Free Amended Document - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) ) ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. ) __________________________________________) FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROCHESTER,

Court File No. 95-517C Judge George W. Miller

SUBMISSION OF PLAINTIFF FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROCHESTER PURSUANT TO THE COURT S OPINION AND ORDER OF APRIL 13, 2007 Plaintiff First Federal Savings and Loan Association of Rochester ( Plaintiff ) files this pleading pursuant to the Opinion and Order issued by the Court on April 13, 2007 ( Order ). At page 69 of the Order, the Court ordered that Plaintiff shall file on or before May 15, 2007, a revised calculation of the proceeds that First Federal would have received from a standard conversion in 1993, taking into account the Court s findings described above. Pursuant to the Order, Plaintiff submits the attached report of Dr. Kaplan, entitled Revised Damage Calculation. In that report, Dr. Kaplan follows the identical process described in his trial testimony to respond to the Order. Dr. Kaplan has also attached three sets of exhibits to his Revised Damage Calculation to assist the Court in reviewing the Revised Damage Calculation and understanding how the revisions correspond to the exhibits admitted at trial.

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Dr. Kaplan s conclusions are summarized at page 6 of his report. In particular, the offset as recalculated is $11.122 million if $7.4 million in tax benefits are excluded, and $8.061 million if $7.4 million in tax benefits are included. In addition to an electronic filing, Plaintiff will hand deliver courtesy copies of this pleading and attachments to chambers, and to counsel for the United States. Should the Court desire any further explanation or detail, Counsel for Plaintiff and Dr. Kaplan are generally available at the Court s request. Respectfully submitted,

s/David T. Case David T. Case Joseph J. Brigati Brendon P. Fowler Kirkpatrick & Lockhart Preston Gates Ellis LLP 1601 K Street, N.W. Washington, D.C. 20006 Attorneys for Plaintiff First Federal Savings and Loan Association of Rochester Date: May 15, 2007

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) ) FIRST FEDERAL SAVINGS AND LOAN ) ASSOCIATION OF ROCHESTER, ) ) Plaintiff, ) ) ) v. ) ) ) THE UNITED STATES, ) ) Defendant. ) __________________________________________ )

Court File No. 95-517

REVISED DAMAGE CALCULATION BY DR. DONALD M. KAPLAN The Opinion and Order of the Court filed April 13, 2007 directed Plaintiff to file a revised calculation of damages in accordance with the Court's findings. Such calculation is to include (a) a revised calculation of the proceeds that First Federal would have received from a standard conversion in 1993, taking into account the Court's findings; and (b) based on such conversion proceeds, a revised calculation of the offset or reduction in the damages of $96.581 million that Defendant is entitled to receive on account of any net benefits Plaintiff received from the CT acquisition. Based on my review of the Opinion and Order, the Court made two findings that affect my calculation of the conversion proceeds First Federal would have received from a standard conversion in 1993. First, the Court found that the portfolio restructuring transactions undertaken in advance of the CT acquisition caused First Federal to lose $2,096,250 in revenue instead of the $11,500,000 claimed at trial. Because my calculation of the conversion proceeds was predicated on the

assumption that First Federal would have had the tax adjusted benefit of the higher sum in its preconversion capital, the Court's finding requires a reduction of the conversion proceeds as 1

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explained more fully below. Second, the Court found that First Federal lost $7.391 million in tax savings due to the premature lapse of its NOLs resulting from the CT acquisition. My calculations of the conversion proceeds excluded the effect of the $7.391 million in lost NOL tax savings because those losses had not been focused upon as an element of its damages at the time I performed those calculations.1 Since the loss of those tax savings caused First Federal's preconversion capital to be lower (like the lost revenue from the restructuring transactions), it seems reasonable to account for them in any new calculation of conversion proceeds. In preparing this revised calculation, I have reviewed the Court's Opinion and Order, the relevant portions of my trial testimony and the damages model that I used to prepare my opinion at trial. I also have reviewed the relevant portions of the trial testimony of Defendant's expert, Dr. David Rochester. I have followed the identical procedure that I described in my trial testimony.2 The changes appropriate to the recalculation affect several exhibits, and I have prepared three sets of exhibits to assist the Court in reviewing my revised calculations: 1. The first set of exhibits is included as a reference point and consists of those presented at trial, namely PX 8000, pages 59, 60, 73, 76, and 77, with cells that are affected by the recalculation highlighted in yellow. Each page of that first set of exhibits is labeled "As Admitted at Trial" and, except for the highlighting, is identical to those admitted at trial. 2. The second set of exhibits mirrors the first, except that the changes due to my recalculation of the conversion proceeds (as discussed more fully below) are shown and highlighted in yellow, and each page is labeled "Recalculated Pursuant to the Court's Order (No Tax Benefit)."

The lost NOL tax savings were added as an element of Plaintiff's damages pursuant to the Court's Order of April 30, 2004 pursuant to Plaintiff's Motion For Leave To Amend Certain Damage Figures In Plaintiff's Memorandum of Contentions Of Fact And Law dated April 8, 2004.
2

1

See Trial Transcript pages 3095-3125.

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3.

The third set of exhibits mirrors the second, but reflects the benefit of the $7.4 million tax benefit that was not included in my offset calculation presented at trial. As discussed below, that tax benefit would have increased First Federal's preconversion capital by $7.4 million and, therefore, would have enhanced the Bank's value correspondingly. As noted above, it was omitted in my earlier calculations because they were completed before the $7.4 million in damages caused by the loss of First Federal's NOLs had been focused upon as an element of its damages. This third set of exhibits is labeled "Recalculated Pursuant to the Court's Order-$7.4 Million Tax Benefit."

My understanding of the Court's Opinion and Order as it relates to the restructuring transactions is summarized in the table below. The restructuring costs identified at page 56 of the Opinion and Order total $2,096,250, and are summarized below.

Summary of Restructuring Costs Pursuant to the Court's Order (Thousands of Dollars)
Restructuring Cost Presented at Trial (c) $ 1,000.000 1,500.000 1,500.000 1,500.000 1,500.000 1,500.000 1,500.000 1,500.000 $ 11,500.000 Restructuring Cost Pursuant to the Court's Order $487,500 per Month (d) $ 975.000 $ 975.000 $48,750 per Month (e) $ 97.500 146.250 146.250 146.250 146.250 146.250 146.250 146.250 $ 1,121.250

Quarter (a) Jun 91 Sep 91 Dec 91 Mar 92 Jun 92 Sep 92 Dec 92 Mar 93

Number of Months (b) 2 3 3 3 3 3 3 3

Total (g) $ 1,072.500 146.250 146.250 146.250 146.250 146.250 146.250 146.250 $ 2,096.250

Source: Opinon and Order, April 13, 2007, page 56

The first recalculation, which excludes the $7.4 million in lost tax benefits, requires only two sets of changes to the damage model. First, the precise losses shown in column (g) above were entered into the damage model. The annual totals, which appear on PX 8000, page 73, 3

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Recalculated Pursuant to the Court's Order, are $1.365 million for 1991, $0.585 million for 1992, and $0.146 million for 1993, a total of $2.096 million. This change causes First Federal's pre-conversion net worth to fall by the after-tax amount3 of the restructuring cost adjustment. The second change is the adjustment of the gross proceeds of First Federal's 1993 conversion to reflect the lower pre-conversion net worth caused by the recalculated restructuring costs. In order to exactly reflect the impact of the reduction in pre-conversion net worth on the conversion proceeds, my recalculation holds First Federal's pro forma price/book ratio constant at 58.97% (as in my original calculations) when I applied the conversion pricing formula. As I explained during my testimony at trial, I consider the pro forma price/book ratio to be the most reliable measure for use in estimating the amount of capital to be expected from a conversion.4 As a result, the gross proceeds of the conversion drop from $220.000 million to $211.750 million. (Compare the exhibits PX 8000, page 60, "First Federal Conversion Proceeds, Earnings and Market Price Ratios," "As Admitted at Trial" and "As Recalculated-Without Tax Benefit.") The reduced proceeds amount flows through the conversion pricing formula and allows the model to calculate the effect on the offset of both the revised restructuring costs and the reduced conversion proceeds. Therefore, the first recalculated offset amount is $11.122 million, compared to the prior amount of $7.962 million. (Compare the first two versions of exhibit PX 8000, page 73, Column F, "As Admitted at Trial" and "As Recalculated-No Tax Benefit".)

As in the case of my original calculations, I have adjusted the additional income by the taxes that would have been paid on it in order to calculate its net effect on capital. "But at the end of the day, it is my opinion that First Federal of Rochester's conversion valuation, based on this information and all of what has preceded it, would be approximately priced at a 60 percent price to pro forma capital ratio, as calculated in and spelled out in the required pricing formula in the regs and the conversion guidelines documents." [Transcript: 3094:11:17] "So that ratio is approximately the 60 percent ratio; it's more precisely 58.97 percent." [Transcript: 3124:10-12] Also see testimony of Dr. David Rochester on the appropriateness of reliance on the price/book ratio: "And I think you can see, since I'm relying heavily on priceto-book, even though other things are changing, earnings and assets, et cetera, are changing as I go through the exclude Monroe, exclude incremental earning assets and exclude Monroe and the incremental earning assets, how consistent my price-to-book ratio stays, all the way across the page. And I think that shows some consistency in my valuation technique that I'm following." [Transcript: 4786:25-4787:7]
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3

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In its Opinion and Order, the Court also concluded that ". . . First Federal would have used $21.7 million in NOLs until they expired at the end of 1992, from which the Association would have derived a benefit of nearly $7.4 million."5 As noted, this benefit was not included in my offset calculation, which was prepared before the loss of NOLs had been focused upon as an element of First Federal's damages. Because the Court found that the loss of those NOLs caused First Federal to lose $7.4 million in tax benefits and because such benefits would have increased First Federal's preconversion capital, it seems appropriate to account for that additional capital in reevaluating First Federal's conversion proceeds. Accordingly, in a second recalculation of First Federal's conversion proceeds, I have added to First Federal's capital account $7.391 million of after-tax benefits, spread in six equal installments of $1.232 million from the September 1991 quarter to the December 1992 quarter. The total

adjustment of $7.391 million in after-tax benefits appears in the third set of PX 8000 exhibits ("Recalculated Pursuant to the Court's Order - $7.4 Million Tax Benefit") page 77, column E. The addition of these after-tax benefits offsets almost exactly the after-tax effect of the reduced restructuring charges on First Federal's pre-conversion GAAP net worth. Following the same

procedure used above, a revised gross conversion proceeds amount of $220 million produces a pro forma price/book ratio after conversion of 58.93%, compared to the same ratio of 58.97% presented at trial. Thus, the gross proceeds from the conversion are unchanged when the effects of both the reduced restructuring charges and the added tax benefits are included. However, the earnings impact of those two adjustments is not identical, and the recalculated offset, including the tax benefits, is $8.061 million, compared to $7.962 million, as presented at trial. The detailed

calculations are shown in the third set of exhibits, PX 8000, pages 59, 60, 73, 76, and 77, "Recalculated Pursuant to the Court's Order-Tax Benefit of $7.4 Million."

5

Opinion and Order, April 13, 2007, pages 51-52.

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Standard Conversion
As Admitted at Trial First Federal Pro Forma Data for Conversion Analysis As of and For The Twelve Months Ended December 31, 1992 (Dollar Amounts in Thousands)

Earnings: First Fed's Actual Pre-Tax Earnings Plus: Incremental Pre-Tax Earnings Pro Forma Pre-Tax Earnings Before Goodwill Amortization Income Taxes at 41 Percent Pro Forma After Tax Earnings Before Goodwill Amortization Less: Amortization of Original Acquisition Goodwill Pro Forma After Tax Earnings - Tax Effected Net Worth: First Fed's Actual GAAP Net Worth at 12/31/92 Add Back Net Worth Eliminated by CT Mark to Market Deduct Amortization of Acquisition Goodwill Add Back Excess Tax Payments per GAAP for 1991-1992 Reverse CT Acquisition Effects and Add Incremental Earnings Pro Forma Net Worth Before Conversion Less: Goodwill Pro Forma Tangible Capital Before Conversion Assets: First Fed's Actual Tangible Assets at 12/31/92 Plus: Incremental Earning Assets Less: Capital Account Adjustments Plus $23.6 Million Additional Net Worth Pro Forma Tangible Assets Plus: Pro Forma Goodwill Pro Forma Total Assets (pre-conversion) Ratios: GAAP Net Worth to Assets Tangible Net Worth to Tangible Assets Return on Assets (Fully Taxable Basis) Return on End of Year GAAP Equity (Fully Taxable Basis) 2.99% 1.54% 0.29% 9.70% 5,662,000 917,000 (145,536) 6,433,464 96,536 6,530,000 233,222 132,371 (24,500) 23,600 (169,136) 195,557 (96,536) 99,022 48,041 7,828 55,869 22,906 32,963 14,000 18,963

Source: Kaplan Expert Report, Exhibit 15 (PX 737)

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Standard Conversion
As Admitted at Trial First Federal Conversion Proceeds, Earnings and Market Price Ratios (Dollar Amounts in Thousands)

Amounts Pro Forma Stockholders' Equity: Gross Proceeds Offering Expenses: Fixed Expenses Commissions (2.75% on 80% of stock sold) Reverse Professional Fees for CT Acquisition Management Recognition Program (MRP) (4% of total) Employee Stock Ownership Program (ESOP) (7% of Total) Net Proceeds Plus: Warrant Payment to FDIC in 1991 Less: Value of Warrants for IPO Net Increase in Capital Plus: Pre-Conversion Net Worth (GAAP) Total Pro Forma Net Worth Less: Goodwill & Core Deposit Intangibles Pro Forma Tangible Net Worth Pro Forma Earnings Gross Return (6% = Avg. of Overall Yield and COF) After taxes of 41% ESOP Amortization over 10 years (after tax) MRP Amortization over 5 years (after-tax) Trailing Twelve Month Earnings at Pro Forma 41% Tax Rate Total Pro Forma Earnings Pro Forma Assets: Pre-Conversion Assets Plus Proceeds Pro Forma Ratios: 1993 IPOs 12.03 59.50% n.a. 8.18 All Public Co. at 7/28/93 First Federal 10.10 9.44 98.00% 58.97% 102.30% 79.56% 8.02% 3.28%

$

220,000 2,500 4,840 (880) 6,460 8,800 15,400 24,200 189,340 3,000 (14,828) 177,512 195,557 373,069 (96,536) 276,534

6,284 (909) (1,038) 4,337 18,963 23,300

6,530,000 177,512 6,707,512

Price/Earnings Price/ Book Price/Tangible Book Price/Assets

Source: Kaplan Report, Exhibit 16 (PX 737)

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Lost Profits
As Admitted at Trial First Federal's Lost Earnings Caused by the Breach - Base Case (Dollar Amounts in Thousands)

A Incremental Earning Period Assets

B Net Spread on Incr. Assets

C Net Interest Income (A x B) -

D Capital Account Adjustments

E Rate on Six-Month Treasuries (Average)

F Earnings on Capital Acct. Adj. (D x E ) -

G H Restructuring Incremental Earnings Pre-Tax Adjustments Earnings (C + F + G) 4,000 6,000 1,500 (3,232) 8,268 4,850 5,850 7,828 7,854 9,378 10,514 8,287 2,192 56,754

I Incremental Pre-Tax ROA (H / A+D) 0.53% 2,310

1989 1990 1991 1992 1993 1994 1995 1996 2/28/97

917,000 917,000 917,000 917,000 928,254 974,666 1,023,400 1,074,570 1,074,570 0.51% 0.87% 0.87% 0.87% 0.87% 0.87% 0.87% 0.87% 0.82%

4,317 (178,761) (169,136) 16,672 26,571 35,606 72,729 73,978 (13,114) 7.45% 5.44% 3.55% 3.12% 4.63% 5.57% 5.08% 5.14%

4,682 7,978 7,978 8,002 8,327 8,743 9,180 1,558 56,448

168 (6,127) (6,150) (1,648) 1,051 1,771 2,339 634 (7,962)

0.72% ####### 1.05% ####### 0.91% 0.96% 1.01% 0.75% 1.15% 0.86% (30,344) (53,628) 22,140 31,963 46,033

Damage Summary: Pre-Tax Earnings Plus: Value of Monroe Deposits at 2/97 (6.14% of $472 million core deposits) Total Sources:

56,754 28,981 85,735

Column A - Exhibit 10, column E Column B - Exhibit 7, column I for 0.87% MBS-borrowing spread and Exhibit 8 for Monroe profitability (0.02% for first three quarters of 1990, 0.87% thereafter) Column D - Exhibit 11, column H Column E - Federal Reserve Board of Governors, Release H15 Column G - Memo from Mark Chaplin to First Federal Board of Directors dated April 12, 1991, rounded to $500,000 per month 5/91 to 3//93 The 1996 adjustment represents the one-time SAIF assessment (0.657% based on $492 million of deposits).

Source: Kaplan Report, Exhibit 6 (PX 737)

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Lost Profits
As Admitted at Trial First Federal's Lost Assets Caused by the Breach (Dollar Amounts in Millions)

Dec 31

B Pro Forma Actual Assets Excl. Assets Monroe 5,640 5,642 5,408 5,664 6,251 6,637 7,217 7,188 7,188 6,040 6,042 5,808 6,064 6,651 7,037 7,617 7,588 7,588

A

C Lost Earning Assets (B - A) 400 400 400 400 405 425 446 469 469

D E Monroe Total Earning Incremental Assets Leverage (C + D) 517 517 517 517 523 550 577 606 606 917 917 917 917 928 975 1,023 1,075 1,075

F Total Capital Adjustments 4 (179) (169) 17 27 36 73 74

G Incremental Tangible Assets (E + F) 917 921 738 748 945 1,001 1,059 1,147 1,149

H I J K Actual Pro Forma Pro Forma Tangible Tangible Pro Forma Total Assets Assets Goodwill Assets (G + H) (I + J) 5,518 5,534 5,408 5,662 6,241 6,629 7,212 7,182 7,182 6,435 6,455 6,147 6,410 7,186 7,630 8,271 8,329 8,330 150 130 112 97 87 68 48 31 29 6,584 #### 6,585 #### 6,259 #### 6,506 #### 7,273 #### 7,698 #### 8,318 #### 8,361 #### 8,359 ####

1989 1990 1991 1992 1993 1994 1995 1996
2/28/97

Sources:
Column A - First Federal TFR Reports Columns B and C - Based on First Federal 1989 Business Plan and Affidavit of Mark Chaplin Column D - Monroe Savings TFR Report dated September 30, 1989; total earning assets, fixed assets and real estate holdings are excluded from all calculations. Column F - Exhibit 11, column H Column H - First Federal TFR Reports, calculated as total assets less goodwill Column J - Exhibit 9, column I

Source: Kaplan Report, Exhibit 10 (PX 737)

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Lost Profits
As Admitted at Trial Adjustments to Capital Account (Dollar Amounts in Thousands)

Period

A CT Capital Infusion

B Net Conversion Proceeds

C Reverse CT Dividend Payments

D First Fed Stockholder Dividends

E Excess Tax Payments

F Cumul Tax & Dividend Adjustments (Sum C, D, E)

G Cumulative After-Tax Incremental Earnings

H Total Capital Adjustments (A+B+F+G)

1989 1990 1991 1992 1993 1994 1995 1996 2/97

(189,995) (189,995) (189,995) (189,995) (189,995) (189,995) (189,995)

177,512 177,512 177,512 177,512 177,512

1,710 2,659 3,819 4,553 6,342 38,999 58,082

(3,300) (6,600) (9,900)

-

1,710 4,369 8,188 12,741 15,783 48,182 48,182

4,317 9,524 16,490 20,967 26,313 32,306 37,030 38,279

4,317

####### #######

(178,761) ####### (169,136) ####### 16,672 26,571 35,606 72,729 73,978 ####### ####### ####### ####### #######

Sources:
Column A - First Federal TFR Reports; initial infusion only Column B - Exhibit 16 Column C - First Federal TFR Reports Column D - Assumes First Federal initiated dividend payments two years following IPO in the amount of 3.00% of the IPO gross proceeds Column G - Cumulative sum of pre-tax earnings from Exhibit 6, column H, tax-effected at 11.00% through December 1992 and 43% thereafter

Source: Kaplan Report, Exhibit 11 (PX 737)

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Standard Conversion
Recalculated Pursuant to the Court's Order - No Tax Benefit First Federal Pro Forma Data for Conversion Analysis As of and For The Twelve Months Ended December 31, 1992 (Dollar Amounts in Thousands)

Earnings: First Fed's Actual Pre-Tax Earnings Plus: Incremental Pre-Tax Earnings Pro Forma Pre-Tax Earnings Before Goodwill Amortization Income Taxes at 41 Percent Pro Forma After Tax Earnings Before Goodwill Amortization Less: Amortization of Original Acquisition Goodwill Pro Forma After Tax Earnings - Tax Effected Net Worth: First Fed's Actual GAAP Net Worth at 12/31/92 Add Back Net Worth Eliminated by CT Mark to Market Deduct Amortization of Acquisition Goodwill Add Back Excess Tax Payments per GAAP for 1991-1992 Reverse CT Acquisition Effects and Add Incremental Earnings Pro Forma Net Worth Before Conversion Less: Goodwill Pro Forma Tangible Capital Before Conversion Assets: First Fed's Actual Tangible Assets at 12/31/92 Plus: Incremental Earning Assets Less: Capital Account Adjustments Plus $23.6 Million Additional Net Worth Pro Forma Tangible Assets Plus: Pro Forma Goodwill Pro Forma Total Assets (pre-conversion) Ratios: GAAP Net Worth to Assets Tangible Net Worth to Tangible Assets Return on Assets (Fully Taxable Basis) Return on End of Year GAAP Equity (Fully Taxable Basis) 2.89% 1.43% 0.24% 8.32% 5,662,000 917,000 (152,907) 6,426,093 96,536 6,522,629 233,222 132,371 (24,500) 23,600 (176,507) 188,186 (96,536) 91,650 48,041 2,223 50,264 20,608 29,655 14,000 15,655

Source: Kaplan Expert Report, Exhibit 15 (PX 737)

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Standard Conversion
Recalculated Pursuant to the Court's Order - No Tax Benefit First Federal Conversion Proceeds, Earnings and Market Price Ratios (Dollar Amounts in Thousands)

Amounts Pro Forma Stockholders' Equity: Gross Proceeds Offering Expenses: Fixed Expenses Commissions (2.75% on 80% of stock sold) Reverse Professional Fees for CT Acquisition Management Recognition Program (MRP) (4% of total) Employee Stock Ownership Program (ESOP) (7% of Total) Net Proceeds Plus: Warrant Payment to FDIC in 1991 Less: Value of Warrants for IPO Net Increase in Capital Plus: Pre-Conversion Net Worth (GAAP) Total Pro Forma Net Worth Less: Goodwill & Core Deposit Intangibles Pro Forma Tangible Net Worth Pro Forma Earnings Gross Return (6% = Avg. of Overall Yield and COF) After taxes of 41% ESOP Amortization over 10 years (after tax) MRP Amortization over 5 years (after-tax) Trailing Twelve Month Earnings at Pro Forma 41% Tax Rate Total Pro Forma Earnings Pro Forma Assets: Pre-Conversion Assets Plus Proceeds Pro Forma Ratios: 1993 IPOs 12.03 59.50% n.a. 8.18 All Public Co. at 7/28/93 First Federal 10.10 10.68 98.00% 58.97% (1) 102.30% 80.65% 8.02% 3.16%

$

211,750 2,500 4,659 (880) 6,279 8,470 14,823 23,293 182,179 3,000 (14,272) 170,907 188,186 359,093 (96,536) 262,557

6,050 (875) (999) 4,176 15,655 19,832

6,522,629 170,907 6,693,536

Price/Earnings Price/ Book Price/Tangible Book Price/Assets (1) Maintaining the 58.97% price/book ratio
Source: Kaplan Report, Exhibit 16 (PX 737)

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Lost Profits
Recalculated Pursuant to the Court's Order - No Tax Benefit First Federal's Lost Earnings Caused by the Breach - Base Case (Dollar Amounts in Thousands)

A Incremental Earning Period Assets

B Net Spread on Incr. Assets

C Net Interest Income (A x B) -

D Capital Account Adjustments

E Rate on Six-Month Treasuries (Average)

F Earnings on Capital Acct. Adj. (D x E ) -

G H Restructuring Incremental Earnings Pre-Tax Adjustments Earnings (C + F + G) 1,365 585 146 (3,232) (1,136) 4,850 3,173 2,223 6,113 8,673 9,642 7,466 2,051 44,190

I Incremental Pre-Tax ROA (H / A+D) 0.53% 2,310

1989 1990 1991 1992 1993 1994 1995 1996 2/28/97

917,000 917,000 917,000 917,000 928,254 974,666 1,023,400 1,074,570 1,074,570 0.51% 0.87% 0.87% 0.87% 0.87% 0.87% 0.87% 0.87% 0.82%

4,317 (181,144) (176,507) 1,703 11,200 19,738 56,392 57,561 (22,971) 7.45% 5.44% 3.55% 3.12% 4.63% 5.57% 5.08% 5.14%

4,682 7,978 7,978 8,002 8,327 8,743 9,180 1,558 56,448

168 (6,170) (6,340) (2,036) 346 899 1,518 493 (11,122)

0.36% ####### 0.30% ####### 0.70% 0.90% 0.94% 0.69% 1.09% 0.65% (38,569) (66,023) 6,941 16,274 29,875

Damage Summary: Pre-Tax Earnings Plus: Value of Monroe Deposits at 2/97 (6.14% of $472 million core deposits) Total Sources:

44,190 28,981 73,171

Column A - Exhibit 10, column E Column B - Exhibit 7, column I for 0.87% MBS-borrowing spread and Exhibit 8 for Monroe profitability (0.02% for first three quarters of 1990, 0.87% thereafter) Column D - Exhibit 11, column H Column E - Federal Reserve Board of Governors, Release H15 Column G - Memo from Mark Chaplin to First Federal Board of Directors dated April 12, 1991, rounded to $500,000 per month 5/91 to 3//93 The 1996 adjustment represents the one-time SAIF assessment (0.657% based on $492 million of deposits).

Source: Kaplan Report, Exhibit 6 (PX 737)

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Lost Profits
Recalculated Pursuant to the Court's Order - No Tax Benefit First Federal's Lost Assets Caused by the Breach (Dollar Amounts in Millions)

Dec 31

B Pro Forma Actual Assets Excl. Assets Monroe 5,640 5,642 5,408 5,664 6,251 6,637 7,217 7,188 7,188 6,040 6,042 5,808 6,064 6,651 7,037 7,617 7,588 7,588

A

C Lost Earning Assets (B - A) 400 400 400 400 405 425 446 469 469

D E Monroe Total Earning Incremental Assets Leverage (C + D) 517 517 517 517 523 550 577 606 606 917 917 917 917 928 975 1,023 1,075 1,075

F Total Capital Adjustments 4 (181) (177) 2 11 20 56 58

G Incremental Tangible Assets (E + F) 917 921 736 740 930 986 1,043 1,131 1,132

H I J K Actual Pro Forma Pro Forma Tangible Tangible Pro Forma Total Assets Assets Goodwill Assets (G + H) (I + J) 5,518 5,534 5,408 5,662 6,241 6,629 7,212 7,182 7,182 6,435 6,455 6,144 6,402 7,171 7,615 8,255 8,313 8,314 150 130 112 97 87 68 48 31 29 6,584 #### 6,585 #### 6,256 #### 6,499 #### 7,258 #### 7,683 #### 8,302 #### 8,344 #### 8,343 ####

1989 1990 1991 1992 1993 1994 1995 1996
2/28/97

Sources:
Column A - First Federal TFR Reports Columns B and C - Based on First Federal 1989 Business Plan and Affidavit of Mark Chaplin Column D - Monroe Savings TFR Report dated September 30, 1989; total earning assets, fixed assets and real estate holdings are excluded from all calculations. Column F - Exhibit 11, column H Column H - First Federal TFR Reports, calculated as total assets less goodwill Column J - Exhibit 9, column I

Source: Kaplan Report, Exhibit 10 (PX 737)

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Case 1:95-cv-00517-GWM

Document 182-2

Filed 05/15/2007

Page 16 of 21

Lost Profits
Recalculated Pursuant to the Court's Order - No Tax Benefit Adjustments to Capital Account (Dollar Amounts in Thousands)

Period

A CT Capital Infusion

B Net Conversion Proceeds

C Reverse CT Dividend Payments

D First Fed Stockholder Dividends

E Excess Tax Payments

F Cumul Tax & Dividend Adjustments (Sum C, D, E)

G Cumulative After-Tax Incremental Earnings

H Total Capital Adjustments (A+B+F+G)

1989 1990 1991 1992 1993 1994 1995 1996 2/97

(189,995) (189,995) (189,995) (189,995) (189,995) (189,995) (189,995)

170,907 170,907 170,907 170,907 170,907

1,710 2,659 3,819 4,553 6,342 38,999 58,082

(3,300) (6,600) (9,900)

-

1,710 4,369 8,188 12,741 15,783 48,182 48,182

4,317 7,141 9,119 12,603 17,547 23,043 27,298 28,467

4,317

####### #######

(181,144) ####### (176,507) ####### 1,703 11,200 19,738 56,392 57,561 ####### ####### ####### ####### #######

Sources:
Column A - First Federal TFR Reports; initial infusion only Column B - Exhibit 16 Column C - First Federal TFR Reports Column D - Assumes First Federal initiated dividend payments two years following IPO in the amount of 3.00% of the IPO gross proceeds Column G - Cumulative sum of pre-tax earnings from Exhibit 6, column H, tax-effected at 11.00% through December 1992 and 43% thereafter

Source: Kaplan Report, Exhibit 11 (PX 737)

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Case 1:95-cv-00517-GWM

Document 182-2

Filed 05/15/2007

Page 17 of 21

Standard Conversion
Recalculated Pursuant to the Court's Order-$7.4 Million Tax Benefit First Federal Pro Forma Data for Conversion Analysis As of and For The Twelve Months Ended December 31, 1992 (Dollar Amounts in Thousands)

Earnings: First Fed's Actual Pre-Tax Earnings Plus: Incremental Pre-Tax Earnings Pro Forma Pre-Tax Earnings Before Goodwill Amortization Income Taxes at 41 Percent Pro Forma After Tax Earnings Before Goodwill Amortization Less: Amortization of Original Acquisition Goodwill Pro Forma After Tax Earnings - Tax Effected Net Worth: First Fed's Actual GAAP Net Worth at 12/31/92 Add Back Net Worth Eliminated by CT Mark to Market Deduct Amortization of Acquisition Goodwill Add Back Excess Tax Payments per GAAP for 1991-1992 Reverse CT Acquisition Effects and Add Incremental Earnings Pro Forma Net Worth Before Conversion Less: Goodwill Pro Forma Tangible Capital Before Conversion Assets: First Fed's Actual Tangible Assets at 12/31/92 Plus: Incremental Earning Assets Less: Capital Account Adjustments Plus $23.6 Million Additional Net Worth Pro Forma Tangible Assets Plus: Pro Forma Goodwill Pro Forma Total Assets (pre-conversion) Ratios: GAAP Net Worth to Assets Tangible Net Worth to Tangible Assets Return on Assets (Fully Taxable Basis) Return on End of Year GAAP Equity (Fully Taxable Basis) 3.00% 1.54% 0.24% 8.06% 5,662,000 917,000 (145,300) 6,433,700 96,536 6,530,236 233,222 132,371 (24,500) 23,600 (168,900) 195,793 (96,536) 99,257 48,041 2,420 50,461 20,689 29,772 14,000 15,772

Source: Kaplan Expert Report, Exhibit 15 (PX 737)

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Case 1:95-cv-00517-GWM

Document 182-2

Filed 05/15/2007

Page 18 of 21

Standard Conversion
Recalculated Pursuant to the Court's Order-$7.4 Million Tax Benefit First Federal Conversion Proceeds, Earnings and Market Price Ratios (Dollar Amounts in Thousands)

Amounts Pro Forma Stockholders' Equity: Gross Proceeds Offering Expenses: Fixed Expenses Commissions (2.75% on 80% of stock sold) Reverse Professional Fees for CT Acquisition Management Recognition Program (MRP) (4% of total) Employee Stock Ownership Program (ESOP) (7% of Total) Net Proceeds Plus: Warrant Payment to FDIC in 1991 Less: Value of Warrants for IPO Net Increase in Capital Plus: Pre-Conversion Net Worth (GAAP) Total Pro Forma Net Worth Less: Goodwill & Core Deposit Intangibles Pro Forma Tangible Net Worth Pro Forma Earnings Gross Return (6% = Avg. of Overall Yield and COF) After taxes of 41% ESOP Amortization over 10 years (after tax) MRP Amortization over 5 years (after-tax) Trailing Twelve Month Earnings at Pro Forma 41% Tax Rate Total Pro Forma Earnings Pro Forma Assets: Pre-Conversion Assets Plus Proceeds Pro Forma Ratios: 1993 IPOs 12.03 59.50% n.a. 8.18 All Public Co. at 7/28/93 First Federal 10.10 10.94 98.00% 58.93% (1) 102.30% 79.49% 8.02% 3.28%

$

220,000 2,500 4,840 (880) 6,460 8,800 15,400 24,200 189,340 3,000 (14,828) 177,512 195,793 373,305 (96,536) 276,769

6,284 (909) (1,038) 4,337 15,772 20,109

6,530,236 177,512 6,707,748

Price/Earnings Price/ Book Price/Tangible Book Price/Assets (1) Maintaining the 58.97% price/book ratio
Source: Kaplan Report, Exhibit 16 (PX 737)

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Case 1:95-cv-00517-GWM

Document 182-2

Filed 05/15/2007

Page 19 of 21

Lost Profits
Recalculated Pursuant to the Court's Order-$7.4 Million Tax Benefit First Federal's Lost Earnings Caused by the Breach - Base Case (Dollar Amounts in Thousands)

A Incremental Earning Period Assets

B Net Spread on Incr. Assets

C Net Interest Income (A x B) -

D Capital Account Adjustments

E Rate on Six-Month Treasuries (Average)

F Earnings on Capital Acct. Adj. (D x E ) -

G H Restructuring Incremental Earnings Pre-Tax Adjustments Earnings (C + F + G) 1,365 585 146 (3,232) (1,136) 4,850 3,219 2,420 6,484 9,352 10,482 8,257 2,187 47,251

I Incremental Pre-Tax ROA (H / A+D) 0.53% 2,310

1989 1990 1991 1992 1993 1994 1995 1996 2/28/97

917,000 917,000 917,000 917,000 928,254 974,666 1,023,400 1,074,570 1,074,570 0.51% 0.87% 0.87% 0.87% 0.87% 0.87% 0.87% 0.87% 0.82%

4,317 (178,640) (168,900) 16,127 26,011 35,028 72,133 73,380 (13,394) 7.45% 5.44% 3.55% 3.12% 4.63% 5.57% 5.08% 5.14%

4,682 7,978 7,978 8,002 8,327 8,743 9,180 1,558 56,448

168 (6,124) (6,143) (1,665) 1,026 1,740 2,309 629 (8,061)

0.37% ####### 0.32% ####### 0.73% 0.96% 1.01% 0.75% 1.14% 0.68% (30,593) (54,170) 21,586 31,391 45,444

Damage Summary: Pre-Tax Earnings Plus: Value of Monroe Deposits at 2/97 (6.14% of $472 million core deposits) Total Sources:

47,251 28,981 76,232

Column A - Exhibit 10, column E Column B - Exhibit 7, column I for 0.87% MBS-borrowing spread and Exhibit 8 for Monroe profitability (0.02% for first three quarters of 1990, 0.87% thereafter) Column D - Exhibit 11, column H Column E - Federal Reserve Board of Governors, Release H15 Column G - Memo from Mark Chaplin to First Federal Board of Directors dated April 12, 1991, rounded to $500,000 per month 5/91 to 3//93 The 1996 adjustment represents the one-time SAIF assessment (0.657% based on $492 million of deposits).

Source: Kaplan Report, Exhibit 6 (PX 737)

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Case 1:95-cv-00517-GWM

Document 182-2

Filed 05/15/2007

Page 20 of 21

Lost Profits
Recalculated Pursuant to the Court's Order-$7.4 Million Tax Benefit First Federal's Lost Assets Caused by the Breach (Dollar Amounts in Millions)

Dec 31

B Pro Forma Actual Assets Excl. Assets Monroe 5,640 5,642 5,408 5,664 6,251 6,637 7,217 7,188 7,188 6,040 6,042 5,808 6,064 6,651 7,037 7,617 7,588 7,588

A

C Lost Earning Assets (B - A) 400 400 400 400 405 425 446 469 469

D E Monroe Total Earning Incremental Assets Leverage (C + D) 517 517 517 517 523 550 577 606 606 917 917 917 917 928 975 1,023 1,075 1,075

F Total Capital Adjustments 4 (179) (169) 16 26 35 72 73

G Incremental Tangible Assets (E + F) 917 921 738 748 944 1,001 1,058 1,147 1,148

H I J K Actual Pro Forma Pro Forma Tangible Tangible Pro Forma Total Assets Assets Goodwill Assets (G + H) (I + J) 5,518 5,534 5,408 5,662 6,241 6,629 7,212 7,182 7,182 6,435 6,455 6,147 6,410 7,185 7,630 8,270 8,329 8,330 150 130 112 97 87 68 48 31 29 6,584 #### 6,585 #### 6,259 #### 6,507 #### 7,273 #### 7,698 #### 8,318 #### 8,360 #### 8,359 ####

1989 1990 1991 1992 1993 1994 1995 1996
2/28/97

Sources:
Column A - First Federal TFR Reports Columns B and C - Based on First Federal 1989 Business Plan and Affidavit of Mark Chaplin Column D - Monroe Savings TFR Report dated September 30, 1989; total earning assets, fixed assets and real estate holdings are excluded from all calculations. Column F - Exhibit 11, column H Column H - First Federal TFR Reports, calculated as total assets less goodwill Column J - Exhibit 9, column I

Source: Kaplan Report, Exhibit 10 (PX 737)

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Case 1:95-cv-00517-GWM

Document 182-2

Filed 05/15/2007

Page 21 of 21

Lost Profits
Recalculated Pursuant to the Court's Order-$7.4 Million Tax Benefit Adjustments to Capital Account (Dollar Amounts in Thousands)

Period

A CT Capital Infusion

B Net Conversion Proceeds

C Reverse CT Dividend Payments

D First Fed Stockholder Dividends

E Excess Tax Payments

F Cumul Tax & Dividend Adjustments (Sum C, D, E)

G Cumulative After-Tax Incremental Earnings

H Total Capital Adjustments (A+B+F+G)

1989 1990 1991 1992 1993 1994 1995 1996 2/97

(189,995) (189,995) (189,995) (189,995) (189,995) (189,995) (189,995)

177,512 177,512 177,512 177,512 177,512

1,710 2,659 3,819 4,553 6,342 38,999 58,082

(3,300) (6,600) (9,900)

2,464 4,927 7,391

4,174 11,760 15,579 20,132 23,174 55,573 55,573

4,317 7,182 9,335 13,031 18,362 24,337 29,043 30,290

4,317

####### #######

(178,640) ####### (168,900) ####### 16,127 26,011 35,028 72,133 73,380 ####### ####### ####### ####### #######

Sources:
Column A - First Federal TFR Reports; initial infusion only Column B - Exhibit 16 Column C - First Federal TFR Reports Column D - Assumes First Federal initiated dividend payments two years following IPO in the amount of 3.00% of the IPO gross proceeds Column G - Cumulative sum of pre-tax earnings from Exhibit 6, column H, tax-effected at 11.00% through December 1992 and 43% thereafter

Source: Kaplan Report, Exhibit 11 (PX 737)

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