CHESTER VALLEY BANCORP INC.
------------------------------
DOWNINGTOWN, PA o NASDAQ: CVAL
DONNA M. COUGHEY G. RICHARD BERTOLET
PRESIDENT & CEO EXECUTIVE VICE PRESIDENT
JOSEPH T. CROWLEY, CPA MATTHEW D. KELLY
CHIEF FINANCIAL OFFICER & TREASURER EXECUTIVE VICE PRESIDENT
SANDLER O'NEILL & PARTNERS, L.P.
June 17, 2004
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FORWARD-LOOKING STATEMENT
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THIS INFORMATION MAY CONTAIN "FORWARD-LOOKING STATEMENTS" EITHER EXPRESSED OR
IMPLIED WHICH ARE MADE IN GOOD FAITH BY CHESTER VALLEY BANCORP INC. ("CVAL"),
PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS MAY INCLUDE STATEMENTS WITH
RESPECT TO CVAL'S STRATEGIES, GOALS, BELIEFS, EXPECTATIONS, ESTIMATES,
INTENTIONS, FINANCIAL CONDITION, RESULTS OF OPERATIONS, FUTURE PERFORMANCE AND
BUSINESS OF CVAL. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES THAT ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS.
NUMEROUS COMPETITIVE, ECONOMIC, REGULATORY, LEGAL AND TECHNOLOGICAL FACTORS,
AMONG OTHERS, COULD CAUSE CVAL'S FINANCIAL PERFORMANCE TO DIFFER MATERIALLY FROM
THE GOALS, PLANS, OBJECTIVES, INTENTIONS AND EXPECTATIONS EXPRESSED IN SUCH
FORWARD-LOOKING STATEMENTS. CVAL DOES NOT UNDERTAKE TO UPDATE ANY
FORWARD-LOOKING STATEMENT WHETHER WRITTEN OR ORAL, THAT MAY BE MADE FROM TIME TO
TIME BY OR ON BEHALF OF CVAL.
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CVAL - SON PRESENTATION JUNE 17, 2004 2
CONTENTS
o OUR BACKGROUND
o KEY DRIVERS
o TACTICS THAT DIFFERENTIATE US
o FINANCIAL HIGHLIGHTS
o WHY INVEST IN CVAL?
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CVAL - SON PRESENTATION JUNE 17, 2004 3
ORGANIZATION HISTORY
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1922 - DOWNINGTOWN BUILDING AND LOAN FOUNDED
1987 - INITIAL IPO
1988 - RENAMED FIRST FINANCIAL SAVINGS BANK
1989 - CONVERTED TO THRIFT HOLDING COMPANY
1997 - NAME CHANGED TO FIRST FINANCIAL BANK
1998 - ACQUIRED PHILADELPHIA CORPORATION FOR INVESTMENT SERVICES
2001 - CONVERTED TO COMMERCIAL BANK CHARTER
2001 - APPROVAL OF BANK HOLDING CO. AND FINANCIAL HOLDING CO.
2001 - ESTABLISHMENT OF FIRST FINANCIAL INVESTMENTS, INC.
2004 - ACQUIRED COATESVILLE BRANCH FROM PNC NATIONAL BANK
- ACQUIRING EXTON BRANCH DEPOSITS FROM FIRSTRUST BANK
- OPENED WEALTH MANAGEMENT OFFICE IN WEST CHESTER, PA
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CVAL - SON PRESENTATION JUNE 17, 2004 4
HOLDING COMPANY STRUCTURE
|--------------------------------------------|
| CHESTER VALLEY BANCORP INC. |
| NASDAQ: CVAL |
|--------------------------------------------|
|
|--------------------------------------|
| |
|-----------------------------------| |-----------------------------------|
| FIRST FINANCIAL BANK | | PHILADELPHIA CORPORATION |
| | | FOR INVESTMENT SERVICES |
|-----------------------------------| |-----------------------------------|
o COMMERCIAL BANK o FULL SERVICE BROKER-DEALER
o 12 FULL SERVICE OFFICES o REGISTERED INVESTMENT ADVISOR
o $630MM IN ASSETS* o 2 INVESTMENT OFFICES
o $420MM IN DEPOSITS*
o FIRST FINANCIAL INVESTMENTS, INC.
* AS OF 3/31/04
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CVAL - SON PRESENTATION JUNE 17, 2004 5
SEASONED MANAGEMENT TEAM
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YEARS IN PRIOR
NAME FUNCTION AGE FIN. SERV. INSTITUTIONS
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Donna M. Coughey President & CEO 54 32 Mellon, Marine
(CVAL & FFB) Midland
Joseph T. Crowley, CPA CFO & Treasurer 42 19 Crusader Holding Co.,
(CVAL & FFB) KPMG
A. Louis Denton, Esq. PCIS Chairman/CEO 46 21 Hopper Soliday & Co.
Mathew D. Kelly PCIS President/COO 40 18 PNC Advisors, Mellon
G. Richard Bertolet EVP - Credit Admin 57 36 Mellon
Colin N. Maropis EVP - Lending 52 28 Sun Life of Canada
William M. Byrne SVP - Lending 49 20 Mellon
Christopher M. Breslin SVP - Retail 43 18 First Union, Chase
Margaret H. Leimkuhler SVP - CAO 39 20 Keystone, Frankford
Thomas A. Varley, Esq. SVP - Trust 53 30 Glenmede, Mellon
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CVAL - SON PRESENTATION JUNE 17, 2004 6
CHESTER COUNTY, PENNSYLVANIA
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o PENNSYLVANIA IS 6TH LARGEST STATE IN POPULATION
[PENNSYLVANIA AND IN THE UNITED STATES.
CHESTER COUNTY MAP
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PENNSYLVANIA
|--------------------------|------------|------------|------------|
| | CHESTER | | |
| | COUNTY | PA | US |
|--------------------------|------------|------------|------------|
| MEDIAN HOUSEHOLD | $65,295 | $40,106 | $41,994 |
| INCOME | | | |
|--------------------------|------------|------------|------------|
| MEDIAN VALUE OF HOUSING | $182,500 | $97,000 | $119,600 |
|--------------------------|------------|------------|------------|
| GROWTH IN NON-FARM | 2.5% | .7% | .9% |
| EMPLOYMENT | | | |
|--------------------------|------------|------------|------------|
| RETAIL SALES PER CAPITA | $14,144 | $9,150 | $9,180 |
|--------------------------|------------|------------|------------|
SOURCE: U.S. CENSUS BUREAU STATISTICS
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CVAL - SON PRESENTATION JUNE 17, 2004 7
OUR BRANCH LOCATIONS
CHESTER COUNTY, PA
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[MAP GRAPHIC OMITTED]
[GRAPHIC OMITTED] EXISTING BRANCHES
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CVAL - SON PRESENTATION JUNE 17, 2004 8
MARKET POSITION IN CHESTER COUNTY
AS A PERCENT OF TOTAL DEPOSITS
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o 6TH LARGEST OF THE 31 BANKS COMPETING IN CHESTER COUNTY
WITH A MARKET SHARE OF 6.65%
o 2ND LARGEST BANK HEADQUARTERED IN CHESTER COUNTY
o AVERAGE DEPOSITS PER BRANCH LOCATION OF $39,500
SOURCE: FDIC SUMMARY OF DEPOSITS AS OF 06/30/03
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CVAL - SON PRESENTATION JUNE 17, 2004 9
KEY DRIVERS OF THE TRANSITION
TO A COMMERCIAL BANK
o DIVERSIFY AND GROW THE LOAN PORTFOLIO
o EXPAND BUSINESS AND RETAIL CORE DEPOSITS
o MAXIMIZE NON-INTEREST REVENUE
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CVAL - SON PRESENTATION JUNE 17, 2004 10
DIVERSIFYING THE LOAN MIX
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LOAN PORTFOLIO SMALL BUSINESS COMMERCIAL
(IN THOUSANDS) LOAN GROWTH (IN THOUSANDS)
[LOAN PORTFOLIO GRAPHIC OMITTED] |----------------|------------|-------------|
| | 06/30/01 | 03/31/04 |
|----------------|------------|-------------|
6/30/2001 3/31/2004 | OUTSTANDINGS | $3,171 | $20,531 |
--------- --------- |----------------|------------|-------------|
RESIDENTIAL 149 77 | CAGR | -- | 97.24% |
CONSTRUCTION 46 42 |----------------|------------|-------------|
COMMERCIAL 83 138 | | | |
COMMERCIAL |----------------|------------|-------------|
BUSINESS 28 47 | # OF LOANS | 45 | 302 |
CONSUMER 65 113 |----------------|------------|-------------|
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CVAL - SON PRESENTATION JUNE 17, 2004 11
BUILDING CORE DEPOSITS
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DEPOSITS CHECKING ACCOUNT GROWTH
(IN MILLIONS) (IN THOUSANDS)
[DEPOSITS GRAPHIC OMITTED] |----------------|------------|-------------|
| | 06/30/01 | 03/31/04 |
6/30/2001 |----------------|------------|-------------|
- --------- | RETAIL | $55,958 | $84,955 |
DDA/NOW MMA/SAV CDs |----------------|------------|-------------|
$82 $87 $244 | CAGR% | -- | 14.75% |
|----------------|------------|-------------|
3/31/2004 | | | |
- --------- |----------------|------------|-------------|
DDA/NOW MMA/SAV CDs | BUSINESS | $26,803 | $45,454 |
$130 $179 $110 |----------------|------------|-------------|
| CAGR% | -- | 15.89% |
|----------------|------------|-------------|
| | | |
|----------------|------------|-------------|
| REPO | $ 2,428 | $18,392 |
|----------------|------------|-------------|
| CAGR% | -- | 108.82% |
|----------------|------------|-------------|
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CVAL - SON PRESENTATION JUNE 17, 2004 12
DEPOSIT AND LOAN FEES
(IN THOUSANDS)
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[DEPOSIT AND LOAN FEES GRAPHIC OMITTED]
JUN-01 JUN-02 JUN-03 JUN-04 PROJECTED
- ------ ------ ------ ------ ---------
$1,723 $1,911 $2,837 $2,802 $3,066
CAGR 17.93%
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CVAL - SON PRESENTATION JUNE 17, 2004 13
TACTICS THAT DIFFERENTIATE CVAL
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o PRODUCTION ORIENTED BRANCH ADVISORY BOARDS
o INSTILLING A "SERVICE-DRIVEN" SALES CULTURE
o OPTIMIZING THE USE OF TECHNOLOGY
o COMPREHENSIVE WEALTH MANAGEMENT APPROACH
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CVAL - SON PRESENTATION JUNE 17, 2004 14
PRODUCTION ORIENTED BRANCH
ADVISORY BOARDS
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NEW BUSINESS - FISCAL 2004:
o $3.0 MILLION IN CONSUMER DEPOSITS
o $2.6 MILLION IN MANAGED TRUST ASSETS
o $2.5 MILLION IN CONSUMER LOANS
o $0.9 MILLION IN COMMERCIAL LOANS
o $0.8 MILLION IN COMMERCIAL DEPOSITS
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CVAL - SON PRESENTATION JUNE 17, 2004 15
INSTILLING A SALES CULTURE
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|----------------------------|---------------|---------------|--------------|---------------|
| | ACTUAL | ACTUAL | ACTUAL | PROJECTED |
| | JUN-01 | JUN-02 | JUN-03 | JUN-04 |
|----------------------------|---------------|---------------|--------------|---------------|
| CONSUMER LOANS CLOSED | $18,500,000 | $51,000,000 | $67,000,000 | $74,000,000 |
|----------------------------|---------------|---------------|--------------|---------------|
| TELLER REFERRALS | 650 | 1,556 | 10,713 | 11,500 |
| TELLER CLOSE RATIO | N/A | 21% | 24% | 37% |
|----------------------------|---------------|---------------|--------------|---------------|
| CROSS-SELL RATIO | 2.0% | 2.8% | 3.4% | 3.8% |
|----------------------------|---------------|---------------|--------------|---------------|
| AVERAGE QUARTERLY | N/A | N/A | 4.37 | 4.51* |
| CUSTOMER SURVEYS (1 TO | | | | |
| 5, 5 - BEST) | | | | |
|----------------------------|---------------|---------------|--------------|---------------|
| BRANCH MANAGER | 22% | 11% | 0% | 0% |
| TURNOVER | | | | |
|----------------------------|---------------|---------------|--------------|---------------|
* AVERAGE
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CVAL - SON PRESENTATION JUNE 17, 2004 16
OPTIMIZING THE USE OF TECHNOLOGY
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o 100% CHECK IMAGED
o ADVANCED SYSTEM FOR TARGETED MARKETING
o EBANK REAL-TIME ACCOUNT INFORMATION
o SYSTEMS INTEGRATION ON EVERY WORKSTATION
o NATIONAL LOCK BOX SYSTEM
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CVAL - SON PRESENTATION JUNE 17, 2004 17
COMPREHENSIVE WEALTH MANAGEMENT
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o SHIFT FOCUS TO HIGHER MARGIN PERSONAL TRUST CLIENTS
o INTEGRATION OF TRUST AND PHILA. CORP INVESTMENT AND ADVISORY SERVICES
o ESTABLISHED A PRIVATE BANKING DIVISION
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CVAL - SON PRESENTATION JUNE 17, 2004 18
WEALTH MANAGEMENT
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ASSETS UNDER MANAGEMENT UVEST PROGRAM
& CUSTODY (DOLLARS IN MILLIONS) (DOLLARS IN THOUSANDS)
[ASSETS UNDER MANAGEMENT |------------------|------------|------------|-------------|
& CUSTODY GRAPHIC OMITTED] | | | | PROJECTED |
| | JUN 02 | JUN 03 | JUN 04 |
|------------------|------------|------------|-------------|
PROJECTED | UVEST INVESTMENT | $2,262 | $6,285 | $12,200 |
JUN-03 JUN-04 | SALES | | | |
------ --------- |------------------|------------|------------|-------------|
PCIS 766 844 | GROSS REVENUE | 103 | $217 | $442 |
TRUST 50 60 |------------------|------------|------------|-------------|
UVEST 10 23 | NUMBER OF TRADES | 157 | 400 | 1,208 |
|------------------|------------|------------|-------------|
| AVERAGE SALE PER | $14 | $15 | $10 |
| TRADE | | | |
|------------------|------------|------------|-------------|
| APPOINTMENTS | N/A | 50% | 45% |
| CLOSED | | | |
|------------------|------------|------------|-------------|
| ASSETS UNDER | $3,200 | $10,200 | $22,500 |
| MANAGEMENT | | | |
|------------------|------------|------------|-------------|
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CVAL - SON PRESENTATION JUNE 17, 2004 19
FINANCIAL HIGHLIGHTS
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ASSETS LOANS (EXCLUDING RESIDENTIAL LOANS)
[ASSETS GRAPHIC OMITTED] [LOANS GRAPHIC OMITTED]
JUN-01 JUN-02 JUN-03 MAR-04 JUN-01 JUN-02 JUN-03 MAR-04
- ------ ------ ------ ------ ------ ------ ------ ------
$545 $566 $585 $630 $201 $243 $288 $321
CAGR 5.96% CAGR 18.66%
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CVAL - SON PRESENTATION JUNE 17, 2004 20
FINANCIAL HIGHLIGHTS
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RESERVES/LOANS NET CHARGE-OFFS/LOANS
[RESERVES/LOANS GRAPHIC OMITTED] [NET CHARGE-OFFS/LOANS GRAPHIC OMITTED]
JUN-01 JUN-02 JUN-03 MAR-04 JUN-01 JUN-02 JUN-03 MAR-04
- ------ ------ ------ ------ ------ ------ ------ ------
1.23% 1.26% 1.39% 1.58% 0.03% 0.10% 0.03% 0.03%
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CVAL - SON PRESENTATION JUNE 17, 2004 21
FINANCIAL HIGHLIGHTS
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NET INTEREST MARGIN NON-INTEREST INCOME
(EXCLUDES SECURITY GAINS (LOSSES))
[NET INTEREST MARGIN GRAPHIC OMITTED] [NON-INTEREST INCOME GRAPHIC OMITTED]
JUN-01 JUN-02 JUN-03 MAR-04 JUN-01 JUN-02 JUN-03 JUN-04 PROJECTED
- ------ ------ ------ ------ ------ ------ ------ ------ ---------
3.19% 3.66% 3.43% 3.48% $5,733 $6,010 $7,092 $7,327 $7,988
CAGR 10.75%
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CVAL - SON PRESENTATION JUNE 17, 2004 22
FINANCIAL HIGHLIGHTS
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NET INCOME RETURNS (%)
[NET INCOME GRAPHIC OMITTED] [RETURNS GRAPHIC OMITTED]
JUN-01 JUN-02 JUN-03 JUN-04 PROJECTED JUN-01 JUN-02 JUN-03 JUN-04
- ------ ------ ------ ------ --------- ------ ------ ------ ------
$4,003 $5,575 $5,262 $4,718 $6,226 ROE 10.50% 13.24% 11.25% 12.23%
ROA 0.76% 1.02% 0.90% 1.04%
CAGR 8.68%
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CVAL - SON PRESENTATION JUNE 17, 2004 23
EFFICIENCY RATIO
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[EFFICIENCY RATIO GRAPHIC OMITTED]
2001 2002 2003 MAR-04
---- ---- ---- ------
72.23% 65.86% 67.45% 64.92%
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CVAL - SON PRESENTATION JUNE 17, 2004 24
WHY INVEST IN CVAL?
o EXCELLENT MARKET DEMOGRAPHICS AND SUSTAINABLE GROWTH RATES
o AGGRESSIVE, SEASONED MANAGEMENT TEAM
o FOCUSED TACTICS THAT DIFFERENTIATE CVAL
o 17% ANNUALIZED RETURN TO SHAREHOLDERS SINCE IPO
o CONTINUED COMMITMENT TO LEVERAGE TECHNOLOGY TO BUILD BUSINESS
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CVAL - SON PRESENTATION JUNE 17, 2004 25