EXHIBIT 99.2
FELDMAN FINANCIAL ADVISORS, INC.
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1725 K STREET, NW o SUITE 205
WASHINGTON, DC 20006
(202) 476-6862 o FAX (202) 467-6963
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First Federal Florida
Lakeland, Florida
Conversion Valuation Appraisal Report
Valued as of December 14, 1998
Prepared By
Feldman Financial Advisors, Inc.
Washington, D.C.
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FELDMAN FINANCIAL ADVISORS, INC.
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1725 K STREET, NW o SUITE 205
WASHINGTON, DC 20006
(202) 476-6862 o FAX (202) 467-6963
December 14, 1998
Board of Directors
First Federal Florida
205 East Orange Street
Lakeland, Florida 33801
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal of the aggregate estimated pro forma market value of First Federal
Florida (the "Bank") in connection with its mutual holding company
reorganization (the "Reorganization"). The transaction structure will include
the formation of a federally chartered stock savings institution as the
successor to the Bank in its mutual form, and concurrent formation of
FloridaFirst Bancorp, Inc. (the "Stock Company") as a majority-owned subsidiary
of FloridaFirst Bancorp, MHC (the "Mutual Company"). The Stock Company will
offer shares of its common stock for sale to eligible depositors and to the
Bank's employee stock benefit plans in a Subscription Offering. Shares not
subscribed for in the Subscription Offering will be offered for sale to certain
members of the general public in a Community Offering.
This appraisal report is being furnished pursuant to the filing of
regulatory applications for the Reorganization by the Bank with the Office of
Thrift Supervision and the Securities and Exchange Commission. Feldman Financial
Advisors, Inc. ("Feldman Financial") is a financial consulting and economic
research firm that specializes in financial valuations and analyses of business
enterprises and securities in the thrift, banking, and mortgage industries. The
background of Feldman Financial is presented in Exhibit I.
In preparing our appraisal, we conducted an analysis of the Bank that
included discussions with the Bank's management, the Bank's independent
accountants, KPMG Peat Marwick LLP, the Bank's offering manager, Sandler O'Neill
& Partners, L.P., and the Bank's Reorganization counsel, Malizia, Spidi, Sloane
& Fisch, P.C. In addition, where appropriate, we considered information based on
other available published sources that we believe are reliable; however, we
cannot guarantee the accuracy and completeness of such information.
We also reviewed, among other factors, the economy in the Bank's
primary market area and compared the Bank's financial condition and operating
performance with that of selected publicly traded thrift institutions. We
reviewed conditions in the securities markets in general and in the market for
thrift institution common stocks in particular.
Our appraisal is based on the Bank's representation that the
information contained in the regulatory applications and additional evidence
furnished to us by the Bank and its independent auditors are truthful, accurate,
and complete. We did not independently verify the financial statements and other
information provided by the Bank and its independent accountants, nor did we
independently value the assets or liabilities of the Bank. The valuation
considers the Bank only as a going concern and should not be considered as an
indication of the liquidation value of the Bank.
FELDMAN FINANCIAL ADVISORS, INC.
Board of Directors
First Federal Florida
December 14, 1998
Page Two
It is our opinion that, as of December 14, 1998, the aggregate
estimated pro forma market value of the Bank was within the valuation range of
$36,975,000 to $50,025,000 with a midpoint of $43,500,000. The valuation range
was based upon a 15 percent decrease from the midpoint to determine the minimum
and a 15 percent increase to establish the maximum. Assuming an additional 15
percent increase above the maximum value would result in an adjusted maximum of
$57,528,750.
The Board of Directors has determined to offer for sale in the
Reorganization a minority ownership interest equal to 47 percent of all the
common stock to be issued and outstanding. Therefore, the aggregate value of
common stock to be sold in the Reorganization will be equal to $17,378,250 at
the minimum valuation, $20,445,000 at the midpoint valuation, $23,511,750 at the
maximum valuation, and $27,038,513 at the adjusted maximum.
Our valuation is not intended, and must not be construed, to be a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the Reorganization. Moreover, because the valuation is necessarily
based upon estimates and projections of a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons who
purchase shares of stock in the Reorganization will thereafter be able to sell
such shares at prices related to the foregoing estimate of the Bank's pro forma
market value. Feldman Financial is not a seller of securities within the meaning
of any federal or state securities laws and any report prepared by Feldman
Financial shall not be used as an offer or solicitation with respect to the
purchase or sale of any securities.
The valuation reported herein will be updated as appropriate. These
updates will consider, among other factors, any developments or changes in the
Bank's operating performance, financial condition, or management policies, and
current conditions in the securities markets for thrift institution common
stocks. Should any such new developments or changes be material, in our opinion,
to the valuation of the Bank, appropriate adjustments to the estimated pro forma
market value will be made. The reasons for any such adjustments will be
explained in detail at that time.
Respectfully,
Feldman Financial Advisors, Inc.
By: /s/Trent R. Feldman
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Trent R. Feldman
President
FELDMAN FINANCIAL ADVISORS, INC.
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TABLE OF CONTENTS
TAB PAGE
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INTRODUCTION.............................................................................. 1
I. Chapter One - BUSINESS OF FIRST FEDERAL FLORIDA
General................................................................................... 4
Financial Condition....................................................................... 10
Income and Expense Trends ................................................................ 18
Asset and Liability Management............................................................ 25
Asset Quality............................................................................. 28
Properties and Equipment.................................................................. 31
Market Area............................................................................... 33
Summary .................................................................................. 38
II. Chapter Two - COMPARISONS WITH PUBLICLY TRADED THRIFTS
General .................................................................................. 39
Selection Criteria ....................................................................... 40
Recent Financial Comparisons ............................................................. 44
III. Chapter Three - MARKET VALUE ADJUSTMENTS
General................................................................................... 55
Earnings Prospects........................................................................ 56
Market Area............................................................................... 57
Management................................................................................ 58
Dividend Policy........................................................................... 58
Liquidity of the Issue.................................................................... 59
Subscription Interest..................................................................... 59
Stock Market Conditions .................................................................. 60
Recent Acquisition Activity............................................................... 65
New Issue Discount........................................................................ 67
MHC Structure............................................................................. 70
Adjustments Conclusion.................................................................... 73
Valuation Approach........................................................................ 73
Valuation Conclusion...................................................................... 75
IV. Appendix - EXHIBITS
I Background of Feldman Financial Advisors, Inc.................................. I-1
II-1 Statement of Financial Condition............................................... II-1
II-2 Statement of Income............................................................ II-2
II-3 Loan Portfolio Composition..................................................... II-3
II-4 Investment Portfolio Composition............................................... II-4
II-5 Deposit Account Distribution................................................... II-5
II-6 Office Facilities.............................................................. II-6
III Financial Performance and Market Data for All Public Thrifts................... III-1
IV-1 Pro Forma Assumptions.......................................................... IV-1
IV-2 Pro Forma Valuation Range: Full Conversion Basis............................... IV-2
IV-3 Pro Forma Valuation Range: MHC Offering........................................ IV-3
IV-4 Comparative Valuation Ratios: Full Conversion Valuation....................... IV-4
IV-5 Pro Forma Full Conversion Analysis at Midpoint Value........................... IV-5
FELDMAN FINANCIAL ADVISORS, INC.
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LIST OF TABLES
TAB PAGE
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I. Chapter One - BUSINESS OF FIRST FEDERAL FLORIDA
Table 1 - Selected Financial Condition Data.......................................... 10
Table 2 - Relative Balance Sheet Concentrations...................................... 11
Table 3 - Income Statement Summary................................................... 19
Table 4 - Income Statement Ratios.................................................... 20
Table 5 - Yield and Cost Summary..................................................... 24
Table 6 - Net Portfolio Value........................................................ 27
Table 7 - Non-performing Asset Summary............................................... 29
Table 8 - Allowance for Loan Losses Summary.......................................... 30
Table 9 - Key Demographic Data....................................................... 36
Table 10 - Deposit Market Share Analysis by County....................................... 37
II. Chapter Two - COMPARISONS WITH PUBLICLY TRADED THRIFTS
Table 11 - Comparative Group Operating Summary........................................ 43
Table 12 - Key Financial Comparisons.................................................. 46
Table 13 - General Financial Performance Ratios....................................... 50
Table 14 - Income and Expense Analysis................................................ 51
Table 15 - Yield-Cost Structure and Growth Rates...................................... 52
Table 16 - Balance Sheet Composition.................................................. 53
Table 17 - Capital Ratios, Asset Quality, and Loan Composition........................ 54
III. Chapter Three - MARKET VALUE ADJUSTMENTS
Table 18 - Comparative Stock Market Indexes........................................... 61
Table 19 - Comparative Stock Market Performance....................................... 62
Table 20 - Selected Interest Rate Benchmarks.......................................... 64
Table 21 - Acquisition Summary of Florida Financial Institutions...................... 66
Table 22 - Summary of Recent Publicly Traded Thrift Conversions....................... 68
Table 23 - Fully Converted Valuation Ratios for MHC Thrifts........................... 72
Table 24 - Comparative Market Valuation Analysis: Full Conversion..................... 76
Table 25 - Comparative Discount and Premium Analysis.................................. 77
Table 26 - Comparative Market Valuation Analysis: MHC Offering........................ 78
FELDMAN FINANCIAL ADVISORS, INC.
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INTRODUCTION
As requested, Feldman Financial Advisors, Inc. ("Feldman Financial")
has prepared an independent appraisal of the aggregate estimated pro forma
market value of First Federal Florida (the "Bank") in connection with its mutual
holding company reorganization (the "Reorganization"). The transaction structure
will include the formation of a stock savings institution as the successor to
the Bank in its mutual form, and concurrent formation of FloridaFirst Bancorp
(the "Stock Company") as the holding company of the Bank and a majority-owned
subsidiary of FloridaFirst Bancorp, MHC (the "Mutual Company"). The Stock
Company will offer shares of its common stock for sale to eligible depositors in
a Subscription Offering. Shares not sold in the Subscription Offering will be
offered for sale to certain members of the general public in a Community
Offering.
The Bank will organize the Mutual Company as a federally chartered
mutual holding company, which will own a majority of the common shares of the
Stock Company. The Bank will be a wholly owned subsidiary of the Stock Company.
The Stock Company expects to sell in the Stock Offering a minority ownership
interest equal to 47% of its common stock. The remaining shares of the Stock
Company will be owned by the Mutual Company.
In the course of preparing this appraisal report, we reviewed and
discussed with the Bank's management, and with the Bank's independent
accountants, KPMG Peat Marwick LLP, the audited financial statements of the
Bank's operations for the fiscal years ended September 30, 1997 and 1998. We
also discussed matters related to the Reorganization with the Bank's legal
counsel, Malizia, Spidi, Sloane & Fisch, P.C., and with the Bank's offering
manager,
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FELDMAN FINANCIAL ADVISORS, INC.
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Sandler O'Neill & Partners, L.P. We also reviewed and discussed with management
other financial matters of the Bank.
Where appropriate, we considered information based upon other available
public sources, which we believe to be reliable; however, we cannot guarantee
the accuracy or completeness of such information. We visited the Bank's primary
market area and examined the prevailing economic conditions. We also examined
the competitive environment within which the Bank operates and assessed the
Bank's relative strengths and weaknesses.
We examined and compared the Bank's financial performance with selected
segments of the thrift industry and selected publicly traded thrift
institutions. We reviewed conditions in the securities markets in general and
the market for thrift institution common stocks in particular. We included in
our analysis an examination of the potential effects of the Reorganization on
the Bank's operating characteristics and financial performance as they relate to
the estimated pro forma market value of the Bank.
In preparing our valuation, we have relied upon and assumed the
accuracy and completeness of financial and statistical information provided by
the Bank and its independent auditors. We did not independently verify the
financial statements and other information provided by the Bank and its
independent auditors, nor did we independently value the assets or liabilities
of the Bank. The valuation considers the Bank only as a going concern and should
not be considered as an indication of the liquidation value of the Bank.
Our valuation is not intended, and must not be construed, to be a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the Reorganization. Moreover, because such valuation is necessarily
based on estimates and
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FELDMAN FINANCIAL ADVISORS, INC.
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projections of a number of matters, all of which are subject to change from time
to time, no assurance can be given that persons who purchase shares of common
stock in the Reorganization will thereafter be able to sell such shares at
prices related to the foregoing valuation of the pro forma market value thereof.
Feldman Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by Feldman Financial
shall not be used as an offer or solicitation with respect to the purchase or
sale of any securities.
The valuation reported herein will be updated as appropriate. These
updates will consider, among other factors, any developments or changes in the
Bank's financial performance or management policies, and current conditions in
the securities market for thrift institution common stocks. Should any such
developments or changes be material, in our opinion, to the Reorganization
valuation of the Bank, appropriate adjustments to the estimated pro forma market
value will be made. The reasons for any such adjustments will be explained in
detail at that time.
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FELDMAN FINANCIAL ADVISORS, INC.
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I. BUSINESS OF FIRST FEDERAL FLORIDA
General
First Federal Florida is a federally chartered mutual savings
institution, originally chartered in 1934 as First Federal Savings and Loan
Association of Lakeland. The Bank conducts business from its main office in
Lakeland, Florida and eight other branch offices located in Polk and Manatee
Counties in Florida. The Bank is subject to regulation by the Office of Thrift
Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC"), the
insurer of its deposit accounts up to applicable limits through the Savings
Association Insurance Fund ("SAIF"). The Bank is a member of the Federal Home
Loan Bank ("FHLB") of Atlanta. As of September 30, 1998, First Federal Florida
had total assets of $419.0 million, total deposits of $352.2 million, and total
equity of $36.1 million or 8.62% of total assets.
The Bank has historically operated as a consumer-oriented savings
institution with a focus on offering traditional savings deposit and mortgage
loan products to its local market area. In recent years, the Bank's operating
strategy has been to maintain profitability while improving its operating
efficiency, diversifying its lending activity, and limiting its credit and
interest rate risk exposure. In order to accomplish these objectives, the Bank
has sought to: (i) continue emphasizing the origination of single-family,
owner-occupied residential mortgage loans; (ii) offer outstanding service and
competitive rates to increase the core deposit base consistent with its capital
management goals; (iii) invest funds in excess of loan demand in investment and
mortgage-backed securities; (iv) expand and diversify its lending activity to
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FELDMAN FINANCIAL ADVISORS, INC.
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include higher-yielding loans and respond to the financing needs of its consumer
and commercial customers; and (v) enhance operating efficiency by blending cost
control with revenue generation. In order to improve operating efficiency and
concentrate its market focus on Polk and Manatee counties, the Bank completed
the sale in 1998 of five small branch offices located in north central Florida
with total deposits of $55.3 million.
With industry consolidation eliminating many locally headquartered
competitors, the Bank recognized an opportunity to fill a perceived void for
locally delivered commercial and consumer financial products and services. As
such, the Bank initiated efforts in recent years to transform itself into a more
diversified community financial institution. The composition of the Bank's
portfolio has changed moderately to include increased proportions of commercial
real estate and consumer loans. Management recognizes that the diversification
of the Bank's loan products may expose the Bank to a higher degree of credit
risk than is involved in its one-to-four family residential mortgage lending. As
a consequence of this strategy, management has developed a credit policy
focusing on quality underwriting, diligent loan administration, and regular
Board monitoring. In addition, the Bank recently added key executive management
in the areas of finance, lending, and retail operations. The new management team
assembled by the Bank consists of personnel formerly associated with commercial
banks such as First Union, AmSouth, Barnett, and SunTrust.
The Bank expects to continue to capitalize on its strengths - the
delivery of traditional thrift products and services with a high level of
customer service, thereby maintaining its community orientation. The Bank's
mission is to be a profitable, sound, and responsive community financial
institution. The Bank's operating goals are outlined as follows:
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FELDMAN FINANCIAL ADVISORS, INC.
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o achieve and maintain high standards of capital, profitability, and asset
quality;
o gain wide recognition as a community financial institution offering a broad
range of products and services to its consumer and business customers;
o develop and deliver high-quality banking products and services with an
emphasis on efficiency, technology, and personalized service;
o maintain a sales-oriented, well-trained, and motivated staff and provide a
work environment that encourages, develops, and rewards outstanding
performance;
o support the continued growth and development of the communities served by
the Bank.
During 1997, management of the Bank developed a product and branch
profitability model to analyze its operations. Based on the Bank's strategic
analyses and other discussions related to future growth and capital deployment,
the Bank entered into an agreement in October 1997 with another financial
institution to sell five branch offices in north central Florida and their
related deposits. The five branches sold were referred to as the Bank's
"Tri-County Region," which was not contiguous to the Bank's primary market area
covering west and west central Florida. The branches had been acquired from
troubled financial institution in the early 1980's. In addition, the growth
projections for the Tri-County Region were below the projected growth in Polk
and Manatee Counties. The Bank believed that its capital and financial resources
could be more effectively and strategically utilized in its primary market area.
The impact of the branch and deposit sale transaction resulted in the sale of
$55.3 million in deposits and a gain on sale of $3.0 million.
The Bank's profitability over the past five fiscal years has
averaged a 0.46% return on average assets. The mediocre earnings levels were
chiefly attributable to narrowing net interest spreads and above-average expense
ratios. Before the recent branch sale, the Bank
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FELDMAN FINANCIAL ADVISORS, INC.
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operated a comparatively large number of branch offices (fourteen) for a
financial institution of its size, which contributed to increased operating
expenses. In addition, the Bank's traditional savings and loan orientation under
former management did not fully exploit market share advantages into additional
revenue generation (through higher loan yields, increased fees, and
cross-selling other products) or maximum cost efficiency. Also, growth prospects
and opportunities in the Bank's primary market area have only recently turned
favorable. The Bank's headquarters city of Lakeland is located almost midway
between Tampa and Orlando on the Interstate-4 highway corridor, and the local
area has begun to benefit from the business spillover effects of both of these
rapidly developing metropolitan regions.
The Bank seeks to become the primary financial institution for
an increased proportion of its customer base. In order to achieve this goal, the
Bank recognizes the importance of continuing its evolution to a comprehensive
provider of financial products and services through an attractive, convenient,
and accessible delivery system. The Bank also realizes that it will require
appropriate investments in technology and personnel to implement current
strategic initiatives such as installing automated teller machines ("ATMs"),
introducing a debit card product, expanding commercial real estate lending
activity, and enhancing its market area penetration through additional branch
offices. The investment in its operating infrastructure in the form of added
personnel, technology, and offices will require some lead time for
implementation and development before improved earnings results are immediately
achievable. However, the Bank believes that it is important to broaden the range
of its product and service capability to offset the declining margins in the
competitive market for residential mortgage loans.
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FELDMAN FINANCIAL ADVISORS, INC.
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The addition of capital proceeds from the Stock Offering will
help the Bank to take advantage of diversified lending and expansion
opportunities within its market area. Management believes it can increase the
market share of its mortgage loans and commercial lending by providing quick
loan approvals and offering truly personalized customer service. The addition of
capital will also enable the Bank to attract deposit accounts by enhancing its
competitive posture. The Bank will utilize increased funds, through the addition
of offering proceeds and increased deposits, to meet the credit needs of its
local market area, as well as to avail itself of strategic and profitable
investment opportunities.
In order to achieve its growth objectives and maintain an appropriate
level of capital, the Bank plans to convert from the mutual to stock form of
organization and offer shares of common stock for sale through the Stock
Company. The Board of Directors has determined that the Reorganization is in the
best interest of the Bank, and has also noted specific business purposes for
effecting the proposed Reorganization. The Reorganization will structure the
Bank in the stock form, which is used by commercial banks, most major business
corporations, and an increasing majority of savings institutions. Formation of
the stock company will permit the Bank to issue common stock, which is a source
of capital not available to mutual institutions.
Concurrently, the Bank's mutual form of ownership will be
sustained by the mutual holding company ("MHC") structure, which permits the
Mutual Company to control at least a majority of the common stock issued in the
Reorganization. Such control will mitigate pressure from public stockholders to
leverage capital quickly and unwisely. The MHC structure will also enable the
Bank to raise significantly less capital than otherwise would result
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FELDMAN FINANCIAL ADVISORS, INC.
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from a full stock conversion in today's equity market. The Reorganization will
not foreclose the opportunity for the Bank to effect a full stock conversion at
some future time.
Additionally the mid-tier Stock Company allows flexibility to
structure mergers and acquisitions, diversify business operations, and to
repurchase shares of common stock, thereby affording the MHC format some of the
advantages that were available previously only to savings institutions that
opted for full conversions. The ability to issue common stock also will enable
the Bank to establish stock benefit plans for management and employees, thereby
improving the Bank's capacity to attract and retain qualified personnel. If, for
some unforeseen reason, the Reorganization is not completed, the Board of
Directors intends for the Bank to continue in its present mutual form until such
time as the Board determines the best interest of its members and the community
are served by the Bank pursuing an alternative organizational structure.
The remainder of Chapter I examines in more detail the trends
addressed in this section, including the impact of changes in the Bank's
economic and competitive environment, and recent management initiatives. The
discussion is supplemented by the exhibits in the Appendix. Exhibit II-1
summarizes the Bank's statements of financial condition as of fiscal year-ends
September 30, 1997 and 1998. Exhibit II-2 presents the Bank's statements of
income for the fiscal years ended September 30, 1996 to 1998.
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FELDMAN FINANCIAL ADVISORS, INC.
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Financial Condition
Table 1 presents selected data concerning the Bank's financial position
as of the fiscal year-ends September 30, 1994 through 1998. Table 2 displays
relative balance sheet concentrations for the Bank over the same period.
Table 1
Selected Financial Condition Data
As of September 30, 1994 to 1998
(Dollars in Thousands)
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September 30,
-----------------------------------------------
1998 1997 1996 1995 1994
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Total Assets 419,041 466,765 440,294 431,414 409,866
Loans Receivable, net 338,610 355,551 321,327 260,675 247,943
Mortgage-backed Secs., net 14,286 5,635 6,619 20,271 23,238
Investment Securities 46,675 68,938 93,222 117,963 112,032
Cash and Cash Equivalents 5,217 21,842 3,885 18,222 13,691
Total Deposits 352,182 429,714 404,184 397,594 378,502
FHLB Advances 21,000 -- -- -- --
Equity Capital 36,107 33,588 30,569 30,774 28,606
- ------------------------------ ------- ------- ------- ------- -------
Allowance for Loan Losses 2,564 2,633 2,385 1,902 1,902
Non-performing Loans 836 2,314 1,184 1,206 2,333
1,330 2,485 1,234 1,554 2,534
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Source: First Federal Florida, prospectus.
Asset Composition
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The Bank's asset base expanded at a compound annual growth rate of 4.4
between September 30, 1994 and September 30, 1997, before decreasing by 10.2%
during fiscal year 1998. The decline resulted from the Tri-County branch sale
transaction, which involved the transfer of $55.3 million in deposits along with
$45.1 million in loans that included consumer and mortgage loans associated with
the branches and certain mortgages from Polk County.
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FELDMAN FINANCIAL ADVISORS, INC.
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Table 2
Relative Balance Sheet Concentrations
As of September 30, 1994 to 1998
(Percent of Total Assets)
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September 30,
-------------------------------------------
1998 1997 1996 1995 1994
================================================================================
Assets
------
Cash and Investments 15.8 20.6 23.5 36.3 36.3
Loans Receivable, net 80.8 76.2 73.0 60.4 60.5
Other Assets 3.4 3.2 3.4 3.3 3.2
----- ----- ----- ----- -----
Total Assets 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== =====
Liabilities and Equity
----------------------
Total Deposits 84.0 92.1 91.8 92.2 92.3
FHLB Advances 5.0 0.0 0.0 0.0 0.0
Other Liabilities 2.4 0.7 1.3 0.7 0.7
Equity Capital 8.6 7.2 6.9 7.1 7.0
----- ----- ----- ----- -----
Total Liabilities and Equity 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== =====
================================================================================
Source: First Federal Florida, prospectus; Feldman Financial calculations.
Over the five-year period, the Bank significantly increased its lending
activity. The Bank's loan portfolio expanded at a compound annual growth rate of
12.8% between September 30, 1994 and September 30, 1997, before decreasing by
4.8% during fiscal year 1998 due to the transfer of loans in conjunction with
the branch sale. The ratio of loans to assets increased from 60.5% at September
30, 1994 to 80.8% at September 30, 1998. In addition to funding from deposit
growth, much of the loan expansion was also supported by reductions in
investments. The relative balance of cash and investments to total assets
declined from 36.3% at September 30, 1994 to 15.8% at September 30, 1998.
The Bank's loan portfolio is predominantly secured by
one-to-four family residential real estate properties. As displayed in Exhibit
II-3, the Bank's gross loan portfolio at
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FELDMAN FINANCIAL ADVISORS, INC.
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September 30, 1998 totaled $358.3 million, of which 68.3% ($244.7 million) were
permanent residential loans, 7.6% ($27.3 million) were construction residential
loans, 7.9% ($28.5 million) were commercial and other real estate loans, and
16.2% ($57.9 million) were consumer loans.
The Bank's primary lending activity consists of the
origination of one-to-four family residential mortgage loans secured by property
located in the Bank's market area. The Bank generally originates residential
loans for retention in its portfolio with a substantial majority of recent
originations comprising fixed-rate mortgages as compared to adjustable-rate
mortgages. Most of the Bank's residential loans are underwritten in accordance
with secondary mortgage market guidelines, and the Bank has periodically sold
loans. As of September 30, 1998, the Bank's portfolio of loans serviced for
others amounted to $23.3 million.
The Bank is also an active lender in the construction of
one-to-four family homes located in the Polk County market. As of September 30,
1998, the Bank's portfolio of construction loans outstanding amounted to $27.3
million, less $17.0 million of loans in progress. Construction loans are
extended mainly to individual homeowners for the construction of their primary
residence. The Bank also originates construction loans to a customer base of
approximately 25 to 35 local homebuilders who have a borrowing history with the
Bank or who are otherwise known to the Bank. The Bank attempts to mitigate its
credit risk exposure for construction lending to builders through site
inspections, limited borrowing concentrations, and periodic credit analysis.
The Bank originates commercial real estate mortgage loans and,
to a lesser extent, loans on multi-family dwellings and developed and
undeveloped land. The Bank's commercial
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FELDMAN FINANCIAL ADVISORS, INC.
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real estate loans are typically secured by improved property such as office
buildings, commercial warehouses, retail stores, and apartment buildings. The
average loan size is approximately $150,000 and usually carries fixed interest
rates with five to ten year maturities, at which point the loan is repaid or the
terms and conditions are renegotiated. The Bank's largest commercial real estate
loan outstanding as of September 30, 1998 had a balance of $1.4 million and was
secured by a commercial warehouse. This loan was also included in the Bank's
largest aggregation of loans to one borrower totaling $4.7 million, which was
within the Bank's legal lending limit to one borrower of $5.4 million. These
fifteen loans outstanding were current as of September 30, 1998 and were secured
primarily by commercial warehouses in the Lakeland area.
To accomplish its mission to become a full service community
bank, the Bank has developed plans to expand its products and services offerings
to the small to medium size business within its market area. The Bank has added
experienced commercial business lending personnel within the past year and
expects to hire additional staff over the next few years. Various business
development plans, loan policies and procedures, and technology systems either
have been implemented or are being effected. The Bank plans to satisfy not only
the borrowing needs of new prospective business customers, but anticipates
providing the full complement of deposit and customer services customary of a
commercial banking relationship. Commercial loans not secured by real estate
increased from $218,000 at September 30, 1997 to $1.1 million at September 30,
1998.
The Bank's consumer loan portfolio increased significantly
from $32.3 million at September 30, 1994 to $69.2 million at September 30, 1997.
The consumer portfolio declined
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FELDMAN FINANCIAL ADVISORS, INC.
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to $57.9 million as of September 30, 1998 and consisted primarily of direct and
indirect automobile loans and home equity loans and credit lines. Automobile
loans comprised $34.8 million of the Bank's consumer loan portfolio at September
30, 1998. Approximately 70% of the automobile loans were originated through
local automobile dealerships. Although this loan category generally carries a
greater risk factor, the Bank believes that it has experienced personnel to
manage this type of lending activity. The dealer arrangements are limited
primarily to a few local dealers where long-term relationships have been
established and the loans acquired typically are those made to higher credit
quality borrowers. The Bank's charge-off experience with automobile loans has
been better than industry standards, which the Bank accredits to the procedures
in which the dealer program is administered. The automobile loan portfolio
shrank during fiscal 1998 due to very competitive rate offerings by automobile
finance companies along with the Bank's determination to place added emphasis on
other lending activities.
Exhibit II-4 displays the composition of the Bank's investment
portfolio. Investment securities totaled $61.0 million or 14.5% of total assets
at September 30, 1998, and consisted primarily of U.S. Government agency
securities ($33.7 million), mortgage-backed securities ($14.3 million), and
collateralized mortgage obligations ($13.0 million). The Bank's portfolio of
investment securities is classified as either available for held or held to
maturity.
The investment policy of the Bank is designed to foster
earnings and liquidity within prudent interest rate risk guidelines, while
complementing the Bank's lending activities. Liquidity levels may be increased
or decreased depending upon the yields on investment alternatives and upon
management's judgment as to the attractiveness of the yields then
-14-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
available in relation to other opportunities and its expectation of future yield
levels, as well as management's projections as to the short-term demand for
funds to be used in the Bank's loan origination activities.
The Bank's mortgage-backed securities comprised participation
certificates issued and guaranteed by the Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA"), and
Federal Home Loan Mortgage Corporation ("FHLMC"). The Bank is also invested in
collateralized mortgage obligations issued or sponsored by FNMA and FHLMC. Other
investment instruments used by the Bank, but not necessarily included in the
investment portfolio, consist of equity securities, interest-bearing deposits,
and federal funds sold. The equity securities owned by the Bank consist of a
$2.9 million common stock investment in the FHLB of Atlanta.
Liability Composition
- ---------------------
Deposits are the major source of the Bank's funds for lending
and other investment purposes. The Bank's deposits at September 30, 1998 totaled
$352.2 million, measuring 84.0% of total assets and 92.0% of total liabilities.
The Bank's deposit accounts consist of transaction accounts (checking, savings,
and money market accounts) and certificate of deposit accounts. Exhibit II-5
presents a summary of the Bank's deposit balances as of September 30, 1996
through 1998. Total deposits declined by $77.5 million from September 30, 1997
to September 30, 1998 as a result of the branch sale and a planned reduction in
higher-cost accounts. The branch sale effected a deposit transfer of $55.3
million and the Bank experienced other net deposit outflows of $35.2 million,
which were offset by interest credited of $12.9 million.
-15-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Transaction accounts amounted to $90.8 million or 25.8% of the
Bank's total deposits at September 30, 1998. Certificate of deposit accounts
amounted to $261.4 million or 74.2% of deposits at that date. The balance of
certificate accounts declined by $71.6 million or 21.5% from $333.0 million at
September 30, 1997. After reviewing its funding alternatives and related costs
in 1998, the Bank decided to reduce its premium pricing on certain certificate
accounts and began pricing other deposit accounts more competitively to reduce
the Bank's overall cost of funds. Accordingly, the Bank experienced a reduction
in deposit balances during 1998, primarily in certificate accounts.
The Bank attracts deposits primarily from residents of Polk
and Manatee Counties by offering quality service, competitive interest rates,
and convenient locations and service hours. The Bank uses traditional methods of
advertising to attract new customers and deposits, including radio, cable
television, direct mail, and print media advertising. The Bank does not utilize
the services of deposit brokers. Jumbo certificates (accounts with $100,000 or
more) amounted to $45.7 million or 13.0% of total deposits.
The Bank utilizes borrowed funds from the FHLB to supplement
its supply of lendable funds and to assist with the interest rate risk
management of its assets and liabilities. The Bank had not borrowed funds in its
recent history, but initiated FHLB borrowings during fiscal 1998 to replace the
run-off of higher costing deposits. FHLB advances are typically secured by the
Bank's stock in the FHLB and a portion of the Bank's residential mortgage loans,
and may also be secured by other investments. FHLB advances outstanding amounted
to $21.0 million as of September 30, 1998. The weighted average interest rate of
the FHLB borrowings was 5.10% during fiscal 1998 and 5.12% based on outstanding
advances at September 30, 1998.
-16-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Equity Capital
- --------------
The Bank's equity capital amounted to $36.1 million or 8.62%
of total assets at September 30, 1998. The Bank's equity ratio in relation to
total assets increased from 7.20% at fiscal year-end 1997 to 8.62% at fiscal
year-end 1998, mainly as a result of the balance sheet contraction following the
branch sale and also due to profitable operating results adding to retained
earnings. The Bank's equity capital at September 30, 1998 was composed of $35.9
million in retained earnings and a $220,000 unrealized gain on investments
available for sale.
For regulatory purposes at September 30, 1998, the Bank's Tier
I leverage capital ratio measured 8.6%, its Tier I risk-based capital ratio was
14.5%, and its total risk-based capital ratio was 15.5%. The Bank not only met
the respective minimum capital requirements, but also qualified for the
designation as "well capitalized" under the regulatory framework guidelines.
-17-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Income and Expense Trends
Table 3 displays the main components of the Bank's earnings performance
for the fiscal years ended September 30, 1996 to 1998. Table 4 displays the
components of income and expense as a percent of average assets for the
corresponding fiscal years.
Table 5 displays weighted average yields and costs for the recent periods.
The Bank's return on average assets measured 0.06%, 0.56%,
and 0.54%, for fiscal 1996, 1997, and 1998, respectively. The Bank's return on
average equity measured 0.79%, 7.71%, and 6.56% for fiscal 1996, 1997, and 1998,
respectively. The Bank's earnings performance in recent years has been
characterized by below-average net interest margins and increasing expense
ratios.
Earnings Results for Fiscal 1998 versus Fiscal 1997
- ---------------------------------------------------
The Bank's earnings decreased by 5.6% from $2.5 million in
fiscal 1997 to $2.4 million for fiscal 1998. Net income was affected by certain
nonrecurring transactions, along with a reduction in net interest margin in the
aftermath of the branch sale. The Bank reported a $3.0 million gain from the
branch sale, which was offset by $2.2 million in charges resulting from changes
in the Bank's employee benefit plans. Excluding non-recurring income and
expense, the Bank's core earnings declined from $2.5 million or 0.54% relative
to average assets in fiscal 1997 to $1.8 million or 0.41% in fiscal 1998. While
the Bank's branch sale resulted in lower net interest income, the reduction in
branch related operating expenses was neutralized by additional expenses
associated with the Bank's diversification initiatives.
-18-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 3
Income Statement Summary
For the Years Ended September 30, 1996 to 1998
(Dollars in Thousands)
================================================================================
Year Ended September 30,
------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Total interest income $31,892 $33,790 $31,694
Total interest expense 18,966 19,702 18,961
------- ------- -------
Net interest income 12,926 14,088 12,733
Provision for loan losses 405 317 600
------- ------- -------
Net interest income after provision 12,521 13,771 12,133
Non-interest operating income 1,828 1,461 1,376
Gain on sale of loans and securities 117 114 170
Gain on sale of branches 3,016 -- --
------- ------- -------
Total non-interest income 4,961 1,575 1,546
Compensation and benefits 6,323 5,863 5,288
Other compensation and benefits 2,085 -- --
Occupancy and equipment costs 1,818 1,646 1,453
Marketing 495 488 471
Data processing costs 558 479 443
Deposit insurance premiums 338 456 1,003
Special SAIF assessment -- -- 2,513
Real estate operations, net 180 22 39
Other expense 2,149 2,566 2,172
------- ------- -------
Total non-interest expense 13,946 11,520 13,382
Income before taxes 3,536 3,826 297
Provision for income taxes 1,151 1,299 44
------- ------- -------
Net income $ 2,385 2,527 $ 253
======= ======= =======
================================================================================
Source: First Federal Florida, prospectus.
-19-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 4
Income Statement Ratios
For the Years Ended September 30, 1996 to 1998
(Percent of Average Assets)
================================================================================
Year Ended September 30,
-------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Total interest income 7.29 7.46 7.34
Total interest expense 4.34 4.35 4.39
---- ---- ----
Net interest income 2.95 3.11 2.95
Provision for loan losses 0.09 0.07 0.14
---- ---- ----
Net interest income after provision 2.86 3.04 2.81
Non-interest operating income 0.42 0.32 0.32
Gain on sale of loans and securities 0.03 0.03 0.04
Gain on sale of branches 0.69 0.00 0.00
---- ---- ----
Total non-interest income 1.13 0.35 0.36
Compensation and benefits 1.44 1.30 1.23
Other compensation and benefits 0.48 0.00 0.00
Occupancy and equipment costs 0.42 0.36 0.34
Marketing 0.11 0.11 0.11
Data processing costs 0.13 0.11 0.10
Deposit insurance premiums 0.08 0.10 0.23
Special SAIF assessment 0.00 0.00 0.58
Real estate operations, net 0.04 0.00 0.01
Other expense 0.49 0.57 0.50
---- ---- ----
Total non-interest expense 3.19 2.55 3.10
Income before taxes 0.80 0.85 0.07
Provision for income taxes 0.26 0.29 0.01
---- ---- ----
Net income 0.54 0.56 0.06
==== ==== ====
================================================================================
Source: First Federal Florida, prospectus; Feldman Financial calculations.
-20-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The Bank's net interest income declined by 8.2% from $14.1 million in
fiscal 1997 to $12.9 million in fiscal 1998, primarily as a result of the
reduction in average interest-earning assets related to the branch sale. The
Bank's net interest spread also declined by 23 basis points from 2.96% to 2.73%.
The earning asset yield declined by 19 basis points from 7.70% to 7.51%, while
the cost of funds increased 4 basis points from 4.74% to 4.78%. The branch sale
also affected the net interest spread as the deposit transfer was funded by
loans, which were then supplemented in portfolio by newly originated loans in
the current low interest rate environment. The Bank's loan yields have been
restrained historically by conservative loan pricing practices.
The Bank increased its provision for loan losses from $317,000
to $405,000 in fiscal 1998. The higher provision reflected an increased level of
net loan charge-offs totaling $474,000 in fiscal 1998 as compared to $68,000 for
fiscal 1997. The allowance for loan losses was relatively unchanged from $2.63
million or 0.74% of total loans at September 30, 1997 to $2.56 million or 0.76%
of total loans at September 30, 1998.
The Bank's non-interest income increased from $1.6 million in
fiscal 1997 to $5.0 million for fiscal 1998, principally as a result of the $3.0
million branch sale gain. Excluding the branch sale and other modest gains on
sales of loans and investments, non-interest operating income increased by 25.1%
from $1.5 million to $1.8 million. Relative to average assets, non-interest
operating income increased from 0.32% to 0.42%. While the Bank's production of
fee income has continued an upward trend, the level of non-interest income
remains moderately below industry norms.
-21-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The Bank's operating expenses increased by 21.1% from $11.5
million in fiscal 1997 to $13.9 million in fiscal 1998. The operating expense
ratio increased from 2.55% relative to average assets to 3.19%. Although the
Bank's office network shrank by four offices (five were sold and a new one was
opened), operating expenses increased substantially due to certain nonrecurring
items related to changes in the Bank's employee benefit plans. The Bank
recognized $2.2 million in such charges, including $1.5 million for the freezing
of benefits under the existing defined benefit pension plans and $400,000 for
the adoption of a directors' retirement plan. Largely as a result of these
charges, compensation and employee benefits increased by $2.5 million. Occupancy
and equipment costs increased due to expenses related to a data processing
conversion in 1998 as well as a full year's cost associated with a new customer
service platform system installed in 1997.
Earnings Results for Fiscal 1997 versus Fiscal 1996
- ---------------------------------------------------
The Bank's net income increased from $253,000 in fiscal 1996
to $2.5 million in fiscal 1997. The Bank's earnings results in fiscal 1996 were
adversely affected by the one-time special SAIF assessment. Excluding this
nonrecurring item, the Bank's earnings would have totaled $1.8 million in fiscal
1996. Additionally, the improved profitability in fiscal 1997 resulted from an
increase in net interest income and a higher net interest margin.
Net interest income increased by $1.4 million from $12.7
million to $14.1 million, bolstered by loan portfolio expansion and an increase
in the net interest spread from 2.76% to 2.96%. The Bank achieved strong loan
growth in its residential mortgage and consumer loan categories. The yield on
earning assets increased by 15 basis points from 7.55% to 7.70%,
-22-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
strengthened by a larger concentration of higher-yielding loans as opposed to
investments. Meanwhile, the Bank's cost of funds declined by 5 basis points from
4.79% to 4.74%.
Operating expenses decreased by $13.4 million in fiscal 1996
to $11.5 million in fiscal 1997. The decrease was primarily due to the $2.5
million special assessment in fiscal 1996 to recapitalize the SAIF and a
$547,000 reduction in deposit insurance premiums due to lower assessment rates
following the recapitalization of the SAIF. Accordingly, the operating expense
ratio fell from 3.10% in fiscal 1996 to 2.55% in fiscal 1997. Compensation and
benefits increased by $575,000 due to additional staff to support the growth in
loans and deposits.
-23-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 5
Yield and Cost Summary
For the Years Ended September 30, 1996 to 1998
================================================================================
Year Ended September 30,
----------------------------------
1998 1997 1996
---- ---- ----
Average Yields
- --------------
Investment securities (1) 5.68% 6.21% 6.37%
Loans receivable (2) 7.97 8.13 8.08
Total interest-earning assets 7.51 7.70 7.55
Average Costs
- -------------
Checking accounts 1.86 2.49 2.53
Savings accounts 2.07 2.50 2.50
Money market accounts 3.79 2.98 2.72
Certificates of deposit 5.62 5.45 5.50
Borrowed funds 5.10 -- --
Total interest-bearing liabilities 4.78 4.74 4.79
Net interest spread (3) 2.73 2.96 2.76
Net interest margin (4) 3.02 3.21 3.03
================================================================================
(1) Includes interest-bearing deposits in other financial institutions.
(2) Includes impact of non-accrual loans.
(3) Average yield on interest-earning assets less average cost of
interest-bearing liabilities.
(4) Net interest income divided by average interest-earning assets.
Source: First Federal Florida, prospectus.
-24-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Asset and Liability Management
The Bank's principal financial objective is to sustain long-term
profitability while reducing its exposure to fluctuating interest rates. The
Bank has sought to reduce exposure of its earnings to market interest rates by
managing the mismatch between asset and liability rates, maturities and
repricings. The focus of the Bank's asset/liability management is to evaluate
the overall interest rate risk included in certain balance sheet accounts,
determine the level of appropriate risk given the Bank's business strategies,
operating environment, liquidity requirements, capitalization, and performance
objectives, and manage the risk consistent with the approved guidelines of the
Board of Directors.
The lending activities of the Bank have historically emphasized
the origination of long-term, fixed-rate mortgages funded by deposit liabilities
with substantially shorter maturities. While having interest-bearing liabilities
that reprice more frequently than interest-earning assets is generally
beneficial to net interest income during a period of declining interest rates,
such an asset/liability mismatch is generally detrimental during periods of
rising interest rates.
In order to reduce the effect of interest rate changes on net
interest income , the Bank has adopted various strategies to enable it to
improve matching of asset and liability maturities. The key elements of these
strategies include: (i) originating commercial and consumer loans with
adjustable-rate terms or fixed-rate loans with short maturities; (ii)
lengthening the maturities of liabilities when deemed cost-effective through the
pricing and promotion of certificates of deposit and utilization of FHLB
advances; (iii) attracting low-cost checking and transaction accounts which tend
to be less interest rate sensitive when interest rates rise; and (iv)
originating and holding, when market conditions permit, adjustable-rate mortgage
loans
-25-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
that have annual interest rate adjustments. The Bank also maintains an
investment portfolio that provides a stable cash flow, thereby providing
investable funds in varying interest rate cycles.
The Board of Directors has established an asset/liability
committee to monitor the Bank's interest rate risk exposure. The Bank's
objective is to maintain a consistent level of profitability within acceptable
risk tolerances across a broad range of potential interest rate scenarios. The
Bank uses the OTS Net Portfolio Value ("NPV") model to evaluate its exposure to
interest rate risk and measure the potential decline in the Bank's NPV based
upon the effects of a series of increases or decrease in interest rates. The NPV
represents the present value of the expected cash flows from the Bank's assets
and liabilities.
Table 6 presents the Bank's NPV at September 30, 1998 as affected
by a 100 to 400 basis points upward and downward parallel shift in interest
rates. As displayed in the table, a 200 basis point upward shift in rates
results in a 12.2% decline in the Bank's NPV. Conversely, a 200 basis point
downward shift produces a 3.7% increase in the Bank' s NPV. Both of these
simulated changes in NPV are well within the OTS exposure guidelines.
The Bank's sensitivity measure, representing the pre-shock NPV
ratio minus the 200 basis point exposure ratio, has improved in recent years due
to the continued implementation of asset/liability management initiatives
previously mentioned. While the Bank's residential mortgage portfolio consists
predominantly of fixed-rate loans, the Bank's interest rate sensitivity has
benefited from the expansion of other types of lending and the shortening of
investment maturities. Overall, the Bank exhibits a moderate level of interest
rate risk as compared to industry norms.
-26-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 6
Net Portfolio Value
As of September 30, 1998
(Dollars in Thousands)
================================================================================
NPV as %
Net Portfolio Value of PV of Assets
----------------------------------------- ---------------------
Change $ $ $ NPV B.P.
in Rates Amount Change Change Ratio Change
- -------- ------ ------ ------ ----- ------
+400 b.p. $29,878 $-14,699 -33.0% 7.56% -291 b.p.
+300 b.p. 34,781 -9,797 -22.0% 8.61% -186 b.p.
+200 b.p. 39,155 -5,423 -12.2% 9.50% -97 b.p.
+100 b.p. 42,431 -2,146 -4.8% 10.12% -35 b.p.
0 b.p. 44,578 -- -- 10.47% --
- -100 b.p. 45,285 +708 +1.6% 10.51% +4 b.p.
- -200 b.p. 46,215 +1,637 +3.7% 10.58% +11 b.p.
- -300 b.p. 48,047 +3,470 +7.8% 10.83% +36 b.p.
- -400 b.p. 49,875 +5,297 +11.9% 11.07% +60 b.p.
================================================================================
Source: First Federal Florida, prospectus.
-27-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Asset Quality
The Bank continues to maintain satisfactory asset quality with
non-performing assets measuring 0.32% of total assets as of September 30, 1998.
Management believes the Bank's improved asset quality is primarily attributable
to the development and utilization of comprehensive loan policies and
documentation, active monitoring, conservative collateralizaton practices,
limited borrower concentrations, and consistent and forceful collection and
workout efforts. The allowance for loan losses at September 30, 1998 equaled
0.76% of total loans and 192.8% of non-performing assets. The Bank periodically
reviews its reserve position at least quarterly and makes adjustments as needed
or required.
During fiscal 1998, the Bank's charge-offs increased to $474,000
from $68,000 in fiscal 1997. The increase was attributable primarily to loans to
two borrowers that were charged off during 1998. One charge-off involved a loan
on a small shopping center that the Bank had been litigating for several years.
Final resolution and repayment of the loan occurred in 1998 with the Bank
incurring a loss approximating $140,000. Another large charge-off involved loans
made to a local builder for the construction of single-family houses. The Bank
foreclosed on the properties and recognized a charge-off of $110,000 in 1998.
Table 7 summarizes the Bank's non-performing asset totals as of
September 30, 1996 to 1998. The Bank had $836,000 of non-accrual loans as of
September 30, 1998, and held five residential properties as real estate owned
with an aggregate book value of $403,000. Other repossessed assets amounting to
$91,000 as of September 30, 1998 consisted primarily of vehicles.
-28-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The increase in non-accrual loans during fiscal 1997 was
attributable primarily to $698,000 in residential construction loans wherein the
borrower declared bankruptcy. During fiscal 1998, the Bank foreclosed and sold
the six residential properties securing the loans. During fiscal 1998, the Bank
also resolved foreclosure and counterclaim litigation relating to a $491,000
loan secured by a retail strip shopping center. In connection with the
settlement of this litigation, the Bank received payments totaling $348,000 from
the borrower and charged off the remainder of its investment. As a result of
these events, total non-performing assets declined to $1.3 million at September
30, 1998 from $2.5 million at September 30, 1997.
Table 7
Non-performing Asset Summary
As of September 30, 1996 to 1998
(Dollars in Thousands)
================================================================================
September 30,
----------------------------------
1998 1997 1996
---- ---- ----
Non-accrual loans:
Residential mortgage loans $ 445 $1,624 $ 654
Other mortgage loans -- 491 491
Consumer loans 391 199 39
Total non-performing loans 836 2,314 1,184
Real estate owned 403 67 8
Other repossessed assets 91 104 42
Total non-performing assets $1,330 $2,485 $1,234
Non-performing loans as a % of net loans 0.25% 0.65% 0.37%
Non-performing loans as a % of total assets 0.20% 0.49% 0.27%
Non-performing assets as a % of total assets 0.32% 0.53% 0.28%
================================================================================
Source: First Federal Florida, prospectus
-29-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 8
Allowance for Loan Losses Summary
As of September 30, 1996 to 1998
(Dollars in Thousands)
================================================================================
September 30,
-----------------------------------
1998 1997 1996
---- ---- ----
Allowance balance (at beginning of period) $ 2,633 $ 2,385 $ 1,902
Provision for loan losses 405 317 600
Charge-offs:
Residential (218) (19) (70)
Commercial real estate (146) (12) --
Consumer (110) (37) (49)
Total charge-offs (474) (68) (119)
------- ------- -------
Recoveries -- -- 2
Net charge-offs (474) (68) (117)
------- ------- -------
Allowance balance (at end of period) $ 2,564 $ 2,633 $ 2,385
======= ======= =======
Allowance as a % of total loans 0.76% 0.74% 0.74%
Net charge-offs as % of average loans 0.14% 0.02% 0.04%
================================================================================
Source: First Federal Florida, prospectus.
-30-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Properties and Equipment
The Bank's executive offices are located in Lakeland, Florida. The
Bank conducts its business through nine offices, which are located in Polk and
Manatee Counties. All of the offices, except for one branch, are owned by the
Bank as indicated in Exhibit II-6. The Bank has recently added five ATMs and
plans to purchase additional ATMs for its remaining branches over the next year.
As of September 30, 1998, the net book value of the Bank's premises and
equipment totaled $6.8 million.
The Bank expects to continue its ongoing analysis to determine the
efficiency and effectiveness of its branch facilities in delivering services and
products to the local community. In addition to installing ATMs at all branch
sites, the Bank plans to redesign one branch office and enhance the customer
service area at another. The Bank has not identified specific office facilities
or sites for new branch locations, but intends to continue to explore feasible
branch expansion opportunities.
The Bank conducts the majority of its data processing operations
through a third-party service bureau. As a result, the Bank does not have a
major investment in mainframe or mid-frame computer hardware nor any internally
developed software that requires significant programming staff to maintain. The
system is accessed by Bank personnel through personal computer workstations
configured into a wide area network. The Bank believes that its data processing
operations are capable of meeting its current and anticipated needs. The service
bureau has advised the Bank that it expects to resolve any Year 2000 computer
program problems. Also, the Bank has been evaluating and testing its technology
systems to resolve any Year 2000 compliance issues. An OTS on-site examination
conducted in April 1998
-31-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
indicated that the Bank was progressing satisfactorily towards implementing its
Year 2000 compliance plan.
As of September 30, 1998, the Bank also held two additional
properties which formerly housed branches that were sold. The properties were
under contract for sale to another financial institution, which was leasing the
sites from the Bank pending closing. In connection with the sale of these
properties, the Bank has agreed to indemnify the purchaser for the costs of
obtaining closure with state environmental authorities regarding the necessity
of further remediation of environmental contamination on the sites. The sale of
one property was completed in December 1998 after the Bank received a notice of
no further action required from the State of Florida. Closing on the other
property is scheduled to take place on or before April 15, 1999. The Bank does
not currently anticipate that it will incur additional material expense
associated with the sale of this property.
-32-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Market Area
The Bank operates seven offices (including the main office) in
Polk County and two offices in Manatee County. Polk County is situated in
central Florida and Manatee County is located in west central Florida. There are
approximately 680,000 residents and 268,000 households within the Bank's primary
market area. Polk County had an estimated 1997 population of 445,000 and
includes Lakeland, Winter Haven, and Bartow among its most populous cities. Polk
County is positioned for continued growth as it is situated between the rapidly
developing counties of Orange (Orlando) and Hillsborough (Tampa). Manatee County
had an estimated 1997 population of 235,000 and includes Bradenton and Palmetto
as its most populous cities. The Bank operates five offices in Lakeland, two in
Winter Haven, and two in Bradenton.
Polk County presently exhibits a diversifying economy that had
long been dependent on the citrus and phosphate mining industries. These
industries remain strong and are continuing to grow through capital investment.
The citrus industry, however, remains vulnerable to severe weather conditions
and increased competition, both domestic and international. In addition, the
local economy had diversified and strengthened the area's business development.
Polk County is home to the largest privately owned employer in the state,
Publix, which is a grocery chain that operates over 575 stores in four states.
Because of Polk County's location in central Florida between Orlando and Tampa
and its accessibility to major interstate highways, Polk County is considered a
major distribution hub and has become a home for large transportation and
distribution companies and related warehousing and supplies operations. The
climate, affordable labor pool, and lifestyle amenities have attracted other
-33-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
major employers in the insurance servicing area (including GEICO) and a variety
of other industries.
Manatee County is situated southwest of Polk County and just south
of Tampa and St. Petersburg, Florida Manatee County and neighboring Sarasota
County have experienced growth among the highest in the nation over the past
several years. Local economies have been supported primarily by the services
industry (including tourism). In addition, recent efforts have resulted in
diversification into light manufacturing operations.
Table 9 displays selected demographic data for the United States,
the State of Florida, Polk County, and Manatee County. Total population growth
in both Polk and Manatee Counties is expected to outpace the national average
over the next five years, but slightly lag the overall statewide trend. The 1997
median household income of $30,087 in Polk County was 19% below the national
median of $37,079 and 9% below the state median of $33,067. The median household
income at $33,640 in Manatee County was comparable to the state median. The age
distribution in Polk County was similar to that of statewide demographics,
evidencing a higher concentration in the 55-plus age group as compared to the
national data. The age distribution in Manatee was skewed even more toward the
upper age group, reflecting the augmented presence of retired residents.
Table 10 shows deposit concentrations in 1997 for Polk County and
Manatee County. The Bank ranked 5th in Polk County among 12 FDIC-insured
financial institutions. The Bank is the only remaining thrift institution based
in Polk County and had a deposit market share of 7.9%. The Bank ranked 12th in
Manatee County among 16 FDIC-insured financial institutions and had a deposit
market share of 2.3%. The deposit markets in both of these counties are
-34-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
dominated by large regional banks (such as NationsBank, First Union, SunTrust,
Huntington, and SouthTrust) that are headquartered outside of Florida.
The Bank faces strong competition in its primary market area for
the attraction of retail deposits and in the origination of loans. The Bank's
most direct competition for deposits has historically come from commercial
banks, thrift institutions, and credit unions operating in its primary market
area. The Bank's competition for loans also comes from banks, thrifts, and
credit unions, in addition to mortgage bankers and brokers. The Bank's market
area can be characterized as a market with moderate incomes, increasing wealth,
and strong population growth, representing an attractive market that can be
served by a community financial institution such as the Bank. The Bank seeks to
enhance its competitive presence by continuing to deliver high-quality,
personalized service and by expanding its product line and integrating upgraded
technology.
-35-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 9
Selected Demographic Data
United States, Florida, Polk County, and Manatee County
=====================================================================================================
United Polk Manatee
Demographic Data States Florida County County
- -----------------------------------------------------------------------------------------------------
Population
Total Population - 1997 267,240,272 14,564,508 445,042 234,543
5-year projection percent change 4.52% 7.42% 5.70% 6.04%
1990-1997 percent change 7.45% 12.57% 9.78% 10.79%
Households
Total Households - 1997
98,741,200 5,704,295 169,705 98,641
5-year projection percent change 4.86% 7.26% 5.69% 5.62%
1990-1997 percent change 7.39% 11.09% 8.81% 8.33%
Per Capita Income
Per Capita Income - 1997 $18,885 $18,529 $15,365 $19,300
5-year projection percent change 20.73% 17.94% 16.34% 22.96%
1990-1997 percent change 31.28% 26.28% 24.07% 34.05%
Average Household Income
Average Household Income - 1997 $50,540 $46,782 $39,832 $45,379
5-year projection percent change 20.73% 17.43% 15.41% 22.70%
1990-1997 percent change 31.28% 27.99% 25.11% 36.68%
Median Household Income
Median Household Income - 1997 $37,079 $33,067 $30,087 $33,640
5-year projection percent change 13.09% 10.72% 8.22% 16.76%
1990-1997 percent change 23.20% 20.18% 19.27% 29.43%
Household Income Distribution
$0 - 24,999 33.51% 36.78% 40.93% 34.98%
$25,000 - 49,999 30.85% 33.40% 35.95% 32.75%
$50,000+ 35.63% 29.82% 23.12% 29.28%
Age Group Distribution
0 - 14 years 21.56% 19.01% 20.52% 16.97%
15 - 34 years 28.24% 25.48% 25.51% 21.25%
35 - 54 years 28.57% 27.16% 25.26% 23.60%
55+ years 21.63% 28.36% 28.71% 38.19%
=====================================================================================================
Source: SNL Securities; Claritas.
-36-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 10
Deposit Market Share Analysis by County
Deposit Data at June 30, 1997 and Adjusted for Merger Activity
=========================================================================================================================
Polk County
=========================================================================================================================
No. Total Market
Inst. of Deposits Share
Rank Institution Lead Company (1) Offs. ($000s) (%)
- -------------------------------------------------------------------------------------------------------------------------
1 NationsBank, NA BankAmerica Corp. (NC) B 27 1,112,877 29.94
2 First Union Nat'l Bank First Union Corp. (NC) B 20 671,009 18.05
3 SunTrust Bank Mid-Fla. SunTrust Banks Inc. (GA) B 18 611,094 16.44
4 Huntington Nat'l Bank Huntington Bancshares (OH) B 10 375,622 10.11
- -------------------------------------------------------------------------------------------------------------------------
5 First Federal Florida First Federal Florida (FL) T 7 294,289 7.92
- -------------------------------------------------------------------------------------------------------------------------
6 Citrus & Chemical Bank Citrus & Chemical Bncp.(FL) B 7 255,036 6.86
7 Colonial Bank Colonial BancGroup (AL) B 5 88,302 2.38
8 Hamilton Bank, NA Hamilton Bancorp (FL) B 1 86,792 2.34
9 American Bank & Trust American Banking Corp.(FL) B 6 73,440 1.98
10 Community Nat'l Bank Community Nat'l Bank (FL) B 2 53,740 1.45
11 First NB of Polk County First NB of Polk County (FL) B 3 53,231 1.43
12 Citizens Bank-Frostproof Citizens Bank-Frostproof (FL) B 3 41,080 1.11
--- ------ ----
Total 109 3,716,512 100.00
=== ========= ======
=========================================================================================================================
=========================================================================================================================
Manatee County
=========================================================================================================================
No. Total Market
Inst. of Deposits Share
Institution Lead Company
Rank (1) Offs. ($000s) (%)
- -------------------------------------------------------------------------------------------------------------------------
1 NationsBank, NA BankAmerica Corp. (NC) B 27 1,138,406 38.81
2 SouthTrust Bank, NA SouthTrust Corp. (AL) B 15 339,984 11.59
3 American Bank American Bancshares (FL) B 5 216,698 7.39
4 First Union National Bank First Union Corp. (NC) B 9 195,718 6.67
5 Republic Bank Republic Bancshares (FL) B 7 162,943 5.55
6 Liberty National Bank Regions Financial (AL) B 5 153,367 5.23
7 Capital Bank Union Planters Corp. (TN) B 2 124,512 4.24
8 First NB of Manatee First NB of Manatee (FL) B 4 110,978 3.78
9 Huntington Nat'l Bank Huntington Bancshares (OH) B 3 108,562 3.70
10 World Savings Bank, FSB Golden West Financial (CA) T 2 103,051 3.51
11 Century Bank, FSB (FL) Century Financial Group T 2 69,090 2.36
- -------------------------------------------------------------------------------------------------------------------------
12 First Federal Florida First Federal Florida (FL) T 2 66,038 2.25
- -------------------------------------------------------------------------------------------------------------------------
13 SunTrust Bank Gulf Coast SunTrust Banks Inc. (GA) B 3 58,087 1.98
14 Northern Trust Bank Northern Trust Corp. (IL) B 2 57,757 1.97
15 Community Bank Community Bank (FL) B 1 14,215 0.48
16 BankAtlantic, FSB BankAtlantic Bancorp (FL) T 1 13,907 0.47
-- --------- ------
Total 90 2,933,313 100.00
== ========= ======
=========================================================================================================================
(1) B=bank; T=thrift.
Source: SNL Securities.
-37-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Summary
First Federal Florida is pursuing a deliberate path of transforming
itself into a community financial institution providing a broader range of
products and services. The impact of these initiatives is reflected by the
balance sheet trends toward increased loans, reduced investments, expanded
consumer and commercial related loan activity, and greater concentrations of
transaction deposit accounts. The evolution to a diversified banking
organization has also required additional operating expenses and technological
investments. As a result, the balance sheet restructurings and strategic
operating initiatives have not translated to immediate improvement in
profitability.
The Bank's earnings amounted to $2.4 million for a 0.54%
return on average assets in fiscal 1998. Core earnings, which exclude $3.1
million in gains on sale and $2.2 million of non-recurring expenses, were lower
at $1.8 million or a 0.41% return on average assets. The Bank's profitability
levels remain below industry norms, as reflected importantly by its lower net
interest margins and higher operating expense ratios. As a result of the branch
sale, the Bank's net interest income and net interest margin declined. However,
the Bank believes that by focusing more strategically and effectively on its
primary market area, its opportunities for achieving growth are enhanced. While
Lakeland does not enjoy the high-growth profile of other notable Florida market
areas, management believes that the Bank's improved competitive positioning can
reap significant benefits in a market frequented by customer displacement from
bank mergers and acquisitions. The addition of capital proceeds from the Stock
Offering will help the Bank further deploy financial resources to grow, increase
earnings, and continue its strategic course.
-38
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
II. COMPARISONS WITH PUBLICLY TRADED THRIFTS
General
The comparative market approach provides a sound basis for determining
estimates of going-concern valuations where a regular and active market exists
for the stocks of peer institutions. The comparative market approach was
utilized in determining the estimated aggregate pro forma market value of the
Bank because: (i) reliable market and financial data are readily available for
comparable institutions; (ii) the comparative market method is required by the
applicable regulatory guidelines; and (iii) other alternative valuation methods
are unlikely to produce a valuation relevant to the future trading patterns of
the related stock investment. The generally employed valuation method in initial
public offerings, where possible, is the comparative market approach, which also
can be relied upon to determine pro forma market value in a thrift stock
conversion.
The comparative market approach derives valuation benchmarks
from the trading patterns of selected peer institutions which due to certain
factors, such as financial performance and operating strategies, enable the
appraiser to estimate the potential value of the subject institution in a stock
conversion offering. The pricing and trading history of recent thrift conversion
offerings are also examined to provide evidence of the "new issue discount"
which must be considered. In Chapter II, our valuation analysis focuses on the
selection and comparison of the Bank with a comparable group of publicly traded
thrift institutions (the "Comparative Group"). Chapter III will detail any
additional discounts or premiums that we believe are appropriate to the Bank's
pro forma conversion valuation.
-39-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Selection Criteria
Selected market price and financial performance data for thrifts listed
on the New York and American Stock Exchanges and those thrifts traded on the
over-the-counter markets listed on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") are shown in Exhibit III. Several
criteria, discussed below, were used to select the individual members of the
Comparative Group from the overall universe of publicly held thrifts.
o Operating characteristics - An institution's operating characteristics
are the most important factors because they affect investors' expected
rates of return on a company's stock under various business/economic
scenarios, and they influence the market's general perception of the
quality and attractiveness of a given company. Operating
characteristics, which may vary in importance during the business
cycle, include financial variables such as profitability, balance
sheet growth, capitalization, asset quality, and other factors such as
lines of business and management strategies.
o Degree of marketability and liquidity - Marketability of a stock
reflects the relative ease and promptness with which a security may be
sold when desired, at a representative current price, without material
concession in price merely because of the necessity of sale.
Marketability also connotes the existence of buying interest as well
as selling interest and is usually indicated by trading volumes and
the spread between the bid and asked price for a security. Liquidity
of the stock issue refers to the organized market exchange process
whereby the security can be converted into cash. We attempted to limit
our selection to companies that have access to a regular trading
market. We eliminated from the comparative group companies with market
prices that were materially influenced by publicly announced or widely
rumored acquisitions. However, the expectation of continued industry
consolidation is currently embedded in thrift equity valuations.
o Geographic Location - The region of the country where a company
operates is also of importance in selecting the comparative group. The
operating environment for thrifts varies from region to region with
respect to business and economic environments, real estate market
conditions, speculative takeover activity, and investment climates.
Economic and investor climates can also vary greatly within a region,
particularly due to takeover activity.
-40-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The operations of First Federal Florida generally fit the profile
of a conventional thrift institution evolving toward a more diverse financial
institution. The Bank's balance sheet remains concentrated predominantly in
single-family residential mortgages with a growing mix of commercial real estate
and consumer loans. In determining the Comparative Group composition, we focused
on the Bank's profitability and size along with its relative levels of capital
and asset quality. As with any composition of a group of comparable companies,
the identification process was broadened sufficiently to assemble a meaningful
number of candidates. Specifically, we initiated a search for companies by
applying the following selection criteria:
o Asset size - total assets between $200 million and $800 million.
o Capital level - tangible equity ratio between 6.0% and 14.0% in
relation to tangible assets.
o Profitability - earnings reflecting a return on average assets
("ROAA") less than 1.00% or a return on average equity ("ROAE") less
than 8.50% for the last twelve months.
o Loan composition - high concentration of residential mortgages
composing a minimum of 60% of total loans.
o Liability funding - reliance on deposits as chief funding source with
borrowed funds amounting to less than 20% of total assets.
o Geographic location - additional consideration given to thrifts in the
same or adjacent regions that meet most, if not all, of the above
criteria.
As a result of applying the above criteria, the screening process
produced a reliable representation of publicly traded thrifts with operations
comparable to those of First Federal Florida. A general overview of the 15
companies selected for the Comparative Group is presented in Table 11. The
Comparative Group institutions were drawn primarily from the Southeast
(numbering seven) and Midwest (totaling six). One each is based in Florida,
-41-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Georgia, Arkansas, North Carolina, and Maryland, while two are located in
Louisiana. From the Midwest, one company was selected from Indiana, two from
Ohio, and three from Illinois. The remaining two companies were drawn from
Massachusetts and California. The vast majority of the Comparative Group
companies are not situated in major metropolitan areas, but instead are located
in moderate-size cities near major population centers.
The Florida thrift included among the Comparative Group is FFLC Bancorp
(the holding company for First Federal Savings Bank of Lake County), which is
based in Leesburg and situated in north central Florida. FFLC Bancorp operates
the same number of offices (nine) as First Federal Florida and, with total
assets of $422 million, is comparable in size to First Federal Florida. FFLC
Bancorp's loan origination activity has increased significantly in recent years
as it leveraged its capital base to support asset growth following its stock
conversion in 1994.
The asset size of the Comparative Group companies ranges from $232
million to $600 million with an overall average size of $383 million. In
comparison to recent performance trends of the aggregate public thrift industry,
the Comparative Group companies generally exhibited below-average capital
ratios, below-average profitability, slightly lower net interest margins, and
moderately higher operating expense ratios. While some differences inevitably
exist between the Bank and the individual companies, we believe that the chosen
Comparative Group on the whole provides a meaningful basis of comparison for
valuation purposes.
-42-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
TABLE 11
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Recent Financial Comparisons
Table 12 summarizes certain key financial comparisons between First
Federal Florida and the Comparative Group. Tables 13 through 17 contain the
detailed financial comparisons of the Bank with the individual Comparative Group
companies based on measures of profitability, income and expense components,
yield-cost structure, capital levels, credit risk, balance sheet composition,
and growth rates. Comparative financial data for the Bank and the Comparative
Group companies were utilized as of or for the latest twelve months ("LTM")
available ending September 30, 1998. Average and median performance ratios are
also presented for the aggregate of all public thrift institutions.
First Federal Florida's ROAA was 0.54% as compared to the Comparative
Group's average ROAA of 0.73% and the all public thrift average ROAA of 0.90%.
The Bank's core earnings, which excludes the impact of gains on sale and
non-recurring expense, measured 0.41% of average assets as compared to the
Comparative Group's average of 0.72%. In contrast to the Comparative Group, the
Bank's lower profitability was restrained by a lower net interest margin and a
higher operating expense ratio. Three of the Comparative Group companies (First
Mutual Bancorp, Monterey Bay Bancorp, and Western Ohio Financial Corp.)
exhibited lower profitability than the Bank.
The Bank's net interest income of 2.96% relative to average assets was
positioned below the Comparative Group's average of 3.17% and the all public
thrift average of 3.29%. The Bank's net interest margin of 3.02% was also lower
than the Comparative Group's average of 3.30%. First Federal Florida's net
interest spread of 273 basis points trailed the
-44-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Comparative Group's average of 280 basis points. Although the Bank's asset base
evidenced a higher concentration of loans versus investments than the
Comparative Group on average, the Bank still exhibited a lower earning asset
yield. As discussed in Chapter I, the Bank has historically employed
conservative loan pricing policies. The Bank's 4.78% cost of funds was lower
than the Comparative Group's average of 4.93% and reflected First Federal
Florida's heavy reliance on retail deposits for deposit funding. As a result of
its lower net interest spread and a lower capital level, the Bank's net interest
earning power has continued to linger behind industry norms.
First Federal Florida's non-interest operating income measured 0.42% in
relation to average assets, slightly above the Comparative Group's average of
0.41% and moderately below the all public thrift average of 0.45%. In recent
years, the Bank has adopted explicit fee pricing schedules in an effort to
generate additional non-interest income. The Bank's production of non-recurring
income was significant during this recent period due to the gain on branch sale,
and totaled 0.72% of average assets in contrast to the Comparative Group's
average ratio of 0.11%. Other than modest contributions from securities gains,
the Bank has not historically relied on non-recurring income to generate
earnings.
The Bank's provision for loan losses measured 0.09% relative to average
assets and was in range of the Comparative Group's average of 0.11% and the all
public thrift average of 0.13%. The Bank and the Comparative Group experienced
low levels of non-performing loans, with the Bank at 0.25% of total loans and
the Comparative Group averaging a higher ratio at 0.46% as compared to the all
public thrift average of 0.83%. Both the Bank and the Comparative Group are
predominantly residential mortgage loan lenders. The Bank's ratio of
-45-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 12
Key Financial Comparisons
First Federal Florida and the Comparative Group
As of the Latest Twelve Months Ended September 30, 1998
First Comparative All Public
Federal Group Thrift
Florida Average Average
------- ------- -------
Profitability
LTM Return on Average Assets 0.54 % 0.73 % 0.90 %
Core Return on Average Assets 0.41 0.72 0.93
LTM Return on Average Equity 6.56 6.23 6.18
Core Return on Average Equity 4.93 7.90 8.20
Income and Expense (% of avg. assets)
Total Interest Income 7.29 7.44 7.39
Total Interest Expense 4.34 4.26 4.10
Net Interest Income 2.95 3.17 3.29
Provision for Loan Losses 0.09 0.11 0.13
Other Operating Income 0.42 0.41 0.45
Net Gains and Non-recurring Income 0.72 0.11 0.11
General and Administrative Expense 2.64 2.46 2.31
Real Estate Expense (Income) 0.04 (0.01) (0.01)
Non-recurring Expense 0.51 0.03 0.09
Pre-tax Core Earnings 0.60 1.03 1.31
Yield-Cost Data
Yield on Earning Assets 7.51 7.73 7.69
Cost of Funds 4.78 4.93 4.86
Net Interest Spread 2.73 2.80 2.83
Asset Utilization (% of avg. assets)
Avg. Interest-earning Assets 97.13 96.20 96.17
Avg. Interest-bearing Liabilities 88.40 86.43 84.25
Net Interest-earning Assets 8.73 9.77 11.92
-46-
Table 12 (continued)
Key Financial Comparisons
First Federal Florida and the Comparative Group
As of the Latest Twelve Months Ended September 30, 1998
First Comparative All Public
Federal Group Thrift
Florida Average Average
------- ------- -------
Balance Sheet Composition (% of assets)
Cash and Securities 16.48 % 23.88 % 29.52 %
Loans Receivable, net 80.80 72.67 67.13
Real Estate 0.12 0.17 0.22
Intangible Assets 0.00 0.51 0.34
Other Assets 2.60 2.77 2.79
Total Deposits 84.04 76.30 69.04
Borrowed Funds 5.01 11.03 16.16
Other Liabilities 2.33 1.01 1.63
Total Equity 8.62 11.66 13.17
Loan Portfolio (% of total loans)
Residential Mortgage Loans 68.28 69.92 NA
Other Real Estate Mortgage Loans 15.26 18.85 NA
Non-mortgage Loans 16.46 11.23 NA
Growth Rates
Total Assets (10.22) 11.42 9.39
Total Loans (4.76) 8.44 8.88
Total Deposits (18.04) 12.00 5.65
Regulatory Capital Ratios
Tier I Leverage Capital 8.56 9.39 10.57
Tier I Risk-based Capital 14.50 16.86 20.77
Total Risk-based Capital 15.54 17.66 21.78
Credit Risk Ratios
Non-performing Loans / Total Loans 0.25 0.46 0.83
Non-performing Assets / Total Assets 0.32 0.60 0.64
Reserves / Non-performing Assets 192.78 144.94 148.74
Reserves / Total Loans 0.76 0.70 0.96
-47-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
loan loss reserves measured 0.76% of total loans, which was moderately above the
Comparative Group's average of 0.70% but below the all public thrift average of
0.96%.
The Bank's operating expense ratio continued to compare unfavorably
with peer trends. The Bank's general and administrative expense ratio of 2.64%
(excluding non-recurring items) relative to average assets was higher than the
Comparative Group's average of 2.46% and the all public thrift average of 2.31%.
Only three members of the Comparative Group (First Mutual Bancorp, FLAG
Financial Corporation, and Teche Holding Company) reported a higher operating
expense ratio than the Bank. The Bank's non-recurring expenses, primarily
comprising personnel benefit adjustments, amounted to 0.51% of average assets
during the recent LTM period.
The Bank's balance sheet composition reflected its traditional thrift
orientation. Total net loans amounted to 80.8% of assets at First Federal
Florida as compared to the all public thrift average of 67.1% and the
Comparative Group's average of 72.7%. The Comparative Group included several
thrifts (Citizens First Financial, Cooperative Bankshares, FFLC Bancorp, and
Teche Holding Company) with loan-to-asset concentrations exceeding 80%. The
Bank's holdings of cash and securities amounted to 16.5% of total assets, below
the Comparative Group's average of 23.9% and the all public thrift average of
29.5%. Many recently converted thrifts have experienced an increase in cash and
securities following the infusion of significant capital proceeds and the
gradual process involved with re-deploying those funds into loans.
First Federal Florida's relatively high deposit concentration at 84.0%
of assets reflected a lower level of borrowing activity. The Bank's borrowed
funds amounted to 5.0% of assets
-48-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
versus the Comparative Group's average of 11.0% and the all public thrift
average of 16.2%. The Bank's equity ratio of 8.6% was positioned below the
Comparative Group's average of 11.7% and the all public thrift average of 13.2%.
First Federal Florida's growth rates reflect the impact of the branch
sale as the Bank experienced net decreases in assets, loans, and deposits. In
contrast, the Comparative Group reported solid increases averaging 11.4% for
asset growth and 12.0% for deposit growth. Several of the Comparative Group
companies such as FLAG Financial Corporation and Kanakee Bancorp were involved
in mergers which substantially augmented their growth.
In summary, the Bank's earnings performance was below that of the
Comparative Group, which itself exhibited below-average performance ratios on
the whole in comparison to the all public thrift aggregate. The Bank's asset
quality and non-interest income production compared favorably to the Comparative
Group's performance. However, the Bank's lower net interest margin and higher
operating expense levels disadvantaged the Bank's earnings performance relative
to the Comparative Group's results.
-49-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
=======================================================================================================================
Table 13
General Financial Performance Ratios
As of or for the Latest Twelve Months Ended September 30, 1998
=======================================================================================================================
Total Tang. Total Net
Total Total Equity/ Equity/ NPAs/ Interest LTM LTM Core Core
Assets Deposits Assets Assets Assets Margin ROAA ROAE ROAA ROAE
($000s) ($000s) (%) (%) (%) (%) (%) (%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------
First Federal Florida 419,041 352,182 8.62 8.62 0.32 3.02 0.54 6.56 0.41 4.93
- -----------------------------------------------------------------------------------------------------------------------
Comparative Group Average 382,532 293,239 11.66 11.20 0.63 3.30 0.73 6.23 0.72 6.18
Comparative Group Median 392,061 301,038 12.51 12.01 0.61 3.27 0.79 6.97 0.79 6.89
- -----------------------------------------------------------------------------------------------------------------------
All Public Thrift Average 1,614,898 957,835 13.17 12.86 0.65 3.43 0.90 7.90 0.93 8.20
All Public Thrift Median 338,152 233,544 10.81 10.61 0.49 3.41 0.90 7.41 0.89 7.40
- -----------------------------------------------------------------------------------------------------------------------
Acadiana Bancshares, Inc. 289,187 205,652 13.65 13.65 0.24 3.40 0.97 6.28 0.98 6.39
Ameriana Bancorp 398,667 331,228 11.35 10.89 0.55 3.29 0.97 8.33 0.97 8.38
Central Co-operative Bank 377,775 277,025 9.94 9.16 0.40 3.29 0.79 8.00 0.63 6.42
Citizens First Financial Corp. 285,449 203,958 13.23 13.23 0.61 3.45 0.75 5.45 0.63 4.55
Cooperative Bankshares, Inc. 389,409 301,038 8.00 8.00 0.86 3.03 0.63 8.07 0.63 8.07
FFLC Bancorp, Inc. 422,228 336,249 12.51 12.51 0.19 3.66 1.03 7.99 1.03 7.99
First Federal Bancshares 599,945 466,218 13.69 13.69 0.90 3.19 1.03 6.97 1.03 6.97
First Mutual Bancorp, Inc. 371,357 309,410 15.10 12.24 0.34 3.27 0.42 2.94 0.36 2.54
FLAG Financial Corporation 453,648 351,273 8.75 8.75 1.61 4.57 0.68 7.72 0.88 10.02
Harbor Federal Bancorp, Inc. 231,693 176,243 12.78 12.78 0.69 2.98 0.79 6.24 0.79 6.24
Kankakee Bancorp, Inc. 405,163 340,777 9.84 8.56 0.97 3.14 0.70 6.95 0.69 6.89
Monterey Bay Bancorp, Inc. 460,183 371,166 9.70 8.95 0.68 2.95 0.30 2.71 0.32 2.96
OHSL Financial Corp. 252,396 186,532 10.77 10.77 0.11 3.04 0.86 7.92 0.86 7.92
Teche Holding Co. 408,823 279,265 12.85 12.85 0.18 3.41 0.94 7.13 0.92 6.97
Western Ohio Financial Corp. 392,061 262,553 12.74 12.01 1.13 2.83 0.10 0.74 0.05 0.37
Source: First Federal Florida; SNL Securities; Feldman Financial
-50-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
=======================================================================================================================
Table 14
Income and Expense Analysis
For the Latest Twelve Months Ended September 30, 1998
=======================================================================================================================
As a Percent of Average Assets
----------------------------------------------------------------------------------------
Net Other Gains & Loan Real Pre-tax
Interest Interest Interest Oper. Non-rec. Loss Operating Estate Non-rec. Core
Income Expense Income Income Income Prov. Expense Expense Expense Earnings
- -----------------------------------------------------------------------------------------------------------------------
First Federal Florida 7.29 4.34 2.95 0.42 0.72 0.09 2.64 0.04 0.51 0.60
- -----------------------------------------------------------------------------------------------------------------------
Comparative Group Average 7.44 4.26 3.17 0.41 0.11 0.11 2.46 (0.01) 0.03 1.03
Comparative Group Median 7.45 4.24 3.12 0.29 0.06 0.05 2.44 0.00 0.00 1.07
- -----------------------------------------------------------------------------------------------------------------------
All Public Thrift Average 7.39 4.10 3.29 0.45 0.11 0.13 2.31 (0.01) 0.09 1.31
All Public Thrift Median 7.31 4.11 3.28 0.32 0.03 0.07 2.25 0.00 0.00 1.29
- -----------------------------------------------------------------------------------------------------------------------
Acadiana Bancshares, Inc. 7.47 4.14 3.34 0.37 0.06 0.05 2.30 (0.14) 0.00 1.50
Ameriana Bancorp 7.35 4.21 3.14 0.62 0.23 0.05 2.44 (0.01) 0.01 1.28
Central Co-operative Bank 7.08 3.89 3.19 0.19 0.00 0.00 2.31 0.00 0.00 1.07
Citizens First Financial Corp. 7.55 4.24 3.31 0.13 0.49 0.23 2.64 0.03 0.00 0.54
Cooperative Bankshares, Inc. 7.45 4.52 2.93 0.18 0.08 0.08 2.07 0.02 0.00 0.93
FFLC Bancorp, Inc. 7.69 4.15 3.54 0.28 0.00 0.17 2.03 0.00 0.00 1.63
First Federal Bancshares 7.57 4.45 3.12 0.29 0.03 0.00 1.83 0.01 0.00 1.57
First Mutual Bancorp, Inc. 7.12 4.10 3.02 0.38 0.21 0.15 2.86 0.00 0.00 0.38
FLAG Financial Corporation 8.57 4.26 4.31 1.26 0.25 0.20 4.35 0.02 0.37 1.01
Harbor Federal Bancorp, Inc. 7.39 4.47 2.91 0.24 0.04 0.05 1.80 0.00 0.00 1.30
Kankakee Bancorp, Inc. 7.00 4.07 2.93 0.55 0.04 0.00 2.54 (0.01) 0.00 0.95
Monterey Bay Bancorp, Inc. 7.14 4.32 2.82 0.43 (0.00) 0.18 2.48 0.00 0.05 0.59
OHSL Financial Corp. 7.54 4.56 2.98 0.18 0.13 0.01 1.94 (0.01) 0.00 1.22
Teche Holding Co. 7.47 4.11 3.36 0.86 (0.00) 0.04 2.76 (0.00) 0.00 1.42
Western Ohio Financial Corp. 7.14 4.43 2.71 0.25 0.10 0.45 2.51 0.00 0.00 0.01
Source: First Federal Florida; SNL Securities; Feldman Financial
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
=======================================================================================================================
Table 15
Yield-Cost Structure and Growth Rates
For the Latest Twelve Months Ended September 30, 1998
=======================================================================================================================
Avg. Int. Avg. Int Net Yield on Cost of
Earning Bearing EarningInterest Interest Net Asset Loan Deposit
Assets/ Liabs./ Assets/Earning Bearing Interest Growth Growth Growth
Assets/ Assets Assets/Assets Liabs. Spread Rate Rate Rate
- -----------------------------------------------------------------------------------------------------------------------
First Federal Florida 97.13 88.40 8.73 7.51 4.78 2.73 (10.22) (4.76) (18.04)
- -----------------------------------------------------------------------------------------------------------------------
Comparative Group Average 96.20 86.43 9.77 7.73 4.93 2.80 11.42 8.44 12.00
Comparative Group Median 96.54 85.86 11.04 7.69 5.01 2.68 6.67 3.08 4.14
- -----------------------------------------------------------------------------------------------------------------------
All Public Thrift Average 96.17 84.25 11.92 7.69 4.86 2.83 13.86 13.80 11.02
All Public Thrift Median 96.54 85.60 10.56 7.60 4.85 2.80 9.39 8.88 5.65
- -----------------------------------------------------------------------------------------------------------------------
Acadiana Bancshares, Inc. 98.07 81.58 16.49 7.62 5.07 2.55 5.54 7.40 8.82
Ameriana Bancorp 95.50 83.76 11.74 7.70 5.02 2.68 1.43 13.34 2.98
Central Co-operative Bank 96.96 89.57 7.39 7.30 4.34 2.96 5.40 (5.41) (0.76)
Citizens First Financial Corp. 95.79 84.75 11.04 7.88 5.01 2.87 2.69 2.23 4.48
Cooperative Bankshares, Inc. 96.70 89.79 6.90 7.70 5.03 2.67 8.31 8.40 4.14
FFLC Bancorp, Inc. 96.54 84.98 11.57 7.96 4.88 3.08 10.13 24.03 9.40
First Federal Bancshares 97.82 85.53 12.28 7.74 5.21 2.53 9.66 4.54 3.37
First Mutual Bancorp, Inc. 92.15 84.48 7.67 7.72 4.85 2.87 (7.71) (4.04) (4.17)
FLAG Financial Corporation 94.29 89.86 4.42 9.09 4.74 4.35 90.24 92.64 97.75
Harbor Federal Bancorp, Inc. 97.90 85.86 12.04 7.55 5.21 2.34 6.67 5.73 2.63
Kankakee Bancorp, Inc. 93.47 89.22 4.25 7.49 4.56 2.93 19.19 3.08 23.37
Monterey Bay Bancorp, Inc. 95.69 88.41 7.28 7.46 4.89 2.57 12.33 (5.74) 17.12
OHSL Financial Corp. 98.05 86.83 11.23 7.69 5.25 2.44 7.59 (0.39) 2.88
Teche Holding Co. 98.31 86.77 11.54 7.60 4.74 2.86 1.17 (0.44) (0.37)
Western Ohio Financial Corp. 95.75 85.12 10.63 7.46 5.20 2.26 (1.35) (18.78) 8.37
Source: First Federal Florida; SNL Securities; Feldman Financial
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FELDMAN FINANCIAL ADVISORS, INC.
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=======================================================================================================================
Table 16
Balance Sheet Composition
As of the Latest Quarter Ended September 30, 1998
=======================================================================================================================
As a Percent of Total Assets
----------------------------------------------------------------------------------------
Cash & Net Real Intang. Other Total Borrowed Other Total Total
Securities Loans Estate Assets Assets Deposits Funds Liabs. Liabs. Equity
- -----------------------------------------------------------------------------------------------------------------------
First Federal Florida 16.48 80.80 0.12 0.00 2.60 84.04 5.01 2.33 91.38 8.62
- -----------------------------------------------------------------------------------------------------------------------
Comparative Group Average 23.88 72.67 0.17 0.51 2.77 76.30 11.03 1.01 88.34 11.66
Comparative Group Median 23.32 74.41 0.05 0.00 2.45 77.31 11.93 0.81 87.49 12.51
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
All Public Thrift Average 29.52 67.13 0.22 0.34 2.79 69.04 16.16 1.63 86.83 13.17
All Public Thrift Median 27.72 68.85 0.07 0.00 2.48 69.58 15.49 1.30 89.19 10.81
- -----------------------------------------------------------------------------------------------------------------------
Acadiana Bancshares, Inc. 21.33 76.41 0.01 0.00 2.25 71.11 14.43 0.81 86.35 13.65
Ameriana Bancorp 25.89 70.48 0.04 0.51 3.08 83.08 3.14 2.43 88.65 11.35
Central Co-operative Bank 19.91 77.45 0.00 0.86 1.79 73.33 15.88 0.85 90.06 9.94
Citizens First Financial Corp. 13.77 81.64 0.26 0.00 4.33 71.45 13.49 1.83 86.77 13.23
Cooperative Bankshares, Inc. 17.53 80.06 0.00 0.00 2.41 77.31 14.15 0.55 92.00 8.00
FFLC Bancorp, Inc. 11.69 86.34 0.09 0.00 1.88 79.64 7.11 0.75 87.49 12.51
First Federal Bancshares 23.32 74.41 0.73 0.00 1.55 77.84 7.93 0.51 86.29 13.71
First Mutual Bancorp, Inc. 13.40 79.59 0.02 3.26 3.73 83.32 0.54 1.04 84.90 15.10
FLAG Financial Corporation 24.20 69.67 0.85 0.00 5.28 77.43 11.93 1.88 91.25 8.75
Harbor Federal Bancorp, Inc. 31.12 66.39 0.04 0.00 2.45 76.07 10.06 1.09 87.22 12.78
Kankakee Bancorp, Inc. 34.88 60.19 0.36 1.40 3.17 84.11 5.65 0.40 90.16 9.84
Monterey Bay Bancorp, Inc. 42.39 53.70 0.05 0.83 3.04 80.66 8.92 0.73 90.30 9.70
OHSL Financial Corp. 31.32 66.89 0.00 0.00 1.79 73.90 14.54 0.79 89.23 10.77
Teche Holding Co. 12.72 84.43 0.08 0.00 2.77 68.31 17.83 1.01 87.15 12.85
Western Ohio Financial Corp. 34.70 62.40 0.08 0.83 1.99 66.97 19.83 0.46 87.26 12.74
Source: First Federal Florida; SNL Securities; Feldman Financial
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
=======================================================================================================================
Table 17
Capital Ratios, Asset Quality, and Loan Composition
As of the Latest Quarter Ended September 30, 1998
=======================================================================================================================
Tier I Tier I Total Resid. Other Non-
Capital/ Capital/ Capital/ Total Total Perm. Real Est. Mortg.
Total RiskAdj. RiskAdj. NPLs/ NPAs/ Resrvs./ Resrvs./ Mortgs./Mortgs./ Loans/
Assets Assets Assets Loans Assets Loans NPAs Loans Loans Loans
- -----------------------------------------------------------------------------------------------------------------------
First Federal Florida 8.56 14.50 15.54 0.25 0.32 0.76 192.78 68.28 15.26 16.46
- -----------------------------------------------------------------------------------------------------------------------
Comparative Group Average 9.39 16.86 17.66 0.46 0.60 0.70 144.94 69.92 18.85 11.23
Comparative Group Median 9.29 16.41 17.05 0.26 0.58 0.55 75.23 70.93 17.94 8.03
- -----------------------------------------------------------------------------------------------------------------------
All Public Thrift Average 10.57 20.77 21.78 0.83 0.64 0.96 148.74 NA NA NA
All Public Thrift Median 9.12 16.66 17.51 0.51 0.49 0.83 100.97 NA NA NA
- -----------------------------------------------------------------------------------------------------------------------
Acadiana Bancshares, Inc. 8.05 15.07 16.33 0.29 0.24 1.20 389.42 75.91 9.78 14.30
Ameriana Bancorp 10.20 19.15 19.49 0.64 0.55 0.45 57.32 69.28 7.60 23.12
Central Co-operative Bank 8.84 14.24 15.47 0.51 0.40 0.99 195.20 72.59 22.94 4.48
Citizens First Financial Corp. 9.74 15.49 16.10 0.22 0.61 0.46 61.34 63.52 20.95 15.54
Cooperative Bankshares, Inc. 7.92 14.04 14.55 0.00 0.86 0.35 32.97 81.04 12.26 6.71
FFLC Bancorp, Inc. 10.60 18.15 19.00 0.14 0.19 0.60 266.67 74.94 18.37 6.69
First Federal Bancshares 11.69 22.12 22.33 0.23 0.90 0.17 14.02 84.50 7.32 8.18
First Mutual Bancorp, Inc. 11.83 19.96 20.63 0.12 0.34 0.50 115.35 60.76 19.59 19.65
FLAG Financial Corporation 7.94 11.07 12.32 1.51 1.61 1.23 53.23 40.34 42.13 17.53
Harbor Federal Bancorp, Inc. 10.01 20.96 21.59 1.00 0.69 0.35 33.35 78.84 17.51 3.64
Kankakee Bancorp, Inc. 6.80 12.52 13.55 0.33 0.97 0.99 61.91 63.74 14.90 21.37
Monterey Bay Bancorp, Inc. 6.61 12.37 13.21 1.17 0.68 1.11 88.55 62.88 34.97 2.15
OHSL Financial Corp. 8.44 17.33 17.77 0.06 0.11 0.33 198.92 63.33 30.71 5.96
Teche Holding Co. 12.76 23.63 24.88 0.20 0.18 1.01 460.90 87.27 4.86 7.88
Western Ohio Financial Corp. 11.10 21.51 22.50 1.67 1.13 1.34 75.02 79.00 13.37 7.63
Source: First Federal Florida; SNL Securities; Feldman Financial
-54-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
III. MARKET VALUE ADJUSTMENTS
This concluding chapter of the appraisal identifies certain additional
adjustments to the Bank's estimated pro forma market value relative to the
Comparative Group of publicly traded thrift institutions selected in Chapter II.
Adjustments are also necessary to reflect the equity market's likely reception
of a new thrift stock offering under current market conditions. The adjustments
discussed in this chapter are made from the viewpoints of potential investors,
which include eligible deposit account holders with subscription rights and
unrelated parties who may purchase stock in a community offering. It is assumed
that these potential investors are aware of all relevant and necessary facts as
they would pertain to the value of First Federal Florida relative to other
publicly traded thrift institutions and relative to alternative investments.
In determining the aggregate pro forma market value of First Federal
Florida pursuant to its Reorganization, we have concluded that the Bank would be
valued based on a fully converted basis. Our appraised value is predicated on a
continuation of the current operating environment for the Bank and thrift
institutions in general. Changes in First Federal Florida's operating
performance along with changes in the local and national economy, the stock
market, the interest rate outlook, the regulatory environment, and other
external factors may occur from time to time, often with great unpredictability,
which could impact materially the pro forma value of the Bank or thrift stocks
in general. Therefore, the pro forma valuation range provided herein is subject
to a more current re-evaluation prior to the actual completion of the
Reorganization.
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
In addition to the comparative operating fundamentals discussed in
Chapter II, it is important to address additional market value adjustments based
on certain financial and other criteria, which include, among other factors:
(1) Earnings Prospects
(2) Market Area
(3) Management
(4) Dividend Policy
(5) Liquidity of the Issue
(6) Subscription Interest
(7) Stock Market Conditions
(8) Recent Acquisition Activity
(9) New Issue Discount
(10) MHC Structure
Earnings Prospects
- ------------------
Earnings prospects are dependent upon the sensitivity of asset yields
and liability costs to changes in market interest rates, the credit quality of
assets, the stability of non-interest components of income and expense, and the
ability to leverage the balance sheet. Each of the foregoing is an important
factor to investors in assessing earnings prospects. The Bank's core earnings
profitability in recent years has been restrained by a comparatively low net
interest margin and above-average operating expense ratio. The Bank's net
interest margin continues to be impacted by a lower yielding asset portfolio in
contrast to the Comparative Group. Historically, prior management of the Bank
employed a very conservative portfolio strategy that emphasized conventional,
fixed-rate residential mortgages and a high volume of investment securities. The
Bank has pursued balance sheet strategies in recent years to increase and
diversify the loan concentration to include higher yielding loans. In addition,
the Bank has attempted to generate increased revenue through more refined,
cost-reflective pricing of products and services.
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
As the Bank seeks to generate growth to spur earnings momentum,
operating expenses and funding requirements become pivotal factors.
Notwithstanding the recent sale of branches, the Bank's operating expenses
remain above industry norms as the Bank's diversification efforts have given
cause for additional personnel, technological, and service capability costs.
While the Bank is laying the groundwork to enhance its future competitive
position, its profitability is not likely to show marked improvement in the
current interest rate environment because of increased pressure on operating
margins. Also, the changeover to a stock company will add various other
operating expenses. In addition, the Bank's funding requirements face pressure
in the form of continued intense competition for retail deposits from other
financial institutions in its market area and alternative investments. Based on
the Bank's recent earnings trends relative to the Comparative Group's results,
we believe that a slight downward valuation adjustment is warranted for this
factor.
Market Area
- -----------
The members of the Comparative Group were primarily selected from the
Southeast and Midwest regions of the country. Most of the Comparative Group
companies are based in moderate-sized cities in or around major metropolitan
areas. The Bank's primary market area is situated between the Tampa and Orlando
markets and has begun to experience solid economic growth as a distribution hub
with an affordable labor pool. While the local market area has exhibited strong
population growth, its growth prospects and income levels generally remain below
statewide levels. We do not believe that, on the whole, the market area
conditions of the Comparative Group are conspicuously different from those
facing the Bank. Accordingly, we believe that no adjustment is warranted for
market area considerations.
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Management
- ----------
Management's principal challenge is to generate profitable results,
monitor credit risks, and control operating costs while the Bank competes in an
increasingly competitive financial services environment. The Bank has assembled
a management team aimed at effectively implementing diversification and
expansion operating strategies to improve historically moderate earnings levels,
and appears to be making sound progress toward achieving these objectives.
Policies and procedures have been developed to guide the Bank's broadened
lending endeavors. Accordingly, we have assumed that the Bank has sufficient
managerial resources in place to continue implementation of its goals and
objectives. Therefore, we believe that no additional adjustment is warranted for
this factor.
Dividend Policy
- ---------------
The Stock Company intends to establish a policy to pay cash dividends
after the Reorganization. The initial annual amount of the dividends is as yet
undetermined. The Stock Company's dividend distribution will take into account
its financial condition, operating results, tax considerations, industry
standards, economic conditions, regulatory restrictions, and other factors. All
but two members of the fifteen companies in the Comparative Group currently pay
regular dividends. Furthermore, payment of cash dividends has become commonplace
among publicly owned thrifts with relatively high capital levels. It is
reasonable to believe that investors will anticipate dividend payments following
the Reorganization given the expected profitability and capitalization of the
consolidated Stock Company. As result, we do not believe that an adjustment is
warranted for this factor.
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Liquidity of the Issue
- ----------------------
Following the completion of the Reorganization, the Stock Company
anticipates that its common stock will be traded on the National Market of
Nasdaq. While an active and liquid market for the common stock may not develop
or be maintained, the pro forma market capitalization and its adequate financial
condition provide convincing evidence that the Stock Company will receive
approval for listing on Nasdaq. The liquidity of thrift common stocks, as with
all securities, has a significant impact on their relative market valuations. Of
the fifteen members of the Comparative Group, twelve are listed on Nasdaq and
three are traded on the American Stock Exchange. The MHC structure will result
in a reduced amount of stock available for trading, but the pro forma market
capitalization indicates the existence of a significant base of publicly held
shares. Given the regular trading activity exhibited by the Comparative Group
and operating similarities of the Comparative Group members with respect to the
Bank, we believe that no adjustment should be accorded for possible lack of
liquidity.
Subscription Interest
- ---------------------
In recent years, initial public offerings of thrift stocks have
attracted a great deal of investor interest and this speculative fervor
continued through the first half of 1998. Contributing to this huge demand is
the growing scarcity factor of mutual candidates for thrift stock conversions
and the favorable after-market performance experienced by many of these issues.
Conversion activity continued at a brisk pace through the first half of 1998 on
the heels of a record-setting stock market. However, the recent market
correction in the late summer of 1998 noticeably affected the after-market
performance of thrift conversions and subscription totals have not
overwhelmingly exceeded offering valuation ranges as was once commonplace.
-59-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Notwithstanding the demand for thrift stocks in initial offerings, a
strong subscription does not always indicate that the valuation range should be
increased or the offering should be priced in the upper end of the valuation
range. Many conversion investors routinely do not purchase stock in the
after-market, particularly at higher trading prices or involving stock issues
with limited liquidity. As such, absent actual results of the Bank's
Subscription Offering, we do not believe any adjustment is warranted at this
time.
Stock Market Conditions
- -----------------------
Table 18 graphically displays the performance of the SNL All Public
Thrift Index as compared to the Standard & Poor's 500 ("S&P 500") Stock Index
and SNL All MHC Thrift Index over the past two years. Table 19 provides a
similar graph with the various indexes all benchmarked at 100 as of year-end
1996. The All Public Thrift Index substantially outperformed the S&P 500 through
April 1998, advancing by 82.4% from year-end 1996 as compared to the broader
market index appreciating 50.1%. The All MHC Thrift Index produced an
exceptionally strong performance, increasing by 133.8% from December 1996 to
April 1998. Many investors determined that the valuation discounts being
accorded to MHCs in the prevailing market cycles were excessive in comparison to
fully converted thrifts and bid up MHC prices in anticipation of favorable
exchange ratios in second-stage conversions.
Since April 1998, thrift stocks underperformed the overall market
with the All Public Thrift Index declining 26.2% through December 14, 1998,
while the All MHC Thrift Index fared much poorly, decreasing by 36.6%. In
comparison, the S&P 500 Index evidenced less volatility and was up 2.6% from
month-end April 1998. The stock market indexes collectively reached a trough in
August 1998 and regained firmer standing in the subsequent months.
-60-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 18
Comparative Stock Market Indexes
Actual Month-end Index Data Trhough December 14, 1998
[OBJECT OMITTED]
-61-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 19
Comparative Stock Market Performance
Indexed to Year-end 1996=100
[OBJECT OMITTED]
-62-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 20 graphically depicts selected interest rates over the past
three years. Interest rates turned upward through the first half of 1997,
responding to concerns about inflationary pressures. Since that point, interest
rates have trended downward with the FNMA Fixed Mortgage Rate Yield falling
below 7.00% and the one-year U.S. Treasury once again falling below 5.00% for
the first time since the first quarter of 1996. Speculation is growing that
rates will continue to drop over the near term as the Federal Reserve considers
lowering rates in response to the turmoil affecting most international markets,
including Asia, Russia, and Latin America.
The uncertainty facing most of the world's financial markets led to the
Dow Jones Industrial Index slipping since crossing the 9300 barrier in the first
half of 1998. The adjustment in stock valuations has hit all segments of the
economy, but especially bank and thrift stocks with stocks of major money-center
banks feeling the effects of the problems that continue regarding Japanese
banks. While the fundamentals of the U.S economy remain relatively strong as
evidenced by low unemployment, low interest rates and strong corporate earnings,
but are counterbalanced by problems facing economies in other parts of the world
and the quandary facing the current Presidential administration, many investors
believe the U.S. markets are headed for continued periods of uncertainty and
wide fluctuations. Concern about the direction of the economy and the level of
profit growth has kept the market's recent focus on large, mature, high-quality
growth companies. Thus, while the more conspicuous, broader market indexes have
rebounded firmly, many individual stocks and specific industry sectors have
experienced sluggish performance.
-63-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 20
Selected Interest Rate Benchmarks
Month-end Indicators
[OBJECT OMITTED]
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Recent Acquisition Activity
- ---------------------------
Acquisition speculation is one factor impacting the prices of thrifts
in the current marketplace. Table 21 summarizes recent acquisition activity
involving thrifts and banks based in Florida. Overall acquisition premiums for
Florida institutions have been similar to the ratios reported nationwide. During
1998 year-to-date, there were 24 publicly announced acquisitions involving
Florida banks and thrifts. The largest acquisition announced during 1998 was the
purchase of First Palm Beach Bancorp, a $1.8 billion-asset thrift, by Republic
Security Financial Corp. Both of these institutions are based in West Palm
Beach. The most prominent acquisition over the past two years was the purchase
of Barnett Banks, a $44.0 billion-asset bank headquartered in Jacksonville, by
NationsBank.
The state's financial institution marketplace is dominated by a large
number of out-of-state banks and thrifts. In fact, among the top ten
institutions based on deposit totals, none were headquartered in Florida.
BankAmerica (successor to NationsBank), First Union, and SunTrust continue as
the largest banks in Florida and controlled over half of the statewide deposit
market. Industry consolidation has proceeded to absorb many financial
institutions within the state, but various de novo institutions have been
established in targeted growth markets. Only six publicly traded thrifts
currently exist in Florida, and five are them are over $1 billion in assets
including three over $3 billion (BankAtlantic Bancorp, BankUnited Financial
Corp., and Ocwen Financial Corp.). We believe that while acquisition premiums
are not a significant factor to consider in determining the Bank's estimated pro
forma market value, such speculative behavior may be reflected to some degree in
the general trading valuation levels of thrift stocks.
-65-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 21
Acquisition Summary of Florida Financial Institutions
Transactions Announced During 1998 Year-to-Date
Seller's Prior Financial Data Offer Value to
-------------------------------- -----------------------
Total TanEq./ YTD YTD Offer Book Tang. LTM Total
B/T B/T Assets Assets ROAA ROAE Date Status Value Value Book EPS Assets
Buyer St. (1) Seller (1) ($M) (%) (%) (%) Anncd. (2) ($M) (%) (%) (x) (%)
----- --- --- ------ --- ---- --- --- --- ------ --- ---- --- --- --- ---
Overall Average 206 8.86 0.86 8.85 -- -- 50.0 291.3 291.8 28.4 25.62
Bank Seller Average 144 9.48 1.07 11.28 -- -- 43.2 304.5 304.9 27.3 28.15
Thrift Seller Average 515 5.74 (0.16) (3.29) -- -- 82.8 228.4 229.7 38.3 13.61
Fifth Third Bancorp OH B South Florida BHC B 86 9.18 1.80 20.14 10/22/98 P 28.7 342.9 342.9 14.0 33.22
Alabama National AL B Comm. Bank of Naples B 77 6.22 0.75 11.32 09/21/98 P 15.0 308.5 312.2 57.9 19.42
Republic Security FL B Northside Bank Tampa B 68 12.76 1.70 12.79 09/14/98 P 19.6 226.7 226.7 16.9 28.93
Union Planters Corp. TN B Ready State Bank B 581 8.87 1.17 13.32 08/28/98 P 169.0 327.0 328.1 22.7 29.10
Republic Security FL B Newberry Bank B 37 6.15 0.75 12.16 08/24/98 C 4.8 209.3 209.3 47.5 12.86
FNB Corporation PA B Guaranty B&T B 142 6.94 0.94 12.54 08/21/98 P 34.3 346.9 346.9 35.1 24.08
SouthTrust Corp. AL B First American Bk IR B 46 10.29 0.87 8.27 07/06/98 C 11.3 238.4 238.4 30.9 24.54
Warrior Capital AL B Emerald Coast Bcshs B 66 8.23 (0.30) (3.15) 06/12/98 P NA NA NA NA NA
SunTrust Banks Inc. GA B Citizens Bancorp B 180 16.24 1.85 11.49 06/04/98 C 49.6 170.0 170.0 15.6 27.61
Republic Security FL B First Palm Beach Bcp T 1,791 6.40 0.49 7.61 05/28/98 C 299.1 237.9 243.1 30.8 16.70
Colonial BancGroup AL B Prime Bk of Cent Fla B 68 9.38 1.10 11.49 05/22/98 C 18.0 279.1 281.3 25.9 26.36
First TeleBanc Corp. FL B Boca Raton First NB B 16 9.90 (1.55) (16.04) 05/06/98 P 4.6 286.0 286.0 NA 28.31
Republic Bancshares FL B Lochaven FS&LA T 58 4.82 (1.43) (25.60) 04/22/98 C 5.8 206.8 206.8 NA 9.96
FNB Corporation PA B Citizens Hldg Corp B 117 10.26 1.03 9.73 04/06/98 C 38.8 323.4 323.4 35.1 33.20
Colonial BancGroup AL B CNB Holding Co. B 88 8.71 1.66 18.89 03/27/98 C 28.5 373.4 373.4 20.4 32.51
Republic Security FL B UniFirst FSB T 142 5.65 0.08 1.40 03/26/98 C 13.5 168.2 168.2 45.8 9.50
SouthTrust Corp. AL B Marine Bank B 58 12.53 1.76 14.13 03/25/98 C 20.9 285.1 285.1 21.3 35.73
Regions Financial AL B Village Bankshares B 191 6.78 1.10 16.41 03/24/98 C 55.4 427.8 427.8 31.5 29.03
Alabama National AL B Public Bank Corp. B 49 9.41 1.73 18.23 03/05/98 C 14.9 325.1 325.1 18.4 30.17
Union Planters Corp. TN B Transflorida Bank B 316 12.95 1.93 15.40 03/04/98 C 101.4 247.8 247.8 17.4 32.09
SouthTrust Corp. AL B American Banks of FL B 547 7.86 0.66 8.90 02/19/98 C 163.0 379.5 379.5 NA 29.81
Republic Bancshares FL B Bankers Savings Bank T 69 6.07 0.21 3.43 02/10/98 C 12.6 300.9 300.9 NA 18.26
FNB Corporation PA B Seminole Bank B 84 10.22 1.28 12.59 02/02/98 C 28.5 333.5 333.5 29.9 34.09
Florida Banks FL B First NB of Tampa B 58 6.71 1.12 17.02 01/23/98 C 13.8 354.9 354.9 22.7 23.80
(1) B=bank; T=thrift.
(2) P=pending; C=completed.
Source: SNL Securities
-66-
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
New Issue Discount
- ------------------
A "new issue" discount that reflects investor concerns and investment
risks inherent in all initial stock offerings is a factor to be considered in
valuations of initial thrift stock offerings. The magnitude of the new issue
discount typically expands during periods of declining thrift stock prices as
investors require larger inducements, and narrows during strong market
conditions. The thrift conversion market continues to respond to the
after-market performance of recent offerings. Table 22 presents a summary of
publicly traded thrifts that have completed standard full conversions and MHC
stock offerings thus far in 1998. The recent after-market performance of thrift
conversions has become much more subdued, with issues moving up only modestly
from initial offering prices. As prior conversion valuations increased to
reflect the cyclical strength of thrift stock performance, it appears that the
current market may have reached its tolerance for historically high valuations
accompanied by the prospect of companies generating lackluster returns on
equity.
The average pro forma price/book ratio for the 30 standard conversions
completed thus far in 1998 was 73.8% with an average price/earnings ratio of
16.8x. However, since the recent market correction, the last seven thrift
conversions averaged a pro forma price/book ratio of 65.3% and a price/earnings
ratio of 15.1x. Additionally, these offerings experienced modest price
appreciation in after-market trading. As of December 14, 1998, four of the last
eight standard conversions remained at or below their initial offering prices.
The after-market price performance of MHC stock offerings has been even more
unfavorable. The past five MHC stock offerings all closed at prices as of
December 14, 1998 below their initial offering prices and were down on average
by 7.4%.
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FELDMAN FINANCIAL ADVISORS, INC.
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Table 22
Summary of Recent Publicly Traded Thrift Conversions
After-Market
Pre-Conversion Pro Forma Ratios Price Change
---------------- --------------------- -----------------
Total Tan.Eq./ Gross Price/ Price/ Price/ IPO One Through
Assets Assets Proceeds Book EPS(1) Assets Price Week 12/14/98
Company Exchange State IPO Date ($mil.) (%) ($mil.) (%) (x) (%) ($) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
Full Conversion Average 369 9.95 78.7 73.8 16.8 16.5 NA 36.6 21.6
- -----------------------------------------------------------------------------------------------------------------------------------
Full Conversion Offerings
- -------------------------
Seacoast Financial Services Corp. NASDAQ MA 11/20/98 1,107 8.87 140.0 52.6 NA 11.2 10.00 0.6 0.0
Northfield Bancorp, Inc. OTC MD 11/12/98 39 7.92 4.8 69.3 9.4 10.9 10.00 2.5 2.5
First Niles Financial Inc. NASDAQ OH 10/27/98 72 16.41 17.5 62.7 23.9 19.5 10.00 8.8 5.6
CNY Financial Corp. NASDAQ NY 10/06/98 234 13.15 52.5 69.9 47.2 18.3 10.00 (4.4) (5.3)
IBL Bancorp Inc. OTC LA 10/01/98 22 7.24 2.1 68.0 10.6 8.6 10.00 NA NA
Farnsworth Bancorp Inc. OTC NJ 09/30/98 39 5.75 3.8 72.5 12.9 8.9 10.00 8.7 6.2
CGB&L Financial Group, Inc. OTC IL 09/23/98 7 14.22 1.0 61.8 18.9 12.5 10.00 0.0 0.0
CFS Bancorp Inc. NASDAQ IN 07/24/98 746 8.80 178.5 71.7 18.2 19.3 10.00 10.6 (2.5)
Carnegie Financial Corporation OTC PA 07/13/98 17 6.91 2.4 79.2 NA 12.5 10.00 15.0 (10.0)
United Community Financial Corp. NASDAQ OH 07/09/98 1,045 13.53 334.7 77.8 14.1 24.3 10.00 50.0 35.0
PCB Holding Company OTC IN 07/02/98 22 9.51 4.0 71.0 17.6 15.3 10.00 21.2 3.7
Hudson River Bancorp Inc. NASDAQ NY 07/01/98 665 10.13 173.3 80.1 22.3 20.7 10.00 33.8 9.4
Anson Bancorp, Inc. OTC NC 06/22/98 20 19.04 5.9 65.3 21.9 22.4 10.00 22.5 0.0
Columbia Financial of Kentucky NASDAQ KY 04/15/98 104 12.59 26.7 74.5 19.6 20.4 10.00 57.5 23.8
Adirondack Fin'l Services Bancorp OTC NY 04/07/98 61 5.38 6.6 77.0 NA 9.8 10.00 20.0 41.2
EFC Bancorp, Inc. AMSE IL 04/07/98 316 9.92 69.4 76.6 13.5 18.0 10.00 48.8 19.4
Quitman Bancorp, Inc. OTC GA 04/07/98 39 7.55 6.6 78.7 14.6 14.4 10.00 38.7 10.0
Northeast Pennsylvania Fin'l Corp.AMSE PA 04/01/98 369 7.73 59.5 75.4 18.7 13.9 10.00 53.1 10.0
Bay State Bancorp, Inc. AMSE MA 03/30/98 233 8.19 46.9 78.6 20.9 16.8 20.00 49.4 24.4
Home Loan Financial Corp. NASDAQ OH 03/26/98 60 17.16 22.5 75.9 17.0 27.1 10.00 58.8 40.0
Cavalry Bancorp, Inc. NASDAQ TN 03/17/98 276 10.69 75.4 79.8 14.3 21.5 10.00 133.8 110.0
Independence Commty. Bank Corp. NASDAQ NY 03/17/98 3,733 6.77 704.1 77.2 17.9 15.9 10.00 76.9 51.3
SFSB Holding Company OTC PA 02/27/98 38 9.20 7.3 76.0 NA 16.1 10.00 31.2 10.0
Richmond County Financial Corp. NASDAQ NY 02/18/98 993 10.15 244.7 79.6 14.0 19.8 10.00 59.4 66.3
HopFed Bancorp, Inc. NASDAQ KY 02/09/98 202 9.02 40.3 75.4 12.4 16.6 10.00 60.0 60.0
Timberland Bancorp, Inc. NASDAQ WA 01/13/98 206 11.57 66.1 81.6 10.5 24.3 10.00 61.9 19.4
Mystic Financial, Inc. NASDAQ MA 01/09/98 150 7.98 27.1 77.8 17.5 15.3 10.00 50.6 23.8
Wyman Park Bancorporation, Inc. OTC MD 01/07/98 62 7.63 10.1 76.7 23.3 14.0 10.00 31.2 20.0
Delaware First Financial Corp. OTC DE 01/05/98 113 5.41 11.6 73.6 20.6 9.3 10.00 21.5 41.2
United Tennessee Bankshares, Inc. NASDAQ TN 01/05/98 64 10.08 14.5 78.4 16.1 18.5 10.00 40.0 10.0
(1) Price/earnings ratios greater than 25 are excluded from average
computations.
-68-
Table 22 (continued)
Summary of Recent Publicly Traded Thrift Conversions
After-Market
Pre-Conversion Pro Forma Ratios Price Change
---------------- -------------------------- ----------------
Total Tan.Eq./ Gross Price/ Price/ Price/ IPO One Through
Assets Assets Proceeds Book EPS Assets Price Week 12/14/98
Company Exchange State IPO Date ($mil.) (%) ($mil.) (%) (x) (%) ($) (%) (%)
------- -------- ----- -------- -------- ------ ------- ------ ----- ------- ----- ----- --------
- ------------------------------------------------------------------------------------------------------------------------------------
MHC Offering Average 329 11.78 39.5 116.1 24.6 21.7 NA 32.8 7.7
- ------------------------------------------------------------------------------------------------------------------------------------
MHC Stock Offerings
- -------------------
Service Bancorp Inc. OTC MA 10/08/98 131 7.54 8.0 104.0 12.2 12.4 10.00 (20.0) (5.0)
Sound Federal Bancorp NASDAQ NY 10/08/98 255 12.52 23.0 100.0 15.6 18.7 10.00 (11.3) (5.0)
West Essex Bancorp Inc. NASDAQ NJ 10/05/98 299 9.79 17.7 95.4 40.2 13.4 10.00 (7.5) (0.6)
BCSB Bankcorp, Inc. NASDAQ MD 07/08/98 252 9.48 22.9 142.2 26.1 22.6 10.00 26.3 (15.0)
Liberty Bancorp, Inc. NASDAQ NJ 07/01/98 217 7.61 18.3 121.7 20.4 16.7 10.00 16.3 (11.3)
Niagara Bancorp, Inc. NASDAQ NY 04/20/98 1,176 10.77 135.0 122.1 20.7 23.0 10.00 68.1 6.3
Gaston Federal Bancorp, Inc. NASDAQ NC 04/13/98 173 12.03 21.1 116.8 24.5 23.5 10.00 70.0 48.1
Mid-Southern S.B., FSB OTC IN 04/09/98 56 12.92 4.0 135.3 19.5 24.1 10.00 72.5 33.1
Brookline Bancorp, Inc. NASDAQ MA 03/25/98 667 17.08 136.7 122.4 19.4 36.8 10.00 63.8 11.3
Marquette Savings Bank OTC WI 01/22/98 67 18.05 8.5 100.6 47.4 25.8 8.00 50.0 15.6
Source: SNL Securities
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
In the after-market, full conversions had been trading upward to and above 90%,
but more recently have found resistance in the 70% to 80% range. To price a new
offering at 90% of pro forma book value, because of the mathematics of the
calculation, would require very large increases in valuations and produce very
marginal returns on equity. This would likely produce price declines in the
after-market. Accordingly, thrift conversions continue to be priced at discounts
relative to more seasoned publicly traded companies. This is due to the
relatively high pro forma equity ratios, expected low returns on equity, and the
uncertainty regarding the ability of an institution to leverage the balance
sheet profitably in a flat yield curve environment.
Investors are aware that at initial pro forma price/book ratios
approaching the current trading range of a majority of public thrifts,
price/earnings ratios of converting thrifts would be excessive, returns on
equity very low, and capital levels dramatically high. Based upon the price/book
ratio measure, standard thrift conversions are being discounted by 40% to 50%
relative to the trading market.
MHC Structure
- -------------
Market evidence indicates that minority ownership interests are
discounted to majority ownership interests, which convey the ability to effect
changes, influence business policies, and transfer control. In the thrift MHC
ownership structure, public shareholders hold an aggregate minority ownership
interest that is subordinate to the MHC. However, the governing board of the MHC
is quite often similar to that managing the subsidiary bank. Furthermore, the
public shareholders in a fully converted thrift offering also assume a minority
ownership role since there are limitations on the purchase and accumulation of
stock interests.
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
The most significant impediment that the MHC poses is the ability to
avert a sale of control by acquisition. Until recent periods, the trading
activity of other publicly held MHCs indicated that this inability to be
acquired suppressed the comparative market valuation of MHCs versus fully
converted thrift stock issues. However, the anticipation of second-stage
conversion announcements, the strong advancements posted by MHCs in general, and
a growing cadre of research analysts advancing the investment attributes of MHC
from prior trading levels combined to propel MHC stock price performance in 1997
through the first half of 1998. In recent months, weakness in the financial
sector drove MHC stock prices downward as bank and thrift stock investors became
more selective.
Table 23 provides estimated fully converted valuation ratios for
current MHC thrifts, based upon a hypothetical second-stage conversion of each
company at common assumptions regarding the amount of capital raised and
re-invested. On a fully converted basis, we have determined that the MHC thrifts
are trading at comparable price/earnings ratios to the overall public thrift
stock norm, but at discounts on a price/book basis. This discount is not so much
a qualitative abstraction but rather a recognition that the resulting high pro
forma capital ratios have a restraining impact on the price/book measure.
MHCs also have been typically characterized by reduced liquidity from
the full conversion valuations and higher dividend expectations. However,
because of the increased market valuations of thrift stocks in general and the
relatively low yields being earned on the increased thrift stock prices, these
characteristics are less important today than in prior periods. Furthermore,
given the size of the Bank's expected Stock Offering and its trading market, the
issue of liquidity does not loom pivotal. Many MHCs have completed full second-
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Table 23
Estimated Fully Converted Valuation Ratios for MHC Thrifts
Market MHC Total Adj. Adj. Price/ Price/
Price Owner- Market Book LTM Adj. Adj.
12/14/98 ship Value Value EPS Book EPS
Company State ($) (%) ($M) ($) ($) (%) (x)
------- ----- --- --- ---- --- --- --- ---
Average 85.4 16.4
Median 83.6 15.4
Alliance Bank PA 12.19 80.1 39.9 17.41 0.94 70.0 13.0
BCSB Bankcorp, Inc. MD 8.50 37.4 52.0 NA NA NA NA
Brookline Bancorp, Inc. MA 11.13 53.0 323.7 14.55 0.92 76.4 12.1
Community Savings Bankshares FL 22.25 51.3 113.6 26.67 1.32 83.4 16.8
Fidelity Bankshares Inc. FL 23.00 52.1 156.5 23.45 1.64 98.1 14.0
Finger Lakes Financial Corp. NY 11.50 66.9 41.1 12.72 0.49 90.4 23.4
First FSB of Siouxland IA 25.00 53.6 71.1 26.38 1.68 94.8 14.9
Gaston Federal Bancorp, Inc. NC 14.81 53.0 66.6 15.82 0.66 93.6 22.3
Harris Financial, Inc. PA 13.75 75.0 467.4 14.31 0.90 96.1 15.2
Jacksonville Savings Bank IL 12.75 54.4 24.3 15.21 0.75 83.8 17.1
Leeds Federal Bankshares, Inc. MD 13.88 63.5 72.1 16.92 1.02 82.0 13.6
Liberty Bancorp, Inc. NJ 8.88 53.0 34.6 12.70 0.60 69.9 14.7
Niagara Bancorp, Inc. NY 10.63 53.3 316.2 13.49 0.72 78.7 14.8
Northwest Bancorp, Inc. PA 9.88 69.1 462.8 10.44 0.69 94.6 14.4
Pathfinder Bancorp, Inc. NY 9.63 56.7 26.3 12.97 0.50 74.2 19.2
People's Bank CT 27.25 56.8 1,748.0 26.32 2.23 103.5 12.2
PHS Bancorp, Inc. PA 13.88 55.0 38.3 17.01 0.74 81.6 18.7
Pulaski Savings Bank NJ 10.38 53.0 21.9 15.29 0.66 67.9 15.6
Skibo Financial Corp. PA 8.50 55.0 29.3 11.07 0.44 76.8 19.3
Sound Federal Bancorp NY 9.50 44.1 49.5 NA NA NA NA
Wayne Savings Bancshares, Inc. OH 19.13 51.7 47.6 18.26 1.03 104.7 18.6
Webster City FSB IA 15.75 54.4 33.3 18.01 0.93 87.4 16.9
West Essex Bancorp Inc. NJ 9.94 NA 18.4 NA NA NA NA
Source: SNL Securities; Feldman Financial
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
stage conversions within a relatively short time frame and there are no special
regulations prohibiting the Bank from electing this course at some future time.
Based on these overall considerations, we do not believe that a specific
adjustment is warranted.
Adjustments Conclusion
- ----------------------
The Bank's pro forma valuation should be discounted relative to the
Comparative Group because of earnings prospects and the new issue discount.
Individual discounts and premiums are not necessarily additive and may, to some
extent, offset or overlay each other. Currently, conversions are often priced at
substantial discounts to peer institutions relative to price/book ratios, but at
lesser discounts to the comparable institutions' price/earnings ratios. It is
the role of the appraiser to balance the relative dynamics of price/book and
price/earnings discounts and premiums.
Valuation Approach
- ------------------
Table 24 displays the market price and valuation data of the
Comparative Group as of December 14, 1998, along with average valuation data for
the nationwide and Florida public thrift aggregates, and compares the Bank on a
pro forma fully converted basis with the various peer groups. Table 25 presents
the relative magnitudes of discount and premiums to the aggregate groups. Table
26 compares the Bank's pro forma valuation ratios, based upon an MHC stock
offering of 47% to minority shareholders, with valuation ratios for all public
MHC thrifts. Exhibit IV displays the pro forma assumptions and calculations
utilized in analyzing the Bank's valuation ratios.
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Investors continue to make decisions to purchase thrift conversion
stocks and more seasoned thrift issues based upon consideration of earnings
prospects and price/book comparisons. Utilizing a discount of approximately 48%
to the corresponding Comparative Group average, the Bank's resulting pro forma
price/book ratio at the midpoint valuation of $43.5 million is 59.4%, producing
a price/book valuation ratio of 63.4% at the range maximum and 67.3% at the
adjusted maximum. The Bank's pro forma price/book ratio of 63.4% at the maximum
represents a 45% discount to the Comparative Group's average. The Florida thrift
aggregate contains six companies, which are trading below industry norms on a
price/book basis either due to excessive capital or, in the case of the larger
companies, lackluster profitability. The average price/book ratio for all
Florida thrifts was 107.6%.
The price/earnings ratio is an important valuation ratio in the current
thrift stock environment and was a central focus in deriving our estimate of the
Bank's pro forma market value. Based on the Bank's LTM earnings and the net
conversion-related returns and adjustments, the Bank is valued at a midpoint
price/earnings ratio of 13.6x and a maximum price/earnings ratio of 15.2x. These
pro forma ratios represent discounts of 19% and 9%, respectively, to the
Comparative Group average of 16.7x. Applying the Bank's lower core earnings base
of $1.8 million, the pro forma price/earnings ratio at the midpoint is 17.1x and
increases to 18.9x and 20.8x at the maximum and adjusted maximum valuations,
respectively. Because of the Bank's low core earnings profitability, its
resulting price/core earnings ratios are skewed above the Comparative Group's
average. Among the Comparative Group companies reporting correspondingly low
core earnings profitability, they similarly
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
experienced higher price/core earnings ratios with Cooperative Bankshares at
21.0x and Citizens First Financial Corp. at 23.6x.
Table 26 presents the Bank's pro forma valuation ratios based upon an
MHC stock offering with 47% of the stock being sold to the public and the MHC
retaining a 53% majority interest. The corresponding valuation ratios are
displayed also for all MHC thrifts. Valuation ratios for MHC thrifts are
generally higher due to the fact that less proportionate capital has been
raised, but with the majority-owned shares still being valued in the market.
Thus, because of the differing public ownership concentrations, such valuation
ratios are not very meaningful for comparative purposes between MHC thrifts or
with other public thrifts.
Valuation Conclusion
- --------------------
It is our opinion that, as of December 14, 1998, the aggregate
estimated pro forma market value of the Bank was within the valuation range of
$36,975,000 to $50,025,000 with a midpoint of $43,500,000. The valuation range
was based upon a 15% decrease from the midpoint to determine the minimum and a
15% increase to establish the maximum. Assuming an additional 15% increase above
the maximum results in an adjusted maximum valuation of $57,528,750. The Board
of Directors of the Bank has determined to offer for sale in the Reorganization
a minority ownership interest equal to 47% of all the common stock to be issued
and outstanding. Therefore, the aggregate value of common stock to be sold in
the Reorganization will be equal to $17,378,250 at the minimum valuation,
$20,445,000 at the midpoint valuation, $23,511,750 at the maximum valuation, and
$27,038,513 at the adjusted maximum.
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FELDMAN FINANCIAL ADVISORS, INC.
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Table 24
Comparative Valuation Analysis - Full Conversion Basis
First Federal Florida and the Comparative Group
Market Price Data as of December 14, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Current Total Price/ Price/ Price/ Price/ Price/ Tang. Current
Stock Market LTM Core Book Tang. Total Equity/ Dividend
Price Value EPS(1) EPS(1) Value Book Assets Assets Yield
Company ($) ($M) (x) (x) (%) (%) (%) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------------
First Federal Florida - Full Conversion
Pro Forma Minimum 10.00 37.0 11.9 15.1 54.8 54.8 8.21 14.99 0.00
Pro Forma Midpoint 10.00 43.5 13.6 17.1 59.4 59.4 9.54 16.05 0.00
Pro Forma Maximum 10.00 50.0 15.2 18.9 63.4 63.4 10.83 17.08 0.00
Pro Forma Adj. Maximum 10.00 57.5 16.9 20.8 67.3 67.3 12.28 18.24 0.00
Comparative Group Average -- 50.2 16.7 16.9 115.3 120.6 13.31 11.20 2.12
All Public Thrift Average -- 227.8 15.5 15.3 127.4 134.2 15.28 12.68 2.07
Florida Thrift Average -- 234.2 17.5 13.6 107.6 117.4 12.49 10.26 1.00
Comparative Group
Acadiana Bancshares, Inc. 17.13 38.9 14.5 14.3 98.9 98.9 13.49 13.65 2.57
Ameriana Bancorp 19.94 63.6 17.5 17.3 141.3 147.9 16.04 10.89 3.31
Central Co-operative Bank 17.94 35.3 12.0 15.0 93.9 102.8 9.33 9.16 1.78
Citizens First Financial Corp. 16.50 37.8 19.6 23.6 104.5 104.5 13.82 13.23 0.00
Cooperative Bankshares, Inc. 15.50 47.2 21.0 21.0 151.5 151.5 12.11 8.00 0.00
FFLC Bancorp, Inc. 16.25 59.9 14.8 14.8 113.6 113.6 14.22 12.51 2.22
First Federal Bancshares 20.13 92.1 16.0 16.0 114.2 114.2 15.64 13.69 1.39
First Mutual Bancorp, Inc. 17.88 63.1 36.5 41.6 112.6 143.6 16.99 12.24 1.79
FLAG Financial Corporation 12.13 62.8 22.5 17.3 158.5 158.5 13.85 8.75 1.98
Harbor Federal Bancorp, Inc. 20.00 37.3 19.6 19.6 125.9 125.9 16.08 12.78 2.60
Kankakee Bancorp, Inc. 26.25 35.9 14.3 14.4 90.4 105.4 8.90 8.56 1.83
Monterey Bay Bancorp, Inc. 14.44 51.0 46.6 42.5 113.4 124.0 11.74 8.95 0.83
OHSL Financial Corp. 14.00 34.9 16.5 16.5 125.9 125.9 13.84 10.77 3.57
Teche Holding Co. 15.00 46.4 12.8 13.2 88.4 88.4 11.36 12.85 3.33
Western Ohio Financial Corp. 21.75 46.8 120.8 241.7 96.5 103.2 12.29 12.01 4.60
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Price/earnings ratios greater than 25.0 are excluded from average
compuations.
Source: First Federal Florida; SNL Securities; Feldman Financial
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FELDMAN FINANCIAL ADVISORS, INC.
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Table 25
Comparative Discount and Premium Analysis
Market Price Data as of December 14, 1998
Relative Premiums (Discounts)
--------------------------------------------
First Comp. All All
Valuation Federal Group Public Florida
Ratio Symbol Florida Average Thrifts(1) Thrifts(2)
----- ------ ------- ------- ---------- ----------
--------------------------------------------
Price / LTM EPS (3) P/E 16.7 15.5 17.5
--------------------------------------------
-----------
Adj. Maximum (x) 16.9 1% 9% -3%
Maximum 15.2 -9% -2% -13%
Midpoint 13.6 -19% -12% -22%
Minimum 11.9 -29% -23% -32%
-----------
--------------------------------------------
Price / Core EPS (3) P/E 16.9 15.3 13.6
--------------------------------------------
-----------
Adj. Maximum (x) 20.8 23% 36% 53%
Maximum 18.9 12% 24% 39%
Midpoint 17.1 1% 12% 26%
Minimum 15.1 -11% -1% 11%
-----------
--------------------------------------------
Price / Book Value P/B 115.3 127.4 107.6
--------------------------------------------
-----------
Adj. Maximum (%) 67.3 -42% -47% -37%
Maximum 63.4 -45% -50% -41%
Midpoint 59.4 -48% -53% -45%
Minimum 54.8 -52% -57% -49%
-----------
--------------------------------------------
Price / Tangible Book P/B 120.6 134.2 117.4
--------------------------------------------
-----------
Adj. Maximum (%) 67.3 -44% -50% -43%
Maximum 63.4 -47% -53% -46%
Midpoint 59.4 -51% -56% -49%
Minimum 54.8 -55% -59% -53%
-----------
--------------------------------------------
Price / Total Assets P/A 13.31 15.28 12.49
--------------------------------------------
-----------
Adj. Maximum (%) 12.28 -8% -20% -2%
Maximum 10.83 -19% -29% -13%
Midpoint 9.54 -28% -38% -24%
Minimum 8.21 -38% -46% -34%
-----------
- ------------------------------------------------------------------------------------------------------------------
(1) Averages for 315 publicly traded, non-MHC, non-acquiree thrifts nationwide.
(2) Averages for 6 publicly traded, non-MHC, non-acquiree thrifts based in
Florida.
(3) Price/earnings ratios exclude values greater than 25.
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FELDMAN FINANCIAL ADVISORS, INC.
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Table 26
Comparative Valuation Analysis - MHC Offering
First Federal Florida and All Public MHC Thrifts
Market Price Data as of December 14, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Current Total Price/ Price/ Price/ Price/ Price/ Tang. Current
Stock Market LTM Core Book Tang. Total Equity/ Dividend
Price Value EPS EPS Value Book Assets Assets Yield
Company ($) ($M) (x) (x) (%) (%) (%) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------------
First Federal Florida - MHC Offering
Pro Forma Minimum 10.00 37.0 13.8 17.9 73.7 54.8 8.54 11.59 0.00
Pro Forma Midpoint 10.00 43.5 15.9 20.6 82.3 82.3 9.98 12.13 0.00
Pro Forma Maximum 10.00 50.0 18.0 23.2 90.1 90.1 11.41 12.67 0.00
Pro Forma Adj. Maximum 10.00 57.5 20.3 26.1 98.1 98.1 13.03 13.28 0.00
MHC Thrift Average -- 185.0 22.5 24.1 150.9 158.5 19.12 12.58 2.25
All MHC Thrifts
Alliance Bank 12.19 39.9 20.0 20.0 131.9 131.9 14.26 10.81 2.95
BCSB Bankcorp, Inc. 8.50 52.0 NA NA NA NA NA 8.00 0.00
Brookline Bancorp, Inc. 11.13 323.7 NA NA 116.3 116.3 38.60 32.89 1.80
Community Savings Bankshares 22.25 113.6 23.7 23.7 131.6 131.6 14.35 10.69 4.04
Fidelity Bankshares Inc. 23.00 156.5 19.8 22.3 171.4 176.1 10.44 5.94 4.35
Finger Lakes Financial Corp. 11.50 41.1 NA NA 183.1 183.1 14.91 8.14 2.09
First FSB of Siouxland 25.00 71.1 20.2 21.2 164.8 202.8 12.49 6.25 1.92
Gaston Federal Bancorp, Inc. 14.81 66.6 NA NA 160.1 160.1 32.02 19.99 1.35
Harris Financial, Inc. 13.75 463.4 26.4 32.0 242.9 267.5 19.31 7.26 1.60
Jacksonville Savings Bank 12.75 24.3 26.0 26.0 135.6 135.6 14.63 10.79 2.35
Leeds Federal Bankshares, Inc. 13.88 72.1 21.0 21.0 145.3 145.3 23.75 16.36 4.04
Liberty Bancorp, Inc. 8.88 34.6 NA NA 101.3 101.3 13.94 13.76 0.00
Niagara Bancorp, Inc. 10.63 316.2 NA NA 121.3 121.3 22.10 18.23 1.13
Northwest Bancorp, Inc. 9.88 467.5 21.5 22.4 208.8 234.6 17.35 7.47 1.62
Pathfinder Bancorp, Inc. 9.63 26.3 22.9 28.3 115.7 136.1 13.75 10.10 2.08
People's Bank 27.25 1,747.6 16.0 22.7 204.0 243.3 18.17 7.57 3.38
PHS Bancorp, Inc. 13.88 38.3 23.1 24.8 130.7 130.7 16.16 12.37 2.02
Pulaski Savings Bank 10.38 21.9 22.1 20.8 97.1 97.1 11.43 11.76 3.08
Skibo Financial Corp. 8.50 29.3 NA NA 118.9 118.9 20.37 17.13 3.53
Sound Federal Bancorp 9.50 49.5 NA NA NA NA NA 11.86 0.00
Wayne Savings Bancshares 19.13 47.6 27.7 27.7 191.6 191.6 18.29 9.54 3.24
Webster City FSB 15.75 33.3 24.6 24.6 145.3 145.3 36.15 24.87 5.08
West Essex Bancorp Inc. 9.94 18.4 NA NA NA NA NA 7.59 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Source: First Federal Florida; SNL Securities; Feldman Financial
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FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
I-1
Exhibit I
Background of Feldman Financial Advisors, Inc.
Overview of Firm
- ----------------
Feldman Financial Advisors provides consulting and advisory services to
financial institutions and mortgage companies in the areas of corporate
valuations, mergers and acquisitions, strategic planning, branch sales and
purchases, developing and implementing regulatory business and capital plans,
enhancing franchise value, portfolio analysis and restructuring, evaluating bank
management, regulatory analysis, and expert witness testimony and analysis. Our
principals have been involved in the stock conversion process since 1982 and
have valued more than 350 converting institutions.
Feldman Financial Advisors was incorporated in February 1996 by a group of
consultants who were previously associated with Kaplan Associates. Each of the
principals at Feldman Financial Advisors has more than 10 years experience in
consulting and all were officers of their prior firm. Our principals
collectively have worked with more than 1,000 banks, thrifts and mortgage
companies nationwide. The firm's office is located in Washington, D.C.
Background of Principals
- ------------------------
Trent Feldman is the President of the firm. Trent is a nationally recognized
expert in valuing financial institutions, providing strategic advice to
financial institutions, and advising on mergers and acquisitions for banks and
thrifts of all sizes. Trent was with Kaplan Associates for 14 years and was one
of three founding principals at that firm. Trent also has worked in the
Chairman's Office of the Federal Home Loan Bank Board, the Federal Savings and
Loan Insurance Corporation, and with the California state legislature. Trent
holds Bachelors and Masters degrees from the University of California at Los
Angeles.
Peter Williams specializes in merger and acquisition analysis, corporate
valuations, strategic business plans and retail branch analysis. Peter was with
Kaplan Associates for 13 years. Peter also served as a Corporate Planning
Analyst with the Wilmington Trust Company in Delaware. Peter holds a BA in
Economics from Yale University and an MBA in Finance from George Washington
University.
Michael Green is an expert in mergers and acquisition analysis, financial
institution valuations, and business plans. During Mike's 10 years at Kaplan
Associates, his experience also included mark-to-market analysis, goodwill
valuations and core deposit studies.
Mike holds a BS in Finance and Economics from Rutgers College.
Linda Farrell is nationally known for her expertise in branch purchases and
sales, and she specializes in small bank mergers and acquisitions, retail
banking analysis, business plans and management reviews. Linda was with Kaplan
Associates for 12 years. Linda also was a Senior Vice President of Retail
Banking at Western Savings in Salt Lake City and a consultant with both Arthur
Young & Company and Richard T. Pratt Associates. Linda holds a BA in English
from Oklahoma State University and an MBA from the University of Utah.
I-1
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-1
Statement of Financial Condition
As of September 30, 1997 and 1998
(Dollars in Thousands)
September 30,
--------------------------------
1998 1997
------ ------
Assets
- ------
Cash and amounts due from depository institutions $ 1,137 $ 3,272
Federal funds sold 4,080 18,570
Investments available for sale, at fair value 42,225 36,761
Investment securities held to maturity, market value 18,736 37,811
Loans receivable, net 338,610 355,551
Premises and equipment, net 6,845 7,800
Real estate owned 493 167
Federal Home Loan Bank stock, at cost 2,864 2,864
Accrued interest receivable on loans, net 1,793 1,900
Accrued interest receivable on investments 605 793
Income tax receivable 618 --
Deferred income taxes, net 484 151
Other assets 551 1,125
-------- --------
Total assets $419,041 $466,765
======= =======
Liabilities and Equity Capital
- ------------------------------
Deposits $352,180 $429,714
Federal Home Loan Bank advances 21,000 --
Advance payments by borrowers for taxes and insurance 1,971 2,004
Due to banks 4,569 483
Deferred income taxes, net -- 129
Current income tax payable -- 364
Other liabilities 3,214 612
------- -------
Total liabilities 382,934 433,306
------- -------
Retained income 35,887 34,200
Unrealized gain on investments available for sale, net 220 86
------- -------
Total equity capital 36,107 34,286
------- -------
Total liabilities and capital $419,041 $466,765
======= =======
Source: First Federal Florida, financial statements.
II-1
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-2
Statement of Income
For the Years Ended September 30, 1996 to 1998
(Dollars in Thousands)
Year Ended September 30,
----------------------------
1998 1997 1996
--------- -------- -------
Total interest income $31,892 $33,790 $31,694
Total interest expense 18,966 19,702 18,961
-------
Net interest income 12,926 14,088 12,733
Provision for loan losses 405 317 600
------- ------- -------
Net interest income after prov 12,521 13,771 12,133
Non-interest operating income 1,828 1,461 1,376
Gain on sale of loans and securities 117 114 170
Gain on sale of branches 3,016 -- --
------- ------- -------
Total non-interest income 4,961 1,575 1,546
Compensation and benefits 6,323 5,863 5,288
Other compensation and benefits 2,085 -- --
Occupancy and equipment costs 1,818 1,646 1,453
Marketing 495 488 471
Data processing costs 558 479 443
Deposit insurance premiums 338 456 1,003
Special SAIF assessment -- -- 2,513
Real estate operations, net 180 22 39
Other expense 2,149 2,566 2,172
------- ------- -------
Total non-interest expense 13,946 11,520 13,382
Income before taxes 3,536 3,826 297
Provision for income taxes 1,151 1,299 44
------- ------- -------
Net income $ 2,385 $ 2,527 $ 253
======= ======= =======
Source: First Federal Florida, financial statements.
II-2
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-3
Loan Portfolio Composition
As of September 30, 1996 to 1998
(Dollars in Thousands)
September 30,
-------------------------------------------------------------------------------------
1998 1997 1996
------------------------- -------------------------- --------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
Mortgage loans
Residential:
Permanent $244,667 68.3% $256,742 69.3% $247,609 69.3%
Construction 27,311 7.6 22,350 6.0 19,778 6.0
Multi-family 4,464 1.2 4,154 1.1 4,564 1.1
Commercial and real estate(1) 17,217 4.8 12,282 3.3 8,562 3.3
Land 6,796 1.9 6,153 1.7 779 1.7
----- ----- ----- ----- ------- -----
Total mortgage loans 300,455 83.8 301,681 81.3 281,292 83.7
Consumer loans
Home equity loans (2) 13,137 3.7 18,310 4.9 18,361 4.9
Automobile loans 34,795 9.7 43,504 11.7 30,911 11.7
Other 9,959 2.8 7,415 2.0 5,311 2.0
----- ----- ------ ----- ----- -----
Total consumer loans 57,891 17.2 69,229 18.7 54,583 16.3
Gross total loans 358,346 100.0% 370,910 100.0% 335,875 100.0%
------- ===== ------- ===== ------- =====
Less:
Loans in process (3) 17,013 12,589 12,072
Deferred income 159 137 91
Allowance for loan losses 2,564 2,633 2,385
------- ------- -------
Total loans, net $338,610 $355,551 $321,327
======== ======== ========
(1) Includes commercial loans of $1,085,000 in 1998 and $218,000 in 1997 which
were not secured by real estate.
(2) Includes home equity lines of credit.
(3) Related to construction loans.
Source: First Federal Florida, prospectus.
II-3
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-4
Investment Portfolio Composition
As of September 30, 1996 to 1998
(Dollars in Thousands)
September 30,
--------------------------------------------------------------------------------
1998 1997 1996
------------------------- -------------------------- --------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
Securities held to maturity
U.S. Govt. agency securities $ 8,998 14.7% $27,993 37.5% $34,983 35.1%
Collateralized mortg. obligations 9,738 16.0 9,819 13.2 9,818 9.8
------ ---- ----- ---- ----- -----
Total securities held to maturity 18,736 30.7 37,812 50.7 44,801 44.9
Securities available for sale
U.S. Govt. agency securities 24,711 40.6 31,126 41.7 38,501 38.6
Collateralized mortg. obligations 3,228 5.3 -- 0.0 -- 0.0
Mortgage-backed securities 14,286 23.4 5,635 7.6 6,619 6.6
Mutual funds -- 0.0 -- 0.0 9,920 9.9
------- ---- ------ ----- ----- ------
Total securities avail. for sale 42,225 69.2 36,761 49.3 55,040 55.1
------- ----- ------- ----- ------- -----
Total investment securities $60,961 100.0% $74,573 100.0% $99,841 100.0%
======= ===== ======= ===== ======= =====
Source: First Federal Florida, prospectus.
II-4
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-5
Deposit Account Distribution
As of September 30, 1996 to 1998
(Dollars in Thousands)
September 30,
------------------------------------------------------------------------------------
1998 1997 1996
------------------------- ------------------------- -------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
Noninterest-bearing checking $ 10,492 3.0% $ 10,529 2.5% $7,938 2.0%
Interest-bearing checking 24,456 7.0 24,149 5.6 22,187 5.5
Savings accounts 37,758 10.7 47,354 11.0 49,098 12.1
Money market accounts 18,091 5.1 14,686 3.4 11,119 2.8
------- ------ ------ ------ ------ ------
Total transaction deposits 90,798 25.8 96,718 22.5 90,342 22.4
------- ------ ------ ------ ------ ------
Certificate of deposit accounts
(by scheduled maturity date):
within 12 months 165,547 47.0 221,586 51.6 228,759 56.6
within 13-24 months 54,045 15.3 49,946 11.6 40,654 10.0
within 25-36 months 11,715 3.3 30,166 7.0 12,932 3.2
within 37-48 months 21,527 6.1 8,827 2.1 20,679 5.1
within 49-60 months 8,548 2.4 22,471 5.2 10,778 2.7
within 61-72 months -- -- -- -- 40 0.0
------- ------ ------- ------ ------- ------
Total certificates of deposit 261,382 74.2 332,996 77.5 313,842 77.6
------- ------ ------- ----- ------- ------
Total deposits $352,180 100.0% $429,714 100.0% $404,184 100.0%
======== ===== ======== ===== ======== =====
Source: First Federal Florida, financial statements.
II-5
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit II-6
Office Facilities
As of September 30, 1998
(Dollars in Thousands)
Year
Facility
Leased or Opened or
Location Owned Acquired Net Book Value
- ---------------------------- ------------- ---------------- ---------------
Main Office / Headquarters Owned 1957 $2,300
Branch Offices:
Grove Park Owned 1961 255
Highlands Owned 1972 455
Interstate Owned 1985 440
Winter Haven North Owned 1978 433
Winter Haven South Owned 1995 874
West Bradenton Owned 1989 744
Cortez (Bradenton) Leased 1972 63
Scott Lake Owned 1997 700
Operations Center Owned 1964 288
Source: First Federal Florida, prospectus.
II-6
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Abington Bancorp, Inc. ABBK MA 560 5.62 0.82 12.66 14.00 46.9 11.97 15.56 136.7 149.7 8.37 1.43
Acadiana Bancshares, Inc. ANA LA 289 13.65 0.97 6.28 17.13 38.9 14.51 14.27 98.9 98.9 13.49 2.57
Access Anytime Bancorp, Inc. AABC NM 118 7.96 0.26 3.12 7.13 8.8 30.98 30.98 92.8 92.8 7.39 0.00
Advance Financial Bancorp AFBC WV 117 12.88 0.70 4.97 12.88 13.3 16.09 16.09 88.1 88.1 11.35 2.49
Albion Banc Corp. ALBC NY 73 8.73 0.52 6.12 9.38 7.1 18.38 18.38 110.7 110.7 9.66 1.28
Alliance Bancorp ABCL IL 2,100 8.78 0.71 7.74 19.50 223.4 16.12 14.13 120.4 121.3 10.64 2.26
Alliance Bancp. of New England ANE CT 252 6.76 0.99 13.69 11.50 26.4 11.98 20.54 151.5 155.0 10.46 1.74
AMB Financial Corp. AMFC IN 119 11.19 0.30 2.20 12.19 10.6 36.93 18.47 79.9 79.9 8.93 2.63
Ambanc Holding Co., Inc. AHCI NY 554 10.84 0.34 3.04 16.00 65.5 34.04 26.23 109.3 109.3 11.85 1.75
Ameriana Bancorp ASBI IN 399 10.89 0.97 8.33 19.94 63.6 17.49 17.34 141.3 147.9 16.04 3.31
American Bank of Connecticut BKC CT 648 9.26 1.62 19.13 21.25 99.9 9.79 10.95 162.5 166.9 15.42 3.76
Anchor BanCorp Wisconsin, Inc. ABCW WI 2,114 6.07 1.15 17.69 18.25 312.2 14.96 14.96 239.5 243.0 14.73 1.10
Andover Bancorp, Inc. ANDB MA 1,366 8.65 1.25 15.64 31.38 204.0 12.45 12.50 172.1 172.1 14.89 2.29
ASB Financial Corp. ASBP OH 117 12.51 0.93 6.55 11.88 19.7 17.46 17.72 134.0 134.0 16.76 3.37
Astoria Financial Corp. ASFC NY 12,713 5.72 0.83 10.02 43.75 1,163.5 13.22 14.34 127.7 175.6 9.15 1.83
Bancorp Connecticut, Inc. BKCT CT 514 9.56 1.38 13.69 15.75 80.7 13.46 15.44 164.1 164.1 15.67 3.43
Bank Plus Corp. BPLS CA 3,825 2.97 (1.27) (30.94) 4.00 77.7 NM NM 60.9 68.9 2.03 0.00
Bank United Corp. BNKU TX 13,665 4.59 0.90 17.78 40.50 1,279.1 11.44 11.64 186.9 204.8 9.36 1.58
Bank West Financial Corp. BWFC MI 188 12.37 0.14 1.05 9.75 25.6 NA NA 110.1 110.1 13.61 2.46
BankAtlantic Bancorp, Inc. BANC FL 3,683 5.27 0.30 4.81 7.28 249.0 30.34 66.19 109.2 141.4 7.33 1.37
BankUnited Financial Corp. BKUNA FL 3,738 4.51 0.24 4.53 7.13 129.3 18.27 18.27 67.9 81.6 3.46 0.00
Bay State Bancorp, Inc. BYS MA 306 20.92 (0.48) (2.80) 24.88 63.1 NA NA 91.3 91.3 20.58 0.00
Bay View Capital Corp. BVCC CA 5,522 4.55 0.34 5.09 17.25 333.8 20.78 12.50 88.7 137.8 6.12 2.32
Bedford Bancshares, Inc. BFSB VA 159 13.39 1.33 9.68 11.75 27.0 13.82 13.82 127.0 127.0 17.01 2.72
Big Foot Financial Corp. BFFC IL 220 16.86 0.55 3.16 14.38 35.3 28.75 38.85 96.5 96.5 16.28 0.00
Blue River Bancshares, Inc. BRBI IN 122 10.38 NA NA 7.50 11.2 NA NA 69.9 91.4 9.19 0.00
BostonFed Bancorp, Inc. BFD MA 1,096 7.44 0.72 8.73 18.00 93.8 13.33 13.33 109.0 112.7 8.81 2.22
Broadway Financial Corp. BYFC CA 139 9.65 0.26 2.55 8.00 7.5 22.86 53.33 57.8 57.8 5.35 2.50
Camco Financial Corp. CAFI OH 602 9.32 1.18 12.05 15.00 82.2 12.50 12.40 138.9 147.5 13.66 2.87
Cameron Financial Corp. CMRN MO 221 19.86 1.14 5.45 15.88 38.6 16.71 15.72 88.1 88.1 17.50 1.76
Carolina Fincorp, Inc. CFNC NC 111 14.08 0.86 4.48 8.38 16.0 14.96 13.29 102.1 102.1 14.38 2.87
III-1
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Carver Bancorp, Inc. CNY NY 430 8.17 0.22 2.59 8.31 19.2 19.79 19.33 53.2 54.9 4.47 0.00
Cascade Financial Corp. CASB WA 460 7.08 0.87 12.40 13.00 56.0 16.25 16.88 171.7 171.7 12.16 0.00
Catskill Financial Corp. CATB NY 315 21.55 1.30 5.60 13.63 59.4 14.65 14.97 87.6 87.6 18.87 2.72
Cavalry Bancorp, Inc. CAVB TN 354 28.83 1.63 7.06 21.00 150.4 NA NA 155.2 155.2 44.75 0.95
CBES Bancorp, Inc. CBES MO 147 11.66 0.86 5.99 16.75 16.2 15.09 15.09 91.9 91.9 10.71 2.87
CENIT Bancorp, Inc. CNIT VA 624 7.50 0.92 12.39 18.25 88.5 14.15 14.26 169.5 183.1 14.33 2.41
Central Co-operative Bank CEBK MA 378 9.16 0.79 8.00 17.94 35.3 11.96 14.95 93.9 102.8 9.33 1.78
Century Bancorp, Inc. CENB NC 92 20.53 1.06 4.52 13.63 17.1 14.65 14.81 91.3 91.3 18.76 4.99
CFS Bancorp Inc. CITZ IN 1,446 NA NA NA 9.75 223.7 NA NA 86.5 NA 15.42 3.28
CFSB Bancorp, Inc. CFSB MI 867 7.82 1.37 17.50 22.38 182.5 16.45 16.70 269.3 269.3 21.06 2.32
Charter One Financial, Inc. COFI OH 19,842 7.18 0.95 13.08 26.25 4,402.1 19.16 15.35 231.5 245.3 17.53 2.13
Chester Valley Bancorp Inc. CVAL PA 381 8.65 1.00 11.55 27.75 68.0 19.01 20.40 206.0 206.0 17.83 1.59
Citizens First Financial Corp. CBK IL 285 13.23 0.75 5.45 16.50 37.8 19.64 23.57 104.5 104.5 13.82 0.00
CKF Bancorp, Inc. CKFB KY 63 21.44 1.30 5.97 16.25 13.7 16.25 18.26 94.6 94.6 21.82 3.32
Classic Bancshares, Inc. CLAS KY 143 12.71 0.68 4.52 15.13 19.7 20.44 21.30 94.9 110.0 13.70 2.12
CNS Bancorp, Inc. CNSB MO 96 22.90 0.88 3.61 13.56 20.2 25.59 25.59 92.1 92.1 21.09 2.21
CNY Financial Corp. CNYF NY 280 11.73 NA NA 9.47 50.7 NA NA NA NA NA 0.00
Coastal Bancorp, Inc. CBSA TX 3,126 2.71 0.55 15.05 15.88 112.8 7.52 7.32 102.6 141.1 3.74 2.02
Coastal Financial Corp. CFCP SC 644 5.88 1.18 19.52 20.00 125.3 19.23 20.41 331.1 331.1 19.47 1.40
Columbia Financial of Kentucky CFKY KY 118 32.02 0.67 2.93 12.38 33.1 NA NA 87.6 87.6 28.07 2.26
Commercial Federal Corp. CFB NE 11,083 6.69 0.66 8.81 21.81 1,320.2 16.53 11.79 144.3 180.7 11.89 1.19
Commonwealth Bancorp, Inc. CMSB PA 2,278 6.70 0.52 5.77 15.13 222.6 18.91 16.26 117.0 149.2 9.80 2.12
Community Federal Bancorp CFTP MS 263 22.27 1.23 4.91 14.75 64.9 22.01 25.43 99.3 99.3 24.64 2.17
Community Financial Corp. CFFC VA 187 13.87 1.01 7.34 12.13 31.2 17.32 18.37 119.5 119.9 16.62 2.64
Community Investors Bancorp CIBI OH 114 8.93 0.87 8.12 12.13 14.9 17.57 17.57 148.1 148.1 13.22 1.98
Cooperative Bankshares, Inc. COOP NC 389 8.00 0.63 8.07 15.50 47.2 20.95 20.95 151.5 151.5 12.11 0.00
Crazy Woman Creek Bancorp CRZY WY 62 22.59 1.16 4.95 12.38 11.0 16.50 16.72 78.3 78.3 17.68 3.23
Crusader Holding Corp. CRSB PA 231 10.10 2.31 26.51 11.25 43.1 8.59 8.59 176.3 185.3 18.64 0.00
CSB Financial Group, Inc. CSBF IL 47 22.18 0.63 2.68 9.13 7.5 24.66 26.07 68.4 72.5 15.86 0.00
Delphos Citizens Bancorp, Inc. DCBI OH 116 22.47 1.48 6.03 18.00 31.6 18.95 18.95 121.4 121.4 27.27 1.33
Dime Bancorp, Inc. DME NY 21,243 5.27 0.92 15.04 23.19 2,593.8 13.72 12.74 193.9 234.7 12.23 0.86
III-2
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Dime Community Bancshares DCOM NY 1,744 9.11 0.93 7.74 21.38 247.9 17.67 18.43 139.1 159.9 14.36 2.25
Downey Financial Corp. DSL CA 5,911 7.89 1.01 13.38 23.25 654.1 11.07 12.17 138.9 140.3 11.07 1.38
Eagle BancGroup, Inc. EGLB IL 176 11.29 0.40 3.47 18.75 20.6 29.30 29.76 103.2 103.2 11.65 2.13
Eagle Bancshares, Inc. EBSI GA 1,243 6.23 0.91 12.62 18.25 104.4 11.55 12.09 136.4 136.4 8.50 3.51
EFC Bancorp, Inc. EFC IL 417 22.89 (0.03) (0.21) 11.94 89.4 NA NA 93.7 93.7 21.44 0.00
Elmira Savings Bank, FSB ESBK NY 232 6.43 0.47 7.43 23.75 17.3 15.73 16.16 113.4 113.4 7.42 2.69
Emerald Financial Corp. EMLD OH 643 8.27 1.17 14.21 10.75 110.7 16.29 16.80 205.9 208.3 17.21 1.49
Empire Federal Bancorp, Inc. EFBC MT 105 35.59 1.20 3.28 13.00 30.4 22.81 18.31 81.3 81.3 28.92 2.62
Equality Bancorp, Inc. EBI MO 283 9.28 0.50 5.26 10.50 26.5 NA NA 101.0 101.0 9.36 2.29
Equitable Federal Savings Bank EQSB MD 360 5.40 0.95 17.97 19.75 24.3 8.16 12.91 124.8 124.8 6.74 0.00
ESB Financial Corp. ESBF PA 966 5.72 0.65 8.86 16.25 87.5 15.33 15.93 141.4 159.5 9.06 2.22
Essex Bancorp, Inc. ESX VA 213 7.08 0.07 1.00 1.75 1.9 NM NM NM NM 0.87 0.00
Falmouth Bancorp, Inc. FCB MA 113 19.72 1.13 5.10 17.13 24.0 20.39 28.07 107.9 107.9 21.28 1.64
FCB Financial Corp. FCBF WI 535 14.18 1.32 9.22 28.63 109.8 15.90 15.90 144.7 144.7 20.52 3.07
Federal Trust Corp. FDTR FL 169 7.69 NA NA 2.31 11.4 NA NA 87.6 87.6 6.75 0.00
FFD Financial Corp. FFDF OH 99 16.07 0.92 4.37 14.50 21.0 23.02 34.52 131.9 131.9 21.20 2.07
FFLC Bancorp, Inc. FFLC FL 422 12.51 1.03 7.99 16.25 59.9 14.77 14.77 113.6 113.6 14.22 2.22
FFW Corp. FFWC IN 213 8.64 0.96 10.17 15.50 22.4 11.57 12.60 113.7 123.0 10.55 2.71
FFY Financial Corp. FFYF OH 659 12.77 1.21 9.22 33.13 130.2 16.48 16.90 156.0 156.0 19.92 2.72
Fidelity Bancorp, Inc. FSBI PA 396 7.09 0.74 10.77 18.00 35.5 12.50 12.95 126.5 126.5 8.97 2.00
Fidelity Bancorp, Inc. FBCI IL 502 10.59 0.19 1.80 23.38 66.2 17.58 23.38 124.5 124.7 13.20 1.71
Fidelity Federal Bancorp FFED IN 200 3.98 (3.35) (59.17) 3.88 12.2 NM NM 153.2 153.2 6.11 0.00
First Bancshares, Inc. FBSI MO 173 13.47 1.04 7.49 12.75 27.6 15.94 15.55 114.0 118.9 15.93 0.94
First Bell Bancorp, Inc. FBBC PA 750 9.88 1.09 10.33 15.50 96.5 11.83 11.83 130.3 130.3 12.87 2.58
First Citizens Corp. FSTC GA 386 8.52 1.45 14.41 25.00 70.1 14.12 14.45 179.6 217.4 18.19 1.44
First Coastal Corp. FCME ME 178 9.12 0.96 9.91 10.00 13.6 9.17 11.90 83.7 83.7 7.64 0.00
First Defiance Financial Corp. FDEF OH 782 12.17 0.89 5.36 13.75 112.5 19.37 19.37 107.1 119.8 14.37 2.62
First Essex Bancorp, Inc. FESX MA 1,241 5.82 0.86 11.49 17.50 132.4 12.96 13.67 138.0 187.0 10.66 3.66
First Federal Bancorp, Inc. FFBZ OH 214 7.72 0.64 8.23 10.88 34.3 28.62 28.62 207.5 207.5 16.05 1.47
First Federal BanCorp. BDJI MN 125 10.44 0.69 6.51 14.50 14.4 14.80 14.80 110.1 110.1 11.50 0.00
First Federal Bancshares of Ark.FFBH AR 600 13.69 1.03 6.97 20.13 92.1 15.97 15.97 114.2 114.2 15.64 1.39
III-3
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
First Federal Capital Corp. FTFC WI 1,737 6.76 1.21 16.78 15.50 286.5 16.15 16.32 233.8 244.9 16.49 1.81
First Federal Financial Corp. FFKY KY 467 9.64 1.47 11.30 27.25 112.5 18.54 18.66 203.1 256.1 24.08 2.20
First Federal S&L of E.Hartford FFES CT 993 7.45 0.60 8.61 27.38 75.2 12.97 12.28 101.8 101.8 7.58 2.48
First Financial Holdings Inc. FFCH SC 1,840 6.80 0.92 13.97 19.31 263.8 16.51 15.70 210.8 210.8 14.34 2.49
First Franklin Corp. FFHS OH 232 8.97 0.81 8.82 13.75 23.4 12.97 13.89 112.3 112.8 10.11 2.18
First Georgia Holding, Inc. FGHC GA 181 7.67 1.16 14.15 8.25 39.6 21.71 21.71 268.7 287.5 21.90 0.00
First Independence Corp. FFSL KS 124 9.73 0.75 7.72 11.00 10.6 11.96 11.96 87.2 87.2 8.49 2.73
First Indiana Corp. FISB IN 1,739 9.29 1.14 12.14 19.38 246.2 13.45 13.74 151.0 152.6 14.16 2.48
First Kansas Financial Corp. FKAN KS 105 19.90 0.72 5.92 10.50 16.3 NA NA 77.0 77.9 15.47 0.00
First Keystone Financial, Inc. FKFS PA 416 6.41 0.73 11.14 15.00 34.9 12.20 12.30 131.0 131.0 8.40 1.60
First Lancaster Bancshares, Inc.FLKY KY 55 24.66 1.05 3.89 13.13 12.2 21.52 21.52 89.4 89.4 22.05 4.57
First Liberty Financial Corp. FLFC GA 1,501 7.46 1.05 13.35 21.75 294.8 19.08 18.13 241.1 264.9 19.63 1.75
First Midwest Financial, Inc. CASH IA 421 9.19 0.71 6.60 14.88 38.0 14.44 15.99 90.7 101.5 9.23 3.50
First Mutual Bancorp, Inc. FMBD IL 371 12.24 0.42 2.94 17.88 63.1 36.48 41.57 112.6 143.6 16.99 1.79
First Mutual Savings Bank FMSB WA 474 7.44 1.09 15.48 14.88 63.2 12.82 16.17 179.0 179.0 13.32 1.34
First Niles Financial Inc. FNFI OH 74 18.38 NA NA 10.56 18.5 NA NA NA NA NA 0.00
First Northern Capital Corp. FNGB WI 710 10.62 0.99 9.04 12.50 109.8 16.67 16.67 145.9 145.9 15.49 2.88
First Savings Bancorp, Inc. SOPN NC 296 23.66 1.76 7.65 22.00 81.7 16.79 16.79 116.8 116.8 27.63 4.55
First SecurityFed Financial, IncFSFF IL 338 25.80 1.24 4.73 13.31 81.0 NA NA 92.7 93.0 23.97 2.10
First Source Bancorp, Inc. FSLA NJ 1,262 20.36 1.23 7.87 7.50 235.6 NA NA 90.6 93.5 18.92 2.40
First Washington Bancorp, Inc. FWWB WA 1,437 10.16 1.14 8.76 20.25 231.4 15.34 15.46 126.0 151.7 16.18 1.78
FirstBank Corp. FBNW ID 202 14.25 1.06 6.98 13.50 26.5 12.62 12.62 83.1 83.1 13.10 2.67
FirstFed America Bancorp FAB MA 1,293 8.60 0.55 5.53 12.88 101.2 14.80 14.47 81.9 81.9 7.83 1.55
FirstFed Bancorp, Inc. FFDB AL 181 9.32 0.86 8.77 10.00 24.5 15.87 15.87 134.8 145.6 13.46 2.80
FirstFed Financial Corp. FED CA 3,827 6.50 0.80 13.91 17.44 368.4 11.63 11.63 147.9 148.8 9.65 0.00
FirstSpartan Financial Corp. FSPT SC 530 22.67 1.42 5.58 30.50 115.5 17.13 17.13 106.8 106.8 24.20 2.62
FLAG Financial Corp. FLAG GA 454 8.75 0.68 7.72 12.13 62.8 22.45 17.32 158.5 158.5 13.85 1.98
Flagstar Bancorp, Inc. FLGS MI 3,093 4.81 1.37 25.26 26.88 367.4 11.01 11.01 241.5 247.2 11.88 1.19
Flushing Financial Corp. FFIC NY 1,143 11.60 0.91 7.16 15.88 178.3 17.45 16.37 131.2 136.3 15.74 1.51
FMS Financial Corp. FMCO NJ 667 6.33 0.81 13.18 9.50 68.7 13.38 13.38 161.6 162.4 10.28 1.26
Fort Thomas Financial Corp. FTSB KY 101 16.07 1.18 7.39 14.25 21.0 17.59 17.59 129.0 129.0 20.73 1.75
III-4
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Frankfort First Bancorp, Inc. FKKY KY 135 16.55 1.20 6.75 15.00 23.8 15.46 15.46 106.5 106.5 17.63 5.87
FSF Financial Corp. FFHH MN 416 10.07 0.74 6.94 15.00 43.5 14.29 14.29 92.3 93.9 10.44 3.33
Fulton Bancorp, Inc. FTNB MO 118 22.50 1.09 4.64 16.50 28.1 22.92 22.92 107.2 107.2 24.13 1.82
GA Financial, Inc. GAF PA 819 13.38 1.06 7.72 15.06 107.4 12.15 13.69 97.5 98.3 13.14 3.72
GFSB Bancorp, Inc. GUPB NM 129 10.30 0.76 6.35 14.25 15.0 17.81 17.81 116.9 116.9 12.04 2.11
Golden State Bancorp GSB CA 53,018 1.39 1.41 21.78 15.50 1,992.5 NA NA 129.9 397.4 3.76 0.00
Golden West Financial Corp. GDW CA 39,383 7.58 1.05 14.83 84.44 4,806.3 11.79 11.60 161.7 161.7 12.26 0.66
Great American Bancorp, Inc. GTPS IL 149 15.60 0.71 3.82 13.50 18.4 20.45 20.45 79.6 79.6 12.41 3.26
Great Pee Dee Bancorp PEDE SC 69 45.53 1.43 3.41 13.50 29.4 NA NA 94.0 94.0 42.76 2.67
Green Street Financial Corp. GSFC NC 173 34.93 1.60 4.55 14.50 59.2 21.01 21.01 98.1 98.1 34.28 3.31
GreenPoint Financial Corp. GPT NY 13,613 6.10 1.17 11.38 33.38 3,157.8 16.52 16.12 156.0 364.0 23.32 1.92
GS Financial Corp. GSLA LA 144 33.31 1.05 2.58 12.88 38.0 26.82 29.94 78.9 78.9 26.30 2.17
GSB Financial Corp. GOSB NY 132 23.87 0.48 1.87 14.50 32.1 50.00 36.25 101.8 101.8 24.31 0.83
Guaranty Federal Bancshares GFED MO 277 23.19 1.27 5.71 11.75 69.5 NA NA 102.1 102.1 25.14 2.72
Hallmark Capital Corp. HALL WI 462 7.45 0.68 8.86 12.25 36.0 12.37 12.37 99.2 99.2 7.80 0.00
Harbor Federal Bancorp, Inc. HRBF MD 232 12.78 0.79 6.24 20.00 37.3 19.61 19.61 125.9 125.9 16.08 2.60
Harbor Florida Bancshares, Inc. HARB FL 1,351 19.37 1.40 9.34 10.88 336.1 NA NA 127.5 128.7 24.89 2.39
Hardin Bancorp, Inc. HFSA MO 133 10.29 0.72 6.67 20.00 16.3 17.86 20.83 119.3 119.3 12.28 3.00
Harleysville Savings Bank HARL PA 418 6.25 0.93 14.24 27.13 45.5 13.43 13.43 174.2 174.2 10.89 1.77
Harrington Financial Group, Inc.HFGI IN 566 3.39 (0.88) (20.62) 8.00 25.6 NM NM 133.8 133.8 4.53 1.50
Harrodsburg First Fin'l Bancorp HFFB KY 109 26.54 1.36 5.07 14.13 27.2 17.88 17.44 87.3 87.3 25.01 2.83
Harvest Home Financial Corp. HHFC OH 96 10.71 0.59 5.26 14.50 12.8 24.17 25.44 123.9 123.9 13.27 3.03
Haven Bancorp, Inc. HAVN NY 2,322 5.06 0.41 7.47 14.63 129.4 15.39 15.90 105.7 110.4 5.57 2.05
Hawthorne Financial Corp. HTHR CA 1,395 5.67 0.95 18.68 16.00 83.1 10.60 6.45 105.2 105.2 5.96 0.00
Haywood Bancshares, Inc. HBS NC 150 13.90 0.08 0.53 16.75 20.9 167.50 12.23 98.0 101.3 14.01 3.82
HCB Bancshares, Inc. HCBBE AR 222 17.08 0.33 1.86 11.06 29.3 NA NA 76.6 77.5 13.20 2.17
Hemlock Federal Fin'l Corp. HMLK IL 198 14.17 0.86 5.31 14.13 25.1 16.24 16.42 94.7 94.7 13.42 2.27
Heritage Bancorp, Inc. HBSC SC 301 31.47 NA NA 20.38 94.3 NA NA 99.6 99.6 31.35 1.47
Heritage Financial Corp. HFWA WA 418 21.19 1.25 6.20 10.06 99.7 NA NA 103.3 113.5 23.54 1.79
HF Financial Corp. HFFC SD 561 9.83 1.07 10.97 14.00 60.0 10.53 10.77 108.9 108.9 10.70 2.57
High Country Bancorp, Inc. HCBC CO 104 17.78 0.85 5.01 13.13 17.4 NA NA 93.7 93.7 16.65 3.05
III-5
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Highland Bancorp, Inc. HBNK CA 595 7.00 1.46 18.86 33.25 72.5 9.93 10.97 174.0 174.0 12.19 1.50
Hingham Institution for Savings HIFS MA 247 9.48 1.25 12.89 17.00 33.4 11.97 12.06 142.7 142.7 13.53 2.35
HMN Financial, Inc. HMNF MN 706 8.90 0.48 4.12 13.25 71.4 24.54 17.91 104.6 114.1 10.09 1.81
Home Bancorp HBFW IN 360 11.92 0.85 6.84 28.75 67.6 22.46 23.00 157.4 157.4 18.76 1.11
Home City Financial Corp. HCFC OH 81 13.65 1.26 7.41 14.50 13.1 14.50 14.50 119.0 119.0 16.24 2.76
Home Federal Bancorp HOMF IN 723 9.40 1.48 16.29 22.38 115.2 11.65 11.65 165.6 169.8 15.92 1.97
Home Financial Bancorp HWEN IN 42 17.06 0.83 4.77 7.13 6.4 16.57 20.36 88.8 88.8 15.16 1.68
Home Loan Financial Corp. HLFC OH 85 37.71 1.49 4.64 14.00 30.6 NA NA 98.6 98.6 37.17 1.43
Home Port Bancorp, Inc. HPBC MA 264 8.87 1.43 15.25 23.00 42.4 12.57 11.27 181.0 181.0 16.06 3.48
Homestead Bancorp, Inc. HSTD LA 88 18.21 0.52 5.03 8.25 12.2 NA NA 76.5 76.5 13.93 2.42
HopFed Bancorp, Inc. HFBC KY 217 27.38 1.26 7.45 16.00 64.5 NA NA 108.8 108.8 29.80 1.88
Horizon Financial Corp. HRZB WA 569 15.30 1.56 9.99 13.25 99.2 11.83 12.16 113.9 113.9 17.43 3.32
Horizon Financial Services Corp.HZFS IA 87 9.86 (0.33) (3.45) 12.88 11.3 NM 15.15 132.7 132.7 13.09 1.40
Hudson River Bancorp Inc. HRBT NY 831 27.17 NA NA 10.94 195.3 NA NA 79.5 79.6 23.50 0.00
Independence Comm. Bank Corp. ICBC NY 5,157 17.38 (0.05) (0.29) 15.13 1,150.2 NA NA 122.5 129.6 22.30 0.79
Independence FSB IFSB DC 249 8.17 1.43 18.88 12.75 16.3 4.29 12.14 74.3 80.8 6.55 1.96
Industrial Bancorp, Inc. INBI OH 389 16.00 1.50 9.18 19.19 93.9 16.54 16.54 154.2 154.2 24.68 3.13
InterWest Bancorp, Inc. IWBK WA 2,448 6.48 0.95 13.58 20.84 326.2 14.89 13.11 189.5 207.0 13.32 2.69
Ipswich Savings Bank IPSW MA 249 5.51 1.14 21.28 11.31 27.1 10.67 10.77 197.1 197.1 10.85 1.41
ITLA Capital Corp. ITLA CA 1,007 10.76 1.45 13.90 16.00 118.1 8.94 8.94 112.1 112.4 12.09 0.00
Jacksonville Bancorp, Inc. JXVL TX 243 14.46 1.33 9.13 15.94 38.6 12.65 12.65 110.1 110.1 15.91 3.14
Jefferson Savings Bancorp, Inc. JSBA MO 1,317 7.81 0.65 6.85 14.00 140.5 17.07 17.72 107.0 130.8 10.72 2.00
JSB Financial, Inc. JSB NY 1,552 24.56 3.17 13.32 50.75 486.0 10.51 11.97 129.9 129.9 31.90 3.15
Kankakee Bancorp, Inc. KNK IL 405 8.56 0.70 6.95 26.25 35.9 14.34 14.42 90.4 105.4 8.90 1.83
Kentucky First Bancorp, Inc. KYF KY 79 17.67 1.05 6.10 13.00 15.6 18.31 18.31 112.2 112.2 19.83 3.85
Klamath First Bancorp, Inc. KFBI OR 1,031 13.10 0.96 6.52 18.38 182.2 18.38 18.94 112.7 122.3 17.67 1.96
KSB Bancorp, Inc. KSBK ME 163 7.19 1.15 14.83 14.63 18.5 10.37 10.37 141.0 158.8 11.33 1.64
Lakeview Financial Corp. LVSB NJ 594 6.60 1.74 17.17 21.50 103.6 7.93 21.72 185.3 276.4 17.67 1.16
Landmark Bancshares, Inc. LARK KS 225 11.04 1.03 7.67 23.81 31.4 16.77 17.77 127.1 127.1 14.03 2.52
Laurel Capital Group, Inc. LARL PA 221 11.10 1.42 13.50 19.50 42.7 14.66 14.23 175.2 175.2 19.44 3.08
Lawrence Savings Bank LSBX MA 340 13.09 2.91 26.36 12.75 55.2 5.64 5.64 124.2 124.2 16.25 0.00
III-6
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Lexington B&L Financial Corp. LXMO MO 95 15.14 0.78 3.83 12.00 12.1 18.18 19.35 79.1 84.8 12.70 2.50
Life Financial Corp. LFCO CA 380 16.18 2.66 20.44 5.50 36.1 3.22 3.07 58.6 58.6 9.49 0.00
Little Falls Bancorp, Inc. LFBI NJ 341 10.23 0.56 5.12 18.00 44.6 21.95 22.22 120.0 128.9 13.09 1.33
Local Financial Corp. LO OK 2,106 4.52 NA NA 9.31 191.3 NA NA 169.3 202.5 9.08 0.00
Logansport Financial Corp. LOGN IN 92 17.52 1.46 7.80 15.00 18.0 14.85 14.71 111.0 111.0 19.44 2.93
LSB Financial Corp. LSBI IN 227 8.01 0.83 9.83 28.50 26.6 14.92 14.92 137.4 137.4 11.71 1.40
MAF Bancorp, Inc. MAFB IL 3,606 7.04 1.09 13.99 24.88 548.3 15.35 15.55 198.1 221.3 15.45 1.13
Marion Capital Holdings, Inc. MARN IN 197 17.79 1.14 5.64 22.00 34.3 17.74 17.74 100.0 102.2 18.11 4.00
Market Financial Corp. MRKF OH 55 27.61 1.00 3.16 11.75 15.7 26.11 26.11 104.1 104.1 28.74 2.38
MASSBANK Corp. MASB MA 934 11.68 1.17 10.22 38.50 136.1 13.05 15.16 124.0 125.6 14.64 2.81
Mayflower Co-operative Bank MFLR MA 143 9.12 1.13 11.78 23.44 21.1 14.03 16.28 159.8 162.1 14.75 3.41
MBLA Financial Corp. MBLF MO 209 13.60 0.88 6.65 17.63 22.0 12.16 12.41 77.4 77.4 10.53 3.40
MECH Financial, Inc. MECH CT 960 9.76 1.02 10.32 28.50 150.9 16.19 16.29 159.8 161.2 15.72 2.11
Medford Bancorp, Inc. MDBK MA 1,134 8.68 1.08 11.88 18.00 156.9 14.06 14.52 152.2 160.0 13.84 2.22
MegaBank Financial Corp. MBFC CO 217 6.61 NA NA 10.88 85.5 NA NA 485.5 485.5 32.07 0.00
Metropolitan Financial Corp. METF OH 1,171 3.26 0.68 17.65 11.25 87.3 13.08 12.10 213.5 229.1 7.45 0.00
MetroWest Bank MWBX MA 669 7.43 1.25 16.85 6.63 94.5 12.05 12.05 189.8 189.8 14.12 3.02
MFB Corp. MFBC IN 310 9.96 0.79 6.94 22.00 32.4 15.83 16.92 105.0 105.0 10.46 1.55
Mid-Coast Bancorp, Inc. MCBN ME 71 7.49 0.55 6.73 8.75 6.3 17.50 17.50 117.8 117.8 8.81 2.29
Midwest Bancshares, Inc. MWBI IA 161 7.36 0.87 12.35 13.00 13.9 10.57 12.15 117.9 117.9 8.67 2.77
Milton Federal Financial Corp. MFFC OH 235 11.17 0.67 5.82 14.25 31.9 20.07 22.62 112.8 112.8 13.55 4.21
Monterey Bay Bancorp, Inc. MBBC CA 460 8.95 0.30 2.71 14.44 51.0 46.57 42.46 113.4 124.0 11.74 0.83
Montgomery Financial Corp. MONT IN 119 16.88 0.92 5.09 10.13 16.4 15.34 15.34 82.6 82.6 13.93 2.17
MSB Financial, Inc. MSBF MI 82 16.51 1.53 9.21 13.50 18.0 13.37 13.37 133.3 133.3 22.00 2.22
Mutual Savings Bank, FSB MSBK MI 586 6.06 (1.21) (22.22) 9.13 39.2 NM NM 110.3 110.3 6.68 0.00
Mystic Financial, Inc. MYST MA 193 17.73 0.89 5.69 12.38 31.9 NA NA 92.8 92.8 16.46 1.62
Net.B@nk, Inc. NTBK GA 283 NA 1.69 8.15 23.50 144.5 52.22 52.22 380.3 NA 50.97 0.00
New Hampshire Thrift Bancshs. NHTB NH 330 7.36 0.92 11.48 15.38 32.3 11.06 10.53 118.1 134.2 9.78 3.90
NewMil Bancorp, Inc. NMSB CT 370 9.35 0.87 9.23 11.50 44.1 15.13 14.38 127.6 127.6 11.93 3.13
North Bancshares, Inc. NBSI IL 125 10.61 0.37 3.12 12.38 15.8 36.40 41.25 118.7 118.7 12.59 3.23
North Central Bancshares, Inc. FFFD IA 335 13.17 1.44 8.73 16.75 52.0 12.14 12.69 104.6 120.3 15.53 1.91
III-7
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Northeast Bancorp NBN ME 329 7.30 0.82 10.39 9.63 25.2 10.69 9.92 102.0 110.3 7.67 2.20
Northeast Indiana Bancorp, Inc. NEIB IN 209 11.77 1.15 8.67 17.38 29.1 12.68 12.68 119.0 119.0 14.01 2.28
Northeast Pennsylvania Fin'l NEP PA 478 17.78 (0.36) (2.92) 11.00 70.7 NM NA 76.6 76.6 14.80 0.00
Northwest Equity Corp. NWEQ WI 99 12.11 1.27 10.79 22.50 18.6 15.00 15.00 154.8 154.8 18.74 3.02
NS&L Bancorp, Inc. NSLB MO 63 18.37 0.69 3.58 13.00 8.4 19.40 20.00 77.0 77.6 14.23 3.85
Nutmeg FS&LA NTMG CT 106 9.02 1.07 12.81 9.75 12.9 20.31 21.20 184.0 184.0 12.25 2.05
Ocean Financial Corp. OCFC NJ 1,544 12.67 0.89 6.44 14.75 217.7 15.21 15.05 110.7 111.3 14.09 3.25
Ocwen Financial Corp. OCN FL 3,391 12.21 0.93 7.61 10.19 619.4 19.59 7.66 139.6 151.4 18.27 0.00
OHSL Financial Corp. OHSL OH 252 10.77 0.86 7.92 14.00 34.9 16.47 16.47 125.9 125.9 13.84 3.57
Oregon Trail Financial Corp. OTFC OR 275 22.76 1.20 4.92 13.63 58.2 NA NA 86.1 86.1 21.20 1.76
Ottawa Financial Corp. OFCP MI 930 6.55 0.92 11.06 20.75 114.9 15.26 15.26 156.6 191.4 12.35 2.12
Pamrapo Bancorp, Inc. PBCI NJ 397 12.41 1.19 9.28 23.50 66.8 14.69 15.26 135.1 135.6 16.82 4.77
Park Bancorp, Inc. PFED IL 198 18.79 0.95 4.59 13.63 29.8 16.62 16.22 80.0 80.0 15.02 0.00
Parkvale Financial Corp. PVSA PA 1,123 7.45 1.08 14.61 21.00 133.2 12.21 12.43 159.6 160.3 11.93 2.86
PBOC Holdings, Inc. PBOC CA 3,211 5.46 NA NA 9.50 205.0 21.59 12.34 117.0 117.0 6.39 0.00
Peekskill Financial Corp. PEEK NY 200 21.51 0.94 4.03 13.50 38.4 20.15 19.57 89.8 89.8 19.32 2.67
PennFed Financial Services, Inc.PFSB NJ 1,566 5.89 0.76 10.97 13.25 122.1 11.13 11.13 109.3 124.8 7.81 1.21
Peoples Bancorp PFDC IN 305 14.65 1.41 9.46 20.00 65.6 16.00 16.00 146.8 146.8 21.52 2.40
People's Bancshares, Inc. PBKB MA 892 3.61 0.79 19.94 20.50 68.0 10.90 10.46 207.7 211.1 7.63 3.71
Peoples Financial Corp. PFFC OH 86 17.42 1.10 6.00 11.50 15.5 16.91 32.86 103.4 103.4 18.01 5.22
Peoples Heritage Fin'l Group PHBK ME 9,883 6.47 0.99 13.32 18.25 1,602.1 16.29 13.62 213.5 253.8 16.21 2.41
Peoples-Sidney Fin'l Corp. PSFC OH 107 17.87 0.95 4.25 16.50 28.7 27.05 27.05 138.9 138.9 27.05 1.70
Permanent Bancorp, Inc. PERM IN 503 6.14 0.60 6.33 13.81 55.0 22.28 23.41 133.0 176.0 10.93 1.74
Perry County Financial Corp. PCBC MO 97 17.44 0.89 4.90 20.00 16.6 19.42 19.42 98.1 98.1 17.10 2.50
PFF Bancorp, Inc. PFFB CA 3,045 7.51 0.60 6.84 14.56 224.9 13.48 13.36 97.4 98.4 7.39 0.00
Piedmont Bancorp, Inc. PDB NC 128 16.65 1.26 7.67 9.25 24.9 15.68 15.68 117.1 117.1 19.48 5.19
Pittsburgh Home Fin'l Corp. PHFC PA 375 6.55 0.57 7.33 14.63 27.4 13.93 13.80 110.4 111.6 7.30 1.64
Pocahontas Bancorp, Inc. PFSL AR 407 14.34 0.73 6.81 8.13 54.3 NA NA 89.7 93.7 13.34 2.95
Potters Financial Corp. PTRS OH 132 8.45 0.78 8.76 15.75 14.8 15.75 16.58 132.4 132.4 11.18 1.78
Prestige Bancorp, Inc. PRBC PA 170 8.98 0.45 4.45 12.75 12.1 17.47 18.21 83.6 83.6 7.50 1.57
Progress Financial Corp. PFNC PA 618 6.10 0.86 13.98 14.00 73.7 16.09 18.67 172.8 193.1 11.76 1.14
III-8
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Provident Financial Holdings PROV CA 841 9.96 0.68 6.10 16.25 75.2 14.01 14.01 89.7 89.7 8.94 0.00
PS Financial, Inc. PSFI IL 100 22.33 0.91 3.28 10.50 19.4 22.34 15.22 91.5 91.5 20.42 4.95
PSB Bancorp Inc. PSBI PA 153 19.74 0.63 5.10 7.63 23.7 NA NA 78.4 78.4 15.48 0.00
Pulaski Financial Corp. PULBD MO 193 13.05 1.00 7.49 9.50 37.7 NA NA NA NA NA 11.58
PVF Capital Corp. PVFC OH 428 7.59 1.19 16.40 12.50 49.9 10.59 10.59 153.6 153.6 11.67 0.00
QCF Bancorp, Inc. QCFB MN 149 14.72 1.70 9.93 25.50 29.4 10.85 11.18 134.0 134.0 19.73 0.00
Quaker City Bancorp, Inc. QCBC CA 894 8.87 0.87 9.94 17.06 98.6 13.13 14.10 124.9 124.9 11.07 0.00
Queens County Bancorp, Inc. QCSB NY 1,707 8.67 1.56 15.63 28.88 614.3 23.48 23.48 361.4 361.4 36.24 2.77
Reliance Bancorp, Inc. RELY NY 2,493 5.25 0.82 9.81 28.94 251.4 14.92 14.99 140.1 203.5 10.43 2.49
Richmond County Fin'l Corp. RCBK NY 1,693 19.43 0.50 2.88 16.63 439.3 NA NA 133.2 133.6 25.95 1.44
River Valley Bancorp RIVR IN 136 13.34 0.96 7.15 16.00 19.1 13.79 14.16 103.8 105.1 13.98 1.38
Riverview Bancorp, Inc. RVSB WA 305 19.88 1.79 7.93 12.00 73.8 14.63 15.00 112.3 115.7 24.21 2.00
Roslyn Bancorp, Inc. RSLN NY 3,719 15.86 1.31 7.99 18.06 747.8 14.45 15.18 126.3 126.9 20.11 2.44
Seacoast Fin'l Services Corp. SCFS MA 1,107 8.73 1.11 12.73 10.00 140.0 NA NA NA NA NA 0.00
SFS Bancorp, Inc. SFED NY 176 12.56 0.63 5.17 20.38 24.6 21.01 21.68 111.2 111.2 13.97 1.57
SGV Bancorp, Inc. SGVB CA 453 6.75 0.42 5.49 12.63 28.0 18.04 18.04 90.6 91.7 6.18 0.00
Skaneateles Bancorp Inc. SKAN NY 272 6.77 0.60 8.74 13.00 18.8 12.38 12.38 100.3 102.5 6.93 2.15
Sobieski Bancorp, Inc. SOBI IN 102 12.71 0.63 4.50 14.00 10.7 17.72 18.18 77.2 77.2 10.50 2.29
South Carolina Comm. Bancshs. SCCB SC 46 21.05 0.89 4.20 13.88 8.0 19.27 19.27 83.8 83.8 17.64 4.90
South Street Financial Corp. SSFC NC 204 16.93 0.55 2.71 7.69 32.4 NA NA 90.5 90.5 17.65 5.20
SouthBanc Shares, Inc. SBAN SC 368 20.75 0.86 7.37 19.38 83.4 NM NA 109.3 109.3 22.69 2.48
Southern Banc Company, Inc. SRN AL 106 17.67 0.53 3.02 12.50 15.4 25.00 25.00 81.6 82.1 14.50 2.80
Southern Comm. Bancshares, Inc. SCBS AL 68 17.34 1.22 6.45 14.00 15.9 15.56 15.38 135.1 135.1 23.44 2.14
Southern Missouri Bancorp, Inc. SMBC MO 156 14.61 0.67 4.17 16.00 21.5 23.19 21.92 99.0 99.0 14.46 3.13
SouthFirst Bancshares, Inc. SZB AL 159 9.66 0.50 4.34 16.13 14.8 24.07 25.60 94.1 96.6 9.30 3.72
Sovereign Bancorp, Inc. SVRN PA 21,497 3.34 0.69 12.20 12.50 1,992.5 15.43 13.16 173.4 282.8 9.52 0.64
St. Francis Capital Corp. STFR WI 1,864 5.84 0.87 11.29 40.50 193.9 14.21 15.28 158.7 178.6 10.40 1.58
St. Paul Bancorp, Inc. SPBC IL 5,948 NA 0.53 5.71 22.63 941.1 29.01 17.01 183.2 NA 15.44 2.65
StateFed Financial Corp. SFFC IA 89 18.00 1.14 6.43 10.00 15.4 15.15 15.15 96.3 96.3 17.34 2.00
Staten Island Bancorp, Inc. SIB NY 3,351 20.23 1.07 5.22 19.75 879.7 NA NA 128.8 132.1 26.60 1.62
Statewide Financial Corp. SFIN NJ 653 9.37 0.54 5.65 18.50 78.4 21.76 23.42 129.6 129.7 12.15 2.81
III-9
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Sterling Financial Corp. STSA WA 2,082 2.44 0.36 6.75 16.38 124.5 17.99 12.41 111.2 252.3 5.98 0.00
Stone Street Bancorp, Inc. SSM NC 124 23.09 1.39 5.02 14.56 25.0 17.34 17.34 87.3 87.3 20.16 3.16
Teche Holding Co. TSH LA 409 12.85 0.94 6.79 15.00 46.4 12.82 13.16 88.4 88.4 11.36 3.33
Telebanc Financial Corp. TBFC VA 1,968 5.09 0.17 3.78 24.00 296.8 NA NA 244.9 300.0 15.08 0.00
Texarkana First Financial Corp. FTF AR 189 14.47 1.78 11.85 23.63 39.6 12.05 12.05 144.4 144.4 20.90 2.71
TF Financial Corp. THRD PA 696 6.52 0.61 7.70 18.63 59.4 15.78 16.93 102.9 120.3 8.54 2.58
Thistle Group Holdings, Co. THTL PA 460 21.92 NA NA 9.63 86.6 NA NA 85.8 85.8 18.81 2.08
Three Rivers Financial Corp. THR MI 100 12.70 0.76 5.72 13.63 9.8 14.97 14.97 84.0 84.3 10.70 3.38
Timberland Bancorp, Inc. TSBK WA 266 30.78 2.14 9.58 11.94 71.2 NA NA 91.7 91.7 28.22 2.01
Tri-County Bancorp, Inc. TRIC WY 87 16.74 1.06 6.63 12.81 15.0 17.31 17.55 103.1 103.1 17.25 3.43
Twin City Bancorp, Inc. TWIN TN 111 12.68 1.10 8.60 14.31 17.5 14.46 14.91 123.4 123.4 15.66 2.79
Union Community Bancorp UCBC IN 108 38.83 NA NA 11.25 34.2 NA NA 81.3 81.3 31.56 3.56
Union Financial Bancshares, Inc.UFBS SC 183 7.08 0.88 11.07 13.94 17.8 11.91 12.02 120.6 138.7 9.71 2.67
United Community Fin'l Corp. UCFC OH 1,249 37.02 NA NA 13.50 433.1 NA NA 93.6 93.6 34.67 2.22
United Financial Corp. UBMT MT 222 13.42 NA NA 22.00 37.4 NA NA 122.5 125.9 16.82 4.55
United PanAm Financial Corp. UPFC CA 437 19.77 NA NA 4.75 82.1 5.46 5.46 94.6 95.0 18.77 0.00
United Tennessee Bankshares UTBI TN 75 26.52 1.43 7.27 11.00 15.5 NA NA 77.6 77.6 20.57 0.00
USABancshares, Inc. USAB PA 151 8.80 0.61 6.53 8.50 17.0 77.27 38.64 134.1 134.7 11.24 0.00
Warren Bancorp, Inc. WRNB MA 384 10.60 1.61 15.00 9.00 71.2 12.16 12.50 175.1 175.1 18.55 4.00
Warwick Community Bancorp WSBI NY 423 19.59 NA NA 15.38 101.6 NA NA 112.0 112.0 24.01 1.11
Washington Federal, Inc. WFSL WA 5,637 12.78 2.00 14.91 24.00 1,234.7 11.32 11.71 161.0 173.0 21.90 3.83
Washington Mutual Inc. WM WA 108,359 5.08 1.03 18.79 32.88 19,503.2 12.04 11.66 212.9 225.2 11.76 2.68
Washington Savings Bank, FSB WSB MD 274 8.76 0.67 7.81 4.44 19.6 14.32 15.85 81.7 81.7 7.16 2.25
Webster Financial Corp. WBST CT 9,164 5.34 0.73 13.06 26.31 996.6 14.30 13.92 176.5 206.1 10.90 1.67
Wells Financial Corp. WEFC MN 186 13.55 1.22 8.37 15.50 25.6 12.02 12.02 101.6 101.6 13.78 3.87
Westcorp WES CA 4,100 8.10 (0.14) (1.59) 7.94 210.1 NM 198.45 62.9 63.1 5.11 2.52
WesterFed Financial Corp. WSTR MT 1,000 9.34 0.71 6.60 19.25 107.6 15.16 14.15 96.5 117.5 10.76 2.81
Western Ohio Financial Corp. WOFC OH 392 12.01 0.10 0.74 21.75 46.8 120.83 241.67 96.5 103.2 12.29 4.60
Westwood Homestead Fin'l Corp. WEHO OH 127 19.51 0.76 3.30 10.13 24.7 NA NA 99.3 99.3 19.35 3.95
WHG Bancshares Corp. WHGB MD 132 15.29 0.58 3.16 11.63 16.2 22.79 23.72 80.1 80.1 12.24 3.10
Winton Financial Corp. WFI OH 354 7.49 1.20 16.17 13.63 54.7 14.19 14.19 203.4 206.4 15.44 1.83
III-10
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Wood Bancorp, Inc. FFWD OH 167 13.87 1.44 10.90 14.00 37.7 16.09 16.09 162.8 162.8 22.58 2.57
WSFS Financial Corp. WSFS DE 1,596 5.93 1.14 18.88 17.31 205.2 12.55 12.64 222.8 223.7 13.27 0.69
WVS Financial Corp. WVFC PA 312 10.59 1.19 10.56 14.75 52.5 15.05 13.79 161.6 161.6 17.12 4.07
Yonkers Financial Corp. YFCB NY 383 10.91 0.82 6.72 13.75 37.5 12.73 13.10 89.7 89.7 9.79 2.33
York Financial Corp. YFED PA 1,235 9.11 0.84 9.50 15.75 150.7 15.14 17.90 133.9 133.9 12.20 3.30
Mean 1,734 12.68 0.91 7.98 NA 234.9 15.46 15.35 127.4 134.2 15.28 2.07
Median 340 10.61 0.92 7.47 NA 46.4 15.16 15.15 113.8 119.3 14.03 2.15
III-11
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
Thrifts Being Acquired
- ----------------------
1ST Bancorp FBCV IN 268 8.96 0.73 8.10 40.50 44.4 23.55 23.82 182.0 185.3 16.57 0.66
1st Bergen Bancorp FBER NJ 306 11.88 0.72 5.66 22.63 58.5 25.71 25.71 160.8 160.8 19.10 1.24
Avondale Financial Corp. AVND IL 509 7.49 0.16 1.92 14.63 42.5 104.46 NM 111.3 111.3 8.34 0.00
Bayonne Bancshares, Inc. FSNJ NJ 673 14.15 0.77 5.18 16.50 150.8 29.46 30.00 158.2 158.2 22.37 1.52
Calumet Bancorp, Inc. CBCI IL 486 17.87 1.46 8.56 27.25 85.7 13.16 12.85 98.8 98.8 17.66 0.00
D & N Financial Corp. DNFC MI 1,998 5.23 0.85 15.35 23.56 215.9 14.19 15.40 192.8 207.2 10.81 0.85
Enterprise Federal Bancorp, Inc.EFBI OH 397 NA 0.72 6.99 45.25 100.0 41.14 45.25 267.0 NA 25.23 2.21
Fidelity Financial of Ohio, Inc.FFOH OH 528 11.46 0.88 7.10 13.00 72.8 15.12 15.66 109.0 122.0 13.79 2.46
Financial Bancorp, Inc. FIBC NY 319 9.13 0.97 10.69 37.50 64.1 21.19 21.80 219.6 220.3 20.11 1.33
First Coastal Bankshares, Inc. FCBK VA 578 7.98 0.71 9.85 22.00 109.7 25.58 25.88 237.8 237.8 18.97 1.09
Fort Bend Holding Corp. FBHC TX 327 6.86 0.66 9.72 25.00 46.7 26.88 26.88 197.8 208.5 14.25 1.60
Glenway Financial Corp. GFCO OH 300 9.90 0.93 9.73 19.00 43.6 15.97 15.83 146.0 147.1 14.54 2.32
HF Bancorp, Inc. HEMT CA 1,060 6.91 (0.02) (0.25) 16.88 107.9 NM 241.07 128.5 148.9 10.18 0.00
Home Bancorp of Elgin, Inc. HBEI IL 386 24.17 0.70 2.72 14.00 92.9 34.15 34.15 99.9 99.9 24.14 2.86
Mid-Iowa Financial Corp. MIFC IA 148 9.32 0.97 10.32 13.50 23.5 18.49 18.49 170.9 171.1 15.93 0.59
Mitchell Bancorp, Inc. MBSP NC 37 39.08 0.87 2.20 15.63 14.6 42.23 37.20 100.1 100.1 39.11 5.12
Peoples Bancorp, Inc. TSBS NJ 872 38.51 1.31 5.08 9.81 356.9 NA NA 104.3 107.4 40.91 1.02
Pulse Bancorp, Inc. PULS NJ 534 8.96 1.07 12.43 28.50 90.9 16.29 16.29 189.8 189.8 17.01 2.81
Raritan Bancorp, Inc. RARB NJ 434 7.67 1.00 13.29 34.38 84.6 20.71 21.35 251.5 254.1 19.47 1.75
Reliance Bancshares, Inc. RELI WI 40 55.71 1.17 2.30 9.81 23.5 46.73 49.07 104.3 104.3 58.11 0.00
Scotland Bancorp, Inc. SSB NC 61 25.25 0.86 3.54 11.25 21.5 35.16 35.16 140.5 140.5 35.45 1.78
SIS Bancorp, Inc. SISB MA 1,900 7.32 0.76 10.59 40.00 287.6 21.05 16.39 207.4 207.4 15.09 1.60
TR Financial Corp. ROSE NY 4,183 6.36 1.04 16.85 36.19 638.0 15.27 18.00 228.0 228.0 15.25 2.43
Westco Bancorp, Inc. WCBI IL 319 15.07 1.41 9.13 34.13 81.1 20.19 20.19 171.1 171.1 25.77 1.99
Mean 694 15.45 0.86 7.79 NA 119.1 17.93 18.01 165.7 164.3 21.59 1.55
Median 415 9.32 0.87 8.33 NA 82.9 17.39 17.20 165.8 160.8 18.32 1.56
III-12
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit III
Financial Performance and Market Data for All Public Thrifts
====================================================================================================================================
Tang. Stock Total Price/ Price/ Price/ Price/ Price/
Total Equity/ LTM LTM Price Market LTM Core Book Tang. Total Div.
Assets Assets ROA ROE 12/14/98 Value EPS EPS Value Book Assets Yield
Company Ticker St. ($M) (%) (%) (%) ($) ($M) (x) (x) (%) (%) (%) (%)
====================================================================================================================================
MHC Thrifts
- -----------
Alliance Bank ALLB PA 280 10.81 0.73 6.72 12.19 39.9 19.98 19.98 131.9 131.9 14.26 2.95
BCSB Bankcorp, Inc. BCSB MD 321 8.00 0.76 8.14 8.50 52.0 NA NA NA NA NA 0.00
Brookline Bancorp, Inc. BRKL MA 839 32.89 2.25 7.95 11.13 323.7 NA NA 116.3 116.3 38.60 1.80
Community Savings Bankshares CMSV FL 791 10.69 0.64 5.86 22.25 113.6 23.67 23.67 131.6 131.6 14.35 4.04
Fidelity Bankshares Inc. FFFL FL 1,498 5.94 0.60 8.93 23.00 156.5 19.83 22.33 171.4 176.1 10.44 4.35
Finger Lakes Financial Corp. SBFL NY 275 8.14 NA NA 11.50 41.1 NA NA 183.1 183.1 14.91 2.09
First FSB of Siouxland FFSX IA 570 6.25 0.71 8.66 25.00 71.1 20.16 21.19 164.8 202.8 12.49 1.92
Gaston Federal Bancorp, Inc. GBNK NC 208 19.99 0.98 7.36 14.81 66.6 NA NA 160.1 160.1 32.02 1.35
Harris Financial, Inc. HARS PA 2,420 7.26 NA NA 13.75 463.4 26.44 31.98 242.9 267.5 19.31 1.60
Jacksonville Savings Bank JXSB IL 166 10.79 0.56 5.35 12.75 24.3 26.02 26.02 135.6 135.6 14.63 2.35
Leeds Federal Bankshares, Inc. LFED MD 303 16.36 1.14 6.89 13.88 72.1 21.02 21.02 145.3 145.3 23.75 4.04
Liberty Bancorp, Inc. LIBB NJ 248 13.76 0.57 6.05 8.88 34.6 NA NA 101.3 101.3 13.94 0.00
Niagara Bancorp, Inc. NBCP NY 1,431 18.23 0.70 4.72 10.63 316.2 NA NA 121.3 121.3 22.10 1.13
Northwest Bancorp, Inc. NWSB PA 2,667 7.47 0.90 10.13 9.88 467.5 21.47 22.44 208.8 234.6 17.35 1.62
Pathfinder Bancorp, Inc. PBHC NY 192 10.10 0.62 5.45 9.63 26.3 22.92 28.31 115.7 136.1 13.75 2.08
People's Bank PBCT CT 9,620 7.57 1.24 13.54 27.25 1,747.6 16.03 22.71 204.0 243.3 18.17 3.38
PHS Bancorp, Inc. PHSED PA 237 12.37 0.72 5.61 13.88 38.3 23.13 24.78 130.7 130.7 16.16 2.02
Pulaski Savings Bank PLSK NJ 191 11.76 0.51 4.31 10.38 21.9 22.07 20.75 97.1 97.1 11.43 3.08
Skibo Financial Corp. SKBO PA 144 17.13 0.52 3.08 8.50 29.3 36.96 42.50 118.9 118.9 20.37 3.53
Sound Federal Bancorp SFFS NY 281 11.86 NA NA 9.50 49.5 NA NA NA NA NA 0.00
Wayne Savings Bancshares WAYN OH 260 9.54 0.69 7.21 19.13 47.6 27.72 27.72 191.6 191.6 18.29 3.24
Webster City FSB WCFB IA 92 24.87 1.41 5.95 15.75 33.3 24.61 24.61 145.3 145.3 36.15 5.08
West Essex Bancorp Inc. WEBK NJ 343 7.59 NA NA 9.94 18.4 NA NA NA NA NA 0.00
Mean 1,016 12.58 0.86 6.94 NA 185.0 21.35 22.35 150.9 158.5 19.12 2.25
Median 281 10.79 0.71 6.72 NA 49.5 21.47 22.39 140.5 140.7 16.76 2.08
Note: mean and median price/earnings ratios exclude values greater than 25.
Source: SNL Securities; Feldman Financial
III-13
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-1
Pro Forma Assumptions
1. The total amount of the net conversion proceeds was fully invested at the
beginning of the applicable period.
2. The net conversion proceeds are invested to yield a return of 4.40%, which
represented the one-year U.S. Treasury bill yield as of September 30, 1998.
The effective income tax rate was assumed to be 37.5%, resulting in an
after-tax yield of 2.75%.
3. It is assumed that 8.0% of the shares offered for sale will be purchased by
an employee stock ownership plan ("ESOP") established by the Bank. Pro
forma adjustments have been made to earnings and equity to reflect the
impact of the ESOP. The annual ESOP expense is estimated based on a
ten-year debt amortization period. No reinvestment is assumed on proceeds
used to fund the ESOP.
4. It is assumed that 4.0% of the shares offered for sale will be acquired by
the Bank's stock programs. Pro forma adjustments have been made to earnings
and equity to reflect the impact of the stock programs. The annual expense
is estimated based on a five-year amortization period. No reinvestment is
assumed on proceeds used to fund the stock programs.
5. Conversion expenses are estimated at fixed costs of $893,000 plus a
marketing fee equal to 0.75% of the aggregate purchase price of stock sold
in the public offerings exclusive of shares sold to insiders and employee
benefit plans.
6. The number of shares outstanding for purposes of calculating earnings per
share is adjusted to reflect the shares assumed to be held by the ESOP and
not committed to be released within the first year following the
conversion.
7. No effect has been given to withdrawals from deposit accounts for the
purpose of purchasing common stock in the conversion.
IV-1
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-2
Pro Forma Valuation Range: Full Conversion Basis
As of September 30, 1998
(In $000s, except share data)
Pro Forma Market Capitalization $36,975 $43,500 $50,025 $57,529
Amount Sold to Public 100.0% 100.0% 100.0% 100.0%
--------------------------------------------------------------------
Minimum Midpoint Maximum Adj. Max.
- -------------------------------------------------------------------------------------------------------------------------
Shares issued 3,697,500 4,350,000 5,002,500 5,752,875
Shares sold 3,697,500 4,350,000 5,002,500 5,752,875
Offering price $10.00 $10.00 $10.00 $10.00
- -------------------------------------------------------------------------------------------------------------------------
Gross proceeds 36,975 43,500 50,025 57,529
Less: estimated expenses (1,139) (1,184) (1,229) (1,280)
Less: capital to MHC 0 0 0 0
Net proceeds 35,836 42,316 48,796 56,248
Less: ESOP purchase (2,958) (3,480) (4,002) (4,602)
Less: Stock Programs purchase (1,479) (1,740) (2,001) (2,301)
------ ------ ------ ------
Net investable proceeds 31,399 37,096 42,793 49,345
- -------------------------------------------------------------------------------------------------------------------------
Net income:
LTM ended September 30, 1998 2,385 2,385 2,385 2,385
Pro forma income on net proceeds 863 1,020 1,177 1,357
Pro forma ESOP adjustment (185) (218) (250) (288)
Pro forma Stock Programs adjustment (185) (218) (250) (288)
------ ------ ------ ------
Pro forma net income 2,878 2,969 3,062 3,166
------ ------ ------ ------
Pro forma net income per share $0.84 $0.74 $0.66 $0.59
- -------------------------------------------------------------------------------------------------------------------------
Core net income:
LTM ended September 30, 1998 1,781 1,781 1,781 1,781
Pro forma income on net proceeds 863 1,020 1,177 1,357
Pro forma ESOP adjustment (185) (218) (250) (288)
Pro forma Stock Programs adjustment (185) (218) (250) (288)
------ ------ ------ ------
Pro forma core net income 2,274 2,365 2,458 2,562
------ ------ ------ ------
Pro forma core income per share $0.66 $0.59 $0.53 $0.48
- -------------------------------------------------------------------------------------------------------------------------
Total equity:
Total equity at September 30, 1998 36,107 36,107 36,107 36,107
Net proceeds 35,836 42,316 48,796 56,248
Less: ESOP purchase (2,958) (3,480) (4,002) (4,602)
Less: Stock Programs purchase (1,479) (1,740) (2,001) (2,301)
------ ------ ------ ------
Pro forma total equity 67,506 73,203 78,900 85,452
------ ------ ------ ------
Pro forma book value per share $18.26 $16.83 $15.77 $14.85
- -------------------------------------------------------------------------------------------------------------------------
Total assets:
Total assets at September 30, 1998 419,041 419,041 419,041 419,041
Net proceeds 35,836 42,316 48,796 56,248
Less: ESOP purchase (2,958) (3,480) (4,002) (4,602)
Less: Stock Programs purchase (1,479) (1,740) (2,001) (2,301)
------ ------ ------ ------
Pro forma total assets 450,440 456,137 461,834 468,386
- -------------------------------------------------------------------------------------------------------------------------
IV-2
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-3
Pro Forma Valuation Range: MHC Offering
As of September 30, 1998
(In $000s, except share data)
Pro Forma Market Capitalization $36,975 $43,500 $50,025 $57,529
Amount Sold to Public 47.0% 47.0% 47.0% 47.0%
--------------------------------------------------------------------
Minimum Midpoint Maximum Adj. Max.
- -------------------------------------------------------------------------------------------------------------------------
Shares issued 3,697,500 4,350,000 5,002,500 5,752,875
Shares sold 1,737,825 2,044,500 2,351,175 2,703,851
Offering price $10.00 $10.00 $10.00 $10.00
- -------------------------------------------------------------------------------------------------------------------------
Gross proceeds 17,378 20,445 23,512 27,039
Less: estimated expenses (1,003) (1,025) (1,046) (1,070)
Less: capital to MHC (200) (200) (200) (200)
Net proceeds 16,175 19,220 22,266 25,769
Less: ESOP purchase (1,390) (1,636) (1,881) (2,163)
Less: Stock Programs purchase (695) (818) (940) (1,082)
------ ------ ------ ------
Net investable proceeds 14,090 16,766 19,445 22,524
- -------------------------------------------------------------------------------------------------------------------------
Net income:
LTM ended September 30, 1998 2,385 2,385 2,385 2,385
Pro forma income on net proceeds 387 461 535 619
Pro forma ESOP adjustment (87) (102) (118) (135)
Pro forma Stock Programs adjustment (87) (102) (118) (135)
------ ------ ------ ------
Pro forma net income 2,598 2,642 2,684 2,734
------ ------ ------ ------
Pro forma net income $0.73 $0.63 $0.56 $0.49
- -------------------------------------------------------------------------------------------------------------------------
Core net income:
LTM ended September 30, 1998 1,781 1,781 1,781 1,781
Pro forma income on net proceeds 387 461 535 619
Pro forma ESOP adjustment (87) (102) (118) (135)
Pro forma Stock Programs adjustment (87) (102) (118) (135)
------ ------ ------ ------
Pro forma core net income 1,994 2,038 2,080 2,130
------ ------ ------ ------
Pro forma core income per share $0.56 $0.48 $0.43 $0.38
- -------------------------------------------------------------------------------------------------------------------------
Total equity:
Total equity at September 30, 1998 36,107 36,107 36,107 36,107
Net proceeds 16,175 19,220 22,266 25,769
Less: ESOP purchase (1,390) (1,636) (1,881) (2,163)
Less: Stock Programs purchase (695) (818) (940) (1,082)
------ ------ ------ ------
Pro forma total equity 50,197 52,873 55,552 58,631
------ ------ ------ ------
Pro forma book value per share $13.58 $12.15 $11.10 $10.19
- -------------------------------------------------------------------------------------------------------------------------
Total assets:
Total assets at September 30, 1998 419,041 419,041 419,041 419,041
Net proceeds 16,175 19,220 22,266 25,769
Less: ESOP purchase (1,390) (1,636) (1,881) (2,163)
Less: Stock Programs purchase (695) (818) (940) (1,082)
------ ------ ------ ------
Pro forma total assets 433,131 435,807 438,486 441,565
- -------------------------------------------------------------------------------------------------------------------------
IV-3
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-4
Comparative Valuation Ratios - Full Conversion Valuation
Market Price Data as of December 14, 1998
- ---------------------------------------------------------------------------------------------------------------------
Nationwide Florida
Comparative Public Thrift Public Thrift
Valuation First Group Aggregate(1) Aggregate(2)
Federal -------------------- ------------------- ------------------
Ratio Symbol Florida Mean Median Mean Median Mean Median
----- ------ ------- ---- ------ ---- ------ ---- ------
Price/LTM EPS (3) P/E
-----------
Adj. Maximum (x) 16.9 16.7 16.2 15.5 15.2 17.5 18.3
Maximum 15.2
Midpoint 13.6
Minimum 11.9
-----------
Price/Core EPS (3) P/E
-----------
Adj. Maximum (x) 20.8 16.9 16.2 15.3 15.2 13.6 14.8
Maximum 18.9
Midpoint 17.1
Minimum 15.1
-----------
Price/Book Value P/B
-----------
Adj. Maximum (%) 67.3 115.3 113.4 127.4 113.8 107.6 111.4
Maximum 63.4
Midpoint 59.4
Minimum 54.8
-----------
Price/Tangible Book P/B
-----------
Adj. Maximum (%) 67.3 120.6 114.2 134.2 119.3 117.4 121.2
Maximum 63.4
Midpoint 59.4
Minimum 54.8
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Price/Total Assets P/A
-----------
Adj. Maximum (%) 12.28 13.31 13.82 15.28 14.03 12.49 10.78
Maximum 10.83
Midpoint 9.54
Minimum 8.21
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(1) Includes 315 publicly traded, non-MHC, non-acquiree thrifts nationwide.
(2) Includes 6 publicly traded, non-MHC, non-acquiree thrifts based in Florida.
(3) Price/earnings ratios exclude values greater than 25.
IV-4
FELDMAN FINANCIAL ADVISORS, INC.
- --------------------------------
Exhibit IV-5
Pro Forma Full Conversion Analysis at Midpoint Value
First Federal Florida
Financial Data as of September 30, 1998
Valuation Parameters Symbol Data
- -------------------- ------ ----
Net income -- LTM Y $ 2,385,000
Core income -- LTM Y 1,781,000
Net worth B 36,107,000
Tangible net worth B 36,107,000
Total assets A 419,041,000
Expenses in conversion X 1,184,000
Other proceeds not reinvested O 5,220,000
ESOP purchase E 8.0% 3,480,000
ESOP expense (pre-tax) F 10.0% 348,000
MRP purchase M 4.0% 1,740,000
MRP expense (pre-tax) N 20.0% 348,000
Re-investment rate (after-tax) R 2.75%
Tax rate T 37.50%
Shares for EPS S 92.80%
Pro Forma Valuation Ratios at Maximum Value
Price / LTM earnings P/E 13.60 x
Price / core earnings P/E 17.07 x
Price / book value P/B 59.42%
Price / tangible book P/B 59.42%
Price / assets P/A 9.54%
Pro Forma Calculation at Maximum Value Based on
- -------------------------------------- --------
V = (P/E / S)*((Y-R*(O+X)-(F+N)*(1-T))) = $43,546,758 [LTM earnings]
1 - (P/E / S) * R
V = (P/E / S)*((Y-R*(O+X)-(F+N)*(1-T))) = $43,547,996 [Core earnings]
1 - (P/E / S) * R
V = P/B * (B - X - E - M) = $43,493,156 [Book value]
1 - P/B
V = P/B * (B - X - E - M) = $43,493,156 [Tangible book]
1 - P/B
V = P/A * (B - X - E - M) = $43,517,101 [Total assets]
1 - P/A
Pro Forma Valuation Range
Minimum = $43,500,000 x 0.85 = $36,975,000
Midpoint = $43,500,000 x 1.00 = $43,500,000
Maximum = $43,500,000 x 1.15 = $50,025,000
Adj. Max. = $50,025,000 x 1.15 = $57,528,750
IV-5