1
Exhibit 99
----------
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. Potters Financial
Corporation desires to take advantage of the "safe harbor" provisions of the
Act. Certain information, particularly information regarding future economic
performance and finances and plans and objectives of management, contained or
incorporated by reference in Potters Financial Corporation's Report on Form
10-QSB for the quarter ended September 30, 1999 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 institutions industry, including, but not limited to,
the following:
Interest Rate Risk
- ------------------
Potters Financial Corporation's operating results are dependent to a significant
degree on its net interest income, which is the difference between interest
income from loans and investments and interest expense on deposits and
borrowings. The interest income and interest expense of Potters Financial
Corporation change as the interest rates on mortgages, securities and other
assets and on deposits and other liabilities change. Interest rates may change
because of general economic conditions, the policies of various regulatory
authorities and other factors beyond Potters Financial Corporation's control.
The interest rates on specific assets and liabilities of Potters Financial
Corporation will change or "reprice" in accordance with the contractual terms of
the asset or liability instrument and in accordance with customer reaction to
general economic trends. 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 Potters Financial Corporation income. Moreover, rising interest rates
tend to decrease loan demand in general, negatively affecting Potters Financial
Corporation income.
Possible Inadequacy of the Allowance for Loan Losses
- ----------------------------------------------------
Potters Bank maintains an allowance for loan losses based upon 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 assets and changes in the composition of the loan
portfolio. While the Board of Directors of Potters Bank believes that it uses
the best information available to determine the 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 one-to-four family residential real estate are generally
considered to involve greater risk of loss than loans secured by one-to-four
family residential real estate due, in part, to the effects of general economic
conditions. The repayment of multifamily residential and nonresidential real
estate loans generally depends upon the cash flow from the operation of the
property, which may be negatively affected by national and local economic
conditions that cause leases not to be renewed or that negatively affect the
operations of a commercial borrower. Construction loans may also be negatively
affected by such economic conditions, particularly loans made to developers who
do not
1
2
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, and the
collateral securing such loans, if any, may decrease in value more rapidly than
the outstanding balance of the loan.
Competition
- -----------
Potters Bank competes for deposits with other savings associations, commercial
banks and 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, Potters Bank 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, the 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 Potters Bank 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 Potters Financial
Corporation.
Legislation and Regulation that may Adversely Affect Potters Bank's Earnings
- ----------------------------------------------------------------------------
Potters Bank is subject to extensive regulation by the Office of Thrift
Supervision (the OTS) and the Federal Deposit Insurance Corporation (the FDIC)
and is periodically examined by such regulatory agencies to test compliance with
various regulatory requirements. As a savings and loan holding company, Potters
Financial Corporation is also subject to regulation and examination by the OTS.
Such supervision and regulation of Potters Bank and Potters Financial
Corporation are intended primarily for the protection of depositors and not for
the 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 Potters Financial Corporation's
net earnings.
The FDIC is authorized to establish separate annual assessment rates for deposit
insurance of members of the Bank Insurance fund (the BIF) and the Savings
Association Insurance Fund (the SAIF). The FDIC may increase assessment rates
for either fund if necessary to restore the fund's ratio of reserves to insured
deposits to the target level within a reasonable time and may decrease such
rates if such target level has been met. 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.
In November 1999, Congress adopted legislation, expected to be signed into law,
making substantial changes to the laws governing financial services. The
legislation, which affects the types of activities in which financial
institutions are permitted to engage, is not expected to have a material effect
on the activities in which Potters Financial Corporation and Potters Bank
currently engage, although it may have a material effect on the activities in
which they may engage in the future and on competition among companies providing
various types of financial services.
2