EXHIBIT 99.1
XXXXXX & COMPANY, INC.
FINANCIAL INSTITUTION CONSULTANTS
000 XXXXX XXXXX XXXXX
XXXXX 000
XXXXXX, XXXX 00000
(000) 000-0000
(000) 000-0000 FAX
November 26, 2003
The Board of Directors
First Federal Savings & Loan Association
000 Xx. Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Re: Conversion Valuation Agreement
Attn: Xxxxx X. Xxxxx
Xxxxxx & Company, Inc. (hereinafter referred to as XXXXXX) hereby
proposes to prepare an independent conversion appraisal of First Federal Savings
& Loan Association (hereinafter referred to as "FIRST FEDERAL," relating to the
minority stock offering of First Federal Financial Service. XXXXXX will provide
a pro forma valuation of the market value of the shares of the Corporation to be
sold in connection with the conversion of FIRST FEDERAL to a stock institution.
XXXXXX is a financial consulting firm that primarily serves the
financial institution industry. XXXXXX is experienced in evaluating and
appraising thrift institutions and thrift institution holding companies. XXXXXX
is an approved conversion appraiser for filings with the Office of Thrift
Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC"), and
is also approved by the Internal Revenue Service as an expert in bank and thrift
stock valuations. Xxxxxx has completed conversion appraisals related to standard
conversions, mutual holding company conversions and conversions involving
foundations.
XXXXXX agrees to prepare the conversion appraisal in the format required
by the OTS in a timely manner for prompt filing with the OTS and the Securities
and Exchange Commission. XXXXXX will provide any additional information as
requested and will complete appraisal updates in accordance with regulatory
requirements and based on market conditions.
The appraisal report will provide a detailed description of FIRST
FEDERAL, including its financial condition, operating performance, asset
quality, rate sensitivity position, liquidity level and management
qualifications. The appraisal will include a description of FIRST FEDERAL's
market area, including both economic and demographic characteristics and trends.
An analysis of other publicly-traded thrift institutions will be performed to
determine a comparable group, and adjustments to the appraised value will be
made based on a comparison of FIRST FEDERAL with the comparable group and
recognizing the risk related to an initial public offering.
In making its appraisal, XXXXXX will rely upon the information in the
Subscription and Community Offering Circular (Prospectus), including the audited
financial statements. Among other factors, XXXXXX will also consider the
following: the present and projected operating results and financial condition
of FIRST FEDERAL; the economic and demographic conditions in FIRST FEDERAL's
existing marketing area; pertinent historical financial and other information
relating to FIRST FEDERAL; a comparative evaluation of the operating and
financial statistics of FIRST FEDERAL with those of other thrift institutions;
the proposed price per share; the aggregate size of the offering of common
stock; the impact of the conversion on FIRST FEDERAL's capital position and
earnings potential; FIRST FEDERAL's proposed initial dividend, if any; and the
trading market for securities of comparable institutions and general conditions
in the market for such securities. In preparing the appraisal, XXXXXX will rely
solely upon, and assume the accuracy and completeness of, financial and
statistical information provided by FIRST FEDERAL, and will not independently
value the assets or liabilities of FIRST FEDERAL in order to prepare the
appraisal.
Upon completion of the conversion appraisal, XXXXXX will make a
presentation to the board of directors of FIRST FEDERAL to review the content of
the appraisal, the format and the assumptions. A written presentation will be
provided to each board member as a part of the overall presentation.
For its services in making this appraisal, XXXXXX'x fee will be $25,000,
plus out-of-pocket expenses not to exceed $700. The appraisal fee will include
the preparation of one valuation update and any requested analysis regarding the
financial impact of a charitable foundation in the conversion appraisal. All
additional valuation updates will be subject to an additional fee of $1,000
each. Upon the acceptance of this proposal, XXXXXX shall be paid a retainer of
$3,000 to be applied to the total appraisal fee of $25,000, the balance of which
will be payable at the time of the completion of the appraisal.
FIRST FEDERAL agrees, by the acceptance of this proposal, to indemnify
XXXXXX and its employees and affiliates for certain costs and expenses,
including reasonable legal fees, in connection with claims or litigation
relating to the appraisal and arising out of any misstatement or untrue
statement of a material fact in information supplied to XXXXXX by FIRST FEDERAL
or by an intentional omission by FIRST FEDERAL to state a material fact in the
information so provided, except where XXXXXX or its employees and affiliates
have been negligent or at fault.
XXXXXX agrees to indemnify FIRST FEDERAL and its employees and
affiliates for certain cost and expenses, including reasonable legal fees, in
connection with claims or litigation relating to or based upon the negligence or
willful misconduct of XXXXXX or its employees or affiliates.
This proposal will be considered accepted upon the execution of the two
enclosed copies of this agreement and the return of one executed copy to XXXXXX,
accompanied by the specified retainer.
XXXXXX & COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
President
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
President
Date: December 9, 2003
