CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
Delanco Bancorp, Inc.
Delanco, New Jersey
As Of:
November 20, 2006
Prepared By:
Keller & Company, Inc.
555 Metro Place North
Suite 524
Dublin, Ohio 43017
(614) 766-1426
KELLER & COMPANY
CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
Delanco Bancorp, Inc.
Delanco, New Jersey
As Of:
November 20, 2006
KELLER & COMPANY, INC.
Financial Institution Consultants
Investment and Financial Advisors
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555 Metro Place North |
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614-766-1426 |
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Suite 524 |
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614-766-1459 (fax) |
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Dublin, Ohio 43017 |
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December 11, 2006
Board of Directors
Delanco Bancorp, Inc.
615 Burlington Avenue
Delanco, New Jersey 08075
To the Board:
We hereby submit our independent appraisal of the pro forma market value of the to-be-issued stock of Delanco Bancorp, Inc. (the Corporation), which is the mid-tier holding company of Delanco Federal Savings Bank, Delanco, New Jersey (Delanco Federal or the Bank). Such stock is to be issued in connection with the application by the Corporation to complete a minority stock offering , with Delanco MHC, a federally chartered mutual holding company, to own 55.0 percent of the Corporation. This appraisal, as of November 20, 2006, was prepared and provided to the Bank in accordance with the appraisal requirements and regulations of the Office of Thrift Supervision of the United States Department of the Treasury.
Keller & Company, Inc. is an independent, financial institution consulting firm that serves both thrift institutions and banks throughout the U.S. The firm is a full-service consulting organization, as described in more detail in Exhibit A, specializing in business and strategic plans, stock valuations, conversion and reorganization appraisals, market studies and fairness opinions for thrift institutions and banks. The firm has affirmed its independence in this transaction with the preparation of its Affidavit of Independence, a copy of which is included as Exhibit C.
Our appraisal is based on the assumption that the data provided to us by Delanco Federal and the material provided by the independent auditors, Connolly, Grady & Cha, P.C., Philadelphia, Pennsylvania, are both accurate and complete. We did not verify the financial statements provided to us, nor did we conduct independent valuations of the Banks assets and liabilities. We have also used information from other public sources, but we cannot assure the accuracy of such material.
In the preparation of this appraisal, we held discussions with the management of Delanco Federal, with the law firm of Muldoon, Murphy & Aguggia LLP, Washington, D.C., the Banks conversion counsel, and with Connolly, Grady & Cha, P.C., the Banks outside auditor. Further, we viewed the Banks local economy and primary market area and also reviewed the Banks most recent business plan as part of our review process.
Board of Directors
Delanco Federal
December 11, 2006
Page 2
This valuation must not be considered to be a recommendation as to the purchase of stock in the Corporation, and we can provide no guarantee or assurance that any person who purchases shares of the Corporations stock will be able to later sell such shares at a price equivalent to the price designated in this appraisal.
Our valuation will be further updated as required and will give consideration to any new developments in Delanco Federals operation that have an impact on operations or financial condition. Further, we will give consideration to any changes in general market conditions and to specific changes in the market for publicly-traded thrift institutions. Based on the material impact of any such changes on the pro forma market value of the Corporation as determined by this firm, we will make necessary adjustments to the Corporations appraised value in an appraisal update.
It is our opinion that as of November 20, 2006, the pro forma market value or appraised value of the Corporation was $18,000,000 at the midpoint, with a minority offering of $8,100,000 or 810,000 shares at $10 per share, representing 45 percent of the total valuation. The pro forma valuation range of the Corporation is from a minimum of $15,300,000 to a maximum of $20,700,000, with a maximum, as adjusted, of $23,805,000, representing a minority offering range of $6,885,000 at the minimum to $9,315,000 at the maximum, with a maximum, as adjusted, of $10,712,250, representing 688,500 shares, 931,500 shares and 1,071,225 shares at $10 per share at the minimum, maximum, and maximum, as adjusted, respectively.
The pro forma appraised value of Delanco Bancorp, Inc. as of November 20, 2006, was $18,000,000, at the midpoint, with a midpoint 45 percent minority offering of $8,100,000.
Very truly yours,
KELLER & COMPANY, INC.
/s/ Keller & Company, Inc.
TABLE OF CONTENTS
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PAGE |
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INTRODUCTION |
1 |
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I. |
Description of Delanco Federal Savings Bank |
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General |
4 |
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Performance Overview |
8 |
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Income and Expense |
9 |
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Yields and Costs |
13 |
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Interest Rate Sensitivity |
14 |
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Lending Activities |
16 |
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Nonperforming Assets |
20 |
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Investments |
22 |
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Deposit Activities |
23 |
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Borrowings |
24 |
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Subsidiaries |
24 |
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Office Properties |
24 |
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Management |
25 |
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II. |
Description of Primary Market Area |
26 |
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III. |
Comparable Group Selection |
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Introduction |
31 |
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General Parameters |
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Merger/Acquisition |
32 |
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Mutual Holding Companies |
32 |
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Trading Exchange |
33 |
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IPO Date |
33 |
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Geographic Location |
34 |
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Asset Size |
34 |
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Balance Sheet Parameters |
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Introduction |
35 |
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Cash and Investments to Assets |
36 |
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Mortgage-Backed Securities to Assets |
37 |
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One- to Four-Family Loans to Assets |
37 |
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Total Net Loans to Assets |
38 |
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Total Net Loans and Mortgage-Backed Securities to Assets |
38 |
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Borrowed Funds to Assets |
38 |
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Equity to Assets |
39 |
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Performance Parameters |
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Introduction |
40 |
TABLE OF CONTENTS (cont.)