03% ----- ----- -- ----- Net Interest Income 1,683 1,728 45 2.67% Operating Expenses 929 958 29 3.12% Noninterest Income 195 222 27 13.85% Provision for Loan Losses 30 30 0 0.00% Income Taxes 329 350 21 6.38% --- --- -- ----- Net Income $590 $612 $22 3.73% ==== ==== === ===== Other Financial Information and Ratios Average Assets $163,728 $165,219 $1,491 0.91% Average Equity 20,464 20,436 (28) -0.14% Return on Average Assets * 1.44% 1.48% 0.04% 2.79% Return on Average Equity * 11.53% 11.98% 0.45% 3.87% Operating Expenses to Average Assets * 2.27% 2.32% 0.05% 2.19% Interest Income to Average Assets * 8.09% 8.20% 0.12% 0.01% Interest Expense to Average Assets * 3.98% 4.02% 0.04% 0.01% Net Interest Income to Average Assets * 4.11% 4.18% 0.07% 0.01% Noninterest Income to Average Assets * 0.48% 0.54% 0.06% 0.13%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1e SELECTED FINANCIAL DATA Industrial Bancorp Bellevue, Ohio - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $6,846 $7,084 $238 3.48% Interest Expense 3,423 3,657 234 6.84% ----- ----- --- ----- Net Interest Income 3,423 3,427 4 0.12% Operating Expenses 1,530 1,630 100 6.54% Noninterest Income 111 120 9 8.11% Provision for Loan Losses 47 45 -2 -4.26% Income Taxes 674 642 -32 -4.75% --- --- --- ------ Net Income $1,283 $1,230 ($53) -4.13% ====== ====== ===== ====== Other Financial Information and Ratios Average Assets $340,987 $351,898 $10,911 3.20% Average Equity 60,843 61,036 193 0.32% Return on Average Assets * 1.51% 1.40% -0.11% -7.10% Return on Average Equity * 8.43% 8.06% -0.37% -4.43% Operating Expenses to Average Assets * 1.79% 1.85% 0.05% 3.23% Interest Income to Average Assets * 8.03% 8.05% 0.02% 0.00% Interest Expense to Average Assets * 4.02% 4.16% 0.14% 0.03% Net Interest Income to Average Assets * 4.02% 3.90% -0.12% -0.03% Noninterest Income to Average Assets * 0.13% 0.14% 0.00% 0.04%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations - -------------------------------------------------------------------------------- National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1f SELECTED FINANCIAL DATA Landmark Bancshares Inc. Dodge City, Kansas - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $4,224 $4,346 $122 2.89% Interest Expense 2,487 2,577 90 3.62% ----- ----- -- ----- Net Interest Income 1,737 1,769 32 1.84% Operating Expenses 838 909 71 8.47% Noninterest Expense 3 0 -3 -100.00% Noninterest Income 259 238 -21 -8.11% Nonrecurring Income 0 0 0 0.00% Provision for Loan Losses 110 110 0 0.00% Income Taxes 418 396 -22 -5.26% --- --- --- ------ Net Income $627 $592 ($35) -5.58% ==== ==== ===== ====== Other Financial Information and Ratios Average Assets $225,950 $227,918 $1,968 0.87% Average Equity 32,103 31,758 (345) -1.07% Return on Average Assets * 1.11% 1.04% -0.07% -6.40% Return on Average Equity * 7.81% 7.46% -0.36% -4.56% Operating Expenses to Average Assets * 1.48% 1.60% 0.11% 7.54% Interest Income to Average Assets * 7.48% 7.63% 0.15% 0.02% Interest Expense to Average Assets * 4.40% 4.52% 0.12% 0.02% Net Interest Income to Average Assets * 3.08% 3.10% 0.03% 0.00% Noninterest Income to Average Assets * 0.46% 0.42% -0.04% -0.08%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations - -------------------------------------------------------------------------------- National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1g SELECTED FINANCIAL DATA MBLA Financial Corp. Macon, Missouri - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $3,936 $3,991 $55 1.40% Interest Expense 2,722 2,798 76 2.79% ----- ----- -- ----- Net Interest Income 1,214 1,193 -21 -1.73% Operating Expenses 358 341 -17 -4.75% Noninterest Income 2 4 2 100.00% Nonrecurring Income 0 0 0 0.00% Provision for Loan Losses 55 15 -40 -72.73% Income Taxes 361 336 -25 -6.93% --- --- --- ------ Net Income $442 $505 $63 14.25% ==== ==== === ====== Other Financial Information and Ratios Average Assets $224,272 $226,439 $2,167 0.97% Average Equity 28,458 28,344 (114) -0.40% Return on Average Assets * 0.79% 0.89% 0.10% 13.16% Return on Average Equity * 6.21% 7.13% 0.91% 14.71% Operating Expenses to Average Assets * 0.64% 0.60% -0.03% -5.66% Interest Income to Average Assets * 7.02% 7.05% 0.03% 0.00% Interest Expense to Average Assets * 4.85% 4.94% 0.08% 0.01% Net Interest Income to Average Assets * 2.17% 2.11% -0.05% -0.02% Noninterest Income to Average Assets * 0.003% 0.007% 0.00% 0.98%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations - -------------------------------------------------------------------------------- National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1h SELECTED FINANCIAL DATA MFB Corp. Mishawaka, Indiana - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $4,511 $4,797 $286 6.34% Interest Expense 2,612 2,779 167 6.39% ----- ----- --- ----- Net Interest Income 1,899 2,018 119 6.27% Operating Expenses 1,155 1,304 149 12.90% Noninterest Income 106 118 12 11.32% Provision for Loan Losses 7 7 0 0.00% Nonrecurring Income 0 0 0 0.00% Income Taxes 336 329 -7 -2.08% --- --- -- ------ Net Income $507 $496 ($11) -2.17% ==== ==== ===== ====== Other Financial Information and Ratios Average Assets $241,266 $252,081 $10,815 4.48% Average Equity 33,939 33,706 (233) -0.69% Return on Average Assets * 0.84% 0.79% -0.05% -6.37% Return on Average Equity * 5.98% 5.89% -0.08% -1.49% Operating Expenses to Average Assets * 1.91% 2.07% 0.15% 8.06% Interest Income to Average Assets * 7.48% 7.61% 0.13% 0.01% Interest Expense to Average Assets * 4.33% 4.41% 0.07% 0.01% Net Interest Income to Average Assets * 3.15% 3.20% 0.05% 0.01% Noninterest Income to Average Assets * 0.18% 0.19% 0.01% 0.06%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations - -------------------------------------------------------------------------------- National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1i SELECTED FINANCIAL DATA Milton Federal Financial Corp. West Milton, Ohio - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $3,517 $3,732 $215 6.11% Interest Expense 2,086 2,309 223 10.69% ----- ----- --- ------ Net Interest Income 1,431 1,423 -8 -0.56% Operating Expenses 958 1,009 51 5.32% Noninterest Income 98 111 13 13.27% Provision for Loan Losses 32 2 -30 -93.75% Income Taxes 183 178 -5 -2.73% --- --- -- ------ Net Income $356 $345 ($11) -3.09% ==== ==== ===== ====== Other Financial Information and Ratios Average Assets $191,419 $203,377 $11,958 6.25% Average Equity 26,154 26,065 (89) -0.34% Return on Average Assets * 0.74% 0.68% -0.06% -8.79% Return on Average Equity * 5.44% 5.29% -0.15% -2.76% Operating Expenses to Average Assets * 2.00% 1.98% -0.01% -0.87% Interest Income to Average Assets * 7.35% 7.34% -0.00% -0.00% Interest Expense to Average Assets * 4.36% 4.54% 0.18% 0.04% Net Interest Income to Average Assets * 2.99% 2.80% -0.19% -0.06% Noninterest Income to Average Assets * 0.20% 0.22% 0.01% 0.06%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations - -------------------------------------------------------------------------------- National Capital Companies, LLC - -------------------------------------------------------------------------------- Exhibit III-1j SELECTED FINANCIAL DATA Midwest Bancshares Inc. Burlington, Iowa - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended Quarterly Percent Income Statement Data June 30, 1997 Sept 30, 1997 Change Change - ---------------------------------------------------------------------------------------------------------- Interest Income $2,676 $2,740 $64 2.39% Interest Expense 1,663 1,724 61 3.67% ----- ----- -- ----- Net Interest Income 1,013 1,016 3 0.30% Operating Expenses 621 615 -6 -0.97% Noninterest Income 78 263 185 237.18% Provision for Loan Losses 12 12 0 0.00% Income Taxes 168 235 67 39.88% --- --- -- ------ Net Income $290 $417 $127 43.79% ==== ==== ==== ====== Other Financial Information and Ratios Average Assets $143,335 $147,676 $4,341 3.03% Average Equity 9,875 10,190 315 3.19% Return on Average Assets * 0.81% 1.13% 0.32% 39.57% Return on Average Equity * 11.75% 16.37% 4.62% 39.35% Operating Expenses to Average Assets * 1.73% 1.67% -0.06% -3.88% Interest Income to Average Assets * 7.47% 7.42% -0.04% -0.00% Interest Expense to Average Assets * 4.64% 4.67% 0.02% 0.00% Net Interest Income to Average Assets * 2.83% 2.75% -0.07% -0.02% Noninterest Income to Average Assets * 0.22% 0.71% 0.49% 2.27%
* Annualized Dollars in thousands Source: SNL Securities, L.P. and National Capital calculations - -------------------------------------------------------------------------------- Exhibit IV-1 SELECTED FINANCIAL AND MARKET STATISTICS Publicly Traded Thrift Institutions Excluding Mutual Holding Companies In the Midwestern Region with Assets Less Than $500 Million and IPO Date Before March 31, 1996 As of November 18, 1997
- ------------------------------------------------------------------------------------------------------------------------------------ * Adjusted Current Current Current Current Stock Price/ Price/ Price/ Tang Price LTM EPS LTM EPS Book Value Ticker Short Name City State Exchange IPO Date ($) (x) (x) (%) - ------------------------------------------------------------------------------------------------------------------------------------ ASBI Ameriana Bancorp New Castle IN NASDAQ 03/02/87 20.000 17.86 17.86 146.84 ASBP ASB Financial Corp. Portsmouth OH NASDAQ 05/11/95 13.250 18.66 18.66 128.64 ATSB AmTrust Capital Corp. Peru IN NASDAQ 03/28/95 14.500 25.89 25.89 101.26 BDJI First Federal Bancorporation Bemidji MN NASDAQ 04/04/95 25.500 21.07 21.07 143.66 BWFC Bank West Financial Corp. Grand Rapids MI NASDAQ 03/30/95 22.000 23.91 23.91 165.41 CAPS Capital Savings Bancorp Inc. Jefferson City MO NASDAQ 12/29/93 18.375 15.44 15.44 157.05 CASH First Midwest Financial Inc. Storm Lake IA NASDAQ 09/20/93 19.750 15.55 15.55 138.02 CBCI Calumet Bancorp Inc. Dolton IL NASDAQ 02/20/92 33.000 16.34 16.34 131.95 CBSB Charter Financial Inc. Sparta IL NASDAQ 12/29/95 21.063 20.25 16.33 173.64 CIBI Community Investors Bancorp Bucyrus OH NASDAQ 02/07/95 15.750 15.00 15.00 130.27 CKFB CKF Bancorp Inc. Danville KY NASDAQ 01/04/95 18.375 14.70 14.70 108.66 CLAS Classic Bancshares Inc. Ashland KY NASDAQ 12/29/95 16.750 19.25 19.25 130.35 CMRN Cameron Financial Corp Cameron MO NASDAQ 04/03/95 19.875 25.16 20.35 115.69 CSBF CSB Financial Group Inc. Centralia IL NASDAQ 10/09/95 12.250 72.06 42.25 99.84 EFBI Enterprise Federal Bancorp West Chester OH NASDAQ 10/17/94 26.750 21.75 21.75 169.20 FBCI Fidelity Bancorp Inc. Chicago IL NASDAQ 12/15/93 24.500 17.75 17.75 131.58 FBCV 1ST Bancorp Vincennes IN NASDAQ 04/07/87 38.750 14.25 14.25 121.06 FBSI First Bancshares Inc. Mountain Grove MO NASDAQ 12/22/93 26.250 15.44 15.44 126.57 FFBI First Financial Bancorp Inc. Belvidere IL NASDAQ 10/04/93 19.000 NM NM 107.83 FFBZ First Federal Bancorp Inc. Zanesville OH NASDAQ 07/13/92 19.250 24.06 15.83 218.75 FFED Fidelity Federal Bancorp Evansville IN NASDAQ 08/31/87 10.250 14.64 14.64 199.03 FFFD North Central Bancshares Inc. Fort Dodge IA NASDAQ 03/21/96 19.000 16.52 16.52 125.58 FFHH FSF Financial Corp. Hutchinson MN NASDAQ 10/07/94 19.000 17.92 17.92 117.00 FFHS First Franklin Corp. Cincinnati OH NASDAQ 01/26/88 26.000 25.49 25.49 149.51 FFKY First Federal Financial Corp. Elizabethtown KY NASDAQ 07/15/87 21.750 14.90 14.90 182.93 FFSL First Independence Corp. Independence KS NASDAQ 10/08/93 15.000 22.06 22.06 127.33 FFWC FFW Corp. Wabash IN NASDAQ 04/05/93 35.000 14.23 14.23 156.53 FFWD Wood Bancorp Inc. Bowling Green OH NASDAQ 08/31/93 18.625 18.44 18.44 190.63 FKKY Frankfort First Bancorp Inc. Frankfort KY NASDAQ 07/10/95 9.750 NM NM 142.54 FMBD First Mutual Bancorp Inc. Decatur IL NASDAQ 07/05/95 20.000 58.82 58.82 156.49 FTSB Fort Thomas Financial Corp. Fort Thomas KY NASDAQ 06/28/95 13.750 17.41 17.41 130.21 GFCO Glenway Financial Corp. Cincinnati OH NASDAQ 11/30/90 16.000 16.16 16.16 133.11 GFSB GFS Bancorp Inc. Grinnell IA NASDAQ 01/06/94 17.500 15.63 15.63 158.95 GTPS Great American Bancorp Champaign IL NASDAQ 06/30/95 18.750 48.08 48.08 101.68 GWBC Gateway Bancorp Inc. Catlettsburg KY NASDAQ 01/18/95 19.125 32.42 32.42 118.42 HALL Hallmark Capital Corp. West Allis WI NASDAQ 01/03/94 28.875 15.95 15.95 136.40 HBBI Home Building Bancorp Washington IN NASDAQ 02/08/95 21.250 18.48 18.48 104.01 HBFW Home Bancorp Fort Wayne IN NASDAQ 03/30/95 25.000 32.89 21.68 141.88 HFFB Harrodsburg First Fin Bancorp Harrodsburg KY NASDAQ 10/04/95 16.875 28.60 23.25 107.62 HFSA Hardin Bancorp Inc. Hardin MO NASDAQ 09/29/95 17.500 18.23 18.23 111.11 HHFC Harvest Home Financial Corp. Cheviot OH NASDAQ 10/10/94 14.250 54.81 26.83 125.99 HMCI HomeCorp Inc. Rockford IL NASDAQ 06/22/90 23.375 25.41 25.41 178.84 HZFS Horizon Financial Svcs Corp. Oskaloosa IA NASDAQ 06/30/94 11.125 14.26 14.26 108.33 INBI Industrial Bancorp Inc. Bellevue OH NASDAQ 08/01/95 17.250 17.08 17.08 146.68 INCB Indiana Community Bank SB Lebanon IN NASDAQ 12/15/94 20.500 107.89 38.59 165.72 JOAC Joachim Bancorp Inc. De Soto MO NASDAQ 12/28/95 15.000 68.18 39.66 110.13 KNK Kankakee Bancorp Inc. Kankakee IL AMSE 01/06/93 31.125 15.26 15.26 121.16 KYF Kentucky First Bancorp Inc. Cynthiana KY AMSE 08/29/95 14.125 17.66 17.66 125.11 - ------------------------------------------------------------------------------------------------------------------------------------ Tangible Total Equity/ Price/ Assets Tang Assets Assets ($000) (%) Ticker Short Name City State Exchange IPO Date (%) Mst RctQ Mst RctQ - ------------------------------------------------------------------------------------------------------------------------------------ ASBI Ameriana Bancorp New Castle IN NASDAQ 03/02/87 16.44 393,028 11.20 ASBP ASB Financial Corp. Portsmouth OH NASDAQ 05/11/95 20.03 112,449 15.57 ATSB AmTrust Capital Corp. Peru IN NASDAQ 03/28/95 10.95 69,685 10.83 BDJI First Federal Bancorporation Bemidji MN NASDAQ 04/04/95 15.38 111,492 10.71 BWFC Bank West Financial Corp. Grand Rapids MI NASDAQ 03/30/95 23.40 164,854 14.15 CAPS Capital Savings Bancorp Inc. Jefferson City MO NASDAQ 12/29/93 14.35 242,259 9.14 CASH First Midwest Financial Inc. Storm Lake IA NASDAQ 09/20/93 13.17 404,589 9.66 CBCI Calumet Bancorp Inc. Dolton IL NASDAQ 02/20/92 21.40 488,346 16.22 CBSB Charter Financial Inc. Sparta IL NASDAQ 12/29/95 22.23 393,268 13.02 CIBI Community Investors Bancorp Bucyrus OH NASDAQ 02/07/95 15.30 94,328 11.75 CKFB CKF Bancorp Inc. Danville KY NASDAQ 01/04/95 27.72 59,868 23.67 CLAS Classic Bancshares Inc. Ashland KY NASDAQ 12/29/95 16.47 132,186 12.92 CMRN Cameron Financial Corp Cameron MO NASDAQ 04/03/95 25.09 208,105 21.69 CSBF CSB Financial Group Inc. Centralia IL NASDAQ 10/09/95 23.62 48,844 23.99 EFBI Enterprise Federal Bancorp West Chester OH NASDAQ 10/17/94 19.33 274,888 11.43 FBCI Fidelity Bancorp Inc. Chicago IL NASDAQ 12/15/93 13.75 497,862 10.46 FBCV 1ST Bancorp Vincennes IN NASDAQ 04/07/87 10.27 260,935 8.50 FBSI First Bancshares Inc. Mountain Grove MO NASDAQ 12/22/93 17.62 162,755 13.92 FFBI First Financial Bancorp Inc. Belvidere IL NASDAQ 10/04/93 9.33 84,531 8.65 FFBZ First Federal Bancorp Inc. Zanesville OH NASDAQ 07/13/92 15.03 201,262 7.54 FFED Fidelity Federal Bancorp Evansville IN NASDAQ 08/31/87 12.16 235,336 6.11 FFFD North Central Bancshares Inc. Fort Dodge IA NASDAQ 03/21/96 28.77 215,133 22.92 FFHH FSF Financial Corp. Hutchinson MN NASDAQ 10/07/94 14.73 388,135 11.17 FFHS First Franklin Corp. Cincinnati OH NASDAQ 01/26/88 13.41 231,189 8.97 FFKY First Federal Financial Corp. Elizabethtown KY NASDAQ 07/15/87 23.64 382,585 13.03 FFSL First Independence Corp. Independence KS NASDAQ 10/08/93 13.04 112,523 10.25 FFWC FFW Corp. Wabash IN NASDAQ 04/05/93 13.79 181,468 8.89 FFWD Wood Bancorp Inc. Bowling Green OH NASDAQ 08/31/93 23.70 166,520 12.44 FKKY Frankfort First Bancorp Inc. Frankfort KY NASDAQ 07/10/95 24.00 133,255 16.83 FMBD First Mutual Bancorp Inc. Decatur IL NASDAQ 07/05/95 17.43 402,389 10.55 FTSB Fort Thomas Financial Corp. Fort Thomas KY NASDAQ 06/28/95 21.01 97,843 16.13 GFCO Glenway Financial Corp. Cincinnati OH NASDAQ 11/30/90 12.44 293,245 9.36 GFSB GFS Bancorp Inc. Grinnell IA NASDAQ 01/06/94 18.30 94,496 11.51 GTPS Great American Bancorp Champaign IL NASDAQ 06/30/95 22.80 139,568 20.43 GWBC Gateway Bancorp Inc. Catlettsburg KY NASDAQ 01/18/95 32.86 62,609 27.74 HALL Hallmark Capital Corp. West Allis WI NASDAQ 01/03/94 9.96 418,467 7.30 HBBI Home Building Bancorp Washington IN NASDAQ 02/08/95 15.86 41,746 14.12 HBFW Home Bancorp Fort Wayne IN NASDAQ 03/30/95 18.85 334,862 13.29 HFFB Harrodsburg First Fin Bancorp Harrodsburg KY NASDAQ 10/04/95 31.36 108,949 26.92 HFSA Hardin Bancorp Inc. Hardin MO NASDAQ 09/29/95 12.81 117,364 11.53 HHFC Harvest Home Financial Corp. Cheviot OH NASDAQ 10/10/94 14.88 87,596 11.81 HMCI HomeCorp Inc. Rockford IL NASDAQ 06/22/90 12.21 326,877 6.83 HZFS Horizon Financial Svcs Corp. Oskaloosa IA NASDAQ 06/30/94 10.79 87,784 9.95 INBI Industrial Bancorp Inc. Bellevue OH NASDAQ 08/01/95 25.20 354,116 17.18 INCB Indiana Community Bank SB Lebanon IN NASDAQ 12/15/94 20.17 93,702 12.17 JOAC Joachim Bancorp Inc. De Soto MO NASDAQ 12/28/95 31.02 34,938 28.16 KNK Kankakee Bancorp Inc. Kankakee IL AMSE 01/06/93 13.05 339,937 10.85 KYF Kentucky First Bancorp Inc. Cynthiana KY AMSE 08/29/95 20.89 88,089 16.70 - ------------------------------------------------------------------------------------------------------------------------------------ NPAs/ Return on Return on Assets Avg Assets Avg Equity (%) (%) (%) Ticker Short Name City State Exchange IPO Date Mst RctQ LTM LTM - ------------------------------------------------------------------------------------------------------------------------------------ ASBI Ameriana Bancorp New Castle IN NASDAQ 03/02/87 0.49 0.92 8.36 ASBP ASB Financial Corp. Portsmouth OH NASDAQ 05/11/95 0.90 0.97 5.89 ATSB AmTrust Capital Corp. Peru IN NASDAQ 03/28/95 2.20 0.40 3.86 BDJI First Federal Bancorporation Bemidji MN NASDAQ 04/04/95 0.24 0.65 5.87 BWFC Bank West Financial Corp. Grand Rapids MI NASDAQ 03/30/95 0.21 1.03 6.76 CAPS Capital Savings Bancorp Inc. Jefferson City MO NASDAQ 12/29/93 0.17 0.95 10.99 CASH First Midwest Financial Inc. Storm Lake IA NASDAQ 09/20/93 0.75 0.92 8.40 CBCI Calumet Bancorp Inc. Dolton IL NASDAQ 02/20/92 1.27 1.44 9.17 CBSB Charter Financial Inc. Sparta IL NASDAQ 12/29/95 0.56 1.13 7.62 CIBI Community Investors Bancorp Bucyrus OH NASDAQ 02/07/95 0.53 0.97 8.37 CKFB CKF Bancorp Inc. Danville KY NASDAQ 01/04/95 0.70 1.82 7.51 CLAS Classic Bancshares Inc. Ashland KY NASDAQ 12/29/95 0.43 0.81 5.53 CMRN Cameron Financial Corp Cameron MO NASDAQ 04/03/95 0.24 1.06 4.41 CSBF CSB Financial Group Inc. Centralia IL NASDAQ 10/09/95 0.56 0.31 1.21 EFBI Enterprise Federal Bancorp West Chester OH NASDAQ 10/17/94 0.07 0.93 7.35 FBCI Fidelity Bancorp Inc. Chicago IL NASDAQ 12/15/93 0.41 0.81 7.81 FBCV 1ST Bancorp Vincennes IN NASDAQ 04/07/87 1.12 0.72 8.73 FBSI First Bancshares Inc. Mountain Grove MO NASDAQ 12/22/93 0.13 1.20 8.49 FFBI First Financial Bancorp Inc. Belvidere IL NASDAQ 10/04/93 0.41 (0.38) (4.72) FFBZ First Federal Bancorp Inc. Zanesville OH NASDAQ 07/13/92 0.47 0.73 9.61 FFED Fidelity Federal Bancorp Evansville IN NASDAQ 08/31/87 0.09 0.75 14.15 FFFD North Central Bancshares Inc. Fort Dodge IA NASDAQ 03/21/96 0.22 1.84 7.58 FFHH FSF Financial Corp. Hutchinson MN NASDAQ 10/07/94 0.15 0.84 7.03 FFHS First Franklin Corp. Cincinnati OH NASDAQ 01/26/88 0.33 0.55 6.18 FFKY First Federal Financial Corp. Elizabethtown KY NASDAQ 07/15/87 0.08 1.64 11.99 FFSL First Independence Corp. Independence KS NASDAQ 10/08/93 0.99 0.65 6.09 FFWC FFW Corp. Wabash IN NASDAQ 04/05/93 0.18 1.05 10.54 FFWD Wood Bancorp Inc. Bowling Green OH NASDAQ 08/31/93 0.03 1.40 11.07 FKKY Frankfort First Bancorp Inc. Frankfort KY NASDAQ 07/10/95 0.00 0.09 0.37 FMBD First Mutual Bancorp Inc. Decatur IL NASDAQ 07/05/95 0.06 0.31 2.16 FTSB Fort Thomas Financial Corp. Fort Thomas KY NASDAQ 06/28/95 1.91 1.22 7.18 GFCO Glenway Financial Corp. Cincinnati OH NASDAQ 11/30/90 0.25 0.80 8.37 GFSB GFS Bancorp Inc. Grinnell IA NASDAQ 01/06/94 0.98 1.27 11.01 GTPS Great American Bancorp Champaign IL NASDAQ 06/30/95 0.01 0.53 2.38 GWBC Gateway Bancorp Inc. Catlettsburg KY NASDAQ 01/18/95 0.76 0.94 3.60 HALL Hallmark Capital Corp. West Allis WI NASDAQ 01/03/94 0.12 0.65 9.10 HBBI Home Building Bancorp Washington IN NASDAQ 02/08/95 0.44 0.75 5.76 HBFW Home Bancorp Fort Wayne IN NASDAQ 03/30/95 0.00 0.56 3.96 HFFB Harrodsburg First Fin Bancorp Harrodsburg KY NASDAQ 10/04/95 0.00 1.03 3.80 HFSA Hardin Bancorp Inc. Hardin MO NASDAQ 09/29/95 0.09 0.80 5.88 HHFC Harvest Home Financial Corp. Cheviot OH NASDAQ 10/10/94 0.11 0.30 2.31 HMCI HomeCorp Inc. Rockford IL NASDAQ 06/22/90 2.16 0.51 7.95 HZFS Horizon Financial Svcs Corp. Oskaloosa IA NASDAQ 06/30/94 0.71 0.81 7.85 INBI Industrial Bancorp Inc. Bellevue OH NASDAQ 08/01/95 0.14 1.51 8.32 INCB Indiana Community Bank SB Lebanon IN NASDAQ 12/15/94 0.13 0.19 1.55 JOAC Joachim Bancorp Inc. De Soto MO NASDAQ 12/28/95 0.17 0.46 1.55 KNK Kankakee Bancorp Inc. Kankakee IL AMSE 01/06/93 0.80 0.89 8.28 KYF Kentucky First Bancorp Inc. Cynthiana KY AMSE 08/29/95 0.04 1.15 6.64
=============================================================================== Exhibit IV-1 SELECTED FINANCIAL AND MARKET STATISTICS Publicly Traded Thrift Institutions Excluding Mutual Holding Companies In the Midwestern Region with Assets Less Than $500 Million and IPO Date Before March 31, 1996 As of November 18, 1997
- ------------------------------------------------------------------------------------------------------------------------------------ * Adjusted Current Current Current Current Stock Price/ Price/ Price/ Tang Price LTM EPS LTM EPS Book Value Ticker Short Name City State Exchange IPO Date ($) (x) (x) (%) - ------------------------------------------------------------------------------------------------------------------------------------ LARK Landmark Bancshares Inc. Dodge City KS NASDAQ 03/28/94 24.000 22.64 16.12 130.51 - ------------------------------------------------------------------------------------------------------------------------------------ LOGN Logansport Financial Corp. Logansport IN NASDAQ 06/14/95 15.750 17.50 17.50 122.47 LSBI LSB Financial Corp. Lafayette IN NASDAQ 02/03/95 26.000 15.57 15.57 128.46 MARN Marion Capital Holdings Marion IN NASDAQ 03/18/93 26.500 16.67 16.67 119.26 - ------------------------------------------------------------------------------------------------------------------------------------ MBLF MBLA Financial Corp. Macon MO NASDAQ 06/24/93 25.250 18.84 18.84 112.98 - ------------------------------------------------------------------------------------------------------------------------------------ MCBS Mid Continent Bancshares Inc. El Dorado KS NASDAQ 06/27/94 39.625 21.08 17.85 198.82 - ------------------------------------------------------------------------------------------------------------------------------------ MFBC MFB Corp. Mishawaka IN NASDAQ 03/25/94 23.250 20.39 20.39 114.48 - ------------------------------------------------------------------------------------------------------------------------------------ MFCX Marshalltown Financial Corp. Marshalltown IA NASDAQ 03/31/94 17.125 30.04 30.04 119.17 - ------------------------------------------------------------------------------------------------------------------------------------ MFFC Milton Federal Financial Corp. West Milton OH NASDAQ 10/07/94 15.000 23.81 23.81 121.85 - ------------------------------------------------------------------------------------------------------------------------------------ MIFC Mid-Iowa Financial Corp. Newton IA NASDAQ 10/14/92 10.375 14.82 11.24 148.43 MIVI Mississippi View Holding Co. Little Falls MN NASDAQ 03/24/95 17.625 18.36 18.36 108.13 MSBF MSB Financial Inc. Marshall MI NASDAQ 02/06/95 17.500 19.66 19.66 169.41 MWBI Midwest Bancshares Inc. Burlington IA NASDAQ 11/12/92 51.000 15.27 15.27 166.94 MWFD Midwest Federal Financial Baraboo WI NASDAQ 07/08/92 26.000 20.00 15.05 240.52 NBSI North Bancshares Inc. Chicago IL NASDAQ 12/21/93 26.500 35.33 35.33 155.52 NEIB Northeast Indiana Bancorp Huntington IN NASDAQ 06/28/95 21.000 17.36 17.36 135.40 NSLB NS&L Bancorp Inc. Neosho MO NASDAQ 06/08/95 18.875 42.90 28.09 114.32 NWEQ Northwest Equity Corp. Amery WI NASDAQ 10/11/94 17.750 14.31 14.31 122.16 OHSL OHSL Financial Corp. Cincinnati OH NASDAQ 02/10/93 26.500 16.16 16.16 123.72 PCBC Perry County Financial Corp. Perryville MO NASDAQ 02/13/95 23.500 24.48 19.33 124.93 PERM Permanent Bancorp Inc. Evansville IN NASDAQ 04/04/94 26.250 21.69 21.69 130.60 PFDC Peoples Bancorp Auburn IN NASDAQ 07/07/87 31.500 22.83 17.29 163.81 PMFI Perpetual Midwest Financial Cedar Rapids IA NASDAQ 03/31/94 25.750 31.40 31.40 141.17 PTRS Potters Financial Corp. East Liverpool OH NASDAQ 12/31/93 32.750 14.00 14.00 146.07 PVFC PVF Capital Corp. Bedford Heights OH NASDAQ 12/30/92 20.250 11.25 11.25 190.50 QCFB QCF Bancorp Inc. Virginia MN NASDAQ 04/03/95 28.250 14.41 14.41 150.03 SFFC StateFed Financial Corp. Des Moines IA NASDAQ 01/05/94 13.500 18.75 18.75 136.92 SFSB SuburbFed Financial Corp. Flossmoor IL NASDAQ 03/04/92 32.875 16.12 16.12 145.14 SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO NASDAQ 04/13/94 17.875 19.02 19.02 109.26 SMFC Sho-Me Financial Corp. Mt. Vernon MO NASDAQ 07/01/94 47.000 17.54 17.54 207.69 SOBI Sobieski Bancorp Inc. South Bend IN NASDAQ 03/31/95 19.500 29.55 29.55 112.98 SWBI Southwest Bancshares Hometown IL NASDAQ 06/24/92 25.250 17.53 17.53 157.71 THR Three Rivers Financial Corp. Three Rivers MI AMSE 08/24/95 20.250 19.10 19.10 129.06 WCBI Westco Bancorp Westchester IL NASDAQ 06/26/92 26.625 15.66 15.66 137.10 WEFC Wells Financial Corp. Wells MN NASDAQ 04/11/95 17.500 15.91 15.91 117.77 WFI Winton Financial Corp. Cincinnati OH AMSE 08/04/88 19.688 12.15 12.15 171.35 WOFC Western Ohio Financial Corp. Springfield OH NASDAQ 07/29/94 25.750 38.43 38.43 117.90 ------------------------------------------------------------------ AVERAGE 21.89 23.40 20.60 139.55 MEDIAN 20.00 18.44 17.75 130.60 ------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Tangible Total Equity/ NPAs/ Price/ Assets Tang Assets Assets Assets ($000) (%) (%) Ticker Short Name City State Exchange IPO Date (%) Mst RctQ Mst RctQ Mst RctQ - ------------------------------------------------------------------------------------------------------------------------------------ LARK Landmark Bancshares Inc. Dodge City KS NASDAQ 03/28/94 18.00 228,100 13.79 0.04 LOGN Logansport Financial Corp. Logansport IN NASDAQ 06/14/95 23.14 85,801 18.89 0.49 LSBI LSB Financial Corp. Lafayette IN NASDAQ 02/03/95 11.90 200,266 8.63 1.05 MARN Marion Capital Holdings Marion IN NASDAQ 03/18/93 26.17 179,822 21.95 1.08 MBLF MBLA Financial Corp. Macon MO NASDAQ 06/24/93 14.30 224,013 12.65 0.57 MCBS Mid Continent Bancshares Inc. El Dorado KS NASDAQ 06/27/94 18.99 408,590 9.39 0.15 MFBC MFB Corp. Mishawaka IN NASDAQ 03/25/94 15.00 255,921 13.10 0.00 MFCX Marshalltown Financial Corp. Marshalltown IA NASDAQ 03/31/94 19.26 125,491 16.16 0.00 MFFC Milton Federal Financial Corp. West Milton OH NASDAQ 10/07/94 16.47 209,958 12.57 0.15 MIFC Mid-Iowa Financial Corp. Newton IA NASDAQ 10/14/92 13.86 125,541 9.34 0.02 MIVI Mississippi View Holding Co. Little Falls MN NASDAQ 03/24/95 19.03 68,546 17.61 NA MSBF MSB Financial Inc. Marshall MI NASDAQ 02/06/95 28.03 77,014 16.54 0.02 MWBI Midwest Bancshares Inc. Burlington IA NASDAQ 11/12/92 11.55 149,850 6.92 0.81 MWFD Midwest Federal Financial Baraboo WI NASDAQ 07/08/92 20.44 207,050 8.52 0.12 NBSI North Bancshares Inc. Chicago IL NASDAQ 12/21/93 20.88 122,081 13.43 0.00 NEIB Northeast Indiana Bancorp Huntington IN NASDAQ 06/28/95 19.45 190,319 14.37 0.17 NSLB NS&L Bancorp Inc. Neosho MO NASDAQ 06/08/95 22.36 59,711 19.56 0.02 NWEQ Northwest Equity Corp. Amery WI NASDAQ 10/11/94 15.36 96,954 11.69 1.42 OHSL OHSL Financial Corp. Cincinnati OH NASDAQ 02/10/93 13.95 234,600 10.92 0.03 PCBC Perry County Financial Corp. Perryville MO NASDAQ 02/13/95 23.99 81,105 19.20 0.03 PERM Permanent Bancorp Inc. Evansville IN NASDAQ 04/04/94 12.73 433,568 9.35 1.07 PFDC Peoples Bancorp Auburn IN NASDAQ 07/07/87 24.91 287,564 15.20 0.34 PMFI Perpetual Midwest Financial Cedar Rapids IA NASDAQ 03/31/94 12.01 401,665 8.51 0.29 PTRS Potters Financial Corp. East Liverpool OH NASDAQ 12/31/93 12.87 122,716 8.81 0.44 PVFC PVF Capital Corp. Bedford Heights OH NASDAQ 12/30/92 13.69 383,278 7.18 1.13 QCFB QCF Bancorp Inc. Virginia MN NASDAQ 04/03/95 24.67 158,192 16.45 0.24 SFFC StateFed Financial Corp. Des Moines IA NASDAQ 01/05/94 24.02 87,542 17.53 2.19 SFSB SuburbFed Financial Corp. Flossmoor IL NASDAQ 03/04/92 9.60 432,559 6.61 NA SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO NASDAQ 04/13/94 17.65 163,297 16.15 0.88 SMFC Sho-Me Financial Corp. Mt. Vernon MO NASDAQ 07/01/94 20.43 344,849 9.03 0.29 SOBI Sobieski Bancorp Inc. South Bend IN NASDAQ 03/31/95 18.04 84,279 14.78 0.13 SWBI Southwest Bancshares Hometown IL NASDAQ 06/24/92 17.89 375,004 11.34 0.20 THR Three Rivers Financial Corp. Three Rivers MI AMSE 08/24/95 17.70 94,216 13.73 0.87 WCBI Westco Bancorp Westchester IL NASDAQ 06/26/92 21.31 309,070 15.54 0.21 WEFC Wells Financial Corp. Wells MN NASDAQ 04/11/95 16.75 204,761 14.22 0.23 WFI Winton Financial Corp. Cincinnati OH AMSE 08/04/88 12.05 324,532 7.04 0.28 WOFC Western Ohio Financial Corp. Springfield OH NASDAQ 07/29/94 15.26 397,425 13.06 0.44 ------------------------------------------------------------------ AVERAGE 18.16 210,724 13.39 0.46 MEDIAN 17.65 181,468 12.57 0.24 ------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------- Return on Return on Avg Assets Avg Equity (%) (%) Ticker Short Name City State Exchange IPO Date LTM LTM - -------------------------------------------------------------------------------------------------------------------- LARK Landmark Bancshares Inc. Dodge City KS NASDAQ 03/28/94 0.88 5.95 LOGN Logansport Financial Corp. Logansport IN NASDAQ 06/14/95 1.42 7.28 LSBI LSB Financial Corp. Lafayette IN NASDAQ 02/03/95 0.78 8.67 MARN Marion Capital Holdings Marion IN NASDAQ 03/18/93 1.70 7.49 MBLF MBLA Financial Corp. Macon MO NASDAQ 06/24/93 0.83 6.50 MCBS Mid Continent Bancshares Inc. El Dorado KS NASDAQ 06/27/94 1.03 9.74 MFBC MFB Corp. Mishawaka IN NASDAQ 03/25/94 0.83 5.63 MFCX Marshalltown Financial Corp. Marshalltown IA NASDAQ 03/31/94 0.67 4.26 MFFC Milton Federal Financial Corp. West Milton OH NASDAQ 10/07/94 0.73 5.08 MIFC Mid-Iowa Financial Corp. Newton IA NASDAQ 10/14/92 1.00 10.89 MIVI Mississippi View Holding Co. Little Falls MN NASDAQ 03/24/95 1.07 6.04 MSBF MSB Financial Inc. Marshall MI NASDAQ 02/06/95 1.50 8.42 MWBI Midwest Bancshares Inc. Burlington IA NASDAQ 11/12/92 0.87 12.54 MWFD Midwest Federal Financial Baraboo WI NASDAQ 07/08/92 1.14 13.21 NBSI North Bancshares Inc. Chicago IL NASDAQ 12/21/93 0.63 4.37 NEIB Northeast Indiana Bancorp Huntington IN NASDAQ 06/28/95 1.20 7.78 NSLB NS&L Bancorp Inc. Neosho MO NASDAQ 06/08/95 0.49 2.39 NWEQ Northwest Equity Corp. Amery WI NASDAQ 10/11/94 1.03 8.75 OHSL OHSL Financial Corp. Cincinnati OH NASDAQ 02/10/93 0.90 8.06 PCBC Perry County Financial Corp. Perryville MO NASDAQ 02/13/95 0.93 4.97 PERM Permanent Bancorp Inc. Evansville IN NASDAQ 04/04/94 0.62 6.64 PFDC Peoples Bancorp Auburn IN NASDAQ 07/07/87 1.12 7.29 PMFI Perpetual Midwest Financial Cedar Rapids IA NASDAQ 03/31/94 0.40 4.65 PTRS Potters Financial Corp. East Liverpool OH NASDAQ 12/31/93 0.98 10.93 PVFC PVF Capital Corp. Bedford Heights OH NASDAQ 12/30/92 1.37 19.66 QCFB QCF Bancorp Inc. Virginia MN NASDAQ 04/03/95 1.65 9.33 SFFC StateFed Financial Corp. Des Moines IA NASDAQ 01/05/94 1.28 7.20 SFSB SuburbFed Financial Corp. Flossmoor IL NASDAQ 03/04/92 0.66 10.11 SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO NASDAQ 04/13/94 0.93 5.81 SMFC Sho-Me Financial Corp. Mt. Vernon MO NASDAQ 07/01/94 1.30 13.64 SOBI Sobieski Bancorp Inc. South Bend IN NASDAQ 03/31/95 0.62 3.88 SWBI Southwest Bancshares Hometown IL NASDAQ 06/24/92 1.05 9.84 THR Three Rivers Financial Corp. Three Rivers MI AMSE 08/24/95 0.90 6.48 WCBI Westco Bancorp Westchester IL NASDAQ 06/26/92 1.50 9.74 WEFC Wells Financial Corp. Wells MN NASDAQ 04/11/95 1.06 7.49 WFI Winton Financial Corp. Cincinnati OH AMSE 08/04/88 1.05 14.63 WOFC Western Ohio Financial Corp. Springfield OH NASDAQ 07/29/94 0.37 2.74 --------------------------------------------- AVERAGE 0.91 7.20 MEDIAN 0.92 7.35 ---------------------------------------------
Source: SNL Securities, L.P. National Capital Companies, LLC ================================================================================ Exhibit IV-2 Hopkinsville Federal Savings Bank Hopkinsville, Kentucky SELECTED FINANCIAL AND MARKET STATISTICS Comparable Group
- ------------------------------------------------------------------------------------------------------------------------------------ Current Tangible Market Price/ Price/ Price/Tang Price/ Publicly Rep Price Value LTM EPS Book Value Book Value Assets Book Value Short Name ($) ($M) (x) (%) (%) (%) ($) - ------------------------------------------------------------------------------------------------------------------------------------ Ameriana Bancorp 20.000 64.63 17.86 146.74 146.84 16.44 13.62 First Bancshares Inc. 26.250 28.68 15.44 126.57 126.57 17.62 20.74 FFW Corp. 35.000 25.02 14.23 142.05 156.53 13.79 22.36 Wood Bancorp Inc. 18.625 39.49 18.44 190.63 190.63 23.70 9.77 Industrial Bancorp 17.250 89.23 17.08 146.68 146.68 25.20 11.76 Landmark Bancshares Inc. # 24.000 41.06 17.46 130.51 130.51 18.00 18.39 MBLA Financial Corp. 25.250 32.00 18.84 112.98 112.98 14.30 22.35 MFB Corp. 23.250 38.38 20.39 114.48 114.48 15.00 20.31 Milton Federal Financial Corp. 15.000 34.57 23.81 121.85 121.85 16.47 12.31 Midwest Bancshares Inc. 51.000 17.30 15.27 166.94 166.94 11.55 30.55 - ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE 25.56 41.04 17.88 139.94 141.40 17.21 18.22 MEDIAN 23.63 36.48 17.66 136.28 138.60 16.46 19.35 - ------------------------------------------------------------------------------------------------------------------------------------
# June 30, 1997 latest financial information and LTM earnings is adjusted for the SAIF Special assessment Current pricing information as of November 18, 1997 Financial information as of September 30, 1997 Source: SNL Securities, L.P. Exhibit IV-2a Hopkinsville Federal Savings Bank Hopkinsville, Kentucky SELECTED FINANCIAL AND MARKET STATISTICS Comparable Group
- -------------------------------------------------------------------------------------------------------------------- Current Current 1 Month Avg One Year Avg Net Dividend Annualized Weekly Vol/ Weekly Vol/ Income Yield Dividend Shares Out Shares Out Short Name ($000) (%) ($) (%) (%) - -------------------------------------------------------------------------------------------------------------------- Ameriana Bancorp 3,656 3.200 0.6400 0.50 0.51 First Bancshares Inc. 1,901 0.762 0.2000 0.23 0.83 FFW Corp. 1,735 2.057 0.7200 0.58 1.01 Wood Bancorp Inc. 2,262 2.148 0.4000 0.29 0.30 Industrial Bancorp 5,090 3.246 0.5600 0.79 1.15 Landmark Bancshares Inc. # 1,929 1.667 0.4000 0.20 0.79 MBLA Financial Corp. 1,840 1.584 0.4000 0.04 0.37 MFB Corp. 2,002 1.376 0.3200 0.59 1.06 Milton Federal Financial Corp. 1,378 4.000 0.6000 0.99 0.73 Midwest Bancshares Inc. 1,235 1.412 0.7200 3.58 0.99 - -------------------------------------------------------------------------------------------------------------------- AVERAGE 2,303 2.15 0.50 0.78 0.77 MEDIAN 1,915 1.86 0.48 0.54 0.81 - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- LTM Insider Institutional Shares Return on Ownership Ownership Outstanding Avg Equity (%) (%) (Actual) (%) - ------------------------------------------------------------------------------------------------- Ameriana Bancorp 15.30 15.90 3,231,407 8.36 First Bancshares Inc. 13.40 0.04 1,092,554 8.49 FFW Corp. 25.72 16.10 714,847 10.54 Wood Bancorp Inc. 22.92 9.06 2,118,538 11.07 Industrial Bancorp 7.70 23.00 5,172,800 8.32 Landmark Bancshares Inc. # 23.70 33.02 1,710,666 5.95 MBLA Financial Corp. 28.25 4.38 1,268,268 6.50 MFB Corp. 18.40 24.05 1,650,567 5.63 Milton Federal Financial Corp. 6.20 14.48 2,304,836 5.08 Midwest Bancshares Inc. 33.68 0.00 339,311 12.54 - ------------------------------------------------------------------------------------------------- AVERAGE 19.53 14.00 1,960,379 8.25 MEDIAN 20.66 15.19 1,680,617 8.34 - -------------------------------------------------------------------------------------------------
# June 30, 1997 latest financial information available Financial information as of September 30, 1997 Source: SNL Securities, L.P. Exhibit V-1 Hopkinsville Federal Savings Bank STANDARD CONVERSION ANALYSIS Page 1
As of November 18, 1997 - ---------------------------------------------------------------------------------------------------------------------------------- Comparable All Publicly Group Traded Thrifts PRICE MULTIPLE: Symbol Subject (As of 11/18/97) (As of 11/18/97) Low High Average Median Average Median - ---------------------------------------------------------------------------------------------------------------------------------- Price-to-Earnings ratio P/E 12.75 15.00 17.88 17.66 20.91 18.25 Price-to-Book ratio P/B 66.00 69.00 141.40 138.60 165.69 150.17 Price-to-Assets P/A 13.00 13.50 17.21 16.46 18.52 16.63 - ------------------------------------------------------------------------ PARAMETERS SYMBOL VALUE - ------------------------------------------------------------------------ Proforma Value after Conversion "V" Pre-conversion earnings (1) "Y" $1,591,000 Est ESOP Borrowings (8%) "E" 2,440,000 Est ESOP Borrowing Rate (2) "S" 5.61% Est Amort. of ESOP Borrowings "T" 8 Pre-Conversion Tangible Book Value (3) "B" 18,732,000 Pre-Conversion Assets (3) "A" 202,009,000 Reinvestment Rate (4) "R" 4.29% Est Conversion Expenses (5) "X" 700,000 Management Recognition Plan Amount (4%) "M" 1,220,000 Management Recognition Plan Expense "N" 244,000 Proceeds not Reinvested "Z" 2,570,000 Projected Dividend Amount "DA" 0 Projected Dividend Yield "DY" 0.00% Tax Rate (State and Federal) 34.00%
(1) LTM earnings as of June 30, 1997 (w/o SAIF assessment). (2) Based upon prime at 8.5% rate less the effective tax rate. (3) As of June 30, 1997. (4) Net return assumes a reinvestment rate of 6.5%, the estimated incremental net assets yield for the Company for the most recent period, less the an estimated tax effect. (5) Estimated total costs for the conversion. Hopkinsville Federal Savings Bank STANDARD CONVERSION ANALYSIS Page 2
Formula PRICE-TO-EARNINGS CALCULATION low 28,015,045 P/E [Y-R(X+Z)-ES-(1-Tax)E/T-(1-Tax)N)] high 32,958,876 V = ---------------------------- average 30,486,961 1-(P/E)R PRICE-TO-BOOK CALCULATION low 27,898,588 P/B (B-X-E-M) high 31,989,290 V = ------------- average 29,943,939 1-P/B PRICE-TO-ASSETS CALCULATION low 30,080,655 P/A (A-X) high 31,237,603 V = ------------- average 30,659,129 1-P/A SUMMARY ESTIMATE =========================================================== As of November 18, 1997 $30,500,000 =========================================================== Allowable Range from 85% -- $25,925,000 to 115% or -- $35,075,000
Exhibit V-2 Hopkinsville Federal Savings Bank PROFORMA EFFECT OF CONVERSION PROCEEDS Estimated Conversion Proceeds $30,500,000 (Midpoint of conversion range) Less Selling Expenses ($700,000) -------------- Conversion Proceeds $29,800,000 ESOP Deduction ($2,440,000) MRP Deduction ($1,220,000) -------------- Estimated Net Capital Addition from Conversion $26,140,000 Estimated Additional Income from Conversion Process - --------------------------------------------------- Conversion Proceeds (1) $27,360,000 Estimated Incremental Rate of Return 4.29% -------------- $1,173,744 Less Amortization of ESOP Borrowing, net of taxes ($201,300) Less ESOP Borrowing Expense, net of taxes (136,884) Less Management Recognition Program Expense ($161,040) -------------- Estimated Net Earnings Increase $674,520 (1) less ESOP
----------------------------------------------- Before Conversion After Conversion ----------------------------------------------- ESTIMATED PROFORMA EARNINGS Normalized Earnings (annualized) $1,591,000 $2,265,520 Return on Assets 0.79% 0.99% ---------------------------------------------------------------------------- ESTIMATED PROFORMA NET WORTH Before Conversion Conversion Proceeds After Conversion ---------------------------------------------------------------------------- As of September 30, 1997 $18,732,000 $26,140,000 $44,872,000 ---------------------------------------------------------------------------- ESTIMATED PROFORMA ASSETS Before Conversion Conversion Proceeds After Conversion ---------------------------------------------------------------------------- As of September 30, 1997 $202,009,000 $26,140,000 $228,149,000
Exhibit V-3 Hopkinsville Federal Savings Bank PROFORMA EFFECT OF STANDARD CONVERSION
------------------------------------------------------------------------ Minimum Midpoint Maximum Super Max ------------------------------------------------------------------------ Estimated Gross Stock Sale Proceeds 25,925,000 30,500,000 35,075,000 40,336,250 Estimated Expenses (1) 700,000 700,000 700,000 700,000 --------------- --------------- --------------- --------------- Estimated Net Conversion Proceeds 25,225,000 29,800,000 34,375,000 39,636,250 ESTIMATED PROFORMA NET WORTH Tangible Net Worth as of September 30, 1997 18,732,000 18,732,000 18,732,000 18,732,000 Conversion Proceeds 25,225,000 29,800,000 34,375,000 39,636,250 --------------- --------------- --------------- --------------- Total 43,957,000 48,532,000 53,107,000 58,368,250 Less ESOP Debt (2) 2,074,000 2,440,000 2,806,000 3,226,900 Less MRP Obligation (2) 1,037,000 1,220,000 1,403,000 1,613,450 --------------- --------------- --------------- --------------- Est. Proforma Tangible Net Worth 40,846,000 44,872,000 48,898,000 53,527,900 ESTIMATED PROFORMA EARNINGS Normalized Earnings (annualized) 1,591,000 1,591,000 1,591,000 1,591,000 Incremental Earnings (3) 993,178 1,173,744 1,354,310 1,561,961 --------------- --------------- --------------- --------------- Sub-total 2,584,178 2,764,744 2,945,310 3,152,961 Less ESOP Adjustment (4) 287,456 338,184 388,912 447,248 Less MRP Adjustment (4) 136,884 161,040 185,196 212,975 --------------- --------------- --------------- --------------- Estimated Proforma Annual Earnings 2,159,838 2,265,520 2,371,203 2,492,738 ESTIMATED PROFORMA NET ASSETS Total as of September 30, 1997 202,009,000 202,009,000 202,009,000 202,009,000 Conversion Proceeds 23,151,000 27,360,000 31,569,000 36,409,350 Less MRP Obligation 1,037,000 1,220,000 1,403,000 1,613,450 --------------- --------------- --------------- --------------- Estimated Proforma Assets 224,123,000 228,149,000 232,175,000 236,804,900 - -------------------------------------------------------------------------------------------------------------------------------- ESTIMATED PROFORMA RATIOS, PRICE TO: Tangible Net Worth 63.47% 67.97% 71.73% 76.36% Earnings 12.00 13.46 14.79 16.18 Assets 11.57% 13.37% 15.11% 17.03% - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- EST. PROFORMA RETURN ON ASSETS 0.98% 0.98% 1.02% 1.05% EST. PROFORMA TANGIBLE NET WORTH to ASSETS 18.22% 19.67% 21.06% 22.60% - --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated issuance costs including legal, accounting and other direct expenses (2) Estimated (3) Estimated 6.5% incremental net return on earning assets less the effective tax rate (4) Tax effected Exhibit V-4 Hopkinsville Federal Savings Bank Hopkinsville, Kentucky Proforma Pricing Multiples Compared to Comparable Group *
------------------------------------------------------------------------------ Institution Comparable (Discount) Premium Proforma Group -- From Comparable Group -- Value Average Median Average Median ------------------------------------------------------------------------------ METHOD At the Minimum Price-to-Earnings (x) 12.00 17.88 17.66 -32.87% -32.03% Price-to-Book (%) 63.47 141.40 138.60 -55.11% -54.21% Price-to-Assets (%) 11.57 17.21 16.46 -32.79% -29.72% At the Midpoint Price-to-Earnings (x) 13.46 17.88 17.66 -24.71% -23.77% Price-to-Book (%) 67.97 141.40 138.60 -51.93% -50.96% Price-to-Assets (%) 13.37 17.21 16.46 -22.32% -18.78% At the Maximum Price-to-Earnings (x) 14.79 17.88 17.66 -17.27% -16.24% Price-to-Book (%) 71.73 141.40 138.60 -49.27% -48.25% Price-to-Assets (%) 15.11 17.21 16.46 -12.22% -8.22% At the Super Max Price-to-Earnings (x) 16.18 17.88 17.66 -9.50% -8.37% Price-to-Book (%) 75.36 141.40 138.60 -46.71% -45.63% Price-to-Assets (%) 17.03 17.21 16.46 -1.03% 3.48%
EX-99.7 7 EXHIBIT 99.7 -- ADDITIONAL SOLICITATION HOPKINSVILLE FEDERAL SAVINGS BANK 2700 Fort Campbell Boulevard Hopkinsville, Kentucky 42240 December ___, 1997 Dear Subscriber: You have previously returned to Hopkinsville Federal Savings Bank (the "Bank") an Order Form subscribing for shares of Common Stock of HopFed Bancorp, Inc. which are to be issued upon the conversion of the Bank from mutual to stock form pursuant to the Bank's Plan of Conversion. In accordance with the Plan of Conversion, an updated appraisal of the pro forma market value of the Common Stock was prepared following the Subscription and Community Offerings which terminated on November 18, 1997. Based upon the improvement in the condition of the general stock market, the results of the Offerings, the Bank's September 30, 1997 results of operations and financial condition and current market pricing for thrift institutions, the updated appraisal dated November 18, 1997 reflects an increased appraised value of the Common Stock from $26.5 million to $30.5 million. Based on the purchase price of $10.00 per share, which has not changed, the Bank has received approval from the Office of Thrift Supervision to increase the number of shares of Common Stock offered in the Conversion from 3,047,500 to 3,507,500, subject to adjustment. As a subscriber for shares of Common Stock, you are being given the opportunity to increase, decrease, cancel or confirm your order using the enclosed Supplemental Stock Order Form. IF YOU WISH TO INCREASE, DECREASE OR CONFIRM YOUR PRESENT ORDER, YOU MUST RETURN THE ENCLOSED SUPPLEMENTAL STOCK ORDER FORM TO THE BANK BY 4:00 P.M., LOCAL TIME, ON JANUARY ___, 1998. IF YOU ARE INCREASING YOUR ORDER, YOU MUST ALSO SUBMIT ADDITIONAL FUNDS IN PAYMENT OR PROVIDE AN ADDITIONAL WITHDRAWAL AUTHORIZATION WITH YOUR SUPPLEMENTAL STOCK ORDER FORM. If you wish to cancel your order, you should return a Supplemental Stock Order Form as soon as possible to expedite the return of funds submitted with your earlier order or release of your withdrawal authorization. If you do not return a Supplemental Stock Order Form, your order will be canceled, but funds submitted with your earlier order will not be returned to you until after the resolicitation period has expired. Information regarding the updated appraisal and the increase in the number of shares of Common Stock being offered is set forth in the enclosed Prospectus Supplement. The Prospectus Supplement also sets forth updated pro forma data which reflect the increased amount of Common Stock being offered, as well as updated information regarding the Bank, including its financial statements through September 30, 1997. The Prospectus Supplement supplements and amends ------------------------------------------------ the Prospectus dated October 10, 1997 which you received earlier from us and - ---------------------------------------------------------------------------- should be read in conjunction therewith. - --------------------------------------- We appreciate your continued interest and support, and we look forward to your participation as a charter stockholder following the completion of the Bank's successful conversion. If you have any questions concerning the procedure to be followed in completing your Supplemental Stock Order Form, please call the Stock Information Center at (502) 881-4001. Sincerely, Bruce Thomas President -----END PRIVACY-ENHANCED MESSAGE-----