<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996
REGISTRATION NO.
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------
CAROLINA FINCORP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6036 56-1978449
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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]
_______________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================
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 .... 1,957,300/(1)/ $10.00 $19,573,000 $6,749.32
================================================================================================================
</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
- ------ ----------------
<S> <C> <C>
1 Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus Front Cover Page
2 Inside Front and Outside Back Cover Pages of
Prospectus Inside Front Cover Page; Table of Contents;
Outside Back Cover Page
3 Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges Summary; Selected Financial and Other
Data of Richmond Savings; Risk Factors
4 Use of Proceeds Summary; Use of Proceeds
5 Determination of Offering Price Summary; The Conversion
6 Dilution Not Applicable
7 Selling Security Holders Not Applicable
8 Plan of Distribution Summary; Use of Proceeds; The Conversion
9 Description of Securities to be Registered Dividend Policy; Description of Capital
Stock; Anti-Takeover Provisions Affecting
The Holding Company and Richmond
Savings
10 Interests of Named Experts and Counsel Not Applicable
11 Information with Respect to the Registrant Summary; Selected Financial and Other
Data 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
Indemnification for Securities Act Liabilities Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
CAROLINA FINCORP, INC.
(Proposed Holding Company for Richmond Savings Bank, SSB)
UP TO 1,957,300 SHARES OF COMMON STOCK
Carolina Fincorp, Inc., a North Carolina corporation (the "Holding
Company"), is offering up to 1,957,300 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 AND ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
<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 $0.57 $9.43
Per Share at Midpoint....................... $10.00 $0.53 $9.47
Per Share at Maximum........................ $10.00 $0.49 $9.51
Per Share at Maximum, as adjusted........... $10.00 $0.46 $9.54
Total at Minimum/(1)/....................... $12,580,000 $717,000 $11,863,000
Total at Midpoint/(1)/...................... $14,800,000 $778,000 $14,022,000
Total at Maximum/(1)/....................... $17,020,000 $839,000 $16,181,000
Total at Maximum, as adjusted /(2)/......... $19,573,000 $910,000 $18,663,000
=================================================================================================================================
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by Baxter
Fentriss and Company ("Baxter Fentriss") dated May 17, 1996, which states
that the estimated aggregate pro forma market value of the Holding
Company and Richmond Savings ranged from $12,580,000 to $17,020,000
("Valuation Range") or between 1,258,000 and 1,702,000 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 $334,000 and $527,000 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 $12,580,000. 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 March 31, 1996, Richmond
Savings had total assets of $95.3 million, net
loans of $68.3 million, deposits of $85.1 million
and retained earnings of $8.5 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 eligible to 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
1,258,000 shares and 1,957,300 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
5
<PAGE>
_________________, 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 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. Notwithstanding
the priorities set forth above, the ESOP shall
have the first priority to purchase any shares
sold above 1,702,000. 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
subscribed for 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 100,640 and 136,160 shares
assuming the issuance of between 1,258,000 and
1,702,000 shares). The ESOP will have first
priority to purchase any shares sold above
1,702,000. If the ESOP is nevertheless unable to
purchase in the aggregate up to 8% of the shares
of Common Stock issued in the Conversion because
of an oversubscription, 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.
6
<PAGE>
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 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 accepted.
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
7
<PAGE>
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."
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 May 17, 1996, the Valuation Range
of the aggregate estimated pro forma market
value of the Holding Company and Richmond Savings
was from $12,580,000 to $17,020,000. 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
will be 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 $19,573,000 or less than $12,580,000
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 $11,863,000 and
$16,181,000, 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 $1,006,400 and $1,361,600
assuming the ESOP's purchase of between 100,640
and 136,160 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
8
<PAGE>
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 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 estimated
cost of such new office, less the expected
proceeds from the sale of the existing Ellerbe
office, is expected to be approximately $225,000.
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
$490,000, 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 50,320 and 68,080 shares
will be acquired by the MRP,
9
<PAGE>
assuming the issuance of between 1,258,000 and
1,702,000 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 $503,000 and $680,000,
respectively, to the MRP for this purpose.
Additional shares would be acquired if the number
of shares issued in the Conversion exceeds
1,702,000, and the price per share paid by the MRP
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 125,800 and 170,200 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
1,258,000 and 1,702,000 shares in the Conversion.
If shares are acquired in the open market, the
Holding Company or Richmond Savings would
contribute between $1,258,000 and $1,702,000,
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 1,702,000, 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." Within
the first year after completion of the Conversion,
the Holding Company may not 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
10
<PAGE>
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 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
American Stock Exchange ("AMEX") under the symbol
"_____." There can be no assurance that the Common
Stock will in fact be listed, or will trade, on
AMEX. 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
$1,319,000, or 131,900 shares. As a result, such
persons anticipate subscribing for 7.75% to 10.48%
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 100,640 and
136,160 shares, assuming the issuance of between
1,258,000 and 1,702,000 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."
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
11
<PAGE>
Conversion (between 50,320 and 68,080 shares,
assuming the issuance of between 1,258,000 and
1,702,000 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
$503,200 and $680,800.
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
1,702,000 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 17,020 shares and 6,808
shares, respectively, having a value of $170,200
and $68,080, 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 20,424 shares, assuming the issuance
of 1,702,000 shares in the Conversion. Assuming
the MRP shares had a value of $10.00 per share,
such shares would have an aggregate value of
$204,240.
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 125,800
and 170,200 shares, assuming the issuance of
between 1,258,000 and 1,702,000 shares).
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 1,702,000 shares were issued in the Conversion,
Messrs. Campbell and Bullard would receive options
to purchase 42,550 and 17,020 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 51,060 shares,
assuming the issuance of 1,702,000 shares in the
Conversion.
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
12
<PAGE>
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 100,640 and 136,160 shares, assuming the
issuance of between 1,258,000 and 1,702,000
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" and "ANTI-TAKEOVER PROVISIONS
AFFECTING THE HOLDING COMPANY AND RICHMOND
SAVINGS."
RISK FACTORS Special attention should be given to the "RISK
FACTORS" section of this Prospectus, which
discusses the possible effects of changes in
interest rates on Richmond Savings and the thrift
industry in general, 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, the potential disparity
between SAIF and Bank Insurance Fund ("BIF")
insurance premiums, proposed recapture of bad debt
reserves, potential financial institution
regulation and legislation, competition, certain
anti-takeover considerations, the limited market
for the Common Stock, income tax consequences of
Subscription Rights, and certain other matters
that potential purchasers should consider before
deciding whether to subscribe for the Common Stock
offered hereby.
13
<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. The information at and for the nine-month periods ended March
31, 1996 and 1995 has been derived from unaudited financial statements and, in
the opinion of management, reflects all adjustments (which comprise only normal
recurring accruals) necessary for a fair presentation for such interim periods.
The operating data for the nine-month period ended March 31, 1996 is not
necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
At or for the
Nine Months
Ended March 31, At or for the Year Ended June 30,
----------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(Unaudited) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Financial condition data:
Total assets $95,278 $88,850 $91,410 $87,504 $87,353 $84,703 $81,290
Investments (1) 22,012 16,905 18,540 16,034 12,789 15,351 14,119
Loans receivable 68,265 67,926 68,745 67,680 67,900 63,004 61,012
Deposits 85,125 79,171 81,437 78,315 79,005 77,431 74,660
Retained earnings 8,549 7,946 8,128 7,414 6,561 5,605 4,753
Operating data:
Interest income $ 5,057 $ 4,683 $ 6,378 $ 6,128 $ 6,698 $ 7,203 $ 7,613
Interest expense 2,975 2,337 3,271 2,934 3,454 4,443 5,305
------- ------- ------- ------- ------- ------- -------
Net interest income 2,082 2,346 3,107 3,194 3,244 2,760 2,308
Provision for loan losses 27 27 36 36 38 48 217
------- ------- ------- ------- ------- ------- -------
Net interest income after provision for
loan losses 2,055 2,319 3,071 3,158 3,206 2,712 2,091
464 356 430 586 533 475 804
Non-interest income 1,845 1,814 2,452 2,392 2,213 2,001 1,908
Non-interest expense ------- ------- ------- ------- ------- ------- -------
Income before income taxes 674 861 1,049 1,352 1,526 1,186 987
Income tax expense 210 278 329 492 570 400 362
------- ------- ------- ------- ------- ------- -------
Net income $ 464 $ 583 $ 720 $ 860 $ 956 $ 786 $ 625
======= ======= ======= ======= ======= ======= =======
Selected Other Data:
Number of outstanding loans 3,048 2,870 2,944 2,727 2,707 2,597 2,469
Number of deposit accounts 11,634 11,300 11,443 10,965 11,163 11,729 12,062
Number of full-service offices open 4 4 4 4 4 4 4
Return on average assets (2) 0.67% 0.88% 0.81% 0.98% 1.11% 0.95% 0.78%
Return on average equity (2) 7.39% 10.16% 9.30% 12.27% 15.82% 15.37% 14.00%
Average equity to average assets 9.09% 8.67% 8.71% 7.98% 6.99% 6.18% 5.55%
Interest rate spread (2) 2.66% 3.33% 3.24% 3.48% 3.59% 3.12% 2.58%
Net yield on average interest-earning
assets (2) 3.15% 3.70% 3.64% 3.79% 3.91% 3.48% 2.99%
Average interest-earning assets to
average interest-bearing liabilities 110.87% 109.95% 110.33% 108.93% 107.80% 106.45% 106.03%
Ratio of non-interest expense
to average total assets (2) 2.67% 2.74% 2.76% 2.72% 2.56% 2.42% 2.37%
Nonperforming assets to total assets 0.18% 0.12% 0.08% 0.13% 0.08% 0.41% 1.27%
Loan loss reserves to nonperforming
loans at period end 224.42% 326.39% 484.00% 282.14% 1,137.04% 107.81% 25.17%
------ ------ ------ ------ -------- ------ -----
</TABLE>
(1) Includes interest-bearing deposits, federal funds sold, FHLB stock and
investment securities.
(2) Annualized.
14
<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.
RECAPITALIZATION OF SAIF, ITS IMPACT ON SAIF PREMIUMS AND POSSIBLE ONE-TIME
RECAPITALIZATION FEE
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 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 $185,000 and $182,000 in
fiscal 1995 and 1994, respectively. 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.
Legislation supported by the thrift industry has been introduced in the
United States Congress providing for a one-time fee for SAIF members only equal
to approximately 85 cents per $100 of domestic deposits. If enacted by
Congress, the premium would have the effect of immediately reducing the capital
of SAIF-member institutions by the amount of the fee. It is anticipated that
SAIF-member institutions would not be allowed to amortize the expense of the
one-time fee over a period of years. Based upon Richmond Savings' deposits as
of March 31, 1996, the proposed one-time fee would equal approximately $724,000.
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. Management cannot
predict whether the legislation will be enacted, or, if enacted, the amount of
any one-time fee 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 IMPACT OF CHANGES IN INTEREST RATES
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.
Other thrift and banking institutions have a positive gap, which means that
the amount of interest-earning assets maturing or otherwise repricing within
specific time periods generally exceeds the amount of interest-bearing
liabilities maturing or otherwise repricing within such periods. Accordingly,
in a rising interest rate environment, absent the effect of other factors, those
institutions would expect to experience a larger increase in the yield on their
assets relative to the cost of their liabilities, thus their net interest income
should be positively affected.
15
<PAGE>
At March 31, 1996, Richmond Savings' cumulative one year gap as a
percentage of total interest-earning assets was a negative 12.32%. 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.
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 March 31, 1996, based
upon information provided by the FHLB of Atlanta, indicated that a 200 basis
point increase in interest rates would result in a 16% decrease in Richmond
Savings' NPV and a 200 basis point decrease in interest rates would result in a
15% increase in Richmond Savings' NPV. Such computations also indicate that the
same 200 basis point increase in interest rates would result in a 7% decrease in
net interest income and that the 200 basis point decrease in interest rates
would result in an 6% increase in net interest income. As is the case with the
gap analysis discussed above, computations of the prospective effects of
hypothetical interest rate changes in determining the effect 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' results of operations will continue to be significantly
affected by changes in interest rates due, among other factors, to (i) the fact
that a large percentage of Richmond Savings' adjustable rate assets only reprice
once a year or less frequently, (ii) the fact that a large percentage of
Richmond Savings' deposit accounts are subject to immediate repricing or to
repricing within one year, (iii) the fact that Richmond Savings' interest-
earning assets and interest-bearing liabilities reprice at different times and
with different frequencies, (iv) the effects of periodic and lifetime interest
rate caps on Richmond Savings' interest-earning assets, (v) the fact that
interest rates on Richmond Savings' assets and liabilities respond differently
to economic, market and competitive factors, and (vi) the fact that sustained
high levels of interest rates may adversely affect real estate and lending
markets in general. Changes in the level of interest rates also can affect the
amount of loans originated by Richmond Savings, as well as the value of its
loans and other interest-earning assets and the resultant ability to realize
gains on the sale of such assets. Changes in interest rates also can result in
disintermediation, which is the flow of funds away from savings institutions
into direct investments, such as U.S. government and corporate securities, and
other investment vehicles which, because of the absence of federal deposit
insurance premiums and reserve requirements, generally can pay higher rates of
interest than savings institutions. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset/Liability Management."
COMPETITION AND 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.
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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 March 31, 1996, Richmond Savings' ratio of equity to assets was 8.97%.
On a pro forma basis at March 31, 1996, assuming the sale of 1,702,000 shares of
Common Stock in the Conversion, the Holding Company's ratio of equity to assets
would have been 20.73%. 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 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.
Following the Conversion, the Holding Company may consider plans to reduce
capital to prudent levels, if the opportunities to deploy it are not found.
Such plans may include payment of cash dividends and repurchasing shares. Any
such steps would be taken based on conditions as they exist following the
Conversion and in compliance with applicable regulations which limit the Holding
Company's ability to pay dividends and repurchase its stock. See "USE OF
PROCEEDS," "DIVIDEND POLICY" and "SUPERVISION AND REGULATION -- Regulation of
the Holding Company -- General" and "-- Dividend Limitations" and "SUPERVISION
AND REGULATION -- Regulation of Richmond Savings -- Restrictions on Dividends
and Other Capital Distributions."
COST OF ESOP
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 1,702,000 shares in the Conversion, it is expected that 136,160
shares will be purchased by the ESOP, which--if such shares are acquired at
$10.00 per share--would have a value of $1,361,600. In the event there is an
oversubscription of shares of Common Stock and, as a result, 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.
It is anticipated that the ESOP will borrow from the Holding Company the
amounts necessary to purchase its shares. Richmond Savings anticipates
contributing approximately $206,000 annually to the ESOP (assuming the issuance
of 1,702,000 shares in the Conversion and assuming that the ESOP acquires its
shares at $10.00 per share) to enable the ESOP to meet its principal and
interest obligations under the loan. It is expected that the ESOP loan will be
fully repaid within 10 years. 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 ("SOP") 93-6, "Employers' Accounting for Employee
Stock Ownership Plans." SOP 93-6, among other things, changes
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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 1,702,000 shares of the Common Stock are issued in the
Conversion, it is expected that options to acquire 170,200 shares of the Common
Stock could be granted under the Stock Option Plan, and awards of an additional
68,080 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 1,702,000 to 1,940,280, the pro forma book value per
share of the outstanding Common Stock at March 31, 1996 would have been $12.81
compared with $13.73 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,
1995 would have been $0.61 compared with $0.71 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 1,702,000 shares of Common Stock
are issued in the Conversion and the MRP acquired 68,080 shares at a cost of
$10.00 per share, the total annual expense of the MRP would be $136,160 per
year. See "PRO FORMA DATA" and "MANAGEMENT OF RICHMOND SAVINGS -- Proposed
Management Recognition Plan" and "-- Proposed Stock Option Plan."
PROPOSED RECAPTURE OF BAD DEBT RESERVES
Proposed federal legislation would eliminate future bad debt deductions and
would require thrifts to recapture into income over a six-year period their
post-1987 additions to their bad debt tax reserves, thereby generating
additional tax liability. Under this proposal, a special provision suspends
recapture of post-1987 excess reserves for up to two years if, during those
years, the institution satisfies a "residential loan requirement." At March 31,
1996, Richmond Savings' post-1987 excess reserves amounted to approximately
$502,000. It is uncertain when or if the proposed legislation will be passed,
and, if passed, in what form the legislation would be passed. See "TAXATION --
Federal Income Taxation."
FINANCIAL INSTITUTION REGULATION AND POSSIBLE LEGISLATION
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
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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 on the AMEX under the symbol "______." There can be no
assurance that the Common Stock will in fact be listed, or will trade, on the
AMEX. 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."
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
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
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.
These provisions include, among others, that (1) the Board of Directors has
the authority to change the number of directors within a range from five to 15;
(2) stockholders who intend to nominate a candidate for election to the Board of
Directors must give advance notice to the Secretary of the Holding Company; (3)
terms for directors will be staggered at any time that the number of directors
exceeds nine; (4) certain merger, consolidation, or other business combinations
(as defined in the Articles of Incorporation) must receive the affirmative vote
of at least 75% of the Continuing Directors (as defined in the Articles of
Incorporation); (5) special meetings of stockholders may be called only by the
Chairman of the Board, the Chief Executive Officer, the President or by the
Board of Directors and (6) directors may be removed from office prior to the end
of their term only for cause.
In addition, the Articles of Incorporation do not provide for cumulative
voting for any purpose. As a result, a majority of shareholders will be able to
approve matters presented to the shareholders for consideration, except such
matters as require more than a majority vote for approval. The Holding
Company's Articles of Incorporation state that the Board of Directors, without
the approval of the stockholders, may authorize the issuance of shares of
preferred stock with such voting rights, designations, preferences, limitations
and relative rights as the Board of Directors shall determine. As a result, 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
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voting control of the Holding Company and to impede other transactions not
favored by management. The amended Certificate of Incorporation and Bylaws of
Richmond Savings upon its conversion to stock form also contain certain
provisions that might discourage potential takeover attempts of Richmond
Savings. 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. Approval will be given during the second and third years after
the Conversion upon a finding by the Administrator 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 supports the
acquisition and (ii) the acquiror is of good character and integrity and
possesses satisfactory managerial skills, after the acquisition the acquiror
will be a source of financial strength to the Holding Company and Richmond
Savings, and the interests of the public will not be adversely affected by the
acquisition. 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. 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 10.48% to 7.75% 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.
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
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Conversion and more 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 27.58%
or 24.85%, 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
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.
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."
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.
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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 March 31, 1996, Richmond Savings had total
assets of $95.3 million, net loans of $68.3 million, deposits of $85.1 million
and retained earnings of $8.5 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 $11,863,000 and $16,181,000, 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 $18,663,000. See "PRO FORMA DATA" for the 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 $1,006,400 (if 1,258,000 shares are issued)
to $1,361,600 (if 1,702,000 shares are issued). If the ESOP is unable to
purchase its shares in the Subscription Offering because of an oversubscription,
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 $1,006,400 to
$1,361,600), 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
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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.
Due to the Holding Company's anticipated highly capitalized position after the
Conversion, management believes that any such acquisitions would most likely
take place as cash transactions. 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.
No stock repurchases may be made within one year after the Conversion without
the approval of the Administrator. 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. The Holding
Company does not intend to repurchase any Common Stock during the first year
following the Conversion.
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.
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 estimated cost of such new office, less
the expected proceeds from the sale of the existing Ellerbe office is expected
to be approximately $225,000. 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 $490,000, 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,
23
<PAGE>
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 50,320 and 68,080 shares will be
acquired by the MRP, assuming the issuance of between 1,258,000 and 1,702,000
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 $503,200 and
$680,800, 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 125,800 and 170,200 shares will be
acquired by the Stock Option Plan, assuming the issuance of between 1,258,000
and 1,702,000 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 $1,258,000 and $1,702,000, 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, 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.
Within the first year after completion of the Conversion, the Holding
Company may not 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,
24
<PAGE>
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 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, 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 1995, it could not
have paid a dividend in excess of $423,000 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 on the AMEX under the symbol "_______." There can be no
assurance that the Common Stock will in fact be listed on the AMEX or that it
will trade on AMEX. 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 March 31, 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 1,258,000,
1,480,000, 1,702,000 and 1,957,000 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."
25
<PAGE>
<TABLE>
<CAPTION>
The Holding Company Pro Forma Capitalization
Based Upon Sale of
-----------------------------------------------------------------------------
1,258,000 1,480,000 1,702,000 1,957,300(1)
Historical shares at a shares at a shares at a shares at a
Capitalization price of price of price of price of
March 31, 1996 $10.00 per share $10.00 per share $10.00 per share $10.00 per share
-------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Deposits (2) $85,125 $ 85,125 $ 85,125 $ 85,125 $ 85,125
======= ========= ========= ========= =========
Stockholders' equity
Common stock, no par value:
Authorized shares: 20,000,000
Assumed outstanding shares as
shown in column headings (3) -- $ 11,863 $ 14,022 $ 16,181 $ 18,663
Preferred stock:
Authorized shares: 5,000,000
No shares outstanding -- -- -- -- --
Additional paid-in capital -- -- -- -- --
Less: Common stock to be acquired by the
MRP (4) -- (503) (592) (681) (783)
Less: Common stock acquired by the ESOP (4) -- (1,006) (1,184) (1,362) (1,566)
Retained earnings (5) 8,549 8,549 8,549 8,549 8,549
------- -------- -------- -------- --------
Total $ 8,549 18,903 $ 20,795 $ 22,687 $ 24,863
======= ======== ======== ======== ========
Total deposits and stockholders' equity $93,674 $104,028 $105,920 $107,812 $109,988
======= ======== ======== ======== ========
</TABLE>
(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.
26
<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 $11,863,000 and $18,663,000, (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) 18.48%,
16.91%, 15.75% and 14.74% 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
________________, 1996 is from a minimum of $12,580,000 to a maximum of
$17,020,000 with a midpoint of $14,800,000. 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
$19,573,000, 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, 1995 and for the nine months ended March 31,
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, 1994 and
yielded net proceeds available for investment of $10,354,000, $12,246,000,
$14,138,000 and $16,314,000 (based upon the issuance of 1,258,000, 1,480,000,
1,702,000 and 1,957,300 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 5.44%, which represents the average one-
year treasury constant maturity rate for the last week of March 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 nine months ended March 31, 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 3.32%.
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.
27
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1995
--------------------------------------------------------------------------
1,258,000 1,480,000 1,702,000 1,957,300
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 $ 12,580 $ 14,800 $ 17,020 $ 19,573
Less Offering expenses and commissions (717) (778) (839) (910)
---------- ---------- ---------- ----------
Estimated net conversion proceeds (1) 11,863 14,022 16,181 18,663
Less shares acquired by ESOP (2) (1,006) (1,184) (1,362) (1,566)
Less shares to be acquired by MRP (3) (503) (592) (681) (783)
---------- ---------- ---------- ----------
Estimated net conversion proceeds $ 10,354 $ 12,246 $ 14,138 $ 16,314
========== ========== ========== ==========
Pro forma net income:
Historical net income $ 720 $ 720 $ 720 $ 720
Pro Forma adjustments:
Pro forma income on net proceeds (1) 344 406 469 541
Pro forma ESOP adjustments (2) (61) (72) (83) (96)
Pro forma MRP adjustments (3) (61) (72) (83) (96)
---------- ---------- ---------- ----------
Pro forma net income $ 942 $ 982 $ 1,023 $ 1,069
========== ========== ========== ==========
Pro forma net income per share (5):
Historical net income per share $ 0.62 $ 0.52 $ 0.46 $ 0.40
Pro forma adjustments:
Pro forma income on net proceeds 0.29 0.30 0.30 0.30
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 $ 0.81 $ 0.72 $ 0.66 $ 0.60
========== ========== ========== ==========
Pro forma, without implementation of SOP 93-6 $ 0.75 $ 0.66 $ 0.60 $ 0.55
========== ========== ========== ==========
Ratio of price per share to pro forma income per share (5) 12.41 13.79 15.20 16.69
========== ========== ========== ==========
Pro forma stockholders' equity (book value) (4):
Historical retained earnings $ 8,128 $ 8,128 $ 8,128 $ 8,128
Estimated net conversion proceeds 11,863 14,022 16,181 18,663
Less shares to be acquired by:
ESOP (2) (1,006) (1,184) (1,362) (1,566)
MRP (3) (503) (592) (681) (783)
---------- ---------- ---------- ----------
Pro forma stockholders' equity (4) $ 18,482 $ 20,374 $ 22,266 $ 24,442
========== ========== ========== ==========
Pro forma stockholders' equity per share (4)
Historical retained earnings $ 6.46 $ 5.49 $ 4.78 $ 4.15
Estimated net conversion proceeds 9.43 9.47 9.51 9.54
Less shares to be acquired by:
ESOP (2) (0.40) (0.40) (0.40) (0.40)
MRP (3) (0.80) (0.80) (0.80) (0.80)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share (4) $ 14.69 $ 13.76 $ 13.09 $ 12.49
========== ========== ========== ==========
Pro forma price to book value 68.07% 72.69% 76.38% 80.08%
========== ========== ========== ==========
Number of shares used to calculate income per share (5) 1,167,424 1,373,440 1,579,456 1,816,374
========== ========== ========== ==========
Number of shares used to calculate stockholders'
equity per share(4) 1,258,000 1,480,000 1,702,000 1,957,300
========== ========== ========== ==========
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
At or For the Nine Months Ended March 31, 1996
-------------------------------------------------------------------------
1,258,000 1,480,000 1,702,000 1,957,300
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 $ 12,580 $ 14,800 $ 17,020 $ 19,573
Less Offering expenses and commissions (717) (778) (839) (910)
---------- --------- --------- ---------
Estimated net conversion proceeds (1) 11,863 14,022 16,181 18,663
Less shares acquired by ESOP (2) (1,006) (1,184) (1,362) (1,566)
Less shares to be acquired by MRP (3) (503) (592) (681) (783)
---------- ----------- ----------- -----------
Estimated net conversion proceeds $ 10,354 $ 12,246 $ 14,138 $ 16,314
========== =========== =========== ===========
Pro forma net income:
Historical net income $ 464 $ 464 $ 464 $ 464
Pro Forma adjustments:
Pro forma income on net proceeds (1) 258 305 352 406
Pro forma ESOP adjustments (2) (46) (54) (62) (72)
Pro forma MRP adjustments (3) (46) (54) (62) (72)
---------- ----------- ----------- -----------
Pro forma net income $ 630 $ 661 $ 692 $ 726
========== =========== =========== ===========
Pro forma net income per share (5):
Historical net income per share $ 0.40 $ 0.34 $ 0.29 $ 0.26
Pro forma adjustments:
Pro forma income on net proceeds 0.22 0.22 0.22 0.22
Pro forma ESOP adjustments (2) (0.04) (0.04) (0.04) (0.04)
Pro forma MRP adjustments (3) (0.04) (0.04) (0.04) (0.04)
---------- ----------- ----------- -----------
Pro forma net income per share $ 0.54 $ 0.48 $ 0.43 $ 0.40
========== =========== =========== ===========
Pro forma, without implementation of SOP 93-6 $ 0.50 $ 0.45 $ 0.41 $ 0.37
========== =========== =========== ===========
Ratio of price per share to pro forma income per share
(5)(6) 13.91 15.6 17.54 18.75
========== =========== =========== ===========
Pro forma stockholders' equity (book value) (4):
Historical retained earnings $ 8,549 $ 8,549 $ 8,549 $ 8,549
Estimated net conversion proceeds 11,863 14,022 16,181 18,663
Less shares to be acquired by:
ESOP (2) (1,006) (1,184) (1,362) (1,566)
MRP (3) (503) (592) (681) (783)
---------- ----------- ----------- -----------
Pro forma stockholders' equity (4) $ 18,903 $ 20,795 $ 22,687 $ 24,863
========== =========== =========== ===========
Pro forma stockholders' equity per share (4)
Historical retained earnings $ 6.80 $ 5.78 $ 5.02 $ 4.37
Estimated net conversion proceeds 9.43 9.47 9.51 9.54
Less shares to be acquired by:
ESOP (2) (0.40) (0.40) (0.40) (0.40)
MRP (3) (0.80) (0.80) (0.80) (0.80)
---------- ----------- ----------- -----------
Pro forma stockholders' equity per share (4) $ 15.03 $ 14.05 $ 13.33 $ 12.71
========== =========== =========== ===========
Pro forma price to book value 66.55% 71.17% 75.02% 78.66%
========== =========== =========== ===========
Number of shares used to calculate income per share (5) 1,167,424 1,373,440 1,579,456 1,816,374
========== =========== =========== ===========
Number of shares used to calculate stockholders' equity
per share (4) 1,258,000 1,480,000 1,702,000 1,957,300
========== =========== =========== ===========
</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 195,730
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 1,957,300 to 2,153,030 and the pro forma earnings
per share of the outstanding Common Stock for the year ended June 30, 1995
(based on shares released for the period pursuant to SOP 93-6) would have
been $.53 compared with $.60 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. In order to show the effect of SOP 93-6, earnings per share
also calculated on all ESOP shares issuable is included in the table.
(6) Pro forma net earnings per share have been annualized for purposes of this
ratio.
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 March 31, 1996,
Richmond Savings' net worth, computed in accordance with such requirements, was
9.44% 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.
30
<PAGE>
The following table presents (i) Richmond Savings' historical regulatory
capital position on March 31, 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.
31
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Regulatory Capital Position at March 31, 1996
---------------------------------------------------------
Richmond Savings'
Historical 1,258,000 1,480,000
Regulatory Capital Shares sold at Shares sold at
Position at Price of $10.00 Price of $10.00
March 31, 1996 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 $8,605 9.03% $13,531 13.50% $14,432 14.27%
Tier 1 (leverage) capital requirement (2) 3,811 4.00% 4,008 4.00% 4,044 4.00%
------ ------ ------- ------ ------- ------
Excess $4,794 5.03% $ 9,523 9.50% $10,388 10.27%
====== ====== ======= ====== ======= ======
Tier 1 risk adjusted capital $8,605 17.31% $13,531 26.69% $14,432 28.37%
Tier 1 risk adjusted capital requirement 1,988 4.00% 2,028 4.00% 2,035 4.00%
------ ------ ------- ------ ------- ------
Excess $6,617 13.31% $11,503 22.69% $12,397 24.37%
====== ====== ======= ====== ======= ======
Total risk based capital $8,991 18.09% $13,917 27.45% $14,818 29.13%
Total risk based capital requirement 3,977 8.00% 4,056 8.00% 4,070 8.00%
------ ------ ------- ------ ------- ------
Excess $5,014 10.09% $ 9,861 19.45% $10,748 21.13%
====== ====== ======= ====== ======= ======
NC regulatory capital $8,991 9.44% $13,917 13.89% $14,818 14.66%
NC regulatory capital requirement 4,764 5.00% 5,010 5.00% 5,055 5.00%
------ ------ ------- ------ ------- ------
Excess $4,227 4.44% $ 8,907 8.89% $ 9,763 9.66%
====== ====== ======= ====== ======= ======
<CAPTION>
Pro Forma Regulatory Capital Position at March 31, 1996
-------------------------------------------------------
1,702,000 1,957,300
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 $15.333 15.03% $16,370 15.89%
Tier 1 (leverage) capital requirement (2) 4,080 4.00% 4,122 4.00%
------- ------ ------- ------
Excess $11,253 11.03% $12,248 11.89%
======= ====== ======= ======
Tier 1 risk adjusted capital $15,333 30.03% $16,370 31.93%
Tier 1 risk adjusted capital requirement 2,042 4.00% 2,051 4.00%
------- ------ ------- ------
Excess $13,291 26.03% $14,319 27.93%
======= ====== ======= ======
Total risk based capital $15,719 30.79% $16,757 32.69%
Total risk based capital requirement 4,084 8.00% 4,101 8.00%
------- ------ ------- ------
Excess $11,635 22.79% $12,656 24.69%
======= ====== ======= ======
NC regulatory capital $15,719 15.41% $16,757 16.26%
NC regulatory capital requirement 5,100 5.00% 5,152 5.00%
------- ------ ------- ------
Excess $10,619 10.41% $11,605 11.26%
======= ====== ======= ======
</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.
32
<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 1,480,000 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
NAME FOR SHARES (1) PURCHASED OFFERED
- ---- -------------- ----------- -------------
<S> <C> <C> <C>
Russell E. Bennett, Jr. $ 225,000 22,500 1.52%
John W. Bullard 150,000 15,000 1.01
R. Larry Campbell 150,000 15,000 1.01
Buena Vista Coggin 150,000 15,000 1.01
Joe M. McLaurin 100,000 10,000 0.68
John T. Page, Jr. 100,000 10,000 0.68
W. Jesse Spencer 100,000 10,000 0.68
J. Stanley Vetter 220,000 22,000 1.48
E. E. Vuncannon, Jr. 124,000 12,400 0.84
Total $1,319,000 131,900 8.91%/(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
Conversion and none of such shares are allocated, then directors and
33
<PAGE>
executive officers would own or control the voting of up to 384,980 shares
or 26.01% of the 1,480,000 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.
34
<PAGE>
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 March 31, 1996,
75.87% of Richmond Savings' certificate of deposit accounts were scheduled to
mature 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 March 31, 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 March 31, 1996, Richmond Savings liquid assets for purposes
of this requirement equalled 24.8% of total assets. At March 31, 1996, Richmond
Savings had $8.43 million of interest-earning deposit balances in other banks
and investments scheduled to mature within one year. 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 March 31, 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 1995, it
could not have paid a cash dividend in excess of $423,000 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
loans, customer deposit account service charges, and other sources of income.
Richmond Savings' net income is also affected by, among other things, provisions
for loan losses and operating expenses. Richmond Savings' principal operating
expenses, aside from interest expense, consist of personnel costs, federal
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.
35
<PAGE>
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) 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
March 31, 1996, approximately 82.8% of its loan portfolio, before net amounts,
was composed of permanent one-to-four family residential loans. As of such date,
an additional 9.8% 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 March
31, 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 March 31, 1996, Richmond Savings' ratio of
nonperforming assets to total assets was 0.18%. 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. Although Richmond Savings has a
"negative gap" and its net interest income would likely be negatively impacted
by increases in interest rates, 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) emphasizing the solicitation of 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 March 31, 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
36
<PAGE>
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.
Richmond Savings' one year interest sensitivity gap as a percentage of
total interest-earning assets on March 31, 1996 was negative 12.32%. Therefore,
interest rate increases would be expected to negatively impact Richmond Savings'
earnings--at least in the short term. On March 31, 1996, Richmond Savings' three
year cumulative interest rate sensitivity gap as a percentage of total interest-
earning assets was positive 0.99% and its five year cumulative interest rate
sensitivity gap as a percentage of total interest-earning assets was negative
0.64%.
The following table sets forth the amount of interest-earning assets and
interest-bearing liabilities outstanding at March 31, 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.
<TABLE>
<CAPTION>
Terms to Repricing at March 31, 1996
---------------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
--------- ---------- ------------ ---------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable:
Adjustable rate residential 1-4 family $ 20,975 $15,494 $ -- $ -- $36,469
Fixed rate residential 1-4 family 3,591 5,394 3,968 7,098 20,051
Multi-family residential and commercial 373 857 101 265 1,596
Construction 1,075 -- -- -- 1,075
Home equity credit lines 5,574 -- -- -- 5,574
Other loans 1,664 1,637 585 -- 3,886
Interest-bearing deposits 5,764 -- -- -- 5,764
Investments 2,663 3,634 3,994 5,222 15,513
FHLB common stock -- -- -- 735 735
-------- ------- ------- ------- -------
Total interest-earning assets $ 41,679 $27,016 $ 8,648 $13,320 $90,663
======== ======= ======= ======= =======
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement accounts $ 1,947 $ 2,957 $ 1,929 $ 4,621 $11,454
NOW and VIP checking accounts 3,320 3,039 813 1,801 8,973
Non-interest-bearing accounts 1,442 1,314 352 778 3,886
Certificate accounts 46,136 7,639 7,037 -- 60,812
-------- ------- ------- ------- -------
Total interest-bearing liabilities $ 52,845 $14,949 $10,131 $ 7,200 $85,125
======== ======= ======= ======= =======
INTEREST SENSITIVITY GAP PER PERIOD $(11,166) $12,067 $(1,483) $ 6,120 $ 5,538
CUMULATIVE INTEREST SENSITIVITY GAP $(11,166) $ 901 $ (582) $ 5,538 $ 5,538
CUMULATIVE GAP AS A PERCENTAGE OF TOTAL
INTEREST-EARNING ASSETS (12.32)% 0.99% (0.64%) 6.11% 6.11%
CUMULATIVE INTEREST-EARNING ASSETS AS A
PERCENTAGE OF INTEREST-BEARING LIABILITIES 48.96% 80.70% 90.86% 106.51% 106.51%
</TABLE>
37
<PAGE>
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 March 31, 1996, based on information provided by the
FHLB of Atlanta's interest rate risk model.
<TABLE>
<CAPTION>
CHANGE IN NET PORTFOLIO VALUE
--------------------------------------------------
INTEREST RATES
IN BASIS POINTS BOARD
(RATE SHOCK) AMOUNT $CHANGE %CHANGE LIMIT
- --------------- ------ ------- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Up 400 $7,156 $(4,434) (38)% (50)%
Up 300 8,422 (3,168) (27) (45)
Up 200 9,687 (1,903) (16) (35)
Up 100 10,639 (951) (8) (20)
Static 11,590 -- -- --
Down 100 12,460 870 8 15
Down 200 13,329 1,739 15 25
Down 300 14,330 2,740 24 35
Down 400 15,331 3,741 32 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 March 31, 1996 of instantaneous and permanent 100 to 400 basis point changes
in market interest rates.
38
<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 $2,327 $(461) (17)% (50)%
Up 300 2,456 (332) (12) (35)
Up 200 2,586 (202) (7) (25)
Up 100 2,687 (101) (4) (15)
Static 2,788 -- -- --
Down 100 2,870 82 3 15
Down 200 2,952 164 6 25
Down 300 3,013 225 8 35
Down 400 3,075 287 10 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 15%
increase in NPV and a 6% 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 16% decrease in NPV and a 7% 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.
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").
39
<PAGE>
The following table sets forth information relating to the balances of
Richmond Savings' assets and liabilities at March 31, 1996 and to the average
balances of Richmond Savings' assets and liabilities for the nine-month periods
ended March 31, 1996 and 1995 and for the years ended June 30, 1995, 1994 and
1993. 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.
40
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
At March 31, 1996 March 31, 1996 March 31, 1995
--------------------- ------------------------------ -----------------------------
Average Average Average Average Average
Balance Yield/Cost Balance Interest Rate Balance Interest Rate
------- ---------- ------- -------- ------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing balances $ 5,764 5.35% $ 3,538 $ 169 6.37% $ 1,557 $ 83 7.11%
Investments 16,248 6.53% 16,137 729 6.02% 14,882 611 5.47%
Loans 68,265 8.12% 68,504 4,159 8.09% 68,172 3,989 7.80%
------- ----- ------- ------- ----- ------- ------- -----
Total interest-earning assets 90,277 7.66% 88,179 5,057 7.65% 84,611 4,683 7.38%
Other assets 5,001 3,877 3,644
------- ------- -------
Total assets $95,278 $92,056 $88,255
======= ======= =======
Interest-bearing liabilities:
Deposits $85,125 4.39% $79,531 2,975 4.99% $76,952 2,337 4.05%
----- ------- ----- ------- -----
Other liabilities 1,604 4,156 3,654
Retained earnings 8,549 8,369 7,649
------- ------- -------
Total liabilities and retained earnings $95,278 $92,056 $88,255
======= ======= =======
Net interest income and interest rate spread 3.27% $ 2,082 2.66% $ 2,346 3.33%
===== ======= ===== ======== =====
Net yield on interest-earning assets 3.52% 3.15% 3.70%
===== ===== =====
</TABLE>
41
<PAGE>
<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 retained earnings $88,886 $87,886
======= =======
Net interest income and interest rate spread $3,107 3.24% $3,194 3.48%
====== ===== ====== =====
Net yield on average interest-earning assets 3.64% 3.79%
===== =====
<CAPTION>
Year Ended June 30, 1993
------------------------------------
Average Average
Balance Interest Rate
-------- -------- -------
<S> <C> <C> <C>
Interest earning assets:
Interest-bearing balances $ 3,205 $ 101 3.15%
Investments 15,076 950 6.30%
Loans 64,602 5,647 8.74%
------- ------ -----
Total interest-earning assets 82,883 6,698 8.08%
Other assets 3,525
-------
Total assets $86,408
=======
Interest-bearing liabilities:
Deposits $76,885 3,454 4.49%
------ -----
Other liabilities 3,479
6,044
Retained earnings -------
Total liabilities and retained earnings $86,408
=======
Net interest income and interest rate spread $3,244 3.59%
====== =====
Net yield on average interest-earning assets 3.91%
=====
</TABLE>
42
<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.
43
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
March 31, 1996 vs. 1995 June 30, 1995 vs. 1994 June 30, 1994 vs. 1993
------------------------------ ----------------------------- -------------------------------
Increase (Decrease) Due To Increase (Decrease) Due To Increase (Decrease) Due To
------------------------------ ----------------------------- -------------------------------
Volume Rate Total Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- ----- ------ ---- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-bearing balances $ 100 $ (14) $ 86 $ (6) $ 69 $ 63 $ (36) $ 17 $ (19)
Investments 54 64 118 (9) (3) (12) 9 (118) (109)
Loans 20 150 170 112 87 199 183 (625) (442)
----- ------ ------ ----- ------ ----- ------ ------ ------
Total interest income 174 200 374 97 153 250 156 (726) (570)
Interest expense:
Deposits 87 551 638 2 335 337 17 (537) (520)
----- ------ ------ ----- ------ ----- ------ ------ ------
Net interest income $ 87 $ (351) $ (264) $ 95 $ (182) $ (87) $ 139 $ (189) $ (50)
===== ======= ======= ===== ====== ====== ====== ======= =======
</TABLE>
44
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1996 AND AT JUNE 30, 1995 AND
1994
Richmond Savings has experienced consistent moderate asset growth in recent
years as total assets have increased from $87.5 million at June 30, 1994, to
$91.4 million at June 30, 1995, to $95.3 million at March 31, 1996. Net loans
receivable have remained relatively unchanged, increasing from $67.7
million at June 30, 1994 to $68.7 million at June 30, 1995, and then decreasing
to $68.3 million at March 31, 1996, 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 from $16.0
million at June 30, 1994 to $18.5 million at June 30, 1995, to $22.0
million at March 31, 1996.
Deposits increased from $78.3 million at June 30, 1994 to $81.4 million at
June 30, 1995, to $85.1 million at March 31, 1996. This increase in deposits
provided funds to support the growth in investments described in the preceding
paragraph.
Retained earnings totalled $7.4 million, $8.1 million and $8.5 million at
June 30, 1994 and 1995 and March 31, 1996, respectively. At March 31, 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 of $9.0 million, which was equal to 9.4% of total assets.
Additionally, at March 31, 1996, Richmond Savings had Tier 1 risk adjusted
capital, leverage capital and total risk-based capital of $8.6 million, $8.6
million and $9.0 million, respectively, exceeding the regulatory capital
requirements by $6.6 million, $5.0 million and $4.7 million, respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND
1995
NET INCOME. Richmond Savings' net income for the nine months ended March
31, 1996 and 1995 was $464,000 and $583,000, respectively. The principal factor
affecting this decrease for 1996 as compared with 1995 was a $264,000 decrease
in net interest income, as interest rates have risen and deposits have repriced
more rapidly than interest-earning assets. In addition, operating expenses also
increased slightly during the nine month period ending March 31, 1996. An
increase of $107,000 in other income during the nine months ended March 31, 1996
more than offset a moderate increase of $30,000 in other expenses during such
period.
NET INTEREST INCOME. Net interest income decreased from $2.3 million for
the nine months ended March 31, 1995 to $2.1 million for the nine months ended
March 31, 1996. While interest rates generally trended upward during both
periods, the rate of increase was more pronounced during the nine months ended
March 31, 1996. Since Richmond Savings' deposits are generally more rate
sensitive than its interest-earning assets, this more rapid interest rate rise
caused the cost of deposit interest to increase more rapidly than the yield on
interest-earning assets. Additionally, because of relatively flat loan demand
in Richmond Savings' primary market area, the growth in average interest-earning
assets during the nine months ended March 31, 1996 as compared with the same
period during the prior year was principally in investments which generally
provide lower yields than loans. The weighted average cost of deposits
increased from 4.05% during the nine months ended March 31, 1995 to 4.99%
during the nine months ended March 31, 1996, while the weighted average yield on
interest-earning assets rose from 7.38% to 7.65%, causing the interest rate
spread to decline from 3.33% during the nine months ended March 31, 1995 to
2.66% during the nine months ended March 31, 1996. An increase in the balances
of interest-bearing deposits also contributed to the lower net interest income
during the nine months ended March 31, 1996.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $27,000 for
each of the nine month periods ended March 31, 1996 and 1995. 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 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 a net loan charge-off of $4,000 during the nine
months ended March 31, 1996 as compared with a net recovery of loans previously
charged off of $5,000 during the nine months ended March 31, 1995.
45
<PAGE>
OTHER INCOME. Other income increased from $356,000 for the six months ended
March 31, 1995 to $464,000 for the nine months ended March 31, 1996, with
substantially all of the increase arising from transaction and other service
charge income, principally due to the implementation of certain new fees and
increases in the number and dollar volume of fee-generating demand deposit
accounts.
OTHER EXPENSES. Other expenses were approximately $1.8 million for each of
the nine month periods ended March 31, 1996 and 1995, with an actual increase of
$30,000 or 1.7% during the nine months ended March 31, 1996. Other expenses as
annualized percentages of average total assets decreased from 2.74% for
the nine month period ended March 31, 1995 to 2.67% for the nine month
period ended March 31, 1996, as management has continued to emphasize control,
to the extent possible, in this area.
INCOME TAXES. Income tax expense decreased from $278,000 for the nine
months ended March 31, 1995 to $210,000 for the nine months ended March 31,
1996, with the decrease being directly attributable to the decrease in income
before income taxes.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND
1993
NET INCOME. Richmond Savings' net income for the years ended June 30,
1995, 1994 and 1993 was $720,000, $860,000 and $956,000, 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. Historically, Richmond Savings' highest level of net income and
net interest income was achieved in fiscal 1993. Declines in net interest
income, combined with increases in other expenses and the significant reduction
in loan sales and resulting gains during 1995, are primarily responsible for the
respective decreases in net income for fiscal 1995 and 1994.
NET INTEREST INCOME. Net interest income before provision for loan losses
decreased to $3.1 million in fiscal 1995 from $3.2 million in fiscal 1994 and
1993. The decrease in net interest income is attributable to a decrease in
interest rate spread over the three-year period, to 3.24% in fiscal 1995 from
3.48% in fiscal 1994 and 3.59% in fiscal 1993. 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 maintained during the balance of 1994 and throughout 1995. 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 impact of increasing rates was more dramatic 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. 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. In fiscal 1994, net interest income before provision for loan losses
was $50,000 lower than in fiscal 1993, as decreases in total interest income
more than offset decreases in total interest expense. The decrease in total
interest income due to rate reductions during fiscal 1994 was reduced because of
an increase in average interest-earning assets during such period.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $36,000 for
each of the years ended June 30, 1995 and 1994 and $38,000 for the year ended
June 30, 1993. 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 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 $27,000 and $7,000 during the years ended June 30, 1994 and 1993,
respectively, as compared with a net recovery of loans previously charged off of
$11,000 during the year ended June 30, 1995.
46
<PAGE>
OTHER INCOME. Other income decreased to $430,000 in fiscal 1995, from
$586,000 in fiscal 1994 and $534,000 in fiscal 1993, with the principal factor
affecting these fluctuations being gains on sales of loans, which were $7,000,
$151,000 and $84,000 for 1995, 1994 and 1993, respectively. Gains were
significantly higher in 1994 and 1993 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 is 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.
OTHER EXPENSES. Other expenses increased to $2.5 million in fiscal 1995
from $2.4 million in fiscal 1994, and $2.2 million in fiscal 1993, representing
increases of $60,000 and $179,000 in 1995 and 1994, respectively. The increase
in fiscal 1995 was primarily due to increases in personnel costs, equipment
rental and maintenance expenses. The increase in fiscal 1994 was principally
attributable to increases in personnel costs and equipment rental and
maintenance of $95,000 and $45,000, respectively. Personnel costs rose as a
result of a combination of normal compensation adjustments and increased costs
for fringe benefits, while the equipment rental and maintenance increase was
related to significant data processing replacements and enhancements carried out
through both fiscal 1993 and 1994. 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 $329,000 in fiscal 1995 from
$492,000 in fiscal 1994 and $570,000 in fiscal 1993, with the decreases being
primarily attributable to corresponding decreases in income before income taxes.
POSSIBLE INSURANCE PREMIUM SURCHARGE
Legislation has been introduced in the United States Congress which would
require financial institutions which are members of SAIF to pay a one-time
premium currently estimated to be approximately 85 cents per $100 of domestic
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 March 31, 1996, the proposed one-time premium or surcharge would equal
approximately $724,000. Management cannot predict whether the proposed
legislation will be enacted by Congress or, if enacted, the amount of the one-
time premium or surcharge. See "RISK FACTORS -- Recapitalization of SAIF, its
Impact on SAIF Premiums and Possible One-Time Recapitalization Fee" and
"SUPERVISION AND REGULATION -- Regulation of Richmond Savings -- Insurance of
Deposit Accounts."
PROPOSED RECAPTURE OF BAD DEBT RESERVES
Proposed federal legislation would eliminate future bad debt deductions and
would require thrifts to recapture into income over a six-year period their
post-1987 additions to their bad debt tax reserves, thereby generating
additional tax liability. Under this proposal, a special provision suspends
recapture of post-1987 excess reserves for up to two years if, during those
years, the institution satisfies a "residential loan requirement." At March 31,
1996, Richmond Savings' post-1987 excess reserves amounted to approximately
$502,000. It is uncertain when or if the proposed legislation will be passed,
and, if passed, in what form the legislation would be passed. See "RISK FACTORS
- --Proposed Recapture of Bad Debt Reserves" and "TAXATION -- Federal Income
Taxation."
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
47
<PAGE>
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 plans to adopt the disclosure
requirements of SFAS No. 107 on June 30, 1996. [Management does not expect that
the adoption of SFAS No. 107 will 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. Richmond Savings
plans to adopt the provisions of SFAS No. 121 on July 1, 1996 and 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. Management
does not expect that adoption of SFAS No. 114 and SFAS No. 118 will 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.
Earlier application is permitted. 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 determined when it will adopt
the provisions of SFAS No. 122 but has determined that the effect of adoption on
Richmond Savings' financial condition or results of operations would be
immaterial.
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. Earlier application is permitted. 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
48
<PAGE>
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 determined when it will adopt the provisions of SFAS No. 123 and 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.
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.
49
<PAGE>
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 97% of Richmond Savings' loan portfolio, before net items, is
secured by real estate. On March 31, 1996, Richmond Savings' largest single
outstanding loan had a balance of approximately $467,000. 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 market
purchase requirements and sold in the secondary market. During 1995, 1994 and
1993, Richmond Savings sold $640,000, $7.4 million and $3.0 million of fixed
rate loans in order to better manage its interest rate risk.
LOAN PORTFOLIO COMPOSITION. Richmond Savings' net loan portfolio totalled
approximately $68.3 million at March 31, 1996 representing 71.6% of Richmond
Savings' total assets at such date. At March 31, 1996, 82.8% 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
9.44% of Richmond Savings' loan portfolio, before net items, and multi-family
residential and commercial and construction loans represented 5.1% of Richmond
Savings' loan portfolio, before net items, on such date. As of March 31, 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.
50
<PAGE>
<TABLE>
<CAPTION>
At March 31, At June 30,
------------------ ---------------------------------------------------------------
1996 1995 1994 1993
------------------ ------------------ ------------------ -------------------
% of % of % of % of
Amount Total Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ ----- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Type of loan:
Real estate loans:
One-to-four family residential $56,520 82.80% $57,980 84.34% $57,025 84.26% $56,786 83.63%
Multi-family residential and commercial 1,596 2.34% 1,425 2.07% 1,959 2.89% 4,495 6.62%
Construction 1,895 2.77% 2,106 3.06% 2,703 3.99% 2,903 4.27%
Home equity lines of credit 5,574 8.17% 4,666 6.79% 3,949 5.84% 3,502 5.16%
------- ------- ------- ------- ------- ------- ------- -------
Total real estate loans 65,585 96.08% 66,177 96.26% 65,636 96.98% 67,686 99.68%
------- ------- ------- ------- ------- ------- ------- -------
Other loans:
Consumer loans 2,257 3.31% 2,418 3.52% 1,734 2.56% 1,374 2.02%
Home improvement loans 870 1.27% 886 1.29% 611 0.90% 99 0.15%
Loans secured by deposits 759 1.11% 736 1.07% 784 1.16% 795 1.17%
------- ------- ------- ------- ------- ------- ------- -------
Total other loans 3,886 5.69% 4,040 5.88% 3,129 4.62% 2,268 3.34%
------- ------- ------- ------- ------- ------- ------- -------
Total loans 69,471 101.77% 70,217 102.14% 68,765 101.60% 69,954 103.02%
Less:
Construction loans in process 820 1.20% 1,109 1.61% 769 1.14% 1,747 2.57%
Allowance for loan losses 386 0.57% 363 0.53% 316 0.46% 307 0.45%
------- ------- ------- ------- ------- ------- ------- -------
$68,265 100.00% $68,745 100.00% $67,680 100.00% $67,900 100.00%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
51
<PAGE>
The following table sets forth the time to contractual maturity of Richmond
Savings' loan portfolio at March 31, 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 March 31, 1996
------------------------------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
-------- --------- ---------- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Real estate loans:
Adjustable rate residential 1-4 family $20,975 $15,494 $ -- $ -- $36,469
Fixed rate residential 1-4 family 32 284 334 19,401 20,051
Multi-family residential and commercial 373 526 244 453 1,596
Construction 1,075 -- -- -- 1,075
Home equity credit lines 5,574 -- -- -- 5,574
Other loans 1,212 1,076 982 616 3,886
Less:
Allowance for loan losses (386) -- -- -- (386)
------- ------- ------ ------- -------
$28,855 $17,380 $1,560 $20,470 $68,265
======= ======= ====== ======= =======
</TABLE>
The following table sets forth the dollar amount at March 31, 1996 of all
loans maturing or repricing on or after March 31, 1997 which have fixed or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Adjustable
Rates Rates
----- ----------
(In Thousands)
<S> <C> <C>
Real estate loans $20,681 $16,055
Other loans 2,674 --
------- -------
$23,355 $16,055
======= =======
</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 March 31, 1996,
approximately 82.8% 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, 64.5% 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 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.
52
<PAGE>
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 March 31,
1996, Richmond Savings had $1.6 million in outstanding loans secured by multi-
family residential and commercial properties, comprising approximately 2.34% of
its loan portfolio, before net items, as of that date. Of these loans,
approximately 57.2% were secured by church properties as of March 31, 1996.
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 March 31, 1996 was approximately $1.9 million,
representing approximately 2.8% 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.
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
53
<PAGE>
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 March 31, 1996, Richmond Savings had approximately
$5.6 million in home equity line of credit loans, representing approximately
8.2% 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. 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 March 31, 1996, Richmond Savings' consumer loan portfolio totalled
$2.3 million, representing 3.31% 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 March 31, 1996, Richmond Savings had $870,000 in
outstanding home improvement loans, representing 1.27% 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 March 31, 1996, such loans totalled $759,000, representing
1.11% 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 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.
54
<PAGE>
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 March 31,
1996, Richmond Savings had $1.0 million in such unfunded mortgage loan
commitments. In addition, on such date Richmond Savings had $820,000 in
undisbursed construction loans and $5.0 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 nine months ended
March 31, 1996 and the fiscal years ended June 30, 1995, 1994 and 1993, Richmond
Savings had $24,000, $37,000, $37,000 and $28,000, 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 March 31, 1996, Richmond Savings did not own any
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 is returned to accrual status. For the fiscal year
ended June 30, 1995, 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.
55
<PAGE>
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
March 31, At June 30,
--------- -------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans not accruing interest $ 172 $ 75 $ 112 $ 24 $ 256 $ 906
Accruing loans 90 days or more past due -- -- -- 3 -- --
----- ----- ----- ----- ----- ------
Total non-performing loans 172 75 112 27 256 906
Foreclosed real estate -- -- -- 43 95 125
----- ----- ----- ----- ----- ------
Total non-performing assets $ 172 $ 75 $ 112 $ 70 $ 351 $ 1,031
====== ====== ====== ====== ====== =======
Non-performing assets to total assets 0.18% 0.08% 0.13% 0.08% 0.41% 1.27%
===== ===== ===== ===== ===== ======
</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 March 31, 1996, Richmond Savings had approximately $183,000 of loans
internally classified as "substandard," approximately $31,000 of loans
classified as "doubtful" and $1,000 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.
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.
56
<PAGE>
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>
Nine Months
Ended March 31, Year Ended June 30,
--------------------- -------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 363 $ 316 $ 316 $ 307 $ 276
------ ------- ------- ----- ------
Loans charged off:
Real estate -- -- 7 20 --
Other 4 1 3 9 9
------ ------- ------- ----- ------
Total loans charged off 4 1 10 29 9
Recoveries:
Real estate -- 6 20 -- --
Other -- -- 1 2 2
------ ------- ------- ----- ------
Net loans charged off (recovered) 4 (5) (11) 27 7
------ -------- -------- ----- ------
Provision for loan losses 27 27 36 36 38
------ ------- ------- ----- ------
Balance at end of period $ 386 $ 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.
57
<PAGE>
<TABLE>
<CAPTION>
AT MARCH 31, At June 30,
---------------------------------------- ------------------------------------------------------------
1996 1995
---------------------------------------- ----------------------------------------
PERCENT OF AMOUNT PERCENT OF AMOUNT
ALLOWANCE OF LOANS ALLOWA NCE OF LOANS
AMOUNT OF TO TOTAL TO GROSS AMOUNT OF TO TOTAL TO GROSS AMOUNT OF
ALLOWANCE ALLOWANCE LOANS ALLOWANCE ALLOWANCE LOANS ALLOWANCE
--------- --------- --------- --------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One-to-four family residential $ 87 22.54% 81.36% $65 17.91% 82.57% $139
Multi-family residential and
commercial 15 3.89% 2.30% 19 5.23% 2.03% 16
Construction 14 3.63% 2.73% 9 2.48% 3.00% 12
Home equity lines of credit 48 12.44% 8.02% 40 11.02% 6.65% 34
------ ------- ------- ------- -------- ------- --------
Total real estate loans 164 42.49% 94.41% 133 36.64% 94.25% 201
------ ------- ------- ------- -------- ------- --------
Other loans:
Consumer loans 150 38.86% 3.25% 138 38.02% 3.44% 54
Home improvement loans 9 2.33% 1.25% 9 2.48% 1.26% 8
Loans secured by deposits -- 0.00% 1.09% -- 0.00% 1.05% --
------ ------- ------- ------- -------- ------- --------
Total other loans 159 41.19% 5.59% 147 40.50% 5.75% 62
------ ------- ------- ------- -------- ------- --------
Unallocated 63 16.32% -- 83 22.87% -- 53
------ ------- ------- ------- -------- ------- --------
Total allowance for loan losses $ 386 100.00% 100.00% $ 363 100.00% 100.00% $ 316
====== ======= ======= ======= ======== ======= ========
<CAPTION>
At June 30,
------------------------------------------------------------------
1994 1993
---------------------- ----------------------------------------
PERCENT OF AMOUNT PERCENT OF AMOUNT
ALLOWANCE OF LOANS ALLOWA NCE OF LOANS
TO TOTAL TO GROSS AMOUNT OF TO TOTAL TO GROSS
ALLOWANCE LOANS ALLOWANCE ALLOWANCE LOANS
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Real estate loans:
One-to-four family residential 43.99% 82.93% $118 38.44% 81.18%
Multi-family residential and
commercial 5.06% 2.85% 15 4.89% 6.43%
Construction 3.80% 3.93% 15 4.89% 4.15%
Home equity lines of credit 10.76% 5.74% 27 8.79% 5.01%
------ ------- ------- ------- --------
Total real estate loans 63.61% 95.45% 175 57.00% 96.76%
------ ------- ------- ------- --------
Other loans:
Consumer loans 17.09% 2.52% 51 16.61% 1.96%
Home improvement loans 2.53% 0.89% 1 0.33% 0.14%
Loans secured by deposits 0.00% 1.14% -- 0.00% 1.14%
------ ------- ------- ------- --------
Total other loans 19.62% 4.55% 52 16.94% 3.24%
------ ------- ------- ------- --------
Unallocated 16.77% -- 80 26.06% --
------ ------- ------- ------- --------
Total allowance for loan losses 100.00% 100.0 0% $ 307 100.00% 100.0 0%
======= ======== ======= ======= ========
</TABLE>
58
<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 March 31, 1996, Richmond Savings' investment
securities portfolio totalled approximately $22.0 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.
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 March 31, 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 C 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 March 31, 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.
59
<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 certain information regarding Richmond
Savings' investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At June 30,
------------ -------------------------
1996 1995 1994 1993
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. government and agency securities $ 8,451 $ 5,474 $ -- $ --
------- ------- ------- -------
Securities held to maturity:
U.S. government and agency securities 4,504 5,991 10,476 8,603
Mortgage-backed securities 898 1,070 1,287 2,569
Corporate debt securities 1,508 1,518 1,533 1,542
Municipal bonds 152 304 460 --
Other -- -- 50 50
------- ------- ------- -------
Total securities held to maturity 7,062 8,883 13,806 12,764
------- ------- ------- -------
Marketable equity securities:
Mutual funds -- -- 626 1,050
------- ------- ------- -------
Total investment securities 15,513 14,357 14,432 13,814
Interest-earning balances in other banks 5,764 3,448 867 838
Federal Home Loan Bank stock 735 735 735 706
------- ------- ------- -------
Total investments $22,012 $18,540 $16,034 $15,358
======= ======= ======= =======
</TABLE>
At March 31, 1996, the market value of Richmond Savings' investment
securities available for sale and held to maturity were $8.5 million and $7.0
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 March 31, 1996.
60
<PAGE>
<TABLE>
<CAPTION>
After One Year After One Year
One Year or Less Through Five Years Through Five Years
----------------------- ------------------------ --------------------------
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
-------- ------- -------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. government and agency securities $1,504 6.59% $4,443 6.10% $2,504 7.08%
Securities held to maturity:
U.S. government and agency securities 498 6.45% 2,500 6.48% 1,506 6.35%
Mortgage-backed securities -- -- 183 6.09% 331 8.76%
Corporate bonds 509 5.51% 502 6.35% 497 6.48%
Municipal bonds 152 4.00% -- -- -- --
Other:
Interest-earning balances in 5,764 5.35% -- -- -- --
other banks -- -- -- -- -- --
Federal Home Loan Bank stock ------ ------ ------
$8,427 5.60% $7,628 6.14% $4,838 6.91%
====== ====== ======
<CAPTION>
After Ten Years Total
--------------------- -----------------------
Carrying Average Carrying Average
Value Yield Value Yield
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. government and agency securities $ -- --% $8,451 6.48%
Securities held to maturity:
U.S. government and agency securities -- --% 4,504 6.43%
Mortgage-backed securities 384 8.50% 898 8.11%
Corporate bonds -- -- 1,508 6.11%
Municipal bonds -- -- 152 4.00%
Other:
Interest-earning balances in other banks -- -- 5,764 5.35%
Federal Home Loan Bank stock 735 7.25% 735 7.25%
------ -------
$1,119 7.68% $22,012 6.22%
====== =======
</TABLE>
61
<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 March 31, 1996,
13.46% of Richmond Savings' deposits consisted of passbook and statement savings
accounts, 10.54% consisted of interest-bearing transaction accounts and 4.56%
consisted of noninterest-bearing transaction accounts. 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.
62
<PAGE>
<TABLE>
<CAPTION>
March 31, 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 accounts $11,454 2.96% 13.46% $11,778 2.96% 14.46% $15,080 2.80% 19.26%
NOW accounts 5,826 2.30% 6.84% 5,666 2.30% 6.96% 5,473 2.30% 6.99%
VIP checking accounts 3,147 3.44% 3.70% 2,552 3.43% 3.13% 2,389 2.60% 3.05%
Non-interest bearing accounts 3,886 0.00% 4.56% 1,934 0.00% 2.38% 1,770 0.00% 2.26%
------- ----- ------- -------- ----- ------- ------- ----- -----
Total demand deposits 24,313 2.39% 28.56% 21,930 2.58% 26.93% 24,712 2.47% 31.55%
------- ----- ------- -------- ----- ------- ------- ----- ------
Certificate accounts with
original maturities of:
3 months or less 3,433 3.58% 4.03% 3,747 3.79% 4.60% 3,559 2.63% 4.54%
6 months 17,516 5.22% 20.58% 16,697 5.64% 20.50% 17,012 3.49% 21.72%
12 months 11,976 5.58% 14.07% 12,637 5.66% 15.52% 10,946 3.97% 13.98%
18 months 1,589 6.31% 1.87% 1,330 6.41% 1.63% -- 0.00% 0.00%
24 months 7,255 5.72% 8.52% 6,990 5.47% 8.58% 6,145 4.86% 7.85%
36 months 2,366 5.64% 2.78% 2,237 5.58% 2.75% 1,830 5.25% 2.34%
60 months 1,918 5.93% 2.25% 1,929 5.90% 2.37% 1,427 5.60% 1.82%
IRA certificates 14,236 6.11% 16.72% 13,401 5.75% 16.46% 11,841 4.75% 15.12%
Other 523 6.03% 0.62% 539 6.18% 0.66% 843 5.90% 1.08%
------- ----- ------- -------- ----- ------- ------- ----- ------
Total certificates 60,812 5.34% 71.44% 59,507 5.32% 73.07% 53,603 4.12% 68.45%
------- ----- ------- -------- ----- ------- ------- ------ ------
Total deposits $85,125 4.39% 100.00% $ 81,437 4.58% 100.00% $78,315 3.60% 100.00%
======= ===== ======= ======== ===== ======= ======= ====== =======
</TABLE>
63
<PAGE>
The following table presents the maturities and weighted average rates paid
on all certificates of deposit as of March 31, 1996:
<TABLE>
<CAPTION>
Amount Due During the Year Ending March 31,
---------------------------------------------------------------
1997 1998 1999
------------------------- -------------------- ------
Weighted Weighted
Amount Rate Amount Rate Amount
------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Certificates of $100,000 or more $ 5,374 5.42% $ 821 5.83% $ 515
Certificates of less than $100,000 40,762 5.35% 4,604 5.66% 1,700
-------- ---- ------ ----- ------
$ 46,136 5.36% $5,425 5.69% $2,215
======== ==== ====== ===== ======
<CAPTION>
Amount Due During the Year Ending March 31,
--------------------------------------------------------------
1999 Thereafter Total
---------- --------------------- ---------------------
Weighted Weighted Weighted
Rate Amount Rate Amount Rate
--------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Certificates of $100,000 or more 5.93% $ 819 6.50% $ 7,529 5.62%
Certificates of less than $100,000 5.83% 6,217 6.52% 53,283 5.53%
----- ------ ----- -------- -----
5.85% $7,036 6.52% $ 60,812 5.54%
===== ====== ===== ======== =====
</TABLE>
The following table presents the maturities and weighted average rates paid
on all time certificates of deposit as of June 30, 1995:
<TABLE>
<CAPTION>
Amount Due During the Year Ending June 30,
--------------------------------------------------------------
1996 1997 1998
----------------------- -------------------- ------
Weighted Weighted
Amount Rate Amount Rate Amount
------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Certificates of $100,000 or more $5,090 5.40% $ 708 5.53% $ 405
Certificates of less than $100,000 37,969 5.32% 8,193 6.04% 1,473
------- ------ ------- ------ -------
$43,059 5.33% $8,901 6.00% $1,878
======= ===== ====== ===== ======
<CAPTION>
Amount Due During the Year Ending June 30,
--------------------------------------------------------------
1998 Thereafter Total
--------- ------------------- ---------------------
Weighed Weighed Weighted
Rate Amount Rate Amount Rate
--------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Certificates of $100,000 or more 6.29% $ 456 6.34% $ 6,659 5.53%
Certificates of less than $100,000 6.20% 5,213 6.54% 52,848 5.58%
------ ------- ------ -------- -----
6.22% $5,669 6.52% $ 59,507 5.57%
===== ====== ===== ======== =====
</TABLE>
64
<PAGE>
Based upon historical experience, Richmond Savings expects that a substantial
percentage of its time deposits coming due within twelve months after March 31,
1996 will be renewed.
As of March 31, 1996, the aggregate amount of time certificates of deposit
in amounts greater than or equal to $100,000 outstanding was $7.5 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 $1,926
Over 3 months through 12 months 3,448
Over 12 months 2,155
------
Total $7,529
======
</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 March 31, 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,
1995 were $150,000 and the net income for that subsidiary for the year ended
June 30, 1995 was $23,000.
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 March 31, 1996:
65
<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 $281,372 Owned
Full-Service Branch Offices:
Richmond Plaza Office
Richmond Plaza Shopping Center
Rockingham, North Carolina 6,649 Leased March 31, 1997
Southern Pines Office
495 Pinehurst Avenue
Southern Pines, North Carolina 743,225 Owned
Ellerbe Office
119 West Sunset Avenue
Ellerbe, North Carolina 38,907 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 March 31, 1996 was $245,806. Richmond Savings has a new office
under construction at 115 West Sunset Avenue, Ellerbe, North Carolina which will
replace the existing Ellerbe office. This office is expected to be opened in
December, 1996.
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 underwriting standards. Competition may
increase as a result of the continuing reduction of restrictions on the
interstate operations of financial institutions.
66
<PAGE>
EMPLOYEES
As of March 31, 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%.
Thrift institutions which qualify under certain definitional tests and
other conditions of the Code are permitted certain favorable provisions
regarding their deductions from taxable income for annual additions to their bad
debt reserve. A reserve may 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 is computed using the experience method.
The percentage of taxable income method is limited to 8% of taxable income.
This method may 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, cannot exceed 12% of the
amount by which total deposits or withdrawable accounts exceed the sum of
surplus, undivided profits and reserves at the beginning of the year. The
experience method is the amount necessary to increase the balance of the reserve
at the close of the year to the greater of (i) the amount which bears 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 bear 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
must have at least 60% of its assets as "qualifying assets" which generally
include, 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 savings accounts and property used in
the conduct of its business. In addition, it must meet certain other
supervisory tests and operate principally for the purpose of acquiring savings
and investing in loans.
67
<PAGE>
Institutions which become ineligible to use the percentage of income method
must change to either the reserve method or the specific charge-off method that
applies to banks. Large institutions, those generally exceeding $500 million in
assets, must convert to the specific charge-off method. Proposed regulations
require ratable inclusion in income of excess reserves over a six-year period in
the event of ineligibility. In the fiscal years 1993, 1994 and 1995, 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 its 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 I to "Notes to Consolidated
Financial Statements."
Legislation currently pending before the U.S. Congress contains a provision
that repeals the reserve method of accounting for thrift bad debt reserves
(including the percentage of taxable income method) for tax years beginning
after December 31, 1995. This would require Richmond Savings to account for bad
debts using the specific charge-off method. Under the proposed legislation, the
change in accounting method that eliminates the reserve method would trigger bad
debt reserve recapture for post-1987 excess reserves over a six-year period. At
December 31, 1995, Richmond Savings' post-1987 excess reserves amounted to
approximately $502,000. A special provision 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 would 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
loans during the six taxable years ending before January 1, 1996. However,
notwithstanding this special provision, recapture would be required to begin no
later than the first taxable year beginning after December 31, 1997. Management
cannot predict whether the legislation providing for the recapture of bad debt
reserves will be enacted, or, if enacted, the final form of such legislation and
its ultimate impact on Richmond Savings. See "RISK FACTORS -- Proposed
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
68
<PAGE>
otherwise payable by it. An annual state franchise tax is imposed at a rate of
0.15% applied to the greatest of the 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.
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
69
<PAGE>
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
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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.
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 this legislation will be enacted or that
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 $724,000, assuming the special assessment is based on deposits held
at March
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31, 1996. Management cannot predict whether the legislation will be enacted, or,
if enacted, the amount of any one-time fee or whether ongoing SAIF premiums will
be reduced to a level equal to that of BIF premiums.
Richmond Savings incurred deposit insurance expense of $185,000 and
$182,000 in fiscal 1995 and 1994, 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 March 31, 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 March 31, 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,
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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. 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 March 31, 1996, the largest aggregate amount of loans which Richmond
Savings had to any one borrower was $467,000. 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
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outstanding advances (borrowings) from the FHLB of Atlanta. On March 31, 1996,
Richmond Savings was in compliance with this requirement with an investment in
FHLB of Atlanta stock of $735,000.
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 March 31, 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 March 31, 1996, Richmond Savings'
liquidity ratio, calculated in accordance with North Carolina regulations, was
approximately 24.8%.
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
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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.
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.
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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 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.
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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.
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.
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.
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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, 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 MARCH 31, 1996 WITH THE HOLDING COMPANY
---- -------------- ------------------------
<S> <C> <C>
R. Larry Campbell 51 President
John W. Bullard 44 Vice President
</TABLE>
Biographical information with resect 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
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<PAGE>
description of certain agreements expected to be entered into with the executive
officers of the Holding Company and Richmond Savings.
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
MARCH 31, 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., 71 Attorney in Rockingham, North Carolina 1975
Vice Chairman
Russell E. Bennett, Jr. 69 Retired; formerly owner and president of Russell Bennett 1982/1/
Chevrolet-Buick-Mazda, Inc.
R. Larry Campbell 51 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 1988
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, 1995. 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, 1995.
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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 absence of a
meeting of the entire Board. This committee meets on an as needed basis, and
during the fiscal year ended June 30, 1995 met six 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, 1995, 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 four times during the
fiscal year ended June 30, 1995.
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, 1995.
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, 1995.
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 1995 all Board
members received additional compensation of $1,000 related to their attendance
at a special two-day planning retreat, and all non-employee Board members
received additional compensation of $150 for each of three 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 $81,000 in the fiscal year ended June 30, 1995.
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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<PAGE>
<TABLE>
<CAPTION>
AGE ON POSITIONS AND OCCUPATIONS EMPLOYED BY
NAME MARCH 31, 1996 DURING LAST FIVE YEARS RICHMOND SAVINGS SINCE
- ----- -------------- ------------------------- ----------------------
<S> <C> <C> <C>
R. Larry Campbell 51 President and Chief Executive 1984
Officer
John W. Bullard 44 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, 1995
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 $100,000 (there were none),
for services in all capacities.
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND COMPENSATION ALL OTHER
PRINCIPAL POSITION SALARY ($)/1/ COMPENSATION
- ------------------ ------ ------------ ------------
<S> <C> <C> <C>
R. Larry Campbell, $97,977 - - - $19,858/2/
President and Director
</TABLE>
____________________
/1/ Under the "Other Annual Compensation" category, perquisites for the fiscal
year ended June 30, 1995 did not exceed the lesser of $50,000, or 10% of
salary and bonus as reported for Mr. Campbell.
/2/ Includes (a) directors' fees of $1,000; (b) $10,114 contributed to Richmond
Savings' target benefit retirement plan for Mr. Campbell during fiscal
1995; (c) $2,744 contributed to Richmond Savings' 401(k) retirement plan
for Mr. Campbell during fiscal 1995; and $6,000 accrued under a deferred
compensation plan established for the benefit of Mr. Campbell.
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. Since this plan was established in June 1995, no bonuses
have yet been earned or paid under this plan.
TARGET BENEFIT PLAN
Richmond Savings 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 all years of
service, excluding salary increases during the final five years of service. The
total amount contributed by Richmond Savings to this retirement plan during
fiscal 1995 was $54,240.
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%;
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7 years or more, 100%. As of December 31, 1995, R. Larry Campbell had eight
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.
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 1995 was $72,000.
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 at age 65 for ten years to Mr. Campbell and/or his family. 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 payable at age 65 to Mr. Bullard and/or his family. 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 1995 totalled $8,400.
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.
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 on the first anniversary date and continuing on each
anniversary date thereafter, following a performance evaluation of the employee,
the agreement may be extended for an additional year so that the remaining term
shall be three years unless written notice of non-renewal is given by the Board
of Directors. The agreements also provide that base salary shall be reviewed by
the Board of Directors not less often than annually. In the event of a change in
control (as defined below), the employee's base salary shall be increased by at
least 6% annually. In addition, the employment agreements provide for
profitability and discretionary bonuses and participation in all other pension,
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<PAGE>
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 for cause, as defined in
the agreement, and that they may otherwise be terminated by Richmond Savings
(subject to vested rights) or by the employee.
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.
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 100,640 and
136,160 shares assuming the issuance of between 1,258,000 and 1,702,000 shares.
In the event of an oversubscription of shares of Common Stock and, as a result,
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
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<PAGE>
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.
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 1,702,000 shares in the Conversion and
receipt of stockholder approval, 68,080 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 17,020
shares, assuming the issuance of 1,702,000 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 6,808 shares, assuming the issuance of 1,702,000 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 20,424 shares, assuming the issuance of 1,702,000 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.
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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 into 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 Plan (less any shares acquired by the Stock
Option Plan in the open market). Assuming the issuance of between 1,258,000 and
1,702,000 shares in the Conversion, an aggregate of between 125,800 and 170,200
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
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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 42,550 shares of Common Stock assuming the issuance of 1,702,000 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 17,020 shares, assuming the issuance
of 1,702,000 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 51,060 shares of
Common Stock, assuming the issuance of 1,702,000 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.
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.
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.
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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
March 31, 1996 totals approximately $98,000 and represents 0.4% of pro forma
stockholders' equity at March 31, 1996, assuming the sale of 1,702,000 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.
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. The Holding Company may not, for a period of at least one year from
the effective date of the Conversion, without the approval of the Administrator,
repurchase any of its capital stock. Such approval shall be given only upon a
showing that the proposed repurchase will not adversely affect the safety and
soundness of Richmond Savings. Stock repurchases are also 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
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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 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
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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 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.
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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.
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
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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 bylaws 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 27.58% or 24.85% 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."
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
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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 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.
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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. It has considered the possibilities of
acquiring other financial institutions, being acquired by other institutions,
and opening or purchasing additional branch offices in or near its current
market areas. At present, it has not made final decisions about any of them, and
has no agreement or plan to acquire any company or to be acquired by any
company.
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 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."
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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; (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).
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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 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
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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 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
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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. In the event the number
of shares sold exceeds 1,702,000, the ESOP shall be given to first priority to
purchase any shares sold above such amount to the extent necessary for the ESOP
to acquire 8% of the number of shares sold. In the event of an oversubscription
of shares of Common Stock and, as a result, 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.
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
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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.
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
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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 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
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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 _______________, 1996, the
Valuation Range of Richmond Savings and the Holding Company was from a minimum
of $12,580,000 to a maximum of $17,020,000, with a midpoint of $14,800,000.
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 1,258,000 shares to a maximum of 1,702,000 shares, with a midpoint of
1,480,000 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 $19,573,000 (1,957,300 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 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
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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. 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
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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 either 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.
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.
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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 $334,000 and $527,000 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.
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
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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 (136,160 shares, assuming the issuance of 1,702,000 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;
(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.
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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 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
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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 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.
107
<PAGE>
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, 1995 and 1994,
and for each of the years in the three-year period ended June 30, 1995 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. 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 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, 1995 and 1994 F-2
Consolidated Statements of Income for the Years Ended June 30, 1995, 1994 and 1993 F-3
Consolidated Statements of Retained Earnings for the Years Ended June 30, 1995, 1994
and 1993 F-4
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements for the Years Ended June 30, 1995, 1994 and
1993 F-7
Consolidated Statements of Financial Condition at March 31, 1996 and 1995 (Unaudited) F-22
Consolidated Statements of Income for the Nine Months Ended March 31, 1996 and 1995
(Unaudited) F-23
Consolidated Statements of Retained Earnings for the Nine Months Ended March 31, 1996
and 1995 (Unaudited) F-24
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1996 and 1995
(Unaudited) F-25
Notes to Consolidated Financial Statements for the Nine Months Ended March 31, 1996 and
1995 (Unaudited) F-27
</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, 1995 and 1994 and
the related consolidated statements of income, retained earnings, and cash flows
for each of the three years in the period ended June 30, 1995. 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1995 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/S DIXON, ODOM & CO., L.L.P.
High Point, North Carolina
July 28, 1995, except for Note N,
as to which the date is May 2, 1996
________
Page F-1
<PAGE>
===============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1995 and 1994
- -----------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Cash on hand and in banks $ 1,418,980 $ 1,088,027
Interest-bearing balances in other banks 3,448,058 867,029
Marketable equity securities (Note B) - 625,585
Investment securities available for sale, at fair value
(amortized cost of $5,493,835) (Note C) 5,474,425 -
Investment securities held to maturity, at amortized cost
(fair value of $8,832,282 and $13,423,175 at June 30,
1995 and 1994, respectively) (Note C) 8,883,510 13,806,049
Loans receivable, net (Note D) 68,744,661 67,679,671
Accrued interest receivable 537,179 545,526
Premises and equipment, net (Note E) 1,403,086 1,526,212
Stock in the Federal Home Loan Bank, at cost 734,700 734,700
Other assets 765,733 631,443
----------- -----------
TOTAL ASSETS $91,410,332 $87,504,242
=========== ===========
LIABILITIES AND RETAINED EARNINGS
Deposit accounts (Note F) $81,437,068 $78,315,213
Accrued interest payable 218,171 126,536
Advance payments by borrowers for property taxes
and insurance 656,786 669,231
Accrued expenses and other liabilities 970,145 979,312
----------- -----------
TOTAL LIABILITIES 83,282,170 80,090,292
Commitments and contingencies (Notes D and M)
Retained earnings, substantially restricted (Notes I and J) 8,128,162 7,413,950
----------- -----------
TOTAL LIABILITIES AND
RETAINED EARNINGS $91,410,332 $87,504,242
=========== ===========
</TABLE>
See accompanying notes. Page F-2
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans $5,403,633 $5,205,264 $5,647,234
Investments and deposits in other banks 973,970 922,393 1,050,372
---------- ---------- ----------
TOTAL INTEREST INCOME 6,377,603 6,127,657 6,697,606
INTEREST EXPENSE ON DEPOSIT ACCOUNTS (Note F) 3,271,197 2,933,705 3,453,714
---------- ---------- ----------
NET INTEREST INCOME 3,106,406 3,193,952 3,243,892
PROVISION FOR LOAN LOSSES (Note D) 36,000 36,000 38,278
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,070,406 3,157,952 3,205,614
---------- ---------- ----------
OTHER INCOME
Transaction and other service fee income 286,452 304,681 343,650
Gain on sale of loans 6,975 151,420 83,580
Gain (loss) on sale of investment securities (4,831) (1,544) 3,037
Gain on sale of real estate acquired in settlement of loans,
net 5,875 3,943 3,355
Other income 135,397 127,809 100,584
---------- ---------- ----------
TOTAL OTHER INCOME 429,868 586,309 534,206
---------- ---------- ----------
OTHER EXPENSES
Personnel costs 1,252,657 1,201,018 1,106,250
Occupancy 152,614 148,177 139,499
Equipment rental and maintenance 173,038 154,455 109,031
Marketing 43,343 57,454 55,317
Data processing and outside service fees 266,523 274,849 286,164
Federal and other insurance premiums 216,983 221,419 195,867
Supplies, telephone and postage 119,783 117,359 130,270
Other 226,642 216,985 190,803
---------- ---------- ----------
TOTAL OTHER EXPENSES 2,451,583 2,391,716 2,213,201
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,048,691 1,352,545 1,526,619
INCOME TAX EXPENSE (Note I) 329,168 492,118 570,309
---------- ---------- ----------
NET INCOME $ 719,523 $ 860,427 $ 956,310
========== ========== ==========
</TABLE>
See accompanying notes. Page F-3
- --------------------------------------------------------------------------------
<PAGE>
================================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Years Ended June 30, 1995, 1994 and 1993
- ------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE, BEGINNING $7,413,950 $6,560,894 $5,604,584
(Increase) decrease in net unrealized losses on
certain marketable equity securities (Note B) 7,371 (7,371) -
Initial effect of adoption of accounting change, net
of deferred income tax assets of $34,240 (Note C) (64,545) - -
Decrease in net unrealized losses on available for
sale securities, net of deferred income taxes of
$27,512 (Note C) 51,863 - -
Net income 719,523 860,427 956,310
---------- ---------- ----------
BALANCE, ENDING $8,128,162 $7,413,950 $6,560,894
========== ========== ==========
</TABLE>
See accompanying notes. Page F-4
- --------------------------------------------------------------------------------
<PAGE>
=================================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 719,523 $ 860,427 $ 956,310
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 135,806 125,695 90,731
Amortization, net 66,759 42,873 10,417
Gain on sale of assets, net (8,019) (152,045) (86,346)
FHLB stock dividend - (28,600) (40,600)
Provision for loan losses 36,000 36,000 38,278
Deferred income taxes 4,485 47,237 47,893
Deferred compensation 89,457 79,127 60,181
Change in assets and liabilities
(Increase) decrease in accrued interest receivable 8,347 4,030 (2,586)
Increase in other assets (136,030) (17,756) (86,332)
Increase (decrease) in accrued interest payable 91,635 (46,279) (34,933)
Decrease in accrued expenses and other liabilities (96,378) (41,672) (45,321)
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 911,585 909,037 907,692
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale investment securities (511,434) - -
Proceeds from sale or maturities of available for sale
investment securities 1,134,316 - -
Purchases of marketable equity securities - (1,524,589) -
Proceeds from sale of marketable equity securities - 1,940,270 -
Proceeds from sale or maturities of held to maturity
investment securities 414,056 3,423,997 11,841,938
Purchase of held to maturity investment securities (999,295) (4,487,218) (11,237,427)
Net increase in loans (1,859,206) (7,246,081) (8,587,269)
Purchase of property and equipment (10,940) (323,606) (163,412)
Proceeds from sale of property and equipment - 575 -
Proceeds from sale of loans 646,667 7,560,110 3,076,733
Proceeds from sale of real estate acquired in
settlement of loans 77,272 47,402 205,477
Capital expenditures for real estate acquired in
settlement of loans (449) - (10,891)
----------- ----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (1,109,013) (609,140) (4,874,851)
----------- ----------- -----------
</TABLE>
See accompanying notes. Page F-5
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand accounts $(2,782,040) $ 2,209,536 $ 2,685,400
Net increase (decrease) in certificates of deposit 5,903,895 (2,899,285) (1,111,740)
Increase (decrease) in advance payments by
borrowers for taxes and insurance (12,445) (50,952) 92,418
----------- ----------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 3,109,410 (740,701) 1,666,078
----------- ----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 2,911,982 (440,804) (2,301,081)
CASH AND CASH EQUIVALENTS, BEGINNING 1,955,056 2,395,860 4,696,941
----------- ----------- -----------
CASH AND CASH
EQUIVALENTS, ENDING $ 4,867,038 $ 1,955,056 $ 2,395,860
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 3,179,562 $ 2,979,984 $ 3,488,647
=========== =========== ===========
Income taxes $ 381,500 $ 473,900 $ 546,589
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Loans receivable transferred to real estate acquired
in settlement of loans $ 70,948 $ - $ 146,255
=========== =========== ===========
Loans receivable securitized into mortgage-backed
securities $ - $ - $ 510,000
=========== =========== ===========
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 of $6,728 $ 12,682 $ - $ -
=========== =========== ===========
</TABLE>
See accompanying notes. Page F-6
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
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
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
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 C 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.
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.
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.
Page F-8
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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, 1995, 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.
Page F-9
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Pronouncements
- -----------------------------
The FASB has issued SFAS No. 107, "Disclosure about Fair Value of Financial
Instruments." SFAS No. 107 requires disclosures in financial statements of the
fair value of all financial instruments, including assets and liabilities both
on- and off-balance sheet, for which it is practicable to estimate such fair
value. Descriptive information pertinent to estimating the value of financial
instruments for which it is not practicable to estimate fair value would also be
required. Since the Bank's total assets were less than $150 million at June 30,
1993, adoption of SFAS No. 107 will not be required until the year ending June
30, 1996.
The FASB has issued SFAS 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 SFAS
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. Management does not expect that adoption of SFAS No. 114 and SFAS No.
118 will have a material impact on the Bank's financial statements.
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.
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 fiscal years
beginning after December 15, 1995. Management has not assessed the impact that
adoption of SFAS No. 122 will have on the Bank's financial statements.
Page F-10
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
NOTE B - MARKETABLE EQUITY SECURITIES
Marketable equity securities which consist of mutual funds are carried at the
lower of their aggregate cost or market which results in the portfolio being
carried at market value at June 30, 1994.
A summary of marketable equity securities follows:
<TABLE>
<CAPTION>
June 30, 1994
----------------------------------------------------
Aggregate
Aggregate Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Mutual funds $ 632,956 $ $ 7,371 $ 625,585
========== ========== ========== ==========
</TABLE>
Proceeds from sales of marketable equity securities during 1994 were $1,940,269.
Gross losses of $1,110 were realized on those sales. Effective July 1, 1994, the
above securities were classified as available for sale, and were subsequently
sold during the year ended June 30, 1995. Information regarding the sale of
these securities is included in Note C.
NOTE C - 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.
Page F-11
- --------------------------------------------------------------------------------
<PAGE>
===========================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
- -------------------------------------------
NOTE C - INVESTMENT SECURITIES (Continued)
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, 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
=========== =========== ========= ===========
June 30, 1994
---------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------- ---------- -----------
<C> <C> <C> <C>
Securities held-to-maturity:
U. S. government securities and obligations
of U. S. government agencies $10,476,134 $ 26,058 $ 331,098 $10,171,094
Mortgage-backed securities 1,287,193 16,763 13,945 1,290,011
Corporate debt securities 1,532,577 - 78,522 1,454,055
Municipal securities 459,945 - 2,130 457,815
Other 50,200 - - 50,200
----------- ----------- --------- -----------
$13,806,049 $ 42,821 $ 425,695 $13,423,175
=========== =========== ========= ===========
</TABLE>
Page F-12
- --------------------------------------------------------------------------------
<PAGE>
===============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- -----------------------------------------------
NOTE C - INVESTMENT SECURITIES (Continued)
The amortized cost and fair values of investment securities available for sale
and held to maturity at June 30, 1995 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 $2,997,945 $2,981,085 $ 669,551 $ 663,030
Due after one year through five years 2,495,890 2,493,340 6,148,108 6,065,322
Due after five years through ten years - - 996,110 1,008,350
Mortgage-backed securities - - 1,069,741 1,095,580
---------- ---------- ---------- ----------
$5,493,835 $5,474,425 $8,883,510 $8,832,282
========== ========== ========== ==========
</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>
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 $286,611 and $455,186 and a fair value of
$287,687 and $446,901 at June 30, 1995 and 1994, respectively, were pledged to
secure public monies on deposit as required by law.
Page F-13
- --------------------------------------------------------------------------------
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- ----------------------------------------------
NOTE D - LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Type of loan:
Real estate loans:
One-to-four family residential $57,979,655 $57,025,520
Multi-family residential and commercial 1,424,895 1,958,619
Construction 2,106,145 2,703,087
Home equity lines of credit 4,666,530 3,949,132
----------- -----------
Total real estate loans 66,177,225 65,636,358
----------- -----------
Other loans:
Consumer loans 2,417,648 1,734,207
Home improvement loans 886,401 610,479
Loans secured by deposits 735,610 783,910
----------- -----------
Total other loans 4,039,659 3,128,596
----------- -----------
Total loans 70,216,884 68,764,954
Less:
Construction loans in process 1,109,352 769,373
Allowance for loan losses 362,871 315,910
----------- -----------
$68,744,661 $67,679,671
=========== ===========
</TABLE>
The allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 315,910 $ 307,061 $ 275,709
Provision for loan losses 36,000 36,000 38,278
Charge-offs (10,377) (29,089) (9,168)
Recoveries 21,338 1,938 2,242
----------- ----------- -----------
Balance at end of year $ 362,871 $ 315,910 $ 307,061
=========== =========== ===========
</TABLE>
At June 30, 1995 and 1994, respectively, the Bank had loans totaling
approximately $75,000 and $112,000 which were in a nonaccrual status.
Loans serviced for other investors amounted to $11,667,424 and $12,950,960 at
June 30, 1995 and 1994, respectively.
Page F-14
- --------------------------------------------------------------------------------
<PAGE>
============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- --------------------------------------------
NOTE D - LOANS RECEIVABLE (Continued)
At June 30, 1995, the Bank had mortgage loan commitments outstanding of $305,000
and pre-approved but unused lines of credit totaling $3,651,000. 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 E - PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Land $ 428,299 $ 428,299
Buildings and improvements 1,145,789 1,143,355
Furniture and equipment 830,370 821,864
Leasehold improvements 19,497 19,497
----------- ----------
2,423,955 2,413,015
Accumulated depreciation (1,020,869) (886,803)
----------- ----------
$ 1,403,086 $1,526,212
=========== ==========
</TABLE>
NOTE F - DEPOSIT ACCOUNTS
Deposit accounts consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Demand and NOW accounts, including non-interest-
bearing deposits of $1,923,993 and $1,774,429
at June 30, 1995 and 1994, respectively, weighted
average rate of 2.14% and 1.96% at June 30, 1995
and 1994, respectively $ 10,151,964 $ 9,631,963
Passbook savings, weighted average rate of 2.96% and
2.80% at June 30, 1995 and 1994, respectively 11,778,046 15,080,087
------------- ------------
21,930,010 24,712,050
------------- ------------
Certificates of deposit: 3,040,932 18,980,556
2.60% to 3.74% 18,133,811 32,543,231
3.75% to 5.49% 38,269,038 1,854,078
5.50% to 7.55% 63,277 225,298
7.56% to 9.25% ------------- ------------
59,507,058 53,603,163
------------- ------------
$ 81,437,068 $ 78,315,213
============= ============
</TABLE>
Page F-15
- --------------------------------------------------------------------------------
<PAGE>
=============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- ---------------------------------------------
NOTE F - DEPOSIT ACCOUNTS (Continued)
The weighted average cost of deposit accounts was 4.58% and 3.59% at June 30,
1995 and 1994, respectively.
A summary of certificate accounts by maturity as of June 30, 1995 follows:
<TABLE>
<CAPTION>
Less than $100,000
$100,000 or More Total
----------- ---------- -----------
<S> <C> <C> <C>
July 1, 1995 - June 30, 1996 $37,968,523 $5,090,271 $43,058,794
July 1, 1996 - June 30, 1997 8,193,266 707,520 8,900,786
July 1, 1997 - June 30, 1998 1,473,326 404,697 1,878,023
Thereafter 5,213,257 456,198 5,669,455
----------- ---------- -----------
Total certificate accounts $52,848,372 $6,658,686 $59,507,058
=========== ========== ===========
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
Passbook savings $ 387,907 $ 413,297 $ 458,418
NOW accounts 213,164 200,711 232,822
Certificates of deposit 2,681,898 2,329,509 2,769,760
----------- ---------- -----------
3,282,969 2,943,517 3,461,000
Penalties for early withdrawal 11,772 9,812 7,286
----------- ---------- -----------
$ 3,271,197 $2,933,705 $ 3,453,714
=========== ========== ===========
</TABLE>
NOTE G - EMPLOYEES' RETIREMENT PLAN
The Bank has a defined contribution retirement plan which covers substantially
all the Bank's employees, and contributions to the plan are determined 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. The contributions to the plans
totaled $71,817, $67,780 and $66,352 for the years ended June 30, 1995, 1994 and
1993, respectively.
NOTE H - DEFERRED COMPENSATION
The Bank has a deferred compensation plan for certain directors and officers.
The plan provides benefits upon disability, death or attainment of a certain
age. The Bank has made current provision for future payments under this plan,
and the related liability and deferred income tax benefits are included in the
accompanying consolidated financial statements. Expenses associated with this
plan were $89,457, $79,127 and $60,181 for the years ended June 30, 1995, 1994
and 1993, respectively.
Page F-16
- --------------------------------------------------------------------------------
<PAGE>
============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- --------------------------------------------
NOTE I - 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,
1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Current tax expense $324,683 $444,881 $522,416
-------- -------- --------
Deferred tax expense (benefit)
Tax on temporary differences (2,243) 47,237 47,893
Less benefit of unrealized loss on
investment securities available for
sale allocated directly to retained
earnings 6,728 - -
-------- -------- --------
Net deferred tax expense included
in operations 4,485 47,237 47,893
-------- -------- --------
$329,168 $492,118 $570,309
======== ======== ========
</TABLE>
Page F-17
- --------------------------------------------------------------------------------
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- ----------------------------------------------
NOTE I - 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, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Income tax at federal statutory rate $ 356,555 $ 459,865 $ 519,050
State income tax, net of federal tax benefit 259 30,314 42,385
Other (27,646) 1,939 8,874
--------- --------- ---------
$ 329,168 $ 492,118 $ 570,309
========= ========= =========
</TABLE>
Deferred tax assets and liabilities arising from temporary differences at June
30, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets relating to:
Loan fees and costs $ - $ 2,304
Deferred compensation 236,667 190,640
Unrealized losses on investment securities
available for sale 6,728 -
---------- ----------
Gross deferred tax assets 243,395 192,944
Valuation allowance - -
---------- ----------
Net deferred tax assets 243,395 192,944
---------- ----------
Deferred tax liabilities relating to:
Allowance for loan losses (62,936) (46,933)
Property and equipment (77,206) (68,221)
FHLB stock dividends (135,948) (135,948)
Loan fees and costs (23,220) -
---------- ----------
Total deferred tax liabilities (299,310) (251,102)
---------- ----------
Net deferred tax liability $ (55,915) $ (58,158)
========== ==========
</TABLE>
Retained earnings at June 30, 1995 include approximately $1,500,000 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 $590,000, has not been provided on such reserve.
Page F-18
- --------------------------------------------------------------------------------
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- ----------------------------------------------
NOTE J - 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 8.9% at
June 30, 1995. 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, 1995, the
Bank exceeded the maximum requirement.
As of June 30, 1995, the Bank exceeded all of its capital requirements.
NOTE K - TRANSACTIONS WITH RELATED PARTIES
The Bank has loan and deposit relationships with executive officers and with
members of the Board of Directors. At June 30, 1995 and 1994, approximately
$262,268 and $170,056, respectively, were outstanding in loans to these related
parties. 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.
NOTE L - 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, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Assets:
Cash $ 1,709 $ 37,500
Building, net 58,670 60,410
Prepaid assets - 4,000
Other assets 89,466 -
---------- ----------
$ 149,845 $ 101,910
========== ==========
Liabilities and Stockholders' Equity:
Income taxes payable $ 803 $ 783
Other borrowed funds 24,500 -
Accrued expenses 769 600
Stockholders' equity 123,773 100,527
---------- ----------
$ 149,845 $ 101,910
========== ==========
</TABLE>
Page F-19
- --------------------------------------------------------------------------------
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- ----------------------------------------------
NOTE L - CONSOLIDATED SUBSIDIARY (Continued)
Summary Statements of Income for the years ended June 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
Income:
Insurance commissions $ 84,199 $ 103,998 $ 78,650
Interest and other 6,950 4,358 4,861
-------- --------- ---------
91,144 108,356 83,511
-------- --------- ---------
Expense:
Management fee to parent 9,500 9,500 9,500
Salaries and other 4,907 15,304 5,611
Commission expense 39,922 52,578 42,243
Income tax expense 13,569 11,460 9,678
-------- --------- ---------
67,898 88,842 67,032
-------- --------- ---------
Net Income $ 23,246 $ 19,514 $ 16,479
======== ========= =========
</TABLE>
NOTE M - 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, 1995 is as follows:
<TABLE>
<S> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit, mortgage loans $ 305,000
Undisbursed construction loans 1,109,000
Undisbursed lines of credit 3,651,000
</TABLE>
Page F-20
- --------------------------------------------------------------------------------
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995, 1994 and 1993
- ----------------------------------------------
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 would 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.
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.
If the conversion is ultimately successful, conversion costs will be accounted
for as a reduction of the stock sale proceeds. If the conversion is
unsuccessful, conversion costs will be charged to the Bank's operations.
Page F-21
- --------------------------------------------------------------------------------
<PAGE>
=============================================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
March 31, 1996 and 1995
- -------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------- -------------
<S> <C> <C>
Cash on hand and in banks $ 2,367,168 $ 1,314,890
Interest-bearing deposits in other banks 5,764,219 2,768,089
Investment securities available for sale, at fair value
(amortized cost of $8,536,580 and $5,492,105 at
March 31, 1996 and 1995, respectively) 8,450,855 5,403,605
Investment securities held to maturity, at amortized cost
(fair value of $7,018,420 and $7,743,014 at March 31,
1996 and 1995, respectively) 7,061,643 7,998,610
Loans receivable, net 68,264,645 67,926,421
Accrued interest receivable 653,759 469,631
Premises and equipment, net 1,315,959 1,435,523
Stock in the Federal Home Loan Bank, at cost 734,700 734,700
Other assets 664,793 799,016
------------- -------------
TOTAL ASSETS $ 95,277,741 $ 88,850,485
============= =============
<CAPTION>
LIABILITIES AND RETAINED EARNINGS
<S> <C> <C>
Deposit accounts $ 85,125,294 $ 79,171,384
Accrued interest payable 216,973 180,397
Advance payments by borrowers for property taxes
and insurance 349,850 534,307
Accrued expenses and other liabilities 1,036,498 1,018,054
------------- -------------
TOTAL LIABILITIES 86,728,615 80,904,142
Retained earnings, substantially restricted 8,549,126 7,946,343
------------- -------------
TOTAL LIABILITIES AND
RETAINED EARNINGS $ 95,277,741 $ 88,850,485
============= =============
</TABLE>
See accompanying notes. Page F-22
- --------------------------------------------------------------------------------
<PAGE>
===============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Nine Months Ended March 31, 1996 and 1995
- -----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans $4,159,153 $3,988,411
Investments and deposits in other banks 897,831 694,309
---------- ----------
TOTAL INTEREST INCOME 5,056,984 4,682,720
INTEREST EXPENSE ON DEPOSIT ACCOUNTS 2,975,121 2,336,728
---------- ----------
NET INTEREST INCOME 2,081,863 2,345,992
PROVISION FOR LOAN LOSSES 27,000 27,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,054,863 2,318,992
---------- ----------
OTHER INCOME
Transaction and other service charge income 326,163 226,066
Gain on sale of loans 9,850 1,588
Loss on sale of investment securities (4,404) (4,831)
Gain on sale of real estate acquired in settlement of loa
net - 5,875
Other income 132,121 127,699
---------- ----------
TOTAL OTHER INCOME 463,730 356,397
---------- ----------
OTHER EXPENSES
Personnel costs 943,774 954,427
Occupancy 108,689 114,990
Equipment rental and maintenance 211,194 225,859
Marketing 34,779 32,896
Data processing and outside service fees 96,767 76,016
Federal and other insurance premiums 183,339 187,567
Supplies, telephone and postage 87,030 88,628
Other 179,439 134,316
---------- ----------
TOTAL OTHER EXPENSES 1,845,011 1,814,699
---------- ----------
INCOME BEFORE INCOME TAXES 673,582 860,690
INCOME TAX EXPENSE 209,575 278,143
---------- ----------
NET INCOME $ 464,007 $ 582,547
========== ==========
</TABLE>
See accompanying notes. Page F-23
- --------------------------------------------------------------------------------
<PAGE>
===========================================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Unaudited)
Nine Months Ended March 31, 1996 and 1995
- -----------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
BALANCE, BEGINNING $8,128,162 $7,413,950
Decrease in net unrealized loss on certain marketable
equity securities - 7,371
Initial effect of adoption of accounting change, net of
deferred income tax assets of $34,240 - (64,545)
(Increase) decrease in net unrealized loss on available
for sale securities, net of deferred income tax assets
(liabilities) of $23,272 and $(3,780), respectively (43,043) 7,020
Net income 464,007 582,547
---------- ----------
BALANCE, ENDING $8,549,126 $7,946,343
========== ==========
</TABLE>
See accompanying notes. Page F-24
- --------------------------------------------------------------------------------
<PAGE>
====================================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended March 31, 1996 and 1995
- ---------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 464,007 $ 582,547
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 100,822 101,629
Amortization, net (7,961) 44,379
Gain on sale of assets, net (5,446) (2,632)
Provision for loan losses 27,000 27,000
Deferred income taxes (20,124) 3,364
Deferred compensation 78,780 71,118
Change in assets and liabilities
(Increase) decrease in accrued interest receivable (116,580) 75,895
(Increase) decrease in other assets 99,635 (167,573)
Increase (decrease) in accrued interest payable (1,198) 53,861
Increase (decrease) in accrued expenses and other
liabilities 30,969 (4,765)
----------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 649,904 784,823
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale investment securities (5,535,574) (11,434)
Proceeds from sale or maturities of available for sale
investment securities 2,496,031 634,316
Proceeds from sale or maturities of held to maturity
investment securities 2,322,222 311,878
Purchase of held to maturity investment securities (500,000) -
Net increase in loans (749,553) (591,242)
Purchase of property and equipment (12,390) (10,940)
Proceeds from sale of loans 1,212,419 212,452
Proceeds from sale of real estate acquired in settlement
of loans - 77,272
Capital expenditures for real estate acquired in settlement
of loans - (449)
----------- ---------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (766,845) 621,853
----------- ---------
</TABLE>
See accompanying notes. Page F-25
- --------------------------------------------------------------------------------
<PAGE>
====================================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended March 31, 1996 and 1995
- ----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand accounts $2,382,791 $(2,320,032)
Net increase in certificates of deposit 1,305,435 3,176,203
Decrease in advance payments by borrowers for taxes
and insurance (306,936) (134,924)
---------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,381,290 721,247
---------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,264,349 2,127,923
CASH AND CASH EQUIVALENTS, BEGINNING 4,867,038 1,955,056
---------- -----------
CASH AND CASH
EQUIVALENTS, ENDING $8,131,387 $ 4,082,979
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $2,976,319 $ 2,282,867
========== ===========
Income taxes $ 158,630 $ 280,500
========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Loans receivable transferred to real estate acquired in
settlement of loans $ - $ 70,948
========== ===========
Decrease in net unrealized losses on marketable equity
securities $ - $ (7,371)
========== ===========
Increase in net unrealized losses on available for sale
investment securities, net of deferred income taxes of
$23,272 and $30,460 for 1996 and 1995, respectively $ 43,043 $ 57,525
========== ===========
</TABLE>
See accompanying notes. Page F-26
- --------------------------------------------------------------------------------
<PAGE>
==============================================
RICHMOND SAVINGS BANK, SSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1995 (Unaudited)
- ----------------------------------------------
NOTE A - BASIS OF PRESENTATION
The financial statements include the accounts of Richmond Savings Bank, SSB
("the Bank") and its wholly-owned subsidiary, CERKO, Inc. All intercompany
transactions and balances are eliminated in consolidation. All adjustments
considered necessary for a fair presentation of the results for the interim
periods presented have been included (such adjustments are normal and recurring
in nature). Operating results for the nine months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1996.
NOTE B - ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
Effective July 1, 1995, as required, the Bank adopted the provisions of SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan: Income Recognition and
Disclosures." The adoption of SFAS Nos. 114 and 118 did not have a material
impact on the Bank's financial condition or results of operations.
NOTE C - PLAN OF CONVERSION
On May 1, 1996, the Board of Directors of the Bank approved a proposed plan to
convert the Bank from a North Carolina-chartered mutual savings bank to a North
Carolina-chartered stock savings bank. The proposed Plan of Conversion
contemplates the organization of a holding company which will acquire and own
all the shares of the Bank issued in the conversion. The Plan of Conversion is
subject to the approval of various regulatory agencies.
At the time of the 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 offering circular. 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 liquidation account in
the amount of the then current adjusted subaccount balance for the 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.
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.
If the conversion is ultimately successful, conversion costs will be accounted
for as a reduction of the stock sale proceeds. If the conversion is
unsuccessful, conversion costs will be charged to the Bank's operations.
Page F-27
- --------------------------------------------------------------------------------
<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 OF CONTENTS
Page
Summary................................................. 4
Selected Financial and Other Data
of Richmond........................................... 14
Risk Factors............................................ 15
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............. 30
Anticipated Stock Purchases by Management............... 33
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 34
Business of the Holding Company......................... 49
Business of Richmond Savings............................ 49
Taxation................................................ 67
Supervision and Regulation.............................. 69
Management of the Holding Company....................... 79
Management of Richmond Savings.......................... 80
Description of Capital Stock............................ 88
Anti-Takeover Provisions Affecting the
Holding Company and Richmond Savings................. 90
The Conversion.......................................... 94
Legal Opinions.......................................... 108
Experts................................................. 108
Registration Requirements............................... 108
Additional Information.................................. 108
Index to Consolidated Financial Statements.............. 109
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
1,957,300 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>
<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 the
II-1
<PAGE>
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
<TABLE>
<CAPTION>
Exhibit No.
(Per Exhibit
Tables in
Item 601 of
Regulation S-K) Description
--------------- -----------
<C> <S>
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. (to be filed subsequently)
2.1 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 (to be filed
subsequently)
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 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>
II-3
<PAGE>
<TABLE>
<C> <S>
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 Financial Data Schedule
28.1 Appraisal Report of Baxter Fentriss and Company
28.2 Form of Stock Order Form (to be filed subsequently)
</TABLE>
(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, 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.
II-4
<PAGE>
(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 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 19th day of June, 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.
Date: June 19, 1996 By: /s/ R. Larry Campbell
-----------------------------------------
R. Larry Campbell, President and Director
(Principal Executive Officer)
Date: June 19, 1996 By: /s/ Winston G. Dwyer
-----------------------------------------
Winston G. Dwyer (Principal Accounting
Officer and Principal Financial Officer)
Date: June 19, 1996 By: /s/ Russell E. Bennett, Jr.
-----------------------------------------
Russell E. Bennett, Jr., Director
Date: June 19, 1996 By: /s/ Buena Vista Coggin
-----------------------------------------
Buena Vista Coggin, Director
Date: June 19, 1996 By: /s/ Joe M. McLaurin
-----------------------------------------
Joe M. McLaurin, Director
Date: June 19, 1996 By: /s/ John T. Page, Jr.
-----------------------------------------
John T. Page, Jr., Director
Date: June 19, 1996 By: /s/ W. Jesse Spencer
-----------------------------------------
W. Jesse Spencer, Director
Date: June 19, 1996 By: /s/ J. Stanley Vetter
-----------------------------------------
J. Stanley Vetter, Director
Date: June 19, 1996 By: /s/ E. E. Vuncannon, Jr.
-----------------------------------------
E. E. Vuncannon, Jr., Director
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
(PER EXHIBIT
TABLES IN
ITEM 601 OF SEQUENTIAL
REGULATION S-K) DESCRIPTION PAGE NO.
- --------------- ----------- -----------
<S> <C> <C>
1.1 Engagement letter dated April 9, 1996 between Richmond
SavingsBank, SSB and Trident Securities, Inc.
1.2 Form of Sales Agency Agreement among Carolina Fincorp, Inc.,
Richmond Savings Bank, SSB and Trident Securities, Inc.
(to be filed subsequently)
2.1 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 (to be filed subsequently)
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
SavingsBank, SSB and Baxter Fentriss and Company for
appraisal services
10.2 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> <C>
10.4 Form of the Management Recognition Plan of Richmond
SavingsBank, 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 Financial Data Schedule
28.1 Appraisal Report of Baxter Fentriss and Company
28.2 Form of Stock Order Form (to be filed subsequently)
</TABLE>
<PAGE>
EXHIBIT 1.1
LETTERHEAD OF
TRIDENT SECURITIES, INC.
April 9, 1996
Board of Directors
Richmond Savings Bank, SSB
115 South Lawrence
Rockingham, North Carolina 28379
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Richmond Savings Bank, SSB, Rockingham, North
Carolina (the "Bank") concerning our investment banking services in connection
with the possible conversion of the Bank from a mutual to a capital stock form
of organization.
Trident is prepared to assist the Bank and any proposed holding company of the
bank (the "Company") in connection with the offering of its shares of common
stock during the subscription offering and community offering as such terms will
be defined in the Bank's Plan of Conversion. The specific terms of the services
contemplated hereunder shall be set forth in a definitive sales agency agreement
(the "Agreement") between Trident, the Bank and the Company to be executed on
the date the offering circular/prospectus is declared effective by the
appropriate regulatory authorities. The price of the shares during the
subscription offering and community offering will be the price established by
the Board of Directors of the Company and the Bank, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident, the Bank and the Company.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the Bank
in the sale of its common stock during the subscription offering and community
offering. Additionally, if necessary, Trident will enter into agreements with
other National Association of Securities Dealers, Inc., ("NASD") member firms to
act as selected dealers, assisting in the sale of the common stock. Trident and
the Bank will determine the selected dealers to assist the Bank during the
community offering. At the appropriate time, Trident in conjunction with its
counsel, will conduct an examination of the relevant documents and records of
the Bank as Trident deems necessary and appropriate. The Bank will make all
documents, records and other information deemed necessary by Trident or its
counsel available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Bank:
<PAGE>
Board of Directors
April 9, 1996
Page 2
1. A management fee in the amount of one percent (1.00%) of the aggregate
dollar amount of capital stock sold in both the subscription offering
and community offering.
2. A commission equal to two percent (2.00%) of the aggregate dollar
amount of capital stock sold in the subscription offering, excluding
any shares of conversion stock sold to the Bank's directors, executive
officers and the employee stock ownership plan. Additionally,
commissions will be excluded on those shares sold to "associates" of
the Bank's directors and executive officers. The term "associates" as
used herein shall have the same meaning as that found in the Bank's
Plan of Conversion.
3. A commission equal to two percent (2.00%) of the aggregate dollar
amount of capital stock sold by Trident in the community offering
excluding shares sold by other NASD member firms under selected
dealer's agreements.
4. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Bank to reflect market requirements at the
time of the stock allocation in any Syndicated Community Offering by
Selected Dealers.
5. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Bank and Trident.
6. Trident shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated.
Trident's out-of-pocket expenses will not exceed $7,500 and its legal
fees and expenses will not exceed $30,000. The Bank will forward to
Trident a check in the amount of $10,000 as an advance payment to
defray the allocable expenses of Trident.
It further is understood that the Bank will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either Trident's attorneys or the
Bank's attorneys relating to any required state securities law filings,
telephone charges, air freight, rental equipment, supplies, transfer agent
charges, fees relating to auditing and accounting and costs of printing all
documents necessary in connection with the foregoing.
Trident understands that the Bank's board of directors has not adopted a plan of
conversion as of the date hereof. Accordingly, the board of directors has not
decided at this point whether a conversion will occur and information about the
possibility of a conversion is strictly confidential. The Bank may terminate
this engagement at any time upon written notice to Trident. In such event,
Trident shall be entitled to receive the reasonable value of its services
rendered to the date of such termination.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the Bank
warrants that: (a) the Bank has not privately placed
<PAGE>
Board of Directors
April 9, 1996
Page 3
any securities within the last 18 months; (b) there have been no material
dealings within the last 12 months between the Bank and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Bank has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with Trident, the Bank has no financial
or management consulting contracts outstanding with any other person; (e) the
Bank has not granted Trident a right of first refusal with respect to the
underwriting of any future offering of the Bank stock; and (f) there has been no
intermediary between Trident and the Bank in connection with the public offering
of the Bank's shares, and no person is being compensated in any manner for
providing such service.
The Bank agrees to indemnify and hold harmless Trident and each person, if any,
who controls the firm against all losses, claims, damages or liabilities, joint
or several and all legal or other expenses reasonably incurred by them in
connection with the investigation or defense thereof (collectively, "Losses"),
to which they may become subject under the securities laws or under the common
law, that arise out of or are based upon the conversion or the engagement
hereunder of Trident unless it is determined by final judgment of a court having
jurisdiction over the matter that such Losses are primarily a result of
Trident's negligence. If the foregoing indemnification is unavailable for any
reason, the Bank agrees to contribute to such Losses in the proportion that its
financial interest in the conversion bears to that of the indemnified parties.
If the Agreement is entered into with respect to the common stock to be issued
in the conversion, the Agreement will provide for indemnification, which will be
in addition to any rights that Trident or any other indemnified party may have
at common law or otherwise. The indemnification provision of this paragraph
will be superseded by the indemnification provisions of the Agreement entered
into by the Bank and Trident.
This letter is merely a statement of intend and is not a binding legal agreement
except as to paragraph (6) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity described in the preceding paragraph. While Trident
and the Bank agree in principle to the contents hereof and propose to proceed
promptly, and in good faith, to work out the arrangements with respect to the
proposed offering, any legal obligations between Trident and the Bank shall be
only as set forth in a duly executed Agreement. Such Agreement shall be in form
and content satisfactory to Trident and the Bank, as well as their counsel, and
Trident's obligations thereunder shall be subject to, among other things, there
being in Trident's opinion no material adverse change in the condition or
obligations of the Bank or no market conditions which might render the sale of
the shares by the Bank hereby contemplated inadvisable.
<PAGE>
Board of Directors
April 9, 1996
Page 4
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter along with the advance payment of
$10,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ Timothy E. Lavelle
-----------------------------------
Timothy E. Lavelle
President
Agreed and accepted to this 10th day
----------
of April, 1996.
RICHMOND SAVINGS BANK, SSB
By: /s/ R. Larry Campbell
---------------------------------------
R. Larry Campbell
President
<PAGE>
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.
This Amended and Restated Plan of Holding Company Conversion adopted by
the Board of Directors of the Savings Bank on June 12, 1996 (the "Plan") amends,
supercedes and replaces the Plan of Holding Company Conversion previously
adopted on May 1, 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.
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.
<PAGE>
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).
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.
2
<PAGE>
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) 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. Maximum Shares: The number of shares of Conversion Stock which would
be issued at the maximum of the Aggregate Valuation Range as set forth in the
Prospectus.
3
<PAGE>
AA. 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.
BB. 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.
CC. Order Forms: The order forms to be used to subscribe for Conversion
Stock in the Subscription and Community Offerings pursuant to the Plan.
DD. 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.
EE. 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.
FF. Plan: This Plan of Holding Company Conversion and any duly adopted
amendments thereto.
GG. 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.
HH. 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.
II. 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.
JJ. Regulations: The Rules and Regulations of the Administrator set
forth in North Carolina Administrative Code Title 4, Chapter 16, Subchapter 16G.
KK. Retirement Accounts: Individual retirement accounts, Keogh savings
accounts or similar retirement accounts.
LL. SAIF: The Savings Association Insurance Fund of the FDIC.
4
<PAGE>
MM. 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.
NN. Savings Bank: Richmond Savings Bank, SSB, Rockingham, North
Carolina, a North Carolina-chartered mutual savings bank.
OO. SEC: The Securities and Exchange Commission.
PP. Special Meeting: The Special Meeting of Members called for the
purpose of considering approval of the Plan.
QQ. 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.
RR. 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.
SS. 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.
TT. 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.
UU. 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.
VV. 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.
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:
5
<PAGE>
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
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
6
<PAGE>
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.
7
<PAGE>
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
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
8
<PAGE>
of this Article. Subscription Rights of Eligible Account Holders shall be
superior to those of all other subscription rights granted in the Conversion.
Notwithstanding the foregoing, as set forth in Section B.2 of this Article,
Subscription Rights of Eligible Account Holders shall be subordinated to the
prior right of the ESOP to purchase shares offered in excess of the Maximum
Shares. 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.
Notwithstanding the foregoing, in the event that the number of shares issued in
the Conversion exceeds the Maximum Shares, the ESOP shall have the first
priority right to purchase any shares issued exceeding the Maximum Shares up to
an aggregate of eight percent (8%) of the total number of shares offered and
sold in the Conversion. 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. 1 and 2. Any Subscription Rights
received by an Eligible Account Holder in accordance with
9
<PAGE>
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 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.
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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, may subscribe for or purchase more than the amount equal to the maximum
purchase limitations set forth in Section D.1 of this Article.
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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.
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
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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 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
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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.
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
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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.
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
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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
sale in such state. No payments will be made in lieu of the granting of
Subscription Rights to persons residing in such jurisdictions.
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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, the Holding Company hereby undertakes not to
deregister such stock for a period of three years thereafter.
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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) 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
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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.
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
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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.
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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 sixty (60) 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
6
<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
8
<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.
9
<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 3.1
ARTICLES OF INCORPORATION
OF
CAROLINA FINCORP, INC.
ARTICLE I
The name of the corporation is Carolina Fincorp, Inc. (the "Corporation").
ARTICLE II
SECTION 2.1. TOTAL AUTHORIZED SHARES OF CAPITAL STOCK. The Corporation
----------- ----------------------------------------
shall have authority to issue a total of 25,000,000 shares of capital stock,
none of which shall have any par value, divided into classes as follows:
Class Number of Shares
----- ----------------
Common Stock 20,000,000
Preferred Stock 5,000,000
SECTION 2.2. COMMON STOCK. The shares of Common Stock shall be of one and
----------- ------------
the same class. Subject to the rights of holders of the Preferred Stock as
determined by the Board of Directors pursuant to Section 2.3 hereof and by the
North Carolina Business Corporation Act ("NCBCA") as now constituted or
hereafter amended, the holders of shares of Common Stock shall have one vote per
share on all matters on which holders of shares of Common Stock are entitled to
vote and shall be entitled to participate pro rata after preferential rights of
holders of Preferred Stock in the distribution of the net assets of the
Corporation upon dissolution.
SECTION 2.3. PREFERRED STOCK. The shares of Preferred Stock may be issued
----------- ---------------
from time to time by the Corporation, and the Board of Directors may create and
divide such shares into series within that class, and such shares and the shares
of each such series shall have such voting powers, full or limited, or no voting
powers, and such designations, preferences, limitations and relative rights (or
qualifications, conditions or restrictions thereon) as the Board of Directors
may and hereby is authorized to determine.
<PAGE>
ARTICLE III
The street address and county of the initial registered office of the
Corporation is 115 South Lawrence Street, Rockingham, Richmond County, North
Carolina 28379. The mailing address of the initial registered office of the
Corporation is Post Office Box 1597, Rockingham, North Carolina 28380-1597. The
name of the initial registered agent is R. Larry Campbell.
ARTICLE IV
The names and addresses of the incorporators are as follows:
Name Address
---- -------
J. Stanley Vetter 1424 Cumberland Circle
Rockingham, North Carolina 28379
John T. Page, Jr. P.O. Box 306
Rockingham, North Carolina 28380
E. E. Vuncannon, Jr. P.O. Box 56
Ellerbe, North Carolina 28338
Buena Vista Coggin 511 Roberdel Road
Rockingham, North Carolina 28379
Joe M. McLaurin P.O. Box 848
Rockingham, North Carolina 28380
Russell E. Bennett, Jr. P.O. Box 1268
Rockingham, North Carolina 28380
W. Jesse Spencer 720 Scotland Avenue
Rockingham, North Carolina 28379
R. Larry Campbell P.O. Box 1597
Rockingham, North Carolina 28380
ARTICLE V
To the fullest extent permitted by the NCBCA as it exists or may hereafter
be amended, no person who is serving or has served as a director of the
Corporation shall be personally liable to the Corporation or any of its
shareholders or otherwise for monetary damages for breach of any duty as a
2
<PAGE>
director. No amendment or repeal of this Article, nor the adoption of any
provision to these Articles of Incorporation inconsistent with this Article,
shall eliminate or reduce the protection granted herein with respect to any
matter that occurred prior to such amendment, repeal, or adoption. The
provisions of this Article shall not be deemed to limit or preclude
indemnification of a director by the Corporation for any liability of a director
which has not been eliminated by the provisions of this Article.
ARTICLE VI
The provisions of Article 9 and Article 9A of the NCBCA entitled "The North
Carolina Shareholder Protection Act" and "The North Carolina Control Share
Acquisition Act," respectively, shall not be applicable to the Corporation.
ARTICLE VII
SECTION 7.1. DEFINITIONS AND TERMS WITH RESPECT TO ARTICLE VII. For
----------- -------------------------------------------------
purposes of this Article VII, the following definitions shall apply:
(a) The terms "Business Combination" shall mean any transaction
in connection with (i) a combination or merger of the Corporation, (ii) the
acquisition of more than ten percent (10%) of the Corporation's outstanding
Voting Shares, or (iii) a purchase or sale of a substantial portion of the
assets of the Corporation or a Subsidiary thereof (a purchase or sale of 20% or
more of the total assets of the Corporation or a Subsidiary as of the end of the
most recent quarterly period being deemed as "substantial") in each case, as
applicable, which requires the approval of, or notice to and absence of
objection by (i) any federal or state regulatory authority of banks, savings
banks, savings and loan associations or their holding companies, (ii) the
Federal Trade Commission or the Anti-Trust Division of the United States
Department of Justice, or (iii) the shareholders of the Corporation, but
excluding any reorganization, acquisition, merger, purchase or sale of assets,
or combination initiated by the Corporation upon the vote of at least fifty-one
percent (51%) of the Continuing Directors.
3
<PAGE>
(b) The term "Continuing Director" shall mean any member of the
Board of Directors of the Corporation who is not a Related Person and is not
affiliated with the Related Person and was a member of the Board of Directors
prior to the time that the Related Person became a Related Person, and any
successor of a Continuing Director who is unaffiliated with the Related Person
and is recommended to succeed a Continuing Director by a majority of the
Continuing Directors.
(c) The term "Person" shall mean an individual, a corporation, a
limited liability company, a partnership, an association, a joint stock company,
a trust, or an unincorporated organization or similar company, and also includes
a syndicate or any group of any of the foregoing formed or acting together in
concert for the purpose of acquiring, holding or disposing of the equity
securities or assets of the Corporation or any Subsidiary.
(d) The term "Related Person" shall mean any individual,
partnership, corporation, trust or other person or entity (together with its
"affiliates" and "associates," as defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "1934
Act")) which as of the date of its offer with respect to a Business Combination
is a "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) in the
aggregate of ten percent (10%) or more of the outstanding Voting Shares of the
Corporation. A Related Person shall be deemed to have acquired a share of the
Voting Stock of the Corporation at the time when such Related Person became the
beneficial owner thereof.
(e) The term "Subsidiary" shall mean any corporation or other
entity of which the Person in question owns not less than fifty percent (50%) of
any class of equity securities, directly or indirectly.
(f) The term "Voting Shares" shall mean any shares of the
authorized stock of the Corporation entitled to vote generally in the election
of directors.
4
<PAGE>
(g) The term "Whole Board of Directors" shall mean the total
number of directors which the Corporation would have if there were no vacancies
on the Board.
SECTION 7.2. RIGHTS OF SHAREHOLDERS. The affirmative vote of the holders
----------- ----------------------
of seventy-five percent (75%) or more of the outstanding Voting Shares, voting
separately as a class, shall be required for the approval or authorization of
any Business Combination, provided, however, that the seventy-five percent (75%)
voting requirement shall not be applicable and such Business Combination may be
approved by the shareholder vote required by law and any other provision of
these Articles of Incorporation if the Business Combination is approved by the
Board of Directors of the Corporation by the affirmative vote of (a) at least
seventy-five percent (75%) of the Whole Board of Directors, and (b) if such
Business Combination is proposed by a Related Person, at least seventy-five
percent (75%) of the Continuing Directors, in either case at a duly called or
convened regular or special meeting of the Board of Directors.
SECTION 7.3. FIDUCIARY OBLIGATIONS. Nothing contained in this Article VII
----------- ---------------------
shall be construed to relieve any Related Person from any fiduciary obligation
imposed by law or equity.
SECTION 7.4. STANDARDS OF BOARD OF DIRECTORS' EVALUATION OF AN OFFER.
----------- -------------------------------------------------------
The Board of Directors of the Corporation, when evaluating any offer of another
Person to effect a Business Combination shall, in connection with the exercise
of its judgment in determining what is in the best interests of the Corporation
and its shareholders, give due consideration to all relevant factors, including,
without limitation: (i) the social and economic effects of acceptance of such
offer on its depositors, borrowers, other customers, employees, and creditors of
the Corporation and its Subsidiaries, and on the communities in which the
Corporation and its Subsidiaries operate or are located; (ii) the ability of the
Corporation and its Subsidiaries to fulfill the objectives of a bank and/or
savings bank and/or savings and loan association holding company, as applicable,
and of commercial banking and/or savings bank and/or
5
<PAGE>
savings and loan entities, as applicable, under applicable federal and state
statutes and regulations; (iii) the business and financial condition and
prospects and earnings prospects of the Person or Persons proposing the Business
Combination, including, but not limited to, debt service and other existing
financial obligations, financial obligations to be incurred in connection with
the Business Combination, and other likely financial obligations of such Person
or Persons, and the possible effect of such conditions and prospects upon the
Corporation and its Subsidiaries and the communities in which the Corporation
and its Subsidiaries are located; (iv) the competence, experience, and integrity
of the Person or Persons proposing the Business Combination and its or their
management; and (v) the prospects for successful conclusion of the proposed
Business Combination. The provisions of this Article VII shall be deemed solely
to grant discretionary authority to the Board of Directors and shall not be
deemed to provide any constituency the right to be considered or to compel the
consideration of its interests.
SECTION 7.5. AMENDMENT AND REPEAL OF ARTICLE VII. Notwithstanding any
----------- -----------------------------------
other provision of these Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law) any amendment, change or repeal of this Article VII, or any
other amendment of these Articles of Incorporation which will have the effect of
modifying or permitting circumvention of this Article VII, shall require the
affirmative vote of the holders of at least seventy-five percent (75%) of the
then outstanding Voting Shares of the Corporation, voting separately as a class;
provided, however, that this restriction shall not apply to, and such seventy
five percent (75%) vote shall not be required for, any such amendment, change or
repeal recommended to shareholders of the Corporation by the affirmative vote of
at least (a) seventy-five percent (75%) of the Whole Board of Directors, and (b)
if at such time there shall be a Related Person, at least seventy-five percent
(75%) of the Continuing Directors, and in either such event such amendment,
change or repeal so recommended shall require only the vote, if any, required
under the applicable provisions of the NCBCA.
6
<PAGE>
ARTICLE VIII
SECTION 8.1. BOARD OF DIRECTORS. The number of directors of the
----------- ------------------
Corporation shall be fixed from time to time as provided in the Corporation's
Bylaws.
In the first election of directors, and in all elections thereafter, in
which the total number of directors as fixed pursuant to the Corporation's
Bylaws is nine (9) or more, the directors shall be divided into three (3)
classes, as nearly equal as possible in number as may be, to serve in the first
instance for terms of one, two and three years, respectively, from the date such
class of directors takes office or until their earlier death, resignation,
retirement, removal or disqualification or until their successors shall be
elected and shall qualify, and thereafter the successors in each class of
directors shall be elected for terms of three (3) years or until their earlier
death, resignation, retirement, removal, or disqualification or until their
successors shall be elected and shall qualify. In the event of any increase or
decrease in the number of directors at a time that the directors are so
classified, the additional or eliminated directorships shall be classified or
chosen so that all classes of directors shall remain or become as nearly equal
as possible in number. At all times that the number of directors, as fixed
pursuant to the Corporation's Bylaws, is less than nine (9), each director shall
be elected to a term ending as of the next succeeding annual meeting of
shareholders or until his or her earlier death, resignation, retirement, removal
or disqualification or until his or her successor shall be elected and shall
qualify.
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 Board of Directors. If the directors remaining
in office do not constitute a quorum, the directors may fill the vacancy by the
affirmative vote of a majority of the remaining directors or by the sole
remaining director. If the vacant office was held by
7
<PAGE>
a director elected by voting group, only the remaining director or directors
elected by that voting group or the holders of shares of that voting group are
entitled to fill the vacancy.
SECTION 8.2. INITIAL BOARD OF DIRECTORS. The number of directors
----------- --------------------------
constituting the initial Board of Directors of the Corporation shall be eight
(8) and the names and addresses of the persons who are to serve as directors of
the Corporation until the first meeting of shareholders or until their
successors are elected and qualify are:
Name Address
---- -------
J. Stanley Vetter 1424 Cumberland Circle
Rockingham, North Carolina 28379
John T. Page, Jr. P.O. Box 306
Rockingham, North Carolina 28380
E. E. Vuncannon, Jr. P.O. Box 56
Ellerbe, North Carolina 28338
Buena Vista Coggin 511 Roberdel Road
Rockingham, North Carolina 28379
Joe M. McLaurin P.O. Box 848
Rockingham, North Carolina 28380
Russell E. Bennett, Jr. P.O. Box 1268
Rockingham, North Carolina 28380
W. Jesse Spencer 720 Scotland Avenue
Rockingham, North Carolina 28379
R. Larry Campbell P.O. Box 1597
Rockingham, North Carolina 28380
SECTION 8.3. REMOVAL OF DIRECTORS. The shareholders may remove a director
----------- --------------------
prior to the end of the director's term only for cause.
8
<PAGE>
This the 20th day of May, 1996.
----
By: /s/ J. Stanley Vetter
--------------------------------------------
J. Stanley Vetter, Incorporator
By: /s/ John T. Page, Jr.
--------------------------------------------
John T. Page, Jr., Incorporator
By: /s/ E. E. Vuncannon, Jr.
--------------------------------------------
E. E. Vuncannon, Jr., Incorporator
By: /s/ Buena Vista Coggin
--------------------------------------------
Buena Vista Coggin, Incorporator
By: /s/ Joe M. McLaurin
--------------------------------------------
Joe M. McLaurin, Incorporator
By: /s/ Russell E. Bennett, Jr.
--------------------------------------------
Russell E. Bennett, Jr., Incorporator
By: /s/ W. Jesse Spencer
--------------------------------------------
W. Jesse Spencer, Incorporator
By: /s/ R. Larry Campbell
--------------------------------------------
R. Larry Campbell, Incorporator
9
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
CAROLINA FINCORP, INC.
ARTICLE I
OFFICES
-------
Section 1. Principal Office. The principal office of the corporation
----------------
shall be located at such place as the Board of Directors may fix from time to
time.
Section 2. Registered Office. The registered office of the corporation
-----------------
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
Section 3. Other Offices. The corporation may have offices at such other
-------------
places, either within or without the State of North Carolina, as the Board of
Directors may designate or as the affairs of the corporation may require from
time to time.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. Place of Meetings. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation, or at such other place, either
within or without the State of North Carolina, as shall in each case be (i)
fixed by the Chief Executive Officer, the President, the Chairman of the Board,
or the Board of Directors and designated in the notice of the meeting or (ii)
agreed upon by a majority of the shareholders entitled to vote at the meeting.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
---------------
held during the first five (5) calendar months following the end of the
corporation's fiscal year, on 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 corporation and for the transaction
of such other business as may be properly brought before the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
-------------------------
held within the time 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 Chief Executive Officer, the President, the Chairman
of the Board of Directors or the Board of Directors.
<PAGE>
Section 5. Notice of Meetings. Written notice stating the date, time, and
------------------
place of the meeting shall be given not less than ten (10) nor more than sixty
(60) days before the date of any shareholders' meeting, either by personal
delivery, or by mail by or at the direction of the Chief Executive Officer, the
President, the Chairman of the Board of Directors or the Board of Directors, to
each shareholder entitled to vote at such meeting, provided that such notice
must be given to all shareholders with respect to any meeting at which a merger
or share exchange is to be considered and in such other instances as required by
law. 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
corporation, with postage thereon prepaid.
In the case of a special meeting, the notice of meeting shall include a
description of the purpose or purposes for which the meeting is called; but, in
the case of an annual or substitute annual meeting, the notice of meeting need
not include a description of the purpose or purposes for which the meeting is
called unless such a description is required by the provisions of Chapter 55 of
the North Carolina General Statutes.
When a meeting 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 is fixed for the
adjourned meeting (which must be done if the new date is more than 120 days
after the date of the original meeting), notice of the adjourned meeting must be
given as provided in this Section 5 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 corporation for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance, in person or
by proxy, at a meeting (i) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder or his proxy at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting, and (ii) 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. Shareholders' List. Before each meeting of shareholders, the
------------------
Secretary of the corporation shall prepare an alphabetical list of the
shareholders entitled to notice of such meeting. 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 corporation, or at a place
identified in the meeting notice in the city where the meeting will be held, 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, his agent or attorney, at any time during regular business hours.
The list shall also be available at the meeting and shall be subject to
inspection by any shareholder, his agent or attorney, at any time during the
meeting or any adjournment thereof.
Section 8. Fixing Record Date. The Board of Directors may fix a date
------------------
selected by them as the record date for one (1) or more voting groups in order
to determine the shareholders entitled to notice of a shareholders' meeting, to
vote, or to take any other action. Such record date may not be more than
2
<PAGE>
seventy (70) days before the meeting or action requiring a determination of
shareholders. A determination of shareholders entitled to notice of or to vote
at a shareholders' meeting 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 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 9. Voting Groups. All shares of one (1) or more classes or series
-------------
that, under the 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 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 Articles of
Incorporation or specifically required by law.
Section 10. Quorum. Shares entitled to vote as a separate voting group
------
may take action on a matter at the meeting only if a quorum of those shares
exists. A majority of the votes entitled to be cast on the matter by the voting
group constitutes 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 the vote of a majority of the
votes cast on the motion to adjourn; and, subject to the provisions of Section 5
of this Article II, at any adjourned meeting any business may be transacted that
might have been transacted at the original meeting if a quorum exists with
respect to the matter proposed.
Section 11. Proxies. Shares may be voted either in person or by one (1)
-------
or more proxies authorized by a written appointment of proxy signed by the
shareholder or by his duly authorized attorney in fact. An appointment of proxy
is valid for eleven months from the date of its execution, unless a different
period is expressly provided in the appointment form.
Section 12. Voting of Shares. Subject to the provisions of the Articles
----------------
of Incorporation, each outstanding share shall be entitled to one (1) vote on
each matter voted on at a meeting of shareholders.
Except in the election of directors as governed by the provisions of
Section 4 of Article III, if a quorum exists, action on a matter by a voting
group 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 Articles of Incorporation or these Bylaws.
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Absent special circumstances, shares of the corporation are not entitled to
vote if they are owned, directly or indirectly, by a second corporation in which
the corporation owns, directly or indirectly, a majority of the shares entitled
to vote for directors of the second corporation; provided that this provision
does not limit the power of the corporation or such second corporation to vote
shares held by it in a fiduciary capacity.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. General Powers. All corporate powers shall be exercised by or
--------------
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Number and Qualification. The number of directors of the
------------------------
corporation shall not be less than five (5) nor more than fifteen (15), with the
exact number to be fixed from time to time by the Board of Directors.
Section 3. Nominations. At any meeting of shareholders at which directors
-----------
are to be elected, nominations for election to the Board of Directors may be
made by the Board of Directors or, subject to the conditions described below, by
any holder of shares entitled to be voted at that meeting in the election of
directors. To be eligible for consideration at the meeting of shareholders, all
nominations, other than those made by the Board of Directors, shall be in
writing and must be delivered to Secretary of the corporation not less than
fifty (50) days nor more than ninety (90) days prior to the meeting at which
such nominations will be made; provided, however, that if less than twenty-one
(21) days' notice of the meeting is given to shareholders, such nominations must
be delivered to the Secretary of the corporation not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed.
Section 4. Election. Except as provided in Section 7 of this Article III,
--------
the directors shall be elected at the annual meeting of shareholders. 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.
Section 5. Terms of Directors. Each initial director shall hold office
------------------
until the earliest of the first shareholders' meeting at which directors are
elected, or until such director's death, resignation, or removal.
At all times that the number of directors is less than nine (9), each
director shall be elected to a term ending as of the next succeeding annual
meeting of shareholders or until his or her earlier death, resignation,
retirement, removal or disqualification or until his or her successor shall be
elected and shall qualify.
In the first election of directors that the total number of directors is
nine (9) or more, the directors shall be divided into three (3) classes, as
nearly equal as possible in number as may be, to serve in the first instance for
terms of one (1), two (2) and three (3) years, respectively, from the date such
class of
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directors takes office or until their earlier death, resignation, retirement,
removal or disqualification or until their successors shall be elected and shall
qualify, and thereafter the successors in each class of directors shall be
elected for terms of three (3) years or until their earlier death, resignation,
retirement, removal, or disqualification or until their successors shall be
elected and shall qualify. In the event of any increase or decrease in the
number of directors at a time that the directors are so classified, the
additional or eliminated directorships shall be classified or chosen so that all
classes of directors shall remain or become as nearly equal as possible in
number.
Notwithstanding the provisions of this Section 5, a decrease in the number
of directors does not shorten an incumbent director's term. Despite the
expiration of a director's term, such director shall continue to serve until a
successor shall be elected and qualified or until there is a decrease in the
number of directors.
Section 6. 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 7. 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 Board of Directors. If the
directors remaining in office do not constitute a quorum, the directors may fill
the vacancy by the affirmative vote of a majority of the remaining directors or
by the sole remaining director. If the vacant office was held by a director
elected by voting group, only the remaining director or directors elected by
that voting group or the holders of shares of that voting group are entitled to
fill the vacancy. 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.
Section 8. Chairman of the Board of Directors. There may be a Chairman of
----------------------------------
the Board of Directors elected by the directors from their number at any meeting
of the Board of Directors. The Chairman shall serve in such position at the
pleasure of the Board of Directors. The Chairman shall preside at all meetings
of the Board of Directors and shareholders, serve as a member of any executive
committee of the Board of Directors, and perform such other duties as may be
directed by the Board of Directors.
Section 9. 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 10. Age Limitation for Non-Employee Directors. A person who is 70
-----------------------------------------
years of age or older and who is not an employee of the corporation or an
employee of a subsidiary of the corporation shall not be eligible for election,
re-election, appointment or re-appointment to the Board of Directors;
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provided, however, that this age limitation shall not apply to any person
serving on the initial board of directors of the corporation as set forth in the
Articles of Incorporation of the corporation.
ARTICLE IV
MEETINGS AND COMMITTEES 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 Chairman of the Board or the President
if such officer is also a director, or by any three (3) or more directors. Such
a meeting may be held either within or without the State of North Carolina, as
fixed by the person or persons calling the meeting.
Section 3. Notice of Meetings. Regular meetings of the Board of Directors
------------------
may be held without notice. The person or persons calling a special meeting of
the Board of Directors shall, at least two (2) days before the meeting, give or
cause to be given notice thereof by any usual means of communication. Such
notice need not specify the purpose for which the meeting is called. Any duly
convened regular or special meeting may be adjourned by the directors to a later
time without further notice.
Section 4. Waiver of Notice. Any director may waive notice of any meeting
----------------
before or after the meeting. The waiver must be in writing, signed by the
director entitled to the notice, and be delivered to the corporation for
inclusion in the minutes or for filing with the corporate records. A director's
attendance at or participation in a meeting waives any required notice of such
meeting unless the director at the beginning of the meeting, or promptly upon
arrival, objects to holding the meeting or to transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting.
Section 5. Quorum. Unless the Articles of Incorporation or these Bylaws
------
provide otherwise, a majority of the number of directors fixed by or pursuant to
these Bylaws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, or if no number is so fixed, a majority of
the number of directors in office immediately before the meeting begins shall
constitute a quorum.
Section 6. Manner of Acting. Except as otherwise provided in the Articles
----------------
of Incorporation or these Bylaws, including Section 9 of this Article IV, the
affirmative vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 7. Presumption of Assent. A director who is present at a meeting
---------------------
of the Board of Directors or a committee of the Board of Directors when
corporate action is taken is deemed to have assented to the action taken unless
(i) he objects at the beginning of the meeting, or promptly upon his arrival, to
holding it or to transacting business at the meeting, or (ii) his dissent or
abstention from the action taken is entered in the minutes of the meeting, or
(iii) he files written notice of his dissent or
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abstention with the presiding officer of the meeting before its adjournment or
with the corporation immediately after the adjournment of the meeting. Such
right of dissent or abstention is not available to a director who votes in favor
of the action taken.
Section 8. Action Without Meeting. Action required or permitted to be
----------------------
taken at a meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board of Directors. The action must
be evidenced by one (1) or more written consents signed by each director before
or after such action, describing the action taken, and included in the minutes
or filed with the corporate records.
Section 9. Committees of the Board of Directors. The Board of Directors
------------------------------------
may create such committees of the Board of Directors as it shall consider
appropriate, including without limitation those committees specifically provided
for in these Bylaws. The creation of a committee of the Board of Directors and
appointment of members to it must by approved by the greater of (i) a majority
of the number of directors in office when the action is taken or (ii) the number
of directors required to take action pursuant to Section 6 of this Article IV.
Each committee of the Board of Directors must have two (2) or more members and,
to the extent authorized by law, shall have such duties and authority as may be
described in these Bylaws or otherwise specified by the Board of Directors.
Each committee member shall serve at the pleasure of the Board of Directors.
The provisions in these Bylaws governing meetings, actions without meeting and
other requirements of the Board of Directors shall also apply to any committees
of the Board of Directors established pursuant to these Bylaws.
Section 10. Executive Committee. There may be a standing committee of the
-------------------
Board of Directors to be known as the Executive Committee and consisting of not
fewer than three (3) directors, one (1) of whom shall be the Chairman of the
Board of Directors and one (1) of whom shall be the President of the
corporation, if such officer is also a director.
Section 11. Audit Committee. There may be a standing committee of the
---------------
Board of Directors to be known as the Audit Committee and consisting of not
fewer than three (3) directors. The Audit Committee shall supervise examination
of the assets and the liabilities and the internal audit program of the
corporation and its subsidiaries, cause outside audits to be performed on the
financial statements of the corporation, and shall make periodic reports to the
Board of Directors.
ARTICLE V
OFFICERS
--------
Section 1. Officers of the Corporation. The officers of the corporation
---------------------------
shall consist of a President, a Secretary, a Treasurer, and such Vice Presidents
or other officers (including assistant officers) as may from time to time be
appointed by or under the authority of the Board of Directors. Any two (2) or
more offices may be held by the same person, but no officer may act in more than
one (1) capacity where action of two (2) or more officers is required.
Section 2. Appointment and Term. The officers of the corporation shall be
--------------------
appointed by the Board of Directors or by a duly appointed officer authorized by
the Board of Directors to appoint one
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(1) or more officers. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification, or his successor shall have
been appointed.
Section 3. Compensation of Officers. The compensation of all officers of
------------------------
the corporation shall be fixed by or under the authority of the Board of
Directors, and no officer shall serve the corporation in any other capacity and
receive compensation therefor unless such additional compensation shall be duly
authorized. The appointment of an officer does not itself create contract
rights.
Section 4. Removal. Any officer may be removed by the Board of Directors
-------
at any time with or without cause; but such removal shall not itself affect the
officer's contract rights, if any, with the corporation except to the extent, if
any, specified in any such contract.
Section 5. Resignation. An officer may resign at any time by
-----------
communicating his resignation to the corporation, orally or in writing. A
resignation is effective when communicated unless it specifies in writing a
later effective date. If a resignation is made effective at a later date that
is accepted by the corporation, the Board of Directors may fill the pending
vacancy before the effective date if the Board of Directors provides that the
successor does not take office until the effective date. An officer's
resignation does not affect the corporation's contract rights, if any, with the
officer except to the extent, if any, specified in any such contract.
Section 6. Bonds. The Board of Directors may by resolution require any
-----
officer, agent, or employee of the corporation to give bond to the corporation,
with sufficient sureties, conditioned on the faithful performance of the duties
of his respective office or position, and to comply with such other conditions
as may from time to time be required by the Board of Directors.
Section 7. President. The President shall be the principal executive
---------
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall sign, with the Secretary, an Assistant
Secretary, or any other proper officer of the corporation thereunto authorized
by the Board of Directors, certificates for shares of the corporation, any
deeds, mortgages, bonds, contracts, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed, and in general he 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. The President
shall be entitled to attend all regular and special meetings and meetings of
committees of the Board of Directors. If the President of the corporation is
also a director of the corporation, he shall serve as a member of the Executive
Committee.
Section 8. 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 (or Assistant Vice
President) may sign, with the Secretary, an Assistant Secretary, or any other
proper officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of the corporation and any other instruments
which may be signed by the President, and shall perform such other duties as
from time to time may be prescribed by the President or Board of Directors.
8
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Section 9. Secretary. The Secretary shall: (i) keep the minutes of the
---------
meetings of shareholders, of the Board of Directors, and of all committees of
the Board of Directors, in one or more books provided for that purpose; (ii) see
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (iii) maintain and authenticate the records of the
corporation and be custodian of the seal of the corporation and see that the
seal of the corporation is affixed to all documents the execution of which on
behalf of the corporation under its seal is duly authorized; (iv) sign with the
President or a Vice President, certificates for shares of the corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (v) maintain or cause to be maintained, and have general charge of,
the stock transfer books of the corporation; (vi) prepare or cause to be
prepared shareholder lists prior to each meeting of shareholders as required by
law; (vii) attest the signature or certify the incumbency or signature of any
officer of the corporation; and (viii) in general perform all duties incident to
the office of secretary and such other duties as from time to time may be
prescribed by the President or by the Board of Directors.
Section 10. Treasurer. The Treasurer shall be, and may be designated as
---------
such as, the corporation's Chief Financial Officer, and shall: (i) have charge
and custody of and be responsible for all funds and securities of the
corporation; receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, and deposit all such moneys in the name
of the corporation in such depositories as shall be selected in accordance with
the provisions of Section 4 of Article VI of these Bylaws; (ii) maintain, or
cause to be maintained, appropriate accounting records as required by law; (iii)
prepare, or cause to be prepared, annual financial statements of the corporation
that include a balance sheet as of the end of the fiscal year and income and
cash flow statement for that year, which statements, or a written notice of
their availability, shall be mailed to each shareholder within 120 days after
the end of such fiscal year; and (iv) in general perform all of the duties
incident to the office of treasurer and such other duties as from time to time
may be prescribed by the President or by the Board of Directors.
Section 11. Assistant Officers. In the absence of a duly appointed
------------------
officer of the corporation, or in the event of his death, inability or refusal
to act, any person appointed by the Board of Directors and designated by title
as an assistant to that officer, unless otherwise determined by the Board of
Directors, may perform the duties of, and when so acting shall have all the
powers of and be subject to all the restrictions upon, that officer. Such
assistant officers shall perform such other duties as from time to time may be
prescribed 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
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. Also, the Board
of Directors may limit, condition, restrict or deny such authority to any
officer or officers, or any agent or agents.
9
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Section 2. Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by 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 corporation, shall be signed by such
officer or officers, agent or agents of the corporation and in such manner as
shall from time to time be determined by the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
depositories as may be selected by or under the authority of the Board of
Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
-------------------------
Section 1. Certificate For Shares. The Board of Directors may authorize
----------------------
the issuance of some or all of the shares of the corporation's classes or series
without issuing certificates to represent such shares. If shares are
represented by certificates, the certificates shall be in such form as required
by law and as determined by the Board of Directors. Certificates shall be
signed, either manually or in facsimile, by the President or a Vice President,
and by the Secretary or Treasurer or an Assistant Secretary or an Assistant
Treasurer. All certificates for shares shall be consecutively numbered or
otherwise identified and entered into the stock transfer books of the
corporation. When shares are represented by certificates, the corporation shall
issue and deliver, to each shareholder to whom such shares have been issued or
transferred, certificates representing the shares owned by him. When shares are
not represented by certificates, then within a reasonable time after the
issuance or transfer of such shares, the corporation shall send 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. Stock Transfer Books. The corporation shall keep or cause to
--------------------
be kept a book or set of books, to be known as the stock transfer books of the
corporation, containing the name of each shareholder of record, together with
such shareholder's address and the number and class or series of shares held by
him. Transfers of shares of the corporation shall be made only on the stock
transfer books of the corporation (i) by the holder of record thereof or by his
legal representative, who shall provide proper evidence of authority to
transfer; (ii) by his attorney authorized to effect such transfer by power of
attorney duly executed and filed with the Secretary; and (iii) on surrender for
cancellation of the certificate for such shares (if the shares are represented
by certificates).
Section 3. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
corporation claimed to have been lost or destroyed, upon receipt of an affidavit
of such fact from the person claiming the certificate to have been lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors shall require that the owner of such lost or destroyed certificate, or
his legal representative, give the corporation a bond in such sum and with such
surety or other security as the Board of Directors may direct as indemnity
against any claims that may be made against the corporation with respect to the
certificate claimed to
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have been lost or destroyed, except where the Board of Directors by resolution
finds that in the judgment of the Board of Directors the circumstances justify
omission of a bond.
Section 4. Distribution or Share Dividend Record Date. The Board of
------------------------------------------
Directors may fix a date as the record date for determining shareholders
entitled to a distribution or share dividend. If no record date is fixed by the
Board of Directors for such determination, it is the date the Board of Directors
authorizes the distribution or share dividend.
Section 5. Holder of Record. Except as otherwise required by law, the
----------------
corporation may treat the person in whose name the shares stand of record on its
books as the absolute owner of the shares and the person exclusively entitled to
receive notification and distributions, to vote, and to otherwise exercise the
rights, powers, and privileges of ownership of such shares.
Section 6. Shares Held by Nominees. The corporation shall recognize the
-----------------------
beneficial owner of shares registered in the name of the nominee as the owner
and shareholder of such shares for certain purposes if the nominee in whose name
such shares are registered files with the Secretary a written certificate in a
form prescribed by the corporation, signed by the nominee, indicating the
following: (i) the name, address, and taxpayer identification number of the
nominee; (ii) the name, address, and taxpayer identification number of the
beneficial owner; (iii) the number and class or series of shares registered in
the name of the nominee as to which the beneficial owner shall be recognized as
the shareholder; and (iv) the purposes for which the beneficial owner shall be
recognized as the shareholder.
The purposes for which the corporation shall recognize the beneficial owner
as the shareholder may include the following: (i) receiving notice of, voting
at, and otherwise participating in shareholders' meetings; (ii) executing
consents with respect to the shares; (iii) exercising dissenters' rights under
the North Carolina Business Corporation Act; (iv) receiving distributions and
share dividends with respect to the shares; (v) exercising inspection rights;
(vi) receiving reports, financial statements, proxy statements, and other
communications from the corporation; (vii) making any demand upon the
corporation required or permitted by law; and (viii) exercising any other rights
or receiving any other benefits of a shareholder with respect to the shares.
The certificate shall be effective ten (10) business days after its receipt
by the corporation and until it is changed by the nominee, unless the
certificate specifies a later effective time or an earlier termination date.
If the certificate affects less than all of the shares registered in the
name of the nominee, the corporation may require the shares affected by the
certificate to be registered separately on the books of the corporation and be
represented by a share certificate that bears a conspicuous legend stating that
there is a nominee certificate in effect with respect to the shares represented
by that share certificate.
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ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1. Distributions. The Board of Directors may from time to time
-------------
authorize, and the corporation may grant, distributions and share dividends to
its shareholders pursuant to law and subject to any provisions with respect
thereto in its Articles of Incorporation.
Section 2. Seal. The corporate seal of the corporation shall consist of
----
two concentric circles between which is the name of the corporation and in the
center of which is inscribed SEAL; and such seal, as impressed or affixed on the
margin hereof, is hereby adopted as the corporate seal of the corporation.
Section 3. Fiscal Year. The fiscal year of the corporation shall be fixed
-----------
by the Board of Directors.
Section 4. Amendments. Except as otherwise provided in the Articles of
----------
Incorporation or by law, these Bylaws may be amended or repealed and new Bylaws
may be adopted by 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 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.
Section 5. Definitions. Unless the context otherwise requires, terms used
-----------
in these Bylaws shall have the meanings assigned to them in the North Carolina
Business Corporation Act to the extent defined therein.
ARTICLE IX
INDEMNIFICATION
---------------
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 or agent of the corporation and any such
person who serves or has served at the request of the corporation as a director,
officer, employee, partner, trustee 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 corporation 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.
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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 corporation shall determine whether any person
described in this Article IX 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 Article IX, (ii) whether the
liability or litigation expense incurred arose out of the status or activities
of such persons as described in this Article IX, (iii) whether liability was
actually incurred and/or litigation expense was actually and reasonably
incurred, and (iv) whether the indemnification requested is 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 Article IX in
connection with a matter described in this Article IX may be paid by the
corporation in advance of the final disposition or termination of such matter,
if the corporation 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 corporation as
provided in this Article IX. Requests for payments in advance of final
disposition or termination shall be submitted in writing unless this requirement
is waived by the corporation.
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 corporation. Such
counsel shall have the authority to disapprove any advance payment or portion of
a payment for which it appears that the person requesting payment will not be
entitled to indemnification.
The corporation shall not be obligated to indemnify persons described in
this Article IX for any amounts paid in settlement unless the corporation
consents in writing to the settlement. The corporation shall not unreasonably
withhold its consent to proposed settlements. The corporation's consent to a
proposed settlement shall not constitute an agreement by the corporation that
any person is entitled to indemnification thereunder. The corporation may waive
the requirement of this section for its written consent as fairness and equity
may require.
A person described in this Article IX may apply to the corporation 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 corporation. The corporation shall respond in writing to such
applications as follows: to a request for indemnity under this Article IX,
within ninety days after receipt of the application; to a request for advance
expenses under this Article IX, within fifteen days after receipt of the
application.
13
<PAGE>
If any action is necessary or appropriate to authorize the corporation 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 corporation, 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 corporation 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 corporation, or who is or was
serving at the request of the corporation 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 corporation
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
corporation. 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 Article IX 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 corporation, 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 corporation shall
nevertheless indemnify each person described in this Article IX 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.
Adopted this the 12th day of June, 1996.
/s/ Karen M. Rickett
--------------------------------
Secretary
14
<PAGE>
Exhibit 5.1
LETTERHEAD OF
BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P.
June 13, 1996
(910) 271-3112
Board of Directors
Carolina Fincorp, Inc.
115 South Lawrence Street
Post Office Box 1597
Rockingham, North Carolina 28379-1597
Re: Registration Statement on Form S-1 under
the Securities Act of 1933, as amended
Gentlemen:
As special counsel to Carolina Fincorp, Inc. (the "Holding Company"), the
proposed parent holding company of Richmond Savings Bank, SSB ("Richmond
Savings"), Rockingham, North Carolina, we are rendering this opinion to you in
connection with the acquisition by the Holding Company of Richmond Savings, upon
the conversion of Richmond Savings from a North Carolina-chartered mutual
savings bank to a North Carolina-chartered capital stock savings bank (the
"Conversion"). As part of the Conversion, the Holding Company will file with
the Securities and Exchange Commission a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended, for the
offering and sale by the Holding Company of its no par common stock, having an
estimated aggregate dollar value represented to us as being between $12,580,000
and $19,573,000 (the "Shares").
In our capacity as special counsel, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Articles of
Incorporation, Bylaws and corporate resolutions of the Holding Company, the
Amended and Restated Plan of Holding Company Conversion, the Registration
<PAGE>
Board of Directors
Carolina Fincorp, Inc.
June 13, 1996
Page 2
Statement and all exhibits thereto and the relevant provisions of Chapters 54C
and 55 of the North Carolina General Statutes and the Securities Act of 1933, as
amended, and the regulations promulgated under all the aforesaid statutes, as we
have considered necessary as a basis for the opinions given herein. In addition,
we have made reasonable inquiries of the officers of Richmond Savings and the
Holding Company as to all relevant items. In all examinations of documents, we
have assumed the genuineness of all original documents and all signatures and
the conformity to original documents of all copies submitted to us as certified,
conformed or photostatic copies. On the basis of such examination, we are of the
opinion that, when the Holding Company has received full payment for the Shares
as described in the Registration Statement, all requisite corporate action will
have been taken with respect to the issuance and sale of the Shares and the
Shares will be validly authorized and issued, fully-paid and nonassessable
shares of common stock of the Holding Company.
This opinion is furnished by us solely for your benefit and for the benefit
of the purchasers of the Shares of the Holding Company in connection with the
Conversion, and may not be quoted or relied upon by, nor copies be delivered to,
any person or entity, or used for any other purpose, without our prior express
written consent.
We hereby consent to the use of this opinion in connection with the
registration of the offering and sale of the Shares with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and to the
reference to us in the Registration Statement and the Prospectus included
therein.
Very truly yours,
/s/ Edward C. Winslow III
BROOKS, PIERCE, McLENDON,
HUMPHREY & LEONARD, L.L.P.
<PAGE>
EXH. 8.1
[LETTERHEAD OF BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P. APPEARS
HERE]
June 13, 1996
Board of Directors
Richmond Savings Bank, Inc., S.S.B.
115 South Lawrence Street
Rockingham, North Carolina 28379
Re: Conversion of Richmond Savings Bank, S.S.B. from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered stock
savings bank and its simultaneous acquisition by Carolina Fincorp,
Inc., a North Carolina savings bank holding company
Members of the Board:
You have requested our opinions regarding certain income tax consequences
in connection with the proposed conversion of Richmond Savings Bank, S.S.B.
("Richmond Mutual") from a North Carolina-chartered mutual savings bank with
federally insured deposit accounts to Richmond Savings Bank, Inc., S.S.B., a
North Carolina-chartered stock savings bank with federally insured deposit
accounts ("Richmond"), and the simultaneous acquisition of Richmond as a wholly-
owned subsidiary by Carolina Fincorp, Inc., a savings bank holding company
organized under North Carolina law ("Holding Company"). This reorganization and
conversion of Richmond Mutual and acquisition of Richmond by Holding Company
shall be referred to as the "Conversion". Terms not otherwise defined in this
letter shall have the meanings assigned to them in the Amended and Restated Plan
of Conversion adopted by the Board of Directors of Richmond Mutual on June 12,
1996 (the "Plan").
In connection with our opinions, we have reviewed copies of applications
filed by Richmond Mutual and the Holding Company with the Administrator, North
Carolina Savings Institutions Division, to effect the Conversion (the
"Applications"), Chapters 54C and 105 of the North Carolina General Statutes,
and applicable federal laws, rules and regulations, including the Internal
Revenue Code of 1986, as amended ("Code"). We have examined the Plan, Richmond
Mutual's existing Certificate of Incorporation and Bylaws, the Second Amended
Certificate of Incorporation for Richmond, the Bylaws for Richmond, the
corporate minutes approving the Conversion and related records of Richmond
Mutual. We have also examined the Holding Company's Articles of Incorporation,
Bylaws, corporate minutes approving the Conversion and related records. In
addition, we have examined certificates of officials of Richmond Mutual,
Richmond and the Holding Company, the Registration Statement of the Holding
Company on Form S-1, which the Holding Company intends to file with the
Securities and Exchange Commission on or about June 18, 1996 (the "Registration
Statement") containing a proposed
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 2
Prospectus (hereinafter referred to as the "Prospectus") and such other
documents as we have deemed necessary or appropriate for purposes of giving the
opinions set forth in this letter. We have assumed the authenticity of all
documents presented to us as originals, the conformity to the originals of all
documents presented to us as copies, and the genuineness of all signatures of
individuals, and we know of no reason such assumptions are unwarranted for
purposes of the opinions expressed herein. We have assumed that all statements
made in the above-described documents are accurate and complete, and will be
accurate and complete at all times from now through the consummation of the
Conversion. We have not independently verified any factual matter relating to
the Conversion in connection with the preparation of our opinions herein and,
accordingly, such opinions do not take into account any matters not set forth
herein which might have been disclosed by independent verification. We have
further assumed that the Conversion will be consummated pursuant to the terms of
the Plan.
In issuing the opinions set forth below, we have also assumed the accuracy
of the following representations of Richmond Mutual:
1. The fair market value of the deposit accounts and the interest in the
Liquidation Account received by each Eligible Account Holder and
Supplemental Eligible Account Holder in Richmond pursuant to the
Conversion will, in each instance, be equal to the fair market value
of the deposit accounts and the proprietary interest of each such
Eligible Account Holder and Supplemental Eligible Account Holder in
Richmond Mutual surrendered in the Conversion. The aggregate fair
market value of the deposit accounts and interests in the Liquidation
Account held by Eligible Account Holders as of the close of business
on the Eligibility Record Date will equal or exceed 99% of the
aggregate fair market value of all deposit accounts in Richmond Mutual
(including accounts of less than $50) as of the close of business on
that date. The aggregate fair market value of the deposit accounts and
interests in the Liquidation Account held by Supplemental Eligible
Account Holders, officers and directors of Richmond Mutual and their
associates as of the close of business on the Supplemental Eligibility
Record Date will equal or exceed 99% of the aggregate fair market
value of all deposit accounts in Richmond Mutual (including accounts
of less than $50) as of the close of business on that date.
2. The Subscription Rights to purchase Conversion Stock received in the
Conversion by each recipient have no fair market value. This
assumption is based upon your representation and the opinion of Baxter
Fentriss and Company that such Subscription Rights have no fair market
value because they will be acquired by recipients without cost, are
nontransferable and afford the recipients the right only to purchase
Conversion 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.
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 3
3. Immediately following the Conversion, the Eligible Account Holders and
Supplemental Eligible Account Holders will own all of the outstanding
interests in the Liquidation Account and will own such interests
solely by reason of their ownership of deposits and proprietary
interests in Richmond Mutual on the Eligibility Record Date and
Supplemental Eligibility Record Date, respectively. Pursuant to the
Plan, no additional interests in the Liquidation Account shall be
issued following the Conversion.
4. Immediately following the consummation of the Conversion, Richmond
will possess the same assets and liabilities as Richmond Mutual held
immediately before the Conversion, plus proceeds from the sale of
Conversion Stock less proceeds retained by the Holding Company, less
assets used to pay expenses incurred in the Conversion. Assets of
Richmond Mutual used to pay expenses of the Conversion and all
distributions (except for regular, normal interest payments made by
Richmond Mutual immediately before the Conversion) in the aggregate
will constitute less than 1% of the net assets of Richmond Mutual.
5. Except for Richmond Mutual's agreement to sell all of Richmond's
issued and outstanding common stock to the Holding Company in the
Conversion, at the time of the Conversion, Richmond Mutual will not
have outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire stock
in Richmond Mutual.
6. Richmond has no plan or intention to reacquire any of its common stock
issued to the Holding Company in the Conversion. Richmond has no plan
or intention to issue additional shares of its common stock following
the Conversion. The common stock of Richmond issued to the Holding
Company in the Conversion will not be callable or subject to a put
option.
7. Richmond has no plan or intention to sell or otherwise dispose of any
of the assets of Richmond Mutual acquired in the Conversion, except
for dispositions made in the ordinary course of business.
8. The liabilities of Richmond Mutual assumed by Richmond and the
liabilities, if any, to which the transferred assets are subject were
incurred by Richmond Mutual in the ordinary course of its business and
are associated with the assets transferred.
9. Following the Conversion, Richmond will continue the historic business
of Richmond Mutual, will use a significant portion of Richmond
Mutual's historic business assets in Richmond's business, and will
continue to engage in the same business in substantially the same
manner as engaged in by Richmond Mutual before the Conversion.
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 4
10. Richmond Mutual and Richmond (treated as one entity for purposes of
this representation) and the Holding Company will each pay their own
expenses attributable to the Conversion.
11. Richmond Mutual is not under the jurisdiction of a court as a debtor
under (i) Title 11 of the United States Code, or (ii) a receivership,
foreclosure, or similar proceeding in a federal or state court.
12. None of the compensation received by an employee of Richmond Mutual or
Richmond who is also an Eligible Account Holder, Supplemental Eligible
Account Holder or Other Member will be separate consideration for, or
allocable to, his or her status as an Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member. None of the
interests in the Liquidation Account of Richmond received by an
employee of Richmond Mutual or Richmond who is an Eligible Account
Holder or Supplemental Eligible Account Holder will be separate
consideration for, or allocable to, any employment agreement or
arrangement. All compensation paid to Eligible Account Holders and
Supplemental Eligible Account Holders who are also employees of
Richmond Mutual or Richmond will be for services actually rendered and
commensurate with amounts paid to third parties bargaining at arm's-
length for similar services. Officers, directors and other employees
may in the future be issued restricted common stock of the Holding
Company for future services pursuant to the proposed Management
Recognition Plan of the Holding Company described in the Prospectus
("MRP").
13. No Eligible Account Holder or Supplemental Eligible Account Holder
will be excluded from participating in the Liquidation Account.
14. The Holding Company has no plan or intention to redeem or otherwise
acquire any of the Conversion Stock to be issued pursuant to the
Conversion, except as disclosed in the Prospectus regarding possible
purchases to fund the ESOP, MRP and stock option plans. The Holding
Company has no plan or intention to sell or otherwise dispose of the
common stock of Richmond received by it in the Conversion. The
Conversion Stock issued in the Conversion will not be callable or
subject to a put option.
15. At the time of Conversion, the fair market value of the assets of
Richmond Mutual on a going-concern basis will equal or exceed the
amount of its liabilities plus the amount of liabilities to which its
assets are subject. Immediately before the Conversion, Richmond Mutual
will have a positive net worth.
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 5
16. No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders or any other grantee of
Subscription Rights in lieu of (i) Subscription Rights for Conversion
Stock, or (ii) an interest in the Liquidation Account of Richmond.
17. There is no plan or intention for Richmond to be liquidated or merged
with another corporation following the Conversion.
18. The Conversion described herein is motivated by valid business
purposes and not by tax avoidance purposes.
19. After the Conversion, Richmond will continue the corporate existence
and business of Richmond Mutual with only the following changes:
(i) An amended and restated Certificate of Incorporation to allow
for the issuance of capital stock of Richmond, and
(ii) New corporate Bylaws.
20. There exists no intercorporate indebtedness between Richmond Mutual
and Richmond (treated as one entity for purposes of this
representation) and the Holding Company, that was issued, acquired, or
will be settled at a discount.
21. In the Conversion, the Holding Company will acquire 100% of the issued
and outstanding common stock of Richmond.
22. Neither Richmond Mutual and Richmond (treated as one entity for
purposes of this representation) nor the Holding Company is an
"investment company," as defined in Section 368(a)(2)(F)(iii) and (iv)
of the Code.
Based upon the foregoing assumptions, our opinions with respect to the
federal and North Carolina income tax consequences of the Conversion are as
follows (for purposes of the opinions set forth below, Eligible Account Holders
shall include, if applicable pursuant to the Plan, Supplemental Eligible Account
Holders):
1. The Conversion of Richmond Mutual from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered stock savings bank
will qualify as a reorganization within the meaning of Section 368(a)
of the Code, and neither Richmond Mutual nor Richmond will recognize
any gain or loss as a result of such reorganization. Revenue Ruling
80-105, 1980-1 C.B. 78. Richmond Mutual in its form as a North
Carolina-chartered mutual savings bank and Richmond in its form as a
North Carolina-chartered
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 6
stock savings bank will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code.
2. Richmond's basis in each of Richmond Mutual's assets will be the same
as Richmond Mutual's basis immediately prior to the Conversion.
Section 362(b) of the Code.
3. No gain or loss will be recognized by the Holding Company upon receipt
of money in exchange for the shares of the Conversion Stock issued
pursuant to the exercise of the Subscription Rights issued therefor.
Section 1032(a) of the Code.
4. No gain or loss will be recognized by Richmond upon receipt of money
from the Holding Company in exchange for the shares of its common
stock to be issued to the Holding Company in the Conversion. Section
1032(a) of the Code.
5. The holding period of the Richmond assets after the Conversion will
include the period during which the assets were held by Richmond
Mutual prior to the Conversion. Section 1223(2) of the Code.
6. Gain or loss, if any, will be realized by an Eligible Account Holder
on the exchange of such person's deposit account and proprietary
interest in Richmond Mutual for (i) a withdrawable deposit account in
Richmond in the same dollar amount as such person's deposit account in
Richmond Mutual immediately prior to the Conversion, (ii) such
person's interest in the Liquidation Account of Richmond, and (iii)
Subscription Rights to purchase the Conversion Stock. Such gain, if
any, will be recognized by an Eligible Account Holder only to the
extent of the fair market value of such person's interest in the
Subscription Rights received. Section 1001 of the Code. You have
represented to us that the Subscription Rights to purchase Conversion
Stock have no fair market value. Accordingly, gain recognized by an
Eligible Account Holder as a result of the Conversion is limited to an
amount not in excess of the fair market value of such person's
interest in the Subscription Rights received in the Conversion.
Paulsen v. Commissioner, 469 U.S. 131, 139 (1985), quoting Society for
---------- ------------ -----------
Savings v. Bowers, 349 U.S. 143, 150 (1955).
-----------------
7. The basis of the deposit account in Richmond received by an Eligible
Account Holder will be the cost of such deposit account. The cost
basis of such deposit account in Richmond (i) will be equal to the
fair market value of such deposit account in Richmond and (ii) will be
equal to such person's basis in his or her deposit account in Richmond
Mutual exchanged therefor. Section 1012 of the Code.
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 7
8. The basis of the interest in the Liquidation Account received by an
Eligible Account Holder will be equal to the cost of such interest.
The cost of the Liquidation Account will be the fair market value of
the proprietary interest in Richmond Mutual given for the Liquidation
Account. Section 1012 of the Code. An interest in the Liquidation
Account will be deemed to have no value, or nominal, if any, fair
market value. Paulsen v. Commissioner, 469 U.S. 131, 139 (1985)
---------- ------------
(quoting Society for Savings v. Bowers, 349 U.S. 143, 150 (1955)).
-----------------------------
9. The basis of Subscription Rights received by an Eligible Account
Holder will be zero, increased by the gain, if any, recognized on
their receipt. Section 1012 of the Code. Gain is recognized only to
the extent of the fair market value of the Subscription Rights. You
have represented to us that the Subscription Rights to purchase
Conversion Stock have no fair market value. Accordingly, the basis of
the Subscription Rights received by an Eligible Account Holder will be
zero.
10. The basis of the Conversion Stock purchased pursuant to the exercise
of Subscription Rights will be the purchase price thereof. Section
1012 of the Code.
11. The holding period of the Conversion Stock acquired through the
exercise of Subscription Rights will commence upon the date of such
exercise. Section 1223(6) of the Code.
12. For purposes of Section 381 of the Code, Richmond will be treated just
as Richmond Mutual would have been treated had there been no
reorganization of Richmond Mutual from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered stock savings bank.
Accordingly, and with regard only to the reorganization of Richmond
Mutual into Richmond, the tax attributes of Richmond Mutual enumerated
in Section 381(c) of the Code shall be taken into account by Richmond
as if there had been no reorganization. Treasury Regulation
(S)1.381(b)(1)(a)(2).
13. For North Carolina income tax purposes, the Conversion will be treated
in a manner identical to the way the Conversion is treated pursuant to
the Code. Sections 105-130.3, 105-130.5, 105-134.5, and 105-134.6 of
the North Carolina General Statutes.
No opinion is expressed with regard to the following:
1. The tax treatment of any aspect of the Conversion that is not
specifically set forth and addressed in the foregoing opinions.
<PAGE>
Board of Directors
Richmond Savings Bank, S.S.B.
June 13, 1996
Page 8
2. The status, including without limitation, the tax treatment, of
Richmond Mutual's and Richmond's bad-debt reserves before or after the
Conversion.
3. For purposes of Section 381 of the Code, the effect upon Richmond
Mutual and Richmond of the acquisition of all of the common stock of
Richmond by the Holding Company in the Conversion.
The opinions herein expressed represent only our best judgments with
respect to the interpretation of published material and are not binding upon the
Internal Revenue Service or the courts. Our opinions are limited to matters of
North Carolina and federal law.
The opinions contained herein are rendered solely for your benefit and for
the benefit of purchasers of Conversion Stock and may not be used for any other
purpose whatsoever or relied upon by, published or communicated to any other
party without our prior written consent in each instance. We hereby consent to
the inclusion of this letter as an exhibit to the Applications being filed by
Richmond Mutual with the Administrator and as an exhibit to the Registration
Statement.
Sincerely,
BROOKS, PIERCE, McLENDON
HUMPHREY & LEONARD, L.L.P.
By: /s/ Howard L. Williams
-----------------------
Howard L. Williams
<PAGE>
EXH. 8.2
LETTERHEAD OF
BAXTER FENTRISS AND COMPANY
June 19, 1996
Board of Directors
Richmond Savings Bank
115 South Lawrence Street
Rockingham, NC 28379
Plan of Conversion Subscription Rights
--------------------------------------
Directors:
Terms used in this letter not otherwise defined herein have the same meanings
for such terms in the Plan of the Holding Company Conversion (the "Plan of
Conversion") adopted by the Board of Directors of Richmond Savings Bank, SSB,
Rockingham, North Carolina ("Richmond Savings" or "Bank"), under which the Bank
will convert from a mutual savings bank to a stock savings bank and issue all of
the Bank's stock to Carolina Fincorp, Inc. (the "Holding Company").
Simultaneously, the Holding Company will issue shares of common stock (the
"Common Stock").
We understand that in accordance with the Plan of Conversion, subscription
rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) the Bank's tax qualified employee
stock ownership plan, (3) Supplemental Eligible Account Holders, (4) Other
Members, and (5) Employees, officers, and directors of Richmond Savings. Based
solely upon our observation that the subscription rights will be available to
such parties without cost, will be legally non-transferable and of short
duration, and will afford such parties the right only to purchase shares of
Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, we are of the belief that:
(1) the subscription rights will have no ascertainable market value, and
(2) the price at which the subscription rights are exercisable will be the
pro forma issuance price.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates and other external forces (e.g.
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the Holding Company's
value. Accordingly, no assurance can be given that persons who subscribe to
shares of Common Stock in the Conversion will thereafter be able to sell such
shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ Baxter Fentriss and Company
<PAGE>
[LETTERHEAD OF BAXTER FENTRISS AND COMPANY APPEARS HERE]
March 28, 1996
Mr. R. Larry Campbell
Chief Executive Officer
Richmond Savings Bank, SSB
115 S. Lawrence
Rockingham, NC 28379-3649
Dear Mr. Campbell:
Baxter Fentriss and Company ("Baxter Fentriss") proposes to act as appraiser to
Richmond Savings Bank, SSB of Rockingham, North Carolina ("Richmond Savings") in
connection with its possible conversion from mutual to stock form of
organization. In this connection, Baxter Fentriss and Richmond Savings agree to
the following terms and conditions:
1. Appointment as Financial Advisor. In the event Richmond Savings shall, on
--------------------------------
or before July 1, 1996, adopt a plan of conversion contemplating a
conversion to the stock form of ownership. Richmond Savings appoints Baxter
Fentriss as its appraiser with respect to such conversion from mutual stock
form of organization.
2. Duties: Baxter Fentriss will (a) prepare a business plan for Richmond
-------
Savings with respect to the conversion based on discussions with management
and the board and its due diligence review of the institution; (b) prepare
an appraisal of Richmond Savings; (c) prepare any required appraisal
updates through the conversion process; (d) performs such other services as
are necessary or required of the appraiser in connection with comments from
regulatory authorities; and (e) meet with the board of directors of
Richmond Savings to discuss and review the business plan and the appraisal.
3. Accuracy of Information. Richmond Savings is responsible for all
-----------------------
information and representations concerning its financial condition which
may be provided to Baxter Fentriss. Richmond Savings shall provide Baxter
Fentriss all information and other materials reasonably requested by Baxter
Fentriss in connection with the business plan and appraisal to assure
compliance with applicable federal, state, securities and similar laws or
otherwise reasonably requested by Baxter Fentriss to carry out its
responsibilities.
<PAGE>
4. Confidentiality. Richmond Savings and Baxter Fentriss recognize an
---------------
obligation to keep confidential all information and other work product
provided by each to the other and shall not, without prior written consent
of the other, provide copies of such information to any other party.
5. Fees and Expenses.
-----------------
A. Business Plan Fee. Richmond Savings will pay Baxter Fentriss a
-----------------
$10,000 fee for preparation of the business plan.
B. Appraisal Fee. Richmond Savings will pay Baxter Fentriss a $15,000
-------------
fee for preparation of the appraisal and one update. If more than one
appraisal update is requested there will be a fee of $2,500 for each
additional update.
C. Expenses. Baxter Fentriss will be reimbursed for all reasonable out-
--------
of-pocket expenses it incurs in connection with acting as appraiser to
Richmond Savings limited to $3,000 without prior written approval.
6. Payment. Upon execution of this agreement $5,000 of the appraisal fee will
-------
be due and is non-refundable. The remaining $10,000 Business Plan and
$10,000 Appraisal Fees will be due upon their completion. The first
appraisal update will be completed upon request at no additional charge. In
the event that Richmond Savings does not adopt a plan of conversion prior
to the completion of the business plan and/or appraisal then Baxter
Fentriss will be due a portion of their fee based on the percentage
completion of the business plan and appraisal.
7. Effective Date; Termination. This agreement shall be effective upon
---------------------------
acceptance by you and will terminate upon completion of the stock
conversion, unless extended by mutual agreement or canceled as hereinafter
provided. Either party may cancel this agreement at any time on written
notice except for conditions related to confidentiality, fees, expenses,
and indemnification which cannot be terminated unless mutually agreed. This
agreement shall be governed under the laws of the State of North Carolina.
Richmond Savings and Baxter Fentriss are not affiliated, and neither Richmond
Savings nor Baxter Fentriss has an economic interest in, or are held in common
with, the other and has not derived a significant portion of its gross revenues,
receipts or net income for any period from transactions with the other.
If the foregoing is in accord with your understanding of our proposed
relationship, please sign and return one copy of this letter and retain one copy
for your files.
<PAGE>
Sincerely,
BAXTER FENTRISS AND COMPANY
By /s/ James E. Baxter
------------------------
Title President
---------------------
Accepted and agreed to as of April 9, 1996.
RICHMOND SAVINGS BANK, SSB
By /s/ R. Larry Campell
------------------------
Title President
---------------------
<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 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 services of the Officer, his experience and knowledge of the
affairs of the Savings Bank, and his reputation and contacts in the industry and
the local community are extremely valuable to the Savings Bank; and
WHEREAS, the Savings Bank wishes to attract and retain such well-qualified
executives and it is in the best interest of the Savings Bank and of the Officer
to secure the continued services of the Officer notwithstanding any change in
control of the Savings Bank or the Holding Company; 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. In determining salary increases, the Board shall compensate the Officer
for increases in the cost of living and may also provide for performance or
merit increases. Participation in incentive compensation, deferred compensation,
discretionary bonus, profit-sharing, retirement, stock option and other employee
benefit plans that the Savings Bank or the Holding Company have adopted or may
from time to time adopt, and participation in any fringe benefits, shall not
reduce the salary payable to the Officer under this Section. 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
2
<PAGE>
the Savings Bank. In the event of a Change of Control (as defined in Section
10), the Officer's rate of salary shall be increased not less than six percent
(6%) annually during the term of this Agreement.
3. BONUS COMPENSATION. During the term of this Agreement, the Officer
------------------
shall be entitled in an equitable manner with all other key management personnel
of the Savings Bank, to such discretionary bonuses as may be authorized,
declared and paid by the Savings Bank to the Savings Bank's key management
employees. In addition, the Officer shall be entitled to participate in any
other bonus compensation plans adopted by the Directors of the Savings Bank and
applicable to key management personnel. No other compensation provided for in
this Agreement shall be deemed a substitute for the Officer's right to such
discretionary and other bonuses when and as declared by the Directors of the
Savings Bank.
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 initial term of employment under this Agreement shall be
----
for the period commencing upon the effective date of this Agreement and ending
three (3) calendar years from the effective date of this Agreement. On each
anniversary of the effective date of this Agreement, the term of this Agreement
shall automatically be extended for an additional one year period beyond the
then effective expiration date unless written notice from the Savings Bank or
the Officer is received 90 days prior to an anniversary date advising the other
party that this Agreement shall not be further extended; provided that the
Directors shall review the Officer's performance annually and make a specific
determination pursuant to such review to renew this Agreement prior to the 90
day notice period.
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.
7. STANDARDS. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards expected of
employees with comparable positions in comparable organizations and as may be
established from time to time by the Board. The Savings Bank will provide the
Officer with the working facilities and staff customary for similar executives
and necessary for him to perform his duties.
4
<PAGE>
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 the Officer's employment at any time, but any
termination by the Board, other than termination for cause, 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. The Officer shall have no right to receive
compensation or other benefits for any period after termination for "cause."
Termination for "cause" shall include termination because of the Officer's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provisions
of this Agreement.
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
5
<PAGE>
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 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
6
<PAGE>
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.
(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
7
<PAGE>
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, Officer and Savings Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
(c) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including this
Section 10, whether instituted by formal legal proceedings or otherwise,
including any action taken by the Officer to enforce the terms of this Section
10 or in defending against any action taken by the Savings Bank, the Savings
Bank shall reimburse the Officer for all costs and expenses incurred in such
proceedings or actions, including attorney's fees, in the event the Officer
prevails in any such action.
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,
8
<PAGE>
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. 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.
13. 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.
14. 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.
9
<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
10
<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 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 services of the Officer, his experience and knowledge of the
affairs of the Savings Bank, and his reputation and contacts in the industry and
the local community are extremely valuable to the Savings Bank; and
WHEREAS, the Savings Bank wishes to attract and retain such well-qualified
executives and it is in the best interest of the Savings Bank and of the Officer
to secure the continued services of the Officer notwithstanding any change in
control of the Savings Bank or the Holding Company; 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. In determining salary increases, the Board shall compensate the Officer
for increases in the cost of living and may also provide for performance or
merit increases. Participation in incentive compensation, deferred compensation,
discretionary bonus, profit-sharing, retirement, stock option and other employee
benefit plans that the Savings Bank or the Holding Company have adopted or may
from time to time adopt, and participation in any fringe benefits, shall not
reduce the salary payable to the Officer under this Section. 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
2
<PAGE>
the Savings Bank. In the event of a Change of Control (as defined in Section
10), the Officer's rate of salary shall be increased not less than six percent
(6%) annually during the term of this Agreement.
3. BONUS COMPENSATION. During the term of this Agreement, the Officer
------------------
shall be entitled in an equitable manner with all other key management personnel
of the Savings Bank, to such discretionary bonuses as may be authorized,
declared and paid by the Savings Bank to the Savings Bank's key management
employees. In addition, the Officer shall be entitled to participate in any
other bonus compensation plans adopted by the Directors of the Savings Bank and
applicable to key management personnel. No other compensation provided for in
this Agreement shall be deemed a substitute for the Officer's right to such
discretionary and other bonuses when and as declared by the Directors of the
Savings Bank.
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 initial term of employment under this Agreement shall be for
----
the period commencing upon the effective date of this Agreement and ending three
(3) calendar years from the effective date of this Agreement. On each
anniversary of the effective date of this Agreement, the term of this Agreement
shall automatically be extended for an additional one year period beyond the
then effective expiration date unless written notice from the Savings Bank or
the Officer is received 90 days prior to an anniversary date advising the other
party that this Agreement shall not be further extended; provided that the
Directors shall review the Officer's performance annually and make a specific
determination pursuant to such review to renew this Agreement prior to the 90
day notice period.
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.
7. STANDARDS. The Officer shall perform his duties and responsibilities
---------
under this Agreement in accordance with such reasonable standards expected of
employees with comparable positions in comparable organizations and as may be
established from time to time by the Board. The Savings Bank will provide the
Officer with the working facilities and staff customary for similar executives
and necessary for him to perform his duties.
4
<PAGE>
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 the Officer's employment at any time, but any
termination by the Board, other than termination for cause, 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. The Officer shall have no right to receive
compensation or other benefits for any period after termination for "cause."
Termination for "cause" shall include termination because of the Officer's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provisions
of this Agreement.
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
5
<PAGE>
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 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
6
<PAGE>
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.
(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
7
<PAGE>
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, Officer and Savings Bank agree in
writing that the same shall not be treated as a Change in Control for purposes
of this Agreement.
(c) In the event any dispute shall arise between the Officer and the
Savings Bank as to the terms or interpretation of this Agreement, including this
Section 10, whether instituted by formal legal proceedings or otherwise,
including any action taken by the Officer to enforce the terms of this Section
10 or in defending against any action taken by the Savings Bank, the Savings
Bank shall reimburse the Officer for all costs and expenses incurred in such
proceedings or actions, including attorney's fees, in the event the Officer
prevails in any such action.
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,
8
<PAGE>
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. 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.
13. 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.
14. 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.
9
<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
10
<PAGE>
EXHIBIT 10.3
EMPLOYEE STOCK OWNERSHIP PLAN
OF
RICHMOND SAVINGS BANK, INC., SSB
Prepared By:
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
Greensboro, North Carolina
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS AND CONSTRUCTION................................................2
EMPLOYEE PARTICIPANTS......................................................12
EMPLOYER CONTRIBUTIONS.....................................................13
ALLOCATIONS................................................................19
TERMINATION OF SERVICE-PARTICIPANT VESTING.................................25
TIME AND METHOD OF PAYMENT OF BENEFITS.....................................30
EMPLOYER SECURITIES........................................................35
EMPLOYER ADMINISTRATIVE PROVISIONS.........................................41
ADMINISTRATION COMMITTEE...................................................42
PARTICIPANT ADMINISTRATIVE PROVISIONS......................................46
FIDUCIARIES' DUTIES........................................................50
DISCONTINUANCE, AMENDMENT AND TERMINATION..................................54
THE TRUST..................................................................57
TOP HEAVY RULES............................................................68
MISCELLANEOUS..............................................................62
</TABLE>
<PAGE>
NATURE OF PLAN
RICHMOND SAVINGS BANK, INC., SSB (the "Company"), in order to provide its
eligible employees with an opportunity to share in the growth and prosperity of
the Company and to accumulate capital for their retirement through the
acquisition of a proprietary interest in the Company, establishes the Employee
Stock Ownership Plan of Richmond Savings Bank, Inc., SSB.
<PAGE>
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.01 DEFINITIONS. For the purpose of this Plan, the following definitions
-----------
shall apply unless the context requires otherwise:
(a) "Accounts or Account" shall mean the separate accounts
-------------------
maintained by the Administration Committee or Trustee to record the
interest of a Participant under the Plan.
(b) "Accrued Benefit" shall mean the amount standing in a
---------------
Participant's Account(s) as of any date derived from both Employer
contributions and Employee contributions, if any.
(c) "Act" shall mean the Employee Retirement Income Security Act of
---
1974, as amended from time to time.
(d) "Active Participant" shall mean for each Plan Year any Employee
------------------
who satisfies the eligibility requirements of Article II and who completes
at least one thousand (1,000) Hours of Service during such Plan Year.
(e) "Administration Committee" shall mean the Plan Administration
------------------------
Committee as from time to time constituted.
(f) "Anniversary Date" shall mean the last day of the Plan Year.
----------------
(g) "Beneficiary" shall mean any person or fiduciary designated by a
-----------
Participant who is or may become entitled to a benefit under the Plan
following the death of the Participant. A Beneficiary who becomes entitled
to a benefit under the Plan remains a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to
(and the Plan Administrator's, Administration Committee's or Trustee's duty
to provide to the Beneficiary) information or data concerning the Plan does
not arise until he first becomes entitled to receive a benefit under the
Plan.
(h) "Board of Directors" shall mean the Board of Directors of
------------------
Richmond Savings Bank, Inc., SSB unless otherwise indicated or the context
otherwise requires.
(i) "Break in Service" shall occur in any Plan Year during which a
----------------
Participant does not complete more than five hundred (500) Hours of
Service, determined as of the end of the Plan Year.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended
----
from time to time.
2
<PAGE>
(k) "Company" shall mean Richmond Savings Bank, Inc., SSB or any
-------
successor thereto which shall adopt this Plan.
(l) "Compensation" shall mean, except as specifically provided
------------
elsewhere in this Plan, the Participant's earned income, wages, salaries,
fees for professional service and other amounts received for personal
services actually rendered in the course of employment with the Employer
maintaining the plan (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe benefits
and reimbursements or other expense allowances under a nonaccountable plan
and elective contributions). "Elective contributions" are amounts
excludible from the Employee's gross income under Code (S) 402(a)(8)
(relating to a Code (S) 401(k) arrangement), Code (S) 402(h) (relating to a
simplified employee pension), Code (S) 125 (relating to a cafeteria plan)
or Code (S) 403(b) (relating to a tax-sheltered annuity) and contributed at
the Employee's election. The term "Compensation" does not include:
(i) Employer contributions (other than "elective
contributions") to a plan of deferred compensation to the extent the
contributions are not included in the gross income of the Employee
for the taxable year in which contributed, on behalf of an Employee
to a simplified employee pension plan to the extent such
contributions are excludible from the Employee's gross income, and
any distributions from a plan of deferred compensation, regardless of
whether such amounts are includible in the gross income of the
Employee when distributed.
(ii) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer subject
to a substantial risk of forfeiture.
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option.
(iv) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that
the premiums are not includible in the gross income of the Employee),
or contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code (S) 403(b) (whether or not the contributions are
excludible from the gross income of the Employee), other than
"elective contributions".
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.01(l), unless the Plan reference specifies a
modification to this definition. The Administration Committee will take
into account only Compensation actually paid for the relevant period.
3
<PAGE>
The Administration Committee must take into account only the first
$150,000 for Plan Years beginning after December 31, 1993 (or such larger
amount as the Commissioner of Internal Revenue may prescribe) of any
Participant's Compensation. The $150,000 Compensation limitation applies
to the combined Compensation of the Employee and of any family member
aggregated with the Employee for purposes of determining who is an "Highly
Compensated Employee" and who is either (i) the Employee's spouse; or (ii)
the Employee's lineal descendant under the age of nineteen (19) years. If
the $150,000 Compensation limitation applies to the combined Compensation
of the Employee and one or more family members, the Administration
Committee will apply the contribution and allocation provisions of Article
III by prorating the $150,000 limitation among the affected individuals in
proportion to each such individual's Compensation determined prior to
application of this limitation.
For purposes of determining whether the Plan discriminates in favor
of Highly Compensated Employees, Compensation means Compensation as defined
in this Section 1.01(l), without regard to any exceptions. For purposes of
this nondiscrimination definition, the Employer may elect to include all
elective contributions made by the Employer on behalf of the Employees. The
Employer's election to include elective contributions must be consistent
and uniform with respect to Employees and all plans of the Employer of any
particular Plan Year. The Employer may make this election to include
elective contributions for nondiscrimination testing purposes, irrespective
of whether the Employer includes elective contributions in the general
Compensation definition applicable to the Plan.
(m) "Disqualified Person" shall have the same meaning as ascribed to
-------------------
the term under Code (S) 4975(e)(2).
(n) "Effective Date" of this Plan shall be the _____ day of
--------------
_____________, 1996, except as otherwise noted.
(o) "Employee" shall mean any person on the payroll of the Employer
--------
whose wages from the Employer are subject to withholding for purposes of
Federal income taxes and for purposes of the Federal Insurance
Contributions Act. Notwithstanding the foregoing, Employee shall not
include any person on the payroll of the Employer who is included in a unit
of employees covered by an agreement which the Secretary of Labor finds to
be a collective bargaining agreement between employee representatives and
the Employer, if there is evidence that retirement benefits were the
subject of good faith bargaining between such employee representatives and
the Employer. The term "employee representatives" does not include any
organization more than half the members of which are owners, officers or
executives of the Employer.
(p) "Employer" shall mean the Company and any corporation or other
--------
organization that is affiliated (as defined in Section 407(d)(7) of the
Act) with the Company which duly adopts the Plan with the approval of the
Company.
4
<PAGE>
(q) "Employer Securities" shall mean the common stock issued by
-------------------
Carolina Fincorp, Inc., which shares constitute "employer securities" under
Code (S) 409(l).
(r) "Employer Securities Account" shall mean a separate account
---------------------------
maintained for each Participant and consisting of his allocable share of
Employer Securities allocated to each Participant under the Plan.
(s) "Employment Commencement Date" shall mean the date on which an
----------------------------
Employee first performs an Hour of Service for the Employer.
(t) "Exempt Loan" shall mean a loan made to this Plan by a
-----------
Disqualified Person, or a loan to this Plan which a Disqualified Person
guarantees, provided the loan satisfies the requirements of Treas. Reg. (S)
54.4975-7(b).
(u) "Fiscal Year" shall mean the Employer's taxable year for federal
-----------
income tax purposes.
(v) "Former Participant" shall mean any individual who has been a
------------------
Participant hereunder and who has not yet received the entire benefit to
which he is entitled under the Plan.
(w) "General Investment Account" shall mean a separate account
--------------------------
maintained for each Participant and consisting of his allocable share of
Employer contributions, forfeitures, earnings of the Trust allocable to
such account, and realized and unrealized gains and losses allocable to
such account, less any amounts distributed to the Participant or his
Beneficiary from such account and which have not been invested in Employer
Securities.
(x) "Highly Compensated Employee" shall mean an Employee who, during
---------------------------
the Plan Year or during the preceding twelve (12)-month period:
(i) is a more than five percent (5%) owner of the Employer
(applying the constructive ownership rules of Code (S) 318);
(ii) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(iii) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part
of the top-paid twenty percent (20%) group of Employees (based on
Compensation for the relevant year); or
(iv) has Compensation in excess of fifty percent (50%) of the
dollar amount prescribed in Code (S) 415(b)(1)(A) (relating to
defined benefit plans) and is an officer of the Employer.
5
<PAGE>
If the Employee satisfies the definition in clause (ii), (iii) or
(iv) in the Plan Year but not during the preceding twelve (12) -month
period and does not satisfy clause (i) in either period, the Employee is a
Highly Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken into
account under clause (iv) will not exceed the greater of three (3) or ten
percent (10%) of the total number (after application of the exclusions
under Code (S) 414(q)) of Employees, but no more than fifty (50) officers.
If no Employee satisfies the Compensation requirement in clause (iv) for
the relevant year, the Administration Committee will treat the highest paid
officer as satisfying clause (iv) for that year.
For purposes of this definition, "Compensation" means Compensation as
defined in Section 1.01(l) but must include: (i) elective deferrals under a
Code (S) 401(k) arrangement or under a simplified employee pension plan
maintained by the Employer; and (ii) amounts paid by the Employer which are
not currently includible in the Employee's gross income because of Code (S)
125 (cafeteria plans) or (S) 403(b)(tax-sheltered annuities). The
Administration Committee must make the determination of who is a Highly
Compensated Employee, including the determinations of the number and
identity of the top paid twenty percent (20%) group, the top 100 paid
Employees, the number of officers includible in clause (iv) and the
relevant Compensation, consistent with Code (S) 414(q) and regulations
issued under that Code section. The Employer may make a calendar year
election to determine the Highly Compensated Employees for the Plan Year,
as prescribed by Treasury regulations. A calendar year election must apply
to all plans and arrangements of the Employer. For purposes of applying
any nondiscrimination test required under the Plan or under the Code, in a
manner consistent with applicable Treasury regulations, the Administration
Committee will not treat as a separate Employee a family member (a spouse,
a lineal ascendant or descendant, or a spouse of a lineal ascendant or
descendant) of a Highly Compensated Employee described in clause (i) of
this Section 1.01(x), or a family member of one of the ten (10) Highly
Compensated Employees with the greatest Compensation for the Plan Year, but
will treat the Highly Compensated Employee and all family members as a
single Highly Compensated Employee. This aggregation rule applies to a
family member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes any former
Employee who separated from Service (or has a deemed separation from
Service, as determined under Treasury regulations) prior to the Plan Year,
performs no Service for the Employer during the Plan Year, and was a Highly
Compensated Employee either for the separation year or any Plan Year ending
on or after his fifty-fifth (55th) birthday. If the former Employee's
separation from Service occurred prior to January 1, 1987, he is a Highly
Compensated Employee only if he satisfied clause (i) of this Section
1.01(x) or received Compensation in excess of $50,000 during: (i) the year
of his separation from Service (or the prior year); or (ii) any year ending
after his fifty-fourth (54th) birthday.
6
<PAGE>
(y) "Hour of Service" shall mean:
---------------
(i) Each Hour of Service for which the Employer, either directly
or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the perfor mance of duties during the Plan
Year. The Administration Committee shall credit Hours of Service
under this paragraph (i) to the Employee for the Plan Year in which
the Employee performs the duties, irrespective of when paid;
(ii) Each Hour of Service for back pay, irrespective of
mitigation of damages, to which the Employer has agreed or for which
the Employee has received an award. The Administration Committee
shall credit Hours of Service under this paragraph (ii) to the
Employee for the Plan Year(s) to which the award or the agreement
pertains rather than for the Plan Year in which the award, agreement
or payment is made; and
(iii) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee
is entitled to payment (irrespective of whether the employment
relationship is terminated), for reasons other than for the
performance of duties during a Plan Year, such as leave of absence,
vacation, holiday, sick leave, illness, incapacity (including
disability), layoff, jury duty or military duty. The Administration
Committee shall not credit more than five hundred one (501) Hours of
Service under this paragraph (iii) to an Employee on account of any
single continuous period during which the Employee does not perform
any duties (whether or not such period occurs during a single Plan
Year). The Administration Committee shall credit Hours of Service
under this paragraph (iii) in accordance with the rules of paragraphs
(b) and (c) of Labor Reg. (S) 2530.200b-2, which the Plan, by this
reference, specifically incorporates in full within this paragraph
(iii).
The Administration Committee shall not credit an Hour of Service
under more than one (1) of the above paragraphs. Furthermore, if the
Administration Committee is to credit Hours of Service to an Employee for
the twelve (12) month period beginning with the Employee's Employment
Commencement Date or with an anniversary of such date, then the twelve (12)
month period shall be substituted for the term "Plan Year" wherever the
latter term appears in this Section 1.01(y). The Administration Committee
shall resolve any ambiguity with respect to the crediting of an Hour of
Service in favor of the Employee.
The Administration Committee shall credit every Employee with Hours
of Service on the basis of the "actual" method. For purposes of the Plan,
"actual" method means the determination of Hours of Service from records of
hours worked and hours for which the Employer makes payment or for which
payment is due from the Employer. An Employee or Participant for whom
hourly records are not maintained shall be credited with forty-five (45)
Hours of Service, if compensated weekly, ninety-five (95) Hours of Service,
if compensated semimonthly, or one hundred ninety (190) Hours of Service,
if compensated
7
<PAGE>
monthly, for each period described above if the Employee were hourly rated
and would have been credited with one Hour of Service under paragraphs (i),
(ii) and (iii) above.
Solely for purposes of determining whether the Employee incurs a
Break in Service under any provision of this Plan, the Administration
Committee shall credit Hours of Service during an Employee's unpaid absence
period due to maternity or paternity leave. The Administration Committee
shall consider an employee on maternity or paternity leave if the
Employee's absence is due to the Employee's pregnancy, the birth of the
Employee's child, the placement with the Employee of an adopted child, or
the care of the Employee's child immediately following the child's birth or
placement. The Administration Committee shall credit Hours of Service under
this paragraph on the basis of the number of Hours of Service the Employee
would receive if he were paid during the absence period or, if the
Administration Committee cannot determine the number of Hours of Service
the Employee would receive, on the basis of eight (8) hours per day during
the absence period. The Administration Committee only shall credit the
number of Hours of Service (up to 501 Hours of Service) necessary to
prevent an Employee's Break in Service. The Administration Committee shall
credit all Hours of Service described in this paragraph to the computation
period in which the absence period begins or, if the Employee does not need
these Hours of Service to prevent a Break in Service in the computation
period in which his absence period begins, the Administration Committee
shall credit these Hours of Service to the immediately following
computation period.
(z) "Leave of Absence" shall mean any period of absence from the
----------------
active employment of the Employer due to jury duty and compulsory service
in the Armed Forces of the United States if the Employee returns to active
Service with the Employer within ninety (90) days after he first becomes
eligible for release from such active duty. A Leave of Absence may be
granted by the Employer for sickness, accident, vacation, disability, or
other similar reasons under rules established by it and uniformly applied
by it to all indivi duals similarly situated. If the Employee does not
return to active Service with the Employer within thirty (30) days of the
termination of his Leave of Absence, his Service will be deemed to have
ceased on the date his absence first commenced.
(aa) "Loan Suspense Account" shall mean an account established for
---------------------
the crediting and holding of Employer Securities purchased with the
proceeds of an Exempt Loan during the pledge period and repayment of the
Exempt Loan.
(bb) "Nonforfeitable" shall mean a Participant's or Beneficiary's
--------------
unconditional claim, legally enforceable against the Plan, for the
Participant's Accrued Benefit.
(cc) "Participant" shall mean an Employee or former Employee who has
-----------
an account balance under the Plan, or an Employee who has met the
eligibility requirements of the Plan.
8
<PAGE>
(dd) "Plan" shall mean the Employee Stock Ownership Plan of Richmond
----
Savings Bank, Inc., SSB as established herein and amended from time to
time.
(ee) "Plan Administrator" shall mean the Company unless the Employer
------------------
designates another person to hold the position of Plan Administrator. In
addition to his other duties, the Plan Administrator shall have full
responsibility for compliance with the reporting and disclosure rules under
the Act as respects this Agreement.
(ff) "Plan Entry Date" shall mean the first day of the Plan Year and
---------------
the first day of the seventh month of the Plan Year.
(gg) "Plan Year" shall mean the fiscal year of the Plan which shall
---------
be the twelve month period ending on the 31st day of December of each year.
(hh) "Related Group" shall mean the Employers as defined in Section
-------------
1.02.
(ii) "Segregated Account" shall mean the Participant Account which is
------------------
divided or segregated for investment or accounting purposes as required by
the Plan for which a special treatment is required.
(jj) "Service" shall mean any period of time the Employee is in the
-------
employ of the Employer, including any period the Employee is on Leave of
Absence authorized by the Employer under a uniform non-discriminatory
policy applicable to all Employees.
(kk) "Suspense Account" shall mean the Employer contributions and
----------------
forfeitures which can not be allocated pursuant to Article III.
(ll) "Trust" shall mean the separate Trust established to hold,
-----
administer, and invest the contributions made under the Plan.
(mm) "Trust Agreement" shall mean the agreement between the Employer
---------------
and the Trustee or any successor Trustee establishing the Trust and
specifying the duties of the Trustee.
(nn) "Trust Fund" shall mean all property of every kind held or
----------
acquired by the Trustee under the Trust Agreement, other than incidental
benefit insurance contracts.
(oo) "Trustee" shall mean the persons or entities from time to time
-------
appointed as Trustee under the Trust Agreement.
(pp) "Valuation Date" shall mean the Anniversary Date of each Plan
--------------
Year or such other dates as the Administration Committee shall from time to
time require. Unless otherwise specified in the Plan, the Administration
Committee will make all Plan allocations for a particular Plan Year as of
the Valuation Date for that Plan Year.
9
<PAGE>
1.02 CONTROLLED BUSINESSES/LEASED EMPLOYEES. If the Employer is a member
--------------------------------------
of a Related Group, the Plan shall treat all employees of the members of such
Related Group as if employed by a single employer for purposes of determining
Years of Service for participation and vesting. An employee shall receive no
credit for Years of Service for purposes of benefit accrual unless employed by a
member of the "Related Group" which adopts the Plan. A Related Group is a
controlled group of corporations (as defined in Code (S) 414(b)), trades or
businesses (whether or not incorporated) which are under common control (as
defined in Code (S) 414(c)) or an affiliated service group (as defined in Code
(S) 414(m) or in Code (S) 414(o)).
The Plan also shall treat an Employee who is a Leased Employee as an
employee of the Employer. However, the Employer shall treat contributions or
benefits provided the Leased Employee by the leasing organization as
contributions or benefits provided by the Employer to the extent attributable to
services the Leased Employee performed for the Employer. A "Leased Employee" is
an individual (who otherwise is not an employee of the Employer) who, pursuant
to a leasing agreement between the Employer and any other person, has performed
services for the Employer (or for the Employer and any persons related to the
Employer within the meaning of Code (S) 144(a)(3)) on a substantially full-time
basis for at least one year and who performs services historically performed by
employees in the Employer's business field.
Notwithstanding the preceding provisions of this paragraph, the Plan shall
not treat an employee as a Leased Employee if, prior to the application of this
exception, twenty percent (20%) or less of the Employer's Employees (other than
Highly Compensated Employees) are leased employees, and the leasing organization
covers the employee in a money purchase pension plan providing immediate
participation for all employees of the leasing organization (other than
employees who perform substantially all of their services for the leasing
organization or whose compensation from the leasing organization in each Plan
Year during the four-year period ending with the Plan Year is less than $1,000),
full immediate vesting, and a nonintegrated contribution formula equal to at
least ten percent (10%) of the employee's compensation without regard to
employment by the leasing organization on a specified date.
1.03 CHANGE IN NON-PARTICIPATING STATUS. If an Employee does not
----------------------------------
participate in the Plan by reason of employment within an excluded
classification, service with the Employer will be counted for purposes of
determining participation and vesting should the Employee's status change to a
non-excluded classification.
1.04 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the plan
--------------------------------
of a predecessor employer, the Plan shall treat service of the Employee with the
predecessor employer as service with the Employer. If the Plan the Employer
maintains is not the plan of a predecessor employer, no credit shall be given
unless specifically provided for in this Plan.
1.05 WORD USAGE. Words used in the masculine shall apply to the feminine
----------
where applicable, and wherever the context of the Plan dictates, the plural
shall be read as the singular and the singular as the plural.
10
<PAGE>
1.06 CONSTRUCTION. It is the intention of the Employer that the Plan be
------------
qualified under the provisions of the Code and the Act and all provisions hereof
shall be construed to that result.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee shall become a Participant in the Plan on
-----------
the Plan Entry Date (if he is employed on that date) coincident with or
immediately following the date on which he completes one (1) Year of Service
with the Employer and is at least twenty-one (21) years of age. Employees
otherwise eligible on the Effective Date shall begin participation immediately.
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of participation
-------------------------------
under Section 2.01, the Plan shall take into account all of an Employee's Years
of Service with the Employer. Year of Service shall mean a twelve (12)
consecutive month period during which the Employee completes not less than one
thousand (1,000) Hours of Service, measuring the beginning of each twelve (12)
month period from the Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. For purposes of participation in
--------------------------------
the Plan, the Plan shall not apply any Break in Service rules.
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
--------------------------------
terminates shall re-enter the Plan as a Participant on the date of his re-
employment. An Employee who terminates his employment after satisfying the
eligibility requirements of the Plan but before becoming a Participant shall
enter the Plan as a Participant on the later of the Plan Entry Date on which he
would have entered the Plan had he not terminated employment, or the date of his
re-employment. Any other Employee whose employment terminates and who is
subsequently re-employed shall become a Participant in accordance with the
provisions of Sections 2.01 and 2.02.
2.05 OMISSION OF ELIGIBLE EMPLOYEE. If, in any fiscal year, any Employee
-----------------------------
who should be included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after a contribution by the
Employer for the year has been made and allocated, the Employer shall make a
subsequent contribution with respect to the omitted Employee in the amount which
the Employer would have contributed with respect to him had he not been omitted.
Such contribution shall be made regardless of whether or not it is deductible in
whole or in part in any taxable year under applicable provisions of the Internal
Revenue Code by the Employer.
2.06 INCLUSION OF INELIGIBLE EMPLOYEE. If, in any fiscal year, any person
--------------------------------
who should not have been included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not made until after a
contribution for the year has been made and allocated, the Employer shall not be
entitled to recover the contribution made with respect to the ineligible person
regardless of whether or not a deduction is allowable with respect to such
11
<PAGE>
contribution. In such event, the amount contributed with respect to the
ineligible person shall constitute a forfeiture for the Plan Year in which the
discovery is made.
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS. For each Plan Year that ends with or within
----------------------
the Employer's taxable year, the Employer shall contribute to the Trust such
amount as the Board of Directors may from time to time deem advisable. The
Employer shall make all contributions without regard to current or accumulated
earnings and profits for the taxable year or years ending with or within such
Plan Year. The Employer's contribution shall not exceed the Maximum Permissible
Amount as hereinafter defined.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records, shall
-----------------------------
determine the amount of any contributions to be made by it to the Trust under
the terms of the Plan; provided however, the contribution of the Employer shall
be paid in cash to the extent needed to provide the Trust with cash sufficient
to pay any currently maturing obligations under any Exempt Loan, notwithstanding
the discretion of the Board of Directors.
3.03 TIME AND METHOD OF PAYMENT OF CONTRIBUTION. The Employer may pay its
------------------------------------------
contribution for each Plan Year in one (1) or more installments, without
interest. The Employer's contribution for any Plan Year shall be due on the last
day of its taxable year with or within which such Plan Year ends, and, unless
paid before, shall be payable then or as soon thereafter as practicable, but not
later than the time prescribed by law for filing the Employer's federal income
tax return (including extensions thereof) for such taxable year, without
interest. Contributions made after the end of the Plan Year but prior to the
filing of the Employer's federal income tax return shall be deemed a
contribution for the Employer's taxable year to which such tax return relates,
unless the contribution shall be accompanied by the Employer's signed statement
to the Trustee that payment is on account of another taxable year. Contributions
shall be paid in cash or in Employer Securities. All contributions for each Plan
Year shall be deemed to be paid as of the last day of such Plan Year.
3.04 RETURN OF EMPLOYER CONTRIBUTIONS. Notwithstanding any provision
--------------------------------
herein to the contrary (other than Section 2.06), upon the Employer's request, a
contribution which was made upon a mistake of fact, conditioned upon initial
qualification of the Plan, or disallowed as a deduction under Code (S) 404 shall
be returned to the Employer within one year after payment of the contribution or
denial of the qualification or deduction, as the case may be. The Trustee will
not increase the amount of the Employer contribution returnable under this
Section 3.04 for any earnings attributable to the contribution, but the Trustee
will decrease the Employer contribution returnable for any losses attributable
to it. The Trustee may require the Employer to furnish it whatever evidence the
Trustee deems necessary to enable the Trustee to confirm the amount the Employer
has requested be returned is properly returnable under ERISA.
12
<PAGE>
3.05 LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. The amount of
----------------------------------------------------
Annual Additions which the Administration Committee may allocate under this Plan
on a Participant's behalf for a Limitation Year may not exceed the Maximum
Permissible Amount. If the amount the Employer otherwise would contribute to the
Participant's Account would cause the Annual Additions for the Limitation Year
to exceed the Maximum Permissible Amount, the Employer will reduce the amount of
its contribution so the Annual Additions for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.05(b)) to the
Participant's Account, the Administration Committee will reallocate the Excess
Amount to the remaining Participants who are eligible for an allocation of
Employer contributions for the Plan Year in which the Limitation Year ends. The
Administration Committee will make this reallocation on the basis of the
allocation method under the Plan as if the Participant whose Account otherwise
would receive the Excess Amount is not eligible for an allocation of Employer
Contributions.
(a) Estimation of Compensation. Prior to the determination of the
--------------------------
Participant's actual Compensation for a Limitation Year, the Administration
Committee may determine the Maximum Permissible Amount on the basis of the
Participant's estimated annual Compensation for such Limitation Year. The
Administration Committee must make this determination on a reasonable and
uniform basis for all Participants similarly situated. The Administration
Committee must reduce any Employer contributions (including any allocation
of forfeitures) based on estimated annual Compensation by any Excess
Amounts carried over from prior years. As soon as is administratively
feasible after the end of the Limitation Year, the Administration Committee
will determine the Maximum Permissible Amount for such Limitation Year on
the basis of the Participant's actual Compensation for such Limitation
Year.
(b) Disposition of Excess Amount. If, pursuant to Section 3.05(a),
----------------------------
or because of the allocation of forfeitures, there is an Excess Amount with
respect to a Participant for a Limitation Year, the Administration
Committee will dispose of such Excess Amount as follows:
(1) The Administration Committee will return any nondeductible
voluntary Employee contributions to the Participant to the extent
that the return would reduce the Excess Amount.
(2) If, after the application of paragraph (1), an Excess
Amount still exists, and the Plan covers the Participant at the end
of the Limitation Year, then the Administration Committee will use
the Excess Amount(s) to reduce future Employer contributions
(including any allocation of forfeitures) under the Plan for the next
Limitation Year and for each succeeding Limitation Year, as is
necessary, for the Participant.
13
<PAGE>
(3) If, after the application of paragraph (1), an Excess
Amount still exists, and the Plan does not cover the Participant at
the end of the Limitation Year, then the Administration Committee
will hold the Excess Amount unallocated in a suspense account. The
Administration Committee will apply the suspense account to reduce
Employer contributions (including allocation of forfeitures) for all
remaining Participants in the next Limitation Year, and in each
succeeding Limitation Year if necessary.
(4) The Administration Committee will not distribute any Excess
Amount(s) to Participants or to former Participants.
(c) More Than One Plan. The Employer may contribute under another
------------------
defined contribution plan in addition to its contributions under this Plan.
If the Administration Committee allocated an Excess Amount to a
Participant's Account on an allocation date of this Plan which coincides
with an allocation date of the other defined contribution plan, the
Administration Committee will attribute the total Excess Amount allocated
as of such date to the other defined contribution plan.
(d) Defined Benefit Plan Limitation. If the Participant presently
-------------------------------
participates, or has ever participated under a defined benefit plan
maintained by the Employer, then the sum of the defined benefit plan
fraction and the defined contribution plan fraction for the Participant for
that Limitation Year must not exceed 1.0. To the extent necessary to
satisfy this limitation, the Employer will reduce its contribution or
allocation on behalf of the Participant to the defined contribution plan
under which the Participant participates and then, if necessary, the
Participant's projected annual benefit under the defined benefit plan under
which the Participant participates.
3.06 DEFINITIONS - ARTICLE III. For purposes of this Article III,
-------------------------
the following terms have the following meanings:
(a) "100% Limitation" - If the 100% Limitation applies, the
Administration Committee must determine the denominator of the defined
benefit plan fraction and the denominator of the defined contribution plan
fraction by substituting 100% for 125%. The 100% limitation applies only
if: (i) the Plan's top heavy ratio exceeds 90%; or (ii) the Plan's top
heavy ratio is greater than 60%, and the Employer does not provide extra
minimum benefits which satisfy Code (S) 416(h)(2).
(b) "Annual Addition" - The sum of the following amounts allocated
on behalf of a Participant for a Limitation Year: (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury regulations, Annual Additions
include excess contributions described in Code (S) 401(k) and excess
aggregate contributions described in Code (S) 401(m), irrespective of
whether the Plan distributes or forfeits such excess amounts. Excess
deferrals under Code (S) 402(g) are not Annual Additions unless distributed
after the correction period described in Code (S) 402(g).
14
<PAGE>
Annual Additions also include Excess Amounts reapplied to reduce Employer
contributions under Section 3.05. Amounts allocated after March 31, 1984,
to an individual medical account (as defined in Code (S) 415(l)(2))
included as part of a defined benefit plan maintained by the Employer are
Annual Additions. Furthermore, Annual Additions include contributions paid
or accrued after December 31, 1985, for taxable years ending after December
31, 1985, attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code (S) 419A(d)(3))
under a welfare benefit fund (as defined in Code (S) 419(e)) maintained by
the Employer, but only for purposes of the dollar limitation applicable to
the Maximum Permissible Amount.
(c) "Compensation" - Compensation as determined under the general
definition of Compensation in Section 1.01 except it does not include
elective contributions.
(d) "Defined benefit plan" - A retirement plan which does not
provide for individual accounts for Employer contributions. The
Administration Committee must treat all defined benefit plans (whether or
not terminated) maintained by the Employer as a single plan.
(e) "Defined Benefit Plan Fraction" -
Projected annual benefit of the Participant
under the defined benefit plan(s)
----------------------------------------------------------
The lesser of (i) 125% (subject to the "100% Limitation"
in paragraph (a)) of the dollar limitation
in effect under Code (S) 415(b)(1)(A) for
the Limitation Year, or (ii) 140% of the
Participant's average Compensation for his
high three (3) consecutive Years of Service
To determine the denominator of this fraction, the Administration
Committee will make any adjustment required under Code (S) 415(b) and will
determine a Year of Service as a Plan Year in which the Employee completed
at least 1,000 Hours of Service. The "projected annual benefit" is the
annual retirement benefit (adjusted to an actuarially equivalent straight
life annuity if the plan expresses such benefit in a form other than a
straight life annuity or qualified joint and survivor annuity) of the
Participant under the terms of the defined benefit plan on the assumptions
he continues employment until his normal retirement age (or current age, if
later) as stated in the defined benefit plan, his compensation continues at
the same rate as in effect in the Limitation Year under consideration until
the date of his normal retirement age and all other relevant factors used
to determine benefits under the defined benefit plan remain constant as of
the current Limitation Year for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits in one
or more defined benefit plans maintained by the Employer which were in
existence on May 5, 1986, the
15
<PAGE>
dollar limitation used in the denominator of this fraction will not be less
than the Participant's Current Accrued Benefit. A Participant's Current
Accrued Benefit is the sum of the annual benefits under such defined
benefit plans which the Participant had accrued as of the end of the 1986
Limitation Year (the last Limitation Year beginning before January 1,
1987), determined without regard to any change in the terms or conditions
of the Plan made after May 5, 1986, and without regard to any cost of
living adjustment occurring after May 5, 1986. This Current Accrued
Benefit rule applies only if the defined benefit plans individually and in
the aggregate satisfied the requirements of Code (S) 415 as in effect at
the end of the 1986 Limitation Year.
(f) "Defined contribution plan" - A retirement plan which provides
for an individual account for each participant and for benefits based
solely on the amount contributed to the participant's account, and any
income, expenses, gains and losses, and any forfeitures of accounts of
other participants which the plan may allocate to such participant's
account. The Administration Committee must treat all defined contribution
plans (whether or not terminated) maintained by the Employer as a single
plan. Solely for the purposes of the limitations of this Article III, the
Administration Committee will treat employee contributions made to a
defined benefit plan maintained by the Employer as a separate defined
contribution plan. The Administration Committee also will treat as a
defined contribution plan an individual medical account (as defined in Code
(S) 415(l)(2)) included as part of a defined benefit plan maintained by the
Employer and, for taxable years ending after December 31, 1985, a welfare
benefit fund under Code (S) 419(e) maintained by the Employer to the extent
there are post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code (S) 419(d)(3)).
(g) "Defined Contribution Plan Fraction" -
The sum, as of the close of the Limitation Year,
of the Annual Additions to the Participant's
Account under the defined contribution plan(s)
-----------------------------------------------------------------
The sum of the lesser of the following amounts determined
for the Limitation Year and for each prior Year of Service
with the Employer: (i) 125% (subject to the "100% Limitation"
in paragraph (a)) of the dollar limitation in effect under
Code (S) 415(c)(1)(A) for the Limitation Year (determined
without regard to the special dollar limitations for employee
stock ownership plans), or (ii) 35% of the Participant's
Compensation for the Limitation Year
For purposes of determining the defined contribution plan fraction,
the Administra tion Committee will not recompute Annual Additions in
Limitation Years beginning prior to January 1, 1987, to treat all Employee
contributions as Annual Additions. If the Plan satisfied Code (S) 415 for
Limitation Years beginning prior to January 1, 1987, the Administration
Committee will redetermine the defined contribution plan fraction and the
16
<PAGE>
defined benefit plan fraction as of the end of the 1986 Limitation Year, in
accordance with this Section 3.06. If the sum of the redetermined
fractions exceeds 1.0, the Administration Committee will subtract
permanently from the numerator of the defined contribution plan fraction an
amount equal to the product of (1) the excess of the sum of the fractions
over 1.0, times (2) the denominator of the defined contribution plan
fraction. In making the adjustment, the Administration Committee must
disregard any accrued benefit under the defined benefit plan which is in
excess of the Current Accrued Benefit. This Plan continues any
transitional rules applicable to the determination of the defined
contribution plan fraction under the Employer's Plan as of the end of the
1986 Limitation Year.
(h) "Employer" - The Employer that adopts this Plan and any related
employers described in Section 1.02. Solely for purposes of applying the
limitations of this Article III, the Administration Committee will
determine related employers described in Section 1.02 by modifying Code (S)
414(b) and (c) in accordance with Code (S) 415(h).
(i) "Excess Amount" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(j) "Limitation Year" - The Plan Year. If the Employer amends the
Limitation Year to a different 12 consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year for which
the Employer makes the amendment, creating a short Limitation Year.
(k) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation under Code (S)
415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. If there is a short Limitation Year because of a change
in Limitation Year, the Administration Committee will multiply the $30,000
(or adjusted) limitation by the following fraction:
Number of months in the short Limitation Year
-----------------------------------------------------
12
ARTICLE IV
ALLOCATIONS
4.01 PARTICIPANT'S ACCOUNTS. For each Participant, the Administration
----------------------
Committee shall establish an Employer Securities Account to reflect a
Participant's interest in Employer Securities held by the Trust and shall
establish an account designated as the General Investments Account to reflect
the Participant's interest in the Trust Fund attributable to assets other than
Employer Securities.
17
<PAGE>
If a Participant re-enters the Plan subsequent to his having a Forfeiture
Break in Service, a separate Account for the Participant's pre-Forfeiture Break
in Service Accrued Benefit and a separate Account for his post-Forfeiture Break
in Service Accrued Benefit, unless the Participant's entire Accrued Benefit
under the Plan is one hundred percent (100%) Nonforfeitable, shall be
maintained.
4.02 VALUATION OF ACCOUNTS. The value of each Participant's Accrued
---------------------
Benefit shall consist of that proportion of the net worth (at fair market value)
of the Trust Fund which the net credit balance in his Account bears to the total
net credit balance in the Accounts of all Participants. For purposes of a
distribution under the Plan, the value of a Participant's Accrued Benefit
attributable to his General Investment Account shall be its value as of the
Valuation Date, or other valuation date, immediately preceding the date of the
distribution.
As of the Anniversary Date of each Plan Year, the Administration Committee
first shall reduce the General Investments Accounts (excluding segregated
Accounts) for any forfeitures arising under Section 5.05 and then shall allocate
the net income (or net loss) from the Trust and the increase or decrease in the
fair market value of the assets of the Trust for the Plan Year pro rata to the
General Investments Accounts of the Participants under the Plan as the General
Investments Accounts stood at the beginning of the current Plan Year, but
excluding the amount of any General Investments Account which the Trustee has
fully distributed since the immediately preceding Valuation Date or utilized for
the purchase of Employer Securities. In making its allocations, the
Administration Committee shall exclude Employer Securities allocated to Employer
Securities Accounts, stock dividends on allocated Employer Securities, and
payments by the Trust on an Exempt Loan. The Administration Committee shall
include as income any cash dividends on Employer Securities except cash
dividends which the Administration Committee has directed the Trustee to
distribute in accordance with Section 7.03.
A segregated investment account receives all income it earns and bears all
expense or loss it incurs. As of the Valuation Date, the Administration
Committee must reduce a segregated investment account for any forfeiture arising
under Section 5.05 after the Administration Committee has made all other
allocations, changes or adjustments to such Account for the Plan Year.
In making a forfeiture reduction, the Administration Committee shall
forfeit pro rata from a Participant's General Investments Account and from any
segregated investment account before making a forfeiture from his Employer
Securities Account.
4.03 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. Subject to the limitations of
-------------------------------------
Article III, Code (S) 415, and Section 4.08 of the Plan:
(a) Employer Securities Account. As of the Anniversary Date of each
---------------------------
Plan Year, the Administration Committee first shall reduce the Employer
Securities Accounts for any forfeitures arising under Section 5.05 and then
shall credit the Employer Securities Account maintained for each
Participant with the Participant's allocable share of Employer Securities
(including fractional shares) purchased and paid for by the Trust or
contributed in kind to
18
<PAGE>
the Trust, with any forfeitures of Employer Securities and with any stock
dividends on Employer Securities allocated to his Employer Securities
Account. Employer Securities purchased or contributed in kind shall be
allocated as of the Anniversary Date among the Participants in accordance
with the ratio of the Participant's Compensation to the total Compensation
of all Participants. The Administration Committee shall allocate Employer
Securities acquired with an Exempt Loan in accordance with Section 4.04.
Except as otherwise specifically provided in Section 4.04, the
Administration Committee shall base allocations to the Participants'
Accounts on dollar values expressed as shares of Employer Securities or on
the basis of actual shares where there is a single class of Employer
Securities. Employer Securities purchased with the proceeds of the General
Investment Account will be allocated directly to the same Participant's
Employer Securities Account.
(b) General Investments Account. Employer contributions and
---------------------------
forfeitures not allocated under Section 4.03 (a) above shall be allocated
as of the Anniversary Date among the Participants in accordance with the
ratio of the Participant's Compensation to the total Compensation of all
Participants.
(c) Dividends on Employer Securities. The Administration Committee
--------------------------------
will allocate any cash dividends the Employer pays with respect to Employer
Securities to the General Investments Accounts of Participants in the same
ratio, determined on the dividend declaration date, that Employer
Securities allocated to a Participant's Employer Securities Account bear to
the Employer Securities allocated to all Employer Securities Accounts. The
Administration Committee will not allocate to the General Investments
Accounts any cash dividends the Employer directs the Trustee to apply to
the payment of an Exempt Loan nor any cash dividends the Administration
Committee directs the Trustee to distribute in accordance with Section
7.03. If the Employer directs the Trustee to apply cash dividends on
Employer Securities to the payment of an Exempt Loan, the Administration
Committee first will allocate the released Employer Securities to the
Participants' Employer Securities Accounts in the same ratio, determined on
the dividend declaration date, that Employer Securities allocated to a
Participant's Employer Securities Account bear to the Employer Securities
allocated to all Employer Securities Accounts. This first allocation of
released Employer Securities must equal the greater of the shares of
released Employer Securities equal to the fair market value of the cash
dividends attributable to the allocated Employer Securities, or equal to
the number of shares of all released Employer Securities attributable to
the cash dividends on allocated Employer Securities. If any released
Employer Securities remain unallocated after the first allocation, the
Administration Committee will allocate these remaining released Employer
Securities under this Section 4.03 as if the Employer has made an Employer
contribution equal to the amount of the cash dividend attributable to the
unallocated Employer Securities.
4.04 EXEMPT LOAN PROCEEDS ALLOCATION LIMITATION. In withdrawing assets
------------------------------------------
from the Loan Suspense Account, the Trustee shall apply the provisions of Treas.
Reg. (S)(S) 54.4975-7(b)(8) and (15) as if all securities in the Loan Suspense
Account were encumbered. Upon the payment of any portion of the loan, the
Trustee shall effect the release of assets in the Loan Suspense
19
<PAGE>
Account from encumbrances. For each Plan Year during the duration of the loan,
the number of Employer Securities released must equal the number of encumbered
Employer Securities held immediately before release for the current Plan Year
multiplied by a fraction. The numerator of the fraction is the amount of
principal and interest paid for the Plan Year. The denominator of the fraction
is the sum of the numerator plus the principal and interest to be paid for all
future Plan Years. The number of future Plan Years under the loan must be
definitely ascertainable and must be determined without taking into account any
possible extension or renewal periods. If the interest rate under the loan is
variable, the interest to be paid in future Plan Years must be computed by using
the interest rate applicable as of the end of the Plan Year. If collateral
includes more than one (1) class of Employer Securities, the number of Employer
Securities of each class to be released for a Plan Year must be determined by
applying the same fraction to each such class. The Administration Committee
shall allocate assets withdrawn from the Loan Suspense Account to the Accounts
of Participants who otherwise share in the allocation of the Employer's
contribution for the Plan Year for which the Trustee has paid the portion of the
loan resulting in the release of the assets. The Administration Committee
consistently shall make this allocation as of each Anniversary Date on the basis
of non-monetary units, taking into account the relative Compensation of all such
Participants for such Plan Year.
The Administration Committee may also elect at the initiation of the Exempt
Loan to have the Employer Securities released from the Loan Suspense Account
solely with reference to principal payments. However, if release is determined
with reference to principal payments only, the following additional rules apply:
(1) the Exempt Loan must provide for annual payments of principal and interest
at a cumulative rate that is not less rapid at any time than level annual
payments of such amounts for 10 years; (2) interest included in any payment is
disregarded only to the extent that it would be determined to be interest under
standard loan amortization tables; and (3) the entire duration of the Exempt
Loan repayment period does not exceed 10 years, even in the event of a renewal,
extension or refinancing of the Exempt Loan.
4.05 EXCESS ALLOCATIONS. The excess amount of any allocations shall be
------------------
distributed or reallocated as provided in Article III.
4.06 EMPLOYER CONTRIBUTIONS CONSIDERED MADE ON LAST DAY OF PLAN YEAR. For
---------------------------------------------------------------
purposes of this Article IV, the Employer's contribution under the Plan which
remains unallocated on the last day of any Plan Year will be considered to have
been made on the last day of that year, regardless of when paid to the Trustee.
4.07 ACCRUAL OF BENEFITS. The Administration Committee shall determine a
-------------------
Participant's Accrued Benefit on the basis of the Limitation Year. In
allocating Employer contributions and forfeitures to a Participant's Accounts,
the Administration Committee shall only take into account the Compensation
earned during that part of the Limitation Year the Employee is actually a
Participant in the Plan.
4.08 PARTICIPANTS TO WHOM EMPLOYER CONTRIBUTIONS AND FORFEITURES WILL BE
-------------------------------------------------------------------
ALLOCATED. The Employer contributions for any Limitation Year,
- ---------
20
<PAGE>
plus any forfeitures which arose under the Plan during that year, will be
allocated among and credited to the Accounts of:
(a) Participants who complete 1,000 Hours of Service during the
Limitation Year and who are in the employ of the Employer on the
Anniversary Date; provided, however, that an Employee who enters or re-
enters the Plan as a Participant on any date other than the first day of
the Limitation Year shall be considered to have completed 1,000 Hours of
Service for purposes of allocation of Employer contributions and
Forfeitures for the Limitation Year in which he enters or re-enters the
Plan as a Participant;
(b) Participants on Leave of Absence on the Anniversary Date who
received Compensation from the Employer during the Limitation Year; and
(c) Participants who died, retired, or became permanently disabled
during the Limitation Year who received Compensation from the Employer
during that year.
(d) Highly Compensated Participants, otherwise qualifying for an
allocation, shall be limited to no more than one-third (1/3) of the
contributions which are deductible under Code (S) 404(a)(9)(B) and
forfeitures of Employer Securities purchased with proceeds of an Exempt
Loan, which limitations shall be applied pro rata to the limited Highly
Compensated Participants.
Notwithstanding the foregoing, in the case of a sale to the Plan in which a
seller elects nonrecognition of gain under Code (S) 1042 of Employer Securities,
no portion of such Employer Securities acquired may be allocated or accrue
(directly or indirectly under any plan of the Employer meeting the requirements
of (S) 401(a) of the Code) during the "nonallocation period" to
(i) any Participant who makes an election under (S) 1042 of the Code,
(ii) any individual who is related to the Participant within the meaning of
(S) 267(b) of the Code (this provision shall not apply to lineal
descendants of the electing Participant if the aggregate amount
allocated to the benefit of all such lienal descendants during the
"nonallocation period" does not exceed more than five percent (5%) of
the Employer Securities (or amounts allocated in lieu thereof) held by
the Plan which are attributable to the sale to the Plan by the
Participant related to such descendants (within the meaning of (S)
267(c) of the Code) or
(iii) any other person who owns (after application of Code (S) 318(a) and
without regard to the employee trust exception of Code (S)
318(a)(2)(B(i)) more than twenty-five percent (25%) of any class of
outstanding stock of the Employer which issued such Employer Securities
or of any corporation which is a member of the same controlled group of
corporations or of the total value of such class of outstanding stock
of any such corporation as defined in (S) 409 of the Code.
21
<PAGE>
The "nonallocation period" shall mean the period beginning on the date of the
sale of the Employer Securities and ending on the later of the date which is 10
years after the date of sale or the date of the plan allocation attributable to
the final payment of the Exempt Loan.
4.09 EQUITABLE ALLOCATIONS. If the Administration Committee determines in
---------------------
making any valuation, allocation, correction or addition of interest to any
Account under the provisions of the Plan that the strict application of the
provisions of the Plan will not produce an equitable and nondiscriminatory
allocation among the Accounts of the Participants, it may modify any procedure
specified in the Plan for the purpose of achieving an equitable and
nondiscriminatory allocation in accordance with the general concepts of the
Plan; provided, however, that any such modification shall not reduce any
Participant's Accrued Benefit and shall be consistent with the provisions of (S)
401(a)(4) of the Code. Should the Administration Committee in good faith deter
mine that certain expenses of administration paid by the Trustee during the Plan
Year under consideration are not general, ordinary, and usual and should not
equitably be borne by all Participants, but should be borne only by one or more
Participants, for whom or because of whom such expenses were incurred, the
Administration Committee shall make suitable adjustments by debiting the
particular Account or Accounts of such one or more Participants, Former
Participants, or Beneficiaries; provided, however, that any such adjustment must
be nondiscriminatory and consistent with the provisions of (S) 401(a) of the
Code.
4.10 VALUATION OF THE TRUST FUND. The Administration Committee shall
---------------------------
direct the Trustee, as of each Valuation Date, and at such other date or dates
deemed necessary by the Administration Committee, to determine the net worth of
the assets comprising the Trust Fund. In determining such net worth, the
Trustee shall value the assets comprising the Trust Fund at their fair market
value as of the Valuation Date. With respect to activities carried on by the
Plan, an independent appraiser meeting requirements similar to those prescribed
by regulations under Code (S) 170(a)(1) must perform all valuations of Employer
Securities which are not readily tradeable on an established securities market.
The valuation requirement of the immediately preceding sentence applies to all
Employer Securities acquired by the Plan. Fair market value of Employer
Securities means the value (i) determined as of the date of the exercise of an
option if the exercise is by a Disqualified Person, or (ii) in all other cases,
determined as of the most recent Valuation Date.
4.11 ALLOCATION DOES NOT CREATE RIGHTS. No Participant shall acquire any
---------------------------------
right to or interest in any specific asset of the Trust as a result of the
allocations provided for in the Plan.
ARTICLE V
TERMINATION OF SERVICE-PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. A Participant's Normal Retirement Age
-----------------
(hereinafter so-called) is age sixty-five (65). A Participant who remains in
the employ of the Employer after attaining Normal Retirement Age shall continue
to participate in Employer contributions until the
22
<PAGE>
date of his actual retirement. Upon termination of a Participant's employment
for any reason after attaining Normal Retirement Age, the Administration
Committee shall direct the Trustee to make payment of the full value of the
Participant's Accrued Benefit to him at such times and in such manner as
provided in Article VI hereof. The value of the Participant's Accrued Benefit
shall be determined as of the Anniversary Date which is on or, if not on,
immediately follows the date of the Participant's employment termination.
Provided however, the Trustee may, at the direction of the Administration
Committee, value the Participant's Accrued Benefit as of the Anniversary Date
immediately preceding the date of the Participant's employment termination, for
purposes of making an immediate distribution to the Participant of his Accrued
Benefit, and shall make a subsequent lump sum distribution to the Participant of
any additional benefit accruing subsequent to the date of his termination
through and including the Valuation Date immediately following the date of the
Participant's termination of employment. Immediate distributions may be reduced
by the Trustee to take into account declines in market value.
5.02 EARLY RETIREMENT. There is no early retirement provision in the
----------------
Plan.
5.03 DISABILITY. A Participant who becomes permanently disabled shall
----------
have the full value of his Accrued Benefit paid to him at such times and in such
manner as provided in Article VI hereof. The value of a disabled Participant's
Accrued Benefit shall be determined as of the Valuation Date which is on, or if
not on, which immediately follows the date of the Participant's termination of
employment due to disability. Provided however, the Trustee may, at the
direction of the Administration Committee, value the Participant's Accrued
Benefit as of the Valuation Date immediately preceding the date of the
Participant's employment termination, for purposes of making an immediate
distribution to the Participant of his Accrued Benefit, and shall make a
subsequent lump sum distribution to the Participant of any additional benefit
accruing subsequent to the date of his termination through and including the
Valuation Date immediately following the date of the Participant's termination
of employment. A Participant shall be considered "disabled" when the
Participant is eligible for and has actually begun to receive benefits under the
Social Security Act. The Administration Committee shall apply the provisions of
this Section 5.03 in a non-discriminatory, consistent and uniform manner.
5.04 DEATH. Upon the death of a Participant, his Beneficiary shall be
-----
entitled to receive the full value of the deceased Participant's Accrued Benefit
determined as of the Valuation Date which is on or, if not on, which immediately
follows the date of such Participant's death, at such times and in such manner
as provided in Article VI hereof. Provided however, the Trustee may, at the
direction of the Administration Committee, value the Participant's Accrued
Benefit as of the Valuation Date immediately preceding the date of the
Participant's death, for purposes of making an immediate distribution to the
Participant's Beneficiary of his Accrued Benefit, and shall make a subsequent
lump sum distribution to said Beneficiary of any additional benefit accruing
subsequent to the date of the Participant's death through and including the
Valuation Date immediately following the date of the Participant's death.
5.05 TERMINATION OF SERVICE PRIOR TO NORMAL RETIREMENT AGE. If a
-----------------------------------------------------
Participant's employment terminates prior to Normal Retirement Age for any
reason other than death
23
<PAGE>
or permanent disability, then for each Year of Service he shall receive a
percentage of his Accrued Benefit derived from Employer contributions and
forfeitures allocated to Participant Accounts (the balance being a forfeiture)
equal to the following percentage:
<TABLE>
<CAPTION>
-------------------------------------------------------
Years of Service Percentage of Accrued
With the Employer Benefit Payable
-------------------------------------------------------
<S> <C>
Less than 1 year 0%
1 year but less than 2 0%
2 years but less than 3 0%
3 years but less than 4 20%
4 years but less than 5 40%
5 years but less than 6 60%
6 years but less than 7 80%
7 years or more 100%
___________________________________________________
</TABLE>
Forfeitures shall be reallocated among the remaining Participants who are
entitled to share in Employer contributions and forfeitures for the Plan Year in
which such forfeiture occurs in accordance with the provisions of Section 4.08.
A Participant shall be 100% vested in his Accounts upon the attainment of Normal
Retirement Age, death or permanent disability.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section
-------------------------
5.05, Year of Service means any Plan Year during which an Employee completes not
less than 1,000 Hours of Service.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
--------------------------
Participant incurs a "Break in Service" if during any Plan Year he does not
complete more than 500 Hours of Service.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
-----------------------------------
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer except any Year of Service
before a Break in Service if the number of consecutive Breaks in Service equals
or exceeds the greater of five (5) or the aggregate number of Years of Service
prior to the Break. This exception applies only if the Participant is 0% vested
in his Accrued Benefit derived from Employer contributions at the time he has a
Break in Service. Furthermore, the aggregate number of Years of Service before a
Break in Service does not include Years of Service not required to be taken into
account under this exception by reason of any prior Break in Service.
For the sole purpose of determining a Participant's nonforfeitable
percentage of his Accrued Benefit derived from Employer contributions which
accrued for his benefit prior to a Forfeiture
24
<PAGE>
Break in Service, the Plan disregards any Year of Service after the Participant
first incurs a Forfeiture Break in Service. The Participant incurs a Forfeiture
Break in Service when he incurs five (5) consecutive Breaks in Service.
The Plan does not apply the Break in Service rule under Code (S)
411(a)(6)(B). Therefore, an Employee need not complete a Year of Service after a
Break in Service before the Plan takes into account the Employee's otherwise
includible Years of Service under this Section 5.08.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his Accrued
-----------------
Benefit derived from Employer contributions occurs under the Plan on the earlier
of:
(a) The last day of the Plan Year in which the Participant first
incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Administration Committee determines the percentage of a Participant's
Accrued Benefit forfeiture, if any, under this Section 5.09 solely by reference
to the vesting schedule of Section 5.05. A Participant does not forfeit any
portion of his Accrued Benefit for any other reason or cause except as expressly
provided by this Section 5.09 or as provided under the Plan's unclaimed account
procedure.
5.10 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION
--------------------------------------------------------------------
OF FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a partially-vested
- ----------------------------
Participant receives a cash-out distribution before he incurs a Forfeiture Break
in Service (as defined in Section 5.08), the cash-out distribution will result
in an immediate forfeiture of the nonvested portion of the Participant's Accrued
Benefit derived from Employer contributions, as provided in Section 5.09. A
partially-vested Participant is a Participant whose Nonforfeitable percentage
determined under Section 5.05 is less than 100%. A cash-out distribution is a
distribution of the entire present value of the Participant's Nonforfeitable
Accrued Benefit.
(a) Restoration and Conditions upon Restoration. A partially-vested
-------------------------------------------
Participant who is re-employed by the Employer after receiving a cash-out
distribution of the Nonforfeitable percentage of his Accrued Benefit may
repay the Trustee the amount of the cash-out distribution attributable to
Employer contributions, unless the Participant no longer has a right to
restoration under the requirements of this Section 5.10. If a partially-
vested Participant makes the cash-out distribution repayment, the
Administration Committee, subject to the conditions of this Section
5.10(a), must restore his Accrued Benefit attributable to Employer
contributions to the same dollar amount as the dollar amount of his Accrued
Benefit on the Valuation Date, or other valuation date, immediately
preceding the date of the cash-out distribution, unadjusted for any gains
or losses occurring subsequent to that Valuation Date, or other valuation
date. Restoration of the Participant's Accrued Benefit includes restoration
of all Code (S) 411(d)(6) protected benefits with respect to that restored
Accrued Benefit, in accordance with applicable Treasury regulations.
25
<PAGE>
The Administration Committee will not restore a re-employed
Participant's Accrued Benefit under this Section 5.10(a) if:
(1) five (5) years or more have elapsed since the Participant's
first re-employment date with the Employer following the cash-out
distribution; or
(2) the Participant incurred a Forfeiture Break in Service (as
defined in Section 5.08). This condition also applies if the
Participant makes repayment within the Plan Year in which he incurs
the Forfeiture Break in Service and that Forfeiture Break in Service
would result in a complete forfeiture of the amount the
Administration Committee otherwise would restore.
(b) Time and Method of Restoration. If neither of the two conditions
------------------------------
preventing restoration of the Participant's Accrued Benefit applies, the
Administration Committee will restore the Participant's Accrued Benefit as
of the Plan Year Valuation Date coincident with or immediately following
the repayment. To restore the Participant's Accrued Benefit, the
Administration Committee, to the extent necessary, will allocate to the
Participant's Account:
(1) first, from the amount, if any, of Participant forfeitures
the Administration Committee would otherwise allocate under Section
5.05;
(2) second, from the amount, if any, of the Trust Fund net
income or gain for the Plan Year; and
(3) third, from the Employer contribution for the Plan Year to
the extent made under a discretionary formula.
To the extent the amounts described in clauses (1), (2) and (3) are
insufficient to enable the Administration Committee to make the required
restoration, the Employer must contribute, without regard to any
requirement or condition of Section 3.01, the additional amount necessary
to enable the Administration Committee to make the required restoration.
If, for a particular Plan Year, the Administration Committee must restore
the Accrued Benefit of more than one re-employed Participant, then the
Administration Committee will make the restoration allocations to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of
all re-employed Participants. The Administration Committee will not take
into account any allocation under this Section 5.10 in applying the
limitation on allocations under Article III.
(c) 0% Vested Participant. The deemed cash-out rule applies to a 0%
---------------------
vested Participant. A 0% vested Participant is a Participant whose Accrued
Benefit derived from Employer contributions is entirely forfeitable at the
time of his separation from Service. Under the deemed cash-out rule, the
Administration Committee will treat the 0% vested Participant as having
received a cash-out distribution on the date of the Participant's
26
<PAGE>
separation from Service or, if the Participant's Account is entitled to an
allocation of Employer contributions for the Plan Year in which he
separates from Service, on the last day of that Plan Year. For purposes of
applying the restoration provisions of this Section 5.10, the
Administration Committee will treat the 0% vested Participant as repaying
his cash-out "distribution" on the first date of his re-employment with the
Employer.
5.11 SEGREGATED INVESTMENT ACCOUNT FOR REPAID AMOUNT. Until the
-----------------------------------------------
Administration Committee restores the Participant's Accrued Benefit, as
described in Section 5.10, the Trustee will invest the cash-out amount the
Participant has repaid in a segregated investment account maintained solely for
that Participant. The Trustee must invest the amount in the Participant's
segregated investment account in Federally insured interest bearing savings
account(s) or time deposit(s) (or a combination of both), or in other fixed
income investments. Until commingled with the balance of the Trust Fund on the
date the Administration Committee restores the Participant's Accrued Benefit,
the Participant's segregated investment account remains a part of the Trust, but
it alone shares in any income it earns and it alone bears any expense or loss it
incurs. The Administration Committee will direct the Trustee to repay to the
Participant as soon as is administratively practicable the full amount of the
Participant's segregated investment account if the Administration Committee
determines either of the conditions of Section 5.10(a) prevents restoration as
of the applicable Valuation Date, notwithstanding the Participant's repayment.
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 DISTRIBUTION AND PAYMENT REQUIREMENTS. Unless the Participant elects
-------------------------------------
in writing to have the Trustee apply other distribution provisions of the Plan,
the Trustee must distribute the Nonforfeitable portion of the Participant's
Accrued Benefit no later than the time prescribed by this Section 6.01,
irrespective of any other provision of the Plan. The distribution provisions of
this Section 6.01 are subject to the consent and form of distribution
requirements of the Plan.
(a) Retirement, Disability and Death. If the Participant separates
--------------------------------
from Service by reason of the attainment of Normal Retirement Age, death,
or disability, the Administration Committee will direct the Trustee to
commence distribution of the Accrued Benefit not later than the 60th day
after the close of the Plan Year in which the applicable event occurs or
separation from Service, if later.
(b) Other Separation from Service. If the Participant separates
-----------------------------
from Service for any reason other than by reason of the attainment of
Normal Retirement Age, death or disability, the Administration Committee
will direct the Trustee to commence distribution of the Participant's
Nonforfeitable Accrued Benefit not later than one year after the close of
the fifth Plan Year following the Plan Year in which the Participant
separated from Service. If the Participant resumes employment with the
Employer on or before the last day of the
27
<PAGE>
fifth Plan Year following the Plan Year of his separation from Service, the
mandatory distribution provisions of this paragraph (b) do not apply. For
purposes of this Section 6.01(b), the Accrued Benefit does not include any
Employer Securities acquired with the proceeds of an Exempt Loan until the
close of the Plan Year in which the borrower repays the Exempt Loan in
full.
(c) Required Beginning Date. If any distribution commencement date
-----------------------
described under Paragraph (a) of this Section 6.01, either by Plan
provision or by Participant election (or nonelection), is later than the
Participant's Required Beginning Date, the Administration Committee instead
must direct the Trustee to make distribution under this Section 6.01 on the
Participant's Required Beginning Date. A Participant's Required Beginning
Date is the April 1 following the close of the calendar year in which the
Participant attains age 70 1/2. A mandatory distribution at the
Participant's Required Beginning Date will be in lump sum unless an
alternate method is provided for in the Plan.
(d) Distribution in Excess of $3500. No distribution shall be made
-------------------------------
to a Participant without the Participant's consent if the Nonforfeitable
Accrued Benefit shall exceed $3500, unless the Participant shall have
attained Normal Retirement Age.
(e) Death of the Participant. The Administration Committee will
------------------------
direct the Trustee, in accordance with this Section, to distribute to the
Participant's Beneficiary the Participant's Nonforfeitable Accrued Benefit
remaining in the Trust at the time of the Participant's death subject to
the requirements of Code (S) 401(a)(9) and any regulations issued
thereunder.
(1) Deceased Participant's Nonforfeitable Accrued Benefit Does
----------------------------------------------------------
Not Exceed $3,500. The Administration Committee must direct the
-----------------
Trustee to distribute the deceased Participant's Nonforfeitable
Accrued Benefit in lump sum, as soon as administratively practicable
following the Participant's death or, if later, the date on which the
Administration Committee receives notification of or otherwise
confirms the Participant's death.
(2) Deceased Participant's Nonforfeitable Accrued Benefit
-----------------------------------------------------
Exceeds $3,500. The Administration Committee will direct the Trustee
--------------
to distribute the deceased Participant's Nonforfeitable Accrued
Benefit at the time and in the method elected by the Participant or,
if applicable, by the Beneficiary, as permitted under this Article
VI. In the absence of an election the Administration Committee will
direct the Trustee to distribute the Participant's undistributed
Nonforfeitable Accrued Benefit in lump sum on the first distribution
date following the close of the Plan Year in which the Participant's
death occurs or, if later, the first distribution date following the
date the Administration Committee receives notification of or
otherwise confirms the Participant's death.
28
<PAGE>
If the death benefit is payable in full to the Participant's
surviving spouse, the surviving spouse, in addition to the distribution
options provided in this Section, may elect, if available, distribution at
any time or in any form this Article VI would permit for a Participant.
(f) Distribution Date. A distribution date, unless otherwise
-----------------
specified within the Plan, is the first day of each month of each Plan Year
or as soon as administratively practicable thereafter.
6.02 ELECTION AND MANNER OF PAYMENT. Not earlier than ninety (90) days,
------------------------------
but not later than thirty (30) days, before the Participant's distribution date,
the Administration Committee shall provide a benefit notice to the Participant.
The notice shall explain the options and material features available to the
Participant regarding the benefit distribution and the Participant's right to
defer distribution until attainment of Normal Retirement Age.
The Administration Committee will direct the Trustee to make distribution
of the Accrued Benefit in a lump sum. In the event any part of the Accrued
Benefit is subject to the "put option" of Section 7.01 and the distribution for
all Participants exceeds $50,000, the Administrative Committee may defer
payment of the distribution over a period of years, not exceeding five (5) years
from the date a Participant is entitled to receive his Accrued Benefit. The
Administrative Committee shall make its decision to defer payment of the
distribution over the deferred period based upon the availability of liquid
assets of the Trust and the Company which will be required in the distributions.
If a Participant's Accrued Benefit attributable to Employer Securities exceeds
$500,000, the maximum payment period, subject to a contrary election by the
Participant, is five (5) years plus one additional year (but no more than five
(5) additional years) for each $100,000 (or fraction of $100,000) by which the
Employer Securities Account exceeds $500,000. The Administration Committee will
apply this Section 6.02 by adjusting the $500,000 and $100,000 limitations by
the adjustment factor prescribed by the Secretary of the Treasury under Code (S)
415(d).
6.03 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
-----------------------------------------------------------
joint and survivor annuity requirements do not apply to this Plan. The Plan does
not provide any annuity distribution to Participants nor to surviving spouses.
6.04 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained in
---------------------------------------------
this Plan prevents the Trustee, in accordance with the direction of the
Administration Committee, from complying with the provisions of a qualified
domestic relations order (as defined in Code (S) 414(p)). This Plan specifically
permits distribution to an alternate payee under a qualified domestic relations
order at any time, irrespective of whether the Participant has attained his
earliest retirement age (as defined under Code (S) 414(p)) under the Plan. A
distribution to an alternate payee prior to the Participant's attainment of
earliest retirement age is available only if: (1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,500, and the
order requires, the alternate payee consents to any distribution occurring prior
to the Participant's attainment of earliest retirement age. Nothing in this
Section 6.05
29
<PAGE>
permits a Participant to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not permitted under the Plan.
The Administration Committee must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon receiving a
domestic relations order, the Administration Committee promptly will notify the
Participant and any alternate payee named in the order, in writing, of the
receipt of the order and the Plan's procedures for determining the qualified
status of the order. Within a reasonable period of time after receiving the
domestic relations order, the Administration Committee must determine the
qualified status of the order and must notify the Participant and each alternate
payee, in writing, of its determination. The Administration Committee must
provide notice under this paragraph by mailing to the individual's address
specified in the domestic relations order, or in a manner consistent with
applicable regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Administration Committee is making its
determination of the qualified status of the domestic relations order, the
Administration Committee must make a separate accounting of the amounts payable.
If the Administration Committee determines the order is a qualified domestic
relations order within eighteen (18) months of the date amounts first are
payable following receipt of the order, the Administration Committee will direct
the Trustee to distribute the payable amounts in accordance with the order. If
the Administration Committee does not make its determination of the qualified
status of the order within the 18-month determination period, the Administration
Committee will direct the Trustee to distribute the payable amounts in the
manner the Plan would distribute if the order did not exist and will apply the
order prospectively if the Administration Committee later determines the order
is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Administration Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.04 by separate benefit checks or other separate distribution to the alternate
payee(s).
6.05 DISTRIBUTION DEMAND FOR EMPLOYER SECURITIES. Distribution of a
-------------------------------------------
Participant's benefit may be made in cash or Employer Securities or both,
provided, however, that if a Participant or Beneficiary so demands, such benefit
shall be distributed only in the form of Employer Securities. Prior to making a
distribution of benefits, the Administrator shall advise the Participant or his
Beneficiary, in writing, of the right to demand that benefits be distributed
solely in Employer Securities.
If a Participant or Beneficiary demands that benefits be distributed solely
in Employer Securities, distribution of a Participant's benefit will be made
entirely in whole shares or other units
30
<PAGE>
of Employer Securities. Any balance in a Participant's General Investment
Account will be applied to acquire for distribution the maximum number of whole
shares or other units of Employer Securities at the then fair market value. Any
fractional unit value unexpended will be distributed in cash. If Employer
Securities are not available for purchase by the Trustee, then the Trustee shall
hold such balance until Employer Securities are acquired and then make such
distribution, subject to this Article.
If the charter or bylaws of the Company restrict the ownership of
substantially all outstanding shares of Employer Securities to current Employees
and the Trust, the distribution of a Participant's Accrued Benefit may be made
entirely in cash without granting him the right to demand distribution in
Employer Securities. Alternatively, Employer Securities may be distributed
subject to the requirement that they be immediately resold to the Company under
payment terms that comply with Section 7.01.
Any balance in a Participant's segregated investment account is not subject
to the demand right that benefits be distributed in the form of Employer
Securities.
The Trustee will make distribution from the Trust only on instructions from
the Plan Administrator.
6.06 ROLLOVER OF LUMP SUM DISTRIBUTION. This Section applies to all
---------------------------------
distributions other than the distribution of Employer Securities.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Article, a distributee may elect, at
the time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
For purposes of this Section, the following definitions apply:
(a) "Eligible rollover distribution." An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: (i) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated beneficiary,
or for a specified period of ten (10) years or more; (ii) any distribution to
the extent such distribution is required under Code (S)401(a)(9); and (iii) the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion of net unrealized appreciation with respect to
Employer Securities).
(b) "Eligible retirement plan." An eligible retirement plan is an
individual retirement account described in Code (S)408(a), an individual
retirement annuity described in Code (S)408(b), an annuity plan described in
Code (S)403(a), or a qualified trust described in Code (S)401(a), that accepts
the distributee's eligible rollover distribution. However, in the case of an
eligible
31
<PAGE>
rollover distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(c) "Distributee." A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code (S)414(p),
are distributees with regard to the interest of the spouse or former spouse.
(d) "Direct rollover." A direct rollover is a payment by the Plan
to the eligible retirement plan specified by the distributee.
ARTICLE VII
EMPLOYER SECURITIES
7.01 PUT OPTION. The Employer will issue a "put option" to each
----------
Participant receiving a distribution of Employer Securities from the Trust if
the Employer Securities are not publicly traded. The put option will permit the
Participant to sell the Employer Securities to the Employer, at any time during
two option periods, at the current fair market value.
The first put option period runs for a period of at least sixty (60) days
commencing on the date of distribution of Employer Securities to the
Participant. The second put option period runs for a period of at least sixty
(60) days commencing after the new determination of the fair market value of
Employer Securities by the Administration Committee and notice to the
Participant of the new fair market value. A Disqualified Person shall be
required to wait for the determination of the next current fair market value
determination as required by Section 4.10.
If a Participant (or his Beneficiary) exercises his put option, the
Employer must purchase the Employer Securities at fair market value upon the
terms provided under this Section 7.01. The Employer may grant the Trust an
option to assume the Employer's rights and obligations at the time a Participant
exercises an option under this Section 7.01.
If the Employer (or the Trustee, at the direction of the Administration
Committee) exercises an option to purchase a Participant's Employer Securities
pursuant to an offer given under this Section 7.01, the purchaser(s) must make
payment in lump sum or, if the distribution to the Participant (or to his
Beneficiary) constitutes a Total Distribution, in substantially equal
installments over a period not exceeding five (5) years, subject to the
Participant's election for a longer payment period than five (5) years. A "Total
Distribution" to a Participant (or to a Beneficiary) is the distribution, within
one taxable year of the recipient, of the entire balance to the Participant's
credit under the Plan.
32
<PAGE>
In the case of a distribution which is not a Total Distribution or which is
a Total Distribution with respect to which the purchaser(s) will make payment in
lump sum, the purchaser(s) must pay the Participant (or Beneficiary) the fair
market value of the Employer Securities repurchased no later than thirty (30)
days after the date the Participant (or Beneficiary) exercises the put option.
In the case of a Total Distribution with respect to which the purchaser(s) will
make installment payments, the purchaser(s) must make the first installment
payment no later than thirty (30) days after the Participant (or Beneficiary)
exercises the put option. For installment amounts not paid within thirty (30)
days of the exercise of the put option, the purchaser(s) must evidence the
balance of the purchase price by executing a promissory note, delivered to the
selling Participant at the Closing. The note delivered at Closing must bear a
reasonable rate of interest, determined as of the Closing Date, and the
purchaser(s) must provide adequate security. The note must provide for equal
annual installments with interest payable with each installment, the first
installment being due and payable one year after the Closing Date. The note
further must provide for acceleration in the event of thirty (30) days' default
of the payment on interest or principal and must grant to the maker of the note
the right to prepay the note in whole or in part at any time or times without
penalty; provided however, the purchaser(s) may not have the right to make any
prepayment during the calendar year or fiscal year of the Participant (or
Beneficiary) in which the Closing Date occurs.
In the case of a purchase from a Disqualified Person, all purchases of
Employer Securities shall be made at prices which, in the judgment of an
Independent Appraiser, do not exceed the fair market value of such shares as of
the date of the transaction.
The requirements of this Section 7.01 shall not apply to the distribution
of any portion of a Participant's Accrued Benefit which has been diversified or
transferred to another plan pursuant to the provisions of Section 7.02 hereof.
Notwithstanding the foregoing, the foregoing shall not be applicable to a
financial institution as defined in Code (S) 581 which is prohibited from
redeeming or purchasing its own securities, if the Participant has been provided
the option to receive its distribution from the Plan in cash.
The protections and rights described in this Section 7.01 are nonterminable
with respect to all Employer Securities acquired with an Exempt Loan. Should
this Plan cease to be an employee stock ownership plan, or should the Exempt
Loan be repaid, Employer Securities acquired with the proceeds of an Exempt Loan
will continue to be subject to the provisions of this Section 7.01 after the
loan is paid.
7.02 DIVERSIFICATION OF INVESTMENTS. Within ninety (90) days after the
------------------------------
close of each Plan Year in the Qualified Election Period, each Participant who
has attained age fifty-five (55) and has completed ten (10) years of
participation under the Plan shall be permitted to direct the Plan as to the
investment of at least twenty-five percent (25%) of the number of shares ever
allocated to the Employer Securities Account, less those shares previously
diversified and or distributed. In the case of the sixth (6th) year of the
Qualified Election Period, the preceding sentence shall be applied by
substituting "fifty percent (50%)" for "twenty-five percent (25%)." The
Participant's direction shall be effective no later than ninety (90) days after
the close of the Plan Year.
33
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For purposes of this Section, Qualified Election Period shall mean the six
(6) Plan Year periods beginning with the Plan Year in which the Participant was
first eligible to make the election.
The Administration Committee shall offer at least three (3) investment
options (not inconsistent with regulations prescribed by Internal Revenue
Service regulations) to each Participant who makes an election under this
Section 7.02 and such funds shall be held in a segregated investment account
under the General Investment Account.
In lieu of offering such investment options, the Administration Committee
may direct that all amounts subject to Participant elections under this Section
7.02 be distributed to Participants. All such distributions shall be distributed
within ninety (90) days after the close of the Plan Year and shall be subject to
the requirements of Article VI of this Plan.
In lieu of receiving a cash distribution under this Section 7.02, a
Participant may direct the Plan to transfer his distribution to another
qualified plan of the Company which accepts such transfers, provided that such
plan permits employee-directed investments and does not invest in Employer
Securities to a substantial degree. Such transfer shall be made within ninety
(90) days after the close of the Plan Year.
7.03 CASH DIVIDENDS. Cash dividends, if any, on shares of Employer
--------------
Securities allocated to Participant Accounts may be accumulated in the Trust or
may be paid to Participants currently as determined in the discretion of the
Board of Directors of the Company, exercised in a uniform and nondiscriminatory
manner. Provided that if the Plan is primarily invested in Employer Securities,
it is intended that the Company shall be allowed a deduction with respect to any
dividends paid on shares of Employer Securities of any class held by the Plan on
the record date to the extent such dividends are paid in cash directly to the
Participants, or their Beneficiaries, or are paid to the Plan and are
distributed from the Plan to the Participants or their Beneficiaries not later
than ninety (90) days after the close of the Plan Year in which paid. Provided
further that if the Plan is primarily invested in Employer Securities, it is
also intended that the Company shall be allowed a deduction for any dividends
paid on shares of Employer Securities (whether or not allocated) and used to
make payments on an Exempt Loan, provided that in the case of dividends paid on
allocated shares, Employer Securities having a fair market value equal to the
dividends will be allocated to such Participants for the year in which such
dividends would otherwise have been allocated to such Participants.
7.04 RIGHT OF FIRST REFUSAL. If any Participant (or Beneficiary) who
----------------------
receives Employer Securities which are not publicly traded, under this Plan
desires to dispose of any of his Employer Securities for any reason during his
lifetime (whether by sale, assignment, gift or any other method of transfer), he
first must offer the Employer Securities for sale to the Employer. The
Administration Committee may require a Participant (or Beneficiary) entitled to
a distribution of Employer Securities to execute an appropriate stock transfer
agreement (evidencing the right of first refusal) prior to receiving a
certificate for Employer Securities.
34
<PAGE>
In the case of an offer by a third party, the offer of the Employer is
subject to all the terms and conditions set forth in Section 7.01, based on the
price equal to the fair market value per share and payable in accordance with
the terms of Section 7.01, unless the selling price and terms offered to the
Participant by the third party are more favorable to the Participant than the
selling price and terms of Section 7.01, in which event, the selling price and
terms of the offer of the third party apply. The Employer must give written
notice to the offering Participant of its acceptance of the Participant's offer
within fourteen (14) days after the Participant has given written notice to the
Employer, or the Employer's rights under this Section 7.04 will lapse. The
Employer may grant the Plan the option to assume the Employer's rights and
obligations with respect to all or any part of the Employer Securities offered
to the Employer under this Section 7.04.
7.05 VOTING EMPLOYER SECURITIES. The Trustee shall vote all Employer
--------------------------
Securities held by it as part of the Plan assets unless provided otherwise
hereinafter:
(a) If any agreement entered into by the Trust provides for voting
of any shares of Employer Securities pledged as security for any obligation
of the Plan, then such shares of Employer Securities shall be voted in
accordance with such agreement. Otherwise, the Trustee shall vote the
Employer Securities pledged.
(b) If the Employer has a registration-type class of securities,
each Participant or Beneficiary shall be entitled to direct the Trustee as
to the manner in which the Employer Securities which are allocated to the
Employer Securities Account of such Participant or Beneficiary is to be
voted.
(c) If the Employer does not have a registration-type class of
securities, each Participant or Beneficiary in the Plan shall be entitled
to direct the Trustee as to the manner in which voting rights on shares of
Employer Securities which are allocated to the Employer Securities Account
of such Participant or Beneficiary are to be exercised with respect to any
corporate matter which involves the voting of such shares with respect to
the approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business, or such similar
transaction as prescribed in applicable regulations.
(d) If the Employer does not have a registration-type class of
securities and the by-laws of the Employer require the Plan to vote an
issue in a manner that reflects a one-man, one-vote philosophy, each
Participant or Beneficiary shall be entitled to cast one vote on an issue
and the Trustee shall vote the shares held by the Plan in proportion to the
results of the votes cast on the issue by the Participants and
Beneficiaries. The Trustee may not vote Employer Securities which a
Participant or Beneficiary, pursuant to this Section, fails to exercise
unless compelled to by Department of Labor rules and regulations.
(e) For purposes of this Section 7.05, the term "registration-type
class of securities" means: (i) a class of securities required to be
registered under Section 12 of the Securities Exchange Act of 1934; and
(ii) a class of securities which would be required to
35
<PAGE>
be so registered except for the exemption from registration provided in
subsection (g)(2)(H) of such Section 12.
7.06 LOANS TO PURCHASE EMPLOYER SECURITIES. The Trustee is specifically
-------------------------------------
authorized to borrow money or to assume indebtedness for the purpose of
acquiring Employer Securities, subject to the following terms and conditions
which shall apply to the Exempt Loan:
(a) The Trustee will use the proceeds of the loan within a
reasonable time after receipt only for any or all of the following
purposes: (i) to acquire Employer Securities, (ii) to repay such loan, or
(iii) to repay a prior Exempt Loan. Except as provided in this Section
7.06, no Employer Security acquired with the proceeds of an Exempt Loan may
be subject to a put, call or other option, or buy-sell or similar
arrangement while held by and when distributed from this Plan, whether or
not this Plan is then an employee stock ownership plan.
(b) The interest rate of the Exempt Loan may not be more than a
reasonable rate of interest.
(c) Any collateral the Trustee pledges to the creditor must consist
only of the assets purchased by the borrowed funds and those assets the
Trust used as collateral on the prior Exempt Loan repaid with the proceeds
of the current Exempt Loan.
(d) The creditor may have no recourse against the Trust under the
Exempt Loan except with respect to such collateral given for the Exempt
Loan, contributions (other than contributions of Employer Securities) that
the Employer makes to the Trust to meet its obligations under the Exempt
Loan, and earnings attributable to such collateral and the investment of
such contributions. The payment made with respect to an Exempt Loan by the
Plan during a Plan Year must not exceed an amount equal to the sum of such
contributions and earnings received during or prior to the year less such
payments in prior years. The Administration Committee and the Trustee must
account separately for such contributions and earnings in the books of
account of the Plan until the Trust repays the Exempt Loan.
(e) In the event of default upon the loan, the value of Plan assets
transferred in satisfaction of the Exempt Loan must not exceed the amount
of the default, and if the lender is a Disqualified Person, the Exempt Loan
must provide for transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the payment schedule of the
Exempt Loan.
(f) The Trustee must add and maintain all assets acquired with the
proceeds of an Exempt Loan in a Loan Suspense Account. In withdrawing
assets from the Loan Suspense Account, the Trustee will apply the
provisions of Treas. Reg. (S)(S) 54.4975-7(b)(8) and (15) as if all
securities in the Loan Suspense Account were encumbered. Upon the payment
of any portion of the loan, the Trustee will effect the release of assets
in the Loan
36
<PAGE>
Suspense Account from encumbrances. For each Plan Year during the duration
of the Exempt Loan, the number of Employer Securities released must equal
the number of encumbered Employer Securities held immediately before
release for the current Plan Year multiplied by a fraction. The numerator
of the fraction is the amount of principal and interest paid for the Plan
Year. The denominator of the fraction is the sum of the numerator plus the
principal and interest to be paid for all future Plan Years. The number of
future Plan Years under the loan must be definitely ascertainable and must
be determined without taking into account any possible extension or renewal
periods. If the interest rate under the Exempt Loan is variable, the
interest to be paid in future Plan Years must be computed by using the
interest rate applicable as of the end of the Plan Year. If collateral
includes more than one class of Employer Securities, the number of Employer
Securities of each class to be released for a Plan Year must be determined
by applying the same fraction to each such class. The Administration
Committee will allocate assets withdrawn from the Loan Suspense Account to
the Accounts of Participants who otherwise share in the allocation of the
Employer's contribution for the Plan Year for which the Trustee has paid
the portion of the Exempt Loan resulting in the release of the assets. The
Administration Committee consistently will make this allocation as of each
Anniversary Date on the basis of non-monetary units, taking into account
the relative Compensation of all such Participants for such Plan Year.
The Administration Committee may also elect at the initiation of the
Exempt Loan to have the Employer Securities released from the Loan Suspense
Account solely with reference to principal payments. However, if release
is determined with reference to principal payments only, the following
additional rules apply: (1) the Exempt Loan must provide for annual
payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for ten (10)
years; (2) interest included in any payment is disregarded only to the
extent that it would be determined to be interest under standard loan
amortization tables; and (3) the entire duration of the Exempt Loan
repayment period does not exceed ten (10) years, even in the event of a
renewal, extension or refinancing of the Exempt Loan.
(g) The loan must be for a specific term and may not be payable at
the demand of any person except in the case of default.
(h) Notwithstanding the fact this Plan ceases to be an employee
stock ownership plan, Employer Securities acquired with the proceeds of an
Exempt Loan will continue after the Trustee repays the loan to be subject
to the provisions of Section 7.01 and 7.04 (if applicable) as required by
Treas. Reg. (S)(S) 54.4975-7(b)(4), (10), (11) and (12) relating to put,
call or other options and to buy-sell or similar arrangements, and shall
not be subjected to any additional puts, calls, options, buy-sell or
similar arrangements while held by or when distributed from the Plan,
except to the extent provided therein.
37
<PAGE>
ARTICLE VIII
EMPLOYER ADMINISTRATIVE PROVISIONS
8.01 INFORMATION. The Employer shall, upon request or as may be
-----------
specifically required hereunder, furnish or cause to be furnished, all of the
information or documentation which is necessary or required by the
Administration Committee and Trustee to perform their respective duties and
functions under the Plan. The Employer's records as to the current information
the Employer furnishes to the Administration Committee and Trustee shall be
conclusive as to all persons.
8.02 NO LIABILITY. The Employer assumes no obligation or responsibility
------------
to any of the Employees, Participants, or Beneficiaries for any act of, or
failure to act, on the part of the Administration Committee (unless the Employer
is the Administration Committee), or the Plan Administrator (unless the Employer
is the Plan Administrator).
8.03 EMPLOYER ACTION. Any action required of the Employer shall be by
---------------
resolution of its Board of Directors or by a person authorized to act by Board
resolution.
8.04 INDEMNITY. The Employer agrees it will indemnify and save harmless
---------
the Board of Directors, individual Trustee(s), and the members of the
Administration Committee, and each of them, from and against any and all loss
resulting from liability to which the Board of Directors, individual Trustee(s),
and the Administration Committee, or the members of the Board of Directors and
Administration Committee, may be subjected by reason of any act or conduct
(except willful or reckless misconduct) in their official capacities in the
administration of this Plan or Trust or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 8.04 shall not relieve the Board
of Directors, individual Trustee(s), or any members of the Administration
Committee from any liability each may have under the Act for breach of a
fiduciary duty.
ARTICLE IX
ADMINISTRATION COMMITTEE
9.01 APPOINTMENT OF COMMITTEE. The Employer shall appoint an
------------------------
Administration Committee to administer the Plan, the members of which may or may
not be Participants in the Plan.
9.02 TERM. Each member of the Administration Committee shall serve until
----
his successor is appointed. Any member of the Administration Committee may be
removed by the Board of Directors, with or without cause, which shall have the
power to fill any vacancy which may occur. An Administration Committee member
may resign upon written notice to the Employer.
38
<PAGE>
9.03 COMPENSATION. The members of the Administration Committee shall
------------
serve without compensation for services as such, but the Employer shall pay all
expenses, including the expenses for any bond required under Act (S) 412. To
the extent such expenses are not paid by the Employer, they shall be paid by the
Trustee from the Trust Fund.
9.04 POWERS OF ADMINISTRATION COMMITTEE. The Administration Committee
----------------------------------
shall have the following powers and duties, which it shall exercise under the
Plan in a uniform and nondiscriminatory manner:
(a) To direct the administration of the Plan in accordance with the
provisions herein set forth;
(b) To adopt rules of procedure and regulations necessary for the
administration of the Plan provided the rules are not inconsistent with the
terms of the Plan;
(c) To determine all questions with regard to rights of Employees,
Participants, and Beneficiaries under the Plan, including but not limited
to rights of eligibility of an Employee to participate in the Plan, the
value of a Participant's Accrued Benefit, and the Accrued Benefit of each
Participant;
(d) To enforce the terms of the Plan and the rules and regulations
it adopts;
(e) To direct the Trustee as respects the crediting and distribution
of the Trust and all other matters within its discretion as provided in the
Trust Agreement;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of counsel (who may, if appropriate, be
counsel for the Employer) and agents whom it may deem advisable to assist
it with the performance of its duties;
(i) To prescribe procedures to be followed by distributees in
obtaining benefits;
(j) To receive from the Employer and from Employees such information
as shall be necessary for the proper administration of the Plan;
(k) To receive and review reports of the financial condition and of
the receipts and disbursements of the Trust Fund from the Trustee;
39
<PAGE>
(l) To establish a nondiscriminatory policy which the Trustee shall
observe in making loans, if any, to Participants;
(m) To maintain, or cause to be maintained, separate Accounts in the
name of each Participant to reflect each Participant's Accrued Benefit
under the Plan;
(n) To select a secretary, who need not be a member of the
Administration Committee;
(o) To interpret and construe the Plan;
(p) To select the issuing company or companies from which insurance
contracts, if any, shall be purchased as provided herein; and to determine
the form, type, and kind of such contract;
(q) To engage the services of an Investment Manager or Managers (as
defined in Act (S) 3(38)), each of whom shall have full power and authority
to manage, acquire or dispose of (or direct the Trustee with respect to
such acquisition or disposition) any plan asset under its control; and
(r) To direct the Trustee in the investment, reinvestment, and
disposition of the Trust Fund as provided in the Trust Agreement.
9.05 MANNER OF ACTION. The decision of a majority of the members of the
----------------
Administration Committee appointed and qualified shall control. In case of a
vacancy in the membership of the Administration Committee, the remaining members
of the Administration Committee may exercise any and all of the powers,
authorities, duties, and discretions conferred upon such Administration
Committee pending the filling of the vacancy. The Administration Committee may,
but need not, call or hold formal meetings. Any decisions made or action taken
pursuant to written approval of a majority of the then members shall be
sufficient. The Administration Committee shall maintain adequate records of its
decisions.
9.06 AUTHORIZED REPRESENTATIVE. The Administration Committee may
-------------------------
authorize any one of its members, or its secretary, to sign on its behalf any
notice, directions, applications, certificates, consents, approvals, waivers,
letters, or other documents. The Administration Committee must evidence this
authority by an instrument signed by all its respective members and filed with
the Trustee.
9.07 NONDISCRIMINATION. The Administration Committee shall administer the
-----------------
Plan in a uniform, nondiscriminatory manner for the exclusive benefit of the
Participants and their Beneficiaries.
9.08 INTERESTED MEMBER. No member of the Administration Committee may
-----------------
decide or determine any matter concerning the distribution, nature, or method of
settlement of his own
40
<PAGE>
benefits under the Plan unless there is only one person acting alone in the
capacity as the Administration Committee.
9.09 FUNDING POLICY. The Administration Committee shall review, not less
--------------
often than annually, all pertinent Employee information and Plan data in order
to establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Administration Committee
shall communicate annually to the Trustee and to any Plan Investment Manager the
Plan's short-term and long-term financial needs so investment policy can be
coordinated with Plan financial requirements.
9.10 INDIVIDUAL STATEMENT. As soon as practicable after the Valuation
--------------------
Date of each Plan Year but within the time prescribed by the Act and the
regulations under the Act, the Administration Committee will deliver to each
Participant (and to each Beneficiary) a statement reflecting the condition of
his Accrued Benefit in the Trust as of that date and such other information the
Act requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Administration Committee, shall have the right to inspect
the records reflecting the Account of any other Participant.
9.11 BOOKS AND RECORDS. The Administration Committee shall maintain, or
-----------------
cause to be maintained, records which will adequately disclose at all times the
state of the Trust Fund and of each separate interest therein. The books,
forms, and methods of accounting shall be the responsibility of the
Administration Committee.
9.12 UNCLAIMED ACCOUNT PROCEDURE. Neither the Trustee nor the
---------------------------
Administration Committee shall be obliged to search for, or ascertain the
whereabouts of, any Participant or Beneficiary. The Administration Committee,
by certified or registered mail addressed to his last known address of record
with the Administration Committee or the Employer, shall notify any Participant
or Beneficiary that he is entitled to a distribution under this Plan, and the
notice shall quote the provisions of this Section. If the Participant or
Beneficiary fails to claim his distributive share or make his whereabouts known
in writing to the Administration Committee within six (6) months from the date
of mailing of the notice, or before this Plan is terminated or discontinued,
whichever should first occur, the Administration Committee shall direct the
Trustee to segregate the Participant's unclaimed Accrued Benefit in a segregated
interest bearing Account in the name of the Participant or Beneficiary. The
Administration Committee shall then notify the Social Security Administration of
the Participant's (or Beneficiary's) failure to claim the distribution to which
he is entitled. The Administration Committee shall request the Social Security
Administration to notify the Participant (or Beneficiary) in accord with the
procedures it has established for this purpose. The segregated Account shall be
entitled to all income it earns and shall bear all expense or loss it incurs.
41
<PAGE>
ARTICLE X
PARTICIPANT ADMINISTRATIVE PROVISIONS
10.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
-----------------------
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee shall pay his Accrued Benefit in the event of his death. A
Participant's Beneficiary designation shall not be valid unless the
Participant's spouse consents to the Beneficiary designation. A Participant's
Beneficiary designation does not require spousal consent if the Participant's
spouse is the Participant's designated Beneficiary, or if the Participant and
his spouse were not married throughout the one-year period ending on the date of
the Participant's death. The spousal consent shall be in a manner consistent
with (S) 401(a)(11) and (S) 417(a)(2)(A) of the Code, shall be in writing, shall
acknowledge the effect of the consent, and shall be witnessed by a notary public
or the Plan Administrator (or his representative). The Administration Committee
shall prescribe the form for the written designation of Beneficiary and, upon
the Participant's filing the form with the Administration Committee, it
effectively shall revoke all designations filed prior to that date by the same
Participant.
10.02 NO BENEFICIARY DESIGNATION. If a Participant fails to name a
--------------------------
Beneficiary in accordance with Section 10.01, or if the Beneficiary named by a
Participant predeceases him or dies before complete distribution of the
Participant's Accrued Benefit, then the Trustee shall pay the Participant's
Accrued Benefit in accordance with Article VII hereof in the following order of
priority:
(a) To the Participant's surviving spouse;
(b) To the Participant's surviving children, including adopted
children, in equal shares;
(c) To the Participant's surviving parents, in equal shares; or
(d) To the legal representative of the estate of the last to die of
the Participant and his Beneficiary.
The Administration Committee shall direct the Trustee as to the method and
to whom the Trustee shall make payment under this Section 10.02.
10.03 PERSONAL DATA TO ADMINISTRATION COMMITTEE. Each Participant and
-----------------------------------------
Beneficiary must furnish to the Administration Committee evidence, data, or
information as the Administration Committee considers necessary or desirable for
the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true, and complete evidence, data,
and information when requested by the Administration Committee, provided the
Administration Committee shall advise each Participant of the effect of his
failure to comply with its request.
42
<PAGE>
10.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of
------------------------
a deceased Participant shall file with the Administration Committee, in writing,
his post office address, and each subsequent change of such post office address.
Any payment or distribution hereunder, and any communication addressed to a
Participant or his Beneficiary, mailed to the last address filed with the
Administration Committee, or if no such address has been filed, then to the last
address indicated on the records of the Employer, shall be deemed to have been
delivered to the Participant or his Beneficiary on the date that such
distribution or communication is deposited in the United States Mail, postage
prepaid.
10.05 ASSIGNMENT OR ALIENATION. Subject to Code (S) 414(p) relating to
------------------------
qualified domestic relations orders, no benefit payable under the Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, including any such liability which is for alimony or
other payments for the support of a spouse or former spouse, or for any other
relative of the Participant, prior to actually being received by the person
entitled to the benefit under the terms of the Plan. The Trust Fund shall not
in any manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any person entitled to benefits hereunder.
10.06 LITIGATION AGAINST THE TRUST. If any legal action which is filed
----------------------------
against the Trustee, Board of Directors, or the Administration Committee, or
against any member or members of the Administration Committee or Board of
Directors, by or on behalf of any Participant or Beneficiary, results adversely
to the Participant or to the Beneficiary, the Trustee shall reimburse itself,
the Board of Directors, Administration Committee, and any member or members of
the Administration Committee or Board of Directors, all costs and fees expended
by it or them by surcharging all costs and fees against the same payable under
the Plan to the Participant or to the Beneficiary, but only to the extent a
court of competent jurisdiction specifically authorizes and directs any such
surcharges.
10.07 INFORMATION AVAILABLE. Any Participant in the Plan or any
---------------------
Beneficiary may examine copies of the summary plan description, the latest
annual report, any bargaining agreement, this Plan, contracts, or any other
instrument under which the Plan was established or is operated. The
Administration Committee will maintain all of the items listed in this Section
in its office, or in such other place or places as may be designated from time
to time in order to comply with the regulations issued under the Act, for
examination during reasonable business hours. Upon the written request of a
Participant or Beneficiary, the Administration Committee shall furnish him with
a copy of any item listed in this Section. The Administration Committee may
make a reasonable charge to the requesting person for the copy so furnished.
10.08 BENEFICIARY'S RIGHT TO INFORMATION. A Beneficiary's right to (and
----------------------------------
the Administration Committee's duty to provide to the Beneficiary) information
or data concerning the Plan shall not arise until he first becomes entitled to
receive a benefit under the Plan.
10.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Administration
---------------------------------------
Committee shall provide adequate notice in writing to any Participant or to any
Beneficiary
43
<PAGE>
("Claimant") whose claim for benefits under the Plan has been denied. The
Administration Committee's notice to the Claimant shall set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the
Administration Committee based its denial;
(c) A description of any additional material and information needed
for the Claimant to perfect his claim and an explanation of why the
material or information is needed;
(d) A statement that the Claimant may;
(i) Request a review upon written application to the
Administration Committee;
(ii) Review pertinent Plan documents; and
(iii) Submit issues and comments in writing; and
(e) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Administration Committee within
seventy-five (75) days after receipt of the Administration Committee's
notice of denial of benefits. The Administration Committee's notice must
further advise the Claimant that his failure to appeal the action to the
Administration Committee in writing within the seventy-five (75)-day period
will render the Administration Committee's determination final, binding,
and conclusive.
If the Claimant should appeal to the Administration Committee, he, or his
duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The
Administration Committee shall re-examine all facts related to the appeal and
make a final determination as to whether the denial of benefits is justified
under the circumstances. The Administration Committee shall advise the Claimant
of its decision within sixty (60) days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make a rendering
of a decision within the sixty (60) day limit infeasible, but in no event shall
the Administration Committee render a decision respecting a denial for a claim
for benefits later than one hundred twenty (120) days after its receipt of a
request for review. A written statement stating the decision on review, the
specific reasons for the decision, and the specific Plan provisions on which the
decision is based shall be mailed or delivered to the Claimant within such sixty
(60) (or one hundred twenty (120)) day period.
The Administration Committee's notice of denial of benefits shall identify
the name of each member of the Administration Committee and the name and address
of the Administration Commit tee member to whom the Claimant may forward his
appeal.
44
<PAGE>
10.10 NO RIGHTS IMPLIED. Nothing contained in this Plan, or any
-----------------
modification or amendment to the Plan, or in the creation of any benefit, or the
payment of any benefit, shall give any Employee, Participant, or any Beneficiary
any right to continue employment, or any legal or equitable right against the
Employer or any officer, director, or Employee of the Employer, or its agents or
employees, except as expressly provided by the Plan, or the Act.
10.11 NOTICE OF CHANGE OF TERMS. The Plan Administrator, within the time
-------------------------
prescribed by the Act and the applicable regulations, shall furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by the Act to be furnished without charge.
ARTICLE XI
FIDUCIARIES' DUTIES
11.01 NAMED FIDUCIARY. The "Named Fiduciary" of the Plan shall consist of
---------------
the following:
(a) The Employer;
(b) The Administration Committee;
(c) The Trustee; and
(d) Such other person or persons that are designated to carry out
fiduciary responsibilities under the Plan in accordance with Section
11.03(c) hereof.
Any person or group of persons may serve in more than one fiduciary capacity
with respect to the Plan. A Named Fiduciary may employ one or more persons to
render advice with regard to any responsibility such Named Fiduciary has under
the Plan.
11.02 ALLOCATION OF RESPONSIBILITIES. The powers and responsibilities of
------------------------------
the Named Fiduciary are hereby allocated as indicated below:
(a) Employer. The Employer shall be responsible for all functions
--------
assigned or reserved to it under the Plan and Trust Agreement. Any
authority assigned or reserved to the Employer under the Plan and Trust
Agreement shall be exercised by resolution of the Employer's Board of
Directors.
(b) Administration Committee. The Administration Committee shall
------------------------
have the responsibility and authority to control the operation and
administration of the Plan in accordance with the terms of the Plan and
Trust Agreement, except with respect to duties and responsibilities
specifically allocated to other fiduciaries. The Administration
<PAGE>
Committee shall have the responsibility and authority to control the
investment of the Trust Fund in accordance with the terms of the Plan and
Trust Agreement, except with respect to duties and responsibilities
specifically allocated to other fiduciaries. The Administration Committee
shall have the authority to issue written directions to the Trustee to the
extent provided in the Trust Agreement. The Trustee shall follow the
Administration Committee's directions unless it is clear that the actions
to be taken under those directions would be violations of applicable
fiduciary standards or would be contrary to the terms of the Plan or Trust
Agreement.
(c) Trustee. The Trustee shall have the duties and responsibilities
-------
set out in the Trust Agreement, subject, however, to direction by the
Administration Committee as set out in the Trust Agreement.
(d) Allocation. Powers and responsibilities may be allocated to
----------
other fiduciaries in accordance with Section 11.03 hereof, or as otherwise
provided herein or in the Trust Agreement.
This Article is intended to allocate to each Named Fiduciary the individual
responsibility for the prudent execution of the functions assigned to it, and
none of such responsibilities or any other responsibility shall be shared by two
or more of such Named Fiduciaries unless such sharing shall be provided by a
specified provision of the Plan or Trust Agreement.
11.03 PROCEDURES FOR DELEGATION AND ALLOCATION OF RESPONSIBILI TIES.
-------------------------------------------------------------
Fiduciary responsibilities may be allocated as follows:
(a) The Administration Committee may specifically allocate
responsibilities to a specified member or members of the Administration
Committee.
(b) The Administration Committee may designate a person or persons
other than a Named Fiduciary to carry out fiduciary responsibilities under
the Plan. This authority shall not cause any person or persons employed to
perform ministerial acts and services for the Plan to be deemed fiduciaries
of the Plan.
(c) The Administration Committee may appoint an Investment Manager
or managers to manage (including the power to acquire and dispose of) the
assets of the Plan (or a portion thereof).
(d) If at any time there be more than one Trustee serving under the
Trust Agreement, such Trustees may allocate specific responsibilities,
obligations, or duties among themselves in such manner as they shall agree.
Any allocation of responsibilities pursuant to this Section shall be made by
filing a written notice thereof with the Administration Committee specifically
designating the person or persons to whom
46
<PAGE>
such responsibilities or duties are allocated and specifically setting out the
particular duties and responsibilities with respect to which the allocation or
designation is made.
11.04 GENERAL FIDUCIARY STANDARDS. Subject to Section 11.05 hereof, a
---------------------------
Named Fiduciary shall discharge his duties with respect to the Plan solely in
the interest of the Participants and their Beneficiaries,
(a) for the exclusive purpose of providing benefits to Participants
and their Beneficiaries and defraying reasonable expenses of administering
the Plan; and
(b) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of any enterprise
of a like character and with like aims; and
(c) by diversifying the investments of the Plan, other than the
investment in Employer Securities, so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so;
and
(d) in accordance with the documents and instruments governing the
Plan, insofar as such documents and instruments are consistent with the
provisions of Title I of the Act.
11.05 LIABILITY AMONG CO-NAMED FIDUCIARIES.
------------------------------------
(a) General. Except for any liability which he may have under the
-------
Act, a fiduciary shall not be liable for the breach of a fiduciary duty or
responsibility by another fiduciary of the Plan except in the following
circumstances:
(i) He participates knowingly in, or knowingly undertakes to
conceal, an act or omission of such other fiduciary, knowing such act
or omission is a breach;
(ii) By his failure to comply with the general fiduciary
standards set out in Section 11.04 hereof in the administration of
his specific responsibilities which give rise to his status as a
fiduciary to commit a breach; or
(iii) He has knowledge of a breach by such other fiduciary and
he does not undertake reasonable efforts under the circumstances to
remedy the breach.
(b) Co-Trustees. In the event that there are two or more Trustees
-----------
serving under the Trust Agreement, each should use reasonable care to
prevent a Co-Trustee from committing a breach of fiduciary responsibility
and they shall jointly manage and control assets of the Plan, except that
in the event of an allocation of responsibilities, obligations, or duties,
a Trustee to whom such responsibilities, obligations, or duties have not
been allocated shall not be liable to any person by reason of this Section,
either individually or as
47
<PAGE>
a Trustee, for any loss resulting to the Plan arising from the acts or
omissions on the part of the Trustee to whom such responsibilities,
obligations, or duties have been allocated.
(c) Liability Where Allocation is in Effect. To the extent that
---------------------------------------
fiduciary responsibilities are specifically allocated by a Named Fiduciary,
or pursuant to the express terms hereof, to any person or persons, then
such Named Fiduciary shall not be liable for any act or omission of such
person in carrying out such responsibility except to the extent that the
Named Fiduciary violated Section 11.04 hereof: (i) with respect to such
allocation or designation, (ii) with respect to the establishment or
implementation of the procedure for making such an allocation or
designation, (iii) in continuing the allocation or designation, or (iv) the
Named Fiduciary would otherwise be liable in accordance with this Section
11.05.
(d) Liability of Trustee Following Administration Committee
-------------------------------------------------------
Directions. No Trustee shall be liable for following instructions of the
Administration Committee given pursuant to Section 11.02(b) and (c) hereof.
(e) No Responsibility for Employer Action. Neither the Trustee nor
-------------------------------------
the Administration Committee shall have any obligation or responsibility
with respect to any action required by the Plan to be taken by the
Employer, any Participant or eligible Employee, or the failure of any of
the above persons to act or make any payment or contribu tion, or to
otherwise provide any benefit contemplated under this Plan, nor shall the
Trustee or the Administration Committee be required to collect any
contribution required under the Plan, or determine the correctness of the
amount of any Employer contribution.
(f) No Duty to Inquire. Neither the Trustee nor the Administration
------------------
Committee shall have any obligation to inquire into or be responsible for
any action or failure to act on the part of others.
(g) Liability of Trustee Where Investment Manager Appointed. If an
-------------------------------------------------------
Investment Manager has been appointed pursuant to Section 11.03(c) hereof,
then neither the Trustee nor the Administration Committee shall be liable
for the acts or omissions of such Investment Manager, or be under any
obligation to invest or otherwise manage any assets of the Plan which are
subject to the management of such Investment Manager.
(h) Successor Fiduciary. No Named Fiduciary shall be liable with
-------------------
respect to any breach of fiduciary duty if such breach was committed before
he became a Named Fiduciary or after he ceased to be a Named Fiduciary.
48
<PAGE>
ARTICLE XII
DISCONTINUANCE, AMENDMENT AND TERMINATION
12.01 DISCONTINUANCE. The Employer shall have the right, at any time, to
--------------
suspend or discontinue its contribution under the Plan.
12.02 AUTHORITY TO AMEND THE PLAN. The Employer may amend the Plan at any
---------------------------
time. However, it shall be impossible, at any time before the satisfaction of
all liabilities hereunder, for any monies to revert to the Employer or be used
for any purpose other than the exclusive benefit of the Participants and persons
claiming through them.
Provided however, that the amendment of the Plan (including any
Restatement) shall not:
(a) revise the vested Accrued Benefit of a Participant determined as
of the later of the date such amendment is adopted, or the date such
amendment becomes effective, if such revised vested Accrued Benefit is less
than that computed under the Plan without regard to such amendment; or
(b) revise the vesting schedule under the Plan unless each
Participant having at least three (3) years or more of Service is permitted
to elect within a reasonable period after the adoption of such amendment to
have his vested Accrued Benefit computed under the Plan without regard to
such amendment. For Plan Years beginning prior to January 1, 1989, the
election described above applies only to Participants having at least five
(5) Years of Service with the Employer. A reasonable period for purposes of
this Section 12.02(b) shall be a period which begins no later than the date
the Plan amendment is adopted and ends no later than the last to occur of
the following:
(i) sixty (60) days after the day the Plan amendment is
adopted;
(ii) sixty (60) days after the day on which the Plan amendment
becomes effective; or
(iii) sixty (60) days after a Participant is issued written
notice of the Plan amendment.
Provided further, no amendment shall:
(a) Authorize or permit any of the Trust Fund (other than the part
which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries;
(b) Cause or permit any portion of the Trust Fund to revert to or
become the property of the Employer;
49
<PAGE>
(c) Increase the duties or responsibilities of the Trustee or the
Administration Committee without the written consent of the affected
Trustee or the affected member of the Administration Committee.
The Employer shall make all amendments in writing. Each amendment shall state
the date to which it is either retroactively or prospectively effective.
12.03 TERMINATION. The Employer shall have the right to terminate the
-----------
Plan at any time. The Plan shall terminate upon the first to occur of the
following:
(a) The date terminated by action of the Board of Directors;
(b) The date the Employer shall be judicially declared bankrupt or
insolvent; or
(c) The dissolution, merger, consolidation, or reorganization of the
Employer or the sale by the Employer of all or substantially all of its
assets, unless the successor or purchaser makes provisions to continue the
Plan, in which event the successor or purchaser shall be substituted as the
Employer under this Plan.
12.04 VESTING ON TERMINATION OR SUSPENSION. Notwithstanding any other
------------------------------------
provision of the Plan to the contrary, upon the date of full or partial
termination of the Plan, or, upon complete discontinuance of contributions to
the Plan, an affected Participant's right to his Accrued Benefit shall be one
hundred percent (100%) Nonforfeitable. The Administration Committee shall
interpret and administer this Section 12.04 in accord with the intent and scope
of the regulations issued under Code (S) 411(d)(3).
12.05 PROCEDURE ON TERMINATION. In the event of termination of the Plan
------------------------
or permanent discontinuance of Employer contributions, the Employer shall, in
its sole discretion, authorize any one of the following procedures:
(a) Continue Plan. To continue the Plan in operation in all
-------------
respects until the Trustee has distributed all benefits under the Plan,
except that no further persons shall become Participants, no further
Employee contributions shall be made, all Accounts shall be fully vested,
and no further payments shall be made except in distribution of the Trust
Fund and payment of administration expenses; or
(b) Liquidate Plan. To wind up and liquidate the Plan and Trust and
--------------
distribute the assets thereof after deduction of all expenses to the
Participants, Former Participants, and Beneficiaries in accordance with
their respective Accounts as then constituted. If the Employer makes no
election before termination, then this subsection (b) will govern
distribution of the Trust Fund.
12.06 MERGER. The Trustee shall not consent to, or be a party to, any
------
merger or consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless
50
<PAGE>
immediately after the merger, consolidation, or transfer, the surviving Plan
provides each Participant a benefit equal to or greater than the benefit each
Participant would have received had the Plan terminated immediately before the
merger, consolidation, or transfer.
12.07 NOTICE OF CHANGE OF TERMS. The Administration Committee, within the
-------------------------
time prescribed by the Act and applicable regulations, shall furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by the Act to be furnished without charge.
12.08 INITIAL QUALIFICATION. Notwithstanding any other provisions of this
---------------------
Plan, the Employer's adoption of this Plan is subject to the condition precedent
that the Plan initially shall be approved and deemed qualified by the Internal
Revenue Service as satisfying the requirements of (S) 401(a) of the Code and
that the Trust shall be entitled to exemption under the provisions of (S)
501(a). In the event the Employer shall fail to secure such initial
determination, the contributions made by the Employer together with any income
received or accrued thereon less any expenses paid shall be returned to the
Employer and the Plan and Trust shall terminate. No Participant or Beneficiary
shall have any right or claim to the Trust Fund or to any benefit under the Plan
before the Internal Revenue Service initially determines that the Plan and Trust
qualify under the provisions of (S)(S) 401(a) and 501(a) of the Code.
12.09 REVERSION OF EXCESS ACCOUNT. Notwithstanding any provisions
---------------------------
contained herein to the contrary, the Employer reserves the right to recover
upon the termination of the Plan and Trust Fund any amounts held in an excess
account that cannot be allocated to the accounts of Participants and their
Beneficiaries in the year of termination because of the limitations contained in
Article III of the Plan and (S) 415 of the Code after the satisfaction of all
fixed and contingent obligations to Participants and their Beneficiaries under
the Plan.
ARTICLE XIII
THE TRUST
13.01 PURPOSE OF THE TRUST FUND. A Trust Fund has been created and will
-------------------------
be maintained for the purposes of the Plan, and the assets thereof shall be
invested in accordance with the terms of the Trust Agreement. The primary
purpose of the Plan is for the investment in Employer Securities. The Trustee
will apply contributions to pay any outstanding obligations of the Trust
incurred for the purchase of Employer Securities or they may be applied to
purchase additional Employer Securities from current shareholders, treasury
shares, or newly issued shares from the Company. All contributions will be paid
into the Trust Fund, and all benefits under the Plan will be paid from the Trust
Fund.
13.02 APPOINTMENT OF TRUSTEE. Trustee(s) shall be appointed by the Board
----------------------
of Directors to administer the Trust Fund. The Trustee's obligations, duties,
and responsibilities shall be governed solely by the terms of the Trust
Agreement.
51
<PAGE>
13.03 EXCLUSIVE BENEFIT OF PARTICIPANTS. Subject to Sections 3.04 and
---------------------------------
12.08 hereof, the Trust Fund will be used and applied only in accordance with
the provisions of the Plan to provide the benefits thereof, and no part of the
corpus or income of the Trust Fund shall be used for or diverted to purposes
other than for the exclusive benefit of the Participants and their Beneficiaries
and with respect to expenses of administration. Notwithstanding the preceding
sentence, as provided in Section 12.09 hereof, the Employer reserves the right
to recover any amounts held in an excess account at the termination of the Trust
Fund that cannot be allocated to the accounts of Participants and their
Beneficiaries in the year of termination because of the limitations contained in
Article III of the Plan and (S) 415 of the Code.
13.04 BENEFITS SUPPORTED ONLY BY THE TRUST FUND. Any person having any
-----------------------------------------
claim under the Plan will look solely to the assets of the Trust Fund for
satisfaction.
ARTICLE XIV
TOP HEAVY RULES
14.01 MINIMUM EMPLOYER CONTRIBUTION. If this Plan is top heavy in any
-----------------------------
Plan Year, the Plan guarantees a minimum contribution (subject to the provisions
of this Article XIV) of three percent (3%) of Compensation for each Non-Key
Employee who is a Participant employed by the Employer on the Valuation Date of
the Plan Year, without regard to Hours of Service completed by such Participant
during the Plan Year. The Plan satisfies the guaranteed minimum contribution
for the Non-Key Employee if the Non-Key Employee's contribution rate is at least
equal to the minimum contribution. For purposes of this paragraph, a Non-Key
Employee Participant includes any Employee otherwise eligible to participate in
the Plan but who is not a Participant because his Compensation does not exceed a
specified level.
If the contribution rate for the Key Employee with the highest contribution
rate is less than three percent (3%), the guaranteed minimum contribution for
Non-Key Employees shall equal the highest contribution rate received by a Key
Employee. The contribution rate is the sum of Employer contributions (not
including Employer contributions to Social Security) and forfeitures allocated
to the Participant's Account for the Plan Year divided by his Compensation for
the Plan Year. For purposes of determining the minimum contribution, the
Administration Committee shall consider contributions made to any plan pursuant
to a salary reduction agreement or similar arrangement as Employer
contributions. To determine the contribution rate, the Administration Committee
shall consider all qualified top heavy defined contribution plans maintained by
the Employer as a single plan.
14.02 ADDITIONAL CONTRIBUTION. If the contribution rate for the Plan Year
-----------------------
with respect to a Non-Key Employee described in Section 14.01 is less then the
minimum contribution, the Employer will increase its contribution for such
Employee to the extent necessary so his contribution rate for the Plan Year will
equal the guaranteed minimum contribution. The
52
<PAGE>
Administration Committee shall allocate the additional contribution to the
Account of the Non-Key Employee for whom the Employer makes the contribution.
14.03 DETERMINATION OF TOP HEAVY STATUS. The Plan is top heavy for a Plan
---------------------------------
Year if the top heavy ratio as of the Determination Date exceeds sixty percent
(60%). The top heavy ratio is a fraction, the numerator of which is the sum of
the present value of Accrued Benefits of all Key Employees as of the
Determination Date, the contributions due as of the Determination Date, and
distributions made within the five (5) Plan Year period ending on the
Determination Date, and the denominator of which is a similar sum determined for
all Employees. The Administration Committee shall calculate the top heavy ratio
by disregarding the Accrued Benefit of any Non-Key Employee who was formerly a
Key Employee. The Administration Committee shall calculate the top heavy ratio
by disregarding the Accrued Benefit (including distributions, if any, of the
Accrued Benefit) of an individual who has not performed any service for the
Employer during the five (5) Plan Year period ending on the Determination Date.
The Administration Committee shall calculate the top heavy ratio, including the
extent to which it must take into account distributions, rollovers and
transfers, in accordance with Code (S) 416 and the regulations under that Code
section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), this Plan is top heavy only if it is a part of the
Required Aggregation Group, and the top heavy ratio for both the Required
Aggregation Group and the Permissive Aggregation Group exceeds sixty percent
(60%). The Administration Committee will calculate the top heavy ratio in the
same manner as required by the first paragraph of this Section 14.03, taking
into account all plans within the Aggregation Group. To the extent the
Administration Committee must take into account distribu tions to a
Participant, the Administration Committee shall include distributions from a
terminated plan which would have been part of the Required Aggregation Group if
it were in existence on the Determination Date. The Administration Committee
shall calculate the present value of Accrued Benefits and the other amounts the
Administration Committee must take into account under defined benefit plans or
simplified employee pension plans included within the group in accordance with
the terms of those plans, Code (S) 416 and the regulations under that Code
section. If an aggregated plan does not have a valuation date coinciding with
the Determination Date, the Administration Committee shall value the Accrued
Benefits in the aggregated plan as of the most recent valuation date falling
within the twelve-month period ending on the Determination Date. The
Administration Committee shall calculate the top heavy ratio with reference to
the Determination Dates that fall within the same calendar year.
14.04 LIMITATION ON ALLOCATIONS. If, during any Limitation Year, this
-------------------------
Plan is top heavy, the Administration Committee shall apply the limitations of
Article III to a Participant by substituting "100%" for "125%" each place it
appears in Section 3.06. This Section 14.04 shall not apply if:
(a) The contribution rate for a Non-Key Employee who participates
only in the defined contribution plan(s) would satisfy Section 14.01 if the
Administration Committee substituted four percent (4%) for three percent
(3%).
53
<PAGE>
(b) A Non-Key Employee who participates in the top heavy defined
benefit plan(s) receives an extra minimum contribution or benefit which
satisfies Code (S) 416(h)(2); and
(c) The top heavy ratio does not exceed ninety percent (90%).
14.05 DEFINITIONS. For purposes of applying the provisions of this
-----------
Article XIV:
(a) "Key Employee" shall mean, as of any Determination Date, any
Employee or former Employee (or Beneficiary of such Employee) who, at any
time during the Plan Year (which includes the Determination Date) or during
the preceding four (4) Plan Years, is an officer (having annual
Compensation in excess of 150% of the Code (S) 415(c)(1)(A) limitation in
effect for any such Plan Years) of the Employer, one of the Employees
(having annual Compensation in excess of the Code (S) 415(c)(1)(A)
limitation in effect for any such Plan Years) owning the ten (10) largest
interests in the Employer, a more than five percent (5%) owner of the
Employer, or a more than one percent (1%) owner of the Employer who has
annual Compensation of more than $150,000. The constructive ownership
rules of Code (S) 318 (or the principles of that section, in the case of an
unincorporated Employer,) will apply to determine ownership in the
Employer. The Administration Committee will make the determination of who
is a Key Employee in accordance with Code (S) 416(i) and the regulations
under that Code section.
(b) "Non-Key Employee" is an Employee who does not meet the
definition of Key Employee.
(c) "Compensation" shall mean the first $200,000 (or, beginning
January 1, 1988, such larger amount as the Commissioner of Internal Revenue
may prescribe) of Compen sation as defined in Section 3.06(c).
(d) "Required Aggregation Group" means:
(1) Each qualified plan of the Employer in which at least one
(1) Key Employee participates; and
(2) Any other qualified plan of the Employer which enables a
plan described in (1) to meet the requirements of Code (S) 401(a)(4)
or Code (S) 410.
(e) "Permissive Aggregation Group" is the Required Aggregation Group
plus any other qualified plans maintained by the Employer, but only if such
group would satisfy in the aggregate the requirements of Code (S) 401(a)(4)
and Code (S) 410. The Administration Committee shall determine which plans
to take into account in determining the Permissive Aggregation Group.
54
<PAGE>
(f) "Employer" shall mean all the members of a controlled group of
corporations (as defined in Code (S) 414(b)), of a commonly controlled
group of trades or businesses (whether or not incorporated) (as defined in
Code (S) 414(c)), or an affiliated service group (as defined in Code (S)
414(m)), of which the Employer is a part. However, the Administration
Committee shall not aggregate ownership interests in more than one member
of a related group to determine whether an individual is a Key Employee
because of his ownership interest in the Employer.
(g) "Determination Date" for any Plan Year is the Valuation Date of
the preceding Plan Year or, in the case of the first Plan Year of the Plan,
the Valuation Date of that Plan Year.
14.06 MINIMUM VESTING. For any Plan Year in which this Plan is top heavy,
---------------
the minimum vesting schedule will automatically apply to the Plan. The minimum
vesting schedule applies to all benefits within the meaning of (S) 411(a)(7) of
the Code except those attributable to Employee contributions, including benefits
accrued before the effective date of Code (S) 416 and benefits accrued before
the Plan became top heavy. Further, no reduction in vested benefits may occur
in the event the Plan's status as top heavy changes for any Plan Year. However,
this Section does not apply to the Accrued Benefit of any Employee who does not
have an Hour of Service after the Plan has initially become top heavy, and such
Employee's Accrued Benefit attributable to Employer contributions and
forfeitures will be determined without regard to this Section.
The nonforfeitable interest of each Employee in his or her Accrued Benefit
attributable to Employer contributions shall be determined on the basis of the
following:
20% vesting after 2 years of service
40% vesting after 3 years of service
60% vesting after 4 years of service
80% vesting after 5 years of service
100% vesting after 6 years of service
Should the Plan cease to be top heavy, the above-stated vesting schedule shall
revert to that stated in Article VI subject to the conditions of Article XII and
it shall be deemed that all Participants having three (3) or more years of
Service shall have elected to retain the schedule stated in this Section.
14.07 NONAPPLICATION OF THIS ARTICLE. If the Participant is provided with
------------------------------
the minimum benefit required by (S) 416 of the Code which is subject to the
above-stated vesting schedule in another plan of the Employer, the provisions of
this Article XIV will have no application.
55
<PAGE>
ARTICLE XV
MISCELLANEOUS
15.01 EXECUTION OF RECEIPTS AND RELEASES. Any payment to any Participant,
----------------------------------
or to his legal representative or Beneficiary, in accordance with the provisions
of the Plan, shall to the extent thereof be in full satisfaction of all claims
hereunder against the Plan and Trust. The Administration Committee may require
such a Participant, legal representative, or Beneficiary, as a condition
precedent to such payment, to execute a receipt and release therefor in such
form as it shall determine.
15.02 NO GUARANTEE OF INTERESTS. Neither the Trustee, the Administration
-------------------------
Committee, nor the Employer guarantee the Trust Fund from loss or depreciation.
The Employer does not guarantee the payment of any money which may be due or may
become due to any person from the Trust Fund. The liability of the
Administration Committee and the Trustee to make any payment from the Trust Fund
is limited to the then available assets of the Trust.
15.03 PAYMENT OF EXPENSES. All expenses incident to the administration,
-------------------
termination, protection of the Plan and Trust, including but not limited to
legal, accounting, and Trustee fees, shall be paid by the Employer, except that
in case of failure of the Employer to pay the expenses, they will be paid from
the Trust Fund, and until paid, shall constitute a first and prior claim and
lien against the Trust Fund.
15.04 EMPLOYER RECORDS. Records of the Employer as to an Employee's or
----------------
Participant's period of employment, termination of employment and the reason
therefor, leaves of absence, re-employment, and compensation will be conclusive
on all persons, unless determined to be incorrect.
15.05 INTERPRETATIONS AND ADJUSTMENTS. To the extent permitted by law, an
-------------------------------
interpretation of the Plan and a decision of any matter within the Named
Fiduciary's discretion made in good faith is binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes known
and the person responsible shall make such adjustment on account thereof as he
considers equitable and practicable.
15.06 UNIFORM RULES. In the administration of the Plan, uniform rules
-------------
will be applied to all Participants similarly situated.
15.07 EVIDENCE. Evidence required of anyone under the Plan may be by
--------
certificate, affidavit, document, or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
15.08 SEVERABILITY. In the event any provision of the Plan shall be held
------------
to be illegal or invalid for any reason, the illegal or invalid provisions of
the Plan shall be fully severable and the
56
<PAGE>
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein.
15.09 NOTICE. Any notice required to be given herein by the Trustee, the
------
Employer, or the Administration Committee, shall be deemed delivered, when (a)
personally delivered, or (b) placed in the United States mail, postage prepaid,
in an envelope addressed to the last known address of the person to whom the
notice is given.
15.10 WAIVER OF NOTICE. Any person entitled to notice under the Plan may
----------------
waive the notice.
15.11 SUCCESSORS. The Plan shall be binding upon all persons entitled to
----------
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, its successors and assigns, and upon the Trustee, the
Administration Committee, and their successors.
15.12 HEADINGS. The titles and headings of Articles and Sections are
--------
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
15.13 GOVERNING LAW. All questions arising with respect to the provisions
-------------
of this Agreement shall be determined by application of the laws of the State of
North Carolina except to the extent North Carolina law is preempted by Federal
statute.
Signed the _____ day of ______________, 1996, effective as of the _____ day
of _______________, 1996.
RICHMOND SAVINGS BANK, INC., SSB
By: ______________________________
President
ATTEST:
____________________________
______ Secretary
57
<PAGE>
EXHIBIT 10.3
EMPLOYEE STOCK OWNERSHIP TRUST
OF
RICHMOND SAVINGS BANK, INC., SSB
Prepared By:
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
Greensboro, North Carolina
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page #
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<S> <C>
RECITALS.......................................................................1
TITLE AND DESCRIPTIONS.........................................................2
1.01 TITLE...............................................................2
-----
1.02 TERMS DEFINED IN PLAN...............................................2
---------------------
1.03 WORD USAGE..........................................................2
----------
PLAN AND TRUST COMPLEMENTARY...................................................3
2.01 COMPLEMENTARY.......................................................3
-------------
2.02 INTENT TO QUALIFY...................................................3
-----------------
CONTRIBUTIONS..................................................................4
3.01 CONTRIBUTIONS.......................................................4
-------------
3.02 COMMINGLING OF FUNDS................................................4
--------------------
PAYMENTS FROM TRUST FUND.......................................................5
4.01 DISTRIBUTIONS.......................................................5
-------------
4.02 DIRECTION BY PLAN ADMINISTRATOR.....................................5
-------------------------------
4.03 TRUST FUND FOR EXCLUSIVE BENEFIT OF PARTICIPANTS....................5
------------------------------------------------
4.04 LIABILITY FOR PAYMENTS..............................................5
----------------------
4.05 RETURN OF EMPLOYER CONTRIBUTIONS....................................5
--------------------------------
4.06 PAYMENT IN THE EVENT OF DISABILITY OR INCAPACITY....................5
------------------------------------------------
INVESTMENT OF TRUST FUND.......................................................7
5.01 INVESTMENTS.........................................................7
-----------
5.02 INVESTMENT MANAGER..................................................7
------------------
5.03 DIRECTION OF INVESTMENTS............................................8
------------------------
5.04 SEPARATE INVESTMENT ACCOUNTS........................................9
----------------------------
5.05 INVESTMENT IN POOLED FUND...........................................9
-------------------------
POWERS OF THE TRUSTEE.........................................................10
6.01 INVESTMENT POWERS..................................................10
-----------------
6.02 ANCILLARY TRUSTEE..................................................12
-----------------
ADMINISTRATIVE PROVISIONS.....................................................14
7.01 ACCOUNTS AND RECORDS...............................................14
--------------------
7.02 INTENTION TO QUALIFY...............................................14
--------------------
7.03 PLAN ADMINISTRATOR ACTION..........................................14
-------------------------
7.04 VALUATION OF TRUST.................................................14
------------------
7.05 EMPLOYER ACTION....................................................15
---------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.06 RELIANCE ON WRITTEN INSTRUMENT.....................................15
------------------------------
7.07 LIABILITY FOR PAYMENT OF FUNDS.....................................15
------------------------------
7.08 LIABILITY OF TRUSTEE...............................................15
--------------------
7.09 COURT PROCEEDINGS..................................................15
-----------------
7.10 PARTIES TO LITIGATION..............................................15
---------------------
7.11 THIRD PARTY........................................................15
-----------
7.12 AUTHORIZATION WITH RESPECT TO TAXES................................16
-----------------------------------
7.13 CONSULTATION WITH COUNSEL..........................................16
-------------------------
7.14 NO INTEREST IN EMPLOYER............................................16
-----------------------
7.15 FEES AND EXPENSES..................................................16
-----------------
7.16 BONDING OF TRUSTEE.................................................16
------------------
7.17 RELATIONSHIP OF FIDUCIARIES........................................16
---------------------------
7.18 PRUDENT MAN RULE...................................................17
----------------
7.19 ALIENATION.........................................................17
----------
7.20 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER
-----------------------------------------------
APPOINTED......................................................17
---------
7.21 INSURANCE COMPANY PROTECTED........................................17
---------------------------
TRUSTEE LIABILITY.............................................................18
8.01 TRUSTEE LIABILITY..................................................18
-----------------
SUBSTITUTION OF TRUSTEE......................................................19
9.01 TRUSTEE............................................................19
-------
9.02 RESIGNATION........................................................19
-----------
9.03 REMOVAL............................................................19
-------
9.04 SUCCESSION OF TRUSTEE..............................................19
---------------------
9.05 MERGER OF CORPORATE TRUSTEE........................................19
---------------------------
AMENDMENT AND TERMINATION.....................................................20
10.01 AMENDMENT..........................................................20
---------
10.02 TERMINATION........................................................20
-----------
10.03 SUSPENSION OF CONTRIBUTIONS........................................20
---------------------------
10.04 MERGER OR CONSOLIDATION............................................20
-----------------------
10.05 REVERSION OF SUSPENSE ACCOUNT......................................20
-----------------------------
OTHER EMPLOYERS; SUCCESSOR EMPLOYERS..........................................21
11.01 ADOPTION BY OTHER EMPLOYERS........................................21
---------------------------
11.02 CONTINUATION BY EMPLOYER'S SUCCESSOR...............................21
------------------------------------
MISCELLANEOUS PROVISIONS......................................................22
12.01 CONTRIBUTIONS NOT RECOVERABLE......................................22
-----------------------------
12.02 LIMITATIONS ON PARTICIPANTS' RIGHTS................................22
-----------------------------------
12.03 INDEMNIFICATION OF INDIVIDUAL TRUSTEE..............................22
-------------------------------------
12.04 RECEIPT OF RELEASE.................................................22
------------------
12.05 ACCEPTANCE.........................................................22
----------
12.06 ACCOUNTING PERIOD..................................................22
-----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12.07 TITLE OF TRUST ASSETS..............................................22
---------------------
12.08 NOTICE.............................................................23
------
12.09 HEADINGS...........................................................23
--------
12.10 GOVERNING LAW......................................................23
-------------
12.11 EXECUTIONS AND COUNTERPARTS........................................23
---------------------------
</TABLE>
<PAGE>
EMPLOYEE STOCK OWNERSHIP TRUST
OF
RICHMOND SAVINGS BANK, INC., SSB
This Agreement by and between RICHMOND SAVINGS BANK, INC., SSB, a North
Carolina corporation (the "Employer" and sometimes referred to herein as the
"Company"), and the undersigned Trustee(s) (the "Trustee").
RECITALS
--------
WHEREAS, RICHMOND SAVINGS BANK, INC., SSB has adopted an Employee Stock
Ownership Plan for the benefit of its employees;
NOW, THEREFORE, the Employee Stock Ownership Trust of Richmond Savings
Bank, Inc., SSB is hereby adopted in its entirety so that it shall provide as
follows:
1
<PAGE>
ARTICLE I
TITLE AND DESCRIPTIONS
1.01 TITLE. This Trust Agreement shall be known as the Employee Stock
-----
Ownership Trust of Richmond Savings Bank, Inc., SSB.
1.02 TERMS DEFINED IN PLAN. The definitions set forth in the Plan are
---------------------
hereby incorporated by reference.
1.03 WORD USAGE. Words used in the masculine shall apply to the feminine
----------
where applicable, and wherever the context of the Plan dictates, the plural
shall be read as the singular and the singular as the plural.
2
<PAGE>
ARTICLE II
PLAN AND TRUST COMPLEMENTARY
2.01 COMPLEMENTARY. This Trust Agreement is established effective as of
-------------
the 1st day of January, 1996. The Trustee's rights, powers, titles, duties,
responsibilities, discretions, and immunities shall be governed solely by this
Trust Agreement except as specifically referenced in the provisions of the Plan.
2.02 INTENT TO QUALIFY. The Plan and Trust are intended to satisfy the
-----------------
requirements of Sections 401 and 501 of the Code and the requirements of the
Act, and all provisions hereof shall be construed to that result.
3
<PAGE>
ARTICLE III
CONTRIBUTIONS
3.01 CONTRIBUTIONS. The Trustee shall receive all contributions made to
-------------
it in cash or in other property acceptable to it. All contributions so received
together with the income therefrom and any other increment thereon shall be
held, managed, and administered by the Trustee pursuant to the terms of the Plan
and Trust without distinction between principal and income. The Trustee shall
be accountable to the Employer for the funds contributed to it by the Employer,
but shall have no duty to administer the Plan nor to determine that the
contributions received from the Employer comply with the provisions of the Plan
or that the assets of the Trust are adequate to provide any benefit payable
pursuant to the Plan. The Trustee shall not be obligated to collect any
contributions from the Employer, nor be obligated to see that funds deposited
with it are deposited according to the provisions of the Plan.
3.02 COMMINGLING OF FUNDS. Unless otherwise directed by the Plan
--------------------
Administrator, the Trustee shall hold, invest, and administer the Trust assets
as a single fund without identification of any part of the Trust assets to the
Employer or to any Participant or group of Participants or their Beneficiaries.
4
<PAGE>
ARTICLE IV
PAYMENTS FROM TRUST FUND
4.01 DISTRIBUTIONS. Payments shall be made from the Trust Fund by the
-------------
Trustee to such persons, in such manner, at such times, and in such amounts as
the Plan Administrator shall from time to time direct in writing, provided,
however, the Trustee may withhold compliance with the Plan Administrator's
direction to the extent that, and so long as, the Trustee shall deem such
withholding necessary to insure payment of the Trustee's expenses or to protect
the Trustee against liability for taxes or any other liability.
4.02 DIRECTION BY PLAN ADMINISTRATOR. The Trustee shall not be liable for
-------------------------------
any distribution made or acts done by it pursuant to written directions of the
Plan Administrator. The Trustee shall not be obligated to inquire as to whether
any payee or distributee is entitled to any payment or whether the distribution
is proper or within the terms of the Plan, or as to the manner of making any
payment or distribution. The Trustee shall be accountable only to the Plan
Administrator for any payment or distribution made by it on the order or
direction of the Plan Administrator.
4.03 TRUST FUND FOR EXCLUSIVE BENEFIT OF PARTICIPANTS. Subject to Section
------------------------------------------------
4.05 hereof, it shall be impossible, at any time, for any part of the Trust
Fund, other than such part as is required to pay taxes and administration
expenses, to revert to the Employer, or to be used for, or diverted to, purposes
other than for the exclusive benefit of the Participants, Former Participants,
or their Beneficiaries prior to the satisfaction of all liabilities under the
Plan. The term "liability" as used herein includes both fixed and contingent
obligations owed to the Participants and their Beneficiaries. It shall be
impossible for the Employer to recover any portion of the Trust Fund other than
such amounts, if any, as may remain in the Trust Fund because of erroneous
actuarial calculations, after the satisfaction of all fixed and contingent
obligations to Participants and their Beneficiaries under the Plan.
4.04 LIABILITY FOR PAYMENTS. The liability of the Trustee to make
----------------------
payments from the Trust Fund is limited to the available assets of the Trust.
4.05 RETURN OF EMPLOYER CONTRIBUTIONS. Notwithstanding any provisions
--------------------------------
herein to the contrary, upon the Employer's request, a contribution which was
made upon a mistake of fact, conditioned upon qualification of the Plan, or upon
deductibility of the contribution under Section 404 of the Code, shall be
returned to the Employer within one year after payment of the contribution,
denial of the qualification, or disallowance of the deduction (to the extent
disallowed), as the case may be.
4.06 PAYMENT IN THE EVENT OF DISABILITY OR INCAPACITY. If any person
------------------------------------------------
entitled to benefits hereunder (the "Payee") shall be under a legal disability,
or, in the sole judgment of the Plan Administrator, shall be unable to apply
such payment in furtherance of his own interest
5
<PAGE>
and advantage, payments hereunder may be made in any one or more of the
following ways as directed by the Plan Administrator:
(a) To the Payee directly;
(b) To the guardian of his person or his estate;
(c) To a relative of the Payee, to be expended for his benefit; or
(d) To the custodian of the Payee under any Uniform Gifts (or
Transfers) to Minors Act.
The Trustee shall not be obligated to determine whether any Payee is a minor or
is so incapacitated, but may rely on the Plan Administrator's directions as to
payment of benefits. The Plan Administrator's determination of minority or
incapacity of the Payee shall be final. Any payment made by the Trustee
pursuant to the powers herein conferred shall operate as a complete discharge of
all obligations of the Trustee and the Plan Administrator, to the extent of the
distributions so made.
6
<PAGE>
ARTICLE V
INVESTMENT OF TRUST FUND
5.01 INVESTMENTS. The Trust Fund, except such estimated amounts as in the
-----------
opinion of the Trustee are required by current payments and expenses, shall be
invested and reinvested by the Trustee without distinction between principal and
income in Employer Securities unless specifically provided to the contrary. It
is specifically acknowledged that the purpose of this Trust is to invest in
Employer Securities as provided in the Act. Subject to the provisions of this
Article V and Article VI hereof, the Trustee is authorized to invest and
reinvest the Trust Fund in such bonds, notes, debentures, mortgages, interest-
bearing accounts and certificates (including those maintained by the Trustee, if
the Trustee is a bank), investment trust certificates, preferred or common
stock, real estate, savings and loan accounts, interest in oil, gas and
minerals, Insurance Contracts, with or without cash surrender value, or in such
other property, real, personal or mixed, either within or without the state of
North Carolina, without being limited by any statute or rule of law regarding
investments by trustees. The Trustee may invest in any common collective trust
fund or pooled investment fund (which could constitute a permissible investment
with respect to the Plan) maintained by any bank (including itself, if the
Trustee is a bank) in North Carolina or in any other state of the United States.
The Trustee may hold any portion of the Trust Fund in cash for a reasonable
period pending investment or payment of expenses or benefits. The Trustee shall
have the further right, to the extent permissible under applicable law and the
Plan, to (a) purchase, sell, exchange, and retain preferred or common stocks or
other marketable obligations, consisting of bonds, debentures, notes,
certificates, or other evidences of indebtedness, issued by an Employer or by an
Affiliate and (b) acquire and hold parcels or real property (and related
personal property) which is leased, or is to be leased, to an Employer or to an
Affiliate. For the purposes of this Section, an Affiliate shall mean any
corporation which is an Affiliate (within the meaning of Section 407(d)(7) of
the Act) of any Employer.
5.02 INVESTMENT MANAGER. The Plan Administrator is given the power to
------------------
appoint one or more Investment Managers (herein so called) to exercise full
investment management authority with respect to all or a portion of the assets
of the Trust Fund and to authorize payment of the fees and expenses of such
Investment Manager from the assets of the Trust Fund. In the event the Plan
Administrator exercises this right, the Plan Administrator shall certify to the
Trustee and such Investment Manager the scope of the duties and responsibilities
of the Investment Manager. Such Investment Manager shall be either (a)
registered as an investment adviser under the Investment Advisers Act of 1940,
(b) a bank, as defined in the Investment Advisers Act of 1940, or (c) an
insurance company qualified to manage, acquire or dispose of plan assets under
the laws of more than one state. Upon its appointment, the Investment Manager
shall certify and acknowledge in writing to the Plan Administrator and the
Trustee that he is a fiduciary with respect to the Plan and Trust, and that he
has assumed the duties and responsibilities conferred upon him by the Plan
Administrator. The duties, responsibilities, and authority of any such
Investment Manager may be revoked or modified by the Plan Administrator at any
time by written notice to such Investment Manager and to the Trustee. Any
Investment Manager duly appointed and authorized by the Plan Administrator,
shall, during the period of his appointment, possess fully and absolutely those
7
<PAGE>
powers, rights, and duties of the Trustee (to the extent delegated by the Plan
Administrator and to the extent permissible under the terms of this Trust
Agreement) with respect to the investment or reinvestment of that portion of the
plan assets over which such Investment Manager has investment management
authority. During any period of time when such Investment Manager is so
appointed and serving, and with respect to those assets of the Trust Fund over
which such Investment Manager exercises investment management authority, the
Trustee's responsibility shall be limited to holding such assets as a custodian,
providing accounting services, disbursing benefits as authorized, and executing
such investment instructions only as directed by such Investment Manager. The
Trustee shall not be responsible for any acts or omissions of such Investment
Manager. Any certificates or other instrument duly signed by such Investment
Manager (or the authorized representative of such Investment Manager),
purporting to evidence any instruction, direction or order of such Investment
Manager with respect to the investment of those assets of the Plan over which
the Investment Manager has investment management authority shall be accepted by
the Trustee as conclusive proof thereof. The Trustee shall also be fully
protected in acting in good faith upon any notice, instruction, direction,
order, certification, opinion, letter, telegram, or other document believed by
the Trustee to be genuine and to be by such Investment Manager (or the
authorized representative of such Investment Manager). The Trustee shall not be
liable for any action taken or omitted by such Investment Manager or for any
mistakes of judgment or other action made, taken or omitted by the Trustee in
good faith upon direction of such Investment Manager.
5.03 DIRECTION OF INVESTMENTS. Notwithstanding any provision contained
------------------------
herein to the contrary, the Plan Administrator shall have the right and power at
any time and from time to time (but shall not be obliged) to direct the Trustee
in writing to purchase, sell, lease, retain, or otherwise act for the Trustee in
regard to any property, real, personal, or mixed, tangible or intangible and the
Trustee shall comply with and carry out such directions without being liable or
responsible in any way for any losses or unfavorable results resulting from its
compliance with such directions; provided that:
(a) So long as, and to the extent that, the Plan Administrator fails
to deliver directions to the Trustee under this Section, the Trustee shall
manage, control, invest, and reinvest the Trust Fund under the powers
granted in Article VI hereof with the same force and effect as if this
Section were not a part of this Agreement.
(b) No person dealing with the Trustee shall be required to
determine whether any sale or purchase by the Trustee has been authorized
or directed by the Plan Administrator, but each person shall be fully
protected in dealing with the Trustee in the same manner as if this Section
were not a part of this Agreement; and
(c) The Plan Administrator shall not direct the Trustee to invest in
the stocks, bonds, notes, debentures, or other obligations of an Employer
or any of its subsidiaries, whether domestic or foreign, nor direct the
purchase of any such investment or any other property from, or sell to, an
Employer or any of its subsidiaries without first obtaining a prior ruling
from the Internal Revenue Service that such purchase or sale would not
adversely affect the qualified status of this Trust under Section 401(a) of
the Code. The Trustee, in its
8
<PAGE>
sole discretion, may refuse to comply with any direction of the Plan
Administrator which the Trustee deems to be improper or contrary to the
provisions of the Plan or any applicable Federal or state statutes.
5.04 SEPARATE INVESTMENT ACCOUNTS. The Plan Administrator may direct the
----------------------------
Trustee to maintain separate Investment Accounts (herein so called) for each
Participant and Beneficiary. The Administration Committee may direct the
Trustee as to the investment of each separate Investment Account and the Trustee
shall be fully protected with respect to any investment so made. If separate
Investment Accounts are established, as of the Valuation Date for each
Limitation Year, the Trustee shall allocate and credit the net income (or net
loss) of each Participant's segregated Investment Account solely to such
Investment Account.
5.05 INVESTMENT IN POOLED FUND. If a bank is acting as Trustee, the Plan
-------------------------
Administrator may specifically authorize the Trustee to invest all or any
portion of the assets comprising the Trust Fund in any collective investment
trust which at the time of the investment provides for the pooling of the assets
of plans described in Section 401(a) of the Code. This authorization applies
solely to a collective investment trust the Trustee maintains and only if the
Trustee has received a determination letter from the Internal Revenue Service to
the effect the collective investment trust is exempt from Federal income tax.
The provisions of the collective investment trust agreement, as amended by the
Trustee from time to time, are by this reference incorporated within the Plan
and this Trust. The provisions of the collective investment trust shall govern
any investment of Plan assets in that trust.
9
<PAGE>
ARTICLE VI
POWERS OF THE TRUSTEE
6.01 INVESTMENT POWERS. Subject to the provisions of Article VIII, the
-----------------
Trustee is authorized and empowered, but not by way of limitation, with the
following powers, rights, and duties:
(a) Property Transactions. To sell, exchange, convey, transfer, or
---------------------
dispose of and also to grant options with respect to any property, whether
real or personal, at any time held by it, and any sale may be made by
private contract or by public auction, and no person dealing with the
Trustee shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency, or propriety of any such sale or
other disposition.
(b) Operation and Lease. To retain, manage, operate, repair, and
-------------------
improve and to mortgage or lease for any period and on such terms as the
Trustee shall deem proper any real estate or personal property held by the
Trustee, including power to demolish any buildings or other improvements in
whole or in part; to erect buildings or other improvements; to make leases
that may extend beyond the term of the Trust; and to foreclose, extend,
renew, assign, release or partially release and discharge mortgages or
other liens.
(c) Vote. To vote in person or by proxy, with or without power of
----
substitution, any stocks, bonds, or other securities held in Trust.
(d) Stock Rights. To exercise any options appurtenant to any
------------
stocks, bonds, or other securities for the conversion thereof into other
stocks, bonds or securities, or to exercise any rights to subscribe for
additional stocks, bonds, or other securities and to make any and all
necessary payments thereof; to join in, dissent from, or oppose the
reorganization, recapitalization, consolidation, sale, or merger of
corporations or properties in which it may be interested as Trustee, upon
such terms and conditions as it may deem wise and to accept any securities
which may be issued upon any such reorganization, recapitalization,
consolidation, sale, or merger and thereafter to hold the same.
(e) Bank Trustee: Transaction by Trustee with Itself. If the
-------------------------------------------------
Trustee is a bank, to contract or otherwise enter into transactions between
itself as Trustee and as a bank, between itself as Trustee and the
Employer, its subsidiaries and affiliates or any of them, or between itself
as Trustee and any other institution for which it then, theretofore, or
thereafter may be acting as Trustee, subject to the provisions of the Act.
(f) Borrow. To borrow money from any source in such amounts and
------
upon such terms and for such purposes as the Trustee may determine and in
connection therewith to execute promissory notes, mortgages, or other
obligations and to pledge or mortgage any Trust assets as security.
10
<PAGE>
(g) Cash. To retain in cash so much of the Trust Fund as it may
----
deem advisable to satisfy liquidity needs of the Plan and to deposit any
cash held in the Trust Fund in a bank account without liability for the
highest rate of interest available, including, if a bank is acting as
Trustee, specified authority to invest in deposits of the Trustee.
(h) Investments. To invest and reinvest all or any part of the
-----------
Trust Fund in bonds, debentures, mortgages, notes, common or preferred
stocks, with or without par value, real estate, and such other property as
the Trustee deems proper.
(i) Mineral Investments. To purchase, convey, lease, and otherwise
-------------------
deal with oil, gas and other minerals, mineral rights, and royalties; to
operate and develop oil, gas, and other mineral properties and interest,
including, but not limited to, the power to make and release oil, gas, and
mineral leases and subleases; to make mineral deeds and royalty transfers;
to create, reserve and dispose of overriding royalties, oil payments, gas
payments, and any other interests; to execute division orders and transfer
orders; to enter into development and drilling contracts, operating
agreements and utilization agreements; and to make agreements for present
or future pooling of any and all interests in oil, gas and other minerals.
(j) Agents. To employ and compensate accountants, attorneys,
------
brokers, attorneys-in-fact, attorneys-at-law, tax specialists, appraisers,
and other advisers and agents deemed by the Trustee necessary or
appropriate for the proper administration of the Trust created hereunder.
(k) Nominee. To hold securities or other property in the name of
-------
the Trustee or its nominee, or in another form as it may deem best, with or
without disclosing the trust relationship.
(l) Documents. To make, execute and deliver any and all contracts,
---------
deeds, leases, waivers, releases, guaranties, pledges, conveyances, powers
of attorney, or other instruments necessary or proper for the
accomplishment of any of the powers herein granted.
(m) Litigation. To begin, maintain, or defend any litigation
----------
necessary in connection with the administration of the Plan, except that
the Trustee shall not be obliged or required to do so unless indemnified to
its satisfaction.
(n) Compromise Claims. To compromise, arbitrate, contest, or
-----------------
abandon any claims or demands.
(o) Taxes. To file all tax returns required of the Trustee and pay
-----
any estate, inheritance, income, or other tax, charge or assessment
attributable to any benefit payable under the Plan required of the Trustee;
to defer making payment of any tax, charge, or assessment if it is
indemnified to its satisfaction in the premises; and to require before
making any payment a release or other document from any lawful taxing
authority.
11
<PAGE>
(p) Retention of Funds. To retain any funds or property subject to
------------------
any dispute, and to decline to make payment or delivery of the funds or
property until final adjudication is made by a court of competent
jurisdiction.
(q) Common Funds. To invest in undivided interests, in common with
------------
any other trust, or trusts, however created, or any other individual, or
individuals, including investments in so-called "common funds", or in
partnerships or joint ventures, operated or created by any person, trust,
or corporation.
(r) Loans. To invest in loans to a Participant in accord with the
-----
loan policy established by the Plan Administrator, provided any loan is
adequately secured, bears a reasonable rate of interest, provides for
repayment within a specified time, and otherwise conforms to the
Participant loan exemption provided by the Code.
(s) General Authorization. To exercise all the further rights,
---------------------
powers, options, and privileges granted, provided for, or vested in
trustees generally under applicable Federal and North Carolina laws, as
amended from time to time, it being intended that, except as herein
otherwise provided, the powers conferred upon the Trustee herein shall not
be construed as being in limitation of any authority conferred by law, but
shall be construed as in addition thereto.
Notwithstanding anything in the Plan or Trust to the contrary, the Trustee shall
not be required by any fiduciary to engage in any action, nor make any
investment which constitutes a prohibited transaction or is otherwise contrary
to the provisions of Sections 406, 407, 408, and 2003 of the Act, or which is
otherwise contrary to law or the terms of the Plan or Trust.
6.02 ANCILLARY TRUSTEE. Whenever and as often as the Trustee deems such
-----------------
action desirable, it may by written instrument appoint any person or corporation
in any State of the United States to act as "Ancillary Trustee" with respect to
any portion of the Trust Fund then held or about to be acquired on behalf of the
Trust. Each such Ancillary Trustee shall have such rights, powers, duties, and
discretions as are delegated to it by the Trustee, but shall exercise the same
subject to limitations or further directions of the Trustee as shall be
specified in the instrument evidencing its appointment.
The Ancillary Trustee may resign or may be removed by the Trustee as to all
or any portion of the assets so held at any time or from time to time by written
instrument delivered one to the other, and the Trustee may thereupon appoint
another Ancillary Trustee as successor to whom such assets shall be transferred,
or may itself receive such assets in termination of the Ancillary Trusteeship to
that extent. Each Ancillary Trustee shall be accountable solely to the Trustee.
The Trustee may pay the Ancillary Trustee reasonable compensation and may
absolve it from any requirement that it post bond or other security.
12
<PAGE>
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.01 ACCOUNTS AND RECORDS. The Trustee shall maintain accurate records
--------------------
and accounts of all transactions hereunder, which shall be available at all
reasonable times for inspection or audit by any person or persons designated by
the Plan Administrator. If the Plan Administrator so directs, the Trustee shall
submit to the Plan Administrator such interim valuations, reports, or other
information as the Plan Administrator may reasonably require. Within ninety
(90) days following (a) the close of each Plan Year or (b) the effective date of
the removal or resignation of the Trustee, the Trustee shall file with the Plan
Administrator a written account setting forth all transactions effected by it
subsequent to the end of the period for the last previous report and account, in
such form and detail as the Plan Administrator may request. The approval of any
such report and account by the Plan Administrator shall be a full acquittance
and discharge by the Plan Administrator of the Trustee with respect to the
matters therein set forth. Nothing herein contained, however, shall be deemed
to preclude the Trustee from its right to have its accounts judicially settled
by a court of competent juris diction, in which event only the Trustee and the
Employer shall be necessary parties.
7.02 INTENTION TO QUALIFY. It is intended that this Trust and Plan
--------------------
constitute a qualified trust under Section 401(a) of the Code and that this
Trust constitutes a tax-exempt trust under Section 501 of the Code, and until
advised to the contrary in writing, the Trustee may assume that the Trust is so
qualified and is entitled to the exemption from Federal income taxes provided
for in said sections. In the event the Trustee at any time believes such
exemption to be uncertain, the Trustee may take such steps and withhold such
payments as it deems necessary to protect itself.
7.03 PLAN ADMINISTRATOR ACTION. The Employer shall promptly notify the
-------------------------
Trustee of the name of the Plan Administrator as of the date of this Agreement
and of any subsequent changes in the Plan Administrator. In the absence of any
notification of changes, the Trustee may assume that the Plan Administrator is
the same as last reported by the Employer to the Trustee. The Plan
Administrator shall furnish the Trustee with all the necessary factual
information required by it to perform its duties as Trustee hereunder, including
a specimen signature of the Plan Administrator. The Trustee shall not be
required to verify the facts so furnished by the Plan Administrator. The
Trustee, in following the directions of the Plan Administrator, is authorized to
act upon the written instructions of the Plan Administrator and shall not be
liable for its acts with respect to payments from the Trust Fund when following
such instructions or directions, or for failure to act in the absence of such
instructions or directions.
7.04 VALUATION OF TRUST. The Trustee shall value the Trust Fund as of the
------------------
end of the Plan Year to determine the fair market value of its assets. The
Trustee shall value the Trust Fund on such other date(s) as may be necessary for
the purpose of the Plan and Trust.
7.05 EMPLOYER ACTION. Any action by an Employer hereunder, pursuant to
---------------
the Plan, shall be evidenced by a certified copy of a resolution of its Board of
Directors, or by written
13
<PAGE>
instrument executed by any person authorized by the Board of Directors to take
such action, and the Trustee shall be fully protected in acting in accordance
with such written instrument or resolution delivered to it.
7.06 RELIANCE ON WRITTEN INSTRUMENT. The Trustee shall be fully protected
------------------------------
in acting upon any instrument, certificate, resolution, instruction, direction,
order, opinion, letter, telegram, or other document believed by it to be
genuine, and to be signed or presented by the proper person or persons, and the
Trustee shall be under no duty to make any investigation or inquiry as to any
statement contained in any such writing but may accept the same as conclusive
evidence of the truth and accuracy of the statements therein contained.
7.07 LIABILITY FOR PAYMENT OF FUNDS. The Trustee shall not be liable for
------------------------------
its action in making payment or delivery of any cash or other property to any
person at the direction of the Plan Administrator and, in the event of
litigation, the Trustee shall not be liable for declining to make delivery
thereof until final adjudication shall be made in a court of competent
jurisdiction by agreement of the parties. The Trustee, at its discretion, may
bring any action in the nature of an interpleader, but shall not be obligated to
do so.
7.08 LIABILITY OF TRUSTEE. The Trustee shall not be liable for any action
--------------------
taken or omitted upon direction of the Plan Administrator or the Employer. If
at any given time the Plan Administrator or the Employer should fail to give
directions or instructions to the Trustee as provided in this Agreement, the
Trustee shall act or refrain from acting without such directions or instructions
and may exercise its own discretion and judgment as seems appropriate and
advisable under the circumstances in carrying out the purposes of this
Agreement, without liability to the Plan A dministrator or the Employer
therefor.
7.09 COURT PROCEEDINGS. The Trustee may institute, maintain, or defend
-----------------
any litigation necessary in connection with the administration of the Trust
Fund, provided, the Trustee shall be under no duty or obligation to do so unless
it shall have been indemnified to its satisfaction against all expenses and
liabilities which it may sustain or reasonably anticipate by reason thereof.
All costs and expenses of litigation for which the Trustee would be liable shall
be paid by the Employer, or if not paid by the Employer, from the Trust Fund.
7.10 PARTIES TO LITIGATION. Except as otherwise provided by the Act, only
---------------------
the Employer, the Plan Administrator, and the Trustee shall be necessary parties
to any court proceeding involving the Trustee or the Trust Fund. No Participant
or Beneficiary shall be entitled to any notice of process unless required by the
Act. Any final judgment entered in any proceeding shall be binding upon the
Employer, the Plan Administrator, the Trustee, Participants, and Beneficiaries.
7.11 THIRD PARTY. No person dealing with the Trustee shall be obligated
-----------
to see to the proper application of any money paid or property delivered to the
Trustee, or to inquire whether the Trustee has acted pursuant to any of the
terms of the Plan. Each person dealing with the Trustee may act upon any notice,
request, or representation in writing by the Trustee, or by the Trustee's duly
authorized agent, and shall not be liable to any person whomever in so doing.
The certificate of the
14
<PAGE>
Trustee that it is acting in accordance with the Plan shall be conclusive in
favor of the person relying on the certificate.
7.12 AUTHORIZATION WITH RESPECT TO TAXES. The Trustee may pay out of the
-----------------------------------
Trust Fund all real and personal property taxes, income taxes, and other taxes
of any and all kinds levied or assessed under existing or future laws against
the Trust Fund, or against the Trustee by reason of its office. The Trustee is
further authorized, but not required, to withhold from distribu tions to any
payee such sum as the Trustee may reasonably estimate as necessary to cover
Federal and states taxes for which the Trustee may be liable, which are, or may
be, assessed with regard to the amount distributable to such payee. Prior to
making any payment or distribution hereunder, the Trustee may require such
releases or other documents from any lawful taxing authority and may require
such indemnity from any payee or distributee as the Trustee shall reasonably
deem necessary for its protection.
7.13 CONSULTATION WITH COUNSEL. Trustee may consult with legal counsel,
-------------------------
who may be counsel for the Employer, if appropriate, with respect to any of its
rights, duties, or obligations hereunder.
7.14 NO INTEREST IN EMPLOYER. Neither the creation of this Trust nor
-----------------------
anything contained in this Agreement shall be construed as giving any person
entitled to benefits hereunder or other employee of the Employer any equity or
other interest in the assets, business, or affairs of the Employer.
7.15 FEES AND EXPENSES. The Trustee shall be reimbursed for all of its
-----------------
expenses and shall be paid such reasonable fees as may be agreed upon from time
to time by the Employer and the Trustee. Such fees and compensation shall be
paid from the Trust Fund if not paid by the Employer; provided, however, that
any person who already receives full-time pay from the Employer shall not
receive any fees for his services as Trustee.
7.16 BONDING OF TRUSTEE. The Trustee shall not be required to furnish any
------------------
bond or security for the performance of its powers and duties hereunder, unless,
irrespective of this provision, the Trustee is required to do so by state or
Federal statute or regulation.
7.17 RELATIONSHIP OF FIDUCIARIES. It is the intent of all fiduciaries
---------------------------
under the Plan and Trust that each fiduciary shall be solely responsible for its
own acts or omissions. Except to the extent imposed by the Act or the Code, no
fiduciary shall have the duty to question whether any other fiduciary is
fulfilling all of the responsibilities imposed upon such other fiduciary by the
Act or by any regulations or rulings issued thereunder. No fiduciary shall have
any liability for a breach of fiduciary responsibility of another fiduciary with
respect to the Plan and this Trust unless he participates knowingly in such
breach, knowingly undertakes to conceal such breach, has actual knowledge of
such breach and fails to take reasonable remedial action to remedy said breach
or, through his negligence in performing his own specific fiduciary
responsibilities which give rise to his status as a fiduciary, has enabled such
other fiduciary to commit a breach of the latter's fiduciary responsibilities.
15
<PAGE>
7.18 PRUDENT MAN RULE. The Trustee, the Plan Administrator, and all other
----------------
Fiduciaries with respect to the Plan and Trust are required to discharge their
duties solely in the interests of Participants and Beneficiaries and for the
exclusive purpose of providing benefits to Participants and Beneficiaries and
defraying reasonable expenses of administration with the care, skill, prudence,
and diligence, under the circumstances then prevailing, that a prudent man
acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims by diversifying
the investments so as to minimize the risks of large losses unless under the
circumstances it is clearly prudent not to do so, and in accordance with the
Plan, this Trust Agreement, the rules and directions of the Plan Administrator
and the provisions of the Act.
7.19 ALIENATION. Except as otherwise provided in the Plan, the benefits,
----------
proceeds, payments, or claims of any Participant or Beneficiary payable from the
Trust assets shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution,
or levy of any kind, either voluntary or involuntary, including any such
liability which is for alimony or other payments for support of a spouse or
former spouse. Any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, garnish, levy, or otherwise dispose of or execute upon any
right or benefit payable hereunder shall be void. The Trust assets shall not in
any manner be liable for or subject to the debts, contracts, liabilities,
engagements, or torts of any Participant entitled to benefits hereunder and such
benefits shall not be considered an asset of the Participant in the event of his
insolvency or bankruptcy.
7.20 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER APPOINTED. The
---------------------------------------------------------
Trustee shall not be liable for the acts or omissions of any Investment Manager
or Managers the Plan Administrator may appoint, nor shall the Trustee be under
any obligation to invest or otherwise manage any assets of the Plan which is
subject to the management of a properly appointed Investment Manager.
7.21 INSURANCE COMPANY PROTECTED. No insurance company shall be under any
---------------------------
duty to inquire into the terms of this Trust Agreement or see to the application
of any proceeds of insurance paid to the Trustee pursuant to any policy of
insurance payable to this Trust. The receipt of the Trustee for any such
payment shall be a full and complete acquittance to the insurance company making
payment.
16
<PAGE>
ARTICLE VIII
TRUSTEE LIABILITY
8.01 TRUSTEE LIABILITY. Notwithstanding any provision in this Trust
-----------------
Agreement to the contrary, the Trustee shall be subject to the standards of
conduct, and shall have the powers and immunities set out in Article VI of the
Plan.
17
<PAGE>
ARTICLE IX
SUBSTITUTION OF TRUSTEE
9.01 TRUSTEE. There shall be one or more individual Trustees or one
-------
corporate Trustee, or any combination thereof, as determined from time to time
by the Company. Each Trustee shall serve until a successor Trustee shall be
named by the Company or until such Trustee's resignation, death, incapacity, or
removal, in which event the Company shall name a successor Trustee. The word
"Trustee" as used herein, shall include the original and any successor Trustee
or Trustees, whether corporate or individual.
9.02 RESIGNATION. Any Trustee may resign at any time upon giving sixty
-----------
(60) days' written notice in advance to the Company and to the Plan
Administrator unless such notice shall be waived.
9.03 REMOVAL. The Company, by giving thirty (30) days' written notice in
-------
advance to the Trustee, may remove any Trustee with or without cause.
9.04 SUCCESSION OF TRUSTEE. Each successor Trustee shall succeed to the
---------------------
title to the Trust vested in his predecessor by accepting in writing his
appointment as successor Trustee and filing the acceptance with the former
Trustee and the Plan Administrator without the signing or filing of any further
statement. The resigning or removed Trustee, upon receipt of acceptance in
writing of the Trust by the successor Trustee, shall execute all documents and
do all acts necessary to vest the title of record in any successor Trustee.
Each successor Trustee shall have and enjoy all of the powers, both
discretionary and ministerial, conferred under this Agreement upon his
predecessor. No successor Trustee shall be personally liable for any act or
failure to act of any predecessor Trustee.
9.05 MERGER OF CORPORATE TRUSTEE. If any corporate Trustee should, before
---------------------------
or after qualification, change its name, become consolidated or merged with
another corporation or otherwise should reorganize, any resulting corporation
which succeeds to the fiduciary business of such corporate Trustee shall become
a Trustee hereunder in lieu of such corporate Trustee.
18
<PAGE>
ARTICLE X
AMENDMENT AND TERMINATION
10.01 AMENDMENT. The Company shall have the right at any time by an
---------
instrument in writing to amend the Trust in any manner provided no amendment
shall:
(a) Authorize or permit any of the Trust Fund (other than the part
which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries.
(b) Cause or permit any portion of the Trust Fund to revert to or
become the property of the Employer.
(c) Increase the duties or responsibilities of the Trustee without
the written consent of the affected Trustee.
10.02 TERMINATION. This Trust may be terminated at any time by the
-----------
Company by delivery to the Trustee of a copy of the resolution of the Board of
Directors specifying such termina tion. In the event of termination of the
Trust, the Trustee shall distribute all property then constituting the Trust
Fund, less any amounts constituting charges against the Trust Fund, in such
manner and at such times as may be directed by the Plan Administrator. This
Trust shall automatically terminate when no cash or other property remains in
the Trust.
10.03 SUSPENSION OF CONTRIBUTIONS. Nothing in this Agreement shall be
---------------------------
construed to prevent the Employer from suspending contributions to the Trust for
any period whatsoever or permanently. Such a suspension, whether temporary or
permanent, shall not, of itself, terminate the Trust.
10.04 MERGER OR CONSOLIDATION. The Plan and this Trust shall not be
-----------------------
merged or consolidated with, nor shall its assets or liabilities be transferred
to, any other plan unless each Participant in the Plan (if the Plan then
terminated) would receive a benefit immediately after the merger, consolidation
or transfer which is equal to or greater than the benefit such Participants,
respectively, would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had been terminated). Where the
foregoing requirements are satisfied the Plan and this Trust may be merged or
consolidated with another qualified plan and trust.
10.05 REVERSION OF SUSPENSE ACCOUNT. Notwithstanding any provisions
-----------------------------
contained herein to the contrary, the Employer reserves the right upon
termination of the Plan and trust to recover any amounts held in a Suspense
Account that cannot be allocated to the accounts of Participants and their
Beneficiaries in the year of termination because of the limitations contained in
Article III of the Plan and Section 415 of the Code after the satisfaction of
all fixed and contingent obligations to Participants and their Beneficiaries
under the Plan.
19
<PAGE>
ARTICLE XI
OTHER EMPLOYERS; SUCCESSOR EMPLOYERS
11.01 ADOPTION BY OTHER EMPLOYERS. Pursuant to the Plan, any business
---------------------------
entity, which is eligible to and does in fact adopt the Plan, may pursuant to
resolutions of its board of directors, adopt this Trust by written instrument,
duly executed, acknowledged, and delivered to the Trustee, the Plan
Administrator, and the Board of Directors of the Company.
11.02 CONTINUATION BY EMPLOYER'S SUCCESSOR. Any corporation succeeding to
------------------------------------
the interest of an Employer by sale, transfer, consolidation, merger, or
bankruptcy, may elect to continue this Trust by adopting this Trust Agreement
and assuming the duties and responsibilities of the Plan and Trust, or such
corporation may establish a separate plan and trust for the continuation of
benefits for its employees in which event the Trust Fund, held on behalf of the
Employees or the prior Employer, shall (subject to Section 10.04 hereof) be
transferred to the trustee of the new trust.
20
<PAGE>
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01 CONTRIBUTIONS NOT RECOVERABLE. Except where contributions are
-----------------------------
required to be returned to the Employer by the provisions of the Plan as
permitted or required by the Act or by the Code, no part of the principal or
income of this Trust shall be used for, or diverted to, purposes other than the
exclusive benefit of Participants or Beneficiaries.
12.02 LIMITATIONS ON PARTICIPANTS' RIGHTS. Participation in this Trust
-----------------------------------
shall not give the Employee the right to be retained as an Employee of the
Employer or any right or interest in this Trust other than as herein provided.
The Employer reserves the right to dismiss any Employee without any liability
for any claim either against this Trust, except to the extent provided herein,
or against the Employer. All benefits payable hereunder shall be provided solely
from the assets of the Trust.
12.03 INDEMNIFICATION OF INDIVIDUAL TRUSTEE. The Employer hereby agrees to
-------------------------------------
indemnify and hold harmless any individual Trustee for any claim, suit,
judgment, or liability arising from the performance of the Trustee hereunder and
as otherwise required by the Plan, so long as such claim, suit, judgment, or
liability does not result from the willful or reckless misconduct of the
individual Trustee. The Trustee assumes no obligation or responsibility with
respect to any action required by this Trust Agreement or by the Plan on the
part of the Employer.
12.04 RECEIPT OF RELEASE. Any payment to any Participant or Beneficiary in
------------------
accordance with the provisions of this Trust shall, to the extent thereof, be in
full satisfaction of all claims against the Trustee, the Plan Administrator, and
the Employer and the Trustee may require such Participant or Beneficiary, as a
condition precedent to such payment, to execute a receipt and release to such
effect.
12.05 ACCEPTANCE. The Trustee accepts the Trust created under the Plan and
----------
agrees to perform the obligations imposed therein.
12.06 ACCOUNTING PERIOD. This Trust shall adopt for accounting purposes
-----------------
the fiscal year beginning January 1 of each year and ending on the last day of
December.
12.07 TITLE OF TRUST ASSETS. The legal and equitable title and ownership
---------------------
of all assets at any time constituting a part of the Trust Fund shall be and
remain with the Trustee and neither the Employer nor any Participant shall ever
have legal or equitable estate therein, save and except that a Participant shall
be entitled to receive distributions as and when lawfully made under the terms
of the Plan and this Trust.
12.08 NOTICE. Any notices required to be given herein by the Trustee shall
------
be deemed delivered when placed in the United States mails, postage prepaid, in
an envelope addressed to the last known address of the person to whom the notice
is given.
21
<PAGE>
12.09 HEADINGS. The titles and headings of Articles and Sections are
--------
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.10 GOVERNING LAW. All questions arising with respect to the provisions
-------------
of this Agreement shall be determined by application of the laws of the State of
North Carolina except to the extent North Carolina law is superseded by Federal
statute.
12.11 EXECUTIONS AND COUNTERPARTS. This Agreement may be executed in a
---------------------------
number of counterparts, each of which shall be deemed an original.
IT WITNESS WHEREOF, this Agreement has been executed this the _____ day of
___________________, 1996, effective as of the _____ day of
____________________, 1996.
A S E M P L O Y E R
--------------------
RICHMOND SAVINGS BANK, INC., SSB
By: _____________________________________
President
ATTEST:
_____________________________
___________ Secretary
(Corporate Seal)
A S T R U S T E E
------------------
______________________________(SEAL)
______________________________(SEAL)
______________________________(SEAL)
______________________________(SEAL)
22
<PAGE>
EXHIBIT 10.4
RICHMOND SAVINGS BANK, INC., SSB
MANAGEMENT RECOGNITION PLAN
Richmond Savings Bank, Inc., SSB, a North Carolina chartered savings bank
(the "Bank"), does herein set forth the terms of the Management Recognition Plan
(the "Plan").
1. Purpose of this Plan. The purpose of this Plan is to provide to the
--------------------
directors, officers and employees (the "Participants") of the Bank and of any
corporation or other entity of which the Bank owns, directly or indirectly, not
less than fifty percent (50%) of any class of the equity securities thereof (a
"Subsidiary"), an ownership interest in the Bank's parent holding company,
Carolina Fincorp, Inc. (the "Corporation") by making awards (hereinafter
referred to as "Awards" or singularly, "Award") of shares of common stock of the
Corporation (the "Common Stock"). The Board of Directors of the Bank (the
"Board") and the Board of Directors of the Corporation believe that
participation in the ownership of the Corporation will induce Participants to
continue to serve the Bank or any Subsidiary as directors, officers and/or
employees and encourage them to contribute to the future growth and profits of
the Bank and the Corporation. In addition, the existence of this Plan will make
it possible for the Bank and its Subsidiaries to attract capable individuals to
serve as directors or officers of the Bank and its Subsidiaries. The Board
believes that the existence of this Plan will provide incentives to the
directors, officers and employees of the Bank and any Subsidiaries which will
contribute materially to the success of such companies.
2. Administration of this Plan.
---------------------------
(a) This Plan shall be administered by a committee of the Board (the
"Committee") which shall consist of not less than three non-employee members of
the Board who are "disinterested persons" as described in Rule 16b-3(c)(2)(i) of
the Rules and Regulations under the Securities Exchange Act of 1934 (the
"Exchange Act"). In the absence of a duly appointed Committee, the Plan shall
be administered by those members of the Board who are "disinterested persons,"
and by the Board if there are less than three "disinterested persons." The
Committee shall have full power and authority to construe, interpret and
administer this Plan. All actions, decisions, determinations, or
interpretations of the Committee shall be final, conclusive, and binding upon
all parties. Members of the Committee shall serve at the pleasure of the Board.
(b) The Committee shall decide (i) to whom Awards shall be made under
this Plan, except as provided in subparagraph 3(b) and paragraph 5 hereof, (ii)
the number of shares of Common Stock subject to each award except as provided in
subparagraph 3(b) and paragraph 5 hereof, (iii) the number of additional shares,
if any, to be purchased or allocated for the purposes of this Plan, (iv) the
determination of leaves of absence which may be granted to Participants without
constituting a termination of their employment for purposes of the Plan and (v)
such additional terms and conditions for Awards as the Committee shall deem
appropriate, including, without limitation, any determinations as to the
restrictions or conditions on transfer of shares of Common Stock that are
necessary or appropriate to satisfy all applicable securities laws, rules,
regulations, and listing requirements.
(c) The Committee may designate any officers or employees of the Bank
or of any Subsidiary to assist in the administration of this Plan. The Committee
may authorize such individuals to execute documents on its behalf and may
delegate to them such other ministerial and limited discretionary duties as the
Committee may see fit.
<PAGE>
(d) Any unallocated, undistributed or forfeited shares of Common
Stock held under this Plan shall be held by ________________________,
_____________________ and ____________________ (the "Trustees") and any
successor or successors who from time to time may be appointed by the Board.
3. Shares of Common Stock Available Under the Plan.
-----------------------------------------------
(a) The Plan shall acquire a number of shares of Common Stock of the
Corporation equal to four percent (4%) of the shares of Common Stock issued in
connection with the conversion of the Bank from a North Carolina chartered
mutual savings bank to a North Carolina chartered stock savings bank on
_____________, 1996 (the "Conversion"). Such shares of Common Stock may be
purchased by the Plan in the open market, or, subject to approval of the Board
of Directors of the Corporation, may be acquired through the issuance by the
Corporation to the Plan of authorized but unissued shares of Common Stock on
such terms as may be approved by the Committee and the Board of Directors of the
Corporation. Such shares (the "Plan Shares") shall be held by the Trustees
until they have been allocated and distributed pursuant to the terms of this
Plan.
(b) Upon the purchase of the Plan Shares as provided in subparagraph
(a) above, such Plan Shares shall be allocated as provided in paragraph 5
hereof.
4. Eligibility. The Participants in this Plan to whom Awards may be made
-----------
shall be the following: members of the Board, members of the Board of Directors
of any Subsidiary, and such officers and employees of the Bank and/or of any
Subsidiary as may be designated by the Board. Notwithstanding the foregoing, no
member of the Committee is eligible to receive any grants or any awards of
shares under this Plan during the one-year period prior to serving on the
Committee or during such service, except for Awards of Plan Shares which are
distributed pursuant to the provisions of paragraph 5 hereof.
In addition, (i) no individual participant shall be awarded more than
twenty-five (25) percent of the Plan Shares to be issued pursuant to this Plan,
(ii) no participant who is a non-employee director of the Bank or a Subsidiary
shall be awarded more than five (5) percent of the Plan Shares to be issued
pursuant to this Plan and (iii) all participants who are non-employee directors
of the Bank or a Subsidiary shall be awarded no more than thirty (30) percent of
the Plan Shares to be issued pursuant to this Plan.
5. Award of Plan Shares. Subject to the provisions of paragraph 7
--------------------
hereof, effective after this Plan is approved by a majority of the shareholders
of the Corporation, the Plan Shares shall be awarded and distributed to
Participants listed in, and in the amounts set forth in, Exhibit A. Awards of
Plan Shares under this Plan shall be effective upon execution and delivery of
the Stock Grant Agreement described in paragraph 7.
6. Vesting of Shares.
-----------------
(a) Shares granted under this Plan shall vest and the right of a
Participant to the Plan Shares shall be nonforfeitable in accordance with the
following schedule:
2
<PAGE>
<TABLE>
<CAPTION>
Date When Plan Shares Percentage of Plan
Become Vested Shares Vested
----------------- ------------------
<S> <C>
First Anniversary of Award of Plan Shares 20%
Second Anniversary of Award of Plan Shares 20%
Third Anniversary of Award of Plan Shares 20%
Fourth Anniversary of Award of Plan Shares 20%
Fifth Anniversary of Award of Plan Shares 20%
</TABLE>
(b) In determining the number of shares vested under the above
vesting schedule, a Participant shall not receive fractional shares. If the
product resulting from multiplying the vested percentage times the allocated
shares results in a fractional share, then a Participant's vested right shall be
rounded down to the nearest whole number of shares.
(c) In the event any Participant shall no longer be either a director
or an employee of the Bank or any Subsidiary for any reason, other than as
provided in subparagraph 6(d)below, and such Participant does not have a 100%
vested interest in his or her shares under the Plan, then any shares which are
not vested, based upon the applicable schedule in subparagraph 6(a) above, shall
be forfeited and, provided this Plan has not terminated pursuant to paragraph 18
below, shall be available again for Awards to Participants as may be determined
by the Committee.
(d) In the event that a Participant shall no longer be an employee or
a director of the Bank or any Subsidiary because of such Participant's
disability or death, prior to the date when all shares allocated to him or her
would be 100% vested in accordance with the schedule in subparagraph 6(a) above,
then, notwithstanding the foregoing schedule in subparagraph 6(a) above, all
shares allocated to such Participant shall immediately become fully vested and
nonforfeitable. For purposes of this Plan, the term "disability" shall be
defined in the same manner as such term is defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
7. Action Required of Participants.
-------------------------------
(a) If required by the Committee, each Participant receiving an Award
of shares under this Plan shall represent to and agree with the Corporation, the
Bank, the Committee and the Trustees (i) that he is acquiring such shares on his
own behalf as an investment and not with a present intention of distribution or
re-sale and (ii) that there shall be placed upon the certificates representing
such shares a legend setting forth these representations and agreements or a
reference thereto. Such shares shall be transferable thereafter only if the
proposed transfer shall be permissible under this Plan and if, in the opinion of
counsel for the Corporation, such transfer shall at such time be in compliance
with all applicable federal and state securities laws and regulations.
(b) Each Participant receiving an Award of Plan Shares under this
Plan shall deliver to the Bank a Stock Grant Agreement, substantially in the
form attached hereto as Exhibit B, as modified as the Committee deems necessary
or desirable (a "Stock Grant Agreement"), which shall be signed by such
Participant.
3
<PAGE>
8. Restrictions.
------------
(a) Plan Shares subject to an award made under this Plan shall
forthwith, after the Participant makes any representations required by paragraph
7 hereof, be issued in a certificate or certificates for such shares which shall
be prepared in the name of such Participant or any transferee permitted by
paragraph 12(a) (a "Permitted Transferee"). Such Participant or transferee shall
thereupon be a shareholder with respect to all of the shares represented by such
certificate or certificates and shall have all of the rights of a shareholder
with respect to all of such shares, including the right to vote such shares and
to receive all dividends and other distributions with respect thereto subject to
possible forfeiture as set forth in paragraph 6 and subject to the provisions of
paragraph 10 hereof.
(b) Certificates of stock representing shares subject to an Award
made under this Plan shall be imprinted with a legend to the effect that the
shares represented are subject to restrictions on transfer and potential
forfeiture in accordance with the terms of the Stock Grant Agreement and this
Plan, and the transfer agent for Common Stock shall be instructed to that effect
with respect to such shares. In aid of such restrictions, the Participant or
Permitted Transferee shall, immediately upon receipt of the certificate or
certificates, deposit such certificate or certificates together with a stock
power or other instrument of transfer, appropriately endorsed in blank, with the
Trustees or with such other escrow agent as may be designated by the Trustees,
with the expenses of any such escrow arrangement to be borne by the Bank.
(c) In addition, all Plan Shares which are awarded with respect to
Participants who are directors or executive officers of the Bank, without the
written consent of the Administrator of the Savings Institutions Division of the
North Carolina Department of Commerce, may not be sold during a period of one
year following the effective date of the Conversion, except upon death of the
director or executive officer. Certificates of stock representing Plan Shares
awarded with respect to Participants who are directors and executive officers of
the Bank (including those transferred to Permitted Transferees) shall be
imprinted with a legend to that effect, and the transfer agent for such Plan
Shares shall be instructed to that effect with respect to such shares.
(d) In the event that, as the result of a stock split or stock
dividend or combination of shares or any other change or exchange for other
securities by reclassification, reorganization, merger, consolidation,
recapitalization, or otherwise, a Participant or Permitted Transferee shall, as
the owner of the shares subject to an Award made under this Plan and subject to
the restrictions hereunder, be entitled to new or additional or different shares
of Common Stock or other securities, the certificate or certificates for, or
other evidence of, such new or additional or different shares or other
securities, together with a stock power or other instrument of transfer
appropriately endorsed, shall also be imprinted with one or more legends as
provided in subparagraph 8(b) and 8(c) above and deposited by such Participant
or Permitted Transferee with the Trustees, and all provisions of this Plan
relating to vesting, restrictions and lapse of restrictions herein set forth
shall thereupon be applicable to such new or additional or different shares or
other securities to the extent applicable to the shares with respect to which
they were distributed; provided, however, that if a Participant or Permitted
Transferee should receive rights, warrants or fractional interests in respect of
any of such shares then being held under the terms of this Plan, such rights or
warrants may be held, exercised, sold or otherwise disposed of, and such
fractional interests may be settled, by such Participant or Permitted Transferee
free and clear of the restrictions herein set forth.
4
<PAGE>
(e) The restriction to which shares subject to an Award made under
this Plan shall be subject is that if the directorship or employment of the
Participant with respect to whom an Award is made (whichever position resulted
in the Award) should be terminated for any reason during the "restricted period"
(as defined in subparagraph 12(b) hereof), except as otherwise specifically
provided in paragraph 6 hereof, the Participant's or Permitted Transferee's
interest in the shares issued under this Plan shall be forfeited as provided in
the applicable schedule in subparagraph 6(a) hereof.
9. Effect of Award on Status of Participant. The fact that an Award is
----------------------------------------
made to a Participant under this Plan shall not confer on such Participant any
right to continued service on the Board or on the Board of Directors of any
Subsidiary, nor any right to continued employment with the Bank or any
Subsidiary; nor shall it limit the right of the Bank, the Corporation, or any
Subsidiary to remove such Participant from any such boards, or to terminate his
or her employment at any time.
10. Voting Rights; Dividends; Other Distributions. After an Award of Plan
---------------------------------------------
Shares to a Participant or Permitted Transferee, the Participant or Permitted
Transferee shall have the full power to vote all of the Plan Shares held by the
Trustees in his name from time to time and shall be entitled to receive all cash
dividends declared upon any such Plan Shares held by the Trustees in his name
from time to time. All shares of Common Stock or other securities, including
but not limited to stock dividends, issued in respect of such Plan Shares or in
substitution thereof, whether by the Corporation or by another issuer, shall be
held by the Trustees and shall be subject to all terms and conditions of this
Plan and shall be redelivered to a Participant or Permitted Transferee or
delivered as instructed by the Committee under the same circumstances as the
shares with respect to, or in substitution for, which they were issued;
provided, however, that if a Participant or Permitted Transferee should receive
rights, warrants or fractional interests in respect of any of the shares held by
the Trustees in his name, such rights or warrants may be held, exercised, sold
or otherwise disposed of, and such fractional interests may be settled, by such
Participants or Permitted Transferees free and clear of the restrictions herein
set forth.
Notwithstanding the foregoing, if a Participant or Permitted
Transferee hereunder forfeits any Plan Shares pursuant to the terms of this
Plan, the Participant or Permitted Transferee, as applicable, shall, within 30
days after the effective date of such forfeiture, pay the Corporation an amount
equal to the dividends received by such Participant or Permitted Transferee with
respect to such forfeited Plan Shares. In the alternative, at the option of the
Bank or a Subsidiary, the amount to be repaid may be withheld by the Bank or
Subsidiary from the final compensation or fees payable to the Participant.
11. Adjustment Upon Changes in Capitalization; Dissolution or Liquidation.
---------------------------------------------------------------------
In the event of a change in the number or type of shares of Common Stock
outstanding, or in the event shares of Common Stock are decreased, changed into
or exchanged for securities of a different entity, by reason of a
reclassification, recapitalization, reorganization, or other similar capital
adjustment; merger or consolidation of the Corporation; or the sale by the
Corporation of all or a substantial portion of its assets, or the occurrence of
any other event which could affect the implementation of this Plan and the
realization of its objectives, the number or kind of shares subject to Awards
which have occurred, or could occur, under this Plan shall be proportionately
and equitably adjusted by the Committee.
5
<PAGE>
12. Non-Transferability.
-------------------
(a) Any shares subject to an Award made under this Plan shall not be
sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of
during the "restricted period." Nothing herein shall preclude a Participant from
making a gift of any such shares to a spouse, child, stepchild, grandchild,
parent or sibling, or legal dependent of such Participant, to a trust of which
the beneficiary or beneficiaries of the trust shall be either a person
designated herein or such Participant, or to a civic or charitable organization
designated by the Participant; provided, however, that any such shares so given
by a Participant shall remain subject to the restrictions, obligations and
conditions set forth in this Plan, including, but not limited to, the escrow
provisions set forth in paragraph 8(b). In addition, such shares may be tendered
in response to a tender offer for or a request or invitation to tenders of
greater than fifty percent (50%) of the outstanding Common Stock and may be
surrendered in a merger, consolidation or share exchange involving the
Corporation; provided, however, in each case, that except as otherwise provided
herein, the securities or other consideration received in exchange therefor
shall thereafter be subject to the restrictions and conditions set forth in this
Plan, including, but not limited to, the escrow provisions set forth in
paragraph 8(b)
(b) The term "restricted period" with respect to shares subject to an
Award made under this Plan shall be the period commencing on the date of making
such Award of such shares to a Participant and ending on the date on which such
shares are no longer subject to forfeiture as provided in paragraph 6 hereof.
The date of making an Award shall be the date of execution by a Participant of a
Stock Grant Agreement in the form referred to in subparagraph 7(b) hereof.
13. Impact of Award on Other Benefits of Participant. The value of any
------------------------------------------------
Award, either on the date of the Award or at the time such shares become vested,
shall not be includable as compensation or earnings for purposes of any other
benefit plan offered by the Bank, the Corporation or any Subsidiary.
14. Corporate Action. The making of an Award under this Plan shall not
----------------
affect in any way the right or power of the Corporation or its shareholders or
the Bank or its shareholders or any Subsidiary or its shareholders to make or
authorize any adjustment, recapitalization, reorganization, or other change in
the Corporation's, the Bank's or any Subsidiary's capital structure or its
business, or any merger or consolidation of the Corporation, the Bank or any
Subsidiary, or the issuance of any bonds, debentures, preferred or other capital
stock or rights with respect thereto, or the dissolution or liquidation of the
Corporation, the Bank or any Subsidiary, or any sale or transfer of all or any
part of the Corporation's, the Bank's or any Subsidiary's assets or business.
15. Tax Withholding. The Bank, the Corporation or any Subsidiary shall
---------------
have the right to deduct or otherwise effect a withholding of any amount
required by federal or state laws to be withheld with respect to the making of
an Award or the sale of shares acquired under this Plan in order for the Bank,
the Corporation or any Subsidiary to obtain a tax deduction otherwise available
as a consequence of such Award or sale, as the case may be.
16. Exculpation and Indemnification. In connection with this Plan, no
-------------------------------
member of the Board, no member of the Board of Directors of the Corporation, no
member of the Committee and no Trustee shall be personally liable for any act or
omission to act in his capacity as a member of the Board, the
6
<PAGE>
Board of Directors of the Corporation or the Committee or as a Trustee, nor for
any mistake in judgment made in good faith, unless arising out of, or resulting
from, such person's own bad faith, willful misconduct, or criminal acts. To the
extent permitted by applicable law and regulation, the Bank shall indemnify,
defend and hold harmless the members of the Board, the members of the Board of
Directors of the Corporation and the Committee and each Trustee and each other
officer or employee of the Bank, the Corporation or of any Subsidiary to whom
any duty or power relating to the administration or interpretation of this Plan
may be assigned or delegated, from and against any and all liabilities
(including any amount paid in settlement of a claim with the approval of the
Board) and any costs or expenses (including counsel fees) incurred by such
persons arising out of, or as a result of, any act or omission to act in
connection with the performance of such person's duties, responsibilities, and
obligations under this Plan, other than such liabilities, costs, and expenses as
may arise out of, or result from, the bad faith, willful misconduct, or criminal
acts of such persons.
17. Amendment and Modification of this Plan. The Board may at any time,
---------------------------------------
and from time to time, amend or modify this Plan (including the form of Stock
Grant Agreement) in any respect; provided, however, any amendment or
modification of this Plan shall not in any manner affect any Award of shares
theretofore made to a Participant under this Plan without the consent of such
Participant or any permitted transferee of such Participant and further provided
that no amendment shall be made to paragraph 5 of the Plan more than once every
six months other than to comport with changes in the Code, Employee Retirement
Income Security Act or the rules thereunder.
18. Termination and Expiration of this Plan. This Plan may be abandoned,
---------------------------------------
suspended, or terminated, in whole or in part, at any time by the Board;
provided, however, that abandonment, suspension, or termination of this Plan
shall not affect any Award theretofore made under this Plan; and provided
further, that in no event shall this Plan be terminated at the time of or
following any merger or consolidation of the Corporation or the Bank, unless and
until the surviving entity shall have made provision for an equivalent benefit
for all the then current participants in the Plan. Unless sooner terminated,
this Plan shall terminate at the close of business on the day that is the tenth
(10th) anniversary of the date of approval of the Plan by a majority of the
shareholders of the Corporation; and no Award of shares may be made under this
Plan thereafter. Such termination shall not effect any Award of shares
theretofore made. In the event that the Board terminates this Plan in whole,
any shares held by the Trustees pursuant to paragraph 2(d) which have not been
allocated to eligible Participants, together with any other assets held by the
Trustees in their capacities as such, shall revert to the Bank.
19. Effective Date. This Plan has been adopted by the Board to be
--------------
effective as of the date of approval of the Plan by a majority of the
shareholders of the Corporation as required by the regulations of the Federal
Deposit Insurance Corporation.
20. Captions and Headings; Gender and Number. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part hereof, and shall not serve as a
basis for interpretation or construction of this Plan. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.
21. Expenses of Administration of Plan. All costs and expenses incurred
----------------------------------
in the operation and administration of this Plan shall be borne by the Bank or
by a Subsidiary.
7
<PAGE>
22. Governing Law. Without regard to the principles of conflicts of laws,
-------------
the laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Plan.
23. Inspection of Plan. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Bank and shall be shown to any
proper person making inquiry about it.
8
<PAGE>
EXHIBIT A
PERCENTAGE OF TOTAL
NAME PLAN SHARES/1/
- ---- -------------------
___________________
/1/Total Plan Shares shall be equal to four percent (4%) of the number of
shares of Common Stock issued by the Corporation in connection with the
Conversion.
<PAGE>
EXHIBIT B
STATE OF NORTH CAROLINA
COUNTY OF RICHMOND
STOCK GRANT AGREEMENT
THIS STOCK GRANT AGREEMENT (the "Agreement") is made and entered into as of
the ____ of ___________________, _______ (the "Effective Date"), by and among
Richmond Savings Bank, Inc., SSB (the "Bank"), a North Carolina corporation,
_______________________ (the "Participant") and ______________________,
___________________ and ____________________ (the "Trustees").
WHEREAS, a Management Recognition Plan (the "Plan") was adopted by the
Board of Directors of the Bank (the "Bank") and approved by the Board of
Directors and by a majority of the shareholders of Carolina Fincorp, Inc., the
holding company of the Bank (the "Corporation").
WHEREAS, it has been determined that it is desirable and in the best
interest of the Bank to make an award (the "Award") of certain shares of the
Common Stock of the Corporation, under the Plan, to the Participant, subject to
certain restrictions as specified below; and
WHEREAS, capitalized terms not otherwise defined herein shall have the same
meaning given to such terms in the Plan.
NOW, THEREFORE, the Parties agree as follows:
1. Date of Award. The date of making the Award under this Agreement is
-------------
the _____ day of _________________, ______. This Award has been made in
recognition of the Participant's status and service as a ____________________ of
_____________________________________________. The Participant is ____ or _____
is not a director or executive officer of the Bank.
2. Receipt by Participant. The Participant acknowledges receipt of
----------------------
________________________________ (__________) shares of Common Stock (the
"Restricted Stock"), and agrees to the execution of stock powers or such other
transfer authorizations as the Committee shall request, in blank, covering the
Restricted Stock to be held by the Trustees until the Restricted Stock becomes
vested and nonforfeitable pursuant to the Plan and this Agreement.
3. Investment Representation and Transfer Restrictions.
---------------------------------------------------
(a) Investment Representation. Participant makes and agrees to the
-------------------------
investment representation, if any, attached hereto as Annex A, and the Committee
may cause a legend to be placed on any certificate representing any of the
shares of Restricted Stock to make appropriate reference to such representation.
(b) Securities Law and Regulations. The Participant agrees that the
-------------------------------
Restricted Stock shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any stock
exchange or interdealer quotation system upon which the Common Stock is then
listed and any
<PAGE>
other applicable federal or state securities laws, rules or regulations, and the
Committee may cause a legend or legends to be placed on any certificate
representing any of the shares of Restricted Stock to make appropriate reference
to such restrictions.
(c) Other Transfer Restrictions. If paragraph 1 above states that
---------------------------
Participant is a director or an executive officer of the Bank and if less than
one year has passed since the consummation of the Conversion (defined below),
the Participant agrees with the Bank that each certificate representing any of
the Restricted Stock may bear a legend, substantially in the form attached as
Annex B hereto, to the effect that, during the one year period following the
effective date of the conversion of the Bank from a North Carolina chartered
mutual savings bank to a North Carolina chartered stock savings bank (the
"Conversion"), the Restricted Stock represented thereby may not be sold without
the written consent of the Administrator of the Savings Institutions Division,
North Carolina Department of Commerce, except upon the death of the Participant.
4. Receipt by the Trustees. The Trustees acknowledge receipt from the
-----------------------
Participant of the Restricted Stock, registered in the name of the Participant,
and acknowledge receipt of stock powers executed in blank by the Participant
covering all of the Restricted Stock. The Restricted Stock shall be held by the
Trustees and distributed or transferred in accordance with the Plan and as set
forth herein.
5. Vesting and Delivery of Restricted Stock by the Trustees.
--------------------------------------------------------
(a) Periodic Vesting. Restricted Stock shall vest and become
----------------
nonforfeitable in accordance with the Plan.
(b) Delivery of Restricted Stock to the Participant. After (i) the
-----------------------------------------------
date on which shares of Restricted Stock have become vested as provided in the
Plan, the Committee shall instruct the Trustees to deliver to the Participant,
the Participant's designee, such other person as shall have been designated as
Participant's beneficiary in accordance with this Agreement, or any other
permitted recipient pursuant to the Plan, as applicable, certificates
representing the shares of Restricted Stock which have become vested and
nonforfeitable, as the Committee shall determine, free from any restrictions
imposed by this Agreement other than such restrictions and conditions as may be
deemed necessary by the Committee pursuant to paragraph 3 above.
(c) Delivery of Forfeited Restricted Stock. If the Restricted
--------------------------------------
Shares, or any of them, are forfeited pursuant to the Plan, the Board shall
instruct the Trustees concerning the disposition of such forfeited shares.
Thereafter such forfeited shares shall cease to be subject to this Agreement.
6. Repayment of Dividends. If the Participant hereunder forfeits any
----------------------
shares of Restricted Stock pursuant to the Plan, the Participant shall, within
30 days after the effective date of such forfeiture, pay the Corporation an
amount equal to the dividends received by the Participant with respect to
forfeited shares of Restricted Stock as set forth in the Plan. In the
alternative, at the option of the Bank or a Subsidiary, the amount to be repaid
may be withheld by the Bank or Subsidiary from the final compensation or fees
payable to the Participant. Each acceptance by a Participant of dividends with
respect to Restricted Shares still subject to forfeiture shall constitute a
reaffirmation of the agreements set forth in this paragraph 6.
2
<PAGE>
7. Designation of Beneficiary. The Participant hereby designates the
--------------------------
person(s) described on Annex C as the beneficiary or beneficiaries who shall be
entitled to receive the Restricted Stock, if any, distributable to the
Participant upon his death. The Participant may, from time to time, revoke or
change his beneficiary designation without the consent of any prior beneficiary,
if any, by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt.
If no such beneficiary designation is in effect at the time of the
Participant's death, or if no designated beneficiary survives the Participant,
or if such designation conflicts with law, the Participant's estate shall be
deemed to have been designated his beneficiary and shall receive the Restricted
Stock, if any, distributable to the Participant upon his death. If the
Committee is in doubt as to the right of any person to receive such
distribution, the Committee may direct the Trustees to retain the Restricted
Stock, without liability for any interest in respect thereof, until the rights
thereto are determined, or the Committee may direct the transfer of such
Restricted Stock into any court of appropriate jurisdiction and such transfer
shall be deemed a complete discharge of the obligations of the Bank, the
Corporation, the Committee and Trustees hereunder.
8. Effect of Award on Status of Participant. The fact that an Award has
----------------------------------------
been made to the Participant under this Plan shall not confer on the Participant
any right to continued service on the Board, on the board of directors of the
Corporation or on the board of directors of any Subsidiary, nor to continued
employment with the Bank, the Corporation or any Subsidiary; nor shall it limit
the right of the Bank, the Corporation or of any Subsidiary to remove the
Participant from any such boards, or to terminate his employment at any time
without prior notice.
9. Impact of Award on Other Benefits of Participant. The value of the
------------------------------------------------
Restricted Stock on the date of the Award or at the time the Restricted Stock
becomes vested, shall not be includable as compensation or earnings for purposes
of any other benefit plan offered by the Bank, the Corporation or any
Subsidiary.
10. Tax Withholding. All Restricted Stock distributed pursuant to this
---------------
Agreement shall be subject to applicable federal, state and local withholding
for taxes. The Participant expressly acknowledges and agrees to such
withholding without regard to whether the Restricted Stock may then be sold or
otherwise transferred by the Participant.
11. Notices. Any notices or other communications required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed to have
been sufficiently given if delivered personally or three business days after
deposit in the United States mail as Certified Mail, return receipt requested,
properly addressed and postage prepaid, if to the Bank, the Committee or the
Trustees at the Bank's principal office address at Post Office Box 1597, 115
South Lawrence Street, Rockingham, North Carolina 28380-1597; and, if to the
Participant, at his last address appearing on the books of the Bank. The Bank
and the Participant may change their address or addresses by giving written
notice of such change as provided herein. Any notice or other communication
hereunder shall be deemed to have been given on the date actually delivered or
as of the third (3rd) business day following the date mailed as set forth above,
as the case may be.
3
<PAGE>
12. Construction Controlled by Plan. The Plan, a copy of which is
-------------------------------
attached hereto as Annex D, is incorporated herein by reference. The Award of
Restricted Shares shall be subject to the terms and conditions of the Plan, and
the Participant hereby assumes and agrees to comply with all of the obligations
imposed upon the Participant in the Plan. This Agreement shall be construed so
as to be consistent with the Plan; and the provisions of the Plan shall be
deemed to be controlling in the event that any provision hereof should appear to
be inconsistent therewith.
13. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.
14. Governing Law. Without regard to the principles of conflicts of laws,
-------------
the laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Agreement.
15. Modification of Agreement; Waiver. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto or their successors in interest. No waiver hereunder shall constitute a
waiver with respect to any subsequent occurrence or other transaction hereunder
or of any other provision hereof.
16. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the parties hereto, and their respective heirs, legatees,
personal representatives, executors, and administrators, successors and assigns.
17. Entire Agreement. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
18. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
19. Substitution of Trustee. In the event any new trustee is substituted
-----------------------
for any Trustee pursuant to the Plan, such substitute trustee shall also be
substituted as a Trustee hereunder.
4
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this instrument to be executed in
its corporate name by its President, or one of its Vice Presidents, and attested
by its Secretary or one of its Assistant Secretaries, and its corporate seal to
be hereto affixed, all by, authority of its Board of Directors first duly given;
and each individual party hereto has hereunto set his hand and adopted as his
seal the typewritten word "SEAL" appearing beside his name, all done this the
day and year first above written.
RICHMOND SAVINGS BANK, INC., SSB
By:_____________________________________
_____________ President
ATTEST:
_____________________________________
___________________ Secretary
[Corporate Seal]
PARTICIPANT
__________________________________(SEAL)
__________________________________(SEAL)
TRUSTEE
__________________________________(SEAL)
TRUSTEE
__________________________________(SEAL)
TRUSTEE
5
<PAGE>
ANNEX A
INVESTMENT REPRESENTATION
-------------------------
<PAGE>
ANNEX B
FORM OF LEGEND
--------------
The shares represented by this certificate are subject to restrictions on
transfer and, for a period ending ______________, 1997, may not be sold without
the written permission of the Administrator of the Savings Institutions
Division, North Carolina Department of Commerce, except in the event of the
death of the holder thereof.
<PAGE>
ANNEX C
MANAGEMENT RECOGNITION PLAN
---------------------------
BENEFICIARY DESIGNATION FORM
----------------------------
As Beneficiary to receive any shares of stock distributable on my behalf
pursuant to the Richmond Savings Bank, Inc., SSB Management Recognition Plan, I
hereby designate the following:
Name Address Relationship
Primary Beneficiary: __________________________________________________________
__________________________________________________________
__________________________________________________________
Contingent Beneficiary:
(if any) __________________________________________________________
__________________________________________________________
__________________________________________________________
If more than one primary beneficiary is named, shares will be paid in equal
shares to surviving primary beneficiaries. Should the contingent beneficiaries
be eligible to receive the benefits (i.e., all primary beneficiaries are
deceased), such benefits will be paid in equal shares to such surviving
contingent beneficiaries.
Name of Spouse if not given above: _____________________________________________
_______________________________________ _______________________________________
Witness Participant
_______________________________________
Date
<PAGE>
ANNEX D
MANAGEMENT RECOGNITION PLAN
---------------------------
<PAGE>
EXHIBIT 10.5
CAROLINA FINCORP, INC.
STOCK OPTION PLAN AND TRUST AGREEMENT
THIS IS THE CAROLINA FINCORP, INC. STOCK OPTION PLAN ("Plan") AND TRUST
AGREEMENT (the "Trust") of Carolina Fincorp, Inc. (the "Corporation"), a North
Carolina corporation, with its principal office in Rockingham, Richmond County,
North Carolina, adopted by the Board of Directors of the Corporation and
effective upon the approval of the Plan by a majority of the shareholders of the
Corporation and the receipt of all necessary regulatory approvals, under which
options may be granted from time to time to eligible directors and employees of
the Corporation, Richmond Savings Bank, Inc., SSB (the "Bank") and of any
corporation or other entity of which either the Corporation or the Bank owns,
directly or indirectly, not less than fifty percent (50%) of any class of equity
securities (a "Subsidiary"), to purchase shares of common stock of the
Corporation ("Common Stock"), subject to the provisions set forth as follows:
1. PURPOSE OF THE PLAN. The purpose of the Plan is to aid the
-------------------
Corporation, the Bank and any Subsidiary in attracting and retaining capable
directors and employees and to provide a long range incentive for directors and
employees to remain in the management of the Corporation, the Bank or any
Subsidiary, to perform at increasing levels of effectiveness and to acquire a
permanent stake in the Corporation with the interest and outlook of an owner.
These objectives will be promoted through the granting of options to acquire
shares of Common Stock pursuant to the terms of this Plan.
2. ADMINISTRATION. The Plan shall be administered by the committee (the
--------------
"Committee"), who are three members of the Board of Directors of the Corporation
(the "Board") who are "disinterested persons" as described in Rule 16b-
3(c)(2)(i) of the Rules and Regulations under the Securities Act of 1934 (the
"Exchange Act"). Members of the Committee shall serve at the pleasure of the
Board. In the absence at any time of a duly appointed Committee, this Plan
shall be administered by those members of the Board who are "disinterested
persons," and by the Board if there are less than three "disinterested persons."
The Committee may designate any officers or employees of the Corporation, the
Bank or any Subsidiary to assist in the administration of the Plan and to
execute documents on behalf of the Committee and perform such other ministerial
duties as may be delegated to them by the Committee.
The Trust shall have three Trustees who shall be appointed by the Board and
shall serve at the pleasure of the Board.
Subject to the provisions of the Plan, the determinations or the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive upon all persons affected thereby. By way of
illustration and not of limitation, the Committee shall have the discretion (a)
to construe and interpret the Plan and all options granted hereunder and to
determine the terms and provisions (and amendments thereof) of the options
granted under the Plan (which need not be identical); (b) to define the terms
used in the Plan and in the options granted hereunder; (c) to prescribe, amend
and rescind the rules and regulations relating to the Plan; (d) to determine the
individuals to whom and the time or times at which such options shall be granted
(except for the options described in paragraph 6), the number of shares to be
subject to each option (except for the options described in paragraph 6), the
option price, and the determination of leaves of absence which may be granted to
participants without constituting a termination of their employment for the
purposes
<PAGE>
of the Plan; and (e) to make all other determinations necessary or advisable for
the administration of the Plan.
It shall be in the discretion of the Committee to grant options which
qualify as "incentive stock options" (as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended) or which do not qualify as
incentive stock options and which will be given tax treatment as "nonqualified
stock options" (herein referred to collectively as "options;" however, whenever
reference is specifically made only to "incentive stock options" or
"nonqualified stock options," such reference shall be deemed to be made to the
exclusion of the other). Any options granted which fail to satisfy the
requirements for incentive stock options shall become nonqualified stock
options.
3. STOCK AVAILABLE FOR OPTIONS. In the discretion of the Committee, the
---------------------------
stock to be subject to options under the Plan shall be authorized but unissued
shares of Common Stock which are issued to and held by the Trust or which are
issued directly to optionees upon exercise of options and/or shares of Common
Stock which are acquired by the Trust in the open market either before or upon
the exercise of options under this Plan. It is contemplated that shares of
Common Stock may be acquired by the Trust upon the grant of options under the
Plan and prior to the time options become vested under the terms of the Plan.
The total number of shares of Common Stock for which options may be granted
under the Plan is the number of shares equal to ten percent (10%) of the total
number of shares of Common Stock issued by the Corporation in connection with
the conversion of the Bank from a North Carolina mutual savings bank to a North
Carolina stock savings bank on __________________, 1996 (the "Conversion"). Such
number of shares is subject to any capital adjustments as provided in Section
15. In the event that an option granted under the Plan is forfeited, released,
expires or is terminated unexercised as to any shares covered thereby, such
shares thereafter shall be available for the granting of options under the Plan;
however, if the forfeiture, expiration, release or termination date of an option
is beyond the term of existence of the Plan as described in Section 22, then any
shares covered by forfeited, unexercised, released or terminated options shall
not reactivate the existence of the Plan and therefore may not be available for
additional grants under the Plan. The Corporation, unless and until the Trust
has acquired all shares of Common Stock necessary to satisfy options granted
under the Plan, will reserve and keep available a number of shares of Common
Stock sufficient to satisfy the requirements of the Plan.
4. CONTRIBUTIONS TO TRUST. The Board shall determine the amount (or the
----------------------
method of computing the amount) and timing of any contributions by the
Corporation, the Bank and any Subsidiary to the Trust established under this
Plan. Such amounts may be paid in cash or in shares of Common Stock and shall
be paid to the Trust at the designated time of contribution. No contributions
by participants under the Plan shall be permitted.
Except for amounts distributed to the Trust pursuant to Section 17 (which
shall be invested as set forth in Section 18), the Trustees shall, after paying
the expenses of the Trust, invest all of the Trust's assets primarily in Common
Stock. Upon the direction of the Committee, a number of shares up to the
aggregate number of shares of Common Stock available for distribution pursuant
to this Plan, as set forth in Section 3 above, shall be acquired by the Trustees
subsequent to approval of the Plan by the Corporation's shareholders and after
receipt of all necessary regulatory approvals. In the discretion of the
Committee, such shares may be acquired either before or upon the exercise of
options under this Plan, and may be acquired immediately upon approval of this
Plan by the Corporation's shareholders and receipt of all necessary regulatory
approvals. In the event that cash is contributed to the Trust and it is
necessary for the Trustees to acquire shares of Common Stock in the open market,
such shares shall be acquired on such terms as
2
<PAGE>
the Trustees deem appropriate.
5. ELIGIBILITY. Options shall be granted only to individuals who meet
-----------
all of the following eligibility requirements:
(a) Such individual must be an employee or a member of the Board of
Directors of the Corporation, the Bank or a Subsidiary. For this purpose,
an individual shall be considered to be an "employee" only if there exists
between the Corporation, the Bank or a Subsidiary and the individual the
legal and bona fide relationship of employer and employee. In determining
whether such relationship exists, the regulations of the United States
Treasury Department relating to the determination of such relationship for
the purpose of collection of income tax at the source on wages shall be
applied.
(b) Such individual must have such knowledge and experience in
financial and business matters that he or she is capable of evaluating the
merits and risks of the investment involved in the exercise of the options.
(c) Such individual, being otherwise eligible under this Section 5,
shall have been selected by the Committee as a person to whom an option
shall be granted under the Plan or shall have been designated in Section 6
hereof.
In determining the directors and employees to whom options shall be granted
and the number of shares to be covered by each option, the Committee shall take
into account the nature of the services rendered by respective directors and
employees, their present and potential contributions to the success of the
Corporation, the Bank and any Subsidiary and such other factors as the Committee
shall deem relevant. A director or employee who has been granted an option
under the Plan may be granted an additional option or options under the Plan if
the Committee shall so determine.
If, pursuant to the terms of the Plan, it is necessary that the percentage
of stock ownership of any individual be determined, stock ownership in the
Corporation or of a related corporation which is owned (directly or indirectly)
by or for such individual's brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants or by or for any corporation,
partnership, estate or trust of which such employee is a shareholder, partner or
beneficiary shall be considered as owned by such director or employee.
Notwithstanding anything in this Plan to the contrary, (i) no individual
optionee shall be granted options to acquire more than twenty-five (25) percent
of the shares of Common Stock to be issued pursuant to this Plan, (ii) no
optionee who is a non-employee director of the Corporation, the Bank or a
Subsidiary shall be granted options to acquire more than five (5) percent of the
shares of Common Stock to be issued pursuant to this Plan and (iii) all
optionees who are non-employee directors of the Corporation, the Bank or a
Subsidiary shall be granted options to acquire no more than thirty (30) percent
of the shares of Common Stock to be issued pursuant to this Plan.
6. INITIAL GRANTS. Subject to the provisions of this Plan, options shall
--------------
be awarded to the directors and employees as set forth on Exhibit A. Such
options shall be granted after the date
3
<PAGE>
the Plan is approved by a majority of the Corporation's shareholders and by all
necessary regulatory authorities, and after execution by the optionee of a Stock
Option Grant and Agreement (the "Option Agreement") in the form attached hereto
as Exhibit B as modified by the Committee to the extent it deems such
modification to be necessary or desirable. Such options shall be granted with
the intention that they will be nonqualified or incentive stock options as
denominated in the Option Agreement. Any option granted with the intention that
it will be an incentive stock option but which fails to satisfy a requirement
for incentive stock options shall continue to be valid and shall be treated as a
nonqualified stock option.
7. OPTION PRICE.
------------
(a) The option price of each option granted under the Plan shall be
not less than one hundred percent (100%) of the market value of the stock
on the date of grant of the option. In the case of incentive stock options
granted to a shareholder who owns stock possessing more than 10 percent
(10%) of the total combined voting power of all classes of stock of the
Corporation, the Bank or a Subsidiary (a "ten percent shareholder"), the
option price of each option granted under the Plan shall not be less than
one hundred and ten percent (110%) of the market value of the stock on the
date of grant of the option. If the Common Stock is listed on a national
securities exchange (including the NASDAQ National Market System) on the
date in question, then the market value per share shall be not less than
the average of the highest and lowest selling price on such exchange on
such date, or if there were no sales on such date, then the market price
per share shall be equal to the average between the bid and asked price on
such date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the market price per
share shall be equal to the average between the bid and asked price on such
date, or, if there is no bid and asked price on such date, then on the next
prior business day on which there was a bid and asked price. If no such
bid and asked price is available, then the market value per share shall be
its fair market value as determined by the Committee, in its sole and
absolute discretion. The Committee shall maintain a written record of its
method of determining such value.
(b) The option price shall be payable to the Corporation either (i)
in cash or by check, bank draft or money order payable to the order of the
Corporation, or (ii) at the discretion of the Committee, through the
delivery of shares of the common stock of the Corporation owned by the
optionee with a market value (determined in a manner consistent with (i)
above) equal to the option price, or (iii) at the discretion of the
Committee by a combination of (i) and (ii) above. No shares shall be
delivered until full payment has been made. The Committee may not approve
a reduction of such purchase price in any such option, or the cancellation
of any such options and the regranting thereof to the same optionee at a
lower purchase price, at a time when the market value of the shares is
lower than it was when such option was granted.
8. EXPIRATION OF OPTIONS. The Committee shall determine the expiration
---------------------
date or dates of each option, but such expiration date shall be not later than
ten (10) years after the date such option is granted. In the event an incentive
stock option is granted to a ten percent shareholder, the expiration date or
dates of each option shall be not later than five (5) years after the date such
option is granted. The Committee, in its discretion, may extend the expiration
date or dates of an
4
<PAGE>
option after such date was originally set; however, such expiration date may not
exceed the maximum expiration date described in this Section 8.
9. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) All options must be granted within ten (10) years of the
Effective Date of this Plan as defined in Section 21.
(b) The Committee may grant options which are intended to be
incentive stock options and nonqualified stock options, either separately
or jointly, to an eligible employee.
(c) The grant of options shall be evidenced by a written instrument
(an Option Agreement) containing terms and conditions established by the
Committee consistent with the provisions of this Plan.
(d) Not less than 100 shares may be purchased at any one time unless
the number purchased is the total number at that time purchasable under the
Plan.
(e) The recipient of an option shall have no rights as a shareholder
with respect to any shares covered by his option until payment in full by
him for the shares being purchased. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date such stock is fully paid for, except as provided in
Section 15.
(f) The aggregate fair market value of the stock (determined as of
the time the option is granted) with respect to which incentive stock
options are exercisable for the first time by any participant during any
calendar year (under all benefit plans of the Corporation, the Bank or any
Subsidiary, if applicable) shall not exceed $100,000; provided, however,
that such $100,000 limit of this subsection (f) shall not apply to the
grant of nonqualified stock options. The Committee may grant options which
are exercisable in excess of the foregoing limitations, in which case
options granted which are exercisable in excess of such limitation shall be
nonqualified stock options.
(g) All stock obtained pursuant to an option which qualifies as an
incentive stock option shall be held in escrow for a period which ends on
the later of (i) two (2) years from the date of the granting of the option
or (ii) one (1) year after the transfer of the stock pursuant to the
exercise of the option. The stock shall be held by the Corporation or its
designee. The employee who has exercised the option shall during such
holding period have all rights of a shareholder, including but not limited
to the rights to vote, receive dividends and sell the stock. The sole
purpose of the escrow is to inform the Corporation of a disqualifying
disposition of the stock within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and it shall be administered solely for
that purpose.
5
<PAGE>
10. EXERCISE OF OPTIONS.
-------------------
(a) An optionee receiving options by virtue of his position as a
director must remain continuously a member of the Board of Directors of the
Corporation, the Board of Directors of the Bank or the Board of Directors
of one or more of the Subsidiaries from the date of the grant until the
exercise of the option except as provided in Sections 11, 12 and 13 of this
Plan. An optionee receiving options by virtue of his position as an
employee must at all times be employed by the Corporation, the Bank or a
Subsidiary from the date of grant until the exercise of the options granted
except as provided in Sections 11, 12 and 13. All options granted under
the Plan shall be exercisable in annual installments in accordance with the
following schedule:
twenty percent (20%) of the shares beginning 1 year after the date of
the grant of the options;
twenty percent (20%) of the shares beginning 2 years after the date of
the grant of the options;
twenty percent (20%) of the shares beginning 3 years after the date of
the grant of the options;
twenty percent (20%) of the shares beginning 4 years after the date of
the grant of the options; and
twenty percent (20%) of the shares beginning 5 years after the date of
the grant of the options.
Notwithstanding the foregoing, options shall become exercisable with
respect to all of the shares subject thereto upon the optionee's death or
upon the optionee's disability within the meaning of Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended.
The right to exercise options in annual installments shall be cumulative
and any vested installments may be exercised, in whole or in part, at the
election of the optionee. The exercise of any option must be evidenced by
written notice to the Corporation that the optionee intends to exercise his
option.
In no event shall an option be deemed granted by the Corporation or
exercisable by a recipient prior to the mutual execution by the Corporation
and the recipient of an Option Agreement which comports with the
requirements of Section 6 and Section 9(c).
(b) The inability of the Corporation or Bank to obtain approval from
any regulatory body or authority deemed by counsel to be necessary to the
lawful issuance and sale of any shares of Common Stock hereunder shall
relieve the Corporation and the Bank of any liability in respect of the
non-issuance or sale of such shares. As a condition to the exercise of an
option, the Corporation may require the person exercising the Option to
make
6
<PAGE>
such representations and warranties as may be necessary to assure the
availability of an exemption from the registration requirements of federal
or state securities laws.
(c) The Committee shall have the discretionary authority to impose in
the Option Agreements such restrictions on shares of Common Stock as it may
deem appropriate or desirable, including but not limited to the authority
to impose a right of first refusal or to establish repurchase rights or
both of these restrictions.
11. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - EXCEPT BY DISABILITY OR
-------------------------------------------------------------------
DEATH. If any optionee receiving the grant of an option by virtue of his
- -----
position as a director ceases to be a director of at least one of the
Corporation, the Bank or any Subsidiary for any reason other than death or
disability (as defined in Section 12) or if any optionee receiving the grant of
an option by virtue of his position as an employee ceases to be an employee of
at least one of the Corporation, the Bank and any Subsidiary for any reason
other than death or disability (as defined in Section 12), he may, (i) at any
time within three (3) months after his date of termination, but not later than
the date of expiration of the option, exercise any option designated in the
Option Agreement as an incentive stock option and (ii) at any time prior to the
date of expiration of the option, exercise any option designated in the Option
Agreement as a nonqualified stock option. However, in either such event the
optionee may exercise any option only to the extent it was vested and he or she
was entitled to exercise the option on the date of termination. Any options or
portions of options of terminated directors or employees not so exercised shall
terminate and be forfeited.
12. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - DISABILITY. If any
------------------------------------------------------
optionee receiving the grant of an option by virtue of his position as a
director ceases to be a director of at least one of the Corporation, the Bank or
any Subsidiary due to his becoming disabled within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended, or if any employee
receiving the grant of an option by virtue of his position as an employee ceases
to be employed by at least one of the Corporation, the Bank and any Subsidiary
due to his becoming disabled within the meaning of Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended, he may, (i) at any time within 12
months after his date of termination, but not later than the date of expiration
of the option, exercise any option designated in the Option Agreement as an
incentive stock option with respect to all shares subject thereto and (ii) at
any time prior to the date of expiration of the option, exercise any option
designated in the Option Agreement as a nonqualified stock option with respect
to all shares subject thereto. Any portions of options of terminated directors
or employees not so exercised shall terminate.
13. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - DEATH. If an optionee
-------------------------------------------------
receiving the grant of an option by virtue of his position as a director dies
while a director of the Corporation, the Bank or any Subsidiary or if any
employee receiving the grant of an option by virtue of his position as an
employee dies while in the employment of the Corporation, the Bank or a
Subsidiary, the person or persons to whom the option is transferred by will or
by the laws of descent and distribution may exercise the option at any time
until the term of the option has expired, with respect to all shares subject
thereto, to the same extent and upon the same terms and conditions the optionee
would have been entitled to do so had he lived. Any options or portions of
options of deceased directors or employees not so exercised shall terminate.
7
<PAGE>
14. RESTRICTIONS ON TRANSFER. An option granted under this Plan may not
------------------------
be transferred except by will or the laws of descent and distribution and,
during the lifetime of the optionee to whom it was granted, may be exercised
only by such optionee.
15. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK.
------------------------------------------
(a) If the outstanding shares of Common Stock of the Corporation are
increased, decreased, changed into or exchanged for a different number or
kind of shares or other securities of the Corporation or another entity as
a result of a recapitalization, reclassification, stock dividend, stock
split, amendment to the Corporation's Certificate of Incorporation, reverse
stock split, merger or consolidation, an appropriate adjustment shall be
made in the number and/or kind of securities allocated to the options
previously and subsequently granted under the Plan, without change in the
aggregate purchase price applicable to the unexercised portion of the
outstanding options but with a corresponding adjustment in the price for
each share or other unit of any security covered by the options.
(b) To the extent that the foregoing adjustments relate to particular
stock or securities of the Corporation subject to option under this Plan,
such adjustments shall be made by the Committee, whose determination in
that respect shall be final and conclusive.
(c) The grant of an option pursuant to this Plan shall not affect in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
(d) No fractional shares of stock shall be issued under the Plan for
any such adjustment.
(e) Any adjustment made pursuant to this Section 15, shall be made in
such manner as not to constitute a modification of any outstanding
incentive stock options within the meaning of Section 424(h) of the
Internal Revenue Code of 1986, as amended.
16. INVESTMENT PURPOSE. At the discretion of the Committee, any Option
------------------
Agreement may provide that the optionee shall, by accepting the option,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon the exercise
of the option will be acquired for investment and not for resale or
distribution, and that upon each exercise of any portion of an option, the
person entitled to exercise the same shall furnish evidence of such facts which
is satisfactory to the Corporation. Certificates for shares of stock acquired
under the Plan may be issued bearing such restrictive legends as the Corporation
and its counsel may deem necessary to ensure that the optionee is not an
"underwriter" within the meaning of the regulations of the Securities Exchange
Commission.
17. DISTRIBUTION OF DIVIDENDS. Any cash dividends, returns of capital or
-------------------------
other distributions paid or made in respect of any shares of Common Stock held
in the Trust, plus the earnings on such amounts, shall be paid by the
Trustees to the Corporation.
8
<PAGE>
18. TRUST. The Trustees shall receive, hold, administer, invest and make
-----
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the Committee pursuant to the Plan.
It is the intent of this Plan and Trust that, except as set forth in
Section 3 above, the Trustees shall have complete authority and discretion with
respect to the arrangement, control and investment of the Trust, and that the
Trustees shall invest all assets of the Trust, except for amounts received
pursuant to Section 17 above, in Common Stock to the fullest extent practicable,
except (i) to the extent that the Trustees determine that the holding of monies
in cash or cash equivalents is necessary to meet the obligations of the Trust
and (ii) contributions to the Trust may be temporarily invested in such
interest-bearing account or accounts as the Trustees shall determine to be
appropriate. Amounts received by the Trustees pursuant to Section 17 shall be
invested in such interest-bearing accounts or in other investments as the
Trustees determine to be appropriate until such time as they are distributed or
used pursuant to Section 17. In performing their duties, the Trustees shall have
the power to do all things and execute such instruments as may be deemed
necessary or proper, including the following powers:
(a) To invest up to 100% of all Trust assets in Common Stock without
regard to any law now or hereafter in force limiting investments for
trustees or other fiduciaries. The investment authorized herein may
constitute the only investment of the Trust, except for the investment of
amounts received by the Trustees pursuant to Section 17, and in making such
investment, the Trustees are authorized to purchase Common Stock from the
Corporation or from any other source, and such Common Stock so purchased
may be outstanding or newly issued.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above, in such deposit accounts (including, without limitation,
deposit accounts at the Bank), certificates of deposit, obligations of the
United States Government or its agencies or such other investments as shall
be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in the
opinion of the Trustees be reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to its rights,
duties and obligations hereunder, and such other legal services or
representation as the Trustees deem desirable.
9
<PAGE>
(h) To hold funds and securities representing the amounts to be
distributed to an optionee or his beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in
common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustees
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to give any bond.
The Trustees shall maintain accurate and detailed records and accounts of
all transactions of the Trust, which shall be available at all reasonable times
for inspection by any legally entitled person or entity to the extent required
by applicable law, or any other person determined by the Committee.
After a stock option has been granted under this Plan, the optionee shall
be entitled to direct the Trustees as to the voting of any shares of Common
Stock held by the Trustees to satisfy the options which have been granted to
such optionee, regardless of whether or not such options have become vested and
nonforfeitable, subject to any rules and procedures adopted by the Committee for
this purpose. If any optionee does not direct the Trustees as to the voting of
any shares held to satisfy options granted to such optionee, such shares shall
not be voted by the Trustees. In the event a tender offer is made for shares of
Common Stock held to satisfy options granted to an optionee, the Trustees shall
tender shares held by the Trustees to satisfy options granted to such optionee
in accordance with instructions from such optionee. Any shares of Common Stock
held by the Trustees to satisfy options not granted to an optionee shall be
voted or tendered by the Trustees in their sole discretion.
It is intended that the trust established hereby be treated as a Grantor
Trust of the Corporation under the provisions of Section 671 et seq. of the
Internal Revenue Code of 1986, as amended.
Notwithstanding anything to the contrary in this Plan or Trust, the assets
of the Plan and Trust are subject to the payment of the claims of creditors of
the Corporation in the event of its insolvency or bankruptcy. The Corporation
is insolvent or bankrupt if it is the subject of a proceeding under the
Bankruptcy Code, 11 U.S.C. Section 101 et seq. or is unable to pay its debts.
The Board of Directors or the chief executive officer of the Corporation must
give written notice to the Trustees of the Corporation's bankruptcy or
insolvency as soon as practicable following the occurrence of such event. Upon
receipt of such notice or other written allegations of the Corporation's
bankruptcy or insolvency, or in the case of the Trustees' actual knowledge of or
determination of the Corporation's bankruptcy or insolvency, the Trustees shall
discontinue delivery of Trust assets to the optionees or the Corporation and
shall hold the assets of the Trust for the benefit of the Corporation's general
creditors and, upon a determination that the Corporation is bankrupt or
insolvent, shall distribute such assets to or for the benefit of the general
creditors. The Trustees shall resume delivery of Trust assets to the optionees
or the Corporation only after it is determined that the Corporation is no longer
bankrupt or insolvent. Determination of the bankruptcy or insolvency shall be
determined by a court of competent jurisdiction or by an arbitrator selected by
and pursuant to rules of the American Arbitration Association upon petition by
an interested party.
19. APPLICATION OF FUNDS. The proceeds received by the Corporation from
--------------------
the sale of Common Stock pursuant to options will be used for general corporate
purposes.
10
<PAGE>
20. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
--------------------------------
impose no obligation upon the optionee to exercise such option.
21. EFFECTIVE DATE OF PLAN. The Plan will become effective upon the
----------------------
approval of the Plan by a majority of the shareholders of the Corporation as
required by regulations of the FDIC and the receipt of all necessary regulatory
approvals.
22. TERM OF PLAN. Options may be granted pursuant to this Plan from time
------------
to time within ten (10) years from the effective date of the Plan.
23. TIME OF GRANTING OF OPTIONS. Nothing contained in the Plan or in any
---------------------------
resolution adopted or to be adopted by the Committee or the shareholders of the
Corporation and no action taken by the Committee shall constitute the granting
of any option hereunder. The granting of an option pursuant to the Plan shall
take place only when an Option Agreement shall have been duly executed and
delivered by and on behalf of the Corporation at the direction of the Committee.
24. WITHHOLDING TAXES. Whenever the Corporation proposes or is required
-----------------
to issue or transfer shares of stock or other assets under the Plan, the
Corporation shall have the right to require the optionee to remit to the
Corporation an amount sufficient to satisfy any Federal, state and/or local
withholding tax requirements prior to the issuance of any certificate or
certificates for such shares or delivery of other assets. Alternatively, the
Corporation may issue or transfer such shares of stock or make other
distributions of assets net of the number of shares or other amounts sufficient
to satisfy the withholding tax requirements. For withholding tax purposes, the
shares of stock and other assets to be distributed shall be valued on the date
the withholding obligation is incurred.
25. TERMINATION AND AMENDMENT. The Board may at any time alter, suspend,
-------------------------
terminate or discontinue the Plan, but may not, without the consent of the
holder of an option previously granted, make any alteration which would deprive
the optionee of his rights with respect thereto; provided, however, that
-------- -------
shareholder approval of certain amendments may be necessary if it is desirable
for the Plan to continue to satisfy the requirements of Rule 16b-3 of the
Securities Exchange Commission; and provided further, that in no event shall
-------- -------
this Plan be terminated at the time of or following any merger or consolidation
of the Corporation or the Bank, unless and until the surviving entity shall have
made provision for an equivalent benefit for all the then current option
holders. Notwithstanding anything herein to the contrary, the Board may not
amend Section 6 hereof or any other provisions of this Plan described in Rule
16b-3(c)(2)(ii)(A) of the regulations promulgated pursuant to the Exchange Act
more than once every six months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder.
26. CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction of, this Plan. As used herein, the masculine
gender shall include the feminine and neuter, and the singular number shall
include the plural, and vice versa, whenever such meanings are appropriate.
11
<PAGE>
27. COST OF PLAN; EXCULPATION AND INDEMNIFICATION. All costs and expenses
---------------------------------------------
incurred in the operation and administration of the Plan and the Trust shall be
borne by the Corporation, the Bank and the Subsidiaries. In connection with
this Plan, no member of the Board, no member of the Board of Directors of the
Bank, and no member of the Board of Directors of any Subsidiary, no member of
the Committee and no Trustee shall be personally liable for any act or omission
to act, nor for any mistake in judgment made in good faith, unless arising out
of, or resulting from, such person's own bad faith, willful misconduct or
criminal acts. To the extent permitted by applicable law and regulation, the
Corporation shall indemnify, defend and hold harmless the members of the Board,
the members of the Board of Directors of the Bank and the members of the Board
of Directors of any Subsidiary, and members of the Committee, each Trustee, and
each other officer or employee of the Bank, the Corporation or of any Subsidiary
to whom any power or duty relating to the administration or interpretation of
this Plan may be assigned or delegated, from and against any and all liabilities
(including any amount paid in settlement of a claim with the approval of the
Board), and any costs or expenses (including counsel fees) incurred by such
persons arising out of or as a result of, any act or omission to act, in
connection with the performance of such person's duties, responsibilities and
obligations under this Plan, other than such liabilities, costs, and expenses as
may arise out of, or result from the bad faith, willful misconduct or criminal
acts of such persons.
28. GOVERNING LAW. Without regard to the principles of conflicts of laws,
-------------
the laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Plan.
29. INSPECTION OF PLAN. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Corporation and shall be shown to
any proper person making inquiry about it.
30. OTHER PROVISIONS. The Option Agreements authorized under this Plan
----------------
shall contain such other provisions not inconsistent with the foregoing,
including, without limitation, increased restrictions upon the exercise of
options, as the Committee may deem advisable.
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
---------
PERCENTAGE OF TOTAL
SHARES SUBJECT TO OPTION
OPTIONEE UNDER PLAN
- -------- -------------------------
<S> <C>
</TABLE>
<PAGE>
EXHIBIT B
---------
STOCK OPTION GRANT AND AGREEMENT
THIS STOCK OPTION GRANT AND AGREEMENT ("Agreement"), being made according
to and subject to the terms and conditions of the STOCK OPTION PLAN of Carolina
Fincorp, Inc. ("Plan"), a copy of which is attached hereto as Annex A and is
hereby incorporated by reference and made a part of this Agreement, is herein
executed and effective the _______ day of _______________, _____, between
Carolina Fincorp, Inc. (the "Corporation") and ____________________
("Optionee"):
1. GRANT. As of the above date, the Corporation hereby grants: (i) an
-----
incentive stock option (as that term is defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) to purchase ________ shares of
Common Stock of the Corporation to the Optionee at the price stated in this
Agreement; and/or (ii) a nonqualified stock option to purchase __________ shares
of Common Stock of the Corporation to the Optionee at the price stated in this
Agreement.
The option(s) granted under this section and as described in this Agreement
is (are) in all respects subject to and conditioned by the terms, definitions,
and provisions of this Agreement and of the Plan. Capitalized terms in this
Agreement which are not otherwise defined but which are defined in the Plan
shall have the same meaning given to those terms in the Plan.
2. PRICE. The option price is $_____________ for each share.
-----
3. EXERCISE OF OPTION. The option(s) granted under this Agreement shall
------------------
be exercisable pursuant to the terms and conditions of the Plan and as set forth
below:
(a) Right to Exercise: There are no other terms and conditions
-----------------
imposed on the Optionee's right to exercise his options other than those
imposed in the Plan, except as stated below:
________________________________________________________________________________
________________________________________________________________________________
(b) Annual Installments: Subject to the terms and conditions of
-------------------
the Plan, the incentive stock options can be exercised in annual
installments as follows:
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
<PAGE>
The nonqualified options can be exercised in annual installments as
follows:
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
__________________ shares beginning on ______________, 19__
The right to exercise the option(s) in annual installments shall be
cumulative. In addition, the option(s) shall be exercisable upon
disability and death as set forth in the Plan.
(c) Method of Exercise: The options under this Agreement shall be
------------------
exercisable by a written notice to the Secretary of the Corporation which
shall include the following:
(1) State the election to exercise the option, the number of
shares in respect of which it is being exercised, the person in whose
name the stock certificate or certificates for such shares of Common
Stock is to be registered, his or her address, and social security
number;
(2) Contain any such representation and agreements as to
Optionee's investment intent with respect to such shares of Common
Stock as may be required by the Corporation;
(3) Be signed by the person entitled to exercise the option and,
if the option is being exercised by any person or persons other than
the Optionee, be accompanied by proof, satisfactory to the
Corporation, of the right of such person or persons to exercise the
option in accordance with the Plan; and
(4) Be accompanied by payment of the purchase price of any
shares with respect to which the option is being exercised which
payment shall be in form acceptable to the Committee pursuant to
Section 6(b) of the Plan.
(d) Representations and Warranties: In order to exercise an option,
------------------------------
the person exercising the option must make the representations and
warranties to the Corporation as may be required by any applicable law or
regulation, or as may otherwise be required pursuant to the Plan.
(e) Approvals. In order for an option to be exercised, all filings
---------
and approvals required by applicable law and regulations or pursuant to the
Plan must have been made and obtained.
4. NON-TRANSFERABILITY OF OPTION. This option may not be transferred in
-----------------------------
any manner otherwise than by will or the laws of descent and distribution and
may be exercised during the life of the Optionee only by him or her.
2
<PAGE>
5. INVESTMENT PURPOSE. This option may not be exercised if the issuance
------------------
of shares upon such exercise would constitute a violation of any applicable
federal or state securities law or other law or valid regulation.
6. EXPIRATION OF OPTION. This option shall expire on _____________,
--------------------
_________.
7. ESCROW. All stock purchased pursuant to an incentive stock option
------
shall be held in escrow for a period which ends on the later of (i) two (2)
years from the date of the granting of the option or (ii) one (1) year after the
transfer of the stock pursuant to the exercise of the option. The stock shall
be held by the Corporation or its designee. The optionee who has exercised the
option shall have all rights of a stockholder, including, but not limited to,
the rights to vote, receive dividends and sell the stock. The sole purpose of
the escrow is to inform the Corporation of a disqualifying disposition of the
stock within the meaning of Section 422 of the Code, and it shall be
administered solely for this purpose.
8. RESOLUTION OF DISPUTES. Any dispute or disagreement which should
----------------------
arise under, or as a result of, or in any way relate to, the interpretation,
construction, or application of this Agreement will be determined by the
Committee designated in Section 2 of the Plan. Any determination made by such
Committee shall be final, binding, and conclusive for all purposes.
9. CONSTRUCTION CONTROLLED BY PLAN. The options evidenced hereby shall
-------------------------------
be subject to all of the requirements, conditions and provisions of the Plan.
This Agreement shall be construed so as to be consistent with the Plan; and the
provisions of the Plan shall be deemed to be controlling in the event that any
provision should appear to be inconsistent therewith.
10. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.
11. MODIFICATION OF AGREEMENT; WAIVER. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto and only subject to the limitations set forth in the Plan. No waiver
hereunder shall constitute a waiver with respect to any subsequent occurrence or
other transaction hereunder or of any other provision.
12. CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction, of this Agreement. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.
3
<PAGE>
13. GOVERNING LAW; VENUE AND JURISDICTION. Without regard to the
-------------------------------------
principles of conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and enforcement of
this Agreement.
14. BINDING EFFECT. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the Corporation, and its successors and assigns, and shall be
binding upon and inure to the benefit of the Optionee, and his or her heirs,
legatees, personal representative, executor, administrator and permitted
assigns.
15. ENTIRE AGREEMENT. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
16. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first above written.
ATTEST: CAROLINA FINCORP, INC.
____________________________ By:_______________________________________
(Corporate Seal) _____________________ President
OPTIONEE:
___________________________________(SEAL)
4
<PAGE>
EXHIBIT 10.6
RICHMOND SAVINGS BANK, SSB
SEVERANCE PLAN
THIS IS THE SEVERANCE PLAN ("PLAN") OF RICHMOND SAVINGS BANK, SSB (THE
"BANK"), A NORTH CAROLINA-CHARTERED SAVINGS BANK, WITH ITS PRINCIPAL OFFICE IN
ROCKINGHAM, NORTH CAROLINA, ADOPTED BY THE BOARD OF DIRECTORS OF THE BANK, TO BE
EFFECTIVE ON THE DATE SET FORTH ON THE LAST PAGE HEREOF.
1. Purpose. The purpose of this Plan is to aid the Bank in attracting
-------
and retaining capable employees by providing the employees with the severance
benefits set forth herein in the event that there is a change in control of the
Bank. For purposes of this Plan, the term "Employee" means and includes any
person employed by the Bank on a full time basis on the date of consummation or
occurrence of a "Change in Control" (as defined in Subparagraph 2(c) below),
excluding any person employed by the Bank on such date pursuant to a written
employment agreement between such employee and the Bank which has a remaining
term in excess of two years.
2. Severance Benefit.
-----------------
(a) In the event (i) the Bank or its successor terminates the employment
of any Employee in connection with, or within twenty-four (24) months
after, a "Change in Control" (as defined in Subparagraph (c) below),
other than for "cause" (as defined in Paragraph 3 below) or (ii) an
Employee terminates his employment following a Termination Event
pursuant to Paragraph 2(b) below, the Bank shall pay the Employee a
severance benefit equal to the greater of (A) an amount equal to two
weeks salary at the Employee's existing salary rate at the time of
termination multiplied times the Employee's number of complete years
of service as an employee of the Bank or (B) the amount of one months
salary at the Employee's existing salary rate at the time of
termination; provided, however, that the severance benefit shall not
exceed 0.5 times the annual salary payable to any Employee at his
salary rate existing on the date of such termination. Such sum shall
be payable as provided in Subparagraph (d) below.
(b) An Employee shall have the right to terminate his or her employment
upon the occurrence of any of the following events (the "Termination
Events") within twenty-four (24) months following a Change in Control:
(i) The Employee's annual base salary rate is decreased from the
level existing at the effective time of the Change in Control; or
(ii) The Employee is transferred to a location more than forty (40)
miles distant from the Employee's primary work station at the
time of the Change in Control.
A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.
<PAGE>
(c) For the purposes of this Plan, 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 in response to Item 1 of the Current Report on Form 8-
K by the Bank or by any parent holding company of the Bank
pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 as in effect on the date hereof (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 Bank or any
parent holding company of the Bank representing 25 percent or
more of the combined voting power of the outstanding capital
stock of the Bank or any parent holding company of the Bank; or
(iii) individuals who constitute the Board of Directors of the Bank
or any parent holding company of the Bank on the date hereof
(each, an "Incumbent Board") 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 whose nomination for election
by the shareholders of the Bank or any parent holding company
of the Bank was approved by the Board of Directors of the Bank
or any parent holding company of the Bank or any Nominating
Committee of any such Board, as applicable, shall be considered
as though he or she were a member of the Incumbent Board; or
(iv) the Bank or any parent holding company of the Bank consolidates
or merges with or into another corporation, association or
entity or is otherwise reorganized, where the Bank or any
parent holding company of the Bank is not the surviving
corporation in such transaction; or
(v) all or substantially all of the assets of the Bank or any
parent holding company of the Bank are sold or otherwise
transferred to or are acquired by any other entity or group.
Notwithstanding the other provisions of this Paragraph 2(c), neither
(i) the conversion of the Bank from a mutual savings bank to a stock
savings bank ("Conversion") pursuant to the rules and regulations
regarding mutual to stock conversions, (ii) the acquisition of capital
stock of the Bank by a parent holding company formed by the Bank to
acquire the capital stock of the Bank issued in connection with a
Conversion (iii) the sale by such parent holding company of its
capital stock to the members of the Bank and the general public
pursuant to the rules and regulations regarding Conversions, or (iv)
any other event or transaction which the Board of Directors of the
Bank shall determine is not a Change in Control for purposes of its
Plan prior to the consummation or occurrence thereof, shall constitute
a Change in Control. In addition, a transaction or event shall not be
considered a Change in Control with respect to any Employee benefitted
hereby if,
2
<PAGE>
prior to the consummation or occurrence of such transaction or event,
such Employee and the Bank agree in writing that the same shall not be
treated as a Change in Control for purposes of this Plan.
(d) Amounts payable pursuant to this Paragraph 2 shall be paid, at the
option of the Bank or any successor in one lump sum or in equal
monthly payments over a period not to exceed a number of months equal
to the Employee's years of service with the Bank divided by two.
(e) Following a Termination Event which gives rise to an Employee's rights
hereunder, the Employee shall have six (6) months from the date of
occurrence of the Termination Event to terminate his or her employment
pursuant to this Paragraph 2. Any such termination shall be deemed to
have occurred only upon delivery to the Bank (or to any successor
corporation) of written notice of termination which describes the
Change in Control and Termination Event. If an Employee does not so
terminate his employment within such six-month period, he or she shall
thereafter have no further rights hereunder with respect to that
Termination Event, but shall retain rights, if any, hereunder with
respect to any other Termination Event as to which such six month
period has yet to expire.
3. Termination for "Cause." Termination for "cause" shall include
----------------------
termination because of the Employee's personal dishonesty, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, or willful violation of any law, rule, regulation (other
than traffic violations or similar offenses) or final cease-and-desist order.
4. Effect on Other Benefits. The benefits payable to or owed to any
------------------------
Employee under this Plan shall not be reduced or otherwise affected by the
Employee's receipt or entitlement to benefits under (i) any agreement between
the Employee and the Bank or any parent holding company of the Bank, or (ii)
any other fringe benefit, compensation, or other employee benefit plan of the
Bank or any parent holding company of the Bank, including, but not limited to,
any employment agreement, stock option plan, restricted stock agreements or
employee stock ownership plan. In addition, the benefits payable to or owed to
any Employee under any such fringe benefit, compensation or other employee
benefit plan of the Bank or any parent holding company of the Bank shall not be
reduced or otherwise affected by the Employee's receipt or entitlement to
benefits under this Plan.
5. Binding Effect. This Plan shall be binding upon any corporate or
--------------
other successor of the Bank which shall acquire, directly or indirectly, by
merger, consolidation, purchase, or otherwise, all or substantially all of the
assets of the Bank.
6. Modification, Waiver, Amendments. Prior to the consummation or
--------------------------------
occurrence of a Change in Control, as defined herein, this Plan may be
terminated, modified or amended in any manner whatsoever, by resolution adopted
by the Bank's Board of Directors. Prior to the time of the consummation or
occurrence of any Change in Control, no employee shall have any vested rights
pursuant to this Plan. After the consummation or occurrence of a Change in
Control, all Employees shall have vested rights pursuant to this Plan, and this
Plan may not be terminated or modified or amended in a manner to reduce the
benefits payable to any Employee, without the written consent of such Employee.
3
<PAGE>
7. Effect of Plan on Employees. This Plan shall not confer upon any
---------------------------
employee of the Bank the right to continued employment with the Bank or any
successor to the Bank, nor shall it limit the right of the Bank or any successor
of the Bank to terminate the employment of any employee at any time, subject to
the terms hereof.
8. Withholding. The Bank or any successor to the Bank shall have the
-----------
right to deduct or otherwise effect a withholding of any amount required by
federal or state laws to be withheld as a result of any payments required to be
made under this Plan.
9. Governing Law. Without regard to principles of conflicts of laws, the
-------------
laws of the State of North Carolina shall govern and control the validity,
interpretation, performance and enforcement of this Plan.
10. Inspection of Plan. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Bank and shall be shown to any
proper person making inquiry with respect thereto.
11. Waiver. Any Employee shall have the right to waive the receipt of any
------
benefits which would otherwise be payable to such Employee pursuant to this Plan
by executing a writing setting forth the terms of such waiver.
12. Excise Taxes. It is the intent of the parties hereto that all
------------
payments made pursuant to this Plan shall be deductible by the Bank for federal
income tax purposes and not result in the imposition of an excise tax on any
Employee. Notwithstanding anything contained in this Plan to the contrary, any
payments to be made to or for the benefit of any Employee which are deemed to be
"parachute payments," as such term is defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), shall be modified or reduced to
the extent, but only to the extent, reasonably deemed to be necessary by the
Bank to avoid the imposition of excise taxes on the Employee under Section 4999
of the Code or the disallowance of a deduction to the Bank under Section 280G(a)
of the Code.
Dated _________________, 1996.
4
<PAGE>
EXH. 10.7
STATE OF NORTH CAROLINA
COUNTY OF RICHMOND CAPITAL MAINTENANCE AGREEMENT
This Capital Maintenance Agreement (the "Agreement"), dated as of
_________, 1996, by and between Carolina Fincorp, Inc., Hillsborough, North
Carolina, a North Carolina-chartered bank holding company (the "Holding
Company") and Richmond Savings Bank, Inc., SSB a North Carolina-chartered stock
savings bank (the "Savings Bank").
WHEREAS, the Savings Bank has applied to the Administrator, Savings
Institutions Division, North Carolina Department of Commerce ("Administrator")
for permission to convert from a North Carolina mutual savings bank to a North
Carolina stock owned savings bank (the "Conversion"); and
WHEREAS, as a part of the Conversion, the Holding Company has applied to
the Administrator for permission to acquire all of the capital stock issued by
the Savings Bank in the Conversion (the "Acquisition") and to sell shares of the
Holding Company's common stock to certain persons in a subscription and, if
necessary, a community offering and a syndicated community offering; and
WHEREAS, the Administrator, the Holding Company and the Savings Bank wish
to protect the interests of the depositors of the Savings Bank and the Savings
Association Insurance Fund; and
WHEREAS, by letters dated _______________, 1996, the Administrator has
approved the Conversion and the Acquisition conditional upon, among other
things, the Holding Company and the Savings Bank entering this Agreement (the
"Approval").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree that, following the
Conversion and Acquisition, the Holding Company and the Savings Bank will
maintain the capital of the Savings Bank at all times in compliance with the
applicable capital requirements of all federal and state regulatory agencies
having supervisory authority over the Savings Bank, including the capital
requirements of the Administrator and the Federal Deposit Insurance Corporation.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by each director of
the Holding Company and the Savings Bank.
DIRECTORS OF CAROLINA FINCORP, INC.:
___________________________________ ____________________________________
J. Stanley Vetter Joe M. McLaurin
___________________________________ ____________________________________
John T. Page W. Jesse Spencer
___________________________________ ____________________________________
Russell E. Bennett E.E. Vuncannon, Jr.
___________________________________ ____________________________________
Buena Vista Coggin R. Larry Campbell
DIRECTORS OF RICHMOND SAVINGS BANK, INC., SSB:
___________________________________ ____________________________________
J. Stanley Vetter Joe M. McLaurin
___________________________________ ____________________________________
John T. Page W. Jesse Spencer
___________________________________ ____________________________________
Russell E. Bennett E.E. Vuncannon, Jr.
___________________________________ ____________________________________
Buena Vista Coggin R. Larry Campbell
2
<PAGE>
EXHIBIT 24.1
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
June 19, 1996
<PAGE>
EXHIBIT. 24.2
LETTERHEAD OF
BAXTER FENTRISS AND COMPANY
June 19, 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.
June 19, 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/arb
<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> 2,367 1,419
<INT-BEARING-DEPOSITS> 5,764 3,448
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 8,451 5,474
<INVESTMENTS-CARRYING> 7,061 8,884
<INVESTMENTS-MARKET> 7,018 8,832
<LOANS> 68,651 69,108
<ALLOWANCE> 386 363
<TOTAL-ASSETS> 95,278 91,410
<DEPOSITS> 85,125 81,437
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 1,604 1,845
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 8,549 8,128
<TOTAL-LIABILITIES-AND-EQUITY> 95,278 91,410
<INTEREST-LOAN> 4,159 5,403
<INTEREST-INVEST> 898 974
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 5,057 6,377
<INTEREST-DEPOSIT> 2,975 3,271
<INTEREST-EXPENSE> 2,975 3,271
<INTEREST-INCOME-NET> 2,082 3,106
<LOAN-LOSSES> 27 36
<SECURITIES-GAINS> (4) (5)
<EXPENSE-OTHER> 1,845 2,452
<INCOME-PRETAX> 674 1,049
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 464 720
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 3.15 3.64
<LOANS-NON> 172 75
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 215 76
<ALLOWANCE-OPEN> 363 316
<CHARGE-OFFS> 4 10
<RECOVERIES> 0 21
<ALLOWANCE-CLOSE> 386 363
<ALLOWANCE-DOMESTIC> 323 280
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 63 83
</TABLE>
<PAGE>
RICHMOND SAVINGS BANK, S.S.B.
Rockingham, North Carolina
PRO FORMA VALUATION REPORT
Valued as of May 17, 1996
PREPARED BY:
BAXTER FENTRISS AND COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Tab Page
- --- ----
<S> <C> <C>
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 25
Summary 29
2 II. COMPARISONS WITH PUBLICLY TRADED THRIFTS
General 30
Selection Criteria 30
Financial Comparisons 34
3 III. MARKET VALUE ADJUSTMENTS
Earnings Prospects 36
Market Area 37
Management 37
Liquidity 37
Dividends 38
Subscription Interest 38
Recent Regulatory Changes 38
Stock Market Conditions 39
Recent Acquisitions in the Savings Bank's Market Area 41
New Issue Discount 42
Adjustments Conclusion 43
Valuation Approach 43
Valuation Conclusion 43
</TABLE>
<PAGE>
LIST OF TABLES
<TABLE>
<CAPTION>
Table
Number Table Title Page
- ------ ----------- ----
<S> <C> <C>
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 17
12 Selected Operating Data 19
13 Key Operating Ratios 20
13-A Net Income for Trailing Twelve Months 21
14 Selected Operating Data-Percentage of Average Assets 21
15 Summary Demographic Data 26
16-A Deposit Market-Richmond County 27
16-B Deposit Market-Moore County 28
16-C Deposit Market-Scotland County 28
CHAPTER II Tab
---
17 General Characteristics 2
18 Key Financial Indicators 2
CHAPTER III Page
----
19 SNL Thrift Index Monthly Performance 40
Tab
---
20 Acquisitions of North Carolina Thrift Institutions 3
21 Standard Conversions Publicly Traded 3
22 Trading Comparisons 3
</TABLE>
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title Tab
- ------ ------------- ---
<S> <C> <C>
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
</TABLE>
<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,
and 1995 and the unaudited statements for the nine month periods ended March 31,
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 March 31, 1996, Richmond Savings had total assets of
$95.3 million, total deposits of $85.1 million and total equity of $8.5 million
or 9.0% 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 $8.5 million and 9.0% at March 31, 1996 and
was in compliance with all applicable regulatory capital requirements. Richmond
Savings remained profitable in each of the last five fiscal years ended June 30,
1995. 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 nine months ended March 31,
1996 was .67% down from .88% at March 31, 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 $95.3 million at March
31, 1996, or 17.2%. The Savings Bank's growth in loans has not kept pace with
deposit expansion. Total deposits increased by 14.0% and net loans outstanding
grew by 11.9% between June 30, 1991 and March 31, 1996, respectively. In
contrast, total cash, interest earning deposits, and investments increased from
$13.9 million to $24.3 million, between June 30, 1991 and March 31, 1996.
3
<PAGE>
Richmond Savings' diversified orientation is evidenced by the composition of its
loan portfolio. At March 31, 1996, 82.8% of the Bank's net loan portfolio
consisted of residential one-to-four family mortgages, 55.4% of the Bank's net
loan portfolio was composed of adjustable rate loans, and non-performing assets
were 0.18% 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, and 1995 and March 31, 1996. Exhibit II-2 summarizes the statements of
income for the fiscal years ended June 30, 1993, 1994, and 1995 and the nine
months ended March 31, 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 17.2% between June 30, 1991 and March
31, 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 declined to 71.6% at March 31, 1996. Net loans outstanding increased from
$61.0 million at June 30, 1991 to $68.3 million at March 31, 1996 (or 11.9%).
Table 3 shows the composition of the loan portfolio at June 30, 1994 to March
31, 1996. Table 4 shows Richmond Savings' loan origination activity for the
last two 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 82.8% of net
loans receivable as of March 31, 1996, approximating levels in recent years.
Consumer lending has been the Bank's primary area of diversification, and
totaled 3.3% of total loans receivable at March 31, 1996, while construction and
home equity loans totaled 10.8% of total 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 March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AT JUNE 30,
- --------------------------------------------------------------------------------------------------
Balance sheet data: 1991 1992 1993 1994 1995 MARCH 31,
1996 (1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total loans, net $61,012 $63,004 $67,900 $67,680 $68,745 $68,265
- --------------------------------------------------------------------------------------------------
Total investments (2) 14,119 15,351 12,789 16,034 18,540 22,012
- --------------------------------------------------------------------------------------------------
Total assets 81,290 84,703 87,353 87,504 91,410 95,278
- --------------------------------------------------------------------------------------------------
Total deposits 74,660 77,431 79,005 78,315 81,437 85,125
- --------------------------------------------------------------------------------------------------
Total liabilities 76,537 79,099 80,793 80,090 83,282 86,729
- --------------------------------------------------------------------------------------------------
Retained income, 4,753 5,605 6,561 7,414 8,128 8,549
substantially restricted
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Unaudited. Source: Richmond Savings Bank, S.S.B., Financial Statements.
(2) Includes interest bearing deposits, fed funds sold, FHLB stock andinvestment
securities.
Table 2
STATEMENT OF FINANCIAL CONDITION
At June 30, 1991, 1992, 1993, 1994, 1995
and March 31, 1996
(As a percentage of Total Assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
AT JUNE 30,
- ------------------------------------------------------------------------- March 31,
Balance Sheet Data: 1991 1992 1993 1994 1995 1996 (1)
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total loans, net 75% 75% 78% 77% 75% 72%
- ---------------------------------------------------------------------------------------
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) Unaudited. Source: Richmond Savings Bank, S.S.B., Financial Statements.
(2) Includes interest bearing deposits, fed funds sold, FHLB stock and
investmentsecurities.
6
<PAGE>
Table 3
LOAN PORTFOLIO COMPOSITION
At June 30, 1994 and 1995
and March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AT JUNE 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1994 1995 MARCH 31, 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% $56,520 81%
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-family and
Commercial 1,959 3 1,425 2 1,596 2
- ----------------------------------------------------------------------------------------------------------------------------------
Construction 2,703 4 2,106 3 1,895 3
- ----------------------------------------------------------------------------------------------------------------------------------
Home Equity Lines of Credit 3,949 6 4,666 6 5,574 8
- ---------------------------------------------------------------------------------------------------------------------------------
Total Other Loans 3,129 4 4,040 6 3,886 6
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS RECEIVABLE 68,765 100 70,217 100 69,471 100
- ----------------------------------------------------------------------------------------------------------------------------------
Less:
- ----------------------------------------------------------------------------------------------------------------------------------
Loans in process $769 $1,109 $820
- ----------------------------------------------------------------------------------------------------------------------------------
Allowance for possible loan 316 363 386
losses
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS, NET $67,680 $68,745 $68,265
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank , S.S.B., Financial Statements
7
<PAGE>
Table 4
LOAN ORIGINATIONS
For the Years Ended June 30, 1994 and 1995
and Nine Months Ended March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, NINE MONTHS
ENDED MARCH
31,
- ---------------------------------------------------------------------------------------
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 11,184
- ---------------------------------------------------------------------------------------
Commercial real estate 405 406 524
- ---------------------------------------------------------------------------------------
Consumer Loans 4,042 4,958 4,515
----- ----- -----
- ---------------------------------------------------------------------------------------
TOTAL LOAN ORIGINATIONS 27,483 16,245 16,223
- ---------------------------------------------------------------------------------------
Loans sold:
- -----------
- ---------------------------------------------------------------------------------------
1-4 family residential 7,560 647 1,212
----- --- -----
- ---------------------------------------------------------------------------------------
Total loans sold 7,560 647 1,212
- ---------------------------------------------------------------------------------------
Other loan activity:
- --------------------
- ---------------------------------------------------------------------------------------
Loan principal repayments 18,681 14,412 16,105
------ ------ ------
- ---------------------------------------------------------------------------------------
TOTAL GROSS LOANS RECEIVABLE $67,627 $68,813 $67,719
AT END OF PERIOD ------- ------- -------
- ---------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
8
<PAGE>
Investment Securities
- ---------------------
As of March 31, 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 $15.5 million at March 31, 1996. The total
investment portfolio amounted to $16.0 million, $18.5 million, and $16.0 million
at June 30, 1994, June 30, 1995, and March 31, 1996, respectively.
Table 5
INVESTMENT SECURITIES PORTFOLIO
At June 30, 1994 and 1995
and March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
AT JUNE 30, MARCH 31,
- ----------------------------------------------------------------------------------
1994 1995 1996
- ----------------------------------------------------------------------------------
MARKET VALUE MARKET VALUE MARKET VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities Available for Sale:
- ----------------------------------------------------------------------------------
U.S. government and agency ----- $ 5,474 $ 8,451
- ----------------------------------------------------------------------------------
Securities Held for Sale:
- ----------------------------------------------------------------------------------
U.S. government and agency 10,476 5,991 4,504
- ----------------------------------------------------------------------------------
Mortgage-backed 1,287 1,070 898
- ----------------------------------------------------------------------------------
Corporate debt 1,533 1,518 1,508
- ----------------------------------------------------------------------------------
Municipal bonds 460 304 152
- ----------------------------------------------------------------------------------
Other 50 --- ---
-- --- ---
- ----------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES $14,432 $14,357 $15,513
- ----------------------------------------------------------------------------------
Interest-earning balances in other banks 867 3,448 5,764
- ----------------------------------------------------------------------------------
Federal Home Loan Bank Stock 735 735 735
--- --- ---
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS $16,034 $18,540 $16,034
- ----------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
9
<PAGE>
Liability Composition
- ---------------------
As of March 31, 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 $85.1 million at March 31, 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. Core
deposits (consisting of money market accounts and passbook savings) were $24.3
million or 24.6% of total deposits at March 31, 1996 and 71.4% 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 and June 30, 1995 and for the nine months ended March 31, 1996. The
majority of the Bank's local customers have deposit balances of less than
$100,000 and the Savings Bank does not accept brokered CDs, so the Bank's local
retail deposit base is believed to be relatively stable.
Table 6
Richmond Savings Bank, S.S.B.
DEPOSIT ACCOUNT DISTRIBUTION
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CATEGORY 6/30/94 WEIGHTED 6/30/95 WEIGHTED 3/31/96 WEIGHTED
-------- ------- -------- ------- -------- ------- --------
BALANCE AVERAGE BALANCE AVERAGE BALANCE AVERAGE
------- ------- ------- ------- ------- -------
($) INTEREST ($) INTEREST ($) INTEREST
-------- -------- --------
RATE RATE RATE
---- ---- ----
(%) (%) (%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Passbook $15,080 2.80% $11,778 2.96% $11,454 2.96%
- ---------------------------------------------------------------------------------------------------------------
Now $ 5,473 2.30% $5,668 2.30% $5,826 2.30%
- ---------------------------------------------------------------------------------------------------------------
VIP Checking $2,389 2.60% $2,552 3.43% $3,147 3.44%
- ---------------------------------------------------------------------------------------------------------------
Non-Interest $1,770 0.00% $1,934 0.00% $3,886 0.00%
Bearing ------ ----- ------ ----- ------ -----
- ---------------------------------------------------------------------------------------------------------------
TOTAL DEMAND $24,712 2.47% $21,930 2.58% $24,313 2.39%
DEPOSITS
- --------------------------------------------------------------------------------------------------------------
Total Certificates $53,603 4.12% $59,507 5.32% $60,812 5.34%
------- ----- ------- ----- ------- -----
- ---------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS $78,315 3.60% $81,437 4.58% $85,125 4.39%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., financial statements
10
<PAGE>
Net Worth
- ---------
At March 31, 1996, Richmond Savings net worth of $8.6 million or 9.0% 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 March 31, 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 $5.8 million at the pro forma midpoint.
The total Tier I leverage capital will equal $14.4 million, or 14.3% of assets,
which is $10.4 million in excess of the 4% requirement. In addition, the pro
forma capital substantially exceeds the total risk-based capital requirement by
$10.7 million and the North Carolina requirement by $9.8 million.
11
<PAGE>
Table 7
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE AT MARCH 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
HISTORICAL - 3/31/96 $12,580 (MIDPOINT) $14,800 (MINIMUM)
------------------------------------------------------------------------
AMOUNT % AMOUNT % AMOUNT %
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Leverage $8,605 9.03% $13,531 13.50% $14,432 14.27%
- -------------------------------------------------------------------------------------------------
Tier 1 Requirement 3,811 4.00% 4,008 4.00% 4,044 4.00%
- -------------------------------------------------------------------------------------------------
Excess $4,794 5.03% $9,523 9.50% $10,388 10.27%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Tier 1 Adjusted $8,605 17.31% $13,531 26.69% $14,432 28.37%
- -------------------------------------------------------------------------------------------------
Tier 1 Requirement 1,988 4.00% 2,028 4.00% 2,035 4.00%
- -------------------------------------------------------------------------------------------------
Excess $6,617 13.31% $11,503 22.69% $12,397 24.37%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Total Risk-Based $8,991 18.09% $13,917 27.45% $14,818 29.13%
- -------------------------------------------------------------------------------------------------
Risk-Based Requirement 3,977 8.00% 4,056 8.00% 4,070 8.00%
- -------------------------------------------------------------------------------------------------
Excess $5,014 10.09% $9,861 19.45% $10,748 21.13%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
NC Regulatory $8,991 9.44% $13,917 13.89% $14,818 14.66%
- -------------------------------------------------------------------------------------------------
NC Requirement 4,764 5.00% 5,010 5.00% 5,055 5.00%
- -------------------------------------------------------------------------------------------------
Excess $4,227 4.44% $8,907 8.89% $9,763 9.66%
- -------------------------------------------------------------------------------------------------
<CAPTION>
$17,020 (MAXIMUM) $19,573 (ADJ. MAXIMUM)
- -------------------------------------------------------------------------------------------------
AMOUNT % AMOUNT %
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 Leverage $15.333 15.03% $16,370 15.89%
- --------------------------------------------------------------------------------------------------
Tier 1 Requirement 4,080 4.00% 4,122 4.00%
- --------------------------------------------------------------------------------------------------
Excess $11,253 11.03% $12,248 11.89%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Tier 1 Adjusted $15,333 30.03% $16,370 31.93%
- --------------------------------------------------------------------------------------------------
Tier 1 Requirement 2,042 4.00% 2,051 4.00%
- --------------------------------------------------------------------------------------------------
Excess $13,291 26.03% $14,319 27.93%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Total Risk-Based $15,719 30.79% $16,757 32.69%
- --------------------------------------------------------------------------------------------------
Risk-Based Requirement 4,084 8.00% 4,101 8.00%
- --------------------------------------------------------------------------------------------------
Excess $11,635 22.79% $12,656 24.69%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
NC Regulatory $15,719 15.41% $16,757 16.26%
- --------------------------------------------------------------------------------------------------
NC Requirement 5,100 5.00% 5,152 5.00%
- --------------------------------------------------------------------------------------------------
Excess $10,619 10.41% $11,605 11.26%
- --------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
ASSET QUALITY
-------------
Richmond Savings regularly reviews its assets to determine if any assets require
classification or changes in a previous classification. At March 31, 1996,
Richmond Savings had non-performing loans of $172,000 and no real estate owned.
Non-performing loans represented 0.18% of total assets and 2.01% of equity.
Table 8 shows Richmond Savings' non-performing assets for each of the last two
fiscal years and for the nine months ended March 31, 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 March 31, 1996, loan loss allowance totaled $386,000.
Table 8
NON-PERFORMING ASSETS
At June 30, 1994 and 1995
and March 31, 1996 (Dollars in Thousands)
<TABLE>
<CAPTION>
=============================================================================================================
YEAR YEAR NINE
ENDED ENDED MONTHS
JUNE 30, JUNE 30, ENDED
1994 1995 MARCH 31,
1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-performing Loans:
- -------------------------------------------------------------------------------------------------------------
Loans accruing interest $112 $75 $172
- -------------------------------------------------------------------------------------------------------------
Accruing loans 90 days or more past due 0 0 0
- - -
- -------------------------------------------------------------------------------------------------------------
TOTAL NON-PERFORMING LOANS $112 $75 $172
- -------------------------------------------------------------------------------------------------------------
Real estate owned 0 0 0
- - -
- -------------------------------------------------------------------------------------------------------------
TOTAL NON-PERFORMING ASSETS $ 112 $75 $ 172
- -------------------------------------------------------------------------------------------------------------
Ratio of non-performing loans to net
loans 0.17% 0.11% 0.25%
- -------------------------------------------------------------------------------------------------------------
Ratio of non-performing loans to total
assets 0.13% 0.08% 0.18%
- -------------------------------------------------------------------------------------------------------------
Ratio of non-performing assets to total
assets 0.13% 0.08% 0.18%
=============================================================================================================
</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
two and one-half fiscal years. The Savings Bank's allowance for loan losses was
$386,000 at March 31, 1996, representing 224.42% of non-performing loans and
0.57% of net loans receivable.
Table 9
ALLOWANCE FOR LOAN LOSSES
For the Years Ended June 30, 1994 and 1995
and the Nine Months Ended March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Year Ended June 30,
----------------------------------------------------------------------------------
1994 1995 Nine Months
Ended
March 31,
1996
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loans Receivable (at end of period) $67,680 $68,745 $68,265
----------------------------------------------------------------------------------
Allowance balances (at beginning of period) 307 316 363
----------------------------------------------------------------------------------
Charge-offs 29 10 4
----------------------------------------------------------------------------------
Recoveries 2 21 0
- -- -
----------------------------------------------------------------------------------
Net loans charged off (recovered) $27 $-11 $4
----------------------------------------------------------------------------------
Provision for loan losses 36 36 27
-- -- --
----------------------------------------------------------------------------------
Allowance balance (at end of period) $316 $363 $386
----------------------------------------------------------------------------------
Allowance for loan losses as a percentage 0.46% 0.53% 0.57%
of net loans receivable at end of period
----------------------------------------------------------------------------------
Ratio of allowance for loan losses to total 282.14% 484.0% 224.42%
loans delinquent 90 days or more at end of
period
----------------------------------------------------------------------------------
</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 16.42%
reduction in the net equity value of the Savings Bank's portfolio. 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 March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------
Market Value of Portfolio Equity
---------------------------------------------------------------
Change in Interest
Rates in Basis Points Market % Change % of Total
(Rate Shock) Value From Base Assets
---------------------------------------------------------------
<S> <C> <C> <C>
Up 400 $7,156 -38.26% 7.47%
---------------------------------------------------------------
Up 200 $9,687 -16.42% 10.12%
---------------------------------------------------------------
BASE $11,590 ------ 12.11%
---------------------------------------------------------------
Down 200 $13,329 15.00% 13.92%
---------------------------------------------------------------
Down 400 $15,331 32.27% 16.01%
---------------------------------------------------------------
</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 and 1995, and the nine
months ended March 31, 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, then
dropped to 2.66% during the nine months ending March 31, 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 March 31, 1996, the Savings Bank's yield on interest bearing assets was 7.65%
and cost of funds was 4.99%, for a spread of 2.66%.
16
<PAGE>
Table 11
WEIGHTED AVERAGE YIELDS AND COSTS
For the Years Ended June 30, 1994 and 1995
and the Nine Months Ended March 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
For the Years Ended June 30, Nine Months
Ended March
31,
- -----------------------------------------------------------------------------------------------
1994 1995 1996
- -----------------------------------------------------------------------------------------------
Assets Average Rate Average Rate Average Rate
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest-earning assets:
------------------------
- ------------------------------------------------------------------------------------------------
Loans receivable, net 7.79% 7.92% 8.09%
- ------------------------------------------------------------------------------------------------
Investment and securities 5.52% 5.50% 6.02%
- ------------------------------------------------------------------------------------------------
Interest-earning deposits 3.80% 7.10% 6.37%
----- ----- -----
- ------------------------------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS 7.28% 7.47% 7.65%
===== ===== =====
- ------------------------------------------------------------------------------------------------
LIABILITIES AND RETAINED INCOME:
- ------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
-----------------------------
- ------------------------------------------------------------------------------------------------
Deposits 3.80% 4.23% 4.99%
- ------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 3.80% 4.23% 4.99%
===== ===== =====
- ------------------------------------------------------------------------------------------------
Net interest spread (1) 3.48% 3.24% 2.66%
- ------------------------------------------------------------------------------------------------
Net yield on average interest-earning assets 3.79% 3.64% 3.15%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Net interest spread represents the difference betweenthe average yield on
interest-earning assets and the average cost of interest-bearing
liabilities
Source: Richmond Savings Bank, S.S.B., Financial Statements
-------
17
<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 and
1995, and for the nine months ended March 31, 1995 and 1996. Table 13-A displays
the Savings Bank's net income for the twelve months ending March 31, 1996. No
adjustments have been made to net income for any extraordinary items.
18
<PAGE>
Table 12
SELECTED OPERATING DATA
For the Years Ended June 30, 1993, 1994 and 1995
and Nine Months Ended March 31, 1995 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
AT JUNE 30, NINE MONTHS
ENDED
MARCH 31
- ------------------------------------------------------------------------------------------
1993 1994 1995 1995/(1)/ 1996/(1)/
- ------------------------------------------------------------------------------------------
Operating Data:
- --------------
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total interest income $6,698 $6,128 $6,378 $4,683 $5,057
- ------------------------------------------------------------------------------------------
Total interest expense 3,454 2,934 3,271 2,337 2,975
----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------
Net interest income $3,244 $3,194 $3,106 $2,346 $2,082
- ------------------------------------------------------------------------------------------
Provision for loan losses 38 36 36 27 27
-- -- -- -- --
- ------------------------------------------------------------------------------------------
Net interest income after provision for $3,206 $3,158 $3,070 $2,319 $2,055
loan losses
- ------------------------------------------------------------------------------------------
Other income 534 586 430 356 464
- -----------------------------------------------------------------------------------------
General, administrative and other 2,213 2,392 2,452 1,815 1,845
----- ----- ----- ----- -----
expenses
- -----------------------------------------------------------------------------------------
Income (loss) before income taxes, $1,526 $1,352 $1,049 $861 $674
credit and cumulative effec of change
- -----------------------------------------------------------------------------------------
Income tax expense (benefit) 570 492 329 278 210
--- --- --- --- ---
- -----------------------------------------------------------------------------------------
Income (loss) before credit cumulative $956 $860 $720 $583 $464
effect of change in accounting for
income taxes
- -----------------------------------------------------------------------------------------
Cumulative effect of change in ----- ----- ----- ----- -----
accounting principle
- -----------------------------------------------------------------------------------------
Net income $956 $860 $720 $583 $464
==== ==== ==== ==== ====
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Unaudited. Sourse: Richmond Savings Bank, S.S.B., Financial Statements
19
<PAGE>
Table 13
KEY OPERATING RATIOS
At or for the Years Ended June 30, 1993, 1994 and 1995
Nine Months Ended March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AT OR FOR THE YEARS NINE MONTHS
ENDED JUNE 30, ENDED
March 31,
- ---------------------------------------------------------------------------------------------------------------------------
1993 1994 1995 1995/(1)/ 1996/(1)/
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Performance ratios: (%)
- ------------------
- ---------------------------------------------------------------------------------------------------------------------------
Return on average assets (Net income/average assets) (2) 1.11% 0.98% 0.81% 0.88% 0.67%
- ---------------------------------------------------------------------------------------------------------------------------
Return on average equity (Net income/average equity) 15.82 12.27 9.3 10.16 7.39
(2)
- ---------------------------------------------------------------------------------------------------------------------------
Interest rate spread(2) 3.59 3.48 3.24 3.33 2.66
- ---------------------------------------------------------------------------------------------------------------------------
Net yield on average interest-earning assets (2) 3.91 3.79 3.64 3.7 3.15
- ---------------------------------------------------------------------------------------------------------------------------
Average interest-earning assets to average 107.8 108.93 110.33 109.95 110.87
interest- bearing liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Asset quality ratios: (%)
- --------------------
- ---------------------------------------------------------------------------------------------------------------------------
Non-performing assets to total assets 0.08% 0.13% 0.08% 0.12% 0.18%
- ---------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses to non-performing loans 438.57 282.14 484 ----- 224.42
- ---------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses to total loans 0.44 0.46 0.53 ----- 0.57
- ---------------------------------------------------------------------------------------------------------------------------
Capital ratios: (%)
- --------------
- ---------------------------------------------------------------------------------------------------------------------------
Equity-to-assets ratio (average equity/average assets) 6.99% 20.17% 21.71% 21.54% 22.20%
- ---------------------------------------------------------------------------------------------------------------------------
Equity-to-assets (end of period) 7.51 8.47 8.89 8.94 8.97
- ---------------------------------------------------------------------------------------------------------------------------
Other data:
- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $956 $860 $720 $583 $464
- ---------------------------------------------------------------------------------------------------------------------------
Average assets 86,028 87,428 89,457 ---- 92,064
- ---------------------------------------------------------------------------------------------------------------------------
Average equity 6,083 6,987 7,771 ---- 8,247
- ---------------------------------------------------------------------------------------------------------------------------
Total number of full service facilities 4 4 4 4 4
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unaudited. Source: Richmond Savings Bank, S.S.B., Financial Statements.
(2) Annualized.
20
<PAGE>
Table 13-A
NET INCOME FOR TRAILING TWELVE MONTHS
(Dollars in Thousands)
<TABLE>
- -------------------------------------------------------------------------------
6/30/95 9/30/95 12/31/95 3/31/96 Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $137 $153 $153 $157 $600
- -------------------------------------------------------------------------------
</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 and 1995
Nine Months Ended March 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
NINE MONTHS
AT JUNE 30, ENDED
MARCH 31,
(ANNUALIZED)
-----------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996/(1)/
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Assets $86,028 $87,428 $89,457 $92,064
-----------------------------------------------------------------------------------------------------------------
Operating Data:
--------------
-----------------------------------------------------------------------------------------------------------------
Total interest income 7.77% 7.00% 7.13% 7.32%
-----------------------------------------------------------------------------------------------------------------
Total interest expense 4.01 3.36 3.66 4.31
---- ---- ---- ----
-----------------------------------------------------------------------------------------------------------------
Net interest income 3.76 3.64 3.47 3.01
-----------------------------------------------------------------------------------------------------------------
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 2.97
losses
-----------------------------------------------------------------------------------------------------------------
Other income (loss) 0.62 0.67 0.48 0.67
-----------------------------------------------------------------------------------------------------------------
General, administrative and other expenses 2.57 2.73 2.74 2.66
---- ---- ---- ----
-----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and cumu- 1.77 1.54 1.17 0.98
lative effect of change in accounting for in-
come taxes
-----------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) 0.66 0.56 0.36 0.31
---- ---- ---- ----
-----------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of 1.11 0.98 0.81 0.67
change in accounting for income taxes
-----------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting ----- ----- ----- -----
principle
-----------------------------------------------------------------------------------------------------------------
Net income 1.11 0.98 0.81 0.67
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unaudited. Source: Richmond Savings Bank, S.S.B., Financial
Statements
21
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND
- ----------------------------------------------------------------------------
1996
- ----
GENERAL. There was a net income of $464,000 for the nine months ended March 31,
1996 and $583,000 for the same period ended March 31, 1995. The principal factor
affecting this decrease from 1995 was a decrease in net interest income of
$264,000. An increase of $107,000 in other income more than offset a moderate
increase of $30,000 in other expenses.
Between June 30, 1994 and March 31, 1996 interest rates generally decreased. At
June 30, 1994, the yields on the one-year U.S. Treasury Bill and the 30-year
U.S. Treasury Bond were 5.49% and 7.61% respectively, and were 5.14% and 5.96%
respectively, at December 31, 1994. Between June 30, 1995 and May 17, 1996,
interest rates increased. At June 30, 1995, the yields on the one-year U.S.
Treasury Bill and the 30-year U.S. Treasury Bond were 5.63% and 6.63%,
respectively, and were 5.67% and 6.83%, respectively, at May 17, 1996.
INTEREST INCOME. Interest income for the nine months ended March 31, 1995,
decreased from $2.3 million to $2.1 million for the nine months ended December
31, 1996, a decrease of $200,000. Since the bank's deposits are generally more
rate-sensitive than its interest-earning assets, this more rapid interest rate
rise caused the cost of deposit interest to increase more rapidly than the yield
on interest-earning assets. Additionally, because of relatively flat loan
demand, the growth in interest-earning assets during the nine month period ended
March 31, 1996, as compared with the same period ended March 31, 1995, was
principally in investments which generally provide lower yields than loans.
INTEREST EXPENSE. The weighted average cost of deposits increased from 4.05%
during the nine months ended March 31, 1995 to 4.99% during the nine months
ended March 31, 1996. The weighted average yield on interest-earning assets rose
from 7.38% to 7.65%, causing the interest spread to decline from 3.33% during
the nine months ended March 31, 1995 to 2.66% during the nine months ended March
31, 1996.
PROVISIONS FOR LOAN LOSSES. For each of the nine month periods ended March 31,
1996, the Savings Bank's provision for loan losses was $27,000. The allowance
for loan losses to total loans for the periods ended June 30, 1994 and 1995, and
for the period ended March 31, 1996 were 0.46%, 0.53%, and 0.57%, respectively.
The amount of the provision and allowance for loan losses is influenced by
current economic conditions, actual loss experience, industry trends and other
factors such as the adverse economic conditions, including changes in real
estate values in the Savings Bank's market area. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Savings Bank's allowance for loan losses. Such agencies may require the
Savings Bank to provide additions to the allowance based upon judgments
different from management. Although management uses the best information
available, future adjustments to the allowance may be necessary due to economic,
operating, regulatory and other conditions that may be beyond the Savings Bank's
control.
22
<PAGE>
NON-INTEREST INCOME. Non-interest income increased from $356,000 for the nine
months ended March 31, 1995 to $464,000 for the nine months ended March 31,
1996, primarily because of transaction and other service charge income as a
result of both of implementation of certain new fees and of increases in the
number and dollar volume of fee-generating demand accounts.
NON-INTEREST EXPENSE. Non-interest expenses were $1.8 million for each of the
nine month periods ending March 31, 1996 and 1995, with an actual increase of
$30,000 or 1.7%. Non-interest expense to average assets decreased from 2.74% for
the nine months ended March 31, 1995 to 2.66% for the nine months ended March
31, 1996.
Management expects that the Savings Bank will experience some increase in non-
interest expense relating to compliance with securities laws, ESOP and MRP
expenses, and other monetary consequences of the Conversion. With the exception
of expenses associated with the ESOP and MRP, such expenses cannot be quantified
at this time, although management does not expect that such expenses will have a
material effect on non- interest expenses.
PROVISION FOR INCOME TAX. The provision for income tax decreased from $278,000
for the nine months ended March 31, 1995 to $210,000 for the same period in 1996
as a result of a decrease in income before taxes.
COMPARISON OF OPERATIONS, RESULTS FOR THE FISCAL YEARS ENDED JUNE 30, 1994 AND
- ------------------------------------------------------------------------------
1995
- ----
GENERAL. Richmond Savings' net income decreased $140,000, or 16.3%, from
$860,000 for the year ended June 30, 1994 to $720,000 for the year ended June
30, 1995. The decrease is attributable to declines in net interest income,
combined with increases in other expenses, and the significant reduction in loan
sales and resulting gains during 1995.
INTEREST INCOME. Net interest income decreased from $3,194,000 in 1994 to
$3,106,000 in 1995. 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. 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 income of $250,000,
which was offset by an increase in interest costs of $338,000.
INTEREST EXPENSE. Savings deposit interest expense increased $338,000 for the
year ended June 30, 1995 as compared to the comparable period in 1994. The
increase was attributable to an increase in the cost of these liabilities as the
weighted average rate paid on deposits. This was partially offset by an increase
in interest income of $250,000.
PROVISION FOR LOAN LOSSES. Richmond Savings' provision for loan losses was
$36,000 during the years ended June 30, 1994 and 1995. At June 30, 1995, the
Savings Bank's allowance for loan losses was equal to 4.84% of non-performing
assets compared to 2.82% at June 30, 1994.
23
<PAGE>
NON-INTEREST INCOME. Non-interest income decreased $156,000 from $586,000 for
the year ended June 30, 1994 to $430,000 for the year ended June 30, 1995. The
decrease was mainly attributable to fluctuations on gains on loan sales which
were $151,000 and $7,000 for 1994 and 1995, respectively.
NON-INTEREST EXPENSE. Non-interest expense increased from $2.4 million in 1994
to $2.5 million in 1995, representing increases of $179,000 and $60,000,
respectively. The 1995 other expense increase was consistend with the overall
trend in inflation for the year.
INCOME TAXES. Income tax expense decreased from $492,000 in 1994 to $329,000 in
1995. The $163,000 decrease is attributed to the corresponding decreases in
income before taxes.
24
<PAGE>
PRIMARY MARKET AREA
-------------------
The Savings Bank's primary market area is Richmond, Moore, and Scotland
Counties, in North Carolina. The Savings Bank operates from its office in
Rockingham located in Richmond County. Demographic growth trends in Richmond,
Moore, and Scotland Counties have been measured by changes in population, number
of households, mean household income, and per capita income with trends in those
areas summarized by the data represented in Table 15.
Population growth in Richmond County of 0.4% was less than the national and
North Carolina rates of 1.1% and 1.5%, respectively, from 1990 to 1995. Moore
County and Scotland County grew at 2.4% and 0.6%, respectively, during the same
period. Projected annual growth of the population through the year 2000 is
expected to be only 0.4% for Richmond County, 0.6% for Moore County, and 0.0%
for Scotland County over the next five years.
Median household income, as well as per capita income, in the Bank's market
area, with the exception of Moore County, is significantly below state and
national averages. The projected growth in the number of households in the
Savings Bank's market area is also significantly below state and national
averages. Mean income levels project household growth in Richmond, Moore, and
Scotland Counties to fall short of state averages, a typical trend among less
urban communities due to generally lower costs of living and less demand for
homes. In general, the demographic trends displayed in Table 15 are typical of
smaller, less urban market areas.
25
<PAGE>
Table 15
SUMMARY DEMOGRAPHIC DATA (1987$)
<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
26
<PAGE>
Tables 16-A through 16-C display selected deposit market data for the Richmond,
Moore, and Scotland Counties as of June 30, 1994. Richmond Savings, a mutually
chartered state savings bank, is the only home based financial institution in
Richmond County. In June 1994, Richmond Savings' market share of total deposits
in Richmond County was 23.0%, Moore County was 1.3%, 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 26.5%. 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, 1994. 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 '94
NO. OF 6/94 (%)
NAME BRANCHES ($000S)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richmond Savings Bank, S.S.B. 3 $69,452 23.0%
- -----------------------------------------------------------------------------------------------------------
United Carolina Bank 5 80,261 26.5
- -----------------------------------------------------------------------------------------------------------
Branch Banking & Trust (formerly Southern National) 3 65,987 21.8
- -----------------------------------------------------------------------------------------------------------
First Southern Savings Bank, S.S.B. 2 32,411 10.7
- ------ ----
- -----------------------------------------------------------------------------------------------------------
Totals for selected banks 13 $248,111 82.0%
== ======== =====
- -----------------------------------------------------------------------------------------------------------
Totals in Richmond County 19 $302,363 100.0%
-- -------- ------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements; FDIC
27
<PAGE>
Table 16-B
SELECTED DEPOSIT MARKET - MOORE COUNTY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
TOTAL % OF COUNTY
DEPOSITS MARKET SHARE '94
NO. OF 6/94 (%)
NAME BRANCHES ($000S)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richmond Savings Bank, S.S.B. 1 $10,184 1.3%
- -------------------------------------------------------------------------------------------------
Branch Banking & Trust 7 156,584 19.5
- -------------------------------------------------------------------------------------------------
First Savings Bank of Moore County 5 182,325 22.7
- -------------------------------------------------------------------------------------------------
First Bank 6 68,055 8.5
- -------------------------------------------------------------------------------------------------
Centura Bank 4 $56,002 7
- ------- -
- -------------------------------------------------------------------------------------------------
Totals for selected banks 23 $473,150 59.0%
== ======== =====
- -------------------------------------------------------------------------------------------------
Totals in Moore County 42 $803,399 100.0%
== ======== ======
- -------------------------------------------------------------------------------------------------
</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 '94
6/94 (%)
NO. OF ($000S)
NAME BRANCHES
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richmond Savings Bank, S.S.B. (1) 0 $0 0%
- -----------------------------------------------------------------------------------------------------
Wachovia Bank of North Carolina, NA 3 77,255 36.2
- -----------------------------------------------------------------------------------------------------
Branch Banking & Trust (formerly Southern National) 2 68,702 47
- -----------------------------------------------------------------------------------------------------
Scotland Savings Bank, S.S.B. 1 43,802 20.5
- ------
- -----------------------------------------------------------------------------------------------------
Totals for selected banks 6 $189,759 89.0%
= ======== =====
- -----------------------------------------------------------------------------------------------------
Totals in Scotland County 12 $213,296 100.0%
== ======== ======
- -----------------------------------------------------------------------------------------------------
</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
28
<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.
29
<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.
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 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
30
<PAGE>
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) 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 eleven 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 eight thrifts located in
North Carolina. The chosen companies ranged in asset size from $55.5 million to
$256.3 million, with seven of the ten having an asset size under $100.0 million.
31
<PAGE>
TABLE 17
GENERAL CHARACTERISTICS
RICHMOND SAVINGS BANK AND THE COMPARATIVE GROUP
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
Intangible LTM
Number Total Equity/ Assets/ NPAs/ Return on
of Assets Assets Equity Assets Avg Assets
Ticker Institution City State Offices IPO Date ($000) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
RICHMOND SAVINGS (as of 3/31/96) Rockingham NC 1 10/29/96 95,277 9.00 0.00 0.18 0.67
----------------------------------------------------------------------------------------------------------------------------
COMPARATIVE GROUP:
Maximum 5 256,294 29.77 0.12 0.73 1.48
Minimum 1 55,489 10.86 0.00 0.00 0.57
Average 2 111,636 20.12 0.01 0.23 1.17
Median 2 87,823 19.72 0.00 0.16 1.20
FSBS First Ashland Financial Corp Ashland KY 3 04/07/95 90,216 26.34 0.00 0.58 0.86
FSVF First Savings Financial Corp Reidsville NC 1 09/25/95 61,303 21.89 0.00 0.15 NA
GSFC Green Street Financial Corp. Fayetteville NC 3 04/04/96 213,285 10.86 0.00 0.16 1.17
HSSC Home Savings Bank of Siler Cty Siler City NC 1 11/16/95 55,489 24.17 0.00 0.02 NA
KSAV KS Bancorp, Inc. Kenly NC 3 12/30/93 89,871 15.16 0.12 0.73 1.14
PDB Piedmont Bancorp, Inc. Hillsborough NC 2 12/08/95 124,847 29.77 0.00 0.44 1.35
SOPN First Savings Bancorp, Inc. Southern Pines NC 5 01/06/94 256,294 26.21 0.00 0.03 1.48
SSB Scotland Bancorp, Inc Laurinburg NC 2 04/01/96 57,718 14.87 0.00 0.00 1.25
SSM Stone Street Bancorp, Inc. Mocksville NC 2 04/01/96 81,560 14.38 0.00 0.00 1.40
SZB SouthFirst Bancshares, Inc. Sylacauga AL 2 02/14/95 85,775 17.55 0.00 0.19 0.74
<CAPTION>
1-4 Fami1y 1-4 Fami1y 1-4 Family
Permanent Permanent Permanent
Mort Loans/ Mort Loans/ Mort Loans/
Assets Mortgage Loans
Ticker Institution (%) (%) (%)
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------
RICHMOND SAVINGS (as of 3/31/9 59.32 86.18 82.79
-------------------------------------------------------------------------
COMPARATIVE GROUP:
Maximum 71.50 95.89 95.13
Minimum 45.49 72.39 74.69
Average 59.69 85.17 84.76
Median 61.54 86.33 86.29
FSBS First Ashland Financial Corp 68.83 94.12 91.15
FSVF First Savings Financial Corp 45.49 86.42 86.58
GSFC Green Street Financial Corp. 63.52 80.14 81.14
HSSC Home Savings Bank of Siler Cty 51.78 95.89 95.13
KSAV KS Bancorp, Inc. 69.33 86.25 86.00
PDB Piedmont Bancorp, Inc. 54.14 76.24 74.69
SOPN First Savings Bancorp, Inc. 60.41 88.11 87.59
SSB Scotland Bancorp, Inc 62.68 87.55 86.62
SSM Stone Street Bancorp, Inc. 71.50 84.56 83.03
SZB SouthFirst Bancshares, Inc. 49.20 72.39 75.64
</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.
FIRST ASHLAND FINANCIAL CORP.; ASHLAND, KY: FA Financial Corp. is located in
- ------------------------------------------
Ashland, Kentucky. FA's total asset size at $90.2 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 68.83% of assets and 94.12% of
mortgage loans. FA is a profitable institution with low levels of non-performing
assets (0.58% of total assets). FA has a capital level of 26.34% of assets and
experienced a trailing twelve month return on average assets of 86 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 is a thrift, one-to-four
family mortgages for its portfolio. First Savings' level of such loans was
45.49% of assets and 86.42% of mortgage loans. First Savings converted on
September 25, 1995. First Saving's asset size is smaller than Richmond Savings'
at $61.3 million, but was included due to its location in North Carolina.
GREEN STREET FINANCIAL CORP.; FAYETTEVILLE, NC: Green Street's asset size is
- ----------------------------------------------
$213.3 million. Green Street's reported returns on average assets of 120 basis
points for the most recent quarter ended March 31, 1996. Grees Street is a
profitable institution with low levels of non-performing assets (0.16% of total
assets). Green Street has a capital level of 10.86% as of March 31, 1996 (prior
to the conversion) and converted to a stock institution in April, 1996. Green
Street's proximity to Richmond County makes it a good comparable to Richmond
Savings.
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 95.89% of total mortgage loans and 95.1% of total loans, an
even higher concentration than that of Richmond Savings. Home Savings has a
high capital ratio of 24.2%. Though Home Savings is smaller than Richmond
Savings, with assets of $55.4 million, its North Carolina location, the
relatively short time since conversion, and its high concentration of one-to-
four single family mortgages make it an excellent comparable.
KS BANCORP, INC.; KENLY, NC: KS's total asset size was $89.9 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 86.3%.
Non-performing assets were 0.73% of total assets. KS's return on assets over
the last twelve months was 114 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 $124.8 million
- ----------------------------------------
and equity was 29.77% of assets. Piedmont's one-to-four-family mortgages were
74.69% of total loans and 76.24% 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.
32
<PAGE>
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 $124.8 million
- ----------------------------------------
and equity was 29.77% of assets. Piedmont's one-to-four-family mortgages were
74.69% of total loans and 76.24% 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
- -----------------------------------------
March 31, 1996, equity was 26.21% of total assets. One-to-four family mortgages
were 88.11% of total mortgages and 60.41% of total assets of $256.3 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.
SCOTLAND BANCORP, INC.; LAURINBURG, NC: Scotland is also a thrift located in
- --------------------------------------
the same market area as Richmond Savings Bank, S.S.B. in North Carolina. Its
asset base is comprised predominantly of one-to-four family mortgages at 62.68%
of assets and 86.62% of total loans. As of March 31, 1996, total assets were
$57.7 million and equity was 14.87% of assets. Scotland is profitable reporting
a return on average assets of 1.25% for the last twelve months. Scotland is a
good comparable because of its financial performance and its proximity to
Richmond Savings in North Carolina.
STONE STREET BANCORP, INC.; MOCKSVILLE, NC: Stone Street is close in size to
- ------------------------------------------
Richmond Savings at $81.6 million. Stone Street's loan portfolio of one-to-four
family mortgages at 83.03% of total loans (71.5% of total assets) is also
comparable. Stone Street's level of equity was 14.38% of assets. Return on
average assets for the last twelve months ended March 31, 1996 was 1.40%. Stone
Street converted to a stock institution in April, 1996. Its North Carolina
location and its comparable size make it a good comparable to Richmond Savings.
SOUTHFIRST BANCSHARES, INC.; SYLACAUGA, AL: SouthFirst converted to a stock
- ------------------------------------------
institution in February, 1995. One-to-four family mortgages were 75.64% of total
loans, but only 49.20% of assets. SouthFirst reported a return on average assets
of 74 basis points for the twelve months ended March 31, 1996. SouthFirst's
total assets were $85.8 million and equity was 17.55% of assets. SouthFirst's
non-performing assets were 0.19% 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.
33
<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 March 31, 1996 unless otherwise noted in Exhibit III. Data for the
Savings Bank was as of or for the nine months ended March 31, 1996.
Richmond Savings' preconversion net income as a percentage of average assets
measured 67 basis points for the year ended March 31, 1996. The comparative
group average return on average assets was 117 basis points and the median
return on average assets was 120 basis points. In our opinion, no adjustments
to 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 3.01%
for the twelve months ended March 31, 1996, while the comparative group average
and median were 3.71% and 3.64%, respecitvely. The Savings Bank's net interest
margin at 2.66% was below the comparative group average and median of 3.85% and
3.83%, 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 67 basis point during the trailing twelve months ended March 31,
1996, which was higher than comparative group's average of 20 basis points. The
Savings Bank's total non-interest expense at 2.66% of average assets for the
last twelve months ended March 31, 1996, was slightly higher than the
comparative group average of 2.13%.
Cash and investments totaled 24.81% of assets for the Savings Bank and averaged
24.54% of assets for the comparative group at March 31, 1996. Total loans were
72.9% of total assets for the Savings Bank, compared to an average of 70.63% for
the comparative group. The Savings Bank held mortgage-backed securities of 0.94%
of assets, while mortgage-backed securities averaged 2.85% 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 89.34%, which was above the
comparative group's average of 78.17% and median of 79.25%. The Savings Bank
had no borrowed funds compared to average borrowings of 2.15% of assets for the
comparative group. The Savings Bank's pre-conversion equity to asset position of
9.00% was lower than the post-conversion average equity of 17.37%.
The Savings Bank is exposed to lower credit risk than most individual
comparative companies. Non-performing assets were lower at 0.18% of assets for
the Savings Bank versus a 0.23% average and a 0.16% median for the comparative
group. Non-performing loans as a percentage of loans receivable were 0.25% for
the Savings Bank, below the 0.31% comparative average and
34
<PAGE>
0.27% comparative group median. The ratio of loan loss reserves to total loans
outstanding was 0.57% for the Savings Bank and averaged 0.46% for the
comparative companies. The Savings Bank had 0.01% in charge-offs during the
period and charge-offs were slightly lower than the comparative companies at
0.02% of average loans.
35
<PAGE>
TABLE 18
KEY FINANCIAL INDICATORS
RICHMOND SAVINGS BANK AND THE COMPARATIVE GROUP
<TABLE>
<CAPTION>
RICHMOND SAVINGS COMPARATIVE GROUP COMPARATIVE GROUP
AVERAGE MEDIAN
(LTM ended (LTM ended (LTM ended
PROFITABILITY (% of Avg. Assets) March 31, 1996 March 31, 1996 March 31, 1996
- ----------- --------------- -------------- --------------
<S> <C> <C> <C>
Net Income 0.67 1.17 1.17
Core Earnings (before gains, 0.50 1.16 1.21
taxes and real estate provisions)
Return on Average Equity 7.39 6.61 7.04
Interest Income 7.32 7.52 7.35
Interest Expense 4.31 3.81 3.67
Net Interest Income 3.01 3.71 3.64
Net Interest Margin 2.66 3.85 3.83
Provision for Loan Losses 0.04 0.03 0.01
Gains on Sale of Assets 0.01 (0.00) 0.00
Real Estate Income 0.00 (0.00) 0.00
Other Non-Interest Income 0.67 0.20 0.11
Non-Interest Expense 2.66 2.13 1.95
Intangible Amortization Expense 0.00 0.00 0.00
YIELD-COST DATA
- ---------------
Yield on Interest-Earning Assets 7.65 7.81 7.80
Cost of Interest-Bearing Liabilities 4.39 4.83 4.96
Net Interest of Yield-Cost Spread 2.66 2.98 3.01
ASSET UTILIZATION (% of Avg. Assets)
- -----------------
Avg. Interest-Earning Assets 95.78 96.38 96.59
Avg. Interest-Bearing Liabilities 86.38 79.23 80.31
Net Interest-Earning Assets 9.40 15.01 14.04
FINANCIAL CONCENTRATION (% of Total Assets)
- -----------------------
Cash and Investments 24.81 24.54 22.05
Gross Loans 72.91 70.63 72.42
Mortgage-Related Securities 0.94 2.85 1.86
Inv. & Foreclosed Real Estate 0.00 0.02 0.00
Intangible Assets 0.00 0.00 0.00
Total Deposits 89.34 78.17 79.25
Borrowed Funds 0.00 2.15 1.21
Total Equity 9.00 17.37 15.24
RISK MEASURES
- -------------
Non-performing Assets/Total Assets 0.18 0.23 0.16
Non-performing Assets/Total Equity 2.01 1.19 0.90
Net Charge-offs/Avg. Loans 0.01 0.02 0.00
Reserves/Non-performing Assets 224.42 227.88 160.24
Non-performing Loans/Loans 0.25 0.31 0.27
Loan Loss Reserves/NPLs 224.42 233.32 194.16
Reserves/Loans 0.57 0.46 0.43
GROWTH RATES
- ------------
Total Assets 7.23 8.75 6.47
Loans Receivable 0.50 11.17 10.18
Total Deposits 7.52 1.55 4.36
</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 the nine months ended March 31, 1996 relative to
the comparable 1995 nine months 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 7.39% than the comparable group, which averages
6.61%. However, the Savings Bank's growth rates in assets, loans, and deposits
are lower than those of the comparative group.
36
<PAGE>
A critical question facing many institutions, including Richmond Savings, is
whether net interest margins have peaked in the current interest rate
environment. The Savings Bank's last nine month's experience has been 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 level of
profitability are 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. 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.
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
37
<PAGE>
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 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.
38
<PAGE>
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 March 29, 1996, the SNL Index peaked at 382
representing a 49.2% increase from 256.1 on January 31, 1995, and only a 2.9%
increase from 371 on January 31, 1996. Almost all of the increase in the index
occurred in 1995 as indicated by the increase from January 1, 1995. The SNL
Index closed on May 17, 1996 at 381, which is essentially flat when compared to
the March 29, 1996 index indicating that the SNL Index has most likely peaked.
Based on this recent leveling off, we have adjusted Richmond Savings slightly
downward.
39
<PAGE>
Table 19
SNL THRIFT INDEX MONTHLY PERFORMANCE
January 3, 1994 to May 17, 1996
<TABLE>
<CAPTION>
SNL Thrift % % %
Index Change Change Change
Since Since 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 1.4 -- --
February 28 277.0 9.7 8.2 --
March 31 278.4 10.3 8.7 --
April 28 295.4 16.8 15.3 --
May 31 307.6 21.8 20.1 --
June 30 313.5 24.2 22.4 --
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 46.8 44.9
February 29 373 47.7 45.6 0.5
March 29 382 51.3 49.2 2.9
April 30 380 50.5 48.4 2.4
May 17 381 50.9 48.8 2.7
</TABLE>
40
<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 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 in North Carolina we have made an upward adjustment.
41
<PAGE>
TABLE 20
RECENT NORTH AND SOUTH CAROLINA ACQUISITIONS
1993-1995
<TABLE>
<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 Pending
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 20.6 160.1 167.5 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% and a price-to-earnings
multiple of 19.0. This compares to the first half of 1995 average price-to-book
ratio of 66.5% and a price-to-earnings ratio of 16.2. There have been 29
conversions completed since the beginning of 1996, at an average price-to-book
ratio of 71.5%.
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 11.65 and
11.59, respectively, compared to an average of 21.4% and 22.0%, respectively, in
the second half of 1995.
In North Carolina in 1996, there have been three conversions including Green
Street Financial Corp., Scotland Bancorp, Inc., and Stone Street Bancorp, Inc.
The average price to book ratio is 73.6% and the average price to earnings
multiple is 16.9. The average one week percent change is 22.9%. Due to the
strong performance of North Carolina thrifts, we believe an upward adjustment
should be made for the new issue discount.
42
<PAGE>
TABLE 21
STANDARD CONVERSION - PUBLICLY TRADED
SELECTED MARKET DATA
1/1/95 to Date
<TABLE>
<CAPTION>
IPO
Share Gross Conversion IPO Price in Relation to Pro Forma
Ticker Institution IPO Date Price $ Proceeds Assets Book Value Tang. Book Earnings
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE OF DEALS TO DATE IN 1996 10.520 32,139 210,658 71.52 71.53 17.74
AVERAGE OF SECOND HALF 1995 DEALS 9.981 42,404 229,647 72.41 72.50 18.98
AVERAGE OF FIRST HALF 1995 DEALS 9.581 19,150 182,895 66.47 66.57 16.19
CONVERSIONS TO DATE IN 1996
FFBH First Federal Bancshares of AR 05/03/96 10.000 51,538 454,479 63.4 63.391 9.8
CBK Citizens First Financial Corp. 05/01/96 10.000 28,175 227,872 73.1 73.104 15.3
NSGB North Cincinnati Savings Bank 05/01/96 10.000 3,968 56,637 65.0 65.025 NA
RELI Reliance Bancshares, Inc. 04/19/96 8.000 20,499 32,260 72.5 72.473 22.5
CATB Catskill Financial Corp 04/18/96 10.000 56,868 230,102 71.9 71.876 19.0
YFCB Yonkers Financial Corporation 04/18/96 10.000 35,708 208,283 74.9 74.930 16.1
GSFC Green Street Financial Corp. 04/04/96 10.000 42,981 151,028 71.0 71.029 14.8
FFDF FFD Financial Corp. 04/03/96 10.000 14,548 58,955 69.9 69.871 17.4
WAKE Wake Forest FS&LA, MHC 04/03/96 10.000 5,150 55,136 104.1 104.054 14.5
PATD Patapsco Bancorp, Inc. 04/02/96 20.000 7,251 77,144 60.0 60.020 16.6
JXVL Jacksonville Bancorp, Inc. 04/01/96 NA NA NA NA NA NA
WHGB WHG Bancshares Corp. 04/01/96 10.000 16,201 85,027 71.1 71.081 15.5
FBER 1st Bergen Bancorp 04/01/96 10.000 31,740 223,167 74.8 74.813 21.7
SSB Scotland Bancorp, Inc 04/01/96 10.000 18,400 57,718 74.8 74.830 16.2
PHFC Pittsburg Home Financial Corp 04/01/96 10.000 21,821 157,570 72.8 72.827 17.5
AMFC AMB Financial Corp. 04/01/96 10.000 11,241 68,851 70.8 70.828 18.2
LONF London Financial Corporation 04/01/96 10.000 5,290 34,152 68.5 68.461 22.4
SSM Stone Street Bancorp, Inc. 04/01/96 15.000 27,376 84,996 74.9 74.920 19.7
PFFB PFF Bancorp, Inc. 03/29/96 10.000 198,375 1,899,412 69.0 68.991 26.6
CRZY Crazy Woman Creek Bancorp 03/29/96 10.000 10,580 37,510 69.7 69.720 16.4
FCB Falmouth Co-Operative Bank 03/28/96 10.000 14,548 73,735 68.7 68.722 19.9
CFTP Community Federal Bancorp 03/26/96 10.000 46,288 162,042 71.4 71.353 14.0
GAF GA Financial, Inc. 03/26/96 10.000 89,000 476,259 70.5 70.521 13.8
FFFD North Central Bancshares, Inc. 03/21/96 NA NA NA NA NA NA
WBIO Washington Bancorp 03/12/96 10.000 6,575 55,202 65.4 65.417 12.7
FFOH Fidelity Financial of Ohio 03/04/96 NA NA NA NA NA NA
BYFC Broadway Financial Corp. 01/09/96 10.000 8,927 102,512 68.5 68.479 13.3
LFBI Little Falls Bancorp, Inc. 01/05/96 10.000 30,418 196,394 71.4 71.425 31.9
FFBA First Colorado Bancorp, Inc. 01/02/96 NA NA NA NA NA NA
<CAPTION>
Percent Change
Ticker Assets One Day One Wey
<S> <C> <C> <C>
AVERAGE OF DEALS TO DATE IN 1996 15.79 11.65 11.59
AVERAGE OF SECOND HALF 1995 DEALS 15.96 21.39 22.03
AVERAGE OF FIRST HALF 1995 DEALS 10.80 13.39 14.48
CONVERSIONS TO DATE IN 1996
FFBH 10.2 13.000 13.250
CBK 11.0 10.500 10.000
NSGB 6.5 10.250 11.000
RELI 38.9 8.375 8.250
CATB 19.8 10.375 10.625
YFCB 14.6 9.750 10.125
GSFC 22.2 12.875 12.250
FFDF 19.8 10.500 10.500
WAKE 8.5 12.750 11.690
PATD 8.6 22.000 22.500
JXVL NA 11.108 9.625
WHGB 16.0 11.125 11.060
FBER 12.5 10.000 9.500
SSB 24.2 12.250 12.500
PHFC 12.2 11.000 11.000
AMFC 14.0 10.500 10.500
LONF 13.4 10.812 10.625
SSM 24.4 17.500 18.000
PFFB 9.5 11.375 11.625
CRZY 22.0 NA 10.750
FCB 16.5 10.750 11.250
CFTP 22.2 12.625 12.875
GAF 15.7 11.375 11.500
FFFD NA 10.875 10.690
WBIO 10.6 10.875 11.125
FFOH NA 10.500 10.000
BYFC 8.0 10.375 10.250
LFBI 13.4 11.313 11.375
FFBA NA 11.438 11.625
</TABLE>
<PAGE>
TABLE 21
STANDARD CONVERSION - PUBLICLY TRADED
SELECTED MARKET DATA
1/1/95 TO DATE
<TABLE>
<CAPTION>
IPO
Share Gross Conversion IPO Price in Relation to Pro Forma
Ticker Institution IPO Date Price $ Proceeds Assets Book Value Tang. Book Earnings
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE OF DEALS TO DATE IN 1996 10.520 32,139 210,658 71.52 71.53 17.74
AVERAGE OF SECOND HALF 1995 DEALS 9.981 42,404 229,647 72.41 72.50 18.98
AVERAGE OF FIRST HALF 1995 DEALS 9.581 19,150 182,895 66.47 66.57 16.19
SECOND HALF 1995 CONVERSIONS
PEEK Peekskill Financial Corp. 12/29/95 10.000 40,998 155,716 70.80 70.81 14.10
CBSB Charter Financial, Inc. 12/29/95 NA NA NA NA NA NA
CLAS Classic Bancshares, Inc. 12/29/95 10.000 13,225 60,911 69.30 69.29 17.20
HFNC HFNC Financial Corp. 12/29/95 10.000 171,925 591,319 71.20 71.22 15.80
JOAC Joachim Bancorp, Inc. 12/28/95 10.000 7,604 30,711 72.00 71.99 18.80
AHCI Ambanc Holding Co., Inc. 12/27/95 10.000 54,223 344,856 72.00 72.05 22.10
PDB Piedmont Bancorp, Inc. 12/08/95 10.000 26,450 95,094 71.50 71.50 14.10
PBIX Patriot Bank Corp. 12/04/95 10.000 37,691 229,300 71.00 70.99 18.00
FFIC Flushing Financial Corp 11/21/95 11.500 99,188 604,230 73.20 73.21 35.80
FWWB First SB of Washington Bancorp 11/01/95 10.000 109,106 491,368 73.10 73.08 13.70
ANBK American National Bancorp 10/31/95 NA NA NA NA NA NA
BFD BostonFed Bancorp, Inc. 10/24/95 10.000 66,125 592,027 74.50 74.54 93.10
CSBF CSB Financial Group, Inc. 10/09/95 8.000 8,280 34,431 66.50 66.50 14.30
SRN Southern Banc Company, Inc. 10/05/95 10.000 14,548 100,564 66.10 67.06 30.10
TPNZ Tappan Zee Financial, Inc. 10/05/95 10.000 16,201 91,149 74.00 74.39 12.30
KFBI Klamath First Bancorp 10/05/95 10.000 122,331 455,111 75.50 75.55 13.40
HFFB Harrodsburg First Fin Bancorp 10/04/95 10.000 21,821 92,715 73.70 73.72 14.00
SFIN Statewide Financial Corp. 10/02/95 10.000 52,698 475,168 76.40 76.67 9.40
DFIN Damen Financial Corp. 10/02/95 10.000 39,675 191,500 73.00 73.02 36.80
FDEF First Definance Financial 10/02/95 NA NA NA NA NA NA
HFSA Hardin Bancorp, Inc. 09/29/95 10.000 10,580 75,993 67.80 67.84 16.40
KYF Kentucky First Bancorp, Inc 08/29/95 10.000 13,886 63,014 72.00 71.95 15.50
THR Three Rivers Financial Corp. 08/24/95 10.000 8,596 72,377 71.00 71.71 9.80
TSBS Trenton SB, MHC 08/03/95 10.000 31,165 445,944 103.50 103.53 10.70
INBI Industrial Bancorp 08/01/95 10.000 55,545 268,041 71.90 71.90 9.40
CZF CitiSave Financial Corp 07/14/95 10.000 9,647 69,125 70.90 70.87 12.50
CCFH CCF Holding Corp 07/12/95 10.000 11,903 69,080 71.80 71.79 11.80
FKKY Frankfort First Bancorp, Inc. 07/10/95 10.000 34,500 110,135 70.50 70.49 14.30
FTF Texarkana First Financial Corp 07/07/95 10.000 19,838 140,178 64.50 64.50 6.00
FMBD First Mutual Bancorp, Inc. 07/05/95 10.000 47,150 250,402 67.50 67.49 13.10
<CAPTION>
Percent Change
Ticker Assets One Day One Week
<S> <C> <C> <C>
AVERAGE OF DEALS TO DATE IN 1996 15.79 11.65 11.59
AVERAGE OF SECOND HALF 1995 DEALS 15.96 21.39 22.03
AVERAGE OF FIRST HALF 1995 DEALS 10.80 13.39 14.48
SECOND HALF 1995 CONVERSIONS
PEEK 20.80 21.25 17.50
CBSB NA NA NA
CLAS 17.80 17.50 17.50
HFNC 22.50 31.25 33.75
JOAC 19.80 35.00 30.00
AHCI 13.60 0.00 3.10
PDB 21.80 NA 28.75
PBIX 14.10 27.50 27.50
FFIC 14.10 23.64 22.83
FWWB 18.20 24.40 26.90
ANBK NA NA NA
BFD 10.00 20.00 20.00
CSBF 19.40 12.50 15.63
SRN 12.60 23.75 25.00
TPNZ 15.10 16.25 15.00
KFBI 21.20 25.00 28.75
HFFB 19.10 25.00 23.75
SFIN 10.00 32.50 31.25
DFIN 17.20 15.00 13.75
FDEF NA NA NA
HFSA 12.20 21.88 22.50
KYF 18.10 20.00 25.00
THR 10.60 13.75 17.50
TSBS 6.50 15.63 17.50
INBI 17.20 21.25 25.63
CZF 12.20 35.00 30.00
CCFH 14.70 15.63 7.50
FKKY 23.90 22.50 20.63
FTF 12.40 28.75 31.25
FMBD 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 IPO Price In Relation To Pro Forma
Ticker Institution IPO Date Price $ Proceeds Assets Book Value Tang. Book Earnings
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE OF DEALS TO DATE IN 1996 10.520 32,139 210,658 71.52 71.53 17.74
AVERAGE OF SECOND HALF 1995 DEALS 9.981 42,404 229,647 72.41 72.50 18.98
AVERAGE OF FIRST HALF 1995 DEALS 9.581 19,150 182,895 66.47 66.57 16.19
- ----------------------------------------------------------------------------------------------------------------------------------
FIRST HALF 1995 CONVERSIONS
GUPB GFSB Bancorp, Inc. 06/30/95 10.000 9,488 43,949 62.50 62.48 13.30
SFED SFS Bancorp, Inc. 06/30/95 10.000 14,950 150,837 64.70 64.71 14.20
HEMT HF Bancorp, Inc. 06/30/95 8.000 52,900 586,553 61.20 61.23 27.00
GTPS Great American Bancorp 06/30/95 10.000 20,528 105,832 61.30 61.35 17.40
FBBC First Bell Bancorp, Inc. 06/29/95 10.000 85,963 406,813 77.20 77.19 9.40
SGVB SGV Bancorp. Inc. 06/29/95 8.000 21,821 259,462 66.20 66.18 28.60
FTSB Fort Thomas Financial Corp 06/28/95 10.000 15,738 70,577 74.00 73.95 14.90
NEIB Northeast Indiana Bancorp 06/28/95 10.000 21,821 114,976 73.40 73.38 9.80
LOGN Logansport Financial Corp. 06/14/95 10.000 13,225 59,351 67.70 67.74 9.50
NSLB NS&L Bancorp, Inc. 06/08/95 10.000 8,564 50,995 64.00 64.05 12.20
ASBP ASB Financial Corp. 05/11/95 10.000 15,870 93,931 66.50 66.52 14.80
JXSB Jacksonville Savings Bank, MHC 04/21/95 10.000 5,575 137,527 76.50 76.51 158.90
TSH Teche Holding Co. 04/19/95 10.000 42,320 284,570 72.00 71.98 8.30
WEFC Wells Financial Corp 04/11/95 8.000 17,504 180,405 65.50 65.51 9.50
CBIN Community Bank Shares 04/10/95 NA NA NA NA NA NA
GFED Guaranty Federal SB, MHC 04/10/95 8.000 7,779 158,850 106.00 105.97 14.90
ISBF ISB Financial Corporation 04/07/95 10.000 74,000 480,293 66.90 67.00 9.40
AVND Avondale Financial Corp. 04/07/95 10.000 42,320 502,065 69.60 69.64 10.20
FSBS First Ashland Financial Corp 04/07/95 10.000 14,088 75,135 62.30 62.34 13.90
BDJI First Federal Bancorporation 04/04/95 10.000 8,625 87,256 62.20 62.17 10.50
CMRN Cameron Financial Corp 04/03/95 10.000 30,269 144,821 65.60 65.64 12.70
QCFB QCF Bancorp, Inc. 04/03/95 10.000 17,828 133,135 60.40 60.37 11.90
SOBI Sobieski Bancorp, Inc. 03/31/95 10.000 9,660 73,397 69.10 69.14 9.90
BWFC Bank West Financial Corp 03/30/95 8.000 18,515 108,056 66.80 66.81 14.00
HBFW Home Bancorp 03/30/95 10.000 33,032 275,210 64.20 64.17 10.60
ATSB AmTrust Capital Corp 03/28/95 8.000 4,641 58,644 62.30 62.35 7.70
MIVI Mississippi View Holding Co. 03/24/95 8.000 8,064 62,887 63.00 62.99 11.10
GDVS Greater Delaware Valley SB, MHC 03/03/95 10.000 6,500 225,545 115.50 115.51 17.70
SJSB SJS Bancorp 02/16/95 10.000 9,522 118,719 59.20 59.18 12.30
MBBC Monterey Bay Bancorp, Inc. 02/15/95 8.000 28,750 284,578 59.30 60.73 13.30
SZB SouthFirst Bancshares, Inc. 02/14/95 10.000 8,300 82,477 58.90 58.86 14.10
PCBC Perry County Financial Corp. 02/13/95 10.000 8,565 69,914 57.50 57.52 8.90
HBBI Home Building Bancorp 02/08/95 10.000 3,220 40,816 57.20 57.18 7.60
SISB SIS Bank 02/08/95 8.000 44,500 929,900 64.70 66.13 NA
CIBI Community Investors Bancorp 02/07/95 10.000 7,381 75,915 63.90 63.86 8.40
MSBF MSB Financial, Inc. 02/06/95 10.000 7,220 46,838 58.60 58.65 11.50
LSBI LSB Financial Corp 02/03/95 10.000 10,296 117,723 60.90 60.91 12.70
MFSB Mutual Bancompany 02/02/95 10.000 3,335 54,095 55.50 56.89 9.10
FKFS First Keystone Financial 01/26/95 10.000 13,600 237,011 58.30 58.26 23.40
FOBC Fed One Bancorp 01/19/95 NA NA NA NA NA NA
GWBC Gateway Bancorp, Inc. 01/18/95 10.000 12,446 67,128 60.10 60.06 12.10
ETFS East Texas Financial Services 01/10/95 10.000 12,152 114,935 55.00 55.02 NA
FSNJ First Savings Bk of NJ. MHC 01/09/95 10.000 13,580 547,550 67.20 67.17 6.70
CKFB CKF Bancorp, Inc. 01/04/95 10.000 10,000 51,002 66.10 66.06 11.10
TWIN Twin City Bancorp 01/04/95 10.000 8,984 94,826 69.00 69.00 10.40
<CAPTION>
PERCENT CHANGE
TICKER Institution ASSETS ONE DAY ONE WEEK
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
AVERAGE OF DEALS TO DATE IN 1996 15.79 11.65 11.59
AVERAGE OF SECOND HALF 1995 DEALS 15.96 21.39 22.03
AVERAGE OF FIRST HALF 1995 DEALS 10.80 13.39 14.48
- -----------------------------------------------------------------------------------------
FIRST HALF 1995 CONVERSIONS
GUPB 17.80 35.00 28.75
SFED 9.00 15.00 13.75
HEMT 8.30 3.13 6.25
GTPS 16.20 22.50 23.75
FBBC 17.40 21.25 21.25
SGVB 7.80 1.56 0.00
FTSB 18.20 21.25 22.50
NEIB 16.00 15.00 15.00
LOGN 18.20 18.75 18.75
NSLB 14.40 23.75 22.50
ASBP 14.50 25.00 21.25
JXSB 3.90 0.00 0.00
TSH 12.90 16.25 13.75
WEFC 8.80 12.50 13.25
CBIN NA NA NA
GFED 4.70 6.25 17.19
ISBF 13.40 29.38 34.40
AVND 7.80 15.00 21.25
FSBS 15.80 25.00 32.50
BDJI 9.00 7.50 7.50
CMRN 17.30 7.50 7.50
QCFB 11.80 14.38 12.50
SOBI 11.60 2.50 0.60
BWFC 14.60 9.38 8.63
HBFW 10.70 25.00 25.60
ATSB 7.30 6.25 3.13
MIVI 11.40 11.73 7.81
GDVS 2.80 5.00 -3.75
SJSB 7.40 10.00 15.00
MBBC 9.20 10.94 10.94
SZB 9.10 15.00 8.75
PCBC 10.90 23.75 35.00
HBBI 7.30 0.00 15.00
SISB 4.60 20.31 26.56
CIBI 8.90 7.50 22.50
MSBF 13.40 10.00 11.25
LSBI 8.00 12.50 12.50
MFSB 5.80 5.00 3.10
FKFS 5.40 3.75 5.00
FOBC NA NA NA
GWBC 15.60 12.50 12.50
ETFS 9.60 11.25 18.75
FSNJ 2.40 10.00 7.50
CKFB 16.40 17.50 17.50
TWIN 8.70 10.00 5.00
</TABLE>
<PAGE>
ADJUSTMENTS CONCLUSION
- ----------------------
We believe the Savings Bank's to-be-issued Common Stock should be discounted by
15% to 25% 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 March 31, 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 15% to 25% relative to the comparable
companies, the resulting pro forma ratio is 75% to 67%. The price/earnings ratio
should be within a range of 13 to 15 times recently reported earnings.
Based upon a 15% to 25% discount relative to the comparative group price/book
ratio, we believe the Savings Bank's pro forma standard conversion value is
$14.8 million. This provides for a pro forma price/book ratio of 71.2% at the
midpoint. The resulting price/earnings ratio based on the last twelve months'
earnings before extraordinary items was 20.0, and last quarter earnings was 19.2
at the midpoint. The range of pro forma price/book ratios was 66.6% to 75.1%,
and 78.8% at the adjusted maximum. The range of price/earnings ratios at the
minimum and the maximum was 16.9 to 21.5 based upon last quarter earnings and
17.5 to 22.3 based upon last twelve months earnings.
VALUATION CONCLUSION
- --------------------
It is therefore our opinion that, as of May 17, 1996, the estimated pro forma
market value of the Savings Bank's to be issued Common Stock is $14,800,000. The
values range from $12,580,000 at the minimum to $17,020,000 at the maximum. The
resulting adjusted maximum at 15% above the maximum is $19,573,000.
43
<PAGE>
TABLE 22
TRADING COMPARISONS
RICHMOND SAVINGS BANK AND THE COMPARATIVE GROUP
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
Current Current
Stock Market Current Price (May 17, 1996) in Relocation to
Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
Ticker Institution ($) ($M) (%) (%) (%) (x) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS (AS OF 3/31/96):
PRO FORMA MINIMUM 10.000 12.58 66.59 66.59 11.91 16.90 14.30
PRO FORMA MIDPOINT 10.000 14.80 71.21 71.21 13.77 19.30 16.40
PRO FORMA MAXIMUM 10.000 17.02 75.07 75.07 15.56 21.60 18.40
PRO FORMA MAXIMUM, ADJUSTED 10.000 19.57 78.77 78.77 17.54 24.00 20.60
COMPARATIVE GROUP:
Maximum 19.250 72.07 108.18 108.18 38.60 32.59 33.45
Minimum 11.125 9.710 67.370 67.370 11.820 11.000 13.220
Average 14.863 28.70 89.11 89.11 24.86 17.07 15.63
Median 13.938 23.90 90.41 90.45 24.69 13.68 19.81
FSBS First Ashland Financial Corp 18.25 25.71 108.18 108.18 NA 32.59 28.08
FSVF First Savings Financial Corp 11.13 9.71 72.33 72.33 15.80 NA NA
GSFC Green Street Financial Corp. ** 12.88 55.34 92.00 92.00 25.95 11.61 19.22
HSSC Home Savings Bank of Siler Cty 14.50 13.00 96.86 96.86 23.43 NA NA
KSAV KS Bancorp, Inc. 18.25 12.10 88.81 88.89 13.46 12.67 13.22
PDB Piedmont Bancorp, Inc. 13.38 35.38 95.20 95.20 28.34 16.72 33.45
SOPN First Savings Bancorp, Inc. 19.25 72.07 107.30 107.30 28.12 19.25 20.26
SSB Scotland Bancorp, Inc ** 12.00 22.08 84.00 84.00 38.25 18.00 19.35
SSM Stone Street Bancorp, Inc. ** 17.25 31.48 79.00 79.00 38.60 11.00 22.70
SZB SouthFirst Bancshares, Inc. 11.75 10.14 67.37 67.37 11.82 14.69 NA
<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 (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS (AS OF 3/31/96):
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 4.26 29.77 29.77 1.63 8.80 1.48 9.78
Minimum 0.000 10.860 10.860 -0.110 -0.690 0.740 3.690
Average 1.37 20.12 20.12 1.01 4.98 1.17 6.81
Median 0.00 19.72 19.72 0.96 4.92 1.16 6.27
FSBS First Ashland Financial Corp 0.00 26.34 26.34 0.83 3.13 0.86 3.69
FSVF First Savings Financial Corp 0.00 21.89 21.89 -0.11 -0.69 NA NA
GSFC Green Street Financial Corp. ** 0.00 10.86 10.86 1.20 8.80 1.17 8.21
HSSC Home Savings Bank of Siler Cty 0.00 24.17 24.17 1.08 5.91 NA NA
KSAV KS Bancorp, Inc. 3.29 15.16 15.16 1.12 7.02 1.14 6.85
PDB Piedmont Bancorp, Inc. 2.99 29.77 29.77 1.63 5.39 1.35 7.23
SOPN First Savings Bancorp, Inc. 3.12 26.21 26.21 1.52 5.83 1.48 5.68
SSB Scotland Bancorp, Inc ** 0.00 14.87 14.87 NA NA 1.25 8.52
SSM Stone Street Bancorp, Inc. ** 0.00 14.38 14.38 NA NA 1.40 9.78
SZB SouthFirst Bancshares, Inc. 4.26 17.55 17.55 0.78 4.45 0.74 4.52
</TABLE>
** Data taken from SNL Securities Monthly Market Report, June 1996
<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, and 1995 and March 31, 1996
<TABLE>
<CAPTION>
March 31,
June 30, 1996
----
1993 1994 1995 (unaudited)
------ ------ ------
<S> <C> <C> <C> <C>
ASSETS
Cash on hand and in banks $ 1,558,094 $ 1,088,027 $ 1,418,980 $ 2,367,168
Interest-bearing balances in other banks 837,766 867,029 3,448,058 5,764,219
Marketable equity securities 1,049,747 625,585 ----- -----
Investment Securities 10,194,654 ----- ----- -----
Investment securities available for sale ----- ----- 5,474,425 8,450,855
Investment securities held to maturity ----- 13,806,049 8,883,510 7,061,643
Loans receivable, net 67,900,425 67,679,671 68,744,661 68,264,645
Mortgage-backed securities 2,569,337 ----- ----- -----
Accrued interest receivable 549,556 545,526 537,179 653,759
Premises and equipment, net 1,391,060 1,526,212 1,403,086 1,315,959
Real estate acquired in settlement of loans 43,459 ----- ----- -----
Stock in Federal Home Loan Bank 706,100 734,700 734,700 734,700
Other assets 553,276 631,443 765,733 664,793
TOTAL ASSETS $87,353,474 $87,504,242 $91,410,332 $95,277,741
LIABILITIES & RETAINED EARNINGS
Deposit Accounts $79,004,962 $78,315,213 $81,437,068 $85,125,294
Accrued interest payable 172,815 126,536 218,171 216,973
Accrued income taxes payable 5,000 ----- ----- -----
Advance payments by borrowers 910,412 669,231 656,786 349,850
Accrued expenses and other liabilities 699,391 979,312 970,145 1,036,498
TOTAL LIABILITIES $80,792,580 $80,090,292 $83,282,170 $86,728,615
Retained income, substantially restricted 6,560,894 7,413,950 8,128,162 8,549,126
TOTAL LIABILITIES AND EQUITY $87,353,474 $87,504,242 $91,410,332 $95,277,741
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
44
<PAGE>
Exhibit II-2
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended June 30, 1993, 1994, and 1995
and Nine Months Ended March 31, 1995 and 1996
<TABLE>
<CAPTION>
Nine Months
Year Ended June 30, Ended March 31,
-------------------- ----------------
1993 1994 1995 1995 1996
----- ------ ------ ------ ------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Interest income:
Loans $5,647,234 $5,205,264 $5,403,633 $3,988,411 $4,159,153
Mortgage-backed securities 245,870 ----- ----- ----- -----
Investments and deposits in banks 804,502 922,393 973,970 694,309 897,831
------- ------- ------- ------- -------
Total interest income $6,697,606 $6,127,657 $6,377,603 $4,682,720 $5,056,984
Interest expense - deposits 3,453,714 2,933,705 3,271,197 2,336,728 2,975,121
--------- --------- --------- --------- ---------
Net interest income $3,243,892 $3,193,952 $3,106,406 $2,345,992 $2,081,863
Provision for loan losses 38,278 36,000 36,000 27,000 27,000
---------- ---------- ---------- ---------- ----------
Net interest income after provision $3,205,614 $3,157,952 $3,070,406 $2,318,992 $2,054,863
Non-interest income:
Transaction income $343,650 $304,681 $288,452 $226,026 $326,163
Gain on sale of loans & MB Securities 83,580 151,420 6,975 1,588 9,850
Gain (loss) on sale of investments 3,037 (1,544) (4,831) (4,831) (4,404)
Gain on sale of real estate, net 3,355 3,943 5,875 5,875 -----
Other income 100,584 127,809 135,397 127,699 132,121
-------- -------- -------- -------- --------
Total other income $586,309 $586,309 $429,868 $356,397 $463,730
Non-interest expenses:
Compensation and employee benefits $1,106,250 $1,201,018 $1,252,657 $954,427 $943,774
Net occupancy expense 139,499 148,177 152,614 114,990 108,689
Equipment rental & maintenance 109,031 154,455 173,038 225,859 211,194
Marketing 55,317 57,454 43,343 32,896 34,779
Data Processing and other fees 286,164 274,849 266,523 76,016 96,767
Federal and other insurance premiums 195,867 221,419 216,983 187,567 183,339
Supplies, telephone, and postage 130,270 117,359 119,783 88,628 87,030
Other 190,803 216,985 226,942 134,316 174,439
---------- ---------- ---------- ---------- ----------
Total non-interest expenses $2,213,201 $2,391,716 $2,451,583 $1,814,699 $1,845,011
Income (loss) before taxes $1,526,619 $1,352,545 $1,048,691 $860,690 $673,582
Income tax benefit (expense) $570,309 $492,118 $329,168 $278,143 $209,575
-------- -------- -------- -------- --------
Net income $956,310 $860,427 $719,523 $582,547 $464,007
======== ======== ======== ======== ========
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
45
<PAGE>
Exhibit II-3
COMPOSITION OF LOAN PORTFOLIO
At March 31, 1996
<TABLE>
<CAPTION>
FIXED & ADJUSTABLE RATE
- -----------------------------------------------------------------
TYPE OF LOAN AMOUNT PERCENT
------------ ------ -------
- -----------------------------------------------------------------
<S> <C> <C>
Loans secured by 1-4 family residential $56,520 81.36%
properties
- -----------------------------------------------------------------
Construction and land development $ 1,895 2.73%
- -----------------------------------------------------------------
Loans secured by multi-family dwellings $ 1,596 2.30%
of five or more units
- -----------------------------------------------------------------
Home Equity Lines of Credit $ 5,574 8.02%
- -----------------------------------------------------------------
Consumer loans $ 2,257 3.25%
- -----------------------------------------------------------------
Loans secured by deposit accounts $ 759 1.09%
- -----------------------------------------------------------------
Home improvement Loans $ 870 1.25%
- -----------------------------------------------------------------
Total Loans $69,471 100.0%
- -----------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements
46
<PAGE>
Exhibit II-4
DESCRIPTION OF OFFICE FACILITIES
At March 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
LOCATION OWNERSHIP NET BOOK VALUE OF PROPERTY
-------- --------- --------------------------
YEAR OPENED OR IMPROVEMENTS AT 3/31/96
----------- --------------------------
- --------------------------------------------------------------------------
<S> <C> <C>
Main Office Land and building $281,372
1956
- --------------------------------------------------------------------------
Plaza Branch Lease $ 6,649
1965
- --------------------------------------------------------------------------
Ellerbe Land and building $ 38,907
1978
- --------------------------------------------------------------------------
Southern Pines Land and building $743,225
1987
- --------------------------------------------------------------------------
Laurinburg Lease N/A
1989
- --------------------------------------------------------------------------
</TABLE>
Source: Richmond Savings Bank, S.S.B., Financial Statements and Records
47
<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
48
<PAGE>
EXHIBIT III-1
PROFITABILITY ANALYSIS
FOR THE TWELVE MONTHS ENDED MARCH 31, 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 3/31/96 0.67 7.39 3.01 2.97 2.66 112.84 0.50 2.66
COMPARATIVE GROUP:
Maximum 1.48 9.78 4.06 3.97 3.33 250.60 1.51 4.17
Minimum 0.74 3.69 3.15 3.16 1.38 109.90 0.58 3.31
Average 1.17 6.61 3.71 3.68 1.96 183.70 1.16 3.85
Median 1.17 7.04 3.71 3.67 1.95 186.53 1.21 3.83
First Ashland Financial Corp 0.86 3.69 3.15 3.16 2.05 154.05 0.85 3.31
First Savings Financial Corp NA NA NA NA 1.86 NA NA NA
Green Street Financial Corp. NA NA NA NA 1.43 NA NA NA
Home Savings Bank of Siler City NA NA NA NA 1.38 NA NA NA
KS Bancorp, Inc. 1.14 6.85 3.76 3.71 2.03 185.75 1.16 4.01
Piedmont Bancorp, Inc. 1.35 7.23 4.06 3.97 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
Scotland Bancorp, Inc 1.25 8.52 3.75 3.73 2.00 187.31 1.25 3.87
Stone Street Bancorp, Inc. 1.40 9.78 3.97 3.94 1.90 209.63 1.40 4.12
SouthFirst Bancshares, Inc. 0.74 4.52 3.66 3.63 3.33 109.90 0.58 3.79
</TABLE>
<PAGE>
EXHIBIT III-2
INCOME AND EXPENSE ANALYSIS
FOR THE TWELVE MONTHS ENDED MARCH 31, 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 (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS:
NINE MONTHS ENDED 3/31/96 7.32 4.31 3.01 0.00 0.67 0.01 0.00 0.04 2.66 0.00
COMPARATIVE GROUP:
Maximum 7.98 4.22 4.06 0.11 0.62 0.09 0.00 0.09 3.33 0.01
Minimum 7.00 3.62 3.15 0.00 0.07 (0.06) (0.01) 0.00 1.44 0.00
Average 7.52 3.81 3.71 0.03 0.20 0.00 0.00 0.03 2.13 0.00
Median 7.35 3.67 3.64 0.00 0.11 0.00 0.00 0.01 1.95 0.00
First Ashland Financial Corp 7.00 3.84 3.15 0.03 0.07 0.00 (0.01) 0.00 2.05 0.00
First Savings Financial Corp NA NA NA NA NA NA NA NA NA NA
Green Street Financial Corp. NA NA NA NA NA NA NA NA NA NA
Home Savings Bank of Siler Cty NA NA NA NA NA NA NA NA NA NA
KS Bancorp, Inc. 7.98 4.22 3.76 0.00 0.15 (0.02) 0.00 0.05 2.03 0.01
Piedmont Bancorp, Inc. 7.94 3.88 4.06 0.11 0.21 (0.06) 0.00 0.09 2.15 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
Scotland Bancorp, Inc 7.46 3.71 3.75 0.00 0.13 0.00 0.00 0.02 2.00 0.00
Stone Street Bancorp, Inc. 7.60 3.63 3.97 0.05 0.09 0.00 0.00 0.03 1.90 0.00
SouthFirst Bancshares, Inc 7.46 3.79 3.66 0.00 0.62 0.09 0.00 0.03 3.33 0.00
</TABLE>
(1) Specific figure was not available. Amount is included in appropriate other
income ratio.
<PAGE>
EXHIBIT III-3
YIELD-COST STRUCTURE
FOR THE TWELVE MONTHS ENDED MARCH 31, 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:
NINE MONTHS ENDED 3/31/96 95.78 86.38 9.4 7.65 4.39 2.66
COMPARATIVE GROUP:
Maximum 98.15 84.56 25.39 8.51 5.48 3.59
Minimum 93.81 72.77 11.93 7.34 4.29 2.29
Average 96.38 79.23 17.16 7.81 4.83 2.98
Median 96.59 80.31 14.04 7.80 4.96 3.01
First Ashland Financial Corp 95.36 76.09 19.27 7.34 5.05 2.29
First Savings Financial Corp NA NA NA NA NA NA
Green Street Financial Corp. NA NA NA NA NA NA
Home Savings Bank of Siler Cty NA NA NA NA NA NA
KS Bancorp, Inc. 93.81 76.93 16.88 8.51 5.48 3.03
Piedmont Bancorp, Inc. 97.30 78.75 18.56 8.16 4.93 3.23
First Savings Bancorp, Inc. 98.15 72.77 25.39 7.37 4.98 2.39
Scotland Bancorp, Inc 96.88 83.62 13.26 7.70 4.43 3.27
Stone Street Bancorp, Inc. 96.50 84.56 11.93 7.88 4.29 3.59
SouthFirst Bancshares, Inc. 96.69 81.88 14.81 7.71 4.63 3.08
</TABLE>
<PAGE>
EXHIBIT III-4
RISK MEASURES
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
NPAs + Loans Loan Loss/ Net Loan Intangible
NPAs/ 90+ Pst Due/ NPLs/ NPAs/ Reserves/ Reserves/ Reserves Chargeoffs Loans/ Assets/
Assets Assets Loans Equity Loans NPAs NPLs Avg Loans Assets Equity
Institution (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RICHMOND SAVINGS (AS OF 3/31/96) 0.18 0.18 0.25 2.01 0.57 224.42 224.42 0.01 71.65 0.00
COMPARATIVE GROUP:
Maximum 0.73 1.33 0.89 4.82 0.93 936.92 936.92 0.14 82.02 0.12
Minimum 0.00 0.00 0.00 0.00 0.15 17.88 22.04 0.00 49.59 0.00
Average 0.23 0.50 0.31 1.19 0.46 227.88 233.32 0.02 66.79 0.01
Median 0.16 0.39 0.27 0.90 0.43 160.24 194.16 0.00 68.93 0.00
First Ashland Financial Corp 0.58 1.33 0.66 2.19 0.15 17.88 22.04 0.14 70.56 0.00
First Savings Financial Corp 0.15 0.21 0.31 0.69 0.80 262.37 262.37 0.00 49.59 0.00
Green Street Financial Corp. 0.16 0.16 0.28 1.43 0.19 67.98 67.98 0.00 55.47 0.00
Home Savings Bank of Siler Cty 0.02 1.01 0.03 0.07 0.93 NA NA 0.00 54.40 0.00
KS Bancorp, Inc. 0.73 0.73 0.89 4.82 0.37 41.55 41.55 0.00 82.02 0.12
Piedmont Bancorp, Inc. 0.44 0.72 0.61 1.47 0.66 108.24 108.24 0.00 71.44 0.00
First Savings Bancorp, Inc. 0.03 0.03 0.04 0.10 0.35 936.92 936.92 0.00 67.30 0.00
Scotland Bancorp, Inc 0.00 0.00 0.00 0.00 0.50 NA NA NA 71.75 0.00
Stone Street Bancorp, Inc. 0.00 0.34 0.00 0.00 0.17 NA NA NA 81.03 0.00
SouthFirst Bancshares, Inc. 0.19 0.44 0.25 1.10 0.48 160.24 194.16 0.01 64.33 0.00
</TABLE>
<PAGE>
EXHIBIT III-5
CAPITAL STRUCTURE
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
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 3/31/96) 0.00 89.34 0.00 9.00 9.00 9.44 17.31 18.09
- ---------------------------------------------------------------------------------------------------------------------------------
COMPARATIVE GROUP:
Maximum 0.12 88.12 11.01 29.77 29.77 20.00 26.09 64.34
Minimum 0.00 58.71 0.00 10.86 10.86 10.86 10.86 12.77
Average 0.01 76.03 2.79 20.12 20.12 15.44 17.89 35.10
Median 0.00 75.37 0.73 19.72 19.72 14.20 16.71 41.64
First Ashland Financial Corp 0.00 68.18 5.00 26.34 26.34 20.00 20.00 40.93
First Savings Financial Corp 0.00 77.01 0.00 21.89 21.89 NA NA NA
First Ashland Financial Corp 0.00 68.18 5.00 26.34 26.34 20.00 20.00 40.93
First Savings Financial Corp 0.00 77.01 0.00 21.89 21.89 NA NA NA
Green Street Financial Corp. 0.00 88.12 0.00 10.86 10.86 10.86 10.86 26.44
Home Savings Bank of Siler Cty 0.00 72.80 1.29 24.17 24.17 NA NA NA
KS Bancorp, Inc. 0.12 80.66 3.34 15.16 15.15 NA NA 12.77
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
Scotland Bancorp, Inc 0.00 83.51 0.00 14.87 14.87 14.20 14.20 32.75
Stone Street Bancorp, Inc. 0.00 84.77 0.00 14.38 14.38 NA NA NA
SouthFirst Bancshares, Inc. 0.00 73.73 7.07 17.55 17.55 16.71 16.71 32.23
</TABLE>
<PAGE>
EXHIBIT III-6
FINANCIAL CONDITION
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
As a Percent of Total Assets
Total Mortgage Investment & Goodwill &
Cash and Backed Gross Foreclosed Other Total Borrowings/ Other Equity/
Investments Securities Loans Real Estate Intangibles Deposits Assets Liabilities Assets
Institution (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
RICHMOND SAVINGS (AS OF 3/31/96 24.81 0.94 72.91 0.00 0.00 89.34 0.00 1.68 9.00
- ------------------------------------------------------------------------------------------------------------------------------------
COMPARATIVE GROUP:
Maximum 44.24 9.16 86.11 0.12 0.02 84.32 11.95 2.33 24.19
Minimum 12.28 0.00 52.54 0.00 0.00 68.45 0.00 0.48 13.77
Average 24.54 2.85 70.63 0.02 0.00 78.17 2.15 1.06 17.37
Median 22.05 1.86 72.42 0.00 0.00 79.25 1.21 0.72 15.24
First Ashland Financial Corp 16.80 4.71 75.51 0.12 0.00 72.96 1.20 0.48 20.00
First Ashland Financial Corp 16.80 4.71 75.51 0.12 0.00 72.96 1.20 0.48 20.00
First Savings Financial Corp 44.24 1.22 52.54 0.00 0.00 82.05 1.31 1.43 15.21
Green Street Financial Corp. 20.45 0.00 78.29 0.00 0.00 84.32 0.00 0.71 14.97
Home Savings Bank of Siler Cty 39.38 5.10 54.42 0.00 0.00 72.83 1.29 1.69 24.19
KS Bancorp, Inc. 15.16 2.15 80.61 0.00 0.02 81.74 3.44 0.73 14.09
Piedmont Bancorp, Inc. 22.39 3.20 72.48 0.00 0.00 68.45 11.95 0.54 19.07
First Savings Bancorp, Inc. 28.24 1.57 68.97 0.03 0.00 75.33 1.22 0.64 22.81
Scotland Bancorp, Inc 24.77 1.08 72.36 0.00 0.00 83.28 0.00 1.45 15.26
Stone Street Bancorp, Inc. 12.28 0.32 86.11 0.00 0.00 83.98 1.14 0.56 14.32
SouthFirst Bancshares, Inc. 21.71 9.16 65.05 0.03 0.00 76.76 0.00 2.33 13.77
</TABLE>
<PAGE>
EXHIBIT III-7
GROWTH RATES
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
Quarter Ended 3/31/96, Annualized LTM Ended March 31, 1996
--------------------------------- ------------------------
Asset Loan Deposit Asset Loan Deposit
Growth Growth Growth Growth Growth Growth
Rate Rate Rate Rate Rate Rate
Institution (%) (%) (%) (%) (%) (%)
- -----------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
RICHMOND SAVINGS (ENDED 3/31/96) 14.12 1.84 13.16 7.23 0.50 7.52
- ----------------------------------------------------------------------------------------------
COMPARATIVE GROUP:
Maximum 64.49 19.21 10.65 22.20 18.06 7.92
Minimum (2.50) (14.90) (9.39) 0.00 0.00 (8.00)
Average 19.74 5.20 1.14 8.75 11.17 1.55
Median 7.48 5.83 2.39 6.47 10.18 4.36
First Ashland Financial Corp 5.98 12.35 10.65 19.50 9.54 4.54
First Ashland Financial Corp 5.98 12.35 10.65 19.50 9.54 4.54
First Savings Financial Corp 53.95 (14.90) (8.74) NA NA NA
Green Street Financial Corp. NA NA NA NA NA NA
Home Savings Bank of Siler Cty 64.49 (2.19) (9.39) NA NA NA
KS Bancorp, Inc. 7.24 19.21 9.90 6.13 11.14 7.92
Piedmont Bancorp, Inc. 7.72 6.53 0.80 22.20 6.71 (4.31)
First Savings Bancorp, Inc. (2.50) 5.13 2.15 2.63 10.31 4.74
Scotland Bancorp, Inc NA NA NA 0.01 12.36 (1.62)
Stone Street Bancorp, Inc. NA NA NA 7.56 18.06 7.56
SouthFirst Bancshares, Inc. 1.31 10.24 2.62 3.21 10.04 (8.00)
</TABLE>
<PAGE>
EXHIBIT III-8
Loan Portfolio Distribution
As of March 31, 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 3/31/96) 69,471 (820) 1,895 56,520 * 1596
- ---------------------------------------------------------------------------------------------------------------
Comparative Group:
Maximum 170,321 (403) 15,423 149,191 5,614
Minimum 30,371 (6,350) 0 26,391 0
Average 74,651 (2,519) 2,988 62,533 1,370
Median 67,077 0 1,088 59,248 752
First Ashland Financial Corp 63,841.00 (403.00) 0.00 58,024.00 1,177.00
First Savings Financial Corp 30,618.00 NA 414.00 26,391.00 1,263.00
First Ashland Financial Corp 63,841.00 (403.00) 0.00 58,024.00 1,177.00
First Savings Financial Corp 30,618.00 NA 414.00 26,391.00 1,263.00
Green Street Financial Corp. 119,372.00 (805.00) 2,038.00 96,127.00 5,614.00
Home Savings Bank of Siler Cty 30,371.00 NA 227.00 28,719.00 59.00
KS Bancorp, Inc. 70,312.00 NA 2,482.00 60,471.00 300.00
Piedmont Bancorp, Inc. 87,794.00 NA 598.00 65,564.00 327.00
First Savings Bancorp, Inc. 170,321.00 NA 1,438.00 149,191.00 3,149.00
Scotland Bancorp, Inc 42,003.00 NA 738.00 36,383.00 323.00
Stone Street Bancorp, Inc. 76,509.00 NA 6,524.00 62,730.00 1,486.00
SouthFirst Bancshares, Inc. 55,373.00 (6,350.00) 15,423.00 41,734.00 0.00
<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 3/31/96) NA NA * **9460
- -----------------------------------------------------------------------------------------------------------------
Comparative Group:
Maximum 16,171 116 2,133 3,594
Minimum 44 0 0 79
Average 4,236 39 332 982
Median 1,693 0 0 391
First Ashland Financial Corp 2,330.0 116.00 0.00 2,597.00
First Savings Financial Corp 1,679.00 NA 0.00 79.00
First Ashland Financial Corp 2,330.00 116.00 0.00 2,597.00
First Savings Financial Corp 1,679.00 NA 0.00 79.00
Green Street Financial Corp. 16,171.00 1.00 0.00 226.00
Home Savings Bank of Siler Cty 818.00 NA 0.00 410.00
KS Bancorp, Inc. 283.00 NA 0.00 197.00
Piedmont Bancorp, Inc. 7,409.00 NA 636.00 1,154.00
First Savings Bancorp, Inc. 10,655.00 NA 0.00 1,001.00
Scotland Bancorp, Inc 1,706.00 NA 74.00 371.00
Stone Street Bancorp, Inc. 1,260.00 NA 2,133.00 191.00
SouthFirst Bancshares, Inc. 44.00 0.00 480.00 3,594.00
</TABLE>
* Total includes Multi family residential and commercial
** Total includes other loans and home equity lines of credit
<PAGE>
EXHIBIT III-9
PUBLIC COMPANIES CONSIDERED FOR COMPARATIVE GROUP
REASONS FOR EXCLUSION
<TABLE>
<CAPTION>
LTM Return
Equity / on Avg.
Total Assets Assets Assets Reason For Exclusion
Ticker Short Name ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
SELECTED COMPARATIVE INSTITUTIONS
FSBS First Ashland Financial Corp 90,216 26.34 0.86
FSVF First Savings Financial Corp 61,303 21.89 NA
GSFC Green Street Financial Corp. 213,285 10.86 NA
HSSC Home Savings Bank of Siler Cty 55,489 24.17 NA
KSAV KS Bancorp, Inc. 89,871 15.16 1.14
PDB Piedmont Bancorp, Inc. 124,847 29.77 1.35
SOPN First Savings Bancorp, Inc. 256,294 26.21 1.48
SSB Scotland Bancorp, Inc 57,718 14.87 1.25
SSM Stone Street Bancorp, Inc. 81,560 14.38 1.40
SZB SouthFirst Bancshares, Inc. 85,775 17.55 0.74
EXCLUDED INSTITUTIONS
BFSB Bedford Bancshares, Inc 115,395 16.23 7.34 Lower level of 1-4 family mortgages
BRFC Bridgeville Savings Bank 216,199 8.69 8.82 Asset size, lower level of 1-4 family mortgages
CBCO CB Bancorp. Inc 297,120 21.57 8.84 Asset size, lower level of 1-4 family mortgages
CIBI Community Investors Bancorp 639,812 7.30 5.56 Asset size, lower level of 1-4 family mortgages
CKFB CKF Bancorp 5,058,597 7.05 15.88 Lower level of 1-4 family mortgages
ETFS East Texas Financial Services 250,658 19.58 5.01 Asset size, lower level of 1-4 family mortgages
FFBS FFBS BanCorp, Inc 497,290 17.71 7.44 Asset size, lower level of 1-4 family mortgages
FFEF FFE Financial Corp 304,667 8.33 11.06 Asset size, low capital ratio
FFWC FFW Corp 138,609 35.80 4.20 Asset size, lower level of 1-4 family mortgages
FKFC First Kent Financial Corp 361,526 6.55 15.40 Asset size, lower level of 1-4 family mortgages
FLAG Flag Financial Corp 334,297 12.59 7.73 Asset size, low capital ratio
FSBC First Savings Bank, FSB 104,089 5.69 (1.55) Asset size, low capital ratio
FSSB First FS&LA of San Bernadino 81,073 11.98 7.56 Lower level of 1-4 family mortgages
FUSB First United Savings Bank, FSB 2,582,977 7.59 10.18 Acquisition company, low capital ratio
GLBK Glendale Co-Operative Bank 313,681 8.40 5.74 Lower level of 1-4 family mortgages
GWBC Gateway Bancorp 558,819 9.07 7.27 No data on 1-4 family mortgages
HBBI Home Building Bancorp 338,021 6.04 6.12 No data on 1-4 family mortgages
HHFC Harvest Home Financial Corp 480,475 16.18 9.40 Asset size, lower level of 1-4 family mortgages
HRBF Harbor Federal Bancorp, Inc 322,994 25.09 8.21 Asset size, lower level of 1-4 family mortgages
HZFS Horizon Financial Svcs Corp 265,870 13.09 8.35 Lower level of 1-4 family mortgages
INCB Indiana Community Bank, SB 138,766 12.06 3.83 Lower level of 1-4 family mortgages
IOWA Iowa Bancorp, Inc 198,081 10.47 7.20 Asset size, very high ROAA
IPSW Ipswich Savings Bank 594,269 28.08 NA Asset size, low capital ratio
KSBK KSB Bancorp, Inc 233,737 28.42 2.75 Lower level of 1-4 family mortgages, low capital
ratio
</TABLE>
<PAGE>
EXHIBIT III-9
PUBLIC COMPANIES CONSIDERED FOR COMPARATIVE GROUP
REASONS FOR EXCLUSION
<TABLE>
<CAPTION>
LTM Return
Equity / on Avg.
Total Assets Assets Assets Reason For Exclusion
Ticker Short Name ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
LAUR Laurel Bancorp, Inc 126,884 8.64 17.40 Asset size
LOAN Horizon Bancorp 328,615 15.04 1.82 Asset size
LSBI LSB Financial Corp 271,700 13.34 11.50 No data on 1-4 family mortgages
MBLF MBLA Financial Corp 54,913 11.31 2.18 Asset size
MCBN Mid-Coast Bancorp, Inc 1,135,188 8.04 10.33 Lower level of 1-4 family mortgages
MFCX Marshalltown Financial Corp 1,757,048 8.23 7.43 Asset size, lower level of 1-4 family mortgages
MFFC Milton Federal Financial Corp 70,748 14.90 6.13 Asset size, lower level of 1-4 family mortgages
MFLR Mayflower Co-operative Bank 454,126 9.69 5.65 Lower level of 1-4 family mortgages
MFSB Mutual Bancompany 52,995 24.91 8.79 Asset size
MIFC Mid-Iowa Financial Corp 177,164 9.34 11.34 Asset size, lower level of 1-4 family mortgages
MIVI Mississippi View Holding Co 656,855 7.25 18.76 Lower level of 1-4 family mortgages
MORG Morgan Financial Corp 111,697 18.86 3.29 Lower level of 1-4 family mortgages
MWBI Midwest Bancshares, Inc 1,572,683 7.64 15.79 Asset size, lower level of 1-4 family mortgages
NBSI North Bancshares, Inc 83,710 6.30 10.34 Lower level of 1-4 family mortgages
NFLS Newnan Savings Bank 1,632,305 11.35 9.40 Asset size
NWEQ Northwest Equity Corp 324,440 6.06 11.65 Lower level of 1-4 family mortgages
PCBC Perry County Financial Corp 357,813 5.94 9.53 Market area, no data on 1-4 family mortgages
PTRS Potters Savings & Loan Co (The) 1,240,882 17.54 9.70 Asset size, low capital ratio
SEAB Seaboard Bancorp, Inc 1,070,978 7.61 17.25 Asset size, low capital ratio
SFFB Southern Financial Federal SB 257,908 26.06 5.69 Asset size
SFFC Statefed Financial Corporation 506,436 5.34 4.07 Lower level of 1-4 family mortgages
SHFC Seven Hills Financial Corp 1,506,496 6.10 8.67 Lower level of 1-4 family mortgages
SJSB SJS Bancorp 359,480 12.75 9.26 Asset size
SMBC Southern Missouri Bancorp, Inc 426,515 8.38 10.21 Asset size, lower level of 1-4 family mortgages
SSBL Sulphur Springs Loan & Bldg 110,542 20.35 7.81 Asset size, lower level of 1-4 family mortgages
THBC Troy Hill Bancorp. Inc 245,892 9.16 6.13 Lower level of 1-4 family mortgages
THIR Third Financial Corp 292,153 11.41 4.12 Asset size, lower level of 1-4 family mortgages
TRIC Tri-County Bancorp, Inc 306,143 15.65 8.86 Lower level of 1-4 family mortgages
TWIN Twin City Bancorp 213,254 12.04 7.85 Asset size, lower level of 1-4 family mortgages
UBMT United Savings Bank, F.A. 195,158 14.78 6.29 Asset size, lower level of 1-4 family mortgages
UNFB United Financial Bancorp 4,928,989 12.13 13.78 Acquisition company, lower level of 1-4 family
mortgages
VAFD Valley Federal Savings Bank 355,854 8.78 19.48 Asset size, lower level of 1-4 family mortgages
WCFB Webster City Federal SB, MHC 230,276 15.62 7.77 Asset size, lower level of 1-4 family mortgages
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market Current Price in Relation To
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71
Advantage Bancorp, Inc. WI 973,305 32.000 110.86 122.28 141.91 11.39 12.90 14.04
Abington Savings Bank MA 460,492 16.000 30.14 98.64 113.56 6.55 10.00 21.92
Anchor BanCorp Wisconsin WI 1,707,062 30.250 155.06 126.94 130.11 9.08 11.63 11.42
Affiliated Community Bancorp MA 878,480 17.500 88.53 92.15 92.89 10.55 NA NA
America First Financial Fund CA 2,416,953 28.250 169.80 112.28 115.26 7.03 9.17 10.74
Ambanc Holding Co., Inc. NY 344,856 9.690 52.54 NA NA NA NA NA
Ahmanson & Company (H.F.) CA 50,529,586 23.125 2,601.63 111.45 118.77 5.29 14.45 16.52
Albion Banc Corp. NY 57,089 16.625 4.33 71.17 71.17 7.59 83.13 23.42
ALBANK Financial Corp NY 2,970,170 28.875 399.24 123.50 130.89 13.44 14.15 14.96
American Federal Bank SC 1,345,884 15.125 164.91 154.34 167.68 12.25 9.95 10.43
American National Bancorp MD 439,005 9.625 38.31 74.67 74.67 8.73 21.88 NA
Andover Bancorp, Inc. MA 1,110,847 22.000 93.21 109.45 109.45 8.39 9.17 9.91
Ameriana Bancorp IN 356,813 14.250 50.32 106.82 106.98 14.10 15.49 15.49
ASB Financial Corp. OH 109,960 15.250 26.14 97.76 97.76 23.77 22.43 NA
Astoria Financial Corporation NY 6,620,102 48.250 545.46 92.34 113.24 8.24 11.49 11.71
AmTrust Capital Corp IN 73,645 10.000 5.75 74.79 75.53 7.81 62.50 NA
Avondale Financial Corp. IL 610,537 14.000 58.56 87.50 87.50 9.59 15.91 NA
Barrington Bancorp, Inc. IL 70,204 23.000 15.21 131.50 131.50 21.66 NM 40.35
BankAtlantic Bancorp, Inc. FL 1,750,689 15.500 164.19 136.20 150.63 9.38 16.15 10.33
First Federal Bancorporation MN 100,591 14.000 12.08 79.95 79.95 12.00 15.91 NA
Bell Bancorp IL 1,926,039 36.750 337.59 111.74 111.74 17.50 31.68 27.43
BostonFed Bancorp, Inc. MA 640,883 12.375 81.55 83.73 83.73 12.72 NA NA
Bedford Bancshares, Inc. VA 115,395 17.310 20.68 104.03 104.03 17.92 13.96 14.31
BFS Bankorp, Inc. NY 562,201 36.250 59.26 137.52 137.52 10.54 6.97 7.09
American Bank of Connecticut CT 476,152 25.250 57.69 129.42 136.63 12.12 10.70 13.29
Bankers Corp. NJ 1,901,915 17.000 219.68 117.48 120.14 11.55 13.28 11.26
Bancorp Connecticut, Inc. CT 383,978 20.250 45.83 106.08 106.08 11.94 13.32 11.07
BankUnited Financial Corp. FL 638,434 7.750 42.10 73.11 73.11 2.55 12.92 6.80
Bankers First Corporation GA 56,166 13.750 15.46 97.73 97.73 27.52 22.92 22.18
Bridgeville Savings Bank PA 173,934 3.000 15.54 132.74 132.74 11.31 12.50 17.65
Brooklyn Bancorp. Inc. NY 216,199 12.758 15.34 91.40 109.07 7.10 10.99 12.14
Branford Savings Bank CT 3,004,496 34.125 242.34 116.51 119.86 8.07 NM NM
Bethel Bancorp MB 138,504 9.625 22.10 80.41 80.41 15.96 24.06 NA
Bay View Capital Corp CA 117,744 10.375 9.26 NA NA NA NA NA
Bank West Financial Corp MB 346,468 17.750 34.99 126.33 126.33 10.10 9.24 9.59
Broadway Financial Corp CA 14,320,600 17.125 842.56 135.59 135.59 5.88 11.27 12.59
Camco Financial Corporation OH 192,464 18.125 18.83 90.63 90.63 9.79 9.64 9.96
Cal Fed Bancorp, Inc. CA 363,225 8.500 19.67 36.22 59.11 5.42 30.36 25.00
Capital Savings Bancorp, Inc. MO 314,139 17.000 27.75 138.32 138.32 8.83 22.37 20.48
Carver Federal Savings Bank NY 314,812 23.000 41.30 106.53 114.14 13.12 13.37 11.50
<CAPTION>
Current Tangible Qtr Qtr LTM LTM Deposit
Dividend Equity/ Equity/ Return on Return on Return on Return on Insurance
Yield Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity Agency
Institution (%) (%) (%) (%) (%) (%) (%) Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 7.93 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 0.00 3.29 2 2.66 (2.56) (37.98) (1.90) (35.64)
Average 2.01 12.23 1212.06 0.91 8.84 0.88 9.07
Median 2.04 9.97 9 9.58 0.87 7.80 0.87 7.73
Advantage Bancorp, Inc. 0.800 9.95 8 8.69 0.94 9.70 0.89 9.50 AADV NASDAQ SAIF
Abington Savings Bank 2.500 6.64 5 5.82 0.72 10.40 0.33 4.68 ABBK NASDAQ BIF
Anchor BanCorp Wisconsin 1.058 7.16 7 7.00 0.84 11.62 0.89 12.07 ABCW NASDAQ SAIF
Affiliated Community Bancorp 2.743 11.30 1111.23 0.06 0.55 0.69 5.90 AFCB NASDAQ SAIF
America First Financial Fund 5.664 6.46 6 6.30 0.87 13.32 0.73 11.46 AFFFZ NASDAQ SAIF
Ambanc Holding Co., Inc. 0.000 7.90 7 7.90 (0.96) (11.86) 0.35 4.35 AHCI NASDAQ BIF
Ahmanson & Company (H.F.) 3.805 6.05 5 5.77 0.48 7.93 0.41 7.47 AHM NYSE SAIF
Albion Banc Corp. 1.846 10.67 1010.67 0.11 1.06 0.31 3.03 ALBC NASDAQ SAIF
ALBANK Financial Corp. 1.662 10.88 1010.33 1.01 9.34 0.99 9.09 ALBK NASDAQ SAIF
American Federal Bank 2.645 8.16 7 7.56 1.32 15.98 1.28 16.14 AMFB NASDAQ SAIF
American National Bancorp 0.000 11.18 1111.18 0.40 3.92 0.18 2.33 ANBK NASDAQ SAIF
Andover Bancorp, Inc. 2.182 7.67 7 7.67 0.92 12.06 0.87 11.51 ANDB NASDAQ BIF
Ameriana Bancorp 3.938 13.20 1313.19 0.90 6.88 0.93 7.00 ASBI NASDAQ SAIF
ASB Financial Corp. 1.967 24.32 2424.32 1.01 4.18 1.04 5.28 ASBP NASDAQ SAIF
Astoria Financial Corporation 1.658 8.92 7 7.40 0.69 7.92 0.73 8.01 ASFC NASDAQ SAIF
AmTrust Capital Corp. 0.000 10.44 1010.35 0.13 1.14 0.26 2.45 ATSB NASDAQ SAIF
Avondale Financial Corp. 0.000 10.96 1010.96 0.62 5.66 0.57 5.97 AVND NASDAQ SAIF
Barrington Bancorp, Inc. 1.217 16.47 1616.47 0.04 0.24 0.53 3.20 BABC NASDAQ SAIF
BankAtlantic Bancorp, Inc. 1.135 6.89 6 6.27 0.93 13.90 1.07 16.03 BANC NASDAQ SAIF
First Federal Bancorporation 0.000 15.01 1515.01 0.70 4.62 0.71 5.79 BDJI NASDAQ SAIF
Bell Bancorp 1.224 15.66 1515.66 0.60 3.77 0.67 4.29 BELL NASDAQ SAIF
BostonFed Bancorp, Inc. 0.000 14.15 1414.15 0.33 3.38 0.19 1.88 BFD AMSE SAIF
Bedford Bancshares, Inc. 2.080 16.23 1616.23 1.23 7.57 1.25 7.34 BFSB NASDAQ SAIF
BFS Bankorp, Inc. 0.000 7.66 7 7.66 1.63 21.76 1.64 23.20 BFSI NASDAQ SAIF
American Bank of Connecticut 5.386 9.36 8 8.91 1.20 13.08 0.97 10.71 BKC AMSE BIF
Bankers Corp. 3.294 9.83 9 9.63 0.90 9.20 1.11 11.23 BKCO NASDAQ BIF
Bancorp Connecticut, Inc. 4.049 11.25 1111.25 0.94 8.45 1.17 10.67 BKCT NASDAQ BIF
BankUnited Financial Corp. 0.000 7.33 7 7.33 0.59 7.95 1.14 15.27 BKUNA NASDAQ SAIF
Bankers First Corporation 2.327 28.15 2828.15 1.25 4.24 1.31 4.32 BNKF NASDAQ SAIF
Bridgeville Savings Bank 0.000 8.51 8 8.51 0.84 9.86 0.67 8.13 BRFC NASDAQ SAIF
Brooklyn Bancorp, Inc. 2.510 8.69 7 7.53 0.84 9.56 0.74 8.82 BRKB NASDAQ BIF
Branford Savings Bank 1.758 6.92 6 6.74 (1.15) (15.63) (0.15) (2.11) BSBC NASDAQ BIF
Bethel Bancorp 2.909 19.84 1919.84 0.60 3.06 0.63 3.21 BTHL NASDAQ BIF
Bay View Capital Corp. 1.928 4.74 4 4.74 0.45 9.46 0.45 9.18 BVFS NASDAQ SAIF
Bank West Financial Corp 2.479 7.99 7 7.99 1.10 13.92 1.08 13.96 BWFC NASDAQ SAIF
Broadway Financial Corp. 0.000 6.20 6 6.20 0.71 11.53 0.65 11.14 BYFC NASDAQ SAIF
Camco Financial Corporation 1.986 10.80 1010.80 0.99 9.23 0.99 9.23 CAFI NASDAQ SAIF
Cal Fed Bancorp, Inc. 0.000 9.63 9 9.20 0.15 1.60 0.20 2.06 CAL NYSE SAIF
Capital Savings Bancorp, Inc. 0.000 6.39 6 6.39 0.45 7.07 0.49 7.81 CAPS NASDAQ SAIF
Carver Federal Savings Bank 1.913 12.31 1111.59 1.12 8.10 1.29 9.64 CARV NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market Current Price in Relation To
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71
Cascade Financial Corp. WA 509,528 28.125 75.17 89.37 89.37 14.75 16.35 13.65
First Midwest Financial, Inc. IA 199,103 17.250 20.49 112.23 112.23 10.29 7.44 8.98
Calumet Bancorp, Inc. IL 215,726 14.125 28.02 110.52 110.52 12.99 15.35 NA
CB Bancorp, Inc. IN 409,498 17.750 30.88 100.28 100.28 7.54 15.30 10.26
Community Bank Shares IN 2,786,528 18.125 89.86 99.21 123.38 3.22 7.95 10.60
Community Bankshares, Inc. NH 297,120 11.500 57.20 89.29 91.78 19.25 NA NA
Coastal Bancorp, Inc. TX 79,578 12.000 13.57 78.13 78.13 16.87 18.75 NA
Charter Financial, Inc. IL 318,191 15.250 29.48 93.10 106.72 9.27 12.30 15.40
CCF Holding Corp GA 2,151,421 25.250 115.08 110.07 110.31 5.35 12.88 16.08
Central Co-Operative Bank MA 6,593,880 38.750 555.69 153.28 168.55 8.43 11.81 10.47
CENFED Financial Corp. CA 428,352 20.750 56.22 215.47 215.47 13.16 14.02 15.37
Commercial Federal Corporation NE 3,580,419 17.875 258.22 116.60 125.26 7.21 8.94 11.31
Coastal Financial Corp. SC 157,766 21.000 26.66 123.60 123.60 16.90 12.50 12.80
Center Financial Corp. CT 1,257,585 21.625 100.83 117.78 119.28 8.02 77.23 54.06
Community Financial Corp. VA 761,418 21.000 93.57 149.15 149.15 12.29 11.17 14.19
California Financial Holding CA 900,549 14.625 109.83 122.08 137.20 12.20 13.06 14.06
CFSB Bancorp, Inc. MI 85,216 14.750 10.89 89.02 89.02 12.78 10.54 NA
CFX Corporation NH 466,208 26.500 70.71 128.77 138.53 15.17 13.52 13.66
Community Investors Bancorp OH 56,549 19.500 18.04 111.88 111.88 31.91 24.38 NA
Central Jersey Financial NJ 67,786 10.875 14.38 73.68 73.68 21.22 NA NA
CKF Bancorp, Inc. KY 174,142 13.500 38.48 77.05 77.05 23.47 14.06 NA
Classic Bancshares, Inc. KY 1,455,700 20.250 174.73 127.52 145.89 12.00 16.33 15.23
Cameron Financial Corp MO 587,064 14.500 70.41 94.40 94.40 11.99 16.48 15.26
Commonwealth Savings Bank, MHC PA 639,812 33.000 52.69 112.74 117.19 8.24 43.42 22.30
Community Savings, MHC FL 303,656 12.750 23.97 141.04 141.04 7.89 15.94 15.94
CENIT Bancorp, Inc. VA 5,058,597 23.625 482.12 135.23 145.56 9.53 8.95 9.05
Covenant Bank for Savings NJ 13,578,859 32.875 1,479.95 175.24 178.38 10.90 NM 44.43
Collective Bancorp, Inc. NJ 488,415 20.625 97.80 117.66 117.66 20.02 25.78 27.50
Charter One Financial OH 311,843 17.750 26.48 91.03 103.92 8.49 40.34 27.31
Conestoga Bancorp, Inc. NY 328,880 20.810 54.98 116.65 121.91 16.72 28.90 24.77
Cooperative Bankshares, Inc. NC 222,438 26.750 18.94 77.99 90.40 8.49 18.07 18.20
CSB Financial Corporation VA 8,251,680 30.000 557.49 133.57 135.93 6.76 15.96 17.54
Circle Financial Corp. OH 41,231 9.125 9.44 74.19 74.19 22.90 NA NA
Coast Savings Financial CA 210,647 13.750 12.80 85.67 85.67 6.08 9.55 12.17
CSB Financial Group, Inc. IL 2,477,970 35.750 202.06 116.22 134.80 8.15 12.95 20.66
Center Banks Incorporated NY 270,695 18.250 28.64 115.14 115.14 10.59 12.01 12.25
CitFed Bancorp, Inc. OH 78,218 14.750 14.23 91.96 92.07 18.19 13.17 NA
Chester Valley Bancorp Inc. PA 235,289 11.750 46.62 81.60 81.60 19.81 NA NA
CitiSave Financial Corp LA 658,373 13.125 65.92 127.55 134.75 10.01 6.19 10.85
Damen Financial Corp. IL 20,326,620 12.000 1,196.47 132.89 134.23 5.89 150.00 21.05
Dime Financial Corp. CT 1,186,661 12.750 86.40 131.44 133.79 7.28 7.08 9.11
<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 (%) (%) (%) (%) (%) (%) (%) Ticker Exchange
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 7.93 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 0.00 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 2.01 12.23 12.06 0.91 8.84 0.88 9.07
Median 2.04 9.97 9.58 0.87 7.80 0.87 7.73
Cascade Financial Corp. 0.000 16.51 16.51 0.97 5.92 1.19 7.22 CASB NASDAQ
First Midwest Financial, Inc. 0.000 9.17 9.17 1.56 16.37 1.50 14.32 CASH NASDAQ
Calumet Bancorp, Inc. 2.407 11.75 11.75 0.88 7.26 0.91 7.07 CBCI NASDAQ
CB Bancorp, Inc. 3.380 7.52 7.52 0.50 6.83 0.76 10.66 CBCO NASDAQ
Community Bank Shares 2.207 3.29 2.66 0.43 12.48 0.34 9.69 CBIN NASDAQ
Community Bankshares, Inc. 2.087 21.57 21.11 1.08 8.70 1.08 8.84 CBNH NASDAQ
Coastal Bancorp, Inc. 3.333 21.60 21.60 0.92 4.27 0.86 6.13 CBSA NASDAQ
Charter Financial, Inc. 0.000 9.95 8.80 0.75 7.68 0.60 6.40 CBSB NASDAQ
CCF Holding Corp 1.426 4.86 4.85 0.43 9.12 0.36 7.46 CCFH NASDAQ
Central Co-Operative Bank 1.032 5.50 5.02 0.73 13.07 0.82 15.67 CEBK NASDAQ
CENFED Financial Corp. 2.410 6.11 6.11 1.02 16.60 0.95 15.65 CENF NASDAQ
Commercial Federal Corporation 1.566 6.18 5.78 0.83 13.54 0.64 10.62 CFB NYSE
Coastal Financial Corp. 2.095 13.68 13.68 1.37 10.20 1.34 10.20 CFCP NASDAQ
Center Financial Corp. 2.035 6.81 6.73 0.11 1.56 0.15 2.26 CFCX NASDAQ
Community Financial Corp. 2.095 8.24 8.24 1.14 13.92 0.92 11.47 CFFC NASDAQ
California Financial Holding 4.923 9.99 8.99 0.98 9.62 0.91 8.88 CFHC NASDAQ
CFSB Bancorp, Inc. 1.085 14.35 14.35 1.11 7.67 1.00 7.39 CFSB NASDAQ
CFX Corporation 1.811 11.78 11.04 1.15 9.86 1.11 10.78 CFX AMSE
Community Investors Bancorp 2.051 28.52 28.52 1.28 4.51 1.32 4.75 CIBI NASDAQ
Central Jersey Financial 0.000 28.79 28.79 1.00 4.84 NA NA CJFC NASDAQ
CKF Bancorp, Inc. 2.074 28.26 28.26 1.58 5.59 1.57 6.04 CKFB NASDAQ
Classic Bancshares, Inc. 2.469 9.41 8.33 0.73 8.04 0.85 8.95 CLAS NASDAQ
Cameron Financial Corp 4.828 12.71 12.71 0.73 5.71 0.82 6.32 CMRN NASDAQ
Commonwealth Savings Bank, MHC 1.212 7.30 7.05 0.20 2.80 0.41 5.56 CMSB NASDAQ
Community Savings, MHC 0.000 8.35 8.35 0.79 9.64 0.72 9.95 CMSV NASDAQ
CENIT Bancorp, Inc. 3.386 7.05 6.58 1.07 15.36 1.06 15.88 CNIT NASDAQ
Covenant Bank for Savings 2.433 6.22 6.12 (1.67) (27.14) 0.23 3.93 CNSK NASDAQ
Collective Bancorp, Inc. 0.000 16.25 16.25 0.75 4.67 0.72 4.40 COFD NASDAQ
Charter One Financial 0.000 9.33 8.27 0.23 2.48 0.32 3.62 COFI NASDAQ
Conestoga Bancorp, Inc. 1.922 14.33 13.80 0.57 4.04 0.68 4.73 CONE NASDAQ
Cooperative Bankshares, Inc. 2.542 10.89 9.54 0.49 4.43 0.53 4.46 COOP NASDAQ
CSB Financial Corporation 0.000 5.06 4.97 0.43 8.70 0.39 8.36 COSB NASDAQ
Circle Financial Corp. 0.000 30.87 30.87 1.10 5.16 NA NA CRCL NASDAQ
Coast Savings Financial 1.745 7.09 7.09 0.65 9.17 0.51 7.29 CSA NYSE
CSB Financial Group, Inc. 0.783 7.02 6.11 0.68 9.41 0.44 6.21 CSBF NASDAQ
Center Banks Incorporated 1.973 9.20 9.20 0.90 9.77 0.89 9.98 CTBK NASDAQ
CitFed Bancorp, Inc. 2.034 18.28 18.26 1.27 6.99 1.12 8.56 CTZN NASDAQ
Chester Valley Bancorp Inc. 0.000 24.28 24.28 0.80 3.30 NA NA CVAL NASDAQ
CitiSave Financial Corp 2.133 7.85 7.46 1.66 21.55 0.95 12.82 CZF AMSE
Damen Financial Corp. 0.000 4.80 4.76 0.04 0.95 0.30 6.56 DFIN NASDAQ
Dime Financial Corp. 0.000 5.54 5.45 1.12 20.57 0.89 17.19 DIBK NASDAQ
<CAPTION>
Deposits
Insurance
Agency
Institution (BIF/SAIF)
<S> <C>
Maximum
Minimum
Average
Median
Cascade Financial Corp. SAIF
First Midwest Financial, Inc. SAIF
Calumet Bancorp, Inc. SAIF
CB Bancorp, Inc. SAIF
Community Bank Shares SAIF
Community Bankshares, Inc. BIF
Coastal Bancorp, Inc. SAIF
Charter Financial, Inc. SAIF
CCF Holding Corp SAIF
Central Co-Operative Bank BIF
CENFED Financial Corp. SAIF
Commercial Federal Corporation SAIF
Coastal Financial Corp. SAIF
Center Financial Corp. BIF
Community Financial Corp. SAIF
California Financial Holding SAIF
CFSB Bancorp, Inc. SAIF
CFX Corporation BIF
Community Investors Bancorp SAIF
Central Jersey Financial SAIF
CKF Bancorp, Inc. SAIF
Classic Bancshares, Inc. SAIF
Cameron Financial Corp SAIF
Commonwealth Savings Bank, MHC SAIF
Community Savings, MHC SAIF
CENIT Bancorp, Inc. SAIF
Covenant Bank for Savings BIF
Collective Bancorp, Inc. SAIF
Charter One Financial SAIF
Conestoga Bancorp, Inc. SAIF
Cooperative Bankshares, Inc. SAIF
CSB Financial Corporation SAIF
Circle Financial Corp. SAIF
Coast Savings Financial SAIF
CSB Financial Group, Inc. SAIF
Center Banks Incorporated BIF
CitFed Bancorp, Inc. SAIF
Chester Valley Bancorp Inc. SAIF
CitiSave Financial Corp SAIF
Damen Financial Corp. SAIF
Dime Financial Corp. BIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current Current
Assets Stock Market Current Price in Relation to Dividend
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS Yield
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17 7.93
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05 0.00
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59 2.01
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71 2.04
Dime Bancorp, Inc. NY 1,252,642 30.750 93.14 115.25 119.65 7.44 10.25 12.55 0.780
D & N Financial Corp. MI 4,656,267 23.500 398.86 103.84 105.76 8.57 11.99 18.95 2.043
DS Bancorp, Inc. CT 394,787 33.000 90.07 187.61 187.61 22.82 39.29 18.97 1.697
Downey Financial Corp. CA 831,775 24.000 57.62 91.53 97.48 6.88 10.17 13.11 3.000
Eagle Bancorp, Inc. WV 558,315 16.000 49.88 134.34 134.34 8.93 9.09 10.46 3.250
Eastern Bancorp VT 207,680 14.500 31.58 97.58 97.77 15.21 11.69 14.65 0.000
Eagle Bancshares GA 1,290,670 23.250 104.27 108.80 120.84 8.07 9.38 9.81 3.957
Enterprise Federal Bancorp Bank OH 255,127 22.500 13.50 102.23 102.23 5.29 9.07 5.29 0.000
Eagle Financial Corp. CT 224,960 18.250 13.01 91.16 95.45 5.78 NM 38.02 3.507
Equitable Federal Savings MD 348,731 2.625 2.76 12.09 19.78 0.79 0.77 NA 0.000
Elmira Savings Bank (The) NY 117,007 15.000 17.90 79.96 79.96 15.30 17.86 NA 1.333
Essex Bancorp, Inc. VA 520,842 13.875 113.31 100.69 100.69 22.90 12.85 NA 1.441
East Texas Financial Services TX 403,842 15.250 47.61 90.45 90.83 11.79 16.58 16.22 1.574
First Bell Bancorp, Inc. PA 248,537 29.190 19.43 90.93 90.93 7.82 1.07 3.05 1.370
Fidelity Bancorp, Inc. IL 241,761 18.250 14.92 86.66 86.66 6.30 8.95 9.46 1.534
1ST Bancorp IN 140,022 16.000 21.32 88.50 88.69 15.23 19.05 19.05 1.250
Fort Bend Holding Corp. TX 250,658 17.750 44.60 95.17 95.17 18.64 16.44 18.49 3.380
First Bancshares, Inc. MO 607,429 19.250 50.62 131.04 131.04 8.33 12.03 13.46 0.000
FCB Financial Corp. WI 525,550 10.375 113.88 85.32 85.32 21.67 NA NA 2.699
First Citizens Financial Corp. MD 4,139,737 15.750 167.18 85.18 86.78 4.04 49.22 25.82 0.000
First Defiance Financial OH 808,792 10.375 62.49 103.85 103.85 7.73 9.26 8.50 4.627
FirstFed Financial Corp. CA 1,480,154 12.000 240.28 NA NA NA NA NA 2.500
First Essex Bancorp, Inc. MA 74,874 15.500 7.31 92.93 92.93 9.77 14.35 11.31 0.000
First Colorado Bancorp, Inc. CO 121,031 19.500 30.83 120.74 120.74 25.47 17.41 17.89 2.051
First Financial Bancorp, Inc. IL 173,797 23.750 18.63 152.54 152.73 10.72 10.80 11.26 1.684
FFBS BanCorp, Inc. MS 1,416,608 20.500 129.77 136.85 137.22 9.14 12.81 13.49 3.122
First Federal Bancorp, Inc. OH 622,500 21.625 50.24 87.09 91.17 8.07 30.03 21.41 1.850
First Financial Holdings Inc. SC 621,590 13.875 95.12 99.75 104.09 15.30 15.77 15.42 1.441
FirstFed Bancshares IL 277,526 14.000 31.61 221.87 221.87 11.38 9.72 9.46 7.143
First Fed Bncshrs Eau Claire WI 139,494 28.750 13.63 153.17 153.17 9.77 21.78 17.75 0.000
Fidelity Federal Bancorp IN 878,778 18.000 46.51 77.65 77.96 5.29 10.47 8.41 3.333
FFE Financial Corp. FL 497,290 29.250 83.42 88.18 89.94 16.77 11.99 13.12 2.735
First Federal of East Hartford CT 179,648 10.500 42.12 NA NA NA NA NA 3.512
FFVA Financial Corp. VA 301,485 2.660 22.42 118.75 118.75 7.44 11.08 13.30 0.000
First FSB Ft Dodge, MHC LA 779,620 13.250 89.01 107.64 109.05 11.42 18.40 18.15 4.528
F.F.O. Financial Group, Inc. FL 5,471,108 21.750 645.46 167.69 177.55 11.80 8.63 10.31 2.759
Fidelity FSB of Florida, MHC FL 319,417 12.500 42.58 81.75 81.75 13.33 28.41 24.51 4.000
First Financial Corp. WI 304,667 14.500 37.28 146.76 146.76 12.24 12.95 14.50 1.517
FSF Financial Corp. MN 213,595 13.500 15.91 78.35 78.35 7.45 11.25 12.86 2.074
First Harrisburg Bancorp PA 708,384 14.940 128.86 91.15 91.15 18.19 NA NA 0.000
First Franklin Corporation OH 341,604 36.500 77.07 158.35 170.16 22.56 14.04 14.20 2.630
<CAPTION>
Tangible Qtr Qtr LTM LTM Deposits
Equity/ Equity/ Return on Return on Return on Return on Insurance
Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity Agency
Institution (%) (%) (%) (%) (%) (%) Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 12.23 12.06 0.91 8.84 0.88 9.07
Median 9.97 9.58 0.87 7.80 0.87 7.73
Dime Bancorp, Inc. 6.45 6.23 0.75 11.47 0.63 9.95 DME NYSE BIF
D & N Financial Corp. 8.25 8.11 0.71 8.84 0.45 5.69 DNFC NASDAQ SAIF
DS Bancorp, Inc. 12.16 12.16 0.57 4.82 1.24 10.71 DSBC NASDAQ BIF
Downey Financial Corp. 7.51 7.09 0.71 9.61 0.55 7.58 DSL NYSE SAIF
Eagle Bancorp, Inc. 6.65 6.65 1.06 15.74 0.97 13.77 EBCI NASDAQ SAIF
Eastern Bancorp 15.58 15.55 1.23 7.06 1.12 5.38 EBCP NASDAQ SAIF
Eagle Bancshares 7.42 6.73 0.95 12.56 0.92 12.33 EBSI NASDAQ SAIF
Enterprise Federal Bancorp Bank 5.18 5.18 0.63 12.02 1.13 21.89 EFBI NASDAQ SAIF
Eagle Financial Corp. 6.34 6.08 (0.03) (0.39) 0.15 2.37 EGFC NASDAQ SAIF
Equitable Federal Savings 6.54 4.11 2.54 76.11 5.78 229.68 EQSB NASDAQ SAIF
Elmira Savings Bank (The) 19.13 19.13 0.83 4.25 0.95 5.25 ESBK NASDAQ BIF
Essex Bancorp, Inc. 22.75 22.75 1.66 7.29 1.48 8.38 ESX AMSE SAIF
East Texas Financial Services 13.03 12.99 0.74 5.50 0.81 5.58 ETFS NASDAQ SAIF
First Bell Bancorp, Inc. 8.60 8.60 6.56 95.88 2.12 38.65 FBBC NASDAQ SAIF
Fidelity Bancorp, Inc. 7.27 7.27 0.80 10.82 0.74 10.08 FBCI NASDAQ SAIF
1ST Bancorp 17.21 17.18 0.76 4.37 0.80 4.32 FBCV NASDAQ SAIF
Fort Bend Holding Corp. 19.58 19.58 1.11 5.68 0.99 5.01 FBHC NASDAQ SAIF
First Bancshares, Inc. 6.36 6.36 0.78 12.29 0.71 11.37 FBSI NASDAQ SAIF
FCB Financial Corp. 25.40 25.40 1.42 5.63 1.13 6.14 FCBF NASDAQ SAIF
First Citizens Financial Corp. 4.74 4.66 0.08 1.75 0.16 3.47 FCIT NASDAQ SAIF
First Defiance Financial 7.44 7.44 0.84 11.46 0.91 12.83 FDEF NASDAQ SAIF
FirstFed Financial Corp. 16.13 15.96 0.91 7.34 0.91 7.29 FED NYSE SAIF
First Essex Bancorp, Inc. 10.51 10.51 0.65 5.93 0.88 8.05 FESX NASDAQ BIF
First Colorado Bancorp, Inc. 19.74 19.74 1.39 6.90 1.38 6.66 FFBA NASDAQ SAIF
First Financial Bancorp, Inc. 7.56 7.55 1.08 15.16 1.04 14.39 FFBI NASDAQ SAIF
FFBS BanCorp, Inc. 6.68 6.66 0.72 10.77 0.72 10.75 FFBS NASDAQ SAIF
First Federal Bancorp, Inc. 9.27 8.89 0.30 3.42 0.46 4.67 FFBZ NASDAQ SAIF
First Financial Holdings Inc. 15.34 14.79 0.89 5.69 1.10 6.17 FFCH NASDAQ SAIF
FirstFed Bancshares 5.13 5.13 1.30 26.35 1.45 28.84 FFDP NASDAQ SAIF
First Fed Bncshrs Eau Claire 6.38 6.38 0.47 7.53 0.57 9.77 FFEC NASDAQ SAIF
Fidelity Federal Bancorp 6.81 6.79 0.53 7.72 0.68 9.78 FFED NASDAQ SAIF
FFE Financial Corp. 17.71 17.42 1.32 7.43 1.35 7.44 FFEF NASDAQ SAIF
First Federal of East Hartford 16.47 16.47 1.51 9.17 1.49 8.74 FFES NASDAQ SAIF
FFVA Financial Corp. 6.23 6.23 0.69 10.59 0.64 9.17 FFFC NASDAQ SAIF
First FSB Ft Dodge, MHC 10.42 10.30 0.62 6.03 0.65 6.22 FFFD NASDAQ SAIF
F.F.O. Financial Group, Inc. 7.04 6.67 1.40 20.30 1.17 18.03 FFFG NASDAQ SAIF
Fidelity FSB of Florida, MHC 16.29 16.29 0.54 3.08 0.70 3.44 FFFL NASDAQ SAIF
First Financial Corp. 8.33 8.33 0.99 12.13 0.91 11.06 FFHC NASDAQ SAIF
FSF Financial Corp. 9.51 9.51 0.70 7.42 0.64 6.70 FFHH NASDAQ SAIF
First Harrisburg Bancorp 19.95 19.95 0.63 5.05 0.53 6.08 FFHP NASDAQ SAIF
First Franklin Corporation 14.25 13.39 1.63 11.40 1.70 11.45 FFHS NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market Current Price in Relation To
Institution State (Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
($000) ($) ($M) (%) (%) (%) (x) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71
Flushing Financial Corp NY 325,832 17.500 46.15 83.37 83.37 14.17 16.83 15.09
First Federal Financial Corp KY 153,250 21.750 11.85 137.92 137.92 7.73 5.98 9.26
FFLC Bancorp, Inc. FL 1,378,589 22.750 122.59 107.26 110.06 8.89 11.38 15.07
First Family Financial Corp. FL 303,329 7.625 25.61 124.39 124.39 8.44 8.66 10.59
First Palm Beach Bancorp, Inc. FL 314,413 13.250 30.17 112.48 112.57 9.60 10.69 9.89
Florida First Bancorp, Inc. FL 102,705 18.875 11.55 87.38 87.38 11.25 8.14 10.26
Fidelity Financial Bankshares VA 947,270 25.250 75.10 157.13 165.25 7.93 12.63 12.95
First Independence Corp. KS 439,784 24.250 41.38 113.85 114.44 9.40 13.78 15.85
FirstFederal Financial Svcs OH 146,028 17.750 13.47 81.72 81.72 9.22 7.92 11.31
First Fed SB of Siouxland, MHC IA 140,383 18.750 19.48 96.55 96.55 13.87 11.72 12.18
FFW Corp. IN 337,749 18.250 39.92 99.08 99.08 11.72 12.33 NM
Wood Bancorp, Inc. OH 574,457 23.250 120.45 115.38 115.38 20.96 16.61 16.97
First Financial-W. Maryland MD 135,582 7.000 14.01 143.74 163.55 10.27 14.58 11.86
FFY Financial Corp. OH 243,450 12.750 23.89 90.88 91.40 10.28 12.26 18.75
First Georgia Holding, Inc. GA 1,523,949 23.625 195.43 151.15 153.41 12.82 12.57 11.81
Financial Bancorp, Inc. NY 78,644 20.500 16.85 121.95 121.95 21.43 18.98 20.10
First Indiana Corporation IN 272,821 18.500 25.16 105.29 105.29 9.22 38.54 NA
First Kent Financial Corp. OH 138,609 14.000 44.51 89.69 89.69 32.11 23.33 NA
First Keystone Financial PA 232,105 12.750 24.43 133.79 133.79 10.53 15.94 13.71
Frankfort First Bancorp, Inc. KY 927,108 20.750 82.43 125.83 151.35 8.89 9.61 10.17
FLAG Financial Corp. GA 275,676 12.250 53.20 74.38 74.38 19.30 21.88 NA
First Liberty Financial Corp. GA 501,551 15.750 38.91 119.41 123.14 7.87 10.36 9.32
First Mutual Bancorp, Inc. IL 514,662 20.250 33.56 113.83 113.83 6.52 8.88 NM
FMS Financial Corporation NJ 892,167 20.750 84.70 123.29 135.27 9.49 11.04 10.92
Farmers & Mechanics Bank CT 361,526 14.750 36.09 152.38 152.38 9.98 10.24 10.77
Family Bancorp MA 553,467 15.875 72.31 99.65 99.65 13.07 15.88 16.04
First Mutual Savings Bank WA 277,057 24.250 36.27 93.56 93.56 13.09 15.95 17.96
First Northern Capital Corp. WI 334,297 15.250 39.30 93.33 98.58 11.76 11.55 NA
Financial Security Corp. IL 231,649 20.750 17.95 118.78 118.78 7.75 15.26 13.22
Fed One Bancorp WV 1,904,253 12.750 93.46 86.38 86.50 4.91 15.94 85.00
First Financial Bancorp FL 116,966 6.375 4.44 78.90 78.90 3.79 39.84 10.81
First Republic Bancorp CA 287,465 18.125 22.47 98.67 99.75 7.81 13.73 14.50
First Savings Bank, FSB NM 90,216 17.750 25.01 105.22 105.22 27.72 31.70 NA
Fidelity Bancorp, Inc. PA 468,603 4.125 56.71 165.66 165.66 12.10 9.38 10.31
First Ashland Financial Corp. KY 354,206 19.750 80.99 115.09 115.09 22.86 27.43 24.69
Framingham Savings Bank MA 597,269 11.750 45.70 106.24 112.23 7.65 7.94 10.31
First Southeast Financial Corp. SC 945,012 15.000 97.59 108.77 126.05 10.33 11.72 12.00
First State Financial Services NJ 657,075 14.250 43.64 80.51 80.51 6.54 NM NA
First Savings Bank, MHC NJ 453,039 17.750 36.03 119.69 123.35 7.95 8.22 7.72
First Savings Bk of NJ, MHC NJ 104,089 11.500 3.78 63.75 66.98 3.63 6.25 NM
First Home Savings Bank, FSB NJ 161,785 15.000 29.76 88.92 88.92 18.39 9.62 NA
<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 (%) (%) (%) (%) (%) (%) (%) Ticker Exchange
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 7.93 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 0.00 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 2.01 12.23 12.06 0.91 8.84 0.88 9.07
Median 2.04 9.97 9.58 0.87 7.80 0.87 7.73
Flushing Financial Corp 1.829 16.99 16.99 0.86 5.01 0.97 5.67 FFIC NASDAQ
First Federal Financial Corp 0.736 5.61 5.61 1.29 23.78 0.82 16.16 FFKY NASDAQ
FFLC Bancorp, Inc. 1.758 8.29 8.10 0.81 9.46 0.64 7.44 FFLC NASDAQ
First Family Financial Corp. 3.148 6.78 6.78 0.94 14.24 0.83 12.70 FFML NASDAQ
First Palm Beach Bancorp, Inc. 1.208 8.54 8.53 0.92 10.76 1.00 11.99 FFPB NASDAQ
Florida First Bancorp, Inc. 2.119 12.87 12.87 1.43 10.85 1.18 8.73 FFPC NASDAQ
Fidelity Financial Bankshares 1.901 8.08 7.83 1.04 12.81 1.07 12.90 FFRV NASDAQ
First Independence Corp. 2.969 8.26 8.22 0.68 8.27 0.60 7.46 FFSL NASDAQ
FirstFederal Financial Svcs 2.704 11.28 11.28 1.18 10.51 0.87 7.67 FFSW NASDAQ
First Fed SB of Siouxland, MHC 1.920 14.37 14.37 1.16 8.12 1.18 8.22 FFSX NASDAQ
FFW Corp. 2.630 11.83 11.83 0.97 8.19 (0.33) (2.80) FFWC NASDAQ
Wood Bancorp, Inc. 2.581 18.17 18.17 1.24 6.71 1.27 6.74 FFWD NASDAQ
First Financial-W. Maryland 0.000 8.30 7.36 0.79 9.24 0.89 11.09 FFWM NASDAQ
FFY Financial Corp. 2.353 11.31 11.25 0.84 7.08 0.61 4.70 FFYF NASDAQ
First Georgia Holding, Inc. 2.370 8.48 8.37 1.07 12.60 1.18 14.03 FGHC NASDAQ
Financial Bancorp, Inc. 3.317 17.58 17.58 1.10 6.26 1.01 5.90 FIBC NASDAQ
First Indiana Corporation 0.000 8.76 8.76 0.22 2.49 0.42 4.98 FISB NASDAQ
First Kent Financial Corp. 2.571 35.80 35.80 1.35 3.74 0.99 4.20 FKFC NASDAQ
First Keystone Financial 2.353 8.92 8.92 0.76 8.11 0.87 9.78 FKFS NASDAQ
Frankfort First Bancorp, Inc. 2.506 7.88 6.77 1.03 13.18 1.02 13.11 FKKY NASDAQ
FLAG Financial Corp. 2.286 25.95 25.95 0.90 3.42 0.93 4.50 FLAG NASDAQ
First Liberty Financial Corp. 1.270 6.59 6.40 0.79 12.18 0.89 13.95 FLFC NASDAQ
First Mutual Bancorp, Inc. 0.000 5.73 5.73 0.75 13.12 (0.06) (1.09) FMBD NASDAQ
FMS Financial Corporation 1.928 7.70 7.07 0.90 11.85 0.95 12.91 FMCO NASDAQ
Farmers & Mechanics Bank 1.356 6.55 6.55 1.02 15.34 1.03 15.40 FMCT NASDAQ
Family Bancorp 3.780 13.11 13.11 0.84 6.47 0.83 6.43 FMLY NASDAQ
First Mutual Savings Bank 0.000 13.99 13.99 0.86 6.50 0.75 5.68 FMSB NASDAQ
First Northern Capital Corp. 3.541 12.59 12.00 1.07 8.46 1.02 7.73 FNGB NASDAQ
Financial Security Corp. 2.892 6.53 6.53 0.54 8.28 0.64 9.93 FNSC NASDAQ
Fed One Bancorp 0.000 5.69 5.68 0.35 5.93 0.07 1.08 FOBC NASDAQ
First Financial Bancorp 0.000 4.80 4.80 0.15 3.07 0.34 7.76 FPRY NASDAQ
First Republic Bancorp 1.766 7.91 7.83 0.58 7.36 0.57 7.31 FRC NYSE
First Savings Bank, FSB 0.000 26.34 26.34 0.83 3.13 0.86 3.69 FSBC NASDAQ
Fidelity Bancorp, Inc. 2.424 7.31 7.31 1.30 17.42 1.23 16.85 FSBI NASDAQ
First Ashland Financial Corp. 2.430 19.87 19.87 0.82 4.16 0.92 4.67 FSBS NASDAQ
Framingham Savings Bank 1.872 7.20 6.84 0.98 14.23 0.74 11.15 FSBX NASDAQ
First Southeast Financial Corp. 3.333 9.49 8.30 0.92 9.72 0.91 10.02 FSFC NASDAQ
First State Financial Services 3.509 8.13 8.13 (0.70) (7.88) 0.04 0.47 FSFI NASDAQ
First Savings Bank, MHC 2.704 6.64 6.46 1.00 15.20 1.11 17.52 FSLA NASDAQ
First Savings Bk of NJ, MHC 0.000 5.69 5.43 0.59 10.52 (0.09) (1.55) FSNJ NASDAQ
First Home Savings Bank, FSB 3.000 20.69 20.69 1.80 8.78 1.55 11.42 FSPG NASDAQ
<CAPTION>
Deposits
Insurance
Agency
Institution (BIF/SAIF)
<S> <C>
Maximum
Minimum
Average
Median
Flushing Financial Corp BIF
First Federal Financial Corp SAIF
FFLC Bancorp, Inc. SAIF
First Family Financial Corp. SAIF
First Palm Beach Bancorp, Inc. SAIF
Florida First Bancorp, Inc. SAIF
Fidelity Financial Bankshares SAIF
First Independence Corp. SAIF
FirstFederal Financial Svcs SAIF
First Fed SB of Siouxland, MHC SAIF
FFW Corp. SAIF
Wood Bancorp, Inc. SAIF
First Financial-W. Maryland SAIF
FFY Financial Corp. SAIF
First Georgia Holding, Inc. SAIF
Financial Bancorp, Inc. SAIF
First Indiana Corporation SAIF
First Kent Financial Corp. SAIF
First Keystone Financial SAIF
Frankfort First Bancorp, Inc. SAIF
FLAG Financial Corp. SAIF
First Liberty Financial Corp. SAIF
First Mutual Bancorp, Inc. SAIF
FMS Financial Corporation SAIF
Farmers & Mechanics Bank BIF
Family Bancorp BIF
First Mutual Savings Bank BIF
First Northern Capital Corp. SAIF
Financial Security Corp. SAIF
Fed One Bancorp SAIF
First Financial Bancorp SAIF
First Republic Bancorp BIF
First Savings Bank, FSB SAIF
Fidelity Bancorp, Inc. SAIF
First Ashland Financial Corp. SAIF
Framingham Savings Bank BIF
First Southeast Financial Corp. SAIF
First State Financial Services SAIF
First Savings Bank, MHC SAIF
First Savings Bk of NJ, MHC SAIF
First Home Savings Bank, FSB SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market Current Price in Relation To
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71
First FS&LA of San Bernardino CA 1,402,477 21.500 141.14 142.67 151.30 10.06 10.14 12.50
Texarkana First Financial Corp. AR 88,470 13.375 21.05 95.40 95.40 23.79 14.54 NA
First Federal Capital Corp. WI 594,917 13.625 137.13 89.34 89.34 23.05 NA NA
Fort Thomas Financial Corp. KY 388,058 21.500 65.60 173.67 173.95 16.90 10.97 11.56
First SB of Washington Bancorp WA 240,468 10.125 33.13 113.76 113.76 13.78 28.13 NA
Glacier Bancorp, Inc. MT 35,118,156 52.125 3,068.67 134.69 143.40 8.74 11.43 13.03
Greater Delaware Valley SB,MHC PA 278,609 21.500 23.37 89.17 91.57 8.39 16.80 15.36
Golden West Financial CA 186,357 12.000 37.50 142.52 142.52 20.12 60.00 NA
Glenway Financial Corp. OH 81,073 20.625 10.80 111.13 111.13 13.32 13.94 15.17
Guaranty Federal SB, MHC MO 35,903 19.000 4.70 80.20 80.20 13.08 14.84 16.81
GFS Bancorp, Inc. IA 14,640,290 17.500 759.50 119.54 130.69 4.87 NM 26.52
Glendale Co-Operative Bank MA 14,670,463 28.500 1,290.99 83.21 146.53 8.80 16.96 12.45
Glendale Federal Bank, FSB CA 568,227 25.250 38.21 107.49 107.81 6.72 8.31 9.42
GreenPoint Financial Corp. NY 2,582,977 11.000 146.18 104.27 104.27 5.66 14.47 13.75
Grove Bank MA 658,834 26.500 117.51 186.49 189.83 18.60 12.27 12.10
Greater New York Savings Bank NY 96,577 8.250 7.58 119.91 119.91 7.85 12.89 11.00
Great Southern Bancorp, Inc. MO 2,486,256 25.310 377.70 131.55 133.70 15.19 17.10 17.58
Guaranty Financial Corp. VA 117,706 14.125 27.01 78.00 78.00 22.95 29.43 NA
Great Financial Corporation KY 66,821 13.560 12.87 79.48 79.48 19.25 22.60 NA
Great American Bancorp IL 73,409 14.500 17.39 90.63 90.63 23.70 16.48 NA
GFSB Bancorp, Inc. NM 44,586,764 22.625 3,107.57 122.83 140.88 6.97 8.57 13.23
Gateway Bancorp, Inc. KY 313,681 15.000 21.64 82.15 82.15 6.90 12.50 14.42
Great Western Financial CA 908,248 27.000 132.85 165.44 165.44 14.60 12.27 12.86
Hallmark Capital Corp. WI 273,008 18.250 23.50 123.48 123.48 8.58 11.41 10.43
Harbor Federal Savings Bk, MHC FL 1,255,864 18.000 201.79 133.23 142.63 16.07 26.47 21.43
Harleysville Savings Bank PA 1,472,816 22.750 97.54 104.17 104.79 6.97 9.81 12.17
Harris Savings Bank, MHC PA 42,954 16.375 5.27 79.37 79.37 12.28 14.62 NA
Haven Bancorp, Inc. NY 314,896 14.500 44.87 89.56 89.56 15.57 18.13 NA
Home Building Bancorp IN 459,961 16.250 37.31 109.43 109.43 8.11 40.63 NM
Home Bancorp IN 748,655 9.500 62.82 70.68 70.74 8.39 26.39 NA
Highland Federal Bank FSB CA 108,172 13.750 30.00 89.81 89.81 27.74 NA NA
HF Bancorp, Inc. CA 558,819 14.500 44.29 87.24 87.51 7.91 9.29 12.83
Harrodsburg First Fin Bancorp KY 214,615 11.125 28.02 152.40 154.73 13.06 23.18 11.13
HF Financial Corp. SD 926,259 14.250 244.99 100.64 100.64 26.45 NA NA
Home Federal Corp. MD 82,651 11.625 12.30 77.50 77.50 14.88 18.16 NA
HFNC Financial Corp. NC 718,390 17.750 65.07 120.67 121.33 9.06 23.36 27.73
Hardin Bancorp, Inc. MO 70,314 12.750 11.41 87.03 87.03 16.23 21.25 19.03
Home Federal Financial Corp. CA 175,409 14.750 19.10 107.19 107.19 10.89 9.97 10.03
Harvest Home Financial Corp. OH 338,021 17.250 19.43 95.20 95.20 5.75 15.97 16.75
Hingham Instit. for Savings MA 537,949 14.875 77.06 86.03 86.03 14.66 12.40 13.65
HomeCorp, Inc. IL 684,230 21.000 56.31 106.01 109.49 8.23 14.19 13.82
<CAPTION>
Current Tangible Qtr Qtr LTM LTM
Dividend Equity/ Equity/ Return on Return on Return on Return on
Institution Yield Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity
(%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum 7.93 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 0.00 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 2.01 12.23 12.06 0.91 8.84 0.88 9.07
Median 2.04 9.97 9.58 0.87 7.80 0.87 7.73
First FS&LA of San Bernardino 2.605 7.05 6.68 1.02 14.77 0.87 12.86
Texarkana First Financial Corp. 1.869 24.93 24.93 1.49 5.95 1.32 6.61
First Federal Capital Corp. 1.468 25.79 25.79 1.32 7.05 NA NA
Fort Thomas Financial Corp. 2.977 9.73 9.72 1.58 16.31 1.58 16.10
First SB of Washington Bancorp 3.556 12.11 12.11 0.51 4.12 0.48 4.10
Glacier Bancorp, Inc. 0.729 6.49 6.12 0.76 11.93 0.69 10.98
Greater Delaware Valley SB,MHC 3.163 9.41 9.18 0.50 5.23 0.56 5.86
Golden West Financial 0.000 14.11 14.11 0.36 2.49 0.71 5.22
Glenway Financial Corp. 1.455 11.98 11.98 0.97 7.92 1.01 7.56
Guaranty Federal SB, MHC 0.000 16.31 16.31 0.87 5.47 0.78 4.98
GFS Bancorp, Inc. 0.000 6.31 5.91 (0.28) (4.54) 0.36 6.02
Glendale Co-Operative Bank 2.807 10.57 6.29 0.52 5.00 1.17 6.96
Glendale Federal Bank, FSB 2.851 6.26 6.24 0.85 13.71 0.77 12.82
GreenPoint Financial Corp. 0.000 7.59 7.59 0.73 9.64 0.74 10.18
Grove Bank 2.642 9.97 9.82 1.54 15.28 1.64 16.20
Greater New York Savings Bank 0.000 6.55 6.55 0.60 9.09 0.57 9.97
Great Southern Bancorp, Inc. 1.580 11.55 11.38 0.92 7.80 1.00 7.78
Guaranty Financial Corp. 7.929 29.42 29.42 0.81 2.75 0.68 2.80
Great Financial Corporation 2.950 24.23 24.23 0.89 3.37 1.40 5.85
Great American Bancorp 2.759 25.17 25.17 1.43 5.44 1.14 5.85
GFSB Bancorp, Inc. 4.066 6.33 5.65 0.88 14.57 0.59 10.03
Gateway Bancorp, Inc. 0.000 8.40 8.40 0.55 6.46 0.56 5.74
Great Western Financial 4.444 8.82 8.82 1.20 13.79 1.18 13.69
Hallmark Capital Corp. 2.192 6.95 6.95 0.78 11.27 0.87 12.74
Harbor Federal Savings Bk, MHC 3.222 12.06 11.36 0.60 4.99 0.81 6.34
Harleysville Savings Bank 1.758 6.69 6.65 0.73 11.20 0.63 9.27
Harris Savings Bank, MHC 1.832 14.35 14.35 0.78 5.42 1.05 7.81
Haven Bancorp, Inc. 0.000 17.39 17.39 0.80 4.62 0.85 5.23
Home Building Bancorp 0.000 7.41 7.41 0.07 1.30 (0.21) (4.47)
Home Bancorp 0.000 11.87 11.86 0.31 2.48 NA NA
Highland Federal Bank FSB 2.909 28.46 28.46 1.41 4.99 NA NA
HF Bancorp, Inc. 2.276 9.07 9.04 0.85 9.53 0.65 7.27
Harrodsburg First Fin Bancorp 1.438 8.57 8.44 0.58 6.78 1.20 15.02
HF Financial Corp. 0.000 26.29 26.29 0.55 2.59 NA NA
Home Federal Corp. 3.441 19.20 19.20 0.77 3.98 0.55 4.35
HFNC Financial Corp. 1.803 7.50 7.47 0.39 5.27 0.33 4.53
Hardin Bancorp, Inc. 3.137 18.65 18.65 0.73 3.97 0.88 4.75
Home Federal Financial Corp. 2.169 10.16 10.16 1.12 10.90 1.17 11.11
Harvest Home Financial Corp. 0.000 6.04 6.04 0.37 6.22 0.36 6.12
Hingham Instit. for Savings 0.000 17.04 17.04 1.08 6.25 1.09 6.22
HomeCorp, Inc. 0.000 7.76 7.53 0.60 7.82 0.62 8.37
<CAPTION>
Deposit
Insurance
Agency
Institution Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C>
Maximum
Minimum
Average
Median
First FS&LA of San Bernardino FSSB NASDAQ SAIF
Texarkana First Financial Corp. FTF AMSE SAIF
First Federal Capital Corp. FTFC NASDAQ SAIF
Fort Thomas Financial Corp. FTSB NASDAQ SAIF
First SB of Washington Bancorp FWWB NASDAQ SAIF
Glacier Bancorp, Inc. GBCI NASDAQ SAIF
Greater Delaware Valley SB,MHC GDVS NASDAQ SAIF
Golden West Financial GDW NYSE SAIF
Glenway Financial Corp. GFCO NASDAQ SAIF
Guaranty Federal SB, MHC GFED NASDAQ SAIF
GFS Bancorp, Inc. GFSB NASDAQ SAIF
Glendale Co-Operative Bank GLBK NASDAQ BIF
Glendale Federal Bank, FSB GLN NYSE SAIF
GreenPoint Financial Corp. GNPT NASDAQ BIF
Grove Bank GROV NASDAQ BIF
Greater New York Savings Bank GRTR NASDAQ BIF
Great Southern Bancorp, Inc. GSBC NASDAQ SAIF
Guaranty Financial Corp. GSLC NASDAQ SAIF
Great Financial Corporation GTFN NASDAQ SAIF
Great American Bancorp GTPS NASDAQ SAIF
GFSB Bancorp, Inc. GUPB NASDAQ SAIF
Gateway Bancorp, Inc. GWBC NASDAQ SAIF
Great Western Financial GWF NYSE SAIF
Hallmark Capital Corp. HALL NASDAQ SAIF
Harbor Federal Savings Bk, MHC HARB NASDAQ SAIF
Harleysville Savings Bank HARL NASDAQ SAIF
Harris Savings Bank, MHC HARS NASDAQ SAIF
Haven Bancorp, Inc. HAVN NASDAQ SAIF
Home Building Bancorp HBBI NASDAQ SAIF
Home Bancorp HBFW NASDAQ SAIF
Highland Federal Bank FSB HBNK NASDAQ SAIF
HF Bancorp, Inc. HEMT NASDAQ SAIF
Harrodsburg First Fin Bancorp HFFB NASDAQ SAIF
HF Financial Corp. HFFC NASDAQ SAIF
Home Federal Corp. HFMD NASDAQ SAIF
HFNC Financial Corp. HFNC NASDAQ SAIF
Hardin Bancorp, Inc. HFSA NASDAQ SAIF
Home Federal Financial Corp. HFSF NASDAQ SAIF
Harvest Home Financial Corp. HHFC NASDAQ SAIF
Hingham Instit. for Savings HIFS NASDAQ BIF
HomeCorp, Inc. HMCI NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current Current
Assets Stock Market Current Price in Relation To Dividend
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS Yield
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107,57 236.17 247.70 32.11 150.00 102.17 7.93
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05 0.00
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59 2.01
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71 2.04
HMN Financial, Inc. MN 1,226,223 13.875 343.40 102.47 102.47 27.85 15.77 15.77 5.766
Hinsdale Financial Corp. IL 595,016 24.500 54.39 111.62 116.28 9.14 7.38 8.17 2.041
Home Financial Corp. FL 167,272 13.500 24.87 135.27 135.27 14.86 7.85 9.00 4.444
Home Federal Bancorp IN 154,218 13.250 24.62 83.91 83.91 15.96 36.81 21.72 3.019
Home Port Bancorp, Inc. MA 480,475 12.000 78.86 101.35 101.35 16.40 11.11 11.21 2.667
Harbor Federal Bancorp, Inc. MD 346,865 14.750 22.95 99.06 99.06 6.52 10.54 8.38 1.898
Horizon Financial Corp. WA 753,577 5.000 13.00 49.60 49.95 1.72 9.62 NM 0.000
Hibernia Savings Bank MA 354,505 17.000 32.01 114.09 114.79 9.03 11.49 16.04 3.176
Hawthorne Financial Corp. CA 73,105 15.750 7.06 83.78 83.78 10.16 11.93 15.00 2.032
Haverfield Corporation OH 737,828 14.375 165.68 107.04 107.04 22.45 22.46 18.20 1.517
Horizon Financial Svcs Corp. IA 263,740 7.750 9.90 57.97 67.45 3.75 8.81 6.98 2.839
IBS Financial Corp NJ 720,980 18.500 87.34 123.50 134.94 12.11 11.56 12.17 3.892
Independence Federal Savings DC 322,994 15.000 83.32 102.81 102.81 25.80 15.00 NA 2.000
Indiana Federal Corporation IN 90,614 15.000 13.83 97.85 97.85 15.26 25.00 18.99 2.333
Industrial Bancorp OH 130,586 8.750 10.26 126.81 126.81 7.86 4.86 7.23 2.286
Indiana Community Bank, SB IN 437,803 14.500 33.50 125.00 125.00 7.65 9.80 9.06 2.207
Ipswich Savings Bank MA 589,007 16.060 109.66 93.16 93.16 18.62 14.34 NA 1.993
Iroquois Bancorp NY 1,281,943 21.375 137.45 149.89 152.35 10.72 10.28 11.25 2.246
ISB Financial Corporation LA 265,870 22.000 48.30 138.71 138.71 18.17 23.91 17.05 1.364
InterWest Bancorp, Inc. WA 36,431 12.500 9.51 88.78 88.78 26.09 NA NA 4.000
Jefferson Bancorp, Inc. LA 1,176,629 29.000 121.03 137.77 169.89 10.29 15.43 19.46 1.103
Joachim Bancorp, Inc. MO 1,545,195 33.875 355.85 104.62 104.62 23.03 15.68 17.02 3.542
Jefferson Savings Bancorp MO 138,766 13.250 16.56 98.95 98.95 11.94 30.11 NA 3.019
JSB Financial, Inc. NY 198,081 9.500 25.24 NA NA NA NA NA 4.455
Jacksonville Savings Bank, MHC IL 594,269 13.250 149.12 89.35 89.35 25.09 NA NA 1.962
Jacksonville Savings & LA, MHC TX 355,103 20.500 29.80 81.74 88.02 8.39 15.07 17.37 1.951
Kentucky Enterprise Bancorp KY 88,274 18.000 12.30 88.71 88.85 13.93 16.07 12.77 3.333
Klamath First Bancorp OR 125,233 19.375 7.24 85.20 93.10 5.78 4.99 8.18 1.032
Kankakee Bancorp, Inc. IL 74,186 12.000 16.66 84.51 84.51 22.46 17.65 NA 4.167
KS Bancorp, Inc. NC 198,535 14.500 29.77 86.16 86.16 14.99 17.26 16.86 2.759
KSB Bancorp, Inc. ME 192,654 16.000 24.12 119.58 119.58 12.52 9.76 9.76 2.000
Kentucky First Bancorp, Inc KY 680,537 24.500 62.52 96.69 96.95 9.19 19.76 19.14 2.449
Landmark Bancshares, Inc. KS 143,572 14.625 24.39 94.78 94.78 16.99 17.41 17.41 2.735
Laurel Capital Group, Inc. PA 310,354 10.250 31.18 NA NA NA NA NA 0.000
Liberty Bancorp, Inc. IL 3,098,577 44.750 442.76 179.36 179.36 14.29 11.30 12.16 1.609
L & B Financial, Inc. TX 260,622 14.000 48.27 112.09 112.09 18.52 17.50 17.72 4.571
Little Falls Bancorp, Inc. NJ 233,737 19.000 64.39 96.94 96.94 27.54 43.18 36.54 0.000
Leader Financial Corp. TN 1,097,000 14.000 152.75 94.92 95.17 13.92 16.67 15.56 3.143
Leeds Federal Savings Bk, MHC MD 4,934,900 27.625 686.72 132.37 132.37 14.30 14.69 15.35 1.448
LFS Bancorp Inc. KY 126,884 11.250 15.60 149.40 154.75 12.30 13.39 10.04 1.422
Life Bancorp, Inc. VA 74,647 13.000 17.19 84.03 84.03 23.03 14.13 NA 3.077
<CAPTION>
Tangible Qtr Qtr LTM LTM Deposit
Equity/ Equity/ Return on Return on Return on Return on Insurance
Assets Tang Assets Avg Assets Avg Equity Avg Asset Avg Equity Agency
Institution (%) (%) (%) (%) (%) (%) Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 35.86 35.80 6.56 95.88 5.78 229.68
Minimum 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 12.23 12.06 0.91 8.84 0.88 9.07
Median 9.97 9.58 0.87 7.80 0.87 7.73
HMN Financial, Inc. 25.78 25.78 1.67 6.50 1.72 6.72 HMNF NASDAQ SAIF
Hinsdale Financial Corp. 8.19 7.89 1.29 15.93 1.17 15.06 HNFC NASDAQ SAIF
Home Financial Corp. 10.99 10.99 1.88 15.85 1.67 14.34 HOFL NASDAQ SAIF
Home Federal Bancorp 19.03 19.03 0.44 2.18 0.82 3.77 HOMF NASDAQ SAIF
Home Port Bancorp, Inc. 16.18 16.18 1.47 9.14 1.51 9.40 HPBC NASDAQ BIF
Harbor Federal Bancorp, Inc. 6.58 6.58 0.67 9.93 0.86 12.76 HRBF NASDAQ SAIF
Horizon Financial Corp. 5.17 5.15 0.28 6.60 (1.90) (35.64) HRZB NASDAQ BIF
Hibernia Savings Bank 7.91 7.87 0.79 9.86 0.58 7.13 HSBK NASDAQ BIF
Hawthorne Financial Corp. 12.12 12.12 0.82 6.73 0.71 5.55 HTHR NASDAQ SAIF
Haverfield Corporation 20.97 20.97 0.95 4.50 1.22 5.57 HVFD NASDAQ SAIF
Horizon Financial Svcs Corp. 6.48 5.62 0.43 6.66 0.54 8.99 HZFS NASDAQ SAIF
IBS Financial Corp 9.81 9.06 1.03 10.64 1.02 10.83 IBSF NASDAQ SAIF
Independence Federal Savings 25.09 25.09 1.62 6.36 1.42 8.21 IFSB NASDAQ SAIF
Indiana Federal Corporation 15.60 15.60 0.58 3.78 0.77 4.97 IFSL NASDAQ SAIF
Industrial Bancorp 6.20 6.20 1.74 28.65 1.27 20.77 INBI NASDAQ SAIF
Indiana Community Bank, SB 7.27 7.27 0.89 12.57 0.97 14.06 INCB NASDAQ SAIF
Ipswich Savings Bank 19.99 19.99 1.31 6.46 NA NA IPSW NASDAQ BIF
Iroquois Bancorp 7.15 7.05 1.07 14.92 1.05 14.08 IROQ NASDAQ BIF
ISB Financial Corporation 13.09 13.09 0.74 5.75 1.01 8.35 ISBF NASDAQ SAIF
InterWest Bancorp, Inc. 29.39 29.39 0.55 2.47 0.68 4.25 IWBK NASDAQ SAIF
Jefferson Bancorp, Inc. 6.66 5.47 0.62 9.28 0.61 7.87 JEBC NASDAQ SAIF
Joachim Bancorp, Inc. 22.01 22.01 1.54 6.97 1.44 6.67 JOAC NASDAQ SAIF
Jefferson Savings Bancorp 12.06 12.06 0.44 3.61 0.41 3.83 JSBA NASDAQ SAIF
JSB Financial, Inc. 10.47 10.47 0.81 7.91 0.74 7.20 JSBF NASDAQ BIF
Jacksonville Savings Bank, MHC 28.08 28.08 1.40 5.36 NA NA JXSB NASDAQ SAIF
Jacksonville Savings & LA, MHC 10.26 9.60 0.61 5.69 0.58 5.10 JXVL NASDAQ SAIF
Kentucky Enterprise Bancorp 15.71 15.69 0.89 5.32 1.20 7.12 KEBI NASDAQ SAIF
Klamath First Bancorp 6.79 6.24 1.08 16.36 0.67 10.33 KFBI NASDAQ SAIF
Kankakee Bancorp, Inc. 26.58 26.58 1.17 4.34 0.70 3.97 KNK AMSE SAIF
KS Bancorp, Inc. 17.40 17.40 0.84 4.98 0.88 5.04 KSAV NASDAQ SAIF
KSB Bancorp, Inc. 10.47 10.47 1.35 12.97 1.35 13.39 KSBK NASDAQ BIF
Kentucky First Bancorp, Inc 9.50 9.48 0.51 5.23 0.59 5.46 KYF AMSE SAIF
Landmark Bancshares, Inc. 17.92 17.92 1.02 5.63 1.09 5.72 LARK NASDAQ SAIF
Laurel Capital Group, Inc. 5.23 4.12 NA NA 0.18 2.94 LARL NASDAQ SAIF
Liberty Bancorp, Inc. 7.97 7.97 1.36 17.28 1.38 17.01 LBCI NASDAQ SAIF
L & B Financial, Inc. 16.53 16.53 1.04 6.36 1.03 6.37 LBFI NASDAQ SAIF
Little Falls Bancorp, Inc. 28.42 28.42 0.69 2.43 0.77 2.75 LFBI NASDAQ SAIF
Leader Financial Corp. 14.67 14.64 0.81 5.49 0.87 5.91 LFCT NASDAQ SAIF
Leeds Federal Savings Bk, MHC 10.81 10.81 0.95 8.85 0.93 8.60 LFED NASDAQ SAIF
LFS Bancorp Inc. 8.64 8.37 1.12 12.44 1.53 17.40 LFSB NASDAQ SAIF
Life Bancorp, Inc. 27.40 27.40 1.65 6.00 1.35 6.33 LIFB NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market
(Most Rec QTR) Price Value Book Value
Institution State ($000) ($) ($M) (%)
<S> <C> <C> <C> <C> <C>
Maximum 50,529.586 58.50 3,107.57 236,17
Minimum 35,903 1.25 2.76 12.09
Average 1,342.177 17.86 124.90 107.94
Median 348,731 16.25 39.78 103.84
Long Island Bancorp. Inc. NY 158,973 15.000 14.05 79.32
Horizon Bancorp TX 305,637 6.125 25.95 108.41
Logansport Financial Corp IN 440,940 19.500 46.82 95.59
LSB Financial Corp IN 1,925.621 26.000 136.36 127.39
Lawrence Savings Bank MA 176,330 20.125 40.31 94.09
Lakeview Financial NJ 854,542 33.000 90.47 99.61
MAF Bancorp Inc. IL 328,615 12.250 41.82 82.16
Marion Capital Holdings IN 197,259 22.OOO 30.82 108.75
MASSBANK Corp. MA 55,406 19.375 4.43 91.26
Monterey Bay Bancorp. Inc. CA 271,700 17.875 37.02 97.62
MBLA Financial Corp. MO 955,933 21.000 95.13 107.91
Mid-Coast Bancorp. Inc. ME 220,855 30.000 23.23 141.24
Mid Continent Bancshares Inc. KS 200,895 14.250 29.61 76.33
Medford Savings Bank MA 125,312 16.250 22.94 119.05
Meritrus Savings Bank LA 164,502 15.750 37.53 105.56
MFB Corp. IN 110,680 12.000 10.48 95.92
Marshalltown Financial Corp. IA 54,913 21.000 7.00 112.72
Milton Federal Financial Corp. OH 1,135.188 30.000 94.49 101.63
Mayflower Co-operative Bank MA 1,204.841 29.500 205.31 166.01
Mutual Bancompany MO 364,809 15.500 29.47 86.30
Maryland Federal Bancorp MD 109,385 7.250 12.20 116.56
Magna Bancorp Inc. MS 68,334 11.500 11.59 84.56
MidConn Bank CT 1,757.048 22.875 142.90 94.33
Mid-Iowa Financial Corp IA 70,748 12.250 10.13 96.15
Mississipi View Holding Co. MN 454,126 17.500 47.69 64.74
MLF Bancorp. Inc. PA 52,995 16.000 10.81 86.25
Morgan Financial Corp. CO 720,318 5.250 22.42 56.57
MSB Bancorp Inc. NY 749,218 13.250 49.26 95.88
MSB Financial Inc. MI 132,964 26.000 9.59 96.91
Mutual Savings Bank MI 177,164 24.000 19.59 118.46
Metropolitan Bancorp WA 656,855 30.750 70.53 148.05
Midwest Bancshares Inc. IA 396,841 15.500 42.63 120.62
Midwest Federal Financial WI 111,697 15.500 19.10 90.70
North American Savings Bank MO 137,569 12.750 26.29 89.66
Northbay Financial Corporation CA 160,656 17.750 25.68 138.02
North Bancshares Inc. IL 294,183 9.250 23.34 96.35
Northeast Indiana Bancorp IN 258,216 10.250 17.32 88.59
Newnan Savings Bank FSB GA 304,574 7.000 31.46 91.50
NHS Financial Inc. CA 1,140.624 40.625 249.45 115.74
New Hampshire Thrift Bochshrs NH 1,572.683 33.750 162.45 134.84
NewMil Bancorp. Inc. CT 56,552 13.500 12.02 83.49
<CAPTION>
Current
Current Price In Relation To Dividend Equity/
Tg Bk Value Assets QTR EPS LTM EPS Yield Assets
Institution (%) (%) (x) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
Maximum 247.70 32.11 150.00 102.17 7.93 35.80
Minimum 19.76 0.79 0.77 3.05 0.00 3.29
Average 110.29 12.57 16.58 15.59 2.01 12.23
Median 105.29 10.86 12.50 11.71 2.04 9.97
Long Island Bancorp. Inc. 79.32 9.71 12.50 NA 0.000 11.37
Horizon Bancorp 108.41 8.49 5.47 8.88 0.000 7.84
Logansport Financial Corp 122.72 10.62 7.74 7.30 1.282 11.11
LSB Financial Corp 127.39 7.30 10.66 9.89 1.231 5.73
Lawrence Savings Bank 94.09 22.84 16.23 17.06 3.578 24.28
Lakeview Financial 99.61 10.59 10.19 10.38 2.667 10.63
MAF Bancorp Inc. 83.39 13.40 31.04 NA 0.000 15.04
Marion Capital Holdings 108.75 15.63 26.19 22.92 1.818 14.37
MASSBANK Corp. 91.26 8.00 12.75 11.89 2.581 8.77
Monterey Bay Bancorp. Inc. 97.78 13.76 9.31 8.76 2.238 13.34
MBLA Financial Corp. 119.66 9.72 10.71 10.45 3.238 9.00
Mid-Coast Bancorp. Inc. 141.24 10.52 11.03 10.99 2.000 7.44
Mid Continent Bancshares Inc. 76.33 14.74 17.81 21.92 0.000 19.31
Medford Savings Bank 119.05 18.30 101.56 49.24 0.000 15.38
Meritrus Savings Bank 105.56 22.82 20.72 20.72 2.540 21.62
MFB Corp. 98.12 9.47 11.11 12.63 3.333 9.87
Marshalltown Financial Corp. 112.72 12.75 105.00 NA 0.000 11.31
Milton Federal Financial Corp. NA 8.17 8.62 10.60 2.133 8.04
Mayflower Co-operative Bank 178.36 17.04 9.97 9.77 2.034 10.26
Mutual Bancompany 104.17 8.08 12.11 26.72 3.871 9.36
Maryland Federal Bancorp 116.75 11.15 13.94 13.68 1.103 9.57
Magna Bancorp Inc. 84.56 16.96 9.91 NA 2.783 20.07
MidConn Bank 96.52 8.43 11.91 13.62 2.798 8.23
Mid-Iowa Financial Corp 96.15 14.32 17.01 16.12 1.959 14.90
Mississipi View Holding Co. 65.89 6.27 12.15 12.59 3.429 9.69
MLF Bancorp. Inc. 86.25 21.49 9.76 NA 2.500 24.91
Morgan Financial Corp. 56.57 3.11 6.25 NM 0.000 5.50
MSB Bancorp Inc. 106.08 6.57 9.20 11.32 0.000 6.86
MSB Financial Inc. 96.91 7.21 4.61 7.67 2.000 7.44
Mutual Savings Bank 124.35 11.06 8.22 11.88 1.250 9.34
Metropolitan Bancorp 154.52 10.74 9.98 8.40 2.033 7.25
Midwest Bancshares Inc. 120.81 10.74 21.53 28.70 2.839 8.91
Midwest Federal Financial 90.70 17.10 35.23 27.19 2.581 18.86
North American Savings Bank 89.66 20.23 17.71 NA 2.353 22.56
Northbay Financial Corporation 138.89 15.99 8.70 8.45 2.254 11.58
North Bancshares Inc. 96.56 7.93 NM 71.15 1.730 8.24
Northeast Indiana Bancorp 88.59 6.71 10.25 14.04 4.878 7.57
Newnan Savings Bank FSB 91.50 10.33 15.91 5.22 2.857 11.29
NHS Financial Inc. 115.74 21.87 11.28 13.45 0.788 20.26
New Hampshire Thrift Bochshrs 136.20 10.31 7.15 9.51 2.963 7.64
NewMil Bancorp. Inc. 83.49 20.45 17.76 NA 3.704 24.49
<CAPTION>
Tangible QTR QTR LTM LTM Deposit
Equity/ Return as Return as Return as Return as Insurance
Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity Agency
Institution (%) (%) (%) (%) (%)Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C> <C> <C>
Maximum 35.80 6.56 95.88 5.78 229.68
Minimum 2.66 (2.56) (37.98) (1.90) (35.64)
Average 12.06 0.91 1.84 0.88 9.07
Median 9.58 0.87 7.80 0.87 7.73
Long Island Bancorp. Inc. 11.37 0.75 6.49 0.87 7.30 LISB NASDAQ SAIF
Horizon Bancorp 7.84 1.63 20.92 1.03 13.59 LOAN NASDAQ SAIF
Logansport Financial Corp 8.87 1.38 12.26 1.55 13.34 LOGN NASDAQ SAIF
LSB Financial Corp 5.73 0.76 12.97 0.86 14.64 LSBI NASDAQ BIF
Lawrence Savings Bank 24.28 1.45 5.99 1.43 5.83 LSBX NASDAQ BIF
Lakeview Financial 10.63 1.06 10.34 1.04 10.65 LVSB NASDAQ SAIF
MAF Bancorp Inc. 14.85 0.23 1.54 0.23 1.82 MAFB NASDAQ SAIF
Marion Capital Holdings 14.37 0.61 4.22 0.72 4.95 MARN NASDAQ SAIF
MASSBANK Corp. 8.77 0.63 7.17 0.68 7.73 MASB NASDAQ BIF
Monterey Bay Bancorp. Inc. 13.32 1.41 10.45 1.68 11.50 MBBC NASDAQ SAIF
MBLA Financial Corp. 8.19 0.98 10.90 1.01 11.52 MBLF NASDAQ SAIF
Mid-Coast Bancorp. Inc. 7.44 1.00 13.61 0.99 13.87 MCBN NASDAQ SAIF
Mid Continent Bancshares Inc. 19.31 0.82 4.09 0.69 3.40 MCBS NASDAQ SAIF
Medford Savings Bank 15.38 0.17 1.12 0.39 2.55 MDBK NASDAQ BIF
Meritrus Savings Bank 21.62 1.14 5.05 1.19 4.88 MERI NASDAQ SAIF
MFB Corp. 9.67 0.91 8.87 0.85 7.90 MFBC NASDAQ SAIF
Marshalltown Financial Corp. 11.31 0.12 1.03 0.22 2.18 MFCX NASDAQ SAIF
Milton Federal Financial Corp. NA 1.01 12.40 0.83 10.33 MFFC NASDAQ SAIF
Mayflower Co-operative Bank 9.62 1.74 17.21 1.82 18.84 MFLR NASDAQ BIF
Mutual Bancompany 7.88 0.67 7.15 0.31 3.24 MFSB NASDAQ SAIF
Maryland Federal Bancorp 9.56 0.83 8.68 0.85 9.09 MFSL NASDAQ SAIF
Magna Bancorp Inc. 20.07 1.50 7.51 1.32 7.10 MGNL NASDAQ SAIF
MidConn Bank 8.06 0.77 8.30 0.69 7.43 MIDC NASDAQ BIF
Mid-Iowa Financial Corp 14.90 0.88 5.79 0.97 6.13 MIFC NASDAQ SAIF
Mississipi View Holding Co. 9.54 0.53 5.62 0.55 5.65 MIVI NASDAQ SAIF
MLF Bancorp. Inc. 24.91 2.08 8.29 2.02 8.79 MLFB NASDAQ SAIF
Morgan Financial Corp. 5.50 0.46 8.75 (0.24) (4.65)MORG NASDAQ SAIF
MSB Bancorp Inc. 6.24 0.74 10.59 0.62 9.38 MSBB NASDAQ BIF
MSB Financial Inc. 7.44 1.62 23.33 1.02 14.73 MSBF NASDAQ SAIF
Mutual Savings Bank 8.93 1.47 15.55 1.11 11.34 MSBK NASDAQ SAIF
Metropolitan Bancorp 6.97 1.08 14.46 1.36 18.76 MSEA NASDAQ SAIF
Midwest Bancshares Inc. 8.89 0.53 5.95 0.40 4.52 MWBI NASDAQ SAIF
Midwest Federal Financial 18.86 0.50 2.61 0.65 3.29 MWFD NASDAQ SAIF
North American Savings Bank 22.56 1.15 4.97 1.04 6.39 NASB NASDAQ SAIF
Northbay Financial Corporation 11.51 1.87 16.31 1.89 17.69 NBF AMSE SAIF
North Bancshares Inc. 8.22 (0.11) (1.36) 0.11 1.31 NBSI NASDAQ SAIF
Northeast Indiana Bancorp 7.57 0.68 8.84 0.51 6.59 NEIB NASDAQ SAIF
Newnan Savings Bank FSB 11.29 0.70 6.15 2.06 20.27 NFSL NASDAQ SAIF
NHS Financial Inc. 20.26 2.05 10.33 1.68 8.94 NHSL NASDAQ SAIF
New Hampshire Thrift Bochshrs 7.57 1.48 20.04 1.12 15.79 NHTB NASDAQ SAIF
NewMil Bancorp. Inc. 24.49 1.05 4.38 NA NA NMSB NASDAQ BIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current
Assets Stock Market Current Price in Relation To
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS
Institution State ($000) ($) ($M) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71
N.S. Bancorp, Inc. IL 675,332 13.750 76.97 101.25 106.84 11.40 14.32 13.75
North Side Savings Bank NY 515,267 19.750 46.70 107.10 107.10 9.06 12.99 9.68
NS&L Bancorp, Inc. MO 83,710 7.750 5.41 112.32 112.32 6.47 13.84 15.50
Norwich Financial Corp. CT 82,976 10.375 10.18 80.05 80.05 12.27 13.65 11.53
Norwalk Savings Society CT 1,632,305 23.000 269.57 141.89 143.75 16.51 16.91 15.65
Nutmeg Federal S&LA CT 2,695,288 23.750 283.46 179.38 179.38 10.47 9.28 22.62
Northwest Equity Corp. WI 370,305 16.250 89.63 112.69 112.77 24.21 23.90 23.55
Northwest Savings Bank, MHC PA 204,023 21.250 26.00 102.26 102.26 12.74 15.18 14.55
New York Bancorp Inc. NY 260,814 23.500 27.19 83.30 83.30 10.42 NM 102.17
Ottawa Financial Corp MI 646,024 13.000 66.32 128.84 135.84 10.27 15.48 16.25
OHSL Financial Corp. OH 371,365 20.000 67.86 114.29 115.34 18.27 13.51 12.12
OSB Financial Corp. WI 6,861,800 20.375 786.78 147.32 147.43 11.47 11.07 11.71
Palfed, Inc. SC 268,869 12.875 45.03 83.23 83.23 16.75 NA NA
Pamrapo Bancorp, Inc. NJ 324,440 8.875 29.98 104.78 113.49 6.36 8.53 10.20
People's Bank, MHC CT 410,164 20.375 39.78 88.97 96.06 9.70 11.32 11.92
Patriot Bank Corp. PA 77,318 17.500 14.99 92.94 92.94 19.38 19.02 NA
People's Bancshares, Inc. MA 259,109 7.750 22.89 104.31 104.31 8.83 5.38 6.46
People's Savings Financial Cp. CT 122,482 12.875 34.05 91.64 91.64 27.80 NA NA
Perry County Financial Corp. MO 189,469 11.500 47.15 80.31 80.31 24.89 NA NA
Pacific Crest Capital CA 377,905 14.750 31.43 76.58 77.67 8.53 26.34 30.10
Piedmont Bancorp, Inc. NC 382,310 13.250 25.88 103.68 104.08 6.77 NM NM
Peekskill Financial Corp. NY 279,626 18.750 44.37 104.52 104.52 15.84 10.65 11.36
Permanent Bancorp, Inc. IN 345,394 6.875 22.55 137.50 138.89 6.53 3.82 8.70
Primary Bank NH 935,037 14.750 74.89 77.35 97.94 8.43 9.97 12.83
Peoples Bancorp IN 357,813 14.500 23.35 109.77 109.77 6.52 12.08 11.98
Progress Financial Corporation PA 3,078,669 21.625 366.42 135.49 147.01 11.90 9.65 10.55
PennFed Financial Services,Inc NJ 825,448 5.250 65.79 92.76 92.76 7.97 1.40 4.13
Pocahontas FS&LA, MHC AR 194,311 17.375 15.46 103.18 107.12 7.96 9.24 10.47
Peoples Heritage Finl Group ME 374,180 17.000 34.30 95.72 95.72 9.17 19.32 23.94
Poughkeepsie Savings Bank, FSB NY 267,272 13.750 78.86 116.43 116.43 29.51 13.22 13.61
Pinnacle Bank AL 607,975 17.500 64.85 115.36 123.76 10.67 11.82 11.29
Perpetual Midwest Financial IA 743,214 27.750 72.93 106.20 106.20 9.81 10.20 11.10
Portsmouth Bank Shares NH 195,666 9.500 10.74 93.50 93.50 5.49 9.13 9.13
Prime Bancorp, Inc. PA 114,242 17.750 9.46 84.52 84.52 8.28 10.09 11.38
Progressive Bank, Inc. NY 177,984 15.125 31.67 141.75 141.75 17.79 22.24 24.01
Palm Springs Savings Bank CA 453,779 16.000 62.18 115.77 115.77 13.62 12.12 12.31
Potters Savings & Loan Co(The) OH 312,466 18.750 29.04 141.62 141.62 9.29 8.37 8.84
Pulaski Bank, Savings Bk, MHC MO 905,709 28.000 89.78 137.93 138.68 9.91 10.77 11.20
Pulse Bancorp NJ 659,371 12.125 47.17 88.05 96.54 7.33 11.66 12.90
PVF Capital Corp. OH 683,090 13.875 55.31 81.19 81.71 8.10 16.52 18.50
Parkvale Financial Corp. PA 161,231 14.375 25.63 81.44 81.44 15.89 10.57 NA
<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 (%) (%) (%) (%) (%) (%) (%) Ticker
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum 7.93 35.80 35.80 6.56 95.88 $ 78 229.68
Minimum 0.00 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 2.01 12.23 12.06 0.91 8.84 0.88 9.07
Median 2.04 9.97 9.58 0.87 7.80 0.87 7.73
N.S. Bancorp, Inc. 2.909 11.26 10.73 0.79 7.01 0.87 7.59 NSBI
North Side Savings Bank 0.000 8.46 8.46 0.71 8.31 0.99 11.65 NSBK
NS&L Bancorp, Inc. 0.000 6.30 6.30 0.65 10.86 0.61 10.34 NSLB
Norwich Financial Corp. 3.470 14.06 14.06 0.84 5.67 1.15 7.49 NSSB
Norwalk Savings Society 2.609 11.35 11.21 0.98 8.55 1.07 9.40 NSSY
Nutmeg Federal S&LA 3.368 5.83 5.83 1.17 20.03 0.49 7.90 NTMG
Northwest Equity Corp. 1.969 21.48 21.48 1.01 4.48 1.08 4.62 NWEQ
Northwest Savings Bank, MHC 3.576 12.48 12.48 0.88 7.03 0.97 7.62 NWSB
New York Bancorp Inc. 2.383 12.51 12.51 (1.03) (8.10) 0.11 0.83 NYB
Ottawa Financial Corp 0.000 7.97 7.59 0.68 8.59 0.64 8.54 OFCP
OHSL Financial Corp. 4.500 15.99 15.86 1.35 8.48 1.49 9.71 OHSL
OSB Financial Corp. 3.534 8.02 8.01 1.12 13.88 1.09 13.97 OSBF
Palfed, Inc. 0.621 20.13 20.13 0.33 4.32 0.51 5.39 PALM
Pamrapo Bancorp, Inc. 2.254 6.06 5.63 0.84 13.06 0.81 11.65 PBCI
People's Bank, MHC 4.319 10.90 10.18 0.87 7.92 0.84 7.84 PBCT
Patriot Bank Corp. 1.714 20.86 20.86 0.93 4.50 1.00 5.18 PBIX
People's Bancshares, Inc. 0.000 8.47 8.47 1.58 18.17 1.34 16.02 PBKB
People's Savings Financial Cp. 3.107 30.35 30.35 1.33 8.13 1.25 8.97 PBNB
Perry County Financial Corp 0.000 30.98 30.98 0.89 3.84 NA NA PCBC
Pacific Crest Capital 1.356 11.14 11.00 0.35 3.10 0.33 2.75 PCCI
Piedmont Bancorp, Inc. 0.000 6.53 6.51 (2.56) (37.98) (0.25) (3.61)PDB
Peekskill Financial Corp. 2.987 15.16 15.16 1.48 9.82 1.42 9.49 PEEK
Permanent Bancorp, Inc. 0.000 4.75 4.70 1.74 40.32 0.76 18.62 PERM
Primary Bank 0.000 10.03 8.10 0.83 8.15 0.71 6.33 PETE
Peoples Bancorp 5.241 5.94 5.94 0.57 9.57 0.57 9.53 PFDC
Progress Financial Corporation 2.960 8.79 8.15 1.26 14.41 1.17 13.67 PFNC
PennFed Financial Services, Inc 1.905 8.59 8.59 6.00 78.13 2.06 28.48 PFSB
Pocahontas FS&LA, MHC 4.144 7.71 7.45 0.87 11.32 0.77 10.29 PFSL
Peoples Heritage Finl Group 1.765 9.58 9.58 0.48 4.85 0.41 3.99 PHBK
Poughkeepsie Savings Bank, FSB 4.279 25.36 25.36 2.67 10.83 2.31 9.23 PKPS
Pinnacle Bank 3.886 9.25 8.68 0.94 10.04 1.00 11.27 PLE
Perpetual Midwest Financial 2.883 9.24 9.24 0.99 10.54 0.95 10.04 PMFI
Portsmouth Bank Shares 1.263 5.87 5.87 0.61 10.69 0.62 11.18 POBS
Prime Bancorp, Inc. 1.239 9.79 9.79 0.83 8.53 0.74 7.88 PSAB
Progressive Bank, Inc. 5.289 12.55 12.55 0.78 6.37 0.72 6.09 PSBK
Palm Springs Savings Bank 4.375 11.76 11.76 1.18 10.05 1.15 9.93 PSSB
Potters Savings & Loan Co(The) 0.000 6.56 6.56 1.19 18.34 1.14 18.41 PTRS
Pulaski Bank, Savings Bk, MHC 1.857 7.18 7.15 0.97 14.00 0.95 13.97 PULB
Pulse Bancorp 2.969 8.33 7.65 0.64 7.80 0.61 7.44 PULS
PVF Capital Corp. 0.000 9.97 9.91 0.50 4.92 0.46 4.39 PVFC
Parkvale Financial Corp. 0.000 19.52 19.52 1.45 7.26 1.45 8.09 PVSA
<CAPTION>
Deposit
Insurance
Agency
Institution Exchange (BIF/SAIF)
<S> <C> <C>
Maximum
Minimum
Average
Median
N.S. Bancorp, Inc. NASDAQ SAIF
North Side Savings Bank NASDAQ BIF
NS&L Bancorp, Inc. NASDAQ SAIF
Norwich Financial Corp. NASDAQ BIF
Norwalk Savings Society NASDAQ BIF
Nutmeg Federal S&LA NASDAQ SAIF
Northwest Equity Corp. NASDAQ SAIF
Northwest Savings Bank, MHC NASDAQ SAIF
New York Bancorp Inc. NYSE SAIF
Ottawa Financial Corp NASDAQ SAIF
OHSL Financial Corp. NASDAQ SAIF
OSB Financial Corp. NASDAQ SAIF
Palfed, Inc. NASDAQ SAIF
Pamrapo Bancorp, Inc. NASDAQ SAIF
People's Bank, MHC NASDAQ BIF
Patriot Bank Corp. NASDAQ SAIF
People's Bancshares, Inc. NASDAQ BIF
People's Savings Financial Cp. NASDAQ BIF
Perry County Financial Corp NASDAQ SAIF
Pacific Crest Capital NASDAQ BIF
Piedmont Bancorp, Inc. AMSE SAIF
Peekskill Financial Corp. NASDAQ SAIF
Permanent Bancorp, Inc. NASDAQ SAIF
Primary Bank NASDAQ BIF
Peoples Bancorp NASDAQ SAIF
Progress Financial Corporation NASDAQ SAIF
PennFed Financial Services, Inc NASDAQ SAIF
Pocahontas FS&LA, MHC NASDAQ SAIF
Peoples Heritage Finl Group NASDAQ BIF
Poughkeepsie Savings Bank, FSB NASDAQ SAIF
Pinnacle Bank AMSE SAIF
Perpetual Midwest Financial NASDAQ SAIF
Portsmouth Bank Shares NASDAQ BIF
Prime Bancorp, Inc. NASDAQ SAIF
Progressive Bank, Inc. NASDAQ BIF
Palm Springs Savings Bank NASDAQ SAIF
Potters Savings & Loan Co(The) NASDAQ SAIF
Pulaski Bank, Savings Bk, MHC NASDAQ SAIF
Pulse Bancorp NASDAQ SAIF
PVF Capital Corp. NASDAQ SAIF
Parkvale Financial Corp. NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current Current
Assets Stock Market Current Price in Relatio Dividend
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS Yield
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529,586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17 7.93
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05 0.00
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59 2.01
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71 2.04
PennFirst Bancorp, Inc. PA 1,240,882 43.000 262.73 124.35 124.35 21.81 11.81 12.61 1.860
Quaker City Bancorp, Inc. CA 354,810 21.000 31.34 118.91 122.02 8.83 11.67 12.88 2.857
QCF Bancorp, Inc. MN 4,111,153 23.375 315.89 114.47 118.41 7.68 11.03 11.08 2.053
Queens County Bancorp, Inc. NY 871,814 8.625 35.07 72.91 72.91 4.02 NM NM 0.000
Raritan Bancorp Inc. NJ 1,197,137 14.875 137.23 87.40 91.82 11.46 12.40 13.40 3.092
RCSB Financial Inc. NY 9,013,061 18.500 778.86 174.53 185.37 8.62 NM 18.69 3.351
RedFed Bancorp Inc. CA 2,904,623 25.250 239.38 110.36 110.36 8.24 9.42 11.48 2.218
Reliance Bancorp, Inc. NY 204,794 15.250 32.87 145.52 165.58 16.05 13.62 13.99 1.311
Roosevelt Financial Group MO 200,246 16.500 24.95 89.58 89.58 12.46 18.75 17.74 3.636
TR Financial Corp. NY 169,685 15.750 28.11 132.69 132.69 16.57 131.25 NA 2.540
Riverview Savings Bank, MHC WA 1,886,084 40.750 212.64 109.25 109.25 11.27 3.90 7.65 1.865
Suburban Bancorporation, Inc. OH 43,939 16.500 12.87 98.80 98.80 29.30 27.50 18.33 3.636
SB of the Finger Lakes, MHC NY 372,140 6.250 12.44 92.87 93.28 3.34 7.81 NA 0.000
Boston Bancorp (The) MA 3,301,444 58.500 566.41 98.67 98.67 17.16 17.21 20.60 1.026
S. Carolina Community Bancshrs SC 13,275,608 41.375 1,290.29 140.83 165.37 9.72 10.66 11.18 1.837
Suncoast Savings and Loan FL 365,307 20.250 30.01 93.32 108.70 8.22 12.05 12.50 3.111
Security Capital Corporation WI 166,529 12.310 18.40 75.85 75.85 11.05 15.39 NA 0.000
Standard Federal Bancorp MI 73,903 17.000 13.95 94.76 94.76 18.88 16.35 16.67 2.353
Security Bancorp MT 559,049 12.625 66.53 92.02 92.29 11.90 NA NA 0.000
SFS Bancorp, Inc. NY 363,480 16.750 21.44 81.35 81.91 5.90 13.09 12.50 1.910
Statefed Financial Corporation IA 458,294 12.750 44.36 109.63 112.83 9.68 8.85 8.85 3.137
Statewide Financial Corp. NJ 293,007 8.875 24.21 72.51 72.51 8.26 36.98 NA 0.000
SuburbFed Financial Corp. IL 332,121 20.500 47.34 99.42 99.42 14.25 14.64 15.30 1.951
Security First Corp. OH 45,401 14.500 7.78 80.82 80.82 17.13 40.28 48.33 2.207
SGV Bancorp, Inc. CA 1,070,978 17.190 88.90 110.19 110.19 8.30 3.01 NA 0.000
First Shenango Bancorp, Inc. PA 143,857 18.500 17.62 100.00 100.00 12.25 17.79 NA 2.162
Seven Hills Financial Corp. OH 159,470 14.000 24.12 90.85 90.85 15.13 19.44 21.21 3.571
SIS Bank MA 252,060 14.625 23.91 77.67 77.67 9.48 12.19 15.23 0.000
SJS Bancorp MI 76,005 13.000 11.01 77.61 77.61 14.48 54.17 NA 0.000
Southern Missouri Bancorp, Inc MO 257,908 18.125 67.86 100.97 100.97 26.31 18.88 19.49 3.310
Sho-Me Financial Corp. MO 506,436 1.250 20.81 77.16 77.16 4.11 15.63 20.83 0.000
Sobieski Bancorp, Inc. IN 4,116,679 24.125 452.34 117.74 118.14 10.99 12.83 12.97 1.658
First Savings Bancorp, Inc. NC 110,757 11.625 16.91 74.90 75.73 15.27 NA NA 3.011
Somerset Savings Bank MA 492,097 19.750 49.98 121.61 124.37 10.16 10.29 10.62 2.228
St. Paul Bancorp, Inc. IL 1,203,689 27.500 164.06 118.53 124.10 13.83 10.11 11.46 1.455
Southern Banc Company, Inc AL 2,081,228 14.750 254.36 92.48 92.53 12.48 14.75 15.05 2.169
Strongsville Savings Bank OH 1,506,496 13.750 74.40 112.80 140.45 4.94 13.75 13.75 0.000
St. Francis Capital Corp. WI 8,078,287 10.750 513.18 145.27 231.68 6.35 9.95 10.75 0.781
Standard Financial, Inc. IL 359,480 27.500 54.87 119.77 119.77 15.26 11.85 14.03 3.927
Sterling Financial Corp. WA 426,515 20.625 38.16 106.15 114.33 8.95 9.38 11.33 4.848
Sovereign Bancorp, Inc. PA 85,775 11.750 10.14 67.37 67.37 11.82 14.69 NA 4.255
<CAPTION>
Tangible Qtr Qtr LTM LTM Deposit
Equity/ Equity/ Return on Return on Return on Return on Insurance
Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity Agency
Institution (%) (%) (%) (%) (%) (%) Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 12.23 12.06 0.91 8.84 0.88 9.07
Median 9.97 9.58 0.87 7.80 0.87 7.73
PennFirst Bancorp, Inc. 17.54 17.54 1.79 9.98 1.72 9.70 PWBC NASDAQ SAIF
Quaker City Bancorp, Inc. 7.43 7.25 0.87 11.19 0.80 10.53 QCBC NASDAQ SAIF
QCF Bancorp, Inc. 9.03 8.81 1.00 10.45 1.05 10.73 QCFB NASDAQ SAIF
Queens County Bancorp, Inc. 5.51 5.51 (2.09) (36.86) (0.86) (15.05)QCSB NASDAQ BIF
Raritan Bancorp Inc. 13.12 12.57 0.91 6.85 1.00 6.52 RARB NASDAQ BIF
RCSB Financial Inc. 5.51 5.25 (0.10) (2.03) 0.49 9.93 RCSB NASDAQ BIF
RedFed Bancorp Inc. 6.87 6.87 0.88 12.99 0.76 10.65 REDF NASDAQ SAIF
Reliance Bancorp, Inc. 11.03 9.83 1.20 11.07 1.21 11.26 RELY NASDAQ SAIF
Roosevelt Financial Group 13.49 13.49 0.65 4.86 0.70 5.20 RFED NASDAQ SAIF
TR Financial Corp. 12.49 12.49 0.13 1.08 0.13 1.06 ROSE NASDAQ BIF
Riverview Savings Bank, MHC 10.32 10.32 2.81 29.78 1.38 18.16 RVSB NASDAQ SAIF
Suburban Bancorporation, Inc. 29.65 29.65 1.00 3.34 1.50 4.95 SBCN NASDAQ SAIF
SB of the Finger Lakes, MHC 6.89 6.87 0.72 11.34 0.34 6.15 SBFL NASDAQ SAIF
Boston Bancorp (The) 17.21 17.21 1.01 5.82 0.89 4.96 SBOS NASDAQ BIF
S. Carolina Community Bancshrs 6.90 5.94 0.93 13.98 0.93 13.93 SCCB NASDAQ SAIF
Suncoast Savings and Loan 8.81 7.66 0.71 8.32 0.69 8.17 SCSL NASDAQ SAIF
Security Capital Corporation 14.57 14.57 0.68 4.76 0.53 5.07 SECP NASDAQ SAIF
Standard Federal Bancorp 19.92 19.92 1.15 5.69 1.17 5.71 SFB NYSE SAIF
Security Bancorp 12.94 12.90 0.35 2.65 NA NA SFBM NASDAQ SAIF
SFS Bancorp, Inc. 7.25 7.21 0.49 6.67 0.54 7.36 SFED NASDAQ SAIF
Statefed Financial Corporation 8.83 8.60 1.29 14.87 1.33 15.39 SFFC NASDAQ SAIF
Statewide Financial Corp. 11.40 11.40 0.22 1.83 0.15 1.62 SFIN NASDAQ SAIF
SuburbFed Financial Corp. 14.34 14.34 0.97 6.84 0.96 6.74 SFSB NASDAQ SAIF
Security First Corp. 21.20 21.20 0.41 1.96 0.36 1.67 SFSL NASDAQ SAIF
SGV Bancorp, Inc. 7.61 7.61 2.90 41.48 1.16 17.25 SGVB NASDAQ SAIF
First Shenango Bancorp, Inc. 12.25 12.25 0.69 5.56 0.68 5.67 SHEN NASDAQ SAIF
Seven Hills Financial Corp. 16.66 16.66 0.78 4.51 0.75 4.20 SHFC NASDAQ SAIF
SIS Bank 12.29 12.29 0.83 6.59 0.78 5.46 SISB NASDAQ BIF
SJS Bancorp 18.66 18.66 0.27 1.44 0.50 2.91 SJSB NASDAQ SAIF
Southern Missouri Bancorp, Inc 26.06 26.06 1.53 5.84 1.47 5.69 SMBC NASDAQ SAIF
Sho-Me Financial Corp. 5.34 5.34 0.32 6.04 0.21 4.07 SMFC NASDAQ SAIF
Sobieski Bancorp, Inc. 9.33 9.30 0.93 9.73 0.90 9.86 SOBI NASDAQ SAIF
First Savings Bancorp, Inc. 20.38 20.20 0.44 2.96 NA NA SOPN NASDAQ SAIF
Somerset Savings Bank 8.35 8.18 1.00 11.98 1.03 12.07 SOSA NASDAQ BIF
St. Paul Bancorp, Inc. 11.48 11.03 1.36 11.77 1.22 11.04 SPBC NASDAQ SAIF
Southern Banc Company, Inc 13.50 13.49 0.83 5.98 0.88 5.97 SRN AMSE SAIF
Strongsville Savings Bank 6.10 5.27 0.49 8.20 0.49 8.67 SSBK NASDAQ SAIF
St. Francis Capital Corp. 5.29 3.82 0.80 14.98 0.78 14.95 STFR NASDAQ SAIF
Standard Financial, Inc. 12.75 12.75 1.38 10.67 1.26 9.26 STND NASDAQ SAIF
Sterling Financial Corp. 8.38 7.83 0.99 12.25 0.83 10.21 STSA NASDAQ SAIF
Sovereign Bancorp, Inc. 17.55 17.55 0.78 4.45 0.74 4.52 SVRN NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-1
ALL PUBLIC THRIFTS
SELECTED MARKET DATA
AS OF MAY 17, 1996
<TABLE>
<CAPTION>
Total Current Current Current
Assets Stock Market Current Price in Relation To Dividend
(Most Rec QTR) Price Value Book Value Tg Bk Value Assets QTR EPS LTM EPS Yield
Institution State ($000) ($) ($M) (%) (%) (%) (x) (x) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 50,529.586 58.50 3,107.57 236.17 247.70 32.11 150.00 102.17 7.93
Minimum 35,903 1.25 2.76 12.09 19.78 0.79 0.77 3.05 0.00
Average 1,342,177 17.86 124.90 107.94 110.89 12.57 16.58 15.59 2.01
Median 348,731 16.25 39.78 103.84 105.29 10.86 12.50 11.71 2.04
Southwest Bancshares IL 214,076 10.000 11.58 87.18 91.83 5.41 8.33 NM 0.000
Sandwich Co-operative Bank MA 7,239,911 35.000 1,246.16 236.17 247.70 17.21 12.50 20.83 1.786
SouthFirst Bancshares, Inc. AL 79,913 13.250 14.15 79.96 79.96 17.71 12.74 13.25 3.019
Tolland Bank CT 156,875 28.875 32.80 117.91 117.91 20.91 16.04 16.22 2.355
TCF Financial Corp. MN 81,841 13.375 11.50 88.69 89.17 14.05 15.92 NA 0.000
Troy Hill Bancorp, Inc. PA 490,358 14.250 64.46 83.43 83.43 13.14 15.49 17.17 2.246
Third Financial Corp. OH 110,542 12.000 19.44 86.39 86.39 17.59 NA NA 1.667
Three Rivers Financial Corp. MI 65,766 18.125 11.61 86.06 86.06 17.66 18.13 17.77 2.759
TF Financial Corporation PA 514,218 14.125 125.89 129.11 132.26 24.48 14.71 NA 2.478
Tappan Zee Financial, Inc. NY 328,426 13.000 55.02 89.10 89.10 16.75 14.13 NA 3.846
Tri-County Bancorp, Inc. WY 102,543 17.000 15.27 107.12 107.12 14.89 14.17 NA 3.765
Trenton SB, MHC NJ 104,213 18.000 22.02 90.96 90.96 21.13 14.52 13.53 4.778
Teche Holding Co. LA 246,918 8.000 24.52 118.34 118.34 9.93 9.09 10.13 2.500
Twin City Bancorp TN 698,962 8.125 40.28 98.13 98.13 5.76 25.39 33.85 1.969
United Savings Bank, F.A. MT 122,083 33.000 12.02 120.04 120.04 9.84 23.57 26.83 1.818
United Federal Savings Bank NC 719,919 11.375 63.88 120.50 125.28 8.87 8.62 7.95 0.527
Virginia Beach Fed. Financial VA 21,633,278 28.250 1,862.78 136.80 155.65 8.61 9.81 10.91 2.973
Valley Federal Savings Bank AL 245,892 20.750 29.53 131.00 131.00 11.99 21.61 21.61 4.241
Virginia First Financial VA 292,153 22.500 35.05 105.14 105.19 12.00 20.09 25.57 1.778
Washington Mutual Inc. WA 3,219,670 28.310 228.68 118.60 121.61 7.10 26.21 12.31 2.261
Wayne Savings & Loan Co. MHC OH 306,143 27.750 49.54 104.05 104.05 16.28 14.76 13.03 2.450
WFS Bancorp, Inc. KS 96,538 12.250 25.73 119.63 119.63 26.65 25.52 24.50 4.898
Webster Financial Corporation CT 213,254 20.000 35.56 138.41 138.41 16.67 19.23 18.02 1.800
Westco Bancorp IL 195,158 10.625 23.24 80.55 80.55 11.91 14.76 NA 0.000
Webster City Federal SB, MHC IA 3,222,798 19.500 478.99 160.89 NA 14.86 12.50 14.44 2.051
Workingmens Capital Holdings IN 218,278 12.125 19.69 119.69 123.98 9.02 8.19 10.10 3.464
Wells Financial Corp MN 801,329 7.810 77.19 163.73 163.73 9.63 13.95 14.46 1.536
Westcorp CA 4,928,989 20.875 889.12 148.68 156.37 18.04 10.23 11.22 4.216
Winton Financial Corp. OH 1,024,731 19.000 99.97 107.04 125.99 9.76 13.97 10.92 2.947
1st Washington Bancorp Inc. VA 231,505 23.000 55.48 91.02 91.02 23.97 13.37 19.49 4.348
Washington Federal, Inc. WA 355,854 10.625 38.65 123.69 123.69 10.86 6.99 7.64 3.765
Walden Bancorp, Inc. MA 262,632 5.190 21.90 103.18 103.18 8.34 9.27 9.79 1.927
Western Ohio Financial Corp. OH 1,218,826 7.750 111.50 152.86 153.16 9.23 4.84 4.21 0.000
Warren Bancorp MA 585,113 14.375 63.19 81.82 81.82 10.80 14.38 15.63 2.226
Washington Savings Bank, FSB MD 230,276 20.750 36.03 100.19 100.19 15.65 7.31 13.22 1.928
WSFS Financial Corporation DE 1,054,864 17.625 106.05 117.58 117.58 10.05 8.16 11.91 3.177
WesterFed Financial Corp. MT 585,113 15.875 69.78 90.35 90.35 11.93 15.88 17.26 2.016
WVS Financial Corporation PA 230,276 21.250 36.90 102.61 102.61 16.02 7.48 13.54 1.882
York Financial Corp. PA 1,054,864 18.500 111.31 123.42 123.42 10.55 8.56 12.50 3.027
<CAPTION>
Tangible Qtr Qtr LTM LTM Deposit
Equity/ Equity/ Return on Return on Return on Return on Insurance
Assets Tang Assets Avg Assets Avg Equity Avg Assets Avg Equity Agency
Institution (%) (%) (%) (%) (%) (%) Ticker Exchange (BIF/SAIF)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum 35.80 35.80 6.56 95.88 5.78 229.68
Minimum 3.29 2.66 (2.56) (37.98) (1.90) (35.64)
Average 12.23 12.06 0.91 8.84 0.88 9.07
Median 9.97 9.58 0.87 7.80 0.87 7.73
Southwest Bancshares 6.20 5.91 0.68 11.06 (0.54) (8.37)SWBI NASDAQ SAIF
Sandwich Co-operative Bank 7.29 6.97 1.40 20.21 0.82 12.49 SWCB NASDAQ BIF
SouthFirst Bancshares, Inc. 22.14 22.14 1.26 5.72 1.35 5.79 SZB AMSE SAIF
Tolland Bank 17.73 17.73 1.38 7.78 1.40 7.86 TBK AMSE BIF
TCF Financial Corp. 15.84 15.77 0.90 5.68 NA NA TCB NYSE SAIF
Troy Hill Bancorp, Inc. 14.95 14.95 0.85 5.54 0.79 4.99 THBC NASDAQ SAIF
Third Financial Corp. 20.35 20.35 0.80 5.80 0.77 7.81 THIR NASDAQ SAIF
Three Rivers Financial Corp. 20.52 20.52 0.98 4.82 1.01 4.95 THR AMSE SAIF
TF Financial Corporation 18.97 18.60 1.70 9.02 1.73 11.33 THRD NASDAQ SAIF
Tappan Zee Financial, Inc. 18.80 18.80 1.12 5.89 1.18 7.91 TPNZ NASDAQ SAIF
Tri-County Bancorp, Inc. 13.91 13.91 1.02 7.41 1.06 7.68 TRIC NASDAQ SAIF
Trenton SB, MHC 23.23 23.23 1.45 6.27 1.49 6.96 TSBS NASDAQ BIF
Teche Holding Co. 8.39 8.39 1.08 13.68 1.00 12.75 TSH AMSE SAIF
Twin City Bancorp 5.87 5.87 0.23 3.94 0.17 2.99 TWIN NASDAQ SAIF
United Savings Bank, F.A. 8.20 8.20 0.41 5.11 0.36 4.61 UBMT NASDAQ SAIF
United Federal Savings Bank 7.36 7.10 1.11 14.35 1.22 16.42 UFRM NASDAQ SAIF
Virginia Beach Fed. Financial 7.36 6.66 1.03 13.96 0.96 13.28 VABF NASDAQ SAIF
Valley Federal Savings Bank 9.16 9.16 0.55 5.99 0.56 6.13 VAFD NASDAQ SAIF
Virginia First Financial 11.41 11.40 0.58 5.15 0.47 4.12 VFFC NASDAQ SAIF
Washington Mutual Inc. 6.52 6.38 0.28 4.99 0.58 10.70 WAMU NASDAQ SAIF
Wayne Savings & Loan Co. MHC 15.65 15.65 1.19 7.64 1.38 8.86 WAYN NASDAQ SAIF
WFS Bancorp, Inc. 22.27 22.27 1.03 4.65 1.06 4.85 WBCI NASDAQ SAIF
Webster Financial Corporation 12.04 12.04 0.86 7.10 0.94 7.85 WBST NASDAQ SAIF
Westco Bancorp 14.78 14.78 0.76 5.18 0.67 6.29 WCBI NASDAQ SAIF
Webster City Federal SB, MHC 9.24 NA 1.25 13.27 1.12 13.11 WCFB NASDAQ SAIF
Workingmens Capital Holdings 7.53 7.29 1.10 14.73 0.91 12.33 WCHI NASDAQ SAIF
Wells Financial Corp 5.89 5.89 0.70 12.10 0.67 11.99 WEFC NASDAQ SAIF
Westcorp 12.13 11.61 1.79 14.56 1.75 13.78 WES NYSE SAIF
Winton Financial Corp. 9.11 7.85 0.75 8.06 0.95 10.58 WFCO NASDAQ SAIF
1st Washington Bancorp Inc. 25.77 25.77 1.83 6.96 1.42 4.72 WFSB NASDAQ SAIF
Washington Federal, Inc. 8.78 8.78 1.67 19.33 1.54 19.48 WFSL NASDAQ SAIF
Walden Bancorp, Inc. 8.08 8.08 0.95 12.31 0.92 12.60 WLDN NASDAQ BIF
Western Ohio Financial Corp. 6.03 6.02 1.96 32.63 2.21 45.68 WOFC NASDAQ SAIF
Warren Bancorp 13.20 13.20 0.79 5.95 0.74 5.53 WRNB NASDAQ BIF
Washington Savings Bank, FSB 15.62 15.62 2.12 14.03 1.18 7.77 WSB AMSE SAIF
WSFS Financial Corporation 8.55 8.55 1.29 15.29 0.92 10.78 WSFS NASDAQ BIF
WesterFed Financial Corp. 13.20 13.20 0.79 5.98 0.74 5.53 WSTR NASDAQ SAIF
WVS Financial Corporation 15.62 15.62 2.12 14.03 1.18 7.77 WVFC NASDAQ SAIF
York Financial Corp. 8.55 8.55 1.29 15.29 0.92 10.78 YFED NASDAQ SAIF
</TABLE>
<PAGE>
EXHIBIT IV-2
COMPARATIVE MARKET INDICES
--------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DJIA THRIFT INDEX
<S> <C> <C>
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 4708.47
08/31/95 355.487 4610.56
09/29/95 362.289 4789.08
10/31/95 354.053 4755.48
11/30/95 370.172 5074.49
12/29/95 376.508 5117.12
01/31/96 370.694 5395.30
02/09/96 376.000 5541.62
02/26/96 374.955 5565.10
02/29/96 373.64 5485.62
03/29/96 382.13 5587.14
04/30/96 380.27 5569.08
05/17/96 381.81 5687.5
</TABLE>
<PAGE>
EXHIBIT IV-3
SELECTED COMPARABLE RATES
-------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PRIME 90 DAY 1 YEAR 30 YEAR
RATE TREASURY T-BILL BOND YIELD
<S> <C> <C> <C> <C>
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
05/17/96 8.25 5.11 5.67 6.83
</TABLE>
<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 5.68%. Income taxes were assumed to be 39%, resulting
in an after-tax yield of 3.46%.
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 $790,000.
49
<PAGE>
EXHIBIT V-1
RICHMOND SAVINGS BANK, S.S.B.
PRO FORMA EFFECT OF CONVERSION PROCEEDS
As of March 31, 1996
(000) omitted
<TABLE>
<CAPTION>
Adjusted
Minimum Midpoint Maximum Maximum
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Offered (Total) 1,258,000 1,480,000 1,702,000 1,957,300
Price per share $10.00 $10.00 $10.00 $10.00
Gross Proceeds $12,580 $14,800 $17,020 $19,573
Estimated expenses 727 790 853 925
Net proceeds $11,853 $14,010 $16,167 $18,648
Adj. net income - twelve months
ended 3/31/96-adjusted $600 $600 $600 $600
Incremental return on proceeds 280 331 383 442
Less: ESOP adjustment (101) (118) (136) (157)
Less: MRP adjustment (61) (72) (83) (96)
Pro forma net income $718 $741 $764 $790
Earnings per share $0.57 $0.50 $0.45 $0.40
Adj. net income - three months
ended 3/31/96, annualized $628 $628 $628 $628
Incremental return on proceeds 280 331 383 442
Less: ESOP adjustment (101) (118) (136) (157)
Less: MRP adjustment (61) (72) (83) (96)
Pro forma net income $746 $769 $792 $818
Earnings per share $0.59 $0.52 $0.47 $0.42
Net worth $8,549 $8,549 $8,549 $8,549
Net conversion proceeds 11,853 14,010 16,167 18,648
Less: ESOP adjustment (1,006) (1,184) (1,362) (1,566)
Less: MRP adjustment (503) (592) (681) (783)
Pro forma net worth $18,893 $20,783 $22,674 $24,848
Book value per share $15.02 $14.04 $13.32 $12.69
Total assets $95,277 $95,277 $95,277 $95,277
Net conversion proceeds 11,853 14,010 16,167 18,648
Less: ESOP adjustment (1,006) (1,184) (1,362) (1,566)
Less: MRP adjustment (503) (592) (681) (783)
Pro forma total assets $105,621 $107,511 $109,402 $111,576
Pro Forma Ratios
Price/EPS (LTM) 17.5 20.0 22.3 24.8
Price/EPS (last quarter) 16.9 19.2 21.5 23.9
Price/book per share 66.59% 71.21% 75.07% 78.77%
Market value/assets 11.91% 13.77% 15.56% 17.54%
</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) 15.6 19.8 15.6 11.7
Pro forma minimum 17.5
Pro forma adjusted midpoint 20.0
Pro forma maximum 22.3
Final Value 24.8
Last three months, annualized 17.0 13.7 16.6 12.5
Pro forma minimum 16.9
Pro forma adjusted midpoint 19.2
Pro forma maximum 21.5
Final Value 23.9
Price/book ratio P/B 89.1% 90.4% 107.9% 103.8%
Pro forma minimum (%) 66.6%
Pro forma adjusted midpoint 71.2%
Pro forma maximum 75.1%
Final Value 78.8%
Price/assets ratio P/A 24.86% 24.69% 12.57% 10.86%
Pro forma minimum (%) 11.91%
Pro forma adjusted midpoint 13.77%
Pro forma maximum 15.56%
Final Value 17.54%
Key Assumptions
Earnings base - last twelve months Y $600,000
Earnings base - last three months Y $628,000
Book value B $8,549,000
Tangible book value B $8,549,000
Total assets A $95,277,000
Estimated conversion
expense at midpoint X $790
Return on conversion
proceeds (after-tax) R 3.46%
Proceeds not reinvested Z $4,440,000
Estimated ESOP E ($1,184,000)
Cost of ESOP S 8.00%
Amort. of ESOP T 10 years
ESOP tax rate Tax 39%
Estimated MRP ($592,000)
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 MAY 17, 1996
<TABLE>
<CAPTION>
Amount Investment Security Yield
<S> <C> <C>
20.00% 3 month Treasury Bill 5.11%
20.00% 6 month Treasury Bill 5.34%
20.00% 1 year US Treasury Note 5.67%
20.00% 2 year US Treasury Note 6.04%
20.00% 3 year US Treasury Note 6.23%
100.00% Weighted Average Yield 5.68%
Weighted Average Maturity 1.35 years
</TABLE>
<PAGE>
EXHIBIT V-3
Pro Forma Midpoint Analysis
Richmond Savings Bank, SSB
Calculation of Estimated Value in a Standard Conversion (V)
- -----------------------------------------------------------
<TABLE>
<S> <C> <C>
P/E (Y - R (X+Z) - ES - (1-Tax) E/T - (1-Tax))
----------------------------------------------
1. V = 1 - (P/E) R = $14,800,000
P/B (B - X - E)
---------------
2. V = 1 - P/B = $14,800,000
P/A (A - X)
-----------
3. V = 1 - P/A = $14,800,000
<CAPTION>
Value Valuation
Final Value Per Share Total Shares Date
----------- --------- ------------ ----
<S> <C> <C> <C>
$14,800,000 $10.00 1,480,000 05/17/96
</TABLE>
