Exhibit 16(c)(1)
The Efficacy of a
Going Private Transaction
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June 20, 2007
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Presented By:
Arthur L. Loomis, II
President Northeast Capital & Advisory, Inc.
(518) 426-0100 * alloomis@ne-capital.com
Discussion Agenda
================================================================================
o Strategic Alternatives Considered
o Going Private Overview
o Going Private Methods
o Shareholder List Analyses
o Fairness Opinion Analyses
NORTH
Capital & Advisory, Inc.
1 EAST
Strategic Alternatives Considered
================================================================================
o Status Quo
o Sell Now or in the Future
o Going Private
NORTH
Capital & Advisory, Inc.
2 EAST
Strategic Alternatives Considered
- ----------------------------------
Status Quo
================================================================================
o Augment Non-Local Shareholder Base
- Meet with accredited investors to inform them of First Ipswich's
strategy, competitive advantages, and impact of current projects.
o Increase Local Shareholder Base
- Reach loyal, local investors and powerful allies of community bank
managements in proxy fights, through investment clubs and corporate
advertising.
. Maintaining communications with individual shareholders may be
more time consuming than dealing with institutions.
. Due to the loyalty of these retail investors, a heavy retail
shareholder base may impact the liquidity of the Company's
stock, due to low trading volume.
NORTH
Capital & Advisory, Inc.
3 EAST
Strategic Alternatives Considered
- ---------------------------------
Status Quo (Continued)
================================================================================
o Do the advantages of remaining a public company outweigh the indirect and
direct costs?
Annual Costs
Historical Costs:
Legal Fees $ 70,000
Accounting Firm Fees 35,000
Personnel Costs 50,000
EDGAR Conversion, Printing & Mailing Costs 20,000
--------
Historical Annual Costs $175,000
Additional Expected Annual Costs:
Full SOX Implementation $110,000
--------
Total Estimated Costs $285,000
Additional One-Time Fees Relating to Section 404
------------------------------------------------
Consulting Fees = $100,000 in 2007 and 2008
Personnel Costs = $100,000 in 2007 and $40,000 in 2008
NORTH
Capital & Advisory, Inc.
4 EAST
Strategic Alternatives Considered
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Sell Now or in the Future
================================================================================
o Another option to unlock value of a sparsely traded company is to be
acquired for cash or for the stock of a more liquid acquirer.
o If the Company were sold to a larger institution, the costs of compliance
would no longer be as disproportionate to the size of the new entity.
o This option is relevant only if the Company's continuing independence
produces less value than a sale.
NORTH
Capital & Advisory, Inc.
5 EAST
Strategic Alternatives Considered
- ---------------------------------
Going Private
================================================================================
o Stock Repurchase Plan
o Tender Offer
- Traditional
- Odd-lot
o Reverse Stock Split
o Cash Out Merger
o Reclassification to a New Security
NORTH
Capital & Advisory, Inc.
6 EAST
Going Private Overview
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Introduction
================================================================================
o In some cases, a bank with a low valuation and/or a limited trading volume
may be deriving little benefit from being a registered company.
o Going private allows the bank to de-register with the SEC.
- Goal: To eliminate all future SEC filings by reducing the number of
registered shareholders below 300.
o Once de-registered, banks cannot be listed on the NASDAQ National and
Small Cap Markets; however, shares are eligible for quotation on the OTC
Bulletin Board or the Pink Sheets.
o The bank may remain private as long as registered shareholders do not
exceed 300 (500 in certain circumstances).
NORTH
Capital & Advisory, Inc.
7 EAST
Going Private Overview
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Selected Transactions
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Related Transactions
Assets Announce
Company Ticker City ST ($000s) Date Transaction Type
- ------- ------ ---- -- ------- ---- ----------------
Monarch Community Bancorp, Inc. MCBF Coldwater MI 291,300 02/16/07 Cash Out Merger
South Street Financial Corp. SSFC Albemarle NC 268,848 12/11/06 Reclassification to Preferred
First Niles Financial, Inc. FNFI Niles OH 100,973 06/29/06 Reclassification to Preferred
Harbor Bankshares Corp. HRBK Baltimore MD 258,174 05/02/06 Cash Out Merger
Home City Financial Corp. HCFL Springfield OH 148,159 01/26/06 Reverse Stock Split
FC Banc Corp. FCBZ Bucyrus OH 178,386 11/15/05 Reverse Stock Split
County Bank Corp. CBNC Lapeer MI 257,355 10/07/05 Reverse Stock Split
First Citizens Bancorporation, Inc. FCBN Columbia SC 4,533,651 09/13/05 Cash Out Merger
Illini Corporation ILII Springfield IL 253,463 08/19/05 Cash-out Merger
Iowa First Bancshares Corporation IOFB Muscatine IA 376,429 07/22/05 Reverse Stock Split
Cherokee Banking Company CHKJ Canton GA 164,843 07/01/05 Cash-out Merger
Community Financial Holding Company, Inc. Duluth GA 274,130 06/17/05 Reclassification to Class A CS
Guaranty Bancshares GNTY Mount Pleasant TX 552,500 06/13/05 Cash Out Merger
Community Investors Bancorp CIBI Bucyrus OH 122,762 06/09/05 Reverse Stock Split
First Southern Bancorp Statesboro GA 113,407 06/02/05 Reclassification to Series A
Home Loan Financial Corp. HLFN Coshocton OH 160,342 05/18/05 Reverse Stock Split
Heartland Bancshares, Inc. Sebring FL 147,922 04/20/05 Reclassification to Preferred
Medians
Cost Saves (Estimates) Premium Over Market Value
------------------------------------ -------------------------
% of Annual Annual
Shares Price Per Recurring - Recurring - Non- At Fairness
Company Impacted Share Personnel Other Recurring Announce(1) Opinion(2)
- ------- -------- ----- --------- ----- --------- ----------- ----------
Monarch Community Bancorp, Inc. 3.11 13.50 - 126,000 - 27.36% 15.88%
South Street Financial Corp. 2.60 NA 129,000 156,000 - NA NA
First Niles Financial, Inc. 2.00 NA 81,000 132,500 174,000 NA NA
Harbor Bankshares Corp. 1.80 31.00 10,000 77,600 150,000 21.57% 0.00%
Home City Financial Corp. 1.77 17.10 30,000 96,300 125,000 11.91% 12.57%
FC Banc Corp. 9.92 29.12 19,000 61,000 200,000 3.63% 3.08%
County Bank Corp. 4.72 55.00 13,400 47,600 75,000 2.42% 1.85%
First Citizens Bancorporation, Inc. 3.43 735.00 1,023,000 322,000 - 24.58% 28.50%
Illini Corporation 9.70 40.50 - 192,000 19,875 3.71% 3.85%
Iowa First Bancshares Corporation 4.72 38.00 32,000 190,000 - 10.95% 10.95%
Cherokee Banking Company 11.01 17.75 - 150,000 - 14.52% 18.65%
Community Financial Holding Company, Inc. 10.19 NA 22,000 90,000 100,000 NA NA
Guaranty Bancshares 2.19 24.00 150,000 200,000 - 24.03% 12.41%
Community Investors Bancorp 3.81 15.00 50,000 150,000 110,000 13.21% 13.21%
First Southern Bancorp 13.11 NA 20,000 82,000 170,000 NA NA
Home Loan Financial Corp. 6.41 20.75 65,000 200,000 34,200 30.50% 14.64%
Heartland Bancshares, Inc. 14.77 NA 22,000 58,000 100,000 NA NA
Medians 13.86% 12.49%
(1) Based on closing trading price on the day prior to announcement of such transaction.
(2) Based on closing trading price on the day of the fairness opinion.
NORTH
Capital & Advisory, Inc.
8 EAST
Going Private Overview
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Strategic Considerations
================================================================================
o What is the Company's Strategic Plan?
- Future capital needs
- Acquisition strategy
- Increase visibility of the Company
- Image
NORTH
Capital & Advisory, Inc.
9 EAST
Going Private Overview
- ----------------------
General Considerations
================================================================================
o Reaction of the Local Community
- How will the community react to the transaction?
- Are many small shareholders customers?
- Would a voluntary method of going private be better received?
o Reaction of Institutional Investors
- Will/can they continue to hold shares?
o Reaction from Other Banks
- Will going private encourage acquisition offers?
o How Many Shareholders Must Be Eliminated?
- How many shares do they own?
NORTH
Capital & Advisory, Inc.
10 EAST
Going Private Overview
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General Considerations (Continued)
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o Financial Impact on the Company
- Cost of purchasing shares plus transaction costs
- Pro-forma capital ratios
- Impact on future growth
- Financing alternatives
o Ability to Obtain Favorable Shareholder Vote
- Insider ownership
- Past history of difficulty
- Shareholder sentiment
NORTH
Capital & Advisory, Inc.
11 EAST
Going Private Overview
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Reasons for Going Private
================================================================================
o Decreases legal and accounting expenses as well as certain
shareholder-related costs
o Eliminates management time and resources dedicated to SEC compliance and
reporting
o Eliminates requirement to comply with Sarbanes-Oxley (SOX)
o Eliminates personal liability of CEO and CFO due to certification of 10-Qs
and 10-Ks
o Increases privacy
NORTH
Capital & Advisory, Inc.
12 EAST
Going Private Overview
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Reasons for Going Private (Continued)
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o Allows management to take longer-term perspective
o May improve shareholder composition
o May reduce expenses related to administering small shareholder accounts
o Discourages stock ownership by professional investors
o May enable small holders to liquidate their shares without paying
brokerage commissions or other transaction fees.
NORTH
Capital & Advisory, Inc.
13 EAST
Going Private Overview
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Reasons for Not Going Private
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o Limits access to capital and acquisition opportunities
o May reduce stock liquidity
o May reduce the visibility of the Company
o Stock based compensation is less attractive to employees
o Possible negative reactions by shareholders and customers
o Requires significant amount of time and expense to implement
NORTH
Capital & Advisory, Inc.
14 EAST
Going Private Overview
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Reasons for Not Going Private (Continued)
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o May require shareholder and/ or regulatory approval
o May invite a hostile or competing offer from another bank
o May be forced to re-register due to forces beyond Company's control
o Rule 144 safe harbor for insider transactions is not available
o ESOP's and employer securities held in 401k plans create additional issues
o Potential negative reactions from large, non-local shareholders.
NORTH
Capital & Advisory, Inc.
15 EAST
Going Private Overview
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Ongoing Issues with Being Private
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o Continue to Monitor Shareholder Base
- Be aware of the broker "kick-out" rule*
o Consider Continuing to Make Quarterly Financial Data Publicly Available to
Shareholders
- Shareholder base is accustomed to it
- Helps with insider trades
- Helps offset broker "kick-out" risk
o Establish a Stock Repurchase Plan to Provide Additional Liquidity
o Maintain Relationships with Market Makers
* After the Form 15 takes effect and there is subsequent cessation of periodic
reporting by the issuer, brokers may "kick-out" shares held in street name to
actual beneficial owners, thereby increasing the number of holders of record.
NORTH
Capital & Advisory, Inc.
16 EAST
Going Private Overview
- ----------------------
Evaluate Shareholder Base
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o Understand the Composition of the Company's Shareholders
- Identify which small shareholders are also customers
o Evaluate Change in Ownership of Company
- May increase certain shareholder's ownership above 10%
- Is voting control of the Company affected?
o Determine Exact Number of Shareholders
- Registered versus street name
- NOBO versus OBO
NORTH
Capital & Advisory, Inc.
17 EAST
Going Private Overview
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Alternative Methods for Going Private*
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Voluntary
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Open market share repurchases
Tender offers
Involuntary
-----------
Reverse stock split
Cash-out merger
Reclassification to a new security
*If any of the options above are used to de-register, form 13E(3) must be filed
with the SEC, which sets forth the Board's reasons for going private and the
impact on the company and its shareholders.
NORTH
Capital & Advisory, Inc.
18 EAST
Voluntary Methods
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Open Market Share Repurchase Program
================================================================================
o Board authorizes repurchase plan
- Typically less than 10% of outstanding shares
o Company follows rules set forth by SEC Rule 10b-18, which restricts
- when an issuer can repurchase its shares,
- the manner in which the repurchase is effected,
- the volume of shares purchased, and
- the price paid.
The desired reduction in the number of holders is not assured within the
required time period.
NORTH
Capital & Advisory, Inc.
19 EAST
Voluntary Methods
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Tender Offers
================================================================================
o Company offers to purchase a set number of shares for a certain period of
time.
- Basically, a tender offer is just a large share repurchase at a
premium with a deadline.
- Open to all shareholders.
o There are several types of tender offers: odd-lot, fixed price, Dutch
auction, etc.
o A tender offer document must be mailed to shareholders setting forth the
offer and its financial impact on the company.
o No guaranty that shareholders will tender shares or tender all shares
owned.
o Oversubscription by large holders may result in few holders being
eliminated.
The desired reduction in the number of shareholders is not assured.
NORTH
Capital & Advisory, Inc.
20 EAST
Involuntary Methods
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Reverse Stock Split
================================================================================
o The number of shares outstanding is reduced.
- Shareholders with fewer shares than the exchange ratio are
eliminated.
- Those with shares above the exchange ratio remain shareholders, but
receive cash for any fractional share created as a result of the
transaction.
- May choose to include or eliminate beneficial shareholders.
o Establish exchange ratio to ensure the number of remaining holders is
below 300.
o Offer price for shares is determined by Board and must be considered
"fair".
NORTH
Capital & Advisory, Inc.
21 EAST
Involuntary Methods
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Reverse Stock Split (Continued)
================================================================================
o Typically, Board receives a fairness opinion.
- Hiring a financial advisor helps the Board fulfill its fiduciary
obligations.
- Advisor studies the trading market for the company's equity
securities, apprises the Board of current market conditions and
evaluates the financial impact of the transaction on the company.
o Transaction must be approved by shareholders.
This method will reduce the number of shareholders in a timely manner. It may
eliminate some desirable shareholders, however.
NORTH
Capital & Advisory, Inc.
22 EAST
Involuntary Methods
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Cash-Out Merger
================================================================================
o Procedurally very similar to a reverse stock split, except that not all
fractional shares are cashed out.
- Only those shareholders with fewer shares than the exchange ratio
are cashed out.
- Shareholders owning more shares than the exchange ratio are
unaffected.
o Not available in all states.
- Allowed in MA if it is approved by holders of 2/3 of the company's
stock or a lower amount as detailed in the articles of
incorporation.
o Similar to forming a holding company.
- Bank merges into a dummy corporation.
- The exchange ratio for the dummy corporation's shares and the bank's
shares is set to result in the elimination of the necessary number
of shareholders.
More focused and involves less cash to repurchase the shares than a reverse
stock split.
NORTH
Capital & Advisory, Inc.
23 EAST
Involuntary Methods
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Reverse Stock Split vs. Cash-Out Merger
================================================================================
o Example:
- 1 for 100 exchange ratio
- $10.00 per share price (pre-split)
- Shareholder A owns 50 shares
- Shareholder B owns 125 shares
Reverse Stock Split
-------------------
o Shareholder A receives $500 cash and retains no shares
o Shareholder B receives 1 share and is paid $250 cash for 25 shares
o Often followed by a concurrent forward split to put shareholders back in a
similar position.
- A subsequent 100:1 forward split would give Shareholder B 100
shares.
Cash Out Merger
---------------
o Shareholder A receives $500 cash (for 0.5 post-split shares) and retains
no shares
o Shareholder B is unaffected, retains all 125 shares
NORTH
Capital & Advisory, Inc.
24 EAST
Going Private Methods
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Additional Transaction Features
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Going private transactions have been structured with the following additional
features:
o Shareholders Affected - The transaction can be structured to include or
exclude beneficially owned (street name) shares. By effecting the
transaction only at the registered shareholder level, shareholders holding
their shares in street name are not impacted by the transaction.
o Restrictions on Trading - Future transfers of shares can be restricted to
maintain a minimum number of shares traded in each block. This mechanism
can be used to prevent an increase in small shareholders.
NORTH
Capital & Advisory, Inc.
25 EAST
Going Private Methods
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Reclassification to a New Security
================================================================================
o Registration of securities is based on the number of holders per security.
o Objective is to split shareholders into two groups by exchanging the
shares held by some existing common shareholders for a new security
(typically preferred stock).
- Number of registered shareholders of common stock will fall below
300.
- Newly created security cannot have more than 500 holders.
Advantages
----------
o May be perceived as a more "friendly" way of going private, enabling
shareholders to retain an equity interest.
o Relatively inexpensive as no capital is used to buyout shareholders.
o Preferred stock can count towards Tier 1 Capital if structured properly.
Disadvantages
-------------
o Relatively new.
o The new security may be fairly illiquid.
o The benefits of repurchasing shares are not realized.
o Since no shareholders are eliminated, the potential for re-registration is
higher.
This is the most viable option for the Company.
NORTH
Capital & Advisory, Inc.
26 EAST
Going Private Methods
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Comparison: Reclassification to Preferred
================================================================================
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Georgia Trust South Street Financial
Bancshares, Inc. Corp. Transaction TBA
- -------------------------------------------------------------------------------------------------------------------------
Status Completed Completed In Process
- -------------------------------------------------------------------------------------------------------------------------
Dividends Receive preference over Receive preference over Receive preference over
common; no obligation to pay common; no obligation to pay common; no obligation to pay
dividends; non-cumulative dividends; non-cumulative dividends; non-cumulative
- -------------------------------------------------------------------------------------------------------------------------
Perpetual No maturity date; Cannot be Matures in 20 years; Can be No maturity date; Cannot be
Preferred redeemed at the option of the redeemed at the option of the redeemed at the option of the
holder holder or issuer before maturity holder
- -------------------------------------------------------------------------------------------------------------------------
Voting Can only vote on a change of Can only vote on the merger, Can only vote on a change of
Rights control; vote together with acquisition or sale of the control; vote together with
common stock instead of as a Company, stock or assets common stock instead of as a
separate class of securities separate class of securities
- -------------------------------------------------------------------------------------------------------------------------
Conversion Converts into common in the Converts into one share of Converts into one share of
Rights event of a change in control common upon a change in common in the event of a
control change in control
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NORTH
Capital & Advisory, Inc.
27 EAST
Going Private Methods
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Comparison: Terms of New Class of Preferred
================================================================================
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Georgia Trust South Street
Bancshares, Inc. Financial Corp. Transaction TBA
- ----------------------------------------------------------------------------------------------------------------------
Liquidation Preference in liquidation, Preference in liquidation Preference in liquidation,
Rights whether voluntary or equal to the greater of $4.50 whether voluntary or
involuntary, equal to $10.00 or the amount paid to involuntary, equal to the
common holders greater of book value per
share, the amount paid to
common shareholders or [$ ]
per share.
- ----------------------------------------------------------------------------------------------------------------------
Preemptive None None None
Rights
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Redemption None The issuer can force the None
Rights holder and the holder can
force the issuer to redeem the
shares
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NORTH
Capital & Advisory, Inc.
28 EAST
Going Private Methods
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Comparison: Terms of New Class of Preferred
================================================================================
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Georgia Trust South Street
Bancshares, Inc. Financial Corp. Transaction TBA
- --------------------------------------------------------------------------------------------------------------------------------
Dissenters Dissenters' rights are not May exercise dissenter's May exercise dissenter's rights
Rights required under Georgia law and rights under North Carolina under Massachusetts law.
have not been voluntarily law.
extended by the board.
- --------------------------------------------------------------------------------------------------------------------------------
Other Antidilution Adjustments - If the Put Option - within 30 days of Antidilution Adjustments - If
outstanding number of common the conversion, preferred the outstanding number of
shares changes due to a holders may sell, transfer and common shares changes due
merger, consolidation, convey shares to the to a merger, consolidation,
liquidation, reclassification, Company at a put price equal liquidation, reclassification,
recapitalization, stock split up, to $10.00 per share recapitalization, stock split up,
combination of shares or stock combination of shares or stock
dividend, an appropriate dividend, an appropriate
adjustment will be made by the adjustment will be made by the
Board and relative terms of the Board and relative terms of the
Series A Preferred Stock. Series A Preferred Stock.
- --------------------------------------------------------------------------------------------------------------------------------
NORTH
Capital & Advisory, Inc.
29 EAST
Shareholder List Analysis
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Registered Shareholder List Analysis
================================================================================
Stratification of Ownership Registered Shareholders
--------------------------- -----------------------
Shares Held Shareholders Shares Cumulative Shares Above Below
----------- ------------ ------ ----------------- ----- -----
370
0 - 100 130 8,059 8,059 240 130
101 - 125 6 687 8,746 234 136
126 - 190 22 3,252 11,998 212 158
191 - 250 32 6,665 18,663 180 190
251 - 400 40 13,669 32,332 140 230
401 - 550 26 12,182 44,514 114 256
551 - 750 16 10,148 54,662 98 272
751 - 1,000 19 17,250 71,912 79 291
1,001 - 1,500 8 9,625 81,537 71 299
1,501 - 2,500 25 47,465 129,002 46 324
2,501 - 4,000 9 30,352 159,354 37 333
4,001 - 7,000 13 73,333 232,687 24 346
7,001 - 9,999 9 73,807 306,494 15 355
10,000+ 15 1,596,116 1,902,610 0 370
----------------------------
Total Registered(1) 370 1,902,610
CEDE Shares 38 442,020
----------------------------
Total 408 2,344,630
============================
(1) Based on the registered shareholder list provided by the Bank as of May 15, 2007.
NORTH
Capital & Advisory, Inc.
30 EAST
Shareholder List Analysis
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Are Small Shareholders Significant Customers?
================================================================================
o Currently, small shareholders have deposits totaling $2.312 million.
- Seven small shareholders comprise over $100,000 in deposits each,
aggregate balance of $1.662 million.
o Currently, small shareholders have loans totaling $1.103 million.
- Four small shareholders have over $100,000 in loan balances each,
aggregate balance of $932,000.
o However, most of these small shareholders are employees; therefore, there
should be no material impact.
NORTH
Capital & Advisory, Inc.
31 EAST
Shareholder List Analysis
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Pro Forma Assumptions
================================================================================
One-Time Cost Estimates
Legal Fees $125,000
Financial Advisory Fees 42,500
Accounting 5,000
SEC Filing 2,000
Printing, Mailing Costs & Misc. 5,000
--------
Total $179,500
Annual Cost Savings
Historical Costs:
Legal Fees $ 70,000
Accounting Firm Fees 35,000
Personnel Costs 50,000
EDGAR Conversion, Printing & Mailing Costs 20,000
--------
Historical Annual Costs $175,000
Additional Expected Annual Costs:
Full SOX Implementation $110,000
--------
Total Estimated Costs $285,000
NPV (approximately equal) $2.486 million
(Using a 12% discount rate)
NPV (approximately equal) $1.06 per share
(Based on 2,344,630 shares outstanding)
Additional One-Time Costs Relating to Section 404
-------------------------------------------------
Consulting Fees = $100,000 in 2007 and 2008
Personnel Costs = $100,000 in 2007 and $40,000 in 2008
NORTH
Capital & Advisory, Inc.
32 EAST
Shareholder List Analysis
- -------------------------
Reverse Stock Split Analysis
================================================================================
Stratification of Ownership Registered Shareholders
--------------------------- -----------------------
Shares Held Shareholders Shares Cumulative Shares Above Below
----------- ------------ ------ ----------------- ----- -----
370
0 - 99 88 3,859 3,859 282 88
100 - 124 47 4,762 8,621 235 135
125 - 189 20 2,807 11,428 215 155
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
190 - 249 35 7,235 18,663 180 190
250 - 399 31 10,069 28,732 149 221
400 - 549 34 15,232 43,964 115 255
550 - 749 17 10,698 54,662 98 272
750 - 999 10 8,250 62,912 88 282
1,000 - 1,499 16 17,125 80,037 72 298
1,500 - 2,499 24 43,965 124,002 48 322
2,500 - 3,999 10 31,352 155,354 38 332
4,000 - 6,999 12 63,333 218,687 26 344
7,000 - 9,999 11 87,807 306,494 15 355
10,000+ 15 1,596,116 1,902,610 0 370
----------------------------
Total Registered(1) 370 1,902,610
CEDE Shares 38 442,020
----------------------------
Total 408 2,344,630
============================
(1) Based on the registered shareholder list provided by the Bank as of May 15, 2007.
NORTH
Capital & Advisory, Inc.
33 EAST
Shareholder List Analysis
- -------------------------
Pro Forma Analysis - Reverse Stock Split
================================================================================
Reverse Stock Split at
-----------------------------------------------------------
Total 1:165 1:190 1:215 1:240
Registered Shareholders
Cashed Out 153 155 182 188
Remaining 370 217 215 188 182
Registered Shares Cashed Out
Shareholders Below Threshold 11,078 11,428 16,808 18,183
Fractional Shares 14,822 16,262 19,817 18,907
------ ------ ------ ------
Total Registered 1,902,610 25,900 27,690 36,625 37,090
Percent of Registered Shares 1.4% 1.5% 1.9% 1.9%
Percent of Outstanding Shares 1.1% 1.2% 1.6% 1.6%
Estimated Cost: Fractional Shares Are Not Cashed Out
$10.00 $110,780 $114,280 $168,080 $181,830
$10.50 $116,319 $119,994 $176,484 $190,922
$11.00 $121,858 $125,708 $184,888 $200,013
$11.50 $127,397 $131,422 $193,292 $209,105
$12.00 $132,936 $137,136 $201,696 $218,196
Estimated Cost: Fractional Shares Are Cashed Out
$10.00 $259,000 $276,900 $366,250 $370,900
$10.50 $271,950 $290,745 $384,563 $389,445
$11.00 $284,900 $304,590 $402,875 $407,990
$11.50 $297,850 $318,435 $421,188 $426,535
$12.00 $310,800 $332,280 $439,500 $445,080
(1) Based on the registered shareholder list dated May 15, 2007.
NORTH
Capital & Advisory, Inc.
34 EAST
Shareholder List Analysis
- -------------------------
Pro Forma Analysis - Reverse Stock Split
================================================================================
Pro Forma 1:190 Reverse Stock Split at(1)
As of ------------------------------------------
3/31/2007 $10.00 $11.00 $12.00
All dollars in thousands, except per share values
Shares Purchased 27,690 27,690 27,690
Cost $277 $305 $332
Assets 302,503 302,109 302,082 302,054
Equity 19,561 19,167 19,140 19,112
Equity/ Assets(2) 6.47% 6.34% 6.34% 6.33%
Change in Net Income(2) $170 $170 $169
LTM Net Income(2) ($507) ($337) ($337) ($338)
LTM Earnings per Share(2) ($0.24) ($0.16) ($0.16) ($0.16)
Book Value per Share(2) $8.46 $8.39 $8.38 $8.37
Tangible Book Value per Share(2) $6.34 $6.24 $6.23 $6.22
Tier 1 Leverage Ratio(2) 6.81% 6.69% 6.69% 6.68%
LTM Return on Average Equity -2.81% -1.91% -1.91% -1.92%
LTM Return on Average Assets -0.14% -0.09% -0.09% -0.09%
Internal Rate of Return(3) 227.14% 198.06% 175.28%
(1) Assumes beneficial shareholders are excluded from the transaction and fractional shares are cashed out.
(2) Assumes $285,000 of annual cost savings, one-time costs of $179,500, an opportunity cost of cash of 5%,
and a marginal tax rate of 35%.
(3) Assumes a growth rate of 3.5% and includes one-time cost savings of $200,000 in 2007 and $140,000 in 2008.
NORTH
Capital & Advisory, Inc.
35 EAST
Shareholder List Analysis
- -------------------------
Pro Forma Analysis - Reclassification
================================================================================
o Proposed Structure
- Share Reclassification - Shareholders with 190 shares or less will
receive preferred shares for their common shares.
- Effected at Record Level - Transaction will not affect shareholders
holding stock in a brokerage account, so long as the brokerage firm
holds more than 190 shares in aggregate.
- No Cash Out Option - No cash will be paid to shareholders as
consideration, unless appraisal rights are exercised.
- Option to Move Between Form of Registration - Registered holders can
choose to move registered shares into a brokerage account to
maintain their ownership of common shares. Beneficial holders can
choose to move their shares into registered form to receive
preferred shares.
NORTH
Capital & Advisory, Inc.
36 EAST
Shareholder List Analysis
- -------------------------
Registered Shareholder List Analysis
================================================================================
Stratification of Ownership Registered Shareholders
--------------------------- -----------------------
Shares Held Shareholders Shares Cumulative Shares Above Below
----------- ------------ ------ ----------------- ----- -----
370
0 - 100 130 8,059 8,059 240 130
101 - 125 6 687 8,746 234 136
126 - 190 22 3,252 11,998 212 158
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
191 - 250 32 6,665 18,663 180 190
251 - 400 40 13,669 32,332 140 230
401 - 550 26 12,182 44,514 114 256
551 - 750 16 10,148 54,662 98 272
751 - 1,000 19 17,250 71,912 79 291
1,001 - 1,500 8 9,625 81,537 71 299
1,501 - 2,500 25 47,465 129,002 46 324
2,501 - 4,000 9 30,352 159,354 37 333
4,001 - 7,000 13 73,333 232,687 24 346
7,001 - 9,999 9 73,807 306,494 15 355
10,000+ 15 1,596,116 1,902,610 0 370
----------------------------
Total Registered(1) 370 1,902,610
CEDE Shares 38 442,020
----------------------------
Total 408 2,344,630
============================
(1) Based on the registered shareholder list provided by the Bank as of May 15, 2007.
NORTH
Capital & Advisory, Inc.
37 EAST
Shareholder List Analysis
- -------------------------
Pro Forma Analysis - Reclassification
================================================================================
As of Reclassification to Preferred(1)
3/31/2007 (Shareholders with 190 shares or less)
--------- --------------------------------------
All dollars in thousands, except per share values
Reclassified Shares 11,428
Cost $0
Assets 302,503 302,386
Equity 19,561 19,444
Equity/Assets(2) 6.47% 6.43%
Change in Net Income(2) $179
LTM Net Income(2) ($507) ($328)
LTM Earnings per Share(2) ($0.24) ($0.16)
Book Value per Share(2) $8.46 $8.45
Tangible Book Value per Share(2) $6.34 $6.32
Tier 1 Leverage Ratio(2) 6.81% 6.77%
LTM Return on Average Equity -2.81% -1.83%
LTM Return on Average Assets -0.14% -0.09%
Internal Rate of Return(3) 256.90%
(1) Assumes no shareholders exercise appraisal rights and no fractional shares are reclassified.
(2) Assumes $285,000 of annual cost savings, one-time costs of $179,500, an opportunity cost of cash of 5%,
and a marginal tax rate of 35%.
(3) Assumes a growth rate of 3.5% and includes one-time cost savings of $200,000 in 2007 and $140,000 in 2008.
NORTH
Capital & Advisory, Inc.
38 EAST
Reclassification to Preferred
- -----------------------------
Impact on First Ipswich
================================================================================
Advantages
----------
o Elimination of SEC Reporting Obligations
o Positively effects LTM diluted losses per share. Increases to -$0.16 per
share, up from -$0.24 per share.
- Series A Preferred shares will be considered as common stock
equivalents
o No effect on outstanding warrants and options to purchase common stock
o Elimination of liability under Section 18 of the Exchange Act
Disadvantages
-------------
o May adversely affect the already limited liquidity of common stock.
o Book value per common equivalent share will decline slightly from $8.46
per share to $8.45 per share.
o We estimate that professional fees and other expenses related to the
transaction will total approximately $179,500.
This transaction should not have a significant impact on any anticipated needs
of the Company to raise additional capital.
NORTH
Capital & Advisory, Inc.
39 EAST
Reclassification to Preferred
- -----------------------------
Impact on All Shareholders
================================================================================
Advantages
----------
o Retain equity interest in the Company.
o Benefit from substantial cost and management time savings.
o Positively effects LTM diluted losses per share. Increases to -$0.16 per
share, up from -$0.24 per share.
- Series A Preferred shares will be considered as common stock
equivalents
Disadvantages
-------------
o Book value per common equivalent share will decline slightly from $8.46
per share to $8.45 per share.
o Loss of benefits from SEC reporting.
- Detailed financial data about First Ipswich will continue to be
available from the Company, the Federal Reserve Board and the FDIC
NORTH
Capital & Advisory, Inc.
40 EAST
Reclassification to Preferred
- -----------------------------
Impact on Those Receiving Preferred Shares
================================================================================
Advantages
----------
o Upon liquidation or dissolution of the Company, holders of Preferred A
shares will be paid before any payments are made to common shareholders.
o Entitled to a preference in the payment of dividends over common
shareholders.
o Conversion to common upon the change of control, enabling holders to
participate in any value received as a result of any future sale.
Disadvantages
o Limited voting rights. May only vote upon a proposed change in control of
the Company.
o Board may authorize the issuance of other classes or series of preferred
stock or equity securities that rank senior to or on parity with Series A
Preferred Stock.
NORTH
Capital & Advisory, Inc.
41 EAST
Reclassification to Preferred
- -----------------------------
Impact on Remaining, Affiliated Shareholders
================================================================================
Advantages
----------
o Information about the compensation and stock ownership of affiliates will
no longer be publicly available
o Elimination of liability under Section 18 of the Exchange Act
o Continue to exercise sole voting control, except with respect to a change
in control of the Company.
Disadvantages
-------------
o May adversely affect the already limited liquidity of common stock
o Rule 144 no longer available to provide a "safe harbor" for resales of
stock by affiliates of an issuer
NORTH
Capital & Advisory, Inc.
42 EAST
Reclassification to Preferred
- -----------------------------
Impact on Remaining, Unaffiliated Shareholders
================================================================================
Advantages
----------
o Continue to exercise sole voting control, except with respect to a change
in control of the Company.
o Net present value of $1.06/share created.
o Immediate improvement in EPS of $0.08/share and IRR of 256.9%.
Disadvantages
-------------
o May adversely affect the already limited liquidity of common stock
o Reduction in publicly available information
o Elimination of protection under Section 18 of the Exchange Act.
NORTH
Capital & Advisory, Inc.
43 EAST
Fairness Opinion Analysis
- -------------------------
Fairness Opinion Analysis
================================================================================
o Historical Trading and Volume
o Recapitalization Premium Analysis
o Comparable Company Analysis
o Dividend Discount Analysis
NORTH
Capital & Advisory, Inc.
44 EAST
Fairness Opinion Analysis
- -------------------------
Stock Performance (Since August 27, 2004)
================================================================================
[LINE GRAPH IN THE PRINTED MATERIALS; PLOT POINTS BELOW]
First Ipswich
Date Price Date Price Date Price Date Price Date Price Date Price
---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ---- -----
8/27/2004 15.00 12/1/2004 19.50 3/1/2005 17.35 6/1/2005 13.70 9/1/2005 12.00 12/1/2005 10.60
8/30/2004 15.00 12/2/2004 19.05 3/2/2005 17.25 6/2/2005 14.20 9/2/2005 12.00 12/2/2005 10.60
8/31/2004 15.00 12/3/2004 19.05 3/3/2005 16.60 6/3/2005 14.20 9/6/2005 12.00 12/5/2005 11.25
9/1/2004 15.00 12/6/2004 19.05 3/4/2005 16.60 6/6/2005 13.99 9/7/2005 12.00 12/6/2005 12.00
9/2/2004 15.00 12/7/2004 19.00 3/7/2005 16.60 6/7/2005 13.99 9/8/2005 12.00 12/7/2005 12.00
9/3/2004 15.00 12/8/2004 19.00 3/8/2005 16.95 6/8/2005 13.99 9/9/2005 12.00 12/8/2005 12.00
9/7/2004 15.00 12/9/2004 19.00 3/9/2005 16.95 6/9/2005 14.00 9/12/2005 12.00 12/9/2005 13.00
9/8/2004 22.00 12/10/2004 19.00 3/10/2005 16.95 6/10/2005 13.50 9/13/2005 12.00 12/12/2005 13.00
9/9/2004 22.00 12/13/2004 19.10 3/11/2005 16.65 6/13/2005 13.20 9/14/2005 12.00 12/13/2005 12.00
9/10/2004 22.00 12/14/2004 19.10 3/14/2005 17.00 6/14/2005 13.20 9/15/2005 12.00 12/14/2005 11.50
9/13/2004 22.00 12/15/2004 18.65 3/15/2005 17.00 6/15/2005 13.20 9/16/2005 12.00 12/15/2005 11.50
9/14/2004 22.00 12/16/2004 18.80 3/16/2005 17.00 6/16/2005 13.20 9/19/2005 12.00 12/16/2005 11.50
9/15/2004 22.00 12/17/2004 18.80 3/17/2005 17.00 6/17/2005 13.20 9/20/2005 12.00 12/19/2005 11.50
9/16/2004 22.00 12/20/2004 19.00 3/18/2005 17.00 6/20/2005 13.20 9/21/2005 12.00 12/20/2005 11.30
9/17/2004 22.00 12/21/2004 19.50 3/21/2005 17.00 6/21/2005 13.20 9/22/2005 12.00 12/21/2005 11.30
9/20/2004 22.00 12/22/2004 19.50 3/22/2005 16.00 6/22/2005 13.20 9/23/2005 12.00 12/22/2005 11.30
9/21/2004 22.00 12/23/2004 19.50 3/23/2005 16.00 6/23/2005 13.20 9/26/2005 12.25 12/23/2005 11.30
9/22/2004 22.00 12/27/2004 19.50 3/24/2005 15.50 6/24/2005 13.20 9/27/2005 11.50 12/27/2005 11.30
9/23/2004 21.50 12/28/2004 19.50 3/28/2005 16.00 6/27/2005 13.20 9/28/2005 12.25 12/28/2005 11.30
9/24/2004 16.00 12/29/2004 19.25 3/29/2005 16.25 6/28/2005 12.00 9/29/2005 12.25 12/29/2005 12.50
9/27/2004 16.00 12/30/2004 19.50 3/30/2005 16.25 6/29/2005 12.50 9/30/2005 12.50 12/30/2005 12.50
9/28/2004 17.00 12/31/2004 19.50 3/31/2005 16.25 6/30/2005 12.05 10/3/2005 12.50 1/3/2006 12.50
9/29/2004 17.00 1/3/2005 19.50 4/1/2005 16.25 7/1/2005 12.05 10/4/2005 12.50 1/4/2006 12.50
9/30/2004 17.00 1/4/2005 19.25 4/4/2005 15.75 7/5/2005 12.05 10/5/2005 12.50 1/5/2006 12.50
10/1/2004 17.00 1/5/2005 19.00 4/5/2005 16.35 7/6/2005 12.10 10/6/2005 12.50 1/6/2006 12.50
10/4/2004 17.50 1/6/2005 19.00 4/6/2005 16.35 7/7/2005 12.10 10/7/2005 12.50 1/9/2006 11.85
10/5/2004 17.50 1/7/2005 19.00 4/7/2005 16.40 7/8/2005 12.00 10/10/2005 12.50 1/10/2006 11.85
10/6/2004 17.50 1/10/2005 19.00 4/8/2005 16.50 7/11/2005 12.00 10/11/2005 12.00 1/11/2006 11.85
10/7/2004 17.50 1/11/2005 19.00 4/11/2005 16.50 7/12/2005 12.00 10/12/2005 11.50 1/12/2006 11.85
10/8/2004 17.50 1/12/2005 18.55 4/12/2005 16.50 7/13/2005 12.00 10/13/2005 11.50 1/13/2006 11.25
10/11/2004 17.50 1/13/2005 18.60 4/13/2005 16.30 7/14/2005 11.80 10/14/2005 11.25 1/17/2006 11.25
10/12/2004 18.75 1/14/2005 18.60 4/14/2005 16.30 7/15/2005 11.80 10/17/2005 11.00 1/18/2006 11.25
10/13/2004 18.75 1/18/2005 18.60 4/15/2005 15.95 7/18/2005 11.80 10/18/2005 11.00 1/19/2006 11.25
10/14/2004 18.75 1/19/2005 18.60 4/18/2005 15.55 7/19/2005 11.80 10/19/2005 11.00 1/20/2006 11.25
10/15/2004 18.75 1/20/2005 18.60 4/19/2005 15.95 7/20/2005 12.00 10/20/2005 11.00 1/23/2006 11.25
10/18/2004 18.75 1/21/2005 18.55 4/20/2005 16.00 7/21/2005 12.00 10/21/2005 11.00 1/24/2006 11.25
10/19/2004 18.75 1/24/2005 18.55 4/21/2005 15.99 7/22/2005 11.75 10/24/2005 11.00 1/25/2006 11.25
10/20/2004 18.75 1/25/2005 18.55 4/22/2005 15.99 7/25/2005 11.75 10/25/2005 11.00 1/26/2006 11.75
10/21/2004 18.75 1/26/2005 18.55 4/25/2005 15.99 7/26/2005 11.75 10/26/2005 11.00 1/27/2006 11.30
10/22/2004 18.75 1/27/2005 18.55 4/26/2005 15.99 7/27/2005 11.75 10/27/2005 11.00 1/30/2006 11.05
10/25/2004 17.48 1/28/2005 18.55 4/27/2005 15.99 7/28/2005 11.75 10/28/2005 11.00 1/31/2006 11.05
10/26/2004 17.48 1/31/2005 18.10 4/28/2005 16.00 7/29/2005 11.75 10/31/2005 11.00 2/1/2006 11.05
10/27/2004 17.48 2/1/2005 18.10 4/29/2005 16.00 8/1/2005 11.75 11/1/2005 10.25 2/2/2006 11.05
10/28/2004 17.48 2/2/2005 18.10 5/2/2005 15.50 8/2/2005 12.00 11/2/2005 10.25 2/3/2006 11.05
10/29/2004 17.48 2/3/2005 18.00 5/3/2005 15.50 8/3/2005 12.00 11/3/2005 10.25 2/6/2006 11.10
11/1/2004 17.48 2/4/2005 18.40 5/4/2005 15.50 8/4/2005 11.75 11/4/2005 10.90 2/7/2006 11.05
11/2/2004 17.48 2/7/2005 18.00 5/5/2005 15.50 8/5/2005 11.75 11/7/2005 10.90 2/8/2006 11.00
11/3/2004 17.48 2/8/2005 18.00 5/6/2005 15.50 8/8/2005 11.75 11/8/2005 10.90 2/9/2006 11.00
11/4/2004 17.48 2/9/2005 18.00 5/9/2005 15.50 8/9/2005 11.75 11/9/2005 10.90 2/10/2006 11.00
11/5/2004 17.48 2/10/2005 17.75 5/10/2005 15.50 8/10/2005 11.70 11/10/2005 10.50 2/13/2006 11.00
11/8/2004 17.48 2/11/2005 17.75 5/11/2005 15.50 8/11/2005 12.00 11/11/2005 11.00 2/14/2006 11.00
11/9/2004 18.25 2/14/2005 17.75 5/12/2005 15.00 8/12/2005 12.00 11/14/2005 11.00 2/15/2006 10.50
11/10/2004 18.25 2/15/2005 17.75 5/13/2005 15.00 8/15/2005 12.00 11/15/2005 11.45 2/16/2006 10.75
11/11/2004 18.25 2/16/2005 17.50 5/16/2005 15.00 8/16/2005 11.70 11/16/2005 11.45 2/17/2006 10.75
11/12/2004 18.50 2/17/2005 17.50 5/17/2005 15.00 8/17/2005 11.70 11/17/2005 11.45 2/21/2006 10.75
11/15/2004 19.00 2/18/2005 17.50 5/18/2005 15.00 8/18/2005 11.70 11/18/2005 11.45 2/22/2006 10.75
11/16/2004 18.75 2/22/2005 17.50 5/19/2005 15.00 8/19/2005 11.70 11/21/2005 11.45 2/23/2006 10.75
11/17/2004 18.75 2/23/2005 17.50 5/20/2005 14.55 8/22/2005 11.70 11/22/2005 11.45 2/24/2006 10.75
11/18/2004 19.00 2/24/2005 17.50 5/23/2005 15.50 8/23/2005 11.70 11/23/2005 11.00 2/27/2006 10.75
11/19/2004 19.00 2/25/2005 17.35 5/24/2005 15.50 8/24/2005 12.25 11/25/2005 11.00 2/28/2006 10.25
11/22/2004 18.65 2/28/2005 17.35 5/25/2005 15.50 8/25/2005 12.25 11/28/2005 11.00
11/23/2004 18.85 5/26/2005 13.85 8/26/2005 12.25 11/29/2005 11.50
11/24/2004 18.60 5/27/2005 13.20 8/29/2005 12.00 11/30/2005 11.50
11/26/2004 18.60 5/31/2005 13.20 8/30/2005 12.00
11/29/2004 18.60 8/31/2005 12.00
11/30/2004 19.20
Date Price Date Price Date Price Date Price Date Price
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
3/1/2006 10.25 6/1/2006 10.05 9/1/2006 9.25 12/1/2006 8.25 3/1/2007 9.30
3/2/2006 10.25 6/2/2006 10.05 9/5/2006 9.25 12/4/2006 8.25 3/2/2007 9.30
3/3/2006 10.25 6/5/2006 10.00 9/6/2006 9.25 12/5/2006 8.25 3/5/2007 9.30
3/6/2006 10.25 6/6/2006 10.00 9/7/2006 9.25 12/6/2006 8.25 3/6/2007 9.30
3/7/2006 11.00 6/7/2006 10.00 9/8/2006 9.25 12/7/2006 8.25 3/7/2007 9.50
3/8/2006 11.00 6/8/2006 10.00 9/11/2006 9.25 12/8/2006 8.25 3/8/2007 9.50
3/9/2006 11.00 6/9/2006 10.00 9/12/2006 9.00 12/11/2006 8.15 3/9/2007 9.50
3/10/2006 11.00 6/12/2006 10.00 9/13/2006 9.00 12/12/2006 8.15 3/12/2007 9.50
3/13/2006 11.00 6/13/2006 10.00 9/14/2006 9.00 12/13/2006 8.15 3/13/2007 9.50
3/14/2006 11.25 6/14/2006 10.00 9/15/2006 9.00 12/14/2006 8.15 3/14/2007 9.50
3/15/2006 10.60 6/15/2006 10.10 9/18/2006 9.00 12/15/2006 8.25 3/15/2007 9.50
3/16/2006 10.60 6/16/2006 10.00 9/19/2006 9.00 12/18/2006 8.25 3/16/2007 9.50
3/17/2006 10.60 6/19/2006 9.50 9/20/2006 8.50 12/19/2006 8.20 3/19/2007 9.40
3/20/2006 10.60 6/20/2006 9.50 9/21/2006 8.50 12/20/2006 8.55 3/20/2007 9.40
3/21/2006 10.60 6/21/2006 9.50 9/22/2006 8.50 12/21/2006 8.55 3/21/2007 9.40
3/22/2006 10.60 6/22/2006 9.50 9/25/2006 8.50 12/22/2006 8.55 3/22/2007 9.40
3/23/2006 10.60 6/23/2006 9.50 9/26/2006 8.50 12/26/2006 8.55 3/23/2007 9.40
3/24/2006 10.60 6/26/2006 9.50 9/27/2006 8.75 12/27/2006 8.55 3/26/2007 9.25
3/27/2006 10.75 6/27/2006 9.50 9/28/2006 8.75 12/28/2006 8.55 3/27/2007 9.25
3/28/2006 10.75 6/28/2006 9.50 9/29/2006 8.75 12/29/2006 8.50 3/28/2007 9.25
3/29/2006 10.75 6/29/2006 9.50 10/2/2006 8.75 1/3/2007 8.55 3/29/2007 9.05
3/30/2006 10.75 6/30/2006 9.50 10/3/2006 8.75 1/4/2007 8.55 3/30/2007 9.05
3/31/2006 10.75 7/3/2006 9.25 10/4/2006 8.75 1/5/2007 8.55 4/2/2007 9.05
4/3/2006 10.75 7/5/2006 9.25 10/5/2006 8.75 1/8/2007 8.50 4/3/2007 9.05
4/4/2006 10.75 7/6/2006 9.25 10/6/2006 8.75 1/9/2007 8.50 4/4/2007 9.25
4/5/2006 10.75 7/7/2006 9.25 10/9/2006 8.75 1/10/2007 8.50 4/5/2007 9.25
4/6/2006 11.00 7/10/2006 9.25 10/10/2006 8.75 1/11/2007 8.50 4/9/2007 9.25
4/7/2006 11.00 7/11/2006 9.00 10/11/2006 8.75 1/12/2007 8.50 4/10/2007 9.25
4/10/2006 10.75 7/12/2006 9.00 10/12/2006 8.75 1/16/2007 8.50 4/11/2007 9.25
4/11/2006 10.75 7/13/2006 9.00 10/13/2006 8.75 1/17/2007 8.95 4/12/2007 9.25
4/12/2006 10.75 7/14/2006 9.00 10/16/2006 8.75 1/18/2007 8.95 4/13/2007 9.25
4/13/2006 10.75 7/17/2006 9.00 10/17/2006 8.75 1/19/2007 8.95 4/16/2007 9.25
4/17/2006 10.60 7/18/2006 8.55 10/18/2006 8.75 1/22/2007 8.95 4/17/2007 9.25
4/18/2006 10.60 7/19/2006 8.55 10/19/2006 8.75 1/23/2007 8.90 4/18/2007 9.25
4/19/2006 10.50 7/20/2006 8.55 10/20/2006 8.75 1/24/2007 12.00 4/19/2007 9.05
4/20/2006 10.50 7/21/2006 8.55 10/23/2006 8.75 1/25/2007 9.50 4/20/2007 9.00
4/21/2006 10.50 7/24/2006 8.55 10/24/2006 8.75 1/26/2007 9.75 4/23/2007 9.00
4/24/2006 10.50 7/25/2006 8.55 10/25/2006 8.75 1/29/2007 9.75 4/24/2007 9.00
4/25/2006 11.00 7/26/2006 8.50 10/26/2006 8.75 1/30/2007 9.50 4/25/2007 9.00
4/26/2006 10.50 7/27/2006 8.50 10/27/2006 8.75 1/31/2007 9.50 4/26/2007 9.30
4/27/2006 10.50 7/28/2006 8.50 10/30/2006 8.75 2/1/2007 9.50 4/27/2007 9.30
4/28/2006 10.50 7/31/2006 8.50 10/31/2006 8.75 2/2/2007 9.30 4/30/2007 9.30
5/1/2006 10.50 8/1/2006 8.50 11/1/2006 8.75 2/5/2007 9.30 5/1/2007 9.05
5/2/2006 10.50 8/2/2006 8.50 11/2/2006 8.75 2/6/2007 9.30 5/2/2007 9.05
5/3/2006 10.50 8/3/2006 8.50 11/3/2006 8.75 2/7/2007 9.50 5/3/2007 9.05
5/4/2006 10.50 8/4/2006 8.50 11/6/2006 8.50 2/8/2007 9.75 5/4/2007 9.05
5/5/2006 10.50 8/7/2006 8.50 11/7/2006 8.50 2/9/2007 9.75 5/7/2007 9.05
5/8/2006 10.50 8/8/2006 8.50 11/8/2006 8.50 2/12/2007 9.75 5/8/2007 9.05
5/9/2006 10.50 8/9/2006 8.20 11/9/2006 8.50 2/13/2007 9.50 5/9/2007 9.50
5/10/2006 10.50 8/10/2006 8.15 11/10/2006 8.75 2/14/2007 9.50 5/10/2007 9.50
5/11/2006 10.50 8/11/2006 8.15 11/13/2006 8.75 2/15/2007 9.50 5/11/2007 9.50
5/12/2006 10.50 8/14/2006 8.10 11/14/2006 8.60 2/16/2007 9.50 5/14/2007 9.50
5/15/2006 10.50 8/15/2006 8.10 11/15/2006 8.45 2/20/2007 9.50 5/15/2007 9.50
5/16/2006 10.05 8/16/2006 9.75 11/16/2006 8.45 2/21/2007 9.50 5/16/2007 9.50
5/17/2006 10.05 8/17/2006 9.50 11/17/2006 8.45 2/22/2007 9.50 5/17/2007 9.50
5/18/2006 10.05 8/18/2006 9.50 11/20/2006 8.45 2/23/2007 9.50 5/18/2007 9.50
5/19/2006 10.05 8/21/2006 9.50 11/21/2006 8.50 2/26/2007 9.35 5/21/2007 9.10
5/22/2006 10.05 8/22/2006 9.50 11/22/2006 8.50 2/27/2007 9.35 5/22/2007 9.10
5/23/2006 10.05 8/23/2006 9.00 11/24/2006 8.50 2/28/2007 9.30 5/23/2007 9.10
5/24/2006 10.05 8/24/2006 9.00 11/27/2006 8.15 5/24/2007 9.10
5/25/2006 10.05 8/25/2006 9.00 11/28/2006 8.15 5/25/2007 9.25
5/26/2006 10.05 8/28/2006 9.25 11/29/2006 8.15 5/29/2007 9.25
5/30/2006 10.05 8/29/2006 9.25 11/30/2006 8.25 5/30/2007 9.50
5/31/2006 10.05 8/30/2006 9.25 5/31/2007 9.10
8/31/2006 9.25
Returns (8/27/04 - 5/31/07)
---------------------------
First Ipswich -39.33%
S&P Banking Index 11.81%
NASDAQ Bank Index 11.10%
NORTH
Capital & Advisory, Inc.
45 EAST
Fairness Opinion Analysis
- -------------------------
Price/ Volume Analysis
================================================================================
[LINE GRAPH IN THE PRINTED MATERIALS; PLOT POINTS BELOW]
First Ipswich
Date Close Volume Date Close Volume
---- ----- ------ ---- ----- ------
6/1/2006 10.05 0 1/3/2007 8.55 1300
6/2/2006 10.05 0 1/4/2007 8.55 0
6/5/2006 10 300 1/5/2007 8.55 0
6/6/2006 10 0 1/8/2007 8.5 800
6/7/2006 10 0 1/9/2007 8.5 0
6/8/2006 10 0 1/10/2007 8.5 0
6/9/2006 10 0 1/11/2007 8.5 6400
6/12/2006 10 0 1/12/2007 8.5 2800
6/13/2006 10 0 1/16/2007 8.5 0
6/14/2006 10 0 1/17/2007 8.95 500
6/15/2006 10.1 3000 1/18/2007 8.95 0
6/16/2006 10 900 1/19/2007 8.95 0
6/19/2006 9.5 200 1/22/2007 8.95 700
6/20/2006 9.5 0 1/23/2007 8.9 200
6/21/2006 9.5 0 1/24/2007 12 13200
6/22/2006 9.5 0 1/25/2007 9.5 12000
6/23/2006 9.5 0 1/26/2007 9.75 5700
6/26/2006 9.5 0 1/29/2007 9.75 0
6/27/2006 9.5 0 1/30/2007 9.5 500
6/28/2006 9.5 0 1/31/2007 9.5 4000
6/29/2006 9.5 2700 2/1/2007 9.5 0
6/30/2006 9.5 0 2/2/2007 9.3 700
7/3/2006 9.25 1000 2/5/2007 9.3 0
7/5/2006 9.25 0 2/6/2007 9.3 0
7/6/2006 9.25 0 2/7/2007 9.5 400
7/7/2006 9.25 0 2/8/2007 9.75 3400
7/10/2006 9.25 0 2/9/2007 9.75 0
7/11/2006 9 2500 2/12/2007 9.75 0
7/12/2006 9 0 2/13/2007 9.5 6200
7/13/2006 9 0 2/14/2007 9.5 4100
7/14/2006 9 0 2/15/2007 9.5 0
7/17/2006 9 0 2/16/2007 9.5 400
7/18/2006 8.55 300 2/20/2007 9.5 0
7/19/2006 8.55 0 2/21/2007 9.5 1500
7/20/2006 8.55 500 2/22/2007 9.5 1000
7/21/2006 8.55 0 2/23/2007 9.5 7000
7/24/2006 8.55 0 2/26/2007 9.35 1600
7/25/2006 8.55 0 2/27/2007 9.35 0
7/26/2006 8.5 100 2/28/2007 9.3 1500
7/27/2006 8.5 0 3/1/2007 9.3 200
7/28/2006 8.5 0 3/2/2007 9.3 0
7/31/2006 8.5 0 3/5/2007 9.3 0
8/1/2006 8.5 100 3/6/2007 9.3 0
8/2/2006 8.5 100 3/7/2007 9.5 500
8/3/2006 8.5 0 3/8/2007 9.5 1600
8/4/2006 8.5 0 3/9/2007 9.5 0
8/7/2006 8.5 0 3/12/2007 9.5 0
8/8/2006 8.5 0 3/13/2007 9.5 0
8/9/2006 8.2 7300 3/14/2007 9.5 0
8/10/2006 8.15 500 3/15/2007 9.5 0
8/11/2006 8.15 1200 3/16/2007 9.5 0
8/14/2006 8.1 2000 3/19/2007 9.4 3900
8/15/2006 8.1 1900 3/20/2007 9.4 0
8/16/2006 9.75 4600 3/21/2007 9.4 0
8/17/2006 9.5 3600 3/22/2007 9.4 0
8/18/2006 9.5 500 3/23/2007 9.4 0
8/21/2006 9.5 0 3/26/2007 9.25 1500
8/22/2006 9.5 0 3/27/2007 9.25 0
8/23/2006 9 300 3/28/2007 9.25 0
8/24/2006 9 0 3/29/2007 9.05 4200
8/25/2006 9 0 3/30/2007 9.05 0
8/28/2006 9.25 800 4/2/2007 9.05 2000
8/29/2006 9.25 0 4/3/2007 9.05 500
8/30/2006 9.25 0 4/4/2007 9.25 3000
8/31/2006 9.25 0 4/5/2007 9.25 0
9/1/2006 9.25 0 4/9/2007 9.25 0
9/5/2006 9.25 0 4/10/2007 9.25 0
9/6/2006 9.25 0 4/11/2007 9.25 1000
9/7/2006 9.25 0 4/12/2007 9.25 0
9/8/2006 9.25 0 4/13/2007 9.25 0
9/11/2006 9.25 0 4/16/2007 9.25 0
9/12/2006 9 500 4/17/2007 9.25 0
9/13/2006 9 0 4/18/2007 9.25 0
9/14/2006 9 0 4/19/2007 9.05 1000
9/15/2006 9 1000 4/20/2007 9 1000
9/18/2006 9 0 4/23/2007 9 0
9/19/2006 9 0 4/24/2007 9 0
9/20/2006 8.5 1000 4/25/2007 9 0
9/21/2006 8.5 0 4/26/2007 9.3 1800
9/22/2006 8.5 0 4/27/2007 9.3 0
9/25/2006 8.5 0 4/30/2007 9.3 0
9/26/2006 8.5 0 5/1/2007 9.05 600
9/27/2006 8.75 2200 5/2/2007 9.05 400
9/28/2006 8.75 0 5/3/2007 9.05 0
9/29/2006 8.75 0 5/4/2007 9.05 0
10/2/2006 8.75 0 5/7/2007 9.05 0
10/3/2006 8.75 0 5/8/2007 9.05 0
10/4/2006 8.75 0 5/9/2007 9.5 3500
10/5/2006 8.75 0 5/10/2007 9.5 3200
10/6/2006 8.75 0 5/11/2007 9.5 0
10/9/2006 8.75 0 5/14/2007 9.5 0
10/10/2006 8.75 0 5/15/2007 9.5 0
10/11/2006 8.75 0 5/16/2007 9.5 0
10/12/2006 8.75 0 5/17/2007 9.5 0
10/13/2006 8.75 0 5/18/2007 9.5 0
10/16/2006 8.75 0 5/21/2007 9.1 1500
10/17/2006 8.75 0 5/22/2007 9.1 0
10/18/2006 8.75 0 5/23/2007 9.1 0
10/19/2006 8.75 2000 5/24/2007 9.1 0
10/20/2006 8.75 0 5/25/2007 9.25 200
10/23/2006 8.75 0 5/29/2007 9.25 0
10/24/2006 8.75 0 5/30/2007 9.5 200
10/25/2006 8.75 2000 5/31/2007 9.1 2200
10/26/2006 8.75 0
10/27/2006 8.75 0
10/30/2006 8.75 0
10/31/2006 8.75 0
11/1/2006 8.75 0
11/2/2006 8.75 3300
11/3/2006 8.75 0
11/6/2006 8.5 5600
11/7/2006 8.5 11300
11/8/2006 8.5 0
11/9/2006 8.5 0
11/10/2006 8.75 1600
11/13/2006 8.75 0
11/14/2006 8.6 1500
11/15/2006 8.45 2600
11/16/2006 8.45 0
11/17/2006 8.45 0
11/20/2006 8.45 0
11/21/2006 8.5 12000
11/22/2006 8.5 0
11/24/2006 8.5 0
11/27/2006 8.15 3500
11/28/2006 8.15 0
11/29/2006 8.15 0
11/30/2006 8.25 1000
12/1/2006 8.25 0
12/4/2006 8.25 0
12/5/2006 8.25 0
12/6/2006 8.25 0
12/7/2006 8.25 0
12/8/2006 8.25 0
12/11/2006 8.15 1800
12/12/2006 8.15 0
12/13/2006 8.15 0
12/14/2006 8.15 0
12/15/2006 8.25 1000
12/18/2006 8.25 0
12/19/2006 8.2 1000
12/20/2006 8.55 1600
12/21/2006 8.55 0
12/22/2006 8.55 0
12/26/2006 8.55 0
12/27/2006 8.55 0
12/28/2006 8.55 1000
12/29/2006 8.5 500
FIWC stock suffers from low trading volume.
FIWC trading below $10 per share.
NORTH
Capital & Advisory, Inc.
46 EAST
Fairness Opinion Analysis
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Trades - Last Twelve Months
================================================================================
Shares Weighted Average Earliest Day
Traded Closing Price Traded Low High(1)
------ ------------- ------ --- -------
Last 5 trading days 7,300 9.29 05/10/07 9.10 9.50
Last 10 trading days 14,600 9.31 04/20/07 9.00 9.50
Last 20 trading days 33,800 9.26 03/07/07 9.00 9.50
Last 6 months 116,800 9.56 12/11/06 8.15 10.00
Last 9 months 167,900 9.25 09/12/06 8.15 10.00
Last 12 months 202,300 9.21 06/05/06 8.10 10.50
(1) Excludes January 24, 2007 and January 25, 2007, when First Ipswich traded at
highs of $12.00 and $11.00, respectively.
FIWC traded on 87 of the 252 trading days over the last 12 months.
NORTH
Capital & Advisory, Inc.
47 EAST
Fairness Opinion Analysis
- -------------------------
Recapitalization Premium Analysis
================================================================================
Reasonable Premium = 13.18%
Related Transactions
Assets Announce
Company Ticker City ST ($000s) Date Transaction Type
- ------- ------ ---- -- ------- ---- ----------------
Monarch Community Bancorp, Inc. MCBF Coldwater MI 291,300 02/16/07 Cash Out Merger
South Street Financial Corp. SSFC Albemarle NC 268,848 12/11/06 Reclassification to Preferred
First Niles Financial, Inc. FNFI Niles OH 100,973 06/29/06 Reclassification to Preferred
Harbor Bankshares Corp. HRBK Baltimore MD 258,174 05/02/06 Cash Out Merger
Home City Financial Corp. HCFL Springfield OH 148,159 01/26/06 Reverse Stock Split
FC Banc Corp. FCBZ Bucyrus OH 178,386 11/15/05 Reverse Stock Split
County Bank Corp. CBNC Lapeer MI 257,355 10/07/05 Reverse Stock Split
First Citizens Bancorporation, Inc. FCBN Columbia SC 4,533,651 09/13/05 Cash Out Merger
Illini Corporation ILII Springfield IL 253,463 08/19/05 Cash-out Merger
Iowa First Bancshares Corporation IOFB Muscatine IA 376,429 07/22/05 Reverse Stock Split
Cherokee Banking Company CHKJ Canton GA 164,843 07/01/05 Cash-out Merger
Community Financial Holding Company, Inc. Duluth GA 274,130 06/17/05 Reclassification to Class A CS
Guaranty Bancshares GNTY Mount Pleasant TX 552,500 06/13/05 Cash Out Merger
Community Investors Bancorp CIBI Bucyrus OH 122,762 06/09/05 Reverse Stock Split
First Southern Bancorp Statesboro GA 113,407 06/02/05 Reclassification to Series A
Home Loan Financial Corp. HLFN Coshocton OH 160,342 05/18/05 Reverse Stock Split
Heartland Bancshares, Inc. Sebring FL 147,922 04/20/05 Reclassification to Preferred
Medians
Premium Over Market Value
-------------------------
% of
Shares Price Per At Fairness
Company Impacted Share Announce(1) Opinion(2)
- ------- -------- ----- ----------- ----------
Monarch Community Bancorp, Inc. 3.11 13.50 27.36% 15.88%
South Street Financial Corp. 2.60 NA NA NA
First Niles Financial, Inc. 2.00 NA NA NA
Harbor Bankshares Corp. 1.80 31.00 21.57% 0.00%
Home City Financial Corp. 1.77 17.10 11.91% 12.57%
FC Banc Corp. 9.92 29.12 3.63% 3.08%
County Bank Corp. 4.72 55.00 2.42% 1.85%
First Citizens Bancorporation, Inc. 3.43 735.00 24.58% 28.50%
Illini Corporation 9.70 40.50 3.71% 3.85%
Iowa First Bancshares Corporation 4.72 38.00 10.95% 10.95%
Cherokee Banking Company 11.01 17.75 14.52% 18.65%
Community Financial Holding Company, Inc. 10.19 NA NA NA
Guaranty Bancshares 2.19 24.00 24.03% 12.41%
Community Investors Bancorp 3.81 15.00 13.21% 13.21%
First Southern Bancorp 13.11 NA NA NA
Home Loan Financial Corp. 6.41 20.75 30.50% 14.64%
Heartland Bancshares, Inc. 14.77 NA NA NA
Medians 13.86% 12.49%
(1) Based on closing trading price on the day prior to announcement of such transaction.
(2) Based on closing trading price on the day of the fairness opinion.
Applying the 13.18% premium to First Ipswich's June 13th closing price
of $9.20, yields a value of $10.41.
NORTH
Capital & Advisory, Inc.
48 EAST
Fairness Opinion Analysis
- -------------------------
Comparable Companies
================================================================================
Peer Group for First Ipswich
Assets
Company City State Ticker Exchange ($000s) ROA (%) ROE (%)
- ------- ---- ----- ------ -------- ------- ------- -------
Beverly National Corporation Beverly MA BNV AMEX 460,918 0.59 6.92
Northeast Bancorp Auburn ME NBN AMEX 562,113 0.43 6.00
Salisbury Bancorp, Inc. Lakeville CT SAL AMEX 431,117 0.96 9.35
Brooklyn Federal Bancorp Inc. Brooklyn NY BFSB NASDAQ 398,816 0.98 4.74
Elmira Savings Bank (NY) Elmira NY ESBK NASDAQ 371,420 0.48 7.19
Evans Bancorp, Inc. Angola NY EVBN NASDAQ 497,392 1.02 12.65
Jeffersonville Bancorp Jeffersonville NY JFBC NASDAQ 396,528 1.30 12.38
LSB Corporation N Andover MA LSBX NASDAQ 559,697 0.12 1.10
Mayflower Co-operative Bk MA Middleboro MA MFLR NASDAQ 238,748 0.22 2.84
New England Bancshares, Inc. Enfield CT NEBS NASDAQ 276,511 0.42 2.01
Rome Bancorp, Inc. Rome NY ROME NASDAQ 302,945 0.84 2.95
Hingham Institution for Savings Hingham MA HIFS NASDAQ 699,414 0.64 8.36
Slade's Ferry Bancorp Somerset MA SFBC NASDAQ 608,969 0.60 7.66
New Hampshire Thrift Bancshares Inc Newport NH NHTB NASDAQ 654,590 0.71 9.87
Northway Financial, Inc Berlin NH NWFI NASDAQ 678,729 0.47 5.79
Medians 460,918 0.60 6.92
First Ipswich Bancorp Ipswich MA FIWC OTC BB 302,503 -0.13 -2.76
Deposit NPAs/ Tang Equity/
Efficiency Loan Growth Growth (3 Total Tang Assets
Company Ratio (%) (3 Yr CAGR) Yr CAGR) Assets (%)
- ------- --------- ----------- -------- ------ ----------
Beverly National Corporation 76.06 19.94 3.99 0.01 10.25
Northeast Bancorp 81.36 1.51 2.75 0.81 6.33
Salisbury Bancorp, Inc. 72.87 21.45 11.75 0.19 7.97
Brooklyn Federal Bancorp Inc. 67.32 NA NA 0.03 21.11
Elmira Savings Bank (NY) 75.19 7.89 6.01 0.09 6.47
Evans Bancorp, Inc. 70.70 15.31 4.57 0.13 5.77
Jeffersonville Bancorp 67.44 7.09 4.09 0.61 10.54
LSB Corporation 77.58 12.27 3.08 0.02 10.58
Mayflower Co-operative Bk MA 78.15 4.86 5.40 0.00 8.11
New England Bancshares, Inc. 82.69 16.95 2.14 0.21 20.10
Rome Bancorp, Inc. 75.22 8.20 (0.72) 0.38 25.13
Hingham Institution for Savings 60.12 14.61 11.84 0.06 7.51
Slade's Ferry Bancorp 71.73 7.16 0.80 0.08 8.02
New Hampshire Thrift Bancshares Inc 70.19 10.57 4.24 0.09 5.44
Northway Financial, Inc 86.75 (1.11) 2.79 0.69 6.04
Medians 75.19 9.39 4.04 0.12 8.02
First Ipswich Bancorp 100.14 7.52 7.49 0.00 4.92
Generally, First Ipswich underperformed in comparison to the peer group.
NORTH
Capital & Advisory, Inc.
49 EAST
Fairness Opinion Analysis
- -------------------------
Comparable Companies - Trading Multiples
================================================================================
Peer Group for First Ipswich
Current Price/
Current Price/ LTM Current Price/ Tangible
Company Core EPS (x) Book Value (%) Book Value (%)
- ------- ------------ -------------- --------------
Beverly National Corporation 17.63 121.0 121.0
Northeast Bancorp 17.88 102.0 121.0
Salisbury Bancorp, Inc. 15.23 126.0 167.0
Brooklyn Federal Bancorp Inc. 52.13 243.0 243.0
Elmira Savings Bank (NY) N/A 156.0 160.0
Evans Bancorp, Inc. 11.30 133.0 190.0
Jeffersonville Bancorp 15.03 185.0 185.0
LSB Corporation 35.12 130.0 130.0
Mayflower Co-operative Bk MA 40.34 111.0 111.0
New England Bancshares, Inc. 59.66 119.0 123.0
Rome Bancorp, Inc. 41.77 138.0 138.0
Hingham Institution for Savings 14.40 129.0 129.0
Slade's Ferry Bancorp 18.33 127.0 133.0
New Hampshire Thrift Bancshares Inc 13.30 124.0 168.0
Northway Financial, Inc 19.29 101.0 132.0
First Quartile 15.08 120.0 126.0
Median 18.11 127.0 133.0
First Ipswich Implied
First Quartile NA 10.01 7.88
Median NA 10.59 8.31
First Ipswich Implied Plus Transaction Premium
First Quartile NA 11.33 8.91
Median NA 11.99 9.41
Range of adjusted per share values: $8.91 - $11.99
NORTH
Capital & Advisory, Inc.
50 EAST
Fairness Opinion Analysis
- -------------------------
Dividend Discount Analysis
================================================================================
Dividend Discount Analysis
Terminal Multiple
Discount Rate 14x 15x 16x 17x
14.00% 5.54 5.90 6.27 6.64
13.00% 5.78 6.16 6.55 6.93
12.00% 6.04 6.44 6.84 7.24
11.00% 6.31 6.73 7.14 7.56
10.00% 6.59 7.03 7.47 7.91
Applying the 13.18% transaction premium yields a range of
fair values between $6.27 and $8.95.
NORTH
Capital & Advisory, Inc.
51 EAST
Fairness Opinion Analysis
- -------------------------
Summary of Fair Value Analyses
================================================================================
- --------------------------------------------------------------------------------
Methodology Low Median High
- --------------------------------------------------------------------------------
Current Price $9.17(1) $10.41 $13.58(2)
- --------------------------------------------------------------------------------
Comparable Company Analysis $8.91 $10.37 $11.99
- --------------------------------------------------------------------------------
Dividend Discount Analysis $6.27 $7.49 $8.95
- --------------------------------------------------------------------------------
(1) Based on the 52 week low price of $8.10.
(2) Based on the 52 week high price of $12.00.
NORTH
Capital & Advisory, Inc.
52 EAST
Disclosure
================================================================================
These materials are for discussion purposes only. They should not be construed
as an offer or solicitation with respect to the purchase or sale of any security
or to enter into any particular transaction and may not be relied on in
evaluating the merits of investing in any security or entering into any
transaction.
The information contained herein and any supplemental information or other
documents provided in connection herewith are submitted to you on a strictly
confidential basis, should be kept confidential and should not be used other
than in connection with your evaluation of a proposed structure or transaction.
By accepting a copy of this presentation, the recipient agrees that neither it
nor any of its employees or advisors shall use the information for any purpose
other than evaluating a proposed structure or transaction or divulge the
information to any other party. The information contained herein shall not be
photocopied, reproduced or distributed to others, in whole or in part, without
the prior written consent of Northeast Capital & Advisory, Inc.
NORTH
Capital & Advisory, Inc.
53 EAST
The Efficacy of a
Going Private Transaction
- --------------------------------------------------------------------------------
June 20, 2007
- --------------------------------------------------------------------------------
Presented By:
Arthur L. Loomis, II
President Northeast Capital & Advisory, Inc.
(518) 426-0100 * alloomis@ne-capital.com