<PAGE>
As filed with the Securities and Exchange Commission on September 10, 1996
Registration No. 333-6855
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
--------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------------------------
CAROLINA FINCORP, INC.
(Exact name of Registrant as specified in its charter)
North Carolina 6036 56-1978449
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation or Classification Code Number)
organization)
115 South Lawrence Street
Post Office Box 1597
Rockingham, North Carolina 28380-1597
(910) 997-6245
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
----------------------
R. LARRY CAMPBELL, President
Carolina Fincorp, Inc.
115 South Lawrence Street
Post Office Box 1597
Rockingham, North Carolina 28380-1597
(910) 997-6245
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
EDWARD C. WINSLOW III
RANDALL A. UNDERWOOD
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
Post Office Box 26000
Greensboro, North Carolina 27420
--------------------
Approximate date of commencement of the proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities to be Amount to Offering Price Aggregate Registration
Registered be Registered Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 1,851,500/(1)/ $10.00 $18,515,000 $6,384.48
===============================================================================================
</TABLE>
(1) The estimated maximum number of shares to be registered is based upon the
maximum of the valuation range of Richmond Savings Bank, SSB and the
Registrant, as established by an independent appraisal, divided by the
proposed offering price per share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
===============================================================================
<PAGE>
CAROLINA FINCORP, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Item Caption or Location
Number in Prospectus
- ------ -----------------
<C> <S> <C>
1 Forepart of the
Registration Statement and Front Cover Page
Outside Front Cover Page
of Prospectus
2 Inside Front and Outside
Back Cover Pages of Inside Front Cover Page; Table of
Prospectus Contents; Outside Back Cover Page
3 Summary Information, Risk
Factors and Ratio of Summary; Selected Financial and Other Data
Earnings to Fixed Charges of Richmond Savings; Risk Factors
4 Use of Proceeds Summary; Use of Proceeds
5 Determination of Offering Summary; The Conversion
Price
6 Dilution Not Applicable
7 Selling Security Holders Not Applicable
8 Plan of Distribution Summary; Use of Proceeds; The Conversion
9 Description of Securities Dividend Policy; Description of Capital
to be Registered Stock; Anti-Takeover Provisions Affecting
The Holding Company and Richmond Savings
10 Interests of Named Experts Not Applicable
and Counsel
11 Information with Respect Summary; Selected Financial and Other Data
to the Registrant of Richmond Savings; Carolina Fincorp,
Inc.; Richmond Savings Bank, SSB; Dividend
Policy; Market for Common Stock;
Management's Discussion and Analysis of
Financial Conditions and Results of
Operation; Business of the Holding
Company; Business of Richmond Savings;
Management of Richmond Savings;
Consolidated Financial Statements
12 Disclosure of Commission
Position on Not Applicable
Indemnification for
Securities Act Liabilities
</TABLE>
<PAGE>
PROSPECTUS
CAROLINA FINCORP, INC.
(Proposed Holding Company for Richmond Savings Bank, SSB)
UP TO 1,851,500 SHARES OF COMMON STOCK
Carolina Fincorp, Inc., a North Carolina corporation (the "Holding
Company"), is offering up to 1,851,500 shares of its common stock, no par value
(the "Common Stock"), in connection with the conversion of Richmond Savings
Bank, SSB ("Richmond Savings") from a North Carolina-chartered mutual savings
bank to a North Carolina-chartered stock savings bank (the "Conversion"). The
purchase price for the Common Stock is $10.00 per share. As part of the
Conversion, the Holding Company will become the sole stockholder and parent
holding company
(cover continued on next page)
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK,
CALL THE STOCK INFORMATION CENTER AT (910) ________________.
_______________________
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY EACH PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE _____.
_______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC"), THE ADMINISTRATOR, SAVINGS INSTITUTIONS
DIVISION, NORTH CAROLINA DEPARTMENT OF COMMERCE (THE "ADMINISTRATOR"), ANY STATE
SECURITIES COMMISSION, OR THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE
"FDIC"); NOR HAS THE SEC, THE ADMINISTRATOR, ANY SUCH STATE COMMISSION, OR THE
FDIC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS (THE "PROSPECTUS").
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS, ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE
INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
<TABLE>
<CAPTION>
=====================================================================================================================
ESTIMATED UNDERWRITING,
MARKETING AND OTHER FEES AND ESTIMATED NET CONVERSION
PURCHASE PRICE EXPENSES/(3)/ PROCEEDS/(4)/
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share at Minimum $10.00 $0.58 $9.42
Per Share at Midpoint $10.00 $0.54 $9.46
Per Share at Maximum $10.00 $0.51 $9.49
Per Share at Maximum, as adjusted $10.00 $0.48 $9.52
Total at Minimum/(1)/ $11,900,000 $695,000 $11,205,000
Total at Midpoint/(1)/ $14,000,000 $754,000 $13,246,000
Total at Maximum/(1)/ $16,100,000 $814,000 $15,286,000
Total at Maximum, as adjusted /(2)/ $18,515,000 $882,000 $17,633,000
=====================================================================================================================
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by Baxter
Fentriss and Company ("Baxter Fentriss") dated August 8, 1996, which states
that the estimated aggregate pro forma market value of the Holding Company
and Richmond Savings ranged from $11,900,000 to $16,100,000 ("Valuation
Range") or between 1,190,000 and 1,610,000 shares of Common Stock at the
purchase price of $10.00 per share, which is the amount to be paid for each
share of Common Stock purchased in the Offerings (as hereinafter defined).
See "THE CONVERSION -- Purchase Price of Common Stock and Number of Shares
Offered."
(2) As adjusted to give effect to an increase in the number of shares that
could be sold in the Conversion due to an increase of up to 15% above the
maximum of the Valuation Range and the related increase of up to 15% above
the maximum number of shares which may be offered in the Conversion at such
maximum, without the resolicitation of subscribers or any right to cancel
or modify subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering (as
hereinafter defined).
(3) Consists of the estimated costs to Richmond Savings and the Holding Company
arising from the Conversion, including estimated fixed expenses of
approximately $383,000 (including reimbursable out-of-pocket expenses to be
paid to Trident Securities, Inc.) and management and marketing fees and
commissions to be paid to Trident Securities, Inc. Total fees and
commissions to be paid to Trident Securities, Inc. are estimated to be
between $312,000 and $499,000 at the minimum and maximum, as adjusted, of
the Valuation Range, respectively. See "PRO FORMA DATA" for the assumptions
used to arrive at these estimates. Trident Securities, Inc. may be deemed
to be an underwriter, and such fees may be deemed to be underwriting fees.
Richmond Savings and the Holding Company have agreed to indemnify Trident
Securities, Inc. against certain claims or liabilities, including claims
under the Securities Act of 1933, as amended. See "THE CONVERSION --
Marketing Arrangements."
(4) Includes estimated net proceeds from the sale of 8% of the shares to be
issued which are expected to be purchased by Richmond Savings' Employee
Stock Ownership Plan (the "ESOP") with funds loaned to the ESOP by the
Holding Company. Actual net proceeds may vary substantially from the
estimated amount, depending upon the number of shares sold respectively in
the Subscription Offering and in any Community Offering and Syndicated
Community Offering (as hereinafter defined), actual expenses and other
factors. See "USE OF PROCEEDS," "CAPITALIZATION," "PRO FORMA DATA" and
"THE CONVERSION -- Purchase Price of Common Stock and Number of Shares
Offered."
TRIDENT SECURITIES, INC.
THE DATE OF THIS PROSPECTUS IS ________________, 1996.
<PAGE>
of Richmond Savings. See "THE CONVERSION." Non-transferable rights
("Subscription Rights") to subscribe for shares of Common Stock of the Holding
Company in a subscription offering (the "Subscription Offering") have been
granted to certain depositors and borrowers of Richmond Savings, Richmond
Savings' Employee Stock Ownership Plan (the "ESOP") and certain others in
accordance with Richmond Savings' Plan of Holding Company Conversion (the "Plan
of Conversion"). The Subscription Offering will expire at 12:00 Noon, Eastern
Time, on __________________, 1996, unless extended by Richmond Savings and the
Holding Company with the approval of the Administrator (the "Expiration Time").
See "THE CONVERSION -- Subscription Offering."
Any shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a community offering (the "Community Offering") to
members of the general public with priority being given to natural persons or
trusts of natural persons residing in Richmond, Moore and Scotland counties in
North Carolina (the "Local Community"), including IRAs, Keogh accounts and
similar retirement accounts established for the benefit of natural persons who
are residents of the Local Community. The Community Offering, if one is held,
may begin at any time after the beginning of the Subscription Offering and may
terminate at the Expiration Time or at any time thereafter, but not later than
____________________, 1996, unless further extended with the consent of the
Administrator. See "THE CONVERSION -- Community Offering."
It is anticipated that any shares of Common Stock not subscribed for in the
Subscription and Community Offerings will be offered to certain members of the
general public on a best efforts basis through a selected dealers arrangement
(the "Syndicated Community Offering"). The Subscription, Community and
Syndicated Community Offerings are referred to collectively as the "Offerings."
Richmond Savings and the Holding Company have engaged Trident Securities, Inc.
("Trident Securities") as financial advisor and to assist in the sale of shares
of Common Stock, on a best efforts basis, in the Offerings. Trident Securities
is under no obligation to purchase any shares of Common Stock in any of the
Offerings. See "THE CONVERSION -- Marketing Arrangements."
The sale of the Common Stock in the Subscription and Community Offerings,
and in the Syndicated Community Offering, if necessary, must be completed within
45 days after the Expiration Time unless such period is extended with the
approval of the Administrator. In the event such an extension is approved,
subscribers would be resolicited. SUBJECT TO THE FOREGOING, AN EXECUTED STOCK
ORDER FORM, ONCE RECEIVED BY RICHMOND SAVINGS, IS IRREVOCABLE AND MAY NOT BE
MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF RICHMOND SAVINGS. See
"THE CONVERSION -- Exercise of Subscription Rights and Purchases in the
Community Offering."
The Conversion and the acceptance of subscriptions are, among other things,
contingent upon approval of the Conversion by Richmond Savings' members at a
special meeting scheduled to be held on ________________, 1996 (the "Special
Meeting") and upon the sale of shares of Common Stock for an aggregate purchase
price of not less than $11,900,000. See "THE CONVERSION -- Offering of Common
Stock."
The Boards of Directors and management of Richmond Savings and the Holding
Company make no recommendation concerning whether any person or entity should
purchase shares of Common Stock. Subscribers are urged to consult with their
own financial advisors with respect to suitability of an investment in the
Common Stock. Also, Trident Securities makes no recommendation relating to such
investment. See "RISK FACTORS -- No Opinion or Recommendation by Sales Agent."
A Stock Information Center has been established at Richmond Savings'
headquarters office at 115 South Lawrence Street, Rockingham, North Carolina, in
an area separate from Richmond Savings' banking operations. The telephone
number of the Stock Information Center is (910) _____________.
2
<PAGE>
RICHMOND SAVINGS BANK, SSB
ROCKINGHAM, NORTH CAROLINA
[MAP OF NORTH CAROLINA WITH RICHMOND SAVINGS' MARKET AREA HIGHLIGHTED.]
3
<PAGE>
SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and financial statements appearing
elsewhere herein. Certain terms used in this summary are defined elsewhere
herein.
CAROLINA FINCORP, INC. The Holding Company is a North Carolina
corporation recently organized by the Board of
Directors of Richmond Savings to acquire all of
the capital stock that Richmond Savings will issue
upon its conversion from the mutual to stock form
of ownership. The conversion of Richmond Savings
to stock form, the issuance of Richmond Savings'
capital stock to the Holding Company, and the
offer and sale of the Common Stock of the Holding
Company are referred to in this Prospectus as the
"Conversion." The Holding Company has not as yet
engaged in any business. Upon completion of the
Conversion, its business will initially consist
solely of owning Richmond Savings, investing the
proceeds of the Conversion that are retained by
the Holding Company and holding the indebtedness
to be outstanding from the ESOP. The Holding
Company has received the approval of the
Administrator and the Board of Governors of the
Federal Reserve System (the "Federal Reserve") to
acquire Richmond Savings.
The executive office of the Holding Company is
located at 115 South Lawrence Street, Rockingham,
North Carolina, and its telephone number is (910)
997-6245.
RICHMOND SAVINGS BANK,
SSB Richmond Savings is a North Carolina-chartered
mutual savings bank headquartered in Rockingham,
North Carolina and has been in operation since
1906. Since 1957, Richmond Savings has been a
member of the Federal Home Loan Bank ("FHLB")
system and its deposits have been federally
insured. Richmond Savings' deposits are now
insured by the Savings Association Insurance Fund
(the "SAIF") of the FDIC to the maximum amount
permitted by law.
Richmond Savings conducts business through two
full service offices in Rockingham and full
service offices in Southern Pines and Ellerbe,
North Carolina. Richmond Savings also operates a
loan origination office in Laurinburg, North
Carolina. Richmond Savings' primary market area
consists of Richmond, Moore and Scotland counties
in North Carolina. At June 30, 1996, Richmond
Savings had total assets of $94.1 million, net
loans of $68.4 million, deposits of $83.7 million
and retained earnings of $8.6 million.
Richmond Savings is primarily engaged in the
business of attracting deposits from the general
public and using such deposits to make mortgage
loans secured by one-to-four family residential
real estate located in Richmond Savings' primary
market area of Richmond, Moore and Scotland
counties in North Carolina. Richmond Savings also
makes home equity line of credit loans, multi-
family residential loans, commercial loans,
construction loans, home improvement loans, loans
secured by deposit accounts, and various types of
consumer loans. See "BUSINESS OF RICHMOND
SAVINGS." Richmond Savings has been and intends to
continue to be a community-oriented financial
institution offering a variety of financial
services to meet the needs of the communities it
serves.
THE CONVERSION Richmond Savings was organized and has operated
for most of its existence as a traditional savings
and loan association. The Board of Directors
believes that the banking and financial services
industries are in the process of fundamental
changes,
4
<PAGE>
reflecting changes in the local, national and
international economies, technological changes and
changes in state and federal laws. As a result,
for several years Richmond Savings has been
studying the environment in which it operates and
its strategic options.
As a result of its study of its strategic options,
Richmond Savings adopted the Plan of Conversion,
which provides for conversion of Richmond Savings
from a North Carolina-chartered mutual savings
bank to a North Carolina-chartered stock savings
bank. Richmond Savings believes that converting
the bank from the mutual to stock form and
organizing the Holding Company will provide
increased flexibility for Richmond Savings and the
Holding Company to react to changes in their
operating environment, regardless of any
strategies ultimately chosen. Richmond Savings
also believes that the additional capital will
enhance its ability to provide additional customer
services and that stockholders of the Holding
Company will be encouraged to do more business
with, and refer more customers to, Richmond
Savings.
The Plan of Conversion must be approved by a
majority of the votes which could be cast by
members of Richmond Savings at a Special Meeting
to be held on ______________, 1996 (the "Special
Meeting"). Consummation of the Conversion is also
contingent upon receipt of the approvals of the
Administrator and the Federal Reserve which are
necessary for the Holding Company to acquire
Richmond Savings and the approvals of the FDIC and
the Administrator which are necessary for Richmond
Savings to convert from mutual to stock form. The
Administrator has conditionally approved the
Conversion and the Holding Company's acquisition
application, subject to approval by Richmond
Savings' members and satisfaction of certain other
conditions. The Federal Reserve has conditionally
approved the Holding Company's acquisition
application, subject to the satisfaction of
certain conditions. The FDIC has issued a notice
of non-objection with respect to the Conversion,
subject to certain conditions. See "THE
CONVERSION -- General."
If the Conversion is not approved by the members
at the Special Meeting or an adjournment thereof,
no Common Stock will be issued, Richmond Savings
will remain a North Carolina-chartered mutual
savings bank, all subscription funds will be
returned promptly plus interest at Richmond
Savings' passbook rate, and all deposit withdrawal
authorizations will be cancelled without any
action on the part of subscribers or purchasers.
THE OFFERINGS Pursuant to the Plan of Conversion, between
1,190,000 shares and 1,851,500 shares of Common
Stock are being offered by the Holding Company at
the price of $10.00 per share in the Subscription
Offering to the following persons in the following
order of priority: (i) Richmond Savings'
depositors as of March 31, 1995 who had aggregate
deposits at the close of business on such date of
at least $50 ("Eligible Account Holders"); (ii)
Richmond Savings' Employee Stock Ownership Plan
(the "ESOP"); (iii) Richmond Savings' depositors
as of _______________, 1996 (the "Supplemental
Eligibility Record Date"), who had aggregate
deposits at the close of business on such date of
at least $50 ("Supplemental Eligible Account
Holders"); (iv) Richmond Savings' depositor and
borrower members as of _________________, 1996,
who are not Eligible Account Holders or
Supplemental Eligible Account Holders ("Other
Members"); and (v) directors, officers and
employees of Richmond Savings who are not Eligible
Account Holders, Supplemental Eligible Account
Holders or Other Members. Beneficial owners
of
5
<PAGE>
individual retirement accounts ("IRAs"), Keogh
savings accounts and other similar retirement
accounts have been deemed to be holders of such
accounts for purposes of the exercise of
Subscription Rights. See "THE CONVERSION --
Subscription Offering."
Shares of Common Stock not subscribed for in the
Subscription Offering will be offered in a
Community Offering to members of the general
public, with priority given to natural persons or
trusts of natural persons who are residents of the
Local Community, including IRAs, Keogh accounts
and similar retirement accounts established for
the benefit of natural persons who are residents
of the Local Community. The Holding Company and
Richmond Savings have the absolute right to reject
orders in the Community Offering in whole or in
part. See "THE CONVERSION --Community Offering."
If there is a Community Offering, it is
anticipated that all shares of Common Stock not
purchased in the Community Offering will be
offered for sale by the Holding Company to the
general public in the Syndicated Community
Offering. See "THE CONVERSION -- Syndicated
Community Offering."
THE SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS
IN THE SUBSCRIPTION OFFERING EXPIRE AT THE
EXPIRATION TIME, WHICH IS 12:00 NOON., EASTERN
TIME, ON _______________, 1996, UNLESS EXTENDED.
THE COMMUNITY OFFERING, IF ANY, MAY COMMENCE AT
ANY TIME AFTER THE COMMENCEMENT OF THE
SUBSCRIPTION OFFERING AND MAY TERMINATE AT THE
EXPIRATION TIME OR AT ANY TIME THEREAFTER, BUT NOT
LATER THAN _________________, 1996, UNLESS
EXTENDED WITH THE APPROVAL OF THE ADMINISTRATOR.
STOCK PURCHASE LIMITATIONS The maximum aggregate number of shares of Common
Stock for which any person or entity (other than
the ESOP), together with associates, and persons
acting in concert, may subscribe in the Offerings
is 25,000 shares. However, Richmond Savings' Board
of Directors has the right, at any time prior to
completion of the Conversion, to decrease the
25,000 maximum purchase limitation to an amount
not less than 1% of the shares issued in the
Conversion or increase such 25,000 share
limitation to an amount up to 5% of the shares
issued in the Conversion. Any decrease or increase
in the maximum purchase limitation will be without
notice to, or resolicitation of, subscribers and
without a resolicitation of proxies in connection
with the Special Meeting. The ESOP may purchase up
to 8% of the shares of Common Stock issued in the
Conversion (between 95,200 and 128,800 shares
assuming the issuance of between 1,190,000 and
1,610,000 shares). If, because there is an
oversubscription for shares or for any other
reason, the ESOP is nevertheless unable to
purchase in the aggregate up to 8% of the shares
of Common Stock issued in the Conversion, it is
expected that the ESOP will purchase shares of
Common Stock in the open market so that after such
purchases a number of shares of Common Stock up to
8% of the number of shares issued in the
Conversion will have been acquired by the ESOP.
See "RISK FACTORS -- Cost of ESOP." No person or
entity may subscribe for less than 50 shares of
Common Stock, or an aggregate dollar amount of
less than $500.
The term "acting in concert" is defined in the
Plan to mean: (i) knowing participation in a joint
activity or interdependent conscious parallel
action towards a common goal, whether or not
pursuant to an express agreement, with respect to
the purchase, ownership, voting or sale of Common
Stock; or (ii) a combination or pooling of voting
or other interests in the securities of the
Holding Company for a common purpose pursuant to
any contract, understanding, relationship,
agreement
6
<PAGE>
or other arrangement, whether written or
otherwise. The Holding Company and Richmond
Savings may presume that certain persons are
acting in concert based upon, among other things,
joint account relationships and the fact that such
persons have filed joint Schedules 13D with the
SEC with respect to other companies. The term
"associate" of a person is defined in the Plan to
mean: (i) any corporation or organization (other
than Richmond Savings, the Holding Company or any
of their majority-owned subsidiaries) of which
such person is an officer or partner or is,
directly or indirectly, the beneficial owner of
10% or more of any class of equity securities;
(ii) any trust or other estate in which such
person has a substantial beneficial interest or as
to which such person serves as trustee or in a
similar fiduciary capacity (excluding tax-
qualified employee plans and charitable trusts
which are exempt from federal taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code, as
amended); and (iii) any relative or spouse of such
person, or any relative of such spouse, who either
has the same home as such person or who is a
director or officer of Richmond Savings, the
Holding Company or any of their parents or
subsidiaries. See "THE CONVERSION -- Minimum and
Maximum Purchase Limitations."
SUBSCRIPTION RIGHTS; PURCHASE
OF SHARES Subscription Rights are non-transferable and may
be exercised only by the person to whom they are
issued and only for his or her own account.
Subscription Rights are exercisable and purchases
may be made in the Offerings only by returning the
stock order form accompanying this Prospectus (the
"Stock Order Form") properly completed with full
payment for the aggregate dollar amount of Common
Stock desired. Stock Order Forms and required
payments for purchases in the Subscription
Offering must be received prior to the Expiration
Time. Stock Order Forms and required payments for
purchases in the Community Offering must be
delivered prior to the time the Community Offering
terminates, which may be at the Expiration Time or
at any time thereafter (but not later than
______________, 1996). Payment may be made in cash
(if delivered in person to any office of Richmond
Savings), by check, bank draft, negotiable order
of withdrawal or money order, or by authorization
of withdrawal from deposit accounts maintained
with Richmond Savings, other than negotiable order
of withdrawal or other demand deposit accounts.
Subscription payments made in cash, by check, bank
draft, negotiable order of withdrawal or money
order will earn interest at Richmond Savings'
passbook savings rate from the date payment in
good funds is received by Richmond Savings until
the completion or termination of the Conversion
or, in the case of an order submitted in the
Community Offering, until it is determined that
such order cannot or will not be filled.
Subscription payments made by authorization of
withdrawal from a deposit account at Richmond
Savings will continue to earn interest at the
applicable contractual rate until the Conversion
is completed or terminated; such funds will be
otherwise unavailable to the depositor. Payment
for Common Stock may be made from funds in an IRA,
Keogh or similar account at Richmond Savings only
if the beneficial owner of such account directs
Richmond Savings to transfer that account to a
self-directed account in the name of an
independent trustee. No early withdrawal penalties
will be incurred in connection with payments made
through authorization of withdrawals from
certificate accounts, including IRA, Keogh and
similar retirement accounts. However, if after
such withdrawal the applicable minimum balance
requirement ceases to be satisfied, such
certificate account will be cancelled and the
remaining balance thereof will earn interest at
Richmond Savings' passbook savings rate. See "THE
CONVERSION -- Exercise of Subscription Rights and
Purchases in the Community Offering."
7
<PAGE>
APPRAISAL The Plan of Conversion requires that the aggregate
purchase price of the Common Stock be based upon
an independent valuation of the estimated
aggregate pro forma market value of the Holding
Company and Richmond Savings. Baxter Fentriss and
Company ("Baxter Fentriss"), an independent
financial consulting firm, has advised Richmond
Savings and the Holding Company that in its
opinion, at August 8, 1996, the Valuation Range of
the aggregate estimated pro forma market value of
the Holding Company and Richmond Savings was from
$11,900,000 to $16,100,000. The appraisal will be
reviewed and, if appropriate, revised by Baxter
Fentriss upon conclusion of the Offerings. The
appraisal by Baxter Fentriss is not intended and
should not be construed as a recommendation of any
kind as to the advisability of purchasing the
Common Stock. See "MARKET FOR COMMON STOCK," "PRO
FORMA DATA" and "THE CONVERSION -- Purchase Price
of Common Stock and Number of Shares
Offered."
STOCK PRICING AND NUMBER OF
SHARES TO BE OFFERED The purchase price of the Common Stock offered in
the Subscription Offering and the price at which
the Common Stock is sold in the Community and
Syndicated Community Offerings, if any, will be
$10.00 per share. The aggregate dollar amount of
Common Stock that may be sold in the Conversion
has been determined by the Board of Directors of
Richmond Savings and the Holding Company based
upon the independent appraisal of the pro forma
market value of the Holding Company and Richmond
Savings prepared by Baxter Fentriss. Depending on
market and financial conditions following
commencement of the Subscription Offering, the
number of shares offered and sold in the
Conversion may be increased or decreased. With the
consent of the Administrator and the FDIC and in
order to reflect changes in market and financial
conditions following commencement of the
Subscription Offering, the aggregate purchase
price of the shares of Common Stock issued in the
Conversion may be increased, without any
solicitation of subscriptions or right to cancel,
rescind or change subscription orders, to up to
15% above the maximum of the Valuation Range.
However, the aggregate dollar amount of Common
Stock that may be sold in the Conversion will not
be more than $18,515,000 or less than $11,900,000
without a resolicitation of subscribers. Any
change in the total dollar amount of the Offerings
outside of the current Valuation Range will be
subject to the receipt of an updated appraisal
confirming such valuation and regulatory
approvals. See "THE CONVERSION -- Purchase Price
of Common Stock and Number of Shares
Offered."
USE OF PROCEEDS The net proceeds from the sale of the Common Stock
in the Conversion, including shares purchased by
the ESOP with funds loaned by the Holding Company,
are estimated to be between $11,205,000 and
$17,633,000 depending upon the actual expenses of
the Conversion and other factors. See "PRO FORMA
DATA." The Holding Company intends to use a
portion of the net proceeds of the Offerings
(estimated between $952,000 and $1,288,000
assuming the ESOP's purchase of between 95,200 and
128,800 shares at $10 per share) to fund the loan
made to the ESOP to purchase shares of Common
Stock in the Conversion. After deducting the
amount of such loan from the proceeds, the Holding
Company is expected to retain approximately 50% of
the remaining net proceeds from the issuance of
the Common Stock. The Holding Company will
initially invest these proceeds primarily in
interest-earning deposits, U.S. government,
federal agency and other marketable securities and
mortgage-backed securities. See "USE OF
PROCEEDS."
The remainder of the net proceeds from the sale of
the Common Stock will be paid by the Holding
Company to Richmond Savings in exchange for all of
the capital
8
<PAGE>
stock of Richmond Savings. The net proceeds paid
to Richmond Savings will become part of Richmond
Savings' general funds, and will initially be
invested in mortgage and other loans, mortgage-
backed securities and investments consisting
primarily of U.S. government and federal agency
obligations, interest-earning deposits and other
marketable securities in accordance with Richmond
Savings' lending and investment policies.
Net proceeds will also be used for other general
corporate purposes. Richmond Savings is in the
process of relocating its Ellerbe, North Carolina
branch office into a new Ellerbe office which is
expected to be opened in late 1996. The completion
of this relocation is not contingent upon
consummation of the Conversion. The estimated cost
of such new office, less the expected proceeds
from the sale of the existing Ellerbe office, is
expected to be approximately $255,000. In
addition, regardless of whether the Conversion is
consummated, Richmond Savings anticipates
relocating its Richmond Plaza branch office in
Rockingham, North Carolina (which is now leased)
to another nearby location in Rockingham to be
owned by Richmond Savings. Although the new
facility is expected to cost approximately
$495,000, the effect on the Holding Company's
financial condition and results of operations is
not expected to be material because lease payments
at the existing Richmond Plaza location would
terminate. Proceeds of the Conversion are not
needed to complete the relocation of the Ellerbe
and Richmond Plaza offices but could be used for
such purposes.
In addition, prior to adopting the Plan of
Conversion, Richmond Savings had begun considering
the possibility of opening other branch offices in
its primary market area and other nearby
communities. Whether such offices will be opened
is not contingent upon consummation of the
Conversion; however, if any such offices are
opened, proceeds of the Conversion could be used
in acquiring, constructing or equipping them. In
addition, the Holding Company and Richmond Savings
may consider acquiring other financial
institutions in Richmond Savings' primary market
area and other nearby communities in transactions
in which such institutions would be merged into
Richmond Savings or held as separate subsidiaries
of the Holding Company. Except for the Ellerbe and
Richmond Plaza branch relocations described above,
the Holding Company and Richmond Savings have no
current plans to open any additional office or to
acquire any other financial institution.
If Richmond Savings' proposed Management
Recognition Plan and Trust (the "MRP") is approved
by the stockholders of the Holding Company, the
MRP will acquire a number of shares of Common
Stock equal to 4% of the number of shares issued
in the Conversion. See "MANAGEMENT OF RICHMOND
SAVINGS --Proposed Management Recognition Plan."
Such shares may either be acquired in the open
market or acquired through the Holding Company's
issuance of authorized but unissued shares. In
either event, it is expected that the MRP will
acquire such shares reasonably promptly after the
MRP is approved by the stockholders. In the event
shares are acquired in the open market, the funds
for such purchase may be provided by Richmond
Savings from the proceeds of the Conversion. It is
estimated that between 47,600 and 64,400 shares
will be acquired by the MRP, assuming the issuance
of between 1,190,000 and 1,610,000 shares in the
Conversion. If all such shares were acquired by
the MRP in the open market, and if such shares
were acquired at a price of $10.00 per share,
Richmond Savings would contribute between $476,000
and $644,000, respectively, to the MRP for this
purpose. Additional shares would be acquired if
the number of shares issued in the Conversion
exceeds 1,610,000 and the price per share paid by
the MRP
9
<PAGE>
could be more or less than $10.00 per share, which
would change the total contribution to the MRP
accordingly. See "RISK FACTORS -- Cost and
Possible Dilutive Effect of the MRP and Stock
Option Plan" and "MANAGEMENT OF RICHMOND SAVINGS
-- Proposed Management Recognition Plan."
If the Holding Company's Stock Option Plan and
Trust (the "Stock Option Plan") is approved by the
stockholders of the Holding Company, the Stock
Option Plan could acquire in the open market a
number of shares equal to 10% of the number of
shares issued in the Conversion, which shares
would be held to satisfy options granted under
such plan. Such shares could be acquired after
options are granted and prior to the time options
vest under the Stock Option Plan. To the extent
that sufficient shares are not acquired in the
open market to satisfy options granted under the
Stock Option Plan, the Holding Company will
reserve authorized but unissued shares for this
purpose. See "MANAGEMENT OF RICHMOND SAVINGS --
Proposed Stock Option Plan." The funds for any
purchases in the open market may be provided by
the Holding Company or Richmond Savings from the
proceeds of the Conversion. It is estimated that
between 119,000 and 161,000 shares will be
acquired by the Stock Option Plan in the open
market and/or reserved for issuance by the Holding
Company, assuming the issuance of between
1,190,000 and 1,610,000 shares in the Conversion.
If shares are acquired in the open market, the
Holding Company or Richmond Savings would
contribute between $1,190,000 and $1,610,000
respectively, to the Stock Option Plan for this
purpose, assuming such shares are acquired at a
price of $10.00 per share. Additional shares could
be acquired if the number of shares issued in the
Conversion exceeds 1,610,000 and the price could
be more or less than $10.00 per share, which would
change the contribution to the Stock Option Plan
accordingly. See "RISK FACTORS -- Cost and
Possible Dilutive Effect on the MRP and Stock
Option Plan" and "MANAGEMENT OF RICHMOND SAVINGS
-- Proposed Stock Option Plan."
DIVIDENDS Following the Conversion, the Holding Company
currently expects to pay quarterly cash dividends
on the Common Stock at a rate to be determined. In
addition, the Holding Company may determine from
time to time that it is prudent to pay special
nonrecurring cash dividends. Payment of dividends
will be subject to determination and declaration
by the Holding Company's Board of Directors. The
Board of Directors will periodically review its
dividend policy in view of the operating results
and financial condition of the Holding Company and
Richmond Savings, net worth and capital
requirements, regulatory restrictions, tax
consequences, industry standards, and general
economic conditions, and it will authorize cash
dividends to be paid if it deems such payment
appropriate and in compliance with applicable law.
There can be no assurance that dividends will in
fact be paid on the Common Stock or that, if paid,
such dividends will not be reduced or eliminated
in future periods. See "DIVIDEND POLICY." In
connection with the Conversion, the Holding
Company and Richmond Savings have agreed with the
FDIC that, within the first year after completion
of the Conversion, neither the Holding Company nor
Richmond Savings will pay any dividend or make any
distribution that represents, or is characterized
as, or is treated for income tax purposes as, a
return of capital. The ability of the Holding
Company to pay dividends may be dependent upon the
Holding Company's receipt of dividends from
Richmond Savings. Richmond Savings' ability to pay
dividends is restricted. See "SUPERVISION AND
REGULATION -- Regulation of Richmond Savings --
Restrictions on Dividends and Other Capital
Distributions." In addition, see "TAXATION" for a
discussion of federal income tax provisions that
may limit the
10
<PAGE>
ability of Richmond Savings to pay dividends to
the Holding Company without incurring a recapture
tax.
MARKET FOR COMMON STOCK The Holding Company, as a newly organized company,
has never issued capital stock, and consequently,
there is no market for the Common Stock at this
time. The Holding Company has received conditional
approval to have the Common Stock listed on the
Nasdaq National Market ("Nasdaq") under the symbol
"CFNC." There can be no assurance that the Common
Stock will in fact be listed for quotation on
Nasdaq. A public market having the desirable
characteristics of depth, liquidity and
orderliness will depend upon the presence in the
market place of both willing buyers and willing
sellers at any given time. No assurance can be
given that an active trading market will develop
and be maintained. See "MARKET FOR COMMON
STOCK."
STOCK OWNERSHIP BY
MANAGEMENT The directors and executive officers of the
Holding Company and of Richmond Savings and their
associates currently anticipate subscribing for
Common Stock in the aggregate amount of
$1,299,000, or 129,900 shares. As a result, such
persons anticipate subscribing for 8.07% to 10.92%
of the shares of Common Stock issued in the
Conversion based upon the maximum and minimum of
the Valuation Range, respectively. See
"ANTICIPATED STOCK PURCHASES BY MANAGEMENT." In
addition, it is expected that the ESOP will
subscribe for 8% of the shares of Common Stock
issued in the Conversion (between 95,200 and
128,800 shares, assuming the issuance of between
1,190,000 and 1,610,000 shares). See "MANAGEMENT
OF RICHMOND SAVINGS -- Employee Stock Ownership
Plan." It is expected that directors, officers and
employees of the Holding Company and Richmond
Savings will also receive restricted stock grants
under the MRP for a number of shares of Common
Stock equal to 4% of the number of shares issued
in the Conversion and will receive options under
the Stock Option Plan to purchase a number of
shares of Common Stock equal to 10% of the number
of shares issued in the Conversion, if such plans
are approved at a meeting of stockholders of the
Holding Company following the Conversion. See "--
Benefits to Directors and Officers" and
"MANAGEMENT OF RICHMOND SAVINGS --Proposed
Management Recognition Plan" and "-- Proposed
Stock Option Plan."
If (i) the Stock Option Plan is approved by the
stockholders of the Holding Company within one
year after the Conversion and all of the stock
options which could be granted to directors and
executive officers under the Stock Option Plan are
granted and exercised or the shares for such
options are acquired by the Stock Option Plan and
all option shares are acquired in the open market,
(ii) the MRP is approved by the stockholders of
the Holding Company within one year after the
Conversion, all of the MRP shares which could be
granted to directors and executive officers are
granted and issued and all such shares are
acquired in the open market, (iii) the ESOP
acquires 8% of the shares issued in the Conversion
and none of such shares are allocated, and (iv)
the Holding Company did not issue any additional
shares of its Common Stock, the shares held by
directors and executive officers and their
associates as a group, including (a) shares
purchased outright in the Conversion, (b) shares
purchased by the ESOP, (c) shares purchased
pursuant to the Stock Option Plan and (d) shares
granted under the MRP, would give such persons
effective control over as much as 28.02% or
25.17%, at the minimum and maximum of the
Valuation Range, respectively, of the Common Stock
issued and outstanding.
11
<PAGE>
BENEFITS TO DIRECTORS AND
EXECUTIVE OFFICERS In connection with the Conversion, certain
benefits will be provided to directors, officers
and employees of Richmond Savings.
Employment Agreements. In connection with the
Conversion, Richmond Savings will enter into
employment agreements with R. Larry Campbell,
President, and John W. Bullard, Executive Vice
President. The employment agreements provide for
initial annual salaries of $95,400 and $63,600,
respectively. See "MANAGEMENT OF RICHMOND
SAVINGS --Employment Agreements."
Restricted Stock Grants. Pursuant to the MRP,
which is expected to be adopted by the Boards of
Directors of the Holding Company and Richmond
Savings, directors, officers and employees of
Richmond Savings could receive restricted stock
grants of a number of shares of Common Stock equal
to 4% of the shares issued in the Conversion
(between 47,600 and 64,400 shares, assuming the
issuance of between 1,190,000 and 1,610,000
shares). Assuming that the shares issued pursuant
to the MRP had a value of $10.00 per share, such
shares would have a value of between $476,000 and
$644,000.
Under the MRP, it is expected that Richmond
Savings' two executive officers, R. Larry Campbell
and John W. Bullard, would receive restricted
stock grants for shares of Common Stock equal to
approximately 25% and 10%, respectively, of the
number of shares issued under the MRP. If
1,610,000 shares were issued in the Conversion and
if such shares had a value of $10.00 per share,
Messrs. Campbell and Bullard would receive
restricted stock grants of 16,100 shares and 6,440
shares, respectively, having a value of $161,000
and $64,400, respectively.
Under applicable regulations, if the proposed MRP
is submitted to and approved by the stockholders
of the Holding Company within one year after
consummation of the Conversion, the seven non-
employee directors of Richmond Savings would
receive restricted stock grants for an aggregate
of not more than 30% of the shares issued under
the MRP, or 19,320 shares, assuming the issuance
of 1,610,000 shares in the Conversion. Assuming
the MRP shares had a value of $10.00 per share,
such shares would have an aggregate value of
$193,200. After such grants, and after the above-
described grants to Messrs. Campbell and Bullard,
35% of the shares which could be issued under the
MRP would be available for grants to other
employees or could be held under the MRP for later
grants pursuant to the plan.
Shares granted under the MRP will be forfeited
unless recipients of grants satisfy certain
vesting requirements, and the MRP will only be
effective if approved by the stockholders of the
Holding Company at a meeting of stockholders which
may be held no sooner than six months following
the Conversion. Grants of restricted stock under
the MRP will be made at no cost to recipients. See
"MANAGEMENT OF RICHMOND SAVINGS -- Proposed
Management Recognition Plan."
Stock Options. Pursuant to the Stock Option Plan
which is expected to be adopted by the Boards of
Directors of the Holding Company and Richmond
Savings, directors and employees of Richmond
Savings could receive options to purchase a number
of shares of Common Stock equal to 10% of the
shares issued in the Conversion (between 119,000
and 161,000 shares, assuming the issuance of
between 1,190,000 and 1,610,000 shares).
12
<PAGE>
Under the proposed Stock Option Plan, it is
expected that Richmond Savings' two executive
officers, R. Larry Campbell and John W. Bullard,
would receive 25% and 10%, respectively, of the
options to be issued under the Stock Option Plan.
If 1,610,000 shares were issued in the Conversion,
Messrs. Campbell and Bullard would receive options
to purchase 40,250 and 16,100 shares,
respectively. Under applicable regulations, if the
proposed Stock Option Plan is submitted to and
approved by the stockholders of the Holding
Company within one year after consummation of the
Conversion, the seven non-employee directors of
Richmond Savings would receive, in the aggregate,
30% of the options to be issued under the Stock
Option Plan, or options to purchase 48,300 shares,
assuming the issuance of 1,610,000 shares in the
Conversion. After such option grants, and after
the above-described grants of options to Messrs.
Campbell and Bullard, 35% of the options which
could be issued under the Stock Option Plan would
be available for grants to other employees or
could be held under the Stock Option Plan for
later grants pursuant to the plan.
Options granted under the Stock Option Plan will
be forfeited unless recipients satisfy certain
vesting requirements. The Stock Option Plan will
only be effective if approved by the stockholders
of the Holding Company at a meeting of
stockholders which may be held no sooner than six
months following the Conversion. The exercise
price of the options will be the fair market value
of the Common Stock at the time the options are
granted (which will be after the Stock Option Plan
is approved by the Holding Company's
stockholders), and the options will have terms of
10 years or less. Options would be issued at no
cost to recipients. See "MANAGEMENT OF RICHMOND
SAVINGS -- Proposed Stock Option Plan."
ESOP. In connection with the Conversion, Richmond
Savings has established the ESOP. As part of the
Conversion, the ESOP intends to borrow funds from
the Holding Company and to use such funds to
purchase 8% of the shares of Common Stock to be
issued in the Conversion, estimated to be between
95,200 and 128,800 shares, assuming the issuance
of between 1,190,000 and 1,610,000 shares. See
"MANAGEMENT OF RICHMOND SAVINGS -- Employee Stock
Ownership Plan."
ANTI-TAKEOVER PROVISIONS The Articles of Incorporation and Bylaws of the
Holding Company and Richmond Savings contain
certain restrictions that are intended to
discourage non-negotiated attempts to acquire
control of the Holding Company or Richmond
Savings. The Board of Directors of the Holding
Company believes that these provisions encourage
potential acquirors to negotiate directly with the
Board of Directors. However, these provisions may
discourage an attempt to acquire control of the
Holding Company which a majority of the
stockholders might deem to be in their best
interests or in which they might receive a premium
over the then market price of their shares. These
provisions may also render the removal of a
director or the entire Board of Directors of the
Holding Company more difficult and may deter or
delay changes in control which have not received
the requisite approval of the Holding Company's
Board of Directors. Other factors, such as voting
control of directors and officers and agreements
with employees, may also have an anti-takeover
effect. See "RISK FACTORS -- Anti-Takeover
Considerations Which Could Impede Changes in
Control" and "ANTI-TAKEOVER PROVISIONS AFFECTING
THE HOLDING COMPANY AND RICHMOND SAVINGS."
13
<PAGE>
RISK FACTORS Special attention should be given to the "RISK
FACTORS" section of this Prospectus, which
discusses the possible effects of increases in
interest rates on Richmond Savings, the disparity
between SAIF and Bank Insurance Fund ("BIF")
insurance premiums, a possible special SAIF
insurance premium assessment, strong competition
and slow growth in Richmond Savings' market area,
possible expansion of Richmond Savings,
anticipated low return on equity following the
Conversion, the cost of the ESOP, the cost and
possible dilutive effect of the MRP and Stock
Option Plan, increased tax liability related to
recapture of bad debt reserves, potential
financial institution regulation and legislation,
absence of a prior market for the Common Stock,
income tax consequences of Subscription Rights,
anti-takeover considerations, and certain other
matters that potential purchasers should consider
before deciding whether to subscribe for the
Common Stock offered hereby.
14
<PAGE>
SELECTED FINANCIAL
AND OTHER DATA OF RICHMOND SAVINGS
Set forth below are summaries of historical financial and other data of
Richmond Savings. This information is derived in part from, and should be read
in conjunction with, the Consolidated Financial Statements and Notes to
Consolidated Financial Statements of Richmond Savings presented elsewhere herein
and with the section of this Prospectus entitled "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." All averages
presented in this Prospectus have been calculated on a monthly basis unless
otherwise stated.
<TABLE>
<CAPTION>
At or for the Year Ended June 30,
----------------------------------------------------
1996 1995 1994 1993 1992
---------- -------- -------- ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Financial condition data:
Total assets $94,110 $91,410 $87,504 $87,353 $84,703
Investments (1) 21,783 18,540 16,034 12,789 15,351
Loans receivable 68,358 68,745 67,680 67,900 63,004
Deposits 83,715 81,437 78,315 79,005 77,431
Retained earnings 8,641 8,128 7,414 6,561 5,605
Operating data:
Interest income $ 6,836 $ 6,378 $ 6,128 $ 6,698 $ 7,203
Interest expense 3,949 3,271 2,934 3,454 4,443
--------- ------- ------- --------- -------
Net interest income 2,887 3,107 3,194 3,244 2,760
Provision for loan losses 36 36 36 38 48
--------- ------- ------- --------- -------
Net interest income after provision for loan losses 2,851 3,071 3,158 3,206 2,712
Non-interest income 532 430 586 533 475
Non-interest expense 2,493 2,452 2,392 2,213 2,001
--------- ------- ------- --------- -------
Income before income taxes 890 1,049 1,352 1,526 1,186
Income tax expense 299 329 492 570 400
--------- ------- ------- --------- -------
Net income $ 591 $ 720 $ 860 $ 956 $ 786
========= ======= ======= ========= =======
Selected Other Data:
Number of outstanding loans 2,685 2,944 2,727 2,707 2,597
Number of deposit accounts 11,610 11,443 10,965 11,163 11,729
Number of full-service offices open 4 4 4 4 4
Return on average assets 0.64% 0.81% 0.98% 1.11% 0.95%
Return on average equity 7.01% 9.30% 12.27% 15.82% 15.37%
Average equity to average assets 9.12% 8.71% 7.98% 6.99% 6.18%
Interest rate spread 2.77% 3.24% 3.48% 3.59% 3.12%
Net yield on average interest-earning assets 3.26% 3.64% 3.79% 3.91% 3.48%
Average interest-earning assets to average
interest-bearing liabilities 110.90% 110.33% 108.93% 107.80% 106.45%
Ratio of non-interest expense to average total
assets 2.70% 2.76% 2.72% 2.56% 2.42%
Nonperforming assets to total assets 0.06% 0.08% 0.13% 0.08% 0.41%
Loan loss reserves to nonperforming loans at
period end 1,296.67% 484.00% 282.14% 1,137.04% 107.81%
--------- ------- ------- --------- -------
</TABLE>
(1) Includes interest-bearing deposits, federal funds sold, FHLB stock and
investment securities.
15
<PAGE>
RISK FACTORS
THE FOLLOWING FACTORS, IN ADDITION TO THE INFORMATION PRESENTED ELSEWHERE
IN THIS PROSPECTUS, SHOULD BE CONSIDERED BY INVESTORS BEFORE DECIDING WHETHER TO
PURCHASE THE COMMON STOCK OFFERED HEREBY.
COMPETITIVE DISADVANTAGE RESULTING FROM DISPARITY BETWEEN SAIF AND BIF INSURANCE
PREMIUMS AND SPECIAL SAIF ASSESSMENT
Financial institutions which are members of the SAIF, such as Richmond
Savings, are required to pay higher deposit insurance premiums than financial
institutions which are members of the BIF, primarily commercial banks, because
the BIF has higher reserves than the SAIF and has been responsible for fewer
troubled institutions. In 1995, the FDIC Board of Directors has recently
approved a new risk-based premium schedule that reduced assessment rates for
commercial banks and left assessment rates for financial institutions such as
Richmond Savings at current levels, which created a disparity between SAIF and
BIF assessments. Assessments for BIF members in the lowest risk category are
now only $2,000. Richmond Savings paid deposit insurance premiums of $186,000
and $185,000 in fiscal 1996 and 1995, respectively. In announcing this
schedule, the FDIC noted that the premium differential may have adverse
consequences for SAIF members, including reduced earnings and an impaired
ability to raise funds in the capital markets. In addition, SAIF members, such
as Richmond Savings, could be placed at a substantial competitive disadvantage
to BIF members with respect to pricing of loans and deposits and the ability to
achieve lower operating costs. Several alternatives to mitigate the effect of
the BIF/SAIF premium disparity have been suggested by the federal banking
regulators, by members of Congress and by industry groups.
The Balanced Budget Act of 1995, which was passed by the United States
Congress but vetoed by the President for reasons unrelated to SAIF
recapitalization, provided for a one-time assessment to recapitalize the SAIF.
The proposed assessment was estimated to equal 85 cents per each $100 of insured
deposits. If enacted by Congress, such a premium would have the effect of
immediately reducing the capital of SAIF-member institutions by the amount of
the assessment. It is anticipated that SAIF-member institutions would not be
allowed to amortize the expense of the one-time assessment over a period of
years. Based upon Richmond Savings' deposits as of June 30, 1996, the proposed
one-time assessment would equal approximately $712,000. A significant increase
in SAIF insurance premiums or a significant one-time assessment to recapitalize
the SAIF would likely have an adverse effect on the operating expenses and
results of operations of Richmond Savings. Management cannot predict whether
similar legislation will be enacted, or, if enacted, the amount of any one-time
assessment or whether ongoing SAIF premiums will be reduced to a level equal to
that of BIF premiums. See "SUPERVISION AND REGULATION -- Regulation of
Richmond Savings --Insurance of Deposit Accounts."
POTENTIAL DECREASES IN EARNINGS WHICH COULD RESULT FROM INTEREST RATE
INCREASES
The results of operations of Richmond Savings, as with savings institutions
generally, are dependent to a large degree on its net interest income, which is
generally the difference between interest income from loans and investments and
interest expense on deposits and borrowings. Richmond Savings' interest income
and interest expense are significantly affected by general economic conditions
and by policies of the federal government and various regulatory agencies.
In recent years, the assets of many savings institutions, including
Richmond Savings, have been negatively "gapped"--which means that the dollar
amount of interest-bearing liabilities which reprice within specific time
periods, either through maturity or rate adjustment, exceeds the dollar amount
of interest-earning assets which reprice within such time periods. As a result,
the net interest income of these savings institutions, including Richmond
Savings, would be expected to be negatively impacted by increases in interest
rates.
At June 30, 1996, Richmond Savings' cumulative one year gap as a percentage
of total interest-earning assets was a negative 15.14%. Richmond Savings
computes its gap position using certain prepayment, deposit decay and other
assumptions used by the FHLB in making gap computations. The results of
Richmond Savings' gap computations could be substantially different if other
assumptions were used.
16
<PAGE>
In addition to the interest rate gap analysis discussed above, Richmond
Savings' management monitors interest rate sensitivity through the use of a
model which estimates the change in net portfolio value ("NPV") and net interest
income in response to a range of assumed changes in market interest rates. NPV
is the present value of expected cash flows from assets, liabilities and off-
balance sheet items. The model estimates the effect on Richmond Savings' NPV
and net interest income of instantaneous and permanent 100 to 400 basis point
increases and decreases in market interest rates. Richmond Savings' Board of
Directors has established maximum acceptable decreases in NPV and net interest
income for various rate scenarios. Computations as of June 30, 1996, based upon
information provided by the FHLB of Atlanta, indicated that a 200 basis point
increase in interest rates would result in a 22% decrease in Richmond Savings'
NPV and a 200 basis point decrease in interest rates would result in a 17%
increase in Richmond Savings' NPV. Such computations also indicate that the
same 200 basis point increase in interest rates would result in a 9% decrease in
net interest income and that the 200 basis point decrease in interest rates
would result in an 8% increase in net interest income. Computations of an
interest rate gap and computations of the prospective effects of hypothetical
interest rate changes on NPV and net interest income are based on numerous
assumptions, including relative levels of market interest rates, loan
prepayments and deposit decay and should not be relied upon as indicative of
actual results. Further, the computations do not incorporate any actions
management may undertake in response to changes in interest rates. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION -- Asset/Liability Management."
Richmond Savings' net interest income during fiscal 1996 was $220,000 or 7%
less than fiscal 1995. This decrease was largely due to an increase in market
interest rates which resulted in a reduction in Richmond Savings' interest rate
spread from 3.24% in fiscal 1995 to 2.77% in fiscal 1996. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION --
Comparison of Results of Operation for the Years Ended June 30, 1996, 1995 and
1994 - Net Interest Income."
STRONG COMPETITION AND SLOW GROWTH WITHIN RICHMOND SAVINGS' MARKET AREA
Richmond Savings faces significant competition both in attracting deposits
and in originating loans. Richmond Savings faces direct competition from a
number of financial institutions, many with a state-wide or regional presence,
and, in some cases, a national presence. Competition arises from other savings
institutions, commercial banks, credit unions and other providers of financial
services, many of which are significantly larger than Richmond Savings and,
therefore, have greater financial and marketing resources than Richmond Savings.
See "BUSINESS OF RICHMOND SAVINGS -- Competition." In addition, Richmond and
Scotland counties in North Carolina have experienced slow population growth in
recent years, although Moore County has had more growth. As a result, the
existing financial institutions are competing for shares of markets which are
experiencing little or no growth.
UNCERTAINTIES RELATED TO POSSIBLE EXPANSION OF RICHMOND SAVINGS
The Holding Company may expand its operations in its existing primary
market area and in other nearby areas. The Holding Company may acquire or
construct new branch offices or acquire other financial institutions which could
be merged with Richmond Savings or operated as separate subsidiaries. If the
Holding Company does expand the existing operations of Richmond Savings, the
success of such activities will depend to a large extent upon the ability of
existing management and employees to effectively manage a larger institution and
to compete in new markets. Neither the Holding Company nor Richmond Savings has
any current plans to open any additional offices (other than in connection with
the relocation of its Ellerbe and Richmond Plaza branches) or acquire any other
financial institutions. See "USE OF PROCEEDS."
ANTICIPATED LOW RETURN ON EQUITY FOLLOWING CONVERSION
At June 30, 1996, Richmond Savings' ratio of equity to assets was 9.18%.
On a pro forma basis at June 30, 1996, assuming the sale of 1,610,000 shares of
Common Stock in the Conversion, the Holding Company's ratio of equity to assets
would have been 20.47%. With its higher capital position as a result of the
Conversion, it is doubtful that the Holding Company will be able to quickly
deploy the capital raised in the Conversion in loans and other assets in a
manner consistent with its business plan and operating philosophies and in a
manner which will generate
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earnings to support its high capital position. As a result, it is expected that
the Holding Company's return on equity initially will be below industry norms.
Consequently, investors expecting a return on equity which will meet or exceed
industry standards for the foreseeable future should carefully evaluate and
consider the risk that such returns will not be achieved.
COST OF ESOP AND ITS EFFECT ON RESULTS OF OPERATIONS
It is expected that the ESOP will purchase 8% of the shares of Common Stock
issued in the Conversion with funds borrowed from the Holding Company. See
"MANAGEMENT OF RICHMOND SAVINGS -- Employee Stock Ownership Plan." Assuming the
issuance of 1,610,000 shares in the Conversion, it is expected that 128,800
shares will be purchased by the ESOP, which--if such shares are acquired at
$10.00 per share--would have a cost of $1,288,000. If, because there is an
oversubscription of shares of Common Stock or for any other reason, the ESOP is
unable to purchase in the Conversion 8% of the total number of shares offered in
the Conversion, then the Board of Directors of the Holding Company intends to
approve the purchase by the ESOP in the open market after the Conversion, of
such shares as are necessary for the ESOP to own a number of shares equal to 8%
of the shares of Common Stock issued in the Conversion. In such event, the
actual cost of the ESOP may be more or less than the amounts set forth above
because the ESOP will be purchasing its shares in the open market and the price
paid for its shares will depend upon the price at which shares can be acquired
in the open market. The purchase of Common Stock by the ESOP will reduce the
pro forma stockholders' equity of Richmond Savings. See "PRO FORMA DATA."
In November 1993, the American Institute of Certified Public Accountants
approved Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans ("SOP 93-6")." SOP 93-6, among other things, changes the
measure of compensation recorded by employers from the cost of ESOP shares to
the fair value of ESOP shares committed to be released to participants'
accounts. Since the fair value of the shares following the Offerings cannot be
predicted, Richmond Savings cannot reasonably estimate the impact of SOP 93-6 on
its financial statements. While an increase in such fair value will cause an
increase in ESOP-related expenses for accounting purposes, an increase in the
fair value of the shares should not increase the actual out-of-pocket cost to
Richmond Savings of the ESOP. Also, earnings per share will be increased as a
result of the implementation of SOP 93-6 because only shares which have been
committed to be released by the ESOP are included as outstanding shares in the
computation.
COST AND POSSIBLE DILUTIVE EFFECT OF THE MRP AND STOCK OPTION PLAN
It is expected that the stockholders of the Holding Company will be asked
to approve the Stock Option Plan and the MRP at a meeting of stockholders to be
held no sooner than six months after the Conversion. Under the MRP, directors
and employees of Richmond Savings would be awarded an aggregate amount of Common
Stock equal to 4% of the shares issued in the Conversion. Under the Stock
Option Plan, directors and employees of Richmond Savings would be granted
options to purchase an aggregate amount of Common Stock equal to 10% of the
shares issued in the Conversion at exercise prices equal to the market price of
the Common Stock on the date of grants. Shares issued to directors and
employees under the MRP and the Stock Option Plan may be from authorized but
unissued shares of Common Stock or they may be purchased in the open market. In
the event the shares issued under the MRP and the Stock Option Plan consist of
newly issued shares of Common Stock, the interests of existing stockholders
would be diluted. If 1,610,000 shares of the Common Stock are issued in the
Conversion, it is expected that options to acquire 161,000 shares of the Common
Stock could be granted under the Stock Option Plan, and awards of an additional
64,400 shares could be made under the MRP. At the maximum of the Valuation
Range, if all shares under the MRP and the Stock Option Plan were newly issued,
the exercise price was $10.00 for the shares issued pursuant to the options, and
all of the options were exercised, the number of outstanding shares of Common
Stock would increase from 1,610,000 to 1,835,400 the pro forma book value per
share of the outstanding Common Stock at June 30, 1996 would have been $13.21
compared with $14.06 if such plans did not exist, and the pro forma net income
per share of the outstanding Common Stock for the fiscal year ended June 30,
1996 would have been $0.55 compared with $0.64 if such plans did not exist. The
cost of the shares acquired by the MRP will be expensed equally over the five
year vesting period set forth in the MRP. If 1,610,000 shares of Common Stock
are issued in the Conversion and the MRP
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acquired 64,400 shares at a cost of $10.00 per share, the total annual expense
of the MRP would be $128,800 per year. See "PRO FORMA DATA" and "MANAGEMENT OF
RICHMOND SAVINGS -- Proposed Management Recognition Plan" and "--Proposed Stock
Option Plan."
INCREASED TAX LIABILITY RESULTING FROM RECAPTURE OF BAD DEBT RESERVES
Recently enacted federal legislation has repealed the reserve method of
accounting for thrift bad debt reserves and requires thrifts to recapture into
income over a six-year period their post-1987 additions to their excess bad debt
tax reserves, thereby generating additional tax liability. Under the
legislation, recapture of post-1987 excess reserves is suspended for up to two
years, to the first tax year beginning after December 31, 1997, if during those
years the institution satisfies a "residential loan requirement." At June 30,
1996, Richmond Savings' post-1987 excess reserves amounted to approximately
$581,000. See "TAXATION -- Federal Income Taxation."
POSSIBLE NEGATIVE IMPACT OF LEGISLATIVE AND REGULATORY CHANGES
Richmond Savings is subject to extensive regulation and supervision as a
North Carolina-chartered savings bank. In addition, the Holding Company, as a
bank holding company, is subject to extensive regulation and supervision. Any
change in the regulatory structure or the applicable statutes or regulations,
whether by the Administrator, the Federal Reserve, the FDIC, the North Carolina
Legislature or the Congress, could have a material impact on the Holding
Company, Richmond Savings, or Richmond Savings' Conversion.
Congress currently has under consideration various proposals to consolidate
the regulatory functions of the four federal banking agencies: the Office of
Thrift Supervision, the FDIC, the Office of the Comptroller of the Currency and
the Federal Reserve. The outcome of efforts to effect regulatory consolidation
is uncertain. Therefore, Richmond Savings is unable to determine the extent to
which legislation, if enacted, would affect its business.
ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK
The Holding Company, as a newly organized company, has never issued capital
stock, and consequently, there is no established market for the Common Stock at
this time. The Holding Company has received conditional approval to have the
Common Stock listed for quotation on Nasdaq under the symbol "CFNC." There can
be no assurance that the Common Stock will in fact be listed for quotation on
Nasdaq. A public trading market having the desirable characteristics of depth,
liquidity and orderliness will depend upon the presence in the market place of
both willing buyers and willing sellers at any given time. No assurance can be
given that an active trading market will develop or be maintained. See "MARKET
FOR COMMON STOCK."
POSSIBLE NEGATIVE INCOME TAX CONSEQUENCES OF SUBSCRIPTION RIGHTS
If the Subscription Rights granted in connection with the Conversion are
deemed to have an ascertainable value, receipt of such rights will be taxable to
recipients who exercise such Subscription Rights, either as ordinary income or
capital gain, in an amount not in excess of such value. Whether such
Subscription Rights are considered to have any ascertainable value is an
inherently factual determination. Richmond Savings has received an opinion from
Baxter Fentriss stating that the Subscription Rights do not have any value. The
opinion of Baxter Fentriss is not binding on the Internal Revenue Service
("IRS"). See "THE CONVERSION -- Income Tax Consequences."
ANTI-TAKEOVER CONSIDERATIONS WHICH COULD IMPEDE CHANGES IN CONTROL
PROVISIONS IN THE ARTICLES OF INCORPORATION AND BYLAWS. The Holding
Company's Articles of Incorporation and Bylaws contain certain provisions that
may discourage attempts to acquire control of the Holding Company that are not
negotiated with the Holding Company's Board of Directors. These provisions may
result in the Holding Company being less attractive to a potential acquiror and
may result in stockholders receiving less for their shares than otherwise might
be available in the event of a takeover attempt. In addition, these provisions
may have the effect of discouraging takeover attempts that some stockholders
might deem to be in their best interests, including takeover proposals in which
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stockholders might receive a premium for their shares over the then-current
market price, as well as making it more difficult for individual stockholders or
a group of stockholders to elect directors or to remove incumbent management.
The Holding Company's Board of Directors believes, however, that these
provisions are in the best interests of the Holding Company and its stockholders
because such provisions encourage potential acquirors to negotiate directly with
the Board of Directors, which the Board of Directors believes is in the best
position to act on behalf of all stockholders.
See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND RICHMOND
SAVINGS."
REGULATORY PROVISIONS. Regulations of the Administrator contain provisions
that, for a period of three years after the Conversion is consummated, prohibit
any person from directly or indirectly acquiring or offering to acquire
beneficial ownership of more than 10% of any class of equity security of the
Holding Company or Richmond Savings, with certain exceptions, without the prior
approval of the Administrator. If any person should acquire beneficial
ownership of more than 10% of any class of equity security without prior
approval, any shares beneficially owned in excess of 10% would not be counted as
shares entitled to vote and would not be voted in connection with any matter
submitted to the stockholders for a vote. Regulations provide that the
Administrator will give his approval of such an acquisition during the first
year after the Conversion only to protect the safety and soundness of the
Holding Company and Richmond Savings. See "ANTI-TAKEOVER PROVISIONS AFFECTING
THE HOLDING COMPANY AND RICHMOND SAVINGS."
The Change in Bank Control Act, together with North Carolina regulations,
require that the consent of the Administrator and Federal Reserve be obtained
prior to any person or company acquiring "control" of a savings bank or a
savings bank holding company. Control is conclusively presumed to exist if,
among other things, an individual or company acquires the power, directly or
indirectly, to direct the management or policies of the Holding Company or
Richmond Savings or to vote 25% or more of any class of voting stock. Control
is rebuttably presumed to exist under the Change in Bank Control Act if, among
other things, a person acquires more than 10% of any class of voting stock and
(i) the issuer's securities are registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the Holding Company's
securities will be, or (ii) the person would be the single largest stockholder.
Restrictions applicable to the operations of bank holding companies and
conditions imposed by the Federal Reserve in connection with its approval of
such acquisitions may deter potential acquirors from seeking to obtain control
of the Holding Company. See "SUPERVISION AND REGULATION -- Regulation of the
Holding Company."
VOTING CONTROL OF OFFICERS AND DIRECTORS. Directors and executive officers
of Richmond Savings and the Holding Company and their associates expect to
purchase approximately 10.92% to 8.07% of the shares of Common Stock issued in
the Conversion based upon the minimum and the maximum of the Valuation Range,
respectively. See "ANTICIPATED STOCK PURCHASES BY MANAGEMENT."
In addition, it is expected that the ESOP will acquire a number of shares
equal to 8% of the shares issued in the Conversion. Employees will vote the
shares allocated to them under the ESOP. The ESOP trustees (directors of the
Holding Company) will vote unallocated shares, and allocated shares for which no
voting instructions have been received, in their discretion, subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
Also, upon approval of the MRP by the shareholders of the Holding Company,
it is expected that an amount equal to 4% of the shares issued in the Conversion
will be issued to directors and employees. It is expected that a minimum of 65%
of such MRP shares will be issued to directors and executive officers.
Directors and executive officers will have authority to vote such shares even
though they are not vested and nonforfeitable.
In addition, upon approval of the Stock Option Plan by the shareholders of
the Holding Company, the Stock Option Plan could acquire a number of shares up
to 10% of the shares issued in the Conversion, which shares would be held to
satisfy options granted to directors and employees. Option holders would be
permitted to direct the voting of shares held to satisfy options granted to
them, and directors and executive officers are expected to receive at least 65%
of the options to be granted under the Stock Option Plan. In addition, trustees
under the Stock Option Plan (three directors of the Holding Company) would vote
all shares held by them to satisfy any options not yet granted under the Stock
Option Plan.
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If (i) the Stock Option Plan is approved by the stockholders of the Holding
Company within one year after the Conversion and all of the stock options which
could be granted to directors and executive officers under the Stock Option Plan
are granted and exercised or the shares for such options are acquired by the
Stock Option Plan and all option shares are acquired in the open market, (ii)
the MRP is approved by the stockholders of the Holding Company within one year
after the Conversion, all of the MRP shares which could be granted to directors
and executive officers are granted and issued and all such shares are acquired
in the open market, (iii) the ESOP acquires 8% of the shares issued in the
Conversion and none of such shares are allocated, and (iv) the Holding Company
did not issue any additional shares of its Common Stock, the shares held by
directors and executive officers and their associates as a group, including (a)
shares purchased outright in the Conversion, (b) shares purchased by the ESOP,
(c) shares purchased pursuant to the Stock Option Plan and (d) shares granted
under the MRP, would give such persons effective control over as much as 28.02%
or 25.17%, at the minimum and maximum of the Valuation Range, respectively, of
the Common Stock issued and outstanding. Because the Holding Company's Articles
of Incorporation requires the affirmative vote of 75% of the outstanding shares
entitled to vote in order to approve certain mergers, consolidations or other
business combinations, the officers and directors, as a group, could effectively
block such transactions. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING
COMPANY AND RICHMOND SAVINGS -- The Holding Company --Supermajority Voting
Provisions."
AGREEMENTS WITH EMPLOYEES. In connection with the Conversion, Richmond
Savings will enter into employment agreements with its two executive officers.
See "MANAGEMENT OF RICHMOND SAVINGS --Employment Agreements." In addition,
Richmond Savings intends to adopt a Severance Plan which would benefit its
employees in the event there was a change in control of the Holding Company or
Richmond Savings. See "MANAGEMENT OF RICHMOND SAVINGS -- Severance Plan." The
existence of the employment agreements and severance plans may tend to
discourage mergers, consolidations, acquisitions or other transactions that
would result in a change in control of the Holding Company or Richmond Savings.
NO OPINION OR RECOMMENDATION BY SALES AGENT; BEST EFFORTS OFFERING
Richmond Savings has engaged Trident Securities to consult with and advise
Richmond Savings with respect to the Conversion and to assist, on a best-efforts
basis, in connection with the solicitation of subscriptions and purchase orders
for shares of Common Stock in the Offerings. Trident Securities has not
prepared or delivered any opinion or recommendation with respect to the
suitability of the Common Stock or the appropriateness of the amount of Common
Stock to be issued in the Conversion. The engagement of Trident Securities by
Richmond Savings and the work performed pursuant to such engagement should not
be construed by purchasers of the Common Stock as constituting an opinion or
recommendation relating to such investment and should not be construed as a
verification of the accuracy or completeness of the information contained in
this Prospectus. See "THE CONVERSION -- Marketing Arrangements."
RISK OF LOSS OF PRINCIPAL
The shares of Common Stock offered by this Prospectus are not savings
accounts or deposits and are not insured or guaranteed by the FDIC or any other
government agency, and they involve investment risk, including possible loss of
principal.
CAROLINA FINCORP, INC.
The Holding Company was incorporated under North Carolina law in June 1996
at the direction of Richmond Savings for the purpose of acquiring and holding
all of the outstanding capital stock of Richmond Savings to be issued in
connection with the Conversion. The Holding Company has received conditional
approval from the Federal Reserve and the Administrator to become a bank holding
company and as such will be subject to regulation by the Federal Reserve and the
Administrator. The holding company structure will give the Holding Company
greater flexibility than Richmond Savings currently has to expand and diversify
its business activities, although there are no definitive plans regarding
expansion or diversification. See "SUPERVISION AND REGULATION -- Regulation of
the Holding Company."
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Prior to completion of the Conversion, the Holding Company will not own any
material assets or transact any material business. Upon completion of the
Conversion, on an unconsolidated basis, the Holding Company will have no
significant assets other than the stock of Richmond Savings acquired in the
Conversion, the loan receivable with respect to the loan made to the ESOP to
enable the ESOP to purchase shares of Common Stock in the Conversion, and the
portion of the net proceeds from the sale of Common Stock in the Conversion
which are retained by it. The Holding Company will have no significant
liabilities upon completion of the Conversion. The management of the Holding
Company is set forth under "MANAGEMENT OF THE HOLDING COMPANY."
The executive office of the Holding Company is located at the headquarters
office of Richmond Savings at 115 South Lawrence Street, Rockingham, North
Carolina.
RICHMOND SAVINGS BANK, SSB
Richmond Savings is a North Carolina-chartered mutual savings bank.
Richmond Savings was organized in 1906. Since 1957, Richmond Savings has been a
member of the FHLB system and its deposits have been federally insured. The
deposits of Richmond Savings are insured by the SAIF of the FDIC to the maximum
amount permitted by law.
Richmond Savings is a member of the FHLB of Atlanta, which is one of the 12
regional banks for federally insured savings institutions and other eligible
members comprising the FHLB system. As a North Carolina-chartered savings bank,
Richmond Savings is regulated by the Administrator. Richmond Savings is further
subject to certain regulations of the FDIC with respect to certain other matters
and, as a subsidiary of the Holding Company, will be indirectly subject to
regulation by the Federal Reserve. See "SUPERVISION AND REGULATION --
Regulation of the Holding Company" and "-- Regulation of Richmond Savings."
Richmond Savings conducts business through its headquarters and branch
offices in Rockingham, North Carolina, its branch offices in Southern Pines and
Ellerbe, North Carolina and its loan origination office in Laurinburg, North
Carolina. Richmond Savings' primary market area is Richmond, Moore and Scotland
counties in North Carolina. While Richmond and Scotland counties have
experienced relatively slow growth during the last five years, more growth has
occurred in Moore County, which includes the retirement and resort communities
of Pinehurst and Southern Pines. At June 30, 1996, Richmond Savings had total
assets of $94.1 million, net loans of $68.4 million, deposits of $83.7 million
and retained earnings of $8.6 million.
Richmond Savings is a community-oriented financial institution which offers
a variety of financial services to meet the needs of the communities it serves.
Richmond Savings is principally engaged in the business of attracting deposits
from the general public and using such deposits to make one-to-four family
residential real estate loans, home equity line of credit loans, multi-family
residential and commercial loans and other loans and investments. In the late
1980's and early 1990's, Richmond Savings began the introduction of credit cards
and other services typically offered by commercial banks.
Revenues of Richmond Savings are derived primarily from interest on loans.
Richmond Savings also receives interest income from its investments, mortgage-
backed securities and interest-earning deposit balances. Richmond Savings also
receives non-interest income from transaction and service fees, gains on sales
of loans and other sources. The major expenses of Richmond Savings are interest
on deposits and noninterest expenses such as personnel costs, federal deposit
insurance premiums, data processing expenses, equipment rental and maintenance
expenses and branch occupancy and related expenses.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently estimated that
such net proceeds will be between $11,205,000 and $15,286,000, based on the
current Valuation Range. If the gross proceeds of the shares sold are increased
to 15% above the maximum of the Valuation Range, it is estimated that net
proceeds will equal $17,633,000. See "PRO FORMA DATA" for the
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assumptions used to arrive at these amounts. The actual net proceeds may vary
substantially from the estimated amounts described herein. The estimated amount
of net proceeds includes proceeds from the sale of the shares which are expected
to be purchased by the ESOP in the Subscription Offering at $10.00 per share
with funds borrowed from the Holding Company. The amount loaned to the ESOP to
enable such purchases is estimated to range from $952,000 (if 1,190,000 shares
are issued) to $1,288,000 (if 1,610,000 shares are issued), and the interest
rate is estimated to be one percent above the prime rate announced in the Wall
Street Journal. If the ESOP is unable to purchase its shares in the
Subscription Offering because of an oversubscription or for any other reason,
the ESOP is expected to purchase its shares in the open market--in which event
the cost of the purchases may be higher or lower because the purchase price per
share may be higher or lower than $10.00. See "MANAGEMENT OF RICHMOND SAVINGS -
- - Employee Stock Ownership Plan."
After first deducting the amount of the net proceeds used by the Holding
Company to make the loan to the ESOP (estimated to range from $952,000 to
$1,288,000), it is expected that the Holding Company will retain approximately
50% of the remaining net proceeds of the Offerings and will pay the balance of
the net proceeds to Richmond Savings in exchange for all of the common stock of
Richmond Savings to be issued in connection with the Conversion. The Holding
Company expects to use the portion of the net proceeds it retains for working
capital and investment purposes. The Holding Company does not expect to have
significant operating expenses and anticipates that it will initially invest the
net proceeds it retains primarily in interest-earning deposits, U.S. government,
federal agency and other marketable securities and mortgage-backed securities.
The types and amounts of such investments will vary from time to time based upon
the interest rate environment, asset/liability mix considerations and other
factors. The net proceeds retained by the Holding Company also may be used to
support the future expansion of operations of the Holding Company through
acquisitions of other financial institutions or their branches in or near
Richmond Savings' primary market area. If another financial institution was
acquired, it could be merged into Richmond Savings or held as a separate
subsidiary of the Holding Company. The Holding Company has no pending
agreements or understandings regarding any such acquisitions, and there are no
pending negotiations regarding any such acquisitions at this time.
Upon completion of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Based upon facts and circumstances which may arise following the
Conversion, the Board of Directors may determine to repurchase stock in the
future. Such facts and circumstances may include but are not limited to (i)
market and economic factors such as the price at which the Common Stock is
trading, the volume of trading, the attractiveness of other investment
alternatives in terms of the rates of return and risks involved in the
investments, (ii) the ability to increase the book value and earnings per share
of the remaining outstanding shares, and improve the Holding Company's return on
equity; (iii) the reduction of dilution to stockholders caused by having to
issue additional shares to cover the exercise of stock options or to fund
employee stock benefit plans; and (iv) any other circumstances in which
repurchases would be in the best interests of the Holding Company and its
stockholders.
Any stock repurchases will be subject to the determination of the Board of
Directors that both the Holding Company and Richmond Savings will be capitalized
in excess of applicable regulatory requirements after any such repurchases and
that capital will be adequate taking into account, among other things, the level
of nonperforming assets and other risks, the Holding Company's and Richmond
Savings' current and projected results of operations and asset/liability
structure, the economic environment and tax and other regulatory considerations.
Federal regulations require that the Holding Company must notify the Federal
Reserve prior to repurchasing Common Stock for in excess of 10% of its net worth
during any 12 month period.
Net proceeds paid to Richmond Savings initially will become part of
Richmond Savings' general funds and will be invested primarily in mortgage,
consumer and other loans, mortgage-backed securities and investments consisting
primarily of interest-earning deposit balances, U.S. government and federal
agency obligations and other marketable securities in accordance with Richmond
Savings' lending and investment policies. The relative amounts to be invested
in each of these types of investments will depend upon loan demand, rates of
return and asset/liability matching considerations at the time the investments
are to be made. Management is not able to predict the yields which will be
produced by the investment of the proceeds of the Offerings because such yields
will be significantly influenced by general economic conditions and the interest
rate environment existing at the time the investments are made.
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Remaining net proceeds paid to Richmond Savings will be used for general
corporate purposes. Richmond Savings is in the process of relocating its
Ellerbe, North Carolina branch office into a new Ellerbe office which is
expected to be opened in late 1996. The completion of this relocation is not
contingent upon consummation of the Conversion. The estimated cost of such new
office, less the expected proceeds from the sale of the existing Ellerbe
office is expected to be approximately $255,000. In addition, regardless of
whether the Conversion is consummated, Richmond Savings anticipates relocating
its Richmond Plaza branch office in Rockingham, North Carolina (which is now
leased) to another nearby location in Rockingham to be owned by Richmond
Savings. Although the new facility is expected to cost approximately $495,000,
the effect on the Holding Company's financial condition and results of
operations is not expected to be material because lease payments at the existing
location would terminate.
In addition, as set forth above, Richmond Savings is considering opening
other branch offices in its primary market area and in other nearby communities.
Whether such offices will be opened is not contingent upon consummation of the
Conversion, however, if any such offices are opened, proceeds of the Conversion
could be used in acquiring, constructing or equipping them. Except for the
Ellerbe and Richmond Plaza branch relocations described above, the Holding
Company and Richmond Savings have no current plans to open any additional
offices.
If the MRP is approved by the stockholders of the Holding Company, the MRP
will acquire a number of shares of Common Stock equal to 4% of the number of
shares issued in the Conversion. See "MANAGEMENT OF RICHMOND SAVINGS --
Proposed Management Recognition Plan." Such shares may be acquired in the open
market or acquired through the Holding Company's issuance of authorized but
unissued shares. In the event shares are acquired in the open market, the funds
for such purchase may be provided by Richmond Savings from the proceeds of the
Conversion. It is estimated that between 47,600 and 64,400 shares will be
acquired by the MRP, assuming the issuance of between 1,190,000 and 1,610,000
shares, respectively, in the Conversion. If all such shares were acquired by
the MRP in the open market, and if such shares were acquired at a price of
$10.00 per share, Richmond Savings would contribute between $476,000 and
$644,000, respectively, to the MRP for this purpose.
If the Stock Option Plan is approved by the stockholders of the Holding
Company, the Stock Option Plan could acquire a number of shares of Common Stock
in the open market equal to 10% of the number of shares issued in the
Conversion. These shares would be held by the Stock Option Plan for issuance
upon the exercise of stock options. To the extent sufficient shares are not
acquired in the open market to satisfy options granted under the Stock Option
Plan, the Holding Company will reserve authorized but unissued shares for this
purpose. See "MANAGEMENT OF RICHMOND SAVINGS -- Proposed Stock Option Plan."
In the event shares are acquired in the open market, the funds for such purchase
may be provided by the Holding Company or Richmond Savings from the proceeds of
the Conversion. It is estimated that between 119,000 and 161,000 shares will be
acquired by the Stock Option Plan, assuming the issuance of between 1,190,000
and 1,610,000 shares, respectively, in the Conversion. If all such shares were
acquired by the Stock Option Plan in the open market, and if such shares were
acquired at a price of $10.00 per share, the Holding Company or Richmond Savings
would contribute between $1,190,000 and $1,610,000, respectively, to the Stock
Option Plan for this purpose.
The proceeds of the Offerings will result in an increase in Richmond
Savings' net worth and regulatory capital and may enhance the potential for
growth through increased lending and investment activities, branch acquisitions,
business combinations or otherwise. Payments for shares of Common Stock of the
Holding Company made through the withdrawal of existing deposit accounts at
Richmond Savings will not result in the receipt of new funds for investment by
Richmond Savings.
DIVIDEND POLICY
Upon Conversion, the Board of Directors of the Holding Company will have
the authority to declare dividends on the Common Stock, subject to statutory and
regulatory requirements. The Holding Company now expects to pay quarterly cash
dividends on the Common Stock at a rate to be determined. In addition, the
Board of Directors may determine from time to time that it is prudent to pay
special nonrecurring cash dividends. Special cash dividends, if paid, may be in
addition to, or in lieu of, regular cash dividends. The Holding Company's Board
of Directors will periodically review its policy concerning dividends.
Declarations of dividends, if any, by the Board of Directors will depend upon a
number of factors, including investment opportunities available to the Holding
Company and Richmond Savings,
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capital requirements, regulatory limitations, the Holding Company's and Richmond
Savings' results of operations and financial condition, tax considerations and
general economic conditions. Upon review of such considerations, the Board of
Directors of the Holding Company may authorize dividends to be paid in the
future if it deems such payment appropriate and in compliance with applicable
law and regulation. No assurances can be given that any dividends will in fact
be paid on the Common Stock or, if dividends are paid, that they will not be
reduced or discontinued in the future.
In connection with the Conversion, the Holding Company and Richmond Savings
have agreed with the FDIC that, within the first year after completion of the
Conversion, neither the Holding Company nor Richmond Savings will pay any
dividend or make any distribution that represents, or is characterized as, or is
treated for tax purposes as a return of capital.
The sources of income to the Holding Company initially will consist of
earnings on the capital retained by the Holding Company and dividends paid by
Richmond Savings to the Holding Company, if any. Consequently, future
declarations of cash dividends by the Holding Company may depend upon dividend
payments by Richmond Savings to the Holding Company, which payments are subject
to various restrictions. Under current North Carolina regulations, Richmond
Savings could not declare or pay a cash dividend if the effect thereof would be
to reduce its net worth to an amount which is less than the minimum required by
the FDIC and the Administrator. In addition, for a period of five years after
the consummation of the Conversion, Richmond Savings will be required, under
existing regulations, to obtain the prior written approval of the Administrator
before it can declare and pay annual cash dividends on its capital stock in an
amount in excess of one-half of the greater of (i) its net income for the most
recent fiscal year, or (ii) the average of its net income after dividends for
the most recent fiscal year and not more than two of the immediately preceding
fiscal years, if applicable. See "SUPERVISION AND REGULATION -- Regulation of
Richmond Savings --Restrictions on Dividends and Other Capital Distributions."
As a result of this limitation, if Richmond Savings had been a stock institution
at the end of fiscal 1996 and for the two preceding fiscal years, it could not
have paid annual cash dividends in excess of $362,000 without the approval of
the Administrator. As a converted institution, Richmond Savings also will be
subject to the regulatory restriction that it will not be permitted to declare
or pay a dividend on or repurchase any of its capital stock if the effect
thereof would be to cause its regulatory capital to be reduced below the amount
required for the liquidation account established in connection with the
Conversion. See "THE CONVERSION --Effects of Conversion -- Liquidation Rights"
and "-- Liquidation Rights After the Conversion." Also, see "TAXATION --
Federal Income Taxation" for a discussion of federal income tax provisions that
may limit the ability of Richmond Savings to pay dividends to the Holding
Company without incurring a recapture tax.
MARKET FOR COMMON STOCK
The Holding Company, as a newly organized company, has never issued capital
stock, and consequently, there is no established market for the Common Stock at
this time. The Holding Company has received conditional approval to have the
Common Stock listed for quotation on Nasdaq under the symbol "CFNC."
There can be no assurance that the Common Stock will in fact be listed for
quotation on Nasdaq. In order to qualify for listing on Nasdaq, the Holding
Company must have at least 400 stockholders and at least two market makers.
Although management believes that the Holding Company will have at least 400
stockholders, there can be no assurance that it will. The Holding Company will
seek to encourage and assist at least two market makers to make a market in the
Common Stock. The Holding Company expects that Trident Securities will act as a
market maker. A public trading market having the desirable characteristics of
depth, liquidity and orderliness will depend upon the presence in the market
place of both willing buyers and willing sellers at any given time. No
assurance can be given that an active trading market will develop or be
maintained.
CAPITALIZATION
The following table presents the historical capitalization of Richmond
Savings at June 30, 1996 and the pro forma capitalization of the Holding Company
after giving effect to the sale of the Common Stock and application of the
assumptions set forth under "PRO FORMA DATA," assuming that 1,190,000,
1,400,000, 1,610,000 and 1,851,500
25
<PAGE>
shares of Common stock are sold at $10.00 per share (the minimum, midpoint,
maximum and 15% above the maximum of the current Valuation Range). A change in
the number of shares issued in the Conversion may materially affect such pro
forma capitalization. See "USE OF PROCEEDS" and "THE CONVERSION -- Purchase
Price of Common Stock and Number of Shares Offered."
26
<PAGE>
<TABLE>
<CAPTION>
THE HOLDING COMPANY PRO FORMA CAPITALIZATION
BASED UPON SALE OF
-----------------------------------------------------------------------------
1,190,000 1,400,000 1,610,000 1,851,500(1)
HISTORICAL SHARES AT A SHARES AT A SHARES AT A SHARES AT A
CAPITALIZATION PRICE OF PRICE OF PRICE OF PRICE OF
JUNE 30, 1996 $10.00 PER SHARE $10.00 PER SHARE $10.00 PER SHARE $10.00 PER SHARE
--------------------- ----------------- ---------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits (2) $83,715 $ 83,715 $ 83,715 $ 83,715 $ 83,715
======= ========== ========== ========== ==========
Stockholders' equity
Common stock, no par value:
Authorized shares: 20,000,000
Assumed outstanding shares
as shown in column headings (3) -- $ 11,205 $ 13,246 $ 15,286 $ 17,633
Preferred stock:
Authorized shares: 5,000,000
No shares outstanding -- -- -- -- --
Additional paid-in capital -- -- -- -- --
Less: Common stock to be acquired
by the MRP (4) -- (476) (560) (644) (741)
Less: Common stock acquired
by the ESOP (4) -- (952) (1,120) (1,288) (1,481)
Retained earnings (5) 8,641 8,641 8,641 8,641 8,641
------- ---------- ---------- ---------- ----------
Total $ 8,641 $ 18,418 $ 20,207 $ 21,995 $ 24,052
======= ========== ========== ========== ==========
$92,356 $ 102,133 $ 103,922 $ 105,710 $ 107,767
======= ========== ========== ========== ==========
</TABLE>
Total deposits and stockholders' equity
(1) Represents the number of shares of Common Stock that would be issued in the
Conversion after giving effect to a 15% increase in maximum valuation in
the Valuation Range.
(2) Withdrawals from deposit accounts for the purchase of Common Stock are not
reflected. Any such withdrawals would reduce pro forma deposits by the
amount of such withdrawals.
(3) Does not reflect the issuance of any shares of Common Stock reserved for
issuance pursuant to Richmond Savings' stock option plan. See "MANAGEMENT
OF RICHMOND SAVINGS --Proposed Stock Option Plan."
(4) Assumes that 8% of the shares of Common Stock offered hereby will be
purchased by the ESOP in the Conversion. The funds used to acquire the ESOP
shares will be borrowed from the Holding Company. Assumes that, after the
Conversion, a number of shares equal to 4% of the shares of Common Stock
offered hereby will be purchased by the MRP with funds contributed by
Richmond Savings. The Common Stock acquired by both the ESOP and the MRP is
reflected as a reduction of stockholders' equity. See "MANAGEMENT OF
RICHMOND SAVINGS -- Employee Stock Ownership Plan-- Proposed Management
Recognition Plan."
(5) Retained earnings is net of unrealized holding gains or losses on
available-for-sale securities.
27
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $11,205,000 and $17,633,000, (including net
proceeds from shares expected to be purchased by the ESOP with funds borrowed
from the Holding Company), based upon the following assumptions: (i) 19.08%,
17.42%, 16.19%, and 15.12% of the Common Stock sold in the Conversion at the
minimum, midpoint, maximum and 15% above the maximum, respectively, of the
Valuation Range will be sold to the ESOP, directors and executive officers and
their associates as defined in the Plan of Conversion during the Subscription
Offering (and that Trident Securities will not receive certain compensation with
respect to such sales), and none of the shares of Common Stock will be sold in
any Syndicated Community Offering pursuant to selected dealer agreements; (ii)
fees will be payable to Trident Securities with respect to the Subscription and
Community Offerings as described in "THE CONVERSION -- Marketing Arrangements;"
and (iii) Conversion expenses, excluding the fees and commissions to Trident
Securities, will be approximately $383,000. Actual net proceeds may vary
depending upon the number of shares sold to the ESOP and to directors, executive
officers and their associates, the number of shares, if any, sold in the
Syndicated Community Offering pursuant to selected dealer arrangements and the
actual expenses of the Conversion. Payments for shares made through withdrawals
from existing Richmond Savings deposit accounts will not result in the receipt
of new funds for investment by Richmond Savings. However, capital will increase
and interest-bearing liabilities will decrease by the amount of such
withdrawals. See "THE CONVERSION -- Purchase Price of Common Stock and Number of
Shares Offered."
Under the Plan of Conversion, the Common Stock must be sold at an aggregate
price equal to not less than the minimum nor more than the maximum of the
Valuation Range based upon an independent appraisal. The Valuation Range as of
August 8, 1996 is from a minimum of $11,900,000 to a maximum of $16,100,000 with
a midpoint of $14,000,000. However, with the consent of the Administrator and
the FDIC, the aggregate price of the Common Stock sold may be increased to up to
15% above the maximum of the Valuation Range, or to $18,515,000, without a
resolicitation and without any right to cancel, rescind or change subscription
orders, to reflect changes in market and financial conditions following
commencement of the Subscription Offering. See "THE CONVERSION -- Purchase
Price of Common Stock and Number of Shares Offered."
Pro forma consolidated net earnings and book value of the Holding Company
at or for the year ended June 30, 1996 have been based upon the following
assumptions: (i) the sale of shares of Common Stock in connection with the
Conversion occurred at July 1, 1995 and yielded net proceeds available for
investment of $11,205,000, $13,246,000, $15,286,000 and $17,633,000 (based upon
the issuance of 1,190,000, 1,400,000, 1,610,000 and 1,851,500 shares,
respectively, at $10.00 per share) on such date; and (ii) such net proceeds were
invested on a consolidated basis at the beginning of the period at a yield of
5.82%, which represents the average one-year treasury constant maturity rate for
the last week of June, 1996. The Holding Company did not use the arithmetic
average of Richmond Savings' weighted-average yield on interest-earning assets
and weighted-average interest rate paid on deposits during the year ended June
30, 1996. Management believes that the one-year Treasury rate is a more
appropriate rate for purposes of preparing the pro forma data because proceeds
from the Conversion are expected to be initially invested in instruments with
similar yields and maturities. The effect of withdrawals from deposit accounts
for the purchase of Common Stock has not been reflected. Such withdrawals have
no effect on pro forma stockholders' equity, and management does not believe
that such withdrawals will have a material impact on pro forma net earnings or
pro forma net earnings per share. In calculating pro forma net earnings, an
effective tax rate of 39% has been assumed, resulting in a yield after taxes of
3.55%. Historical and pro forma per share amounts have been calculated by
dividing Richmond Savings' historical amounts and the Holding Company's pro
forma amounts by the indicated number of shares of Common Stock, assuming that
such number of shares had been outstanding during the entire period.
The following pro forma information is not intended to represent the market
value of the Common Stock, the value of net assets and liabilities or of future
results of operations. The assumption regarding investment yields should not be
considered indicative of actual yields for future periods. The following
information is not intended to be used as a basis for projection of results of
operations for future periods.
28
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
--------------------------------------------------------------------------
1,190,000 1,400,000 1,610,000 1,851,500
shares at $10.00 shares at $10.00 shares at $10.00 shares at $10.00
per share per share per share per share
(Minimum) (Midpoint) (Maximum) (15% above Max.)
---------------- ---------------- ---------------- ----------------
(In Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 11,900 $ 14,000 $ 16,100 $ 18,515
Less Offering expenses and commissions (695) (754) (814) (882)
----------- ----------- ----------- -----------
Estimated net conversion proceeds (1) 11,205 13,246 15,286 17,633
Less shares acquired by ESOP (2) (952) (1,120) (1,288) (1,481)
Less shares to be acquired by MRP (3) (476) (560) (644) (741)
----------- ----------- ----------- -----------
Estimated net conversion proceeds $ 9,777 $ 11,566 $ 13,354 $ 15,411
=========== =========== =========== ===========
Pro forma net income:
Historical net income $ 591 $ 591 $ 591 $ 591
Pro Forma adjustments:
Pro forma income on net proceeds (1) 348 410 475 547
Pro forma ESOP adjustments (2) (58) (68) (79) (91)
Pro forma MRP adjustments (3) (58) (68) (79) (91)
----------- ----------- ----------- -----------
Pro forma net income $ 823 $ 865 $ 908 $ 956
=========== =========== =========== ===========
Pro forma net income per share (5):
Historical net income per share $ 0.54 $ 0.45 $ 0.40 $ 0.34
Pro forma adjustments:
Pro forma income on net proceeds 0.31 0.32 0.31 0.32
Pro forma ESOP adjustments (2) (0.05) (0.05) (0.05) (0.05)
Pro forma MRP adjustments (3) (0.05) (0.05) (0.05) (0.05)
----------- ----------- ----------- -----------
Pro forma net income per share $ 0.75 $ 0.67 $ 0.61 $ 0.56
=========== =========== =========== ===========
Ratio of price per share to pro forma income per 13.42 15.02 16.46 17.96
share (5) =========== =========== =========== ===========
Pro forma stockholders' equity (book value) (4):
Historical retained earnings $ 8,641 $ 8,641 $ 8,641 $ 8,641
Estimated net conversion proceeds 11,205 13,246 15,286 17,633
Less shares to be acquired by:
ESOP (2) (952) (1,120) (1,288) (1,481)
MRP (3) (476) (560) (644) (741)
----------- ----------- ----------- -----------
Pro forma stockholders' equity (4) $ 18,418 $ 20,207 $ 21,995 $ 24,052
=========== =========== =========== ===========
Pro forma stockholders' equity per share (4)
Historical retained earnings $ 7.26 $ 6.17 $ 5.37 $ 4.67
Estimated net conversion proceeds 9.42 9.46 9.49 9.52
Less shares to be acquired by:
ESOP (2) (0.80) (0.80) (0.80) (0.80)
MRP (3) (0.40) (0.40) (0.40) (0.40)
----------- ----------- ----------- -----------
Pro forma stockholders' equity per share (4) $ 15.48 $ 14.43 $ 13.66 $ 12.99
=========== =========== =========== ===========
Pro forma price to book value 64.61% 69.20% 73.20% 76.98%
=========== =========== =========== ===========
Number of shares used to calculate income per 1,104,320 1,299,200 1,494,080 1,718,192
share (5) =========== =========== =========== ===========
Number of shares used to calculate stockholders'
equity per share(4) 1,190,000 1,400,000 1,610,000 1,851,500
=========== =========== =========== ===========
</TABLE>
29
<PAGE>
(1) Subject to approval by the Holding Company's stockholders at a meeting to
be held no sooner than six months after the Conversion, 10% of the shares
issued in the Conversion may be reserved for issuance to directors,
officers, and employees under the Stock Option Plan. In lieu of reserving
shares for issuance, the Stock Option Plan may purchase shares to be
delivered upon the exercise of options in the open market. Because
management cannot reasonably estimate the number of options which might be
exercised or the option exercise price or whether the shares will be
purchased in the open market, no provision for the Stock Option Plan has
been made in the preceding pro forma calculations. At 15% above the maximum
of the Valuation Range, it is expected that options to acquire 185,150
shares of the Common Stock could be granted under the Stock Option Plan. If
all shares under the Stock Option Plan were newly issued, the exercise
price was $10.00 for the shares issued pursuant to the options, and all of
the options were exercised, the number of outstanding shares of Common
Stock would increase from 1,851,500 to 2,036,650 and the pro forma earnings
per share of the outstanding Common Stock for the year ended June 30, 1996
(based on shares released for the period pursuant to SOP 93-6) would have
been $.54 compared with $.56 if the Stock Option Plan did not exist. See
"MANAGEMENT OF RICHMOND SAVINGS -- Proposed Stock Option Plan."
(2) It is assumed that 8% of the shares of Common Stock in the Conversion will
be purchased by the ESOP. Pro forma ESOP adjustments assume that 10% of
the shares will be committed to be released each year, and that expense is
reduced by a 39% tax rate. See "MANAGEMENT OF RICHMOND SAVINGS -- Employee
Stock Ownership Plan."
(3) It is assumed that the MRP will purchase a number of shares equal to 4% of
the shares of Common Stock issued in the Conversion for issuance to
directors, officers and employees, subject to approval by the Holding
Company's stockholders at a meeting to be held no sooner than six months
after Conversion. Pro forma MRP adjustments assume that expense will be
amortized over five years, and that expense is reduced by a 39% tax rate.
See "MANAGEMENT OF RICHMOND SAVINGS -- Proposed Management Recognition
Plan."
(4) The retained earnings of Richmond Savings will be substantially restricted
after the Conversion. See "DIVIDEND POLICY," "SUPERVISION AND REGULATION -
- Regulation of Richmond Savings --Restrictions on Dividends and Other
Capital Distributions." Pursuant to SOP 93-6, stockholders' equity per
share is calculated based on all ESOP shares issuable.
(5) Earnings per share is calculated based on the number of shares outstanding
indicated in the previous tables which include shares to be acquired by the
ESOP and the MRP. Pursuant to SOP 93-6, earnings per share is calculated
based on the ESOP shares released for the period according to scheduled
contributions.
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
Richmond Savings is subject to the North Carolina savings bank requirement
that net worth, computed in accordance with the requirements of the
Administrator, equal or exceed 5% of total assets. As of June 30, 1996,
Richmond Savings' net worth, computed in accordance with such requirements, was
9.69% of total assets. In addition, Richmond Savings is subject to the capital
requirements of the FDIC. The FDIC requires that institutions which receive the
highest rating during their examination process and are not experiencing or
anticipating significant growth must maintain a leverage ratio of Tier I capital
to total assets (as defined in FDIC regulations) of at least 3%. All other
institutions are required to maintain a ratio of 1% or 2% above the 3% minimum
with an absolute minimum leverage ratio of not less than 4%. The FDIC also
imposes requirements that (i) the ratio of Tier I capital to risk-weighted
assets equal at least 4% and (ii) the ratio of total capital to risk-weighted
assets equal at least 8%. As demonstrated in the table below, Richmond Savings
exceeds the FDIC Tier I and risk-based capital requirements and North Carolina
capital requirements on a historical and pro forma basis.
The following table presents (i) Richmond Savings' historical regulatory
capital position on June 30, 1996 and (ii) Richmond Savings' pro forma
regulatory capital position on such date after giving effect to the assumptions
set forth under "PRO FORMA DATA" and "CAPITALIZATION" and further assuming that
the Holding Company will retain 50% of the net proceeds of the Common Stock sold
in the Conversion after deducting the amount necessary to fund the loan to the
ESOP.
30
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA REGULATORY CAPITAL POSITION AT JUNE 30, 1996
---------------------------------------------------------------------
RICHMOND SAVINGS'
HISTORICAL
REGULATORY CAPITAL 1,190,000 1,400,000
POSITION AT SHARES SOLD AT SHARES SOLD AT
JUNE 30, 1996 PRICE OF $10.00 PRICE OF $10.00
---------------------- PER SHARE PER SHARE
------------------------------- -----------------------------
PERCENT OF PERCENT OF PERCENT OF
REGULATORY REGULATORY REGULATORY
AMOUNT ASSETS (1) AMOUNT ASSETS (1) AMOUNT ASSETS (1)
------ ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 (leverage) capital $8,732 9.28% $13,383 13.55% $14,235 14.29%
Tier 1 (leverage) capital
requirement (2) 3,764 4.00% 3,950 4.00% 3,984 4.00%
------ ------ ------- ---------- ------- ------
Excess $4,968 5.28% $ 9,433 9.55% $10,251 10.29%
====== ====== ======= ========== ======= ======
Tier 1 risk based capital $8,732 17.62% $13,383 26.43% $14,235 28.02%
Tier 1 risk based capital
requirement 1,982 4.00% 2,026 4.00% 2,032 4.00%
------ ------ ------- ---------- ------- ------
Excess $6,750 13.62% $11,357 22.43% $12,203 24.02%
====== ====== ======= ========== ======= ======
Total risk based capital $9,121 18.41% $13,772 27.19% $14,624 28.78%
Total risk based capital
requirement 3,964 8.00% 4,051 8.00% 4,065 8.00%
------ ------ ------- ---------- ------- ------
Excess $5,157 10.41% $ 9,721 19.19% $10,559 20.78%
====== ====== ======= ========== ======= ======
NC regulatory capital $9,121 9.69% $13,772 13.78% $14,624 14.51%
NC regulatory capital
requirement 4,706 5.00% 4,939 5.00% 4,981 5.00%
------ ------ ------- ---------- ------- ------
Excess $4,415 4.69% $ 8,833 8.78% $ 9,643 9.51%
====== ====== ======= ========== ======= ======
<CAPTION>
PRO FORMA REGULATORY CAPITAL POSITION AT JUNE 30, 1996
-----------------------------------------------------------------
1,610,000 1,851,500
SHARES SOLD AT SHARES SOLD AT
PRICE OF $10.00 PRICE OF $10.00
PER SHARE PER SHARE
-------------------------- ----------------------------
PERCENT OF PERCENT OF
REGULATORY REGULATORY
AMOUNT ASSETS (1) AMOUNT ASSETS (1)
------ ---------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Tier 1 (leverage) capital $15,087 15.02% $16,067 15.84%
Tier 1 (leverage) capital
requirement (2) 4,018 4.00% 4,057 4.00%
------- ------ ------- ----------
Excess $11,069 11.02% $12,010 11.84%
======= ====== ======= ==========
Tier 1 risk based capital $15,087 29.59% $16,067 31.39%
Tier 1 risk based capital
requirement 2,039 4.00% 2,047 4.00%
------- ------ ------- ----------
Excess $13,048 25.59% $14,020 27.39%
======= ====== ======= ==========
Total risk based capital $15,476 30.36% $16,456 32.16%
Total risk based capital
requirement 4,078 8.00% 4,094 8.00%
------- ------ ------- ----------
Excess $11,398 22.36% $12,362 24.16%
======= ====== ======= ==========
NC regulatory capital $15,476 15.23% $16,456 16.04%
NC regulatory capital
requirement 5,024 5.00% 5,073 5.00%
------- ------ ------- ----------
Excess $10,452 10.23% $11,383 11.04%
======= ====== ======= ==========
</TABLE>
________________________________
(1) For the Tier 1 (leverage) capital and North Carolina regulatory capital
calculations, percent of total average assets. For the Tier 1 risk-based
capital and total risk-based capital calculations, percent of total risk-
weighted assets. Net proceeds (after ESOP and MRP) were assumed to be
invested in short-term treasury securities (0% risk-weight) and one-to-four
family residential mortgage loans (50% risk-weight) with a weighted average
risk-weight of 20%.
(2) As a North Carolina-chartered savings bank, Richmond Savings is subject to
the capital requirements of the FDIC and the Administrator. The FDIC
requires state-chartered savings banks, including Richmond Savings, to have
a minimum leverage ratio of Tier 1 capital to total assets of at least 3%;
provided, however, that all institutions, other than those (i) receiving
the highest rating during the examination process and (ii) not anticipating
any significant growth, are required to maintain a ratio of 1% to 2% above
the stated minimum, with an absolute minimum leverage ratio of at least 4%.
For the purposes of this table, Richmond Savings has assumed that its
leverage capital requirement is 4% of total average assets.
31
<PAGE>
ANTICIPATED STOCK PURCHASES BY MANAGEMENT
Directors, officers and employees of Richmond Savings will be entitled to
subscribe for shares of Common Stock in the Subscription Offering in their
capacities as such and to the extent they qualify as Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members. Shares purchased by
such persons will be purchased at the same price per share--$10.00--that will be
paid by other purchasers in the Offerings. They may also purchase Common Stock
in the Community Offering or in the Syndicated Community Offering, if any,
subject to the maximum purchase limitations applicable to all purchasers of
shares in the Conversion.
The following table sets forth for each of the executive officers and
directors of Richmond Savings who intends to purchase Common Stock, and for all
executive officers and directors as a group (including in each case all
"associates" of such persons) the aggregate dollar amount of Common Stock for
which such director or executive officer has informed Richmond Savings he
intends to subscribe. The amounts reflected in the table are estimates only and
the actual shares of Common Stock actually subscribed for by the listed
individuals may differ from the amounts reflected in the table. The following
table assumes that 1,400,000 shares of Common Stock will be issued and that
sufficient shares will be available to satisfy the subscriptions of Richmond
Savings' executive officers and directors.
<TABLE>
<CAPTION>
ANTICIPATED
ANTICIPATED NUMBER
AMOUNT OF SHARES AS A PERCENT
TO BE PAID TO BE OF SHARES
FOR SHARES (1) PURCHASED OFFERED
NAME -------------- ----------- -------------
- ----
<S> <C> <C> <C>
Russell E. Bennett, Jr. $ 200,000 20,000 1.43%
John W. Bullard 125,000 12,500 0.89
R. Larry Campbell 150,000 15,000 1.07
Buena Vista Coggin 150,000 15,000 1.07
Joe M. McLaurin 100,000 10,000 0.71
John T. Page, Jr. 100,000 10,000 0.71
W. Jesse Spencer 100,000 10,000 0.71
J. Stanley Vetter 250,000 25,000 1.79
E. E. Vuncannon, Jr. 124,000 12,400 0.89
---------- ------- ----------
Total $1,299,000 129,900 9.28%/(2)/
========== ======= ==========
</TABLE>
______________________
(1) Subscriptions by the ESOP are not aggregated with shares of Common Stock
purchased by the executive officers and directors listed above. See
"MANAGEMENT OF RICHMOND SAVINGS -- Employee Stock Ownership Plan." Also,
grants under the proposed MRP and shares subject to option under the Stock
Option Plan, if approved by the stockholders of the Holding Company at a
meeting of stockholders following the Conversion, are not aggregated with
shares of Common Stock purchased by the executive officers and directors
listed above. See "MANAGEMENT OF RICHMOND SAVINGS -- Proposed Management
Recognition Plan" and "-- Proposed Stock Option Plan."
(2) If (i) the MRP and Stock Option Plan are approved by the Holding Company's
stockholders within one year after the Conversion, (ii) all restricted
shares to be issued to directors and executive officers under the MRP are
acquired in the open market and issued, (iii) all options which could be
issued to directors and executive officers under the Stock Option Plan are
issued and all shares necessary to fund such options are acquired in the
open market and held by the Stock Option Plan or by directors and executive
officers, and (iv) the ESOP acquires 8% of the shares issued in the
32
<PAGE>
Conversion and none of such shares are allocated, then directors and
executive officers would own or control the voting of up to 369,300 shares
or 26.38% of the 1,400,000 shares outstanding. See "MANAGEMENT OF RICHMOND
SAVINGS -- Employee Stock Ownership Plan," "--Proposed Management
Recognition Plan" and "-- Proposed Stock Option Plan."
Without the prior written consent of the Administrator, shares of Common
Stock purchased by directors or executive officers of Richmond Savings in the
Conversion cannot be sold during a period of one year following the Conversion,
except upon death of the director or executive officer. Such restriction also
applies to any shares issued to such person as a stock dividend, stock split or
otherwise with respect to any of such originally restricted stock.
In addition, the North Carolina conversion regulations provide that
directors and executive officers and their associates are prohibited from
purchasing outstanding shares of Common Stock for a period of three years
following the Conversion, except from or through a broker or dealer registered
with the SEC or Secretary of State of North Carolina, unless the prior written
approval of the Administrator is obtained. This provision does not apply to
negotiated transactions involving more than 1% of the Holding Company's
outstanding Common Stock or to purchases of stock made by or held by one or more
tax-qualified or non-tax-qualified employee stock benefit plans of Richmond
Savings or the Holding Company which may be attributable to individual executive
officers or directors. Purchases and sales of Common Stock by officers and
directors will also be subject to the short-swing trading prohibitions contained
in Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"),
and the short-swing trading and other rules promulgated pursuant to the Exchange
Act.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management's discussion and analysis of financial condition and results of
operations are intended to assist in understanding the financial condition and
results of operations of Richmond Savings. The information contained in this
section should be read in conjunction with the Consolidated Financial
Statements, the accompanying Notes to Consolidated Financial Statements and the
other sections contained in this Prospectus.
The Holding Company was incorporated under North Carolina law in June, 1996
at the direction of Richmond Savings for the purpose of acquiring and holding
all of the outstanding stock of Richmond Savings to be issued in the Conversion.
The Holding Company's principal business activities after the Conversion are
expected to be conducted through Richmond Savings.
Richmond Savings' results of operations depend primarily on net interest
income, which is the difference between interest income from interest-earning
assets and interest expense on interest-bearing liabilities. Richmond Savings'
operations are also affected by non-interest income, such as transaction and
other service fee income, miscellaneous income from loans, commissions from the
sale of certain insurance products, and other sources of income. Richmond
Savings' principal operating expenses, aside from interest expense, consist of
personnel costs, federal deposit and other insurance premiums, office occupancy
costs, data processing expenses, equipment expenses and other general and
administrative expenses.
CAPITAL RESOURCES AND LIQUIDITY
The objective of Richmond Savings' liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses
Richmond Savings' ability to meet deposit withdrawals on demand or at
contractual maturity, to repay borrowings as they mature, and to fund new loans
and investments as opportunities arise.
Richmond Savings' primary sources of internally generated funds are
principal and interest payments on loans receivable, cash flows generated from
operations and cash flows generated by investments, including mortgage-backed
securities. External sources of funds include increases in deposits, advances
from the FHLB of Atlanta, and sales of loans and investments. At June 30, 1996,
73.78% of Richmond Savings' certificate of deposit accounts were scheduled to
mature
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<PAGE>
within one year. Management expects that the majority of these deposits
will be renewed. Although it has not found it necessary to do so in several
years, Richmond Savings may obtain advances from the FHLB of Atlanta to
supplement its liquidity needs. The FHLB system functions in a reserve credit
capacity for savings institutions. As a member, Richmond Savings is required to
own capital stock in the FHLB of Atlanta and is authorized to apply for advances
from the FHLB of Atlanta on the security of that stock and a floating lien on
certain of its real estate secured loans and other assets. At June 30, 1996,
Richmond Savings had no outstanding borrowings.
North Carolina-chartered savings banks must maintain liquid assets equal to
at least 10% of total assets. The computation of liquidity under North Carolina
regulation allows the inclusion of mortgage-backed securities and investments
with readily marketable value, including investments with maturities in excess
of five years. As of June 30, 1996, Richmond Savings liquid assets for purposes
of this requirement equalled 23.6% of total assets. At June 30, 1996, Richmond
Savings had $6.84 million of interest-earning deposit balances in other banks
and investments scheduled to mature within one year. At June 30, 1996, Richmond
Savings had $5.1 million, $881,000 and $565,000 in outstanding commitments for
home equity loans, undisbursed construction loans and outstanding commitments
for mortgage loans, respectively. Richmond Savings believes that it will have
sufficient funds available to meet its anticipated future loan commitments as
well as other liquidity needs.
Following the Conversion, the Holding Company will initially conduct no
business other than holding the capital stock of Richmond Savings and the loan
it will make to the ESOP. The Holding Company expects to retain and invest
approximately 50 percent of the net proceeds of the Conversion at the Holding
Company level in order to provide sufficient funds for its operations. In the
future, the Holding Company's primary source of funds, other than income from
its investments and principal and interest payments received from the ESOP with
respect to the ESOP loan, is expected to be dividends from Richmond Savings. As
a North Carolina-chartered stock savings bank, Richmond Savings may not declare
or pay a cash dividend on or repurchase any of its capital stock if the effect
of such transaction would be to reduce the net worth of the institution to an
amount which is less than the minimum amount required by applicable federal and
state regulations. At June 30, 1996, Richmond Savings was in compliance with
all applicable capital requirements. In addition, for a period of five years
after the Conversion, Richmond Savings must obtain written approval from the
Administrator before declaring or paying a cash dividend on its capital stock in
an amount in excess of one-half of the greater of (i) its net income for the
most recent fiscal year end, or (ii) the average of its net income after
dividends for the most recent fiscal year end and not more than two of the
immediately preceding fiscal year ends. As a result of this limitation, if
Richmond Savings had been a stock institution at the end of fiscal 1996 and for
the two preceding fiscal years, it could not have paid a cash dividend in excess
of $362,000 without approval of the Administrator. In addition, after the
Conversion, Richmond Savings will be subject to the restriction that it will not
be permitted to declare or pay a cash dividend on or repurchase any of its
capital stock if the effect thereof would be to cause its net worth to be
reduced below the amount required for the liquidation account to be established
in connection with the Conversion. See "THE CONVERSION -- Effects of Conversion
- -- Liquidation Rights -- Liquidation Rights After the Conversion."
OPERATING STRATEGY
The primary goals of management are to increase Richmond Savings'
profitability, monitor its capital position and build a community banking
franchise. Richmond Savings' results of operations are dependent primarily on
net interest income, which is the difference between the income earned on its
interest-earning assets, such as loans and investments, and the cost of its
interest-bearing liabilities, consisting of deposits. Richmond Savings'
operations are also affected by non-interest income, such as late charges on
Richmond Savings' net income is also affected by, among other things, provisions
for loan losses and operating expenses. Richmond Savings' principal operating
deposit and other insurance premiums, data processing expenses, equipment
expenses, office occupancy costs, and other general and administrative expenses.
Richmond Savings' results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in market
interest rates and government legislation and policies concerning monetary and
fiscal affairs, housing and financial institutions.
In guiding the operations of Richmond Savings, management has implemented
various strategies designed to continue Richmond Savings' profitability while
maintaining the safety and soundness of the institution. These strategies
include: (i)
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<PAGE>
emphasizing one-to-four family residential lending; (ii) maintaining asset
quality; and (iii) monitoring interest-rate risk. It is anticipated, subject to
market conditions, that the strategies presently in place will be continued
following completion of the Conversion.
EMPHASIS ON ONE-TO-FOUR FAMILY RESIDENTIAL HOUSING. Historically, Richmond
Savings has been predominantly a one-to-four family residential lender.
As of June 30, 1996, approximately 81.0% of its loan portfolio, before net
amounts, was composed of permanent one-to-four family residential loans. As of
such date, an additional 11.4% of its loan portfolio, before net amounts, was
composed of construction loans and home equity loans. As a result, Richmond
Savings has developed expertise in mortgage loan underwriting and origination.
Richmond Savings has established methods to expand its loan originations through
contacts with realtors, homebuilders and past and present customers. Richmond
Savings also uses advertising and community involvement to gain exposure within
the communities in which it operates. Richmond Savings emphasizes the
origination and purchase of adjustable rate loans when market conditions permit.
As of June 30, 1996, approximately 65.4% of Richmond Savings' net loan
portfolio, before net items, was composed of adjustable rate loans.
MAINTENANCE OF ASSET QUALITY. Due to the types of loans made by Richmond
Savings and the implementation of its underwriting policies and collection
procedures by its employees, at June 30, 1996, Richmond Savings' ratio of
nonperforming assets to total assets was 0.06%. Since June 30, 1991, average
nonperforming assets have not exceeded 0.41% of average total assets during any
fiscal year period.
MONITORING OF INTEREST-RATE RISK. Richmond Savings has a "negative gap" and
during recent years its net interest income has been, and in the future will
likely continue to be, negatively impacted by increases in interest rates.
However, management considers Richmond Savings' interest rate exposure to be at
an acceptable level, given Richmond Savings' historical operating results and
capital position. In order to reduce the impact on Richmond Savings' net
interest income resulting from changes in interest rates, Richmond Savings'
management has implemented several strategies. These include (i) emphasizing the
origination of adjustable rate mortgage loans when market conditions permit;
(ii) emphasizing the origination of adjustable rate home equity line of credit
loans; (iii) soliciting demand, checking and transaction accounts which are
considered to be less interest-rate sensitive deposits; (iv) attempting to
increase nonmortgage loans with shorter maturities; and (v) selling fixed rate
mortgage loans.
ASSET/LIABILITY MANAGEMENT
Richmond Savings' asset/liability management, or interest rate risk
management, program is designed to maximize net interest income while managing
levels of liquidity, interest rate risk, and capital adequacy. Richmond Savings'
management meets at least quarterly to review and discuss interest rate risk
management reports (produced by the FHLB of Atlanta based on information
provided by Richmond Savings) which include an interest rate gap analysis and
the projected change in net portfolio value and net interest income given
certain changes in interest rates. Based upon its modeling at June 30, 1996,
management believes that its interest rate risk is at an acceptable level. In
order to maximize net interest income in the long-term, management believes
continued emphasis on originating adjustable rate mortgages and home equity
loans in Richmond Savings' market area is desirable, along with increasing lower
cost deposit accounts. Management will also continue to consider selling current
fixed rate mortgage loans as a tool in both liquidity and asset/liability
management.
INTEREST RATE GAP ANALYSIS. As part of its quarterly interest rate risk
management reports, Richmond Savings receives an interest rate "gap" analysis
based on information provided regarding the repricing of assets and liabilities.
Interest rate gap analysis is a common indicator of interest rate risk, which
measures the relative dollar amounts of interest-earnings assets and interest-
bearing liabilities which reprice within a specific time period, either through
maturity or rate adjustment. Gap is the difference between the amount of such
assets and liabilities that are subject to repricing. A negative gap for a given
period means that the amount of interest-bearing liabilities maturing or
otherwise repricing within that period exceeds the amount of interest-earning
assets maturing or otherwise repricing within the same period. Accordingly, in a
rising interest-rate environment, an institution with a negative gap would
generally be expected, absent the effects of other factors, to experience a
larger increase in the cost of its liabilities relative to the yield on its
assets, thus its net interest income should be negatively affected. Conversely,
in a declining rate environment, the cost of funds for an institution with a
negative gap would generally be expected to decline more quickly than the yield
on its assets, thus positively affecting the institution's net interest income.
Changes in interest rates generally have the opposite effect on an institution
with a positive gap.
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<PAGE>
Richmond Savings' one year interest sensitivity gap as a percentage of
total interest-earning assets on June 30, 1996 was negative 15.14%. Therefore,
interest rate increases would be expected to negatively impact Richmond Savings'
earnings--at least in the short term. On June 30, 1996, Richmond Savings' three
year cumulative interest rate sensitivity gap as a percentage of total interest-
earning assets was negative 2.75% and its five year cumulative interest rate
sensitivity gap as a percentage of total interest-earning assets was positive
0.46%.
The following table sets forth the amount of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1996 which are projected to
reprice or mature in each of the future time periods shown. The table was
prepared using the assumptions regarding loan prepayment rates, loan repricing
and deposit decay rates which are used by the FHLB in making its gap
computations. These assumptions should not be regarded as indicative of the
actual prepayments and withdrawals that may be experienced by Richmond Savings.
However, management believes that these assumptions approximate actual
experience and considers them appropriate and reasonable.
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<PAGE>
<TABLE>
<CAPTION>
Terms to Repricing at June 30, 1996
---------------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
--------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
INTEREST-EARNING ASSETS:
Loans receivable:
Adjustable rate residential 1-4 family $ 21,583 $16,876 $ -- $ -- $38,459
Fixed rate residential 1-4 family 2,615 4,372 3,694 6,246 16,927
Multi-family residential and commercial 459 1,054 124 326 1,963
Construction 1,420 -- -- -- 1,420
Home equity credit lines 5,465 -- -- -- 5,465
Other loans 1,872 1,865 776 -- 4,513
Interest-bearing deposits 4,686 -- -- -- 4,686
Investments 2,156 4,955 3,130 6,121 16,362
FHLB common stock -- -- -- 735 735
-------- ------- ------ ------- -------
Total interest-earning assets $ 40,256 $29,122 $7,724 $13,428 $90,530
======== ======= ====== ======= =======
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement accounts $ 1,852 $ 2,813 $1,834 $ 4,869 $11,368
NOW and VIP checking accounts 3,245 2,970 795 1,773 8,783
Non-interest-bearing accounts 725 661 177 391 1,954
Certificate accounts 48,137 11,467 2,006 -- 61,610
-------- ------- ------ ------- -------
Total interest-bearing liabilities $ 53,959 $17,911 $4,812 $ 7,033 $83,715
======== ======= ====== ======= =======
INTEREST SENSITIVITY GAP PER PERIOD $(13,703) $11,211 $2,912 $ 6,395 $ 6,815
CUMULATIVE INTEREST SENSITIVITY GAP $(13,703) $(2,492) $ 420 $ 6,815 $ 6,815
CUMULATIVE GAP AS A PERCENTAGE OF TOTAL
INTEREST-EARNING ASSETS (15.14)% (2.75%) 0.46% 7.53% 7.53%
CUMULATIVE INTEREST-EARNING ASSETS AS A
PERCENTAGE OF INTEREST-BEARING LIABILITIES 48.09% 82.87% 92.10% 108.14% 108.14%
</TABLE>
NET PORTFOLIO VALUE AND NET INTEREST INCOME ANALYSIS. In addition to the
interest rate gap analysis discussed above, management monitors Richmond
Savings' interest rate sensitivity through the use of a model which estimates
the change in net portfolio value ("NPV") and net interest income in response to
a range of assumed changes in market interest rates. NPV is the present value
of expected cash flows from assets, liabilities, and off-balance sheet items.
The model estimates the effect on Richmond Savings' NPV and net interest income
of instantaneous and permanent 100 to 400 basis point increases and decreases in
market interest rates. Richmond Savings' Board of Directors has established
maximum acceptable decreases in NPV and net interest income for the various rate
scenarios.
The following table presents information regarding possible changes in
Richmond Savings' NPV as of June 30, 1996, based on information provided by the
FHLB of Atlanta's interest rate risk model.
37
<PAGE>
<TABLE>
<CAPTION>
NET PORTFOLIO VALUE
CHANGE IN -----------------------------------
INTEREST RATES
IN BASIS POINTS BOARD
(RATE SHOCK) AMOUNT $CHANGE %CHANGE LIMIT
- --------------- ------- -------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Up 400 $ 5,882 $(5,404) (48)% (50)%
Up 300 7,353 (3,933) (35) (45)
Up 200 8,824 (2,462) (22) (35)
Up 100 10,055 (1,231) (11) (20)
Static 11,286 -- -- --
Down 100 12,234 948 8 15
Down 200 13,182 1,896 17 25
Down 300 14,189 2,903 26 35
Down 400 15,195 3,909 35 50
</TABLE>
The following table presents the predicted effects, based on the FHLB of
Atlanta's interest rate risk model, on Richmond Savings' net interest income as
of June 30, 1996 of instantaneous and permanent 100 to 400 basis point changes
in market interest rates.
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<PAGE>
<TABLE>
<CAPTION>
CHANGE IN NET INTEREST INCOME
INTEREST RATES ----------------------------------
IN BASIS POINTS BOARD
(RATE SHOCK) AMOUNT $CHANGE %CHANGE LIMIT
------ -------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Up 400 $2,190 $(557) (20)% (50)%
Up 300 2,340 (407) (15) (35)
Up 200 2,491 (256) (9) (25)
Up 100 2,619 (128) (5) (15)
Static 2,747 -- -- --
Down 100 2,854 107 4 15
Down 200 2,961 214 8 25
Down 300 3,044 297 11 35
Down 400 3,126 379 14 50
</TABLE>
Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit decay, and should not be relied upon as
indicative of actual results. Further, the computations do not reflect any
actions management may undertake in response to changes in interest rates.
Management has structured its assets and liabilities in an attempt to limit
its exposure to interest rate risk. In the event of a 200 basis point decrease
in interest rates, Richmond Savings would be expected to experience a 17%
increase in NPV and a 8% increase in net interest income. In the event of a 200
basis point increase in interest rates, Richmond Savings would be expected to
experience a 22% decrease in NPV and a 9% decrease in net interest income.
Certain shortcomings are inherent in the method of analysis presented in
both the NPV and net interest income computations and in the gap computations
presented in the tables above. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, adjustable-rate mortgages have features which
restrict changes in interest rates on a short-term basis and over the life of
the assets. The proportion of adjustable-rate loans could be reduced in future
periods if market interest rates should decline and remain at lower levels for a
sustained period due to increased refinancing activity. Further, in the event of
a change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in the tables. Finally, the ability of
many borrowers to service their adjustable-rate debt may decrease in the event
of a sustained interest rate increase.
As the tables set forth above indicate, Richmond Savings' earnings are
expected to be negatively impacted by rising interest rates. Richmond Savings'
earnings during recent years have been negatively impacted during periods of
rising interest rates. Nevertheless, Richmond Savings' management believes that
Richmond Savings present asset/liability matching is appropriate given Richmond
Savings historical operating results and capital position.
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<PAGE>
NET INTEREST INCOME
Net interest income represents the difference between income derived from
interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is affected by both (i) the difference between
the rates of interest earned on interest-earning assets and the rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities ("net
earning balance").
The following table sets forth information relating to the balances of
Richmond Savings' assets and liabilities at June 30, 1996 and to the average
balances of Richmond Savings' assets and liabilities for the years ended June
30, 1996, 1995, and 1994. For the periods indicated, the table reflects the
average yield on interest-earning assets and the average cost of interest-
bearing liabilities (derived by dividing income or expense by the monthly
average balance of interest-earning assets or interest-bearing liabilities,
respectively) as well as the net yield on interest-earning assets (which
reflects the impact of the net earning balance). For the purpose of preparing
this table, nonaccrual loans have been included in the balances for loans.
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<PAGE>
<TABLE>
<CAPTION>
At June 30,1996 Year Ended June 30, 1996
-------------------- ---------------------------
Average Average Average
Balance Yield/Cost Balance Interest Rate
------- ----------- -------- -------- --------
(DOLLARS iN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-bearing balances $ 4,686 5.35% $ 3,876 $ 245 6.32%
Investments 17,097 6.68 % 16,366 995 6.08%
Loans 68,358 8.08% 68,332 5,596 8.19%
------- ----- ------- ------ ----
Total interest-earning
assets 90,141 7.67% 88,574 6,836 7.72%
Other assets 3,969 3,844
------- -------
Total assets $94,110 $92,418
======= =======
Interest-bearing
liabilities:
Deposits $83,715 4.69% $79,867 3,949 4.95%
Other liabilities 1,754 ----- 4,124 ------ ----
Retained earnings 8,641 8,427
------- -------
Total liabilities and
retained earnings $94,110 $92,418
======= =======
Net interest income and
interest rate spread 2.98% $2,887 2.77%
===== ====== ====
Net yield on average
interest-earning assets 3.32% 3.26%
===== ====
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30, 1995 Year Ended June 30, 1994
------------------------------- ---------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- --------- -------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-bearing balances $ 2,041 $ 145 7.10% $2,158 $ 82 3.80%
Investments 15,079 829 5.50% 15,234 841 5.52%
Loans 68,245 5,404 7.92% 66,820 5,205 7.79%
------- ------ ----- ------ ------ ----
Total interest-earning
assets 85,365 6,378 7.47% 84,212 6,128 7.28%
Other assets 3,521 3,674
------- -------
Total assets $88,886 $87,886
======= =======
Interest-bearing
liabilities:
Deposits $77,371 3,271 4.23% $77,311 2,934 3.80%
------ ---- ------- ------ ----
Other liabilities 3,774 3,565
Retained earnings 7,741 7,010
------- -------
Total liabilities and $88,886 $87,886
retained earnings ======= =======
Net interest income and $3,107 3.24% $3,194 3.48%
interest rate spread ====== ==== ====== ====
Net yield on average 3.64% 3.79%
interest-earning assets ==== ====
</TABLE>
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<PAGE>
RATE/VOLUME ANALYSIS
The following table analyzes the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. The table distinguishes between (i) changes
attributable to volume (changes in volume multiplied by the prior period's
rate), (ii) changes attributable to rate (changes in rate multiplied by the
prior period's volume), and (iii) net change (the sum of the previous columns).
The change attributable to both rate and volume (changes in rate multiplied by
changes in volume) has been allocated equally to both the changes attributable
to volume and the changes attributable to rate.
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<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 vs. 1995 June 30, 1995 vs. 1994
-------------------------- --------------------------
Increase (Decrease) Due To Increase (Decrease) Due To
-------------------------- --------------------------
Volume Rate Total Volume Rate Total
------- -------- ------ -------- -------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-bearing balances $123 $ (23) $ 100 $ (6) $ 69 $ 63
Investments 74 92 166 (9) (3) (12)
Loans 7 185 192 112 87 199
----- ------ ------ ---- ------ -----
Total interest income 204 254 458 97 153 250
Interest expense:
Deposits 86 563 678 2 335 337
----- ------ ------ ---- ------ -----
Net interest income $ 89 $(309) $(220) $ 95 $(182) $(87)
===== ====== ====== ==== ====== =====
</TABLE>
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<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1996, JUNE 30, 1995 AND 1994
Richmond Savings has experienced consistent moderate asset growth in recent
years as total assets have increased to $94.1 million at June 30, 1996 from
$91.4 million at June 30, 1995, and $87.5 million at June 30, 1994. Net loans
receivable have remained relatively unchanged, totalling $68.4 million at June
30, 1996, $68.7 million at June 30, 1995, and $67.7 million at June 30, 1994, as
demand for adjustable rate loans emphasized by Richmond Savings has not
maintained pace with Richmond Savings' deposit growth. During the same period,
investments increased to $21.8 million at June 30, 1996 from $18.5 million at
June 30, 1995, and $16.0 million at June 30, 1994.
Deposits increased to $83.7 million at June 30, 1996 from $81.4 million at
June 30, 1995, and $78.3 million at June 30, 1994. This increase in deposits
provided funds to support the growth in investments described in the preceding
paragraph.
Retained earnings totalled $8.6 million, $8.1 million and $7.4 million at
June 30, 1996, 1995 and 1994, respectively. At June 30, 1996, Richmond Savings
was required to maintain net worth equal to 5% of its total assets under the
Administrator's regulations. On such date, Richmond Savings had net worth under
such regulations of $9.1 million, which was equal to 9.7% of total assets.
Additionally, at June 30, 1996, Richmond Savings had Tier 1 risk based capital,
leverage capital and total risk-based capital of $8.7 million, $8.7 million and
$9.1 million, respectively, exceeding the regulatory capital requirements by
$6.8 million, $5.0 million and $5.2 million, respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1996, 1995, AND
1994
NET INCOME. Richmond Savings' net income for the years ended June 30, 1996,
1995, and 1994 was $591,000, $720,000 and $860,000, respectively. Net income was
positively affected in 1994 by gains associated with the sale of loans as
management sold certain fixed rate loans in an effort to maintain and improve
Richmond Savings' interest rate risk and liquidity positions while satisfying
demand in Richmond Savings' market area for long-term fixed rate mortgage loans.
Declines in net interest income, combined with increases in other expenses and
the significant reduction in loan sales and resulting gains after fiscal 1994,
are primarily responsible for the respective decreases in net income for fiscal
1995 and 1996.
NET INTEREST INCOME. Net interest income before provision for loan losses
decreased to $2.9 million in fiscal 1996 from $3.1 million in 1995 and $3.2
million in 1994. The decrease in net interest income is attributable to a
decrease in interest rate spread over the three-year period, to 2.77% in fiscal
1996 from 3.24% in fiscal 1995 and 3.48% in fiscal 1994. Because Richmond
Savings' deposits are generally more rate sensitive than are its interest-
earning assets, interest margins generally increase during periods of declining
rates and decrease during periods of increasing rates. During the middle part of
the year ended June 30, 1994, a sustained downward trend in interest rates in
general, which had begun prior to 1993, came to an end, with an overall upward
trend in rates being generally maintained since that time. The reversal in the
rate trend in 1994 had begun quickly to negatively impact or increase interest
costs, and the lagging impact on loan yields continued to trend downward as a
result of the declining interest rate environment of previous years. The overall
impact of increasing rates was evident in fiscal 1995, as an increase in
interest income of $250,000 was more than offset by an increase in interest
costs of $338,000. The impact was more dramatic in fiscal 1996, as an increase
in interest income of $459,000 was more than offset by a $678,000 increase in
interest costs. During fiscal 1995, the increase in rates also offset the fact
that the average balances of interest-earning assets increased significantly
more than the average balances of interest-bearing deposits.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $36,000 for
each of the years ended June 30, 1996, 1995 and 1994. The provisions and the
resulting loan loss allowances are amounts Richmond Savings' management believes
will be adequate to absorb possible losses on existing loans. Loans are charged
off against the allowance when management believes collectibility is unlikely,
although management continues to actively pursue collection of loans which have
been charged off. Management decisions regarding the provision and resulting
allowance
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<PAGE>
are based both on prior loan loss experience and other factors, such as existing
loan levels and types of loans outstanding, nonperforming loans, industry
standards and general economic conditions. Richmond Savings experienced net loan
charge-offs of $10,000 and $27,000 during the years ended June 30, 1996 and
1994, respectively, as compared with a net recovery of loans previously charged
off of $11,000 during the year ended June 30, 1995.
OTHER INCOME. Other income increased to $532,000 in fiscal 1996 from $430,000
in fiscal 1995, after decreasing from $586,000 in fiscal 1994. The principal
factor resulting in the decrease in 1995 was a reduction in gains on sales of
loans, which decreased from $151,000 in 1994 to $7,000 in 1995. Gains were
significantly higher in 1994 because market interest rates were lower and there
was more demand for fixed rate loans--which are generally sold by Richmond
Savings. Because gains on the sale of loans are dependent upon the interest rate
environment and its effect on the demand for fixed rate loans, gains from sale
of loans is a volatile source of income. Gains on sales of loans increased only
slightly to $8,000 in 1996. The overall increase in other income in 1996 was
primarily the result of increases in transaction and other service fee income
and the receipt of $31,000 in proceeds from an insurance policy insuring a
former director.
OTHER EXPENSES. Other expenses increased to $2.49 million in fiscal 1996
from $2.45 million in fiscal 1995, and $2.39 million in fiscal 1994,
representing increases of $41,000 and $60,000 in 1996 and 1995, respectively.
The increase in fiscal 1996 was due primarily to an increase in personnel costs.
The increase in fiscal 1995 was primarily due to increases in personnel costs,
equipment rental and maintenance expenses. Management anticipates that other
expenses will increase following the Conversion as the result of additional
expenses incurred as a result of operating as a public company and additional
compensation expense associated with the ESOP and MRP. Other items of
noninterest expense could also significantly increase in the future.
INCOME TAXES. Income tax expense decreased to $299,000 in fiscal 1996 from
$329,000 in fiscal 1995 and $492,000 in fiscal 1994, with the decreases being
primarily attributable to corresponding decreases in income before income
taxes.
POSSIBLE INSURANCE PREMIUM SURCHARGE
The Balanced Budget Act of 1995, which was passed by the United States
Congress but vetoed by the President for reasons unrelated to SAIF
recapitalization, provided for a one-time assessment to recapitalize the SAIF.
The proposed assessment was estimated to equal 85 cents per each $100 of insured
deposits. If enacted, this premium or surcharge would have the effect of
reducing the capital of SAIF-member institutions by the amount of the fee, net
of any income tax benefit, and would reduce earnings in the fiscal year during
which such fee was enacted into law. Based upon Richmond Savings' deposits as of
June 30, 1996, the proposed one-time premium or surcharge would equal
approximately $712,000. Management cannot predict whether similar legislation
will be enacted by Congress or, if enacted, the amount of the one-time premium
or surcharge. See "RISK FACTORS -- Competitive Disadvantage Resulting From
Disparity Between SAIF and BIF Insurance Premiums and Special SAIF Assessment"
and "SUPERVISION AND REGULATION -- Regulation of Richmond Savings -- Insurance
of Deposit Accounts."
RECAPTURE OF BAD DEBT RESERVES
Recently enacted federal legislation has repealed the reserve method of
accounting for thrift bad debt reserves and requires thrifts to recapture into
income over a six-year period their post-1987 additions to their excess bad debt
tax reserves, thereby generating additional tax liability. Under the
legislation, recapture of post-1987 excess reserves is suspended for up to two
years, to the first tax year beginning after December 31, 1997, if, during those
years, the institution satisfies a "residential loan requirement." At June 30,
1996, Richmond Savings' post-1987 excess reserves amounted to approximately
$581,000. See "RISK FACTORS -- Increases in Tax Liability Resulting From
Recapture of Bad Debt Reserves" and "TAXATION -- Federal Income Taxation."
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IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented in this
Prospectus have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of Richmond Savings' operations.
Unlike most industrial companies, nearly all the assets and liabilities of
Richmond Savings are monetary in nature. As a result, interest rates have a
greater impact on Richmond Savings' performance than do the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and services.
IMPACT OF NEW ACCOUNTING STANDARDS
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosure about Fair Value of
Financial Instruments," was issued by the Financial Accounting Standards Board
("FASB") in December 1991 and is effective for years ending after December 15,
1995. The statement requires, among other things, disclosure of the fair value
of financial instruments, both assets and liabilities recognized and not
recognized in the statement of financial condition, for which it is practicable
to estimate fair value. Richmond Savings adopted the disclosure requirements of
SFAS No. 107 on June 30, 1996. The adoption of SFAS No. 107 did not have a
material impact on Richmond Savings' financial position or results of
operations.
IMPAIRMENT OF LONG-LIVED ASSETS. In March 1995, the FASB issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of." The statement is effective for years beginning after
December 15, 1995 and requires, among other things, recognition of impairment of
long-lived assets, if any, based upon the difference between the undiscounted
expected future cash flows and the carrying value. Further, the statement
requires that long-lived assets to be disposed of be reported at the lower of
carrying amount or fair value less costs to sell. Management does not believe
the adoption of this statement will have a material effect on Richmond Savings'
financial position or results of operations.
IMPAIRMENT OF LOANS. The FASB has issued Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," which
requires that creditors value all loans for which it is probable that the
creditor will be unable to collect all amounts due according to the terms of the
loan agreement based on the discounted expected future cash flows. This
discounting would be at the loan's effective interest rate. The income
recognition provisions of SFAS No. 114 have subsequently been amended by
Statement of Financial Accounting Standards No. 118, which permits companies to
continue using existing income recognition policies with respect to impaired
loans upon adopting SFAS No. 114. SFAS No. 114 and SFAS No. 118 apply
prospectively for fiscal years beginning after December 15, 1994. Adoption of
SFAS No. 114 and SFAS No. 118 did not have a material impact on Richmond
Savings' financial condition or results of operations.
MORTGAGE SERVICING RIGHTS. In May 1995, the FASB issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 122 is effective for years beginning after December 15, 1995.
The statement will require, among other things, Richmond Savings to capitalize
the estimated fair value of servicing rights on loans originated for sale, and
amortize such amount over the estimated servicing life of the loans. Management
has not assessed the impact that adoption of SFAS No. 122 will have on Richmond
Savings' financial condition or results of operations.
In June, 1996, the FASB issued Statement of Financial Accounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," which provides new accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities. Those standards are based on consistent application of a financial
components approach that focuses on control. Under the financial components
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
and derecognizes liabilities when extinguished. SFAS No. 125 supersedes SFAS No.
122 and is effective for transfers and servicing of financial assets and
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extinguishment of liabilities occurring after December 31, 1996. Management has
not yet determined the impact that adoption of SFAS No. 125 will have on
Richmond Savings' financial condition or results of operations.
ACCOUNTING FOR STOCK-BASED COMPENSATION. In November 1995, the FASB issued
Statement of Financial Accounting Standards No. 123, "Accounting for Awards of
Stock-Based Compensation to Employees." SFAS No. 123 is effective for years
beginning after December 15, 1995. The statement defines a fair value-based
method of accounting for employee stock options or similar equity instruments
and encourages all entities to adopt that method of accounting for employee
stock options or similar equity instruments and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value-based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25").
Under the fair value-based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value-based method,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock. Most fixed stock option plans - the most common type of
stock compensation plan - have no intrinsic value at grant date, and under
Opinion 25 no compensation cost is recognized for them. Compensation cost is
recognized for other types of stock-based compensation plans under Opinion 25,
including plans with variable, usually performance-based, features. SFAS No. 123
requires that an employer's financial statements include certain disclosures
about stock-based employee compensation arrangements regardless of the method
used to account for them. Management has not estimated the effect of adoption on
Richmond Savings' financial condition or results of operations.
ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS. The Accounting Standards
Division of the American Institute of Independent Certified Public Accountants
approved SOP 93-6, "Employers' Accounting for Employee Stock Ownership Plans,"
which is effective for fiscal years beginning after December 31, 1993 and
applies to shares of capital stock of sponsoring employers acquired by employee
stock ownership plans after December 31, 1992 that had not been committed to be
released as of January 1, 1992. SOP 93-6, among other things, changed the
measure of compensation recorded by employers from the cost of employee stock
ownership plan shares to the fair value of employee stock ownership plan shares.
To the extent that the fair value of the shares held by the ESOP, committed to
be released directly to compensate employees, differs from the cost of such
shares, compensation expenses and a related charge or credit to additional paid-
in capital will be reported in Richmond Savings' financial statements.
BUSINESS OF THE HOLDING COMPANY
Prior to the Conversion, the Holding Company will not transact any material
business. Following the Conversion, in addition to directing, planning and
coordinating the business activities of Richmond Savings, the Holding Company
will invest the proceeds of the Conversion which are retained by it. See "USE OF
PROCEEDS." Upon consummation of the Conversion, the Holding Company will have no
significant assets other than the shares of Richmond Savings' capital stock
acquired in the Conversion, the loan receivable held with respect to its loan to
the ESOP and that portion of the net proceeds of the Conversion retained by it,
and will have no significant liabilities. Cash flow to the Holding Company will
be dependent upon investment earnings from the net proceeds retained by it,
payments on the ESOP loan and any dividends received from Richmond Savings.
Initially, the Holding Company will neither own nor lease any property, but will
instead use the premises, equipment and furniture of Richmond Savings. At the
present time, the Holding Company does not intend to employ any persons other
than its officers (who are not anticipated to be separately compensated by the
Holding Company), but will utilize the support staff of Richmond Savings from
time to time. Additional employees will be hired as appropriate to the extent
the Holding Company expands its business in the future. In the future, the
Holding Company will consider using some of the proceeds of the Conversion
retained by it to expand its operations in its existing primary market and other
nearby areas by acquiring other financial institutions which could be merged
with Richmond Savings or operated as separate subsidiaries. Presently, there are
no agreements or understandings for expansion of the Holding Company's
operations.
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BUSINESS OF RICHMOND SAVINGS
GENERAL
Richmond Savings is engaged primarily in the business of attracting
deposits from the general public and using such deposits to make mortgage loans
secured by real estate. Richmond Savings makes one-to-four family residential
real estate loans, home equity line of credit loans and home improvement loans,
loans secured by multi-family residential and commercial real property and
construction loans. Richmond Savings also makes a limited number of loans which
are not secured by real property, such as loans secured by pledged deposit
accounts and various types of consumer loans. Richmond Savings' primary source
of revenue is interest income from its lending activities. Richmond Savings'
other major sources of revenue are interest and dividend income from investments
and mortgage-backed securities, interest income from its interest-earning
deposit balances in other depository institutions, transaction and fee income
from its lending and deposit activities and gains from sale of loans. The major
expenses of Richmond Savings are interest on deposits and noninterest expenses
such as personnel costs, federal deposit insurance premiums, data processing
expenses, equipment expenses and branch occupancy and related expenses.
As a North Carolina-chartered savings bank, Richmond Savings is subject to
examination and regulation by the FDIC and the Administrator. Upon consummation
of the Conversion, Richmond Savings, as a subsidiary of the Holding Company,
will be subject to indirect regulation by the Federal Reserve. The business and
regulation of Richmond Savings are subject to legislative and regulatory changes
from time to time, such as those resulting from the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") and the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "1991 Banking Law"). See
"SUPERVISION AND REGULATION --Regulation of Richmond Savings."
MARKET AREA
Richmond Savings' primary market area consists of Richmond, Moore and
Scotland counties in North Carolina. Richmond County, which contains Rockingham,
is located in south central North Carolina near the North Carolina-South
Carolina boundary, and is the home of the North Carolina Motor Speedway,
location of two Winston-Cup stock car races annually. Moore County, which is
immediately north of Richmond County, is the home of several retirement
communities and golf resorts, including Pinehurst and Southern Pines. Scotland
County, which includes Laurinburg, is located east of Richmond County. Richmond
and Scotland counties have experienced relatively slow growth during the last
five years. Moore County, which includes the resort and retirement communities
of Pinehurst and Southern Pines, has experienced greater growth. The economy in
Richmond Savings' primary market area is largely rural with employment
diversified among manufacturing, agricultural, retail and wholesale trade,
government, services and utilities. Major area employers include Richmond
Apparel Company, Burlington Industries, Sara Lee Hosiery, Perdue Farms, Inc.,
Moore County Regional Hospital, Ithaca Industries, Inc., Resorts of Pinehurst,
Campbell Soup Company and Abbott Laboratories.
LENDING ACTIVITIES
GENERAL. Richmond Savings' primary source of revenue is interest income
from its lending activities, consisting primarily of mortgage loans for the
purchase or refinancing of one-to-four family residential real property located
in its primary market area. Richmond Savings also makes home equity loans and
loans secured by multi-family and commercial properties, construction loans,
home improvement loans, savings account loans and various types of consumer
loans. Over 96% of Richmond Savings' loan portfolio, before net items, is
secured by real estate. On June 30, 1996, Richmond Savings' largest single
outstanding loan had a balance of approximately $373,000. This loan was
performing in accordance with its original terms. In addition to interest earned
on loans, Richmond Savings receives fees in connection with loan originations,
loan servicing, loan modifications, late payments, loan assumptions and other
miscellaneous services.
Adjustable rate loans are generally originated with the intention that they
will be held in Richmond Savings' loan portfolio. Fixed rate one-to-four family
residential loans are generally originated in conformity with secondary
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market purchase requirements and sold in the secondary market. During 1996,
1995, and 1994, Richmond Savings sold $1.4 million, $640,000, and $7.4 million
of fixed rate loans in order to better manage its interest rate risk.
LOAN PORTFOLIO COMPOSITION. Richmond Savings' net loan portfolio totalled
approximately $68.4 million at June 30, 1996 representing 72.6% of Richmond
Savings' total assets at such date. At June 30, 1996, 81.0% of Richmond Savings'
loan portfolio, before net items, was composed of one-to-four family residential
mortgage loans. Home equity and home improvement loans represented 9.35% of
Richmond Savings' loan portfolio, before net items, and multi-family residential
and commercial and construction loans represented 6.2% of Richmond Savings' loan
portfolio, before net items, on such date. As of June 30, 1996, 65.4% of the
loans in Richmond Savings' loan portfolio had adjustable interest rates.
The following table sets forth the composition of Richmond Savings' loan
portfolio by type of loan at the dates indicated.
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<TABLE>
<CAPTION>
June 30,
----------------------------------------------------
1996 1995 1994
--------------------------- ----
% of % of % of
Amount Total Amount Total Amount Total
------- ------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Type of loan:
Real estate loans:
One-to-four family residential $55,386 81.02% $57,980 84.34% $57,025 84.26%
Multi-family residential and commercial 1,963 2.87% 1,425 2.07% 1,959 2.89%
Construction 2,301 3.37% 2,106 3.06% 2,703 3.99%
Home equity lines of credit 5,465 8.00% 4,666 6.79% 3,949 5.84%
------- ------ ------- ------ ------- -------
Total real estate loans 65,115 95.26% 66,177 96.26% 65,636 96.98%
------- ------ ------- ------ ------- -------
Other loans:
Consumer loans 2,861 4.18% 2,418 3.52% 1,734 2.56%
Home improvement loans 928 1.36% 886 1.29% 611 0.90%
Loans secured by deposits 724 1.06% 736 1.07% 784 1.16%
------- ------ ------- ------ ------- -------
Total other loans 4,513 6.60% 4,040 5.88% 3,129 4.62%
------- ------ ------- ------ ------- -------
Total loans 69,628 101.86% 70,217 102.14% 68,765 101.60%
Less:
Construction loans in process 881 1.29% 1,109 1.61% 769 1.14%
Allowance for loan losses 389 0.57% 363 0.53% 316 0.46%
------- ------ ------- ------ ------- -------
$68,358 100.00% $68,745 100.00% $67,680 100.00%
======= ====== ======== ====== ======= ======
</TABLE>
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In addition to the home equity line of credit loans shown above, Richmond
Savings had $5.1 million in outstanding commitments for home equity loans at
June 30, 1996.
The following table sets forth the time to contractual maturity of Richmond
Savings' loan portfolio at June 30, 1996. Loans which have adjustable rates are
shown as being due in the period during which rates are next subject to change,
while fixed rate and other loans are shown as due in the period of contractual
maturity. Demand loans, loans having no stated maturity and overdrafts are
reported as due in one year or less. The table does not include prepayments or
scheduled principal repayments. Amounts in the table are net of loans in
process and are net of unamortized loan fees.
<TABLE>
<CAPTION>
At June 30, 1996
----------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
-------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Real estate loans:
Adjustable rate residential 1-4 family $21,583 $16,876 $ -- $ -- $38,459
Fixed rate residential 1-4 family 35 308 379 16,205 16,927
Multi-family residential and commercial 283 596 524 560 1,963
Construction 1,420 -- -- -- 1,420
Home equity credit lines 5,465 -- -- -- 5,465
Other loans 1,786 1,392 796 539 4,513
----- ----- --- --- -----
Less:
Allowance for loan losses (389) -- -- -- (389)
------- ------- ------ ------- -------
$30,183 $19,172 $1,699 $17,304 $68,358
======= ======= ====== ======= =======
</TABLE>
The following table sets forth the dollar amount at June 30, 1996 of all
loans maturing or repricing on or after June 30, 1997 which have fixed or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Adjustable
Rates Rates
----- ----------
<S> <C> <C>
(In Thousands)
Real estate loans $18,572 $16,876
------- -------
Other loans 2,727 --
------- -------
$21,299 $16,876
======= =======
</TABLE>
ONE-TO-FOUR FAMILY RESIDENTIAL REAL ESTATE LENDING. Richmond Savings'
primary lending activity, which it intends to continue to emphasize, is the
origination of fixed and adjustable rate first mortgage loans to enable
borrowers to purchase or refinance one-to-four family residential real property.
Consistent with Richmond Savings' emphasis on being a community-oriented
financial institution, it is and has been Richmond Savings' strategy to focus
its lending efforts in its primary market area. On June 30, 1996, approximately
81.0% of Richmond Savings' real estate loan portfolio, before net items,
consisted of one-to-four family residential real estate loans. These include
both loans secured by detached single-family residences and condominiums and
loans secured by housing containing not more than four separate dwelling units.
Of such loan amounts, 69.4% had adjustable interest rates.
Richmond Savings originates conventional mortgage loans secured by owner
occupied property having terms of up to 30 years in amounts of up to 95% of the
value of the property. Private mortgage insurance is generally required if the
loan amount exceeds 80% of the value of the property. The loans have both fixed
and adjustable rates. The fixed
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rate loans are generally originated for sale. Some of such loans are sold
servicing retained and others (including all FHA and VA loans) are sold
servicing released. The interest rates on adjustable rate loans are generally
adjustable every 1, 3 or 5 years and are tied to the average weekly yield on
United States Treasury securities adjusted to a constant maturity. The loans
have rate caps which limit the amount of changes at the time of each adjustment
and over the lives of the loans.
In addition, Richmond Savings originates FHA and VA loans secured by one-
to-four family residential property. These loans, which are government insured
or guaranteed, are made in amounts of up to 100% of the value of the property.
Such loans have terms of up to 30 years. These loans have fixed interest rates
and are sold in the secondary market, servicing released.
Adjustable rate loans are generally considered to involve a greater degree
of risk than fixed rate loans because borrowers may have difficulty meeting
their payment obligations if interest rates and required payment amounts
increase substantially. Substantially all of the fixed-rate loans in Richmond
Savings' mortgage loan portfolio have due on sale provisions allowing Richmond
Savings to declare the unpaid balance due and payable in full upon the sale or
transfer of an interest in the property securing the loan.
While one-to-four family residential loans are normally originated for up
to 30 year terms, such loans customarily remain outstanding for substantially
shorter periods because borrowers often prepay their loans in full upon sale of
the property pledged as security or upon refinancing the original loan. Thus,
average loan maturity is a function of, among other factors, the level of
purchase and sale activity in the real estate market, prevailing interest rates,
and the interest rates payable on outstanding loans.
Richmond Savings generally requires title insurance for its one-to-four
family residential loans. Richmond Savings also generally requires that fire
and extended coverage casualty insurance (and, if appropriate, flood insurance)
be maintained in an amount at least equal to the loan amount or replacement cost
of the improvements on the property securing the loans, whichever is greater.
MULTI-FAMILY RESIDENTIAL AND COMMERCIAL REAL ESTATE LENDING. On June 30,
1996, Richmond Savings had $2.0 million in outstanding loans secured by multi-
family residential and commercial properties, comprising approximately 2.87% of
its loan portfolio, before net items, as of that date. Of these loans,
approximately 45.0% were secured by church properties. Most of the other loans
are secured by apartments, office, retail and other commercial real estate in
Richmond Savings' primary market area and have fixed and adjustable interest
rates. These loans generally do not exceed 80% of the appraised value of the
real estate securing the loans, and have terms of up to 20 years. The
adjustable rate loans generally use the same indexes as are used in one-to-four
family residential lending. See "-- One-to-Four Family Residential Real Estate
Lending." Loans secured by multi-family and commercial real estate generally
are larger than one-to-four family residential loans and involve a greater
degree of risk. Payments on these loans depend to a large degree on results of
operations and management of the properties and may be affected to a greater
extent by adverse conditions in the real estate market or the economy in
general.
CONSTRUCTION LENDING. Richmond Savings makes construction loans primarily
for the construction of single-family dwellings. The aggregate outstanding
balance of such loans on June 30, 1996 was approximately $2.3 million,
representing approximately 3.4% of Richmond Savings' loan portfolio, before net
items. Most of these loans were made to persons who are constructing properties
for the purpose of occupying them; some were made to builders who were
constructing properties for sale. Loans made to builders are generally "pure
construction" loans which require the payment of interest during the
construction period of generally one year or less and the payment of the
principal in full at the end of the construction period. Loans made to
individual property owners are both pure construction loans and "construction-
permanent" loans which generally provide for the payment of interest only during
a construction period, after which the loans convert to a permanent loan at
fixed or adjustable interest rates having terms similar to other one-to-four
family residential loans.
Short-term full construction loans generally have a maximum loan-to-value
ratio of 80% of the appraised value of the property. Construction-permanent
loans made to persons who intend to occupy the finished premises are made at
loan to value ratios of up to 80%, or up to 95% if private mortgage insurance is
obtained.
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Construction loans are generally considered to involve a higher degree of
risk than long-term financing secured by real estate which is already occupied.
A lender's risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at the completion of
construction and the estimated cost (including interest) of construction. If
the estimate of construction costs proves to be inaccurate, the lender may be
required to advance funds beyond the amount originally committed in order to
permit completion of construction. If the estimate of anticipated value proves
to be inaccurate, the lender may have security which has value insufficient to
assure full repayment. In addition, repayment of loans made to builders to
finance construction of properties is often dependent upon the builder's ability
to sell the property once construction is completed.
HOME EQUITY LENDING. At June 30, 1996, Richmond Savings had approximately
$5.5 million in home equity line of credit loans, representing approximately
8.0% of its loan portfolio, before net items. Richmond Savings' home equity
lines of credit have adjustable interest rates tied to prime interest rates plus
a margin. The home equity lines of credit require the payments of principal and
interest monthly, and all outstanding amounts must be paid in full at the end of
15 years. Home equity lines of credit are generally secured by subordinate
liens against residential real property. Richmond Savings requires limited title
opinions in connection with these loans. Richmond Savings requires that fire
and extended coverage casualty insurance (and, if appropriate, flood insurance)
be maintained in an amount at least sufficient to cover its loan. Home equity
loans are generally limited so that the amount of such loans, along with any
senior indebtedness, does not exceed 90% of the value of the real estate
security. Because home equity loans involve revolving lines of credit which can
be drawn over a period of time, Richmond Savings faces risks associated with
changes in the borrower's financial condition. Because home equity loans have
adjustable interest rates with no rate caps (other than usury limitations),
increased delinquencies could occur if interest rate increases occur and
borrowers are unable to satisfy higher payment requirements. At June 30, 1996,
Richmond Savings had $5.1 million in unused commitments under its home equity
lines of credit. Richmond Savings intends to continue to emphasize its home
equity program. The presence of home equity loans in Richmond Savings'
portfolio has assisted the institution in achieving a satisfactory matching of
the interest sensitivity of its assets and liabilities because home equity lines
of credit have adjustable rates which are subject to change monthly and without
any significant rate caps.
CONSUMER AND HOME IMPROVEMENT LOANS. Richmond Savings offers a wide
variety of secured and unsecured consumer loans, including automobile loans,
overdraft protection loans, credit card loans and other secured and unsecured
loans. At June 30, 1996, Richmond Savings' consumer loan portfolio totalled
$2.9 million, representing 4.18% of its loan portfolio, before net items.
Automobile loans generally have terms not exceeding 60 months, have fixed
interest rates and do not exceed 90% of the fair market value of the automobile
securing the loan. Overdraft loans and credit card loans are unsecured and have
fixed interest rates. Consumer lending usually involves more risk than
residential mortgage lending because payment patterns are more significantly
influenced by general economic conditions and because any collateral for such
loans frequently consists of depreciating property.
In addition, at June 30, 1996, Richmond Savings had $928,000 in outstanding
home improvement loans, representing 1.36% of its loan portfolio, before net
items. These loans are generally secured by a subordinate lien on the property
being improved, do not exceed 80% of the value of such property, less the amount
secured by any prior liens, have terms of no more than 10 years and fixed
interest rates.
LOANS SECURED BY DEPOSITS. Richmond Savings also offers loans secured by
deposit accounts. At June 30, 1996, such loans totalled $724,000, representing
1.06% of Richmond Savings' loan portfolio, before net items. The interest rates
on these loans are variable and are generally between 2% and 3% above the
interest rate being paid on the deposit account serving as collateral with a
minimum rate of 7% per annum. The maximum amounts of these loans is generally
90% of the related deposit account.
LOAN SOLICITATION, PROCESSING AND UNDERWRITING. Loan originations are
derived from a number of sources such as referrals from real estate brokers,
present depositors and borrowers, builders, attorneys, walk-in customers and in
some instances, other lenders.
During its loan approval process, Richmond Savings assesses the applicant's
ability to make principal and interest payments on the loan and the value of the
property securing the loan. Richmond Savings obtains detailed written loan
applications to determine the borrower's ability to repay and verifies responses
on the loan application through the
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use of credit reports, financial statements, and other confirmations. Under
current practice, the responsible officer or loan officer of Richmond Savings
analyzes the loan application and the property involved, and an appraiser
inspects and appraises the property. Richmond Savings requires independent fee
appraisals on all loans originated primarily on the basis of real estate
collateral. Richmond Savings also obtains information concerning the income,
financial condition, employment and the credit history of the applicant.
Richmond Savings' internal loan committee, which consists of the President,
Executive Vice President and Loan Department Manager, has authority to approve
many of the loans made by Richmond Savings, although loans exceeding specified
limits also require approval of at least one non-employee member of the Board of
Directors. The full Board of Directors must approve all real estate loans
exceeding $300,000. The largest consumer loan not secured by real estate which
may be approved by any individual officer is $30,000.
Normally, upon approval of a residential mortgage loan application,
Richmond Savings gives a commitment to the applicant that it will make the
approved loan at a stipulated rate any time within a 30-day period. The loan is
typically funded at such rate of interest and on other terms which are based on
market conditions existing as of the date of the commitment. As of June 30,
1996, Richmond Savings had $565,000 in such unfunded mortgage loan commitments.
In addition, on such date Richmond Savings had $881,000 in undisbursed
construction loans and $5.1 million in unfunded commitments for unused lines of
credit.
INTEREST RATES, TERMS, POINTS AND FEES. Interest rates and fees charged on
Richmond Savings' loans are affected primarily by the market demand for loans,
competition, the supply of money available for lending purposes and Richmond
Savings' cost of funds. These factors are affected by, among other things,
general economic conditions and the policies of the federal government,
including the Federal Reserve, tax policies and governmental budgetary matters.
In addition to earning interest on loans, Richmond Savings receives fees in
connection with originating loans. Fees for loan servicing, loan modifications,
late payments, loan assumptions and other miscellaneous services in connection
with loans are also charged by Richmond Savings. During the fiscal years ended
June 30, 1996, 1995, and 1994, Richmond Savings had $32,000, $37,000, and
$37,000, respectively, in fee income on loans serviced for others.
NONPERFORMING ASSETS AND ASSET CLASSIFICATION. When a borrower fails to
make a required payment on a loan and does not cure the delinquency promptly,
the loan is classified as delinquent. In this event, the normal procedure
followed by Richmond Savings is to make contact with the borrower at prescribed
intervals in an effort to bring the loan to a current status, and late charges
are assessed as allowed by law. In most cases, delinquencies are cured
promptly. If a delinquency is not cured, Richmond Savings normally, subject to
any required prior notice to the borrower, commences foreclosure proceedings.
If the loan is not reinstated within the time permitted for reinstatement, or
the property is not redeemed prior to sale, the property may be sold at a
foreclosure sale. In foreclosure sales, Richmond Savings may acquire title to
the property through foreclosure, in which case the property so acquired is
offered for sale and may be financed by a loan involving terms more favorable to
the borrower than those normally offered. Any property acquired as a result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until such time as it is sold or otherwise disposed of by Richmond Savings to
recover its investment. As of June 30, 1996, Richmond Savings held $29,000 of
real estate acquired in settlement of loans. Real estate acquired through, or
in lieu of, loan foreclosure is initially recorded at the lower of cost or fair
value at the date of foreclosure, establishing a new cost basis. After
foreclosure, valuations are periodically performed by management, and the real
estate is carried at the lower of cost or fair value minus costs to sell. Costs
relating to the development and improvement of the property are capitalized, and
costs relating to holding the property are charged to expenses.
Interest on loans is recorded as borrowers' monthly payments become due.
Accrual of interest income on loans is suspended when, in management's judgment,
doubts exist as to the collectibility of additional interest within a reasonable
time. Loans are returned to accrual status when management determines, based
upon an evaluation of the underlying collateral, together with the borrower's
payment record and financial condition, that the borrower has the capability and
intent to meet the contractual obligations of the loan agreement. Interest on
loans placed on nonaccrual status is generally charged off. The allowance is
established by a charge to interest income equal to all interest previously
accrued, and income is subsequently recognized only to the extent cash payments
are received until the loan
54
<PAGE>
is returned to accrual status. For the fiscal year ended June 30, 1996, interest
income that would have been recorded on nonaccrual loans under the original
terms of such loans was approximately $8,000. During such period, no interest
income on nonaccrual loans was included in net income.
The following table sets forth information with respect to nonperforming
assets identified by Richmond Savings, including nonaccrual loans and real
estate owned at the dates indicated. At such dates, Richmond Savings had no
loans which were "troubled debt restructurings," as defined in SFAS No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings."
<TABLE>
<CAPTION>
At June 30,
--------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Loans not accruing interest $ 27 $ 75 $ 112 $ 24 $ 256
Accruing loans 90 days or more past due 3 -- -- 3 --
----- ----- ----- ----- -----
Total non-performing loans 30 75 112 27 256
Foreclosed real estate 29 -- -- 43 95
----- ----- ----- ----- -----
Total non-performing assets $ 59 $ 75 $ 112 $ 70 $ 351
===== ===== ===== ===== =====
Non-performing assets to total assets 0.06% 0.08% 0.13% 0.08% 0.41%
===== ===== ===== ===== =====
</TABLE>
Applicable regulations require Richmond Savings to "classify" its own
assets on a regular basis. In addition, in connection with examinations of
savings institutions, regulatory examiners have authority to identify problem
assets and, if appropriate, classify them. Problem assets are classified as
"substandard," "doubtful" or "loss," depending on the presence of certain
characteristics as discussed below.
An asset is considered "substandard" if not adequately protected by the
current net worth and paying capacity of the obligor or the collateral pledged,
if any. "Substandard" assets include those characterized by the "distinct
possibility" that the insured institution will sustain "some loss" if the
deficiencies are not corrected. Assets classified as "doubtful" have all of the
weaknesses inherent in those classified "substandard" with the added
characteristic that the weaknesses present make "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable." Assets classified "loss" are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a loss reserve is not warranted.
As of June 30, 1996, Richmond Savings had approximately $130,000 of loans
internally classified as "substandard," approximately $23,000 of loans
classified as "doubtful" and $6,000 of loans classified as "loss." Total
classified loans as of June 30, 1995 and 1994 were approximately $76,000 and
approximately $494,000, respectively.
When an insured institution classifies problem assets as either substandard
or doubtful, it is required to establish general allowances for loan losses in
an amount deemed prudent by management. These allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities and the risks associated with particular problem assets.
When an insured institution classifies problem assets as "loss," it charges off
the balance of the asset. Richmond Savings' determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the FDIC and the Administrator which can order the
establishment of additional loss allowances.
Richmond Savings also identifies assets which possess credit deficiencies
or potential weaknesses deserving close attention by management. These assets
are maintained on a "watch list" and do not yet warrant adverse classification.
At June 30, 1996, Richmond Savings' watch list consisted of 11 one-to-four
family residential loans aggregating $482,000, one commercial loan aggregating
$66,000 and 19 consumer loans aggregating $111,000.
55
<PAGE>
ALLOWANCE FOR LOAN LOSSES. In originating loans, Richmond Savings
recognizes that credit losses will be experienced and that the risk of loss will
vary with, among other things, the type of loan being made, the creditworthiness
of the borrower over the term of the loan and, in the case of a secured loan,
the quality of the security for the loan as well as general economic conditions.
It is management's policy to maintain an adequate allowance for loan losses
based on, among other things, Richmond Savings' historical loan loss experience,
evaluation of economic conditions and regular reviews of delinquencies and loan
portfolio quality. Specific allowances are provided for individual loans when
ultimate collection is considered questionable by management after reviewing the
current status of loans which are contractually past due and considering the net
realizable value of the security for the loans.
Management continues to actively monitor Richmond Savings' asset quality,
to charge off loans against the allowance for loan losses when appropriate and
to provide specific loss reserves when necessary. Although management believes
it uses the best information available to make determinations with respect to
the allowance for loan losses, future adjustments may be necessary if economic
conditions differ substantially from the economic conditions in the assumptions
used in making the initial determinations.
The following table describes the activity related to Richmond Savings'
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------
1996 1995 1994 1993 1992
------ -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Balance at beginning of period $ 363 $ 316 $ 316 $ 307 $ 276
----- ------- ------- ----- -----
Loans charged off:
Real estate -- -- 7 20 --
Other 11 1 3 9 9
----- ------- ------- ----- -----
Total loans charged off 11 1 10 29 9
Recoveries:
Real estate 1 6 20 -- --
Other -- -- 1 2 2
----- ------- ------- ----- -----
Net loans charged off (recovered) 10 (5) (11) 27 7
----- ------- ------- ----- -----
Provision for loan losses 36 27 36 36 38
----- ------- ------- ----- -----
Balance at end of period $ 389 $ 348 $ 363 $ 316 $ 307
===== ======= ======= ===== =====
Ratio of net charge-offs (recoveries) to average loans outstanding during
the period 0.01% (0.01)% (0.02)% 0.04% 0.01%
===== ======= ======= ===== =====
</TABLE>
The following table sets forth the composition of the allowance for loan
losses by type of loan at the dates indicated. The allowance is allocated to
specific categories of loans for statistical purposes only, and may be applied
to loan losses incurred in any loan category.
56
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30,
---------------------------------------------------------------------------------------
1996 1995
-------------------------------------- -------------------------------------------
PERCENT OF AMOUNT PERCENT OF AMOUNT
AMOUNT OF ALLOWANCE OF LOANS AMOUNT ALLOWANCE OF LOANS
ALLOWANCE TO TOTAL TO GROSS OF TO TOTAL TO GROSS
--------- ALLOWANCE LOANS ALLOWANCE ALLOWANCE LOANS
---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Real estate loans:
One-to-four family residential $ 57 14.65% 79.55% $ 65 17.91% 82.57%
Multi-family residential
and commercial 15 3.86% 2.82% 19 5.23% 2.03%
Construction 6 1.54% 3.30% 9 2.48% 3.00%
Home equity lines of credit 27 6.94% 7.85% 40 11.02% 6.65%
---- ------ ----- ---- ------ ------
Total real estate loans 105 26.99% 93.52% 133 36.64% 94.25%
---- ------ ------ ---- ------ ------
Other loans:
Consumer loans 174 44.73% 4.11% 138 38.02% 3.44%
Home improvement loans 4 1.03% 1.33% 9 2.48% 1.26%
Loans secured by deposits -- 0.00% 1.04% -- 0.00% 1.05%
---- ------- ------- ---- ------- -------
Total other loans 178 45.76% 6.48% 147 40.50% 5.75%
---- ------- ------- ---- ------- -------
Unallocated 106 27.25% -- 83 22.86% --
---- ------- ------- ---- ------- -------
Total allowance for loan losses $389 100.00% 100.00% $363 100.00% 100.00%
==== ======= ======= ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------------------------------------------
1994 1993
--------------------------------------- ---------------------------------------
PERCENT OF AMOUNT PERCENT OF AMOUNT
ALLOWANCE OF LOANS ALLOWANCE OF LOANS
AMOUNT OF TO TOTAL TO GROSS AMOUNT OF TO TOTAL TO GROSS
ALLOWANCE ALLOWANCE LOANS ALLOWANCE ALLOWANCE LOANS
--------- ---------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Real estate loans:
One-to-four family residential $139 43.99% 82.93% $118 38.43% 81.18%
Multi-family residential
and commercial 16 5.06% 2.85% 15 4.89% 6.43%
Construction 12 3.80% 3.93% 15 4.89% 4.15%
Home equity lines of credit 34 10.76% 5.74% 27 8.79% 5.00%
---- ------ ------ ---- ------ ------
Total real estate loans 201 63.61% 95.45% 175 57.00% 96.76%
---- ------ ------ ---- ------ ------
Other loans:
Consumer loans 54 17.09% 2.52% 51 16.61% 1.96%
Home improvement loans 8 2.53% 0.89% 1 0.33% 0.14%
Loans secured by deposits -- 0.00% 1.14% -- 0.00% 1.14%
---- ------- ------- ---- ------- -------
Total other loans 62 19.62% 4.55% 52 16.94% 3.24%
---- ------- ------- ---- ------- -------
Unallocated 53 16.77% -- 80 26.06% --
---- ------- ------- ---- ------- -------
Total allowance for loan losses $316 100.00% 100.00% $307 100.00% 100.00%
==== ======= ======= ==== ======= =======
</TABLE>
57
<PAGE>
INVESTMENT SECURITIES
Interest and dividend income from investment securities generally provides
the second largest source of income to Richmond Savings after interest on loans.
In addition, Richmond Savings receives interest income from deposits in other
financial institutions. At June 30, 1996, Richmond Savings' investment
securities portfolio totalled approximately $21.8 million and consisted of U.S.
government and agency securities, mortgage-backed securities, municipal bonds,
deposits in other financial institutions, and investments in corporate debt
securities of three large financial institutions and IBM Corporation.
Investments in mortgage-backed securities involve a risk that, because of
changes in the interest rate environment, actual prepayments will be greater
than estimated prepayments over the life of the security, which may require
adjustments to the amortization of any premium or accretion of any discount
relating to such instruments, thereby reducing the net yield on such securities.
There is also reinvestment risk associated with the cash flows from such
securities. In addition, the market value of such securities may be adversely
affected by changes in interest rates.
The FASB has issued Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
Securities" which addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. These investments are to be classified in three
categories and accounted for as follows: (1) debt securities that the entity
has the positive intent and ability to hold to maturity are classified as held-
to-maturity and reported at amortized cost; (2) debt and equity securities that
are bought and held principally for the purpose of selling them in the near term
are classified as trading securities and reported at fair value, with net
unrealized gains and losses included in earnings; and (3) debt and equity
securities not classified as either held-to-maturity or trading securities are
classified as securities available-for-sale and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of equity. At June 30, 1996, Richmond Savings had no trading
securities. Richmond Savings adopted SFAS No. 115 as of July 1, 1994. The
adoption affected only the held-to-maturity and available-for-sale
classifications, with net unrealized securities losses on the securities
available-for-sale of $64,545, net of related deferred tax assets of $34,240,
reported as a separate component of equity in its financial statements at July
1, 1994. See Note B of "Notes to Consolidated Financial Statements."
The amortized cost of securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest
income from investments. Interest and dividends are included in interest income
from investments. Realized gains and losses, and declines in value judged to be
other than temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method. Prior to the
adoption of SFAS No. 115, Richmond Savings stated its debt securities at
amortized cost and its marketable equity securities at the lower of cost or
market. Accumulated changes in net unrealized losses on marketable equity
securities were included in retained earnings.
As a member of the FHLB of Atlanta, Richmond Savings is required to
maintain an investment in stock of the FHLB of Atlanta equal to the greater of
1% of Richmond Savings' outstanding home loans or 5% of its outstanding advances
from the FHLB of Atlanta. No ready market exists for such stock, which is
carried at cost. As of June 30, 1996, Richmond Savings' investment in stock of
the FHLB of Atlanta was $735,000.
North Carolina regulations require Richmond Savings to maintain a minimum
amount of liquid assets which may be invested in specified short-term
securities. See "SUPERVISION AND REGULATION -- Regulation of Richmond Savings -
- - Liquidity." Richmond Savings is also permitted to make certain other
securities investments.
Richmond Savings' current investment policy states that Richmond Savings'
investments will be limited to U.S. Treasury obligations, federal agency
securities, certain state, county or municipal securities, certificates of
deposits and time deposits, bankers' acceptances, commercial paper, corporate
bonds, mortgage-backed securities and mutual funds composed entirely of assets
in which the institution could invest directly.
58
<PAGE>
Investment decisions are made by authorized officers of Richmond Savings
under policies established by the Board of Directors. Such investments are
managed in an effort to produce the highest yield consistent with maintaining
safety of principal and compliance with regulations governing the savings
industry.
The following table sets forth the carrying value of Richmond Savings'
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
(Dollars in Thousands)
Securities available for sale:
U.S. government and agency securities $ 8,387 $ 5,474 $ --
Securities held to maturity:
U.S. government and agency securities 4,008 5,991 10,476
Mortgage-backed securities 1,817 1,070 1,287
Corporate debt securities 1,999 1,518 1,533
Municipal bonds 151 304 460
Other -- -- 50
------- ------- -------
Total securities held to maturity 7,975 8,883 13,806
------- ------- -------
Marketable equity securities:
Mutual funds -- --
------- ------- -------
626
Total investment securities 16,362 14,357 14,432
Interest-earning balances in other banks 4,686 3,448 867
Federal Home Loan Bank stock 735 735 735
------- ------- -------
Total investments $21,783 $18,540 $16,034
======= ======= =======
</TABLE>
At June 30, 1996, the market value of Richmond Savings' investment
securities available for sale and held to maturity were $8.4 million and $7.9
million, respectively.
The following table sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of Richmond Savings'
investment portfolio as of June 30, 1996.
59
<PAGE>
<TABLE>
<CAPTION>
After One
Year
Through After Five Years
One Year or Less Five Years Through Ten Years AFTER TEN YEARS TOTAL
------------------ ---------------- ------------------ ----------------- -----------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
-------- -------- -------- -------- ---------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Securities available for
sale:
U.S. government and
agency securities $1,000 5.69% $4,921 6.35% $2,466 7.50% $ -- --% $8,387 6.61%
Securities held to
maturity:
U.S. government and
agency securities 499 6.45% 1,999 5.70% 1,510 6.35% -- --% 4,008 6.04%
Mortgage-backed
securities -- -- 169 6.08% 1,265 7.17% 383 8.50% 1,817 7.35%
Corporate bonds 506 5.51% 996 6.72% 497 6.48% -- -- 1,999 6.35%
Municipal bonds 151 4.00% -- -- -- -- -- -- 151 4.00%
Other:
Interest-earning 4,686 5.35% -- -- -- -- -- -- 4,686 5.35%
balances in other banks -- -- -- -- -- -- 735 7.25% 735 7.25%
Federal Home Loan Bank
stock ----- ------ ------ ------ -----
$6,842 5.46% $8,085 6.23% $5,738 7.04% $1,118 7.68% $21,783 6.28%
====== ====== ====== ====== ========
</TABLE>
60
<PAGE>
DEPOSITS AND BORROWINGS
GENERAL. Deposits are the primary source of Richmond Savings' funds for
lending and other investment purposes. In addition to deposits, Richmond
Savings derives funds from loan principal repayments, interest payments,
investment income and principal repayments, interest from its own interest-
earning deposits, interest income and repayments from mortgage-backed securities
and otherwise from its operations. Loan repayments are a relatively stable
source of funds while deposit inflows and outflows may be significantly
influenced by general interest rates and money market conditions. Borrowings
may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources. They may also be used on a longer
term basis for general business purposes.
DEPOSITS. Richmond Savings attracts both short-term and long-term
deposits from the general public by offering a variety of accounts and rates.
Richmond Savings offers passbook savings accounts, statement savings accounts,
negotiable order of withdrawal accounts, individual retirement accounts, and
fixed interest rate certificates with varying maturities. At June 30, 1996,
13.58% of Richmond Savings' deposits consisted of passbook and statement savings
accounts, 10.49% consisted of interest-bearing transaction accounts and 2.33%
consisted of noninterest-bearing transaction accounts. Although the vast
majority of Richmond Savings' deposits are certificate of deposit accounts,
management of Richmond Savings believes that it has been successful in
maintaining a high percentage of demand deposit and transaction accounts which
are generally considered to be less interest rate sensitive than certificate
accounts. This is consistent with Richmond Savings' asset/liability management
strategies. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Asset/Liability Management." Deposit flows are
greatly influenced by economic conditions, the general level of interest rates,
competition, and other factors, including the restructuring of the thrift
industry. Richmond Savings' savings deposits traditionally have been obtained
primarily from its primary market area. Richmond Savings utilizes traditional
marketing methods to attract new customers and savings deposits, including print
media advertising and direct mailings. Richmond Savings does not advertise for
deposits outside of its local market area or utilize the services of deposit
brokers.
The following table sets forth certain information regarding Richmond
Savings' savings deposits at the dates indicated.
61
<PAGE>
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995 June 30, 1994
---------------------------- -------------------------------- -------------------------------
Weighted Weighted Weighted
Average % of Average % of Average % of
Amount Rate Total Amount Rate Total Amount Rate Total
------ -------- ----- ------ -------- ----- ------ -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand accounts:
Passbook and statement $11,368 2.95% 13.58% $11,778 2.96% 14.46% $15,080 2.80% 19.25%
accounts 5,663 2.31% 6.77% 5,666 2.30% 6.96% 5,473 2,30% 6.99%
NOW accounts 3,120 3.44% 3.73% 2,552 3.43% 3.13% 2,389 2.60% 3.05%
VIP checking accounts 1,954 0.00% 2.33% 1,934 0.00% 2.38% 1,770 0.00% 2.26%
Non-interest bearing ------- ---- ------ ------- ---- ------ ------- ------ ------
accounts
Total demand deposits 22,105 2.59% 26.41% 21,930 2.58% 26.93% 24,712 2.47% 31.55%
------- ---- ------ ------- ---- ------ ------- ----- ------
Certificate accounts with
original maturities of: 3,613 3.61% 4.32% 3,747 3.79% 4.60% 3,559 2.63% 4.54%
3 months or less 18,156 5.06% 21.69% 16,697 5.64% 20.50% 17,012 3.49% 21.72%
6 months 11,341 5.30% 13.55% 12,637 5.66% 15.52% 10,946 3.97% 13.98%
12 months 2,718 6.08% 3.25% 1,330 6.41% 1.63% -- 0.00% 0.00%
18 months 6,484 5.80% 7.74% 6,990 5.47% 8.58% 6,145 4.86% 7.85%
24 months 2,265 5.61% 2.70% 2,237 5.58% 2.75% 1,830 5.25% 2.34%
36 months 2,006 5.92% 2.40% 1,929 5.90% 2.37% 1,427 5.60% 1.82%
60 months 14,504 6.08% 17.32% 13,401 5.75% 16.46% 11,841 4.75% 15.12%
IRA certificates 523 5.99% 0.62% 539 6.18% 0.66% 843 5.90% 1.08%
Other ------- ---- ------ ------- ---- ------ ------- ----- -------
Total certificates 61,610 5.44% 73.59% 59,507 5.32% 73.07% 53,603 4.12% 68.45%
------- ---- ------ ------- ---- ------ ------- ----- -------
Total deposits $83,715 4.69% 100.00% $81,437 4.58% 100.00% $78,315 3.60% 100.00%
======= ==== ====== ======= ==== ====== ======= ===== =======
</TABLE>
62
<PAGE>
The following table presents the maturities and weighted average rates paid
on all certificates of deposit as of June 30, 1996:
<TABLE>
<CAPTION>
Amount Due During the Year Ending June 30,
----------------------------------------------------------------------------------------------------
1997 1998 1999 Thereafter Total
-------------------- ----------------- ----------------- ------------------ --------------------
Weighted Weighted Weighted Weighted Weighted
Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------- --------- ------ --------- ------ --------- ------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Certificates of $100,000 $ 5,057 5.29% $1,665 5.84% $ 216 5.25% $ 828 6.53% $ 7,766 5.54%
or more
Certificates of less than 40,399 5.21% 5,815 5.62% 1,300 5.54% 6,330 6.50% 53,844 5.41%
$100,000 ------- ---- ------ ---- ------ ---- ------ ---- ------- ----
$45,456 5.22% $7,480 5.67% $1,516 5.50% $7,158 6.50% $61,610 5.54%
======= ==== ====== ==== ====== ==== ====== ==== ======= ====
</TABLE>
63
<PAGE>
Based upon historical experience, Richmond Savings expects that a substantial
percentage of its time deposits coming due within twelve months after June 30,
1996 will be renewed.
As of June 30, 1996, the aggregate amount of time certificates of deposit
in amounts greater than or equal to $100,000 outstanding was $7.8 million. Some
of these deposits were deposits of state and local governments which are subject
to rebidding from time to time and to securitization requirements. The following
table presents the maturity of these time certificates of deposit at
such date.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
3 Months or less $2,179
Over 3 months through 12 months 2,878
Over 12 months 2,709
------
Total $7,766
======
</TABLE>
BORROWINGS. Although it has not found it necessary to do so in several
years, Richmond Savings may obtain advances from the FHLB of Atlanta to
supplement its liquidity needs. The FHLB system functions in a reserve credit
capacity for savings institutions. As a member, Richmond Savings is required to
own capital stock in the FHLB of Atlanta and is authorized to apply for advances
from the FHLB of Atlanta on the security of that stock and a floating lien on
certain of its real estate secured loans and other assets. Each credit program
has its own interest rate and range of maturities. Depending on the program,
limitations on the amount of advances are based either on a fixed percentage of
an institution's net worth or on the FHLB of Atlanta's assessment of the
institution's creditworthiness. At June 30, 1996, Richmond Savings had no
outstanding borrowings.
SUBSIDIARIES
As a North Carolina-chartered savings bank, Richmond Savings is able to
invest up to 10% of its total assets in subsidiary service corporations.
However, any investment in service corporations which would cause Richmond
Savings to exceed an investment of 3% of assets must receive prior approval of
the FDIC.
Richmond Savings has one wholly-owned subsidiary, CERKO, Inc., a North
Carolina corporation ("CERKO"). CERKO acts as an agent in the sale of annuities,
Medicare and Medicaid supplements, and major medical and life insurance
policies. In addition, CERKO owns certain real property. Regulations of the
Administrator and FDIC place limitations upon the activities of subsidiaries of
North Carolina-chartered savings banks. The total assets of CERKO at June 30,
1996 were $157,000 and the net income for that subsidiary for the year ended
June 30, 1996 was $21,000.
PROPERTIES
The following table sets forth the location of Richmond Savings'
headquarters office in Rockingham, North Carolina, its three full-service branch
offices and its loan origination office, as well as certain other information
relating to these offices as of June 30, 1996:
64
<PAGE>
<TABLE>
<CAPTION>
Net Book
Value of Lease
Property and Owned or Expiration
Improvements Leased Date
------------ -------- ----------
<S> <C> <C> <C>
Headquarters Office
115 South Lawrence Street
Rockingham, North Carolina $274,000 Owned
Full-Service Branch Offices:
Richmond Plaza Office
Richmond Plaza Shopping Center
Rockingham, North Carolina 5,000 Leased March 31, 1997
Southern Pines Office
495 Pinehurst Avenue
Southern Pines, North Carolina 744,000 Owned
Ellerbe Office
119 West Sunset Avenue
Ellerbe, North Carolina 35,000 Owned
Loan Origination Office
800-C Atkinson Street
Laurinburg, North Carolina -- Leased Month-to-month
</TABLE>
The total net book value of Richmond Savings' furniture, fixtures and
equipment at June 30, 1996 was $248,000. Richmond Savings has a new office under
construction at 115 West Sunset Avenue, Ellerbe, North Carolina which will
replace the existing Ellerbe office. Costs incurred in connection with this
facility aggregated $48,000 as of June 30, 1996. This office is expected to be
opened in December, 1996. Richmond Savings is seeking regulatory approval to
replace its Richmond Plaza office with a new office to be
located nearby.
LEGAL PROCEEDINGS
From time to time, Richmond Savings is a party to legal proceedings which
arise in the ordinary course of its business. Most commonly, such proceedings
are commenced by Richmond Savings to enforce obligations owed to it. From time
to time, claims are asserted against Richmond Savings directly or as defenses
and counterclaims in actions filed by Richmond Savings. At this time, Richmond
Savings is not a party to any legal proceeding which is expected to have a
material effect on its financial condition or results of operations.
COMPETITION
Richmond Savings faces strong competition both in attracting deposits and
making real estate and other loans. Its most direct competition for deposits has
historically come from other savings institutions, credit unions and commercial
banks located in its primary market area, including large financial institutions
which have greater financial and marketing resources available to them.
Richmond Savings has also faced additional significant competition for
investors' funds from short-term money market securities and other corporate
and government securities. The ability of Richmond Savings to attract and
retain savings deposits depends on its ability to generally provide a rate of
return, liquidity and risk comparable to that offered by competing investment
opportunities.
Richmond Savings experiences strong competition for real estate loans from
other savings institutions, commercial banks, and mortgage banking companies.
Richmond Savings competes for loans primarily through the interest rates and
loan fees it charges, the efficiency and quality of services it provides
borrowers, and its more flexible
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underwriting standards. Competition may increase as a result of the continuing
reduction of restrictions on the interstate operations of financial
institutions.
EMPLOYEES
As of June 30, 1996, Richmond Savings had 39 full-time employees and four
part-time employees. Richmond Savings provides its employees with basic and
major medical insurance, life insurance, sick leave and vacation benefits. In
addition, Richmond Savings maintains a target benefit retirement plan which
seeks to provide participants with a target retirement benefit equal to a
maximum of 60% of annual earnings, reduced pro-rata for years of service less
than 25. Richmond Savings also has a 401(k) retirement plan pursuant to which
Richmond Savings has in the past matched one-half of employees' contributions,
with its contribution limited to 3% of each employee's salary. See Note G of
the "Notes to Consolidated Financial Statements."
In connection with the Conversion, Richmond Savings has adopted the ESOP,
which will provide benefits to employees of Richmond Savings. See "MANAGEMENT OF
RICHMOND SAVINGS -- Employee Stock Ownership Plan." Also, the Boards of
Directors of the Holding Company and Richmond Savings plan to adopt, and
stockholders of the Holding Company will be asked to approve, the MRP and the
Stock Option Plan at a meeting of stockholders following the Conversion. See
"MANAGEMENT OF RICHMOND SAVINGS -- Proposed Management Recognition Plan" and "--
Proposed Stock Option Plan."
Employees are not represented by any union or collective bargaining group,
and Richmond Savings considers its employee relations to be good.
TAXATION
FEDERAL INCOME TAXATION
Savings institutions such as Richmond Savings are subject to the taxing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for
corporations, as modified by certain provisions specifically applicable for
financial or thrift institutions. Income is reported using the accrual method
of accounting. The maximum corporate federal income tax rate is 35%.
For fiscal years beginning prior to December 31, 1995, thrift institutions
which qualified under certain definitional tests and other conditions of the
Code were permitted certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. A reserve could
be established for bad debts on qualifying real property loans (generally loans
secured by interests in real property improved or to be improved) under (i) a
method based on a percentage of the institution's taxable income, as adjusted
(the "percentage of taxable income method") or (ii) a method based on actual
loss experience (the "experience method"). The reserve for nonqualifying loans
was computed using the experience method.
The percentage of taxable income method was limited to 8% of taxable
income. This method could not raise the reserve to exceed 6% of qualifying real
property loans at the end of the year. Moreover, the additions for qualifying
real property loans, when added to nonqualifying loans, could not exceed 12% of
the amount by which total deposits or withdrawable accounts exceeded the sum of
surplus, undivided profits and reserves at the beginning of the year. The
experience method was the amount necessary to increase the balance of the
reserve at the close of the year to the greater of (i) the amount which bore the
same ratio to loans outstanding at the close of the year as the total net bad
debts sustained during the current and five preceding years bore to the sum of
the loans outstanding at the close of such six years or (ii) the balance in the
reserve account at the close of the last taxable year beginning before 1988
(assuming that the loans outstanding have not declined since such date).
In order to qualify for the percentage of income method, an institution had
to have at least 60% of its assets as "qualifying assets" which generally
included, cash, obligations of the United States government or an agency or
instrumentality thereof or of a state or political subdivision, residential real
estate-related loans, or loans secured by
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savings accounts and property used in the conduct of its business. In addition,
it had to meet certain other supervisory tests and operate principally for the
purpose of acquiring savings and investing in loans.
Institutions which became ineligible to use the percentage of income method
had to change to either the reserve method or the specific charge-off method
that applied to banks. Large thrift institutions, those generally exceeding
$500 million in assets, had to convert to the specific charge-off method. In
the fiscal years 1994, 1995 and 1996, Richmond Savings elected to use the
percentage of taxable income method in computing its bad debt reserve for
federal income taxes.
Bad debt reserve balances in excess of the balance computed under the
experience method or amounts maintained in a supplemental reserve built up prior
to 1962 ("excess bad debt reserve") require inclusion in taxable income upon
certain distributions to shareholders. Distributions in redemption or
liquidation of stock or distributions with respect to its stock in excess of
earnings and profits accumulated in years beginning after December 31, 1951, are
treated as a distribution from the excess bad debt reserve. When such a
distribution takes place and it is treated as from the excess bad debt reserve,
the thrift is required to reduce its reserve by such amount and simultaneously
recognize the amount as an item of taxable income increased by the amount of
income tax imposed on the inclusion. Dividends not in excess of earnings and
profits accumulated since December 31, 1951 will not require inclusion of part
or all of the bad debt reserve in taxable income. Richmond Savings has
accumulated earnings and profits since December 31, 1951 and has an excess in
its bad debt reserve. Distributions in excess of current and accumulated
earnings and profits will increase taxable income. Net retained earnings at
June 30, 1995 includes approximately $1.5 million for which no provision for
federal income tax has been made. See Note H to "Notes to Consolidated
Financial Statements."
Legislation passed by the U.S. Congress and signed by the President in
August, 1996 contains a provision that repeals the percentage of taxable income
method of accounting for thrift bad debt reserves (including the percentage of
taxable income method) for tax years beginning after December 31, 1995. This
requires Richmond Savings to account for bad debts using the specific charge-off
method. The legislation, will trigger bad debt reserve recapture for post-1987
excess reserves over a six-year period. At June 30, 1996, Richmond Savings'
post-1987 excess reserves amounted to approximately $581,000. The legislation
suspends recapture of post-1987 excess reserves for up to two years if, during
those years, the institution satisfies a "residential loan requirement." This
requirement will be met if the principal amount of the institution's residential
loans exceeds a base year amount, which is determined by reference to the
average of the institution's residential loans during the six taxable years
ending before January 1, 1996. However, notwithstanding this special provision,
recapture must begin no later than the first taxable year beginning after
December 31, 1997. See "RISK FACTORS -- Increased Tax Liability Resulting From
Recapture of Bad Debt Reserves."
Richmond Savings may also be subject to the corporate alternative minimum
tax ("AMT"). This tax is applicable only to the extent it exceeds the regular
corporate income tax. The AMT is imposed at the rate of 20% of the
corporation's alternative minimum taxable income ("AMTI") subject to applicable
statutory exemptions. AMTI is calculated by adding certain tax preference items
and making certain adjustments to the corporation's regular taxable income.
Preference items and adjustments generally applicable to financial institutions
include, but are not limited to, the following: (i) the excess of the bad debt
deduction over the amount that would have been allowable on the basis of actual
experience; (ii) interest on certain tax-exempt bonds issued after August 7,
1986; and (iii) 75% of the excess, if any, of a corporation's adjusted earnings
and profits over its AMTI (as otherwise determined with certain adjustments).
Net operating loss carryovers, subject to certain adjustments, may be utilized
to offset up to 90% of the AMTI. Credit for AMT paid may be available in future
years to reduce future regular federal income tax liability. Richmond Savings
has not been subject to the AMT in recent years.
Richmond Savings' federal income tax returns have not been audited in the
last five tax years.
STATE AND LOCAL TAXATION
Under North Carolina law, the corporate income tax is 7.75% of federal
taxable income as computed under the Code, subject to certain prescribed
adjustments. In addition, for tax years beginning in 1991, 1992, 1993 and 1994,
corporate taxpayers were required to pay a surtax equal to 4%, 3%, 2% and 1%,
respectively, of the state income tax otherwise payable by it. An annual state
franchise tax is imposed at a rate of 0.15% applied to the greatest of the
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institutions (i) capital stock, surplus and undivided profits, (ii) investment
in tangible property in North Carolina or (iii) appraised valuation of property
in North Carolina.
The North Carolina corporate tax note will drop to 7.5% in 1997, 7.25% in
1998, 7% in 1999 and 6.9% thereafter.
SUPERVISION AND REGULATION
REGULATION OF THE HOLDING COMPANY
GENERAL. The Holding Company was organized for the purpose of acquiring
and holding all of the capital stock of Richmond Savings to be issued in the
Conversion. As a savings bank holding company subject to the Bank Holding
Company Act of 1956, as amended ("BHCA"), the Holding Company will become
subject to certain regulations of the Federal Reserve. Under the BHCA, the
Holding Company's activities and those of its subsidiaries are limited to
banking, managing or controlling banks, furnishing services to or performing
services for its subsidiaries or engaging in any other activity which the
Federal Reserve determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. The BHCA prohibits the
Holding Company from acquiring direct or indirect control of more than 5% of the
outstanding voting stock or substantially all of the assets of any bank or
savings bank or merging or consolidating with another bank holding company or
savings bank holding company without prior approval of the Federal Reserve.
Additionally, the BHCA prohibits the Holding Company from engaging in, or
acquiring ownership or control of, more than 5% of the outstanding voting stock
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
properly incident thereto. The BHCA generally does not place territorial
restrictions on the activities of such nonbanking related activities.
Similarly, Federal Reserve approval (or, in certain cases, non-disapproval)
must be obtained prior to any person acquiring control of the Holding Company.
Control is conclusively presumed to exist if, among other things, a person
acquires more than 25% of any class of voting stock of the Holding Company or
controls in any manner the election of a majority of the directors of the
Holding Company. Control is presumed to exist if a person acquires more than
10% of any class of voting stock and the stock is registered under Section 12 of
the Exchange Act or the acquiror will be the largest shareholder after the
acquisition.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default or in default. For example, under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("1991 Banking
Law"), to avoid receivership of an insured depository institution subsidiary, a
bank holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" with the
terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of the institution's total assets at the time the institution became
undercapitalized or (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all acceptable capital
standards as of the time the institution fails to comply with such capital
restoration plan. Under a policy of the Federal Reserve with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. The Federal Reserve under the BHCA also has the
authority to require a bank holding company to terminate any activity or to
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.
In addition, the "cross-guarantee" provisions of the Federal Deposit
Insurance Act, as amended ("FDIA") require insured depository institutions under
common control to reimburse the FDIC for any loss suffered by either the SAIF or
the BIF as a result of the default of a commonly controlled insured depository
institution or for any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the
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BIF or both. The FDIC's claim for damages is superior to claims of stockholders
of the insured depository institution or its holding company but is subordinate
to claims of depositors, secured creditors and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institutions.
No stock repurchases may be made within one year after the Conversion
without the approval of the Administrator. Also, the Holding Company must
notify the Federal Reserve prior to repurchasing Common Stock for in excess of
10% of its net worth during any 12 month period.
As a result of the Holding Company's ownership of Richmond Savings, the
Holding Company will be registered under the savings bank holding company laws
of North Carolina. Accordingly, the Holding Company is also subject to
regulation and supervision by the Administrator.
CAPITAL ADEQUACY GUIDELINES FOR HOLDING COMPANIES. The Federal Reserve has
adopted capital adequacy guidelines for bank holding companies and banks that
are members of the Federal Reserve system and have consolidated assets of $150
million or more. For bank holding companies with less than $150 million in
consolidated assets, the guidelines are applied on a bank-only basis unless the
parent bank holding company (i) is engaged in nonbank activity involving
significant leverage or (ii) has a significant amount of outstanding debt that
is held by the general public.
Bank holding companies subject to the Federal Reserve's capital adequacy
guidelines are required to comply with the Federal Reserve's risk-based capital
regulations. Under these regulations, the minimum ratio of total capital to
risk-weighted assets (including certain off-balance sheet activities, such as
standby letters of credit) is 8%. At least half of the total capital is
required to be "Tier I capital," principally consisting of common stockholders'
equity, noncumulative perpetual preferred stock, and a limited amount of
cumulative perpetual preferred stock, less certain goodwill items. The
remainder ("Tier II capital") may consist of a limited amount of subordinated
debt, certain hybrid capital instruments and other debt securities, perpetual
preferred stock, and a limited amount of the general loan loss allowance. In
addition to the risk-based capital guidelines, the Federal Reserve has adopted a
minimum Tier I (leverage) capital ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company which has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain a Tier I
(leverage) capital ratio of at least 1% to 2% above the stated minimum.
The 1991 Banking Law requires each federal banking agency, including the
Federal Reserve, to revise its risk-based capital standards within 18 months of
enactment of the statute to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risks of non-
traditional activities, as well as reflect the actual performance and expected
risk of loss on multi-family mortgages. In December 1994, the federal banking
agencies jointly issued final regulations effective January 17, 1995, revising
the risk-based capital rules to take account of interest rate risk.
DIVIDEND LIMITATIONS. In connection with the Conversion, the FDIC has
required the Holding Company and Richmond Savings to agree that, during the
first year after consummation of the Conversion, the Holding Company will not
pay any dividend or make any other distribution to its stockholders which
represents, is characterized as or is treated for federal tax purposes as, a
return of capital.
CAPITAL MAINTENANCE AGREEMENT. In connection with the Administrator's
approval of the Holding Company's application to acquire control of Richmond
Savings, the Holding Company was required to execute a Capital Maintenance
Agreement whereby it has agreed to maintain Richmond Savings' capital in an
amount sufficient to enable Richmond Savings to satisfy all regulatory capital
requirements.
FEDERAL SECURITIES LAW. The Holding Company has filed with the SEC a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), for the registration of the Common Stock to be issued in the
Conversion. The Holding Company intends to register the Common Stock with the
SEC pursuant to Section 12 of the Exchange Act. Upon such registration, the
proxy and tender offer rules, insider trading reporting requirements and
restrictions, annual and periodic reporting and other requirements of the
Exchange Act will be applicable to the Holding Company.
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REGULATION OF RICHMOND SAVINGS
GENERAL. Federal and state legislation and regulation have significantly
affected the operations of federally insured savings institutions and other
federally regulated financial institutions in the past several years and have
increased competition among savings institutions, commercial banks and other
providers of financial services. In addition, federal legislation has imposed
new limitations on investment authority, and higher insurance and examination
assessments on savings institutions and has made other changes that may
adversely affect the future operations and competitiveness of savings
institutions with other financial institutions, including commercial banks and
their holding companies. The operations of regulated depository institutions,
including Richmond Savings, will continue to be subject to changes in applicable
statutes and regulations from time to time.
Richmond Savings is a North Carolina-chartered savings bank, is a member of
the FHLB system, and its deposits are insured by the FDIC through the SAIF. It
is subject to examination and regulation by the FDIC and the Administrator and
to regulations governing such matters as capital standards, mergers,
establishment of branch offices, subsidiary investments and activities, and
general investment authority. Generally, North Carolina-chartered savings banks
whose deposits are insured by the SAIF are subject to restrictions with respect
to activities and investments, transactions with affiliates and loans-to-one
borrower similar to those applicable to SAIF-insured savings associations. Such
examination and regulation is intended primarily for the protection of
depositors and the federal deposit insurance funds.
Richmond Savings is subject to various regulations promulgated by the
Federal Reserve including, without limitation, Regulation B (Equal Credit
Opportunity), Regulation D (Reserves), Regulation E (Electronic Fund Transfers),
Regulation O (Loans to Executive Officers, Directors and Principal
Shareholders), Regulation Z (Truth in Lending), Regulation CC (Availability of
Funds) and Regulation DD (Truth in Savings). As holders of loans secured by real
property and as owners of real property, financial institutions, including
Richmond Savings, may be subject to potential liability under various statutes
and regulations applicable to property owners generally, including statutes and
regulations relating to the environmental condition of real property.
The FDIC has extensive enforcement authority over North Carolina-chartered
savings banks, including Richmond Savings. This enforcement authority includes,
among other things, the ability to assess civil money penalties, to issue cease
and desist or removal orders and to initiate injunctive actions. In general,
these enforcement actions may be initiated in response to violations of laws and
regulations and unsafe or unsound practices.
The grounds for appointment of a conservator or receiver for a North
Carolina savings bank on the basis of an institution's financial condition
include: (i) insolvency, in that the assets of the savings bank are less than
its liabilities to depositors and others; (ii) substantial dissipation of assets
or earnings through violations of law or unsafe or unsound practices; (iii)
existence of an unsafe or unsound condition to transact business; (iv)
likelihood that the savings bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business; and (v)
insufficient capital or the incurring or likely incurring of losses that will
deplete substantially all of the institution's capital with no reasonable
prospect of replenishment of capital without federal assistance.
TRANSACTIONS WITH AFFILIATES. Under current federal law, transactions
between Richmond Savings and any affiliate are governed by Sections 23A and 23B
of the Federal Reserve Act. An affiliate of Richmond Savings is any company or
entity that controls, is controlled by or is under common control with the
savings bank. Upon consummation of the Conversion, Richmond Savings will be an
affiliate of the Holding Company. Generally, Sections 23A and 23B (i) establish
certain collateral requirements for loans to affiliates; (ii) limit the extent
to which the savings institution or its subsidiaries may engage in "covered
transactions" with any one affiliate to an amount equal to 10% of such savings
institution's capital stock and surplus, and contain an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus and (iii) require that all such transactions be on terms
substantially the same, or at least as favorable, to the savings institution or
the subsidiary as those provided to a nonaffiliate. The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate, the purchase of assets from an affiliate, the purchase of, or an
investment in, the securities of an affiliate, the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person, or
issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate.
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Further, current federal law has extended to savings banks the restrictions
contained in Section 22(h) of the Federal Reserve Act with respect to loans to
directors, executive officers and principal stockholders. Under Section 22(h),
loans to directors, executive officers and stockholders who own more than 10% of
a savings bank, and certain affiliated entities of any of the foregoing, may not
exceed, together with all other outstanding loans to such person and affiliated
entities, the savings bank's loans-to-one borrower limit as established by
federal law (as discussed below). Section 22(h) also prohibits loans above
amounts prescribed by the appropriate federal banking agency to directors,
executive officers and stockholders who own more than 10% of a savings bank, and
their respective affiliates, unless such loan is approved in advance by a
majority of the board of directors of the savings bank. Any "interested"
director may not participate in the voting. The Federal Reserve has prescribed
the loan amount (which includes all other outstanding loans to such person), as
to which such prior board of director approval is required, as being the greater
of $25,000 or 5% of unimpaired capital and unimpaired surplus (up to $500,000).
Further, pursuant to Section 22(h) the Federal Reserve requires that loans to
directors, executive officers, and principal stockholders be made on terms
substantially the same as offered in comparable transactions to other persons
and not involve more than the normal risk of repayment or present other
unfavorable features.
INSURANCE OF DEPOSIT ACCOUNTS. The FDIC administers two separate deposit
insurance funds. The SAIF maintains a fund to insure the deposits of
institutions the deposits of which were insured by the Federal Savings and Loan
Insurance Corporation (the "FSLIC") prior to the enactment of FIRREA, and the
BIF maintains a fund to insure the deposits of institutions the deposits of
which were insured by the FDIC prior to the enactment of FIRREA. Richmond
Savings is a member of the SAIF of the FDIC.
As a SAIF-insured institution, Richmond Savings is subject to insurance
assessments imposed by the FDIC. Effective January 1, 1993, the FDIC replaced
its uniform assessment rate with a transitional risk-based assessment schedule
issued by the FDIC pursuant to the 1991 Banking Law, which imposes assessments
ranging from 23 cents to 31 cents per $100 of an institution's average
assessment base. The actual assessment to be paid by each SAIF member is based
on the institution's assessment risk classification, which is based on whether
the institution is considered "well capitalized," "adequately capitalized" or
"undercapitalized" (as such terms have been defined in federal regulations), and
whether such institution is considered by its supervisory agency to be
financially sound or to have supervisory concerns. Under the 1991 Banking Law,
the FDIC also may impose special assessments on SAIF members to repay amounts
borrowed from the U.S. Treasury or for any other reason deemed necessary by the
FDIC. As a result of the 1991 Banking Law, the assessment rate on deposits
could further increase over a 15 year period.
Financial institutions such as Richmond Savings which are members of the
SAIF, are required to pay higher deposit insurance premiums than financial
institutions which are members of the BIF, primarily commercial banks, because
the BIF has higher reserves than the SAIF and has been responsible for fewer
troubled institutions. The FDIC Board of Directors has recently approved a new
risk-based premium schedule that will reduce assessment rates for commercial
banks, will leave assessment rates for financial institutions such as Richmond
Savings at current levels, and will increase the disparity between SAIF and BIF
assessments. Annual assessments for BIF members in the lowest risk category
have been reduced to $2,000. In announcing this rule, the FDIC noted that the
premium differential may have adverse consequences for SAIF members, including
reduced earnings and an impaired ability to raise funds in the capital markets.
In addition, SAIF members, such as Richmond Savings, could be placed at a
substantial competitive disadvantage to BIF members with respect to pricing of
loans and deposits and the ability to achieve lower operating costs. Several
alternatives to mitigate the effect of the BIF/SAIF premium disparity have been
suggested by the federal banking regulators, by members of Congress and by
industry groups.
The Balanced Budget Act of 1995, which was passed by the United States
Congress but vetoed by the President for reasons unrelated to the SAIF
recapitalization, provided for a one-time assessment that would fully capitalize
the SAIF, currently estimated to be 85 cents per $100 of an institution's
assessment base. It is unknown whether similar legislation will be enacted or
whether premiums for either BIF or SAIF members will be adjusted in the future
by the FDIC or by legislative action. If a special assessment as described
above were to be required, it would result in a one-time charge to Richmond
Savings estimated at $712,000, assuming the special assessment is based on
deposits held at June 30, 1996. Management cannot predict whether such
legislation will be enacted, or, if enacted, the amount of any one-time
assessment or whether ongoing SAIF premiums will be reduced to a level equal to
that of BIF premiums.
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Richmond Savings incurred deposit insurance expense of $186,000 and
$185,000 in fiscal 1996 and 1995, respectively. A significant increase in SAIF
insurance premiums or a significant one-time fee to recapitalize the SAIF would
likely have an adverse effect on the operating expenses and results of
operations of Richmond Savings.
COMMUNITY REINVESTMENT ACT. Richmond Savings, like other financial
institutions, is subject to the Community Reinvestment Act ("CRA"). A purpose of
the CRA is to encourage financial institutions to help meet the credit needs of
its entire community, including the needs of low- and moderate-income
neighborhoods. During Richmond Savings' last compliance examination, Richmond
Savings received a "satisfactory" rating with respect to CRA compliance.
Richmond Savings' rating with respect to CRA compliance would be a factor to be
considered by the Federal Reserve and FDIC in considering applications submitted
by Richmond Savings to acquire branches or to acquire or combine with other
financial institutions and take other actions and, if such rating was less than
"satisfactory," could result in the denial of such applications.
The federal banking regulatory agencies have issued a revision of the CRA
regulations, which became effective on January 1, 1996, to implement a new
evaluation system that rates institutions based on their actual performance in
meeting community credit needs. Under the regulations, a savings bank will
first be evaluated and rated under three categories: a lending test, an
investment test and a service test. For each of these three tests, the savings
bank will be given a rating of either "outstanding," "high satisfactory," "low
satisfactory," "needs to improve" or "substantial non-compliance." A set of
criteria for each rating has been developed and is included in the regulation.
If an institution disagrees with a particular rating, the institution has the
burden of rebutting the presumption by clearly establishing that the quantative
measures do not accurately present its actual performance, or that demographics,
competitive conditions or economic or legal limitations peculiar to its service
area should be considered. The ratings received under the three tests will be
used to determine the overall composite CRA rating. The composite ratings will
be the same as those that are currently given: "outstanding," "satisfactory,"
"needs to improve" or "substantial non-compliance."
CAPITAL REQUIREMENTS APPLICABLE TO RICHMOND SAVINGS. The FDIC requires
Richmond Savings to have a minimum leverage ratio of Tier I capital (principally
consisting of common stockholders' equity, noncumulative perpetual preferred
stock and minority interests in consolidated subsidiaries, less certain
intangible and goodwill items), to total assets of at least 3%; provided,
however that all institutions, other than those (i) receiving the highest rating
during the examination process and (ii) not anticipating or experiencing any
significant growth, are required to maintain a ratio of 1% or 2% above the
stated minimum, with an absolute minimum leverage ratio of not less than 4%. The
FDIC also requires Richmond Savings to have a ratio of total capital to risk-
weighted assets, including certain off-balance sheet activities, such as standby
letters of credit, of at least 8%. At least half of the total capital is
required to be Tier I capital. The remainder (Tier II capital) may consist of a
limited amount of subordinated debt, certain hybrid capital instruments, other
debt securities, certain types of preferred stock and a limited amount of
general loan loss allowance.
An institution which fails to meet minimum capital requirements may be
subject to a capital directive which is enforceable in the same manner and to
the same extent as a final cease and desist order, and must submit a capital
plan within 60 days to the FDIC. If the leverage ratio falls to 2% or less, the
institution may be deemed to be operating in an unsafe or unsound condition,
allowing the FDIC to take various enforcement actions, including possible
termination of insurance or placement of the institution in receivership.
The Administrator requires that net worth equal at least 5% of total
assets. Intangible assets must be deducted from net worth and assets when
computing compliance with this requirement.
At June 30, 1996, Richmond Savings complied with each of the capital
requirements of the FDIC and the Administrator. For a description of Richmond
Savings' required and actual capital levels on June 30, 1996, see "HISTORICAL
AND PRO FORMA CAPITAL COMPLIANCE."
The 1991 Banking Law requires each federal banking agency to revise its
risk-based capital standards within 18 months of enactment of the statute to
ensure that those standards take adequate account of interest rate risk,
concentration of credit risk, and the risk of nontraditional activities, as well
as reflect the actual performance and expected risk of loss on multi-family
mortgages. On September 14, 1993, the agencies issued a joint notice of
proposed rulemaking soliciting comment on proposed revisions to the risk-based
capital rules to take account of interest rate risk.
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The notice proposes alternative approaches for determining the additional amount
of capital, if any, that a bank may be required to have as a result of interest
rate risk. The first approach would reduce a bank's risk-based capital ratios
by an amount based on its measured exposure to interest rate risk in excess of a
specified threshold. The second approach would assess the need for additional
capital on a case-by-case basis, considering both the level of measured
exposure and qualitative risk factors. In February 1994, the federal banking
agencies proposed amendments to their respective risk-based capital requirements
that would explicitly identify concentration of credit risk and certain risks
arising from nontraditional activities, and the management of such risks, as
important factors to consider in assessing an institution's overall capital
adequacy. The proposed amendments do not, however, mandate any specific
adjustments to the risk-based capital calculations as a result of such factors.
Richmond Savings cannot assess at this point the impact the proposal would have
on its capital requirements.
In December 1994, the FDIC adopted a final rule changing its risk-based
capital rules to recognize the effect of bilateral netting agreements in
reducing the credit risk of two types of financial derivatives - interest and
exchange rate contracts. Under the rule, savings banks are permitted to net
positive and negative mark-to-market values of rate contracts with the same
counterparty, subject to legally enforceable bilateral netting contracts that
meet certain criteria. This represents a change from the prior rules which
recognized only a very limited form of netting. Richmond Savings does not
anticipate that this rule will have a material effect upon its financial
condition or results of operations.
LOANS TO ONE BORROWER. Richmond Savings is subject to the Administrator's
loans-to-one borrower limits. Under these limits, no loans and extensions of
credit to any borrower outstanding at one time and not fully secured by readily
marketable collateral shall exceed 15% of the net worth of the savings bank.
Loans and extensions of credit fully secured by readily marketable collateral
may comprise an additional 10% of net worth. Notwithstanding the limits just
described, savings banks may make loans to one borrower, for any purpose, in an
amount of up to $500,000. A savings institution also is authorized to make
loans to one borrower to develop domestic residential housing units, not to
exceed the lesser of $30 million, or 30% of the savings institution's net worth,
provided that (i) the purchase price of each single-family dwelling in the
development does not exceed $500,000; (ii) the savings institution is in
compliance with its fully phased-in capital requirements; (iii) the loans comply
with applicable loan-to-value requirements; (iv) the aggregate amount of loans
made under this authority does not exceed 150% of net worth; and (v) the
institution's regulator issues an order permitting the savings institution to
use this higher limit. These limits also authorize a savings bank to make
loans-to-one borrower to finance the sale of real property acquired in
satisfaction of debts in an amount up to 50% of net worth.
As of June 30, 1996, the largest aggregate amount of loans which Richmond
Savings had to any one borrower was $734,000. Richmond Savings had no loans
outstanding which management believes violate the applicable loans-to-one
borrower limits.
LIMITATIONS ON RATES PAID FOR DEPOSITS. Regulations promulgated by the
FDIC pursuant to the 1991 Banking Law place limitations on the ability of
insured depository institutions to accept, renew or roll over deposits by
offering rates of interest which are significantly higher than the prevailing
rates of interest on deposits offered by other insured depository institutions
having the same type of charter in such depository institution's normal market
area. Under these regulations, "well capitalized" depository institutions may
accept, renew or roll such deposits over without restriction, "adequately
capitalized" depository institutions may accept, renew or roll such deposits
over with a waiver from the FDIC (subject to certain restrictions on payments of
rates) and "undercapitalized" depository institutions may not accept, renew or
roll such deposits over. The definitions of "well capitalized," "adequately
capitalized" and "undercapitalized" are the same as the definitions adopted by
the FDIC to implement the corrective action provisions of the 1991 Banking Law.
See " -- Regulation of Richmond Savings -- 1991 Banking Law."
FEDERAL HOME LOAN BANK SYSTEM. The FHLB system provides a central credit
facility for member institutions. As a member of the FHLB of Atlanta, Richmond
Savings is required to own capital stock in the FHLB of Atlanta in an amount at
least equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar obligations at
the end of each calendar year, or 5% of its outstanding advances (borrowings)
from the FHLB of Atlanta. On June 30, 1996, Richmond Savings was in compliance
with this requirement with an investment in FHLB of Atlanta stock
of $735,000.
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FEDERAL RESERVE SYSTEM. Federal Reserve regulations require savings banks,
not otherwise exempt from the regulations, to maintain reserves against their
transaction accounts (primarily negotiable order of withdrawal accounts) and
certain nonpersonal time deposits. The reserve requirements are subject to
adjustment by the Federal Reserve. As of June 30, 1996, Richmond Savings was in
compliance with the applicable reserve requirements of the Federal Reserve.
RESTRICTIONS ON ACQUISITIONS. Federal law generally provides that no
"person," acting directly or indirectly or through or in concert with one or
more other persons, may acquire "control," as that term is defined in FDIC
regulations, of a state savings bank without giving at least 60 days' written
notice to the FDIC and providing the FDIC an opportunity to disapprove the
proposed acquisition. Pursuant to regulations governing acquisitions of
control, control of an insured institution is conclusively deemed to have been
acquired, among other things, upon the acquisition of more than 25% of any
class of voting stock. In addition, control is presumed to have been acquired,
subject to rebuttal, upon the acquisition of more than 10% of any class of
voting stock. Such acquisitions of control may be disapproved if it is
determined, among other things, that (i) the acquisition would substantially
lessen competition; (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the savings bank or prejudice the
interests of its depositors; or (iii) the competency, experience or integrity of
the acquiring person or the proposed management personnel indicates that it
would not be in the interest of the depositors or the public to permit the
acquisition of control by such person.
For three years following completion of the Conversion, North Carolina
conversion regulations require the prior written approval of the Administrator
before any person may directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class of an equity security of
Richmond Savings. If any person were to so acquire the beneficial ownership of
more than 10% of any class of any equity security without prior written
approval, the securities beneficially owned in excess of 10% would not be
counted as shares entitled to vote and would not be voted or counted as voting
shares in connection with any matter submitted to stockholders for a vote.
Approval is not required for (i) any offer with a view toward public resale made
exclusively to Richmond Savings or its underwriters or the selling group acting
on its behalf or (ii) any offer to acquire or acquisition of beneficial
ownership of more than 10% of the common stock of Richmond Savings by a
corporation whose ownership is or will be substantially the same as the
ownership of Richmond Savings, provided that the offer or acquisition is made
more than one year following the consummation of the Conversion. The regulation
provides that within one year following the Conversion, the Administrator would
approve the acquisition of more than 10% of beneficial ownership only to protect
the safety and soundness of the institution. During the second and third years
after the Conversion, the Administrator may approve such an acquisition upon a
finding that (i) the acquisition is necessary to protect the safety and
soundness of the Holding Company and Richmond Savings or the Boards of Directors
of the Holding Company and Richmond Savings support the acquisition and (iii)
the acquiror is of good character and integrity and possesses satisfactory
managerial skills, the acquiror will be a source of financial strength to the
Holding Company and Richmond Savings and the public interests will not be
adversely affected.
LIQUIDITY. Richmond Savings is subject to the Administrator's requirement
that the ratio of liquid assets to total assets equal at least 10%. The
computation of liquidity under North Carolina regulation allows the inclusion of
mortgage-backed securities and investments which, in the judgment of the
Administrator, have a readily marketable value, including investments with
maturities in excess of five years. At June 30, 1996, Richmond Savings'
liquidity ratio, calculated in accordance with North Carolina regulations, was
approximately 23.6%.
ADDITIONAL LIMITATIONS ON ACTIVITIES. Recent FDIC law and regulations
generally provide that Richmond Savings may not engage as principal in any type
of activity, or in any activity in an amount, not permitted for national banks,
or directly acquire or retain any equity investment of a type or in an amount
not permitted for national banks. The FDIC has authority to grant exceptions
from these prohibitions (other than with respect to non-service corporation
equity investments) if it determines no significant risk to the insurance fund
is posed by the amount of the investment or the activity to be engaged in and if
Richmond Savings is and continues to be in compliance with fully phased-in
capital standards. National banks are generally not permitted to hold equity
investments other than shares of service corporations and certain federal agency
securities. Moreover, the activities in which service corporations for savings
banks are permitted to engage are limited to those of service corporations for
national banks.
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Savings banks are also required to notify the FDIC at least 30 days prior
to the establishment or acquisition of any subsidiary, or at least 30 days prior
to conducting any such new activity. Any such activities must be conducted in
accordance with the regulations and orders of the FDIC and the Administrator.
Savings banks are also generally prohibited from directly or indirectly
acquiring or retaining any corporate debt security that is not of investment
grade (generally referred to as "junk bonds").
1991 BANKING LAW. The 1991 Banking Law became effective on December 19,
1991. Among other things, the 1991 Banking Law provided increased funding for
the BIF and provided for expanded regulation of depository institutions and
their affiliates, including bank holding companies.
The 1991 Banking Law provided the federal banking agencies with broad
powers to take corrective action to resolve problems of insured depository
institutions. The extent of these powers will depend upon whether the
institutions in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," or "critically
undercapitalized." Under the FDIC regulations applicable to Richmond Savings,
an institution is considered "well capitalized" if it has (i) a total risk-based
capital ratio of 10% or greater, (ii) a Tier I risk-based capital ratio of 6% or
greater, (iii) a leverage ratio of 5% or greater and (iv) is not subject to any
order or written directive to meet and maintain a specific capital level for any
capital measure. An "adequately capitalized" institution is defined as one that
has (i) a total risk-based capital ratio of 8% or greater, (ii) a Tier I risk-
based capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater
(or 3% or greater in the case of an institution with the highest examination
rating and which is not experiencing or anticipating significant growth). An
institution is considered (A) "undercapitalized" if it has (i) a total risk-
based capital ratio of less than 8%, (ii) a Tier I risk-based capital ratio of
less than 4% or (iii) a leverage ratio of less than 4% (or 3% and is not
experiencing or anticipating significant growth); (B) "significantly
undercapitalized" if the institution has (i) a total risk-based capital ratio of
less than 6%, (ii) a Tier I risk-based capital ratio of less than 3% or (iii) a
leverage ratio of less than 3% and (C) "critically undercapitalized" if the
institution has a ratio of tangible equity to total assets equal to or less than
2%.
To facilitate the early identification of problems, the 1991 Banking Law
required the federal banking agencies to review and, under certain
circumstances, prescribe more stringent accounting and reporting requirements
than those required by generally accepted accounting principles. The FDIC issued
a final rule, effective July 2, 1993, implementing those provisions.
The 1991 Banking Law further requires the federal banking agencies to
develop regulations requiring disclosure of contingent assets and liabilities
and, to the extent feasible and practicable, supplemental disclosure of the
estimated fair market value of assets and liabilities. The 1991 Banking Law also
requires annual examinations of all insured depository institutions by the
appropriate federal banking agency, with some exceptions for small, well-
capitalized institutions and state chartered institutions examined by state
regulators. Moreover, the 1991 Banking Law, as modified by the Federal Housing
Enterprises Financial Security and Soundness Act, requires the federal banking
agencies to set operational and managerial, asset quality, earnings and stock
valuation standards for insured depository institutions and depository
institution holding companies, as well as compensation standards (but not dollar
levels of compensation) for insured depository institutions that prohibit
excessive compensation, fees or benefits to officers, directors, employees, and
principal stockholders. In July 1992, the federal banking agencies issued a
joint advance notice of proposed rulemaking soliciting comments on all aspects
of the implementation of these standards in accordance with the 1991 Banking
Law, including whether the compensation standards should apply to depository
institution holding companies. An interagency notice of proposed rulemaking was
issued in November 1993. However, sections of the Riegle Community Development
and Regulatory Improvement Act of 1994 will affect the nature and scope of the
proposed regulations, and eliminates the requirement that the regulations apply
to depository institution holding companies.
The foregoing necessarily is a general description of certain provisions of
the 1991 Banking Law and does not purport to be complete.
INTERSTATE BANKING. A bank or savings bank holding company and its
subsidiaries are currently prohibited from acquiring any voting shares of, or
interest in, any banks or savings banks located outside of the state in which
the operations of the savings bank holding company's subsidiaries are located,
unless the acquisition is specifically authorized by the statutes of the state
in which the target bank is located. However, in September 1994, Congress
passed
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the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"). The Interstate Banking Act permits adequately
capitalized bank and savings bank holding companies to acquire control of banks
and savings banks in any state beginning on September 29, 1995, one year after
the effectiveness of the Interstate Banking Act. North Carolina adopted
nationwide reciprocal interstate acquisition legislation in 1994.
Such interstate acquisitions are subject to certain restrictions. States
may require the bank or savings bank being acquired to have been in existence
for a certain length of time but not in excess of five years. In addition, no
bank or saving bank may acquire more than 10% of the insured deposits in the
United States or more than 30% of the insured deposits in any one state, unless
the state has specifically legislated a higher deposit cap. States are free to
legislate stricter deposit caps and, at present, 18 states have deposit caps
lower than 30%.
The Interstate Banking Act also provides for interstate branching. The
McFadden Act of 1927 established state lines as the ultimate barrier to
geographic expansion of a banking network by branching. The Interstate Banking
Act withdraws these barriers, effective June 1, 1997, allowing interstate
branching in all states, provided that a particular state has not specifically
prohibited interstate branching by legislation prior to such time. Unlike
interstate acquisitions, a state may prohibit interstate branching if it
specifically elects to do so by June 1, 1997. States may choose to allow
interstate branching prior to June 1, 1997 by opting-in to a group of states
that permits these transactions. These states generally allow interstate
branching via a merger of an out-of-state bank with an in-state bank, or on a de
novo basis. North Carolina has enacted legislation permitting interstate
branching transactions.
It is anticipated that the Interstate Banking Act will increase competition
within the market in which Richmond Savings now operates, although the extent to
which such competition will increase in such market or the timing of such
increase cannot be predicted. In addition, there can be no assurance as to
whether, or in what form, legislation may be enacted in North Carolina in
reaction to the Interstate Banking Act or what impact such legislation or the
Interstate Banking Act might have upon Richmond Savings.
The Interstate Banking Act also modifies the controversial safety and
soundness provisions contained in Section 39 of the 1991 Banking Law which
required the banking regulatory agencies to promulgate regulations governing
such topics as internal controls, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation and fees and other matters
those agencies determine to be appropriate. The legislation exempts bank
holding companies from these provisions and requires the agencies to prepare
guidelines, as opposed to regulations, dealing with these areas. It also gives
more discretion to the banking regulatory agencies in prescribing standards for
banks' asset quality, earnings and stock valuation.
The Interstate Banking Act also expands current exemptions from the
requirement that banks be examined on a 12-month cycle. Exempted banks will be
inspected every 18 months. Other provisions address paperwork reduction and
regulatory improvements, small business and commercial real estate loan
securitization, truth-in-lending amendments regarding high cost mortgages,
strengthening of the independence of certain financial regulatory agencies,
money laundering, flood insurance reform and extension of certain statutes of
limitations.
RESTRICTIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS. A North
Carolina-chartered stock savings bank may not declare or pay a cash dividend on,
or repurchase any of, its capital stock if the effect of such transaction would
be to reduce the net worth of the institution to an amount which is less than
the minimum amount required by applicable federal and state regulations. In
addition, a North Carolina-chartered stock savings bank, for a period of five
years after its conversion from mutual to stock form, must obtain the written
approval from the Administrator before declaring or paying a cash dividend on
its capital stock in an amount in excess of one-half of the greater of (i) the
institution's net income for the most recent fiscal year end, or (ii) the
average of the institution's net income after dividends for the most recent
fiscal year end and not more than two of the immediately preceding fiscal year
ends, if applicable.
Also, without the prior written approval of the Administrator, a North
Carolina-chartered stock savings bank, for a period of five years after its
conversion from mutual to stock form, may not repurchase any of its capital
stock. The Administrator will give approval to repurchase only upon a showing
that the proposed repurchase will not adversely affect the safety and soundness
of the institution. Under FDIC regulations, stock repurchases may be made
during the first year after the Conversion only after receipt of FDIC approval.
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In addition, Richmond Savings is not permitted to declare or pay a cash
dividend or repurchase any of its capital stock if the effect thereof would be
to cause its net worth to be reduced below the amount required for the
liquidation account established in connection with Richmond Savings' conversion
from mutual to stock ownership.
In connection with the Conversion, the FDIC has required the Holding
Company and Richmond Savings to agree that, during the first year after the
Conversion, Richmond Savings will not pay any dividend or make any other
distribution to its stockholder which represents, is characterized as or is
treated for federal tax purposes as, a return of capital.
RESTRICTIONS ON BENEFIT PLANS. FDIC regulations provide that for a period
of one year from the date of the Conversion, Richmond Savings may not implement
or adopt a stock option plan or restricted stock plan, other than a tax-
qualified plan or ESOP, unless: (1) the plans are fully disclosed in the
Conversion proxy soliciting and stock offering material, (2) all such plans are
approved by a majority of the Holding Company's stockholders prior to
implementation and no earlier than six months following the Conversion, (3) for
stock option plans, the exercise price must be at least equal to the market
price of the stock at the time of grant, and (4) for restricted stock plans, no
stock issued in connection with the Conversion may be used to fund the plan.
The FDIC regulations provide that, in reviewing plans submitted to the
stockholders within one year after the consummation of the Conversion, the FDIC
will presume that excessive compensation will result if stock based benefit
plans fail to satisfy percentage limitations on management stock-based benefit
plans set forth in the regulations of the OTS. Those regulations provide that
(1) for stock option plans, the total number of shares for which options may
be granted may not exceed 10% of the shares issued in the Conversion, (2) for
restricted stock plans, the shares issued may not exceed 3% of the shares issued
in the Conversion (4% for institutions with tangible capital of 10% or greater
after the Conversion), (3) the aggregate amount of stock purchased by the ESOP
shall not exceed 10% (8% for well-capitalized institutions utilizing a 4%
restricted stock plan), (4) no individual employee may receive more than 25% of
the available awards under any plan, and (5) directors who are not employees may
not receive more than 5% individually or 30% in the aggregate of the awards
under any plan. The awards and grants to be made under the MRP and Stock Option
Plan will conform to these requirements if such plans are submitted for
stockholder approval within one year after the Conversion is consummated.
OTHER NORTH CAROLINA REGULATION. As a North Carolina-chartered savings
bank, Richmond Savings derives its authority from, and is regulated by, the
Administrator. The Administrator has the right to promulgate rules and
regulations necessary for the supervision and regulation of North Carolina
savings banks under his jurisdiction and for the protection of the public
investing in such institutions. The regulatory authority of the Administrator
includes, but is not limited to: the establishment of reserve requirements; the
regulation of the payment of dividends; the regulation of stock repurchases, the
regulation of incorporators, stockholders, directors, officers and employees;
the establishment of permitted types of withdrawable accounts and types of
contracts for savings programs, loans and investments; and the regulation of the
conduct and management of savings banks, chartering and branching of
institutions, mergers, conversions and conflicts of interest. North Carolina law
requires that Richmond Savings maintain federal deposit insurance as a condition
of doing business.
The Administrator conducts regular examinations of North Carolina-chartered
savings banks. The purpose of such examinations is to assure that institutions
are being operated in compliance with applicable North Carolina law and
regulations and in a safe and sound manner. These examinations are usually
conducted on a joint basis with the FDIC. In addition, the Administrator is
required to conduct an examination of any institution when he has good reason to
believe that the standing and responsibility of the institution is of doubtful
character or when he otherwise deems it prudent. The Administrator is empowered
to order the revocation of the license of an institution if he finds that it has
violated or is in violation of any North Carolina law or regulation and that
revocation is necessary in order to preserve the assets of the institution and
protect the interests of its depositors. The Administrator has the power to
issue cease and desist orders if any person or institution is engaging in, or
has engaged in, any unsafe or unsound practice or unfair and discriminatory
practice in the conduct of its business or in violation of any other law, rule
or regulation.
A North Carolina-chartered savings bank must maintain net worth, computed
in accordance with the Administrator's requirements, of 5% of total assets and
liquidity of 10% of total assets, as discussed above. Additionally,
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a North Carolina-chartered savings bank is required to maintain general
valuation allowances and specific loss reserves in the same amounts as required
by the FDIC.
Subject to limitation by the Administrator, North Carolina-chartered
savings banks may make any loan or investment or engage in any activity which is
permitted to federally chartered institutions. However, a North Carolina-
chartered savings bank cannot invest more than 15% of its total assets in
business, commercial, corporate and agricultural loans. In addition to such
lending authority, North Carolina-chartered savings banks are authorized to
invest funds, in excess of loan demand, in certain statutorily permitted
investments, including but not limited to (i) obligations of the United States,
or those guaranteed by it; (ii) obligations of the State of North Carolina;
(iii) bank demand or time deposits; (iv) stock or obligations of the federal
deposit insurance fund or a FHLB; (v) savings accounts of any savings
institution as approved by the board of directors; and (vi) stock or obligations
of any agency of the State of North Carolina or of the United States or of any
corporation doing business in North Carolina whose principal business is to make
education loans.
North Carolina law provides a procedure by which savings institutions may
consolidate or merge, subject to approval of the Administrator. The approval is
conditioned upon findings by the Administrator that, among other things, such
merger or consolidation will promote the best interests of the members or
stockholders of the merging institutions. North Carolina law also provides for
simultaneous mergers and conversions and for supervisory mergers conducted by
the Administrator.
MANAGEMENT OF THE HOLDING COMPANY
The Board of Directors of the Holding Company currently consists of eight
directors: Russell E. Bennett, Jr., R. Larry Campbell, Buena Vista Coggin, Joe
M. McLaurin, John T. Page, Jr., W. Jesse Spencer, J. Stanley Vetter and E. E.
Vuncannon, Jr. Each of these persons is also a director of Richmond Savings,
and biographical information with respect to each is set forth under "MANAGEMENT
OF RICHMOND SAVINGS -- Directors." Each director is elected for a one-year
term. However, at such times as the number of directors is at least nine, the
Articles of Incorporation and Bylaws of the Holding Company provide for
staggered elections so that approximately one-third of the directors will each
be initially elected to one, two and three-year terms, respectively, and
thereafter, all directors will be elected to terms of three years each.
The executive officers of the Holding Company, each of whom is also
currently an executive officer of Richmond Savings, and each of whom serves at
the discretion of the Board of Directors of the Holding Company, are as follows:
<TABLE>
<CAPTION>
AGE AT POSITION HELD
NAME JUNE 30, 1996 WITH THE HOLDING COMPANY
---- ------------- ------------------------
<S> <C> <C>
R. Larry Campbell 52 President
John W. Bullard 45 Vice President
</TABLE>
Biographical information with respect to each of these officers is set
forth below under "MANAGEMENT OF RICHMOND SAVINGS -- Executive Officers." There
are no employees of the Holding Company other than the executive officers listed
above and Winston G. Dwyer, who is treasurer, and Karen M. Rickett, who is the
corporate secretary. No officer, director or employee of the Holding Company
has received remuneration from the Holding Company to date, and it is currently
expected that no compensation will be paid by the Holding Company after the
Conversion. Information concerning the principal occupations and employment of,
and compensation paid by Richmond Savings to, the directors and executive
officers of the Holding Company is set forth under "MANAGEMENT OF RICHMOND
SAVINGS." See "MANAGEMENT OF RICHMOND SAVINGS -- Employment Agreements" for a
description of certain agreements expected to be entered into with the executive
officers of the Holding Company and Richmond Savings.
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MANAGEMENT OF RICHMOND SAVINGS
DIRECTORS
The direction and control of Richmond Savings, as a mutual North Carolina-
chartered savings bank, has been vested in its eight-member Board of Directors
elected by the depositor and borrower members of Richmond Savings. Upon
conversion of Richmond Savings to capital stock form, each director of Richmond
Savings immediately prior to the Conversion will continue to serve as a director
of Richmond Savings as a stock institution. All directors currently serve for
one-year terms. Richmond Savings' proposed Bylaws, which would become effective
after the Conversion, provide for staggered elections of its directors, if and
when the number of directors shall equal at least nine, so that approximately
one-third of the directors would be elected each year for three-year terms.
Upon consummation of the Conversion, the Holding Company will own all of the
issued and outstanding shares of capital stock of Richmond Savings, and the
Holding Company will elect the directors of Richmond Savings. The Holding
Company now plans to nominate and re-elect all members of Richmond Savings'
existing board of directors when their existing terms expire. The following
table sets forth certain information with respect to the persons who currently
serve as members of the Board of Directors of Richmond Savings.
<TABLE>
<CAPTION>
AGE ON
JUNE 30, PRINCIPAL OCCUPATION DIRECTOR
NAME 1996 DURING LAST FIVE YEARS SINCE
- ---- -------- ---------------------- --------
<S> <C> <C> <C>
J. Stanley Vetter, 67 Physician in Rockingham, North Carolina 1970
Chairman
John T. Page, Jr., 72 Attorney in Rockingham, North Carolina 1975
Vice Chairman
Russell E. Bennett, Jr. 70 Retired; formerly owner and president of Russell 982/1/
Bennett Chevrolet-Buick-Mazda, Inc. in Rockingham,
North Carolina
R. Larry Campbell 52 President of Richmond Savings 1990
Buena Vista Coggin 68 Retired; former President of Richmond Savings 1978
Joe M. McLaurin 69 Retired 1978
W. Jesse Spencer 75 Certified Public Accountant, Rockingham, North 1988
Carolina
E. E. Vuncannon, Jr. 67 President of E. E. Vuncannon, Inc., Ellerbe, North 1969
Carolina, supplier of farm chemicals, feed and fertilizer
</TABLE>
/1/ Mr. Bennett also served as a director from 1967 through 1970.
BOARD MEETINGS AND COMMITTEES
Richmond Savings' Board of Directors has regular monthly meetings, and held
16 regular and special meetings in the fiscal year ended June 30, 1996. The
Board has also established five committees to whom certain responsibilities have
been delegated - an Executive Committee, an Audit Committee, an Investment
Committee, a CRA Committee and a Capital Planning Committee. No director
attended fewer than 75% of the total number of Board meetings and meetings of
Board committees on which he served during the year ended June 30, 1996.
The Executive Committee is composed of directors Vetter, Chairman; Bennett,
Campbell and Vuncannon. The Executive Committee makes recommendations to the
full Board and acts on policies adopted by the full Board in the
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absence of a meeting of the entire Board. This committee meets on an as needed
basis, and during the fiscal year ended June 30, 1996 met five times.
Richmond Savings' Audit Committee is composed of directors Spencer,
Chairman; Page and Coggin. This committee is responsible for meeting with and
retaining independent auditors, overseeing the adequacy of internal control,
insuring compliance with Richmond Savings' policies and procedures and with
generally accepted accounting principles. The Audit Committee meets on an as
needed basis, and during the fiscal year ended June 30, 1996, met one time.
Richmond Savings' Investment Committee is composed of directors McLaurin,
Chairman; Bennett and Campbell. The Investment Committee is responsible for
overseeing the implementation of the investment policy adopted by the Board and
meets on an as needed basis. The Investment Committee met three times during
the fiscal year ended June 30, 1996.
Richmond Savings' CRA Committee is composed of directors Coggin, Chairman;
Page and Campbell. In addition, John W. Bullard, Executive Vice President, is a
member of this committee. This committee is responsible for monitoring Richmond
Savings' compliance with the CRA and assessing community credit and deposit
needs. This committee meets as needed and did not meet during the fiscal year
ended June 30, 1996.
Richmond Savings' Capital Planning Committee is composed of directors
Spencer, Chairman; Bennett, Vetter and Campbell. John W. Bullard, Executive
Vice President is also a member of this committee. The Capital Planning
Committee is responsible for determining the capital needs of Richmond Savings
and making recommendations regarding how those needs may be satisfied. This
committee meets on an as needed basis and did not meet during the fiscal year
ended June 30, 1996.
DIRECTORS' FEES
For their service on Richmond Savings' Board of Directors, all non-employee
members of Richmond Savings' Board of Directors receive $1,000 per month. The
Chairman of the Board receives an additional $500 per month for serving as
Chairman of the Board. In addition, all non-employee directors who serve on
Board committees receive $75 per meeting for their service. Board fees are
subject to adjustment annually. In addition, during fiscal 1996 all non-
employee Board members received additional compensation of $150 for each of four
additional special meetings.
Richmond Savings has entered into deferred compensation agreements with
several of its directors. Under such arrangements, the directors waived
immediate receipt of their directors' fees for various periods of time in
exchange for Richmond Savings' agreement to pay to the director amounts over a
specified period of time beginning at a date set forth in the agreements.
Benefits are also payable to designated beneficiaries upon the director's death.
Richmond Savings has purchased life insurance policies of which it is the
beneficiary in order to fund certain of the deferred compensation benefits.
Total expense related to the directors' deferred compensation arrangements was
approximately $91,000 in the fiscal year ended June 30, 1996.
Existing members of the Board of Directors may also receive additional
benefits following the Conversion. See "-- Proposed Management Recognition Plan"
and "-- Proposed Stock Option Plan."
EXECUTIVE OFFICERS
Richmond Savings has two executive officers. The following table sets
forth certain information with respect to such executive officers:
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<TABLE>
<CAPTION>
AGE ON POSITIONS AND OCCUPATIONS EMPLOYED BY
NAME JUNE 30, 1996 DURING LAST FIVE YEARS RICHMOND SAVINGS SINCE
- ---- ------------- ------------------------- ----------------------
<S> <C> <C> <C>
R. Larry Campbell 52 President and Chief 1984
Executive
Officer
John W. Bullard 45 Executive Vice President and 1988
Chief Operations Officer;
previously Vice President in
charge of lending
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended June 30, 1996
certain information as to the cash compensation received by (i) the chief
executive officer of Richmond Savings and (ii) all other executive officers of
Richmond Savings whose cash compensation exceeded $100,000 (there were none),
for services in all capacities.
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND COMPENSATION ALL OTHER
PRINCIPAL POSITION SALARY BONUS ($)/3/ COMPENSATION
- ------------------ ------ ----- ------------ ------------
<S> <C> <C> <C> <C>
R. Larry Campbell, $96,888/1/ $9,977/2/ - - - $18,282/4/
President and Director
</TABLE>
____________________
/1/ Includes $1,835 for unused sick days and $1,731 for unused vacation
days.
/2/ Of this amount, $8,977 represents a bonus applicable to performance during
the fiscal year ended June 30, 1996, which amount was not paid until after
the end of such fiscal year.
/3/ Under the "Other Annual Compensation" category, perquisites for the fiscal
year ended June 30, 1996 did not exceed the lesser of $50,000, or 10% of
salary and bonus as reported for Mr. Campbell.
/4/ Includes (a) $10,114 contributed to Richmond Savings' target benefit
retirement plan for Mr. Campbell during fiscal 1996; (b) $2,892 contributed
to Richmond Savings' 401(k) retirement plan for Mr. Campbell during fiscal
1996; and (c) $5,276 accrued under a deferred compensation plan established
for the benefit of Mr. Campbell during fiscal 1996.
BONUS COMPENSATION
In June 1995, Richmond Savings' Board of Directors approved a bonus
compensation plan pursuant to which selected officers of the savings bank could
receive bonus compensation of up to 10% of their salaries if certain performance
goals are achieved. In August, 1996, $18,000 was paid to officers of Richmond
Savings as bonuses for their performance during fiscal 1996.
TARGET BENEFIT PLAN
Richmond Savings currently maintains a defined contribution target benefit
plan for the benefit of all of its employees who have completed one year of
service and who are at least twenty-one (21) years of age. Under the plan,
Richmond Savings contributes an actuarially determined amount for each
participant based upon the individual level premium cost for the "target"
benefit Richmond Savings is attempting to provide the participant at retirement.
This amount is calculated using a formula that takes into account a
participant's compensation and years of participation. The "target" retirement
benefit is 60% of each participant's "compensation," reduced pro-rata for each
year of service less than 25, but may be more or less than the amount, depending
on the participant's account balance at his normal retirement date. For
purposes of the plan, compensation means the participant's highest consecutive
three-year average salary over
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all years of service, excluding salary increases during the final five years of
service. The amount contributed by Richmond Savings to this retirement plan
during fiscal 1996 was $27,000.
Participants are fully vested in amounts contributed to the plan on their
behalf by Richmond Savings after seven years of service, as follows: 1 year of
service, 0%; 2 years, 0%; 3 years, 20%; 4 years, 40%; 5 years, 60%; 6 years,
80%; 7 years or more, 100%. As of December 31, 1996, R. Larry Campbell had nine
years of service under the target benefit plan.
Benefits under the plan are payable in the event of the participant's
retirement, death, disability or termination of employment. A participant's
normal retirement age under the plan is age 65, with at least 5 years of
participation in the plan. The plan also provides for early retirement within 5
years of the participant's normal retirement age.
Upon consummation of the Conversion and establishment of the ESOP, Richmond
Savings plans to terminate its defined contribution target benefit plan.
401(K) PROFIT SHARING PLAN
Richmond Savings has established a contributory savings plan for its
employees, which meets the requirements of section 401(k) of the Code. All
employees who are at least 21 and who have completed one year of service may
elect to contribute a percentage of their compensation to the plan each year,
subject to certain maximums imposed by federal law. Richmond Savings will match
50% of each participant's contribution, up to a maximum employer contribution of
3% of the participant's compensation. For purposes of the 401(k) plan,
compensation means a participant's total compensation received from the
employer.
Participants are fully vested in amounts they contribute to the plan.
Participants are fully vested in amounts contributed to the plan on their behalf
by Richmond Savings as employer matching contributions and as profit sharing
contributions after seven years of service as follows: 1 year, 0%; 2 years, 0%;
3 years, 20%; 4 years, 40%; 5 years, 60%; 6 years, 80%; 7 or more years, 100%.
Benefits under the plan are payable in the event of the participant's
retirement, death, disability or termination of employment. Normal retirement
age under the plan is 65 years of age with at least five years of participation
in the plan. The plan also provides for early retirement within five years of
the participant's normal retirement age. The total amount contributed by
Richmond Savings to the 401(k) plan during fiscal 1996 was $15,000.
RETIREMENT PLANS
Richmond Savings has adopted retirement plans for the benefit of R. Larry
Campbell, President, and John W. Bullard, Executive Vice President. Mr.
Campbell's retirement plan provides a retirement benefit of $30,000 per year
payable for ten years to Mr. Campbell and/or his family upon Mr. Campbell's
retirement on or after age 65. The plan also provides a $30,000 per year
disability benefit until age 65 and a death benefit of $300,000 to Mr.
Campbell's family if he should die prior to retirement. Mr. Bullard's
retirement plan provides a retirement benefit of $10,000 per year for ten years
to Mr. Bullard and/or his family upon Mr. Bullard's retirement on or after age
65. Mr. Bullard's plan provides for a $10,000 per year disability benefit until
age 65 and a death benefit of $100,000 to Mr. Bullard's family if he should die
prior to retirement. These plans are funded by insurance. Richmond Savings'
accrual for these plans in fiscal year 1996 totalled $6,400.
OTHER BENEFITS
Richmond Savings provides its employees with group medical, dental, life
and disability insurance benefits. Employees are also provided with vacation,
holiday and sick leave.
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EMPLOYMENT AGREEMENTS
In connection with the Conversion, Richmond Savings will enter into
employment agreements with R. Larry Campbell, President, and John W. Bullard,
Executive Vice President, in order to establish their duties and compensation
and to provide for their continued employment with Richmond Savings. The
agreements will provide for initial annual base salaries of $95,400 and $63,600,
respectively. The agreements will provide for an initial term of employment of
three years. Commencing at the end of the initial three year term and
continuing on each anniversary date thereafter, following a performance
evaluation of the employee, the agreement may be extended for an additional
year. The agreements also provide that base salary shall be reviewed by the
Board of Directors not less often than annually. In addition, the employment
agreements provide for participation in bonus compensation plans established for
the officers' positions and participation in all other pension, profit-sharing
or retirement plans maintained by Richmond Savings or by the Holding Company for
employees of Richmond Savings, as well as fringe benefits normally associated
with such employee's office. The employment agreements provide that they may be
terminated by Richmond Savings upon the payment of twelve months compensation
and without affecting the other benefits to which the officers are entitled
under the agreements. The agreements may also be terminated by the officers
upon 60 days written notice.
The employment agreements provide that the nature of the employee's
compensation, duties or benefits cannot be diminished following a change in
control of Richmond Savings or the Holding Company. For purposes of the
employment agreement, a change in control generally will occur if (i) after the
effective date of the employment agreement, any "person" (as such term is
defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act) directly or
indirectly, acquires beneficial ownership of voting stock, or acquires
irrevocable proxies or any combination of voting stock and irrevocable proxies,
representing 25% or more of any class of voting securities of either the Holding
Company or Richmond Savings, or acquires in any manner control of the election
of a majority of the directors of either the Holding Company or Richmond
Savings, (ii) either the Holding Company or Richmond Savings consolidates or
merges with or into another corporation, association or entity, or is otherwise
reorganized, where neither the Holding Company nor Richmond Savings is the
surviving corporation in such transaction, or (iii) all or substantially all of
the assets of either the Holding Company or Richmond Savings are sold or
otherwise transferred to, or are acquired by, any other entity or group.
The employment agreements could have the effect of making it less likely
that Richmond Savings or the Holding Company will be acquired by another entity.
See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND RICHMOND SAVINGS
- -- The Holding Company -- Anti-Takeover Effect of Employment Agreements and
Benefit Plans."
SEVERANCE PLAN
In connection with the Conversion, Richmond Savings' Board of Directors
plans to adopt a Severance Plan for the benefit of its employees. The Severance
Plan provides that in the event there is a "change in control" (as defined in
the Severance Plan) of Richmond Savings or the Holding Company and (i) Richmond
Savings or any successor of Richmond Savings terminates the employment of any
full time employee of Richmond Savings in connection with, or within 24 months
after the change in control, other than for "cause" (as defined in the Severance
Plan), or (ii) an employee terminates his or her employment with Richmond
Savings or any successor following a decrease in the level of such employee's
annual base salary rate or a transfer of such employee to a location more than
40 miles distant from the employee's primary work station within 24 months after
a change in control, the employee shall be entitled to a severance benefit equal
to the greater of (a) an amount equal to two weeks' salary at the employee's
existing salary rate multiplied times the employee's number of complete years of
service as a Richmond Savings employee or (b) the amount of one month's salary
at the employee's salary rate at the time of termination, subject to a maximum
payment equal to one half of an employee's annual salary. Officers of Richmond
Savings who, at the time of a "change in control," are parties to employment
agreements having a remaining term of more than two years are not covered by the
Severance Plan.
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<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
Richmond Savings has established the ESOP for its eligible employees. The
ESOP will become effective upon the Conversion. Employees with one year of
service with Richmond Savings who have attained age 21 are eligible to
participate. As part of the Conversion, the ESOP intends to borrow funds from
the Holding Company and use the funds to purchase up to 8% of the shares of
Common Stock to be issued in the Conversion, estimated to be between 95,200 and
128,800 shares assuming the issuance of between 1,190,000 and 1,610,000 shares.
If, because there is an oversubscription of shares of Common Stock or for any
other reason, the ESOP is unable to purchase in the Conversion 8% of the total
number of shares offered in the Conversion, then the Board of Directors of the
Holding Company intends to approve the purchase by the ESOP in the open market
after the Conversion of such shares as are necessary for the ESOP to acquire a
number of shares equal to 8% of the shares of Common Stock issued in the
Conversion.
Collateral for the Holding Company's loan to the ESOP will be the Common
Stock purchased by the ESOP. It is expected that the loan will be repaid
principally from Richmond Savings' discretionary contributions to the ESOP
within 10 years. Dividends, if any, paid on shares held by the ESOP may also be
used to reduce the loan. It is anticipated that the interest rate for the loan
will be a commercially reasonable rate at the time of the loan inception. The
loan will not be guaranteed by Richmond Savings. Shares purchased by the ESOP
and pledged as security for the loan will be held in a suspense account for
allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account in
an amount proportional to the repayment of the ESOP loan will be allocated among
ESOP participants on the basis of relative compensation in the year of
allocation. Benefits will vest in full upon five years of service with credit
given for years of service prior to the Conversion. Benefits are payable upon
death or disability. Richmond Savings' contributions to the ESOP are not fixed,
so benefits payable and corresponding expenses under the ESOP cannot be
determined although benefits payable and corresponding expenses have been
estimated in preparing the pro forma computations set forth in this Prospectus.
See "PRO FORMA DATA."
In connection with the establishment of the ESOP, the Holding Company will
establish a committee of the Board of Directors to administer the ESOP.
Trustees for the ESOP will also be appointed prior to the Conversion. The ESOP
committee may instruct the trustees regarding investment of funds contributed to
the ESOP. Participating employees shall instruct the trustees as to the voting
of all shares allocated to their respective accounts and held in the ESOP. The
unallocated shares held in the suspense account, and all allocated shares for
which voting instructions are not received, will be voted by the trustees in
their discretion subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
The ESOP may be considered an "anti-takeover" device since the ESOP may
become the owner of a sufficient percentage of the total outstanding Common
Stock of the Holding Company that the vote or decision whether to tender shares
of the ESOP may be used as a defense in a contested takeover. See "ANTI-
TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND RICHMOND SAVINGS -- The
Holding Company -- Anti-Takeover Effect of Employment Agreements and Benefit
Plans."
PROPOSED MANAGEMENT RECOGNITION PLAN
The Boards of Directors of the Holding Company and Richmond Savings intend
to adopt the MRP, subject to approval of the stockholders of the Holding Company
at a meeting to be held no sooner than six months following the Conversion. The
MRP will serve as a means of providing the directors and employees of Richmond
Savings with an ownership interest in the Holding Company in a manner designed
to encourage such persons to continue their service to Richmond Savings. All
directors and certain employees of Richmond Savings would receive benefits under
the MRP. Upon stockholder approval of the MRP, the Holding Company and Richmond
Savings expect to fund the MRP with a number of shares of Common Stock equal to
4% of the shares issued in the Conversion. Such shares would be provided by the
issuance of authorized but unissued shares of Common Stock or shares purchased
by the MRP in the open market. Shares issued to recipients under the MRP will be
restricted and subject to forfeiture as described below.
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<PAGE>
To the extent that the MRP acquires authorized but unissued shares of
Common Stock after the Conversion, the interests of existing shareholders will
be diluted. Shares issued under the MRP will be issued at no cost to
recipients. Assuming the issuance of 1,610,000 shares in the Conversion and
receipt of stockholder approval, 64,400 shares would be issued pursuant to the
MRP. It is expected that R. Larry Campbell, President, would be issued 25% of
the shares of Common Stock to be issued under the proposed MRP, or 16,100
shares, assuming the issuance of 1,610,000 shares of Common Stock in the
Conversion. It is expected that John W. Bullard, Executive Vice President,
would be issued 10% of the shares of Common Stock to be issued under the
proposed MRP, or 6,440 shares, assuming the issuance of 1,610,000 shares of
Common Stock in the Conversion. If the MRP is submitted to and approved by the
Holding Company's stockholders within one year after consummation of the
Conversion, the seven nonemployee directors of Richmond Savings would be issued,
in the aggregate, a maximum of 30% of the shares of Common Stock to be issued
under the MRP, or 19,320 shares, assuming the issuance of 1,610,000 shares of
Common Stock in the Conversion. Remaining shares not issued to the executive
officers or nonemployee directors under the MRP would be available for possible
grants to employees of Richmond Savings or could be held for later grants in the
future pursuant to the plan.
After the grant of shares of Common Stock under the MRP, recipients will be
entitled to vote all vested and unvested shares and receive all dividends and
other distributions with respect thereto. The MRP will provide that 20% of the
shares granted will vest and become nonforfeitable on the first anniversary of
the date of the grant under the MRP, and 20% will vest and become nonforfeitable
on each subsequent anniversary date, so that the shares would be completely
vested at the end of five years after the date of grant. Grants of Common Stock
under the MRP will immediately vest upon the disability or death of a recipient.
If the MRP is submitted to the Holding Company's stockholders and approved by
them more than one year after the consummation of the Conversion, the MRP may
provide that grants of Common Stock under the MRP will become automatically
vested upon retirement or upon a change in control of the Holding Company or
Richmond Savings. In such event, it is expected that "change in control" would
have the same meaning as is set forth in the employment agreements of the
executive officers. See "-- Employment Agreements."
Until shares become vested, the right to direct the voting of such shares
and the right to receive dividends thereon may not be sold, assigned,
transferred, exchanged, pledged or otherwise encumbered. If the recipient of
shares under the MRP terminates his service to Richmond Savings prior to the
time shares become vested (and such shares are not automatically vested under
the MRP), unvested shares would be forfeited to the MRP and would be subject to
future allocations to others. In addition, the MRP requires recipients to repay
any dividends received with respect to shares which are later forfeited. It is
expected that the MRP will provide that it cannot be terminated upon a change in
control of the Holding Company or Richmond Savings unless the acquiror provides
for an equivalent benefit.
If the MRP is approved by the stockholders, Richmond Savings expects to
recognize a compensation expense for the MRP awards in the amount of the fair
market value of the Common Stock granted. The expense would be recognized pro
rata over the years during which shares vest. The recipients of stock grants
would be required to recognize ordinary income equal to the fair market value of
the stock. The stock grants would be made in recognition of the recipients'
past service to Richmond Savings and as an incentive for their continued
performance.
PROPOSED STOCK OPTION PLAN
The Boards of Directors of the Holding Company and Richmond Savings intend
to adopt the Stock Option Plan, subject to approval of the stockholders of the
Holding Company at a meeting to be held no sooner than six months following the
Conversion.
Upon stockholder approval of the Stock Option Plan, the trustees under the
Stock Option Plan could acquire in the open market a number of shares of Common
Stock equal to 10% of shares issued in the Conversion. Such shares could be
acquired prior to the time options vest or are exercised under the Stock Option
Plan, or they could be acquired after the options vest and upon their exercise.
In lieu of purchasing shares in the open market, the Holding Company could issue
authorized but unissued shares of Common Stock to satisfy options. The Holding
Company will reserve for issuance the maximum number of shares of Common Stock
to be issued under the Stock Option Plan (less any shares acquired by the Stock
Option Plan in the open market). Assuming the issuance of between 1,190,000 and
1,610,000
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shares in the Conversion, an aggregate of between 119,000 and 168,000
shares of Common Stock would be reserved for issuance and/or purchased in the
open market to be delivered upon the exercise of options granted under the Stock
Option Plan.
Assuming the Stock Option Plan is approved by the stockholders of the
Holding Company, the Stock Option Plan would be administered by a committee of
the Holding Company's Board of Directors. Options granted under the Stock
Option Plan will have an option exercise price of not less than the fair market
value of the Common Stock on the date the options are granted. Options granted
under the Stock Option Plan will have a term of ten years, would not be
transferable except upon death and would continue to be exercisable upon
retirement, death or disability. Options granted under the Stock Option Plan
will have a vesting schedule which will provide that 20% of the options granted
would vest and become nonforfeitable on the first anniversary of the date of the
option grant and 20% will vest and become nonforfeitable on each subsequent
anniversary date, so that the options would be completely vested at the end of
five years after the date of the option grant. Options will become 100% vested
upon death or disability. In addition, if the Stock Option Plan is submitted to
and approved by the Holding Company's stockholders more than one year after
consummation of the Conversion, the Stock Option Plan may provide that options
will become automatically vested upon retirement or upon a change in control of
the Holding Company or Richmond Savings. In such event, it is expected that
"change in control" would have the same meaning as is set forth in the
employment agreements of the executive officers. See "-- Employment Agreements."
The Stock Option Plan will provide that the Plan cannot be terminated upon a
change in control of the Holding Company or Richmond Savings unless the acquiror
provides for an equivalent benefit to holders of unvested options.
It is expected that R. Larry Campbell, President, would be issued 25% of
the options to be issued under the proposed Stock Option Plan, or options to
purchase 40,250 shares of Common Stock assuming the issuance of 1,610,000 shares
in the Conversion. It is expected that John W. Bullard, Executive Vice
President, would be issued 10% of the options to be issued under the proposed
Stock Option Plan, or options to purchase 16,100 shares, assuming the issuance
of 1,610,000 shares in the Conversion. If the Stock Option Plan is submitted to
and approved by the Holding Company's stockholders within one year after
consummation of the Conversion, the seven nonemployee directors of Richmond
Savings would be issued, in the aggregate, a maximum of 30% of the options to be
issued under the Stock Option Plan, or options to purchase 48,300 shares of
Common Stock, assuming the issuance of 1,610,000 shares in the Conversion.
Remaining options not issued to executive officers or nonemployee directors
under the Stock Option Plan would be available for possible grants to employees
of Richmond Savings or could be held for later grants in the future pursuant to
the plan.
Options granted to employees under the Stock Option Plan may be "incentive
stock options" which are designed to result in beneficial tax treatment to the
employee but no tax deduction to the Holding Company or Richmond Savings. The
holder of an incentive stock option generally is not taxed for federal income
tax purposes on either the grant or the exercise of the option. However, the
optionee must include in his or her federal alternative minimum tax income any
excess (the "Bargain Element") of the acquired common stock's fair market value
at the time of exercise over the exercise price paid by the optionee.
Furthermore, if the optionee sells, exchanges, gives or otherwise disposes of
such common stock (other than in certain types of transactions) either within
two years after the option was granted or within one year after the option was
exercised (an "Early Disposition"), the optionee generally must recognize the
Bargain Element as compensation income for regular federal income tax purposes.
Any gain realized on the disposition in excess of the Bargain Element is subject
to recognition under the usual rules applying to dispositions of property. If a
taxable sale or exchange is made after such holding periods are satisfied, the
difference between the exercise price and the amount realized upon the
disposition of the common stock generally will constitute a capital gain or loss
for tax purposes. If an optionee exercises an incentive stock option and
delivers shares of common stock as payment for part or all of the exercise price
of the stock purchased ("Payment Stock"), no gain or loss generally will be
recognized with respect to the Payment Stock; provided, however, if the Payment
Stock was acquired pursuant to the exercise of an incentive stock option, the
optionee will be subject to recognizing as compensation income the Bargain
Element on the Payment Stock as an Early Disposition if the exchange for the new
shares occurs prior to the expiration of the holding periods for the Payment
Stock. The Holding Company generally would not recognize gain or loss or be
entitled to a deduction upon either the grant of an incentive stock option or
the optionee's exercise of an incentive stock option. However, if there is an
Early Disposition, the Holding Company generally would be entitled to deduct the
Bargain Element as compensation paid the optionee.
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Options granted to directors under the Stock Option Plan would be "non-
qualified stock options." In general, the holder of a non-qualified stock
option will recognize compensation income equal to the amount by which the fair
market value of the common stock received on the date of exercise exceeds the
sum of the exercise price and any amount paid for the non-qualified stock
option. If the optionee elects to pay the exercise price in whole or in part
with common stock, the optionee generally will not recognize any gain or loss on
the common stock surrendered in payment of the exercise price. The Holding
Company would not recognize any income or be entitled to claim any deduction
upon the grant of a non-qualified stock option. At the time the optionee is
required to recognize compensation income upon the exercise of the non-qualified
stock option, the Holding Company would recognize a compensation expense and be
entitled to claim a deduction in the amount equal to such compensation income.
It is expected that the Stock Option Plan will provide that after an option
has been granted, the optionee will be entitled to direct the trustees (three
directors of Richmond Savings) as to the voting of any shares of Common Stock
held by the trustees to satisfy vested and unvested options which have been
granted to the optionee. In the event a tender offer is made for shares held by
the trustees to satisfy vested and unvested options granted to an optionee, the
optionee will be able to instruct the trustees' response. Any shares held by
the trustees to satisfy options not yet granted shall be voted or tendered by
the trustees in their discretion.
It is expected that the Stock Option Plan will provide that any cash
dividends or other distributions paid or made with respect to shares of Common
Stock held by the trustees in trust under the Stock Option Plan, plus earnings
on such amounts, less amounts retained by the trustees to pay the expenses of
such trust, will be paid by the trustees to the Holding Company.
If the Stock Option Plan is approved by the stockholders of the Holding
Company, the options granted to employees and directors pursuant to the Stock
Option Plan would be issued in recognition of the recipients' past service to
Richmond Savings and as an incentive for their continued performance. No cash
consideration will be paid for the options.
CERTAIN INDEBTEDNESS AND TRANSACTIONS OF MANAGEMENT
Richmond Savings makes loans to executive officers and directors of
Richmond Savings in the ordinary course of its business. These loans are made
on the same terms, including interest rates and collateral, as those then
prevailing for comparable transactions with nonaffiliated persons, and do not
involve more than the normal risk of collectibility or present any other
unfavorable features. Applicable regulations prohibit Richmond Savings from
making loans to executive officers and directors of Richmond Savings on terms
more favorable than could be obtained by persons not affiliated with Richmond
Savings. Richmond Savings' policy concerning loans to executive officers and
directors complies with such regulations. The aggregate unpaid principal
balance of loans to directors and officers and their affiliates outstanding at
June 30, 1996 totals approximately $101,000 and represents 0.5% of pro forma
stockholders' equity at June 30, 1996, assuming the sale of 1,610,000 shares of
Common Stock.
In addition, director John T. Page, Jr. is a partner of Page, Page & Webb,
a Rockingham, North Carolina law firm which performs legal services for Richmond
Savings.
DESCRIPTION OF CAPITAL STOCK
THE HOLDING COMPANY
The Holding Company is authorized to issue 20,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock. Neither the authorized Common
Stock nor the authorized preferred stock has any par value.
COMMON STOCK. General. THE HOLDING COMPANY'S COMMON STOCK WILL REPRESENT
NONWITHDRAWABLE CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL
NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL ENTITY. Upon payment of
the purchase price for the Common Stock, all such stock will be duly authorized,
validly issued, fully paid, and nonassessable.
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Dividends. The holders of the Holding Company's Common Stock will be
entitled to receive and share ratably in such dividends on Common Stock as may
be declared by the Board of Directors of the Holding Company out of funds
legally available therefor, subject to applicable statutory and regulatory
restrictions. See "SUPERVISION AND REGULATION -- Regulation of the Holding
Company -- Restrictions on Dividends." The ability of the Holding Company to
pay dividends may be dependent on the receipt of dividends from Richmond
Savings. See "DIVIDEND POLICY," "SUPERVISION AND REGULATION -- Regulation of
Richmond Savings --Restrictions on Dividends and Other Capital Distributions,"
and "TAXATION."
Stock Repurchases. The shares of Common Stock do not have any redemption
provisions. Stock repurchases are subject to North Carolina regulations
regarding capital distributions.
Voting Rights. Upon Conversion, the holders of Common Stock, as the only
class of capital stock of the Holding Company then outstanding, will possess
exclusive voting rights with respect to the Holding Company. Such holders will
have the right to elect the Holding Company's Board of Directors and to act on
such other matters as are required to be presented to stockholders under North
Carolina law or as are otherwise presented to them. Each holder of Common Stock
will be entitled to one vote per share. The holders of Common Stock will have
no right to vote their shares cumulatively in the election of directors. As a
result, the holders of a majority of the shares of Common Stock will have the
ability to elect all of the directors on the Holding Company's Board of
Directors.
Liquidation Rights. In the event of a liquidation, dissolution or winding
up of the Holding Company, the holders of Common Stock of the Holding Company
would be entitled to ratably receive, after payment of or making of adequate
provisions for, all debts and liabilities of the Holding Company and after the
rights, if any, of preferred stockholders of the Holding Company, all remaining
assets of the Holding Company available for distribution.
Preemptive Rights. Holders of the Common Stock of the Holding Company will
not be entitled to preemptive rights with respect to any shares which may be
issued by the Holding Company.
Shares Owned by Directors and Executive Officers. All shares of Common
Stock issued in the Conversion to directors and executive officers of the
Holding Company and Richmond Savings will contain a restriction providing that
such shares may not be sold without the written permission of the Administrator
for a period of one year following the date of purchase, except in the event of
death of the director or the executive officer.
PREFERRED STOCK. None of the 5,000,000 shares of the Holding Company's
authorized preferred stock have been issued and none will be issued in the
Conversion. Such stock may be issued in one or more series with such rights,
preferences and designations as the Board of Directors of the Holding Company
may from time to time determine subject to applicable law and regulations. If
and when such shares are issued, holders of such shares may have certain
preferences, powers and rights (including voting rights) senior to the rights of
the holders of the Common Stock. The Board of Directors can (without
stockholder approval) issue preferred stock with voting and conversion rights
which could, among other things, adversely affect the voting power of the
holders of the Common Stock and assist management in impeding an unfriendly
takeover or attempted change in control of the Holding Company that some
stockholders may consider to be in their best interests but to which management
is opposed. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND
RICHMOND SAVINGS --The Holding Company -- Restrictions in Articles of
Incorporation and Bylaws." The Holding Company has no current plans to issue
preferred stock.
RESTRICTIONS ON ACQUISITION. Acquisitions of the Holding Company and
acquisitions of the capital stock of the Holding Company are restricted by
provisions in the Articles of Incorporation and Bylaws of the Holding Company
and by various federal and state laws and regulations. See "ANTI-TAKEOVER
PROVISIONS AFFECTING THE HOLDING COMPANY AND RICHMOND SAVINGS -- The Holding
Company -- Restrictions in Articles of Incorporation and Bylaws" and "--
Regulatory Restrictions."
RICHMOND SAVINGS
COMMON STOCK. After consummation of the Conversion, Richmond Savings will
be authorized to issue 100,000 shares of common stock, no par value ("Richmond
Savings Common Stock"). The Richmond Savings Common
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Stock will represent nonwithdrawable capital, will not be an account of an
insurable type, and will not be insured by the FDIC or any other governmental
entity.
DIVIDENDS. The payment of dividends by Richmond Savings is subject to
limitations which are imposed by North Carolina law and regulations. See
"DIVIDEND POLICY" and "SUPERVISION AND REGULATION --Regulation of Richmond
Savings -- Restrictions on Dividends and Other Capital Distributions." In
addition, federal income tax law considerations may affect the ability of
Richmond Savings to pay dividends and make other capital distributions. See
"TAXATION." The holders of Richmond Savings Common Stock will be entitled to
receive and share ratably in such dividends on the Richmond Savings Common Stock
as may be declared by the Board of Directors of Richmond Savings out of funds
legally available therefor, subject to applicable statutory and regulatory
restrictions.
VOTING RIGHTS. As a mutual North Carolina-chartered savings bank, Richmond
Savings currently has no stockholders, and voting rights in Richmond Savings are
currently held by Richmond Savings' members (depositors and borrowers). Members
elect Richmond Savings' Board of Directors and vote on such other matters as are
required to be presented to them under North Carolina law.
Upon Conversion, the Holding Company, as sole stockholder of Richmond
Savings, will possess the exclusive voting rights with respect to the Richmond
Savings Common Stock, will elect Richmond Savings' Board of Directors and will
act on such other matters as are required to be presented to stockholders under
North Carolina law or as are otherwise presented to stockholders by Richmond
Savings' Board of Directors. The holders of Richmond Savings Common Stock will
have no right to vote their shares cumulatively in the election of directors of
Richmond Savings.
LIQUIDATION RIGHTS. After the Conversion, in the event of any liquidation,
dissolution or winding up of Richmond Savings, the Holding Company, as holder of
all of Richmond Savings' outstanding capital stock, would be entitled to receive
all remaining assets of Richmond Savings available for distribution, after
payment of or making of adequate provisions for, all debts and liabilities of
Richmond Savings (including all deposit accounts and accrued interest thereon)
and after distribution of the balance in the liquidation account established in
connection with the Conversion to Eligible Account Holders and Supplemental
Eligible Account Holders. See "THE CONVERSION -- Effects of Conversion --
Liquidation Rights."
PREEMPTIVE RIGHTS. Holders of the Richmond Savings Common Stock will not
be entitled to preemptive rights with respect to any shares which may be issued
by Richmond Savings.
RESTRICTIONS ON ACQUISITION. Acquisitions of Richmond Savings and
acquisitions of its capital stock are restricted by various federal and state
laws and regulations. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING
COMPANY AND RICHMOND SAVINGS -- Richmond Savings."
ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND RICHMOND SAVINGS
THE HOLDING COMPANY
RESTRICTIONS IN ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of the Holding Company contain certain provisions that
are intended to encourage a potential acquiror to negotiate any proposed
acquisition of the Holding Company directly with the Holding Company's Board of
Directors. An unsolicited non-negotiated takeover proposal can seriously
disrupt the business and management of a corporation and cause it great expense.
Accordingly, the Board of Directors believes it is in the best interests of the
Holding Company and its stockholders to encourage potential acquirors to
negotiate directly with management. The Board of Directors believes that these
provisions will encourage such negotiations and discourage hostile takeover
attempts. It is also the Board of Directors' view that these provisions should
not discourage persons from proposing a merger or transaction at prices
reflective of the true value of the Holding Company and that otherwise is in the
best interests of all stockholders. However, these provisions may have the
effect of discouraging offers to purchase the Holding Company or its securities
which are not approved by the Board of Directors but which certain of the
Holding Company's stockholders may deem to be in their best interests or
pursuant to which stockholders would receive a substantial premium for their
shares over
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the current market prices. As a result, stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of the current Board of Directors and
management more difficult. The Boards of Directors of Richmond Savings and the
Holding Company believe these provisions are in the best interests of the
stockholders because they will assist the Holding Company's Board of Directors
in managing the affairs of the Holding Company in the manner they believe to be
in the best interests of stockholders generally and because a company's board of
directors is often best able in terms of knowledge regarding the company's
business and prospects, as well as resources, to negotiate the best transaction
for its stockholders as a whole.
The following description of certain of the provisions of the Articles of
Incorporation and Bylaws of the Holding Company is necessarily general and
reference should be made in each instance to such Articles of Incorporation and
Bylaws. See "ADDITIONAL INFORMATION" regarding how to obtain a copy of these
documents.
Board of Directors. The Bylaws of the Holding Company provide that the
number of directors shall not be less than five nor more than 15. The initial
number of directors is eight, but such number may be changed by resolution of
the Board of Directors. These provisions have the effect of enabling the Board
of Directors to elect directors friendly to management in the event of a non-
negotiated takeover attempt and may make it more difficult for a person seeking
to acquire control of the Holding Company to gain majority representation on the
Board of Directors in a relatively short period of time. The Holding Company
believes these provisions to be important to continuity in the composition and
policies of the Board of Directors.
The Articles of Incorporation provide that, if and when the number of
directors is at least nine, there will be staggered elections of directors so
that the directors will each be initially elected to one, two or three-year
terms, and thereafter (so long as the number of directors is nine or more) all
directors will be elected to terms of three years each. This provision also has
the effect of making it more difficult for a person seeking to acquire control
of the Holding Company to gain majority representation on the Board of
Directors.
Cumulative Voting. The Articles of Incorporation do not provide for
cumulative voting for any purpose. Cumulative voting in election of directors
entitles a stockholder to cast a total number of votes equal to the number of
directors to be elected multiplied by the number of his or her shares and to
distribute that number of votes among such number of nominees as the stockholder
chooses. The absence of cumulative voting for directors limits the ability of a
minority stockholder to elect directors. Because the holder of less than a
majority of the Holding Company's shares cannot be assured representation on the
Board of Directors, the absence of cumulative voting may discourage
accumulations of the Holding Company's shares or proxy contests that would
result in changes in the Holding Company's management. The Board of Directors
believes that (i) elimination of cumulative voting will help to assure
continuity and stability of management and policies; (ii) directors should be
elected by a majority of the stockholders to represent the interests of the
stockholders as a whole rather than be the special representatives of particular
minority interests; and (iii) efforts to elect directors representing specific
minority interests are potentially divisive and could impair the operations of
the Holding Company.
Special Meetings. The Bylaws of the Holding Company provide that special
meetings of stockholders of the Holding Company may be called by the Chairman of
the Board, the Chief Executive Officer, the President, or by the Board of
Directors. If a special meeting is not called by such persons or entities,
stockholder proposals cannot be presented to the stockholders for action until
the next annual meeting.
Capital Stock. The Articles of Incorporation of the Holding Company
authorize the issuance of 20,000,000 shares of common stock and 5,000,000 shares
of preferred stock. The shares of common stock and preferred stock authorized
in addition to the number of shares of Common Stock to be issued pursuant to the
Conversion were authorized to provide the Holding Company's Board of Directors
with flexibility to issue additional shares, without further stockholder
approval, for proper corporate purposes, including financing, acquisitions,
stock dividends, stock splits, director and employee stock options, grants of
restricted stock to directors and employees and other appropriate purposes.
However, issuance of additional authorized shares may also have the effect of
impeding or deterring future attempts to gain control of the Holding Company.
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The Board of Directors also has sole authority to determine the terms of
any one or more series of preferred stock, including voting rights, conversion
rates, dividend rights, and liquidation preferences, which could adversely
affect the voting power of the holders of the Common Stock and discourage an
attempt to acquire control of the Holding Company. The Board of Directors does
not intend to issue any preferred stock, except on terms which it deems to be in
the best interests of the Holding Company and its stockholders. However, the
Board of Directors has the power, to the extent consistent with its fiduciary
duties, to issue preferred stock to persons friendly to management or otherwise
in order to impede attempts by third parties to acquire voting control of the
Holding Company and to impede other transactions not favored by management. The
Board of Directors currently has no plans for the issuance of additional shares
of Common Stock (except for such shares as may be necessary to fund the MRP and
the Stock Option Plan) or of shares of preferred stock.
Director Nominations. The Bylaws of the Holding Company require a
stockholder who intends to nominate a candidate for election to the Board of
Directors at a stockholders' meeting to give written notice to the Secretary of
the Holding Company at least 50 days (but not more than 90 days) in advance of
the date of the meeting at which such nominations will be made. The nomination
notice is also required to include specified information concerning the nominee
and the proposing stockholder. The Board of Directors of the Holding Company
believes that it is in the best interests of the Holding Company and its
stockholders to provide sufficient time for the Board of Directors to study all
nominations and to determine whether to recommend to the stockholders that such
nominees be considered.
Removal of Directors. The Holding Company's Articles of Incorporation
provide that directors may be removed prior to the end of their term only for
cause.
SUPERMAJORITY VOTING PROVISIONS. The Holding Company's Articles of
Incorporation require the affirmative vote of 75% of the outstanding shares
entitled to vote to approve a merger, consolidation, or other business
combination, unless the transaction is approved, prior to consummation, by the
vote of at least 75% of the number of the Continuing Directors (as defined in
the Articles of Incorporation) on the Holding Company's Board of Directors.
"Continuing Directors" generally includes all members of the Board of Directors
who are not affiliated with any individual, partnership, trust or other person
or entity (or the affiliates and associates of such person or entity) which is a
beneficial owner of 10% or more of the voting shares of the Holding Company.
This provision could tend to make the acquisition of the Holding Company more
difficult to accomplish without the cooperation or favorable recommendation of
the Holding Company's Board of Directors.
ANTI-TAKEOVER EFFECT OF EMPLOYMENT AGREEMENTS AND BENEFIT PLANS. The
existence of the ESOP may tend to discourage takeover attempts because employees
participating under the ESOP and the trustees of the ESOP will effectively
control the voting of the large block of shares held by the ESOP. See
"MANAGEMENT OF RICHMOND SAVINGS -- Employee Stock Ownership Plan." Also, if
approved by the stockholders of the Holding Company at a meeting of stockholders
following the Conversion, the MRP and the Stock Option Plan will provide for the
ownership of additional shares of Common Stock by the employees and the
directors of Richmond Savings and for voting control by directors and employees
over shares held by the MRP and Stock Option Plan which are attributable to
grants made to them under such plans even though the grants are not yet vested.
See "MANAGEMENT OF RICHMOND SAVINGS -- Proposed Management Recognition Plan" and
"-- Proposed Stock Option Plan."
If (i) the MRP and the Stock Option Plan are approved by the stockholders
of the Holding Company within one year after the Conversion, (ii) all of the
options issuable to directors and executive officers under the Stock Option Plan
are issued and all shares necessary to fund such options are acquired in the
open market and held by the Stock Option Plan or by directors and executive
officers, (iii) all of the shares issuable to directors and executive officers
under the MRP are purchased in the open market and issued, (iv) the ESOP
acquires 8% of the shares issued in the Conversion and none of such shares are
allocated, the directors and executive officers and their affiliates as a group
would own or control the voting of as much as 28.02% or 25.17% of the Common
Stock issued and outstanding at the minimum and maximum of the Valuation Range,
respectively. Because the Holding Company's Articles of Incorporation require
the affirmative vote of 75% of the outstanding shares entitled to vote in order
to approve certain mergers, consolidations or other business combinations, the
officers and directors, as a group, could effectively block such transactions.
See "--The Holding Company -- Supermajority Voting Provisions."
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REGULATORY RESTRICTIONS. Applicable North Carolina regulations provide
that for a period of three years following the Conversion, the prior written
approval of the Administrator will be required before any person may, directly
or indirectly, acquire beneficial ownership of or make any offer to acquire any
stock or other equity security of the Holding Company if, after the acquisition
or consummation of such offer, such person would be the beneficial owner of more
than 10% of such class of stock or other class of equity security of the Holding
Company. If any person were to so acquire the beneficial ownership of more than
10% of any class of any equity security without prior written approval, the
securities beneficially owned in excess of 10% would not be counted as shares
entitled to vote and would not be voted or counted as voting shares in
connection with any matter submitted to stockholders for a vote. Approval is
not required for (i) any offer with a view toward public resale made exclusively
to the Holding Company or its underwriters or the selling group acting on its
behalf or (ii) any offer to acquire or acquisition of beneficial ownership of
more than 10% of the common stock of the Holding Company by a corporation whose
ownership is or will be substantially the same as the ownership of the Holding
Company, provided that the offer or acquisition is made more than one year
following the consummation of the Conversion. The regulation provides that
within one year following the Conversion, the Administrator would approve the
acquisition of more than 10% of beneficial ownership only to protect the safety
and soundness of the institution. During the second and third years after the
Conversion, the Administrator may approve such an acquisition upon a finding
that (i) the acquisition is necessary to protect the safety and soundness of the
Holding Company and Richmond Savings or the Board of Directors of the Holding
Company and Richmond Savings support the acquisition and (ii) the acquiror is of
good character and integrity and possesses satisfactory managerial skills, the
acquiror will be a source of financial strength to the Holding Company and
Richmond Savings and the public interests will not be adversely affected.
The Change in Bank Control Act, together with North Carolina regulations,
require that the consent of the Administrator and Federal Reserve be obtained
prior to any person or company acquiring "control" of a North Carolina-chartered
savings bank or a North Carolina-chartered savings bank holding company. Upon
acquiring control, such acquiror will be deemed to be a bank holding company.
Control is conclusively presumed to exist if, among other things, an individual
or company acquires the power, directly or indirectly, to direct the management
or policies of the Holding Company or Richmond Savings or to vote 25% or more of
any class of voting stock. Control is rebuttably presumed to exist under the
Change in Bank Control Act if, among other things, a person acquires more than
10% of any class of voting stock, and the issuer's securities are registered
under Section 12 of the Exchange Act or the person would be the single largest
stockholder. Restrictions applicable to the operations of bank holding
companies and conditions imposed by the Federal Reserve in connection with its
approval of such acquisitions may deter potential acquirors from seeking to
obtain control of the Holding Company. See "SUPERVISION AND REGULATION --
Regulation of the Holding Company."
RICHMOND SAVINGS
Upon consummation of the Conversion, Richmond Savings will become a wholly-
owned subsidiary of the Holding Company, and, consequently, restrictions on the
acquisition of Richmond Savings would have a more limited effect than if
Richmond Savings' common stock were held directly by the stockholders purchasing
in the Conversion. However, restrictions on the acquisition of Richmond Savings
may discourage takeover attempts of the Holding Company in order to gain
immediate control of Richmond Savings.
REGULATORY RESTRICTIONS. The Administrator and the Federal Reserve have
conditionally approved the Holding Company's acquisition of all of the stock of
Richmond Savings issued in the Conversion. For three years following completion
of a conversion, North Carolina conversion regulations require the prior written
approval of the Administrator before any person may directly or indirectly offer
to acquire or acquire the beneficial ownership of more than 10% of any class of
an equity security of a converting state savings bank such as Richmond Savings.
If any person were to so acquire the beneficial ownership of more than 10% of
any class of any equity security without prior written approval, the securities
beneficially owned in excess of 10% would not be counted as shares entitled to
vote and would not be voted or counted as voting shares in connection with any
matter submitted to stockholders for a vote. Approval is not required for (i)
any offer with view toward public resale made exclusively to Richmond Savings or
its underwriters or the selling group acting on its behalf or (ii) any offer to
acquire or acquisition of beneficial ownership of more than 10% of the common
stock of Richmond Savings by a corporation whose ownership is or will be
substantially the same as the ownership of Richmond Savings, provided that the
offer or acquisition is made more than one year following the
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consummation of the Conversion. Similarly, Federal Reserve approval is required
before any person or entity may acquire "control" of Richmond Savings. See "--
The Holding Company-- Regulatory Restrictions."
BOARD OF DIRECTORS. The amended Articles of Incorporation of Richmond
Savings upon consummation of the Conversion will provide that the number of
directors may be no less than five. The initial number of directors will be
eight, but such number may be changed by resolution of the Board of Directors.
This provision has the effect of enabling the Board of Directors to elect
directors friendly to management in the event of a non-negotiated takeover
attempt. Richmond Savings' Bylaws also provide for staggered elections of
directors if and when the total number of directors is at least nine. These
provisions are designed to make it more difficult for a person seeking to
acquire control of Richmond Savings to gain majority representation on the Board
of Directors in a relatively short period of time. Richmond Savings believes
these provisions to be important to continuity in the composition and policies
of its Board of Directors.
THE CONVERSION
THE BOARD OF DIRECTORS OF RICHMOND SAVINGS HAS ADOPTED AND THE ADMINISTRATOR HAS
APPROVED COMPLETION OF THE TRANSACTIONS DESCRIBED IN THE PLAN OF CONVERSION
SUBJECT TO APPROVAL BY THE MEMBERS OF RICHMOND SAVINGS AND TO THE SATISFACTION
OF CERTAIN OTHER CONDITIONS. APPROVAL BY THE ADMINISTRATOR DOES NOT CONSTITUTE
A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE ADMINISTRATOR.
GENERAL
Richmond Savings was organized and has operated for most of its existence
as a traditional savings and loan association. It recognizes that the banking
and financial services industries are in the process of fundamental changes,
reflecting changes in the local, national and international economies,
technological changes and changes in state and federal laws. As a result, for
several years Richmond Savings has been studying the environment in which it
operates and its strategic options.
As a result of its study of its strategic options, Richmond Savings adopted
the Plan of Conversion. The Board of Directors believes that converting the
bank from the mutual to stock form and organizing the Holding Company will
provide increased flexibility for Richmond Savings and the Holding Company to
react to changes in their operating environment, regardless of the strategies
ultimately chosen. Richmond Savings also believes that the additional capital
will enhance its ability to provide additional customer services and that
stockholders of the Holding Company will be encouraged to do more business with,
and refer more customers to, Richmond Savings.
The Board of Director's adoption of the Plan of Conversion is subject to
approval by the members of Richmond Savings and receipt of required regulatory
approvals. Pursuant to the Plan of Conversion, Richmond Savings will be
converted from a North Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank and will become a wholly-owned subsidiary
of the Holding Company. The Holding Company will issue the Common Stock to be
sold in the Conversion and will use that portion of the net proceeds thereof
which it does not retain to purchase the capital stock of Richmond Savings. By
letter dated _______________, 1996, the Administrator approved the Plan of
Conversion, subject to approval by the members of Richmond Savings and
satisfaction of certain other conditions. The Special Meeting will be held on
_____________, 1996 for the purpose of considering approval of the Plan of
Conversion.
Consummation of the Conversion is contingent also upon receipt of the
approvals of the Federal Reserve and the Administrator for the Holding Company
to acquire Richmond Savings. Those approvals have been received. The
Conversion cannot be consummated until the expiration of the Bank Merger Act of
1956 waiting period which began to run upon approval by the Federal Reserve of
the Holding Company's application and expires _____________, 1996. Finally,
consummation of the Conversion is contingent upon receipt from the FDIC of a
final non-objection letter with
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respect to the transaction. The FDIC has issued a conditional notification that
it does not intend to object to the Conversion.
The following is a summary of all material provisions of the Plan of
Conversion. It is qualified in its entirety by the provisions of the Plan of
Conversion, which contains a more detailed description of the terms of the
Conversion. The Plan of Conversion is attached as Attachment I to Richmond
Savings' Proxy Statement for the Special Meeting which has been delivered to all
members of Richmond Savings. The Plan of Conversion can also be obtained by
written request from Richmond Savings. See "ADDITIONAL INFORMATION."
PURPOSES OF CONVERSION
Richmond Savings, as a mutual savings bank, now has no stockholders and no
authority to issue capital stock. By converting to the stock form of
organization, Richmond Savings will be structured in the form used by most
commercial banks, other business entities and a substantial number of savings
institutions. Conversion to a North Carolina-chartered capital stock savings
bank and the formation of a holding company offers a number of advantages which
may be important to the future and performance of Richmond Savings, including
(i) a larger capital base for Richmond Savings' operations, (ii) an enhanced
future access to capital markets, (iii) an opportunity for depositors of
Richmond Savings to become stockholders of the Holding Company, and (iv) an
enhanced ability to enter into business combinations with other financial
institutions.
After completion of the Conversion, the unissued common and preferred stock
authorized by the Holding Company's Articles of Incorporation will permit the
Holding Company, subject to market conditions, to raise additional equity
capital through further sales of securities. Following the Conversion, the
Holding Company will also be able to use stock-related incentive programs to
attract, retain and provide incentives for qualified directors and executive and
other personnel of the Holding Company and Richmond Savings. See "MANAGEMENT OF
RICHMOND SAVINGS --Employee Stock Ownership Plan," "-- Proposed Management
Recognition Plan" and "-- Proposed Stock Option Plan."
Formation of the Holding Company will provide greater flexibility than
Richmond Savings would otherwise have to diversify its business activities
through existing or newly formed subsidiaries, or through acquisitions of, or
mergers with, both mutual and stock institutions, as well as other companies.
However, there are no current arrangements, understandings or agreements
regarding any such business combinations.
EFFECTS OF CONVERSION
GENERAL. Each person with a deposit account in Richmond Savings has pro
rata rights, based upon the balance in his or her account, in the net worth of
Richmond Savings upon liquidation. However, this right is tied to the
depositor's account and has no tangible market value separate from such deposit
account. Further, Richmond Savings' depositors can realize value with respect
to their interests only in the unlikely event that Richmond Savings is
liquidated and has a positive net worth. In such an event, the depositors of
record at that time, as owners, would share pro rata in any residual surplus
after other claims, including those with respect to the deposit accounts of
depositors, are paid.
Upon Richmond Savings' conversion to stock form, its Articles of
Incorporation will be amended to authorize the issuance of permanent
nonwithdrawable capital stock to represent the ownership of Richmond Savings,
including its net worth. THE CAPITAL STOCK WILL BE SEPARATE AND APART FROM
DEPOSIT ACCOUNTS AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL
ENTITY. Certificates will be issued to evidence ownership of the capital stock.
All of the outstanding capital stock of Richmond Savings will be acquired by the
Holding Company, which in turn will issue its Common Stock to purchasers in the
Conversion. The stock certificates issued by the Holding Company will be
transferable and, therefore, subject to applicable law, the stock could be sold
or traded if a purchaser is available with no effect on any deposit account the
seller may hold at Richmond Savings.
VOTING RIGHTS. Under Richmond Savings' current Articles of Incorporation
and Bylaws, deposit account holders and borrowers have voting rights with
respect to certain matters relating to Richmond Savings, including the election
of directors. After the Conversion, (i) neither deposit account holders nor
borrowers will have voting rights with respect to Richmond Savings and will
therefore not be able to elect directors of Richmond Savings or control its
affairs;
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(ii) voting rights with respect to Richmond Savings will be vested in the
Holding Company as the sole stockholder of Richmond Savings; and (iii) voting
rights with respect to the Holding Company will be vested in the Holding
Company's stockholders. Each purchaser of Common Stock will be entitled to vote
on any matters to be considered by the Holding Company's stockholders. For a
description of the voting rights of the holders of Common Stock, see
"DESCRIPTION OF CAPITAL STOCK."
DEPOSIT ACCOUNTS AND LOANS. The account balances, interest rates and other
terms of deposit accounts at Richmond Savings and the existing deposit insurance
coverage of such accounts will not be affected by the Conversion (except to the
extent that a depositor directs Richmond Savings to withdraw funds to pay for
his or her Common Stock). Furthermore, the Conversion will not affect any loan
account, the balances, interest rates, maturities or other terms of these
accounts, or the obligations of borrowers under their individual contractual
arrangements with Richmond Savings.
CONTINUITY. Richmond Savings will continue without interruption, during
and after completion of the Conversion, to provide its services to depositors
and borrowers pursuant to existing policies and will maintain its offices
operated by the existing management and employees of Richmond Savings.
LIQUIDATION RIGHTS. In the unlikely event of a complete liquidation of
Richmond Savings, either before or after Conversion, account holders would have
claims for the amount of their deposit accounts, including accrued interest, and
would receive the protection of deposit insurance up to applicable limits. In
addition to deposit insurance coverage, depositor liquidation rights before and
after Conversion would be as follows:
Liquidation Rights Prior to the Conversion. Prior to the Conversion, in
the event of a complete liquidation of Richmond Savings, each holder of a
deposit account in Richmond Savings would receive such holder's pro rata share
of any assets of Richmond Savings remaining after payment of claims of all
creditors (including the claims of all depositors to the withdrawal value of
their accounts, including accrued interest). Such holder's pro rata share of
such remaining assets, if any, would be in the same proportion of such assets as
the value of such holder's deposit account was to the total value of all deposit
accounts in Richmond Savings at the time of liquidation.
Liquidation Rights After the Conversion. As required by North Carolina
conversion regulations, the Plan of Conversion provides that, upon completion of
the Conversion, a memorandum account called a "Liquidation Account" will be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. The amount of the Liquidation Account will be equal
to the net worth of Richmond Savings as of the date of its latest statement of
financial condition contained in the final prospectus relating to the sale of
shares of Common Stock in the Conversion. Under applicable regulations, Richmond
Savings will not be permitted to pay dividends on, or repurchase any of, its
capital stock if its net worth would thereby be reduced below the aggregate
amount then required for the Liquidation Account. See "DIVIDEND POLICY" and
SUPERVISION AND REGULATION -- Regulation of Richmond Savings --Restrictions on
Dividends and Other Capital Distributions." After the Conversion, Eligible
Account Holders and Supplemental Eligible Account Holders will be entitled, in
the event of a liquidation of Richmond Savings, to receive liquidating
distributions of any assets remaining after payment of all creditors' claims
(including the claims of all depositors to the withdrawal values of their
deposit accounts, including accrued interest), before any distributions are made
on Richmond Savings' capital stock, equal to their proportionate interests at
that time in the Liquidation Account.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have an initial interest ("subaccount balance") in the Liquidation Account for
each deposit account held as of March 31, 1995 (the Eligibility Record Date) or
as of __________________, 1996 (the Supplemental Eligibility Record Date),
respectively. Each initial subaccount balance will be the amount determined by
multiplying the total opening balance in the Liquidation Account by the
Qualifying Deposit (a deposit of at least $50 as of the Eligibility Record Date
or Supplemental Eligibility Record Date, as applicable) of such deposit account
divided by the total of all Qualifying Deposits on that date. If the amount in
the deposit account on any subsequent annual closing date of Richmond Savings is
less than the balance in such deposit account on any other annual closing date
or the balance in such an account on the Eligibility Record Date or Supplemental
Eligibility Record Date, as the case may be, this interest in the Liquidation
Account will be reduced by an amount proportionate to any such reduction, and
will not thereafter be increased despite any subsequent increase in the related
deposit account. An Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the Liquidation Account will cease to exist if the deposit
account is closed. The Liquidation Account will never increase
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and will be correspondingly reduced as the interests in the Liquidation Account
are reduced or cease to exist. In the event of a liquidation, any assets
remaining after the above liquidation rights of Eligible Account Holders and
Supplemental Eligible Account Holders are satisfied would be distributed to the
Holding Company, as sole stockholder of Richmond Savings.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with another FDIC-insured depository institution, whether or not
Richmond Savings is the surviving institution, would not be viewed as a complete
liquidation for purposes of distribution of the Liquidation Account. In any
such transaction, the Liquidation Account would be assumed by the surviving
institution to the full extent authorized by regulations of the Administrator as
then in effect.
OFFERING OF COMMON STOCK
As part of the Conversion, the Holding Company is making the Subscription
Offering of Common Stock in the priorities and to the persons described below
under "-- Subscription Offering." In addition, any shares which remain
unsubscribed for in the Subscription Offering will be offered in the Community
Offering to members of the general public, with priority being given to natural
persons and trusts of natural persons residing or located in the Local
Community, including IRAs, Keogh accounts and similar retirement accounts
established for the benefit of natural persons who are residents of the Local
Community. See "-- Community Offering." If necessary, all shares of Common
Stock not purchased in the Subscription Offering and Community Offering, if any,
may be offered for sale to the general public through a syndicate of registered
broker-dealers as selected dealers to be managed by Trident Securities. See "--
Syndicated Community Offering." The Plan of Conversion requires that the
aggregate dollar amount of the Common Stock sold equal not less than the minimum
nor more than the maximum of the Valuation Range which is established in
connection with the Conversion; provided, however, with the consent of the
Administrator and the FDIC the aggregate dollar amount of the Common Stock sold
may be increased to as much as 15% above the maximum of the Valuation Range,
without a resolicitation of subscribers or any right to cancel subscriptions, in
order to reflect changes in market and financial conditions following
commencement of the Subscription Offering. See "-- Purchase Price of Common
Stock and Number of Shares Offered." If the Syndicated Community Offering is
not feasible or successful and Common Stock having an aggregate value of at
least the minimum of the Valuation Range is not subscribed for in the
Subscription and Community Offerings, the Holding Company will consult with the
Administrator to determine an appropriate alternative method of selling all
shares of Common Stock offered in the Conversion and not subscribed for in the
Offerings. The same per share price ($10.00) will be paid by purchasers in the
Subscription, Community and Syndicated Community Offerings.
The Subscription Offering will expire at the Expiration Time, which is
12:00 noon, Eastern Time, on _________________, 1996, unless, with the approval
of the Administrator, the offering period is extended by the Holding Company and
Richmond Savings. The Community Offering, if any, may begin at any time after
the Subscription Offering begins and will terminate at the Expiration Time or at
any time thereafter, but not later than ___________________, 1996, unless
extended with the approval of the Administrator. The Syndicated Community
Offering, if any, or other sale of all shares not subscribed for in the
Subscription and Community Offerings, will be made as soon as practicable
following the Expiration Time. The sale of the Common Stock must, under the
North Carolina conversion regulations, be completed within 45 days after the
Expiration Time unless such period is extended with the approval of the
Administrator. In the event such an extension is approved, subscribers would be
given the opportunity to increase (subject to maximum purchase limitations),
decrease (subject to minimum purchase limitations) or rescind their
subscriptions. In such event, substantial additional printing, legal and
accounting expenses may be incurred in completing the Conversion.
The commencement and completion of any required Community or Syndicated
Community Offering will be subject to market conditions and other factors beyond
the Holding Company's control. Accordingly, no assurance can be given that any
required Community or Syndicated Community Offering or other sale of Common
Stock will be commenced at any particular time or as to the length of time that
will be required to complete the sale of all shares of Common Stock offered, and
significant changes may occur in the estimated pro forma market value of the
Common Stock, together with corresponding changes in the offering price, the
number of shares being offered, and the net
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proceeds realized from the sale of the Common Stock. The Plan of Conversion
requires that the Conversion be completed within 24 months after the date of
approval of the Plan of Conversion by Richmond Savings' members.
SUBSCRIPTION OFFERING
In accordance with North Carolina conversion regulations, non-transferable
Subscription Rights have been granted under the Plan of Conversion to the
following persons in the following order of priority: (i) Richmond Savings'
Eligible Account Holders, who are depositors as of March 31, 1995 who had
aggregate deposits at the close of business on such date of at least $50
("Qualifying Deposits"); (ii) the ESOP; (iii) Richmond Savings' Supplemental
Eligible Account Holders, who are depositors as of _____________, 1996 who had
Qualifying Deposits on such date; (iv) Richmond Savings' Other Members, who are
depositor and borrower members as of _______________, 1996, the voting record
date for the Special Meeting, who are not Eligible Account Holders or
Supplemental Eligible Account Holders; and (v) directors, officers and employees
of Richmond Savings who are not Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members, in the priorities and subject to the
limitations described herein. All subscriptions received will be subject to the
availability of Common Stock after satisfaction of subscriptions of all persons
having prior rights in the Subscription Offering, and to the maximum purchase
limitations and other terms and conditions set forth in the Plan of Conversion
and described below.
IN ORDER TO ENSURE PROPER IDENTIFICATION OF SUBSCRIPTION RIGHTS, IT IS THE
RESPONSIBILITY OF SUBSCRIBERS IN THE SUBSCRIPTION OFFERING TO PROVIDE CORRECT
ACCOUNT VERIFICATION INFORMATION ON THE STOCK ORDER FORM.
ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder has been granted,
without payment therefor, non-transferable Subscription Rights to purchase
Common Stock up to the maximum purchase limitation described in "--Minimum and
Maximum Purchase Limitations." If Eligible Account Holders subscribe for more
shares of Common Stock than are available for purchase, the shares offered will
first be allocated among the subscribing Eligible Account Holders so as to
enable each subscribing Eligible Account Holder to the extent possible, to
purchase the number of shares necessary to make his or her total allocation of
Common Stock equal to the lesser of 100 shares of Common Stock or the number of
shares subscribed for by such Eligible Account Holder. Any shares remaining
after such allocation will be allocated among the subscribing Eligible Account
Holders whose subscriptions remain unsatisfied in the proportion that each such
Eligible Account Holder's Qualifying Deposits bears to the total of the
Qualifying Deposits of all such Eligible Account Holders.
ESOP. The ESOP has been granted, without payment therefor, Subscription
Rights to purchase a number of shares of Common Stock up to 8% of the aggregate
number of shares issued in the Conversion. The ESOP is expected to purchase 8%
of the number of shares to be issued in the Conversion. If, because of an
oversubscription or for any other reason, the ESOP is unable to purchase in the
Conversion 8% of the total number of shares offered in the Conversion, then the
Board of Directors of the Holding Company intends to approve the purchase by the
ESOP in the open market after the Conversion, of such shares as are necessary
for the ESOP to acquire a number of shares equal to 8% of the shares of Common
Stock issued in the Conversion.
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders and the ESOP, each Supplemental Eligible Account Holder has been
granted, without payment therefor, non-transferable Subscription Rights to
purchase Common Stock up to the maximum purchase limitation described in "--
Minimum and Maximum Purchase Limitations." If Supplemental Eligible Account
Holders subscribe for more shares of Common Stock than are available for
purchase, the shares offered will first be allocated among the subscribing
Supplemental Eligible Account Holders so as to enable each subscribing
Supplemental Eligible Account Holder to the extent possible, to purchase the
number of shares necessary to make his or her total allocation of Common Stock
equal to the lesser of 100 shares of Common Stock or the number of shares
subscribed for by such Supplemental Eligible Account Holder. Any shares
remaining after such allocation will be allocated among the subscribing
Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in
the proportion that each such Supplemental Eligible Account Holder's Qualifying
Deposits bears to the total of the Qualifying Deposits of all such Supplemental
Eligible Account Holders.
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OTHER MEMBERS. To the extent that shares remain available for purchase
after satisfaction of subscriptions of Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders, members of Richmond Savings as of
___________________, 1996 (the voting record date for the Special Meeting),
other than Eligible Account Holders and Supplemental Eligible Account Holders
(Other Members) have each been granted, without payment therefor, non-
transferable Subscription Rights to purchase Common Stock up to the maximum
purchase limitation described in "--Minimum and Maximum Purchase Limitations."
If Other Members subscribe for more shares of Common Stock than remain available
for purchase by Other Members, shares will be allocated among the subscribing
Other Members in the proportion that the number of votes eligible to be cast by
each Other Member bears to the total number of votes eligible to be cast at the
Special Meeting.
EMPLOYEES, OFFICERS, AND DIRECTORS. To the extent that shares remain
available for purchase after satisfaction of subscriptions of Eligible Account
Holders, the ESOP, Supplemental Eligible Account Holders and Other Members,
Richmond Savings' employees, officers and directors who are not Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members have each been
granted, without payment therefor, non-transferable Subscription Rights to
purchase Common Stock up to the maximum purchase limitation described in "--
Minimum and Maximum Purchase Limitations." If more shares are subscribed for by
such employees, officers and directors than are available for purchase by them,
the available shares will be allocated among subscribing employees, officers and
directors pro rata on the basis of the amount of their respective subscriptions.
COMMUNITY OFFERING
Any shares of Common Stock which remain unsubscribed for in the
Subscription Offering may be offered by the Holding Company to members of the
general public in the Community Offering, which may commence at any time after
commencement of the Subscription Offering, with priority given to natural
persons and trusts of natural persons residing or located in Richmond, Moore and
Scotland counties in North Carolina (the Local Community), including IRA
accounts, Keogh accounts and similar retirement accounts established for the
benefit of natural persons who are residents of, the Local Community. The
Community Offering may terminate the Expiration Time or at any time thereafter,
but no later than _______________, 1996, unless further extended with the
consent of the Administrator. THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON
STOCK IN THE COMMUNITY OFFERING IS SUBJECT TO THE RIGHT OF RICHMOND SAVINGS AND
THE HOLDING COMPANY, IN THEIR SOLE DISCRETION, TO ACCEPT OR REJECT ANY SUCH
ORDERS, IN WHOLE OR IN PART, EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS
SOON AS PRACTICABLE FOLLOWING THE TERMINATION OF THE COMMUNITY OFFERING. In the
event Richmond Savings and the Holding Company reject any such orders after
receipt, subscribers will be promptly notified and all funds submitted with
subscriptions will be returned with interest at Richmond Savings' passbook
savings rate.
In the event that subscriptions by subscribers in the Community Offering
whose orders would otherwise be accepted exceed the shares available for
purchase in the Community Offering, then subscriptions of natural persons and
trusts of natural persons residing in the Local Community, including IRAs, Keogh
accounts and similar retirement accounts established for the benefit of natural
persons who are residents of the Local Community ("First Priority Community
Subscribers") will be filled in full up to applicable purchase limitations (to
the extent such subscriptions are not rejected by Richmond Savings and the
Holding Company) prior to any allocation to other subscribers in the Community
Offering.
In the event of an oversubscription by First Priority Community Subscribers
whose orders would otherwise be accepted, shares of Common Stock will be
allocated first to each First Priority Community Subscriber whose order is
accepted in full or in part by Richmond Savings and the Holding Company in the
entire amount of such order up to a number of shares no greater than 25,000
shares, which number shall be determined by the Board of Directors of Richmond
Savings prior to the time the Conversion is consummated with the intent to
provide for a wide distribution of shares among such subscribers. Any shares
remaining after such allocation will be allocated to each First Priority
Community Subscriber whose order is accepted in full or in part on an equal
number of shares basis until all orders are filled. Such allocation shall also
be applied to subscriptions by other subscribers in the Community Offering, in
the event shares are available for such subscribers but there is an
oversubscription by them.
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IN ORDER TO ENSURE PROPER ALLOCATION OF SHARES IN THE EVENT OF AN
OVERSUBSCRIPTION, IT IS THE RESPONSIBILITY OF SUBSCRIBERS IN THE COMMUNITY
OFFERING TO PROVIDE CORRECT ADDRESSES OF RESIDENCE ON THE STOCK ORDER FORM.
SYNDICATED COMMUNITY OFFERING
The Plan of Conversion provides that, if necessary, all shares of Common
Stock not purchased in the Subscription and Community Offerings, if any, may be
offered for sale to the general public in a Syndicated Community Offering
through a syndicate of registered broker-dealers as selected dealers ("Selected
Dealers") to be formed and managed by Trident Securities acting as agent of the
Holding Company in the sale of the Common Stock. THE HOLDING COMPANY AND
RICHMOND SAVINGS HAVE THE RIGHT TO REJECT ORDERS, IN WHOLE OR IN PART, IN THEIR
SOLE DISCRETION IN THE SYNDICATED COMMUNITY OFFERING. Neither Trident Securities
nor any registered broker-dealer shall have any obligation to take or purchase
any shares of the Common Stock in the Syndicated Community Offering; however,
Trident Securities has agreed to use its best efforts in the sale of shares in
the Syndicated Community Offering. Common Stock sold in the Syndicated Community
Offering will be sold at the purchase price of $10.00 per share which is the
same price as all other shares being offered in the Conversion.
It is estimated that the Selected Dealers will receive a negotiated
commission based on the amount of Common Stock sold by the Selected Dealer,
payable by the Holding Company. During the Syndicated Community Offering,
Selected Dealers may only solicit indications of interest from their customers
to place orders with the Holding Company as of a certain date (the "Order Date")
for the purchase of shares of Common Stock. When and if Trident Securities and
the Holding Company believe that enough indications and orders have been
received in the Offerings to consummate the Conversion, Trident Securities will
request, as of the Order Date, Selected Dealers to submit orders to purchase
shares for which they have received indications of interest from their
customers. Selected Dealers will send confirmations of the orders to such
customers on the next business day after the Order Date. Selected Dealers will
debit the accounts of their customers on a date which will be three business
days from the Order Date ("Debit Date"). Customers who authorize Selected
Dealers to debit their brokerage accounts are required to have the funds for
payment in their account on but not before the Debit Date. On the next business
day following the Debit Date, Selected Dealers will remit funds to the account
that the Holding Company established for each Selected Dealer. After payment
has been received by the Holding Company from Selected Dealers, funds will earn
interest at Richmond Savings' passbook savings rate until the consummation of
the Conversion. In the event the Conversion is not consummated as described
above, funds with interest will be returned promptly to the Selected Dealers,
who, in turn, will promptly credit their customers' brokerage accounts.
The Syndicated Community Offering may close at any time after the
Expiration Time at the discretion of Richmond Savings and the Holding Company,
but in no case later than __________________, 1996.
FRACTIONAL SHARES
In making allocations in the event of oversubscriptions, all computations
will be rounded down to the nearest whole share; no fractional shares will be
issued. Excess and other amounts sent by subscribers which are not used to
satisfy subscriptions will be refunded with interest at Richmond Savings'
passbook savings rate, and amounts designated for withdrawal from deposit
accounts will be released.
PURCHASE PRICE OF COMMON STOCK AND NUMBER OF SHARES OFFERED
The purchase price of shares of Common Stock sold in the Subscription
Offering, Community Offering and Syndicated Community Offering will be $10.00
per share. The purchase price was determined by the Boards of Directors of the
Holding Company and Richmond Savings in consultation with Richmond Savings'
financial advisor and sales agent, Trident Securities, and was based upon a
number of factors, including the market price per share of the stock of other
financial institutions. The North Carolina regulations governing conversions of
North Carolina-chartered mutual savings banks to stock form require that the
aggregate purchase price of the shares of Common Stock of the Holding Company
sold in connection with the Conversion be equal to not less than the minimum,
nor more than the maximum, of the Valuation Range which is established by an
independent appraisal in the Conversion and is described below; provided,
however, that with the consent of the Administrator and the FDIC the aggregate
purchase price of the Common
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Stock sold may be increased to up to 15% above the maximum of the Valuation
Range, without a resolicitation of subscribers or any right to cancel, rescind
or change subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering.
FDIC rules with respect to appraisals require that the independent
appraisal must include a complete and detailed description of the elements of
the appraisal report, justification for the methodology employed and sufficient
support for the conclusions reached. The appraisal report must include a full
discussion of each peer group member and documented analytical evidence
supporting variances from peer group statistics. The appraisal report must also
include a complete analysis of the converting institution's pro forma earnings,
which should include the institution's full potential once it fully deploys the
capital from the conversion pursuant to its business plan.
Richmond Savings has retained Baxter Fentriss, an independent appraisal
firm experienced in the valuation and appraisal of savings institutions and
their holding companies, to prepare an appraisal of the pro forma market value
of Richmond Savings and the Holding Company and to assist Richmond Savings in
preparing a business plan. For its services in determining such valuation and
assisting with the business plan, Baxter Fentriss will receive an aggregate fee
of $25,000, plus an additional $2,500 for each appraisal update required in
excess of one, and will be reimbursed for certain reasonable out-of-pocket
expenses, subject to a $3,000 maximum.
Baxter Fentriss has informed Richmond Savings that its appraisal has been
made in reliance upon the information contained in this Prospectus, including
the financial statements of Richmond Savings. Baxter Fentriss has further
informed Richmond Savings that it also considered the following factors, among
others, in making the appraisal: (i) the present and projected operating results
and financial condition of the Holding Company and Richmond Savings; (ii) the
economic and demographic conditions in Richmond Savings' existing market area;
(iii) certain historical, financial and other information relating to Richmond
Savings; (iv) the proposed dividend policy of the Holding Company; (v) a
comparative evaluation of the operating and financial statistics of Richmond
Savings with those of other savings institutions; (vi) the aggregate size of the
offering of the Common Stock; and (vii) the trading market for the securities of
institutions Baxter Fentriss believes to be comparable in relevant respects to
the Holding Company and Richmond Savings and general conditions in the markets
for such securities. In addition, Baxter Fentriss has advised Richmond Savings
that it has considered the effect of the Conversion on the net worth and
earnings potential of the Holding Company and Richmond Savings.
On the basis of its consideration of the above factors, Baxter Fentriss has
advised Richmond Savings that, in its opinion, at August 8, 1996, the
Valuation Range of Richmond Savings and the Holding Company was from a minimum
of $11,900,000 to a maximum of $16,100,000, with a midpoint of $14,000,000.
Based upon such valuation and a purchase price for shares offered in the
Conversion of $10.00 per share, the number of shares to be offered ranges from a
minimum of 1,190,000 shares to a maximum of 1,610,000 shares, with a midpoint of
1,400,000 shares.
The Board of Directors of Richmond Savings has reviewed the methodology and
assumptions used by Baxter Fentriss in preparing the appraisal and has
determined that the Valuation Range, as well as the methodology and assumptions
used, were reasonable and appropriate.
Upon completion of the Offerings, Baxter Fentriss will confirm or update
its valuation of the estimated aggregate pro forma market value of Richmond
Savings and the Holding Company. Based on the confirmed or updated appraisal, a
determination will be made of the total number of shares of Common Stock which
shall be offered and sold in the Conversion.
With the consent of the Administrator and the FDIC, the aggregate price of
the shares sold in the Conversion may be increased by up to 15% above the
maximum of the Valuation Range, or to $18,515,000 (1,851,500 shares), without a
resolicitation of subscribers and without any right to cancel, rescind or change
subscription orders, to reflect changes in market and financial conditions
following commencement of the Subscription Offering.
No sale of shares of Common Stock may be consummated unless, after the
expiration of the offering period, Baxter Fentriss confirms to Richmond Savings,
the Holding Company, the Administrator and the FDIC, that, to the best
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of its knowledge, nothing of a material nature has occurred which, taking into
account all relevant factors, would cause Baxter Fentriss to conclude that the
aggregate purchase price of the Common Stock sold in the Conversion is
incompatible with its estimate of the aggregate pro forma market value of
Richmond Savings and the Holding Company at the conclusion of the Offerings. If
the aggregate pro forma market value of Richmond Savings and the Holding Company
as of such date is within the Valuation Range (or, with the consent of the
Administrator and FDIC, not more than 15% above the maximum of the Valuation
Range), then such pro forma market value will determine the number of shares of
Common Stock to be sold in the Conversion. If there has occurred a change in the
aggregate pro forma market value of Richmond Savings and the Holding Company so
that the aggregate pro forma market value is below the minimum of the Valuation
Range or more than 15% above the maximum of the Valuation Range, a
resolicitation of subscribers may be made based upon a new Valuation Range, the
Plan of Conversion may be terminated or such other actions as the Administrator
and the FDIC may permit may be taken.
In the event of a resolicitation, subscribers would be given a specified
time period within which to respond to the resolicitation. If a subscriber
fails to respond to the resolicitation by the end of such period, the
subscription of such subscriber will be cancelled, funds submitted with the
subscription will be refunded promptly with interest at Richmond Savings'
passbook savings rate, and holds on accounts from which withdrawals were
designated will be released. Any such resolicitation will be by means of an
amended prospectus filed with the SEC. A resolicitation may delay completion of
the Conversion. If the Plan of Conversion is terminated, all funds will be
returned promptly with interest at Richmond Savings' passbook savings rate from
the date payment was deemed received, and holds on funds authorized for
withdrawal from deposit accounts will be released. See "-- Exercise of
Subscription Rights and Purchases in the Community Offering."
THE VALUATION BY BAXTER FENTRISS IS NOT INTENDED, AND MUST NOT BE
CONSTRUED, AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING
COMMON STOCK. BAXTER FENTRISS DID NOT INDEPENDENTLY VERIFY THE FINANCIAL
STATEMENTS AND OTHER INFORMATION PROVIDED BY RICHMOND SAVINGS, NOR DID BAXTER
FENTRISS VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF RICHMOND SAVINGS. THE
VALUATION CONSIDERS RICHMOND SAVINGS AS A GOING CONCERN AND SHOULD NOT BE
CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF RICHMOND SAVINGS OR THE
HOLDING COMPANY. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON
ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT TO
CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING SUCH
SHARES IN THE CONVERSION WILL THEREAFTER BE ABLE TO SELL SHARES AT PRICES IN THE
RANGE OF THE FOREGOING VALUATION OF THE PRO FORMA MARKET VALUE THEREOF.
A copy of the complete appraisal by Baxter Fentriss is on file and
available for inspection at the office of the Savings Institutions Division of
the North Carolina Department of Commerce, Tower Building, Suite 301, 1110
Navaho Drive, Raleigh, North Carolina 27609. A copy is also available for
inspection at the Stock Information Center. A copy of the appraisal has also
been filed as an exhibit to the Registration Statement filed with the SEC with
respect to the Common Stock offered hereby. See "ADDITIONAL INFORMATION."
EXERCISE OF SUBSCRIPTION RIGHTS AND PURCHASES IN COMMUNITY OFFERING
In order for Subscription Rights to be effectively exercised in the
Subscription Offering and in order to purchase in the Subscription Offering, the
Stock Order Form, accompanied by the required payment for the aggregate dollar
amount of Common Stock desired or appropriate instructions authorizing
withdrawal from one or more Richmond Savings deposit accounts (other than
negotiable order of withdrawal accounts or other demand deposit accounts), must
be received by Richmond Savings by the Expiration Time, which is 12:00 noon,
Eastern Time, on __________________, 1996. Subscription Rights (i) for which
Richmond Savings does not receive Stock Order Forms by the Expiration Time
(unless such time is extended), or (ii) for which Stock Order Forms are executed
defectively or are not accompanied by full payment (or appropriate withdrawal
instructions) for subscribed shares, will expire whether or not Richmond Savings
has been able to locate the persons entitled to such rights. In order to
purchase in the Community Offering, the Stock Order Form, accompanied by the
required payment for the aggregate dollar amount of Common Stock desired or
appropriate instructions authorizing withdrawal from one or more Richmond
Savings deposit accounts (other than negotiable order of withdrawal accounts or
other demand deposit accounts), must be received by Richmond Savings prior to
the time the Community Offering terminates, which could be at any time at or
subsequent to the Expiration Time.
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No orders will be accepted from persons who do not have Subscription Rights in
the Subscription Offering unless a Community Offering is commenced.
AN EXECUTED STOCK ORDER FORM ONCE RECEIVED BY RICHMOND SAVINGS, MAY NOT BE
MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF RICHMOND SAVINGS.
Richmond Savings has the right to extend the subscription period subject to
applicable regulations, unless otherwise ordered by the Administrator, or to
waive or permit correction of incomplete or improperly executed Stock Order
Forms, but does not represent that it will do so.
The amount to be remitted with the Stock Order Form shall be the aggregate
dollar amount that a subscriber or purchaser desires to invest in the
Subscription and Community Offerings. Payment must accompany all completed
Stock Order Forms submitted in the Subscription and Community Offerings in order
for subscriptions to be valid. See "-- Purchase Price of Common Stock and
Number of Shares Offered."
Payment for shares will be permitted to be made by any of the following
means: (i) in cash, if delivered in person to any office of Richmond Savings;
(ii) by check, bank draft, negotiable order of withdrawal or money order,
provided that the foregoing will only be accepted subject to collection and
payment; or (iii) by appropriate authorization of withdrawal from any deposit
account in Richmond Savings (other than a negotiable order of withdrawal account
or other demand deposit account). IN ORDER TO ENSURE PROPER IDENTIFICATION OF
SUBSCRIPTION RIGHTS AND PROPER ALLOCATIONS IN THE EVENT OF AN OVERSUBSCRIPTION,
IT IS THE RESPONSIBILITY OF SUBSCRIBERS TO PROVIDE CORRECT ACCOUNT VERIFICATION
INFORMATION ON THE STOCK ORDER FORM. STOCK ORDER FORMS SUBMITTED BY
UNAUTHORIZED PURCHASERS OR IN AMOUNTS EXCEEDING PURCHASE LIMITATIONS WILL NOT BE
HONORED.
For purposes of determining the withdrawal balance of deposit accounts from
which withdrawals have been authorized, such withdrawals will be deemed to have
been made upon receipt of appropriate authorization therefor, but interest will
be paid by Richmond Savings on the amount deemed to have been withdrawn at the
contractual rate of interest paid on such accounts until the date on which the
Conversion is completed or terminated.
Interest will be paid by Richmond Savings on payments for Common Stock made
in cash or by check, bank draft, negotiable order of withdrawal or money order
at Richmond Savings' passbook savings rate. Such interest shall be paid from
the date the order is accepted for processing and payment in good funds is
received by Richmond Savings until consummation or termination of the
Conversion. Richmond Savings shall be entitled to invest all amounts paid on
subscriptions for Common Stock for its own account until completion or
termination of the Conversion. Richmond Savings may not knowingly lend funds or
otherwise extend credit to any person to purchase Common Stock.
The Stock Order Forms contain appropriate means by which authorization of
withdrawals from deposit accounts may be made to pay for subscribed shares.
Once such a withdrawal has been authorized, none of the designated withdrawal
amount may be withdrawn (except by Richmond Savings as payment for Common Stock)
until the Conversion is completed or terminated. Savings accounts will be
permitted to be established for the purpose of making payment for subscribed
shares of Common Stock. Funds authorized for withdrawal will continue to earn
interest at the applicable contract interest rate until completion or
termination of the Conversion or, in the case of an order submitted in the
Community Offering, until it is determined that such order cannot or will not be
accepted. Notwithstanding any regulatory provision regarding penalties for
early withdrawal from certificate accounts, payment for subscribed shares of
Common Stock will be permitted through authorization of withdrawals from such
accounts without the assessment of such penalties. However, if after such
withdrawal the applicable minimum balance requirement ceases to be satisfied,
such certificate account will be cancelled and the remaining balance thereof
will earn interest at Richmond Savings' passbook savings rate.
Upon completion or termination of the Conversion, Richmond Savings will
return to subscribers all amounts paid with subscriptions which are not applied
to the purchase price for shares, plus interest at its passbook savings rate
from the date good funds are received until the consummation or termination of
the Conversion, and Richmond Savings will release deposit account withdrawal
orders given in connection with the subscriptions to the extent funds are not
withdrawn and applied toward the purchase of shares.
102
<PAGE>
DELIVERY OF STOCK CERTIFICATES
Certificates representing Common Stock issued in the Conversion will be
mailed by the Holding Company's transfer agent to persons entitled thereto at
the address of such persons appearing on the Stock Order Form as soon as
practicable following consummation of the Conversion. Any certificates returned
as undeliverable will be held by the Holding Company until claimed by persons
legally entitled thereto or otherwise disposed of in accordance with applicable
law. Until certificates for Common Stock are available and delivered to
subscribers, subscribers may not be able to sell the shares of Common Stock for
which they have subscribed, even though trading of the Common Stock may have
commenced.
PERSONS IN NON-QUALIFIED OR FOREIGN JURISDICTIONS
The Holding Company will make reasonable efforts to comply with the
securities laws of all states of the United States in which Eligible Account
Holders, Supplemental Eligible Account Holders, or Other Members entitled to
subscribe for shares of Common Stock reside. However, no shares of Common Stock
or Subscription Rights under the Plan of Conversion will be offered or sold in a
foreign country, or in a state in the United States (i) where a small number of
persons otherwise eligible to subscribe for shares under the Plan of Conversion
reside or (ii) if the Holding Company determines that compliance with the
securities laws of such state would be impracticable for reasons of cost or
otherwise, including, but not limited to, a requirement that the Holding
Company, Richmond Savings or any employee or representative thereof register as
a broker, dealer, agent or salesperson or register or otherwise qualify the
Subscription Rights or Common Stock for sale in such state. No payments will be
made in lieu of the granting of Subscription Rights to persons residing in such
jurisdictions.
MARKETING ARRANGEMENTS
Richmond Savings has retained Trident Securities to consult with and advise
Richmond Savings and the Holding Company and to assist the Holding Company, on a
best-efforts basis, in the marketing of shares in the Offerings. Trident
Securities is a broker-dealer registered with the SEC and a member of the
National Association of Securities Dealers, Inc. ("NASD"). Trident Securities
will assist Richmond Savings and the Holding Company in the Conversion as
follows: (i) it will act as marketing advisor with respect to the Subscription
Offering and will represent the Company as placement agent on a best-efforts
basis in the sale of the Common Stock in the Community Offering and Syndicated
Community Offering; (ii) members of its staff will conduct training sessions to
ensure that directors, officers and employees of Richmond Savings are
knowledgeable regarding the Conversion process; and (iii) it will provide
assistance in the establishment and supervision of the Stock Information Center,
including training staff to properly record and tabulate orders for the purchase
of Common Stock and to appropriately respond to customer inquiries.
For rendering its services, Richmond Savings has agreed to pay Trident
Securities (a) a management fee equal to 1.0% of the aggregate dollar amount of
Common Stock sold in the Offerings; (b) a commission equal to 2.0% of the
aggregate dollar amount of Common Stock sold in the Subscription Offering,
excluding shares purchased by the ESOP, directors, executive officers and their
"associates" (as defined in the Plan of Conversion); and (c) a commission equal
to 2.0% of the aggregate dollar amount of Common Stock sold by Trident
Securities in the Community Offering, excluding shares sold by other NASD member
firms under Selected Dealers agreements. Richmond Savings has also agreed to
pay to Selected Dealers, if any, negotiated commissions. Richmond Savings has
paid Trident Securities $10,000 toward amounts due to such agent.
Richmond Savings has agreed to reimburse Trident Securities for its
reasonable out-of-pocket expenses, including but not limited to travel,
communications, legal fees and postage, and to indemnify Trident Securities
against certain claims or liabilities, including certain liabilities under the
Securities Act. Trident has agreed that Richmond Savings is not required to pay
its legal fees to the extent they exceed $30,000 or its other out of pocket
expenses to the extent they exceed $7,500. Total fees and commissions to
Trident Securities are expected to be between $312,000 and $499,000 at the
minimum and 15% above the maximum, respectively, of the Valuation Range. See
"PRO FORMA DATA" for the assumptions used to determine these estimates.
103
<PAGE>
Sales of Common Stock will be made primarily by registered representatives
affiliated with Trident Securities or by the broker-dealers managed by Trident
Securities. In addition, subject to applicable law, executive officers of the
Holding Company and Richmond Savings may participate in the solicitation of
offers to purchase Common Stock. Other employees of Richmond Savings may
participate in the Offerings in clerical capacities, providing administrative
support in effecting sales transactions and answering questions of a mechanical
nature relating to the proper execution of the Stock Order Form. Other
questions of prospective purchasers, including questions as to the advisability
or nature of the investment, will be directed to registered representatives.
Such other employees have been instructed not to solicit offers to purchase
Common Stock or provide advice regarding the purchase of Common Stock. A Stock
Information Center will be established in Richmond Savings' headquarters office,
in an area separate from Richmond Savings' banking operations. Employees will
inform prospective purchasers that their questions should be directed to the
Stock Information Center and will provide such persons with the telephone number
of the Stock Information Center. Stock orders will be accepted at Richmond
Savings' offices and will be promptly forwarded to the Stock Information Center
for processing. Sales of Common Stock by registered representatives will be made
from the Stock Information Center. In addition, Richmond Savings may hire one or
more temporary clerical persons to assist in typing, opening mail, answering the
phone, and with other clerical duties. An employee of Richmond Savings will also
be present at the Stock Information Center to process funds and answer questions
regarding payment for stock, including verification of account numbers in the
case of payment by withdrawal authorization and similar matters. Subject to
applicable state law, the Holding Company will rely on Rule 3a4-1 under the
Exchange Act, and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers and current full and part-
time Richmond Savings employees to participate in the sale of Common Stock. No
officer, director or employee of the Holding Company or Richmond Savings will be
compensated in connection with his or her participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.
The engagement of Trident Securities and the work performed by Trident
Securities pursuant to its engagement, including a due diligence investigation,
should not be construed by purchasers of Common Stock as constituting an
endorsement or recommendation relating to such investment or a verification of
the accuracy or completeness of information contained in this Prospectus.
MINIMUM AND MAXIMUM PURCHASE LIMITATIONS
Each person subscribing for Common Stock in the Conversion must subscribe
for at least 50 shares of the Common Stock to be offered in the Conversion. In
addition, the maximum number of shares of Common Stock which may be purchased in
the Conversion by any person, together with all associates of such person, or
group of persons otherwise acting in concert, is 25,000 shares; provided,
however, that the ESOP may purchase up to 8% of the number of shares offered in
the Conversion (128,800 shares, assuming the issuance of 1,610,000 shares). Any
shares held by the ESOP and attributed to a natural person shall not be
aggregated with other shares purchased directly by or otherwise attributable to
that natural person. The Board of Directors of Richmond Savings may in its
absolute discretion (i) reduce the 25,000 share maximum purchase limitation to
an amount not less than 1% of the number of shares offered and sold in the
Conversion or (ii) increase the 25,000 share maximum purchase limitation to an
amount of up to 5% of the shares of Common Stock offered and sold. Any
reduction or increase in the maximum purchase limitation by Richmond Savings'
Board of Directors may occur at any time prior to consummation of the
Conversion, either before or after the Special Meeting on _________________,
1996. In the event the 25,000 share maximum purchase limitation is increased,
any subscriber in the Subscription, Community or Syndicated Community Offering
who has subscribed for 25,000 shares, and certain other large subscribers in the
discretion of the Holding Company, shall be given the opportunity to increase
their subscriptions up to the then applicable maximum purchase limitation.
The Plan of Conversion further provides that for purposes of the foregoing
limitations the term "associate" is used to indicate any of the following
relationships with a person:
(i) any relative or spouse of such person, or any relative of such spouse,
who has the same home as such person or who is a director or officer
of Richmond Savings, the Holding Company or any subsidiary of Richmond
Savings or of the Holding Company;
104
<PAGE>
(ii) any corporation or organization (other than Richmond Savings, the
Holding Company or a majority-owned subsidiary of Richmond Savings
or the Holding Company) of which the person is an officer or partner
or is, directly or indirectly, the beneficial owner of 10% or more
of any class of equity security; and
(iii) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as a trustee
or in a similar fiduciary capacity, except for any tax-qualified
employee stock benefit plan or any charitable trust which is exempt
from federal taxation pursuant to Section 501(c)(3) of the Code.
For purposes of the foregoing limitations, (i) directors and officers of
Richmond Savings or the Holding Company shall not be deemed to be associates or
a group of persons acting in concert solely as a result of their serving in such
capacities, (ii) the ESOP will not be deemed to be acting in concert with any of
its trustees for purposes of determining the number of shares which any such
trustee, individually, may purchase and (iii) shares of Common Stock held by the
ESOP and attributed to an individual will not be aggregated with other shares
purchased directly by, or otherwise attributable to, that individual.
For purposes of the foregoing limitations, persons will be deemed to be
"acting in concert" if they are (i) knowingly participating in a joint activity
or interdependent conscious parallel action towards a common goal (whether or
not pursuant to an express agreement), with respect to the purchase, ownership,
voting or sale of Common Stock or (ii) engaged in a combination or pooling of
voting or other interests in the securities of the Holding Company for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. The Holding Company and
Richmond Savings may presume that certain persons are acting in concert based
upon, among other things, joint account relationships and the fact that such
persons have filed joint Schedules 13D with the SEC with respect to other
companies.
APPROVAL, INTERPRETATION, AMENDMENT AND TERMINATION
Under the Plan of Conversion, the Administrator's approval thereof, and
applicable North Carolina conversion regulations, consummation of the Conversion
is subject to satisfaction of certain conditions, including the following: (i)
approval of the Plan of Conversion by the affirmative vote of a majority of the
votes eligible to be cast by members of Richmond Savings at the Special Meeting;
(ii) sale of shares of Common Stock for an aggregate purchase price equal to
not less than the minimum or more than the maximum of the Valuation Range unless
the aggregate purchase price is increased to as much as 15% above the maximum
with the consent of the Administrator and FDIC, and (iii) receipt by the Holding
Company and Richmond Savings of favorable opinions of counsel or other tax
advisor as to the federal and state tax consequences of the Conversion. See "--
Income Tax Consequences."
If all conditions for consummation of the Conversion are not satisfied, no
Common Stock will be issued, Richmond Savings will continue to operate as a
North Carolina-chartered mutual savings bank, all subscription funds will be
promptly returned with interest at Richmond Savings' passbook savings rate, and
all deposit withdrawal authorizations (and holds placed on such accounts) will
be cancelled. In such an event, the Holding Company would not acquire control
of Richmond Savings.
All interpretations by Richmond Savings and the Holding Company of the Plan
of Conversion and of the Stock Order Forms and related materials for the
Subscription and Community Offerings will be final, subject to the authority of
the Administrator. Richmond Savings and the Holding Company may reject Stock
Order Forms that are not properly completed. However, the Holding Company and
Richmond Savings retain the right, but will not be required, to waive
irregularities in submitted Stock Order Forms or to require the submission of
corrected Stock Order Forms or the remittance of full payment for all shares
subscribed for by such dates as they may specify. In addition, the Plan of
Conversion may be substantively amended by a two-thirds vote of Richmond
Savings' Board of Directors at any time prior to the Special Meeting, and at any
time thereafter by a two-thirds vote of Richmond Savings' Board of Directors
with the concurrence of the Administrator. If Richmond Savings determines upon
the advice of counsel and after consultation with the Administrator that any
such amendment is material, subscribers would be given the opportunity to
increase, decrease or cancel their subscriptions. Also, as required by the
regulations of the Administrator, the Plan
105
<PAGE>
of Conversion provides that the transactions contemplated thereby may be
terminated by a two-thirds vote of Richmond Savings' Board of Directors at any
time prior to the Special Meeting and may be terminated by a two-thirds vote of
Richmond Savings' Board of Directors at any time thereafter but prior to the
completion of the Conversion with the concurrence of the Administrator,
notwithstanding approval of the Plan of Conversion by the Members at the Special
Meeting.
CERTAIN RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS; FALSE OR MISLEADING
ORDER FORMS
The Subscription Rights granted under the Plan of Conversion are non-
transferable. Subscription Rights may be exercised only by the person to whom
they are issued and only for his or her own account. Persons exercising
Subscription Rights are required to certify that they are purchasing shares for
their own accounts within the purchase limitations set forth in the Plan of
Conversion and that they have no agreement or understanding for the sale or
transfer of such shares.
The Plan of Conversion provides that, if Richmond Savings' Board of
Directors determines that a subscriber (i) has submitted a false or misleading
information on his or her Stock Order Form or otherwise in connection with the
attempted purchase of shares, (ii) has attempted to purchase shares of Common
Stock in violation of provisions of the Plan of Conversion or (iii) fails to
cooperate with attempts by Richmond Savings or the Holding Company or their
employees or agents to verify information with respect to purchase rights, the
Board of Directors may reject the order of such subscriber.
INCOME TAX CONSEQUENCES
Richmond Savings has received an opinion from its special counsel, Brooks,
Pierce, McLendon, Humphrey & Leonard, L.L.P., of Greensboro, North Carolina, to
the effect that for federal income tax purposes: (i) the Conversion will
constitute a tax free reorganization with respect to Richmond Savings and no
gain or loss will be recognized by Richmond Savings either in its mutual or
stock form; (ii) no gain or loss will be recognized by Richmond Savings as a
result of the transfer of the Subscription Rights to Eligible Account Holders;
(iii) no gain or loss will be recognized by Richmond Savings upon the purchase
of Richmond Savings' stock by the Holding Company or upon the sale by the
Holding Company of its Common Stock; (iv) no gain or loss will be recognized by
Richmond Savings' depositors with respect to their deposit accounts at Richmond
Savings as a consequence of the Conversion; (v) the tax basis of depositors'
deposit accounts at Richmond Savings will not be changed as a result of the
Conversion; (vi) assuming the Subscription Rights have no value, no gain or loss
will be recognized by Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, or directors, officers and employees of Richmond Savings
upon either the issuance to them of the Subscription Rights or the exercise or
lapse thereof; (vii) no gain or loss will be recognized by Eligible Account
Holders or Supplemental Eligible Account Holders upon the distribution to them
of interests in the Liquidation Account; (viii) assuming the Subscription Rights
have no value, the tax basis for Common Stock purchased in the Conversion will
be the amount paid therefor; and (ix) the tax basis of interests in the
Liquidation Account will be zero. Richmond Savings has been further advised by
its special counsel, Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., that
the tax effects of the Conversion under North Carolina tax laws will be
consistent with the federal income tax consequences.
Several of the foregoing legal opinions are premised on the assumption that
the Subscription Rights will have no value. Richmond Savings has been advised
by Baxter Fentriss that, in its opinion, the Subscription Rights will not have
any value, based on the fact that such rights are acquired by the recipients
without cost, are non-transferable, are of short duration and afford the
recipients the right only to purchase Common Stock at a price equal to its
estimated fair market value as of the date such rights are issued, which will be
the same price paid by all purchasers in the Conversion. The opinion of Baxter
Fentriss is not binding on the IRS and if the Subscription Rights were
ultimately determined to have ascertainable value, recipients of Subscription
Rights would have to include in gross income an amount equal to the value of the
Subscription Rights received by them. The basis of the Common Stock purchased
pursuant to Subscription Rights would be increased by the amount of income
realized with respect to the receipt or exercise of the Subscription Rights.
Moreover, recipients of Subscription Rights could then have to report the
transaction to the IRS. Each Eligible Account Holder, Supplemental Eligible
Account Holder, Other Member or other recipient of Subscription
106
<PAGE>
Rights is encouraged to consult with his, her or its own tax advisor as to the
tax consequences in the event the Subscription Rights are deemed to have
ascertainable value.
No legal opinion has been or will be received with respect to any tax
consequences of the Conversion not specifically described above, including the
tax consequences to Eligible Account Holders, Supplemental Eligible Account
Holders, Other Members, other recipients of Subscription Rights or purchasers of
Common Stock under the laws of any other state, local or foreign taxing
jurisdiction to which they may be subject. Special counsel expresses no opinion
regarding the value of the Subscription Rights.
LEGAL OPINIONS
The validity of the issuance of the Common Stock in the Conversion will be
passed upon for the Holding Company by its special counsel, Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., Greensboro, North Carolina, which firm has
also rendered its opinion to Richmond Savings concerning certain federal and
North Carolina income tax aspects of the Conversion as described herein under
"THE CONVERSION -- Income Tax Consequences." Certain legal matters will be
passed upon for Trident Securities by Breyer & Aguggia , Washington, D.C.
EXPERTS
The Financial Statements of Richmond Savings as of June 30, 1996 and 1995,
and for each of the years in the three-year period ended June 30, 1996 included
herein have been included herein in reliance upon the report of Dixon, Odom &
Co., L.L.P., independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
Baxter Fentriss has consented to being named as an expert herein and to the
summary herein of its appraisal report as to the estimated pro forma market
value of Richmond Savings and the Holding Company and its opinion with respect
to Subscription Rights.
REGISTRATION REQUIREMENTS
The Holding Company will register its Common Stock with the SEC pursuant to
Section 12 of the Exchange Act in connection with the Conversion and will not
deregister the Common Stock for a period of three years following the completion
of the Conversion. Upon such registration, the proxy and tender offer rules,
insider trading reporting requirements and restrictions, annual and periodic
reporting and other requirements of the Exchange Act will be applicable to the
Holding Company.
ADDITIONAL INFORMATION
The Holding Company has filed a registration statement with the SEC on Form
S-1 under the Securities Act, with respect to the Common Stock offered hereby.
As permitted by the rules and regulations of the SEC, this Prospectus does not
contain all of the information set forth in the registration statement. Such
information can be examined and copied at the public reference facilities of the
SEC located at Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and
at the regional offices of the SEC at 75 Park Place, Fourteenth Floor, New York,
New York 10007 and Room 3190, John C. Kluczynski Building, 230 South Dearborn
Street, Chicago, Illinois 60604. Copies of such material can be obtained by
mail from the SEC at prescribed rates from the Public Reference Section of the
SEC at 450 Fifth Street, N. W., Washington, D.C. 20549. In addition, the SEC
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC, including the Holding Company; the address is
(http://www.sec.gov.). The statements contained in this Prospectus as to the
contents of any contract or other document filed as an exhibit to the
registration statement are, of
107
<PAGE>
necessity, brief descriptions thereof and are not necessarily complete; each
such statement is qualified by reference to such contract or document.
Richmond Savings has filed an Application to Convert a Mutual Savings Bank
to a Stock Owned Savings Bank with the Administrator. Pursuant to the North
Carolina conversion regulations, this Prospectus omits certain information
contained in such Application. The Application, which contains a copy of Baxter
Fentriss' appraisal, may be inspected at the office of the Administrator,
Savings Institutions Division, North Carolina Department of Commerce, Tower
Building, Suite 301, 1110 Navaho Drive, Raleigh, North Carolina 27609. Copies
of the Plan of Conversion, which includes a copy of Richmond Savings' proposed
Amended Certificate of Incorporation and Stock Bylaws, and copies of the Holding
Company's Articles of Incorporation and Bylaws are available for inspection at
each office of Richmond Savings and may be obtained by writing to Richmond
Savings at Post Office Box 1597, Rockingham, North Carolina 28379; Attention: R.
Larry Campbell, President, or by telephoning Richmond Savings at (910) 997-6245.
A copy of Baxter Fentriss' independent appraisal is also available for
inspection at the Stock Information Center.
108
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Financial Condition at June 30, 1996 and 1995 F-2
Consolidated Statements of Income for the Years Ended June 30, 1996, 1995 and 1994 F-3
Consolidated Statements of Retained Earnings for the Years Ended June 30, 1996, 1995
and 1994 F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements for the Years Ended June 30, 1996, 1995 and
1994 F-7
</TABLE>
All schedules are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
Consolidated Financial Statements of Richmond Savings or related notes. No
financial statements are provided for the Holding Company since it was not in
operation for any of the periods presented.
109
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Richmond Savings Bank, SSB
Rockingham, North Carolina
We have audited the accompanying consolidated statements of financial condition
of Richmond Savings Bank, SSB and subsidiary as of June 30, 1996 and 1995 and
the related consolidated statements of income, retained earnings, and cash flows
for each of the three years in the period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Richmond Savings
Bank, SSB and subsidiary at June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, the Bank
changed its method of accounting for investment securities in 1995 to adopt the
provisions of Statement of Financial Accounting Standards No. 115.
/s/ Dixon, Odom & Co., L.L.P.
High Point, North Carolina
August 1, 1996
__________
Page F-1
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1996 and 1995
- ----------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Cash on hand and in banks $ 1,207,513 $ 1,418,980
Interest-bearing balances in other banks 4,685,583 3,448,058
Investment securities available for sale, at fair value
(amortized cost of $8,526,954 and $5,493,835 at June 30,
1996 and 1995, respectively) (Note B) 8,386,835 5,474,425
Investment securities held to maturity, at amortized cost
(fair value of $7,871,834 and $8,832,282 at June 30, 1996
and 1995, respectively) (Note B) 7,974,880 8,883,510
Loans receivable, net (Note C) 68,357,610 68,744,661
Accrued interest receivable 577,578 537,179
Premises and equipment, net (Note D) 1,355,694 1,403,086
Real estate acquired in settlement of loans 29,074 -
Stock in the Federal Home Loan Bank, at cost 734,700 734,700
Other assets 800,589 765,733
------------ ------------
TOTAL ASSETS $ 94,110,056 $ 91,410,332
============ ============
LIABILITIES AND RETAINED EARNINGS
Deposit accounts (Note E) $ 83,714,929 $ 81,437,068
Accrued interest payable 210,823 218,171
Advance payments by borrowers for property taxes
and insurance 469,603 656,786
Accrued expenses and other liabilities 1,073,975 970,145
------------ ------------
TOTAL LIABILITIES 85,469,330 83,282,170
Commitments and contingencies (Notes C, D and L)
Retained earnings, substantially restricted (Notes H and I) 8,640,726 8,128,162
------------ ------------
TOTAL LIABILITIES AND
RETAINED EARNINGS $ 94,110,056 $ 91,410,332
============ ============
</TABLE>
See accompanying notes. Page F-2
________________________________________________________________________________
<PAGE>
=========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 1996, 1995 and 1994
- -----------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 5,596,504 $ 5,403,633 5,205,264
Investments and deposits in other banks 1,239,616 973,970 922,393
----------- ----------- ----------
TOTAL INTEREST INCOME 6,836,120 6,377,603 6,127,657
INTEREST EXPENSE ON DEPOSIT ACCOUNTS (Note E) 3,949,476 3,271,197 2,933,705
----------- ----------- ----------
NET INTEREST INCOME 2,886,644 3,106,406 3,193,952
PROVISION FOR LOAN LOSSES (Note C) 36,000 36,000 36,000
----------- ----------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,850,644 3,070,406 3,157,952
----------- ----------- ----------
OTHER INCOME
Transaction and other service fee income 357,386 286,452 304,681
Gain on sale of loans 8,390 6,975 151,420
Loss on sale of investment securities (4,404) (4,831) (1,544)
Gain on sale of real estate acquired in settlement
of loans, net - 5,875 3,943
Other income 170,970 135,397 127,809
----------- ----------- ----------
TOTAL OTHER INCOME 532,342 429,868 586,309
----------- ----------- ----------
OTHER EXPENSES
Personnel costs 1,284,791 1,252,657 1,201,018
Occupancy 148,963 152,614 148,177
Equipment rental and maintenance 159,803 173,038 154,455
Marketing 50,351 43,343 57,454
Data processing and outside service fees 274,763 266,523 274,849
Federal and other insurance premiums 218,822 216,983 221,419
Supplies, telephone and postage 116,280 119,783 117,359
Other 239,107 226,642 216,985
----------- ----------- ----------
TOTAL OTHER EXPENSES 2,492,880 2,451,583 2,391,716
----------- ----------- ----------
INCOME BEFORE INCOME TAXES 890,106 1,048,691 1,352,545
INCOME TAX EXPENSE (Note H) 299,146 329,168 492,118
----------- ----------- ----------
NET INCOME $ 590,960 $ 719,523 $ 860,427
=========== =========== ==========
</TABLE>
See accompanying notes. Page F-3
________________________________________________________________________________
<PAGE>
============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Years Ended June 30, 1996, 1995 and 1994
- --------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, BEGINNING $ 8,128,162 $ 7,413,950 $ 6,560,894
(Increase) decrease in net unrealized losses on
certain marketable equity securities - 7,371 (7,371)
Initial effect of adoption of accounting change, net
of deferred income tax assets of $34,240 (Note B) - (64,545) -
(Increase) decrease in net unrealized losses on
available for sale securities, net of deferred
income tax assets (liabilities) of $42,314 and
$(27,512), respectively (Note B) (78,396) 51,863 -
Net income 590,960 719,523 860,427
----------- ----------- -----------
BALANCE, ENDING $ 8,640,726 $ 8,128,162 $ 7,413,950
=========== =========== ===========
</TABLE>
See accompanying notes. Page F-4
________________________________________________________________________________
<PAGE>
=========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1996, 1995 and 1994
- -----------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 590,960 $ 719,523 $ 860,427
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 130,485 135,806 125,695
Amortization, net 42,925 66,759 42,873
(Gain) loss on sale of assets, net (3,986) (8,019) (152,045)
Origination of mortgage loans held for sale (1,380,132) (639,692) (7,408,690)
Proceeds from sale of loans held for sale 1,388,522 646,667 7,560,110
FHLB stock dividend - - (28,600)
Provision for loan losses 36,000 36,000 36,000
Deferred income taxes (2,988) 4,485 47,237
Deferred compensation 97,024 89,457 79,127
Change in assets and liabilities
(Increase) decrease in accrued interest receivable (40,399) 8,347 4,030
(Increase) decrease in other assets 25,026 (136,030) (17,756)
Increase (decrease) in accrued interest payable (7,348) 91,635 (46,279)
Increase (decrease) in accrued expenses and
other liabilities 52,108 (96,378) (41,672)
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 928,197 918,560 1,060,457
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of:
Available for sale investment securities (4,559,814) (511,434) -
Held to maturity investment securities (3,482,952) (999,295) -
Marketable equity securities - - (1,524,589)
Proceeds from maturities and calls of:
Available for sale investment securities 2,000,000 500,000 -
Held to maturity investment securities 2,401,418 414,056 2,425,560
Proceeds from sales of:
Available for sale investment securities 1,511,069 634,316 -
Held to maturity investment securities - - 998,437
Marketable equity securities - - 1,940,270
Net (increase) decrease in loans 283,896 (1,219,514) 162,609
Purchase of property and equipment (81,353) (10,940) (323,606)
Proceeds from sale of property and equipment - - 575
Proceeds from sale of real estate acquired in
settlement of loans - 77,272 47,402
Capital expenditures for real estate acquired in
settlement of loans (3,459) (449) -
----------- ----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (1,931,195) (1,115,988) (760,560)
----------- ----------- -----------
</TABLE>
See accompanying notes. Page F-5
________________________________________________________________________________
<PAGE>
=========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1996, 1995 and 1994
- -----------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand accounts $ 174,584 $ (2,782,040) $ 2,209,536
Net increase (decrease) in certificates of deposit 2,103,277 5,903,895 (2,899,285)
Decrease in advance payments by borrowers for
taxes and insurance (187,183) (12,445) (50,952)
Stock conversion costs incurred (61,622) - -
------------ ------------ ------------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 2,029,056 3,109,410 (740,701)
------------ ------------ ------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,026,058 2,911,982 (440,804)
CASH AND CASH EQUIVALENTS, BEGINNING 4,867,038 1,955,056 2,395,860
------------ ------------ ------------
CASH AND CASH
EQUIVALENTS, ENDING $ 5,893,096 $ 4,867,038 $ 1,955,056
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 3,956,824 $ 3,179,562 $ 2,979,984
============ ============ ============
Income taxes $ 234,733 $ 381,500 $ 473,900
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Loans receivable transferred to real estate acquired
in settlement of loans $ 25,615 $ 70,948 $ -
============ ============ ============
Transfer of investment securities from held to maturity
to available for sale (Note B) $ 1,995,851 $ - $ -
============ ============ ============
Increase (decrease) in net unrealized losses on
marketable equity securities $ - $ (7,371) $ 7,371
============ ============ ============
Increase in net unrealized losses on available for
sale investment securities, net of deferred income
taxes $ 78,396 $ 12,682 $ -
============ ============ ============
</TABLE>
See accompanying notes. Page F-6
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Richmond Savings Bank, SSB and
Subsidiary (the Bank) conform to generally accepted accounting principles and to
general practice within the savings bank industry. The following is a
description of the more significant accounting and reporting policies that the
Bank follows in preparing its consolidated financial statements.
Organization and Operations
- ---------------------------
The Bank is an operating North Carolina-chartered mutual savings bank primarily
engaged in the business of obtaining savings deposits and providing mortgage and
consumer loans to the general public.
Principles of Consolidation and Reporting
- -----------------------------------------
These consolidated financial statements include the accounts of the Bank and its
wholly-owned subsidiary, CERKO, Inc. The subsidiary's principal business
activity is that of an agent for various insurance products. All significant
intercompany transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand and in banks, interest-bearing
balances in other banks with original maturities of three months or less and
federal funds sold.
Investments and Mortgage-Backed Securities
- ------------------------------------------
The Bank adopted the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS No. 115"), as of July 1, 1994. Under SFAS No. 115, management determines
the appropriate classification of investments and mortgage-backed securities at
the time of purchase and reevaluates such designation at each reporting date.
Securities are classified as held-to-maturity when the Bank has both the
positive intent and ability to hold the securities to maturity. Held-to-
maturity securities are stated at amortized cost. Securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are stated at fair value, with the unrealized gains and losses, net
of tax, reported in a separate component of retained earnings. The Bank has no
trading securities.
The amortized cost of securities classified as held-to-maturity or available-
for-sale is adjusted for amortization of premiums and accretion of discounts to
maturity, or in the case of mortgage-backed securities, over the estimated life
of the security. Such amortization is included in interest income from
investments. Interest and dividends are included in interest income from
investments. Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
Page F-7
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments and Mortgage-Backed Securities (Continued)
- -----------------------------------------------------
Prior to the adoption of SFAS No. 115, the Bank stated its debt securities at
amortized cost and its marketable equity securities (mutual funds) at the lower
of aggregate cost or market. Accumulated changes in net unrealized losses on
marketable equity securities were included in retained earnings.
Note B to the consolidated financial statements provides further information
about the effect of adopting SFAS No. 115.
Loans Receivable
- ----------------
Loans receivable are carried at their principal amount outstanding, net of
deferred loan origination fees.
Interest on loans is recorded as borrowers' monthly payments become due.
Accrual of interest income on loans is suspended when, in management's judgment,
doubts exist as to the collectibility of principal and interest. Loans are
returned to accrual status when management determines, based on an evaluation of
the underlying collateral together with the borrower's payment record and
financial condition, that the borrower has the capability and intent to meet the
contractual obligations of the loan agreement.
Loan fees are accounted for in accordance with Statement of Financial Accounting
Standards No. 91. Loan origination fees and certain direct loan origination
costs are being deferred and the net amount amortized as an adjustment of the
related loans' yield over the contractual life of the related loans using a
level-yield method. Unamortized net loan fees or costs on loans sold are
recorded as gain or loss on sale in the year of disposition.
Loans Held for Sale
- -------------------
First mortgage loans held for sale are valued at the lower of cost or market as
determined by outstanding commitments from investors or current investor yield
requirements calculated on an aggregate basis.
Allowance for Loan Losses
- -------------------------
The Bank provides for loan losses on the allowance method. Accordingly, all
loan losses are charged to the related allowance and all recoveries are credited
to it. Additions to the allowance for loan losses are provided by charges to
operations based on various factors which, in management's judgment, deserve
current recognition in estimating possible losses. Such factors considered by
management include the market value of the underlying collateral, growth and
composition of the loan portfolio, the relationship of the allowance for loan
losses to outstanding loans, delinquency trends, and economic conditions.
Management evaluates the carrying value of loans periodically and the allowance
is adjusted accordingly. While management uses the best information available
to make evaluations, future adjustments to the allowance may be necessary if
conditions differ substantially from the assumptions used in making the
evaluations.
Page F-8
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses (Continued)
- ------------------------------------
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgments of information available to them at the time of their
examination.
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," which is
effective for fiscal years beginning after December 15, 1994. The
Statement addresses the accounting by creditors for impairment of certain loans.
It is generally applicable for all loans except large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment including
residential mortgage loans and consumer installment loans.
SFAS No. 114 requires that impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate,
or at the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. A loan is considered impaired when, based on
current information and events, it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreements.
In October 1994, the FASB issued SFAS No. 118, which is effective concurrent
with the effective date of SFAS No. 114. This Statement amends SFAS No. 114 to
allow a creditor to use existing methods for recognizing interest income on
impaired loans. Also, this Statement requires disclosure about the recorded
investment in certain impaired loans and how the creditor recognizes interest
income related to those impaired loans.
The Bank adopted the provisions of SFAS Nos. 114 and 118 as of July 1, 1995 and
the impact of the adoption of SFAS Nos. 114 and 118 was immaterial.
Premises and Equipment
- ----------------------
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation of premises and equipment is recorded on a straight-line basis over
the estimated useful lives of the related assets.
Expenditures for maintenance and repairs are charged to expense as incurred,
while those for improvements are capitalized. The costs and accumulated
depreciation relating to premises and equipment retired or otherwise disposed of
are eliminated from the accounts, and any resulting gains or losses are credited
or charged to earnings.
Page F-9
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment in Federal Home Loan Bank Stock
- ------------------------------------------
As a requirement for membership, the Bank invests in stock of the Federal Home
Loan Bank of Atlanta (FHLB) in the amount of 1% of its outstanding residential
loans or 5% of its outstanding advances from the FHLB, whichever is greater. At
June 30, 1996, the Bank owned 7,347 shares of the FHLB's $100 par value capital
stock.
Real Estate Acquired In Settlement of Loans
- -------------------------------------------
Real estate acquired in settlement of loans represents real estate acquired
through foreclosure or deed in lieu thereof and is initially recorded at the
lower of cost (principal balance of the former mortgage loan) or estimated fair
value. Management evaluates the carrying value of real estate acquired in
settlement of loans periodically and carrying values are reduced when they
exceed net realizable value. Costs relating to the development and improvement
of property are capitalized, whereas those costs relating to holding the
property are charged to expense.
Income Taxes
- ------------
During the year ended June 30, 1994, the Bank adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109").
Under SFAS No. 109, deferred income taxes or benefits are provided on temporary
differences between the financial statement carrying values and the tax bases of
assets and liabilities. The cumulative effect of this change in accounting
principle is not significant and is included in determining net income for the
year ended June 30, 1994. Financial statements for prior years have not been
restated. For prior years, the provision for income taxes was based on income
and expenses included in the consolidated statements of income, with differences
between taxes so computed and taxes payable under applicable statutes and
regulations classified as deferred taxes arising from timing differences.
Retirement Plans
- ----------------
The Bank has a noncontributory defined contribution retirement plan and a 401(k)
retirement plan covering substantially all of its employees. The Bank's policy
is to fund retirement plan contributions as accrued.
New Accounting Pronouncements
- -----------------------------
The FASB has issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
evaluating recoverability, if estimated future cash flows, undiscounted and
without interest charges, are less than the carrying amount of the asset, an
impairment loss is recognized. SFAS No. 121 also requires that certain long-
lived assets and certain identifiable intangibles to be disposed of be reported
at the lower of carrying amount or fair value less cost to sell. SFAS No. 121
applies prospectively for fiscal years beginning after December 15, 1995.
Management does not expect that adoption of SFAS No. 121 will have a material
impact on the Bank financial statements.
Page F-10
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Pronouncements (Continued)
- ----------------------------------------
The FASB has also issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights," an amendment of FASB Statement No. 65, which provides guidance for the
capitalization of originated as well as purchased mortgage servicing rights and
the measurement of impairment of those rights. SFAS No. 122 requires that an
entity recognize as separate assets the rights to service mortgage loans for
others, however those servicing rights are acquired. SFAS No. 122 also requires
that an entity assess its capitalized mortgage servicing rights for impairment
based on the fair value of those rights. It should stratify its mortgage
servicing rights based on one or more predominant risk characteristics of the
underlying loans, and recognize impairment through a valuation allowance for
each impaired stratum. SFAS No. 122 applies prospectively for the Bank's fiscal
year beginning July 1, 1996. Management has not assessed the impact that
adoption of SFAS No. 122 will have on the Bank's financial statements.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," which provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities. Those standards are based on
consistent application of a financial components approach that focuses on
control. Under the financial components approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. This
statement supersedes SFAS No. 122 and is effective for transfers and servicing
of financial assets and extinguishment of liabilities occurring after December
31, 1996. Management of the Bank has not yet determined the impact of the
adoption of SFAS No. 125.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Page F-11
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE B - INVESTMENT SECURITIES
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities." This statement addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. These
investments are to be classified in three categories and accounted for as
follows: (1) debt securities that the entity has the positive intent and
ability to hold to maturity are classified as held-to-maturity and reported at
amortized cost; (2) debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with net unrealized gains and
losses included in earnings; and (3) debt and equity securities not classified
as either held-to-maturity or trading securities are classified as securities
available-for-sale and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of retained
earnings.
The Bank adopted SFAS No. 115 on July 1, 1994. The adoption affected only the
held-to-maturity and available-for-sale classifications, with the net unrealized
securities losses on the securities available-for-sale of $64,545, net of
deferred tax assets of $34,240, reported as a decrease in retained earnings.
The adoption had no effect on previously reported net income. The Bank has no
trading securities.
The following is a summary of the securities portfolios by major classification:
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available-for-sale:
U. S. government securities and obligations
of U. S. government agencies $ 8,526,954 $ 10,270 $ 150,389 $ 8,386,835
=========== ========== ========== ===========
Securities held-to-maturity:
U. S. government securities and obligations
of U. S. government agencies $ 4,008,469 $ 1,850 $ 98,715 $ 3,911,604
Mortgage-backed securities 1,816,592 21,505 14,105 1,823,992
Corporate debt securities 1,998,695 1,685 15,590 1,984,790
Municipal securities 151,124 324 - 151,448
----------- ---------- ---------- -----------
$ 7,974,880 $ 25,364 $ 128,410 $ 7,871,834
=========== ========== ========== ===========
</TABLE>
Page F-12
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE B - INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
June 30, 1995
-----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Securities available-for-sale:
U. S. government securities and obligations
of U. S. government agencies $ 5,493,835 $ 19,175 $ 38,585 $ 5,474,425
=========== ========== ========== ===========
Securities held-to-maturity:
U. S. government securities and obligations
of U. S. government agencies $ 5,991,360 $ 26,885 $ 89,065 $ 5,929,180
Mortgage-backed securities 1,069,741 27,861 2,022 1,095,580
Corporate debt securities 1,517,985 520 14,515 1,503,990
Municipal securities 304,424 - 892 303,532
----------- ---------- ---------- -----------
$ 8,883,510 $ 55,266 $ 106,494 $ 8,832,282
=========== ========== ========== ===========
</TABLE>
The amortized cost and fair values of investment securities available for sale
and held to maturity at June 30, 1996 by contractual maturity are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
----------------------------- -----------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Due within one year $ 998,880 $ 1,000,440 $ 1,155,789 $ 1,157,213
Due after one year through five years 4,984,320 4,920,530 2,995,450 2,952,225
Due after five years through ten years 2,543,754 2,465,865 1,509,989 1,455,474
Due after ten years - - 497,060 482,930
Mortgage-backed securities - - 1,816,592 1,823,992
----------- ----------- ----------- -----------
$ 8,526,954 $ 8,386,835 $ 7,974,880 $ 7,871,834
=========== =========== =========== ===========
</TABLE>
The accounting change relating to investment securities which the Bank adopted
on July 1, 1994 is discussed in Note A. The change in unrealized gain/loss on
investment securities available for sale during the year ended June 30, 1995,
including the related effects on deferred income taxes and retained earnings,
follows:
<TABLE>
<CAPTION>
Deferred Increase
Unrealized Income (Decrease)
Holding Tax Asset in Retained
Gain (Loss) (Liability) Earnings
----------- ----------- -----------
<S> <C> <C> <C>
Initial effect of adoption of accounting change $ (98,785) $ 34,240 $ (64,545)
Decrease in unrealized loss on available-for-sale
securities during the year 79,375 (27,512) 51,863
----------- ---------- ----------
$ (19,410) $ 6,728 $ (12,682)
=========== ========== ==========
</TABLE>
Page F-13
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE B - INVESTMENT SECURITIES (Continued)
In November 1995, the FASB published a guide with respect to implementation of
SFAS No. 115 (the "guide"). Any entity which implemented SFAS No. 115 prior to
issuance of this guide was permitted to make a one-time reassessment of its
implementation of SFAS No. 115 on the basis of the information contained in the
guide. The guide stated that timely reclassifications from the held to maturity
category that resulted from that one-time reassessment would not call into
question the classifications of the entity's other securities. On December 31,
1995, the Bank reclassified securities with an amortized cost of $1,995,851 and
a net unrealized gain of $12,954 from held to maturity to available for sale.
Proceeds from sales and maturities of investment securities available for sale
during the year ended June 30, 1996 were $3,511,069. Gross gains of $-0- and
gross losses of $4,404 were realized on those sales.
Proceeds from sales and maturities of investment securities available for sale
during the year ended June 30, 1995 were $1,134,316. Gross gains of $5,243 and
gross losses of $10,074 were realized on those sales.
Securities with a carrying value of $554,172 and $286,611 and a fair value of
$568,355 and $287,687 at June 30, 1996 and 1995, respectively, were pledged to
secure public monies on deposit as required by law.
NOTE C - LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Type of loan:
Real estate loans:
One-to-four family residential $55,385,874 $57,979,655
Multi-family residential and commercial 1,963,248 1,424,895
Construction 2,300,620 2,106,145
Home equity lines of credit 5,465,095 4,666,530
----------- -----------
Total real estate loans 65,114,837 66,177,225
----------- -----------
Other loans:
Consumer loans 2,861,449 2,417,648
Home improvement loans 927,919 886,401
Loans secured by deposits 723,838 735,610
----------- -----------
Total other loans 4,513,206 4,039,659
----------- -----------
Total loans 69,628,043 70,216,884
Less:
Construction loans in process 881,075 1,109,352
Allowance for loan losses 389,358 362,871
----------- -----------
$68,357,610 $68,744,661
=========== ===========
</TABLE>
Page F-14
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE C - LOANS RECEIVABLE (Continued)
The allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year $ 362,871 $ 315,910 $ 307,061
Provision for loan losses 36,000 36,000 36,000
Charge-offs (10,970) (10,377) (29,089)
Recoveries 1,457 21,338 1,938
---------- ---------- ----------
Balance at end of year $ 389,358 $ 362,871 $ 315,910
========== ========== ==========
</TABLE>
At June 30, 1996 and 1995, respectively, the Bank had loans totaling
approximately $27,000 and $75,000 which were in a nonaccrual status.
Loans serviced for other investors amounted to $9,695,290 and $11,667,424 at
June 30, 1996 and 1995, respectively. The Bank had no loans held for sale at
June 30, 1996 and 1995.
At June 30, 1996, the Bank had mortgage loan commitments outstanding of $565,000
and pre-approved but unused lines of credit totaling $5,131,000. In
management's opinion, these commitments, and undisbursed proceeds on
construction loans in process reflected above, represent no more than normal
lending risk to the Bank and will be funded from normal sources of liquidity.
NOTE D - PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Land $ 467,285 $ 428,299
Buildings and improvements 1,159,259 1,145,789
Furniture and equipment 857,026 830,370
Leasehold improvements 21,740 19,497
----------- -----------
2,505,310 2,423,955
Accumulated depreciation (1,149,616) (1,020,869)
----------- -----------
$ 1,355,694 $ 1,403,086
=========== ===========
</TABLE>
The Bank has committed for construction of a new branch facility to replace an
existing branch. The total cost of the new branch, including land, is estimated
to be approximately $340,000. Approximately $48,000 of these costs have been
incurred as of June 30, 1996. Proceeds from the sale of the existing branch
facility of approximately $85,000 will be applied to the new branch facility.
Page F-15
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE E - DEPOSIT ACCOUNTS
Deposit accounts consist of the following:
<TABLE>
<CAPTION> 1996 1995
---- ----
<S> <C> <C>
Demand and NOW accounts, including non-interest-
bearing deposits of $1,954,320 and $1,923,993 at
June 30, 1996 and 1995, respectively, weighted
average rate of 2.21% and 2.14% at June 30, 1996
and 1995, respectively $ 10,736,983 $ 10,151,964
Passbook savings, weighted average rate of 2.95% and
2.96% at June 30, 1996 and 1995, respectively 11,367,611 11,778,046
------------ ------------
22,104,594 21,930,010
------------ ------------
Certificates of deposit:
2.60% to 3.74% 3,141,282 3,040,932
3.75% to 5.49% 35,067,738 18,133,811
5.50% to 7.55% 23,391,957 38,269,038
7.56% to 9.25% 9,358 63,277
------------ ------------
61,610,335 59,507,058
------------ ------------
$ 83,714,929 $ 81,437,068
============ ============
</TABLE>
The weighted average cost of deposit accounts was 4.69% and 4.77% at June 30,
1996 and 1995, respectively.
A summary of certificate accounts by maturity as of June 30, 1996 follows:
<TABLE>
<CAPTION>
Less than 100,000
$ 100,000 or More Total
------------ ----------- -----------
<S> <C> <C> <C>
July 1, 1996 - June
30, 1997 $ 40,398,530 $ 5,057,265 $ 45,455,795
July 1, 1997 - June
30, 1998 5,814,628 1,665,229 7,479,857
July 1, 1998 - June
30, 1999 1,300,086 216,147 1,516,233
Thereafter 6,330,459 827,991 7,158,450
------------ ----------- ------------
Total certificate
accounts $ 53,843,703 $ 7,766,632 $ 61,610,335
============ =========== ============
</TABLE>
Page F-16
________________________________________________________________________________
<PAGE>
==========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ------------------------------------------
NOTE E - DEPOSIT ACCOUNTS (Continued)
Interest expense on deposits for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Passbook savings $ 339,120 $ 387,907 $ 413,297
NOW accounts 231,069 213,164 200,711
Certificates of deposit 3,391,091 2,681,898 2,329,509
----------- ----------- -----------
3,961,280 3,282,969 2,943,517
Penalties for early withdrawal 11,804 11,772 9,812
----------- ----------- -----------
$ 3,949,476 $ 3,271,197 $ 2,933,705
=========== =========== ===========
</TABLE>
NOTE F - EMPLOYEES' RETIREMENT PLAN
The Bank has a defined contribution retirement plan which covers substantially
all the Bank's employees. Contributions to the plan are discretionary, but are
generally made in amounts which are estimated to be sufficient to provide a
target retirement benefit based on a percentage of the employee's eligible
compensation. In addition, the Bank has a 401(k) plan which contains provisions
for specified matching contributions. Provisions for contributions to the plans
totaled $41,526, $71,817 and $67,780 for the years ended June 30, 1996, 1995 and
1994, respectively.
NOTE G - DEFERRED COMPENSATION
The Bank has deferred compensation plans for certain directors and officers.
These plans provide benefits upon disability, death or attainment of a certain
age. The Bank has made current provisions for future payments under these
plans, and the related liabilities and deferred income tax benefits are included
in the accompanying consolidated financial statements. Expenses associated with
these plans were $97,024, $89,457 and $79,127 for the years ended June 30, 1996,
1995 and 1994, respectively.
Page F-17
________________________________________________________________________________
<PAGE>
============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- --------------------------------------------
NOTE H - INCOME TAXES
During the year ended June 30, 1994, the Bank adopted SFAS No. 109, "Accounting
for Income Taxes." The cumulative effect of the change in accounting principle
is included in determining net income for the year ended June 30, 1994 and is
not significant. Financial statements for prior years have not been restated.
Prior to the year ended June 30, 1994, the provision for income taxes was based
on income and expenses included in the statements of income, with differences
between taxes so computed and taxes payable under applicable statutes and
regulations classified as deferred taxes arising from timing differences (the
deferred method as required by the American Institute of Certified Public
Accountants Accounting Principles Board Opinion No. 11). SFAS No. 109 requires
the use of the asset and liability method of accounting for income taxes. Under
the asset and liability method, deferred income taxes are recognized for the tax
consequences of temporary differences, by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Temporary differences giving rise to deferred taxes relate to property and
equipment, deferred loan fees and costs, FHLB of Atlanta stock dividends,
deferred compensation, bad debt reserves, and unrealized gains (losses) on
investment securities available for sale.
The components of income tax expense are as follows for the years ended June 30,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current tax expense $ 302,134 $ 324,683 $ 444,881
---------- ---------- ----------
Deferred tax expense (benefit)
Tax on temporary differences (45,302) (2,243) 47,237
Less benefit of unrealized loss on
investment securities available for
sale allocated directly to retained
earnings 42,314 6,728 -
---------- ---------- ----------
Net deferred tax expense (benefit)
included in operations (2,988) 4,485 47,237
---------- ---------- ----------
$ 299,146 $ 329,168 $ 492,118
========== ========== ==========
</TABLE>
Page F-18
________________________________________________________________________________
<PAGE>
============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- --------------------------------------------
NOTE H - INCOME TAXES (Continued)
The differences between the provision for income taxes and the amount computed
by applying the statutory federal income tax rate to income before income taxes
were as follows for the years ended June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Income tax at federal statutory rate $ 302,636 $ 356,555 $ 459,865
State income tax, net of federal tax benefit - 259 30,314
Other (3,490) (27,646) 1,939
---------- ---------- ----------
$ 299,146 $ 329,168 $ 492,118
========== ========== ==========
</TABLE>
Deferred tax assets and liabilities arising from temporary differences at June
30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets relating to:
Deferred compensation $ 259,034 $ 236,667
Unrealized losses on investment securities
available for sale 49,042 6,728
----------- -----------
Gross deferred tax assets 308,076 243,395
Valuation allowance - -
----------- -----------
Net deferred tax assets 308,076 243,395
----------- -----------
Deferred tax liabilities relating to:
Allowance for loan losses (74,999) (62,936)
Property and equipment (70,704) (77,206)
FHLB stock dividends (135,948) (135,948)
Loan fees and costs (37,038) (23,220)
----------- -----------
Total deferred tax liabilities (318,689) (299,310)
----------- -----------
Net deferred tax liability $ (10,613) $ (55,915)
=========== ===========
</TABLE>
Retained earnings at June 30, 1996 include approximately $1,400,000 of bad debt
reserves for which no provision for income taxes has been made. If in the
future this portion of retained earnings is used for any purpose other than to
absorb tax bad debt losses, income taxes will be imposed at the then applicable
rates. Since there is no intention to use the reserves for purposes other than
to absorb tax bad debt losses, a deferred tax liability, which would otherwise
be approximately $550,000, has not been provided on such reserve.
Page F-19
________________________________________________________________________________
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ----------------------------------------------
NOTE I - RETAINED EARNINGS AND CAPITAL REQUIREMENTS
The Bank is subject to a North Carolina savings bank capital requirement of at
least 5% of total assets. The Bank's capital to total assets ratio is 9.18% at
June 30, 1996. In addition, the Bank is subject to the capital requirements of
the FDIC. The FDIC requires the Bank to maintain (i) a Tier 1 capital to risk-
weighted assets ratio of 4% and (ii) a risk-based capital requirement of 8%.
The FDIC also imposes a minimum leverage ratio requirement which varies from 3%
to 5%, depending on the institution. At June 30, 1996, the Bank exceeded the
maximum requirement.
As of June 30, 1995, the Bank exceeded all of its capital requirements.
NOTE J - TRANSACTIONS WITH RELATED PARTIES
The Bank has loan and deposit relationships with executive officers and with
members of the Board of Directors. Such loans are made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other borrowers. In the opinion of
management, such loans did not involve more than the normal risk of
collectibility. A summary of loans to directors and executive officers for the
years ended June 30, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Balance at beginning of year $ 111,650 $ 114,830
Additions 793 13,029
Repayments (11,035) (16,209)
--------- ---------
Balance at end of year $ 101,408 $ 111,650
========= =========
</TABLE>
Page F-20
________________________________________________________________________________
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ----------------------------------------------
NOTE K - CONSOLIDATED SUBSIDIARY
The following condensed statements summarize the financial position and
operating results of the Bank's wholly-owned subsidiary, CERKO, Inc.
Summary Statements of Financial Condition as of June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Assets:
Cash $ 10,707 $ 1,709
Other assets 146,625 148,136
--------- ---------
$ 157,332 $ 149,845
========= =========
Liabilities and Stockholders' Equity:
Income taxes payable $ - $ 803
Loan from parent 11,231 24,500
Accrued expenses 893 769
Stockholders' equity 145,208 123,773
--------- ---------
$ 157,332 $ 149,845
========= =========
</TABLE>
Summary Statements of Income for the years ended June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Income:
Insurance commissions $ 94,695 $ 84,194 $ 103,998
Interest and other 5,116 6,950 4,358
----------- ----------- ------------
99,811 91,144 108,356
----------- ----------- ------------
Expense:
Management fee to parent 9,700 9,500 9,500
Salaries and other 7,467 4,907 15,304
Commission expense 46,139 39,922 52,578
Income tax expense 15,070 13,569 11,460
----------- ----------- ------------
78,376 67,898 88,842
----------- ----------- ------------
Net Income $ 21,435 $ 23,246 $ 19,514
=========== =========== ============
</TABLE>
Page F-21
________________________________________________________________________________
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ----------------------------------------------
NOTE L - CONCENTRATION OF CREDIT RISK AND OFF-BALANCE SHEET RISK
The Bank generally originates single-family residential loans within its primary
lending area of Richmond, Scotland and Moore counties. The Bank's underwriting
policies require such loans to be made at no greater than 80% loan-to-value
based upon appraised values unless private mortgage insurance is obtained.
These loans are secured by the underlying properties.
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit on mortgage loans,
standby letters of credit and equity lines of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated statements of financial condition.
The contract or notional amounts of those instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
A summary of the contract amount of the Bank's exposure to off-balance sheet
risk as of June 30, 1996 is as follows:
<TABLE>
<S> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit, mortgage loans $ 565,000
Undisbursed construction loans 881,000
Undisbursed lines of credit 5,131,000
</TABLE>
NOTE M - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Bank has implemented Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments ("SFAS 107"), which
requires disclosure of the estimated fair values of the Bank's financial
instruments whether or not recognized in the balance sheet, where it is
practical to estimate that value. Such instruments include cash and cash
equivalents, investment securities, loans, accrued interest receivable, stock in
the Federal Home Loan Bank of Atlanta, deposit accounts, and commitments. Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Bank's entire holdings of a particular financial instrument.
Because no active market readily exists for a portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgement and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Page F-22
________________________________________________________________________________
<PAGE>
============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- --------------------------------------------
NOTE M - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
CASH AND CASH EQUIVALENTS
The carrying amounts for cash and cash equivalents approximate fair value.
INVESTMENT SECURITIES
Fair value for investment securities equals quoted market price if such
information is available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
LOANS
For certain homogenous categories of loans, such as residential mortgages,
fair value is estimated using the quoted market prices for securities
backed by similar loans, adjusted for differences in loan characteristics.
The fair value of other types of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities.
ACCRUED INTEREST
The carrying amounts of accrued interest approximate fair values.
STOCK IN FEDERAL HOME LOAN BANK OF ATLANTA
The fair value for FHLB stock is its carrying value, since this is the
amount for which it could be redeemed. There is no active market for this
stock and the Bank is required to maintain a minimum balance based on the
unpaid principal of home mortgage loans.
DEPOSIT LIABILITIES
The fair value of demand deposits is the amount payable on demand at the
reporting date. The fair value of certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
With regard to financial instruments with off-balance sheet risk, it is
not practicable to estimate the fair value of future financing
commitments, and because, in the case of loans sold with limited recourse,
the Bank has access to underlying collateral and other lender's remedies,
the fair value of such recourse loans is estimated to have only a nominal
value.
Page F-23
________________________________________________________________________________
<PAGE>
=============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ---------------------------------------------
NOTE M - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The carrying amounts and estimated fair values of the Bank's financial
instruments, none of which are held for trading purposes, are as follows at June
30, 1996:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------------- --------------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 5,893,096 $ 5,893,096
Investment securities 16,361,715 16,258,669
Loans 68,357,610 69,180,000
Accrued interest receivable 577,578 577,578
Stock in Federal Home Loan Bank of Atlanta 734,700 734,700
Financial liabilities:
Deposits $ 83,714,929 $ 82,086,000
</TABLE>
NOTE N - PLAN OF CONVERSION
On May 1, 1996, the Board of Directors of the Bank unanimously adopted a Plan of
Holding Company Conversion whereby the Bank will convert from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered stock savings bank
and will become a wholly-owned subsidiary of a holding company formed in
connection with the conversion. The holding company will issue common stock to
be sold in the conversion and will use that portion of the net proceeds thereof
which it does not retain to purchase the capital stock of the Bank. The Plan is
subject to approval by regulatory authorities and the members of the Bank at a
special meeting.
The stockholders of the holding company will be asked to approve a proposed
stock option plan and a proposed management recognition plan at a meeting of the
stockholders after the conversion. Shares issued to directors and employees
under these plans may be from authorized but unissued shares of common stock or
they may be purchased in the open market. In the event that options or shares
are issued under these plans, such issuances will be included in the earnings
per share calculation; thus, the interests of existing stockholders will be
diluted.
At the time of conversion, the Bank will establish a liquidation account in an
amount equal to its net worth as reflected in its latest statement of financial
condition used in its final conversion prospectus. The liquidation account will
be maintained for the benefit of eligible deposit account holders who continue
to maintain their deposit accounts in the Bank after conversion. Only in the
event of a complete liquidation will each eligible deposit account holder be
entitled to receive a subaccount balance for deposit accounts then held before
any liquidation distribution may be made with respect to common stock.
Dividends paid by the Bank subsequent to the conversion cannot be paid from this
liquidation account.
Page F-24
________________________________________________________________________________
<PAGE>
=============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- ---------------------------------------------
NOTE N - PLAN OF CONVERSION (Continued)
The Bank may not declare or pay a cash dividend on or repurchase any of its
common stock if its net worth would thereby be reduced below either the
aggregate amount then required for the liquidation account or the minimum
regulatory capital requirements imposed by federal and state regulations.
Conversion costs of approximately $62,000 have been incurred and are included in
prepaid expenses and other assets as of June 30, 1996. If the conversion is
ultimately successful, conversion costs will be accounted for as a reduction of
the stock proceeds. If the conversion is unsuccessful, conversion costs will be
charged to the Savings Bank's operations.
Page F-25
________________________________________________________________________________
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL OR ENTITY HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
ANY SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY CAROLINA FINCORP, INC. OR RICHMOND SAVINGS BANK, SSB. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY, OR ANY OTHER SECURITIES, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CAROLINA FINCORP, INC. OR
RICHMOND SAVINGS BANK, SSB SINCE ANY OF THE DATES AS OF WHICH INFORMATION IS
FURNISHED HEREIN OR SINCE THE DATE HEREOF.
_____________________________
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Summary...................................................................... 4
Selected Financial and Other Data
of Richmond................................................................. 15
Risk Factors................................................................. 16
Carolina Fincorp, Inc........................................................ 21
Richmond Savings Bank, SSB................................................... 22
Use of Proceeds.............................................................. 22
Dividend Policy.............................................................. 24
Market for Common Stock...................................................... 25
Capitalization............................................................... 25
Pro Forma Data............................................................... 27
Historical and Pro Forma Capital Compliance.................................. 29
Anticipated Stock Purchases by Management.................................... 31
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................... 32
Business of the Holding Company.............................................. 46
Business of Richmond Savings................................................. 46
Taxation..................................................................... 65
Supervision and Regulation................................................... 67
Management of the Holding Company............................................ 77
Management of Richmond Savings............................................... 78
Description of Capital Stock................................................. 87
Anti-Takeover Provisions Affecting the
Holding Company and Richmond Savings....................................... 89
The Conversion............................................................. 93
Legal Opinions...............................................................107
Experts......................................................................107
Registration Requirements....................................................107
Additional Information.......................................................107
Index to Consolidated Financial Statements...................................109
</TABLE>
Until ________________, 1996, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may
be required to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
================================================================================
================================================================================
UP TO
1,851,500 SHARES
CAROLINA
FINCORP, INC.
(Proposed Holding Company for
Richmond Savings Bank, SSB)
COMMON STOCK
PROSPECTUS
TRIDENT SECURITIES, INC.
______ ________, 1996
================================================================================
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses
(other than fees and commissions payable to the selling agent) to be incurred in
connection with the issuance and distribution of the shares.
<TABLE>
<CAPTION>
<S> <C>
Registration and Filing Fees.................................... $ 37,500
Postage and Printing............................................ 70,000
Accounting Fees and Expenses.................................... 50,000
Fees and Expenses Payable to Appraiser and Business Plan
Consultant..................................................... 30,000
Legal Fees...................................................... 125,000
Sales Agent Expenses............................................ 40,000
Conversion Data Processing...................................... 7,500
Stock Transfer Agent Fees and Costs of Stock Certificates....... 10,000
Miscellaneous................................................... 12,000
--------
$383,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation provide that, to the fullest
extent permitted by the North Carolina Business Corporation Act (the "NCBCA"),
no person who serves as a director shall be personally liable to the Registrant
or any of its stockholders or otherwise for monetary damages for breach of any
duty as director. The Registrant's By-laws state that any person who at any
time serves or has served as a director, officer, employee or agent of the
Registrant, or any such person who serves or has served at the request of the
Registrant as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
as a trustee or administrator under an employee benefit plan, shall have a right
to be indemnified by the Registrant to the fullest extent permitted by law
against liability and litigation expense arising out of such status or
activities in such capacity. "Liability and litigation expense" shall include
costs and expenses of litigation (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement which are actually and
reasonably incurred in connection with or as a consequence of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including appeals.
Sections 55-8-50 through 55-8-58 of the NCBCA contain provisions
prescribing the extent to which directors and officers shall or may be
indemnified. Section 55-8-51 of the NCBCA permits a corporation, with certain
exceptions, to indemnify a present or former director against liability if (i)
the director conducted himself in good faith, (ii) the director reasonably
believed (x) that the director's conduct in the director's official capacity
with the corporation was in its best interests and (y) in all other cases the
director's conduct was at least not opposed to the corporation's best interests,
and (iii) in the case of any criminal proceeding, the director had no reasonable
cause to believe the director's conduct was unlawful. A corporation may not
indemnify a director in connection with a proceeding by or in
II-1
<PAGE>
the right of the corporation in which the director was adjudged liable to the
corporation or in connection with a proceeding charging improper personal
benefit to the director. The above standard of conduct is determined by the
board of directors, or a committee or special legal counsel or the shareholders
as prescribed in Section 55-8-55.
Sections 55-8-52 and 55-8-26 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which the
director or officer was a party against reasonable expenses when the director or
officer is wholly successful in the director's or officer's defense, unless the
articles of incorporation provide otherwise. Upon application, the court may
order indemnification of the director or officer if the director or officer is
adjudged fairly and reasonably so entitled under Section 55-8-54.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
The foregoing is only a general summary of certain aspects of North
Carolina law dealing with indemnification of directors and officers and does not
purport to be complete. It is qualified in its entirety by reference to the
relevant statutes, which contain detailed specific provisions regarding the
circumstances under which and the person for whose benefit indemnifications
shall or may be made.
Item 15. Recent Sales of Unregistered Securities.
In June, 1996, Registrant sold one share of common stock, no par value per
share, to R. Larry Campbell for an aggregate purchase price of $10.00. Such
sale was exempt from registration under Section 4(2) of Securities Act of 1933.
Item 16. Exhibits.
The following exhibits and financial statement schedules are filed herewith
or will, as noted, be filed by amendment.
II-2
<PAGE>
(a) Exhibits
Exhibit No.
(Per Exhibit
Tables in
Item 601 of
Regulation S-K) Description
--------------- -----------
1.1 Engagement letter dated April 9, 1996 between Richmond Savings
Bank, SSB and Trident Securities, Inc.*
-
1.2 Form of Sales Agency Agreement among Carolina Fincorp, Inc.,
Richmond Savings Bank, SSB and Trident Securities, Inc.
2.1 Revised Amended and Restated Plan of Holding Company Conversion
of Richmond Savings Bank, SSB
3.1 Articles of Incorporation of Carolina Fincorp, Inc.*
-
3.2 Bylaws of Carolina Fincorp, Inc.*
-
4.1 Forms of Stock Certificate for Carolina Fincorp, Inc. and
Richmond Savings Bank, Inc., SSB
5.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
as to legality of securities to be registered hereby*
-
8.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
as to federal and state tax consequences*
-
8.2 Opinion of Baxter Fentriss and Company as to the value of
subscription rights*
-
10.1 Letter Agreement dated March 28, 1996 between Richmond Savings
Bank, SSB and Baxter Fentriss and Company for appraisal
services*
-
10.2 Revised Forms of Employment Agreement to be entered into
between Richmond Savings Bank, Inc., SSB and (i) R. Larry
Campbell and (ii) John W. Bullard
10.3 Forms of Employee Stock Ownership Plan and Trust of Richmond
Savings Bank, Inc., SSB*
-
10.4 Form of the Management Recognition Plan of Richmond Savings
Bank, Inc., SSB if the Plan is adopted and approved by the
stockholders of
II-3
<PAGE>
Carolina Fincorp, Inc. within one year after the conversion
of Richmond Savings Bank, SSB to stock form*
-
10.5 Form of Registrant's Stock Option Plan and Trust if the Plan
and Trust are adopted and approved by the stockholders of
Carolina Fincorp, Inc. within one year after the conversion of
Richmond Savings Bank, SSB to stock form*
-
10.6 Form of Richmond Savings Bank, SSB Severance Plan*
-
10.7 Form of Capital Maintenance Agreement between Carolina
Fincorp, Inc. and Richmond Savings Bank, Inc., SSB*
-
24.1 Consent of Dixon, Odom & Co., L.L.P.
24.2 Consent of Baxter Fentriss and Company
24.3 Consent of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P.
27.1 Revised Financial Data Schedule
-------
28.1 Appraisal Report of Baxter Fentriss and Company as of May 17,
-------------
1996*
-----
28.2 Appraisal Report of Baxter Fentriss and Company as of August
---- ------------------------------------------------------------
8, 1996
-------
28.3 Form of Stock Order Form
*Filed previously.
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director,
II-4
<PAGE>
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of Regulation S-X at the start of any delayed offering or
throughout a continuous offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Rockingham, State of North Carolina, on the 4th day of September, 1996.
CAROLINA FINCORP, INC.
By: /s/ R. Larry Campbell
---------------------------
R. Larry Campbell
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: September 4, 1996 By: /s/ R. Larry Campbell
------------------------------------------
R. Larry Campbell, President and Director
(Principal Executive Officer)
Date: September 4, 1996 By: /s/ Winston G. Dwyer
------------------------------------------
Winston G. Dwyer, Treasurer (Principal
Accounting Officer and Principal Financial
Officer)
Date: September 4, 1996 By: /s/ Russell E. Bennett, Jr.
------------------------------------------
Russell E. Bennett, Jr., Director
Date: September 4, 1996 By: /s/ Buena Vista Coggin
------------------------------------------
Buena Vista Coggin, Director
Date: September 4, 1996 By: /s/ Joe M. McLaurin
------------------------------------------
Joe M. McLaurin, Director
Date: September 4, 1996 By: /s/ John T. Page
------------------------------------------
John T. Page, Jr., Director
Date: September 4, 1996 By: /s/ W. Jesse Spencer
------------------------------------------
W. Jesse Spencer, Director
Date: September 4, 1996 By: /s/ J. Stanley Vetter
------------------------------------------
J. Stanley Vetter, Director
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
(Per Exhibit
Tables in
Item 601 of Sequential
Regulation S-K) Description Page No.
- --------------- ----------- ----------
<S> <C>
1.1 Engagement letter dated April 9, 1996 between Richmond
Savings Bank, SSB and Trident Securities, Inc.*
1.2 Form of Sales Agency Agreement among Carolina Fincorp, Inc.,
Richmond Savings Bank, SSB and Trident Securities, Inc.
2.1 Revised Amended and Restated Plan of Holding Company Conversion of
Richmond Savings Bank, SSB
3.1 Articles of Incorporation of Carolina Fincorp, Inc.*
3.2 Bylaws of Carolina Fincorp, Inc.*
4.1 Forms of Stock Certificate for Carolina Fincorp, Inc. and
Richmond Savings Bank, Inc., SSB
5.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to legality of securities to be registered hereby*
8.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to federal and state tax consequences*
8.2 Opinion of Baxter Fentriss and Company as to the value of
subscription rights*
10.1 Letter Agreement dated March 28, 1996 between Richmond
Savings Bank, SSB and Baxter Fentriss and Company for
appraisal services*
10.2 Revised Forms of Employment Agreement to be entered into between
Richmond Savings Bank, Inc., SSB and (i) R. Larry Campbell
and (ii) John W. Bullard
10.3 Forms of Employee Stock Ownership Plan and Trust of Richmond
Savings Bank, Inc., SSB*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Page No.
----------
<S> <C>
10.4 Form of the Management Recognition Plan of Richmond
Savings Bank, Inc., SSB if the Plan is adopted and approved
by the stockholders of Carolina Fincorp, Inc. within one year
after the conversion of Richmond Savings Bank, SSB to
stock form*
10.5 Form of Registrant's Stock Option Plan and Trust if the Plan
and Trust are adopted and approved by the stockholders of
Carolina Fincorp, Inc. within one year after the conversion of
Richmond Savings Bank, SSB to stock form*
10.6 Form of Richmond Savings Bank, SSB Severance Plan*
10.7 Form of Capital Maintenance Agreement between Carolina
Fincorp, Inc. and Richmond Savings Bank, Inc., SSB*
24.1 Consent of Dixon, Odom & Co., L.L.P.
24.2 Consent of Baxter Fentriss and Company
24.3 Consent of Brooks, Pierce, McLendon, Humphrey &
Leonard, L.L.P.
27.1 Revised Financial Data Schedule
28.1 Appraisal Report of Baxter Fentriss and Company as of
May 17, 1996*
28.2 Appraisal Report of Baxter Fentriss and Company as of
August 8, 1996
28.3 Form of Stock Order Form
</TABLE>
*Filed previously.
<PAGE>
EXHIBIT 1.2
CAROLINA FINCORP, INC.
(a North Carolina corporation)
UP TO 1,610,000 (ESTIMATED MAXIMUM) SHARES OF COMMON STOCK
(No Par Value Per Share)
Purchase Price $10.00 Per Share
AGENCY AGREEMENT
----------------
_________, 1996
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Gentlemen:
Carolina Fincorp, Inc., a North Carolina corporation ("Company"), and
Richmond Savings Bank, SSB, a North Carolina-chartered savings bank ("Bank"),
hereby confirm their respective agreements with Trident Securities, Inc.
("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introduction. In accordance with the Bank's plan of conversion
------------
("Plan"), pursuant to which the Bank intends to convert from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered stock savings bank
("Conversion"), the Company is offering, in order of priority, to the Bank's
Eligible Account Holders (as defined in the Plan), the Bank's employee stock
ownership plan ("ESOP"), the Bank's Supplemental Eligible Account Holders (as
defined in the Plan), the Bank's Other Members (as defined in the Plan), and
officers, directors and employees of the Bank who are not Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members, non-
transferable rights to subscribe for a minimum of 1,190,000 and a maximum of
1,610,000 shares ("Shares"), of its Common Stock, no par value per share
("Common Stock"), in a subscription offering ("Subscription Offering"), and, if
necessary, will offer the Shares not so subscribed to the public in a direct
community offering ("Community Offering") subject to the limitations described
in the Plan. If necessary, all Shares not purchased in the Subscription and
Community Offerings will be offered for sale to the general public by a
syndicate of registered broker-dealers as selected dealers to be formed and
managed by Trident ("Syndicated Community Offering") pursuant to the form of
Selected Dealers' Agreement attached hereto as Exhibit A. As set forth in the
Prospectus, the maximum number of shares offered and sold may be increased to up
to 1,851,500.
<PAGE>
Trident Securities, Inc.
Page 2
The Bank has been advised by Trident that Trident desires to use its best
efforts to assist the Bank with its sale of the Common Stock in the Subscription
Offering and, subsequently, if necessary, in the Community Offering and, if
necessary, in the Syndicated Community Offering (collectively, the "Offering").
2. Representations and Warranties. The Company and Bank represent and
------------------------------
warrant, jointly and severally, to Trident that:
(a) The Company has filed with the Commission a registration
statement on Form S-1, including exhibits and all amendments and supplements
thereto (No. 333-6855), including a prospectus, for the registration of the
Shares under the Securities Act of 1933, as amended ("1933 Act"). Such
registration statement has been declared effective by the Commission under the
1933 Act and no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the best of its knowledge,
threatened by the Commission (provided that for this purpose the Company and the
Bank shall not regard any such proceeding as "threatened" unless the Commission
has manifested to the management of the Company, or to its counsel, a present
intention to initiate such proceeding). Such registration statement, as amended
or supplemented, on file with the Commission at the time the registration
statement became effective, including the prospectus, financial statements,
schedules, exhibits and all other documents filed as part thereof, is herein
called the "Registration Statement," and the prospectus, as amended or
supplemented, if amended or supplemented, on file with the Commission at the
time the Registration Statement became effective is herein called the
"Prospectus," except that if the prospectus filed by the Company with the
Commission pursuant to Rule 424(b) of the General Rules and Regulations of the
Commission under the 1933 Act ("1933 Act Regulations") differs from the form of
prospectus on file at the time the Registration Statement became effective, the
term "Prospectus" shall refer to the Rule 424(b) prospectus from and after the
time it is filed with the Commission and shall include any amendments or
supplements thereto from and after their dates of effectiveness or use,
respectively. The Registration Statement complies in all material respects with
the 1933 Act and the 1933 Act Regulations.
(b) The Bank has filed with the Administrator of the North Carolina
Savings Institutions Division ("Administrator") and with the Federal Deposit
Insurance Corporation ("FDIC") an Application to Convert a Mutual Savings Bank
into a Stock Owned Savings Bank (as amended or supplemented, if so amended or
supplemented), including exhibits, ("Form AC") in accordance with the
requirements of North Carolina law and the published rules and regulations of
the Administrator ("Administrator Regulations") and the Federal Deposit
Insurance Act and the published rules and regulations of the FDIC. The Form AC
complies in all material respects with the Administrator Regulations and the
rules and regulations of the FDIC. The Form AC has been conditionally approved
by the Administrator, and the Bank has received from the FDIC a conditional
notice of
<PAGE>
Trident Securities, Inc.
Page 3
intention not to object; the Prospectus (included as part of the Form AC) has
been approved for use by the Administrator and has received a conditional notice
of intention not to object from the FDIC; no order has been issued by the
Administrator or the FDIC preventing or suspending the use of the Prospectus
and, to the best of the Bank's knowledge, no action by or before the
Administrator revoking such approval or by or before the FDIC revoking such
conditional notification of intention not to object is pending or threatened.
(c) The Company has filed with the Federal Reserve Board ("FRB") an
application ("BHC Application") pursuant to Section 3(a)(1) of the Bank Holding
Company Act of 1956, as amended, and the regulations promulgated thereunder, for
approval to acquire all of the outstanding common stock of the Bank upon
consummation of the Conversion; the BHC Application has been approved by the FRB
and no order has been issued by the FRB suspending or revoking such approval
and, to the best of the Company's knowledge, no action by or before the FRB to
revoke or suspend such approval is pending or threatened.
(d) The Registration Statement does not contain an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Prospectus does not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Representations or warranties in this subsection shall not
apply to statements or omissions made in reliance upon and in conformity with
written information regarding Trident furnished to the Company or the Bank by
Trident expressly for use in the Registration Statement or the Prospectus.
(e) The Company has been duly organized as a business corporation
under the laws of the State of North Carolina and the Bank is duly organized as
a mutual savings bank under the laws of the State of North Carolina, and each of
them is validly existing and in good standing under the laws of the State of
North Carolina with full power and authority to own their respective properties
and conduct their respective businesses as described in the Prospectus. The
Bank is a member in good standing of the Federal Home Loan Bank of Atlanta and
no actions or proceedings have been instituted, or to the best knowledge of the
Bank, are pending or threatened to revoke or suspend such membership. The
deposit accounts of the Bank are insured by the Savings Association Insurance
Fund ("SAIF") administered by the FDIC up to applicable legal limits and no
actions or proceedings have been instituted or, to the best knowledge of the
Bank, are pending or threatened to suspend or revoke such insurance. Each of
the Company and the Bank is qualified to do business as a foreign corporation in
any jurisdiction where non-qualification has or would have a material adverse
effect on the condition (financial or otherwise), operations, business, assets,
earnings, properties or prospects ("Material Adverse Effect")
<PAGE>
Trident Securities, Inc.
Page 4
of the Company and the Bank, taken as a whole. Upon amendment of the Bank's
charter and bylaws as provided in the Administrator Regulations and completion
of the sale by the Company of the Shares as contemplated by the Prospectus, (i)
the Bank will be converted pursuant to the Plan to a North Carolina-chartered
capital stock savings bank in good standing and with full power and authority to
own its property and conduct its business as described in the Prospectus, (ii)
all of the outstanding shares of capital stock of the Bank will be owned of
record and beneficially by the Company, and (iii) the Company will have no
direct subsidiaries other than the Bank.
(f) The Bank owns of record and beneficially all of the outstanding
shares of CERKO, Inc. (the "Subsidiary"). The Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina with full power and authority to own its properties and conduct
its business as described in the Prospectus. The Subsidiary has obtained all
material licenses, permits and other governmental authorizations currently
required for the conduct of its business, all of which are in full force and
effect, and the Subsidiary is in all material respects complying therewith. The
Subsidiary is qualified to do business as a foreign corporation in any
jurisdiction where non-qualification has or would have a Material Adverse Effect
on the Company, the Bank and the Subsidiary, taken as a whole.
(g) Each of the Company, the Bank and the Subsidiary has good and
marketable title to all assets material to its business and to those assets
described in the Prospectus as owned by the Company, the Bank, or the Subsidiary
free and clear of all liens, charges, encumbrances or restrictions, except as
are described in the Prospectus or are not reasonably expected to have a
Material Adverse Effect on the Company, the Bank and the Subsidiary, taken as a
whole, and all of the leases and subleases of the Bank under which it holds
properties material to its business, including those described in the
Prospectus, are in full force and effect as described therein.
(h) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of each of the Company and the
Bank, and this Agreement is a valid and binding obligation of each of the
Company and the Bank, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of savings and loan
holding companies, the accounts of whose subsidiaries are insured by the FDIC,
or by general equity principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and except to the extent that
the provisions of Sections 8 and 9 hereof may be unenforceable as against public
policy or Section 23A of the Federal Reserve Act, 12 U.S.C. Section 371c
("Section 23A").
<PAGE>
Trident Securities, Inc.
Page 5
(i) There is no litigation or governmental proceeding pending or, to
the best knowledge of the Company or the Bank, threatened against or involving
the Company, the Bank, or the Subsidiary or any of their assets which
individually or in the aggregate would reasonably be expected to affect the
performance of the terms and conditions of this Agreement or the consummation of
the Conversion or which have or would reasonably be expected to have a Material
Adverse Effect on the Company, the Bank and the Subsidiary, taken as a whole,
except as referred to in the Prospectus. Any litigation or governmental
proceeding is not considered "threatened" unless the potential litigant or
governmental authority has manifested to the management of the Company or the
Bank, or to their counsel, a present intention to initiate such litigation or
proceeding.
(j) The Conversion will constitute a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and will not be a taxable
transaction under the laws of the State of North Carolina to the Company and the
Bank; the Bank has received the opinion of Brooks, Pierce, McLendon, Humphrey &
Leonard, L.L.P., Greensboro, North Carolina, with respect to federal and North
Carolina income tax consequences of the Conversion, which is filed as an exhibit
to the Registration Statement and the Form AC; and the facts and representations
relied upon in such opinion are true, accurate and complete and neither the
Company nor the Bank has taken any actions inconsistent therewith.
(k) The Company and the Bank each has all power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to carry out the provisions and conditions hereof and, in the case of
the Company, to issue and sell the Shares to be sold by it as provided herein,
and in the case of the Bank, to issue and sell the shares of its capital stock
to be sold to the Company as provided in the Plan (subject to the issuance of an
amended charter in the form required for a stock savings bank ("Stock Charter"),
the form of which is filed as an exhibit to the Form AC).
(l) Neither the Company, the Bank nor the Subsidiary is in violation
of any rule or regulation of the Administrator or the FDIC that would result in
any enforcement action against the Company, the Bank or the Subsidiary or their
officers or directors that has or may have a Material Adverse Effect on the
Company, the Bank and the Subsidiary, taken as a whole.
(m) The consolidated financial statements of the Bank which are
included in the Registration Statement and the Form AC and are part of the
Prospectus fairly present the financial condition, results of operations,
retained earnings and cash flows of the Bank at the respective dates thereof and
for the respective periods covered thereby and comply as to form with applicable
accounting requirements of both the 1933 Act Regulations and the Administrator
Regulations. Such financial statements have been prepared according to
generally accepted accounting principles consistently applied
<PAGE>
Trident Securities, Inc.
Page 6
throughout the periods involved. The financial tables in the Prospectus
accurately present the information purported to be shown thereby at the
respective dates thereof and for the respective periods covered thereby.
(n) There has been no change with respect to the condition,
financial or otherwise, results of operations, business, assets or properties of
the Company, the Bank or the Subsidiary which is material to the Company, the
Bank and the Subsidiary, taken as a whole, since the latest date as of which
such condition or the latest period for which such operations is set forth in
the Prospectus except as referred to therein; and the capitalization, assets,
properties and businesses of the Company, the Bank and the Subsidiary conform in
all material respects to the descriptions thereof contained in the Prospectus as
of the date specified and, since such date, there has been no occurrence which
has had or would have a Material Adverse Effect on the Company, the Bank and the
Subsidiary, taken as a whole. Neither the Company, the Bank nor the Subsidiary
have any material contingent liabilities, except as set forth in the Prospectus.
(o) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default, on the part of the
Company, the Bank or the Subsidiary or, to the best knowledge of the Company and
Bank, on the part of any other party in the due performance and observance of
any term, covenant or condition of any agreement which would result in a
Material Adverse Effect on the Company, the Bank and the Subsidiary, taken as a
whole; and said agreements are in full force and effect; and no other party to
any such agreement has instituted or, to the best knowledge of the Company or
the Bank, threatened any action or proceeding wherein the Company, the Bank or
the Subsidiary would or might be alleged to be in default thereunder.
(p) Neither the Company, the Bank nor the Subsidiary is in violation
of their respective charters, articles of incorporation or bylaws or in default
in the performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence or indebtedness which is material to
the Company, the Bank and the Subsidiary, taken as a whole. The execution and
delivery of this Agreement, the fulfillment of the terms set forth herein and
the consummation of the transactions contemplated hereby will not violate or
conflict with the respective charters, articles of incorporation or bylaws of
the Company or the Bank or violate, conflict with or constitute a breach of, or
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, any agreement, indenture or other instrument by
which any of the Company, the Bank or the Subsidiary is bound and which is
material to the Company, the Bank and the Subsidiary, taken as a whole, or under
any governmental license or permit or any law, administrative regulation,
authorization, approval, order, court decree, injunction or order which is
material to the Company, the Bank and the Subsidiary, taken as a whole, subject
to the satisfaction of certain conditions imposed by the Administrator or FDIC
in connection with their approval of, or conditional notification of intention
not to object to, the Form AC, and
<PAGE>
Trident Securities, Inc.
Page 7
as may be required under the blue sky laws and regulations (collectively, the
"Blue Sky Laws") of various jurisdictions.
(q) Subsequent to the respective dates as of which information is
given in the Prospectus, neither the Company, the Bank nor the Subsidiary has
issued any securities or incurred any liabilities or obligation, direct or
contingent, for borrowed money, except borrowings by the Bank in the ordinary
course of business, or entered into any transaction, other than transactions in
the ordinary course of business, which is material in light of the businesses
and properties of the Company, the Bank and the Subsidiary, taken as a whole.
(r) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company shall be as set forth in the
Prospectus under the caption "Capitalization," and no equity or debt securities
of the Company has been or shall be issued and outstanding prior to the Closing
Date other than one share of Common Stock, no par value, issued to R. Larry
Campbell. The issuance and the sale of the Shares have been duly authorized by
all necessary action of the Company and the Bank, has been conditionally
approved by the Administrator and received a conditional notice of intention not
to object from the FDIC. When issued in accordance with the terms of the Plan
in exchange for the consideration described in the Prospectus, the Shares shall
be validly issued, fully paid and nonassessable and shall conform to the
description thereof contained in the Prospectus. The issuance of the Shares is
not subject to preemptive rights. Good title to the Shares will be transferred
to the purchasers thereof upon issuance thereof against payment therefore, free
and clear of all claims, encumbrances, security interests and liens whatsoever,
with respect to the Company's interest in such Shares. The certificates
representing the Shares will conform with the requirements of applicable laws
and regulations. The issuance and sale of the Common Stock of the Bank to the
Company has been duly authorized by all necessary action of the Bank and the
Company and appropriate regulatory authorities subject to the satisfaction of
certain conditions for consummating the Conversion and the approval or
conditional notices of nonobjection received from regulatory officials with
respect thereto, and such Common Stock, when issued in accordance with the terms
of the Plan in exchange for the consideration described in the Prospectus, will
be fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus.
(s) No approval of any regulatory, supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance of the Shares, except as may be required under the
Blue Sky Laws of various jurisdictions and except as shall have been previously
obtained, and except as may be required by the conditions of regulatory
approvals or notices of non-objection received from regulatory officials.
<PAGE>
Trident Securities, Inc.
Page 8
(t) All contracts and other documents required to be filed as
exhibits to the Registration Statement or the Form AC have been filed with the
Commission and/or the Administrator, as the case may be.
(u) Dixon, Odom & Co., L.L.P., which has certified the financial
statements of the Bank as of June 30, 1995 and 1996, and for each of the years
in the three-year period ended June 30, 1996, included in the Prospectus, are,
and were during the periods covered in its report in the Prospectus, independent
public accountants within the meaning of the 1933 Act, the 1933 Act Regulations,
and the Code of Professional Ethics of the American Institute of Certified
Public Accountants.
(v) Baxter Fentriss and Company, which prepared the Conversion
appraisal dated as of _________, 1996, described in the Prospectus, is
independent with respect to the Bank within the meaning of applicable
regulations of the Administrator, is believed by the Bank to be experienced and
expert in rendering corporate appraisals of thrift institutions, and the Bank
believes that Baxter Fentriss and Company has prepared the pricing information,
set forth in the Prospectus, in accordance with the requirements of the
Administrator Regulations.
(w) The Company, the Bank and the Subsidiary have timely filed all
required federal and state tax returns and no deficiency has been asserted or
assessed with respect to such returns by any taxing authorities, except for
taxes which the Company, the Bank and the Subsidiary may in good faith contest,
have paid all taxes that have become due and, to the best of their knowledge,
have made adequate reserves for similar future tax liabilities.
(x) The records of deposit account holders and borrowers (who
constitute the members of the Bank) delivered to Trident by the Bank or its
agent for use during the Conversion are reliable, accurate and complete, and
Trident shall have no liability to any person relating to the reliability,
accuracy or completeness of such records or for any denial or allocation of a
subscription to purchase Shares to any person based upon such records.
(y) Neither the Company nor the Bank has made any payment of funds
of the Company or the Bank prohibited by law, and no funds of the Company or the
Bank have been set aside to be used for any payment prohibited by law.
(z) All documents delivered by the Bank or the Company or their
representatives in connection with the issuance and sale of the Common Stock,
except for those documents which were prepared by parties other than the Bank,
the Company or their representatives, were on the dates on which they were
delivered, true, complete and correct.
<PAGE>
Trident Securities, Inc.
Page 9
(aa) To the best of the Bank's knowledge, the Bank complies with all
laws, rules and regulations relating to environmental protection, and the Bank
has not been notified or is otherwise aware that it is potentially liable, or is
considered potentially liable, under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any similar state or
local laws. There are no actions, suits, regulatory investigations or other
proceedings pending or, to the best knowledge of the Bank, threatened against
the Bank relating to environmental protection, nor does the Bank have any reason
to believe any such proceedings may be brought against it. To the best
knowledge of the Bank, no disposal, release or discharge of hazardous or toxic
substances, pollutants or contaminants, including petroleum and gas products, as
any of these terms may be defined under applicable federal, state or local laws,
has occurred on, in, at or about any of the facilities or properties of the Bank
or any of the facilities or properties pledged to the Bank as collateral for any
loan or other extension of credit granted by the Bank, except which would not
have a Material Adverse Effect on the Bank.
2A. Representations and Warranties of Trident. Trident represents and
-----------------------------------------
warrants to the Company and the Bank that:
(a) Trident is registered as a broker-dealer with the Commission and is in
good standing with the NASD.
(b) Trident is validly existing as a corporation under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
provide the services to be furnished to the Company and the Bank hereunder.
(c) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of Trident, and this Agreement is a legal,
valid and binding obligation of Trident, enforceable in accordance with its
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of creditors of
registered broker-dealers the accounts of whom may be insured by the Securities
Investor Protection Corporation or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in equity or at law,
and except to the extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or Section 23A).
(d) Each of Trident and, to Trident's knowledge, its employees, agents and
representatives who shall perform any of the services required hereunder to be
performed by Trident shall be duly authorized and shall have all licenses,
approvals and permits necessary to perform such services; and Trident is a
registered selling agent in such jurisdictions in which the Company is relying
on such registration for the sale of the Shares,
<PAGE>
Trident Securities, Inc.
Page 10
and will remain registered in such jurisdictions until the Conversion is
consummated or terminated.
(e) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not conflict with the corporate charter
or bylaws of Trident or constitute a breach of, or default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, any
material agreement, indenture or other instrument by which Trident is bound or
under any governmental license or permit or any law, administrative regulation,
authorization, approval or order or court decree in injunction by which Trident
is bound.
(f) Any funds received by Trident to purchase Common Stock will be handled
in accordance with Rule 15c2-4 under the Securities Exchange Act of 1934, as
amended ("1934 Act").
(g) There is not now pending or, to Trident's knowledge, threatened
against Trident any action or proceeding before the SEC, NASD, any state
securities commission or any state or federal court concerning Trident's
activities as a broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the basis
------------------------------------------------------
of the representations and warranties herein but subject to the terms and
conditions set forth in this Section 3, the Bank hereby employs Trident as its
agent to use its best efforts in assisting the Bank's sale of the Shares in the
Offering. The employment of Trident hereunder shall terminate (a) forty-five
(45) days after the Subscription Offering closes, unless the Bank, with the
approval of the Administrator, is permitted to extend such period of time, or
(b) upon the Closing Date of the Conversion, whichever date shall first occur.
In the event the Company is unable to sell a number of shares
sufficient to produce aggregate gross proceeds equal to the pro forma appraised
value, as amended, established for the Conversion within the period herein
provided, then, unless the parties hereto otherwise agree with the consent of
the Administrator, this Agreement shall terminate and the Company shall refund
promptly to any persons who have subscribed for any Shares the full amount which
it may have received from such persons; and no party to this Agreement shall
have any obligation to the other parties, except as set forth in Sections 6, 8
and 9 hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in one or more special interest-bearing accounts with
the Bank until all Shares are sold and paid for were made prior to the
commencement of the Subscription Offering, with provision for prompt refund to
the purchasers as set forth above, or for delivery to the Company if the
required number of Shares is sold.
If the required number of Shares is sold, the Company agrees to issue
or have issued such Shares and to release for delivery certificates to
subscribers therefor as soon as
<PAGE>
Trident Securities, Inc.
Page 11
practicable after the Closing Date. Such release for delivery shall be against
payment to the Company by any means authorized pursuant to the Prospectus, at
the executive office of the Bank, 115 South Lawrence Street, Rockingham, North
Carolina, or at such other place as shall be agreed upon among the parties
hereto. The date upon which Trident is paid the compensation due hereunder is
herein called the "Closing Date."
Trident shall receive the following compensation for its services
hereunder:
(a) (i) a management fee of one percent (1.00%) of the aggregate
dollar amount of capital stock sold in both the Subscription Offering and
Community Offering, (ii) a commission equal to two percent (2.00%) of the
aggregate dollar amount of any Shares sold in the Subscription Offering
(excluding any shares sold to the Bank's directors, executive officers and their
"associates," as such term is defined in the Plan, and the Bank's employee stock
ownership plan), and (iii) a commission equal to two percent (2.00%) of the
aggregate dollar amount of Shares sold by Trident in the Community Offering
(excluding shares sold by other NASD member firms under selected dealers
agreements). For stock sold by other NASD member firms under selected dealer's
agreements, the commission payable shall equal the agreed-upon fee to be paid to
the selected dealers, as approved by the Bank. All such fees are to be payable
in next day funds to Trident in Raleigh, North Carolina, on the Closing Date.
(b) Trident shall be reimbursed for all allocable expenses,
including legal fees, incurred by it whether or not the Conversion is
consummated, provided, however, that the Bank shall not pay or reimburse Trident
for any of the foregoing expenses incurred after Trident shall have notified the
Bank of its election to terminate this Agreement pursuant to Section 11 hereof
or after such time as the Bank shall have given notice in accordance with
Section 12 hereof that Trident is in breach of this Agreement. Notwithstanding
the foregoing, Trident's legal fees and expenses to be paid by the Bank shall
not exceed $30,000, and Trident's other allocable expenses to be paid by the
Bank shall not exceed $7,500. Full payment of Trident's allocable expenses,
including legal fees, shall be made in next day funds on the Closing Date or, if
the Conversion is not completed or is terminated for any reason, within ten (10)
calendar days of receipt by the Bank of the detailed listing from Trident of its
allocable expenses. Trident acknowledges receipt of a $10,000 advance payment
from the Bank which shall be credited against the total reimbursement due
Trident hereunder. In the event the Offering is terminated, Trident shall be
reimbursed only for its allocable expenses, including legal fees, which expenses
and fees will not exceed the limitations set forth above.
The Company and the Bank shall pay all stock issue and transfer taxes
with respect to the sale of the Shares. The Company and the Bank shall pay all
expenses of the Conversion, including, but not limited to, their attorneys'
fees, NASD filing fees, filing and registration fees, attorneys' fees relating
to any required "blue sky" or state securities laws research and filings,
telephone charges, air freight, rental equipment, supplies, transfer agent
<PAGE>
Trident Securities, Inc.
Page 12
charges, fees relating to auditing and accounting and costs of printing all
documents necessary in connection with the Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
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assisting the Company and the Bank on a best efforts basis in offering a minimum
of 1,258,000 Shares and a maximum of 1,702,000 Shares (which maximum may be
increased to an amount of up to 1,957,300 shares as set forth in the Prospectus)
in a Subscription Offering and, if necessary, any Shares which remain
unsubscribed at the conclusion of the Subscription Offering, in a Community
Offering. Any Shares which remain unsubscribed in the Subscription and
Community Offering will be offered to the general public through a syndicate of
registered broker dealers to be formed and managed by Trident. The Shares are
to be initially offered to the public at the price set forth on the cover page
of the Prospectus and the first page of this Agreement.
5. Covenants. The Company and Bank covenant and agree, jointly and
---------
severally, that:
(a) If any Shares remain unsubscribed following completion of the
Subscription Offering and the Community Offering, the Company to the extent
required by the 1933 Act or 1993 Act Regulations, will promptly file with the
Commission a post-effective amendment to the Registration Statement relating to
the results of the Offerings, any additional information with respect to the
proposed plan of distribution and any revised pricing information.
(b) The Company shall deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident reasonably may request. The
Company authorizes Trident to use the Prospectus in connection with the offer
and sale of the Shares.
(c) The Company shall notify Trident immediately, and confirm the
notice in writing, (i) when any post-effective amendment to the Registration
Statement becomes effective or any supplement to the Prospectus has been filed,
(ii) of the issuance by the Commission of any stop order relating to the
Registration Statement or the initiation or threat of any proceeding for that
purpose, (iii) of the issuance by the Administrator or FDIC of any stop order
relating to the Form AC or of the initiation or the threat of any proceedings
for that purpose, (iv) of the issuance by the Administrator or the FDIC of any
order preventing or suspending the use of the Prospectus or the approval of the
Form AC, (v) the issuance by the FDIC of any order revoking its non-objection of
the Form AC, (vi) of the receipt of any notice with respect to the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, and
(vii) of the receipt of any comments from the staff of the Commission, the
Administrator or the FDIC relating to the Registration Statement or the Form AC,
as the case may be. If the Commission enters a stop order relating to the
Registration Statement or the Administrator or the FDIC enters a similar
<PAGE>
Trident Securities, Inc.
Page 13
order with respect to the Form AC at any time, the Company, or the Bank, as the
case may be, will make every reasonable effort to obtain the lifting of such
order(s) as soon as possible.
(d) During the time when a prospectus is required to be delivered
under the 1933 Act, the Company will comply with all requirements imposed upon
it by the 1933 Act, as now in effect and hereafter amended, and by the 1933 Act
Regulations, as from time to time in force, so far as necessary to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is used in connection with the offer and sale of the Shares any event
relating to or affecting the Company or the Bank shall occur as a result of
which it is necessary, in the opinion of counsel for Trident, to amend or
supplement the Prospectus in order to make the Prospectus not false or
misleading in light of the circumstances existing at the time it is delivered to
a purchaser of the Shares, the Company forthwith shall prepare and furnish to
Trident a reasonable number of copies of an amendment or amendments or of a
supplement or supplements to the Prospectus (in form and substance reasonably
satisfactory to counsel for Trident) which shall amend or supplement the
Prospectus so that, as amended or supplemented, the Prospectus shall not contain
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
existing at the time the Prospectus is delivered to a purchaser of the Shares,
not misleading. The Company will not file or use any amendment or supplement to
the Registration Statement or the Prospectus of which Trident has not first been
furnished a copy or to which Trident shall reasonably object after having been
furnished such copy. For the purposes of this subsection, the Company and the
Bank shall furnish such information with respect to themselves as Trident from
time to time may reasonably request.
(e) The Company shall take all necessary action and furnish to
appropriate counsel, such information as may be required to qualify or register
the Shares for offer and sale by the Company under the Blue Sky Laws of such
jurisdictions as Trident and the Company may reasonably agree upon; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction. In each
jurisdiction where such qualification or registration shall be effected, the
Company, unless Trident agrees that such action is not necessary or advisable in
connection with the distribution of the Shares, shall file and make such
statements or reports as are, or reasonably may be, required by the laws or
regulations of such jurisdiction.
(f) Appropriate entries will be made in the financial records of the
Bank to establish a liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders according to the requirements
of the Administrator Regulations.
<PAGE>
Trident Securities, Inc.
Page 14
(g) The Company shall file a registration statement for the Common
Stock under Section 12(g) of the 1934 Act prior to completion of the Offering
pursuant to the Plan and shall request that such registration statement be
effective upon completion of the Conversion. The Company shall maintain the
effectiveness of such registration for at least the minimum time period required
by the Administrator Regulations.
(h) For three (3) years from the date of this Agreement, the Company
shall furnish Trident, (i) as soon as publicly available after the end of each
fiscal year, a copy of its annual report to stockholders for such year, (ii) as
soon as publicly available, a copy of each report mailed to shareholders or
definitive proxy statement of the Company filed with the Commission under the
1934 Act, and (iii) from time to time, such other public information concerning
the Company as Trident may reasonably request.
(i) The Company and the Bank shall use the net proceeds from the
sale of the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
(j) The Company shall not deliver the Shares until it has satisfied
all conditions set forth in Section 7 hereof, unless such condition is waived in
writing by Trident.
(k) If necessary, the Company and the Bank shall advise Trident as
to the allocation of deposits, in the case of Eligible Account Holders and
Supplemental Eligible Account Holders (as defined in the Plan), and votes, in
the case of Other Members (as defined in the Plan), and of the Shares in the
event of an oversubscription and shall provide Trident final instructions as to
the allocation of the Shares in such event, and such instructions shall be
accurate, reliable and complete. Trident shall be entitled to rely exclusively
on such instructions and shall have no liability to any person as a result of
its reliance thereon, including without limitation, no liability to any person
for or related to any denial or grant of a subscription for Shares. The Company
shall indemnify and hold Trident harmless for any liability arising out of such
instructions or any records of account holders, depositors, borrowers and other
members of the Bank delivered to Trident by the Company or the Bank or their
agents for use during the Offering and the Conversion.
(l) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
ensure compliance with the NASD's "Interpretation Relating to Free-Riding and
Withholding."
(m) The Company will not sell or issue, contract to sell or
otherwise dispose of, for a period of 90 days after the Closing Date, without
Trident's prior written consent, any shares of common stock other than as
described in the Prospectus.
<PAGE>
Trident Securities, Inc.
Page 15
(n) The Company will use its best efforts to obtain approval for and
maintain quotation of the shares on the Nasdaq National Market effective on or
prior to the Closing Date.
(o) The Company and the Bank will maintain appropriate arrangements
for depositing all funds received from persons mailing subscriptions for or
orders to purchase Common Stock in the Subscription and Community Offering on an
interest bearing basis at the rate described in the Prospectus until the Closing
Date and satisfaction of all conditions precedent to the release of the Bank's
obligation to refund payments received from persons subscribing for or ordering
Common Stock in the Subscription and Community Offering in accordance with the
Plan as described in the Prospectus or until refunds of such funds have been
made to the persons entitled thereto in accordance with the Plan and as
described in the Prospectus.
(p) The Company and Bank will conduct the Conversion in accordance
with the Plan, the Administrator Regulations and all other applicable laws,
regulations, decisions and orders, including all terms, conditions, requirements
and provisions precedent to the Conversion and the non-objection of the FDIC.
6. Payment of Expenses. Whether or not the Conversion is completed or
-------------------
the sale of the Shares by the Company is consummated, the Company and the Bank
shall pay or reimburse Trident for (a) all filing fees paid or incurred by
Trident in connection with all filings with the NASD; and, (b) in addition, if
this Agreement does not become effective, the Company is unable to sell the
number of shares sufficient to produce aggregate gross proceeds equal to the pro
forma appraised value of the Company and the Bank, as amended, as established
for the Conversion or the Offering or Conversion is otherwise terminated, the
Company and the Bank shall reimburse Trident for all allocable expenses incurred
by Trident relating to the Offering, subject to the provisions of Section 3
hereof provided; however, that the Company and the Bank shall not pay or
reimburse Trident for any of the foregoing expenses accrued after Trident shall
have notified the Company and the Bank of its election to terminate this
Agreement pursuant to Section 11 hereof or after such time as the Company and
the Bank shall have given notice in accordance with Section 12 hereof that
Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived in
-----------------------------------
writing by Trident, the obligations of Trident as provided herein shall be
subject to the accuracy of the representations and warranties contained in
Section 2 hereof as of the date hereof and as of the Closing Date, to the
accuracy of the statements of officers and directors of the Company and the Bank
made pursuant to the provisions hereof, to the performance by the Company and
the Bank of its obligations hereunder and to the following conditions:
(a) At the Closing Date, Trident shall receive:
<PAGE>
Trident Securities, Inc.
Page 16
(1) the favorable opinion of Brooks, Pierce, McLendon, Humphrey &
Leonard, L.L.P., special counsel for the Company and the Bank, dated the Closing
Date, addressed to Trident, in form and substance satisfactory to counsel for
Trident and to the effect that:
(i) the Company has been duly incorporated, is validly
existing and is in good standing under the laws of State of North Carolina, with
full power and authority to own its properties and conduct its business as
described in the Prospectus;
(ii) the Bank is duly organized and is validly existing as a
mutual savings bank in good standing under the laws of North Carolina, with full
power and authority to own its properties and conduct its business as described
in the Prospectus; the Bank is a member of the Federal Home Loan Bank of Atlanta
and the deposit accounts of the Bank are insured by the SAIF up to applicable
legal limits and, to such counsel's Actual Knowledge, no actions or proceedings
are pending or threatened to suspend or revoke such membership or insurance
coverage;
(iii) the Subsidiary has been duly incorporated, is validly
existing and is in good standing under the laws of State of North Carolina, with
full power and authority to own its properties and conduct its business as
described in the Prospectus; the Bank owns of record and, to such counsel's
Actual Knowledge, beneficially all of the shares of capital stock of the
Subsidiary and does not have any subsidiaries other than the Subsidiary;
(iv) the Company, the Bank and the Subsidiary are each duly
qualified to do business and each are in good standing as a foreign corporation
in each jurisdiction where the ownership or leasing of its properties of which
such counsel has Actual Knowledge or the conduct of its business of which such
counsel has Actual Knowledge requires such qualification unless the failure to
be so qualified would not have a Material Adverse Effect on the Company, the
Bank and the Subsidiary, taken as a whole;
(v) to such counsel's Actual Knowledge, (a) the Company, the
Bank and the Subsidiary have obtained all licenses, permits and other
governmental authorizations currently required for the conduct of their
respective businesses except where the failure to obtain such licenses, permits
and governmental authorizations would not have a Material Adverse Effect on the
Company, the Bank and the Subsidiary taken as a whole, (b) all such licenses,
permits and other governmental authorizations are in full force and effect and
(c) the Company, the Bank and the Subsidiary are complying therewith in all
material respects;
(vi) the Plan has been duly adopted and approved by the Board of
Directors and members of the Bank and by the Board of Directors of the
<PAGE>
Trident Securities, Inc.
Page 17
Company; the Plan complies with, and to such counsel's Actual Knowledge, the
Conversion has been effected in accordance with, all applicable laws, rules,
regulations, decisions and orders (with such modifications as were disclosed and
approved by the Administrator and FDIC, as evidenced by their approval and
conditional notice of intent not to object, and were in such counsel's opinion
appropriate for the transactions described in the Form AC); to such counsel's
Actual Knowledge, all of the terms, conditions, requirements and provisions with
respect to the Plan and the Conversion imposed by the Administrator and the
FDIC, except with respect to filing certain post-Conversion reports, have been
complied with by the Bank or appropriate waivers have been obtained; to such
counsel's Actual Knowledge, no person has sought to obtain regulatory or
judicial review of the final action of the Administrator or the FDIC in
approving the Plan;
(vii) the Company has authorized Common Stock as set forth in
the Registration Statement and the Prospectus; the Bank has authorized capital
stock as set forth in the Form AC and the Prospectus and the description of such
capital stock in the Registration Statement, Form AC and the Prospectus is
accurate and complete in all material respects;
(viii) upon the effectiveness of the Bank's Stock Charter and
Bylaws in accordance with the Administrator Regulations and the completion of
the sale by the Company of the Shares as contemplated by the Prospectus and Plan
of Conversion, (a) the Bank will be converted pursuant to the Plan of Conversion
to a permanent capital stock savings bank under the laws of the State of North
Carolina with full power and authority to own its property and conduct its
business as described in the Prospectus, and (b) all of the outstanding capital
stock of the Bank will be owned of record and, to such counsel's Actual
Knowledge, beneficially by the Company free and clear of all liens, charges,
encumbrances and restrictions;
(ix) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of the Company
and the Bank and have received all requisite regulatory approvals or, in the
case of the FDIC, its non-objection; the Shares, upon receipt of payment and
issuance in accordance with the terms of the Plan and this Agreement, will be
fully paid and non-assessable, and the purchasers of the Shares from the
Company, upon issuance thereof against payment therefor, will acquire such
Shares free and clear of all claims, encumbrances, security interests and liens
whatsoever created or suffered to be created against the Company;
(x) the certificates for the Common Stock comply with
applicable requirements of North Carolina law and applicable Administrator
Regulations and are in due and proper form;
<PAGE>
Trident Securities, Inc.
Page 18
(xi) the sale and issuance of the capital stock of the Bank to
the Company have been duly authorized by all necessary action of the Bank and
the Company and approved by the Administrator; when issued in accordance with
the terms of the Plan of Conversion, such common stock will be validly issued,
fully paid and nonassessable; there are no preemptive rights or rights to
subscribe for or to purchase any capital stock of the Bank; good title to such
capital stock will be transferred to the Company upon issuance thereof against
payment to the Bank of a portion of the net proceeds of the sale of the Shares,
and, to such counsel's Actual Knowledge, free and clear of all claims,
encumbrances, security interests and liens whatsoever;
(xii) the Form AC has been approved by the Administrator and
has received the non-objection of the FDIC; the acquisition of the Bank by the
Company has been approved by the FRB; subject to the satisfaction of post-
Conversion conditions and approvals of the Administrator, FDIC and FRB, no
further approval, authorization, consent, non-objection or other order of any
public board or body is required in connection with the execution and delivery
of this Agreement, the issuance of the Shares and the consummation of the
Conversion, except as may be required under the Blue Sky Laws of the various
jurisdictions (as to which no opinion need be given);
(xiii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate or otherwise, on the part of each
of the Company and the Bank; and this Agreement is a legal, valid and binding
obligation of the Company and the Bank, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship or other laws affecting creditors'
rights generally, except as may be limited by the exercise of judicial
discretion in applying principles of equity and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against public
policy or Section 23A;
(xiv) the statements in the Prospectus under the captions
"Supervision and Regulation," "Taxation," "Dividend Policy," "Description of
Capital Stock" and "Anti-takeover Provisions Affecting the Holding Company and
Richmond Savings ," insofar as they are, or refer to, statements of law or legal
conclusions thereon, have been prepared by such counsel and are correct in all
material respects;
(xv) the Administrator has approved and the FDIC has given its
non-objection to the solicitation of proxies pursuant to the Bank's Proxy
Statement and the consummation of the Conversion as described in the Plan; the
Stock Charter when filed with the North Carolina Secretary of State will be in
full force and effect; and, to such counsel's Actual Knowledge, no proceedings
are pending by or before the Commission, the Administrator, the FRB or the FDIC
seeking to revoke or rescind the orders declaring the
<PAGE>
Trident Securities, Inc.
Page 19
Prospectus effective or approving the Conversion nor, to such counsel's Actual
Knowledge, are any such proceedings contemplated or threatened;
(xvi) the execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated hereby do not (a) conflict with the certificate of
incorporation, charter or bylaws of the Bank (in either mutual or stock form) or
the Company, (b) to such counsel's Actual Knowledge, constitute a breach of or
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, nor give rise to any right of termination,
cancellation or acceleration contained in, or result in the creation or
imposition or any material lien, charge or other encumbrance upon any of the
properties or assets of the Company and the Bank pursuant to any of the terms,
provisions or conditions, of any material agreement, contract, indenture, bond,
debenture, note, instrument or obligation to which the Company and the Bank is a
party or by which it or its assets or properties may be bound or is subject, or
any governmental license or permit, which in any such event would result in a
Material Adverse Effect on the Company and the Bank, taken as a whole,or (c)
violate any law, administrative regulation or order or court order, writ,
injunction or decree;
(xvii) to such counsel's Actual Knowledge, there has been no
violation of the Company's or the Bank's certificate of incorporation, charter
or bylaws, or breach or default (or the occurrence of any event which, with the
lapse of time or action, or both, by a third party, would result in a material
breach or a material default), under any agreement, contract, indenture, bond,
debenture, note, instrument or obligation to which the Company or the Bank is a
party or by which any of them or any of their respective assets or properties
may be bound, or any governmental license or permit, or a violation of any law,
administrative regulation or order, or court order, writ, injunction or decree
which in any such event would have a Material Adverse Effect on the Company and
the Bank, taken as a whole;
(xviii) the Registration Statement, Form AC, and the Prospectus
(in each case as amended or supplemented, if so amended or supplemented) comply
as to form in all material respects with the requirements of all applicable laws
and the rules, regulations, and all written and published decisions and orders
of the Commission, the Administrator and the FDIC (except as to financial
statements, notes to financial statements, financial tables and other financial
and statistical data, including the appraisal included therein, as to which no
opinion need be expressed); to such counsel's Actual Knowledge, all documents
and exhibits required to be filed as part of or with the Registration Statement
or Form AC (as amended or supplemented, if so amended or supplemented) have been
so filed; the description in the Registration Statement, Form AC and the
Prospectus of such documents and exhibits is accurate in all material respects
and presents fairly the information required to be shown; except as set forth in
the Prospectus,
<PAGE>
Trident Securities, Inc.
Page 20
to such counsel's Actual Knowledge (a) there are no legal or governmental
proceedings pending or threatened against or involving the assets of the Bank
required to be disclosed in the Prospectus and (b) there are no any statutes,
regulations, contracts or other documents required to be described or disclosed
in the Prospectus which are not so described or disclosed; the description in
the Prospectus of the statutes, regulations, contracts and other documents
therein described are in all material respects accurate summaries and fairly
present the information required to be shown;
(xix) The Registration Statement has been declared effective by
the Commission, and, to such counsel's Actual Knowledge, no stop order has been
issued with respect thereto and no proceedings are pending by or before the
Commission seeking to revoke or rescind the order declaring the Registration
Statement effective, nor are any such proceedings contemplated or threatened;
(xx) to such counsel's Actual Knowledge, the Bank is not in
violation of any directive from the Administrator or the FDIC to make any change
in the method of conducting its business; and
(xix) the Bank is not required to be registered as an
investment company under the Investment Company Act of 1940.
In giving such opinion, such counsel may rely as to all matters of fact on
certificates of officers and directors of the Bank and certificates of public
officials delivered pursuant hereto. For purposes of such opinion, any
litigation or governmental proceeding is not considered to be "threatened"
unless the potential litigant or governmental authority has manifested to the
management of the Bank, or to their counsel, a present intention to initiate
such litigation or proceeding.
As used in such counsel's opinion, the phrase "Actual Knowledge" shall mean
the conscious awareness of facts or other information by Edward C. Winslow III,
Randall A. Underwood, Ellen P. Hamrick and John M. Cross, Jr., who are all the
lawyers employed by such counsel who have had active involvement with the
Conversion, and except to the extent stated in such opinion, such counsel will
not be deemed to have undertaken any independent investigation or inquiry to
determine the existence or absence of any facts.
(2) the letter of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P., special counsel for the Company and the Bank, addressed to Trident,
dated the Closing Date and in form and substance satisfactory to special counsel
for Trident to the effect that, nothing has come to such counsel's attention
that would lead it to believe that, the Registration Statement, as amended or
supplemented, if amended or supplemented (except as to financial statements,
notes to financial statements, financial tables and other financial and
statistical data, including the appraisal contained therein, with respect to
which
<PAGE>
Trident Securities, Inc.
Page 21
such counsel need make no statement), at the time it became effective and at the
time any post-effective amendment thereto became effective, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein in light of the
circumstances under which they were made not misleading, or that the Prospectus,
as amended or supplemented, if amended or supplemented (except as to financial
statements, notes to financial statements, financial tables and other financial
and statistical data contained therein, with respect to which counsel need make
no statement), as of its date and as of the Closing Date, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling it to review or pass
upon the matters required by Trident, and for the purpose of evidencing the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained, including but not limited to, resolutions of the
Boards of Directors of the Company and the Bank regarding the authorization of
this Agreement and the transactions contemplated hereby.
(c) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material adverse change in the condition,
financial or otherwise, affairs or prospects of the Company and the Bank from
that as of the latest date as of which such condition is set forth in the
Prospectus, except as referred to therein; (ii) there shall have been no
material transactions entered into by the Company and the Bank from the latest
date as of which the financial condition of the Bank is set forth in the
Prospectus other than transactions referred to or contemplated therein and
transactions by the Company and the Bank in the ordinary course of business;
(iii) neither the Company nor the Bank shall have received from the
Administrator or the Commission any direction (oral or written) to make any
material change in the method of conducting their respective businesses with
which they have not complied; (iv) no action, suit or proceeding, at law or in
equity or before or by any federal or state commission, board or other
administrative agency, shall be pending or, to the best of the Company's and the
Bank's knowledge, threatened against the Bank or the Company or affecting any of
their respective assets, wherein an unfavorable decision, ruling or finding
would result in a Material Adverse Effect on the Bank and the Company, taken as
a whole; and (v) the Shares shall have been qualified or registered for offering
and sale by the Company under the Blue Sky Laws of such jurisdictions as Trident
and the Bank shall have agreed upon.
(d) At the Closing Date, Trident shall receive a certificate of the
Presidents and the principal financial officers of the Company and the Bank,
dated the Closing Date, to the effect that: (i) they have carefully examined the
Prospectus and at the time the
<PAGE>
Trident Securities, Inc.
Page 22
Prospectus became authorized for final use, the Prospectus did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) since the date the Prospectus became
authorized for final use, no event has occurred which should have been set forth
in an amendment or supplement to the Prospectus which has not been so set forth,
including specifically, but without limitation, any event that has or may have a
Material Adverse Effect on the Company and the Bank, and the conditions set
forth in clauses (ii) through (iv) inclusive of subsection (c) of this Section 7
have been satisfied; (iii) no order has been issued by the Commission, FDIC, the
Administrator or the FRB to suspend the Offering or the Conversion or the
effectiveness of the Prospectus and, to the best knowledge of such officers, no
action for such purposes has been instituted or threatened by such agencies;
(iv) to the best knowledge of such officers, no person has sought to obtain
review of the final action of the Administrator approving the Plan and, (v) all
of the representations and warranties contained in Section 2 of this Agreement
are true and correct, with the same force and effect as though expressly made on
the Closing Date.
(e) At the Closing Date, Trident shall receive, among such other
documents as it may reasonably request, (i) a copy of the letter from the
Administrator authorizing the use of the Prospectus and related materials, (ii)
a copy of the order of the FDIC granting its non-objection to the Conversion;
(iii) a copy of the letter from the Administrator approving the consummation of
the Conversion; (iv) a copy of a letter from the Administrator evidencing the
good standing of the Bank; (v) a copy of the letter from the Administrator
approving the amendment to the Bank's mutual charter; and (vi) a copy of the
letter from the FRB approving the BHC Application.
(f) As soon as available after the Closing Date, Trident shall
receive a certified copy of the Bank's stock charter as filed with the North
Carolina Secretary of State.
(g) Concurrently with the execution of this Agreement, Trident shall
have received a letter from Dixon, Odom & Co., L.L.P. independent certified
public accountants, dated the date hereof and addressed to Trident, in substance
and form satisfactory to counsel for Trident, with respect to the financial
statements and certain financial information contained in the Prospectus, to the
effect that (i) they are independent certified public accountants with respect
to the Company and the Bank within the meaning of the 1933 Act, 1933 Act
Regulations, and the Code of Professional Ethics of the American Institute of
Certified Public Accountants; (ii) in their opinion, the financial statements
and schedules audited by them and included in the Registration Statement and the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1933 Act Regulations; and (iii)
in addition to the audits referred to in their report included in the Prospectus
and on the basis of certain other limited
<PAGE>
Trident Securities, Inc.
Page 23
procedures, including an inspection of the minute book of the Company and the
Bank since the date of the latest audited financial statements included in the
Prospectus, inquiries of officials of the Company and the Bank responsible for
financial and accounting matters and such other inquiries and procedures as may
be specified in such letter, they have carried out certain specified procedures,
not constituting an audit, in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by counsel to Trident which are derived from the general
accounting records of the Company and the Bank, which appear in the Prospectus,
or in exhibits and schedules to the Registration Statement, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and the Bank and have found them to be in
agreement.
(h) At the Closing Date, Trident shall receive a letter, in form and
substance satisfactory to counsel for Trident, from Dixon, Odom & Co., L.L.P.,
independent certified public accountants, dated the Closing Date and addressed
to Trident, confirming the statements made by them in the letter delivered by
them pursuant to the preceding subsection as of a specified date not more than
five (5) business days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company and the Bank
and delivered to Trident or to counsel for Trident shall be deemed a
representation and warranty by the Company or the Bank to Trident as to the
statements made therein. If any condition to Trident's obligations hereunder to
be fulfilled prior to or at the Closing Date is not so fulfilled, Trident, in
its sole discretion, may terminate this Agreement or, if Trident, in its sole
discretion so elects, may waive any such conditions which have not been
fulfilled, or may extend the time of their fulfillment. If Trident terminates
this Agreement as aforesaid, the Bank shall reimburse Trident for its allocable
expenses as provided in Section 3(b) hereof.
8. Indemnification.
---------------
(a) The Company and the Bank agree to indemnify and hold harmless
Trident, its officers, directors and employees and all persons who control
Trident within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all loss, liability, claim, damage and expense
whatsoever that such indemnified persons shall suffer and shall further
reimburse promptly such persons for any legal or other expenses reasonably
incurred by each or any of them investigating, preparing to defend or defending
against any such action, proceeding or claim (whether commenced or threatened)
arising out of any misrepresentation by the Company or the Bank in this
Agreement, or any breach of warranty by the Company or the Bank with respect to
this Agreement or arising out of
<PAGE>
Trident Securities, Inc.
Page 24
or based upon any untrue or alleged untrue statement of a material fact or the
omission or alleged omission of a material fact necessary to make not misleading
in light of the circumstances under which it was made, any statements contained
in (i) the Prospectus or (ii) any application (including the Form AC or other
document or communication (in this Section 8 collectively called "Application"))
prepared or executed by or on behalf of the Bank or based upon written
information furnished by or on behalf of the Company or the Bank, whether or nor
filed in any jurisdiction, to effect the Conversion or qualify the Shares under
the Blue Sky Laws thereof or filed with the Commission, the FDIC, or the
Administrator, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company and the Bank
regarding Trident by or on behalf of Trident expressly for use in the Prospectus
or any amendment or supplement thereof or in any Application, or (iii) any
unwritten statement made to a purchaser of the Shares by any director or officer
or any person employed by or associated with the Company or the Bank other than
Trident, its officers, directors, employees or agents. This indemnity shall be
in addition to any other liability the Company or the Bank may have to Trident.
(b) Trident agrees to indemnify and hold harmless the Company and
the Bank, its officers, directors and employees and all persons who control the
Company and the Bank within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company and the Bank to Trident, but only with respect to any statements or
omissions made in the Prospectus or any amendment or supplement thereof in
reliance upon, and in conformity with, written information furnished to the Bank
regarding Trident by or on behalf of Trident expressly for use in the
Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party of the commencement
thereof, but the omission to so notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may have to any indemnified
party otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified
<PAGE>
Trident Securities, Inc.
Page 25
party, the indemnified party may retain additional counsel, but shall bear the
fees and expenses of such counsel unless (i) the indemnifying party shall have
specifically authorized the indemnified party to retain such counsel or (ii) the
parties to such suit include such indemnifying party and the indemnified party,
and such indemnified party shall have been advised by counsel that one or more
material legal defenses may be available to the indemnified party which may not
be available to the indemnifying party, in which case the indemnifying party
shall not be entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such counsel.
An indemnifying party against whom indemnity may be sought shall not be liable
to indemnify an indemnified party under this Section 8 if any settlement of any
such action is effected without such indemnifying party's consent.
9. Contribution. (a) In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
Section 8 above is for any reason held to be unavailable to the Company and the
Bank or Trident other than in accordance with its terms, the Company and the
Bank and Trident shall contribute to the aggregate losses, liabilities, claims,
damages, and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and the Bank and Trident (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Bank on the one hand and Trident on the other from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but also the relative fault
of the Company and the Bank on the one hand and Trident on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Bank on the one hand and Trident on the other shall be deemed to be in the same
proportion as the total proceeds from the Conversion (before deducting expenses)
received by the Company and the Bank bear to the total fees received by Trident
under this Agreement. The relative fault of the Company and the Bank on the one
hand and Trident on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Bank or by Trident and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(b) The Company and the Bank and Trident agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to
<PAGE>
Trident Securities, Inc.
Page 26
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 9, Trident shall not be required to contribute any amount in excess of
the amount by which fees owed Trident pursuant to this Agreement exceeds the
amount of any damages which Trident has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission for
which Trident would be provided indemnification under Section 8 hereof. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is
innocent of such fraudulent misrepresentation.
10. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company and the Bank and Trident and the
representations and warranties of the Company and the Bank set forth in or made
pursuant to this Agreement shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement or any investigation made by
or on behalf of Trident or the Company and the Bank or any controlling person or
indemnified party referred to in Section 8 hereof, and shall survive any
termination or consummation of this Agreement and/or the issuance of the Shares,
and any legal representative of Trident, the Company, or the Bank and any such
controlling persons shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated in subsection (c) below at any time after this Agreement
becomes effective as follows:
(a) If the Company or the Bank breaches a representation or warranty
specified in Section 2 of this Agreement or if any domestic or international
event or act or occurrence has materially disrupted the United States securities
markets such as to make it, in Trident's opinion, impracticable to proceed with
the offering of the Shares; or if trading on the New York Stock Exchange shall
have been suspended; or if the United States shall have become involved in a war
or major hostilities; or if a general banking moratorium has been declared by a
state or federal authority; or if a moratorium in foreign exchange trading by
major international banks or persons has been declared; or if there shall have
been a material adverse change in the capitalization, condition or business of
the Company and the Bank; or if the Company, or the Bank shall have sustained a
material or substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act, whether or not said loss
shall have been insured.
(b) The Company and the Bank may terminate this Agreement with
respect to Trident upon a material breach of this Agreement by Trident.
<PAGE>
Trident Securities, Inc.
Page 27
(c) If any party hereto elects to terminate this Agreement as
provided in this Section, such party shall notify the other parties hereto
promptly by telephone or telegram, confirmed by letter and delivered by an
overnight courier service the same day.
(d) If this Agreement is terminated by Trident for any of the
reasons set forth in subsection (a) above and to fulfill its obligations
pursuant to Sections 3, 6, 8 and 9 of this Agreement and upon demand, the
Company and the Bank shall pay Trident the full amount owing thereunder.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows (with a copy to Breyer & Aguggia, 1300 I Street, N.W., Suite 470 East,
Washington, D.C. 20005, Attention: Paul M. Aguggia, Esquire), or if sent to the
Company or the Bank shall be mailed, delivered or telegraphed and confirmed to
Richmond Savings Bank, SSB, 115 South Lawrence Street, North Carolina 28379,
Attention: R. Larry Campbell, President (with a copy to Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., 2000 Renaissance Plaza, 230 North Elm
Street, Greensboro, North Carolina 27420, Attention: Edward C. Winslow, III,
Esquire).
13. Parties. The Company and the Bank shall be entitled to act and rely
-------
on any request, notice, consent, waiver or agreement purportedly given on behalf
of Trident when the same shall have been given by the undersigned or any other
officer of Trident. Trident shall be entitled to act and rely on any request,
notice, consent, waiver or agreement purportedly given on behalf of the Company
or the Bank, when the same shall have been given by the undersigned or any other
officer of the Company or the Bank. This Agreement shall inure solely to the
benefit of, and shall be binding upon, Trident, the Company, the Bank and the
controlling persons referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Partial Invalidity. In the event that any term, provision or covenant
------------------
herein or the application thereof to any circumstance or situation shall be
invalid or unenforceable, in whole or in part, the remainder hereof and the
application of said term, provision or covenant to any other circumstance or
situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
15. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of North Carolina.
<PAGE>
Trident Securities, Inc.
Page 28
16. Amendment. This Agreement may be amended only by a subsequent writing
---------
signed by all parties hereto.
17. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
Trident Securities, Inc.
Page 29
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company and the Bank one copy of this Agreement.
Yours very truly,
CAROLINA FINCORP, INC.
By:
------------------------------------------
R. Larry Campbell
President
RICHMOND SAVINGS BANK, SSB
By:
------------------------------------------
R. Larry Campbell
President
Agreed to and accepted as of the date first written above.
TRIDENT SECURITIES, INC.
By:
--------------------------------------------
<PAGE>
EXHIBIT A
CAROLINA FINCORP, INC.
(a North Carolina corporation)
Up to 1,610,000 Shares of Common Stock
(No Par Value Per Share)
Selected Dealers' Agreement
---------------------------
_____________, 1996
Gentlemen:
We have agreed to assist Carolina Fincorp, Inc. ("Company"), in connection
with the offer and sale of up to 1,610,000 shares of the Company's common stock,
no par value ("Common Stock"), to be issued in connection with the conversion of
Richmond Savings Bank, SSB ("Bank") from a North Carolina-chartered mutual
savings bank to a North carolina-chartered stock savings bank, and the issuance
of all of the Bank's outstanding capital stock to the Company pursuant to the
Bank's Plan of Conversion. The simultaneous conversion of the Bank to stock
form, the issuance of the Bank's outstanding common stock to the Company and
Company's offer and sale of its Common Stock are referred to herein as the
"Conversion." The price per share of the Common Stock has been fixed at $10.00.
The Common Stock and certain of the terms on which it is being offered, are more
fully described in the enclosed Prospectus dated __________, 1996
("Prospectus").
In connection with the Conversion, the Company has offered the Common Stock
concurrently in a Subscription Offering (as defined in the Prospectus). If
necessary, and subject to the prior rights of holders of subscription rights,
the Company will offer the shares of Common Stock offered but not subscribed for
in the Subscription Offering for sale in a Community Offering to certain members
of the general public, with a preference to natural persons residing in the
Bank's Local Community (as defined in the Prospectus). Shares of Common Stock
not subscribed for in the Subscription and Community Offerings will be offered
at the discretion of the Bank to certain members of the general public on a best
efforts basis by a selling group of broker-dealers.
We are offering the selected dealers (of which you are one) the opportunity
to participate in the solicitation of offers to buy the Common Stock and we will
pay you a fee of ____________ of the amount of the Common Stock sold on behalf
of the Company by you, as evidenced by the authorized designation of your firm
on the order form or forms for such Common Stock accompanying the funds
transmitted for payment therefore to the special account established by the
Company for the purpose of holding such funds. It is
<PAGE>
understood that payment of your fee will be made to you directly by us for the
Common Stock sold on behalf of the Company by you, as evidenced in accordance
with the preceding sentence. As soon as practicable after the closing date of
the offering, we will remit to you the fees to which you are entitled hereunder.
Each order form for the purchase of Common Stock must set forth the
identity and address of each person to whom the certificates for such Common
Stock should be issued and delivered. Such order form should clearly identify
your firm. You shall instruct any subscriber who elects to send his order from
to you to make any accompanying check payable to "Carolina Fincorp, Inc."
This offer is made subject to the terms and conditions herein set forth and
is made only to selected dealers who are (i) members in good standing of the
National Association of Securities Dealers, Inc. ("NASD") who are to comply with
all applicable rules of the NASD, including, without limitation, the NASD's
Interpretation With Respect to Free-Riding and Withholding and Sections 8, 24,
25 and 36 of Article III of the NASD's Rules of Fair Practice, or (ii) foreign
dealers not eligible for membership in the NASD who agree (A) not to sell any
Common Stock within the United States, its territories or possessions or to
persons who are citizens thereof or resident therein and (B) in making other
sales, to comply with the above-mentioned NASD Interpretation, Sections 8, 24,
25 and 36 of the above-mentioned Article III as it applies to non-member brokers
or dealers in a foreign country.
Orders for Common Stock will be strictly subject to confirmation and we,
acting on behalf of the Company, reserve the right in our uncontrolled
discretion to reject any order in whole or in part, to accept or reject orders
in the order of their receipt or otherwise, and to allot. Neither you nor any
other person is authorized by the Company or by us to give any information or
make any representations other than those contained in the Prospectus in
connection with the sale of any of the Common Stock. No selected dealer is
authorized to act as agent for us when soliciting offers to buy the Common Stock
from the public or otherwise. No selected dealer shall engage in any
stabilizing (as defined in Rule 10b-7 promulgated under the Securities and
Exchange Act of 1934, as amended ("1934 Act")) with respect to the Company's
Common Stock during the offering.
We and each selected dealer assisting in selling Common Stock pursuant
hereto agree to comply with the applicable requirements of the 1934 Act and
applicable state rules and regulations. In addition, we and each selected
dealer confirm that the Securities and Exchange Commission ("Commission")
interprets Rule 15c2-8 promulgated under the 1934 Act as requiring that a
Prospectus be supplied to each person who is expected to receive a confirmation
of sale 48 hours prior to delivery of such person's order form.
We and each selected dealer within the meaning of Rule 15c3-1(a)(1) further
agree to the extent that our customers desire to pay for shares with funds held
by or to be deposited with us, in accordance with the interpretation of the
Commission of Rule 15c2-4
2
<PAGE>
promulgated under the 1934 Act, either (a) upon receipt of an executed order
form or direction to execute an order form on behalf of a customer to forward
the offering price for the Common Stock ordered on or before twelve noon of the
business day following receipt or execution of an order form by us to the
Company for deposit in a segregated account or (b) to solicit indications of
interest in which event (i) we will subsequently contact any customer indicating
interest to confirm the interest and give instructions to execute and return an
order form or to receive authorization to execute and return an order form or to
receive authorization to execute the order form on the customer's behalf, (ii)
we will mail acknowledgements of receipt of orders to each customer confirming
interest on the business day following such confirmation, (iii) we will debit
accounts of such customers on the third business day ("debit date") following
receipt of the confirmation referred to in (i), and (iv) we will forward
completed order forms together with such funds to the Company on or before
twelve noon on the next business day following the debit date for deposit in a
segregated account. We and each selected dealer acknowledge that if the
procedure in (b) is adopted, our customers' funds are not required to be in
their accounts until the debit date.
Unless terminated earlier by us, this Agreement shall terminate upon the
closing date of this offering. We may terminate this Agreement or any
provisions hereof at any time by written or telegraphic notice to you. Of
course, our obligations hereunder are subject to the successful completion of
the offering.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of shares of
Common Stock sold on behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem advisable
in respect of all matters pertaining to the offering. We shall be under no
liability to you except for lack of good faith and for obligations expressly
assumed by us in this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Common Stock has been qualified for sale under, or are exempt from
the requirements of, the respective blue sky laws of such states, but we assume
no responsibility or obligation as to your rights to sell Common Stock in any
state.
Additional copies of this Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned, or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the State
of North Carolina.
3
<PAGE>
Please confirm your agreement hereto by signing and returning the
confirmation accompanying this letter at once to us at 4601 Six Forks Road,
Suite 400, Raleigh, North Carolina 27609. The enclosed duplicate copy will
evidence the agreement between us.
TRIDENT SECURITIES, INC.
By:
------------------
Agreed and accepted
as of ____________, 1996
- ----------------------
By:
-------------------
Title:
----------------
4
<PAGE>
Exhibit 2.1
AMENDED AND RESTATED
PLAN OF HOLDING COMPANY CONVERSION
OF
RICHMOND SAVINGS BANK, SSB
Rockingham, North Carolina
From Mutual to Stock Organization
I. General
On May 1, 1996, the Board of Directors of Richmond Savings Bank, SSB,
Rockingham, North Carolina (the "Savings Bank") adopted a Plan of Holding
Company Conversion pursuant to which the Savings Bank will convert from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered capital
stock savings bank and simultaneously become a wholly-owned subsidiary of
Carolina Fincorp, Inc., a savings bank holding company organized under North
Carolina law.
The Plan of Holding Company Conversion was amended and superceded by an
Amended and Restated Plan of Holding Company Conversion adopted by the Board of
Directors of the Savings Bank on June 12, 1996.
This Amended and Restated Plan of Holding Company Conversion adopted by the
Board of Directors of the Savings Bank on September 4, 1996 (the "Plan") amends,
supercedes and replaces the Amended and Restated Plan of Holding Company
Conversion adopted on June 12, 1996.
This Plan is subject to the prior approval of the Administrator, Savings
Institutions Division, North Carolina Department of Commerce, and must be
adopted by the affirmative vote of the members of the Savings Bank holding not
less than a majority of the total outstanding votes eligible to be cast. In
addition, in order to consummate the conversion herein described, this Plan must
be filed with the Federal Deposit Insurance Corporation ("FDIC") and must not
have been objected to by the FDIC in accordance with applicable FDIC
regulations.
II. Definitions
As used in this Plan, the terms set forth below have the following
meanings:
A. Acting in Concert: The term "acting in concert" means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal, whether or not pursuant to an express agreement, with
respect to the purchase, ownership, voting or sale of Common Stock; or (ii) a
combination or pooling of voting or other interests in the securities of the
Holding Company for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. The
Holding Company and the Savings Bank may presume that certain persons are acting
in concert based upon, among other things, joint account relationships and the
fact that such persons have filed joint Schedules 13D with the SEC with respect
to other companies.
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B. Actual Purchase Price: The actual price per share, determined as
provided in Article VI hereof, at which the shares of common stock of the
Holding Company will be issued and sold by the Holding Company to subscribers.
C. Administrator: Administrator, Savings Institutions Division, North
Carolina Department of Commerce.
D. Affiliate: The term "affiliate" of, or a person "affiliated with," a
specified person, means a person that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
E. Aggregate Valuation Range: The range of value for the aggregate number
of shares of common stock of the Holding Company to be offered in the
Conversion, which range is established pursuant to Article VI hereof and which
shall be from a low of 15 percent below the estimated aggregate pro forma market
value of the Savings Bank and the Holding Company to a high of 15 percent above
the estimated aggregate pro forma market value of the Savings Bank and the
Holding Company, as such range may be amended from time to time by an
independent appraiser.
F. Amended Charter: The Savings Bank's North Carolina stock savings bank
charter in the form permitted by the Administrator.
G. Applications: The Savings Bank's Application to Convert a Mutual
Savings Bank to a Stock Owned Savings Bank and the Holding Company's Acquisition
Application, including amendments thereto, as filed with the Administrator
pursuant to the Regulations.
H. Associate: The term "Associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Savings Bank, the Holding Company or any of their majority-owned subsidiaries)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, except for a tax-qualified employee stock benefit plan or a charitable
trust which is exempt from federal taxation pursuant to Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, and (iii) any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person or who is a director or officer of the Savings Bank, the Holding Company,
or any of their parents or subsidiaries.
I. Charter: The North Carolina mutual savings bank charter of Richmond
Savings Bank, SSB.
J. Community Offering: The offering for sale of shares of Conversion
Stock to the general public, subsequent to termination of the Subscription
Offering, with priority given to natural persons and trusts of natural persons
residing in the Local Community (including Retirement Accounts established for
the benefit of natural persons who area are residents of such area).
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K. Conversion: The conversion of the Savings Bank to a North Carolina-
chartered stock savings bank, the deposit accounts of which will be insured by
the SAIF of the FDIC, pursuant to, and in accordance with, the Regulations, the
Plan and the Applications.
L. Conversion Stock: The shares of common stock of the Holding Company to
be issued and sold in the Conversion.
M. Converted Savings Bank: Richmond Savings Bank, Inc., SSB, the North
Carolina capital stock savings bank resulting from the Conversion.
N. Directors: The Board of Directors of the Savings Bank, the Converted
Savings Bank or the Holding Company (as applicable).
O. Eligibility Record Date: The close of business on March 31, 1995.
P. Eligible Account Holder: The holder of a Qualifying Deposit on the
Eligibility Record Date, with the beneficial owner of a Retirement Account being
deemed the holder thereof.
Q. ESOP: The Savings Bank's tax-qualified Employee Stock Ownership Plan
adopted by the Board of Directors of the Savings Bank to be effective upon
consummation of the Conversion.
R. Executive Officer: An officer of the Savings Bank, the Converted
Savings Bank or the Holding Company (as applicable) performing a policy-making
function for such entity.
S. FDIC: The Federal Deposit Insurance Corporation.
T. Federal Reserve Board: The Board of Governors of the Federal Reserve
System.
U. First Priority Community Subscribers: Natural persons and trusts of
natural persons residing in the Local Community, including Retirement Accounts
established for the benefit of natural persons residing in the Local Community.
V. Holding Company: The North Carolina corporation under the name of
Carolina Fincorp, Inc. which, upon completion of the Conversion, will become a
savings bank holding company owning all of the outstanding capital stock of the
Converted Savings Bank.
W. Liquidation Account: That account established by the Converted Savings
Bank pursuant to Article XI of this Plan.
X. Local Community: Richmond, Moore and Scotland counties in North
Carolina.
Y. Market Maker: A dealer (i.e., any person who engages directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii)
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furnishes bona fide competitive bid and offer quotations on request; and
(iii) is ready, willing, and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
Z. Members: All persons or entities who qualify as members of the Savings
Bank pursuant to its Charter and bylaws prior to the Conversion, including
beneficial owners of Retirement Accounts at the Savings Bank.
AA. Notice: The Savings Bank's Notice of Intent to Convert to Stock Form,
including amendments thereto, as filed with the FDIC pursuant to 12 C.F.R. Part
303.
BB. Order Forms: The order forms to be used to subscribe for Conversion
Stock in the Subscription and Community Offerings pursuant to the Plan.
CC. Other Members: The following as of the Voting Record Date:
(1) holders of Savings Accounts at the Savings Bank (other than Eligible Account
Holders and Supplemental Eligible Account Holders), with the beneficial owners
of Retirement Accounts being deemed the holders of such accounts, and (2) those
Persons or entities (other than Eligible Account Holders and Supplemental
Eligible Account Holders) who are borrowers from the Savings Bank whose
borrowings are still in existence as of the Voting Record Date.
DD. Person: An individual, a corporation, a partnership, an association,
a joint stock company, a trust, an unincorporated organization, or a government
or political subdivision thereof.
EE. Plan: This Plan of Holding Company Conversion and any duly adopted
amendments thereto.
FF. Prospectus: The document containing information about and a
description of the Savings Bank, the Holding Company, this Plan and the process
of issuing the Conversion Stock, which may be combined with proxy statements for
the Members and distributed in the Subscription Offering and which may be
distributed to the general public in the Community Offering and Syndicated
Community Offering.
GG. Proxy Statement: The written information distributed by the Savings
Bank to the Members in its solicitation of their votes in connection with
consideration of the Plan at the Special Meeting, which written information may
be in summary form.
HH. Qualifying Deposit: A balance of $50 or more in any Savings Account
in the Savings Bank as of the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable. Each deposit account which is deemed to
be a separate account for purposes of FDIC insurance shall be deemed to be a
separate account for purposes of determining whether a Qualifying Deposit
exists.
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II. Regulations: The Rules and Regulations of the Administrator set forth
in North Carolina Administrative Code Title 4, Chapter 16, Subchapter 16G.
JJ. Retirement Accounts: Individual retirement accounts, Keogh savings
accounts or similar retirement accounts.
KK. SAIF: The Savings Association Insurance Fund of the FDIC.
LL. Savings Accounts: Withdrawable deposits, certificates or other
savings and deposit accounts of the Savings Bank, including money market deposit
accounts and negotiable order of withdrawal accounts, held by Members. Each
such deposit, certificate or other deposit account which is deemed to be a
separate account for FDIC insurance shall be deemed to be a separate Savings
Account for purposes of the Plan.
MM. Savings Bank: Richmond Savings Bank, SSB, Rockingham, North Carolina,
a North Carolina-chartered mutual savings bank.
NN. SEC: The Securities and Exchange Commission.
OO. Special Meeting: The Special Meeting of Members called for the
purpose of considering approval of the Plan.
PP. Subscription Offering: The offering of shares of Conversion Stock to
Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders, Other
Members, and Directors, officers and employees of the Savings Bank pursuant to
the Plan.
QQ. Subscription Rights: Non-transferable, non-negotiable, personal
rights distributed, without payment, to Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders, Other Members, and Directors, officers
and employees of the Savings Bank to subscribe for shares of Conversion Stock in
the Subscription Offering pursuant to the Plan.
RR. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Applications by the Administrator, if the
establishment of such date is required by the Regulations.
SS. Supplemental Eligible Account Holder: The holder of a Qualifying
Deposit (other than an Executive Officer or Director of the Savings Bank or any
Associate of such Person), on the Supplemental Eligibility Record Date, with the
beneficial owner of a Retirement Account being deemed the holder thereof.
TT. Syndicated Community Offering: The offering for sale of shares of
Conversion Stock to the general public through a syndicate of registered broker-
dealers to be formed and managed by the sales agent in the Subscription Offering
and Community Offering.
UU. Voting Record Date: The date fixed by the Board of Directors of the
Savings Bank for determining Members entitled to vote at the Special
Meeting.
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III. Steps Prior to Submission of Plan of Conversion to the Members for Approval
Prior to submission of the Plan to the Members of the Savings Bank for
approval, the Savings Bank must receive the Administrator's approval of the
Applications and the FDIC must have issued a notice of non-objection to the
proposed conversion or the time period for FDIC review and objection shall have
expired without objection by the FDIC. The following steps must be taken prior
to such regulatory approvals:
A. The Board of Directors of the Savings Bank shall adopt and approve the
Plan by the affirmative vote of not less than two-thirds of its members.
B. The Savings Bank shall notify its members of the adoption of the Plan
by publishing a statement in a newspaper having a general circulation in the
communities in which the Savings Bank maintains offices or by mailing a letter
to each of its Members.
C. Copies of the Plan shall be made available for inspection at each
office of the Savings Bank.
D. The Holding Company shall submit an application to the Federal Reserve
Board pursuant to Federal law for permission to become a savings bank holding
company in order to enable it to acquire 100% of the capital stock of the
Converted Savings Bank, and such application shall be approved and any required
waiting period shall have expired.
E. The Savings Bank shall submit the requisite number of copies of the
Applications to the Administrator and the requisite number of copies of the
Notice to the FDIC. Upon receipt of advice from the Administrator that the
Applications have been received, are properly executed and not materially
incomplete, the Savings Bank shall publish a "Notice of Filing of an Application
for Holding Company Conversion" in a newspaper of general circulation in each
community in which the Savings Bank maintains an office. The Savings Bank also
shall prominently display a copy of such notice in each of its offices.
F. The Savings Bank shall obtain an opinion of counsel or tax advisor or a
favorable ruling from the Internal Revenue Service to the effect that the
Conversion of the Savings Bank from a North Carolina-chartered mutual savings
bank to a North Carolina-chartered capital stock savings bank, the sale of the
Conversion Stock to subscribers in the Subscription, Community and Syndicated
Community Offerings and the issuance of the shares of common stock of the
Converted Savings Bank to the Holding Company, all in accordance with the terms
of the Plan, should not result in any gain or loss for federal or North Carolina
income tax purposes, to the Savings Bank, the Converted Savings Bank, the
Holding Company or the Members of the Savings Bank. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
G. The Holding Company shall file a registration statement with the SEC
with respect to the Conversion Stock to be offered pursuant to the Plan and such
registration statement shall be declared effective.
IV. Meeting of Members
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Upon receipt of Administrator approval of the Applications and (i) receipt
from the FDIC of a conditional intention to issue a notice of non-objection or
(ii) expiration of the time period for FDIC review and objection without receipt
of an objection by the FDIC, a Special Meeting of the Members of the Savings
Bank shall be scheduled in accordance with the Savings Bank's bylaws for
the purpose of voting on approval of the Plan. Promptly after receipt of
Administrator approval and at least 20 days, but not more than 45 days, prior to
the Special Meeting, the Savings Bank will distribute proxy solicitation
materials to all Members as of the Voting Record Date. The proxy materials will
include the Proxy Statement and the Prospectus and other documents authorized
for use by the regulatory authorities and may also include a copy of the Plan,
the Amended Charter and other materials as provided in Article VII hereof.
At the Special Meeting, an affirmative vote of not less than a majority of
the total votes entitled to be cast by the Savings Bank's Members will be
required for approval of the Plan. Voting may be in person or by proxy. The
Administrator shall be promptly notified of the results of the vote of the
Members at the Special Meeting.
V. Procedure
The Conversion Stock shall be offered for sale in the Subscription Offering
to Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders,
Other Members, and Directors, officers and employees of the Savings Bank. The
Subscription Offering may commence concurrently with or during the solicitation
of proxies for the Special Meeting. The Community Offering may commence at any
time following commencement of the Subscription Offering. The Syndicated
Community Offering, if any, may commence concurrently with or during the
Community Offering or as promptly thereafter as is practicable. The
Subscription Offering may be closed before the Special Meeting, provided that
the offer and sale of the Conversion Stock shall be conditioned upon approval of
the Plan by the Members at the Special Meeting.
The period for the Subscription Offering shall not be less than 20 days nor
more than 45 days, unless extended by the Savings Bank and the Holding Company.
Any unsubscribed shares of Conversion Stock are to be offered for sale to the
general public in the Community Offering with priority being given to natural
persons and trusts of natural persons residing in the Local Community, including
Retirement Accounts established for the benefit of natural persons who reside in
such area. The Community Offering may commence, subject to the availability of
shares, at any time following commencement of the Subscription Offering. Any
shares of Conversion Stock offered but not subscribed for in the Subscription
and Community Offerings may, in the discretion of the Savings Bank and the
Holding Company, be offered for sale in the Syndicated Community Offering.
Completion of the sale of all shares of Conversion Stock not sold in the
Subscription Offering shall occur within 45 days after termination of the
Subscription Offering, subject to extension of such 45-day period by the Savings
Bank and the Holding Company with the approval of the Administrator. The Boards
of Directors of the Savings Bank and the Holding Company may seek one or more
extensions of such 45-day period if necessary to complete the sale of all shares
of Conversion Stock. In connection with any such extension, subscribers shall be
permitted to increase, decrease or rescind their subscriptions to the extent
required by the Administrator in approving the extensions. As provided in
Article XIII hereof, completion of the sale of all shares of Conversion Stock
must occur in any event within 24 months after the date of the Special Meeting.
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VI. Stock Offering
A. Purchase Price and Number of Shares of Conversion Stock
-------------------------------------------------------
The total number of shares and the subscription price per share of the
Conversion Stock being issued and sold by the Holding Company in the Conversion
will be determined by the Holding Company. The aggregate purchase price at which
all shares of the Conversion Stock will be sold in the Conversion will be based
upon the aggregate pro forma market value of the Converted Savings Bank and the
Holding Company after giving effect to the issuance of the Conversion Stock, as
determined by an independent appraisal. The aggregate purchase price will be
within the Aggregate Valuation Range as stated in the approval or amended
approval of the Plan by the Administrator; provided, however, that with the
consent of the Administrator and the FDIC, the aggregate purchase price of the
Conversion Stock sold may be increased to up to 15% above the maximum of the
Aggregate Valuation Range, without any resolicitation of subscribers or any
right to cancel, rescind or change subscription orders, to reflect changes in
market and financial conditions following commencement of the Subscription
Offering. The appraisal will be made by an investment banking or financial
consulting firm selected by the Savings Bank and which is experienced and expert
in the area of savings institution appraisals. Such appraisal will be updated
prior to the commencement of the Subscription Offering, if necessary, and will
be further updated upon completion of the later of the Subscription Offering,
the Community Offering or the Syndicated Community Offering.
The Actual Purchase Price per share at which the Conversion Stock will be
offered to subscribers in the Subscription, Community and Syndicated Community
Offerings will be determined by the Holding Company immediately prior to the
commencement of the Subscription Offering. All shares of Conversion Stock sold
in the Conversion will be sold at the same price per share.
B. Method of Offering Shares
-------------------------
On the date Order Forms are mailed, Subscription Rights to purchase shares
will be issued at no cost to Eligible Account Holders, the ESOP, Supplemental
Eligible Account Holders (if applicable), Other Members, and Directors, officers
and employees of the Savings Bank pursuant to priorities established by this
Plan and the Regulations. With respect to Eligible Account Holders,
Supplemental Eligible Account Holders and Voting Members who are beneficial
owners of Retirement Accounts, such persons have the right to exercise
Subscription Rights only to the extent Subscription Rights granted with respect
to such Retirement Accounts are not exercised directly by such Retirement
Accounts. Each subscriber shall purchase the number of whole shares indicated
on the Order Form of such subscriber, subject to the purchase limitations set
forth herein, and any excess amounts shall be refunded. To the extent that
shares are available, no subscriber will be allowed to purchase Conversion Stock
having an aggregate purchase price of less than $500.
The priorities established by applicable Regulations for the purchase of
shares are as follows:
1. Category No. 1: Eligible Account Holders
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Each Eligible Account Holder shall receive, without payment, Subscription
Rights to purchase an amount of Conversion Stock equal to the maximum purchase
limitation set forth in Section D.1 of this Article. Subscription Rights of
Eligible Account Holders shall be superior to those of all other subscription
rights granted in the Conversion. In the event of an oversubscription for the
Conversion Stock among Eligible Account Holders, shares shall be allocated among
Eligible Account Holders as follows. The Conversion Stock shall be allocated
among subscribing Eligible Account Holders so as to permit each such Eligible
Account Holder, to the extent possible, to purchase the lesser of (a) the number
of shares for which such Eligible Account Holder subscribed, or (b) 100 shares.
Any shares remaining after that allocation shall be allocated among subscribing
Eligible Account Holders whose subscriptions remain unsatisfied in the
proportion that the amount of Qualifying Deposits of each such Eligible Account
Holder bears to the total amount of Qualifying Deposits of all Eligible Account
Holders whose subscriptions remain unsatisfied. If the amount so allocated
exceeds the amount subscribed for by any one or more Eligible Account Holders,
the excess shall be reallocated (one or more times as necessary) among those
Eligible Account Holders whose subscriptions are still not fully satisfied on
the same principle described above until all available shares have been
allocated or all subscriptions satisfied. All computations shall be rounded down
to the nearest whole share.
2. Category No. 2: ESOP
The ESOP shall receive, without payment, Subscription Rights to purchase a
number of shares of Conversion Stock equal to eight percent (8%) of the total
number of shares of Conversion Stock offered and sold in the Conversion.
Subscription Rights received pursuant to this Category shall be subordinated to
all Subscription Rights received pursuant to Category No. 1 above. In the event
there is an oversubscription of shares of Conversion Stock and, as a result, the
ESOP is unable to purchase in the Conversion eight percent (8%) of the total
number of shares offered and sold in the Conversion, then the Board of Directors
of the Holding Company intends to, and shall be authorized to, approve the
purchase by the ESOP in the open market after the Conversion, of such shares as
are necessary for the ESOP to purchase a number of shares equal to eight percent
(8%) of the total number of shares of Conversion Stock issued in the Conversion.
Any purchases made by the ESOP may be purchased with funds borrowed by the ESOP
from the Holding Company.
3. Category No. 3: Supplemental Eligible Account Holders
In the event that the Eligibility Record Date is more than 15 months prior
to the date of the latest amendment of the Applications filed prior to
Administrator approval, then, and only in that event, each Supplemental Eligible
Account Holder of the Savings Bank shall receive, without payment, Subscription
Rights to purchase an amount of Conversion Stock equal to the maximum purchase
limitation set forth in Section D.1 of this Article. Subscription Rights
received pursuant to this Category shall be subordinated to all Subscription
Rights received pursuant to Category Nos.
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1 and 2. Any Subscription Rights received by an Eligible Account Holder in
accordance with Category No. 1 shall reduce, to the extent thereof, the
Subscription Rights to be distributed to such account holder pursuant to this
Category.
In the event of an oversubscription for the Conversion Stock, shares shall
be allocated among the Supplemental Eligible Account Holders as follows. The
Conversion Stock shall be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase the lesser of (including the number of
shares, if any allocated in accordance with Category No. 1) (a) the number of
shares for which such Supplemental Eligible Account Holder subscribed, or (b)
100 shares. Any shares remaining after that allocation shall be allocated among
subscribing Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied in the proportion that the amount of the Qualifying Deposits of each
such Supplemental Eligible Account Holder bears to the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds the amount
subscribed for by any one or more Supplemental Eligible Account Holders, the
excess shall be reallocated (one or more times as necessary) among those
Supplemental Eligible Account Holders whose subscriptions are still not fully
satisfied on the same principle described above until all available shares have
been allocated or all subscriptions satisfied. All computations shall be
rounded down to the nearest whole share.
4. Category No. 4: Other Members
Each Other Member shall receive, without payment, Subscription Rights to
purchase an amount of Conversion Stock equal to the maximum purchase limitation
set forth in Section D.1 of this Article. Subscription Rights received pursuant
to this Category shall be subordinated to all Subscription Rights received
pursuant to Category Nos. 1-3.
In the event of an oversubscription for shares of Conversion Stock under
this Category, the Conversion Stock available shall be allocated among the
subscribing Other Members whose subscriptions are not satisfied in the
proportion that the number of votes eligible to be cast by each such Other
Member at the Special Meeting bears to the total number of votes eligible to be
cast by all Other Members whose subscriptions remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for by any one or more Other Member,
the excess shall be reallocated (one or more times as necessary) among those
Other Members whose subscriptions are still not satisfied on the same principle
described above until all available shares have been allocated or all
subscriptions satisfied. All computations shall be rounded down to the nearest
whole share.
5. Category No. 5: Directors, Officers and Employees
Each Director and officer of the Savings Bank, and each employee of the
Savings Bank, as of the date of the commencement of the Subscription Offering
shall receive, without payment, Subscription Rights to purchase an amount of
Conversion Stock equal to the maximum purchase limitation set forth in Section
D.1 of this Article. Subscription Rights received pursuant to this Category
shall be subordinated to all Subscription Rights received pursuant to Category
Nos. 1-4. Any Subscription Rights received by a Director, officer or employee in
accordance with Category
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Nos. 1, 3, or 4 shall reduce, to the extent thereof, the Subscription Rights to
be distributed to such Director, officer or employee pursuant to this Category.
In the event of an oversubscription for shares of Conversion Stock under
this Category, the shares available shall be allocated among the subscribing
Directors, officers and employees of the Savings Bank whose subscriptions are
not satisfied pro rata on the basis of the amounts of their respective
subscriptions. All computations shall be rounded down to the nearest whole
share.
6. Category No. 6: Community Offering
Any shares of Conversion Stock not purchased through the exercise of
Subscription Rights received pursuant to Category Nos. 1-5 above may be sold to
the general public in a Community Offering. The Community Offering may
commence, subject to the availability of shares, at any time following
commencement of the Subscription Offering and may terminate at any time
thereafter. The Community Offering must be completed within 45 days after the
last day of the Subscription Offering, unless extended by the Savings Bank and
the Holding Company with the approval of the Administrator.
The Savings Bank and the Holding Company may accept or reject, in whole or
in part, orders received in the Community Offering in their sole discretion.
In the event that subscriptions by subscribers in the Community Offering
whose orders would otherwise be accepted exceed the shares available for
purchase in the Community Offering, then
(i) subscriptions of First Priority Community Subscribers will be
filled in full up to applicable purchase limitations (to the
extent such subscriptions are not rejected by the Savings Bank and
the Holding Company),
(ii) then subscriptions of other subscribers in the Community Offering
will be filled up to applicable purchase limitations (to the
extent such subscriptions are not rejected by the Savings Bank and
the Holding Company).
In the event of an oversubscription by First Priority Community Subscribers
whose orders would otherwise be accepted, shares of Conversion Stock will be
allocated first to each First Priority Community Subscriber whose order is
accepted in full or in part by the Savings Bank and the Holding Company in the
entire amount of such order up to a number of shares no greater than the number
which would have an aggregate purchase price of $250,000, which number shall be
determined by the Board of Directors of the Savings Bank prior to the time the
Conversion is consummated with the intent to provide for a wide distribution of
shares among such subscribers. Any shares remaining after such allocation will
be allocated to each First Priority Community Subscriber whose order is accepted
in full or in part on an equal number of shares basis until all orders are
filled. Such allocation shall also be applied to subscriptions by other
subscribers in the Community Offering, in the event shares are available for
subscribers in such category but there is an oversubscription within such
category. All computations shall be rounded down to the nearest whole share.
No Person, directly or indirectly or with an Associate or a group acting in
concert,
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may subscribe for or purchase more than the amount equal to the maximum
purchase limitations set forth in Section D.1 of this Article.
The Conversion Stock to be offered in this Category No. 6 will be offered
and sold in a manner that will achieve the widest distribution of such stock.
7. Category No. 7: Syndicated Community Offering
If necessary, all shares of Conversion Stock not purchased in the
Subscription and Community Offerings, if any, may, at the option of the Savings
Bank and Holding Company, be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
as selected dealers to be formed and managed by the sales agent in the
Subscription and Community Offerings. The Holding Company and Savings Bank have
the right to reject orders, in whole or part, in their sole discretion in the
Syndicated Community Offering. During the Syndicated Community Offering, shares
of Conversion Stock will be sold subject to such conditions, terms and
procedures as may be determined by the Holding Company and the Savings Bank.
Shares of Conversion Stock sold in the Syndicated Community Offering will be
sold in a manner calculated to achieve the widest distribution of Conversion
Stock.
The Syndicated Community Offering may close as early as the Community
Offering, or thereafter at the discretion of the Savings Bank and the Holding
Company. The Syndicated Community Offering may run concurrently with the
Community Offering or subsequent to such offering.
D. Additional Limitations Upon Purchases of Shares of Conversion Stock
The following additional limitations and exceptions shall apply to all
purchases of Conversion Stock in the Conversion:
1. The aggregate purchase price of shares of Conversion Stock purchased by
any Person, together with all Associates thereof, or a group of Persons acting
in concert, shall not exceed $250,000 (which limit may be decreased or increased
by the Board of Directors of the Savings Bank in accordance with Section D.4 of
this Article) provided, however, that the ESOP may purchase in the aggregate a
number of shares not more than eight percent (8%) of the total number of shares
of Conversion Stock offered and sold in the Conversion. Any shares held by the
ESOP and attributed to a natural person shall not be aggregated with other
shares purchased directly by or otherwise attributable to that natural person.
2. The Boards of Directors of the Savings Bank and Holding Company will
not be deemed to be Associates or a group acting in concert solely as a result
of membership on the Boards of Directors.
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3. To the extent that Conversion Stock is available, no subscriber will be
allowed to purchase Conversion Stock having an aggregate purchase price of less
than $500.
4. Either before or subsequent to approval of the Plan by the Members and
prior to consummation of the sale of the Conversion Stock, the Board of
Directors of the Savings Bank may, in its sole discretion, (i) increase the
maximum individual purchase limitation set forth in Section D.1 of this Article
to an amount not greater than five percent (5%) of the aggregate purchase price
of shares of Conversion Stock offered and sold in the Conversion or (ii) reduce
such maximum individual purchase limitation to an amount not less than one
percent (1%) of the aggregate purchase price of shares of Conversion Stock
offered and sold in the Conversion, each without further approval of the
Members.
5. Each person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or regulation.
6. Subscription Rights to purchase the Conversion Stock received by
Executive Officers and Directors of the Savings Bank and their Associates, based
on their increased deposits in the Savings Bank in the one year period preceding
the Eligibility Record Date shall be subordinated to all other subscriptions
involving the exercise of Subscription Rights to purchase the Conversion Stock
pursuant to Category No. 1.
E. Restrictions on and Other Characteristics of Stock Being Sold
1. Transferability. Conversion Stock purchased by Directors or Executive
---------------
Officers of the Converted Savings Bank shall not be sold or otherwise disposed
of for value for a period of not less than one year from the date of purchase
without written permission of the Administrator, except for any disposition of
such shares following the death of the original purchaser.
The Conversion Stock issued by the Holding Company to Directors and
Executive Officers of the Converted Savings Bank shall bear a legend giving
appropriate notice of the one-year holding period restriction. This legend will
state as follows:
The shares of stock evidenced by this Certificate may not be sold, except
in the event of the death of the registered holder, for a period of one
year from the date of this certificate without the prior written consent of
the Administrator, Savings Institutions Division, North Carolina Department
of Commerce.
In addition, the Holding Company shall give appropriate instructions to the
transfer agent with respect to the applicable restrictions relating to the
transfer of restricted stock. Any shares subsequently issued as a stock
dividend, stock split, or otherwise with respect to any such restricted stock,
shall be subject to the same holding period restrictions for Directors and
Executive Officers of the Converted Savings Bank as may be then applicable to
such restricted stock.
No Director, Executive Officer or Associate of a Director or Executive
Officer of the Converted Savings Bank shall purchase any outstanding shares of
common stock of the Holding
13
<PAGE>
Company for a period of three years following the Conversion without the prior
written approval of the Administrator, except (a) through a broker or dealer
registered with the SEC or the Secretary of State of North Carolina or (b) in a
"negotiated transaction" involving more than one percent of the then outstanding
shares of capital stock of the Holding Company or (c) through the purchase of
common stock made by and held by one or more tax-qualified or non-tax-qualified
employee stock benefit plans of the Converted Savings Bank or the Holding
Company which may be attributable to Executive Officers or Directors. As used
herein, the term "negotiated transaction" means a transaction in which the
securities are offered and the terms and arrangements relating to any sale are
arrived at through direct communications between the seller or any Person acting
on his or her behalf and the purchaser or his or her investment representative.
The term "investment representative" shall mean a professional investment
advisor acting as agent for the purchaser and independent of the seller and not
acting on behalf of the seller in connection with the transaction.
2. Repurchase and Dividend Rights. Subject to the Regulations and
regulations of the FDIC, the Converted Savings Bank may not declare or pay a
cash dividend on or repurchase any of its capital stock if the effect thereof
would cause the regulatory capital of the Converted Savings Bank to be reduced
below (a) the amount required for the Liquidation Account or (b) the net worth
requirements of the Administrator or the minimum capital requirements of the
FDIC. As set forth in the Regulations and regulations of the FDIC, there exist
additional limitations on the ability of the Converted Savings Bank to pay
dividends and repurchase stock without the written approval of the Administrator
and the FDIC.
The above limitations shall not preclude payments of dividends or
repurchases of capital stock by the Converted Savings Bank or the Holding
Company in the event applicable federal or state regulatory limitations are
liberalized subsequent to the Conversion.
3. Voting Rights. After the Conversion, holders of Savings Accounts and
obligors on loans will not have voting rights in the Converted Savings Bank.
Exclusive voting rights shall be vested in the Holding Company as the owner of
all of the capital stock of the Converted Savings Bank. Each holder of common
stock of the Holding Company will be entitled to vote on any matter coming
before the stockholders of the Holding Company for consideration and will be
entitled to one vote for each share of common stock of the Holding Company owned
by such stockholder.
4. Preemptive Rights. Holders of common stock of the Holding Company
shall not have preemptive rights to acquire additional or treasury shares of the
Holding Company. Holders of common stock of the Converted Savings Bank shall
not have preemptive rights to acquire additional or treasury shares of the
Savings Bank.
F. Mailing of Offering Materials and Collation of Subscriptions
After (i) approval of the Plan by the Administrator, (ii) receipt of a
notice of non-objection by the FDIC or expiration of the time period for FDIC
review and objection without receipt of an objection from the FDIC and (iii) the
SEC's declaration of the effectiveness of the registration statement containing
the Prospectus, the Holding Company shall distribute the Prospectus and Order
Forms for the purchase of shares to holders of Subscription Rights in accordance
with the terms of the Plan.
14
<PAGE>
As set forth in the Prospectus, each such recipient of an Order Form will
be given a period of not less than 20 days nor more than 45 days from the date
of mailing, unless extended, to properly complete, execute and return the Order
Form to the Savings Bank on behalf of the Holding Company. Self-addressed,
postage-paid return envelopes will accompany these forms when mailed. The
Savings Bank will collate the returned executed forms upon completion of the
subscription period. Failure of any eligible subscriber in the Subscription or
Community Offerings to return a properly completed and executed Order Form with
full payment for all shares subscribed for within the prescribed time limits
shall be deemed a waiver and a release by such person of any rights to purchase
shares hereunder.
The Savings Bank may require a Person to provide evidence satisfactory to
the Savings Bank that such Person qualifies as an Eligible Account Holder,
Supplemental Eligible Account Holder, Other Member, or First Priority Community
Subscriber, as the case may be. All determinations as to whether a Person
qualifies to purchase in a particular category shall be made by the Savings Bank
in its sole discretion and shall be final and conclusive.
If the Board of Directors of the Savings Bank determines that a subscriber
(i) has submitted false or misleading information on an Order Form or otherwise,
(ii) has attempted to purchase shares of Conversion Stock in violation of
provisions of this Plan or applicable law or (iii) has failed to cooperate with
attempts by the Savings Bank, its employees or agents to verify information with
respect to purchase rights, such Board of Directors may reject the order of such
subscriber.
G. Method of Payment
Payment for all shares of Conversion Stock subscribed for in the
Subscription and Community Offerings may be made in cash, if delivered in
person, by check or money order, or if the subscriber has a Savings Account
(other than a demand deposit or NOW account), by withdrawal authorization from
the Savings Account for the purchase amount. Unless payment is to be made by
withdrawal from a Savings Account, it shall accompany the Order Forms.
Notwithstanding the foregoing, the ESOP shall not be required to make payment
for shares subscribed for until the date set for consummation of the Conversion,
provided that, at the time the ESOP submits its Order Form, it has obtained a
commitment from the Holding Company or an independent third party lender to loan
it the funds necessary to satisfy its order.
If a subscriber authorizes the withdrawal from his or her Savings Account,
the funds may be withdrawn from the subscriber's Savings Account at any time
after receipt of the subscriber's stock order form and will continue to earn
interest at the applicable rate for such Savings Account until the Conversion is
completed or terminated. The withdrawal will be given effect only to the
extent necessary to satisfy the subscription at a price equal to the aggregate
Actual Purchase Price of the Conversion Stock sold to the subscriber. The
Savings Bank will allow subscribers to purchase shares of Conversion Stock by
withdrawing funds from certificate accounts without the assessment of early
withdrawal penalties. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be canceled if the
remaining balance of the account is less than the applicable minimum balance
requirement. In that event, the remaining balance will earn interest at the
passbook savings rate. This waiver of the early withdrawal penalty is
applicable only to withdrawals made in connection with the purchase of
Conversion Stock under the Plan.
15
<PAGE>
A subscriber who is the beneficial owner of a Retirement Account may pay
for shares of Conversion Stock subscribed for by authorizing and directing the
Savings Bank on the Order Form to roll over the subscriber's Retirement Account
to a self-directed Retirement Account at an independent trustee, who shall then
be directed to make a withdrawal from such Retirement Account in an amount equal
to the Actual Purchase Price of such shares. Such shares shall then become part
of the Retirement Account estate.
All amounts received for the purchase of Conversion Stock in the
Subscription Offering and the Community Offering (other than by charge against
the Subscriber's account or as provided above) shall be placed in a special
escrow account with the Savings Bank. The Savings Bank shall pay interest to
the subscriber at the passbook savings rate on such amounts paid to purchase
Conversion Stock from the date payment is received until the Conversion is
completed or terminated, as the case may be. The Savings Bank shall deliver
all amounts received for the purchase of Conversion Stock in the Subscription
Offering and the Community Offering to the Holding Company on the date the
Conversion is consummated.
H. Undelivered, Defective or Late Order Forms: Insufficient Payment
If an Order Form in the Subscription or Community Offering (a) is not
delivered and is returned by the United States Postal Service (or the Savings
Bank is unable to locate the addressee); (b) is not received by the Savings Bank
or is received by the Savings Bank after the date specified for receipt therein;
(c) is defectively completed or executed; (d) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscriber's Savings Account is insufficient to cover the
amount of such required payment pursuant to a withdrawal authorization) or (e)
is not accompanied by immediately available funds, the Subscription Rights and
other rights to purchase of the person to whom such rights have been granted
will be deemed waived and will not be honored. The Savings Bank may, but will
not be required to, waive any irregularity relating to any Order Form or require
the submission of a corrected Order Form or the remittance of full payment for
subscribed shares by such date as the Savings Bank may specify. Subscription
orders, once tendered, cannot be revoked. The Savings Bank's interpretation of
the terms and conditions of this Plan and acceptability of the Order Forms will
be final.
I. Members in Non-Qualified States or in Foreign Countries
The Holding Company will make reasonable efforts to comply with the
securities laws of all states of the United States in which Eligible Account
Holders, Supplemental Eligible Account Holders, or Other Members entitled to
subscribe for shares of Conversion Stock reside. However, the Holding Company
shall not elect to offer or sell shares of Conversion Stock or Subscription
Rights under the Plan of Conversion in a foreign country, and may elect not to
offer or sell shares of Conversion Stock or Subscription Rights in a state in
the United States (i) where a small number of persons otherwise eligible to
subscribe for shares under this Plan reside or (ii) if the Holding Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including, but not limited to, a
requirement that the Holding Company, the Savings Bank or any employee or
representative thereof register as a broker, dealer, agent or salesperson or
register or otherwise qualify the Subscription Rights or Conversion Stock for
16
<PAGE>
sale in such state. No payments will be made in lieu of the granting of
Subscription Rights to persons residing in such jurisdictions.
J. Acquisition of Capital Stock of the Converted Savings Bank
One half of the net proceeds from the sale of the Conversion Stock (after
such net proceeds is reduced by the amount of any loan made by the Holding
Company to the ESOP), will be used by the Holding Company to purchase all of the
outstanding capital stock of the Converted Savings Bank.
VII. Amended Charter and Bylaws
As part of the Conversion and this Plan, the Amended Charter and new bylaws
of the Converted Savings Bank will be adopted to authorize the Converted Savings
Bank to operate as a North Carolina capital stock savings bank under the name
Richmond Savings Bank, Inc., SSB. The Amended Charter and bylaws for the
Converted Savings Bank are attached hereto as Annex I and Annex II,
respectively. By approving the Plan, the Members will thereby approve the
Amended Charter and bylaws. Accordingly, the Amended Charter and bylaws may be
amended in the same manner as the Plan pursuant to Article XIII.
VIII. Consummation of Conversion
After approval of the Plan by the Members, completion of the issuance and
sale of the Conversion Stock, and provided the Amended Charter and new bylaws
have been filed with and approved by the Administrator, the Conversion will
become effective. The effective time of such Conversion will be the date of
completion of such issuance and sale unless a later date is specified by the
Savings Bank. The Conversion shall constitute a change of form of organization
of the Savings Bank and shall not impair or affect any contracts, rights,
liabilities, obligations, interest and relations of whatever kind of the Savings
Bank.
The Conversion of the Savings Bank from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered capital stock savings bank shall be
deemed to be an extension of the corporate existence of the Savings Bank, and
all property of the Savings Bank including all its rights, title and interest in
and to all property of whatever kind, whether real, personal or mixed, and
things in action, and every right, privilege, interest and asset of any
conceivable value or benefit then existing, belonging or pertaining to it, or
which would inure to it, shall immediately by act of law and without any
conveyance or transfer, and without any further act or deed, be vested in and
become the property of the Converted Savings Bank, which shall have, hold and
enjoy the same in its own right as fully and to the same extent as the same was
possessed, held and enjoyed by the Savings Bank, and the Converted Savings Bank
shall succeed to all the rights, obligations and relations of the Savings Bank.
IX. Registration and Market Making
Upon completion of the Conversion, the Conversion Stock will be registered
with the SEC pursuant to the Securities Exchange Act of 1934, as amended. In
connection with the registration,
17
<PAGE>
the Holding Company hereby undertakes not to deregister such stock for a period
of three years thereafter.
The Holding Company will use its best efforts to encourage and assist a
Market Maker to establish and maintain a market for the shares of the Conversion
Stock. The Holding Company will also use its best efforts to list the
Conversion Stock on a national or regional securities exchange or on the
National Association of Securities Dealers Inc. Automated Quotation System.
X. Status of Savings Accounts and Loans Subsequent to Conversion
All Savings Accounts will retain the same status after Conversion as these
accounts had prior to Conversion. Each Savings Account holder shall retain,
without payment, a Savings Account or Accounts in the Converted Savings Bank,
equal in amount to the withdrawable value of such account holder's Savings
Account or Accounts in the Savings Bank prior to Conversion. All Savings
Accounts will continue to be insured by the SAIF of the FDIC up to the
applicable limits of insurance coverage. All loans shall retain the same status
after Conversion as such loans had prior to Conversion.
XI. Liquidation Account
After the Conversion, holders of Savings Accounts and borrowers will not
have voting rights in the Converted Savings Bank and will not be entitled to
share in the residual assets after liquidation of the Converted Savings Bank.
However, pursuant to the Regulations, the Savings Bank shall, at the time of
Conversion, establish a Liquidation Account on the records of the Converted
Savings Bank in an amount equal to its total regulatory capital as of the date
of the latest statement of financial condition contained in the final Prospectus
used in connection with the Conversion or such other amount as shall be required
by the Regulations. The function of the Liquidation Account is to establish a
priority on liquidation and, except as provided in Article VI.E.2 above, the
existence of the Liquidation Account shall not operate to restrict the use or
applications of any of the net worth, regulatory capital or other accounts of
the Converted Savings Bank.
The Liquidation Account shall be maintained by the Converted Saving Bank
subsequent to Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders (as applicable) who maintain Savings
Accounts in the Converted Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to each Savings Account
held, have a related inchoate interest in a portion of the Liquidation Account
balance (the "subaccount balance").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder or a Supplemental Eligible Account Holder shall be determined by
multiplying the total opening balance in the Liquidation Account by a fraction,
of which the numerator is the amount of the Qualifying Deposits in the related
Savings Account on the Eligibility Record Date or the Supplemental Eligibility
Record Date (as applicable) and of which the denominator is the total amount of
all Qualifying Deposits of all Eligible Account Holders or Supplemental Eligible
Account Holders (as applicable)
18
<PAGE>
on such dates. Each such initial subaccount balance in the Liquidation Account
shall never be increased, but shall be subject to downward adjustment as
provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the Eligibility Record Date or Supplemental
Eligibility Record Date (as applicable) is less than the lesser of (a) the
deposit balance in such Savings Account at the close of business on any previous
annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date, as applicable, or (b) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, as applicable, then the subaccount balance
for such Savings Account shall be adjusted by reducing such subaccount balance
in an amount proportionate to the reduction in such deposit balance. In the
event of a downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. The subaccount balance of a Savings Account holder shall be
maintained for as long as the Savings Account holder maintains an account with
the same social security number with the Converted Savings Bank.
In the event of a complete liquidation of the Converted Savings Bank (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder, as applicable, shall be entitled to receive a liquidation
distribution from the Liquidation Account in the amount of the then current
adjusted subaccount balances for Savings Accounts then held, after the payment
of creditors of the Converted Savings Bank, including deposit account holders,
but before any liquidation distribution may be made to the Converted Savings
Bank's stockholders. No merger, consolidation, purchase of bulk assets with
assumption of deposit accounts and other liabilities, or similar combination or
transaction with or by another FDIC-insured institution shall be considered to
be a complete liquidation for this purpose. In such transactions, the
Liquidation Account shall be assumed by the surviving institution.
XII. Management
The Savings Bank or the Holding Company have entered or will enter into
contracts of employment with selected executives; the Savings Bank intends to
adopt and approve the ESOP; and, subject to approval of the stockholders of the
Holding Company, the Holding Company intends to approve and adopt stock option
plans for employees and directors of the Holding Company and/or the Savings Bank
and a management recognition plan providing for the issuance of restricted stock
of the Holding Company to certain employees and directors of the Holding Company
and/or the Savings Bank.
XIII. Amendment or Termination of Plan
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the Board of Directors of the Savings Bank. After submission of the Plan and
proxy materials to the Members, the Plan may be amended by a two-thirds vote of
the Board of Directors of the Savings Bank, but only with the concurrence of the
Administrator.
19
<PAGE>
In the event that mandatory new regulations pertaining to conversions are
adopted by the Administrator or FDIC prior to the completion of the Conversion,
the Plan will be amended as provided above to conform to the new mandatory
regulations without a re-solicitation of proxies or another Special Meeting. In
the event that new conversion regulations adopted by the Administrator or FDIC
prior to completion of the Conversion contain optional provisions, the Plan may
be amended as provided above to utilize such optional provisions without a re-
solicitation of proxies or another Special Meeting.
The Plan may be terminated by a two-thirds vote of the Board of Directors
of the Savings Bank at any time prior to the Special Meeting, and at any time
following such Special Meeting with the concurrence of the Administrator. The
Plan shall terminate automatically if the sale of all shares of Conversion Stock
required to be sold is not completed within 12 months of the date of the Special
Meeting, unless the Administrator agrees in writing to an extension of up to an
additional 12 months.
By adoption of the Plan, the Members authorize the Board of Directors of
the Savings Bank to amend or terminate the Plan under the circumstances set
forth above.
XIV. Expenses of the Conversion
The Savings Bank will use its best efforts to assure that expenses incurred
in connection with the Conversion shall be reasonable.
XV. Prohibition on Extensions of Credit
The Savings Bank, the Holding Company or any subsidiary of either of them
may not knowingly loan funds or otherwise extend unsecured credit or credit
secured by the Holding Company's Conversion Stock to any person to purchase
shares of Conversion Stock.
XVI. Contributions to Tax-Qualified Employee Stock Benefit Plans
The Savings Bank may make scheduled discretionary contributions to the
ESOP or any other tax-qualified employee stock benefit plan, provided such
contributions do not cause the Savings Bank to fail to meet its net worth
requirements.
20
<PAGE>
ANNEX I
Second Amended and Restated Certificate of Incorporation
of
Richmond Savings Bank, Inc., SSB
ARTICLE I
The name of the corporation is Richmond Savings Bank, Inc., SSB (the
"Savings Bank").
ARTICLE II
The principal office of the Savings Bank shall be located at 115 South
Lawrence Street, Rockingham, Richmond County, North Carolina. The street
address of the registered office of the Savings Bank is 115 South Lawrence
Street, Rockingham, North Carolina, the mailing address of the registered office
of the Savings Bank is P.O. Box 1597, Rockingham, North Carolina 28380-1597, and
the name of the registered agent at the address is R. Larry Campbell.
ARTICLE III
The period of duration of the Savings Bank is perpetual.
ARTICLE IV
The purposes for which the Savings Bank is organized are to pursue any and
all of the lawful objectives of a stock savings bank chartered under the
provisions of the General Statutes of North Carolina and to exercise all of the
express, implied, and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto, subject to the constitutions and
laws of the State of North Carolina and the United States as they are now in
effect, or as they may hereafter be amended, and subject to all lawful and
applicable rules, regulations and orders of appropriate regulatory authorities.
ARTICLE V
The Savings Bank shall have authority to issue 100,000 shares of stock.
These shares shall be all of one class, designated as common stock with no par
value.
ARTICLE VI
The minimum amount of consideration to be received for its shares of stock
before the Savings Bank shall commence business as a stock savings bank is $100.
<PAGE>
ARTICLE VII
The shareholders of the Savings Bank do not have preemptive rights to
---
acquire additional or treasury shares of the Savings Bank.
ARTICLE VIII
Pursuant to the requirements of the rules and regulations of the
Administrator of the Savings Institutions Division, North Carolina Department of
Commerce, the Savings Bank shall establish and maintain a liquidation account
for the benefit of its "Eligible Account Holders" and "Supplemental Eligible
Account Holders," if applicable, as defined in the Plan of Holding Company
Conversion adopted by the Savings Bank in connection with its conversion to the
stock form of ownership. In the event of a complete liquidation of the Savings
Bank, it shall comply with such rules and regulations with respect to the amount
and the priorities on liquidation of each Eligible Account Holder's or
Supplemental Eligible Account Holder's inchoate interest in the liquidation
account, to the extent it is still in existence; provided, however, that an
Eligible Account Holder's or Supplemental Eligible Account Holder's inchoate
interest in the liquidation account shall not entitle such person or entity to
any voting rights at meetings of the Savings Bank's shareholders.
ARTICLE IX
The business and affairs of the Savings Bank shall be managed by a Board of
Directors. The number of directors shall be fixed by the Savings Bank's Bylaws
but shall not be less than five (5). Terms of directors may be classified as
stated in the Savings Bank's Bylaws. A director may be removed by the
shareholders prior to the end of the director's term only for cause.
ARTICLE X
To the fullest extent that the law of North Carolina as it exists on the
effective date of this Article, or as it may thereafter be amended, permits the
elimination of liability of directors, no director of the Savings Bank shall be
personally liable to the Savings Bank or any of its shareholders for monetary
damages for any breach of duty as a director. No amendment to or repeal of this
Article shall apply to or have any effect on the liability or alleged liability
of any director of the Savings Bank for or with respect to any act or failure to
act on the part of such director occurring prior to such amendment or repeal.
The provisions of this Article shall not be deemed to limit or preclude
indemnification of a director by the Savings Bank for any liability of a
director which has not been eliminated by the provisions of this Article.
2
<PAGE>
ARTICLE XI
Any addition, alteration or amendment to this Charter shall be made in
accordance with the provisions of Chapter 54C of the General Statutes of North
Carolina and any amendments thereto.
RICHMOND SAVINGS BANK, INC., SSB
ATTEST:
By: ________________________________________
By:______________________________ R. Larry Campbell, President
______________ Secretary
STATE OF NORTH CAROLINA
COUNTY OF _________________
This is to certify that on this ________ day of __________________, 19___,
before me, a Notary Public, personally appeared R. Larry Campbell and
____________________, each of whom, being by me first duly sworn, declared that
he signed the foregoing instrument in the capacity indicated, that he was
authorized so to sign, and that the statements contained therein are true.
Witness my hand and official seal, this _____ day of ____________________,
19___.
______________________________________________
Notary Public
(OFFICIAL SEAL)
My Commission Expires: _______________________
3
<PAGE>
ANNEX II
BYLAWS
OF
RICHMOND SAVINGS BANK, INC., SSB
ARTICLE I.
OFFICES
-------
Section 1. Principal Office. The principal office of the Savings Bank
--------- ----------------
shall be located at 115 South Lawrence Street, Rockingham, North Carolina 28379.
Section 2. Registered Office. The registered office of the Savings Bank
--------- -----------------
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
ARTICLE II.
MEETING OF SHAREHOLDERS
-----------------------
Section 1. Place of Meetings. All meetings of shareholders shall be held
--------- -----------------
at the principal office of the Savings Bank, or at such other place, either
within or without the State of North Carolina, as shall be designated in the
notice of the meeting or agreed upon by a majority of the shareholders entitled
to vote thereat.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
--------- ---------------
held during the first five calendar months following the end of the Savings
Bank's fiscal year, or any day (except Saturday, Sunday or a legal holiday)
during that period as shall be determined by the Board of Directors, for the
purpose of electing directors of the Savings Bank, receiving annual reports of
officers, and transacting such other business as may be properly brought before
the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
--------- -------------------------
held on the date designated by these Bylaws, a substitute annual meeting may be
called in accordance with the provisions of Section 4 of this Article II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
Section 4. Special Meetings. Special meetings of the shareholders may be
--------- ----------------
called at any time by the President, or a majority of the Board of Directors by
giving notice as hereinafter provided, and, unless the Savings Bank shall at
such time have a class of shares registered under
<PAGE>
Section 12 of the Securities Exchange Act of 1934, as amended, shall be called
by any of the foregoing pursuant to the written request of the holders of not
less than one-tenth of all votes entitled to be cast on any issue proposed to be
considered at the meeting.
Section 5. Notice of Meetings. Written or printed notice stating the
--------- ------------------
time, place and date of the meeting shall be delivered not less than ten (10)
nor more than fifty (50) days before the date thereof, either in person or by
mail, by or at the direction of the Board of Directors, the President or the
Secretary to each shareholder of record entitled to vote at such meeting unless
applicable law or the Saving Bank's articles of incorporation require that such
notice shall be given to all shareholders with respect to such meeting. If
mailed, such notice shall be deemed to be effective when deposited in the United
States mail, correctly addressed to the shareholder at the shareholder's address
as it appears on the current record of shareholders of the Savings Bank, with
postage thereon prepaid.
In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
such a statement expressly is required by the provisions of the North Carolina
Business Corporation Act. In the case of a special meeting, the notice of
meeting specifically shall state the purpose or purposes for which the meeting
is called.
If any meeting of shareholders is adjourned to a different date, time or
place, notice need not be given of the new date, time or place if the new date,
time or place is announced at the meeting before adjournment and if a new record
date is not fixed for the adjourned meeting. If a new record date for the
adjourned meeting is or must be fixed pursuant to North Carolina law, notice of
the adjourned meeting must be given as provided in this Section to persons who
are shareholders as of the new record date.
Section 6. Waiver of Notice. Any shareholder may waive notice of any
--------- ----------------
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder, and delivered to the Savings Bank for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance, in person or
by proxy, at a meeting (a) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder or the shareholder's proxy at the
beginning of the meeting objects to holding the meeting or transacting business
thereat, and (b) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder or his proxy objects to considering the matter
before it is voted upon.
Section 7. Voting List. Before each meeting of shareholders, an
--------- -----------
alphabetical list of the shareholders entitled to notice of such meeting shall
be prepared by the Secretary of the Savings Bank. The list shall be arranged by
voting group and within each voting group by class or series of shares and show
the address of and number of shares held by each shareholder. The list shall be
kept on file at the principal office of the Savings Bank for the period
beginning two (2) business days after notice of the meeting is given and
continuing through the meeting, and shall be available for inspection by any
shareholder or the agent or attorney of any shareholder at any time prior to the
meeting during regular business hours and at any time during the meeting or any
adjournment thereof.
2
<PAGE>
Section 8. Voting Group. All shares of one or more classes or series
--------- ------------
that under the Savings Bank's articles of incorporation or the North Carolina
Business Corporation Act are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders constitute a voting group.
All shares entitled by the Savings Bank's articles of incorporation or the North
Carolina Business Corporation Act to vote generally on a matter are for that
purpose a single voting group. Classes or series of shares shall not be
entitled to vote separately by voting group unless expressly authorized by the
Savings Bank's articles of incorporation or specifically required by law.
Section 9. Quorum. Shares entitled to vote generally as a single voting
--------- ------
group or as a separate voting group may take action on a matter at the meeting
of shareholders only if a quorum of those shares is present at the meeting. A
majority of the votes entitled to be cast on the matter by the voting group
shall constitute a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by a vote of a majority of the
votes cast on the motion to adjourn; and at any adjourned meeting any business
may be transacted which might have been transacted at the original meeting if a
quorum exists with respect to the matter proposed.
Section 10. Proxies. Shares may be voted either in person or by one or
---------- -------
more agents authorized by a written proxy executed by the shareholder or by the
shareholder's duly authorized attorney-in-fact. A proxy shall not designate as
a holder any corporation or partnership including any person acting on behalf of
any corporation or partnership, or any person other than a living natural
person. However, a proxy may designate the holder of a specified title or
office, if a natural person, or a committee composed solely of natural persons,
including a committee composed of the Board of Directors of the Savings Bank.
Section 11. Voting of Shares. Subject to the provisions of the Savings
---------- ----------------
Bank's articles of incorporation, each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Except in the election of directors as provided in Section 3 of Article
III, if a quorum exists, action on a matter by a voting group at a meeting of
shareholders is approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action, unless a greater vote is
required by law or the Savings Bank's articles of incorporation or these Bylaws.
Section 12. Informal Action by Shareholders. Any action which may be
---------- -------------------------------
taken at a meeting of shareholders may be taken without a meeting if one or more
written consents, setting forth the action so taken, shall be signed by all of
the persons who would be entitled to vote upon such action at a meeting, and
delivered to the Secretary of the Savings Bank for inclusion in the minutes or
filing with the corporate records.
3
<PAGE>
If the Savings Bank is required by law to give notice to nonvoting
shareholders of action to be taken by unanimous written consent of the voting
shareholders, then the Savings Bank shall give the nonvoting shareholders, if
any, written notice of the proposed action at least ten (10) days before the
action is taken.
ARTICLE III.
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the Savings Bank
--------- --------------
shall be managed by the Board of Directors or by such Executive Committee as the
Board may establish.
Section 2. Number, Term and Qualifications. The number of Directors of
--------- -------------------------------
the Savings Bank shall be no less than five (5), with the exact number to be
fixed from time to time by the Board of Directors. Each Director shall hold
office until his death, resignation, retirement, removal, disqualification, or
his successor shall have been elected and qualified.
Section 3. Election of Directors. Except as provided in Section 5 of this
--------- ---------------------
Article III, the directors shall be elected at the annual meeting of
shareholders, and those persons who receive the highest number of votes at a
meeting at which a quorum is present shall be deemed to have been elected. If
any shareholder so demands, election of directors shall be by ballot. At all
times when the number of directors shall be nine (9) or more, the Board of
Directors shall be divided into three (3) classes, as nearly equal in number as
possible, and each class shall be elected for staggered terms of three (3) years
or until successors are duly elected and qualified.
Section 4. Removal. Any director may be removed from office at any time,
--------- -------
only for cause, by a vote of the shareholders if the number of votes cast to
remove such director exceeds the number of votes cast not to remove him. If a
director is elected by a voting group of shareholders, only the shareholders of
that voting group may participate in the vote to remove him. A director may not
be removed by the shareholders at a meeting unless the notice of that meeting
states that the purpose, or one (1) of the purposes, of the meeting is removal
of the director. If any directors are so removed, new directors may be elected
at the same meeting.
Section 5. Vacancies. Any vacancy occurring in the Board of Directors,
--------- ---------
including without limitation a vacancy resulting from an increase in the number
of directors or from the failure by the shareholders to elect the full
authorized number of directors, may be filled by the shareholders, a majority of
the remaining directors, though less than a quorum, or by the sole remaining
director. A director elected to fill a vacancy shall be elected to serve the
remaining term of the director replaced, or if a director is not elected to
replace a previously elected director, the new director shall be elected to
serve until the next shareholders' meeting at which directors are elected. The
shareholders may elect a director at any time to fill any vacancy not filled by
the directors.
4
<PAGE>
Section 6. Compensation. The Board of Directors may provide for the
--------- ------------
compensation of directors for their services as such and for the payment or
reimbursement of any or all expenses incurred by them in connection with such
services.
Section 7. Age Limitation for Non-Employee Directors. A person who is 70
--------- -----------------------------------------
years of age or older and who is not an employee of the Savings Bank shall not
be eligible for election, re-election, appointment, or re-appointment to the
Board of Directors; provided, however, that this age limitation shall not apply
to any person serving as a director on the effective date of the conversion of
the Savings Bank from a mutual savings bank to a stock savings bank.
ARTICLE IV.
MEETINGS OF DIRECTORS
---------------------
Section 1. Regular Meetings. A regular meeting of the Board of Directors
--------- ----------------
shall be held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called by or at the request of the President, Vice President acting in
his absence or incapacity, or any three Directors, upon notice either in person
or by mail. Such meetings shall be held either within or without the State of
North Carolina as fixed by the person or persons calling any such meeting.
Section 3. Notice of Meetings. The applicable provisions of North
--------- ------------------
Carolina law shall govern meetings of the Board of Directors, notice of
meetings, waiver of notice, quorums and actions of the Board of Directors.
Section 4. Quorum. A majority of the number of directors shall constitute
--------- ------
a quorum for the transaction of business at any meeting of the Board of
Directors.
Section 5. Manner of Acting. Except as otherwise provided in these
--------- ----------------
Bylaws, the act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 6. Presumption of Assent. A director of the Savings Bank who is
--------- ---------------------
present at a meeting of the Board of Directors at which action on any matter is
taken shall be presumed to have assented to the action unless his contrary vote
is recorded or his dissent is otherwise entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Savings Bank immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 7. Informal Action by Directors. Action taken by the directors
--------- ----------------------------
without a meeting is nevertheless Board action if written consent to the action
is signed by all the directors and filed
5
<PAGE>
with the minutes of the proceedings of the Board or other corporate records,
whether done before or after the actions are taken.
ARTICLE V.
OFFICERS
--------
Section 1. Officers of the Savings Bank. The officers of the Savings Bank
--------- ----------------------------
shall consist of a President, a Secretary, a Treasurer, and such Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers as
the Board of Directors may from time to time elect. Any two or more offices may
be held by the same person, except the offices of President and Secretary, but
no officer may act in any more than one capacity where action of two or more
officers is required.
Section 2. Election and Term. The officers of the Savings Bank shall be
--------- -----------------
elected by the Board of Directors. Such election may be held at any regular or
special meeting of the Board. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification or his successor is elected
and qualified.
Section 3. Removal. Any officer or agent elected or appointed by the
--------- -------
Board of Directors may be removed by the Board whenever in its judgment the best
interests of the Savings Bank will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. President. The President shall be the principal executive
--------- ---------
officer and managing officer of the Savings Bank and, subject to the control of
the Board of Directors, shall supervise and control all of the business and
affairs of the Savings Bank. He or she shall sign, with the Secretary, an
Assistant Secretary, or with any other proper officer authorized by the Board of
Directors and whose signature is required, certificates for shares of the
Savings Bank and any deeds, mortgages, bonds, contracts, or other instruments
which may be lawfully executed on behalf of the Savings Bank, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors or these Bylaws to some other officer or agent of the Savings Bank;
and, in general, he or she shall perform all duties incident to the office of
the President and such other duties as may be prescribed by the Board of
Directors from time to time.
Section 5. Vice Presidents. In the absence of the President or in the
--------- ---------------
event of his death, inability or refusal to act, the Vice Presidents, unless
otherwise determined by the Board of Directors, shall perform the duties of the
President, and when so acting shall have all the powers of and be subject to all
the restrictions upon the President. Any Vice President, with any other proper
officer whose signature is required, may sign certificates for shares of the
Savings Bank and shall perform such other duties as from time to time may be
assigned to him or her by the President or Board of Directors.
Section 6. Secretary. The Secretary shall: (a) keep the minutes of the
--------- ---------
meetings of shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see
<PAGE>
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the corporate records and of
the seal of the Savings Bank and see that the seal of the Savings Bank is
affixed to all documents the execution of which on behalf of the Savings Bank
under its seal is duly authorized; (d) have general charge of the stock transfer
books of the Savings Bank and shall keep, at the registered or principal office
of the Savings Bank a record of shareholders showing the name and address of
each shareholder and the number and class of the shares held by each; (e) be
authorized, with any other proper officer, to sign certificates for shares of
the Savings Bank and shall sign such other instruments as may require the
Secretary's signature; and (f) in general perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him or her by the President or by the Board of Directors.
Section 7. Assistant Secretaries. In the absence of the Secretary or in
--------- ---------------------
the event of his or her death, inability or refusal to act, the Assistant
Secretaries, unless otherwise determined by the Board of Directors, shall
perform the duties of the Secretary, and when so acting shall have all the
powers of and be subject to all the restrictions upon the Secretary. Any
Assistant Secretary, with any other proper officer, may sign certificates for
shares of the Savings Bank. They shall perform such other duties as may be
assigned to them by the Secretary, by the President, or by the Board of
Directors.
Section 8. Treasurer. The Treasurer shall: (a) have charge and custody
--------- ---------
of and be responsible for all funds and securities of the Savings Bank; receive
and give receipts for money due and payable to the Savings Bank from any source
whatsoever, and deposit all such moneys in the name of the Savings Bank in such
depositories as shall be selected by the Board of Directors of the Savings Bank;
(b) have authority, with any other proper officer, to sign certificates for
shares of the Savings Bank; and (c) in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors, or by
these Bylaws.
Section 9. Assistant Treasurers. In the absence of the Treasurer or in
--------- --------------------
the event of his or her death, inability or refusal to act, the Assistant
Treasurers, unless otherwise determined by the Board of Directors, shall perform
the duties of the Treasurer, and when so acting shall have all the powers of and
be subject to all the restrictions upon the Treasurer. Any Assistant Treasurer,
with any other proper officer, may sign certificates for shares of the Savings
Bank. They shall perform such other duties as may be assigned to them by the
Treasurer, by the President, or by the Board of Directors.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
Section 1. Contracts. The Board of Directors may authorize any officer or
--------- ---------
officers, agent or agents, to enter into any contract or execute and deliver any
instruments in the name of and on behalf of the Savings Bank, and such authority
may be general or confined to specific instances.
7
<PAGE>
Section 2. Loans. No loan shall be contracted on behalf of the Savings
--------- -----
Bank and no evidences of indebtedness shall be issued in its name unless
authorized by Article VI of these Bylaws or authorized by a resolution of the
Board of Directors. Such authority may be general or confined to specific
instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for the
--------- -----------------
payment of money issued in the name of the Savings Bank shall be signed by such
President or such other officer or officers, agent or agents of the Savings Bank
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
Section 4. Deposits. All funds of the Savings Bank not otherwise employed
--------- --------
shall be deposited from time to time to the credit of the Savings Bank in such
depositories as the Board of Directors shall direct.
ARTICLE VII.
DEPOSIT ACCOUNTS
----------------
Section 1. Classes of Deposit Accounts. The Savings Bank may issue as
--------- ---------------------------
many classes of deposit accounts as the Board of Directors shall establish,
subject to such regulations and limitations as the Administrator of the Savings
Institutions Division of the North Carolina Department of Commerce and the
Federal Deposit Insurance Corporation may prescribe. Such classes of deposit
accounts may include passbook accounts, certificate accounts, NOW accounts,
trust accounts, demand accounts and such other accounts as are permitted by law.
The minutes of the meetings of the Board of Directors of the Savings Bank shall
define each class of deposit account being offered to the public and shall show
all changes made in the class or classes of deposit accounts available to the
customers of the Savings Bank.
Section 2. Withdrawals. The Savings Bank shall have the right to pay the
--------- -----------
withdrawal value of its deposit accounts at any time upon written application
therefor and to pay the holders thereof the withdrawal value thereof. Upon
receipt of a written application from any holder of a deposit account of all or
any part of the withdrawal value thereof, the Savings Bank shall within thirty
(30) days pay the amount requested. If the Savings Bank is unable to pay all
withdrawals requested at the end of thirty (30) days from the date of such
requests, it shall then pay all withdrawals requested in accordance with the
applicable provisions of the General Statutes of North Carolina, as amended, and
the regulations of the Federal Deposit Insurance Corporation. Holders of
deposit accounts for which application for withdrawal has been made shall remain
holders of deposit accounts until paid and shall not become creditors.
When a certificate or agreement between the Savings Bank and the account
holder specifies a particular period of time for notice of withdrawals,
withdrawals shall be made in accordance with such certificate or agreement.
Section 3. Forced Retirement. If so provided in the deposit account
--------- -----------------
contract, the Savings Bank may redeem all or any part of its deposit accounts
which have not been pledged as security for
31
<PAGE>
loans. The Savings Bank shall give at least thirty (30) days notice of such
redemption by certified mail addressed to the holder of each deposit account at
his or her last address as recorded on the books of the Savings Bank. The
Savings Bank may not redeem any of its deposit accounts when it has any request
for withdrawal which has been on file and unpaid for more than thirty (30) days.
Also, the Savings Bank may not redeem any fixed-term deposit accounts which
have not matured. The redemption price of each deposit account redeemed shall be
the full value thereof, as determined by the Board of Directors, but in no event
shall the redemption price be less than the withdrawal amount of such deposit
accounts. If notice of redemption is duly given and sufficient funds are
available for such redemption, interest shall cease to accrue on the deposit
account as of the redemption date. After the redemption date all rights with
respect to the deposit account shall terminate, except for the right of the
deposit account holder to receive the redemption price thereof without interest.
Section 4. New Account Books. The Savings Bank may issue a new account
--------- -----------------
book or certificate, or other evidence of ownership of a deposit account, in the
name of the holder of record at any time when requested by such holder or his or
her legal representative upon proof satisfactory to the Savings Bank that the
original account book or certificate has been lost or destroyed. Such proof of
loss shall ordinarily include a written verification by the holder or his or her
legal representative that the account book or certificate has been lost or
destroyed and the account has not been pledged or assigned. Such new account
book or certificate shall expressly state that it is issued in lieu of the one
lost or destroyed and that the Savings Bank shall in no way be liable thereafter
on account of the original book or certificate. When issuing such a new account
book or certificate, the Savings Bank may, at its option, require the holder of
record to give to the Savings Bank a bond in such sum as it may direct, or such
other indemnification as it may dictate, in order to indemnify the Savings Bank
against any loss that might result from the issuance of the new account book,
certificate, or other evidence of ownership of a deposit account.
ARTICLE VIII.
LOANS AND INVESTMENTS
---------------------
Section 1. General Lending Authority. Funds of the Savings Bank shall be
--------- -------------------------
loaned in compliance with the General Statutes of North Carolina, the
regulations promulgated by the Administrator of the Savings Institutions
Division of the North Carolina Department of Commerce and applicable federal
statutes and regulations, and in such sums and at such times as the Board of
Directors may determine.
Section 2. Manner of Making Loans. The Board of Directors shall establish
--------- ----------------------
and maintain procedures by which loans are to be considered, approved, and made
by the Savings Bank. Such loan procedures may be amended by resolution of the
Board of Directors.
The Board of Directors may establish a Loan Committee to implement the
Board's loan procedures and to consider and approve loans.
32
<PAGE>
The Board of Directors may designate one or more of the Savings Bank's
officers to serve as Loan Officers. Such Loan Officers shall have authority to
approve loans as determined by the Board.
All actions taken on loan applications to the Savings Bank shall be
reported to the Board of Directors at its meeting next following such actions.
Section 3. Appraisals. The Board of Directors shall cause all loans
--------- ----------
secured by real estate to be appraised and approved as provided by law.
ARTICLE IX.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
Section 1. Certificate For Shares. If the shares of the Savings Bank are
--------- ----------------------
represented by certificates, the certificates shall be in such form as required
by law and as determined by the Board of Directors and shall be signed by the
President or any Vice President and either the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer. All certificates for
shares shall be numbered consecutively or otherwise identified and shall
indicate thereon a reference to any and all restrictive conditions of said
shares. Certificates representing shares of the Savings Bank may be issued to
every shareholder for the fully paid shares owned thereby; the name and address
of the persons to whom they are issued, the number of shares, and the date of
issue shall be entered on the stock transfer books of the Savings Bank. If the
shares are not represented by certificates, then within a reasonable time after
issuance or transfer of such shares, the Savings Bank shall deliver to the
shareholder to whom such shares have been issued or transferred a written
statement of the information required by law to be on certificates.
Section 2. Transfer of Shares. If the shares are represented by
--------- ------------------
certificates, transfer of shares shall be made on the stock transfer books of
the Savings Bank only upon surrender of the certificates for the shares sought
to be transferred by the record holder thereof or by such shareholder's duly
authorized agent, transferee or legal representative. All certificates
surrendered for transfer shall be cancelled before new certificates for the
transferred shares shall be issued. If the shares are not represented by
certificates, transfer of shares shall be made on the stock transfer books of
the Savings Bank only upon the furnishing of proper evidence of authority to
transfer by the holder of record thereof or such shareholder's duly authorized
agent, transferee or legal representative. Transfer of shares may be restricted
by an agreement of the shareholder(s).
Section 3. Fixing Record Date. The Board of Directors of the Savings Bank
--------- ------------------
may fix a date selected by it as the record date for one or more voting groups
in order to determine (a) the shareholders entitled to notice of a meeting of
shareholders, (b) the shareholders entitled to demand a special meeting, if any,
(c) the shareholders entitled to vote, or (d) the shareholders entitled to take
any other action. A record date fixed under this Section may not be more than
seventy (70) days before the meeting or action requiring a determination of
shareholders.
10
<PAGE>
A determination of shareholders entitled to notice of or to vote at a
meeting of shareholders is effective for any adjournment of the meeting unless
the Board of Directors fixes a new record date for the adjourned meeting, which
it must do if the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
If no record date is fixed by the Board of Directors for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
the close of business on the day before the first notice of the meeting is
delivered to shareholders shall be the record date for such determination of
shareholders.
Section 4. Lost Certificates. The Board of Directors may authorize the
--------- -----------------
issuance of a new share certificate in place of a certificate theretofore issued
by the Savings Bank claimed to have been lost or destroyed, upon receipt of an
affidavit of such fact from the person claiming the loss or destruction. When
authorizing such issuance of a new certificate, the Board shall require the
claimant to give the Savings Bank a bond in such sum as the Board may direct to
indemnify the Savings Bank against loss from any claim with respect to the
certificate claimed to have been lost or destroyed; provided, however, that the
Board, by resolution reciting the circumstances justifying such action, may
authorize the issuance of the new certificate without requiring such a bond.
Section 5. Holder of Record. Except as otherwise required by law, the
--------- ----------------
Savings Bank may treat as the absolute owner of shares and as the person
exclusively entitled to receive notification and distributions, to vote and
otherwise to exercise the rights, powers, and privileges of ownership of such
shares, the person in whose name the shares stand of record on its books.
Section 6. Reacquired Shares. Shares of the Savings Bank that have been
--------- -----------------
issued and thereafter reacquired by the Savings Bank shall constitute authorized
but unissued shares.
ARTICLE X.
GENERAL PROVISIONS
------------------
Section 1. Distributions. The Board of Directors from time to time may
--------- -------------
authorize, and the Savings Bank may pay, distributions and share dividends on
the Savings Bank's outstanding shares in the manner and upon the terms and
conditions provided by law and by the Savings Bank's articles of incorporation.
Section 2. Seal. The corporate seal of the Savings Bank shall consist of
--------- ----
two concentric circles between which is the name of the Savings Bank and in the
center of which is inscribed SEAL; and such seal, as impressed on the margin
hereof, is hereby adopted as the corporate seal of the Savings Bank.
Section 3. Indemnity. In addition to any indemnification required or
--------- ---------
permitted by law, and except as otherwise provided in these Bylaws, any person
who at any time serves or has served as a director, officer, employee, partner,
trustee or agent of the Savings Bank and any such person who serves or has
served at the request of the Savings Bank as a director, officer, employee or
agent
11
<PAGE>
of another corporation, partnership, joint venture, trust or other enterprise,
or as a trustee or administrator under an employee benefit plan, shall have a
right to be indemnified by the Savings Bank to the full extent allowed by
applicable law against liability and litigation expense arising out of such
status or activities in such capacity. "Liability and litigation expense" shall
include costs and expenses of litigation (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement which are actually and
reasonably incurred in connection with or as a consequence of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including appeals.
Promptly after the final disposition or termination of any matter which
involves liability or litigation expense as described above or at such earlier
time as it sees fit, the Savings Bank shall determine whether any person
described in this Section 3 is entitled to indemnification thereunder. Such
determination shall be limited to the following issues: (i) whether the
persons to be indemnified are persons described in this Section 3, (ii) whether
the liability or litigation expense incurred arose out of the status or
activities of such persons as described in this Section 3, (iii) whether
liability was actually incurred and litigation expense was actually and
reasonably incurred, and (iv) whether the indemnification requested is not
permitted by applicable law. Such determination shall be made by a majority
vote of directors who were not parties to the action, suit or proceeding (or, in
connection with "threatened" actions, suits or proceedings, who were not
"threatened parties"). If at least two such disinterested directors are not
obtainable, or, even if obtainable, if at least half of the number of
disinterested directors so direct, such determination shall be made by
independent legal counsel in written opinion.
Litigation expense incurred by a person described in this Section 3 in
connection with a matter described in this Section 3 shall be paid by the
Savings Bank in advance of the final disposition or termination of such matter,
if the Savings Bank receives an undertaking, dated, in writing and signed by the
person to be indemnified, to repay all such sums unless such person is
ultimately determined to be entitled to be indemnified by the Savings Bank as
provided in this Section 3. Requests for payments in advance of final
disposition or termination shall be submitted in writing unless this requirement
is waived by the Savings Bank.
Notwithstanding the foregoing, no advance payment shall be made as to any
payment or portion of a payment for which the determination is made that the
person requesting payment will not be entitled to indemnification. Such
determination may be made only by a majority vote of disinterested directors or
by independent legal counsel as next provided. If there are not at least two
disinterested directors, the notice of all requests for advance payment shall be
delivered for review to independent legal counsel for the Savings Bank. Such
counsel shall have the authority to disapprove any advance payment or portion of
a payment for which it plainly appears that the person requesting payment will
not be entitled to indemnification.
The Savings Bank shall not be obligated to indemnify persons described in
this Section 3 for any amounts paid in settlement unless the Savings Bank
consents in writing to the settlement. The Savings Bank shall not unreasonably
withhold its consent to proposed settlements. The Savings Bank's consent to a
proposed settlement shall not constitute an agreement by the Savings Bank that
any person is entitled to indemnification hereunder. The Savings Bank shall
waive the requirement of this section for its written consent as fairness and
equity may require.
12
<PAGE>
A person described in this Section 3 may apply to the Savings Bank in
writing for indemnification or advance expenses. Such applications shall be
addressed to the Secretary or, in the absence of the Secretary, to any officer
of the Savings Bank. The Savings Bank shall respond in writing to such
applications as follows: to a request for indemnity under this Section 3, within
ninety days after receipt of the application; to a request for advance expenses
under this Section 3, within fifteen days after receipt of the application.
If any action is necessary or appropriate to authorize the Savings Bank to
pay the indemnification required by these Bylaws, the Board of Directors shall
take such action, including (i) making a good faith evaluation of the
indemnification request, (ii) giving notice to, and obtaining approval by, the
shareholders of the Savings Bank, and (iii) taking any other action.
The right to indemnification or advance expenses provided herein shall be
enforceable in any court of competent jurisdiction. A legal action may be
commenced if a claim for indemnity or advance expenses is denied in whole or in
part, or upon the expiration of the time periods provided above. In any such
action, if the claimant establishes the right to indemnification, he or she
shall also have the right to be indemnified against the litigation expense
(including, without limitation, reasonable attorneys' fees) of such action.
As provided by N.C. Gen. Stat. (S)55-8-57, the Savings Bank shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Savings Bank, or who is or was
serving at the request of the Savings Bank as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or as a trustee or administrator under an employee benefit plan,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Savings Bank
has the power to indemnify him against such liability.
The right to indemnification provided herein shall not be deemed exclusive
of any other rights to which any persons seeking indemnity may be entitled apart
from the provisions of this bylaw, except there shall be no right to
indemnification as to any liability or litigation expense for which such person
is entitled to receive payment under any insurance policy other than a
directors' and officers' liability insurance policy maintained by the Savings
Bank. Such right inures to the benefit of the heirs and legal representatives
of any persons entitled to such right. Any person who at any time after the
adoption of this bylaw serves or has served in any status or capacity described
in this Section 3, shall be deemed to be doing or to have done so in reliance
upon, and as consideration for, the right of indemnification provided herein.
Any repeal or modification hereof shall not affect any rights or obligations
then existing. The right provided herein shall not apply as to persons serving
institutions which are hereafter merged into or combined with the Savings Bank,
except after the effective date of such merger or combination and only as to
status and activities after such date.
If this Article or any portion hereof shall be invalidated on any ground by
any court or agency of competent jurisdiction, then the Savings Bank shall
nevertheless indemnify each person described in this Section 3 to the full
extent permitted by the portion of this Article that is not invalidated and also
to the full extent (not exceeding the benefits described herein) permitted or
required by other applicable law.
13
<PAGE>
Section 4. Fiscal Year. The fiscal year of the Savings Bank shall be
--------- -----------
the twelve-month period which ends on June 30th.
Section 5. Amendments. Except as otherwise provided herein, or required
--------- ----------
by law, these Bylaws may be amended or repealed and new Bylaws may be adopted by
the affirmative vote of a majority of the Directors then holding office at any
regular or special meeting of the Board of Directors. No bylaw adopted, amended
or repealed by the shareholders shall be readopted, amended or repealed by the
Board of Directors unless the Savings Bank's articles of incorporation or a
bylaw adopted by the shareholders authorizes the Board of Directors to adopt,
amend or repeal that particular bylaw or the Bylaws generally.
The shareholders may amend or repeal these Bylaws even though these Bylaws
also may be amended or repealed by the Board of Directors.
Adopted this _____ day of _____________, 1996.
- ---------------------------------------------
Secretary
14
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
[LOGO APPEARS HERE]
- --------------- ----------------
NUMBER SHARES
CF
- --------------- ----------------
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
CAROLINA FINCORP, INC.
ROCKINGHAM, N.C.
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 143874 10 5
THIS IS TO CERTIFY THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE OF
_________________________ CAROLINA FINCORP, INC.________________________
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon the surrender of this certificate properly
endorsed. The security evidenced by this certificate is not a deposit account or
savings account and is not federally insured or guaranteed. This certificate is
not valid unless countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SECRETARY [SEAL APPEARS HERE] PRESIDENT
COUNTERSIGNED AND REGISTERED:
REGISTRAR AND TRANSFER COMPANY
(CRANFORD, NEW JERSEY) TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
<PAGE>
CAROLINA FINCORP, INC
KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN OR DESTROYED, THE
CORPORATION MAY REQUIRE A BOND AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT
CERTIFICATE.
The Corporation will furnish to any shareholder upon request and without charge
a copy of the Articles of Incorporation and Bylaws of the Corporation, which set
forth certain other provisions with respect to acquisition of shares of the
Corporation, as well as a description of the Corporation's authorized common and
preferred stock and other provisions affecting stockholder rights and corporate
governance.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants
in common UNIF GIFT MIN ACT - .........Custodian.........
TEN ENT - as tenants (Cust) (Minor)
by the entireties under Uniform Gifts Minors
JT TEN - as joint tenants Act........................
with right of (State)
survivorship and
not as tenants in
common
Additional abbreviations may also be used though not in the above list.
For value received,__________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL, SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________
____________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated _____________________________
NOTICE: _________________________________________________________
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: ___________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
- --------------------------------------------------------------------------------
- ---------------- Richmond Savings Bank, Inc., SSB ------------------
NUMBER Rockingham, North Carolina SHARES
- ---------------- ------------------
--------------------------------------------------------------------------
COMMON STOCK
--------------------------------------------------------------------------
The security evidenced by this Certificate is not a deposit account
or savings account and is not federally insured or guaranteed.
THIS CERTIFIES THAT _______________________________________________ is the
registered holder of ______________________________________________ Shares
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be
hereunder affixed
this ______________ day of _____________________ A. D. 19__
_________________________ [SEAL APPEARS HERE] _______________________
Secretary President
- --------------------------------------------------------------------------------
<PAGE>
The Corporation will furnish to any stockholder upon request and without a
charge a copy of the Charter and Bylaws of the Corporation, which set forth
certain other provisions with respect to acquisition of shares of the
Corporation, as well as a description of the Corporation's authorized common and
preferred stock and other provisions affecting stockholder rights and corporate
governance.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT--.....Custodian.....
TEN ENT - as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
JT TEN - as joint tenants with right
of survivorship and not as Act...................
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For Value received,____________________hereby sell, assign and transfer unto
Please insert social security or other
identifying number of Assignee
______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocable constitute and
appoint________________________________________________________________________
_______________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated,_______________
___________________________
In presence of
_______________________________
<PAGE>
Exhibit 10.2
RICHMOND SAVINGS BANK, INC., SSB
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of _______________,1996, by and between
RICHMOND SAVINGS BANK, INC., SSB (hereinafter referred to as the "Savings Bank")
and R. LARRY CAMPBELL (hereinafter referred to as the "Officer") and is joined
in by CAROLINA FINCORP, INC., the parent holding company of the Savings Bank
(hereinafter referred to as the "Holding Company").
WHEREAS, the Officer has heretofore been employed by the Savings Bank as
its President and Chief Executive Officer; and
WHEREAS, the Savings Bank is a state-chartered stock savings bank and the
wholly-owned subsidiary of the Holding Company; and
WHEREAS, the Savings Bank desires to retain the services of the Officer as
the President and Chief Executive Officer of the Savings Bank upon the terms and
conditions set forth herein; and
WHEREAS, the Savings Bank considers the establishment and maintenance of a
sound and vital management to be part of its overall corporate strategy and to
be essential to protecting and enhancing the best interests of the Holding
Company, the Savings Bank and their stockholders; and
WHEREAS, the parties desire to enter into this Agreement in order to set
forth the terms and conditions of the Officer's employment relationship with the
Savings Bank.
<PAGE>
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. EMPLOYMENT. The Savings Bank hereby agrees to employ the Officer and
----------
the Officer hereby agrees to accept employment, upon the terms and conditions
stated herein, as the President and Chief Executive Officer of the Savings Bank.
The Officer shall render such administrative and management services to the
Savings Bank as are customarily performed by persons situated in a similar
executive capacity. The Officer shall promote the business of the Savings Bank
and perform such other duties as shall, from time to time, be reasonably
prescribed by the Board of Directors of the Savings Bank (the "Board").
2. COMPENSATION. The Savings Bank shall pay the Officer during the term
------------
of this Agreement, as compensation for all service rendered by him to the
Savings Bank, a base salary at the rate of $95,400 per annum, payable in cash
not less frequently than monthly; provided that the rate of such salary shall be
reviewed by the Board not less often than annually. Such rate of salary, or
increased rate of salary, as the case may be, may be further increased from time
to time in such amounts as the Board, in its discretion, may decide. The
Officer will be entitled to such customary fringe benefits, vacation and sick
leave as are consistent with the normal practices and established policies of
the Savings
2
<PAGE>
Bank.
3. BONUS COMPENSATION. The Officer shall be entitled to participate
------------------
in any bonus compensation plan adopted by the Directors of the Savings Bank
which would apply to the Officer's position.
4. PARTICIPATION IN RETIREMENT AND EMPLOYEE BENEFIT PLANS; FRINGE
--------------------------------------------------------------
BENEFITS. The Officer shall be entitled to participate in any plan relating to
deferred compensation, stock awards, stock options, stock purchases, pension,
thrift, profit sharing, group life insurance, medical and dental coverage,
disability coverage, education, or other retirement or employee benefits that
the Savings Bank or the Holding Company have adopted, or may, from time to time
adopt, for benefit of their executive employees and for employees generally,
subject to the eligibility rules of such plans.
The Officer shall also be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Officer or the
Savings Bank's other executive employees, including the payment of reasonable
expenses for attending annual and periodic meetings of trade associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Officer under this Agreement. Additionally, the Officer
shall be entitled to such vacation and sick leave as shall be established under
uniform employee policies promulgated by the Directors. The Savings
3
<PAGE>
Bank shall reimburse the Officer for all out-of-pocket reasonable and necessary
business expenses which the Officer may incur in connection with his services on
behalf of the Savings Bank.
5. TERM. The term of employment under this Agreement shall be for a period
----
of three (3) years commencing on the effective date of this Agreement (effective
date meaning the date first set forth above), and will automatically extend on a
year to year basis at the conclusion of the initial three year period provided
neither the Board nor the Officer give the other written notice at least 90 days
prior to the expiration date of the initial three year period, and provided that
neither give the other written notice at least 90 days prior to the expiration
date of any subsequent yearly period, and further provided that this section be
additionally subject to provisions in Section 8(c).
6. LOYALTY. The Officer shall devote his full efforts and entire business
-------
time to the performance of his duties and responsibilities under this Agreement.
The Officer agrees that he will hold in confidence all knowledge or
information of a confidential nature with respect to the respective businesses
of the Holding Company, the Savings Bank or of their subsidiaries, if any,
received by him during the term of this Agreement and will not disclose or make
use of such information, except in the ordinary course of his duties under this
Agreement, without the prior written consent of the Holding Company or the
Savings Bank.
4
<PAGE>
7. STANDARDS. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards as expected of
the Officer and as outlined in Section 1 of this Agreement, and as may be
established from time to time by the Board.
8. TERMINATION AND TERMINATION PAY.
-------------------------------
(a) The Officer's employment under this Agreement shall be terminated upon
the death of the Officer during the term of this Agreement, in which event, the
Officer's estate shall be entitled to receive the compensation due the Officer
through the last day of the calendar month in which his death shall have
occurred and for a period of one month thereafter.
(b) The Officer's employment under this Agreement may be terminated at any
time by the Officer upon sixty (60) days' written notice to the Board of
Directors. Upon such termination, the Officer shall be entitled to receive
compensation through the effective date of such termination.
(c) The Board may terminate this Agreement at any time, or request
Officer's resignation, but only upon a two-thirds vote of the Board. Any
termination of the Officer by the Board shall not prejudice the Officer's right
to compensation or other benefits under this Agreement for the remaining period
which would have been covered by this Agreement if such termination had not
occurred.
5
<PAGE>
However, in no event will the Officer be compensated for more or less than
twelve months. Any benefits to which the Officer may be entitled shall not be
affected.
9. ADDITIONAL REGULATORY REQUIREMENTS.
----------------------------------
(a) If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(3) and (g)(1)), the Savings Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Savings
Bank shall (i) pay the Officer all of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations which were suspended.
(b) If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) of Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(c) If the Savings Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(x)(1)), all obligations under
this Agreement shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the Savings Bank, (i) by the Federal Deposit Insurance
Corporation (the "Corporation"), at the time the Corporation enters into an
agreement to provide assistance to or on behalf of the Savings Bank under the
authority contained in
6
<PAGE>
Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(c)); or
(ii) by the Administrator of the Savings Institution Division of the North
Carolina Department of Commerce (the "Administrator"), at the time the
Administrator approves a supervisory merger to resolve problems related to
operation of the Savings Bank or when the Savings Bank is determined by the
Administrator to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
10. CHANGE IN CONTROL.
-----------------
(a) In the event of a "Change in Control" (as defined in Subsection (b)
below), the term of employment under this Agreement shall automatically be
extended for a period of three (3) years beginning on the date of the Change in
Control, and the acquiror shall be bound by the terms of this Agreement and
shall be prohibited, during the remainder of the term of this Agreement, from:
(i) Assigning Officer any duties and/or responsibilities that are
inconsistent with his position, duties, responsibilities or status at
the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in effect
at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Section 2 of this Agreement; or
(iii) Reducing in level, scope or coverage or eliminating Officer's
life insurance, medical or hospitalization insurance, disability
insurance, profit sharing plans, stock option plans, stock purchase
plans, deferred compensation plans, bonus compensation plans,
management retention plans, retirement plans or similar plans or
benefits being provided by the Savings Bank or the Holding Company to
the Officer as of the effective date of the Change in Control; or
(iv) Transferring Officer to a location more than forty (40) miles
distant from Officer's primary work station at the time of a Change in
Control, without the Officer's express written consent.
7
<PAGE>
(b) For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(i) a change in control of a nature that would be required to be
reported by the Holding Company in response to Item 1 of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Exchange Act; or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Holding Company or Savings Bank
representing 25 percent or more of the combined voting power of the
outstanding Common Stock of the Holding Company or Common Stock of the
Savings Bank, as applicable; or
(iii) individuals who constitute the Board or board of directors of
the Holding Company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company Board," respectively) cease for any reason
to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board or Incumbent Holding Company Board, as
applicable, or whose nomination for election by the Savings Bank's or
Holding Company's shareholders was approved by the Savings Bank's or
Holding Company's Board of Directors or Nominating Committee, as
applicable, shall be considered as though he or she were a member of
the Incumbent Board or Incumbent Holding Company Board, as applicable;
or
(iv) either the Holding Company or the Savings Bank consolidates or
merges with or into another corporation, association or entity or is
otherwise reorganized, where neither the Holding Company nor the
Savings Bank, respectively, is the surviving corporation in such
transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to or
are acquired by any other entity or group.
Notwithstanding the other provisions of this Section 10, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event,
8
<PAGE>
Officer and Savings Bank agree in writing that the same shall not be treated as
a Change in Control for purposes of this Agreement.
11. SUCCESSORS AND ASSIGNS.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Savings Bank which shall acquire, directly
or indirectly, by conversion, merger, consolidation, purchase or otherwise, all
or substantially all of the assets of the Holding Company or the Savings Bank.
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Officer, the Officer shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
12. NONCOMPETITION. Officer agrees that he will not, for a period of 12
--------------
full months after separation from the Savings Bank, become a director or
officer, or go to work for or become employed by any bank, savings bank, or
similar financial institution, or engage in, raid or attempt to switch any
customers on the books of the Savings Bank at the time the Officer separated
from the Savings Bank. This covenant applies only to the North Carolina counties
of Richmond, Moore and Scotland and is in no way intended to prevent Officer
from gaining employment in any other financial institution except within the
counties herein listed.
9
<PAGE>
13. MODIFICATION; WAIVER; AMENDMENTS. No provision of this Agreement may
--------------------------------
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing, signed by the Officer and on behalf of the Savings Bank
by such officer as may be specifically designated by the Directors. No waiver
by either party hereto, at any time, of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties, except as herein otherwise provided.
14. APPLICABLE LAW. This Agreement shall be governed in all respects
--------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
RICHMOND SAVINGS BANK, INC., SSB
By:___________________________________
Chairman of the Board
_________________________________(SEAL)
R. Larry Campbell
The foregoing Agreement is consented and agreed to by Carolina Fincorp,
Inc., the parent holding company of Richmond Savings Bank, Inc., SSB.
CAROLINA FINCORP, INC.
By:____________________________________
Chairman of the Board
11
<PAGE>
RICHMOND SAVINGS BANK, INC., SSB
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of _______________,1996, by and between
RICHMOND SAVINGS BANK, INC., SSB (hereinafter referred to as the "Savings Bank")
and JOHN W. BULLARD (hereinafter referred to as the "Officer") and is joined in
by CAROLINA FINCORP, INC., the parent holding company of the Savings Bank
(hereinafter referred to as the "Holding Company").
WHEREAS, the Officer has heretofore been employed by the Savings Bank as
its Executive Vice President and Chief Operations Officer; and
WHEREAS, the Savings Bank is a state-chartered stock savings bank and the
wholly-owned subsidiary of the Holding Company; and
WHEREAS, the Savings Bank desires to retain the services of the Officer as
the Executive Vice President and Chief Operations Officer of the Savings Bank
upon the terms and conditions set forth herein; and
WHEREAS, the Savings Bank considers the establishment and maintenance of a
sound and vital management to be part of its overall corporate strategy and to
be essential to protecting and enhancing the best interests of the Holding
Company, the Savings Bank and their stockholders; and
WHEREAS, the parties desire to enter into this Agreement in order to set
forth the terms and conditions of the Officer's employment relationship with the
Savings Bank.
<PAGE>
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants and conditions hereinafter set forth and other good and
valuable considerations, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. EMPLOYMENT. The Savings Bank hereby agrees to employ the Officer and
----------
the Officer hereby agrees to accept employment, upon the terms and conditions
stated herein, as the Executive Vice President and Chief Operations Officer of
the Savings Bank. The Officer shall render such administrative and management
services to the Savings Bank as are customarily performed by persons situated in
a similar executive capacity. The Officer shall promote the business of the
Savings Bank and perform such other duties as shall, from time to time, be
reasonably prescribed by the Board of Directors of the Savings Bank (the
"Board").
2. COMPENSATION. The Savings Bank shall pay the Officer during the term
------------
of this Agreement, as compensation for all service rendered by him to the
Savings Bank, a base salary at the rate of $63,600 per annum, payable in cash
not less frequently than monthly; provided that the rate of such salary shall be
reviewed by the Board not less often than annually. Such rate of salary, or
increased rate of salary, as the case may be, may be further increased from time
to time in such amounts as the Board, in its discretion, may decide. The
Officer will be entitled to such customary fringe benefits, vacation and sick
leave as are consistent with the normal practices and established policies of
the Savings
2
<PAGE>
Bank.
3. BONUS COMPENSATION. The Officer shall be entitled to participate in
------------------
any bonus compensation plan adopted by the Directors of the Savings Bank which
would apply to the Officer's position.
4. PARTICIPATION IN RETIREMENT AND EMPLOYEE BENEFIT PLANS; FRINGE
--------------------------------------------------------------
BENEFITS. The Officer shall be entitled to participate in any plan relating to
- --------
deferred compensation, stock awards, stock options, stock purchases, pension,
thrift, profit sharing, group life insurance, medical and dental coverage,
disability coverage, education, or other retirement or employee benefits that
the Savings Bank or the Holding Company have adopted, or may, from time to time
adopt, for benefit of their executive employees and for employees generally,
subject to the eligibility rules of such plans.
The Officer shall also be entitled to participate in any other fringe
benefits which are now or may be or become applicable to the Officer or the
Savings Bank's other executive employees, including the payment of reasonable
expenses for attending annual and periodic meetings of trade associations, and
any other benefits which are commensurate with the duties and responsibilities
to be performed by the Officer under this Agreement. Additionally, the Officer
shall be entitled to such vacation and sick leave as shall be established under
uniform employee policies promulgated by the Directors. The Savings
3
<PAGE>
Bank shall reimburse the Officer for all out-of-pocket reasonable and necessary
business expenses which the Officer may incur in connection with his services on
behalf of the Savings Bank.
5. TERM. The term of employment under this Agreement shall be for a
----
period of three (3) years commencing on the effective date of this Agreement
(effective date meaning the date first set forth above), and will automatically
extend on a year to year basis at the conclusion of the initial three year
period provided neither the Board nor the Officer give the other written notice
at least 90 days prior to the expiration date of the initial three year period,
and provided that neither give the other written notice at least 90 days prior
to the expiration date of any subsequent yearly period, and further provided
that this section be additionally subject to provisions in Section 8(c).
6. LOYALTY. The Officer shall devote his full efforts and entire
-------
business time to the performance of his duties and responsibilities under this
Agreement.
The Officer agrees that he will hold in confidence all knowledge or
information of a confidential nature with respect to the respective businesses
of the Holding Company, the Savings Bank or of their subsidiaries, if any,
received by him during the term of this Agreement and will not disclose or make
use of such information, except in the ordinary course of his duties under this
Agreement, without the prior written consent of the Holding Company or the
Savings Bank.
4
<PAGE>
7. STANDARDS. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards as expected of
the Officer and as outlined in Section 1 of this Agreement, and as may be
established from time to time by the Board.
8. TERMINATION AND TERMINATION PAY.
-------------------------------
(a) The Officer's employment under this Agreement shall be terminated upon
the death of the Officer during the term of this Agreement, in which event, the
Officer's estate shall be entitled to receive the compensation due the Officer
through the last day of the calendar month in which his death shall have
occurred and for a period of one month thereafter.
(b) The Officer's employment under this Agreement may be terminated at any
time by the Officer upon sixty (60) days' written notice to the Board of
Directors. Upon such termination, the Officer shall be entitled to receive
compensation through the effective date of such termination.
(c) The Board may terminate this Agreement at any time, or request
Officer's resignation, but only upon a two-thirds vote of the Board. Any
termination of the Officer by the Board shall not prejudice the Officer's right
to compensation or other benefits under this Agreement for the remaining period
which would have been covered by this Agreement if such termination had not
occurred.
5
<PAGE>
However, in no event will the Officer be compensated for more or less than
twelve months. Any benefits to which the Officer may be entitled shall not be
affected.
9. ADDITIONAL REGULATORY REQUIREMENTS.
----------------------------------
(a) If the Officer is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(3) and (g)(1)), the Savings Bank's obligations under this
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Savings Bank shall (i) pay the Officer all of the compensation withheld while
its contract obligations were suspended and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.
(b) If the Officer is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) of Section 8(g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(c) If the Savings Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(x)(1)), all obligations under
this Agreement shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the Savings Bank, (i) by the Federal Deposit Insurance
Corporation (the "Corporation"), at the time the Corporation enters into an
agreement to provide assistance to or on behalf of the Savings Bank under the
authority contained in
6
<PAGE>
Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(c)); or
(ii) by the Administrator of the Savings Institution Division of the North
Carolina Department of Commerce (the "Administrator"), at the time the
Administrator approves a supervisory merger to resolve problems related to
operation of the Savings Bank or when the Savings Bank is determined by the
Administrator to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
10. CHANGE IN CONTROL.
-----------------
(a) In the event of a "Change in Control" (as defined in Subsection (b)
below), the term of employment under this Agreement shall automatically be
extended for a period of three (3) years beginning on the date of the Change in
Control, and the acquiror shall be bound by the terms of this Agreement and
shall be prohibited, during the remainder of the term of this Agreement, from:
(i) Assigning Officer any duties and/or responsibilities that are
inconsistent with his position, duties, responsibilities or status at
the time of the Change in Control or with his reporting
responsibilities or equivalent titles with the Savings Bank in effect
at such time; or
(ii) Adjusting Officer's annual base salary rate other than in
accordance with the provisions of Section 2 of this Agreement; or
(iii) Reducing in level, scope or coverage or eliminating Officer's
life insurance, medical or hospitalization insurance, disability
insurance, profit sharing plans, stock option plans, stock purchase
plans, deferred compensation plans, bonus compensation plans,
management retention plans, retirement plans or similar plans or
benefits being provided by the Savings Bank or the Holding Company to
the Officer as of the effective date of the Change in Control; or
(iv) Transferring Officer to a location more than forty (40) miles
distant from Officer's primary work station at the time of a Change in
Control, without the Officer's express written consent.
7
<PAGE>
(b) For the purposes of this Agreement, the term "Change in Control" shall
mean any of the following events:
(i) a change in control of a nature that would be required to be
reported by the Holding Company in response to Item 1 of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Exchange Act; or
(ii) such time as any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Holding Company or Savings Bank
representing 25 percent or more of the combined voting power of the
outstanding Common Stock of the Holding Company or Common Stock of the
Savings Bank, as applicable; or
(iii) individuals who constitute the Board or board of directors of
the Holding Company on the date hereof (the "Incumbent Board" and
"Incumbent Holding Company Board," respectively) cease for any reason
to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board or Incumbent Holding Company Board, as
applicable, or whose nomination for election by the Savings Bank's or
Holding Company's shareholders was approved by the Savings Bank's or
Holding Company's Board of Directors or Nominating Committee, as
applicable, shall be considered as though he or she were a member of
the Incumbent Board or Incumbent Holding Company Board, as applicable;
or
(iv) either the Holding Company or the Savings Bank consolidates or
merges with or into another corporation, association or entity or is
otherwise reorganized, where neither the Holding Company nor the
Savings Bank, respectively, is the surviving corporation in such
transaction; or
(v) all or substantially all of the assets of either the Holding
Company or the Savings Bank are sold or otherwise transferred to or
are acquired by any other entity or group.
Notwithstanding the other provisions of this Section 10, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event,
8
<PAGE>
Officer and Savings Bank agree in writing that the same shall not be treated as
a Change in Control for purposes of this Agreement.
11. SUCCESSORS AND ASSIGNS.
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Savings Bank which shall acquire, directly
or indirectly, by conversion, merger, consolidation, purchase or otherwise, all
or substantially all of the assets of the Holding Company or the Savings Bank.
(b) Since the Savings Bank is contracting for the unique and personal
skills of the Officer, the Officer shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Savings Bank.
12. NONCOMPETITION. Officer agrees that he will not, for a period of 12
--------------
full months after separation from the Savings Bank, become a director or
officer, or go to work for or become employed by any bank, savings bank, or
similar financial institution, or engage in, raid or attempt to switch any
customers on the books of the Savings Bank at the time the Officer separated
from the Savings Bank. This covenant applies only to the North Carolina
counties of Richmond, Moore and Scotland and is in no way intended to prevent
Officer from gaining employment in any other financial institution except within
the counties herein listed.
9
<PAGE>
13. MODIFICATION; WAIVER; AMENDMENTS. No provision of this Agreement may
--------------------------------
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing, signed by the Officer and on behalf of the Savings Bank
by such officer as may be specifically designated by the Directors. No waiver
by either party hereto, at any time, of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties, except as herein otherwise provided.
14. APPLICABLE LAW. This Agreement shall be governed in all respects
--------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.
15. SEVERABILITY. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
RICHMOND SAVINGS BANK, INC., SSB
By:____________________________________
Chairman of the Board
_________________________________(SEAL)
John W. Bullard
The foregoing Agreement is consented and agreed to by Carolina Fincorp,
Inc., the parent holding company of Richmond Savings Bank, Inc., SSB.
CAROLINA FINCORP, INC.
By:_____________________________________
Chairman of the Board
11
<PAGE>
Exhibit 24.1
LETTERHEAD OF
-------------
DIXON, ODOM & CO., L.L.P.
-------------------------
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors To the Board of Directors
Richmond Savings Bank, SSB Carolina Fincorp, Inc.
Rockingham, North Carolina Rockingham, North Carolina
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ Dixon, Odom & Co., L.L.P.
High Point, North Carolina
September 6, 1996
<PAGE>
Exhibit 24.2
LETTERHEAD OF
BAXTER FENTRISS AND COMPANY
September 4, 1996
Board of Directors
Richmond Savings Bank, SSB
115 South Lawrence Street
Rockingham, North Carolina 28379
Directors:
We hereby consent to the use of our firm's name in the applications for
conversion of Richmond Savings Bank, SSB, Rockingham, North Carolina, and any
amendments thereto, filed with the Division of Savings Institutions, North
Carolina Department of Commerce (the "Division"), and the FDIC, in the Form S-1
Registration Statement and any amendments thereto, and in the Acquisition
Application and the Holding Company Application for Carolina Fincorp, Inc., as
filed with the Division and the Federal Reserve Board, respectively. We also
hereby consent to the inclusion of, a summary of, and references to our
Appraisal Report, including Updates, and our opinion concerning subscription
rights in such filings including the Prospectus of Carolina Fincorp, Inc., and
the Proxy Statement of Richmond Savings Bank, SSB.
Sincerely,
/s/ Baxter Fentriss and Company
<PAGE>
Exhibit 24.3
LETTERHEAD OF
-------------
BROOKS, PIERCE, McLENDON, HUMPHREY & LEONARD, L.L.P.
----------------------------------------------------
September 6, 1996
-----------------
Board of Directors
Carolina Fincorp, Inc.
P.O. Box 1597
Rockingham, North Carolina 28379-1597
Gentlemen:
We hereby consent to reference to our firm in the "Legal Opinions" section
of the Prospectus included in the Registration Statement of Carolina Fincorp,
Inc. on Form S-1 (the "Registration Statement") and to the reference to the
opinions rendered by our firm which are described in such section of the
Registration Statement.
Very truly yours,
BROOKS, PIERCE, MCLENDON,
HUMPHREY & LEONARD, L.L.P.
By: /s/ Randall A. Underwood
-----------------------
Randall A. Underwood
--------------------
RAU/mfm
- -------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR RICHMOND SAVINGS BANK, SSB FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND THE YEAR ENDED JUNE 30, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1994
<PERIOD-END> MAR-31-1996 JUN-30-1995
<CASH> 1,207 1,419
<INT-BEARING-DEPOSITS> 4,686 3,448
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 8,387 5,474
<INVESTMENTS-CARRYING> 7,975 8,884
<INVESTMENTS-MARKET> 0 0
<LOANS> 68,747 69,108
<ALLOWANCE> 389 363
<TOTAL-ASSETS> 94,110 91,410
<DEPOSITS> 83,715 81,437
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 1,754 1,845
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 8,641 8,128
<TOTAL-LIABILITIES-AND-EQUITY> 94,110 91,410
<INTEREST-LOAN> 5,596 5,403
<INTEREST-INVEST> 1,240 974
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 6,836 6,377
<INTEREST-DEPOSIT> 3,949 3,271
<INTEREST-EXPENSE> 3,949 3,271
<INTEREST-INCOME-NET> 2,887 3,106
<LOAN-LOSSES> 36 36
<SECURITIES-GAINS> (4) (5)
<EXPENSE-OTHER> 2,493 2,452
<INCOME-PRETAX> 890 1,049
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 591 720
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 3.26 3.64
<LOANS-NON> 30 75
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 159 76
<ALLOWANCE-OPEN> 363 316
<CHARGE-OFFS> 11 10
<RECOVERIES> 1 21
<ALLOWANCE-CLOSE> 389 363
<ALLOWANCE-DOMESTIC> 283 280
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 106 83
</TABLE>
<PAGE>
Richmond Savings Bank, S.S.B.
Rockingham, North Carolina
Pro Forma Valuation Report
Valued as of August 8, 1996
Prepared by:
BAXTER FENTRISS AND COMPANY
<PAGE>
TABLE OF CONTENTS
Tab Page
- --- ----
INTRODUCTION 1
1 I. RICHMOND SAVINGS BANK, S.S.B.
General Overview 3
Financial Condition Overview 5
Asset Quality 13
Asset/Liability Management and Net Interest Spreads 15
Income and Expense Trends 18
Primary Market Area 23
Summary 27
2 II. COMPARISONS WITH PUBLICLY TRADED THRIFTS
General 28
Selection Criteria 28
Financial Comparisons 32
3 III. MARKET VALUE ADJUSTMENTS
Earnings Prospects 34
Market Area 35
Management 35
Liquidity 35
Dividends 36
Subscription Interest 36
Recent Regulatory Changes 36
Stock Market Conditions 37
Recent Acquisitions in the Savings Bank's Market Area 39
New Issue Discount 40
Adjustments Conclusion 41
Valuation Approach 41
Valuation Conclusion 41
<PAGE>
LIST OF TABLES
Table
Number Table Title Page
- ------ ----------- ----
CHAPTER I
1 Selected Financial Data 6
2 Statement of Financial Condition 6
3 Loan Portfolio Composition 7
4 Loan Originations 8
5 Investment Securities Portfolio 9
6 Deposit Account Distribution 10
7 Historical and Pro Forma Capital Compliance 12
8 Nonperforming Assets 13
9 Allowance For Loan Losses 14
10 Net Portfolio Equity Value 15
11 Weighted Average Yields and Costs 16
12 Selected Operating Data 18
13 Key Operating Ratios 19
13-A Net Income for Trailing Twelve Months 20
14 Selected Operating Data-Percentage of Average Assets 20
15 Summary Demographic Data 24
16-A Deposit Market-Richmond County 25
16-B Deposit Market-Moore County 26
16-C Deposit Market-Scotland County 26
CHAPTER II Tab
---
17 General Characteristics 2
18 Key Financial Indicators 2
CHAPTER III Page
----
19 SNL Thrift Index Monthly Performance 38
Tab
---
20 Acquisitions of North Carolina Thrift Institutions 3
21 Standard Conversions Publicly Traded 3
22 Trading Comparisons 3
<PAGE>
LIST OF EXHIBITS
Exhibit
Number Exhibit Title Tab
- ------ ------------- ---
I-1 Profile of Baxter Fentriss and Company 4
II-1 Balance Sheet 5
II-2 Consolidated Statements of Income 5
II-3 Loans Portfolio 5
II-4 Office Facilities 5
II-5 Directors and Executive Officers 5
III-1 Profitability Analysis 6
III-2 Income and Expense Analysis 6
III-3 Yield-Cost Structure 6
III-4 Risk Measures 6
III-5 Capital Structure 6
III-6 Financial Condition 6
III-7 Growth Rates 6
III-8 Loan Portfolio Distribution 6
III-9 Public Institutions Considered for Comparative Group 6
IV-1 Selected Market Data-All Public Thrifts 7
IV-2 Comparative Market Indices 7
IV-3 Selected Comparative Rates 7
V-1 Calculation of Return on Conversion Proceeds 8
V-2 Pro Forma Effect of Conversion Proceeds 8
V-3 Pro Forma Midpoint Analysis 8
<PAGE>
INTRODUCTION
Set forth herein is the independent appraisal, prepared by Baxter Fentriss and
Company ("Baxter Fentriss"), of the estimated pro forma fair market value of
common stock (the "Common Stock") to be issued by Carolina Fincorp, Inc.
("Carolina Fincorp" or the "Holding Company") in connection with the Plan of
Conversion ("Conversion") of Richmond Savings Bank, S.S.B. ("Richmond Savings"
or the "Savings Bank") from a state chartered mutual savings bank to a state
chartered stock savings bank, and the offer and sale of shares of common stock
by the Savings Bank (transactions collectively referred to as the "Conversion"
and the sale of common stock as the "Offering").
Pursuant to the Plan of Conversion, (I) Richmond Savings will convert from a
North Carolina-chartered savings bank organized in mutual form to a North
Carolina savings bank organized in stock form, (II) Richmond Savings will sell
its capital stock to Carolina Fincorp, Inc., a North Carolina corporation and
become a wholly-owned subsidiary of the Holding Company, and (III) the Holding
Company will offer and sell shares of its common stock in a subscription
offering and, if necessary, in a community offering.
In the course of preparing this report, we reviewed and discussed with Richmond
Savings' management and independent accountants the audited financial statements
of the Savings Bank's operations for the fiscal years ended June 30, 1993, 1994,
1995, and 1996. We also reviewed and discussed with management other financial
matters of the Savings Bank.
Where appropriate, we considered information based upon other available public
sources, which we believe to be reliable; however, we cannot guarantee the
accuracy or completeness of such information. We visited the Savings Bank's
primary market area and examined the prevailing economic conditions. We also
examined the competitive environment within which the Savings Bank operates and
assessed the Savings Bank's relative strengths and weaknesses.
We examined and compared Richmond Savings' performance with selected segments of
the thrift industry and selected publicly traded savings institutions. We
reviewed conditions in the securities markets in general and the market for
savings institution common stock in particular. We included in our analysis an
examination of the potential effects of the Conversion on the Savings Bank's
operating characteristics and financial performance as they relate to the
estimated pro forma market value of the Savings Bank.
In preparing our valuation, we have relied upon and assumed the accuracy and
completeness of financial and statistical information provided by Richmond
Savings and its independent accountants. We did not independently verify the
financial statements and other information provided by the Savings Bank and its
independent accountants, nor did we independently value the assets or
liabilities of the Savings Bank. The valuation considers the Savings Bank only
as a going concern and should not be considered as an indication of the
liquidation value of the Savings Bank.
1
<PAGE>
Our valuation is not intended, and must not be construed, to be a recommendation
of any kind as to the advisability of purchasing shares of Common Stock in the
Offering. Moreover, because such valuation is necessarily based on estimates
and projections of a number of matters, all of which are subject to change from
time to time, no assurance can be given that persons who purchase shares of
Common Stock in the Offering will thereafter be able to sell such shares at
prices related to the foregoing valuation of the pro forma market value thereof.
Baxter Fentriss is not a seller of securities within the meaning of any federal
and state securities laws and any report prepared by Baxter Fentriss shall not
be used as an offer or solicitation with respect to the purchase or sale of any
securities.
The accompanying report is an integral part of our valuation and must be read in
its entirety to fully understand the basis for our opinion. The valuation
reported will be updated as appropriate. These updates will consider, among
other factors, any developments or changes in the Savings Bank's financial
condition and operating performance, management policies, and current conditions
in the securities markets for thrift institution common stock. Should any such
developments or changes be material, in our opinion, to the valuation of shares
offered in the conversion, appropriate adjustments to the estimated pro forma
market value will be made. The reasons for any such adjustments will be
explained in detail at that time.
2
<PAGE>
I. Richmond Savings Bank, S.S.B.
General Overview
----------------
Richmond Savings Bank, S.S.B. ("Richmond Savings"), was organized in 1906 and is
headquartered in Rockingham, North Carolina. The Savings Bank operates from its
office located at 115 S. Lawrence Street in Rockingham. Richmond Savings'
deposits are insured by the SAIF of the FDIC and it is a member of the Federal
Home Loan Bank System. At June 30, 1996, Richmond Savings had total assets of
$94.1 million, total deposits of $83.7 million and total equity of $8.6 million
or 9.2% of period end assets.
Richmond Savings' business is attracting deposits from the general public and
investing those deposits primarily in first mortgages secured by one-to-four
family residences. Richmond Savings also makes a limited number of commercial
real estate loans and consumer loans in its market area. Richmond Savings is a
community-oriented savings institution offering a diverse selection of deposit
and loan products with a strong orientation toward customer service.
Substantially all of Richmond Savings' loan and deposit business is located in
Richmond, Moore, and Scotland Counties. Management does not anticipate any
dramatic change in the Savings Bank's operations after the Conversion.
Management of Richmond Savings implemented various strategies designed to
continue the Bank's profitability while maintaining the safety and soundness of
the institution. These strategies include: (1) emphasizing residential and
consumer lending; (2) maintaining asset quality; (3) controlling operating
expenses; and (4) monitoring interest rate risk.
Richmond Savings' capital increased from $4.8 million with an equity to assets
ratio of 5.8% at June 30, 1991 to $8.6 million and 9.2% at June 30, 1996 and was
in compliance with all applicable regulatory capital requirements. Richmond
Savings remained profitable in each of the last six fiscal years ended June 30,
1996. The return on average assets has ranged from a low of 0.78% in fiscal
1991, in which the provision for loan losses was expensed, to a high of 1.11% in
fiscal 1993. The return on average assets for the year ended June 30, 1996 was
.64% down from .81% at June 30, 1995, partially due to a decrease in net
interest income.
Management has sought to increase the asset size of the Savings Bank. Total
assets increased from $81.3 million at June 30, 1991 to $94.1 million at June
30, 1996, or 15.8%. The Savings Bank's growth in loans has not kept pace with
deposit expansion. Total deposits increased by 12.1% and net loans outstanding
grew by 12.0% between June 30, 1991 and June 30, 1996, respectively. In
contrast, investments including interest earning deposits, fed funds sold, FHLB
stock, and investment securities increased from $14.1 million to $21.8 million,
between June 30, 1991 and June 30, 1996.
3
<PAGE>
Richmond Savings' diversified orientation is evidenced by the composition of its
loan portfolio. At June 30, 1996, 81.0% of the Bank's loan portfolio before net
items consisted of residential one-to-four family mortgages, 69.4% of the Bank's
net loan portfolio was composed of adjustable rate loans, and non-performing
assets were 0.06% of total assets.
The remainder of Chapter I discusses, in more detail, the overall trends
identified in this section. The discussion is supplemented by the tables and
exhibits throughout the chapters and at the back of the book. Exhibit II-1
summarizes Richmond Savings' statements of financial condition at June 30, 1993,
1994, 1995, and 1996. Exhibit II-2 summarizes the statements of income for the
fiscal years ended June 30, 1993, 1994, 1995, and 1996.
4
<PAGE>
Financial Condition Overview
----------------------------
The following discusses asset and liability composition, loans, securities
investments, market area, and Richmond Savings' earnings outlook following the
Conversion.
Assets
- ------
Richmond Savings' asset base increased by 15.8% between June 30, 1991 and June
30, 1996. Table 1 shows selected consolidated balance sheet data and Table 2
shows selected balance sheet data as a percentage of period-end assets. The
Savings Bank's loan growth did not keep pace with its deposit growth. The
Savings Bank portfolios adjustable rate mortgages and sells fixed rate mortgage
loans in the secondary market as part of its lending strategy. In addition to
1-4 family permanent mortgage loans, the Bank has diversified its loan portfolio
by increasing its offering of consumer loan products. In the low interest rate
environment that existed during 1992 through early 1994, consumers generally
preferred fixed-rate mortgages, which worked to the bank's favor since it
offered both fixed and adjustable rate loans. The bank will emphasize the
origination and purchase of adjustable rate loans when market conditions permit
due to the fact that these are favorable to have in a rising interest rate
environment.
Loans
- -----
Richmond Savings' ratio of net loans to total assets was 75.1% at June 30, 1991
and increased slightly to 75.2% at June 30, 1996. Net loans outstanding
increased from $61.0 million at June 30, 1991 to $68.4 million at June 30, 1996
(or 12.1%). Table 3 shows the composition of the loan portfolio from June 30,
1994 to June 30, 1996. Table 4 shows Richmond Savings' loan origination
activity for the last three fiscal years. Richmond Savings is primarily a one-
to-four family residential lender with most all of its loans directly originated
in its market area.
The Savings Bank's permanent 1-4 family mortgage loans comprised 81.0% of net
loans receivable as of June 30, 1996, approximating levels in recent years.
Consumer lending has been the Bank's primary area of diversification, and
totaled 4.2% of net loans receivable at June 30, 1996, while construction and
home equity loans totaled 11.4% of net loans receivable. The Savings Bank has
minimized the risk associated with long term assets by focusing on assets with
shorter maturities and better interest rate spreads.
The loan programs and terms currently offered by the Savings Bank include
permanent fixed rate and adjustable rate 1-4 family loans have varying terms up
to 30 years and commercial real estate and multi-family loans offered by the
Savings Bank have terms up to 15 years. Loan to value ratios range from 65 to
95%. The bank also sells fixed rate mortgages in the secondary mortgage market.
5
<PAGE>
Table 1
Selected Financial Data
At June 30, 1991, 1992, 1993, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
At June 30,
- ---------------------------------------------------------------------------------------------
Balance sheet data: 1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total loans, net $61,012 $63,004 $67,900 $67,680 $68,745 $68,358
- ---------------------------------------------------------------------------------------------
Total investments (2) 14,119 15,351 12,789 16,034 18,540 21,783
- ---------------------------------------------------------------------------------------------
Total assets 81,290 84,703 87,353 87,504 91,410 94,110
- ---------------------------------------------------------------------------------------------
Total deposits 74,660 77,431 79,005 78,315 81,437 83,715
- ---------------------------------------------------------------------------------------------
Total liabilities 76,537 79,099 80,793 80,090 83,282 85,469
- ---------------------------------------------------------------------------------------------
Retained income, 4,753 5,605 6,561 7,414 8,128 8,641
substantially restricted
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Source: Richmond Savings Bank, S.S.B., Financial Statements.
(2) Includes interest bearing deposits, fed funds sold, FHLB stock and
investment securities.
Table 2
Statement of Financial Condition
At June 30, 1991, 1992, 1993, 1994, 1995, and 1996
(As a percentage of Total Assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
At June 30,
- ---------------------------------------------------------------------------------------------
Balance Sheet Data: 1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total loans, net 75% 75% 78% 77% 75% 73%
- ---------------------------------------------------------------------------------------------
Total investments (2) 18 18 15 18 20 23
- ---------------------------------------------------------------------------------------------
Total deposits 92 91 90 89 89 89
- ---------------------------------------------------------------------------------------------
Total liabilities 94 93 92 92 91 91
- ---------------------------------------------------------------------------------------------
Retained income, 6 7 8 8 9 9
substantially restricted
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Source: Richmond Savings Bank, S.S.B., Financial Statements.
(2) Includes interest bearing deposits, fed funds sold, FHLB stock and
investment securities.
6
<PAGE>
Table 3
Loan Portfolio Composition
At June 30, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
At June 30,
- --------------------------------------------------------------------------------------------------------------------
1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------
Amount % of total Amount % of total Amount % of total
$ loans $ loans $ loans
receivable receivable receivable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
- --------------------------------------------------------------------------------------------------------------------
1-4 Family Residential $57,025 83% $57,980 83% $55,386 80%
- --------------------------------------------------------------------------------------------------------------------
Multi-family and Commercial 1,959 3 1,425 2 1,963 3
- --------------------------------------------------------------------------------------------------------------------
Construction 2,703 4 2,106 3 2,301 3
- --------------------------------------------------------------------------------------------------------------------
Home Equity Lines of Credit 3,949 6 4,666 6 5,465 8
- --------------------------------------------------------------------------------------------------------------------
Total Other Loans 3,129 4 4,040 6 4,513 6
- --------------------------------------------------------------------------------------------------------------------
Total loans receivable 68,765 100 70,217 100 69,628 100
- --------------------------------------------------------------------------------------------------------------------
Less:
- --------------------------------------------------------------------------------------------------------------------
Loans in process $ 769 $ 1,109 $ 881
- --------------------------------------------------------------------------------------------------------------------
Allowance for possible loan losses 316 363 389
- --------------------------------------------------------------------------------------------------------------------
Total loans, net $67,680 $68,745 $68,358
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
7
<PAGE>
Table 4
Loan Originations
For the Years Ended June 30, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended June 30,
- --------------------------------------------------------------------------------
1994 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total gross loans receivable at $66,385 $67,627 $68,813
beginning of period ------- ------- -------
- --------------------------------------------------------------------------------
Loan originated:
- ----------------
- --------------------------------------------------------------------------------
1-4 family residential 23,036 10,881 15,039
- --------------------------------------------------------------------------------
Commercial real estate 405 406 959
- --------------------------------------------------------------------------------
Consumer Loans 4,042 4,958 6,070
------- ------- -------
- --------------------------------------------------------------------------------
Total loan originations 27,483 16,245 22,068
- --------------------------------------------------------------------------------
Loans sold:
- -----------
- --------------------------------------------------------------------------------
1-4 family residential 7,560 647.00 4,826
------- ------- -------
- --------------------------------------------------------------------------------
Total loans sold 7,560 647.00 4,826
- --------------------------------------------------------------------------------
Other loan activity:
- --------------------
- --------------------------------------------------------------------------------
Loan principal repayments 18,681 14,412 27,455
------- ------- -------
- --------------------------------------------------------------------------------
Total gross loans receivable $67,627 $68,813 $68,252
at end of period ------- ------- -------
- --------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
8
<PAGE>
Investment Securities
- ---------------------
As of June 30, 1996, the Savings Bank's investment securities portfolio
consisted primarily of U.S. Treasury and Government agency securities. Other
investments include mortgage-backed securities, corporate debt, municipal bonds,
and Federal Home Loan Bank Stock. The market value of the Savings Bank's
investment securities totaled $16.3 million at June 30, 1996. The total
investment portfolio amounted to $16.0 million, $18.5 million, and $21.8
million, at June 30, 1994, 1995, and 1996, respectively.
Table 5
Investment Securities Portfolio
At June 30, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
At June 30,
- --------------------------------------------------------------------------------
1994 1995 1996
- --------------------------------------------------------------------------------
Market Value Market Value Market Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities Available for Sale:
- --------------------------------------------------------------------------------
U.S. government and agency ----- $ 5,474 $ 8,387
- --------------------------------------------------------------------------------
Securities Held to Maturity:
- --------------------------------------------------------------------------------
U.S. government and agency 10,476 5,991 4,008
- --------------------------------------------------------------------------------
Mortgage-backed 1,287 1,070 1,817
- --------------------------------------------------------------------------------
Corporate debt 1,533 1,518 1,999
- --------------------------------------------------------------------------------
Municipal bonds 460 304 151
- --------------------------------------------------------------------------------
Other 50 --- ---
-- --- ---
- --------------------------------------------------------------------------------
Total investment securities $14,432 $14,357 $16,362
- --------------------------------------------------------------------------------
Interest-earning balances in other 867 3,448 4,686
banks
- --------------------------------------------------------------------------------
Federal Home Loan Bank Stock 735 735 735
--- --- ---
- --------------------------------------------------------------------------------
Total investments $16,034 $18,540 $21,783
- --------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
9
<PAGE>
Liability Composition
- ---------------------
As of June 30, 1996, Richmond Savings' assets were funded primarily with
deposits, loan repayments, available funds from repayments from mortgage-backed
securities and retained earnings. In recent years, local retail deposits have
generally been sufficient to meet Richmond Savings' funding needs. Richmond
Savings attracts deposits from within its market area by offering a variety of
deposit products, including NOW, money market, regular savings and term
certificate accounts. The Savings Bank offers competitive rates and relies
substantially on customer service, convenience, advertising and long-standing
relationships with customers to attract and retain deposits. Management
periodically sets deposit rates and terms and service charges based on Richmond
Savings' funding needs, competitor offerings, and anticipated future economic
conditions and related interest rates. Deposits rose from $74.7 million at June
30, 1991 to $83.7 million at June 30, 1996.
The Savings Bank has sought to reduce its interest rate risk by encouraging
depositors to invest in longer term certificates of deposits and encouraging
long-term depositors to maintain their accounts with the Savings Bank. Total
demand deposits were $22.1 million or 26.4% of total deposits at June 30, 1996
and 73.6% of total deposits were certificate of deposit accounts. Table 6 shows
the distribution and the weighted average rate of Richmond Savings' deposits for
the years ended at June 30, 1994, 1995, and 1996. The majority of the Bank's
local customers have deposit balances of less than $100,000 and the Savings Bank
does not accept brokered CDs, so the Bank's local retail deposit base is
believed to be relatively stable.
Table 6
Richmond Savings Bank, S.S.B.
Deposit Account Distribution
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Category 6/30/94 Weighted 6/30/95 Weighted 6/30/96 Weighted
-------- ------- -------- ------- -------- ------- --------
Balance Average Balance Average Balance Average
------- ------- ------- ------- ------- -------
Interest Interest Interest
-------- -------- --------
($) Rate ($) Rate ($) Rate
---- ---- ----
(%) (%) (%)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Passbook $15,080 2.80% $11,778 2.96% $11,368 2.95%
- --------------------------------------------------------------------------------------------------------------------------------
Now $ 5,473 2.30% $ 5,668 2.30% $ 5,663 2.31%
- --------------------------------------------------------------------------------------------------------------------------------
VIP Checking $ 2,389 2.60% $ 2,552 3.43% $ 3,120 3.44%
- --------------------------------------------------------------------------------------------------------------------------------
Non-Interest Bearing $ 1,770 0.00% $ 1,934 0.00% $ 1,954 0.00%
------- ---- ------- ---- ------- ----
- --------------------------------------------------------------------------------------------------------------------------------
Total Demand $24,712 2.47% $21,930 2.58% $22,105 2.59%
Deposits
- --------------------------------------------------------------------------------------------------------------------------------
Total Certificates $53,603 4.12% $59,507 5.57% $61,610 5.44%
------- ---- ------- ---- ------- ----
- --------------------------------------------------------------------------------------------------------------------------------
Total Deposits $78,315 3.60% $81,437 4.76% $83,715 4.69%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., financial statements
10
<PAGE>
Net Worth
- ---------
At June 30, 1996, Richmond Savings net worth of $8.6 million or 9.2% of total
assets substantially exceeded all applicable regulatory capital requirements.
Table 7 presents Richmond Savings' regulatory capital position and the pro forma
estimated capital compliance ratios at June 30, 1996.
Assuming that 50% of the net proceeds are invested in the Savings Bank and
reducing the capital by the amount of the ESOP and the MRPs results in an
increase of Tier I leverage capital of $5.6 million at the pro forma midpoint.
The total Tier I leverage capital will equal $14.2 million, or 15.1% of assets,
which is $10.3 million in excess of the 4% requirement. In addition, the pro
forma capital substantially exceeds the total risk-based capital requirement by
$10.6 million and the North Carolina requirement by $9.6 million.
11
<PAGE>
Table 7
Historical and Pro Forma Capital Compliance at June 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Historical - 6/30/96 $11,900(Minimum) $14,000(Midpoint) $16,100(Maximum) $18,515 (Adj. Maximum)
- ---------------------------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount % Amount % Amount %
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 Leverage $8,732 9.28% $13,383 13.55% $14,235 14.29% $15,087 15.02% $16,067 15.84%
- ---------------------------------------------------------------------------------------------------------------------------------
Tier 1 Requirement $3,764 4.00% $ 3,950 4.00% $ 3,984 4.00% $ 4,018 4.00% $4,057 4.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Excess $4,968 5.28% $ 9,433 9.55% $10,251 10.29% $11,069 11.02% $12,009 11.84%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Tier 1 Adjusted $8,732 17.62% $13,383 26.43% $14,235 28.02% $15,087 29.59% $16,067 31.39%
- ---------------------------------------------------------------------------------------------------------------------------------
Tier 1 Requirement $1,982 4.00% $ 2,026 4.00% $ 2,032 4.00% $ 2,039 4.00% $2,047 4.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Excess $6,750 13.62% $11,357 22.43% $12,203 24.02% $13,048 25.59% $14,019 27.39%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Total Risk-Based $9,121 18.41% $13,772 27.19% $14,624 28.78% $15,476 30.36% $16,456 32.16%
- ---------------------------------------------------------------------------------------------------------------------------------
Risk-Based $3,964 8.00% $ 4,051 8.00% $ 4,065 8.00% $ 4,078 8.00% $4,094 8.00%
Requirement
- ---------------------------------------------------------------------------------------------------------------------------------
Excess $5,157 10.41% $ 9,720 19.19% $10,559 20.78% $11,398 22.36% $12,363 24.16%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NC Regulatory $9,121 9.69% $13,772 13.78% $14,624 14.51% $15,476 15.23% $16,456 16.04%
- ---------------------------------------------------------------------------------------------------------------------------------
NC Requirement $4,706 4.69% $ 4,939 5.00% $ 4,981 5.00% $ 5,024 5.00% $5,073 5.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Excess $4,415 4.69% $ 8,834 8.78% $ 9,643 9.51% $10,452 10.23% $11,384 11.04%
=================================================================================================================================
</TABLE>
Source: Richmond Savings Bank, S.S.B. Financial Statements, Pro Forma Business
Plan
12
<PAGE>
Asset Quality
-------------
Richmond Savings regularly reviews its assets to determine if any assets require
classification or changes in a previous classification. At June 30, 1996,
Richmond Savings had total non-performing loans of $30,000 and real estate owned
of $29,000. Non-performing loans represented 0.03% of total assets and 0.35% of
equity. Table 8 shows Richmond Savings' non-performing assets for each of the
last three fiscal years ended June 30, 1996.
Richmond Savings considers both identified probable losses and losses that have
not been specifically identified but can be expected to occur in establishing
its reserve for loan losses. General and specific reserves are established by
the Board of Directors as necessary based on an assessment of risk in the
portfolio. Specific reserves are provided for individual assets, or portions of
assets, when ultimate collection is considered improbable by management based on
the current payment status and the fair or net realizable value of the security.
At June 30, 1996, loan loss allowance totaled $389,000.
Table 8
Non-performing Assets
At June 30, 1994, 1995, and 1996 (Dollars in Thousands)
<TABLE>
<CAPTION>
===============================================================================================
Year Year Year
Ended Ended Ended
June 30, June 30, June 30,
1994 1995 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-performing Loans:
- -----------------------------------------------------------------------------------------------
Loans accruing interest $ 112 $ 75 $ 27
- -----------------------------------------------------------------------------------------------
Accruing loans 90 days or more past due 0 0 3
- - -
- -----------------------------------------------------------------------------------------------
Total non-performing loans $ 112 $ 75 $ 30
- -----------------------------------------------------------------------------------------------
Real estate owned 0 0 29
- - --
- -----------------------------------------------------------------------------------------------
Total non-performing assets $ 112 $ 75 $ 59
- -----------------------------------------------------------------------------------------------
Ratio of non-performing loans to net loans 0.17% 0.11% 0.04%
- -----------------------------------------------------------------------------------------------
Ratio of non-performing loans to total assets 0.13% 0.08% 0.03%
- -----------------------------------------------------------------------------------------------
Ratio of non-performing assets to total assets 0.13% 0.08% 0.06%
===============================================================================================
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
13
<PAGE>
Table 9 shows the activity in the reserve for loan losses account for the same
periods. There have been insignificant amounts of charge-offs during the past
three fiscal years. The Savings Bank's allowance for loan losses was $389,000
at June 30, 1996, representing 1296.67% of non-performing loans and 0.57% of net
loans receivable.
Table 9
Allowance for Loan Losses
For the Years Ended June 30, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year Ended June 30,
- -------------------------------------------------------------------------------------
1994 1995 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loans Receivable (at end of period) $67,680 $68,745 $ 68,357
- -------------------------------------------------------------------------------------------
Allowance balances (at beginning of period) 307 316 363
- -------------------------------------------------------------------------------------------
Charge-offs 29 10 11
- -------------------------------------------------------------------------------------------
Recoveries 2 21 1
- -- -
- -------------------------------------------------------------------------------------------
Net loans charged off (recovered) $27 $-11 $10
- -------------------------------------------------------------------------------------------
Provision for loan losses 36 36 36
-- -- --
- -------------------------------------------------------------------------------------------
Allowance balance (at end of period) $316 $363 $ 389
- -------------------------------------------------------------------------------------------
Allowance for loan losses as a percentage of
net loans receivable at end of period 0.46% 0.53% 0.57%
- -------------------------------------------------------------------------------------------
Ratio of allowance for loan losses to total loans
delinquent 90 days or more at end of period 282.14% 484.00% 1296.67%
- -------------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
14
<PAGE>
Asset/Liability Management and Net Interest Spreads
---------------------------------------------------
The Savings Bank has an acceptable level of interest rate risk, compared to many
similar sized thrift institutions. The Savings Bank's strategies include: (1)
emphasizing the origination of adjustable rate, residential one-to-four family
real estate loans when market conditions permit; (2) emphasizing the origination
of adjustable rate home equity lines of credit; (3) emphasizing the solicitation
of checking and transaction accounts which are considered to be less interest-
rate sensitive deposits; and (4) attempting to lengthen deposit maturities.
Richmond Savings has maintained adequate levels of capital to minimize interest
rate risk. The extent of interest rate risk to which the Savings Bank is
subject is monitored by management through an analysis of the institution's
interest sensitivity gap (the difference between the amounts of interest-earning
assets and interest-bearing liabilities repricing during a given time), as well
as by other means.
Table 10 displays the Savings Bank's interest rate shock analysis as measured by
the sensitivity of the Savings Bank's net portfolio value to instantaneous
changes in interest rates. The analysis was calculated by the FHLB of Atlanta.
The analysis shows that a 200 basis point rate shock would result in a 21.8%
reduction in the net equity value of the Savings Bank's portfolio as of June 30,
1996. The pattern displayed shows the Savings Bank's balance sheet contains a
moderate level of interest rate risk with declining net interest income expected
in increasing interest-rate environments.
Table 10
Net Portfolio Equity Value
As of June 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Market Value of Portfolio Equity
- -------------------------------------------------------------------------------
Change in Interest Rates in
Basis Points Market Value % Change % of Total
(Rate Shock) From Base Assets
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Up 400 $ 5,882 -47.9% 6.3%
- -------------------------------------------------------------------------------
Up 200 $ 8,824 -21.8% 9.4%
- -------------------------------------------------------------------------------
Base $11,286 ------ 12.0%
- -------------------------------------------------------------------------------
Down 200 $13,182 16.8% 14.0%
- -------------------------------------------------------------------------------
Down 400 $15,195 34.6% 16.2%
- -------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
FHLB of Atlanta Interest Rate Risk Service Report
15
<PAGE>
Richmond Savings' earnings are primarily the result of the positive spread
between the yield on its earning assets and the cost of its interest bearing
liabilities. This spread is subject to fluctuation, caused by changes in the
general level of interest rates in the economy as whole and in Richmond Savings'
market area. Table 11 shows Richmond Savings' average earning assets yields,
average interest-bearing liabilities costs, interest rate spreads and net
interest margin for the fiscal years ended June 30, 1994, 1995, and 1996.
Richmond Savings' interest rate spread fell from 3.48% during the fiscal year
ending June 30, 1994 to 3.24% in the fiscal year ending June 30, 1995, and then
dropped to 2.77% during the fiscal year ending June 30, 1996. Like many
financial institutions, the Savings Bank's interest rate spread probably peaked
early in 1994 as interest rates began an upward trend during the Spring of 1994.
At June 30, 1996, the Savings Bank's yield on interest bearing assets was 7.72%
and cost of funds was 4.94%, for a spread of 2.77%.
Table 11
Weighted Average Yields and Costs
For the Years Ended June 30, 1994, 1995, and 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
For the Years Ended June 30,
- ---------------------------------------------------------------------------------------
1994 1995 1996
- ---------------------------------------------------------------------------------------
Assets Average Rate Average Rate Average Rate
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest-earning assets:
------------------------
- ---------------------------------------------------------------------------------------
Loans receivable, net 7.79% 7.92% 8.19%
- ---------------------------------------------------------------------------------------
Investment and securities 5.52% 5.50% 6.08%
- ---------------------------------------------------------------------------------------
Interest-earning deposits 3.80% 7.10% 6.32%
---- ---- ----
- ---------------------------------------------------------------------------------------
Total interest-earning assets 7.28% 7.47% 7.72%
==== ==== ====
- ---------------------------------------------------------------------------------------
Liabilities and retained income:
- ---------------------------------------------------------------------------------------
Interest-bearing liabilities:
- ---------------------------------------------------------------------------------------
Deposits 3.80% 4.23% 4.94%
- ---------------------------------------------------------------------------------------
Total interest-bearing liabilities 3.80% 4.23% 4.94%
==== ==== ====
- ---------------------------------------------------------------------------------------
Net interest spread (1) 3.48% 3.24% 2.77%
- ---------------------------------------------------------------------------------------
Net yield on average interest-earning assets 3.79% 3.64% 3.26%
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Net interest spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
Source: Richmond Savings Bank, S.S.B., Financial Statements
-------
16
<PAGE>
Income and Expense Trends
-------------------------
Operating Results
- -----------------
Tables 12, 13, and 14 display selected operating data and ratios and income
statement data, respectively, for the fiscal years-ended June 30, 1993, 1994,
1995, and 1996. Table 13-A displays the Savings Bank's net income for the
twelve months ending June 30, 1996. No adjustments have been made to net income
for any extraordinary items.
17
<PAGE>
Table 12
Selected Operating Data
For the Years Ended June 30, 1993, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
At June 30,
- -------------------------------------------------------------------------------
1993 1994 1995 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Data:
- ---------------
- -------------------------------------------------------------------------------
Total interest income $6,698 $6,128 $6,378 $6,836
- -------------------------------------------------------------------------------
Total interest expense 3,454 2,934 3,271 3,949
----- ----- ----- -----
- -------------------------------------------------------------------------------
Net interest income $3,244 $3,194 $3,106 $2,887
- -------------------------------------------------------------------------------
Provision for loan losses 38 36 36 36
-- -- -- --
- -------------------------------------------------------------------------------
Net interest income after provision for $3,206 $3,158 $3,070 $2,851
loan losses
- -------------------------------------------------------------------------------
Other income 534 586 430 532
- -------------------------------------------------------------------------------
General, administrative and other 2,213 2,392 2,452 2,493
expenses ----- ----- ----- -----
- -------------------------------------------------------------------------------
Income (loss) before income taxes, $1,526 $1,352 $1,049 $ 890
credit and cumulative effect of change
- -------------------------------------------------------------------------------
Income tax expense (benefit) 570 492 329 299
--- --- --- ---
- -------------------------------------------------------------------------------
Income (loss) before credit cumulative $ 956 $ 860 $ 720 $ 591
effect of change in accounting for
income taxes
- -------------------------------------------------------------------------------
Cumulative effect of change in ---- ---- ---- ----
accounting principle
- -------------------------------------------------------------------------------
Net income $ 956 $ 860 $ 720 $ 591
===== ===== ===== =====
- -------------------------------------------------------------------------------
</TABLE>
(1) Source: Richmond Savings Bank, S.S.B., Financial Statements
18
<PAGE>
Table 13
Key Operating Ratios
At or for the Years Ended June 30, 1993, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
For the Years Ended
June 30,
- -------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Performance ratios: (%)
- -----------------------
- -------------------------------------------------------------------------------------------------------------
Return on average assets (Net income/average assets) 1.11% 0.98% 0.81% 0.64%
- -------------------------------------------------------------------------------------------------------------
Return on average equity (Net income/average equity) 15.82 12.27 9.3 7.01
- -------------------------------------------------------------------------------------------------------------
Interest rate spread 3.59 3.48 3.24 2.77
- -------------------------------------------------------------------------------------------------------------
Net yield on average interest-earning assets 3.91 3.79 3.64 3.26
- -------------------------------------------------------------------------------------------------------------
Average interest-earning assets to average 107.8 108.93 110.33 110.9
interest-bearing liabilities
- -------------------------------------------------------------------------------------------------------------
Asset quality ratios: (%)
- --------------------
- -------------------------------------------------------------------------------------------------------------
Non-performing assets to total assets 0.08% 0.13% 0.08% 0.06 %
- -------------------------------------------------------------------------------------------------------------
Allowance for loan losses to non-performing loans 438.57 282.14 484 1,296.67
- -------------------------------------------------------------------------------------------------------------
Allowance for loan losses to total loans 0.44 0.46 0.53 0.56
- -------------------------------------------------------------------------------------------------------------
Capital ratios: (%)
- --------------
- -------------------------------------------------------------------------------------------------------------
Equity-to-assets ratio (average equity/average assets) 7.07% 7.99% 8.69% 9.04%
- -------------------------------------------------------------------------------------------------------------
Equity-to-assets (end of period) 7.51 8.47 8.89 9.18
- -------------------------------------------------------------------------------------------------------------
Other data:
- ----------
- -------------------------------------------------------------------------------------------------------------
Net income (loss) $956 $860 $720 $591
- -------------------------------------------------------------------------------------------------------------
Average assets 86,028 87,428 89,457 92,760
- -------------------------------------------------------------------------------------------------------------
Average equity 6,083 6,988 7,771 8,385
- -------------------------------------------------------------------------------------------------------------
Total number of full service facilities 4 4 4 4
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Source: Richmond Savings Bank, S.S.B., Financial Statements.
19
<PAGE>
Table 13-A
Net Income for Trailing Twelve Months
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
9/30/95 12/31/95 3/31/96 6/30/96 Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $152 $154 $157 $128 $591
- --------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
Table 14
Selected Operating Data-% of Average Assets
For the Years Ended June 30, 1993, 1994, 1995, and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
At June 30,
- -----------------------------------------------------------------------------------------
1993 1994 1995 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Assets $86,028 $87,428 $89,457 $92,760
- -----------------------------------------------------------------------------------------
Operating Data:
- ---------------
- -----------------------------------------------------------------------------------------
Total interest income 7.77% 7.00% 7.13% 7.37%
- -----------------------------------------------------------------------------------------
Total interest expense 4.01 3.36 3.66 4.26
---- ---- ---- ----
- -----------------------------------------------------------------------------------------
Net interest income 3.76 3.64 3.47 3.11
- -----------------------------------------------------------------------------------------
Provision for loan losses 0.04 0.04 0.04 0.04
---- ---- ---- ----
- -----------------------------------------------------------------------------------------
Net interest income after provision for loan 3.72 3.6 3.43 3.07
losses
- -----------------------------------------------------------------------------------------
Other income (loss) 0.62 0.67 0.48 0.57
- -----------------------------------------------------------------------------------------
General, administrative and other expenses 2.57 2.73 2.74 2.69
---- ---- ---- ----
- -----------------------------------------------------------------------------------------
Income (loss) before income taxes and cumulative 1.77 1.54 1.17 0.96
effect of change in accounting for income
taxes
- -----------------------------------------------------------------------------------------
Income tax expense (benefit) 0.66 0.56 0.36 0.32
---- ---- ---- ----
- -----------------------------------------------------------------------------------------
Income (loss) before cumulative effect of 1.11 0.98 0.81 0.64
change in accounting for income taxes
- -----------------------------------------------------------------------------------------
Cumulative effect of change in accounting ---- ---- ---- ----
principle
- -----------------------------------------------------------------------------------------
Net income 1.11 0.98 0.81 0.64
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Source: Richmond Savings Bank, S.S.B., Financial Statements
20
<PAGE>
Comparison of Operating Results for the Fiscal Years Ended June 30, 1994,
------------------------------------------------------------------------------
1995, and 1996
--------------
General. The Savings Bank experienced moderate asset growth from June 30, 1994
of $87.5 million to $91.4 million at June 30, 1995, to $94.1 million at June 30,
1996. Net loans receivable remained stable increasing from $67.7 at June 30,
1994 to $68.7 million at June 30, 1995, and then decreased to $68.4 million at
June 30, 1996. The demand for the Bank's adjustable rate loans has not kept
pace with the Bank's deposit growth. During the same period, investments
increased from $16.0 million at June 30, 1994 to $18.5 million at June 30, 1995,
to $21.8 million at June 30, 1996. This investment growth was funded by the
growth in deposits from $78.3 million at June 30, 1994 to $81.4 million at June
30, 1995, to $83.7 million at June 30, 1996.
Net Income. Richmond Savings Bank's net income for the fiscal years ended June
30, 1994, 1995, and 1996 was $860,000, $720,000, and $591,000, respectively.
Net income was positively affected in 1994 by gains associated with the sale of
loans as management sold certain fixed rate loans in an effort to maintain and
improve the Bank's interest rate risk and liquidity positions while satisfying
demand in the Bank's market area for long-term fixed rate mortgage loans.
Declines in the Bank's net interest income, combined with increases in other
expenses and significant reduction in loan sales and resulting gains after
fiscal 1994, are primarily responsible for the respective decreases in net
income for 1995 and 1996.
Net Interest Income. Net interest income before provision for loan losses
decreased from $3.4 million in 1994 to $3.1 million in 1995, and then to $2.9
million in 1996. The decrease in net income is attributable to a decrease in
the interest rate spread from 3.48% in 1994 to 3.24% in 1995 to 2.77% in 1996.
The Bank's deposits are more rate sensitive than its interest-earning assets,
interest margins usually increase during periods of declining rates and decrease
during periods of increasing rates. In the middle of 1994, interest rates began
to increase and continued to increase through the end of 1995. The impact of
the increasing rates in 1995 resulted in an increase in interest costs $338,000
while interest income increased by only $250,000. The impact of increasing
rates during 1996 was an increase in interest costs of $678,000 while interest
income increased by only $459,000.
Provision for Loan Losses. Richmond Savings' provision for loan losses was
$36,000 during the years ended June 30, 1994, 1995, and 1996. At June 30, 1996,
the Savings Bank's allowance for loan losses was equal to 1,296% of non-
performing loans compared to 282% at June 30, 1994 and 484% at June 30, 1995.
The Bank experienced net loan charge-offs of $27,000 and $10,000 during the
years ended June 30, 1994 and June 30, 1996, respectively, as compared with a
net recovery of loans previously charged off of $11,000 during the year ended
June 30, 1995.
Non-Interest Income. Non-interest income decreased from $586,000 for the year
ended June 30, 1994 to $430,000 for the year ended June 30, 1995, and then
increased to $532,000 for the year ended June 30, 1996. The decrease in 1995
was mainly attributable to fluctuations on gains on loan sales which were
$151,000, $7,000, and $8,000 for 1994, 1995, and 1996, respectively.
21
<PAGE>
Non-Interest Expense. Non-interest expense increased from $2.39 million in 1994
to $2.45 million in 1995, to $2.49 million in 1996, representing increases of
$60,000 and $41,000, respectively. The other expense increases were consistent
with the overall trend in inflation.
Income Taxes. Income tax expense decreased from $492,000 in 1994, to $329,000
in 1995, to $299,000 in 1996, with the decreases being primarily attributable to
corresponding decreases in income before taxes.
22
<PAGE>
Primary Market Area
-------------------
The Savings Bank's primary market area is Richmond, Moore, and Scotland
Counties, in North Carolina. The Savings Bank operates from its office in
Rockingham located in Richmond County. Demographic growth trends in Richmond,
Moore, and Scotland Counties have been measured by changes in population, number
of households, mean household income, and per capita income with trends in those
areas summarized by the data represented in Table 15.
Population growth in Richmond County of 0.4% was less than the national and
North Carolina rates of 1.1% and 1.5%, respectively, from 1990 to 1995. Moore
County and Scotland County grew at 2.4% and 0.6%, respectively, during the same
period. Projected annual growth of the population through the year 2000 is
expected to be only 0.4% for Richmond County, 0.6% for Moore County, and 0.0%
for Scotland County over the next five years.
Median household income, as well as per capita income, in the Bank's market
area, with the exception of Moore County, is significantly below state and
national averages. The projected growth in the number of households in the
Savings Bank's market area is also significantly below state and national
averages. Mean income levels project household growth in Richmond, Moore, and
Scotland Counties to fall short of state averages, a typical trend among less
urban communities due to generally lower costs of living and less demand for
homes. In general, the demographic trends displayed in Table 15 are typical of
smaller, less urban market areas.
23
<PAGE>
Table 15
Summary Demographic Data (1987$)
<TABLE>
<CAPTION>
1990 1995 2000 Annual Forecasted
Census Estimate Forecast Growth Annual
Rate Growth Rate
1990-1995 1995-2000
<S> <C> <C> <C> <C> <C>
Population (000)
United States 249,399 263,211 275,260 1.1% 0.9%
North Carolina 6,653 7,182 7,718 1.5 1.4
Richmond County 45 46 47 0.4 0.4
Moore County 59 66 68 2.4 0.6
Scotland County 34 35 35 0.6 0.0
Households (000)
United States 92,209 97,777 102,838 1.2% 1.0%
North Carolina 2,527 2,759 2,986 1.8 1.6
Richmond County 17 17 17 0.0 0.0
Moore County 24 26 27 1.7 0.8
Scotland County 12 12 12 0.0 0.0
Mean Household Income ($)
United States $ 42,977 $ 44,363 $ 47,853 0.6% 1.5%
North Carolina 36,307 37,531 40,597 0.7 1.6
Richmond County 29,384 29,206 31,402 -0.1 1.5
Moore County 40,445 40,748 43,832 0.1 1.5
Scotland County 30,304 32,815 35,540 1.7 1.7
Per Capita Income ($)
United States $ 16,246 $ 16,862 $ 18,315 0.7% 1.7%
North Carolina 14,172 14,820 16,152 0.9 1.7
Richmond County 11,284 11,202 12,069 -0.1 1.5
Moore County 16,556 16,684 18,024 0.2 1.6
Scotland County 10,906 11,826 12,876 1.7 1.8
</TABLE>
Source: (1) Woods & Poole Economics, Inc., 1994, State Profile of North
Carolina
24
<PAGE>
Tables 16-A through 16-C display selected deposit market data for the Richmond,
Moore, and Scotland Counties as of June 30, 1995. Richmond Savings, a mutually
chartered state savings bank, is the only home based financial institution in
Richmond County. In June 1995, Richmond Savings' market share of total deposits
in Richmond County was 21.0%, Moore County was 1.4%, and Scotland County was
0.0%. Richmond Savings was second only to United Carolina Bank (UCB) in
Richmond County. UCB held the largest deposit market share of 27.5%. In
Scotland County, Richmond Savings operates a loan production office. Since a
loan production office is not considered a full-service banking office, the
Savings Bank's market share of total deposits in Scotland County as listed in
Table 16-C was 0.0% as of June 30, 1995. However, the Savings Bank does collect
deposits from Scotland County through banking offices in Richmond County.
Table 16-A
Selected Deposit Market - Richmond County
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total % of County
Deposits Market Share '95
No. of 6/95 (%)
Name Branches ($000s)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richmond Savings Bank, S.S.B. 3 $ 71,210 21.0%
- --------------------------------------------------------------------------------
United Carolina Bank and Trust Company 4 93,287 27.5
- --------------------------------------------------------------------------------
Branch Banking & Trust Company 3 70,983 20.9
- --------------------------------------------------------------------------------
Centura Bank 2 35,099 10.3
-- -------- -----
- --------------------------------------------------------------------------------
Totals for selected banks 12 $270,579 79.7%
== ======== =====
- --------------------------------------------------------------------------------
Totals in Richmond County 18 $339,702 100.0%
-------- -----
- --------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements; FDIC
25
<PAGE>
Table 16-B
Selected Deposit Market - Moore County
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total % of County
Deposits Market Share '95
No. of 6/95 (%)
Name Branches ($000s)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richmond Savings Bank, S.S.B. 1 $ 11,743 1.4%
- --------------------------------------------------------------------------------
Branch Banking & Trust Company 8 248,426 29.8
- --------------------------------------------------------------------------------
First Savings Bank of Moore County 5 183,185 22
- --------------------------------------------------------------------------------
First Bank 6 70,605 8.5
- --------------------------------------------------------------------------------
First Union 2 75,021 9
- --------------------------------------------------------------------------------
Centura Bank 4 52,387 6.3
- ------ ---
- --------------------------------------------------------------------------------
Totals for selected banks 26 $641,367 77.0%
== ======== =====
- --------------------------------------------------------------------------------
Totals in Moore County 39 $832,791 100.0%
== ======== ======
- --------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements; FDIC
Table 16-C
Selected Deposit Market - Scotland County
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total % of County
Deposits Market Share '95
No. of 6/95 (%)
Name Branches ($000s)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Richmond Savings Bank, S.S.B. (1) 0 $ 0 0%
- --------------------------------------------------------------------------------
Wachovia Bank of North Carolina, NA 3 72,837 35.6
- --------------------------------------------------------------------------------
Branch Banking & Trust Company 2 45,625 22.3
- --------------------------------------------------------------------------------
Scotland Savings Bank, S.S.B. 1 42,632 20.8
- ------ ----
- --------------------------------------------------------------------------------
Totals for selected banks 6 $161,094 78.7%
= ======== =====
- --------------------------------------------------------------------------------
Totals in Scotland County 11 $204,640 100.0%
== ======== ======
- --------------------------------------------------------------------------------
</TABLE>
(1) Richmond Savings Bank does not have a full-service banking office in
Scotland County. Deposits from Scotland County are received in Richmond
Savings Bank's offices in Richmond County.
Source: Richmond Savings Bank, S.S.B., Financial Statements; FDIC
26
<PAGE>
Summary
- -------
Richmond Savings operates in an economically diverse market area. The Bank's
customer base consists of residents from Richmond, Moore, and Scotland Counties
which have been experiencing moderate population and economic growth. The
economic stability of the market area is favorable as evidenced by the variety
of industries located nearby, based primarily on manufacturing and agriculture.
Competition in the Savings Bank's market area is strong, however, Richmond
Savings maintains a favorable image as the only locally-owned and community-
oriented financial institution, and thus has been able to maintain its
deposit market share.
27
<PAGE>
II. COMPARISONS WITH PUBLICLY TRADED THRIFTS
General
- -------
The comparative market approach provides a sound basis for making valuation
estimates for going-concerns where a large and liquid market exists for peer
institutions. The comparative market approach was utilized in deriving a value
for Richmond Savings since reliable data is readily available for comparable
institutions, this methodology is favored under the conversion guidelines, and
other alternative valuation methods (such as a liquidation valuation, discounted
cash flow, capitalization of gross revenues, and others) are unlikely to produce
a value relevant to the conversion transaction. The generally employed
valuation methodology in initial public offerings, where possible, is the
comparative market approach. The comparative market approach derives a value
from the trading pattern of comparable institutions. The pricing and trading
history of recent conversion offerings provide evidence of the "new issue
discount" which must be considered in all initial public offerings. Chapter III
will detail the new issue discount which we believe is appropriate to Richmond
Savings' offering.
This chapter selects and compares Richmond Savings with a group of publicly
traded thrift institutions (the "comparative group") in order to determine the
appropriate adjustments to the Savings Bank's pro forma market value relative to
publicly traded companies. Exhibits III-1 through III-8 contain financial
comparisons of the Savings Bank with the selected comparative group based on
measures of profitability, income and expense trends, yield-cost structure,
capital levels, balance sheet composition, and risk measures. The selection
criteria employed for the comparative group, and a comparison of the Savings
Bank's financial performance with the comparative group are highlighted below.
Exhibit III-9 contains public companies considered for the comparative group
that were excluded because of their dissimilar financial characteristics or
unreasonable geographic location when compared to the Savings Bank.
Selection Criteria
- ------------------
Selected market price and financial data for thrifts listed on the New York and
American Stock Exchanges and those thrifts traded on the national over-the-
counter ("OTC") markets listed on the National Savings Bank of Securities
Dealers Automated Quotation System ("NASDAQ") are shown in Exhibit IV-1.
Several criteria, discussed below, were used to select the comparative group
from among this larger publicly traded group.
Trading volume and degree of liquidity. The existence of an active and regular
- ---------------------------------------
trading market for the stock is imperative because the reliability of share
price data on thinly traded stocks is sometimes questionable due to infrequent
trades or widely varying transaction prices. Therefore, the available pricing
information on thinly traded stocks may not be a sound indicator of current
market conditions and could be particularly misleading as an indicator of market
conditions for the to-be-issued stock of a converting savings institution. To
insure the equities in the comparative group have access to an active and
regular trading market, we attempted to limit our selection to companies listed
on the three major exchanges and those demonstrating an active and liquid
trading market. However, we did select some savings institutions that were not
listed on one of the three major exchanges in order to include institutions in
North Carolina. Even on the
28
<PAGE>
three major exchanges trading volume in all stocks varies considerably,
especially among the OTC-listed companies. Therefore, the underlying reasons for
the volume of trading for particular issues must be given consideration. We
attempted to eliminate from the comparative group companies with market prices
that were materially influenced by publicly announced or widely rumored
acquisitions. However, the expectation of continued industry consolidation is
embedded in the thrift equities' market.
Geographic Location. The region of the country where a company operates is also
- --------------------
of considerable importance in selecting the comparative group. The operating
environment for savings institutions can vary greatly from state to state, with
respect to legal and regulatory climates from region to region because of
economic characteristics, real estate market conditions, takeover activity, and
investment climates. Economic and investor climates can vary greatly within a
region, particularly due to takeover activity. We attempted to select savings
institutions in the Southeast, primarily in North Carolina, that also met most
of the other criteria.
Operating characteristics. Critically, an institution's operating
- --------------------------
characteristics are important factors because they effect investors' expected
rates of return on a company's stock under various economic scenarios, and they
influence the market's general perception of the quality and attractiveness of a
given company. Operating characteristics, which may vary in importance during
the business cycle, include financial variables such as profitability, balance
sheet growth, capitalization, asset quality, and other factors such as lines of
business and management strategies. Asset quality remains significant among
investor considerations as thrift earnings problems in the current interest rate
environment are frequently due to real estate problems.
In arriving at a comparative group for Richmond Savings, we initially examined
the universe of profitable similarly sized thrifts (under $100 million, where
possible) and thrifts headquartered in or near North Carolina. We considered
Richmond Savings' loan portfolio consisting primarily of one-to-four family
residential loans and the wide variety of deposit products it offers, as
critical variables which distinguish Richmond Savings from other thrift
institutions. Another issue of importance was the criterion of capitalization.
We included companies that offered mortgage loans as well as non-mortgage loans.
Richmond Savings' historic core earnings are strong and we generally excluded
companies reporting negative earnings, unless other factors outweighed this
restriction. We also eliminated companies in less favorable market areas and
relaxed our criteria modestly for institutions located in the Southeast. Where
possible, we included companies headquartered in or near North Carolina.
Table 17 provides a summary of the general characteristics of Richmond Savings
and the ten companies selected for the comparative group. Exhibit III-8
provides a comparison of the loan portfolios of the individual comparative
companies and the Savings Bank. While differences inevitably exist between the
Savings Bank and the individual comparative companies, we believe the
comparative group provides a basis for meaningful comparisons for valuation
purposes. We included within the comparative group five thrifts located in
North Carolina, one thrift located in Virginia, two thrifts located in Ohio, one
thrift located in Kentucky, and one thrift located in Alabama. The chosen
companies ranged in asset size from $56.4 million to $256.3 million, with five
of the ten having an asset size under $100.0 million.
29
<PAGE>
TABLE 17
GENERAL CHARACTERISTICS
RICHMOND SAVINGS BANK AND THE COMPARATIVE GROUP
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
Intangible
Number Total Equity/ Assets/ NPAs/
of Assets Assets Equity Assets
Ticker Institution City State Offices IPO Date ($000) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
RICHMOND SAVINGS (as of 6/30/96) Rockingham NC 4 10/29/96 94,110 9.18 0.00 0.06
- ---------------------------------------------------------------------------------------------------------------------------
Comparative Group:
Maximum 6 256,294 29.77 0.10 1.48
Minimum 1 56,489 14.60 0.00 0.00
Average 3 114,281 20.77 0.01 0.35
Median 3 102,627 20.65 0.00 0.14
ASBP ASB Financial Corp. Portsmouth OH 1 05/11/95 111,718 23.08 0.00 1.48
BFSB Bedford Bancshares, Inc. Bedford VA 3 08/22/94 121,783 15.22 0.00 0.00
FFWD Wood Bancorp, Inc. Bowling Green OH 6 08/31/93 139,718 14.60 0.00 0.04
FSBS First Ashland Financial Corp Ashland KY 3 04/07/95 86,860 27.21 0.00 NA
FSVF First Savings Financial Corp Reidsville NC 1 09/25/95 58,799 18.22 0.00 0.41
HSSC Home Savings Bank of Siler Cty Siler City NC 1 11/16/95 56,489 23.72 0.00 0.08
KSAV KS Bancorp, Inc. Kenly NC 3 12/30/93 93,536 14.79 0.10 0.51
PDB Piedmont Bancorp, Inc. Hillsborough NC 2 12/08/95 128,711 29.77 0.00 0.44
SOPN First Savings Bancorp, Inc. Southern Pines NC 5 01/06/94 256,294 26.21 0.00 0.03
SZB SouthFirst Bancshares, Inc. Sylacauga AL 2 02/14/95 88,899 14.89 0.00 0.14
<CAPTION>
1-4 Family 1-4 Family 1-4 Family
LTM Permanent Permanent Permanent
Number Return on Mort Loans/ Mort Loans/ Mort Loans/
of Avg Assets Assets Mortgages Loans
Ticker Institution City State Offices IPO Date (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
RICHMOND SAVINGS (as of 6/30/96) Rockingham NC 4 10/29/96 0.64 58.85 96.58 81.02
- ----------------------------------------------------------------------------------------------------------------------------------
Comparative Group:
Maximum 6 1.48 76.95 96.11 94.88
Minimum 1 0.08 45.21 71.38 67.26
Average 3 1.00 59.92 87.85 83.88
Median 3 1.11 63.95 91.11 89.33
ASBP ASB Financial Corp. Portsmouth OH 1 05/11/95 1.02 45.21 79.45 69.90
BFSB Bedford Bancshares, Inc. Bedford VA 3 08/22/94 1.29 64.56 80.48 73.59
FFWD Wood Bancorp, Inc. Bowling Green OH 6 08/31/93 1.17 64.12 91.88 80.51
FSBS First Ashland Financial Corp Ashland KY 3 04/07/95 0.96 70.14 93.99 90.39
FSVF First Savings Financial Corp Reidsville NC 1 09/25/95 0.08 47.70 89.95 89.72
HSSC Home Savings Bank of Siler Cty Siler City NC 1 11/16/95 NA 50.79 96.11 94.88
KSAV KS Bancorp, Inc. Kenly NC 3 12/30/93 1.11 76.95 93.03 92.74
PDB Piedmont Bancorp, Inc. Hillsborough NC 2 12/08/95 1.35 65.30 90.72 88.94
SOPN First Savings Bancorp, Inc. Southern Pines NC 5 01/06/94 1.48 63.77 91.50 90.83
SZB SouthFirst Bancshares, Inc. Sylacauga AL 2 02/14/95 0.55 50.61 71.38 67.26
</TABLE>
<PAGE>
The following provides a brief discussion of each company including the reasons
for their inclusion within the comparative group and noting differences with
Richmond Savings and the comparative group overall.
ASB Financial Corp.; Portsmouth, OH: ASB's asset size is $111.7 million. ASB's
- ------------------------------------
reported returns on average assets of 102 basis points for the twelve months
ended June 30, 1996. ASB is a profitable institution with 69.90% of its loan
portfolio of one-to-four family mortgage loans and moderate levels of non-
performing assets (1.48% of total assets). ASB has a capital level of 23.08%
and converted to a stock institution in May, 1995. ASB's financial performance,
loan portfolio composition, and size make it a good comparable to Richmond
Savings.
Bedford Bancshares, Inc.; Bedford, VA: Bedford is located in the Southeast in
- --------------------------------------
Virginia as is Richmond Savings Bank, S.S.B. in North Carolina. Its asset base
is comprised predominantly of one-to-four family mortgages at 64.56% of assets
and 73.59% of total loans. As of June 30, 1996, total assets were $121.7
million and equity was 15.22% of assets. Bedford is profitable reporting a
return on average assets of 1.29% for the last twelve months. Bedford is a good
comparable for Richmond Savings because of its financial performance, its
location in the Southeast, and its loan portfolio composition.
Wood Bancorp, Inc.; Bowling Green, OH: Wood's asset size is $139.7 million.
- --------------------------------------
Wood's loan portfolio of one-to-four family mortgages at 80.51% of total loans
(64.12% of total assets) is also comparable. Wood's level of equity was 14.60%
of assets. Return on average assets for the last twelve months ended June 30,
1996 was 1.17%. Wood converted to a stock institution in August, 1993. Its
loan portfolio composition and financial performance make it a good comparable
to Richmond Savings.
First Ashland Financial Corp.; Ashland, KY: FA Financial Corp. is located in
- -------------------------------------------
Ashland, Kentucky. FA's total asset size at $86.8 million is close to the asset
size of Richmond Savings. FA converted to a stock institution in April, 1995.
FA operates as a thrift institution with a concentration of conventional
mortgage loans, representing approximately 70.14% of assets and 90.39% of
mortgage loans. FA is a profitable institution with no non-performing assets
(0.00% of total assets). FA has a capital level of 27.21% of assets and
experienced a trailing twelve month return on average assets of 96 basis points.
FA's size and heavy concentration in mortgage loans make it comparable to
Richmond Savings.
First Savings Financial Corp.; Reidsville, NC: First Savings is located in a
- ----------------------------------------------
small community in North Carolina. First Savings' loan portfolio has a high
level of one-to-four family mortgages. One-to-four family mortgages comprise
47.70% of assets and 89.95% of mortgage loans. First Savings converted on
September 25, 1995. First Saving's asset size is smaller than Richmond Savings'
at $58.7 million, but was included due to its location in North Carolina.
Home Savings Bank of Siler City; Siler City, NC: Home Savings is located in
- ------------------------------------------------
Siler City, North Carolina which is also a small community in North Carolina.
Home Savings has a loan portfolio that is concentrated in single-family
mortgages totaling 96.11% of total mortgage loans and 94.88% of total loans.
Home Savings has a high capital ratio of 23.72%. Though Home Savings is smaller
than Richmond Savings, with assets of $56.4 million, its North Carolina location
and its high concentration of one-to-four single family mortgages make it an
excellent comparable.
30
<PAGE>
KS Bancorp, Inc.; Kenly, NC: KS's total asset size was $93.5 million, which is
- ----------------------------
slightly smaller than Richmond Savings, and is a profitable, thrift institution.
The loan portfolio is comprised of one-to-four- family mortgages totaling
92.74%. Non-performing assets were 0.51% of total assets. KS's return on
assets over the last twelve months was 111 basis points. KS converted in
December of 1993. KS's size, high concentration of one-to-four family
mortgages, asset quality, and North Carolina location make it an excellent
comparable.
Piedmont Bancorp, Inc.; Hillsborough, NC: Piedmont's assets were $128.7 million
- -----------------------------------------
and equity was 29.77% of assets. Piedmont's one-to-four-family mortgages were
88.94% of total loans and 90.72% of total mortgages. Non-performing assets were
0.44% of total assets. Piedmont's profitability was 1.35% of average assets for
the last twelve months. Piedmont was selected as a comparable institution
because of its North Carolina location and its financial performance.
First Savings Bancorp; Southern Pines, NC: FS converted early in 1994. As of
- ------------------------------------------
June 30, 1996, equity was 26.21% of total assets. One-to-four family mortgages
were 91.50% of total mortgages and 63.77% of total assets of $256.2 million. FS
had non-performing assets at 0.03% of total assets and its return on average
assets for the last twelve months was 148 basis points. FS's location in North
Carolina (within the same market area) and its low level of non-performing
assets matches Richmond Savings as well as any of the comparable institutions.
SouthFirst Bancshares, Inc.; Sylacauga, AL: SouthFirst converted to a stock
- -------------------------------------------
institution in February, 1995. One-to-four family mortgages were 67.26% of
total loans, but only 50.61% of assets. SouthFirst reported a return on average
assets of 55 basis points for the twelve months ended June 30, 1996.
SouthFirst's total assets were $88.8 million and equity was 14.89% of assets.
SouthFirst's non-performing assets were 0.14% of assets. SouthFirst's location
is not in North Carolina, but its asset size and financial performance make the
institution a good comparable to Richmond Savings.
31
<PAGE>
Financial Comparisons
---------------------
Table 18 summarizes certain key financial comparisons shown in Exhibit III
between Richmond Savings and the comparative group, indicating the comparative
group averages and medians. Data for the comparables was as of or for the twelve
months ended June 30, 1996 unless otherwise noted in Exhibit III. Data for the
Savings Bank was also as of or for the twelve months ended June 30, 1996.
Richmond Savings' preconversion net income as a percentage of average assets
measured 64 basis points for the year ended June 30, 1996. The comparative
group average return on average assets was 100 basis points and the median
return on average assets was 11 basis points. In our opinion, no significant
adjustments to the net income number were necessary for a more accurate
reflection of the profitability of the Savings Bank.
The Savings Bank's profitability is generated principally through its net
interest spread. The Savings Bank's ratios of net interest income to average
assets, net interest margin, and yield-cost spread were below the comparative
group averages and medians. The Savings Bank's net interest income was 3.11%
for the twelve months ended June 30, 1996, while the comparative group average
and median were 3.59% and 3.61%, respectively. The Savings Bank's net interest
margin at 2.77% was below the comparative group average and median of 3.72% and
3.74%, respectively. The Savings Bank's cost of funds was below the comparative
measures as was its yield on interest-earning assets.
The Savings Bank's total other non-interest income as a percentage of average
assets was 57 basis point during the trailing twelve months ended June 30, 1996,
which was higher than comparative group's average of 20 basis points. The
Savings Bank's total non-interest expense at 2.69% of average assets for the
last twelve months ended June 30, 1996, was slightly higher than the comparative
group average of 2.27%.
Cash and investments totaled 23.65% of assets for the Savings Bank and averaged
22.66% of assets for the comparative group at June 30, 1996. Gross loans were
73.99% of total assets for the Savings Bank, compared to an average of 70.32%
for the comparative group. The Savings Bank held mortgage-backed securities of
1.92% of assets, while mortgage-backed securities averaged 4.79% of assets for
the comparative group. The Savings Bank reported no intangible assets and the
comparative group average was zero with most comparative companies also
reporting no intangibles.
The Savings Bank's ratio of deposits to assets was 88.95%, which was above the
comparative group's average of 77.02% and median of 77.60%. The Savings Bank
had no borrowed funds compared to average borrowings of 2.54% of assets for the
comparative group. The Savings Bank's pre-conversion equity to asset position of
9.18% was lower than the post-conversion average equity of 17.04%.
The Savings Bank is exposed to lower credit risk than most individual
comparative companies. Non-performing assets were lower at 0.06% of assets for
the Savings Bank versus a 0.35% average and a 0.11% median for the comparative
group. Non-performing loans as a percentage of total loans receivable were
0.04% for the Savings Bank, below the 0.43% comparative average and
32
<PAGE>
0.16% comparative group median. The ratio of loan loss reserves to total loans
outstanding was 0.57% for the Savings Bank and averaged 0.63% for the
comparative companies. The Savings Bank had 0.01% in charge-offs during the
period and charge-offs for the comparative companies were (0.03%) of average
loans.
33
<PAGE>
<TABLE>
TABLE 18
Key Financial Indicators
RICHMOND SAVINGS BANK and the Comparative Group
<CAPTION>
Richmond Savings Comparative Group Average Comparative Group Median
(LTM ended (LTM ended (LTM ended
Profitability (% of Avg. Assets) June 30, 1996) June 30, 1996) June 30, 1996)
<S> <C> <C> <C>
Net Income 0.64 1.00 1.11
Core Earnings (before gains) 0.63 0.98 1.12
Return on Average Equity 7.01 5.30 5.68
Interest Income 7.37 7.54 7.46
Interest Expense 4.26 3.94 3.79
Net Interest Income 3.11 3.59 3.61
Net Interest Margin 2.77 3.72 3.74
Provision for Loan Losses 0.04 0.04 0.04
Gains on Sale of Assets 0.01 0.02 0.01
Real Estate Income 0.00 (0.00) 0.00
Other Non-Interest Income 0.57 0.20 0.14
Non-Interest Expense 2.69 2.27 2.11
Intangible Amortization Expense 0.00 0.00 0.00
Yield-Cost Data
Yield on Interest-Earning Assets 7.72 7.81 7.74
Cost of Interest-Bearing Liabilities 4.94 5.05 4.98
Net Interest of Yield-Cost Spread 2.77 2.77 2.97
Asset Utilization (% of Avg. Assets)
Avg. Interest-Earning Assets 95.49 96.48 96.59
Avg. Interest-Bearing Liabilities 86.10 78.23 78.28
Net Interest-Earning Assets 9.39 18.25 16.64
Financial Concentration (% of Total Assets)
Cash and Investments 23.65 22.66 21.13
Gross Loans 73.99 70.32 71.81
Mortgage-Related Securities 1.92 4.79 4.06
Inv. & Foreclosed Real Estate 0.03 0.09 0.01
Intangible Assets 0.00 0.00 0.00
Total Deposits 88.95 77.02 77.60
Borrowed Funds 0.00 2.54 1.20
Total Equity 9.18 17.04 15.88
Risk Measures
Non-performing Assets/Total Assets 0.06 0.35 0.11
Non-performing Assets/Total Equity 0.68 1.70 0.94
Net Charge-offs/Avg. Loans 0.01 (0.03) 0.00
Reserves/Non-performing Assets 659.32 365.71 167.19
Non-performing Loans/Loans 0.04 0.43 0.16
Loan Loss Reserves/NPLs 1,296.67 488.72 198.96
Reserves/Loans 0.57 0.63 0.54
Growth Rates
Total Assets 2.95 8.38 7.00
Loans Receivable 0.56 7.66 7.38
Total Deposits 2.80 1.60 1.20
</TABLE>
Source: Richmond Savings Bank, Financial Statements; SNL Securities, Inc.
<PAGE>
III. MARKET VALUE ADJUSTMENTS
This chapter identifies the adjustments to the Savings Bank's estimated pro
forma market value because of the financial differences between Richmond Savings
and the comparative group. Adjustments are also necessary to reflect the equity
market's likely reception of a new thrift stock offering. The adjustments
discussed in this chapter are made from the viewpoint of potential investors,
which include depositors holding subscription rights and unrelated parties who
may purchase stock in the community offering. It is assumed that these
potential investors are aware of all relevant and necessary facts as they
pertain to the value of the Savings Bank relative to other publicly traded
thrift institutions and relative to alternative investments.
The market value adjustments are based on certain financial and other criteria,
which include, among other factors:
(1) Earnings Prospects
(2) Market Area
(3) Management
(4) Dividend Policy
(5) Liquidity of the Issue
(6) Subscription Interest
(7) Regulatory Environment
(8) Stock Market Conditions and New Issue Discount
The final section of this chapter identifies the Savings Bank's estimated pro
forma market value, and compares the resulting company with members of the
comparative group, and the all public thrift aggregate with respect to market
valuation ratios.
Earnings Prospects
- ------------------
Earnings prospects depend upon the relative sensitivity of asset yields and
liability costs to changes in market interest rates (which are displayed in
Exhibit IV-3), the credit quality of assets, the stability of non-interest
components of income and expense, and the ability to leverage the balance sheet.
Each of the foregoing is an important factor to investors.
Richmond Savings' profitability peaked in 1993. The lower level profitability
in 1994 was fueled by a higher interest rate environment. Net interest income
fell during 1995 as customers refinanced to lower interest rates and the
competitive pressure to pay higher rates on CDs lowered the profitability. Net
interest income declined during 1996 relative to the comparable 1995 due to the
increase in interest rates that caused the cost of deposit interest to increase
more rapidly than the yield on interest-earning assets.
As discussed in Chapter II, the Savings Bank compared favorably to peer
institutions on selected profitability measures. The Savings Bank generates a
higher return on equity at 7.01% than the comparable group, which averages
5.30%, and has lower growth rates in assets, loans, and deposits than those of
the comparative group.
34
<PAGE>
A critical question facing many institutions, including Richmond Savings, is
whether net interest margins have peaked in the current interest rate
environment. In the last twelve months, the Savings Bank experienced a
shrinkage of the net interest margin which probably indicates that the Savings
Bank's net interest margin has peaked for now. Thus, future earnings
enhancement is unlikely to come from improving spreads and more likely to be
predicated on business expansion and expense controls. Though Richmond Savings'
asset base is growing, the balance sheet indicates it may have difficulty in the
future increasing earnings through growth. Positively, the Savings Bank's asset
quality is good and management remains committed to maintaining asset quality.
Given the composition of the loan portfolio, significant asset quality problems
are unlikely.
The comparative companies were selected to represent thrift institutions which
face the same pressures as the Savings Bank. When the Savings Bank is compared
to the comparative group, the Savings Bank's asset growth and its level of
profitability is lower. For this reason, we believe a slight downward
adjustment should be made for earnings prospects.
Market Area
- -----------
As discussed in Chapter I, the Savings Bank maintains a larger share of its
local deposit and lending market in Richmond County than it does in Moore and
Scotland Counties. The Bank also faces competition in its market area from
larger institutions with greater resources, as is typical of institutions of its
asset size. The Savings Bank's primary market area is rural and is not
projected to grow by more than 1 to 2 percent in the next five years. The
Bank's deposit market share has declined in all but one of the three counties it
serves. Overall, we believe that a slight downward adjustment is warranted to
reflect the increased competition and slow population growth.
Management
- ----------
Management has operated the Savings Bank in a conservative manner, stressing an
adequate capital level and maintaining good asset quality. The result has been
an increase in capital. Management of the individual comparative companies face
similar demands as the Savings Bank's management. We do not believe that the
demands placed on the Savings Bank's management exceed those experienced by most
public thrift institutions and the Savings Bank appears to have competent
management for its business strategy. Management also has a detailed management
succession plan in place that should assure the continued progress of the
Savings Bank and that the assets will be properly safeguarded in the event of
the personal disaster of any of the key management personnel. Accordingly, we
believe no adjustment should be made for management.
Liquidity
- ---------
Small conversion offerings often do not have a firm and liquid market after
conversion. The market for Richmond Savings' common stock following the
conversion based on the Savings Bank's plan is to list on NASDAQ. A lack of
liquidity in a stock typically reduces investor demand for the stock and is a
negative consideration. The degree of the discount which is experienced by
liquid stocks relative to more widely traded shares is not subject to a precise
determination. Several studies suggest that the discount could be large.
35
<PAGE>
Modestly capitalized thrifts listed on NASDAQ appear to be trading at a discount
relative to thrifts overall. This is because trading activity remains very low.
To some extent, a discount for liquidity is evident among the smaller market
capitalized comparative companies. The Savings Bank's capital at the midpoint
is close to the average of the comparative group. Therefore, we do not believe
an adjustment for liquidity is warranted.
Dividends
- ---------
The Savings Bank will consider paying an annual dividend following conversion.
The Savings Bank has sufficient capital and earnings to pay a dividend. Since
most thrifts pay some kind of dividend, we do not believe an adjustment is
warranted for dividends.
Subscription Interest
- ---------------------
It is very difficult to predict the outcome of subscription offerings. In
recent years, initial offerings of publicly traded thrift stocks attracted a
great deal of professional investor interest, which resulted in sell-outs in the
subscription phase. During the last half of 1994, as valuation ratios were
pushed higher, offerings experienced lackluster subscription interest. In the
second half of 1995 the interest for these offerings was extremely strong. The
first few conversions of 1996 have reached even new valuation highs. There is,
however, some indication from underwriters that the interest level is peaking as
valuation levels may have become too high for the sophisticated investor. The
Savings Bank's offering will be only to members of the Bank. Based on this
limited offering, we believe that a slight downward adjustment is warranted at
this time.
Recent Regulatory Changes
- -------------------------
As widely reported, the regulatory environment for conversions changed
significantly. Responding to large after-market price increases of many earlier
conversions, the regulatory focus shifted towards minimizing short-term after-
market appreciation. The federal regulatory agencies publicly stated that only
modest after- market price appreciation will be tolerated. New appraisal
guidelines indicate the adequacy of the appraisal will be judged by the
immediate price movement of conversions in the after-market, utilizing the
closing price on the second trading day after closing. The average price
appreciation of all IPOs was between 10%-15% during the past few years. The
regulatory guidelines indicate that this is unacceptable for conversion
offerings.
There is wide variability in the after-market performance of all initial public
offerings. Market conditions at the time of the offering, economic conditions
facing the specific industry and company and investor perception of potential
returns are critical factors in after-market performance of any particular IPO.
When making a decision to invest in a thrift conversion, investors will compare
the potential for after-market price appreciation in a conversion offering with
that of alternative investments, including other IPOs. When the price
performance of recent conversions turned negative, many investors refused to
continue to participate.
Investors have and are likely to continue to look negatively upon the regulatory
environment facing conversion offerings and the thrift industry and the
uncertainty regarding the ultimate pricing levels which the regulators will
require. We have taken into account the changing regulatory requirements in
valuing Richmond Savings' conversion and have made a downward adjustment
36
<PAGE>
because of the decline in the one-week price changes for conversions in the
first part of 1996 when compared to the one-week price changes for conversions
from the second half of 1995.
Stock Market Conditions
- -----------------------
Table 19 displays the performance of the SNL Thrift Index during the past three
years. During 1994, interest rates moved upward as the Federal Reserve raised
short-term interest rates several times. Economic reports displayed continued
strong growth, and earnings reports indicating little to no earnings growth at
some institutions helped to depress thrift and bank stock prices. During the
spring of 1994, falling bond prices and inflation fears caused declining stock
prices among financial services and other interest rate sensitive companies.
Thrift stocks regained some momentum during the summer months as inflation fears
eased slightly. A sell-off resumed during the Fall as indicated by the SNL
Index fall of 15.4% between September 1 and December 1, 1994. Thrift stocks
declined more steeply than the bond market averages because of higher interest
rates which included an increase in the 30 year bond over 8.00% and the Federal
Reserve's short-term interest rate hike of 0.75% in mid-November. Following the
mid-November rate hike and a brief rally in the bond market, thrift stocks
traded within a narrow range as the year headed towards a close. The downward
trend among thrift stock prices was quickly reversed early in 1995 as economic
news indicated the Federal Reserve's prior actions to slow the economy were
having a noticeable impact.
A strong bond market and a consensus among investors that the Federal Reserve
would not raise short-term rates further pushed stock prices higher. Through
the second half of 1995 as the Federal Reserve lowered interest rates, the stock
prices continued ever higher. During the first part of 1996, bond prices began
to decline and increases in the SNL Index slowed from the growth experienced in
the last half of 1995. On January 31, 1996, the SNL Index closed at 371
representing a 44.9% increase from 256 on January 31, 1995. The SNL Index
peaked on August 8, 1996, at 399, which represents a 7.5% increase since January
31, 1996. Almost all of the increase in the index occurred in 1995 as indicated
by the increase from January 1, 1995. During July 1996, uncertainty about the
Federal Reserve raising interest rates and mixed signals from economic data
further impacted stock market fluctuations. Based on the relatively flat
increase in the SNL index of 4.5% from March 29, 1996, through August 8, 1996,
we have adjusted Richmond Savings slightly downward.
37
<PAGE>
Table 19
SNL Thrift Index Monthly Performance
January 3, 1994 to August 8, 1996
<TABLE>
<CAPTION>
% % %
SNL Thrift Index Change Since Change Since Change Since
01/03/94 01/31/95 1/31/96
<S> <C> <C> <C> <C>
1994
- ----
January 3 253 -- -- --
February 1 257 1.9 -- --
March 1 245 -2.8 -- --
April 1 242 -4.3 -- --
May 2 249 -1.3 -- --
June 1 263 4.3 -- --
July 6 274 8.4 -- --
August 1 277 9.8 -- --
September 1 286 13.4 -- --
October 3 277 9.8 -- --
November 1 259 2.5 -- --
December 1 242 -4.3 -- --
December 30 244 -3.6
1995
- ----
January 31 256 1.2 -- --
February 28 277 9.5 8.2 --
March 31 278 9.9 8.6 --
April 28 295 16.6 15.2 --
May 31 308 21.7 20.3 --
June 30 314 24.1 22.7 --
July 31 328 29.6 28.1 --
August 31 356 40.7 39.1 --
September 29 362 43.1 41.4 --
October 31 354 39.9 38.2 --
November 30 370 46.2 44.5 --
December 29 377 49.1 47.2 --
1996
- ----
January 31 371 46.7 44.9 --
February 29 373 47.4 45.7 0.5
March 29 382 51 49.2 3
April 30 380 50.2 48.4 2.4
May 31 383 51.4 49.6 3.2
June 28 387 53 51.2 4.3
July 31 390 54.2 52.3 5.1
August 8 399 57.7 55.9 7.5
</TABLE>
38
<PAGE>
Recent Acquisitions in the Savings Bank's Market Area
- -----------------------------------------------------
Acquisition speculation is one factor impacting the prices of newly-converted
thrifts in the aftermarket. Table 20 displays acquisitions of North and South
Carolina thrifts announced from January 1, 1993 through December 31, 1995.
During 1993, 1994, and 1995, there were 15, 18, and 9 transactions completed
respectively. The average price/book ratio for transactions in 1995 was 207.3%,
168.6% in 1994, and 167.5% in 1993. The average acquisition price/trailing
twelve months earnings ratio was 24.6 in 1995, 17.5 in 1994, and 16.6 in 1993.
Continued industry consolidation impacts thrift stock prices and to some degree,
influences the trading pattern of the comparative companies. Due to the
acquisition activity primarily in North Carolina we have made an upward
adjustment.
39
<PAGE>
<TABLE>
TABLE 20
RECENT NORTH AND SOUTH CAROLINA ACQUISITIONS
1993-1995
<CAPTION>
Deal Value Target Assets P/B P/E
Buyer State Seller State ($000) ($000) (%) (x) Status
- ----- ----- ------ ----- ------ ------ --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
==========================================================================================================================
Average for the Year 1995 43.2 244.5 207.3 24.6
==========================================================================================================================
First Charter Corp. NC Bank of Union NC 32.6 126 304.00 22.90 Closed
Centura Banks NC First Commercial Holding NC 54.2 175 287.00 18.60 Closed
First Bancorp NC First Scotland Bank NC 2.3 21 134.00 N/A Closed
First Union Corp. NC RS Financial Corp. NC 111.6 787 162.00 19.90 Closed
United Carolina Bancshares NC Seaboard Savings Bank NC 9.4 45 159.00 38.10 Closed
First Citizens SC SNB Financial Corp. SC 3.9 24.2 154.00 N/A Closed
United Carolina Bancshares NC Triad Bank NC 37.5 199 251.00 20.40 Closed
First Union Corp. NC United Financial Corp. SC 127.4 759 195.00 19.90 Closed
Triangle Bancorp NC Village Bank NC 9.7 64 220.00 32.50 Closed
==========================================================================================================================
Average for the Year 1994 96.3 630.0 168.6 17.5
==========================================================================================================================
Carolina First Corp. SC Aiken County National SC 7.0 44.0 186.00 32.60 Closed
Triangle Bancorp NC Atlantic Community NC 19.9 163.6 135.24 NA Closed
United Carolina Bncs NC Bank of Iredell NC 16.0 79.3 240.17 20.13 Closed
Centura Banks NC Cleveland Federal NC 15.5 87.6 146.59 14.72 Closed
Triangle Bancorp NC Columbus Nat'l Bank NC 13.4 54.8 210.00 17.29 Closed
First Citizens BcShrs NC Edgecombe Homestead NC 10.9 38.9 154.41 20.72 Closed
Security Capital NC First FS & LA NC 41.0 354.7 143.00 17.20 Closed
Commonwealth Savings MS First FS&LA - Durham NC NA 68.1 NA NA Closed
First Citizens BcShrs NC First Investors SB NC 6.9 54.6 215.89 26.64 Closed
First Citizens BcShrs NC First Republic SB NC 10.9 59.2 186.20 10.93 Closed
Centura Banks NC First Southern Bncp NC 54.8 318.8 122.01 14.52 Closed
Mutual Community SB NC Greensboro NB NC 1.1 20.8 88.21 8.46 Closed
Carolina First Corp. SC Midlands National Bank SC 8.7 43.0 224.00 2.24 Closed
CCB Financial Corp NC Security Capital NC 235.4 914.1 183.35 16.44 Closed
BB&T Financial Corp NC Southern Nat'l Corp NC 1,111.0 8,236.4 138.16 9.82 Closed
Triangle Bancorp NC Standard Bank NC 14.6 77.5 191.45 33.87 Closed
First Citizens BcShrs NC State Bk-Fayetteville NC 11.9 54.4 186.14 24.74 Closed
American Fed. Bank SC United Financial of SC SC 58.5 671.0 116.00 9.50 Terminated
==========================================================================================================================
Average for the Year 1993 20.6 160.1 167.6 16.6
==========================================================================================================================
First Union Corp NC American Bancshares NC 20.7 242.2 127.09 15.03 Closed
First Citizens BcShrs NC Bank of Bladenboro NC 3.4 21.0 188.68 21.12 Closed
Triad Bank NC BTNC Corp NC NA 81.9 NA NA Closed
First Bancorp NC Central State Bank NC 7.0 35.6 201.90 25.18 Closed
Southern Bancshares NC Citizens Savings Bank NC 5.5 112.0 174.88 NA Closed
BB&T Financial Corp NC Citizens Savings Bank NC 38.2 276.8 189.29 10.47 Closed
Centura Banks NC First Charlotte Fncl NC 30.5 168.4 232.66 25.00 Closed
Security Capital NC First FS&LA NC 40.4 354.7 148.93 12.78 Closed
Southern Nat'l Corp NC Home Federal SB NC 18.2 102.8 218.91 11.54 Closed
United Carolina Bncs NC Home FSB-Eastern NC NC 21.0 122.1 187.23 15.87 Closed
Triangle Bancorp NC New East Bancorp NC 18.3 141.6 107.89 NA Closed
First Citizens BcShrs NC Pioneer Bancorp, Inc NC 3.6 325.7 47.73 NA Closed
Southern Nat'l Corp NC Regency Bancshares NC 50.4 279.0 199.61 19.41 Closed
Centura Banks NC Robeson Savings Bank NC 10.4 98.6 152.65 9.65 Closed
Anchor Fin'l Corp SC Topsail State Bank NC NA 38.9 NA NA Closed
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
New Issue Discount
- ------------------
Typically, a "new issue" discount that encompasses investor concerns and
investment risks inherent in all initial stock offerings is a factor to be
considered in conversion valuations. The magnitude of the new issue discount
for conversions typically expands during periods of declining thrift stock
prices as investors require larger inducements and narrows during strong
markets.
A potential new issue discount must consider the after-market performance of
recent thrift offerings. Table 21 presents a summary of standard conversions
completed during each half of 1995 and conversions completed to date in 1996.
In 1995, improving market fundamentals, declining concerns over inflation, and
lower pro forma valuation ratios at the beginning of the year added momentum to
the conversion market. In the wake of Carver Federal's decline and the decline
in the overall thrift market, initial offering prices were driven back into the
general range of 55% to 60% of pro forma book value in early 1995. The pro
forma price/book ratio of 1995 conversions in the second half of 1995, however,
escalated to an average price-to-book ratio of 72.4% and a price-to-earnings
multiple of 19.0. This compares to the first half of 1995 average price-to-book
ratio of 66.6% and a price-to-earnings ratio of 16.2. There have been 49
conversions completed since the beginning of 1996, at an average price-to-book
ratio of 69.3% and a price-to-earnings ratio of 20.8.
Clearly, the support for new conversions has been strong. Based on discussions
with underwriters of recent transactions, it seems that once again the pricing
on the conversion market is peaking and investors are beginning to feel that
these issues are fully priced. This sentiment is being born out by the one-day
and one-week percentage change in stock prices, which in 1996 averaged 9.6% and
9.9%, respectively, compared to an average of 21.4% and 22.0%, respectively, in
the second half of 1995.
In North Carolina in 1996, excluding Wake Forest FS&LA, MHC, a mutual holding
company, there have been four conversions including Green Street Financial
Corp., Scotland Bancorp, Inc., Stone Street Bancorp, Inc., and Mitchell Bancorp,
Inc. The average price to book ratio is 72.2% and the average price to earnings
multiple is 36.3. This average is above the average of all deals for 1996.
Excluding the price to earnings multiple of Mitchell Bancorp, Inc. of 94.5, the
average price to earnings multiple for the remaining three North Carolina
conversions in 1996 is 16.9. The average one week percent change for the four
conversions is 18.4%. The Mitchell Bancorp transaction which closed in July 1996
was the lowest price to book ratio of each of the North Carolina conversions in
1996 at 68.1%. This is a further indication that the market for thrift
conversions during the month of July had weakened due to the overall stock
market conditions. Although the market has weakened, North Carolina thrifts
typically have outperformed other out of area thrifts, therefore, we believe an
upward adjustment should be made for the new issue discount.
Adjustments Conclusion
- ----------------------
We believe the Savings Bank's to-be-issued Common Stock should be discounted by
25% to 34% relative to the comparative group. We believe the discount is due, in
large part, to the new issue discount needed for a thrift stock offering. With
respect to the other factors discussed above, the overall discount is relatively
modest. Conversions are often priced at substantial discounts relative to the
price/book ratio but near the comparative price earnings ratio. It is the role
of the appraiser to balance the price/book and price/earning discounts and
premiums. In this instance, the pro forma price/earnings ratio should be placed
within the range of the comparative institutions.
Valuations Approach
- -------------------
Table 22 displays the market valuation characteristics of Richmond Savings and
the comparative group as of June 30, 1996. Exhibit V displays the pro forma
pricing worksheet for Richmond Savings.
We believe that investors continue to make decisions with respect to conversion
stock based upon price/book and price/earnings comparisons. The price/assets
ratio, we believe, is not currently accorded much weight by investors. Utilizing
a price/book discount of approximately 25% to 34% relative to the comparable
companies, the resulting pro forma ratio is 73% to 65%. The price/earnings ratio
should be within a range of 18 to 16 times recently reported earnings.
Based upon a 25% to 34% discount relative to the comparative group price/book
ratio, we believe the Savings Bank's pro forma standard conversion value is
$14.0 million. This provides for a pro forma price/book ratio of 69.28% at the
midpoint. The resulting price/earnings ratio based on the last twelve month's
earnings before extraordinary items was 18.3, and last quarter earnings was 20.5
at the midpoint. The range of pro forma price/book ratios was 64.6% to 73.2%,
and 77.0% at the adjusted maximum. The range of price/earnings ratios at the
minimum and the maximum was 18.2 to 22.7 based upon last quarter earnings and
16.1 to 20.3 based upon last twelve month earnings.
Valuation Conclusion
- --------------------
It is therefore our opinion that, as of August 8, 1996, the estimated pro forma
market value of the Savings Bank's to be issued Common Stock is $14,000,000. The
values range from $11,900,000 at the minimum to $16,100,000 at the maximum. The
resulting adjusted maximum above the maximum is $18,515,000.
40
<PAGE>
- --------------------------------------------------------------------------------
TABLE 21
STANDARD CONVERSION - PUBLICLY TRADED
SELECTED MARKET DATA
1/1/95 to Date
<TABLE>
<CAPTION>
IPO
Share Gross Conversion
Ticker Institution IPO Date Price$ Proceeds Assets
- ------ ----------- --------- ------- --------- --------
<S> <C> <C> <C> <C>
=============================================================================================
Average of Deals to Date in 1996 10.595 32,757 221,148
Average of Second Half 1995 Deals 9.981 42,404 229,647
Average of First Half 1995 Deals 9.581 19,150 182,895
=============================================================================================
Conversions to Date in 1996
- ---------------------------
LNXC Lenox Bancorp, Inc. 07/18/96 10.00 4,256 43,149
ANA Acadiana Bancshares, Inc. 07/16/96 12.00 32,775 225,248
PWBK Pennwood Savings Bank 07/15/96 10.00 6,101 41,592
MBSP Mitchell Bancorp, Inc. 07/12/96 10.00 9,799 28,222
ALGC Algiers Bancorp, Inc. 07/09/96 10.00 6,480 42,450
OCFC Ocean Financial Corp. 07/03/96 20.00 167,762 1,036,445
HWEN Home Financial Bancorp 07/02/96 10.00 5,059 33,462
EGLB Eagle BancGroup, Inc. 07/01/96 10.00 13,027 150,974
KNWP Kenwood Bancorp, Inc. 07/01/96 NA NA NA
FLKY First Lancaster Bancshares 07/01/96 10.00 9,588 35,361
PROV Provident Financial Holdings 06/28/96 10.00 51,252 570,691
WYNE Wayne Bancorp, Inc. 06/27/96 10.00 22,314 207,997
PRBC Prestige Bancorp, Inc. 06/27/96 10.00 9,630 91,841
MECH Mechanics Savings Bank 06/26/96 10.00 52,900 662,482
DIME Dime Community Bancorp, Inc. 06/26/96 10.00 145,475 665,187
CMSB Commonwealth Bancorp, Inc. 06/17/96 NA NA NA
CNSB CNS Bancorp, Inc. 06/12/96 10.00 16,531 85,390
WWFC Westwood Financial Corporation 06/07/96 NA NA NA
LXMO Lexington B&L Financial Corp. 06/06/96 10.00 12,650 49,981
FFFB First Federal Financial Bancrp 06/04/96 10.00 6,718 51,296
FFBH First Federal Bancshares of AR 05/03/96 10.00 51,538 454,479
NSGB North Cincinnati Savings Bank 05/01/96 10.00 3,968 56,637
CBK Citizens First Financial Corp. 05/01/96 10.00 28,175 227,872
RELI Reliance Bancshares, Inc. 04/19/96 8.00 20,499 32,260
YFCB Yonkers Financial Corporation 04/18/96 10.00 35,708 208,283
CATB Catskill Financial Corp. 04/18/96 10.00 56,868 230,102
GSFC Green Street Financial Corp. 04/04/96 10.00 42,981 151,028
FFDF FFD Financial Corp. 04/03/96 10.00 14,548 58,955
WAKE Wake Forest FS&LA, MHC 04/03/96 10.00 5,150 55,136
PATD Patapsco Bancorp, Inc. 04/02/96 20.00 7,251 77,144
SSB Scotland Bancorp, Inc 04/01/96 10.00 18,400 57,718
WHGB WHG Bancshares Corp. 04/01/96 10.00 16,201 85,027
SSM Stone Street Bancorp, Inc. 04/01/96 15.00 27,376 84,996
FBER 1st Bergen Bancorp 04/01/96 10.00 31,740 223,167
AMFC AMB Financial Corp. 04/01/96 10.00 11,241 68,851
PHFC Pittsburgh Home Financial Corp 04/01/96 10.00 21,821 157,570
JXVL Jacksonville Bancorp, Inc. 04/01/96 NA NA NA
LONF London Financial Corporation 04/01/96 10.00 5,290 34,152
PFFB PFF Bancorp, Inc. 03/29/96 10.00 198,375 1,899,412
CRZY Crazy Woman Creek Bancorp 03/29/96 10.00 10,580 37,510
FCB Falmouth Co-Operative Bank 03/28/96 10.00 14,548 73,735
GAF GA Financial, Inc. 03/26/96 10.00 89,000 476,259
CFTP Community Federal Bancorp 03/26/96 10.00 46,288 162,042
FFFD North Central Bancshares, Inc. 03/21/96 NA NA NA
WBIO Washington Bancorp 03/12/96 10.00 6,575 55,202
FFOH Fidelity Financial of Ohio 03/04/96 NA NA NA
BYFC Broadway Financial Corp. 01/09/96 10.00 8,927 102,512
LFBI Little Falls Bancorp, Inc. 01/05/96 10.00 30,418 196,394
FFBA First Colorado Bancorp, Inc. 01/02/96 NA NA NA
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
IPO Prior in Relative to Pro Forma Percent Change
----------------------------------------- --------------------
Ticker Institution IPO Date Book Value Tang. Book Earnings Assets One Day One Week
- ------ ----------- -------- ---------- ---------- -------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
==============================================================================================================================
Average of Deals to Date in 1996 69.25 69.25 20.79 44.88 9.56 9.25
Average of Second Half 1995 Deals 72.41 72.50 18.96 15.90 21.39 22.83
Average of First Half 1995 Deals 66.47 66.57 16.19 14.80 33.39 14.00
==============================================================================================================================
Conversions to Date in 1996
- ---------------------------
LNXC Lenox Bancorp, Inc. 07/18/96 58.2 58.190 29.2 9.0 -1.25 0.00
ANA Acadiana Bancshares, Inc. 07/16/96 69.9 69.920 NA 12.7 0.00 -2.08
PWBK Pennwood Savings Bank 07/15/96 65.8 65.759 13.3 12.8 -5.00 -8.75
MBSP Mitchell Bancorp, Inc. 07/12/96 68.1 68.129 94.5 25.8 0.00 6.25
ALGC Algiers Bancorp, Inc. 07/09/96 67.1 67.137 19.5 13.2 7.50 2.50
OCFC Ocean Financial Corp. 07/03/96 69.2 69.210 13.8 13.9 6.25 0.63
HWEN Home Financial Bancorp 07/02/96 66.2 66.227 12.4 13.1 2.50 -1.25
EGLB Eagle BancGroup, Inc. 07/01/96 57.1 57.114 58.1 7.9 12.50 12.50
KNWP Kenwood Bancorp, Inc. 07/01/96 NA NA NA NA NA NA
FLKY First Lancaster Bancshares 07/01/96 72.5 72.505 19.0 21.3 35.00 33.75
PROV Provident Financial Holdings 06/28/96 60.9 60.870 18.2 8.2 9.70 8.10
WYNE Wayne Bancorp, Inc. 06/27/96 60.9 60.935 16.7 9.7 11.25 13.75
PRBC Prestige Bancorp, Inc. 06/27/96 61.9 61.902 24.6 9.5 3.75 2.50
MECH Mechanics Savings Bank 06/26/96 72.0 71.957 NA 7.4 15.00 15.00
DIME Dime Community Bancorp, Inc. 06/26/96 69.1 69.157 15.7 17.9 16.87 20.00
CMSB Commonwealth Bancorp, Inc. 06/17/96 NA NA NA NA NA NA
CNSB CNS Bancorp, Inc. 06/12/96 69.3 69.350 26.1 16.2 10.00 16.25
WWFC Westwood Financial Corporation 06/07/96 NA NA NA NA NA NA
LXMO Lexington B&L Financial Corp. 06/06/96 69.1 69.095 14.4 20.2 -5.00 -2.50
FFFB First Federal Financial Bancrp 06/04/96 62.9 62.873 9.4 11.6 7.50 7.50
FFBH First Federal Bancshares of AR 05/03/96 63.4 63.391 9.8 10.2 30.00 32.50
NSGB North Cincinnati Savings Bank 05/01/96 65.0 65.025 NA 6.5 2.50 10.00
CBK Citizens First Financial Corp. 05/01/96 73.1 73.104 15.3 11.0 5.00 0.00
RELI Reliance Bancshares, Inc. 04/19/96 72.5 72.473 22.5 38.9 4.69 3.13
YFCB Yonkers Financial Corporation 04/18/96 74.9 74.930 16.1 14.6 -2.50 1.25
CATB Catskill Financial Corp. 04/18/96 71.9 71.876 19.0 19.8 3.75 6.25
GSFC Green Street Financial Corp. 04/04/96 71.0 71.029 14.8 22.2 28.75 22.50
FFDF FFD Financial Corp. 04/03/96 69.9 69.871 17.4 19.8 5.00 5.00
WAKE Wake Forest FS&LA, MHC 04/03/96 104.1 104.054 14.5 8.5 27.50 16.90
PATD Patapsco Bancorp, Inc. 04/02/96 60.0 60.020 16.6 8.6 10.00 12.50
SSB Scotland Bancorp, Inc 04/01/96 74.8 74.830 16.2 24.2 22.50 25.00
WHGB WHG Bancshares Corp. 04/01/96 71.1 71.081 15.5 16.0 11.25 10.60
SSM Stone Street Bancorp, Inc. 04/01/96 74.9 74.920 19.7 24.4 16.67 20.00
FBER 1st Bergen Bancorp 04/01/96 74.8 74.813 21.7 12.5 0.00 -5.00
AMFC AMB Financial Corp. 04/01/96 70.8 70.828 18.2 14.0 5.00 5.00
PHFC Pittsburgh Home Financial Corp 04/01/96 72.8 72.827 17.5 12.2 10.00 10.00
JXVL Jacksonville Bancorp, Inc. 04/01/96 NA NA NA NA NA NA
LONF London Financial Corporation 04/01/96 68.5 68.461 22.4 13.4 8.12 6.25
PFFB PFF Bancorp, Inc. 03/29/96 69.0 68.991 26.6 9.5 13.75 16.25
CRZY Crazy Woman Creek Bancorp 03/29/96 69.7 69.720 16.4 22.0 0.00 7.50
FCB Falmouth Co-Operative Bank 03/28/96 68.7 68.722 19.9 16.5 7.50 12.50
GAF GA Financial, Inc. 03/26/96 70.5 70.521 13.8 15.7 13.75 15.00
CFTP Community Federal Bancorp 03/26/96 71.4 71.353 14.0 22.2 26.25 28.75
FFFD North Central Bancshares, Inc. 03/21/96 NA NA NA NA NA NA
WBIO Washington Bancorp 03/12/96 65.4 65.417 12.7 10.6 8.75 11.25
FFOH Fidelity Financial of Ohio 03/04/96 NA NA NA NA NA NA
BYFC Broadway Financial Corp. 01/09/96 68.5 68.479 13.3 8.0 3.75 2.50
LFBI Little Falls Bancorp, Inc. 01/05/96 71.4 71.425 31.9 13.4 13.13 13.75
FFBA First Colorado Bancorp, Inc. 01/02/96 NA NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE 21
STANDARD CONVERSION - PUBLICLY TRADED
SELECTED MARKET DATA
1/1/95 to Date
<TABLE>
<CAPTION>
IPO
Share Gross Conversion
Ticker Institution IPO Date Price $ Proceeds Assets
- ------ ------------ -------- -------- --------- ------
<S> <C> <C> <C> <C>
Average of Deals to Date in 1996 10.595 32,757 221,148
Average of Second Half 1995 Deals 9.981 42,404 229,647
Average of First Half 1995 Deals 9.581 19,150 182,895
Second Half 1995 Conversions
- -----------------------------
PEEK Peekskill Financial Corp. 12/29/95 10.000 40,998 155,716
CBSB Charter Financial, Inc. 12/29/95 NA NA NA
CLAS Classic Bancshares, Inc. 12/29/95 10.000 13,225 60,911
HFNC HFNC Financial Corp. 12/29/95 10.000 171,925 591,319
JOAC Joachim Bancorp, Inc. 12/28/95 10.000 7,604 30,711
AHCI Ambanc Holding Co., Inc. 12/27/95 10.000 54,223 344,856
PDB Piedmont Bancorp, Inc. 12/08/95 10.000 26,450 95,094
PBIX Patriot Bank Corp. 12/04/95 10.000 37,691 229,300
FFIC Flushing Financial Corp. 11/21/95 11.500 99,188 604,230
FWWB First SB of Washington Bancorp 11/01/95 10.000 109,106 491,368
ANBK American National Bancorp 10/31/95 NA NA NA
BFD BostonFed Bancorp, Inc. 10/24/95 10.000 66,125 592,027
CSBF CSB Financial Group, Inc. 10/09/95 8.000 8,280 34,431
SRN Southern Banc Company, Inc. 10/05/95 10.000 14,548 100,564
TPNZ Tappan Zee Financial, Inc. 10/05/95 10.000 16,201 91,149
KFBI Klamath First Bancorp 10/05/95 10.000 122,331 455,111
HFFB Harrodsburg First Fin Bancorp 10/04/95 10.000 21,821 92,715
SFIN Statewide Financial Corp. 10/02/95 10.000 52,698 475,168
DFIN Damen Financial Corp. 10/02/95 10.000 39,675 191,500
FDEF First Defiance Financial 10/02/95 NA NA NA
HFSA Hardin Bancorp, Inc. 09/29/95 10.000 10,580 75,993
KYF Kentucky First Bancorp, Inc. 08/29/95 10.000 13,886 63,014
THR Three Rivers Financial Corp. 08/24/95 10.000 8,596 72,377
TSBS Trenton SB, MHC 08/03/95 10.000 31,165 445,944
INBI Industrial Bancorp 08/01/95 10.000 55,545 268,041
CZF CitiSave Financial Corp. 07/14/95 10.000 9,647 69,125
CCFH CCF Holding Corp. 07/12/95 10.000 11,903 69,080
FKKY Frankfort First Bancorp, Inc. 07/10/95 10.000 34,500 110,135
FTF Texarkana First Financial Corp. 07/07/95 10.000 19,838 140,178
FMBD First Mutual Bancorp, Inc. 07/05/95 10.000 47,150 250,402
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------- ------------------
IPO Price in Relation to Pro Forma Percent Change
----------------------------------------------- ------------------
Ticker Institution IPO Date Book Value Tang. Book Earnings Assets One Day One Week
- ------ ----------- -------- ---------- ---------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Average of Deals to Date in 1996 69.25 69.25 20.79 14.88 9.56 9.85
Average of Second Half 1995 Deals 72.41 72.50 18.98 15.96 21.39 22.03
Average of First Half 1995 Deals 66.47 66.57 16.19 10.80 13.39 14.48
PEEK Peekskill Financial Corp. 12/29/95 70.80 70.81 14.10 20.80 21.25 17.50
CBSB Charter Financial, Inc. 12/29/95 NA NA NA NA NA NA
CLAS Classic Bancshares, Inc. 12/29/95 69.30 69.29 17.20 17.80 17.50 17.50
HFNC HFNC Financial Corp. 12/29/95 71.20 71.22 15.80 22.50 31.25 33.75
JOAC Joachim Bancorp, Inc. 12/28/95 72.00 71.99 18.80 19.80 35.00 30.00
AHCI Ambanc Holding Co., Inc. 12/27/95 72.00 72.05 22.10 13.60 0.00 3.10
PDB Piedmont Bancorp, Inc. 12/08/95 71.50 71.50 14.10 21.80 NA 28.75
PBIX Patriot Bank Corp. 12/04/95 71.00 70.99 18.00 14.10 27.50 27.50
FFIC Flushing Financial Corp. 11/21/95 73.20 73.21 35.80 14.10 23.64 22.83
FWWB First SB of Washington Bancorp 11/01/95 73.10 73.08 13.70 18.20 24.40 26.90
ANBK American National Bancorp 10/31/95 NA NA NA NA NA NA
BFD BostonFed Bancorp, Inc. 10/24/95 74.50 74.54 93.10 10.00 20.00 20.00
CSBF CSB Financial Group, Inc. 10/09/95 66.50 66.50 14.30 19.40 12.50 15.63
SRN Southern Banc Company, Inc. 10/05/95 66.10 67.06 30.10 12.60 23.75 25.00
TPNZ Tappan Zee Financial, Inc. 10/05/95 74.00 74.39 12.30 15.10 16.25 15.00
KFBI Klamath First Bancorp 10/05/95 75.50 75.55 13.40 21.20 25.00 28.75
HFFB Harrodsburg First Fin Bancorp 10/04/95 73.70 73.72 14.00 19.10 25.00 23.75
SFIN Statewide Financial Corp. 10/02/95 76.40 76.67 9.40 10.00 32.50 31.25
DFIN Damen Financial Corp. 10/02/95 73.00 73.02 36.80 17.20 15.00 13.75
FDEF First Defiance Financial 10/02/95 NA NA NA NA NA NA
HFSA Hardin Bancorp, Inc. 09/29/95 67.80 67.84 16.40 12.20 21.88 22.50
KYF Kentucky First Bancorp, Inc. 08/29/95 72.00 71.95 15.50 18.10 20.00 25.00
THR Three Rivers Financial Corp. 08/24/95 71.00 71.71 9.80 10.60 13.75 17.50
TSBS Trenton SB, MHC 08/03/95 103.50 103.53 10.70 6.50 15.63 17.50
INBI Industrial Bancorp 08/01/95 71.90 71.90 9.40 17.20 21.25 25.63
CZF CitiSave Financial Corp. 07/14/95 70.90 70.87 12.50 12.20 35.00 30.00
CCFH CCF Holding Corp. 07/12/95 71.80 71.79 11.80 14.70 15.63 7.50
FKKY Frankfort First Bancorp, Inc. 07/10/95 70.50 70.49 14.30 23.90 22.50 20.63
FTF Texarkana First Financial Corp. 07/07/95 64.50 64.50 6.00 12.40 28.75 31.25
FMBD First Mutual Bancorp, Inc. 07/05/95 67.50 67.49 13.10 15.80 11.25 16.25
</TABLE>
<PAGE>
TABLE 21
STANDARD CONVERSION - PUBLICLY TRADED
SELECTED MARKET DATA
1/1/95 to Date
<TABLE>
<CAPTION>
IPO
Share Gross Conversion
Ticker Institution IPO Date Price $ Proceeds Assets
- ------ ----------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Average of Deals to Date in 1996 10.595 32,757 221,148
Average of Second Half 1995 Deals 9.981 42,404 229,647
Average of First Half 1995 Deals 9.581 19,150 182,895
First Half 1995 Conversions
- ---------------------------
GUPB GFSB Bancorp, Inc. 06/30/95 10.000 9,488 43,949
SFED SFS Bancorp, Inc. 06/30/95 10.000 14,950 150,837
HEMT HF Bancorp, Inc. 06/30/95 8.000 52,900 586,553
GTPS Great American Bancorp 06/30/95 10.000 20,528 105,832
FBBC First Bell Bancorp, Inc. 06/29/95 10.000 85,963 406,813
SGVB SGV Bancorp, Inc. 06/29/95 8.000 21,821 259,462
FTSB Fort Thomas Financial Corp 06/28/95 10.000 15,738 70,577
NEIB Northeast Indiana Bancorp 06/28/95 10.000 21,821 114,976
LOGN Logansport Financial Corp. 06/14/95 10.000 13,225 59,351
NSLB NS&L Bancorp, Inc. 06/08/95 10.000 8,564 50,995
ASBP ASB Financial Corp. 05/11/95 10.000 15,870 93,931
JXSB Jacksonville Savings Bank, MHC 04/21/95 10.000 5,575 137,527
TSH Teche Holding Co. 04/19/95 10.000 42,320 284,570
WEFC Wells Financial Corp 04/11/95 8.000 17,504 180,405
CBIN Community Bank Shares 04/10/95 NA NA NA
GFED Guaranty Federal SB, MHC 04/10/95 8.000 7,779 158,850
ISBF ISB Financial Corporation 04/07/95 10.000 74,000 480,293
AVND Avondale Financial Corp. 04/07/95 10.000 42,320 502,065
FSBS First Ashland Financial Corp 04/07/95 10.000 14,088 75,135
BDJI First Federal Bancorporation 04/04/95 10.000 8,625 87,256
CMRN Cameron Financial Corp 04/03/95 10.000 30,269 144,821
QCFB QCF Bancorp, Inc. 04/03/95 10.000 17,828 133,135
SOBI Sobieski Bancorp, Inc. 03/31/95 10.000 9,660 73,397
BWFC Bank West Financial Corp 03/30/95 8.000 18,515 108,056
HBFW Home Bancorp 03/30/95 10.000 33,032 275,210
ATSB AmTrust Capital Corp 03/28/95 8.000 4,641 58,644
MIVI Mississippi View Holding Co. 03/24/95 8.000 8,064 62,887
GDVS Greater Delaware Valley SB,MHC 03/03/95 10.000 6,500 225,545
SJSB SJS Bancorp 02/16/95 10.000 9,522 118,719
MBBC Monterey Bay Bancorp, Inc. 02/15/95 8.000 28,750 284,578
SZB SouthFirst Bancshares, Inc. 02/14/95 10.000 8,300 82,477
PCBC Perry County Financial Corp. 02/13/95 10.000 8,565 69,914
HBBI Home Building Bancorp 02/08/95 10.000 3,220 40,816
SISB SIS Bank 02/08/95 8.000 44,500 929,900
CIBI Community Investors Bancorp 02/07/95 10.000 7,381 75,915
MSBF MSB Financial, Inc. 02/06/95 10.000 7,220 46,838
LSBI LSB Financial Corp. 02/03/95 10.000 10,296 117,723
MFSB Mutual Bancompany 02/02/95 10.000 3,335 54,095
FKFS First Keystone Financial 01/26/95 10.000 13,600 237,011
FOBC Fed One Bancorp 01/19/95 NA NA NA
GWBC Gateway Bancorp, Inc. 01/18/95 10.000 12,446 67,128
ETFS East Texas Financial Services 01/10/95 10.000 12,152 114,935
FSNJ First Savings Bk of NJ, MHC 01/09/95 10.000 13,580 547,550
CKFB CKF Bancorp, Inc. 01/04/95 10.000 10,000 51,002
TWIN Twin City Bancorp 01/04/95 10.000 8,984 94,826
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
IPO Price in Relation to Pro Forma Percent Change
---------------------------------------- ---------------------
Ticker Institution IPO Date Book Value Tang. Book Earnings Assets One Day One Week
- ------ ----------- -------- ---------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Average of Deals to Date in 1996 69.25 69.25 20.79 14.88 9.56 9.8
Average of Second Half 1995 Deals 72.41 72.50 18.98 15.96 21.39 22.03
Average of First Half 1995 Deals 66.47 66.57 16.19 10.80 13.39 14.48
GUPB GFSB Bancorp, Inc. 06/30/95 62.50 62.48 13.30 17.80 35.00 28.75
SFED SFS Bancorp, Inc. 06/30/95 64.70 64.71 14.20 9.00 15.00 13.75
HEMT HF Bancorp, Inc. 06/30/95 61.20 61.23 27.00 8.30 3.13 6.25
GTPS Great American Bancorp 06/30/95 61.30 61.35 17.40 16.20 22.50 23.75
FBBC First Bell Bancorp, Inc. 06/29/95 77.20 77.19 9.40 17.40 21.25 21.25
SGVB SGV Bancorp, Inc. 06/29/95 66.20 66.18 28.60 7.80 1.56 0.00
FTSB Fort Thomas Financial Corp 06/28/95 74.00 73.95 14.90 18.20 21.25 22.50
NEIB Northeast Indiana Bancorp 06/28/95 73.40 73.38 9.80 16.00 15.00 15.00
LOGN Logansport Financial Corp. 06/14/95 67.70 67.74 9.50 18.20 18.75 18.75
NSLB NS&L Bancorp, Inc. 06/08/95 64.00 64.05 12.20 14.40 23.75 22.50
ASBP ASB Financial Corp. 05/11/95 66.50 66.52 14.80 14.50 25.00 21.25
JXSB Jacksonville Savings Bank, MHC 04/21/95 76.50 76.51 158.90 3.90 0.00 0.00
TSH Teche Holding Co. 04/19/95 72.00 71.98 8.30 12.90 16.25 13.75
WEFC Wells Financial Corp 04/11/95 65.50 65.51 9.50 8.80 12.50 13.25
CBIN Community Bank Shares 04/10/95 NA NA NA NA NA NA
GFED Guaranty Federal SB, MHC 04/10/95 106.00 105.97 14.90 4.70 6.25 17.19
ISBF ISB Financial Corporation 04/07/95 66.90 67.00 9.40 13.40 29.38 34.40
AVND Avondale Financial Corp. 04/07/95 69.60 69.64 10.20 7.80 15.00 21.25
FSBS First Ashland Financial Corp 04/07/95 62.30 62.34 13.90 15.80 25.00 32.50
BDJI First Federal Bancorporation 04/04/95 62.20 62.17 10.50 9.00 7.50 7.50
CMRN Cameron Financial Corp 04/03/95 65.60 65.64 12.70 17.30 7.50 7.50
QCFB QCF Bancorp, Inc. 04/03/95 60.40 60.37 11.90 11.80 14.38 12.50
SOBI Sobieski Bancorp, Inc. 03/31/95 69.10 69.14 9.90 11.60 2.50 0.60
BWFC Bank West Financial Corp 03/30/95 66.80 66.81 14.00 14.60 9.38 8.63
HBFW Home Bancorp 03/30/95 64.20 64.17 10.60 10.70 25.00 25.60
ATSB AmTrust Capital Corp 03/28/95 62.30 62.35 7.70 7.30 6.25 3.13
MIVI Mississippi View Holding Co. 03/24/95 63.00 62.99 11.10 11.40 11.73 7.81
GDVS Greater Delaware Valley SB,MHC 03/03/95 115.50 115.51 17.70 2.80 5.00 -3.75
SJSB SJS Bancorp 02/16/95 59.20 59.18 12.30 7.40 10.00 15.00
MBBC Monterey Bay Bancorp, Inc. 02/15/95 59.30 60.73 13.30 9.20 10.94 10.94
SZB SouthFirst Bancshares, Inc. 02/14/95 58.90 58.86 14.10 9.10 15.00 8.75
PCBC Perry County Financial Corp. 02/13/95 57.50 57.52 8.90 10.90 23.75 35.00
HBBI Home Building Bancorp 02/08/95 57.20 57.18 7.60 7.30 0.00 15.00
SISB SIS Bank 02/08/95 64.70 66.13 NA 4.60 20.31 26.56
CIBI Community Investors Bancorp 02/07/95 63.90 63.86 8.40 8.90 7.50 22.50
MSBF MSB Financial, Inc. 02/06/95 58.60 58.65 11.50 13.40 10.00 11.25
LSBI LSB Financial Corp. 02/03/95 60.90 60.91 12.70 8.00 12.50 12.50
MFSB Mutual Bancompany 02/02/95 55.50 56.89 9.10 5.80 5.00 3.10
FKFS First Keystone Financial 01/26/95 58.30 58.26 23.40 5.40 3.75 5.00
FOBC Fed One Bancorp 01/19/95 NA NA NA NA NA NA
GWBC Gateway Bancorp, Inc. 01/18/95 60.10 60.06 12.10 15.60 12.50 12.50
ETFS East Texas Financial Services 01/10/95 55.00 55.02 NA 9.60 11.25 18.75
FSNJ First Savings Bk of NJ, MHC 01/09/95 67.20 67.17 6.70 2.40 10.00 7.50
CKFB CKF Bancorp, Inc. 01/04/95 66.10 66.06 11.10 16.40 17.50 17.50
TWIN Twin City Bancorp 01/04/95 69.00 69.00 10.40 8.70 10.00 5.00
- -----------------------------------------------------------------------------------------------------------------------
Source: SNL Securities, L.P.
</TABLE>
<PAGE>
Adjustments Conclusion
- ----------------------
We believe the Savings Bank's to-be-issued Common Stock should be discounted by
25% to 34% relative to the comparative group. We believe the discount is due,
in large part, to the new issue discount needed for a thrift stock offering.
With respect to the other factors discussed above, the overall discount is
relatively modest. Conversions are often priced at substantial discounts
relative to the price/book ratio but near the comparative price earnings ratio.
It is the role of the appraiser to balance the price/book and price/earning
discounts and premiums. In this instance, the pro forma price/earnings ratio
should be placed within the range of the comparative institutions.
Valuation Approach
- ------------------
Table 22 displays the market valuation characteristics of Richmond Savings and
the comparative group as of June 30, 1996. Exhibit V displays the pro forma
pricing worksheet for Richmond Savings.
We believe that investors continue to make decisions with respect to conversion
stock based upon price/book and price/earnings comparisons. The price/assets
ratio, we believe, is not currently accorded much weight by investors.
Utilizing a price/book discount of approximately 25% to 34% relative to the
comparable companies, the resulting pro forma ratio is 73% to 65%. The
price/earnings ratio should be within a range of 18 to 16 times recently
reported earnings.
Based upon a 25% to 34% discount relative to the comparative group price/book
ratio, we believe the Savings Bank's pro forma standard conversion value is
$14.0 million. This provides for a pro forma price/book ratio of 69.28% at the
midpoint. The resulting price/earnings ratio based on the last twelve months'
earnings before extraordinary items was 18.3, and last quarter earnings was 20.5
at the midpoint. The range of pro forma price/book ratios was 64.6% to 73.2%,
and 77.0% at the adjusted maximum. The range of price/earnings ratios at the
minimum and the maximum was 18.2 to 22.7 based upon last quarter earnings and
16.1 to 20.3 based upon last twelve months earnings.
Valuation Conclusion
- --------------------
It is therefore our opinion that, as of August 8, 1996, the estimated pro forma
market value of the Savings Bank's to be issued Common Stock is $14,000,000.
The values range from $11,900,000 at the minimum to $16,100,000 at the maximum.
The resulting adjusted maximum above the maximum is $18,515,000.
41
<PAGE>
TABLE 22
TRADING COMPARISONS
RICHMOND SAVINGS BANK AND THE COMPARATIVE GROUP
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
Current Current Current Price (August 8, 1996) in Relation to
Stock Market ------------------------------------------------------
Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
Ticker Institution ($) ($M) (%) (%) (%) (x) (x)
- ------ ----------- --- ---- --- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================
RICHMOND SAVINGS (as of 6/30/96):
PRO FORMA MINIMUM 10.00 11.90 64.61 64.61 11.45 18.20 16.10
PRO FORMA MIDPOINT 10.00 14.00 69.28 69.28 13.25 20.50 18.30
PRO FORMA MAXIMUM 10.00 16.10 73.20 73.20 14.98 22.70 20.30
PRO FORMA MAXIMUM, Adjusted 10.00 18.52 76.98 76.98 16.91 24.90 22.40
====================================================================================================================
Comparative Group:
Maximum 20.00 66.46 113.00 113.00 30.74 106.25 106.25
Minimum 12.25 10.69 82.36 82.36 12.26 11.18 11.18
Average 15.30 24.05 97.52 97.53 20.40 27.25 24.53
Median 14.50 19.70 97.55 97.55 20.39 16.38 14.23
ASBP ASB Financial Corp. 14.75 25.28 98.07 98.07 22.63 26.34 26.34
BFSB Bedford Bancshares, Inc. 17.00 19.74 100.24 100.24 16.21 11.18 11.18
FFWD Wood Bancorp, Inc. 12.75 19.66 97.03 97.03 14.07 12.26 12.26
FSBS First Ashland Financial Corp 18.25 26.70 113.00 113.00 30.74 26.84 26.84
FSVF First Savings Financial Corp 12.25 10.69 99.76 99.76 18.18 NM NM
HSSC Home Savings Bank of Siler Cty 14.25 12.77 95.32 95.32 22.61 16.19 16.19
KSAV KS Bancorp, Inc. 20.00 13.27 95.88 95.97 14.19 11.90 11.90
PDB Piedmont Bancorp, Inc. 13.25 35.05 94.58 94.58 27.23 16.56 16.56
SOPN First Savings Bancorp, Inc. 17.75 66.46 98.94 98.94 25.93 17.75 17.75
SZB SouthFirst Bancshares, Inc. 12.75 10.90 82.36 82.36 12.26 106.25 106.25
<CAPTION>
Current Tangible Qtr Qtr LTM LTM
Dividend Equity/ Equity/ Return on Return on Return on Return on
Yield Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Ticker Institution (%) (%) (%) (%) (%) (%) (%)
- ------ ----------- --- --- --- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C>
=====================================================================================================================
RICHMOND SAVINGS (as of 6/30/96):
PRO FORMA MINIMUM 2.50 17.89 17.89 0.70 3.94 0.83 4.66
PRO FORMA MIDPOINT 2.50 19.33 19.33 0.71 3.86 0.84 4.55
PRO FORMA MAXIMUM 2.50 20.73 20.73 0.72 3.63 0.85 4.26
PRO FORMA MAXIMUM, Adjusted 2.50 22.27 22.27 0.73 3.43 0.85 4.01
=====================================================================================================================
Comparative Group:
Maximum 3.92 29.77 29.77 1.63 9.12 1.48 8.14
Minimum 0.00 14.60 14.60 (0.24) (1.29) 0.08 0.48
Average 2.09 20.77 20.77 1.02 4.96 1.00 5.30
Median 2.53 20.65 20.65 1.21 5.61 1.11 5.68
ASBP ASB Financial Corp. 2.71 23.08 23.08 0.83 3.50 1.02 4.52
BFSB Bedford Bancshares, Inc. 2.35 15.22 15.22 1.42 9.12 1.29 7.96
FFWD Wood Bancorp, Inc. 1.88 14.60 14.60 1.15 7.95 1.17 8.14
FSBS First Ashland Financial Corp 0.00 27.21 27.21 1.02 3.80 0.96 3.61
FSVF First Savings Financial Corp 0.00 18.22 18.22 (0.24) (1.29) 0.08 0.48
HSSC Home Savings Bank of Siler Cty 0.00 23.72 23.72 1.44 6.00 NA NA
KSAV KS Bancorp, Inc. 3.00 14.79 14.78 1.27 8.51 1.11 6.88
PDB Piedmont Bancorp, Inc. 3.62 29.77 29.77 1.63 5.39 1.35 7.23
SOPN First Savings Bancorp, Inc. 3.38 26.21 26.21 1.52 5.83 1.48 5.68
SZB SouthFirst Bancshares, Inc. 3.92 14.89 14.89 0.12 0.75 0.55 3.24
</TABLE>
Source: SNL Securities, L.P.
<PAGE>
================================================================================
===============================================================
BAXTER
FENTRISS
AND COMPANY
===============================================================
MISSION: Baxter Fentriss and Company provides innovative
solutions, experience and leadership to financial
institutions pursuing major strategic objectives.
AREAS OF EXPERTISE:
. Strategy development to maximize shareholder value
. Merger and acquisition transactions
. Business valuations
. Private placement of debt or equity
. Hostile takeover preparation/defense
. Capital planning
. Fairness opinions
. Employee stock ownership plans
. Asset acquisition searches
. Mutual conversions
. Resolution Trust Corporation transactions
. Buy/sell agreements
. Branch Sales and purchases
===============================================================================
Baxter Fentriss & Company
<PAGE>
===============================================================================
UNIQUE QUALIFICATIONS OF
BAXTER FENTRISS AND COMPANY
. BFC is especially qualified to develop, evaluate, and execute major
strategies.
. Principals managed strategic planning function for
a major Regional Bank, achieving over $4 billion in
asset growth through 29 acquisitions.
. Principals formed two nationally ranked investment
banking firms specializing in financial
institutions since 1983.
. Strategic advisor for over 100 thrifts and banks
since 1991.
. BFC has significant M & A experience.
. Ranked 3rd in total 1994 transactions
. Over 50 years of combined M & A experience.
. 200 plus successful transactions.
. Wide breadth of skill, experience, and training.
. Nationally recognized professionals.
. BFC is particularly qualified to execute transactions.
. Principals have directly acquired over 30
companies.
. Firm enjoys exceptional relationships with bank and
thrift acquirors.
. BFC fully understands acquiror strategies/
motivations.
. BFC is recognized Nationally as a result of its publishing
capabilities.
. Principals author articles for national
publications.
. Baxter Fentriss publishes The CEO Report.
===============================================================================
Baxter Fentriss & Company
<PAGE>
===============================================================================
UNIQUE QUALIFICATIONS OF
BAXTER FENTRISS AND COMPANY
(CONTINUED)
. BFC enjoys excellent reputation throughout Southeast.
. Firm stresses honesty and fairness in
transactions.
. Long list of referrals.
. Exceptional success rate.
. BFC is not "wed" to one institution.
. Reputation for fairness.
. No reluctance by Acquiror's to bid.
. Reputation for quality.
. BFC brings multiple alternatives to a
transaction.
. BFC has demonstrated creativity that has been adopted nationally.
. Principals developed a "consortium" bid
concept used in most RTC transactions.
. BFC has developed two unique strategies
for mutual institutions.
. BFC specializes in demonstrating to
potential acquirors how they can
materially improve the terms/structure of
their bids.
. BFC has extensive capabilities in the placement of financings.
. Network of hundreds of investors and
financiers.
. Significant experience with financial
institutions in difficult financings.
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
UNIQUE QUALIFICATIONS OF
BAXTER FENTRISS AND COMPANY
(CONTINUED)
. BFC has unique expertise in Financial Institution transactions in the
Southeastern markets.
. Largest number of community financial
institution transactions in the market.
. Reputation for success in transactions
with highest degree of difficulty.
. Involved in over $7 billion in deposit
transfers in the market.
. Recognized by acquirors in prioritizing
transactions.
================================================================================
Baxter Fentriss & Company
<PAGE>
===============================================================================
BAXTER FENTRISS AND COMPANY
PRINCIPALS OF THE FIRM:
Laurence C. Fentriss (804) 323-1405
Prior to co-founding the company, Larry was managing director
of Crestar Financial Corporation's merger and acquisition
division. From 1979 to 1992, he developed Crestar's merger and
acquisition strategy. Larry has successfully completed over 25
major transactions for Crestar, acquiring assets exceeding $4.5
Billion.
Larry also created and managed Crestar's merger and acquisition
advisory division, a group of nine professionals who have
successfully completed several hundred valuation, merger,
acquisition, divestiture, and financing transactions for Crestar
customers.
Larry graduated from the University of Virginia with a B.S. in
finance and with honors. He also received a Masters in Business
Administration, with honors, from Virginia Commonwealth
University. Larry also graduated, with honors, from the
Graduate School of Banking at Louisiana State University.
James E. Baxter, II (804) 323-1306
Prior to co-founding the company, Jim worked for Crestar
Financial Corporation's merger and acquisition division as the
Director of Financial Institutions. He was responsible for the
development of the nationally ranked advisory division. He has
been involved in the purchase or sale of several billion dollars
in assets of both healthy and failed institutions.
Jim received the Gold Medal for achieving the highest score in
the State of Virginia on the 1983 Certified Public Accountants
examination. He also served as a senior auditor for Ernst and
Young and is a member of both the American and Virginia
Societies of CPAs.
Jim graduated Summa Cum Laude in accounting at Virginia
Commonwealth University. He also graduated first in the School
of Business.
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS AND COMPANY
PROFESSIONALS OF THE FIRM:
David C. Burns (804) 323-7541
Prior to joining Baxter Fentriss and Company, David spent 4-1/2
years as Vice President with Goldman Sachs and Company in New
York. He was responsible for private companies in the Southeast
seeking equity and/or debt financing, developing cash management
instruments and $8 billion in structured secondary debt.
From 1985 to 1988, David was President of Rapid Systems, Inc.,
a retail chain in Nashville, Tennessee. Prior to Rapid Systems,
he was Senior Auditor for Ernst & Young and Company, in
Richmond, Virginia, where his primary focus was in the banking,
manufacturing and insurance industries.
David graduated from the University of Tennesee, cum laude,
with a B.S. in accounting. David also holds a Master of
Business Administration from Vanderbilt University's Graduate
School of Business and is a Certified Public Accountant.
C. M. (Kay) Carpenter (804) 323-7540
Kay is a former Executive Vice President of Crestar Bank. He
was responsible for managing the integration of many of
Crestar's acquisitions during the 1970's and 1980's. He also
managed the downsizing efforts in the Western region and has
served on numerous local advisory boards.
Kay graduated from the Executive Program at the Darden School
in Charlottesville, Virginia and the Stonier Graduate School of
Banking at Rutgers.
Donald R. Draughon, Jr. (919) 471-0340
Don is a former senior financial analyst and project manager
for Montrose Capital. He has previously served on the Board of
Directors for the Pantry, Inc., and Nationwide Industries. He
also was a Vice President of D.C. Land Group and project manager
for Robert Trent Jones Golf Club in Washington D.C.
Don spent five years with Wachovia Bank and Trust in
Winston-Salem, North Carolina in the corporate finance group.
He was the product manager/specialist for industrial revenue
bond financing, interest rate swaps, and private placements.
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS AND COMPANY
PROFESSIONALS OF THE FIRM-con't:
Don received a Bachelor of Arts in 1982 from Brigham Young
University in Provo, Utah and a Masters in Business
Administration in 1984 from Wake Forest University's Babcock
School of Management in Winston-Salem, North Carolina.
Rodney W. Martin (804) 323-7113
Before joining the firm, Rodney was employed with Crestar
Financial Corporation as a Balance Sheet Management Officer.
During this time, Rodney's responsibilities included measuring
and managing interest rate sensitivity, forecasting the earnings
stream of the balance sheet, managing the balance sheet and
capital structure at the parent company level, and assisting in
merger and acquisition analysis.
Prior to his employment with Crestar, Rodney was a Financial
Analyst with Virginia State Corporation Commission where he
provided independent financial analysis and testimony in Public
Utility Rate Case Hearings and conducted financial research for
the Commission. Rodney has also worked with Central Fidelity
Banks, Inc. as a Credit/Loan Review Analyst.
Rodney graduated from Virginia Commonwealth University with a
Masters in Finance and a Bachelors in Finance and Economics.
Rodney has also received training in all phases of the brokerage
business and passed the NASD Series 7 and State's Series 63
securities exams.
Brian L. Johnson (804) 323-7540
Before joining Baxter Fentriss and Company, Brian was a retail
mortgage loan originator with Household Bank in Alexandria, VA.
He was responsible for developing business with builders,
realtors, and bank clientele as well as administering CRA
activities in the Alexandria area. Brian was also a leading
loan producer in 1993, closing approximately $10 million in
mortgage loans. Prior to working with Household Bank, he worked
as a bank examiner with the Bureau of Financial Institutions in
Virginia.
Brian graduated from James Madison University with a B.B.A. in
Finance. He completed his Master of Business Administration in
Finance at Virginia Commonwealth University in December of 1995.
Brian has also had experience as a securities broker and has
held the NASD Series 7 and State's Series 63 licenses.
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS AND COMPANY
PROFESSIONALS OF THE FIRM-con't:
Kristi Briggs (804) 323-9332
Prior to joining the firm, Kristi was an internal auditor in Crestar Financial
Corporation's Commercial Audit Division. During this time, Kristi conducted and
assisted in the completion of audits to evaluate the adequacy, effectiveness,
and efficiency of the systems of internal control within Crestar Bank. She also
participated in the completion of other special projects assigned to the Audit
Department.
Before joining Crestar, Kristi spent more than three years as a bank examiner
for the Office of the Comptroller of the Currency (OCC) in Charlotte, NC. While
with the OCC, Kristi was responsible for assessing the financial performance of
both community and regional banks throughout the Carolinas. In addition to those
field responsibilities, she was also the assigned analyst for ongoing
communications with management and for the monitoring of two South Carolina
community banks with combined total assets in excess of $400 million.
Kristi received a Bachelor of Science degree in Finance from Virginia
Commonwealth University. She also completed formalized OCC training in bank
analysis, commercial bank management, consumer compliance, and commercial
credit.
The professionals of the firm have been guest lecturers for various professional
organizations and universities around the country.
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS RECENT TRANSACTION ANNOUNCEMENTS
------------------------------------------------
Anchor Financial Corporation merged with Topsail State Bank
BB&T acquisition of Mutual Savings of Reidsville
Horizon Bancorp Inc. merged with Allegheny Bankshares Corp.
Sequoia Federal Savings Bank acquisition of Federal Capital Bank
New East Bancorp private placement
Peoples Bank of Richwood sale to First Community
Sale of HESCO to private investor
Sale of SEMCO to private investor
Triangle Bancorp acquisition of New East Bancorp
United Carolina Bank acquisition of Home Federal Savings Bank
Patmark Research Services acquired Specialized Patent Services
Triad Bank merger with BTNC Corp
MNC Financial sale of Virginia Federal to Crestar Financial
First Citizens acquisition of First Savings Bank
National Bank of South Carolina acquisition of Standard Federal
Bank of Lancaster acquisition of Tidemark Bank for Savings branch
Centura Bank acquisition of First American Federal Savings Bank
Central State Bank sale to First Bank
NBSC sale of Loan Portfolios to Liberty
Jefferson Savings and Loan acquisition of 2 First Union branches
Bank of Marlinton sale to First Citizens
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS RECENT TRANSACTION ANNOUNCEMENTS
------------------------------------------------
(continued)
United Insulation Company, Inc. sale of minority interest
Bank of Iredell sale to United Carolina Bank
Pioneer Financial Corporation sale to Signet Bank
First M & F acquisition of Starkville branch of Security Federal
FNB of Albany acquisition of Ripley branch of Security Federal
FNB of Bolivar County acquisition of Cleveland branch of Sec. Fed.
Farmers & Merchants acquisition of Booneville branch of Sec. Fed.
United Southern acquisition of Clarksdale branch of Sec. Federal
Peoples Bank acquisition of Selma branch of Altus Federal
Old White Bankshares, Inc. sale to First Citizens
Pace American sale to First Citizens
First Investors Savings Bank, SSB sale to First Citizens
Abigail Adams Bancorp sale to private investor
Sale of SBI Publishing to private investor
Independent Bank sale to Crestar Financial Corporation
Union Planters acquisition of Cherokee Federal Savings Bank
First Citizens acquisition of State Bank
Columbus National Bank sale to Triangle Bancorp
NBSC Corporation sale to Synovus Financial Corporation
Bank of the Potomac sale to F&M National Corporation
Lucor, Inc. private placement of senior debt
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS RECENT TRANSACTION ANNOUNCEMENTS
------------------------------------------------
(continued)
Sale of 15 First Union branches to:
. First Citizens
. Enterprise Bank
. Peoples Bank
. Security Capital Bancorp
. Southern Bank and Trust Co.
. Community Bank and Trust Co.
. Citizens Bank
Bank of Southside Virginia acquisition of NationsBank branches
Sale of 2 Newberry Federal branches to American Federal Bank
Suburban Bank of Virginia sale to Tysons Financial Corporation
First Commercial Bank sale to United Bankshares
Templeton National Bank sale to Bank of Santa Maria
First Merchants Bancorp sale to City Holding Company
SNB Financial Corp. sale to First Citizens Bancorp of SC
Laser Entertainment of the Carolina's LLC private placement of equity
Old North State Bank merger with Piedmont Bancorp
Sale of First Union branch to Sterling Bancorp
CoBank Financial Corporation sale to Vallicorp Holdings, Inc.
Seaboard Bancorp, Inc. sale to Life Bancorp, Inc.
Bank of Tazewell sale to National Bankshares, Inc.
Bank of Union sale to First Charter Corporation
Sale of Mutual Savings Bank to American National Bankshares, Inc.
Sale of Gulf South Bancshares, Inc. to Gulf Coast Bank and Trust Company
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS RECENT TRANSACTION ANNOUNCEMENTS
------------------------------------------------
(continued)
Sale of 2 Union Planters Branches to First Farmers and Merchants National Bank
Sale of Twentieth Bancorp, Inc. to Horizon Bancorp, Inc.
Conversion of Home Savings Bank of Siler City
Sale of Friendship Community Bank to Fidelity National
================================================================================
Baxter Fentriss & Company
<PAGE>
================================================================================
BAXTER FENTRISS
---------------
RECENT CORPORATE ANNOUNCEMENTS
------------------------------
ESOP valuation of Bank of Lancaster
Financial advisor to Valuation of Cason Company, Inc.
Financial advisor to The Bank of Currituck
Financial advisor to Abigail Adams Bancorp shareholder rights plan
Financial advisor to United Insulation Company, Inc.
Financial advisor to Central State Bank minority interest
Financial advisor to Randleman Savings Bank, SSB
Financial advisor to Office Supply Services, Inc.
Financial advisor to CompSource, Inc.
Financial advisor to Insura, Inc.
Financial advisor to Rawls & Winstead, Inc.
Financial advisor to Robert W. Chapman & Co., Inc.
Financial advisor to Old North State Bank
Financial advisor to Commonwealth Packaging Corporation
================================================================================
Baxter Fentriss & Company
<PAGE>
Exhibit II-1
Balance Sheet
June 30, 1993, 1994, 1995, and 1996
<TABLE>
<CAPTION>
June 30,
1993 1994 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash on hand and in banks $ 1,558,094 $ 1,088,027 $ 1,418,980 $ 1,207,513
Interest-bearing balances in other banks 837,766 867,029 3,448,058 $ 4,685,583
Marketable equity securities 1,049,747 625,585 ----- -----
Investment Securities 10,194,654 ----- ----- -----
Investment securities available for sale ----- ----- 5,474,425 8,386,835
Investment securities held to maturity ----- 13,806,049 8,883,510 7,974,880
Loans receivable, net 67,900,425 67,679,671 68,744,661 68,357,610
Mortgage-backed securities 2,569,337 ----- ----- -----
Accrued interest receivable 549,556 545,526 537,179 577,578
Premises and equipment, net 1,391,060 1,526,212 1,403,086 1,355,694
Real estate acquired in settlement of loans 43,459 ----- ----- 29,074
Stock in Federal Home Loan Bank 706,100 734,700 734,700 734,700
Other assets 553,276 631,443 765,733 800,589
TOTAL ASSETS $87,353,474 $87,504,242 $91,410,332 $94,110,056
LIABILITIES & RETAINED
EARNINGS
Deposit Accounts $79,004,962 $78,315,213 $81,437,068 $83,714,929
Accrued interest payable 172,815 126,536 218,171 210,823
Accrued income taxes payable 5,000 ----- ----- -----
Advance payments by borrowers 910,412 669,231 656,786 469,603
Accrued expenses and other liabilities 699,391 979,312 970,145 1,073,975
TOTAL LIABILITIES $80,792,580 $80,090,292 $83,282,170 $85,469,330
Retained income, substantially restricted 6,560,894 7,413,950 8,128,162 8,640,726
TOTAL LIABILITIES AND EQUITY $87,353,474 $87,504,242 $91,410,332 $94,110,056
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
42
<PAGE>
Exhibit II-2
Consolidated Statements of Income
For the Years Ended June 30, 1993, 1994, 1995, and 1996
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1993 1994 1995 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans $5,647,234 $5,205,264 $5,403,633 $5,596,504
Mortgage-backed securities 245,870 ----- ----- -----
Investments and deposits in banks 804,502 922,393 973,970 1,239,616
---------- ---------- ---------- ----------
Total interest income $6,697,606 $6,127,657 $6,377,603 $6,863,120
Interest expense - deposits 3,453,714 2,933,705 3,271,197 2,886,644
---------- ---------- ---------- ----------
Net interest income $3,243,892 $3,193,952 $3,106,406 $2,886,644
Provision for loan losses 38,278 36,000 36,000 36,000
---------- ---------- ---------- ----------
Net interest income after provision $3,205,614 $3,157,952 $3,070,406 $2,850,644
Non-interest income:
Transaction income $ 343,650 $ 304,681 $ 288,452 $ 357,386
Gain on sale of loans & MB Securities 83,580 151,420 6,975 8,390
Gain (loss) on sale of investments 3,037 (1,544) (4,831) (4,404)
Gain on sale of real estate, net 3,355 3,943 5,875 -----
Other income 100,584 127,809 135,397 170,970
---------- ---------- ---------- ----------
Total other income $ 586,309 $ 586,309 $ 429,868 $ 532,342
Non-interest expenses:
Compensation and employee benefits $1,106,250 $1,201,018 $1,252,657 $1,284,791
Net occupancy expense 139,499 148,177 152,614 148,963
Equipment rental & maintenance 109,031 154,455 173,038 159,803
Marketing 55,317 57,454 43,343 50,351
Data Processing and other fees 286,164 274,849 266,523 274,763
Federal and other insurance premiums 195,867 221,419 216,983 218,822
Supplies, telephone, and postage 130,270 117,359 119,783 116,820
Other 190,803 216,985 226,942 239,107
---------- ---------- ---------- ----------
Total non-interest expenses $2,213,201 $2,391,716 $2,451,583 $2,492,880
Income (loss) before taxes $1,526,619 $1,352,545 $1,048,691 $ 890,106
Income tax benefit (expense) $ 570,309 $ 492,118 $ 329,168 $ 299,146
---------- ---------- ---------- ----------
Net income $ 956,310 $ 860,427 $ 719,523 $ 590,960
========== ========== ========== ==========
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
43
<PAGE>
Exhibit II-3
Composition of Loan Portfolio
At June 30, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fixed & Adjustable Rate
- -------------------------------------------------------------------------------
Type of Loan Amount Percent
- -------------------------------------------------------------------------------
<S> <C> <C>
Loans secured by 1-4 family residential $55,385,874 81.02%
properties
- -------------------------------------------------------------------------------
Construction and land development $ 2,300,620 2.87%
- -------------------------------------------------------------------------------
Loans secured by multi-family dwellings $ 1,963,248 3.37%
of five or more units
- -------------------------------------------------------------------------------
Home Equity Lines of Credit $ 5,465,095 7.99%
- -------------------------------------------------------------------------------
Consumer loans $ 2,861,449 4.19%
- -------------------------------------------------------------------------------
Loans secured by deposit accounts $ 723,738 1.06%
- -------------------------------------------------------------------------------
Home improvement Loans $ 927,919 1.36%
- -------------------------------------------------------------------------------
Total Loans $69,628,043 101.86%
- -------------------------------------------------------------------------------
Less:
- -------------------------------------------------------------------------------
Construction loans in process $ 881,075 1.29%
- -------------------------------------------------------------------------------
Allowance for loan losses $ 389,358 0.57%
- -------------------------------------------------------------------------------
Loans, net $68,357,610 100.00%
- -------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
44
<PAGE>
Exhibit II-4
Description of Office Facilities
At June 30, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Location Ownership Net Book Value of Property or
Year Opened Improvements at 6/30/96
- --------------------------------------------------------------------------------
<S> <C> <C>
Main Office Land and building $274,299
1956
- --------------------------------------------------------------------------------
Plaza Branch Lease $ 5,110
1965
- --------------------------------------------------------------------------------
Ellerbe Land and building $ 35,210
1978
- --------------------------------------------------------------------------------
Southern Pines Land and building $744,210
1987
- --------------------------------------------------------------------------------
Laurinburg Lease N/A
1989
- --------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements and Records
45
<PAGE>
Exhibit II-5
Directors and Executive Officers
Richmond Savings Bank, S.S.B.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name Position
Year of Birth Director Since
- -------------------------------------------------------------------------------
<S> <C>
Russell E. Bennett Director
1926 1967-1970, 1982
- -------------------------------------------------------------------------------
R. Larry Campbell Director and President
1944 1990
- -------------------------------------------------------------------------------
Buena Vista Coggin Director
1928 1978
- -------------------------------------------------------------------------------
Joe M. McLaurin Director
1926 1978
- -------------------------------------------------------------------------------
John T. Page, Jr. Director and Vice Chairman
1924 1975
- -------------------------------------------------------------------------------
W. Jesse Spencer Director
1921 1988
- -------------------------------------------------------------------------------
Dr. J. Stanley Vetter Director and Chairman
1928 1970
- -------------------------------------------------------------------------------
E. E. Vuncannon, Jr. Director
1928 1969
- -------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Internal Documents
46
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT III-1
Profitability Analysis
For the Twelve Months Ended June 30, 1996
<TABLE>
<CAPTION>
Net Interest
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Income Aft. G&A Net Interest Core Net
Return on Return on Income/ Provision/ Expense/ Income/ Income/ Interest
Avg Assets Avg Equity Avg Assets Avg Assets Avg Assets G&A Expense Avg Assets Margin
Institution (%) (%) (%) (%) (%) (%) (%) (%)
- ----------- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
RICHMOND SAVINGS
Nine Months Ended 6/30/96 0.64 7.01 3.11 3.07 2.69 115.76 0.63 2.77
Comparative Group:
Maximum 1.48 8.14 4.13 4.07 3.58 250.60 1.51 4.29
Minimum 0.08 0.48 2.33 2.24 0.00 100.85 0.04 2.38
Average 1.00 5.30 3.58 3.56 2.20 164.93 0.98 3.72
Median 1.11 5.68 3.61 3.61 2.13 163.98 1.12 3.74
ASB Financial Corp. 1.02 4.52 3.44 3.44 2.04 168.52 1.02 3.56
Bedford Bancshares, Inc. 1.29 7.96 3.99 3.99 2.47 161.60 1.28 4.16
Wood Bancorp, Inc. 1.17 8.14 4.13 4.05 2.52 163.98 1.13 4.29
First Ashland Financial Corp 0.96 3.61 3.37 3.35 2.11 159.44 0.95 3.53
First Savings Financial Corp 0.08 0.48 2.33 2.24 2.16 107.87 0.04 2.38
Home Savings Bank of Siler Cty NA NA NA NA NA NA NA NA
KS Bancorp, Inc. 1.11 6.88 3.72 3.67 2.04 182.79 1.12 3.96
Piedmont Bancorp, Inc. 1.35 7.23 4.15 4.07 2.15 188.68 1.38 4.17
First Savings Bancorp, Inc. 1.48 5.68 3.61 3.61 1.44 250.60 1.51 3.68
SouthFirst Bancshares, Inc. 0.55 3.24 3.61 3.57 3.58 100.85 0.37 3.74
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: SNL Securities, L.P.
<PAGE>
EXHIBIT III-2
Income and Expense Analysis
For the Twelve Months Ended June 30, 1996
<TABLE>
<CAPTION>
As a Percent of Average Assets
Net Real Loan Amortization
Interest Interest Interest Loan Other Gain Estate Loss G&A of
Income Expense Income Fees Income On Sale Expense Provision Expense Intangibles
Institution (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 7.37 4.26 3.11 0.00 0.57 0.01 0.00 0.04 2.69 0.00
Comparative Group:
Maximum 8.03 4.53 4.15 0.28 0.60 0.12 0.00 0.09 3.58 0.01
Minimum 6.86 3.62 2.33 0.00 0.03 (0.04) (0.03) 0.00 1.44 0.00
Average 7.54 3.94 3.59 0.05 0.20 0.02 (0.00) 0.04 2.27 0.00
Median 7.46 3.79 3.61 0.00 0.14 0.01 0.00 0.04 2.11 0.00
ASB Financial Corp. 7.45 4.01 3.44 0.00 0.15 0.00 0.00 0.00 2.04 0.00
Bedford Bancshares, Inc. 7.76 3.77 3.99 0.28 0.24 0.01 (0.03) 0.00 2.47 0.00
Wood Bancorp, Inc. 7.92 3.79 4.13 0.00 0.26 0.06 0.00 0.08 2.52 0.00
First Ashland Financial Corp 7.15 3.79 3.37 0.04 0.06 0.02 0.00 0.01 2.11 0.00
First Savings Financial Corp 6.86 4.53 2.33 0.00 0.03 0.09 0.00 0.09 2.16 0.00
Home Savings Bank of Siler Cty NA NA NA NA NA NA NA NA NA NA
KS Bancorp, Inc. 8.03 4.31 3.72 0.00 0.16 (0.02) 0.00 0.05 2.04 0.01
Piedmont Bancorp, Inc. 7.95 3.79 4.15 0.12 0.13 (0.04) 0.00 0.08 2.10 0.00
First Savings Bancorp, Inc. 7.24 3.62 3.61 0.00 0.13 (0.04) (0.00) 0.00 1.44 0.00
SouthFirst Bancshares, Inc. 7.47 3.86 3.61 0.00 0.60 0.12 0.00 0.04 3.58 0.00
</TABLE>
(1) Specific figure was not available. Amount is included in appropriate other
income ratio.
Source: SNL Securities, L.P.
<PAGE>
EXHIBIT III-3
Yield-Cost Structure
For the Twelve Months Ended June 30, 1996
<TABLE>
<CAPTION>
Average Average
Int Earning Int Bearing
Assets/ Liabilities/ Net Yield on Cost of Interest
Average Average Interest Int Earning Int Bearing Yield
Assets Assets Position Assets Liabilities Spread
Institution (%) (%) (%) (%) (%) (%)
- ----------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 95.49 86.10 9.39 7.72 4.94 2.77
----------------------------------------------------------------------------------
Comparative Group:
Maximum 98.15 84.86 25.39 8.54 5.50 3.77
Minimum 94.03 72.75 11.25 7.00 4.47 1.51
Average 96.48 78.23 18.25 7.81 5.05 2.77
Median 96.59 78.28 16.64 7.74 4.98 2.97
ASB Financial Corp. 96.59 75.85 20.75 7.71 5.28 2.43
Bedford Bancshares, Inc. 96.01 78.47 17.54 8.08 4.80 3.28
Wood Bancorp, Inc. 96.11 84.86 11.25 8.24 4.47 3.77
First Ashland Financial Corp 95.48 72.75 22.73 7.49 5.21 2.28
First Savings Financial Corp 97.93 82.61 15.33 7.00 5.49 1.51
Home Savings Bank of Siler Cty NA NA NA NA NA NA
KS Bancorp, Inc. 94.03 78.28 15.74 8.54 5.50 3.04
Piedmont Bancorp, Inc. 97.39 77.50 19.90 8.16 4.93 3.23
First Savings Bancorp, Inc. 98.15 72.77 25.39 7.37 4.98 2.39
SouthFirst Bancshares, Inc. 96.60 80.96 15.63 7.74 4.77 2.97
</TABLE>
Source: SNL Securities, L.P.
<PAGE>
EXHIBIT III-4
Risk Measures
As of June 30, 1996
<TABLE>
<CAPTION>
NPAs + Loans Loan Loss
NPAs/ 90+ Pst Due/ NPLs/ NPAs/ Reserves/ Reserves/ Reserves/
Assets Assets Loans Equity Loans NPAs NPLs
Institution (%) (%) (%) (%) (%) (%) (%)
RICHMOND SAVINGS: (as of 6/30/96) 0.06 0.06 0.04 0.68 0.57 659.32 1,296.67
Comparative Group:
Maximum 1.48 1.48 1.46 6.40 1.30 936.92 1,764.29
Minimum 0.00 0.03 0.00 0.00 0.17 53.58 57.53
Average 0.35 0.64 0.43 1.70 0.63 365.71 488.72
Median 0.11 0.56 0.16 0.94 0.54 167.19 198.96
ASB Financial Corp. 1.48 1.48 1.46 6.40 1.30 53.58 89.56
Bedford Bancshares, Inc. 0.00 0.87 0.00 0.00 0.61 NM NM
Wood Bancorp, Inc. 0.04 0.18 0.03 0.28 0.46 851.72 1764.29
First Ashland Financial Corp NA NA NA NA 0.17 NA NM
First Savings Financial Corp 0.41 0.41 0.78 2.26 0.97 123.97 123.97
Home Savings Bank of Siler Cty 0.08 0.99 0.16 0.36 0.93 583.33 583.33
KS Bancorp, Inc. 0.51 0.51 0.62 3.46 0.36 57.53 57.53
Piedmont Bancorp, Inc. 0.44 0.72 0.61 1.47 0.66 108.24 80.21
First Savings Bancorp, Inc. 0.03 0.03 0.04 0.10 0.35 936.92 936.92
SouthFirst Bancshares, Inc. 0.14 0.56 0.16 0.94 0.45 210.40 273.96
<CAPTION>
Net Loan Intangible
Chargeoffs/ Loans/ Assets/
Avg Loans Assets Equity
Institution (%) (%) (%)
<S> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 0.01 72.64 0.00
Comparative Group:
Maximum 0.05 85.47 0.10
Minimum (0.43) 52.50 0.00
Average (0.03) 68.71 0.01
Median 0.00 69.37 0.00
ASB Financial Corp. 0.05 60.64 0.00
Bedford Bancshares, Inc. 0.00 85.47 0.00
Wood Bancorp, Inc. 0.00 76.37 0.00
First Ashland Financial Corp 0.00 72.12 0.00
First Savings Financial Corp (0.43) 52.50 0.00
Home Savings Bank of Siler Cty 0.00 53.21 0.00
KS Bancorp, Inc. 0.00 82.03 0.10
Piedmont Bancorp, Inc. 0.02 71.44 0.00
First Savings Bancorp, Inc. 0.00 67.30 0.00
SouthFirst Bancshares, Inc. 0.02 65.99 0.00
</TABLE>
Source: SNL Securities, L.P.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT III-5
Capital Structure
As of June 30, 1996
Intangible Tangible Regulatory Core Cap/ Total Cap/
Assets/ Deposits/ Borrowings/ Equity/ Equity/ Tang Cap/ Risk-Adj Risk-Adj
Equity Assets Assets Assets Tang Assets Assets Assets Assets
Institution (%) (%) (%) (%) (%) (%) (%) (%)
- ----------- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 0.00 88.95 0.00 9.18 9.18 9.69 17.62 18.41
Comparative Group:
Maximum 0.10 82.28 11.32 29.77 29.77 20.15 26.09 64.34
Minimum 0.00 58.71 0.17 14.60 14.60 12.11 12.11 23.03
Average 0.01 74.22 3.97 20.77 20.77 14.79 17.07 35.36
Median 0.00 73.74 2.36 20.65 20.65 12.78 16.33 36.25
ASB Financial Corp. 0.00 74.05 1.27 23.08 23.08 16.33 16.33 36.56
Bedford Bancshares, Inc. 0.00 77.29 6.57 15.22 15.22 12.78 12.78 23.22
Wood Bancorp, Inc. 0.00 82.28 2.41 14.60 14.60 12.11 12.11 23.51
First Ashland Financial Corp 0.00 69.82 2.31 27.21 27.21 20.15 20.15 40.58
First Savings Financial Corp 0.00 80.49 0.29 18.22 18.22 NA NA NA
Home Savings Bank of Siler Cty 0.00 73.43 1.16 23.72 23.72 NA NA NA
KS Bancorp, Inc. 0.10 81.24 3.21 15.16 14.78 NA NA NA
Piedmont Bancorp, Inc. 0.00 58.71 11.01 29.77 29.77 NA 19.49 36.25
First Savings Bancorp, Inc. 0.00 72.76 0.17 26.21 26.21 NA 26.09 64.34
SouthFirst Bancshares, Inc. 0.00 72.17 11.32 14.89 14.89 12.57 12.57 23.03
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: SNL Securities, L.P.
<PAGE>
<TABLE>
<CAPTION> EXHIBIT III-6
Financial Condition
As of June 30, 1996
As a Percent of Total Assets
Total Mortgage Investment & Goodwill &
Cash and Backed Gross Foreclosed Other
Investments Securities Loans Real Estate Intangibles
Institution (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 23.65 1.92 73.99 0.03 0.00
Comparative Group (1):
Maximum 44.18 11.14 84.71 0.63 0.02
Minimum 12.03 0.45 52.97 0.00 0.00
Average 22.66 4.79 70.32 0.09 0.00
Median 21.13 4.06 71.81 0.01 0.00
ASB Financial Corp. 22.33 11.14 63.97 0.63 0.00
Bedford Bancshares, Inc. 12.03 0.45 84.71 0.00 0.00
Wood Bancorp, Inc. 15.82 3.90 78.21 0.02 0.00
First Ashland Financial Corp 15.06 4.60 76.96 0.23 0.00
First Savings Financial Corp 44.18 1.20 52.97 0.00 0.00
Home Savings Bank of Siler Cty 34.58 10.90 53.22 0.00 0.00
KS Bancorp, Inc. 13.16 1.80 82.98 0.00 0.02
Piedmont Bancorp, Inc. 20.36 4.21 73.41 0.00 0.00
First Savings Bancorp, Inc. 27.15 1.44 70.21 0.03 0.00
SouthFirst Bancshares, Inc. 21.90 8.26 66.57 0.03 0.00
(1) Comparative Financial Information as of 3/31/96
Source: SNL Securities, L.P.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT III-6
Financial Condition
As of June 30, 1996
As a Percent of Total Assets
Total Borrowings/ Other Equity/
Deposits Assets Liabilities Assets
Institution (%) (%) (%) (%)
<S> <C> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 88.95 0.00 1.14 9.18
Comparative Group (1):
Maximum 84.27 13.73 2.23 23.72
Minimum 66.56 0.00 0.55 12.11
Average 77.02 2.54 1.21 17.04
Median 77.60 1.20 0.93 15.88
ASB Financial Corp. 79.21 1.06 1.81 16.58
Bedford Bancshares, Inc. 79.09 2.96 0.73 12.99
Wood Bancorp, Inc. 84.27 0.39 0.76 12.11
First Ashland Financial Corp 74.55 1.24 1.65 20.10
First Savings Financial Corp 82.45 1.33 1.05 15.17
Home Savings Bank of Siler Cty 73.44 1.16 1.68 23.72
KS Bancorp, Inc. 81.71 3.38 0.82 14.09
Piedmont Bancorp, Inc. 66.56 13.73 0.55 19.16
First Savings Bancorp, Inc. 76.10 0.18 0.81 22.92
SouthFirst Bancshares, Inc. 72.84 0.00 2.23 13.52
(1) Comparative Financial Information as of 3/31/96
Source: SNL Securities, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT III-7
Growth Rates
As of June 30, 1996
Quarter Ended 6/30/96, Annualized
Asset Loan Deposit
Growth Growth Growth
Rate Rate Rate
Institution (%) (%) (%)
<S> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) (4.88) (0.54) (6.62)
Comparative Group:
Maximum 16.31 25.26 19.32
Minimum (14.88) 11.40) (5.62)
Average 4.55 6.43 5.55
Median 6.81 5.83 5.48
ASB Financial Corp. 6.40 9.82 6.12
Bedford Bancshares, Inc. 14.24 15.60 5.17
Wood Bancorp, Inc. (1.89) 11.40) 10.27
First Ashland Financial Corp (14.88) (6.37) (5.62)
First Savings Financial Corp (1.73) 5.10 0.80
Home Savings Bank of Siler Cty 7.21 (1.72) 10.70
KS Bancorp, Inc. 16.31 16.39 19.32
Piedmont Bancorp, Inc. 7.72 6.53 0.80
First Savings Bancorp, Inc. (2.50) 5.13 2.15
SouthFirst Bancshares, Inc. 14.57 25.26 5.79
Source: SNL Securities, L.P.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT III-7
Growth Rates
As of June 30, 1996
LTM Ended June 30, 1996
Asset Loan Deposit
Growth Growth Growth
Rate Rate Rate
Institution (%) (%) (%)
<S> <C> <C> <C>
RICHMOND SAVINGS: (as of 6/30/96) 2.95 0.56 2.80
Comparative Group:
Maximum 22.20 17.89 12.05
Minimum (1.27) (4.49) (14.70)
Average 8.38 7.66 1.60
Median 7.00 7.38 1.20
ASB Financial Corp. 15.61 13.35 (1.36)
Bedford Bancshares, Inc. 8.92 6.96 8.45
Wood Bancorp, Inc. 5.90 (0.69) 12.05
First Ashland Financial Corp (1.27) 7.38 (14.70)
First Savings Financial Corp 8.56 (4.49) (2.04)
Home Savings Bank of Siler Cty NA NA NA
KS Bancorp, Inc. 7.00 11.54 10.35
Piedmont Bancorp, Inc. 22.20 6.71 (4.31)
First Savings Bancorp, Inc. 2.63 10.31 4.74
SouthFirst Bancshares, Inc. 5.84 17.89 1.20
Source: SNL Securities, L.P.
</TABLE>
<PAGE>
EXHIBIT III-8
Loan Portfolio Distribution
As of June 30, 1996
<TABLE>
<CAPTION>
Total Total Total 1-4 Family 5+ Family
Gross Loans in Construction Permanent Permanent
Loans Process Mort Loans Mort Loans Mort Loans
Institution ($000) ($000) ($000) ($000) ($000)
<S> <C> <C> <C> <C> <C>
RICHMOND SAVINGS (as of 6/30/96) 69,628 (881) 2,301 55,386 * 1,963
Comparative Group:
Maximum 172,502 (335) 17,838 156,683 8,240
Minimum 30,248 (7,431) 0 27,799 0
Average 79,368 (2,670) 3,887 67,428 1,624
Median 70,829 (168) 1,106 62,722 738
ASB Financial Corp. 67,950 (563) 547 47,890 8,240
Bedford Bancshares, Inc. 100,512 (3,240) 10,104 76,352 211
Wood Bancorp, Inc. 106,881 (1,781) 3,340 87,488 1,613
First Ashland Financial Corp 62,819 (335) 0 57,088 1,168
First Savings Financial Corp 30,984 NA 217 27,799 1,246
Home Savings Bank of Siler Cty 30,248 NA 321 28,690 58
KS Bancorp, Inc. 73,708 NA 4,296 68,355 299
Piedmont Bancorp, Inc. 89,210 NA 585 79,339 307
First Savings Bancorp, Inc. 172,502 NA 1,626 156,683 3,094
SouthFirst Bancshares, Inc. 58,868 (7,431) 17,838 44,596 0
<CAPTION>
Non-residential Total Total
(Except Land) Land Commercial Consumer
Mort Loans Mort Loans Loans Loans
Institution ($000) ($000) ($000) ($000)
<S> <C> <C> <C> <C>
RICHMOND SAVINGS (as of 6/30/96) NA NA * ** 9,978
Comparative Group:
Maximum 9,826 3,729 3,201 10,239
Minimum 44 0 0 80
Average 3,258 908 871 3,180
Median 2,302 0 237 1,844
ASB Financial Corp. 3,447 150 2,475 5,764
Bedford Bancshares, Inc. 4,479 3,729 1,961 6,916
Wood Bancorp, Inc. 2,226 555 3,201 10,239
First Ashland Financial Corp 2,377 106 0 2,415
First Savings Financial Corp 1,642 NA 0 80
Home Savings Bank of Siler Cty 781 NA 0 389
KS Bancorp, Inc. 526 NA 0 232
Piedmont Bancorp, Inc. 7,227 NA 602 1,141
First Savings Bancorp, Inc. 9,826 NA 0 1,273
SouthFirst Bancshares, Inc. 44 0 474 3,347
</TABLE>
* Total includes Multi family residential and commercial
** Total includes other loans and home equity lines of credit
Source: SNL Securities, L.P.
<PAGE>
EXHIBIT III-9
PUBLIC COMPANIES CONSIDERED FOR COMPARATIVE GROUP
REASONS FOR EXCLUSION
<TABLE>
<CAPTION>
LTM Return
Equity/ on Avg.
Ticker Short Name State Total Asset Assets Assets Reason For Exclusion
- ------ ---------- ----- ($000) (%) (%) --------------------
------ --- ---
Selected Comparative Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASBP ASB Financial Corp. OH 111,718 23.08 1.02
BFSB Bedford Bancshares, Inc. VA 121,783 15.22 1.29
FFWD Wood Bancorp, Inc. OH 139,718 14.60 1.17
FSBS First Ashland Financial Corp KY 86,860 27.21 0.96
FSVF First Savings Financial Corp NC 58,799 18.22 0.08
HSSC Home Savings Bank of Siler Cty NC 56,489 23.72 NA
KSAV KS Bancorp, Inc. NC 93,536 14.79 1.11
PDB Piedmont Bancorp, Inc. NC 128,711 29.77 1.35
SOPN First Savings Bancorp, Inc. NC 256,294 26.21 1.48
SZB SouthFirst Bancshares, Inc. AL 88,899 14.89 0.55
<CAPTION>
Excluded Institutions
- ---------------------
<S> <C> <C> <C> <C> <C> <C>
BRFC Bridgeville Savings Bank PA 55,712 28.51 1.24 Location
CBCO CB Bancorp, Inc. IN 195,658 9.87 1.38 Asset size
ETFS East Texas Financial Services TX 114,961 19.63 0.89 Location
FFBS FFBS BanCorp, Inc. MS 123,553 19.56 1.32 Location
FFWC FFW Corp. IN 148,892 10.80 0.90 Location
FLAG FLAG Financial Corp. GA 225,960 9.56 0.92 Asset size, low capital ratio
FSBC First Savings Bank, FSB NM 115,492 4.74 0.31 Location, low capital ratio
FSSB First FS&LA of San Bernardino CA 103,288 5.64 (0.17) Location, financial performance
GLBK Glendale Co-Operative Bank MA 36,677 15.82 0.77 Location
HBBI Home Building Bancorp IN 43,135 13.94 0.41 Location
HRBF Harbor Federal Bancorp, Inc. MD 201,030 13.82 0.56 Asset size
HZFS Horizon Financial Svcs Corp. IA 73,464 11.42 0.53 Location
INCB Indiana Community Bank, SB IN 94,476 14.98 0.67 Location
IPSW Ipswich Savings Bank MA 150,962 5.76 1.30 Location, low capital ratio
KSBK KSB Bancorp, Inc. ME 132,533 6.82 0.89 Location
LOAN Horizon Bancorp TX 130,930 8.55 1.47 Asset size, location
LSBI LSB Financial Corp. IN 162,520 10.66 0.83 Asset size, location
MBLF MBLA Financial Corp. MO 195,074 14.54 0.70 Asset size, location
MCBN Mid-Coast Bancorp, Inc. ME 55,048 9.04 0.60 Location
MFCX Marshalltown Financial Corp. IA 125,308 15.61 0.38 Location
MFFC Milton Federal Financial Corp. OH 178,289 18.93 1.04 Location
MFLR Mayflower Co-operative Bank MA 113,182 9.58 0.89 Location
MFSB Mutual Bancompany MO 53,311 11.70 0.20 Financial Performance, location
MIFC Mid-Iowa Financial Corp. IA 115,260 9.38 0.93 Location
MORG Morgan Financial Corp. CO 71,654 14.66 0.97 Location
MWBI Midwest Bancshares, Inc. IA 138,628 6.67 1.01 Location, low capital ratio
NBSI North Bancshares, Inc. IL 119,436 15.50 0.59 Financial performance, location
NFSL Newnan Savings Bank, FSB GA 160,656 11.58 1.89 Location, financial performance
NWEQ Northwest Equity Corp. WI 91,804 12.77 1.00 Location
PCBC Perry County Financial Corp. MO 78,480 20.05 1.00 Location
PTRS Potters Financial Corp. OH 114,714 9.24 0.51 Asset size, low capital ratio
SFFC StateFed Financial Corporation IA 76,705 19.46 1.19 Location
SHFC Seven Hills Financial Corp. OH 45,511 21.21 0.36 Financial Performance
SISB SIS Bancorp, Inc. MA 1,209,843 7.19 1.38 Asset size, location
SJSB SJS Bancorp MI 150,752 11.67 0.63 Asset size, location
SMBC Southern Missouri Bancorp, Inc MO 161,992 16.40 0.87 Asset size, location
THBC Troy Hill Bancorp, Inc. PA 80,484 22.20 1.38 Location
THIR Third Financial Corp. OH 155,911 18.38 1.37 Asset size, financial performance
THR Three Rivers Financial Corp. MI 85,138 15.32 NA Location, no financial performance data
TRIC Tri-County Bancorp, Inc. WY 76,718 16.17 0.95 Location
UBMT United Financial Corp. MT 104,574 23.53 1.50 Location, financial performance
</TABLE>
Source: SNL Securities, L.P.
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
- -------------------------------------------------------------------------------------------------------------
Advantage Bancorp, Inc. WI AADV 996719 33.5 113.66 128.99 148.23
Abington Savings Bank MA ABBK 483549 16.125 30.43 96.79 109.62
Anchor BanCorp Wisconsin WI ABCW 1754556 35 169.38 145.83 149.76
Affiliated Community Bancorp MA AFCB 983904 17.5 88.91 90.67 91.34
America First Financial Fund CA AFFFZ 2274053 29.25 175.81 113.11 115.57
Ambanc Holding Co., Inc. NY AHCI 392338 9.875 53.54 71.2 71.2
Ahmanson & Company (H.F.) CA AHM 49506630 26 2786.89 131.45 140.77
Albion Banc Corp. NY ALBC 56692 17.5 4.56 75.14 75.14
ALBANK Financial Corporation NY ALBK 3325592 26 345.49 109.11 123.52
American Federal Bank, FSB SC AMFB 1339147 16.25 177.61 164.47 178.38
AMB Financial Corp. IN AMFC 80533 10.375 11.66 NA NA
Acadiana Bancshares, Inc. LA ANA 225248 12 32.78 NA NA
American National Bancorp MD ANBK 449019 9.875 37.34 76.73 76.73
Andover Bancorp, Inc. MA ANDB 1173956 24.25 103.06 116.2 116.2
Ameriana Bancorp IN ASBI 402051 13.25 43.77 98.08 98.22
ASB Financial Corp. OH ASBP 112988 14.75 25.28 92.59 92.59
Astoria Financial Corporation NY ASFC 7078383 26.75 575.38 102.45 125.94
AmTrust Capital Corp. IN ATSB 73072 9.25 5.24 69.44 70.18
Avondale Financial Corp. IL AVND 592727 14 50.4 85.73 85.73
BankAtlantic Bancorp, Inc. FL BANC 1975287 11.875 185.3 125.13 135.4
First Federal Bancorporation MN BDJI 104969 13.75 10.7 76.9 76.9
BostonFed Bancorp, Inc. MA BFD 777997 12.375 81.55 85.05 85.05
Bedford Bancshares, Inc. VA BFSB 121783 17 19.74 100.24 100.24
BFS Bankorp, Inc. NY BFSI 621324 39.75 65.01 133.7 133.7
American Bank of Connecticut CT BKC 531638 26.25 60.03 133.25 140.22
Bankers Corp. NJ BKCO 1915528 17.75 227.1 120.83 123.44
Bancorp Connecticut, Inc. CT BKCT 405761 22 58.45 136.48 136.48
BankUnited Financial Corp. FL BKUNA 738491 7.25 39.52 91.42 96.8
Bank Plus Corp. CA BPLS 3296633 10.25 186.99 107.33 NA
Bridgeville Savings Bank PA BRFC 55712 15.25 17.14 107.93 107.93
Branford Savings Bank CT BSBC 178121 3.125 16.19 131.3 131.3
Bay View Capital Corp. CA BVFS 3388847 35.25 242.7 117.74 133.42
Bank West Financial Corp. MI BWFC 139217 11.75 25.63 98 98
Broadway Financial Corp. CA BYFC 115222 10 8.93 67.89 67.89
Camco Financial Corporation OH CAFI 343711 19 39.33 137.38 137.38
Cal Fed Bancorp, Inc. CA CAL 14045400 22.625 1117.58 163.59 163.59
Capital Savings Bancorp, Inc. MO CAPS 202554 19.75 19.5 97.1 97.1
Carver Federal Savings Bank NY CARV 362369 8 18.52 53.23 55.83
Cascade Financial Corp. WA CASB 326266 17 34.78 171.03 171.03
First Midwest Financial, Inc. IA CASH 342095 21.75 38.68 99.13 106.15
Catskill Financial Corp. NY CATB 231164 10.5 59.71 NA NA
Calumet Bancorp, Inc. IL CBCI 500814 27.813 67.38 83.7 83.7
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
- ------------------------------------------------------------------------------------------------------
Advantage Bancorp, Inc. WI AADV 11.4 13.96 14.08 0.96 9.44
Abington Savings Bank MA ABBK 6.29 9.38 18.12 2.48 6.5
Anchor BanCorp Wisconsin WI ABCW 9.84 12.15 12.96 1.43 6.75
Affiliated Community Bancorp MA AFCB 9.04 9.31 NA 2.74 9.85
America First Financial Fund CA AFFFZ 7.73 9.26 9.32 5.47 7.09
Ambanc Holding Co., Inc. NY AHCI 13.65 NM NA 0 19.17
Ahmanson & Company (H.F.) CA AHM 5.63 13 7.69 3.39 5.61
Albion Banc Corp. NY ALBC 8.05 20.83 26.12 1.75 10.71
ALBANK Financial Corporation NY ALBK 10.39 12.04 12.5 1.85 9.52
American Federal Bank, FSB SC AMFB 13.25 10.69 10.98 2.46 8.21
AMB Financial Corp. IN AMFC NA NA NA 0 20.05
Acadiana Bancshares, Inc. LA ANA NA NA NA 0 7.86
American National Bancorp MD ANBK 8.75 13.72 NA 0 10.92
Andover Bancorp, Inc. MA ANDB 8.78 8.79 9.51 2.47 7.56
Ameriana Bancorp IN ASBI 10.89 13.25 13.52 4.23 11.1
ASB Financial Corp. OH ASBP 22.38 19.41 21.38 2.71 22.7
Astoria Financial Corporation NY ASFC 8.13 12.16 11.73 1.65 7.93
AmTrust Capital Corp. IN ATSB 7.18 15.42 25.69 0 10.34
Avondale Financial Corp. IL AVND 8.5 13.46 15.05 0 9.92
BankAtlantic Bancorp, Inc. FL BANC 8.97 8.25 9.65 1.19 7.17
First Federal Bancorporation MN BDJI 10.2 12.73 15.63 0 13.26
BostonFed Bancorp, Inc. MA BFD 10.48 17.19 NA 1.62 11.43
Bedford Bancshares, Inc. VA BFSB 16.21 11.18 12.88 2.35 15.22
BFS Bankorp, Inc. NY BFSI 10.46 6.9 6.67 0 7.83
American Bank of Connecticut CT BKC 11.29 9.24 10.21 5.18 8.48
Bankers Corp. NJ BKCO 11.86 9.44 11.31 3.61 9.81
Bancorp Connecticut, Inc. CT BKCT 14.4 13.1 13.66 3.26 10.56
BankUnited Financial Corp. FL BKUNA 5.59 45.31 5.99 0 9.41
Bank Plus Corp. CA BPLS 5.67 64.06 NM 0 5.31
Bridgeville Savings Bank PA BRFC 30.77 23.83 25.42 2.1 28.51
Branford Savings Bank CT BSBC 11.51 13.02 13.59 0 8.75
Bay View Capital Corp. CA BVFS 7.16 14.69 121.55 1.7 6.08
Bank West Financial Corp. MI BWFC 19.38 22.6 26.11 2.38 19.78
Broadway Financial Corp. CA BYFC 7.75 NA NA 2 12.2
Camco Financial Corporation OH CAFI 11.44 8.48 9.41 2.31 8.33
Cal Fed Bancorp, Inc. CA CAL 7.96 7.86 10.98 0 4.86
Capital Savings Bancorp, Inc. MO CAPS 10.13 10.73 10.91 1.82 10.43
Carver Federal Savings Bank NY CARV 5.11 16.67 22.86 0 9.6
Cascade Financial Corp. WA CASB 10.63 14.66 22.08 0 6.21
First Midwest Financial, Inc. IA CASH 11.31 10.88 12.43 2.02 11.41
Catskill Financial Corp. NY CATB NA NA NA 0 12.75
Calumet Bancorp, Inc. IL CBCI 13.45 9.79 11.89 0 16.08
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
- ----------------------------------------------------------------------------------------------------------------
Advantage Bancorp, Inc. WI AADV 8.32 0.89 9.18 0.9 9.41
Abington Savings Bank MA ABBK 5.78 0.71 10.81 0.39 5.86
Anchor BanCorp Wisconsin WI ABCW 6.58 0.88 12.65 0.88 12.13
Affiliated Community Bancorp MA AFCB 9.78 1 9.97 0.74 6.71
America First Financial Fund CA AFFFZ 6.95 0.92 13.32 0.89 13.53
Ambanc Holding Co., Inc. NY AHCI 19.17 -0.3 -1.65 -0.03 -0.26
Ahmanson & Company (H.F.) CA AHM 5.34 0.55 9.6 0.92 15.79
Albion Banc Corp. NY ALBC 10.71 0.38 3.55 0.3 2.87
ALBANK Financial Corporation NY ALBK 8.51 0.94 9.78 0.97 9.5
American Federal Bank, FSB SC AMFB 7.62 1.3 15.72 1.29 15.99
AMB Financial Corp. IN AMFC 20.05 0.46 3.06 0.5 4.75
Acadiana Bancshares, Inc. LA ANA 7.86 NA NA -0.43 -5.23
American National Bancorp MD ANBK 10.92 0.61 5.49 0.34 3.88
Andover Bancorp, Inc. MA ANDB 7.56 1.01 13.19 0.97 12.72
Ameriana Bancorp IN ASBI 11.08 0.86 7.55 0.92 7.38
ASB Financial Corp. OH ASBP 22.7 1.09 4.76 1.01 4.3
Astoria Financial Corporation NY ASFC 6.55 0.68 8.28 0.74 8.56
AmTrust Capital Corp. IN ATSB 10.24 0.46 4.46 0.31 2.75
Avondale Financial Corp. IL AVND 9.92 0.64 6.22 0.62 5.81
BankAtlantic Bancorp, Inc. FL BANC 6.66 1.28 15.89 1.12 15.74
First Federal Bancorporation MN BDJI 13.26 0.79 5.8 0.7 4.74
BostonFed Bancorp, Inc. MA BFD 11.43 0.62 4.98 0.49 4.66
Bedford Bancshares, Inc. VA BFSB 15.22 1.42 9.12 1.29 7.96
BFS Bankorp, Inc. NY BFSI 7.83 1.69 21.29 1.84 24.09
American Bank of Connecticut CT BKC 8.09 1.27 14.6 1.24 13.7
Bankers Corp. NJ BKCO 9.62 1.31 13.3 1.13 11.42
Bancorp Connecticut, Inc. CT BKCT 10.56 1.2 11.13 1.18 10.7
BankUnited Financial Corp. FL BKUNA 9.1 0.42 5.01 1.12 14.68
Bank Plus Corp. CA BPLS NA 0.08 1.33 -1.74 -30.56
Bridgeville Savings Bank PA BRFC 28.51 1.21 4.24 1.24 4.17
Branford Savings Bank CT BSBC 8.75 0.96 10.97 0.86 10
Bay View Capital Corp. CA BVFS 5.41 0.54 8.23 0.06 0.85
Bank West Financial Corp. MI BWFC 19.78 0.78 3.95 0.69 3.41
Broadway Financial Corp. CA BYFC 12.2 0.39 4.64 0.41 6.78
Camco Financial Corporation OH CAFI 8.33 1.34 16.46 1.22 15.56
Cal Fed Bancorp, Inc. CA CAL 4.86 1.02 21.74 0.82 14.79
Capital Savings Bancorp, Inc. MO CAPS 10.43 0.92 8.68 0.95 8.96
Carver Federal Savings Bank NY CARV 9.2 0.29 3.05 0.21 2.15
Cascade Financial Corp. WA CASB 6.21 0.81 12.79 0.56 8.9
First Midwest Financial, Inc. IA CASH 10.74 1.09 9.16 1.06 8.14
Catskill Financial Corp. NY CATB 12.75 0.93 7.39 NA NA
Calumet Bancorp, Inc. IL CBCI 16.08 1.53 9.23 1.31 7.85
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION> ---------------------
Total Current Current Current
Assets Stock Market ---------------------
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
- ----------- ----- ------ ----- --- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
=============================================================================================================
CB Bancorp, Inc. IN CBCO 195658 17.25 20.27 104.93 104.93
Community Bank Shares IN CBIN 223914 13.75 27.28 107 107
Citizens First Financial Corp. IL CBK 232196 10.5 29.58 NA NA
Community Bankshares, Inc. NH CBNH 546725 18.563 44.98 119.07 119.07
Coastal Bancorp, Inc. TX CBSA 2796568 17.75 88.08 93.97 113.56
Charter Financial, Inc. IL CBSB 300812 11 51.98 84.94 87.16
CCF Holding Company GA CCFH 78772 12.375 13.99 83.67 83.67
Central Co-Operative Bank MA CEBK 310949 17 33.41 107.46 123.19
CENFED Financial Corp. CA CENF 2148344 22.75 114.67 106.96 107.21
Commercial Federal Corporation NE CFB 6607670 38.25 577.18 139.65 154.92
Coastal Financial Corp. SC CFCP 452809 20 68.73 248.76 248.76
Center Financial Corporation CT CFCX 4018341 24.563 368.79 157.66 168.01
Community Financial Corp. VA CFFC 158835 21.5 27.35 122.65 122.65
California Financial Holding CA CFHC 1327178 21.875 102.56 117.99 118.69
CFSB Bancorp, Inc. MI CFSB 791610 20.125 89.89 138.13 138.13
Community Federal Bancorp MS CFTP 201650 13 60.17 90.47 90.47
CFX Corporation NH CFX 1025771 13.25 100.25 107.99 120.35
Community Investors Bancorp OH CIBI 85785 15.375 10.78 90.82 90.82
Central Jersey Financial NJ CJFC 468272 32.375 86.39 155.35 166.71
CKF Bancorp, Inc. KY CKFB 58763 19.5 19.39 113.31 113.31
Classic Bancshares, Inc. KY CLAS 66083 12.125 16.04 82.26 82.26
Cameron Financial Corp MO CMRN 172484 14 39.9 80.97 80.97
Commonwealth Bancorp, Inc. PA CMSB 1657690 10.5 188.23 NA NA
Community Savings, MHC FL CMSV 632507 16 77.9 104.23 104.23
CENIT Bancorp, Inc. VA CNIT 655771 32.688 52.74 110.51 114.61
CNS Bancorp, Inc. MO CNSB 85390 11.75 19.42 NA NA
Covenant Bank for Savings NJ CNSK 354822 12.5 24.5 144.51 144.51
Collective Bancorp, Inc. NJ COFD 5145471 24 488.98 134.23 143.8
Charter One Financial OH COFI 13951846 36.25 1631.6 174.61 188.9
Cooperative Bankshares, Inc. NC COOP 316654 17.25 25.73 87.25 98.85
Circle Financial Corp. OH CRCL 229406 37 26.2 107.22 123.62
Crazy Woman Creek Bancorp WY CRZY 50324 10.125 10.71 69.3 69.3
Coast Savings Financial CA CSA 8350710 33 613.26 142.67 144.93
CSB Financial Group, Inc. IL CSBF 41211 9.125 9.44 74.19 74.19
Center Banks Incorporated NY CTBK 220373 13.5 12.75 82.27 82.27
CitFed Bancorp, Inc. OH CTZN 2661006 37.75 214.85 122.56 140.6
Chester Valley Bancorp Inc. PA CVAL 274575 18.5 29.04 116.28 116.28
CitiSave Financial Corp LA CZF 76128 13.875 13.39 97.3 97.37
Damen Financial Corp. IL DFIN 235320 11.25 42.19 78.45 78.45
Dime Financial Corp. CT DIBK 688993 15.375 78.44 138.76 145.46
Dime Community Bancorp, Inc. NY DIME 1371821 12.625 183.66 86.18 99.33
Dime Bancorp, Inc. NY DME 19544289 13 1382.01 139.34 140.69
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
- ----------- ----- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
=====================================================================================================
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
=====================================================================================================
CB Bancorp, Inc. IN CBCO 10.36 7.7 8.21 0 9.87
Community Bank Shares IN CBIN 12.18 14.32 NA 2.47 11.38
Citizens First Financial Corp. IL CBK NA NA NA 0 6.79
Community Bankshares, Inc. NH CBNH 8.23 9.28 10.73 3.23 6.94
Coastal Bancorp, Inc. TX CBSA 3.15 7.4 8.29 2.25 3.4
Charter Financial, Inc. IL CBSB 18.19 13.1 NA 2.18 21.41
CCF Holding Company GA CCFH 17.76 18.2 NA 3.23 21.23
Central Co-Operative Bank MA CEBK 10.74 NM 26.56 0 10
CENFED Financial Corp. CA CENF 5.34 9.64 10.11 1.58 4.99
Commercial Federal Corporation NE CFB 8.74 9.19 10.25 1.05 6.25
Coastal Financial Corp. SC CFCP 15.18 14.71 16.13 2.2 6.1
Center Financial Corporation CT CFCX 9.18 11.37 13.42 1.14 5.82
Community Financial Corp. VA CFFC 17.22 12.5 13.27 2.42 14.04
California Financial Holding CA CFHC 7.73 9.11 14.3 2.01 6.55
CFSB Bancorp, Inc. MI CFSB 11.36 12.58 12.66 2.39 8.22
Community Federal Bancorp MS CFTP 29.84 16.25 NA 2.31 32.99
CFX Corporation NH CFX 9.77 9.74 10.86 0 9.05
Community Investors Bancorp OH CIBI 12.57 13.25 12.2 2.6 13.84
Central Jersey Financial NJ CJFC 18.45 16.86 16.52 3.46 11.88
CKF Bancorp, Inc. KY CKFB 32.99 27.08 25.66 2.26 27.29
Classic Bancshares, Inc. KY CLAS 24.26 37.89 NA 0 29.51
Cameron Financial Corp MO CMRN 23.13 17.5 NA 2 26.54
Commonwealth Bancorp, Inc. PA CMSB NA NA NA 2.37 8.31
Community Savings, MHC FL CMSV 12.32 15.38 16 5 11.82
CENIT Bancorp, Inc. VA CNIT 8.04 11.19 17.57 2.45 7.28
CNS Bancorp, Inc. MO CNSB NA NA NA 0 10.75
Covenant Bank for Savings NJ CNSK 6.9 14.2 15.63 0 6.93
Collective Bancorp, Inc. NJ COFD 9.5 8.33 8.99 4.17 7.08
Charter One Financial OH COFI 11.69 10.07 31.8 2.54 6.7
Cooperative Bankshares, Inc. NC COOP 8.13 22.7 30.26 0 9.31
Circle Financial Corp. OH CRCL 11.42 23.72 25.69 1.84 10.65
Crazy Woman Creek Bancorp WY CRZY 21.28 18.08 NA 1.98 30.71
Coast Savings Financial CA CSA 7.34 20.12 15.35 0 5.15
CSB Financial Group, Inc. IL CSBF 22.92 25.35 NA 0 30.89
Center Banks Incorporated NY CTBK 5.78 12.05 10.47 1.78 7.03
CitFed Bancorp, Inc. OH CTZN 8.07 11.1 12.71 0.85 6.59
Chester Valley Bancorp Inc. PA CVAL 10.64 11.28 12.01 2.38 9.15
CitiSave Financial Corp LA CZF 17.58 15.08 NA 2.16 16.73
Damen Financial Corp. IL DFIN 18.97 17.58 NA 2.13 24.18
Dime Financial Corp. CT DIBK 11.38 6.41 7.25 2.08 8.2
Dime Community Bancorp, Inc. NY DIME 13.39 NA NA 0 15.53
Dime Bancorp, Inc. NY DME 7.07 12.04 18.06 0 5.08
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
- ----------- ----- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
================================================================================================================
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
================================================================================================================
CB Bancorp, Inc. IN CBCO 9.87 1.41 14.85 1.38 14.64
Community Bank Shares IN CBIN 11.38 0.87 7.12 0.91 7.91
Citizens First Financial Corp. IL CBK 6.79 0.57 8.39 0.43 6.49
Community Bankshares, Inc. NH CBNH 6.94 0.95 13.21 0.81 11.11
Coastal Bancorp, Inc. TX CBSA 2.83 0.43 12.81 0.4 11.69
Charter Financial, Inc. IL CBSB 20.97 1.35 7.02 1.11 7.88
CCF Holding Company GA CCFH 21.23 0.95 4.46 0.85 5.07
Central Co-Operative Bank MA CEBK 8.84 -0.22 -2.23 0.38 3.94
CENFED Financial Corp. CA CENF 4.98 0.58 11.54 0.55 11.33
Commercial Federal Corporation NE CFB 5.67 0.96 15.52 0.84 14.74
Coastal Financial Corp. SC CFCP 6.1 1.1 18.12 1.04 17.09
Center Financial Corporation CT CFCX 5.48 0.83 14.1 0.73 12.12
Community Financial Corp. VA CFFC 14.04 1.38 9.96 1.31 9.62
California Financial Holding CA CFHC 6.51 0.89 13.41 0.57 8.53
CFSB Bancorp, Inc. MI CFSB 8.22 0.95 11.45 0.96 11.7
Community Federal Bancorp MS CFTP 32.99 1.68 5.08 1.29 6.12
CFX Corporation NH CFX 8.19 1.04 11.31 1 10.23
Community Investors Bancorp OH CIBI 13.84 0.93 6.5 1.01 6.98
Central Jersey Financial NJ CJFC 11.16 1.13 9.53 1.13 10.41
CKF Bancorp, Inc. KY CKFB 27.29 1.16 4.15 1.24 4.39
Classic Bancshares, Inc. KY CLAS 29.51 0.62 2.11 0.46 2.18
Cameron Financial Corp MO CMRN 26.54 1.33 4.77 1.6 5.72
Commonwealth Bancorp, Inc. PA CMSB 7.37 0.69 7.71 0.78 8.41
Community Savings, MHC FL CMSV 11.82 0.83 6.77 0.84 6.62
CENIT Bancorp, Inc. VA CNIT 7.03 0.75 10.39 0.48 6.67
CNS Bancorp, Inc. MO CNSB 10.75 NA NA 0.22 2.14
Covenant Bank for Savings NJ CNSK 6.93 0.75 10.69 0.76 9.79
Collective Bancorp, Inc. NJ COFD 6.64 1.14 16.22 1.07 15.71
Charter One Financial OH COFI 6.22 1.22 17.8 0.42 6.39
Cooperative Bankshares, Inc. NC COOP 8.31 0.38 4.03 0.29 3.14
Circle Financial Corp. OH CRCL 9.37 0.51 4.67 0.49 4.32
Crazy Woman Creek Bancorp WY CRZY 30.71 1.08 3.49 NA NA
Coast Savings Financial CA CSA 5.07 0.37 7.3 0.49 9.9
CSB Financial Group, Inc. IL CSBF 30.89 0.78 2.51 0.84 4.03
Center Banks Incorporated NY CTBK 7.03 0.48 6.83 0.57 8.15
CitFed Bancorp, Inc. OH CTZN 5.79 0.78 11.58 0.71 10.2
Chester Valley Bancorp Inc. PA CVAL 9.15 0.94 10.25 0.91 10.03
CitiSave Financial Corp LA CZF 16.72 1.05 5.7 1.21 6.68
Damen Financial Corp. IL DFIN 24.18 1 4.15 NA NA
Dime Financial Corp. CT DIBK 7.86 1.79 22.47 1.64 21.02
Dime Community Bancorp, Inc. NY DIME 13.76 0.5 3.23 0.62 4.32
Dime Bancorp, Inc. NY DME 5.03 0.59 11.72 0.38 7.94
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
- -------------------------------------------------------------------------------------------------------------
D & N Financial Corp. MI DNFC 1364024 12.875 97.4 125 126.72
DS Bancor, Inc. CT DSBC 1257432 36.75 111.41 132.24 136.46
Downey Financial Corp. CA DSL 4712294 23.125 392.5 100.15 101.87
Eastern Bancorp NH EBCP 840534 17.938 65.5 100.95 106.9
Eagle Bancshares GA EBSI 611512 15.75 71.7 125.4 125.4
Enterprise Federal Bancorp OH EFBI 203431 12.75 26.38 84.49 84.66
Eagle Financial Corp. CT EGFC 1402417 24.875 112.35 109.77 150.3
Eagle BancGroup, Inc. IL EGLB 150974 11.688 15.23 NA NA
Equitable Federal Savings Bank MD EQSB 267776 25 15 105.75 105.75
Elmira Savings Bank (The) NY ESBK 223165 16.5 11.65 83.84 87.77
Essex Bancorp, Inc. VA ESX 315568 2 2.1 25.91 NM
East Texas Financial Services TX ETFS 114961 15 17.01 79.32 79.32
First Bell Bancorp, Inc. PA FBBC 570649 13.875 107.64 97.44 97.44
Fidelity Bancorp, Inc. IL FBCI 456896 16 46.89 94.17 94.51
1ST Bancorp IN FBCV 263483 29 19.33 88.96 88.96
1st Bergen Bancorp NJ FBER 252173 9.875 31.34 72.24 72.24
Fort Bend Holding Corp. TX FBHC 254739 17 13.93 77.34 77.34
First Bancshares, Inc. MO FBSI 140471 16 20.3 87.62 87.82
Falmouth Co-Operative Bank MA FCB 88498 10.875 15.82 72.74 72.74
FCB Financial Corp. WI FCBF 255660 17.75 43.66 94.52 94.52
First Citizens Financial Corp. MD FCIT 624118 17.125 49.92 127.32 127.32
First Defiance Financial OH FDEF 520666 10.188 106.29 83.92 83.92
FirstFed Financial Corp. CA FED 4104854 17.75 186.53 98.83 100.51
First Essex Bancorp, Inc. MA FESX 842903 11.125 67.26 107.9 107.9
First Colorado Bancorp, Inc. CO FFBA 1501330 14 281.88 115.04 116.38
First Federal Bancshares of AR AR FFBH 466101 13.5 69.58 NA NA
First Financial Bancorp, Inc. IL FFBI 88615 15.5 7.31 92.98 92.98
FFBS BanCorp, Inc. MS FFBS 123553 19.75 31.06 120.21 120.21
First Federal Bancorp, Inc. OH FFBZ 177778 23.5 18.44 139.55 139.71
First Financial Holdings Inc. SC FFCH 1523224 20.25 129.14 132.7 132.7
FFD Financial Corp. OH FFDF 76159 10.375 15.09 NA NA
FirstFed Bancshares IL FFDP 635096 16.5 56.09 102.36 107.21
First Fed Bncshrs Eau Claire WI FFEC 706672 15 102.83 105.49 109.81
Fidelity Federal Bancorp IN FFED 280138 10.75 26.82 188.6 188.6
First Federal of East Hartford CT FFES 947807 17.625 45.77 80.3 80.52
FFVA Financial Corp. VA FFFC 522811 17 88.08 100.71 102.84
North Central Bancshares, Inc. IA FFFD 194283 11.5 46.13 82.73 82.73
F.F.O. Financial Group, Inc. FL FFFG 305683 2.625 22.13 120.41 120.41
Fidelity FSB of Florida, MHC FL FFFL 791897 12.25 82.32 100.57 101.83
First Financial Corp. WI FFHC 5579294 23 687.82 168.62 176.79
FSF Financial Corp. MN FFHH 331395 11.5 39.99 73.81 73.81
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
- ------------------------------------------------------------------------------------------------------
D & N Financial Corp. MI DNFC 7.14 7.85 7.36 0 5.79
DS Bancor, Inc. CT DSBC 8.86 12.09 13.03 0.65 6.7
Downey Financial Corp. CA DSL 8.33 12.3 12.11 2.08 8.32
Eastern Bancorp NH EBCP 7.79 13.19 11.35 3.12 7.72
Eagle Bancshares GA EBSI 11.72 11.93 10.29 3.81 9.35
Enterprise Federal Bancorp OH EFBI 13.07 13.28 12.75 0 15.47
Eagle Financial Corp. CT EGFC 8.01 10.03 6.93 3.7 7.3
Eagle BancGroup, Inc. IL EGLB NA NA NA 0 7.63
Equitable Federal Savings Bank MD EQSB 5.6 7.35 7.96 0 5.3
Elmira Savings Bank (The) NY ESBK 5.22 37.5 33.67 3.88 6.23
Essex Bancorp, Inc. VA ESX 0.67 12.5 NM 0 7.32
East Texas Financial Services TX ETFS 15.57 19.74 16.3 1.33 19.63
First Bell Bancorp, Inc. PA FBBC 19.86 11.19 12.61 1.44 20.37
Fidelity Bancorp, Inc. IL FBCI 10.26 14.29 16.33 1.5 10.9
1ST Bancorp IN FBCV 7.34 13.94 3.36 1.38 8.25
1st Bergen Bancorp NJ FBER 12.43 NA NA 0 17.21
Fort Bend Holding Corp. TX FBHC 5.47 10.63 9.55 1.65 7.07
First Bancshares, Inc. MO FBSI 14.83 16.67 17.78 1.25 16.92
Falmouth Co-Operative Bank MA FCB 17.88 22.66 NA 0 24.57
FCB Financial Corp. WI FCBF 17.44 16.44 17.57 4.06 18.46
First Citizens Financial Corp. MD FCIT 8 12.59 12.88 0 6.28
First Defiance Financial OH FDEF 20.41 15.92 NA 2.75 24.32
FirstFed Financial Corp. CA FED 4.54 13.87 19.51 0 4.6
First Essex Bancorp, Inc. MA FESX 7.98 7.95 8.43 4.32 7.4
First Colorado Bancorp, Inc. CO FFBA 18.77 13.46 NA 2.29 16.32
First Federal Bancshares of AR AR FFBH NA NA NA 0 7.78
First Financial Bancorp, Inc. IL FFBI 8.25 129.17 13.72 0 8.88
FFBS BanCorp, Inc. MS FFBS 25.14 17.63 18.46 2.53 19.56
First Federal Bancorp, Inc. OH FFBZ 10.37 8.64 10.13 1.87 7.89
First Financial Holdings Inc. SC FFCH 8.48 10.77 11.57 3.16 6.39
FFD Financial Corp. OH FFDF NA NA NA 1.93 10.9
FirstFed Bancshares IL FFDP 8.83 51.56 17.74 2.42 8.63
First Fed Bncshrs Eau Claire WI FFEC 14.55 15.63 17.44 1.87 13.79
Fidelity Federal Bancorp IN FFED 9.57 13.44 8.53 7.44 5.08
First Federal of East Hartford CT FFES 4.83 8.01 9.28 3.4 6.01
FFVA Financial Corp. VA FFFC 16.85 13.28 14.05 2.35 15.58
North Central Bancshares, Inc. IA FFFD 23.74 11.06 NA 2.17 28.69
F.F.O. Financial Group, Inc. FL FFFG 7.24 65.63 17.5 0 6.02
Fidelity FSB of Florida, MHC FL FFFL 10.4 13.92 16.78 4.9 10.24
First Financial Corp. WI FFHC 12.33 9.91 9.79 2.61 7.31
FSF Financial Corp. MN FFHH 12.07 13.69 20.18 4.35 14.37
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
- ----------------------------------------------------------------------------------------------------------------
D & N Financial Corp. MI DNFC 5.71 1.01 17.23 1.08 19.53
DS Bancor, Inc. CT DSBC 6.51 0.78 11.56 0.72 10.98
Downey Financial Corp. CA DSL 8.19 0.68 8.1 0.69 8.44
Eastern Bancorp NH EBCP 7.32 0.63 8.14 0.72 9.6
Eagle Bancshares GA EBSI 9.35 0.86 10.69 0.98 13.09
Enterprise Federal Bancorp OH EFBI 15.44 0.91 5.88 1.03 5.52
Eagle Financial Corp. CT EGFC 5.44 0.83 11.37 1.27 17.56
Eagle BancGroup, Inc. IL EGLB 7.63 NA NA -0.05 -0.68
Equitable Federal Savings Bank MD EQSB 5.3 0.81 15.35 0.78 14.98
Elmira Savings Bank (The) NY ESBK 5.97 0.14 2.21 0.15 2.4
Essex Bancorp, Inc. VA ESX 4.8 0.71 10.57 0.32 6.11
East Texas Financial Services TX ETFS 19.63 0.74 3.81 0.89 4.58
First Bell Bancorp, Inc. PA FBBC 20.37 1.64 7.93 1.62 7.34
Fidelity Bancorp, Inc. IL FBCI 10.87 0.76 6.42 0.74 5.88
1ST Bancorp IN FBCV 8.25 0.52 6.42 2.05 29.45
1st Bergen Bancorp NJ FBER 17.21 0.77 4.59 NA NA
Fort Bend Holding Corp. TX FBHC 7.07 0.65 9.12 0.7 9.62
First Bancshares, Inc. MO FBSI 16.9 0.82 4.79 0.79 4.42
Falmouth Co-Operative Bank MA FCB 24.57 0.79 3.21 NA NA
FCB Financial Corp. WI FCBF 18.46 1.06 5.58 1.03 5.37
First Citizens Financial Corp. MD FCIT 6.28 0.7 11.04 0.71 11.36
First Defiance Financial OH FDEF 24.32 1.28 5.16 1.21 3.29
FirstFed Financial Corp. CA FED 4.53 0.33 7.08 0.23 4.98
First Essex Bancorp, Inc. MA FESX 7.4 1.03 13.63 0.99 13.34
First Colorado Bancorp, Inc. CO FFBA 16.16 1.32 8.09 1.09 8.16
First Federal Bancshares of AR AR FFBH 7.78 0.82 10.54 NA NA
First Financial Bancorp, Inc. IL FFBI 8.88 0.06 0.61 0.7 6.53
FFBS BanCorp, Inc. MS FFBS 19.56 1.43 7.13 1.32 4.5
First Federal Bancorp, Inc. OH FFBZ 7.88 1.32 16.84 1.14 15.12
First Financial Holdings Inc. SC FFCH 6.39 0.81 12.53 0.78 11.81
FFD Financial Corp. OH FFDF 10.9 0.88 7.34 0.87 6.92
FirstFed Bancshares IL FFDP 8.27 0.18 2.04 0.58 6.32
First Fed Bncshrs Eau Claire WI FFEC 13.32 0.89 6.38 0.87 5.7
Fidelity Federal Bancorp IN FFED 5.08 0.83 15.62 1.29 25.83
First Federal of East Hartford CT FFES 6 0.63 10.37 0.57 8.65
FFVA Financial Corp. VA FFFC 15.31 1.32 8.13 1.24 7.51
North Central Bancshares, Inc. IA FFFD 28.69 2.09 7.27 1.64 8.13
F.F.O. Financial Group, Inc. FL FFFG 6.02 0.07 1.21 0.45 6.83
Fidelity FSB of Florida, MHC FL FFFL 10.13 0.76 7.34 0.65 6.23
First Financial Corp. WI FFHC 7 1.29 17.41 1.31 18.55
FSF Financial Corp. MN FFHH 14.37 0.82 5.49 0.64 3.79
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
- -------------------------------------------------------------------------------------------------------------
First Franklin Corporation OH FFHS 216508 14.5 16.9 83.29 84.16
Flushing Financial Corp NY FFIC 766632 18.125 156.33 113.35 113.35
First Federal Financial Corp. KY FFKY 352671 21.5 90.48 181.13 193.87
FFLC Bancorp, Inc. FL FFLC 332087 18.375 48.12 85.31 85.31
First Family Financial Corp. FL FFML 159049 21.5 11.72 131.26 131.26
Fidelity Financial of Ohio OH FFOH 251188 10 40.74 79.74 79.74
First Palm Beach Bancorp, Inc. FL FFPB 1438024 21.375 110.75 97.47 99.98
Florida First Bancorp, Inc. FL FFPC 302689 11.125 37.65 176.31 176.31
Fidelity Financial Bankshares VA FFRV 325814 13 29.79 106.38 106.47
First Independence Corp. KS FFSL 105771 18.5 10.79 82.7 82.7
FirstFederal Financial Svcs OH FFSW 1044608 30 107.51 198.81 245.1
First Fed SB of Siouxland, MHC IA FFSX 443632 25 42.68 115.79 116.93
FFW Corp. IN FFWC 148892 19.5 14.41 89.61 89.61
Wood Bancorp, Inc. OH FFWD 139718 13.094 20.19 99.65 99.65
First Financial-W. Maryland MD FFWM 326489 22.5 48.98 120.32 120.32
FFY Financial Corp. OH FFYF 573162 24 121.95 118.52 118.52
First Georgia Holding, Inc. GA FGHC 144022 6.25 12.65 105.57 118.6
Financial Bancorp, Inc. NY FIBC 262497 14.75 26.49 101.03 NA
First Indiana Corporation IN FISB 1473094 23.125 191.81 141.01 142.92
First Keystone Financial PA FKFS 278204 16.75 21.65 93.94 93.94
Frankfort First Bancorp, Inc. KY FKKY 138616 11.25 38.81 81.11 81.11
FLAG Financial Corp. GA FLAG 225960 12 24.1 111.63 111.63
First Liberty Financial Corp. GA FLFC 981694 21 84.05 124.7 148.51
First Lancaster Bancshares KY FLKY 33812 14.125 13.54 NA NA
First Mutual Bancorp, Inc. IL FMBD 301690 12.75 52.61 75.76 75.76
FMS Financial Corporation NJ FMCO 517943 15.875 39.17 114.13 116.99
Farmers & Mechanics Bank CT FMCT 536955 30.75 51.09 171.31 171.31
Family Bancorp MA FMLY 925239 25.75 108.54 155.12 168.74
First Mutual Savings Bank WA FMSB 370986 14 34.25 139.03 139.03
First Northern Capital Corp. WI FNGB 580128 15.375 67.57 95.5 95.5
Financial Security Corp. IL FNSC 258452 26 40.32 101.21 101.21
Fed One Bancorp WV FOBC 343028 14 35.81 83.68 88.22
First Republic Bancorp CA FRC 2064209 13 95.59 83.55 83.66
First Savings Bank, FSB NM FSBC 115492 5.625 3.91 71.56 71.56
Fidelity Bancorp, Inc. PA FSBI 317315 16.25 22.25 103.31 103.83
First Ashland Financial Corp KY FSBS 86860 17.875 26.15 110.68 110.68
First Southeast Financial Corp SC FSFC 326573 9.438 41.42 123.05 123.05
First State Financial Services NJ FSFI 628684 13.375 53.83 125.12 132.03
First Savings Bank, MHC NJ FSLA 959356 15.75 102.56 112.66 129.84
First Savings Bk of NJ, MHC NJ FSNJ 651945 14.063 43.07 86.97 86.97
First Home Bancorp, Inc. NJ FSPG 479314 17.75 36.03 116.85 119.77
First FS&LA of San Bernardino CA FSSB 103288 10 3.28 56.34 59
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
- ------------------------------------------------------------------------------------------------------
First Franklin Corporation OH FFHS 7.8 13.43 13.55 2.21 9.37
Flushing Financial Corp NY FFIC 20.39 22.66 NA 0 17.99
First Federal Financial Corp. KY FFKY 25.66 17.92 16.54 2.23 14.16
FFLC Bancorp, Inc. FL FFLC 14.49 14.82 15.71 2.18 16.98
First Family Financial Corp. FL FFML 7.37 8.27 8.37 0.74 5.61
Fidelity Financial of Ohio OH FFOH 16.22 15.63 NA 2 20.34
First Palm Beach Bancorp, Inc. FL FFPB 7.7 10.08 11.19 1.87 7.9
Florida First Bancorp, Inc. FL FFPC 12.44 13.91 13.73 2.16 7.05
Fidelity Financial Bankshares VA FFRV 9.14 8.55 9.49 1.54 8.6
First Independence Corp. KS FFSL 10.2 11.01 10.05 2.16 12.34
FirstFederal Financial Svcs OH FFSW 10.29 12.5 15.31 1.6 7.93
First Fed SB of Siouxland, MHC IA FFSX 9.62 12.76 13.97 2.88 8.31
FFW Corp. IN FFWC 9.68 9.2 11.47 3.08 10.8
Wood Bancorp, Inc. OH FFWD 14.54 12.59 12.47 1.83 14.6
First Financial-W. Maryland MD FFWM 15.08 12.5 34.62 2.13 12.53
FFY Financial Corp. OH FFYF 21.75 18.75 17.78 2.5 18.35
First Georgia Holding, Inc. GA FGHC 8.78 9.77 10.78 0 8.3
Financial Bancorp, Inc. NY FIBC 10.09 12.72 17.15 2.03 9.99
First Indiana Corporation IN FISB 13.02 10.32 11.34 2.42 9.24
First Keystone Financial PA FKFS 7.78 10.47 15.8 0 8.28
Frankfort First Bancorp, Inc. KY FKKY 28 21.63 NA 3.2 34.51
FLAG Financial Corp. GA FLAG 10.67 10.71 12.24 2.83 9.56
First Liberty Financial Corp. GA FLFC 8.52 9.37 9.91 2.48 7.6
First Lancaster Bancshares KY FLKY NA NA NA 0 13.73
First Mutual Bancorp, Inc. IL FMBD 17.44 22.77 NA 2.2 23.02
FMS Financial Corporation NJ FMCO 7.56 9.02 9.74 1.26 6.63
Farmers & Mechanics Bank CT FMCT 9.51 12.4 153.75 0 5.55
Family Bancorp MA FMLY 11.73 16.09 13.7 1.86 7.56
First Mutual Savings Bank WA FMSB 9.23 9.46 9.86 1.43 6.64
First Northern Capital Corp. WI FNGB 11.65 14.78 16.18 3.9 12.2
Financial Security Corp. IL FNSC 15.6 24.07 19.55 0 15.42
Fed One Bancorp WV FOBC 10.44 10.94 11.29 3.86 12.01
First Republic Bancorp CA FRC 4.63 9.85 12.87 0 5.55
First Savings Bank, FSB NM FSBC 3.39 46.88 NA 0 4.74
Fidelity Bancorp, Inc. PA FSBI 7.01 9.23 11.95 1.97 6.79
First Ashland Financial Corp KY FSBS 30.11 26.29 NA 0 27.21
First Southeast Financial Corp SC FSFC 12.68 NM 31.46 1.7 10.31
First State Financial Services NJ FSFI 8.56 41.8 13.93 1.65 6.84
First Savings Bank, MHC NJ FSLA 10.69 11.93 13.02 2.54 9.49
First Savings Bk of NJ, MHC NJ FSNJ 6.61 13.02 66.97 3.56 7.6
First Home Bancorp, Inc. NJ FSPG 7.52 8.22 8.26 2.7 6.43
First FS&LA of San Bernardino CA FSSB 3.18 NM NM 0 5.64
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
- ----------------------------------------------------------------------------------------------------------------
First Franklin Corporation OH FFHS 9.28 0.61 6.46 0.62 6.56
Flushing Financial Corp NY FFIC 17.99 0.88 4.78 0.94 6.33
First Federal Financial Corp. KY FFKY 13.36 1.46 10.32 1.6 11.28
FFLC Bancorp, Inc. FL FFLC 16.98 0.96 5.65 0.94 5.51
First Family Financial Corp. FL FFML 5.61 0.91 16.2 0.9 17.04
Fidelity Financial of Ohio OH FFOH 20.34 1.01 4.94 0.87 5.6
First Palm Beach Bancorp, Inc. FL FFPB 7.72 0.75 9.51 0.74 8.92
Florida First Bancorp, Inc. FL FFPC 7.05 0.88 12.49 0.9 13.27
Fidelity Financial Bankshares VA FFRV 8.59 1.06 12.35 1 12.03
First Independence Corp. KS FFSL 12.34 0.93 7.5 1.1 8.51
FirstFederal Financial Svcs OH FFSW 6.93 1.33 16.8 1.12 13.85
First Fed SB of Siouxland, MHC IA FFSX 8.23 0.76 8.99 0.7 8.44
FFW Corp. IN FFWC 10.8 1.07 9.65 0.9 8.07
Wood Bancorp, Inc. OH FFWD 14.6 1.15 7.95 1.17 8.14
First Financial-W. Maryland MD FFWM 12.53 1.19 9.78 0.43 3.56
FFY Financial Corp. OH FFYF 18.35 1.1 6.03 1.21 6.5
First Georgia Holding, Inc. GA FGHC 7.46 0.91 11.04 0.88 10.61
Financial Bancorp, Inc. NY FIBC NA 0.79 7.61 0.66 5.76
First Indiana Corporation IN FISB 9.12 1.33 14.47 1.19 13.57
First Keystone Financial PA FKFS 8.28 0.71 8.22 0.48 5.49
Frankfort First Bancorp, Inc. KY FKKY 34.51 1.16 3.35 1.06 3.82
FLAG Financial Corp. GA FLAG 9.56 1.04 11.1 0.92 9.91
First Liberty Financial Corp. GA FLFC 6.58 1.05 13.35 1.03 13.14
First Lancaster Bancshares KY FLKY 13.73 NA NA 1.5 11.24
First Mutual Bancorp, Inc. IL FMBD 23.02 0.77 3.2 0.98 3.8
FMS Financial Corporation NJ FMCO 6.48 0.87 13.16 0.83 12.68
Farmers & Mechanics Bank CT FMCT 5.55 0.78 13.48 0.07 1.12
Family Bancorp MA FMLY 6.99 0.74 9.81 0.9 11.79
First Mutual Savings Bank WA FMSB 6.64 1.02 15.45 1.03 15.31
First Northern Capital Corp. WI FNGB 12.2 0.82 6.62 0.78 6.12
Financial Security Corp. IL FNSC 15.42 0.64 4.33 0.77 5.46
Fed One Bancorp WV FOBC 11.46 0.96 7.99 1 7.93
First Republic Bancorp CA FRC 5.54 0.6 10.61 0.46 7.94
First Savings Bank, FSB NM FSBC 4.74 0.08 1.66 0.31 6.81
Fidelity Bancorp, Inc. PA FSBI 6.76 0.79 11.35 0.65 8.66
First Ashland Financial Corp KY FSBS 27.21 1.02 3.8 0.96 3.61
First Southeast Financial Corp SC FSFC 10.31 -1.35 -7.42 0.31 1.61
First State Financial Services NJ FSFI 6.51 0.2 2.86 0.63 9.27
First Savings Bank, MHC NJ FSLA 8.34 0.92 9.66 0.87 9.48
First Savings Bk of NJ, MHC NJ FSNJ 7.6 0.5 6.42 0.11 1.2
First Home Bancorp, Inc. NJ FSPG 6.28 0.93 14.4 0.97 14.89
First FS&LA of San Bernardino CA FSSB 5.4 -0.42 -7.33 -0.17 -2.9
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
- -------------------------------------------------------------------------------------------------------------
Texarkana First Financial Corp AR FTF 163391 15.5 30.75 91.28 91.28
First Federal Capital Corp. WI FTFC 1382069 20.5 127.74 136.39 144.88
Fort Thomas Financial Corp. KY FTSB 87960 13.75 21.64 101.25 101.25
First SB of Washington Bancorp WA FWWB 743176 16.125 162.5 105.39 105.39
GA Financial, Inc. PA GAF 562351 11.5 102.35 79.7 79.7
Glacier Bancorp, Inc. MT GBCI 408467 21 70.58 183.41 183.57
Greater Delaware Valley SB,MHC PA GDVS 235877 9.5 31.09 107.22 107.22
Golden West Financial CA GDW 35775375 57.75 3345.09 141.61 150.39
Glenway Financial Corp. OH GFCO 273890 20 22.91 86.51 88.61
Guaranty Federal SB, MHC MO GFED 185546 10.25 32.03 117.95 117.95
GFS Bancorp, Inc. IA GFSB 83305 20.5 10.45 105.02 105.02
Glendale Co-Operative Bank MA GLBK 36677 16.5 4.08 70.3 70.3
Glendale Federal Bank, FSB CA GLN 14456564 18 841.13 120.24 129.68
GreenPoint Financial Corp. NY GPT 14150594 34 1697.42 101.04 180.85
Grove Bank MA GROV 590405 29.5 45.5 121.1 121.25
Greater New York Savings Bank NY GRTR 2540811 11.25 150.62 103.4 103.4
Great Southern Bancorp, Inc. MO GSBC 658997 27.5 121.59 182.85 185.94
Green Street Financial Corp. NC GSFC 178965 12.875 55.34 88.18 88.18
Guaranty Financial Corp. VA GSLC 102967 7.25 6.66 104.62 104.62
Great Financial Corporation KY GTFN 2808092 26.75 379.41 138.03 143.43
Great American Bancorp IL GTPS 120540 13.25 24.51 73.78 73.78
GFSB Bancorp, Inc. NM GUPB 70422 14 13.28 81.92 81.92
Gateway Bancorp, Inc. KY GWBC 71260 13 14.72 83.12 83.12
Great Western Financial CA GWF 43719958 24.625 3383.29 133.18 151.35
Hallmark Capital Corp. WI HALL 377157 15.25 21.55 81.46 81.46
Harbor Federal Savings Bk, MHC FL HARB 1014013 23.75 117.16 137.76 143.07
Harleysville Savings Bank PA HARL 298172 18.25 23.53 118.66 118.66
Harris Savings Bank, MHC PA HARS 1546469 15.5 173.85 114.39 135.73
Haven Bancorp, Inc. NY HAVN 1550275 26.875 116.1 123.45 124.19
Home Building Bancorp IN HBBI 43135 17.75 5.89 88.18 88.18
Home Bancorp IN HBFW 315901 16 44.68 94.34 94.34
Highland Federal Bank FSB CA HBNK 441911 14.75 33.87 97.81 97.81
Haywood Bancshares, Inc. NC HBS 134274 18.625 24.01 125.17 130.79
HF Bancorp, Inc. CA HEMT 826916 9.375 58.89 72.62 NA
Harrodsburg First Fin Bancorp KY HFFB 108710 16.5 36.01 106.52 106.52
HF Financial Corp. SD HFFC 574027 15.25 46.98 90.45 90.72
Harrington Financial Group IN HFGI 418196 10.25 33.38 144.37 144.37
Home Federal Corp. MD HFMD 219737 10.25 25.82 134.34 135.94
HFNC Financial Corp. NC HFNC 716277 16.5 283.68 116.12 116.12
Hardin Bancorp, Inc. MO HFSA 86949 11.25 10.83 76.27 76.27
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
- ------------------------------------------------------------------------------------------------------
Texarkana First Financial Corp AR FTF 18.82 10.2 NA 2.9 20.61
First Federal Capital Corp. WI FTFC 9.34 11.39 11.08 3.12 6.85
Fort Thomas Financial Corp. KY FTSB 24.6 21.48 NA 1.82 24.29
First SB of Washington Bancorp WA FWWB 21.86 18.32 NA 1.24 20.74
GA Financial, Inc. PA GAF 18.2 11.06 NA 1.74 22.84
Glacier Bancorp, Inc. MT GBCI 17.28 11.17 11.54 3.05 9.42
Greater Delaware Valley SB,MHC PA GDVS 13.18 26.39 27.14 3.79 12.29
Golden West Financial CA GDW 9.35 10.94 11.98 0.66 6.6
Glenway Financial Corp. OH GFCO 8.36 16.13 15.04 3.24 9.67
Guaranty Federal SB, MHC MO GFED 17.26 8.54 NA 6.24 14.64
GFS Bancorp, Inc. IA GFSB 12.54 9.67 11.92 1.95 11.94
Glendale Co-Operative Bank MA GLBK 11.12 15.87 14.6 0 15.82
Glendale Federal Bank, FSB CA GLN 5.82 20.45 51.43 0 6.62
GreenPoint Financial Corp. NY GPT 12 10.24 13.65 2.35 10.36
Grove Bank MA GROV 7.71 8.68 9.39 2.44 6.36
Greater New York Savings Bank NY GRTR 5.93 16.54 14.42 0 7.9
Great Southern Bancorp, Inc. MO GSBC 18.5 9.82 11.55 2.55 10.12
Green Street Financial Corp. NC GSFC 30.92 NA NA 3.11 35.07
Guaranty Financial Corp. VA GSLC 6.47 8.63 8.84 1.38 6.19
Great Financial Corporation KY GTFN 13.51 14.54 16.11 1.79 9.79
Great American Bancorp IL GTPS 20.33 41.41 NA 3.02 27.55
GFSB Bancorp, Inc. NM GUPB 18.86 19.44 NA 2.86 23.03
Gateway Bancorp, Inc. KY GWBC 20.66 21.67 19.7 3.08 24.86
Great Western Financial CA GWF 7.74 11.84 11.73 4.06 6.48
Hallmark Capital Corp. WI HALL 5.71 9.78 11.47 0 7.16
Harbor Federal Savings Bk, MHC FL HARB 11.55 10.42 10.8 5.05 8.39
Harleysville Savings Bank PA HARL 7.89 9.31 10.74 2.19 6.65
Harris Savings Bank, MHC PA HARS 11.24 15.5 20.39 3.74 9.82
Haven Bancorp, Inc. NY HAVN 7.49 9.74 11.2 2.23 6.07
Home Building Bancorp IN HBBI 13.65 16.44 30.08 1.69 13.94
Home Bancorp IN HBFW 14.62 15.38 18.18 1.25 15.5
Highland Federal Bank FSB CA HBNK 7.66 14.18 23.05 0 7.84
Haywood Bancshares, Inc. NC HBS 17.88 16.06 17.57 2.79 14.28
HF Bancorp, Inc. CA HEMT 7.12 33.48 28.41 0 9.8
Harrodsburg First Fin Bancorp KY HFFB 33.12 25.78 NA 2.42 28.66
HF Financial Corp. SD HFFC 8.12 8.47 11.13 2.36 8.97
Harrington Financial Group IN HFGI 7.98 85.42 17.98 0 5.53
Home Federal Corp. MD HFMD 11.75 12.2 16.53 0 8.75
HFNC Financial Corp. NC HFNC 39.61 25.78 NA 0 34.12
Hardin Bancorp, Inc. MO HFSA 13.1 14.06 NA 3.56 17.17
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
- ----------------------------------------------------------------------------------------------------------------
Texarkana First Financial Corp AR FTF 20.61 1.73 8.41 1.77 10.8
First Federal Capital Corp. WI FTFC 6.48 0.89 12.58 0.92 13.46
Fort Thomas Financial Corp. KY FTSB 24.29 1.03 4.2 1.29 5.55
First SB of Washington Bancorp WA FWWB 20.74 1.32 5.74 1.11 6.62
GA Financial, Inc. PA GAF 22.84 1.5 6.59 0.78 5.9
Glacier Bancorp, Inc. MT GBCI 9.41 1.57 16.5 1.59 16.4
Greater Delaware Valley SB,MHC PA GDVS 12.29 0.49 4.08 0.48 3.98
Golden West Financial CA GDW 6.24 0.87 13.03 0.81 12.46
Glenway Financial Corp. OH GFCO 9.46 0.53 5.53 0.56 5.82
Guaranty Federal SB, MHC MO GFED 14.64 2.02 14.02 1.02 7.11
GFS Bancorp, Inc. IA GFSB 11.94 1.33 11.14 1.16 9.19
Glendale Co-Operative Bank MA GLBK 15.82 0.72 4.46 0.77 4.23
Glendale Federal Bank, FSB CA GLN 6.24 0.51 7.79 0.28 4.43
GreenPoint Financial Corp. NY GPT 6.07 1.05 10.01 0.89 7.42
Grove Bank MA GROV 6.36 0.92 14.51 0.87 13.91
Greater New York Savings Bank NY GRTR 7.9 0.66 8.53 0.73 9.63
Great Southern Bancorp, Inc. MO GSBC 9.97 1.98 19.63 1.74 17.18
Green Street Financial Corp. NC GSFC 35.07 1.78 7.37 NA NA
Guaranty Financial Corp. VA GSLC 6.19 0.79 12.35 0.68 10.91
Great Financial Corporation KY GTFN 9.45 1.01 9.55 1 8.68
Great American Bancorp IL GTPS 27.55 0.58 2.03 0.68 2.46
GFSB Bancorp, Inc. NM GUPB 23.03 0.93 3.95 1.25 4.87
Gateway Bancorp, Inc. KY GWBC 24.86 0.94 3.76 1.05 4.05
Great Western Financial CA GWF 5.83 0.73 11.28 0.72 11.6
Hallmark Capital Corp. WI HALL 7.16 0.62 8.31 0.6 7.17
Harbor Federal Savings Bk, MHC FL HARB 8.1 1.16 13.43 1.18 13.57
Harleysville Savings Bank PA HARL 6.65 0.91 13.35 0.81 11.83
Harris Savings Bank, MHC PA HARS 8.41 0.74 7.21 0.66 5.64
Haven Bancorp, Inc. NY HAVN 6.03 0.8 12.8 0.74 11.42
Home Building Bancorp IN HBBI 13.94 0.77 5.46 0.41 2.86
Home Bancorp IN HBFW 15.5 0.9 5.64 0.84 4.99
Highland Federal Bank FSB CA HBNK 7.84 0.54 7 0.22 3.92
Haywood Bancshares, Inc. NC HBS 13.76 1.11 7.79 1.01 6.66
HF Bancorp, Inc. CA HEMT NA 0.2 1.86 0.26 2.31
Harrodsburg First Fin Bancorp KY HFFB 28.66 1.15 4.02 NA NA
HF Financial Corp. SD HFFC 8.95 1.02 11.15 0.78 8.68
Harrington Financial Group IN HFGI 5.53 0.08 1.73 0.37 9.49
Home Federal Corp. MD HFMD 8.65 0.98 11.33 0.73 8.36
HFNC Financial Corp. NC HFNC 34.12 1.26 4.23 NA NA
Hardin Bancorp, Inc. MO HFSA 17.17 0.92 5.06 0.76 4.25
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To
Total Current Current ------------------------------
Assets Stock Market Book Tg Bk
(Most Rec QTR) Price Value Value Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
- -------------------------------------------------------------------------------------------------------------
Harvest Home Financial Corp. OH HHFC 73005 12 10.74 83.1 83.1
Hingham Instit. for Savings MA HIFS 186724 14.625 18.98 104.09 104.09
HomeCorp, Inc. IL HMCI 338985 18 20.31 96.15 96.15
HMN Financial, Inc. MN HMNF 542012 15.25 68.73 86.94 86.94
Hinsdale Financial Corp. IL HNFC 662482 23.875 64.23 115.79 119.32
Home Financial Corp. FL HOFL 1215712 13.875 342.94 107.89 107.89
Home Federal Bancorp IN HOMF 630015 26.25 58.44 113.44 117.77
Home Port Bancorp, Inc. MA HPBC 180451 14 25.79 134.23 134.23
Harbor Federal Bancorp, Inc. MD HRBF 201030 12.625 22.15 79.7 79.7
Horizon Financial Corp. WA HRZB 493499 13 85.73 107.26 107.26
Hibernia Savings Bank, (The) MA HSBK 372978 14.75 24.52 98.93 98.93
Hawthorne Financial Corp. CA HTHR 761162 8.75 22.74 65.84 66.14
Haverfield Corporation OH HVFD 334226 19.25 36.7 129.19 129.46
Home Financial Bancorp IN HWEN 39426 12 6.07 NA NA
Horizon Financial Svcs Corp. IA HZFS 73464 14 6.27 74.75 74.75
IBS Financial Corp. NJ IBSF 748745 14 154.03 103.32 103.32
Independence Federal Savings DC IFSB 263735 7.25 9.27 54.88 63.76
Indiana Federal Corporation IN IFSL 717720 18.875 89.42 126.85 136.58
Industrial Bancorp OH INBI 313563 10.125 56.24 92.47 92.47
Indiana Community Bank, SB IN INCB 94476 13.75 12.68 89.58 89.58
Ipswich Savings Bank MA IPSW 150962 9.875 11.64 133.81 133.81
Iroquois Bancorp NY IROQ 470710 15 35.35 123.56 137.99
ISB Financial Corporation LA ISBF 623720 15 105.77 91.63 91.69
Imperial Thrift and Loan CA ITLA 655435 13.5 105.58 137.06 137.06
InterWest Bancorp, Inc. WA IWBK 1413926 25 161.26 167.34 172.06
Jefferson Bancorp, Inc. LA JEBC 265594 22.5 49.4 137.03 137.03
Joachim Bancorp, Inc. MO JOAC 36779 13.25 10.08 93.71 93.71
Jefferson Savings Bancorp MO JSBA 1114294 23.75 99.31 110 133.43
JSB Financial, Inc. NY JSBF 1548328 33.063 341.65 101.11 101.11
Jacksonville Savings Bank, MHC IL JXSB 143044 13.25 16.86 99.55 99.55
Jacksonville Bancorp, Inc. TX JXVL 213062 10.625 28.23 NA NA
Klamath First Bancorp OR KFBI 604663 13.625 146.55 91.44 91.44
Kankakee Bancorp, Inc. IL KNK 359171 19.5 27.96 78.76 84.75
KS Bancorp, Inc. NC KSAV 93536 20 13.27 95.88 95.97
KSB Bancorp, Inc. ME KSBK 132533 20.453 8.41 92.97 100.41
Kentucky First Bancorp, Inc. KY KYF 83981 14.625 20.31 102.34 102.34
Landmark Bancshares, Inc. KS LARK 200469 15.25 29.19 88.3 88.3
Laurel Capital Group, Inc. PA LARL 193008 15.375 23.22 112.55 112.55
Liberty Bancorp, Inc. IL LBCI 651198 23.75 58.83 91.91 92.16
L & B Financial, Inc. TX LBFI 143223 16.625 26.34 107.26 107.26
Little Falls Bancorp, Inc. NJ LFBI 282232 10.25 31.18 71.18 77.18
Leader Financial Corp. TN LFCT 3211064 47.5 472.52 177.37 177.37
Leeds Federal Savings Bk, MHC MD LFED 266658 13 44.82 102.77 102.77
Life Bancorp, Inc. VA LIFB 1240520 14.875 146.47 100.98 104.9
Long Island Bancorp, Inc. NY LISB 5221019 27.875 691.45 132.55 132.55
Horizon Bancorp TX LOAN 130930 15.75 21.84 204.81 211.69
Logansport Financial Corp. IN LOGN 77195 13.125 17.36 87.56 87.56
London Financial Corporation OH LONF 37552 10.5 5.55 NA NA
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
- ------------------------------------------------------------------------------------------------------
Harvest Home Financial Corp. OH HHFC 14.71 21.43 18.75 3.33 17.71
Hingham Instit. for Savings MA HIFS 10.16 9.62 9.95 2.46 9.76
HomeCorp, Inc. IL HMCI 5.99 12.86 15.65 0 6.23
HMN Financial, Inc. MN HMNF 14.58 11.55 12.92 0 16.77
Hinsdale Financial Corp. IL HNFC 9.7 14.92 15.4 0 8.37
Home Financial Corp. FL HOFL 28.21 NM 21.35 5.77 24.81
Home Federal Bancorp IN HOMF 9.28 8.41 8.15 1.91 8.18
Home Port Bancorp, Inc. MA HPBC 14.29 8.54 8.54 5.71 10.65
Harbor Federal Bancorp, Inc. MD HRBF 11.02 15.78 22.95 3.17 13.82
Horizon Financial Corp. WA HRZB 17.37 11.21 11.5 3.08 16.2
Hibernia Savings Bank, (The) MA HSBK 6.57 8.58 11.17 1.9 6.64
Hawthorne Financial Corp. CA HTHR 2.99 2.04 NA 0 6.06
Haverfield Corporation OH HVFD 10.98 14.58 14.92 2.81 8.5
Home Financial Bancorp IN HWEN NA NA NA 0 8.65
Horizon Financial Svcs Corp. IA HZFS 8.54 10.94 16.67 2.29 11.42
IBS Financial Corp. NJ IBSF 20.57 19.44 19.18 1.71 19.91
Independence Federal Savings DC IFSB 3.52 10.66 7.25 3.03 6.4
Indiana Federal Corporation IN IFSL 12.46 13.88 12.34 3.82 9.82
Industrial Bancorp OH INBI 17.94 10.55 NA 2.96 19.39
Indiana Community Bank, SB IN INCB 13.42 24.55 19.64 2.55 14.98
Ipswich Savings Bank MA IPSW 7.71 8.51 7.21 2.03 5.76
Iroquois Bancorp NY IROQ 7.51 8.33 9.15 2.13 7.07
ISB Financial Corporation LA ISBF 17.75 14.42 NA 2.13 19.37
Imperial Thrift and Loan CA ITLA 12.32 9.12 NA 0 8.99
InterWest Bancorp, Inc. WA IWBK 11.41 10.42 11.26 2.08 6.81
Jefferson Bancorp, Inc. LA JEBC 18.6 18.15 18.75 1.33 13.58
Joachim Bancorp, Inc. MO JOAC 27.39 47.32 NA 3.77 29.23
Jefferson Savings Bancorp MO JSBA 8.91 11.88 13.42 1.35 7.28
JSB Financial, Inc. NY JSBF 22.07 14.76 16.13 3.63 21.83
Jacksonville Savings Bank, MHC IL JXSB 11.79 22.08 25 3.02 11.84
Jacksonville Bancorp, Inc. TX JXVL NA NA NA 4.71 16.7
Klamath First Bancorp OR KFBI 25.36 16.22 NA 1.91 27.73
Kankakee Bancorp, Inc. IL KNK 7.78 12.19 15.35 2.05 9.88
KS Bancorp, Inc. NC KSAV 14.18 11.9 14.39 3 14.79
KSB Bancorp, Inc. ME KSBK 6.34 6.73 6.96 0.98 6.82
Kentucky First Bancorp, Inc. KY KYF 24.18 15.9 NA 3.42 23.63
Landmark Bancshares, Inc. KS LARK 14.56 15.25 16.22 2.62 16.49
Laurel Capital Group, Inc. PA LARL 12.02 8.94 9.26 2.86 10.68
Liberty Bancorp, Inc. IL LBCI 9.03 19.15 17.86 2.53 9.83
L & B Financial, Inc. TX LBFI 18.39 19.79 18.89 2.41 17.14
Little Falls Bancorp, Inc. NJ LFBI 11.05 17.08 NA 0.98 15.52
Leader Financial Corp. TN LFCT 14.72 8.86 10.87 1.52 8.3
Leeds Federal Savings Bk, MHC MD LFED 16.81 14.13 16.25 4.92 16.35
Life Bancorp, Inc. VA LIFB 12.11 13.28 15.34 2.96 11.99
Long Island Bancorp, Inc. NY LISB 13.24 14.83 14.91 1.44 9.99
Horizon Bancorp TX LOAN 16.68 15.14 14.72 1.02 8.55
Logansport Financial Corp. IN LOGN 22.49 15.63 15.44 3.05 25.68
London Financial Corporation OH LONF NA NA NA 0 20.86
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
- ----------------------------------------------------------------------------------------------------------------
Harvest Home Financial Corp. OH HHFC 17.71 0.63 3.47 0.8 4.31
Hingham Instit. for Savings MA HIFS 9.76 1.07 10.68 1.1 10.64
HomeCorp, Inc. IL HMCI 6.23 0.48 7.86 0.4 6.66
HMN Financial, Inc. MN HMNF 16.77 1.18 6.88 1.1 6.27
Hinsdale Financial Corp. IL HNFC 8.15 0.68 8.27 0.63 8.18
Home Financial Corp. FL HOFL 24.81 -0.11 -0.42 1.23 4.78
Home Federal Bancorp IN HOMF 7.9 1.16 13.97 1.23 15.14
Home Port Bancorp, Inc. MA HPBC 10.65 1.75 15.97 1.79 15.72
Harbor Federal Bancorp, Inc. MD HRBF 13.82 0.64 4.58 0.56 3.19
Horizon Financial Corp. WA HRZB 16.2 1.53 9.46 1.54 9.56
Hibernia Savings Bank, (The) MA HSBK 6.64 0.77 11.71 0.61 9.15
Hawthorne Financial Corp. CA HTHR 6.04 3.11 54.91 0.61 12.77
Haverfield Corporation OH HVFD 8.48 0.77 8.86 0.71 8.57
Home Financial Bancorp IN HWEN 8.65 0.71 7.69 0.82 8.77
Horizon Financial Svcs Corp. IA HZFS 11.42 0.76 6.64 0.53 4.38
IBS Financial Corp. NJ IBSF 19.91 0.98 4.89 1.05 4.99
Independence Federal Savings DC IFSB 5.56 0.33 5.09 0.49 7.71
Indiana Federal Corporation IN IFSL 9.19 0.91 9.27 1.02 10.75
Industrial Bancorp OH INBI 19.39 1.56 8.05 1.57 7.13
Indiana Community Bank, SB IN INCB 14.98 0.54 3.53 0.67 4.39
Ipswich Savings Bank MA IPSW 5.76 1.02 16.92 1.3 21.16
Iroquois Bancorp NY IROQ 6.48 0.99 14.18 0.96 13.57
ISB Financial Corporation LA ISBF 19.36 1.15 5.9 1.24 6.22
Imperial Thrift and Loan CA ITLA 8.99 1.42 15.5 NA NA
InterWest Bancorp, Inc. WA IWBK 6.64 1.14 16.51 1.11 15.69
Jefferson Bancorp, Inc. LA JEBC 13.58 0.98 7.26 0.94 7.22
Joachim Bancorp, Inc. MO JOAC 29.23 0.57 1.94 0.63 2.82
Jefferson Savings Bancorp MO JSBA 6.08 0.71 9.87 0.62 8.9
JSB Financial, Inc. NY JSBF 21.83 1.58 7.21 1.47 6.76
Jacksonville Savings Bank, MHC IL JXSB 11.84 0.55 4.58 0.48 4.16
Jacksonville Bancorp, Inc. TX JXVL 16.7 0.86 7.53 0.79 7.47
Klamath First Bancorp OR KFBI 27.73 1.6 5.72 1.34 6.64
Kankakee Bancorp, Inc. IL KNK 9.25 0.67 6.83 0.56 5.37
KS Bancorp, Inc. NC KSAV 14.78 1.27 8.51 1.11 6.88
KSB Bancorp, Inc. ME KSBK 6.35 0.91 13.28 0.89 13.42
Kentucky First Bancorp, Inc. KY KYF 23.63 1.49 5.97 1.12 5.27
Landmark Bancshares, Inc. KS LARK 16.49 0.96 5.71 0.93 5.45
Laurel Capital Group, Inc. PA LARL 10.68 1.38 13.09 1.35 13.23
Liberty Bancorp, Inc. IL LBCI 9.81 0.5 5.17 0.55 5.61
L & B Financial, Inc. TX LBFI 17.14 0.9 5.15 1.06 5.76
Little Falls Bancorp, Inc. NJ LFBI 14.49 0.6 3.88 NA NA
Leader Financial Corp. TN LFCT 8.3 1.71 21.04 1.48 18.45
Leeds Federal Savings Bk, MHC MD LFED 16.35 1.17 7.07 1.03 6.32
Life Bancorp, Inc. VA LIFB 11.6 0.88 7.05 0.87 6.25
Long Island Bancorp, Inc. NY LISB 9.99 0.89 8.71 0.93 8.78
Horizon Bancorp TX LOAN 8.29 1.32 13.96 1.47 16.04
Logansport Financial Corp. IN LOGN 25.68 1.47 5.62 1.5 5.55
London Financial Corporation OH LONF 20.86 0.89 5.76 NA NA
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value
Institution State Ticker ($000) ($) ($M)
- ----------- ----- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
==============================================================================================
Maximum 49,506,630 60.88 3,383.29
Minimum 27,596 1.47 2.10
Average 1,322,401 17.32 128.03
Median 338,985 15.75 37.76
==============================================================================================
LSB Financial Corp. IN LSBI 162520 16 14.68
Lawrence Savings Bank MA LSBX 332956 6 25.47
Lakeview Financial NJ LVSB 455155 21.125 47.86
Lexington B&L Financial Corp. MO LXMO 49981 9.875 12.49
MAF Bancorp, Inc. IL MAFB 3117149 25.25 261.1
Marion Capital Holdings IN MARN 177767 20 38.67
MASSBANK Corp. MA MASB 880534 32.625 88.74
Monterey Bay Bancorp, Inc. CA MBBC 318879 12.5 42.68
MBLA Financial Corp. MO MBLF 195074 21.25 29.15
Mitchell Bancorp, Inc. NC MBSP 27596 11 10.78
Mid-Coast Bancorp, Inc. ME MCBN 55048 20.25 4.65
Mid Continent Bancshares Inc. KS MCBS 313759 18.625 37.84
Medford Savings Bank MA MDBK 993467 22 99.69
Mechanics Savings Bank CT MECH 727720 12 63.48
Meritrust Federal SB LA MERI 228419 31.5 24.39
MFB Corp. IN MFBC 210559 15.625 30.84
Marshalltown Financial Corp. IA MFCX 125308 16 22.58
Milton Federal Financial Corp. OH MFFC 178289 12.75 28.8
Mayflower Co-operative Bank MA MFLR 113182 15.75 13.75
Mutual Bancompany MO MFSB 53311 21.25 7.09
Maryland Federal Bancorp MD MFSL 1128449 28.875 88.94
Magna Bancorp, Inc. MS MGNL 1308657 41 280.91
MidConn Bank CT MIDC 367212 18.25 34.86
Mid-Iowa Financial Corp. IA MIFC 115260 6.375 10.73
Mississippi View Holding Co. MN MIVI 69983 11.25 9.06
MLF Bancorp, Inc. PA MLFB 1876018 25 148.36
Morgan Financial Corp. CO MORG 71654 12.25 10.2
MSB Bancorp, Inc. NY MSBB 840552 16 45.34
MSB Financial, Inc. MI MSBF 56317 17.25 11.31
Mutual Savings Bank, FSB MI MSBK 680033 5.125 21.91
Metropolitan Bancorp WA MSEA 761014 17.125 63.54
Midwest Bancshares, Inc. IA MWBI 138628 25 8.73
MetroWest Bank MA MWBX 490130 3.75 52.06
Midwest Federal Financial WI MWFD 178249 16 26.13
North American Savings Bank MO NASB 664250 29.938 68.14
North Bancshares, Inc. IL NBSI 119436 15.75 17.54
Northeast Bancorp ME NEBC 218187 13.125 15.91
Northeast Indiana Bancorp IN NEIB 154128 12.25 25.26
Newnan Savings Bank, FSB GA NFSL 160656 21 30.62
NHS Financial, Inc. CA NHSL 284191 11.25 28.38
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
Current Price in Relation To
-----------------------------------------------------------
Book Value Tg Bk Value Assets QTR EPS LTM EPS
Institution (%) (%) (%) (x) (x)
- ----------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
==================================================================================================
Maximum 249.50 260.82 39.61 218.75 153.75
Minimum 25.91 55.83 0.67 2.04 3.36
Average 108.53 112.78 12.45 16.38 16.16
Median 101.11 103.83 10.52 12.24 11.57
==================================================================================================
LSB Financial Corp. 82.47 82.47 9.5 10.81 12.31
Lawrence Savings Bank 100.84 100.84 7.65 6.25 6.82
Lakeview Financial 105.68 137.62 10.52 7.88 10.06
Lexington B&L Financial Corp. NA NA NA NA NA
MAF Bancorp, Inc. 107.81 126.38 8.38 9.15 9.15
Marion Capital Holdings 93.15 93.15 21.75 15.15 16.39
MASSBANK Corp. 102.95 102.95 10.08 9.48 9.98
Monterey Bay Bancorp, Inc. 82.73 83.72 13.38 31.25 62.5
MBLA Financial Corp. 102.76 102.76 14.94 20.43 22.14
Mitchell Bancorp, Inc. NA NA NA NA NA
Mid-Coast Bancorp, Inc. 93.45 93.45 8.45 10.77 14.57
Mid Continent Bancshares Inc. 98.34 98.44 12.06 10.12 10.58
Medford Savings Bank 112.82 123.73 10.03 10.19 10.38
Mechanics Savings Bank 93.02 93.02 8.72 NA NA
Meritrust Federal SB 140.63 140.63 10.68 11.41 11.33
MFB Corp. 81.85 81.85 14.65 17.76 22.01
Marshalltown Financial Corp. 115.44 115.44 18.02 28.57 50
Milton Federal Financial Corp. 85.51 85.51 16.19 18.75 17.47
Mayflower Co-operative Bank 126.81 129.63 12.15 14.58 15.14
Mutual Bancompany 113.64 113.64 13.29 NM 62.5
Maryland Federal Bancorp 96.41 97.95 8.09 12.24 10.42
Magna Bancorp, Inc. 223.31 236.04 21.47 13.14 13.67
MidConn Bank 99.84 118.97 9.49 13.42 26.45
Mid-Iowa Financial Corp. 99.3 99.45 9.31 7.59 10.63
Mississippi View Holding Co. 81.64 81.64 15.39 14.8 11.25
MLF Bancorp, Inc. 102.92 107.2 8.32 11.57 12.95
Morgan Financial Corp. 97.15 97.15 14.24 14.58 15.31
MSB Bancorp, Inc. 80.16 207.25 5.39 18.18 14.04
MSB Financial, Inc. 91.46 91.46 20.7 11.06 11.13
Mutual Savings Bank, FSB 56.76 56.76 3.22 128.13 NM
Metropolitan Bancorp 124.18 136.89 8.35 9.73 11.05
Midwest Bancshares, Inc. 94.48 94.48 6.3 7.72 6.98
MetroWest Bank 140.45 140.45 10.62 7.81 8.33
Midwest Federal Financial 156.71 164.27 14.66 12.12 13.91
North American Savings Bank 139.64 145.47 10.26 7.27 8.09
North Bancshares, Inc. 94.77 94.77 14.69 32.81 28.64
Northeast Bancorp 95.73 114.03 7.24 17.27 13.67
Northeast Indiana Bancorp 86.69 86.69 16.39 12.76 15.31
Newnan Savings Bank, FSB 163.3 164.32 18.91 10.29 10
NHS Financial, Inc. 113.41 113.64 9.99 15.63 21.63
</TABLE>
<TABLE>
<CAPTION>
Current Tangible Qtr Qtr LTM LTM
Dividend Equity/ Equity/ Return on Return on Return on Return on
Yield Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution (%) (%) (%) (%) (%) (%) (%)
- ----------- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
=================================================================================================================================
Maximum 7.44 35.07 35.07 3.11 54.91 2.30 38.10
Minimum 0.00 3.40 2.83 (3.28) (80.66) (1.74) (30.56)
Average 1.98 12.21 11.98 0.90 8.53 0.88 8.48
Median 2.08 9.81 9.36 0.88 7.81 0.86 7.47
=================================================================================================================================
LSB Financial Corp. 2 10.66 10.66 0.86 7.81 0.83 6.94
Lawrence Savings Bank 0 7.59 7.59 1.25 16.51 1.24 13.92
Lakeview Financial 1.18 9.95 7.82 1.35 12.79 1.15 10.25
Lexington B&L Financial Corp. 0 14.4 14.4 NA NA 1.17 8.36
MAF Bancorp, Inc. 1.27 7.77 6.7 0.87 13.26 0.85 14.21
Marion Capital Holdings 4 23.35 23.35 1.41 5.95 1.41 5.96
MASSBANK Corp. 2.94 9.79 9.79 1.1 11.02 1.06 10.4
Monterey Bay Bancorp, Inc. 0.8 14.98 14.83 0.39 2.68 0.19 1.28
MBLA Financial Corp. 1.88 14.54 14.54 0.73 5.11 0.7 4.83
Mitchell Bancorp, Inc. 0 22.02 22.02 NA NA 0.92 4.24
Mid-Coast Bancorp, Inc. 2.47 9.04 9.04 0.79 8.63 0.6 6.65
Mid Continent Bancshares Inc. 2.15 11.7 11.69 1.21 9.77 1.27 9.59
Medford Savings Bank 3.09 8.89 8.17 1.03 11.59 1.04 11.68
Mechanics Savings Bank 0 9.38 9.38 -3.28 -80.66 NA NA
Meritrust Federal SB 1.91 7.59 7.59 0.98 12.97 1.01 13.7
MFB Corp. 1.54 17.9 17.9 0.82 4.43 0.73 3.69
Marshalltown Financial Corp. 0 15.61 15.61 0.64 4.15 0.38 2.43
Milton Federal Financial Corp. 4.08 18.93 18.93 0.88 4.54 1.04 4.8
Mayflower Co-operative Bank 2.54 9.58 9.39 0.84 8.6 0.89 8.54
Mutual Bancompany 0 11.7 11.7 0.05 0.45 0.2 1.84
Maryland Federal Bancorp 2.22 8.39 8.27 0.67 8.02 0.79 9.6
Magna Bancorp, Inc. 2.93 9.61 9.14 1.68 17.3 1.71 17.31
MidConn Bank 3.29 9.51 8.1 0.71 7.48 0.37 3.87
Mid-Iowa Financial Corp. 1.26 9.38 9.36 1.28 13.87 0.93 10
Mississippi View Holding Co. 1.42 18.86 18.86 1.01 5.17 1.32 6.75
MLF Bancorp, Inc. 3.04 7.53 7.25 0.71 9.01 0.72 8.3
Morgan Financial Corp. 1.96 14.66 14.66 0.95 6.42 0.97 6.38
MSB Bancorp, Inc. 3.75 8.21 4.26 0.43 5.27 0.44 3
MSB Financial, Inc. 2.9 22.63 22.63 1.85 7.77 1.92 7.29
Mutual Savings Bank, FSB 0 5.68 5.68 0.01 0.24 0.01 0.18
Metropolitan Bancorp 0 6.72 6.14 0.85 12.85 0.78 11.41
Midwest Bancshares, Inc. 2.08 6.67 6.67 0.87 12.92 1.01 14.64
MetroWest Bank 2.67 7.55 7.55 1.34 17.32 1.3 17.23
Midwest Federal Financial 1.88 9.35 8.96 1.28 13.38 1.2 12.27
North American Savings Bank 2.09 7.35 7.07 1.43 19.05 1.33 18.15
North Bancshares, Inc. 2.54 15.5 15.5 0.45 2.76 0.59 3.19
Northeast Bancorp 2.44 8.48 7.36 0.56 6.48 0.68 7.97
Northeast Indiana Bancorp 2.45 18.9 18.9 1.25 6.41 1.19 5.46
Newnan Savings Bank, FSB 2.1 11.58 11.51 1.87 16.31 1.89 17.69
NHS Financial, Inc. 1.42 8.81 8.79 0.66 7.59 0.45 5.34
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION> ----------------------
Total Current Current Current
Assets Stock Market ----------------------
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
- ----------- ----- ------ ----- --- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
=============================================================================================================
New Hampshire Thrift Bncshrs NH NHTB 252481 9.875 16.71 85.94 85.94
NewMil Bancorp, Inc. CT NMSB 309363 7 28.49 89.29 89.29
North Side Savings Bank NY NSBK 1654624 44.188 213.6 172.95 174.52
NS&L Bancorp, Inc. MO NSLB 59052 12.5 11.1 80.03 80.03
Norwich Financial Corp. CT NSSB 731193 15.75 84.93 115.89 128.57
Norwalk Savings Society CT NSSY 609522 21.875 52.17 117.61 117.61
Nutmeg Federal S&LA CT NTMG 85194 8 5.66 102.04 102.04
Northwest Equity Corp. WI NWEQ 91804 10.25 9.69 76.21 76.21
Northwest Savings Bank, MHC PA NWSB 1877529 11.219 262.26 135.5 142.74
New York Bancorp Inc. NY NYB 2918120 28.5 327.52 206.82 206.82
Ocean Financial Corp. NJ OCFC 1036445 21.25 178.25 NA NA
Ottawa Financial Corp. MI OFCP 782145 16.125 87.31 108.66 135.5
OHSL Financial Corp. OH OHSL 209037 20.5 24.96 97.9 97.9
OSB Financial Corp. WI OSBF 250003 23 25.55 81.39 81.39
Palfed, Inc. SC PALM 638002 12.688 66.3 123.54 129.6
Pamrapo Bancorp, Inc. NJ PBCI 365553 18.625 61.11 108.1 109.05
People's Bank, MHC CT PBCT 7441500 22.25 885.84 154.3 154.51
Patriot Bank Corp. PA PBIX 417746 13.25 49.22 92.46 92.46
People's Bancshares, Inc. MA PBKB 533134 9.75 32.57 118.9 125.64
People's Savings Financial Cp. CT PBNB 437034 22.875 43.48 98.3 105.9
Perry County Financial Corp. MO PCBC 78480 15.5 13.28 84.38 84.38
Pacific Crest Capital CA PCCI 290443 9 26.64 113.78 113.78
Piedmont Bancorp, Inc. NC PDB 128711 13.25 35.05 94.58 94.58
Peekskill Financial Corp. NY PEEK 191323 12.25 50.22 84.02 84.02
Permanent Bancorp, Inc. IN PERM 395903 15.75 33.62 81.02 82.12
Primary Bank NH PETE 408086 12.25 23.93 95.63 95.93
Peoples Bancorp IN PFDC 277958 19.25 45.15 104.28 104.28
Park Bancorp, Inc. IL PFED 158939 10.25 27.69 NA NA
PFF Bancorp, Inc. CA PFFB 2146293 11.25 223.17 76.84 77.75
Progress Financial Corporation PA PFNC 347858 6.25 23.31 119.5 120.42
PennFed Financial Services,Inc NJ PFSB 1086524 17 82 82.93 104.1
Pocahontas FS&LA, MHC AR PFSL 369379 14.5 23.35 106.3 106.3
Peoples Heritage Finl Group ME PHBK 4371709 21.125 531.82 145.19 162.38
Pittsburgh Home Financial Corp PA PHFC 184002 10.5 22.91 75.38 75.38
Poughkeepsie Savings Bank, FSB NY PKPS 840491 5.125 64.32 90.71 90.71
Pinnacle Bank AL PLE 185793 17.125 15.24 100.09 103.79
Perpetual Midwest Financial IA PMFI 374039 17.5 35.17 97.98 97.98
Portsmouth Bank Shares NH POBS 266877 12.75 73.15 109.54 109.54
Prestige Bancorp, Inc. PA PRBC 102609 10.25 9.87 64.63 64.63
Provident Financial Holdings CA PROV 567186 10.75 55.1 NA NA
Prime Bancorp, Inc. PA PSAB 644560 19.5 72.64 125.16 133.47
Progressive Bank, Inc. NY PSBK 901690 29 76.76 106.85 122.99
Palm Springs Savings Bank CA PSSB 187327 13.938 15.76 131.49 131.49
Potters Financial Corp. OH PTRS 114714 15.5 7.85 74.06 74.06
Pulaski Bank, Savings Bk, MHC MO PULB 179406 13 27.22 120.15 120.15
<CAPTION>
------------------------------
Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
- ----------- ----- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
======================================================================================================
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
======================================================================================================
New Hampshire Thrift Bncshrs NH NHTB 6.61 11.76 11.9 5.06 7.69
NewMil Bancorp, Inc. CT NMSB 9.21 12.5 14 2.86 10.31
North Side Savings Bank NY NSBK 12.91 11.75 11.69 2.26 7.47
NS&L Bancorp, Inc. MO NSLB 18.79 22.32 NA 4 23.48
Norwich Financial Corp. CT NSSB 11.62 14.58 15.59 3.05 10.02
Norwalk Savings Society CT NSSY 8.56 9.11 12.29 0.91 7.28
Nutmeg Federal S&LA CT NTMG 6.65 12.5 13.56 0 6.51
Northwest Equity Corp. WI NWEQ 10.56 10.25 11.14 3.9 12.77
Northwest Savings Bank, MHC PA NWSB 13.97 14.02 14.57 2.85 10.15
New York Bancorp Inc. NY NYB 11.22 8.8 10.04 2.81 5.43
Ocean Financial Corp. NJ OCFC NA NA NA 0 8.91
Ottawa Financial Corp. MI OFCP 11.16 14.4 18.53 1.98 10.27
OHSL Financial Corp. OH OHSL 11.94 13.49 13.49 3.71 12.2
OSB Financial Corp. WI OSBF 10.22 14.02 46.94 2.78 12.56
Palfed, Inc. SC PALM 10.39 14.42 14.93 0.63 8.41
Pamrapo Bancorp, Inc. NJ PBCI 16.72 14.55 12.76 4.83 15.47
People's Bank, MHC CT PBCT 11.9 12.36 11.71 3.6 7.8
Patriot Bank Corp. PA PBIX 12.38 17.43 NA 2.42 12.93
People's Bancshares, Inc. MA PBKB 6.11 9.75 10.05 2.87 4.93
People's Savings Financial Cp. CT PBNB 9.95 9.22 11.44 4.02 10.12
Perry County Financial Corp. MO PCBC 16.92 17.61 16.32 1.94 20.05
Pacific Crest Capital CA PCCI 9.17 9 7.32 0 8.06
Piedmont Bancorp, Inc. NC PDB 27.23 16.56 NA 3.62 28.79
Peekskill Financial Corp. NY PEEK 26.25 17.01 NA 2.94 31.24
Permanent Bancorp, Inc. IN PERM 8.49 26.25 28.64 1.91 10.48
Primary Bank NH PETE 5.86 7.85 NM 0 6.14
Peoples Bancorp IN PFDC 16.24 10.94 11.26 2.91 15.58
Park Bancorp, Inc. IL PFED NA NA NA 0 11.03
PFF Bancorp, Inc. CA PFFB 10.4 21.63 NA 0 13.53
Progress Financial Corporation PA PFNC 6.7 13.02 7.02 1.28 5.61
PennFed Financial Services,Inc NJ PFSB 7.55 9.04 10.97 0 8.34
Pocahontas FS&LA, MHC AR PFSL 6.32 12.08 11.98 5.52 5.95
Peoples Heritage Finl Group ME PHBK 12.17 13.2 10.21 3.22 8.38
Pittsburgh Home Financial Corp PA PHFC 12.45 NA NA 1.91 16.52
Poughkeepsie Savings Bank, FSB NY PKPS 7.65 NM 4.79 1.95 8.44
Pinnacle Bank AL PLE 8.2 10.7 10.07 4.2 8.19
Perpetual Midwest Financial IA PMFI 9.44 20.83 23.65 1.71 9.64
Portsmouth Bank Shares NH POBS 27.41 12.75 12.62 4.71 25.02
Prestige Bancorp, Inc. PA PRBC 9.62 NA NA 0 14.88
Provident Financial Holdings CA PROV NA NA NA 0 6.58
Prime Bancorp, Inc. PA PSAB 11.27 11.34 12.04 3.49 9.01
Progressive Bank, Inc. NY PSBK 8.51 6.47 9.03 2.76 7.97
Palm Springs Savings Bank CA PSSB 8.41 12.02 13.03 0.86 6.4
Potters Financial Corp. OH PTRS 6.84 19.38 14.22 1.55 9.24
Pulaski Bank, Savings Bk, MHC MO PULB 15.17 16.25 17.81 6.15 12.63
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
- ----------- ----- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
================================================================================================================
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
================================================================================================================
New Hampshire Thrift Bncshrs NH NHTB 7.69 0.56 7.31 0.58 7.41
NewMil Bancorp, Inc. CT NMSB 10.31 0.81 7.44 0.75 6.71
North Side Savings Bank NY NSBK 7.4 1.17 15.31 1.19 15.97
NS&L Bancorp, Inc. MO NSLB 23.48 0.92 3.84 0.92 3.83
Norwich Financial Corp. CT NSSB 9.13 0.85 8.24 0.83 7.62
Norwalk Savings Society CT NSSY 7.28 0.99 12.69 0.81 9.66
Nutmeg Federal S&LA CT NTMG 6.51 0.74 11.55 0.66 10.75
Northwest Equity Corp. WI NWEQ 12.77 0.99 7.56 1 6.91
Northwest Savings Bank, MHC PA NWSB 9.69 0.99 9.5 1.01 9.47
New York Bancorp Inc. NY NYB 5.43 1.37 24.15 1.27 28.77
Ocean Financial Corp. NJ OCFC 8.91 NA NA 0.8 9.44
Ottawa Financial Corp. MI OFCP 8.41 0.77 7.13 0.91 5.72
OHSL Financial Corp. OH OHSL 12.2 0.93 7.54 0.95 7.55
OSB Financial Corp. WI OSBF 12.56 0.73 5.77 0.21 1.63
Palfed, Inc. SC PALM 8.05 0.72 8.51 0.69 8.33
Pamrapo Bancorp, Inc. NJ PBCI 15.36 1.14 7.34 1.34 8.52
People's Bank, MHC CT PBCT 7.79 1.02 12.86 1.13 14.14
Patriot Bank Corp. PA PBIX 12.93 0.71 4.99 0.63 4.91
People's Bancshares, Inc. MA PBKB 4.68 0.75 12.2 0.8 12.24
People's Savings Financial Cp. CT PBNB 9.46 1.17 10.99 0.97 8.89
Perry County Financial Corp. MO PCBC 20.05 0.91 4.44 1 4.86
Pacific Crest Capital CA PCCI 8.06 1.04 13.03 1.31 15.81
Piedmont Bancorp, Inc. NC PDB 28.79 1.52 5.19 1.46 6.69
Peekskill Financial Corp. NY PEEK 31.24 1.46 4.7 1.23 4.96
Permanent Bancorp, Inc. IN PERM 10.36 0.31 2.91 0.34 2.94
Primary Bank NH PETE 6.12 0.79 12.77 -0.03 -0.43
Peoples Bancorp IN PFDC 15.58 1.46 9.53 1.45 9.51
Park Bancorp, Inc. IL PFED 11.03 NA NA 0.65 5.46
PFF Bancorp, Inc. CA PFFB 13.4 0.47 3.34 NA NA
Progress Financial Corporation PA PFNC 5.57 0.53 9.44 0.91 18.78
PennFed Financial Services,Inc NJ PFSB 6.75 0.86 9.75 0.82 8.36
Pocahontas FS&LA, MHC AR PFSL 5.95 0.56 9.43 0.56 9.45
Peoples Heritage Finl Group ME PHBK 7.56 0.92 11.11 1.14 13.37
Pittsburgh Home Financial Corp PA PHFC 16.52 0.78 7.09 NA NA
Poughkeepsie Savings Bank, FSB NY PKPS 8.44 0.01 0.09 1.7 21.07
Pinnacle Bank AL PLE 7.93 0.75 9.69 0.79 10.34
Perpetual Midwest Financial IA PMFI 9.64 0.46 4.75 0.41 4.09
Portsmouth Bank Shares NH POBS 25.02 2.17 9.07 2.3 9.38
Prestige Bancorp, Inc. PA PRBC 14.88 0.33 2.23 NA NA
Provident Financial Holdings CA PROV 6.58 NA NA -0.72 -9.81
Prime Bancorp, Inc. PA PSAB 8.49 1.05 11.39 1.02 10.9
Progressive Bank, Inc. NY PSBK 7 1.32 16.6 1.1 12.3
Palm Springs Savings Bank CA PSSB 6.4 0.72 11.65 0.64 10.87
Potters Financial Corp. OH PTRS 9.24 0.36 3.77 0.51 3.27
Pulaski Bank, Savings Bk, MHC MO PULB 12.63 0.95 7.52 0.84 6.94
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
=============================================================================================================
Pulse Bancorp NJ PGLS 505034 17.375 52.98 134.69 134.69
PVF Capital Corp. OH PVFC 318100 20.75 32.14 150.69 150.69
Parkvale Financial Corporation PA PVSA 919242 26.5 85.74 122.91 123.43
PennFirst Bancorp, Inc. PA PWBC 680434 13.875 54.65 103.78 113.92
Pennwood Savings Bank PA PWBK 42366 9.625 5.87 NA NA
Quaker City Bancorp, Inc. CA QCBC 725085 14.75 56.25 82.82 83.19
QCF Bancorp, Inc. MN QCFB 145608 14.75 23.67 82.77 82.77
Queens County Bancorp, Inc. NY QCSB 1302281 47.5 286.65 132.72 132.72
Raritan Bancorp Inc. NJ RARB 346841 20.625 29.34 117.19 120.19
RCSB Financial Inc. NY RCSB 4048684 24.5 304.02 119.69 123.93
RedFed Bancorp Inc. CA REDF 857959 9.25 37.76 77.73 77.73
Reliance Bancshares, Inc. WI RELI 32260 8.125 20.82 NA NA
Reliance Bancorp, Inc. NY RELY 1782550 16.875 154.05 100.27 147.9
Roosevelt Financial Group MO RFED 9327772 16.438 692.79 149.71 NA
TR Financial Corp. NY ROSE 3073458 28 249.63 120.64 120.64
Riverview Savings Bank, MHC WA RVSB 209506 15 32.33 140.06 158.23
Suburban Bancorporation, Inc. OH SBCN 197137 15.5 22.95 88.67 88.67
SB of the Finger Lakes, MHC NY SBFL 197438 16.25 29.01 143.68 143.68
S. Carolina Community Bancshrs SC SOCB 44088 16 11.96 95.24 95.24
Suncoast Savings and Loan FL SCSL 466504 6.625 13.18 100.53 100.99
Security Capital Corporation WI SECP 3437317 60.875 567.01 107.5 107.5
Standard Federal Bancorp MI SFB 15239983 41.625 1303.87 135.41 172.93
Security Bancorp MT SFBM 360021 21.5 31.44 97.86 113.64
SFS Bancorp, Inc. NY SFED 164366 12.75 16.48 73.96 73.96
StateFed Financial Corporation IA SFFC 76705 15.75 12.81 85.83 85.83
Statewide Financial Corp. NJ SFIN 634464 12 63.24 89.82 90.09
SuburbFed Financial Corp. IL SFSB 378388 17.5 22 84.46 84.95
Security First Corp. OH SFSL 588592 14.5 71.48 128.21 130.75
SGV Bancorp, Inc. CA SGVB 333064 8.75 22.67 73.28 73.28
First Shenango Bancorp, Inc. PA SHEN 369279 20.75 47.34 101.07 101.07
Seven Hills Financial Corp. OH SHFC 45511 17.5 9.39 97.28 97.28
SIS Bancorp, Inc. MA SISB 1209843 18.25 104.44 114.28 114.28
SJS Bancorp MI SJSB 150752 20 19.65 111.73 111.73
Southern Missouri Bancorp, Inc MO SMBC 161992 14.375 24.78 93.28 93.28
Sho-Me Financial Corp. MO SMFC 280027 16.75 29.02 85.5 85.5
Sobieski Bancorp, Inc. IN SOBI 76362 11.75 9.83 69.65 69.65
First Savings Bancorp, Inc. NC SOPN 256294 17.75 66.46 98.94 98.94
Somerset Savings Bank MA SOSA 511390 1.469 24.46 85.91 85.91
St. Paul Bancorp, Inc. IL SPBC 4337546 23.813 428.36 114.05 114.43
Southern Banc Company, Inc AL SRN 109768 12.75 18.55 83.22 NA
Scotland Bancorp, Inc NC SSB 70488 12 22.08 89.35 89.35
Strongsville Savings Bank OH SSBK 529187 21.875 55.36 130.13 132.82
Stone Street Bancorp, Inc. NC SSM 116101 16.625 30.34 NA NA
St. Francis Capital Corp. WI STFR 1329903 25.875 144.56 110.62 115.88
Standard Financial, Inc. IL STND 2274536 16.125 263.58 98.99 99.17
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
======================================================================================================
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
======================================================================================================
Pulse Bancorp NJ PGLS 10.49 12.07 12.59 4.03 7.79
PVF Capital Corp. OH PVFC 10.1 9.1 9.7 0 6.7
Parkvale Financial Corporation PA PVSA 9.33 9.6 9.27 1.96 7.59
PennFirst Bancorp, Inc. PA PWBC 8.15 13.88 14.16 2.6 7.85
Pennwood Savings Bank PA PWBK NA NA NA 0 9.63
Quaker City Bancorp, Inc. CA QCBC 7.76 13.66 16.03 0 9.37
QCF Bancorp, Inc. MN QCFB 18.06 11.17 NA 0 21.81
Queens County Bancorp, Inc. NY QCSB 22.01 10.8 12.43 2.81 16.58
Raritan Bancorp Inc. NJ RARB 8.48 11.21 12.2 2.91 7.24
RCSB Financial Inc. NY RCSB 7.51 11.34 11.4 1.96 8.63
RedFed Bancorp Inc. CA REDF 4.38 10.05 NM 0 5.63
Reliance Bancshares, Inc. WI RELI NA NA NA 0 29.81
Reliance Bancorp, Inc. NY RELY 8.64 10.55 12.88 2.73 8.62
Roosevelt Financial Group MO RFED 7.43 9.78 13.05 3.77 5.54
TR Financial Corp. NY ROSE 8.12 8.54 9.59 2.57 6.21
Riverview Savings Bank, MHC WA RVSB 15.43 9.87 12.3 1.47 11.00
Suburban Bancorporation, Inc. OH SBCN 11.64 NM 29.25 3.87 13.01
SB of the Finger Lakes, MHC NY SBFL 14.69 81.25 NA 2.46 10.23
S. Carolina Community Bancshrs SC SOCB 27.11 19.05 19.75 3.75 28.47
Suncoast Savings and Loan FL SCSL 2.83 16.56 13.52 0 5.43
Security Capital Corporation WI SECP 16.5 13.96 17.9 0.99 16.26
Standard Federal Bancorp MI SFB 8.56 9.82 10.48 1.92 6.32
Security Bancorp MT SFBM 8.73 12.8 13.27 2.98 8.92
SFS Bancorp, Inc. NY SFED 10.03 13.86 15.18 1.88 13.56
StateFed Financial Corporation IA SFFC 16.7 13.13 14.19 2.54 19.46
Statewide Financial Corp. NJ SFIN 9.97 12 NA 0 11.1
SuburbFed Financial Corp. IL SFSB 5.81 13.26 13.06 1.83 6.88
Security First Corp. OH SFSL 12.14 10.36 11.07 3.03 9.47
SGV Bancorp, Inc. CA SGVB 7.17 218.75 NA 0 9.78
First Shenango Bancorp, Inc. PA SHEN 12.82 13.3 13.65 2.31 12.68
Seven Hills Financial Corp. OH SHFC 20.63 48.61 58.33 2.06 21.21
SIS Bancorp, Inc. MA SISB 8.63 8.15 6.56 0 7.19
SJS Bancorp MI SJSB 13.04 27.78 21.74 2 11.67
Southern Missouri Bancorp, Inc MO SMBC 15.3 12.39 18.2 3.48 16.4
Sho-Me Financial Corp. MO SMFC 10.36 11.63 13.29 0 10.99
Sobieski Bancorp, Inc. IN SOBI 12.88 32.64 31.76 0 18.49
First Savings Bancorp, Inc. NC SOPN 25.93 17.75 18.68 3.38 26.21
Somerset Savings Bank MA SOSA 4.78 9.18 11.3 0 5.56
St. Paul Bancorp, Inc. IL SPBC 9.88 11.02 12.4 2.02 8.66
Southern Banc Company, Inc AL SRN 16.9 21.25 NA 2.75 20.31
Scotland Bancorp, Inc NC SSB 31.32 NA NA 2.5 35.05
Strongsville Savings Bank OH SSBK 10.46 11.16 11.39 2.19 8.04
Stone Street Bancorp, Inc. NC SSM NA NA NA 2.65 33.69
St. Francis Capital Corp. WI STFR 10.87 14.38 10.48 1.55 9.82
Standard Financial, Inc. IL STND 11.59 16.8 15.81 1.98 11.71
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
================================================================================================================
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
================================================================================================================
Pulse Bancorp NJ PGLS 7.79 1.16 10.56 1.19 10.28
PVF Capital Corp. OH PVFC 6.7 1.18 17.84 1.13 17.86
Parkvale Financial Corporation PA PVSA 7.56 1.01 13.8 1.06 15.11
PennFirst Bancorp, Inc. PA PWBC 7.2 0.61 7.37 0.61 7.46
Pennwood Savings Bank PA PWBK 9.63 0.71 7.35 NA NA
Quaker City Bancorp, Inc. CA QCBC 9.33 0.58 5.99 0.53 5.25
QCF Bancorp, Inc. MN QCFB 21.81 1.43 6.93 1.51 7.61
Queens County Bancorp, Inc. NY QCSB 16.58 1.99 11.87 1.82 10.45
Raritan Bancorp Inc. NJ RARB 7.07 0.86 11.44 0.82 10.69
RCSB Financial Inc. NY RCSB 8.42 0.94 10.71 1.01 10.78
RedFed Bancorp Inc. CA REDF 5.63 0.44 7.81 -0.56 -9.99
Reliance Bancshares, Inc. WI RELI NA NA NA 1.23 4.32
Reliance Bancorp, Inc. NY RELY 6.01 0.81 9.47 0.83 7.61
Roosevelt Financial Group MO RFED NA 0.84 15.39 0.64 12.31
TR Financial Corp. NY ROSE 6.21 0.96 15.23 0.92 13.93
Riverview Savings Bank, MHC WA RVSB 9.88 1.57 14.33 1.31 12.02
Suburban Bancorporation, Inc. OH SBCN 13.01 -0.41 -3.08 0.39 2.95
SB of the Finger Lakes, MHC NY SBFL 10.23 0.21 1.93 NA NA
S. Carolina Community Bancshrs SC SOCB 28.47 1.38 4.75 1.35 4.5
Suncoast Savings and Loan FL SCSL 5.42 0.48 7.9 0.51 8.77
Security Capital Corporation WI SECP 16.26 1.2 7.22 0.99 5.85
Standard Federal Bancorp MI SFB 5.02 0.97 14.36 0.95 14.09
Security Bancorp MT SFBM 7.78 0.71 7.92 0.69 8.01
SFS Bancorp, Inc. NY SFED 13.56 0.71 5.15 0.69 4.88
StateFed Financial Corporation IA SFFC 19.46 1.28 6.46 1.19 3.99
Statewide Financial Corp. NJ SFIN 11.07 0.87 10.43 NA NA
SuburbFed Financial Corp. IL SFSB 6.85 0.47 6.79 0.5 6.91
Security First Corp. OH SFSL 9.3 1.38 14.08 1.21 13.36
SGV Bancorp, Inc. CA SGVB 9.78 0.01 0.07 0.12 1.1
First Shenango Bancorp, Inc. PA SHEN 12.68 1 7.63 1.03 7.45
Seven Hills Financial Corp. OH SHFC 21.21 0.42 1.99 0.36 1.69
SIS Bancorp, Inc. MA SISB 7.19 1.05 14.72 1.38 19.41
SJS Bancorp MI SJSB 11.67 0.46 3.84 0.63 3
Southern Missouri Bancorp, Inc MO SMBC 16.4 1.13 6.84 0.87 4.98
Sho-Me Financial Corp. MO SMFC 10.99 0.88 7.66 0.85 6.89
Sobieski Bancorp, Inc. IN SOBI 18.49 0.38 2.06 0.42 2.24
First Savings Bancorp, Inc. NC SOPN 26.21 1.52 5.83 1.48 5.68
Somerset Savings Bank MA SOSA 5.56 0.5 8.97 0.42 7.83
St. Paul Bancorp, Inc. IL SPBC 8.63 0.96 10.76 0.91 9.81
Southern Banc Company, Inc AL SRN NA 0.74 3.66 0.54 3.96
Scotland Bancorp, Inc NC SSB 35.05 1.74 4.81 NA NA
Strongsville Savings Bank OH SSBK 7.89 0.96 11.8 0.99 11.84
Stone Street Bancorp, Inc. NC SSM 33.69 0.88 6.44 NA NA
St. Francis Capital Corp. WI STFR 9.42 0.78 7.79 1.18 10.78
Standard Financial, Inc. IL STND 11.69 0.69 5.72 0.81 6.06
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF AUGUST 8, 1996
<TABLE>
<CAPTION> -----------------------------
Total Current Current Current Price in Relation to
Assets Stock Market -----------------------------
(Most Rec QTR) Price Value Book Value Tg Bk Value
Institution State Ticker ($000) ($) ($M) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Maximum 49,506,630 60.88 3,383.29 249.50 260.82
Minimum 27,596 1.47 2.10 25.91 55.83
Average 1,322,401 17.32 128.03 108.53 112.78
Median 338,985 15.75 37.76 101.11 103.83
- ---------------------------------------------------------------------------------------------------------------------
Sterling Financial Corp. WA STSA 1479643 14 75.97 127.16 156.95
Sovereign Bancorp, Inc. PA SVRN 9183447 10 495.73 129.03 190.11
Southwest Bancshares IL SWBI 356692 27.125 48.68 121.64 121.64
Sandwich Co-operative Bank MA SWCB 449889 20.5 38.56 104.11 110.87
SouthFirst Bancshares, Inc. AL SZB 88899 12.75 10.9 82.36 82.36
Tolland Bank CT TBK 217233 10.375 12.01 88.45 92.8
TCF Financial Corp. MN TCB 7000871 37.375 1306.65 249.5 260.82
Troy Hill Bancorp, Inc. PA THBC 80484 13.375 14.28 79.95 79.95
Third Financial Corp. OH THIR 155911 32.25 36.63 127.82 127.82
Three Rivers Financial Corp. MI THR 85138 12.625 10.85 83.22 83.61
TF Financial Corporation PA THRD 528910 14.125 60.7 78.6 78.6
Tappan Zee Financial, Inc. NY TPNZ 119167 13.25 20.58 95.74 95.74
Tri-County Bancorp, Inc. WY TRIC 76718 18.875 11.49 92.62 92.62
Trenton SB, MHC NJ TSBS 517363 13.75 122.55 122.44 125.23
Teche Holding Co. LA TSH 346115 13 50.32 89.59 89.59
Twin City Bancorp TN TWIN 102321 16.75 15.05 106.76 106.76
United Financial Corp. MT UBMT 104574 18.125 22.17 90.08 90.08
United Federal Savings Bank NC UFRM 252170 7.5 22.99 110.13 110.13
Virginia Beach Fed. Financial VA VABF 608832 7.5 37.24 90.36 90.36
Valley Federal Savings Bank AL VAFD 118625 31 11.37 118.5 118.5
Virginia First Financial VA VFFC 713931 12.25 68.79 124.87 129.49
Washington Mutual Inc. WA WAMU 22323472 35.25 2541.06 178.66 199.83
Wayne Savings & Loan Co. MHC OH WAYN 250266 19.75 29.54 127.42 127.42
WFS Bancorp, Inc. KS WBCI 267829 22.875 35.79 104.02 104.07
Webster Financial Corporation CT WBST 3837220 29.5 238.99 120.8 158.35
Westco Bancorp IL WCBI 312158 21.5 56.37 116.85 116.85
Webster City Federal SB, MHC IA WCFB 97391 12.5 26.25 120.42 120.42
Workingmens Capital Holdings IN WCHI 208203 20.625 37.3 140.98 140.98
Wells Financial Corp. MN WEFC 196184 11.75 25.7 87.62 87.62
Westcorp CA WES 3027248 18.5 480.58 153.65 NA
Winton Financial Corp. OH WFCO 282833 13.5 26.81 127.24 130.56
Washington Federal, Inc. WA WFSL 5040588 21.875 924.14 154.7 162.4
WHG Bancshares Corp. MD WHGB 111704 11.75 19.04 NA NA
Walden Bancorp, Inc. MA WLDN 1051743 19 101.07 103.94 120.71
Western Ohio Financial Corp. OH WOFC 319558 21.125 50.01 83.86 89.06
Warren Bancorp, Inc. MA WRNB 349421 12 44.2 140.19 140.19
Washington Savings Bank, FSB MD WSB 254968 5 21.1 100.6 100.6
WSFS Financial Corporation DE WSFS 1312864 8 110.66 149.25 150.94
WesterFed Financial Corp. MT WSTR 563931 14.313 62.91 80.05 80.05
WVS Financial Corporation PA WVFC 259622 21 36.47 107.14 107.14
Westwood Financial Corporation NJ WWFC 84779 10.875 7.03 NA NA
Wayne Bancorp, Inc. NJ WYNE 207997 12.625 28.17 NA NA
Yonkers Financial Corporation NY YFCB 242826 10.25 36.6 74.65 74.65
York Financial Corp. PA YFED 1109804 16.25 98.93 105.73 105.73
</TABLE>
<TABLE>
<CAPTION>
------------------------------
Current Price in Relation To Current
------------------------------ Dividend Equity/
Assets QTR EPS LTM EPS Yield Assets
Institution State Ticker (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Maximum 39.61 218.75 153.75 7.44 35.07
Minimum 0.67 2.04 3.36 0.00 3.40
Average 12.45 16.38 16.16 1.98 12.21
Median 10.52 12.24 11.57 2.08 9.81
- ------------------------------------------------------------------------------------------------------
Sterling Financial Corp. WA STSA 5.13 15.22 15.56 0 5.79
Sovereign Bancorp, Inc. PA SVRN 5.4 8.93 9.35 0.84 5.02
Southwest Bancshares IL SWBI 13.65 13.3 13.84 3.98 11.22
Sandwich Co-operative Bank MA SWCB 8.57 10.68 10.57 4.88 8.23
SouthFirst Bancshares, Inc. AL SZB 12.26 106.25 22.37 3.92 14.89
Tolland Bank CT TBK 5.53 10.38 NM 0 6.25
TCF Financial Corp. MN TCB 18.66 12.46 13.11 2.01 7.48
Troy Hill Bancorp, Inc. PA THBC 17.75 11.53 12.5 2.99 22.2
Third Financial Corp. OH THIR 23.5 18.75 18.22 2.36 18.38
Three Rivers Financial Corp. MI THR 12.75 19.73 NA 2.38 15.32
TF Financial Corporation PA THRD 12.08 13.58 13.99 2.27 14.2
Tappan Zee Financial, Inc. NY TPNZ 17.27 19.49 NA 1.51 18.04
Tri-County Bancorp, Inc. WY TRIC 14.98 15.73 18.33 2.65 16.17
Trenton SB, MHC NJ TSBS 23.69 13.75 NA 2.55 19.34
Teche Holding Co. LA TSH 15.37 14.13 NA 3.85 17.16
Twin City Bancorp TN TWIN 14.71 11.96 13.19 3.82 13.78
United Financial Corp. MT UBMT 21.2 17.43 13.73 4.86 23.53
United Federal Savings Bank NC UFRM 9.12 12.5 10.27 2.67 8.27
Virginia Beach Fed. Financial VA VABF 6.12 14.42 18.75 2.13 6.77
Valley Federal Savings Bank AL VAFD 9.59 40.79 119.23 1.94 8.09
Virginia First Financial VA VFFC 9.64 8.06 8.45 0 7.72
Washington Mutual Inc. WA WAMU 11.38 11.6 12.41 2.61 7.38
Wayne Savings & Loan Co. MHC OH WAYN 11.8 17.03 18.99 4.46 9.26
WFS Bancorp, Inc. KS WBCI 13.36 13.3 18.45 1.75 12.85
Webster Financial Corporation CT WBST 6.23 9.1 12.09 2.44 5.59
Westco Bancorp IL WCBI 18.06 14.53 15.58 2.23 15.45
Webster City Federal SB, MHC IA WCFB 26.95 22.32 23.15 6.4 22.39
Workingmens Capital Holdings IN WCHI 17.92 23.44 20.22 1.75 12.71
Wells Financial Corp. MN WEFC 13.1 12.24 NA 0 14.95
Westcorp CA WES 15.87 11.28 12.25 2.16 10.33
Winton Financial Corp. OH WFCO 9.48 11.25 10.89 3.11 7.45
Washington Federal, Inc. WA WFSL 18.33 9.94 11.05 4.21 11.85
WHG Bancshares Corp. MD WHGB NA NA NA 0 20.6
Walden Bancorp, Inc. MA WLDN 9.61 8.64 9.95 3.37 9.25
Western Ohio Financial Corp. OH WOFC 15.27 44.01 20.31 4.73 18.2
Warren Bancorp, Inc. MA WRNB 12.65 8.11 7.79 3.67 9.03
Washington Savings Bank, FSB MD WSB 8.28 11.36 9.09 2 8.22
WSFS Financial Corporation DE WSFS 8.43 8.33 4.28 0 5.65
WesterFed Financial Corp. MT WSTR 11.16 12.34 13.38 2.52 13.94
WVS Financial Corporation PA WVFC 14.05 11.67 10.19 1.91 13.11
Westwood Financial Corporation NJ WWFC NA NA NA 0 7.05
Wayne Bancorp, Inc. NJ WYNE NA NA NA 0 8.32
Yonkers Financial Corporation NY YFCB 15.07 NA NA 1.95 20.19
York Financial Corp. PA YFED 8.91 10.69 9.97 3.69 8.43
</TABLE>
<TABLE>
<CAPTION>
Tangible Qtr Qtr LTM LTM
Equity/ Return on Return on Return on Return on
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
Institution State Ticker (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Maximum 35.07 3.11 54.91 2.30 38.10
Minimum 2.83 (3.28) (80.66) (1.74) (30.56)
Average 11.98 0.90 8.53 0.88 8.48
Median 9.36 0.88 7.81 0.86 7.47
- ----------------------------------------------------------------------------------------------------------------
Sterling Financial Corp. WA STSA 5.05 0.46 7.92 0.45 2.73
Sovereign Bancorp, Inc. PA SVRN 3.79 0.78 15.04 0.79 14.64
Southwest Bancshares IL SWBI 11.22 1.12 9.4 1.15 8.95
Sandwich Co-operative Bank MA SWCB 7.77 0.87 10.47 0.87 10.76
SouthFirst Bancshares, Inc. AL SZB 14.89 0.12 0.75 0.55 3.24
Tolland Bank CT TBK 5.98 0.56 9.08 -0.46 -7.5
TCF Financial Corp. MN TCB 7.18 1.54 20.22 1.43 20.06
Troy Hill Bancorp, Inc. PA THBC 22.2 1.42 6.27 1.38 6.09
Third Financial Corp. OH THIR 18.38 1.34 7.31 1.37 7.66
Three Rivers Financial Corp. MI THR 15.26 0.68 4.37 NA NA
TF Financial Corporation PA THRD 14.2 0.84 5.89 0.91 5.94
Tappan Zee Financial, Inc. NY TPNZ 18.04 0.87 4.63 0.8 5.22
Tri-County Bancorp, Inc. WY TRIC 16.17 1 6.82 0.95 5.13
Trenton SB, MHC NJ TSBS 19 1.69 8.75 1.8 9.97
Teche Holding Co. LA TSH 17.16 1.04 5.81 1.17 6.66
Twin City Bancorp TN TWIN 13.78 1.18 8.38 1.08 7.84
United Financial Corp. MT UBMT 23.53 1.16 5.09 1.5 6.64
United Federal Savings Bank NC UFRM 8.27 0.72 8.7 0.87 11.31
Virginia Beach Fed. Financial VA VABF 6.77 0.41 6.07 0.29 4.81
Valley Federal Savings Bank AL VAFD 8.09 0.23 2.86 0.08 0.96
Virginia First Financial VA VFFC 7.46 1.25 15.98 1.21 16.02
Washington Mutual Inc. WA WAMU 6.76 1.1 15.08 1.04 14.25
Wayne Savings & Loan Co. MHC OH WAYN 9.26 0.7 7.44 0.62 6.73
WFS Bancorp, Inc. KS WBCI 12.84 0.99 7.86 0.67 5.71
Webster Financial Corporation CT WBST 4.43 0.78 13.86 0.6 10.69
Westco Bancorp IL WCBI 15.45 1.37 8.76 1.3 8.37
Webster City Federal SB, MHC IA WCFB 22.39 1.22 5.46 1.16 5.24
Workingmens Capital Holdings IN WCHI 12.71 0.77 6.13 0.86 7.04
Wells Financial Corp. MN WEFC 14.95 1.02 6.88 0.81 5.96
Westcorp CA WES NA 1.4 13.84 1.28 13.55
Winton Financial Corp. OH WFCO 7.28 0.87 11.34 0.94 12.39
Washington Federal, Inc. WA WFSL 11.36 1.87 15.7 1.78 14.47
WHG Bancshares Corp. MD WHGB 20.6 0.52 2.52 NA NA
Walden Bancorp, Inc. MA WLDN 8.07 1.15 12.34 1.03 11.09
Western Ohio Financial Corp. OH WOFC 17.32 0.41 1.9 1.12 4.19
Warren Bancorp, Inc. MA WRNB 9.03 1.64 18.32 1.7 19.56
Washington Savings Bank, FSB MD WSB 8.22 0.8 9.78 0.94 12.56
WSFS Financial Corporation DE WSFS 5.59 1.03 17.96 2.2 38.1
WesterFed Financial Corp. MT WSTR 13.94 0.86 6.25 4.79 5.9
WVS Financial Corporation PA WVFC 13.11 1.24 8.93 1.51 10.19
Westwood Financial Corporation NJ WWFC 5.65 0.64 9.16 0.67 9.4
Wayne Bancorp, Inc. NJ WYNE 8.32 NA NA 0.46 5.12
Yonkers Financial Corporation NY YFCB 20.19 1.04 5.13 NA NA
York Financial Corp. PA YFED 8.43 0.91 10.62 0.99 11.57
</TABLE>
Source: JML Securities L.P.
<PAGE>
----------------------------
Exhibit IV-2
Comparative Market Indices
----------------------------
[LINE GRAPH APPEARS HERE]
Thrift Dow Jones
Index Index
12/31/93 252.548 3,754.090
01/31/94 258.468 3,978.360
02/28/94 249.529 3,832.020
03/31/94 241.573 3,635.960
04/29/94 248.312 3,681.690
05/31/94 263.340 3,758.370
06/30/94 269.584 3,624.960
07/29/94 276.692 3,764.500
08/31/94 287.183 3,913.420
09/30/94 279.687 3,843.190
10/31/94 263.118 3,908.120
11/30/94 245.835 3,739.230
12/30/94 244.727 3,834.440
01/31/95 256.138 3,843.860
02/28/95 276.973 4,011.050
03/31/95 278.404 4,157.690
04/28/95 295.442 4,321.270
05/31/95 307.584 4,465.140
06/30/95 313.454 4,556.100
07/31/95 328.184 4,708.470
08/31/95 355.487 4,610.560
09/29/95 362.289 4,789.080
10/31/95 354.053 4,755.480
11/30/95 370.172 5,074.490
12/29/95 376.508 5,117.120
01/31/96 370.694 5,395.300
02/29/96 373.640 5,485.620
03/29/96 382.130 5,587.140
04/30/96 380.270 5,569.080
05/31/96 382.992 5,643.180
06/28/96 387.179 5,654.630
07/31/96 389.887 5,528.910
08/08/96 399.361 5,713.490
<PAGE>
----------------------------
Exhibit IV-3
Selected Comparative Rates
----------------------------
[LINE GRAPH APPEARS HERE]
90 Day 30 Year
Prime Rate Treasury 1 Year T-Bill Bond Yield
12/31/91 6.5 3.95 4.08 7.409
01/31/92 6.5 3.94 4.21 7.763
02/29/92 6.5 4.02 4.31 7.8
03/29/92 6.5 4.15 4.51 7.96
04/29/92 6.5 3.79 4.33 8.052
05/29/92 6.5 3.8 4.25 7.833
06/29/92 6.5 3.65 4.06 7.784
07/29/92 6 3.25 3.62 7.453
08/29/92 6 3.23 3.46 7.471
09/29/92 6 2.74 3.06 7.375
10/29/92 6 3.02 3.53 7.629
11/29/92 6 3.34 3.81 7.621
12/29/92 6 3.15 3.59 7.396
01/29/93 6 2.97 3.36 7.212
02/28/93 6 3 3.29 6.959
03/28/93 6 2.96 3.29 6.927
04/28/93 6 2.95 3.27 6.943
05/28/93 6 3.13 3.62 6.979
06/28/93 6 3.1 3.44 6.677
07/28/93 6 3.11 3.52 6.566
08/28/93 6 3.08 3.38 6.22
09/28/93 6 2.98 3.38 6.034
10/28/93 6 3.09 3.45 5.957
11/28/93 6 3.14 3.56 6.288
12/28/93 6 3.01 3.47 6.348
01/28/94 6 3.03 3.51 6.231
02/28/94 6 3.44 3.99 6.671
03/28/94 6.25 3.57 4.4 7.11
04/28/94 6.75 3.96 5.1 7.309
05/28/94 7.25 4.28 5.38 7.436
06/28/94 7.25 4.23 5.5 7.622
07/28/94 7.25 4.37 5.37 7.385
08/28/94 7.75 4.68 5.54 7.548
09/28/94 7.75 4.79 5.95 7.818
10/28/94 7.75 5.16 6.16 7.964
11/28/94 8.5 5.74 6.88 7.988
12/28/94 8.5 5.7 7.18 7.881
01/28/95 8.5 6 6.79 7.707
02/28/95 9 5.94 6.42 7.508
03/28/95 9 5.88 6.5 7.434
04/28/95 9 5.88 6.33 7.339
05/28/95 9 5.83 5.83 6.665
06/28/95 9 5.66 5.72 6.624
07/27/95 8.75 5.46 5.77 6.89
08/28/95 8.75 5.43 5.76 6.72
09/28/95 8.75 5.14 5.78 6.61
10/27/95 8.75 5.22 5.54 6.38
11/28/95 8.75 5.32 5.43 6.22
12/28/95 8.5 4.91 5.21 6
01/30/95 8.5 5.01 5.03 6.08
02/26/95 8.25 4.81 5.04 6.44
03/31/96 8.25 4.8 5.44 6.67
04/30/96 8.25 4.9 5.62 6.9
08/08/96 8.25 5.17 5.72 7.16
<PAGE>
Exhibit V-I
Calculation of Return on Conversion Proceeds
In making the pro forma adjustments to calculate the additional income from the
net conversion proceeds, we have made the following assumptions:
1. The net proceeds are invested at the beginning of the applicable
period to yield 5.64%. Income taxes were assumed to be 39%, resulting
in an after-tax yield of 3.44%.
2. Earnings before extraordinary items were utilized as the earnings
base.
3. The Employee Stock Ownership Plan and Trust (ESOP) will purchase 8% of
the shares of Common Stock issued in the Conversion. Funds used to
acquire the ESOP shares will be borrowed from the Holding Company.
The Savings Bank expects to repay the debt over a 10-year period at
the prime rate. Appropriate adjustments to pro forma equity and
earnings have been incorporated.
4. Management intends to propose for consideration and approval by
stockholders at the first annual meeting following the Management
Recognition Plan ("MRP") for outside directors and for officers and
employees. It is assumed that the MRP will be acquired through open
market purchases.
5. It is assumed that (i) 100% of the shares will be sold in the
Offerings; and (ii) Trident Securities will receive a management fee
of 1% of the gross proceeds of the Offerings, plus commissions of 2%
of the gross proceeds less: Directors purchases and the amount of the
ESOP.
6. Total expenses at the midpoint are estimated to be $754,000.
47
<PAGE>
EXHIBIT V-1
Richmond Savings Bank, S.S.B.
Pro Forma Effect of Conversion Proceeds
As of June 30, 1996
(000) omitted
<TABLE>
<CAPTION>
Adjusted
Minimum Midpoint Maximum Maximum
=======================================================================================
<S> <C> <C> <C> <C>
Shares Offered (Total) 1,190,000 1,400,000 1,610,000 1,851,500
Price per share $10.00 $10.00 $10.00 $10.00
Gross Proceeds $11,900 $14,000 $16,100 $18,515
Estimated expenses 695 754 814 882
-----------------------------------------------------
Net proceeds $11,205 $13,246 $15,286 $17,633
Adj. net income - twelve months
ended 6/30/96-adjusted $591 $591 $591 $591
Incremental return on proceeds 263 311 360 416
Less: ESOP adjustment (58) (68) (79) (90)
Less: MRP adjustment (58) (68) (79) (90)
-----------------------------------------------------
Pro forma net income $738 $766 $794 $826
Earnings per share $0.62 $0.55 $0.49 $0.45
Adj. net income - three months
ended 6/30/96, annualized $508 $508 $508 $508
Incremental return on proceeds 263 311 360 416
Less: ESOP adjustment (58) (68) (79) (90)
Less: MRP adjustment (58) (68) (79) (90)
-----------------------------------------------------
Pro forma net income $654 $682 $711 $743
Earnings per share $0.55 $0.49 $0.44 $0.40
Net worth $8,641 $8,641 $8,641 $8,641
Net conversion proceeds 11,205 13,246 15,286 17,633
Less: ESOP adjustment (952) (1,120) (1,288) (1,481)
Less: MRP adjustment (476) (560) (644) (741)
-----------------------------------------------------
Pro forma net worth $18,418 $20,207 $21,995 $24,051
Book value per share $15.48 $14.43 $13.66 $12.99
Total assets $94,110 $94,110 $94,110 $94,110
Net conversion proceeds 11,205 13,246 15,286 17,633
Less: ESOP adjustment (952) (1,120) (1,288) (1,481)
Less: MRP adjustment (476) (560) (644) (741)
-----------------------------------------------------
Pro forma total assets $103,887 $105,676 $107,464 $109,521
Pro Forma Ratios
Price/EPS (LTM) 16.1 18.3 20.3 22.4
Price/EPS (last quarter) 18.2 20.5 22.7 24.9
Price/book per share 64.61% 69.28% 73.20% 76.98%
Market value/assets 11.45% 13.25% 14.98% 16.91%
</TABLE>
<PAGE>
EXHIBIT V-2
Richmond Savings Bank, SSB
Pro Forma Midpoint Analysis
<TABLE>
<CAPTION>
Comparative Group All Public Thrifts
----------------- ------------------
Symbols Value Average Median Average Median
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price/earnings ratio P/E
Last twelve months (X) 24.5 14.2 20.8 16.7
Pro forma minimum 16.1
Pro forma adjusted midpoint 18.3
Pro forma maximum 20.3
Final Value 22.4
Last three months, annualized 27.3 16.4 20.8 16.7
Pro forma minimum 18.2
Pro forma adjusted midpoint 20.5
Pro forma maximum 22.7
Final Value 24.9
Price/book ratio P/B 97.5% 97.6% 69.3% 69.3%
Pro forma minimum (%) 64.6%
Pro forma adjusted midpoint 69.3%
Pro forma maximum 73.2%
Final Value 77.0%
Price/assets ratio P/A 20.40% 20.39% 14.90% 13.30%
Pro forma minimum (%) 11.45%
Pro forma adjusted midpoint 13.25%
Pro forma maximum 14.98%
Final Value 16.91%
Key Assumptions
Earnings base - last twelve months Y $591,000
Earnings base - last three months Y $507,812
Book value B $8,640,726
Tangible book value B $8,640,726
Total assets A $94,110,056
Estimated conversion
expense at midpoint X $754
Return on conversion
proceeds (after-tax) R 3.44%
Proceeds not reinvested Z $4,200,000
Estimated ESOP E ($1,120,000)
Cost of ESOP S 8.00%
Amort. of ESOP T 10 years
ESOP tax rate Tax 39%
Estimated MRP ($560,000)
Cost of MRP 4%
Amort. of MRP 5 years
</TABLE>
<PAGE>
EXHIBIT V-2 (Continued)
Richmond Savings Bank, SSB
Return on Conversion Proceeds
As of August 8, 1996
Amount Investment Security Yield
20.00% 3 month Treasury Bill 5.15%
20.00% 6 month Treasury Bill 5.32%
20.00% 1 year US Treasury Note 5.66%
20.00% 2 year US Treasury Note 5.95%
20.00% 3 year US Treasury Note 6.13%
100.00% Weighted Average Yield 5.64%
Weighted Average Maturity 1.35 years
<PAGE>
EXHIBIT V-3
Pro Forma Midpoint Analysis
Richmond Savings Bank, SSB
Calculation of Estimated Value in a Standard Conversion (V)
P/E (Y - R (X+Z) - ES - (1-Tax) E/T - (1-Tax))
1. V = ---------------------------------------------- = $14,000,000
1 - (P/E) R
P/B (B - X - E)
2. V = --------------- = $14,000,000
1 - P/B
P/A (A - X)
3. V = ----------- = $14,000,000
1 - P/A
Value Valuation
Final Value Per Share Total Shares Date
----------- --------- ------------ ----
$14,000,000 $10.00 1,400,000 08/08/96
<PAGE>
Exhibit 28.3
+++ +++ CAROLINA FINCORP, INC.
+ + ====================================
+ + HOLDING COMPANY FOR RICHMOND SAVINGS
BANK, SSB
STOCK ORDER FORM
+ +
+ +
+++ +++ NOTE: Please read the Stock Order Form
Instructions and Guide on the back as
you complete this form.
DEADLINE: The Subscription Offering will expire at 12:00 noon, Eastern Time,
on , 1996, unless extended.
- -----------------------------------------------------------------------------
(1) Number of Subscription Price (2) Total Payment
Shares Due
----------------------- --------------------
X $10.00=
----------------------- --------------------
The minimum number of shares that may be subscribed for is 50 shares and the
maximum is 25,000, except for purchases by the Employee Stock Ownership Plan
of Richmond Savings Bank, SSB ("Richmond"). The maximum purchase limit is
subject to possible change. See the Stock Order Form Instructions and Guide
on the back of this form and the Prospectus.
- -----------------------------------------------------------------------------
METHOD OF PAYMENT IMPORTANT PURCHASER INFORMATION
(5)a[_]Check here if you were a depositor
(3)[_]Enclosed is a check, of Richmond on March 31, 1995 (the
bank draft or money Eligibility Record Date). Enter
order made payable to information below for all deposit
Carolina Fincorp, Inc. accounts that you had at Richmond
in the amount of: on March 31, 1995.
------------ Cash can be
$ used only (5)b[_]Check here if you were a depositor
if presented of Richmond on , 1996 (the
in person at any Supplemental Eligibility Record
------------ Richmond office. Date). Enter information below for
(4)[_]The undersigned all deposit accounts that you had
authorizes withdrawal at Richmond on , 1996.
from this (these) (5)c[_]Check here if you were a borrower
account(s) at from Richmond on , 1996 (the
Richmond. Voting Record Date) or a depositor of
Please contact the Stock Richmond who did not have a deposit
------------------------ on March 31, 1995 or , 1996.
Information Center prior to , Enter information below for all loan
------------------------------ and deposit accounts that you had at
1996 if you wish to Richmond on , 199 (the Voting
------------------- Record Date).
use your Richmond IRA (5)d[_]State in which you reside:__________
---------------------
for stock purchase.
-------------------
Account Number Amount Account Title Deposit Loan Account
- ---------------------------- (Names on Accounts) Account Account Number
$ ---------------------------------------------
- ---------------------------- [_] [_]
$ ---------------------------------------------
- ---------------------------- [_] [_]
$ ---------------------------------------------
- ---------------------------- [_] [_]
Total Withdrawal ---------------------------------------------
Amount $ [_] [_]
------------ ---------------------------------------------
There is no penalty for early
withdrawals used for stock
payment.
STOCK REGISTRATION (SEE BACK UNDER STOCK OWNERSHIP GUIDE)
(6) Form of Stock Ownership:
[_]Individual [_]Joint tenants with right of survivorship
[_]Tenants in common [_]Uniform Transfer to Minors
[_]Fiduciary (i.e., trust, estate, etc.)
[_]Corporation or Partnership
[_]Other ___________________
- -------------------------------------------------------------------------------
(7)Name(s) in which your stock is to be registered (Please Print Clearly)
- -------------------------------------------------------------------------------
Social Security No. or Tax ID No.
- -------------------------------------------------------------------------------
Name(s) continued
- -------------------------------------------------------------------------------
Street Address City County State Zip
Code
- -------------------------------------------------------------------------------
--------------------- -------------------
Daytime Phone Evening Phone
(8)Telephone Information ( ) ( )
--------------------- -------------------
NASD AFFILIATION
(9)[_]Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with a NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which a
NASD member or person associated with a NASD member has a beneficial interest.
To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD Affiliation box: (i) that you are an
eligible purchaser in Richmond's mutual to stock conversion, (ii) not to sell,
transfer or hypothecate the stock for a period of three months following
issuance, and (iii) to report this subscription in writing to the applicable
NASD member within one day of payment therefor.
ACKNOWLEDGMENT
(10)To be effective in the Subscription Offering, this fully completed Stock
Order Form must be actually received by Richmond no later than 12:00 noon,
Eastern time on , 1996, unless extended; otherwise this Stock Order
Form and all subscription rights will be void. Completed Stock Order Forms,
together with the required payment or withdrawal authorization, may be
delivered to any Richmond office or may be mailed to the Post Office Box
indicated on the enclosed business reply envelope. All rights exercisable
hereunder are not transferable and shares purchased upon exercise of such
rights must be purchased for the account of the person exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Amended and Restated
Plan of Holding Company Conversion ("Plan of Conversion") of Richmond
described in the accompanying Prospectus. If the Plan of Conversion is not
approved by the voting members of Richmond at a Special Meeting to be held on
, 1996, or any adjournment thereof, all orders will be cancelled and
funds received as payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Richmond, this Stock Order Form
may not be modified, withdrawn or cancelled (unless the Conversion is not
completed within 45 days of the completion of the Subscription Offering)
without Richmond's' consent and if authorization to withdraw from deposit
accounts at Richmond has been given as payment for shares, the amount
authorized for withdrawal shall not otherwise be available for withdrawal by
the undersigned.
APPLICABLE FEDERAL REGULATIONS PROHIBIT ANY PERSON FROM TRANSFERRING OR
ENTERING INTO ANY AGREEMENT DIRECTLY OR INDIRECTLY TO TRANSFER THE LEGAL OR
BENEFICIAL OWNERSHIP OF CONVERSION SUBSCRIPTION RIGHTS, OR THE UNDERLYING
SECURITIES TO THE ACCOUNT OF ANOTHER. RICHMOND AND CAROLINA FINCORP, INC. WILL
PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT THEY BECOME AWARE
OF THE TRANSFER OF CONVERSION SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS
KNOWN BY THEM TO INVOLVE SUCH TRANSFER.
I ACKNOWLEDGE THAT THE COMMON STOCK OFFERED IS NOT A SAVINGS OR DEPOSIT
ACCOUNT AND IS NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE BANK
INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY, MAY LOSE VALUE AND IS NOT GUARANTEED BY CAROLINA FINCORP,
INC. OR RICHMOND.
I ALSO ACKNOWLEDGE RECEIPT OF A PROSPECTUS DATED , 1996.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED BELOW
Under penalty of perjury, I certify that the Social Security or Tax ID Number
and the information provided in this Stock Order Form are true, correct and
complete, that I am not subject to back-up withholding, that I am purchasing
for my own account, that there is no agreement or understanding regarding the
transfer of my subscription rights or the sale or transfer of these shares and
that I have received a copy of the Prospectus and am aware of the risks
associated with an investment in Carolina Fincorp, Inc.
SIGNATURE(S)
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(11)Signature Date Signature Date
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FOR OFFICE USE ONLY
- --------------------------------------- STOCK INFORMATION CENTER
Date Category # ______ RICHMOND SAVINGS BANK, SSB
Received _ /_ /_
Batch # _________ Deposit _________ 115 SOUTH LAWRENCE STREET
Order # _________ Date Input /_ / ROCKINGHAM, NORTH CAROLINA 28380
- --------------------------------------- (910) -
<PAGE>
CAROLINA FINCORP, INC.
===============================================================================
SUBSCRIPTION OFFERING
STOCK ORDER FORM
INSTRUCTIONS AND GUIDE
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- ---------------------
STOCK OWNERSHIP GUIDE
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INDIVIDUAL
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of
the deceased co-tenant. All parties must agree to the transfer or sale of
shares held by tenants in common.
UNIFORM TRANSFER TO MINORS
Stock may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Acts of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for
Custodian is "CUST", while the Uniform Transfer to Minors Act is "Unif Tran
Min Act". Standard U.S. Postal Service state abbreviations should be used to
describe the appropriate state. For example, stock held by John Doe as
custodian for Susan Doe under the North Carolina Uniform Transfer to Minors
Act will be abbreviated John Doe, CUST Susan Doe Unif Tran Min Act, NC (use
minor's social security number).
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
* The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
* The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
* A copy and description of the document governing the fiduciary
relationship, such as living trust agreement or court order. Without
documentation establishing a fiduciary relationship, your stock may not be
registered in a fiduciary capacity.
* The date of the document governing the relationship except that the date of
a trust created by a will need not be included in the description.
* The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John
Doe, Trustee Under Agreement Dated 10-1-87 for Susan Doe.
You may mail your completed Stock Order Form in the envelope that has been
provided, or you may deliver your Stock Order Form to any banking office of
Richmond. In order to purchase stock in the Subscription Offering, your Stock
Order Form, properly completed, and payment in full (or withdrawal
authorization) at the Subscription Price of $10 per share must be received by
Richmond no later than 12:00 noon, Eastern Time, on , 1996, unless such
date is extended, or your Stock Order Form will become void. Stock Order Forms
shall be deemed received only upon actual receipt at any banking office of
Richmond.
If you need further assistance, please call the Stock Information Center at
(910) . We will be pleased to help you with the completion of your Stock
Order Form or answer any questions you may have.
ITEM INSTRUCTIONS
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ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares
purchased by the Subscription Price of $10.00 per share. The minimum purchase
is 50 shares. The maximum purchase by any person or entity (other than
Richmond's Employee Stock Ownership Plan), or persons acting in concert is
25,000 shares. The Board of Directors of Richmond has the right to (i) reduce
the maximum purchase limitation to an amount not less than one percent of the
shares of common stock issued in the Conversion or (ii) increase the maximum
purchase limitation to an amount of up to five percent of the shares of common
stock issued in the Conversion. Any change in the maximum purchase limitation
may occur at any time prior to consummation of the Conversion, either before
or after , 1996. If the maximum purchase limitation is increased, any
subscriber who has subscribed for 25,000 shares, and certain other large
subscribers in the discretion of Carolina Fincorp, Inc.,, will be given the
opportunity to increase their subscriptions up to the higher maximum purchase
limitation. Carolina Fincorp, Inc. and Richmond reserve the right to reject
any order received in the Community Offering, in whole or in part.
The Holding Company and Richmond also have the right to reject the order of
any subscriber who (i) submits false or misleading information on a Stock
Order Form or otherwise, (ii) attempts to purchase shares in violation of the
Plan of Conversion or applicable law or (iii) fails to cooperate with attempts
to verify information with respect to purchase rights.
ITEM 3--
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order made payable to Carolina Fincorp. Inc.
Your funds will earn interest at the Richmond current passbook savings rate
until the Conversion is completed or terminated. DO NOT MAIL CASH TO PURCHASE
STOCK! Please check this box if your method of payment is by cash, check, bank
draft or money order.
ITEM 4--
If you pay for your stock by a withdrawal from a Richmond deposit account,
insert the account number(s) and the amount of your withdrawal authorization
for each account. The total amount withdrawn should equal the amount of your
stock purchase. There will be no penalty assessed for early withdrawals from
certificate accounts used for stock purchases. This form of payment may not be
used if your account is an Individual Retirement Account. If you wish to use
your IRA currently at Richmond, you must call the Stock Information Center
prior to , 1996 and complete all paperwork required no later than
, 1996.
ITEM 5--
a. Please check this box if you were a depositer of Richmond on March 31, 1995
(the Eligibility Record Date). You must list the full title and account
numbers of all accounts you had on this date in order to insure proper
identification of your purchase rights and preferences.
b. Please check this box if you were a depositor of Richmond on , 1996
(the Supplemental Eligibility Record Date). You must list the full title and
account numbers of all accounts you had on this date in order to insure proper
identification of your purchase rights and preferences.
c. Please check this box if you are a borrower from Richmond as of , 1996
(the "Voting Record Date") or a depositor at Richmond on the Voting Record
Date and you were not a depositor on March 31, 1995 or , 1996. If you were
a borrower from Richmond on , 1996 (the Voting Record Date), you must
list the name of all borrowers on your loan accounts and the loan account
number for all loan accounts that you had at such date in order to insure
proper identification of your purchase rights and preferences. If you were a
depositor, you must list the full title and account numbers of all accounts
you had on this date in order to insure proper identification of your purchase
rights and preferences.
d. You must list the state in which you reside.
ITEMS 6,7 AND 8--
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your common stock. Please
complete items 6, 7 and 8 as fully and accurately as possible, and be certain
to supply your social security number or tax identification number and your
daytime and evening telephone number(s). We will need to call you if we cannot
execute your order as given. If you have any questions or concerns regarding
the registration of your stock, please consult your legal advisor. Stock
ownership must be registered in one of the ways described under "Stock
Ownership Guide."
ITEM 9--
Please check this box if you are a member of the NASD or if this item
otherwise applies to you.
ITEMS 10 AND 11--
Please sign and date the Stock Order Form where indicated. Review the Stock
Order Form carefully before you sign, including the acknowledgement. Normally,
one signature is required. An additional signature is required only when
payment is to be made by withdrawal from a deposit account that requires
multiple signatures to withdraw funds. If you have any remaining questions, or
if you would like assistance in completing your Stock Order Form, you may call
the Stock Information Center. The Stock Information Center phone number is
(910) .
