February 18, 1998
Board of Directors
Lockport Savings Bank
6950 South Transit Road
Lockport, New York 14095-0514
Board of Directors:
The notice of intent to convert from mutual to stock form and related application for approval of a
merger transaction. filed on behalf of Lockport Savings Bank, Lockport, New York ("Lockport"),
have been reviewed by the Federal Deposit Insurance Corporation ("FDIC") pursuant to section
303.15 of the FDIC Rules and Regulations and Section 18(c) of the Federal Deposit Insurance
Act.
These filings were made in connection with the "Lockport Savings Bank Plan of Reorganization
From a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan" ("Plan").
Pursuant to the Plan, Lockport will: (i) merge with an interim stock savings bank that will succeed
to all the rights and obligations of Lockport; (ii) establish a mid-tier Delaware stock holding
company, Niagara Bancorp, Inc. ("Niagara") which will own 100 percent of the common stock of
the stock savings bank; and (iii) establish a New York mutual-holding company, Niagara
Bancorp, MHC ("MHC") which will own 53.3 percent of the common stock of Niagara.
Concurrently, with the reorganization, Niagara intends to offer for sale 45.4 percent of its common
stock on a priority basis to qualifying depositors and to an employee stock ownership plan. The
remaining 1.3 percent will be used to fund a charitable foundation ("Foundation").
The FDIC has relied on information provided in Lockport's notice of conversion and the
accompanying business plan in reaching its decision regarding that notice. It is anticipated that
notification of any, planned material deviations from the business plan, such as a return of capital
will be provided to the FDIC in advance of such an event. Based on the information and
representations presented, the FDIC plans to issue a letter of non-objection to the proposed
conversion transaction provided that the bank satisfies the following conditions:
(1) Lockport must execute the enclosed Tolling Agreement and deliver it to this office
on or before February 27, 1998;
(2) Lockport must submit final disclosure materials acceptable to the FDIC Division
of Supervision, Registration and Disclosure Section;
(3) Lockport must provide written evidence that its Plan of Conversion has been
approved by the affirmative vote of a majority of the votes eligible to be cast at a
special meeting of the Bank's voting participants;
(4) Lockport must advise this office of the results of the subscription offering and
deliver an updated appraisal that:
(a) takes the results of the subscription offering into account;
(b) discusses any material occurrences during the subscription period; and
(c) explains any orders that may have been rejected.
(5) Lockport must receive final approval from the appropriate State of New York
officials for its establishment as a stock savings bank. The mutual holding company
and the mid-tier stock holding company must receive final approval from the
appropriate Federal Reserve officials for the establishment of the bank holding
companies.
Provided Lockport meets the foregoing conditions and that the FDIC is satisfied with the appraiser's
determination in the updated appraisal that the results of the subscription offering represent fair value
for Lockport, the FDIC will issue a letter of nonobjection to the proposed conversion transaction.
Enclosed is the FDIC's Order and Basis for the merger application filed on behalf of Lockport in connection
with the conversion transaction. Please furnish the FDIC's New York Regional Office with satisfactory
evidence of Lockport's compliance with the conditions stated in the Order, and notify that office in writing when
the proposed transaction has been consummated. If an extension of the time limitation included in the Order is
necessary, please submit to the New York Regional Office a letter requesting a specific extension of the
limitation, including the reasons for the requested extension.
Sincerely,
Mark S. Schmidt
Associate Director
FEDERAL DEPOSIT INSURANCE CORPORATION
Lockport Savings Bank
Lockport, Niagara County, New York
Application for Consent to Merge
to facilitate a conversion from a
Mutual Savings Bank to a Stock Savings Bank
ORDER AND BASIS FOR CORPORATION APPROVAL
Pursuant to Section 18(c) and other provisions of the Federal Deposit Insurance Act ("FDI Act"), an
application has been filed on behalf of Lockport Savings Bank , Lockport, New York ("Lockport"), a New
York-chartered mutual savings bank for the FDIC's consent to merge with an interim New York-chartered
stock savings bank ("Stock Bank"). Lockport is currently a Bank Insurance Fund ("BIF") member. with
total assets of $1,176,451,000 and total deposits of $1,012,677,000.
This transaction is the result of the "Lockport Savings Bank Plan of Reorganization From a Mutual
Savings Bank to a Mutual Holding Company and Stock Issuance Plan" ("Plan"). Pursuant to the Plan,
Lockport will: (1) merge with the Stock Bank that will succeed to all the rights and obligations of Lockport,
(ii) establish a mid-tier Delaware stock holding company, Niagara Bancorp, Inc. ("Niagara"). which will
own 100 percent of the common stock of the Stock Bank; and (iii) establish a New York mutual holding
company, Niagara Bancorp, MHC ("MHC'"), which will own 53.3 percent of the common stock of
Niagara. Concurrently with the reorganization, Niagara intends to offer for sale 45.4 percent of its
common stock on a priority basis to qualifying depositors and to an employee stock ownership plan. The
remaining 1.3 percent will be used to fund a charitable foundation ("Foundation"). The proposed
transaction per se will not alter the competitive structure of banking in the market currently served by
Lockport. Lockport's principal office will remain at 6950 South Transit Road, Niagara, New
York. Notice of the proposed transaction, in a form approved by the FDIC, has been published
pursuant to the FDI Act.
A review of available information, including the Community Reinvestment Act ("CRA") Statement of
Mutual Institution discloses no inconsistencies with the purposes of the CRA. The bank is expected to
continue to meet the credit needs of its entire community, consistent with safe and sound operation of the
institution.
In connection with the application, the FDIC has taken into consideration the financial and managerial
resources and future prospects of the resultant Bank, and the convenience and needs of the community to
be served. Having found favorably on these statutory factors and having considered other relevant
information, including any reports on the competitive factors furnished
by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of
Thrift Supervision, or the Attorney General of the United States, it is the FDIC's judgement that the
application should be and hereby is approved, subject to the following conditions:
(1) The Foundation's organizers shall commit to the following oversight provisions:
(a) Common stock of Niagara held by the Foundation shall be voted by the
Foundation at the same ratio as the shares voted on each and every proposal
considered by the stockholders of Niagara, excluding the shares voted by the MHC;
(b) The Foundation shall be subject to examination by the FDIC;
(c) The Foundation shall comply with all supervisory directives imposed by the
FDIC;
(d) The Foundation shall operate in accordance with written policies adopted by the
Foundation's board of directors, including adopting a conflict of interest policy acceptable
to the FDIC. and
(e) The Foundation shall provide a proposed operating plan prior to conversion
and annual reports to the FDIC describing the grants made and grant recipients.
(2) The proposed transaction may, not be consummated unless the Plan receives prior approval by
an affirmative vote of a majority of the votes eligible to be cast at a special meeting of
Lockport's voting participants;
(3) The proposed transaction may not be consummated unless and until the FDIC issues a
nonobjection letter to the Notice filed on behalf of the applicant pursuant to section 303.15 of
the FDIC's Rules and Regulations concerning the mutual-to-stock conversion portion of this
transaction;
(4) The proposed transaction may not be consummated unless and until the resultant Bank has
authority to conduct a banking business, and that its establishment and operation as a stock
savings bank have been fully approved by the New York State Banking Department, and that
the applications by the mutual holding company and the mid-tier stock holding company to
become bank holding companies is approved by the Board of Governors of the Federal Reserve
System.
(5) Any changes in proposed management. including the board of directors or proposed
ownership (10 percent or more of the stock and new acquisitions of or subscriptions to 10
percent or more of the stock), will render this approval null and void unless such proposal is
approved by the Regional Director (Supervision) of the FDIC's New York Regional Office
prior to the consummation of the proposed transaction;
(6) The transaction being consummated not less than fifteen calendar days
after the date of this Order or later than six months after the date of the Order, unless such period
is extended for good cause by the FDIC;
(7) Prior to a sale, transfer, or disposition of any shares of Niagara by the MHC to any person
(including any Employee Stock Ownership Plan), or a conversion of the mutual holding
company to stock form, MHC will provide written notification to the FDIC and provide the
FDIC with copies of all documents filed with state and federal banking and /or securities
regulators in connection with any such sale, transfer, disposition, or conversion;
(8) That, should any shares of the stock of Niagara or the Stock Bank be issued to persons
other than MHC, any dividends waived by MHC must be retained by Niagara or the Stock Bank
and segregated, earmarked, or otherwise identified on the books and records of Niagara or the
Stock Bank; such amounts must be taken into account in any valuation of the institution and
factored into the calculation used in establishing a fair and reasonable basis for exchanging
shares in any subsequent conversion of MHC to stock form; such amounts shall not be available
for payment to or the value thereof transferred to minority shareholders, by means including
through dividend payments or at liquidation;
(9) Until the proposed transaction is consummated, the FDIC has the right to alter, suspend,
or withdraw its approval should any interim development be deemed to warrant such
action:
Pursuant to delegated authority.
Dated Washington. D.C.. this 18th day of February, 1998
Mark S. Schmidt
Associate Director
Division of Supervision
Tolling Agreement
by and between
The Lockport Savings Bank
Lockport, New York
and
The Federal Deposit Insurance Corporation
The undersigned parties hereby agree as follows:
1. The time in which the Federal Deposit Insurance Corporation ("FDIC") may act to object to the
notice of the proposed conversion of Lockport Savings Bank ("Lockport") to stock ownership filed
with the FDIC on December 23, 1997 and accepted January 6, 1998, pursuant to section 303.15 of
the FDIC Rules and Regulations (*'Notice") is hereby extended from March 7, 1998, until 30 days
after Lockport advises the FDIC of the results of the subscription offering and delivers an appraisal
that:
(a) takes into account the results of the subscription offering;
(b) discusses any material occurrences during the subscription period; and
(c) explains any orders that may have been rejected.
2. Any action taken by the FDIC on the aforementioned Notice during the extension period described in
paragraph 1 shall have the same force and effect as if it were taken by the FDIC before March 7, 1998, and
shall not be challenged by Lockport or anyone associated with it solely for having been taken during the
extension period described above in paragraph 1.
Dated:
Dated:
By:
Lockport Savings Bank
By:
Federal Deposit Insurance Corporation
