EXHIBIT 99.5
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Little Falls Bancorp, Inc.
Merger with
Skylands Community Bank
Making the Transition to a Commercial Bank
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These investor materials contain forward-looking statements that involve risk
and uncertainty. It should be noted that a variety of factors would cause the
combined company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the combined company's
forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development, growth projections and results of the combined company's business
include, but are not limited to, the growth of the economy, interest rate
movements, timely development by the combined company of technology enhancements
for its products and operating systems, the impact of competitive products,
services and pricing, customer based requirement, Congressional legislation,
acquisition cost savings and revenue enhancements and similar matters. Readers
of this report are cautioned not to place undue reliance on forward-looking
statements which are subject to influence by the named risk factors and
unanticipated future events. Actual results, accordingly, may differ materially
from management expectations.
August 15, 1998
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Deal Structure
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o The entity will incorporate a state chartered bank holding company
("Acquisition Company").
o Little Falls Bancorp, Inc. will be merged into Acquisition Company. Little
Falls Bank will be merged into Skylands Community Bank, which will retain
its name. Skylands is a New Jersey-chartered commercial bank.
o Acquisition Company would be renamed Little Falls Bancorp, Inc.
o Fixed exchanged ratio, each share of Skylands will become 0.80 shares of
the resultant entity, while each share of Little Falls Bancorp will become
1.00 share of the resultant entity.
o The transaction will be accounted for using pooling of interests accounting
methodology. No goodwill will be created.
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Deal Structure
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- ------------------- -----------------------------
| Little Falls | | Acquisition Company |
| Bancorp, Inc. |--------------------------------| to be re-named |
| | (Arrow pointed right) | Little Falls Bancorp, Inc.|
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| |
| (Arrow pointed up) (Arrow pointed up) |
| |
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| | | |
|Little Falls Bank |-------------------------------| Skylands Community |
| | (Arrow pointed right) | Bank |
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Deal Structure (Continued)
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o Michael Halpin will become President and CEO of both Skylands Community
Bank and Little Falls Bancorp, Inc. He is an experienced commercial banker,
having significantly enchnced shareholder value at Skylands Community Bank
and Lakeland First Financial Group while being President.
o Leonard Romaine will become Executive Vice President and COO of both
Skylands Community Bank and Little Falls Bancorp, Inc.
o Little Falls' Chairman, Albert Weite, will become Chairman of the new
holding company.
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Rationale Behind the Merger
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The Board of Little Falls has set a number of goals for the institution. These
goals include:
1 Transformation into a community bank
2 Earnings enhancement and accretion
3 Enhancement of the branch franchise
4 Commercial banking management expertise
5 Creation of economies of scale
6 Achievement of critical mass
7 Improvement of the liquidity and trading of the stock
Management believes the merger with Skylands Community Bank accomplishes all of
these goals. Furthermore, management feels it is also a relatively quick and
inexpensive way to accomplish these goals.
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1 Transformation into a Community Bank
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o Skylands will substantially shift Little Falls' focus to community banking
from its traditional thrift focus.
o Little Falls has strived toward this goal since the purchase of the
Hunterdon County Branches from Corestates.
o Skylands' staff will provide the commercial banking expertise necessary to
accomplish this goal.
o Skylands should provide a low cost of funds.
o The loan mix will be diversified with the addition of Skylands' loan
portfolio.
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2 Earnings enchancement and accretion
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Based on LTM ended June 30, 1998
Unaudited Statements of Operations
($ in millions)
Estimated
Pro Forma
LFBI Net Income $1.9
SKCB Net Income 1.7
Total Estimated Net Income 3.5
After Tax Cost Savings ($1.2 Pre-Tax) 0.8
Revenue Enhancements 0.0
----
Pro Forma Net Income 4.3
LFBI Estimated FD Shares (1) 2.3
SKCB Estimated FD Shares (1) 2.5
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(Exchange Ratio = 0.80)
Pro forma Estimated FD Share 4.3
LFBI Stand Alone EPS $0.77
LFBI Pro Forma EPS $1.01
Accretion
31.17%
(1) Weighted average diluted shares outstanding for the quarter ended June 30,
1998.
Note:Nonrecurring restructuring charges are not reflected. These charges are
expected to equal approximately $5.2 million pre-tax.
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3 Enhancement of the Branch Franchise
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o Skylands will bridge the gap between Little Falls' Passaic and Hunterdon
branches.
o Skylands' branches are in growth markets.
Population
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Hackettstown/
Jefferson Netcong Roxbury Byram Independence Oxford NJ
--------- ------- ------- ----- ------------- ------ --
1990 Census 17,825 3,311 20,273 8,153 11,889 1,800 7.7M
1997 Est. 18,667 3,368 22,364 8,891 13,013 2,017 7.9M
2002 Proj. 19,352 3,442 23,715 9,365 13,771 2,153 8.1M
Growth 90-02 8.57% 3.96% 16.98% 14.86% 15.83% 19.58% 5.32%
Source: Claritas - 1997 Release
o The majority of Skylands' branches are recent de-novos and/or recent
acquisitions, which have yet to reach their potential. Four of Skylands'
six branches opened after June 30, 1995.
Branch Deposits ($ in thousands)
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Jefferson Netcong Roxbury Byram Independence Oxford
--------- ------- ------- ----- ------------ ------
June 30, 1996 NA 25,230 10,465 NA 55,916 5,543
June 30, 1997 NA 30,005 16,215 NA 60,235 9,918
Growth 96-97 NA 18.93% 54.95% NA 7.72% 78.93%
Source: Sheshunoff - 1997 Release
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3 Enhancement of the Branch Franchise (Continued)
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[Map Omitted]
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4 Commercial Banking Management Expertise
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Michael Halpin, the new CEO, is an experienced commercial banker. Prior to
joining Skylands Community Bank, Michael Halpin was the President and CEO of
Lakeland Financial Group. While at each institution, Michael has substantially
enhanced shareholder value. In short, Michael Halpin is a proven commodity.
While at Skylands Michael Halpin has:
o Increased earnings per share from $0.15 for year ended 1995 to
$0.61 for year ended 1997. EPS was $0.74 for the six months ended
June 30, 1998, annualized.
o Grown the balance sheet from $94 million at June 30, 1995 to $162
at June 30, 1998.
o Increased net loans from $33 million to $101 million.
Between 1990 and June 1995, Michael Halpin was the President and CEO of Lakeland
Financial Group. During his tenure, Michael:
o Effectively doubled the size of the bank from $313 million in
1990 to $675 at December 31, 1994.
o Increased earnings from $1.4 million in 1990 to $8.5 million as
of June 1994, and was on target to achieve $10 million for 1995.
o Introduced commercial services and grew outstanding loans from a
few million to $80 million in four years.
o Decreased non-performing loans and REO from 5.7% of assets to
under 1.0%.
o Even more noteworthy, during his tenure the stock price increased
from $4.39 per share during September 1990 to a buyout price of
$32.75, representing a 750% return to investors.
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5 Creation of Economies of Scale
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The resulting entity expects to achieve approximately $1.2 million in
annual expense savings. These savings will occur in the following
areas:
- Accounting
- Legal
- Examination fees
- Systems
- Professional fees
- ESOP/MRP expense
- Provision for loan losses
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6 Achievement of Critical Mass
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Based on June 30, 1998
Unaudited Statements of Condition
($ in millions)
Estimated
LFBI SKCB Pro Forma
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Assets $351 $162 $513
Loans, net 153 101 254
Investments 178 49 227
Deposits 229 145 374
Borrowings 84 4 88
Tangible Capital 34 11 45
Approximate
Market Capitalization 49 35 84
Loans/Assets 43.87% 63.58% 50.10%
Borrowings/Assets 23.88% 2.28% 17.06%
Tangible Capital/Assets 9.71% 6.83% 8.78%
ALLL/Loans 0.82% 1.51% 1.10%
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7 Improvement of the Liquidity and Trading of the Stock
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o The resultant entity will have significantly higher outstanding shares,
providing buyers and sellers with a more liquid stock. Liquid stocks tend
to trade at better multiples.
o As the resultant entity continues its balance sheet shift toward commercial
lines of business, and begins to provide returns like a community bank,
although there can be no assurances it should trade at community bank
multiples.
Median Median
Price to Price to
LTM EPS* Book Value*
Banks less than $1B in Assets 18.82 X 204.80%
Thrifts less than $1B in Assets 18.04 X 128.27%
*Source: SNL Securities as of 8/12/98
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FUTURE DIRECTION
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o Improve EPS and enhance shareholder value.
o Merge operations seamlessly and quickly.
o Implement expense reductions
o Change deposit mix to place a heavier emphasis on commercial deposits.
o Focus on selected commercial segments.
o Hire commercial lenders.
o Complete franchise with new branches where necessary.
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