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MILTON FEDERAL FINANCIAL CORPORATION
EXHIBIT NO. 99
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SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies, so long as those statements are
identified as forward-looking, and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. Milton Federal
Financial Corporation ("MFFC") desires to take advantage of the "safe harbor"
provisions of the Act. Certain information, particularly information regarding
future economic performance, finances, plans and objectives of management,
contained or incorporated by reference in MFFC's Form 10-Q for the period ended
December 31, 1998 is forward-looking. In some cases, information regarding
certain important factors that could cause actual results of operations or
outcomes of other events to differ materially from any such forward-looking
statement appear together with such statement. In addition, forward-looking
statements are subject to other risks and uncertainties affecting the financial
institution industry, including, but not limited to, the following:
INTEREST RATE RISK
MFFC's operating results are dependent to a significant degree on its net
interest income, which is the difference between interest income from loans,
investments and other interest-earning assets and interest expense on deposits,
borrowings and other interest-bearing liabilities. The interest income and
interest expense of MFFC change as the interest rates on interest-earning assets
and interest-bearing liabilities change. Interest rates may change because of
general economic conditions, policies of various regulatory authorities and
other factors beyond MFFC's control. In a rising interest rate environment,
loans tend to prepay slowly and new loans at higher rates increase slowly, while
interest paid on deposits increases rapidly because the terms to maturity of
deposits tend to be shorter than the terms to maturity or prepayment of loans.
Such differences in the adjustment of interest rates on assets and liabilities
may negatively affect MFFC's income.
POSSIBLE INADEQUACY OF THE ALLOWANCE FOR LOAN LOSSES
MFFC maintains an allowance for loan losses based on a number of relevant
factors, including, but not limited to, trends in the level of nonperforming
assets and classified loans, current and anticipated economic conditions in the
primary lending area, past loss experience, possible losses arising from
specific problem loans and changes in composition of the loan portfolio. While
the Board of Directors of MFFC believes it uses the best information available
to determine allowance for loan losses, unforeseen market conditions could
result in material adjustments, and net earnings could be significantly
adversely affected if circumstances differ substantially from the assumptions
used in making the final determination.
Loans not secured by 1-4 family residential real estate are generally considered
to involve greater risk of loss than loans secured by 1-4 family residential
real estate due, in part, to the effect of general economic conditions. The
repayment of multifamily residential and nonresidential real estate loans
generally depends on cash flow from the operation of the property, which may be
negatively affected by national and local economic conditions. Construction
loans may also be negatively affected by such economic conditions, particularly
loans made to developers who do not have a buyer for a property before the loan
is made. The risk of default on consumer loans increases during periods of
recession, high unemployment and other adverse economic conditions. When
consumers have trouble paying their bills, they are more likely to pay mortgage
loans than consumer loans. In addition, the collateral securing such loans, if
any, may decrease in value more rapidly than the outstanding balance of the
loan.
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MILTON FEDERAL FINANCIAL CORPORATION
EXHIBIT NO. 99
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COMPETITION
Milton Federal Savings Bank ("Milton Federal") competes for deposits with other
savings associations, commercial banks, credit unions and issuers of commercial
paper and other securities, such as shares in money market mutual funds. The
primary factors in competing for deposits are interest rates and convenience of
office location. In making loans, Milton Federal competes with other savings
associations, commercial banks, consumer finance companies, credit unions,
leasing companies, mortgage companies and other lenders. Competition is affected
by, among other things, general availability of lendable funds, general and
local economic conditions, current interest rate levels and other factors, which
are not readily predictable. The size of financial institutions competing with
Milton Federal is likely to increase as a result of changes in statutes and
regulations eliminating various restrictions on interstate and inter-industry
branching and acquisitions. Such increased competition may have an adverse
effect upon MFFC.
LEGISLATION AND REGULATION THAT MAY ADVERSELY AFFECT MFFC'S EARNINGS
Milton Federal is subject to extensive regulation by the Office of Thrift
Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC"), and
is periodically examined by such regulatory agencies to test compliance with
various requirements. As a savings and loan holding company, MFFC is also
subject to regulation and examination by the OTS. Such supervision and
regulation of Milton Federal and MFFC are intended primarily for the protection
of depositors and not for maximization of shareholder value, and may affect the
ability of the company to engage in various business activities. The
assessments, filing fees and other costs associated with reports, examinations
and other regulatory matters are significant and may have an adverse effect on
the Company's net earnings.
The FDIC is authorized to establish separate annual assessment rates for deposit
insurance of members of the Bank Insurance fund ("BIF") and the Savings
Association Insurance Fund ("SAIF"). The FDIC has established a risk-based
assessment system for both SAIF and BIF members. Under such system, assessments
may vary depending on the risk the institution poses to its deposit insurance
fund. Such risk level is determined by reference to the institution's capital
level and the FDIC's level of supervisory concern about the institution.
The SAIF recapitalization plan also provides for the merger of the SAIF and BIF
effective January 1, 1999, assuming there are no savings associations under
federal law. Under separate proposed legislation, Congress is considering
elimination of the federal thrift charter and separate federal regulation of
thrifts. Therefore, Milton Federal would have to convert to a different
financial institution charter. In addition, Milton Federal would be regulated
under federal law as a bank and would, therefore, become subject to the more
restrictive activity limitations imposed on national banks. Moreover, MFFC might
become subject to more restrictive holding company requirements, including
activity limits and capital requirements similar to those imposed on Milton
Federal. MFFC cannot predict the impact of the conversion of Milton Federal to,
or regulation of Milton Federal as, a bank until the legislation requiring such
change is enacted.
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