<PAGE>
As filed with the Securities and Exchange Commission on October 8, 1996
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------
CENTURY BANCORP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
North Carolina 6036 56-1981518
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
22 Winston Street
Post Office Box 989
Thomasville, North Carolina 27361-0989
(910) 475-4663
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
----------------------
JAMES G. HUDSON, JR., President
Century Bancorp, Inc.
22 Winston Street
Post Office Box 989
Thomasville, North Carolina 27361-0989
(910) 475-4663
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
EDWARD C. WINSLOW III
RANDALL A. UNDERWOOD
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
Post Office Box 26000
Greensboro, North Carolina 27420
--------------------
Approximate date of commencement of the proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
Title of Each Class Proposed Proposed Amount of
of Securities to be Amount to Maximum Maximum Registration
Registered be Registered Offering Aggregate Fee
Price Offering
Per Share Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 383,525/(1)/ $50.00 $19,176,000 $6,612.42
================================================================================
</TABLE>
(1) The estimated maximum number of shares to be registered is based upon the
maximum of the valuation range of Home Savings, 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>
CENTURY BANCORP, 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 Home 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 Home Savings
10 Interests of Named Experts and Counsel Not Applicable
11 Information with Respect to the Registrant Summary; Selected Financial and Other Data
of Home Savings; Century Bancorp, Inc.;
Home Savings, SSB; Dividend Policy; Market
for Common Stock; Management's Discussion
and Analysis of Financial Condition and
Results of Operation; Business of the
Holding Company; Business of Home Savings;
Management of the Holding Company;
Management of Home Savings; Financial
Statements
12 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
CENTURY BANCORP, INC.
(Proposed Holding Company for Home Savings, SSB)
Up to 383,525 Shares of Common Stock
Century Bancorp, Inc., a North Carolina corporation (the "Holding
Company"), is offering up to 383,525 shares of its common stock, no par value
(the "Common Stock"), in connection with the conversion of Home Savings, SSB
("Home 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 $50.00 per share. The minimum number of shares that any
subscriber may purchase is 10, for an aggregate minimum purchase price of
$500.00. As part of the Conversion, the Holding Company will become the sole
stockholder and parent holding company of Home Savings. See "THE
(cover continued on next page)
------------------------------
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. THE
SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL INVESTED.
<TABLE>
<CAPTION>
================================================================================
Estimated
Underwriting,
Marketing and Estimated Net
Other Fees and Conversion
Purchase Price Expenses/(3)/ Proceeds/(4)/
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share at Minimum $ 50.00 $ 2.82 $ 47.18
Per Share at Midpoint $ 50.00 $ 2.61 $ 47.39
Per Share at Maximum $ 50.00 $ 2.45 $ 47.55
Per Share at Maximum, as $ 50.00 $ 2.32 $ 47.68
adjusted $12,325,000 $694,000 $11,631,000
Total at Minimum/(1)/ $14,500,000 $756,000 $13,744,000
Total at Midpoint/(1)/ $16,675,000 $817,000 $15,858,000
Total at Maximum/(1)/ $19,176,250 $888,000 $18,288,250
Total at Maximum, as
adjusted /(2)/
================================================================================
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by JMP
Financial, Inc. ("JMP Financial") dated September 23, 1996, which states
that the estimated aggregate pro forma market value of the Holding Company
and Home Savings ranged from $12,325,000 to $16,675,000 ("Valuation Range")
or between 246,500 and 333,500 shares of Common Stock at the purchase
price of $50.00 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 Home Savings and the Holding Company
arising from the Conversion, including estimated fixed expenses of
approximately $366,000 (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 $328,000 and $522,000 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. Home 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 Home 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 any Community Offering and in any 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>
CONVERSION." 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 Home
Savings, Home Savings' Employee Stock Ownership Plan (the "ESOP") and certain
others in accordance with Home 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 Home Savings and
the Holding Company with the approval of the Administrator (the "Expiration
Time"). See "THE CONVERSION -- Subscription Offering." Subscription Rights are
not transferable; persons who attempt to transfer Subscription Rights may lose
their right to purchase Common Stock and may be subject to other sanctions. See
"The Conversion --Certain Restrictions on Transfer of Subscription Rights; False
or Misleading Order Forms."
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 Davidson County, 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."
Home 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 Boards of Directors and management of Home 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. Trident Securities has not prepared any fairness opinion with
respect to the terms of the Offerings or any opinion with respect to the price
at which shares of Common Stock may trade. See "RISK FACTORS -- Best Efforts
Offering."
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 Home Savings, is irrevocable and may not be
modified, amended or rescinded without the consent of Home 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 Home 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 $12,325,000 nor more than $19,176,250. See "THE CONVERSION --
Offering of Common Stock."
Neither the Holding Company nor Home Savings has ever issued stock before
and, due to the relatively small size of the Offerings, it is unlikely that an
active and liquid trading market will develop. Upon the consummation of the
Conversion, the Holding Company will review the eligibility of the Common Stock
for quotation on the Nasdaq SmallCap Market. In the event that the Common Stock
is eligible for quotation on the Nasdaq SmallCap Market, the Holding Company
will apply to have the Common Stock quoted on the Nasdaq SmallCap Market. There
can be no assurance, however, that any such application will be approved or that
the
2
<PAGE>
Common Stock will be quoted on the Nasdaq SmallCap Market. If the Common Stock
is quoted on the Nasdaq SmallCap Market, Trident Securities intends to act as a
market maker and to encourage at least one other market maker to make a market
in the Common Stock. In the event the Common Stock does not qualify for
quotation on the Nasdaq SmallCap Market, the Holding Company intends to list the
Common Stock over-the-counter through the National Daily Quotation System "Pink
Sheets" published by the National Quotation Bureau, Inc., and the Holding
Company intends to request that Trident Securities undertake to match offers to
buy and offers to sell the Common Stock. There can be no assurance that timely
or accurate quotations will be available in the "Pink Sheets." In addition, the
existence of a public trading market will depend upon the presence in the market
of both willing buyers and willing sellers at any given time. Due to the small
number of shares of Common Stock being offered in the Conversion and the
concentration of ownership, it is unlikely that an active or liquid trading
market for the Common Stock will develop and be maintained. Further, the absence
of an active and liquid trading market may make it difficult to sell the Common
Stock and may have an adverse effect on the price of the Common Stock.
Purchasers should consider the potentially illiquid and long-term nature of
their investment in the shares offered hereby. See "MARKET FOR COMMON STOCK."
A Stock Information Center has been established at Home Savings'
headquarters office at 22 Winston Street, Thomasville, North Carolina, in an
area separate from Home Savings' banking operations. The telephone number of
the Stock Information Center is (910) _____________.
3
<PAGE>
Home Savings, SSB
Thomasville, North Carolina
[MAP OF NORTH CAROLINA WITH
DAVIDSON COUNTY HIGHLIGHTED]
4
<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.
Century Bancorp, Inc.
The Holding Company is a North Carolina corporation recently organized by the
Board of Directors of Home Savings to acquire all of the capital stock that Home
Savings will issue upon its conversion from the mutual to stock form of
ownership. The conversion of Home Savings to stock form, the issuance of Home
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 Home 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 Home Savings.
The executive office of the Holding Company is located at 22 Winston Street,
Thomasville, North Carolina, and its telephone number is (910) 475-4663.
Home Savings, SSB
Home Savings is a North Carolina-chartered mutual savings bank headquartered in
Thomasville, North Carolina and has been in operation since 1915. Home Savings
has been a member of the Federal Home Loan Bank ("FHLB") system, and its
deposits have been federally insured since the late 1950's. Home Savings'
deposits are now insured by the Savings Association Insurance Fund (the "SAIF")
of the FDIC to the maximum amount permitted by law.
Home Savings conducts business through one full service office in Thomasville,
North Carolina. Home Savings' primary market area consists of the communities
within a 10-mile radius of its office, which includes portions of Davidson,
Randolph and Guilford counties in North Carolina. At June 30, 1996, Home
Savings had total assets of $81.3 million, net loans of $55.2 million, deposits
of $69.7 million and retained earnings of $11.2 million.
Home 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 Home Savings' primary
market area. Home Savings also makes home equity line of credit loans, multi-
family residential loans, commercial loans, construction loans, loans secured by
deposit accounts, and various types of consumer loans. Home Savings is a
portfolio lender in that it does not originate its fixed or adjustable rate
loans for sale in the secondary market. See "BUSINESS OF HOME SAVINGS." Home
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.
Highlights of Home Savings' operations include:
. Profitability. For the fiscal years ended June 30, 1996, 1995 and 1994,
Home Savings had net income of $677,000, $921,000, and $1.2 million,
respectively, and a return on average assets of 0.86%, 1.25%,
5
<PAGE>
and 1.59%, respectively. Future profitability of Home Savings will be
affected by changes in market interest rates and other factors. See "RISK
FACTORS."
. Capital Position. As of June 30, 1996, Home Savings' ratios of Tier I
capital to total assets and total capital to risk-weighted assets were
13.79% and 27.73%, respectively, which substantially exceeded the FDIC's
requirements. On such date, Home Savings' ratio of net worth to total
assets, calculated under the Administrator's regulations, was 14.44%, which
substantially exceeded the North Carolina requirement. See "SUPERVISION AND
REGULATION -- Regulation of Home Savings --Capital Requirements Applicable
to Home Savings."
. Emphasis on One- to Four-Family Residential Lending. Historically, Home
Savings has been predominantly a one-to-four family residential lender. As
of June 30, 1996, 75.4% of Home Savings' loan portfolio, before net items,
was composed of permanent one-to-four family residential loans and 8.0% of
its loan portfolio, before net items, was composed of construction and home
equity loans.
. Asset Quality. On June 30, 1996 and June 30, 1995, Home Savings' ratio of
nonperforming assets to total assets was 0.76% and 1.21%, respectively. See
"BUSINESS OF HOME SAVINGS -- Lending Activities -- Nonperforming Assets and
Asset Classification."
. Control of General and Administrative Expenses. Home Savings strives to
control its non-interest expenses. For the years ended June 30, 1996 and
June 30, 1995, Home Savings' ratio of non-interest expense to average total
assets was 1.49% and 1.33%, respectively.
. Interest Rate Risk. Home Savings has a significant amount of interest rate
risk; however, management believes its interest rate risk is at an
acceptable level given Home Savings' capital position and historical
results of operations. As of June 30, 1996, Home Savings' one-year interest
sensitivity gap was a negative 48.86% of total interest-earning assets, and
its three year cumulative interest sensitivity gap was a negative 49.45%.
Other modeling used by Home Savings indicates that, as of June 30, 1996,
its net portfolio value (present values of cash flows from assets,
liabilities and off-balance sheet items) would decrease by 27% in the event
of an instantaneous and permanent 200 basis point increase in market
interest rates and would increase by 25% in the event of a 200 basis point
decrease in market interest rates. Such modeling also indicates that, as of
June 30, 1996, such a 200 basis point increase in market interest rates
would result in a 17% decrease in net interest income and that a 200 basis
point decrease in such rates would result in a 17% increase in net interest
income. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS --Asset/Liability Management."
. Low Loan Growth. At June 30, 1996, 1995 and 1994, Home Savings' net loans
receivable were $55.2 million, $54.0 million and $53.8 million. During
recent periods, Home Savings loan growth has been
6
<PAGE>
lower than the average for comparable thrift institutions and has not
matched its growth in deposits.
. Unpredictability of Earnings. The earnings of financial institutions are
significantly impacted by changes in noninterest income and by the interest
sensitivity of its assets and liabilities. As is described above, Home
Savings' asset/liability structure presents a significant amount of
interest rate risk, and Home Savings' earnings have been reduced during
periods of increasing interest rates and are likely to continue to be
significantly and negatively impacted if interest rates increase. Home
Savings has not established a consistent source of noninterest income to
stabilize its net income. As a result, Home Savings earnings are
significantly tied to market interest rates and are, therefore, not highly
predictable.
The Conversion
Home Savings was organized and has operated as a traditional savings
institution. 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 Home Savings has been studying
the environment in which it operates and its strategic options.
As a result of its study of its strategic options, Home Savings adopted the Plan
of Conversion, which provides for conversion of the bank from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered stock savings bank.
Home Savings believes that converting the bank from the mutual to stock form and
organizing the Holding Company will provide increased flexibility for Home
Savings and the Holding Company to react to changes in their operating
environment.
Consummation of the Conversion is contingent upon receipt of the approvals of
the Administrator and the Federal Reserve which are necessary for the Holding
Company to acquire Home Savings and the approvals of the FDIC and the
Administrator which are necessary for Home 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 Home 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, Home Savings will remain a
North Carolina-chartered mutual savings bank, all subscription funds will be
returned promptly plus interest at Home Savings' passbook rate, and all deposit
withdrawal authorizations will be cancelled without any action on the part of
subscribers or purchasers.
The existing management of Home Savings and the Holding Company believes that it
will be in the best interests of Home Savings, the Holding Company and the
stockholders of the Holding Company for the Holding Company to remain an
independent financial institution. Assuming the consummation of the Conversion,
7
<PAGE>
the Holding Company and Home Savings intend to pursue the business strategy
described in this Prospectus with the goal of enhancing shareholder value over
the long term. Neither the Holding Company nor Home Savings has any existing
plan to consider any business combination, and neither company has any agreement
or understanding with respect to any possible business combination.
The Offerings
Pursuant to the Plan of Conversion, between 246,500 shares and 383,525 shares of
Common Stock are being offered by the Holding Company at the price of $50.00 per
share in the Subscription Offering to the following persons in the following
order of priority: (i) Home 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) Home Savings' Employee Stock Ownership Plan
(the "ESOP"); (iii) Home Savings' depositors as of September 30, 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) Home Savings' depositor and borrower members as of
_________________, 1996, who are not Eligible Account Holders or Supplemental
Eligible Account Holders ("Other Members"); and (v) directors, officers and
employees of Home 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. Subscription Rights received in any of
the foregoing categories will be subordinate to the Subscription Rights received
by those in a prior category. 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 Home Savings have the absolute right to
reject orders in the Community Offering in whole or in part. See "THE
CONVERSION -- Community Offering." If there is a Community Offering, it is
anticipated that all shares of Common Stock not purchased in the Community
Offering will be offered for sale by the Holding Company to the general public
in the Syndicated Community Offering. See "THE CONVERSION -- Syndicated
Community Offering."
The Subscription Offering and Subscription Rights in the Subscription Offering
expire at the Expiration Time, which is 12:00 Noon., Eastern Time, on
_______________, 1996, unless extended. The Community Offering, if any, may
commence at any time after the commencement of the Subscription Offering and may
terminate at the Expiration Time or at any time thereafter, but not later than
_________________, 1996, unless extended with the approval of the Administrator.
Stock Purchase Limitations
The maximum aggregate number of shares of Common Stock for which (i) any person
or entity (other than the ESOP), (ii) persons or entities exercising
Subscription Rights through a single account or (iii) persons acting in concert,
may subscribe in the Offerings is 5,000 shares. In addition, no person or
entity, or group of persons or entities acting in concert, together with any
associates (as defined in the Plan of Conversion), may subscribe for more than
7,000 shares of Common Stock sold in the Conversion. However, Home Savings'
Board of Directors has the right, at any time prior to
8
<PAGE>
completion of the Conversion, to decrease the 5,000 and 7,000 share maximum
purchase limitations to an amount not less than 1% of the shares issued in the
Conversion or increase such 5,000 and 7,000 share limitations 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 19,720 and 26,680 shares assuming the issuance
of between 246,500 and 333,500 shares). If because there is an oversubscription
or for any other reason the ESOP is unable to purchase in the aggregate up to 8%
of the shares of Common Stock issued in the Conversion, it is expected that the
ESOP will purchase shares of Common Stock in the open market so that after such
purchases a number of shares of Common Stock up to 8% of the number of shares
issued in the Conversion will have been acquired by the ESOP. See "RISK
FACTORS -- Cost of ESOP." No person or entity may subscribe for less than 10
shares of Common Stock, or an aggregate dollar amount of less than $500.
The term "acting in concert" is defined in the Plan to mean: (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal, whether or not pursuant to an express agreement, with
respect to the purchase, ownership, voting or sale of Common Stock; or (ii) a
combination or pooling of voting or other interests in the securities of the
Holding Company for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. The
Holding Company and Home 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 Home 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 Home
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 exercisable and purchases may be made in the Offerings
only by returning the original of 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. Copies of the Stock Order Form, including facsimile copies,
will not be accepted. 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 Home Savings), by check, bank
draft, negotiable order of
9
<PAGE>
withdrawal or money order, or by authorization of withdrawal from deposit
accounts maintained with Home Savings, other than negotiable order of withdrawal
or other demand deposit accounts. Stock Order Forms directing that payment for
shares be made by authorization of withdrawal will be accepted only if, at the
time the Stock Order Form is received, there exists sufficient funds in the
account from which withdrawal is authorized to pay the full purchase price for
the number of shares ordered. Payment may not be made by wire transfer.
Subscription payments made in cash, by check, bank draft, negotiable order of
withdrawal or money order will earn interest at Home Savings' passbook savings
rate from the date payment in good funds is received by Home 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 Home 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
Home Savings only if the beneficial owner of such account directs Home Savings
to transfer that account to a self-directed account in the name of an
independent trustee. Persons wishing to use their Home Savings IRA's to
purchase shares of Common Stock must visit the Stock Information Center on or
before _____________, 1996 in order for the necessary paperwork for such
purchases to be completed and executed prior to the Expiration Time. No early
withdrawal penalties will be incurred in connection with payments made through
authorization of withdrawals from certificate accounts, including IRA, Keogh and
similar retirement accounts. However, if after such withdrawal the applicable
minimum balance requirement ceases to be satisfied, such certificate account
will be cancelled and the remaining balance thereof will earn interest at Home
Savings' passbook savings rate. After amounts submitted for payment are applied
to the purchase price for shares sold, they will no longer earn interest, and
they will not be insured by the FDIC or any other government agency or other
entity. THE CONVERSION -- Exercise of Subscription Rights and Purchases in the
Community Offering."
Non-transferability of Subscription Rights
The Subscription Rights granted under the Plan of Conversion are non-
transferable. Subscription Rights may be exercised only by the person to whom
they are issued and only for his or her own account. Persons exercising
Subscription Rights are required to certify that they are purchasing shares for
their own accounts within the purchase limitations set forth in the Plan of
Conversion and that they have no agreement or understanding for the sale or
transfer of such shares. See "THE CONVERSION -- Certain Restrictions on Transfer
of Subscription Rights; False or Misleading Order Forms."
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 Home Savings. JMP Financial, Inc.,
of Grosse Pointe Park, Michigan ("JMP Financial"), an independent financial
consulting firm, has advised Home Savings and the Holding Company that in its
opinion, at September 23, 1996, the Valuation Range of the aggregate estimated
pro forma market value of the Holding Company and Home Savings was from
$12,325,000 to $16,675,000. The appraisal will be reviewed and, if appropriate,
revised by JMP Financial upon conclusion of the Offerings. The appraisal by JMP
Financial is not intended and should not be construed as a recommendation of any
10
<PAGE>
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 $50.00 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 Home Savings and the Holding
Company based upon the independent appraisal of
the pro forma market value of the Holding
Company and Home Savings prepared by JMP
Financial. 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 $19,176,250 or less than
$12,325,000 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
$11,631,000 and $15,858,000, 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
$986,000 and $1,334,000 assuming the ESOP's
purchase of between 19,720 and 26,680 shares at
$50.00 per share) to fund the loan made to the
ESOP to purchase shares of Common Stock in the
Conversion. After deducting the amount of such
loan from the proceeds, the Holding Company is
expected to retain approximately 50% of the
remaining net proceeds from the issuance of the
Common Stock. The Holding Company will initially
invest these proceeds primarily in interest-
earning deposits, U.S. government, federal
agency and other marketable securities and
mortgage-backed securities. See "USE OF
PROCEEDS."
The remainder of the net proceeds from the sale
of the Common Stock will be paid by the Holding
Company to Home Savings in exchange for all of
the capital stock of Home Savings. The net
proceeds paid to Home Savings will become part
of Home 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 Home Savings'
lending and investment policies.
Net proceeds will also be used for other general
corporate purposes. Home Savings and the Holding
Company may consider opening one or more branch
offices or
11
<PAGE>
acquiring other financial institutions in its
primary market area and other nearby
communities, and such proceeds could be used for
such purposes. However, the Holding Company and
Home Savings have no current plans to open any
additional office or to acquire any other
financial institution.
If Home Savings' proposed Management Recognition
Plan (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 HOME 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 Home
Savings from the proceeds of the Conversion. It
is estimated that between 9,860 and 13,340
shares will be acquired by the MRP, assuming the
issuance of between 246,500 and 333,500 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 $50.00
per share, Home Savings would contribute between
$493,000 and $667,000, respectively, to the MRP
for this purpose. Additional shares would be
acquired if the number of shares issued in the
Conversion exceeds 333,500, and the price per
share paid by the MRP could be more or less than
$50.00 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 HOME 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 will 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 the Stock Option Plan does not acquire
sufficient shares 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 HOME SAVINGS--Proposed Stock
Option Plan." The funds for any purchases in the
open market may be provided by the Holding
Company or Home Savings from the proceeds of the
Conversion. It is estimated that between 24,650
and 33,350 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 246,500 and 333,500
shares in the Conversion. If shares are acquired
in the open market, the Holding Company or Home
Savings would contribute between $1,232,500 and
$1,667,500, respectively, to the Stock Option
Plan for this purpose, assuming such shares are
acquired at a price of $50.00 per share.
Additional shares would be acquired if the
number of shares issued in the Conversion
exceeds 333,500, and the price could be more or
less than $50.00 per share, which would change
the contribution to the Stock Option Plan
accordingly. See "RISK FACTORS--Cost and
Possible Dilutive Effect of the MRP and Stock
Option Plan" and "MANAGEMENT OF HOME 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
12
<PAGE>
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 Home 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 Home Savings. Home Savings'
ability to pay dividends is restricted. See
"SUPERVISION AND REGULATION--Regulation of
Home 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
Home Savings to pay dividends to the Holding
Company without incurring a recapture tax.
Market for Common Stock Neither the Holding Company nor Home Savings has
ever issued stock before and, due to the
relatively small size of the Offerings, it is
unlikely that an active and liquid trading
market will develop. Upon the consummation of
the Conversion, the Holding Company will review
the eligibility of the Common Stock for
quotation on the Nasdaq SmallCap Market. In the
event that the Common Stock is eligible for
quotation on the Nasdaq SmallCap Market, the
Holding Company will apply to have the Common
Stock quoted on the Nasdaq SmallCap Market.
There can be no assurance, however, that any
such application will be approved or that the
Common Stock will be quoted on the Nasdaq
SmallCap Market. If the Common Stock is quoted
on the Nasdaq SmallCap Market, Trident
Securities intends to act as a market maker and
to encourage at least one other market maker to
make a market in the Common Stock. In the event
the Common Stock does not qualify for quotation
on the Nasdaq SmallCap Market, the Holding
Company intends to list the Common Stock over-
the-counter through the National Daily Quotation
System "Pink Sheets" published by the National
Quotation Bureau, Inc., and the Holding Company
intends to request that Trident Securities
undertake to match offers to buy and offers to
sell the Common Stock. There can be no assurance
that timely or accurate quotations will be
available in the "Pink Sheets." In addition, the
existence of a public trading market will depend
upon the presence in the market of both willing
buyers and willing sellers at any given time.
Due to the small number of shares of Common
Stock being offered in the Conversion and the
concentration of ownership, it is unlikely that
an active or liquid trading market for the
Common Stock will develop and be maintained.
Further, the absence of an active and liquid
trading market may make it difficult to sell the
Common Stock and may have an adverse effect on
the price of the Common Stock. Purchasers should
consider the potentially illiquid and long-term
nature of their investment in the shares offered
hereby. See "MARKET FOR COMMON STOCK."
Stock Ownership by
Management The directors and executive officers of the
Holding Company and of Home Savings and their
associates currently anticipate subscribing for
Common Stock in the
13
<PAGE>
aggregate amount of $1,115,000, or 22,300
shares. As a result, such persons anticipate
subscribing for 9.05% to 6.69% 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
19,720 and 26,680 shares, assuming the issuance
of between 246,500 and 333,500 shares). See
"MANAGEMENT OF HOME SAVINGS--Employee Stock
Ownership Plan." It is expected that directors
and certain employees of the Holding Company and
Home 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 by the
stockholders of the Holding Company at a meeting
of stockholders following the Conversion. See
"--Benefits to Directors and Officers" and
"MANAGEMENT OF HOME SAVINGS--Proposed
Management Recognition Plan" and "--Proposed
Stock Option Plan."
If (i) the Stock Option Plan is approved by the
stockholders of the Holding Company within one
year after the Conversion and all of the stock
options which could be granted to directors and
executive officers under the Stock Option Plan
are granted and exercised or the shares for such
options are acquired by the Stock Option Plan
and all option shares are acquired in the open
market, (ii) the MRP is approved by the
stockholders of the Holding Company within one
year after the Conversion, all of the MRP shares
which could be granted to directors and
executive officers are granted and issued and
all such shares are acquired in the open market,
(iii) the ESOP acquires 8% of the shares issued
in the Conversion and none of such shares are
allocated, and (iv) the Holding Company did not
issue any additional shares of its Common Stock,
the shares held by directors and executive
officers and their associates as a group,
including (a) shares purchased outright in the
Conversion, (b) shares purchased by the ESOP,
(c) shares purchased pursuant to the Stock
Option Plan and (d) shares granted under the
MRP, would give such persons effective control
over as much as 30.35% or 27.99%, at the minimum
and maximum of the Valuation Range,
respectively, of the Common Stock issued and
outstanding.
Benefits to Directors and
Executive Officers In connection with the Conversion, certain
benefits will be provided to directors, officers
and employees of Home Savings.
Employment Agreement. In connection with the
Conversion, Home Savings expects to enter into
an employment agreement with James G. Hudson,
Jr., President, Chief Executive Officer and
Treasurer. The employment agreement with Mr.
Hudson provides for an initial annual salary of
$93,600. See "MANAGEMENT OF HOME SAVINGS--
Employment Agreement." In addition, Mr. Hudson
participates in a bonus compensation plan
pursuant to which he received $10,283, $15,861
and $18,909 in bonus compensation for fiscal
years 1996, 1995 and 1994, respectively. Mr.
Hudson, along with all other employees, is also
eligible to receive holiday bonuses as declared
by Home Savings' Board of Directors. During the
fiscal years ended June 30, 1996, 1995 and 1994,
Home Savings' employees have received holiday
bonuses
14
<PAGE>
equal to two weeks salary. See "MANAGEMENT OF
HOME SAVINGS--Bonus Compensation."
Special Termination Agreements. In connection
with the Conversion, the Holding Company expects
to enter into Special Termination Agreements
with John E. Todd, Vice President, and Drema A.
Michael, Secretary and Assistant Treasurer. The
Special Termination Agreements provide for the
payment to such officers of an amount equal to
two times their salary and bonuses for the most
recently completed calendar year if, within two
years after a change in control, the officer is
terminated without cause or if the officer
terminates their employment after certain
changes in their employment circumstances. If a
change in control and such a termination
occurred during calendar year 1996, Mr. Todd and
Ms. Michael would be entitled to receive
$121,654 and $114,394, respectively, under such
agreements. See "MANAGEMENT OF HOME SAVINGS--
Special Termination Agreements."
Restricted Stock Grants. Pursuant to the MRP,
which is expected to be adopted by the Boards of
Directors of the Holding Company and Home
Savings, directors and certain employees of Home
Savings could receive restricted stock grants of
a number of shares of Common Stock equal to 4%
of the shares issued in the Conversion (between
9,860 and 13,340 shares, assuming the issuance
of between 246,500 and 333,500 shares). Assuming
that the shares issued pursuant to the MRP had a
value of $50.00 per share, such shares would
have a value of between $493,000 and
$667,000.
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, (i)
no employee of Home Savings (including Mr.
Hudson, Mr. Todd and Ms. Michael) could receive
more than 25% of the shares issued under the
MRP, or 3,335 shares, assuming the issuance of
333,500 shares in the Conversion, (ii) the four
non-employee directors of Home Savings could
receive restricted stock grants for an aggregate
of not more than 20% of the shares issued under
the MRP, or 2,668 shares, assuming the issuance
of 333,500 shares in the Conversion and (iii)
none of the four non-employee directors of Home
Savings could receive individually more than 5%
of the shares issued under the MRP, or 667
shares, assuming the issuance of 333,500 shares
in the Conversion. Assuming the MRP shares had a
value of $50.00 per share, 3,335 shares would
have a value of $166,750, and 2,668 shares would
have a value of $133,400 and 667 shares would
have a value of $33,350. If the MRP is submitted
to and approved by the Holding Company's
stockholders more than one year after
consummation of the Conversion, the regulatory
percentage limitations set forth above would not
apply.
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 to
be held no sooner than six months following the
Conversion. Recipients of restricted stock under
the MRP will not have to pay for their
restricted shares. See "MANAGEMENT OF HOME
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 Home
Savings, directors
15
<PAGE>
and certain employees of Home Savings could
receive options to purchase a number of shares
of Common Stock equal to 10% of the shares
issued in the Conversion (between 24,650 and
33,350 shares, assuming the issuance of between
246,500 and 333,500 shares).
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, (i) no employee of Home Savings
(including Mr. Hudson, Mr. Todd and Ms. Michael)
could receive more than 25% of the options
issued under the Stock Option Plan, or options
to purchase 8,337 shares, assuming the issuance
of 333,500 shares in the Conversion, (ii) the
four non-employee directors of Home Savings
could receive not more than 20% of the options
issued under the Stock Option Plan, or options
to purchase 6,670 shares, assuming the issuance
of 333,500 shares in the Conversion, and (iii)
none of the four non-employee directors of Home
Savings could receive individually more than 5%
of the options issued under the Stock Option
Plan, or options to purchase 1,667 shares,
assuming the issuance of 333,500 shares in the
Conversion. 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 regulatory
percentage limitations set forth above would not
apply.
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 to be held no sooner than six
months following the Conversion. The exercise
price of the options will be the fair market
value of the Common Stock at the time the
options are granted (which will be after the
Stock Option Plan is approved by the Holding
Company's stockholders), and the options will
have terms of 10 years or less. Recipients of
options under the Stock Option Plan will not
have to pay for the options issued to them. See
"MANAGEMENT OF HOME SAVINGS--Proposed Stock
Option Plan."
ESOP. In connection with the Conversion, Home
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 19,720 and 26,680 shares, assuming the
issuance of between 246,500 and 333,500 shares.
See "MANAGEMENT OF HOME SAVINGS--Employee
Stock Ownership Plan."
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. Home Savings
has received an opinion from JMP Financial
stating that the Subscription Rights do not have
any ascertainable value. The opinion of JMP
Financial is not binding on the Internal Revenue
Service ("IRS"). See "THE CONVERSION--Income
Tax Consequences."
Anti-Takeover Provisions The Articles of Incorporation and Bylaws of the
Holding Company and Home Savings contain certain
restrictions that are intended to discourage
non-negotiated
16
<PAGE>
attempts to acquire control of the Holding
Company or Home 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 HOME 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 Home Savings and the thrift
industry in general, Home Savings' high volume
of deposits exceeding $100,000, anticipated low
return on equity following the Conversion,
importance of key employers, the
recapitalization of the SAIF, its impact on
deposit insurance premiums and a potential
recapitalization fee, proposed recapture of bad
debt reserves, the limited market for the Common
Stock, the cost of the ESOP, the cost and
possible dilutive effect of the MRP and Stock
Option Plan, potential financial institution
regulation and legislation, competition, certain
anti-takeover considerations, income tax
consequences of Subscription Rights, the
possibility of a delay in completing the
offering and issuing the shares of Common Stock
and certain other matters that potential
purchasers should consider before deciding
whether to subscribe for the Common Stock
offered hereby.
17
<PAGE>
SELECTED FINANCIAL
AND OTHER DATA OF HOME SAVINGS
Set forth below are summaries of historical financial and other data
of Home Savings. This information is derived in part from, and should be read
in conjunction with, the Financial Statements and Notes to Financial Statements
of Home 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.
18
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended June 30,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Financial condition data:
Total assets $81,304 $75,508 $73,843 $70,864 $65,947
Investments (1) 22,823 18,852 18,012 15,833 13,729
Loans receivable, net 55,193 54,020 53,802 53,566 50,120
Deposits 69,669 64,448 63,937 62,129 58,205
Retained earnings 11,245 10,640 9,610 8,439 7,370
Operating data:
Interest income $5,868 $5,371 $5,337 $5,402 $5,439
Interest expense 3,540 2,788 2,487 2,736 3,472
Net interest income $2,328 2,583 2,850 2,666 1,967
Provision for loan losses 165 105 114 165 87
Net interest income after provision for loan losses 2,163 2,478 2,736 2,501 1,880
Non-interest income 35 15 40 40 97
Non-interest expense 1,169 979 910 833 775
Income before income taxes 1,029 1,514 1,866 1,708 1,202
Income tax expense 352 593 694 639 421
Net income $ 677 $ 921 $ 1,172 $ 1,069 $ 781
Other selected data:
Number of outstanding loans 1,306 1,317 1,783 1,992 1,987
Number of deposit accounts 4,670 4,715 5,241 5,250 4,989
Number of full-service offices open 1 1 1 1 1
Return on average assets 0.86% 1.25% 1.59% 1.55% 1.24%
Return on average equity 6.19% 9.15% 12.82% 13.37% 11.22%
Average equity to average assets 13.94% 13.68% 12.43% 11.56% 11.06%
Interest rate spread 2.41% 3.10% 3.55% 3.53% 2.64%
Net yield on average interest-earning assets 3.05% 3.61% 3.97% 3.97% 3.22%
Average interest-earning assets to average
interest-bearing liabilities 113.86% 113.08% 112.12% 110.59% 110.09%
Ratio of non-interest expense to average total
assets 1.49% 1.33% 1.24% 1.20% 1.23%
Nonperforming assets to total assets 0.76% 1.21% 2.32% 2.53% 1.09%
Nonperforming loans to total loans 0.52% 1.56% 2.98% 2.99% 1.11%
Allowance for loan losses to total loans 0.97% 0.74% 0.55% 0.37% 0.19%
Allowance for loan losses to nonperforming loans 187.02% 47.68% 18.38% 12.43% 17.06%
Provision for loan losses to total loans receivable,
net 0.30% 0.19% 0.21% 0.31% 0.17%
Net charge-offs to average loans outstanding 0.06% 0.00% 0.03% 0.12% 0.08%
Retained earnings to total assets 13.83% 14.09% 13.01% 11.91% 11.18%
Average equity to average assets 13.95% 13.68% 12.43% 11.56% 11.06%
</TABLE>
(1) Includes interest-bearing deposits, federal funds sold, FHLB stock and
investment securities.
19
<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.
Potential Impact of Changes in Interest Rates
The results of operations of Home 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. Home 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
Home 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 Home Savings,
would be expected to be negatively impacted by increases in interest rates.
Some 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.
At June 30, 1996, Home Savings' cumulative one year gap as a
percentage of total interest-earning assets was a negative 48.86%, and its
cumulative three year gap as a percentage of total interest-earning assets was a
negative 49.45%. Home Savings' computes its gap position without using certain
prepayment, deposit decay and other assumptions sometimes used in such
computations. The results of Home Savings' gap computations could be
substantially different if these or other assumptions were used.
In addition to the interest rate gap analysis discussed above, Home
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 Home Savings' NPV and
net interest income of instantaneous and permanent 100 to 400 basis point
increases and decreases in market interest rates. Home Savings' Board of
Directors has established maximum acceptable decreases in NPV and net interest
income for various rate scenarios. Computations as of June 30, 1996, based upon
information provided by the FHLB of Atlanta, indicated that a 200 basis point
increase in interest rates would result in a 27% decrease in Home Savings' NPV
and a 200 basis point decrease in interest rates would result in a 25% increase
in Home Savings' NPV. Such computations also indicate that the same 200 basis
point increase in interest rates would result in a 17% decrease in net interest
income and that the 200 basis point decrease in interest rates would result in a
17% increase in net interest income. 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, such computations and the
gap computations described above 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."
The computations described above indicate that Home Savings' asset and
liability structure presents significant interest rate risk and that Home
Savings' portfolio value and net interest income would be negatively impacted by
increases in interest rates. Home Savings net interest income during fiscal
1996 was $255,000 or 9.87% less than fiscal 1995. This decrease was largely due
to an increase in market interest rates which resulted in a reduction of Home
Savings' interest rate spread from 3.10% in fiscal year 1995 to 2.41% in fiscal
year 1996. See
20
<PAGE>
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION--Comparison of Results of Operation for the Years Ended June 30,
1996, 1995 and 1994--Net Interest Income." However, because of Home Savings'
capital position and historical results of operations, Home Savings' management
did not consider Home Savings' interest rate risk position as of June 30, 1996
to be unacceptable.
Home 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 Home Savings' adjustable rate assets only reprice
once a year, (ii) the fact that Home Savings originates significant amounts of
fixed rate mortgage loans and does not sell such loans in the secondary market,
(iii) the fact that a large percentage of Home Savings' deposit accounts are
subject to immediate repricing or to repricing within one year, (iv) the fact
that Home Savings' interest-earning assets and interest-bearing liabilities
reprice at different times and with different frequencies, (v) the effects of
periodic and lifetime interest rate caps on Home Savings' interest-earning
assets, (vi) the fact that interest rates on Home Savings' assets and
liabilities respond differently to economic, market and competitive factors, and
(vii) 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 Home Savings. 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. Home Savings does not originate its fixed rate or adjustable rate
loans for sale, or sell its loans in the secondary market, and this tends to
increase its exposure to interest rate risk. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Asset/Liability
Management."
High Level of Deposits of $100,000 or More
At June 30, 1996, $13.7 million of Home Savings' certificate of
deposit accounts, or 26.3% of all of its certificate of deposit accounts, were
for balances of $100,000 or more. Such deposit accounts, which are frequently
referred to as "jumbo" deposits, are generally considered to be more interest
rate sensitive than other deposits. As a result, it would generally be
expected that a significant amount of such jumbo deposits could be withdrawn
from Home Savings if higher rates could be obtained elsewhere. Home Savings
does not solicit or accept brokered deposits. Home Savings believes that most
of the jumbo deposits at Home Savings are held by long-time local customers of
the institution.
Anticipated Low Return on Equity Following Conversion
At June 30, 1996, Home Savings' ratio of equity to assets was 13.83%.
On a pro forma basis at June 30, 1996, assuming the sale of 333,500 shares of
Common Stock in the Conversion, the Holding Company's ratio of equity to assets
would have been 26.38%. 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 norms 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 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 Home Savings--Restrictions on Dividends and Other Capital
Distributions."
21
<PAGE>
Importance of Key Employers
The High Point and Thomasville, North Carolina area is considered to
be the furniture capital of the world. As a result, the furniture industry is a
key employer in Home Savings' primary market area. Thomasville Furniture
Industries, Inc., a Thomasville, North Carolina furniture manufacturer, is by
far the largest employer in Thomasville, North Carolina. As a result, any
adverse changes in the furniture industry in general or in the business of
Thomasville Furniture Industries, Inc., could have an adverse impact upon Home
Savings' primary market area. Any such changes could adversely affect real
estate values in Home Savings' primary market area, increase unemployment and
increase rates of delinquencies in Home Savings' loan portfolio.
Recapitalization of SAIF, its Impact on SAIF Premiums and One-Time
Recapitalization Fee
As a SAIF-insured institution, Home 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, which imposed assessments ranging from 23 cents to 31 cents
per $100 of insured domestic deposits. As a result of subsequent changes to the
uniform assessment rate, financial institutions such as Home Savings which are
members of the SAIF are currently 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. This has created a disparity
between SAIF and BIF assessments. Annual assessments for BIF members in the
lowest risk category are now only $2,000. Home Savings paid deposit insurance
premiums of $149,000 and $145,000 in fiscal 1996 and 1995, respectively. The
FDIC has noted that the premium differential may have adverse consequences for
SAIF members, including reduced earnings and an impaired ability to raise funds
in capital markets. In addition, SAIF members, such as Home 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.
A comprehensive continuing appropriations bill, which was passed by
the United States Congress and signed by the President on September 30, 1996,
reduced this premium differential between BIF- and SAIF-insured institutions but
did not eliminate it. As a result of this legislation, it is now anticipated
that, beginning on January 1, 1997, BIF-insured institutions, except those in
higher risk categories, will pay deposit insurance premiums equal to
approximately 1.3 cents per $100 of insured domestic deposits and SAIF-insured
institutions, except those in higher risk categories, will pay deposit insurance
premiums equal to approximately 6.4 cents per $100 of insured domestic deposits.
This premium differential is expected to exist until at least January 1, 1999.
See "SUPERVISION AND REGULATION--Regulation of Home Savings--Insurance of
Deposit Accounts."
The above-described comprehensive continuing appropriations bill
enacted on September 30, 1996 provides for a one-time assessment on SAIF members
to recapitalize the SAIF. The assessment is estimated to equal 65.7 cents per
each $100 of insured domestic deposits. Such premium will have the effect of
immediately reducing the capital of SAIF-member institutions by the amount of
the assessment. It is anticipated that SAIF-member institutions will not be
allowed to amortize the expense of the one-time assessment over a period of
years. The one-time assessment, which is expected to be based on Home Savings'
deposits as of March 31, 1995, is expected to equal approximately $409,000 on a
before tax basis and be payable prior to December, 1996. This one-time
assessment to recapitalize the SAIF is expected to have an adverse effect on the
operating expenses and results of operations of Home Savings during the quarter
ended December 31, 1996. See "SUPERVISION AND REGULATION--Regulation of Home
Savings--Insurance of Deposit Accounts."
Increased Tax Liability From Recapture of Bad Debt Reserves
Recently enacted federal legislation has repealed the reserve method
of accounting for thrift bad debt reserves and requires thrifts to recapture
into income over a six-year period their post-1987 additions to their excess bad
debt tax reserves, thereby generating additional tax liability. Under the
legislation, recapture of post-1987 excess reserves is suspended for up to two
years to the first tax year beginning after December 31, 1997 if, during those
22
<PAGE>
years, the institution satisfies a "residential loan requirement." At June 30,
1996, Home Savings' post-1987 excess reserves amounted to approximately
$264,000. See "TAXATION -- Federal Income Taxation."
Limited Market for the Common Stock
It is anticipated that immediately following completion of the
Conversion the Holding Company will have no more than 383,525 shares of Common
Stock issued and outstanding if the pro forma appraised valuation of the Holding
Company and Home Savings is increased by 15% above the maximum of the Valuation
Range. Upon the consummation of the Conversion, the Holding Company will review
the eligibility of the Common Stock for quotation on the Nasdaq SmallCap Market.
In the event that the Common Stock is eligible for quotation on the Nasdaq
SmallCap Market, the Holding Company will apply to have the Common Stock quoted
on the Nasdaq SmallCap Market. There can be no assurance, however, that any
such application will be approved or that the Common Stock will be quoted on the
Nasdaq SmallCap Market. If the Common Stock is quoted on the Nasdaq SmallCap
Market, Trident Securities intends to act as a market maker and will attempt to
enlist at least one other market maker to make a market in the Common Stock. In
the event the Common Stock does not qualify for quotation on the Nasdaq SmallCap
Market, the Holding Company intends to list the Common Stock over-the-counter
through the National Daily Quotation System "Pink Sheets" published by the
National Quotation Bureau, Inc., and the Holding Company will request that
Trident Securities undertake to match offers to buy and offers to sell the
Common Stock. There can be no assurance that timely or accurate quotations will
be available in the "Pink Sheets." In addition, the existence of a public
trading market will depend upon the presence in the market place of both willing
buyers and willing sellers at any given time. The presence of a sufficient
number of buyers and sellers at any given time is a factor over which neither
the Holding Company nor any broker or dealer has control. Due to the small
number of shares of Common Stock being offered in the Conversion and the
concentration of ownership, it is unlikely that an active or liquid trading
market for the Common Stock will develop and be maintained. Purchasers of Common
Stock should recognize that the absence of an active and liquid trading market
may make it difficult to sell the Common Stock and may have an adverse effect on
the price. Purchasers should consider the potentially illiquid and long-term
nature of their investment in the shares offered hereby. See "MARKET FOR COMMON
STOCK."
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 HOME SAVINGS--Employee Stock Ownership Plan." Assuming the
issuance of 333,500 shares in the Conversion, it is expected that 26,680 shares
will be purchased by the ESOP, which--if such shares are acquired at $50.00 per
share--would have a value of $1,334,000. If, because there is an
oversubscription for shares of Common Stock or for any other reason, the ESOP is
unable to purchase in the Conversion 8% of the total number of shares offered in
the Conversion, then the Board of Directors of the Holding Company intends to
approve the purchase by the ESOP in the open market after the Conversion, of
such shares as are necessary for the ESOP to own a number of shares equal to 8%
of the shares of Common Stock issued in the Conversion. In such event, the
actual cost of the ESOP may be more or less than the amounts set forth above
because the ESOP will be purchasing its shares in the open market and the price
paid for its shares will depend upon the price at which shares can be acquired
in the open market. The purchase of Common Stock by the ESOP will reduce the pro
forma stockholders' equity of Home 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 the
measure of compensation recorded by employers from the cost of ESOP shares to
the fair value of ESOP shares. Since the fair value of the shares following the
Offerings cannot be predicted, Home 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 Home 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.
23
<PAGE>
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
after the Conversion. Under the MRP, directors and certain employees of Home
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
certain employees of Home 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 certain 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 333,500 shares of the Common Stock are issued in the Conversion, it is
expected that options to acquire 33,350 shares of the Common Stock could be
granted under the Stock Option Plan, and awards of an additional 13,340 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 $50.00 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 333,500 to 380,190, the pro forma book value per share of the
outstanding Common Stock at June 30, 1996 would have been $72.04 compared with
$77.13 if such plans did not exist, and the pro forma net income per share of
the outstanding Common Stock for the fiscal year ended June 30, 1996 would have
been $3.06 compared with $3.59 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 333,500 shares of Common Stock are issued in
the Conversion and the MRP acquired 13,340 shares at a cost of $50.00 per share,
the total annual expense of the MRP would be $133,400 per year. See "PRO FORMA
DATA" and "MANAGEMENT OF HOME SAVINGS--Proposed Management Recognition Plan"
and "--Proposed Stock Option Plan."
Financial Institution Regulation and Possible Legislation
Home 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, Home Savings, or Home Savings' Conversion.
Congress currently has under consideration various proposals to
consolidate the regulatory functions of the four federal banking agencies: the
Office of Thrift Supervision, the FDIC, the Office of the Comptroller of the
Currency and the Federal Reserve. The outcome of efforts to effect regulatory
consolidation is uncertain. Therefore, Home Savings is unable to determine the
extent to which legislation, if enacted, would affect its business.
Competition
Home Savings' market area is a highly competitive market, and Home
Savings faces significant competition both in attracting deposits and in
originating loans. Home 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 Home Savings and,
therefore, have greater financial and marketing resources than Home Savings.
Management estimates that, based upon 1995 comparative data, Home Savings had
15.7% of the deposits in Thomasville, North Carolina and 5.5% of the deposits in
Davidson County, North Carolina. See "BUSINESS OF HOME SAVINGS--Competition."
24
<PAGE>
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 voting control
of the Holding Company and to impede other transactions not favored by
management. The amended Certificate of Incorporation and Bylaws of Home Savings
upon its conversion to stock form also contain certain provisions that might
discourage potential takeover attempts of Home Savings. See "ANTI-TAKEOVER
PROVISIONS AFFECTING THE HOLDING COMPANY AND HOME 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 Home 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 Home 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 Home 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
Home 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
25
<PAGE>
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 HOME 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 Home
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, Directors and Employees. Directors and
executive officers of Home Savings and the Holding Company and their associates
expect to purchase approximately 9.05% to 6.69% 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
Home Savings) 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.
Under the proposed MRP, if approved by the stockholders of the Holding
Company, a number of shares equal to 4% of the shares issued in the Conversion
could be issued to directors and certain employees of Home Savings. Such shares
could be purchased in the open market or could be issued out of authorized but
unissued shares. Recipients of shares under the MRP will have voting control
over such shares regardless of whether such shares have vested. See "MANAGEMENT
OF HOME SAVINGS--Proposed Management Recognition Plan." Under the proposed
Stock Option Plan, if approved by the stockholders of the Holding Company,
directors and certain employees of Home Savings could receive options to
purchase a number of shares equal to 10% of the shares issued in the Conversion.
Shares to fund such options could be acquired in the open market or could be
acquired through the issuance of authorized but unissued shares. If shares are
acquired in the open market and held by the Stock Option Plan prior to the
exercise of options under the Plan, holders of unexercised options will have
voting control over the shares held to fund their options. See "MANAGEMENT OF
HOME SAVINGS--Proposed Stock Option Plan."
If (i) the Stock Option Plan is approved by the stockholders of the
Holding Company within one year after the Conversion and all of the stock
options which could be granted to directors and executive officers under the
Stock Option Plan are granted and exercised or the shares for such options are
acquired by the Stock Option Plan and all option shares are acquired in the open
market, (ii) the MRP is approved by the stockholders of the Holding Company
within one year after the Conversion, all of the MRP shares which could be
granted to directors and executive officers are granted and issued and all such
shares are acquired in the open market, (iii) the ESOP acquires 8% of the shares
issued in the Conversion and none of such shares are allocated, and (iv) the
Holding Company did not issue any additional shares of its Common Stock, the
shares held by directors and executive officers and their associates as a group,
including (a) shares purchased outright in the Conversion, (b) shares purchased
by the ESOP, (c) shares purchased pursuant to the Stock Option Plan and (d)
shares granted under the MRP, would give such persons effective control over as
much as 30.35% or 27.99%, 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
directors, officers and employees, as a group, could effectively block such
transactions. See "ANTI-TAKEOVER
26
<PAGE>
PROVISIONS AFFECTING THE HOLDING COMPANY AND HOME SAVINGS--The Holding Company
- --Supermajority Voting Provisions."
Agreements With Employees. In connection with the Conversion, Home
Savings will enter into an employment agreement with James G. Hudson, Jr.,
President, Chief Executive Officer and Treasurer and will enter into Special
Termination Agreements with John E. Todd, Vice President, and Drema A. Michael,
Secretary and Assistant Treasurer. See "MANAGEMENT OF HOME SAVINGS--
Employment Agreement" and "Special Termination Agreements." In addition, Home
Savings intends to adopt a Severance Plan which would benefit its employees in
the event there is a change in control of the Holding Company or Home Savings.
See "MANAGEMENT OF HOME SAVINGS--Severance Plan." The existence of the
employment agreement, special termination 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 Home Savings.
See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND HOME SAVINGS--
The Holding Company--Anti-Takeover Effect of Employment Agreement, Special
Termination Agreements and Benefit Plans."
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. Home Savings has received an opinion from JMP
Financial stating that the Subscription Rights do not have any ascertainable
value. The opinion of JMP Financial is not binding on the Internal Revenue
Service ("IRS"). See "THE CONVERSION--Income Tax Consequences."
Possible Delays in Consummation of the Conversion
Consummation of the Conversion is contingent upon receipt of approvals
from the Administrator and Federal Reserve. In addition, the Conversion cannot
be consummated until the FDIC issues a notice of non-objection with respect to
the transaction and until the Conversion has been approved by the members of
Home Savings. Final regulatory approval is subject to receipt and review of an
updated appraisal from JMP Financial which considers the results of the
Offerings and any material developments occurring subsequent to the most recent
appraisal submitted in connection with the Conversion.
Accordingly, consummation of the Conversion and issuance of
certificates for shares of Common Stock could be delayed if receipt of the final
regulatory approval is delayed or not obtained. Until the Conversion is
consummated, no shares of Common Stock may be traded. If all necessary
approvals are not obtained, all subscription funds held will be returned with
interest and all withdrawal authorizations will be terminated.
Best Efforts Offering
Home Savings has engaged Trident Securities to consult with and advise
Home 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 is under no
obligation to purchase any shares of Common Stock in any of the Offerings.
Trident Securities has not prepared or delivered any opinion or recommendation
with respect to the appropriateness of the amount of Common Stock to be issued
in the Conversion. Trident Securities has not prepared any fairness opinion
with respect to the terms of the Offerings or any opinion with respect to the
price at which shares of Common Stock may trade.
CENTURY BANCORP, INC.
The Holding Company was incorporated under North Carolina law in July
1996 at the direction of Home Savings for the purpose of acquiring and holding
all of the outstanding capital stock of Home 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
27
<PAGE>
Reserve and the Administrator. The holding company structure will give the
Holding Company greater flexibility than Home Savings currently has to expand
and diversify its business activities, although there are no current 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 Home 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 Home
Savings at 22 Winston Street, Thomasville, North Carolina.
The existing management of the Holding Company believes that it will
be in the best interests of the Holding Company, Home Savings and the Holding
Company's stockholders for the Holding Company to remain an independent company.
HOME SAVINGS, SSB
Home Savings is a North Carolina-chartered mutual savings bank. Home
Savings was organized in 1915. Home Savings has been a member of the FHLB system
and its deposits have been federally insured since the late 1950's. The deposits
of Home Savings are insured by the SAIF of the FDIC to the maximum amount
permitted by law.
Home 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,
Home Savings is regulated by the Administrator. Home 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 Home Savings."
Home Savings conducts business through its full service office in
Thomasville, North Carolina. Home Savings' primary market area encompasses the
communities within a 10-mile radius of its office, which includes portions of
Davidson, Randolph and Guilford counties in North Carolina. At June 30, 1996,
Home Savings had total assets of $81.3 million, net loans of $55.2 million,
deposits of $69.7 million and retained earnings of $11.2 million.
Home Savings is a community-oriented financial institution which
offers a variety of financial services to meet the needs of the communities it
serves. Home 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, multi-family residential and commercial
loans, construction loans, home equity line of credit loans and other loans and
investments.
Revenues of Home Savings are derived primarily from interest on loans.
Home Savings also receives interest income from its investments, mortgage-backed
securities and interest-earning deposit balances. Home Savings also receives
non-interest income from transaction and service fees and other sources. The
major expenses of Home Savings are interest on deposits and general and
administrative expenses such as compensation and employee benefits, federal
deposit insurance premiums, data processing expenses and 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 $11,631,000 and $15,858,000,
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 $18,288,250. See "PRO FORMA DATA" for the
assumptions used to arrive at these amounts. The actual net proceeds may vary
materially from the estimated amounts
28
<PAGE>
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 $50.00 per share with funds borrowed from the Holding
Company. The amount loaned to the ESOP to enable such purchases is estimated to
range from $986,000 (if 246,500 shares are issued) to $1,334,000 (if 333,500
shares are issued). If for any reason the ESOP is unable to purchase its shares
in the Subscription Offering, 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 $50.00. See
"MANAGEMENT OF HOME 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 $986,000
to $1,334,000), it is expected that the Holding Company will retain
approximately 50% of the remaining net proceeds of the Offerings and will pay
the balance of the net proceeds to Home Savings in exchange for all of the
common stock of Home 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 could 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 Home Savings' primary market area. The Holding Company has
no current plans or pending agreements or understandings regarding any such
acquisitions, and there are no pending negotiations regarding any such
acquisitions at this time.
Net proceeds paid to Home Savings initially will become part of Home
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 Home 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 Home Savings will be used for general corporate purposes.
The proceeds of the Offerings will result in an increase in Home
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 Home
Savings will not result in the receipt of new funds for investment by Home
Savings.
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 Home 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 Home Savings' current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations. Federal regulations require that, subject to certain
exceptions, the Holding Company must obtain approval of the Federal Reserve
prior to
29
<PAGE>
repurchasing Common Stock for in excess of 10% of its net worth during any 12
month period. See "SUPERVISION AND REGULATION--Regulation of the Holding
Company--Dividend and Repurchase Limitations." The Holding Company has no
present intention at this time to repurchase any Common Stock during the first
year following the Conversion; however, the Company will continue to study
whether it will at some time be appropriate to repurchase shares of its Common
Stock, and it could decide to repurchase shares at any time, subject to
regulatory requirements.
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 HOME 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 Home Savings from the proceeds of the Conversion.
It is estimated that between 9,860 and 13,340 shares will be acquired by the
MRP, assuming the issuance of between 246,500 and 333,500 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 $50.00 per share, Home
Savings would contribute between $493,000 and $667,000, respectively, to the MRP
for this purpose.
If the Stock Option Plan is approved by the stockholders of the
Holding Company, the Stock Option Plan could acquire a number of shares of
Common Stock in the open market equal to 10% of the number of shares issued in
the Conversion. These shares would be held by the Stock Option Plan for
issuance upon the exercise of stock options. To the extent the Stock Option
Plan does not acquire sufficient shares to satisfy options granted under the
Stock Option Plan, the Holding Company will reserve authorized but unissued
shares for this purpose. See "MANAGEMENT OF HOME 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 Home Savings from
the proceeds of the Conversion. It is estimated that between 24,650 and 33,350
shares will be acquired by the Stock Option Plan, assuming the issuance of
between 246,500 and 333,500 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 $50.00 per share, the Holding Company or
Home Savings would contribute between $1,232,500 and $1,667,500, respectively,
to the Stock Option Plan for this purpose.
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 Home Savings, capital requirements, regulatory
limitations, the Holding Company's and Home Savings' results of operations and
financial condition, tax considerations and general economic conditions. Upon
review of such considerations, the Board of Directors of the Holding Company may
authorize dividends to be paid in the future if it deems such payment
appropriate and in compliance with applicable law and regulation. No assurances
can be given that any dividends will in fact be paid on the Common Stock or, if
dividends are paid, that they will not be reduced or discontinued in the future.
In connection with the Conversion, the Holding Company and Home
Savings have agreed with the FDIC that, within the first year after completion
of the Conversion, neither the Holding Company nor Home Savings will pay any
dividend or make any distribution that represents, or is characterized as, or is
treated for tax purposes as a return of capital.
The sources of income to the Holding Company initially will consist of
earnings on the capital retained by the Holding Company and dividends paid by
Home Savings to the Holding Company, if any. Consequently, future declarations
of cash dividends by the Holding Company may depend upon dividend payments by
Home Savings to the
30
<PAGE>
Holding Company, which payments are subject to various restrictions. Under
current North Carolina regulations, Home 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,
Home 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 Home Savings--Restrictions on Dividends and Other
Capital Distributions." As a result of this limitation, if Home Savings had been
a stock institution at the end of fiscal 1996 and for the two preceding fiscal
years, it could not have paid a dividend in excess of $462,000 without the
approval of the Administrator. As a converted institution, Home 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 Home Savings to pay dividends to the Holding Company without
incurring a recapture tax.
MARKET FOR COMMON STOCK
Neither the Holding Company nor Home Savings has ever issued stock
before, and, due to the relatively small size of the offering, it is unlikely
that an active and liquid trading market will develop. Upon the consummation of
the Conversion, the Holding Company will review the eligibility of the Common
Stock for quotation on the Nasdaq SmallCap Market. In the event that the Common
Stock is eligible for quotation on the Nasdaq SmallCap Market, the Holding
Company will apply to have the Common Stock quoted on the Nasdaq SmallCap
Market. There can be no assurance, however, that any such application will be
approved or that the Common Stock will be quoted on the Nasdaq SmallCap Market.
If the Common Stock is quoted on the Nasdaq SmallCap Market, Trident Securities
intends to act as a market maker and to encourage at least one other market
maker to make a market in the Common Stock. In the event the Common Stock does
not qualify for quotation on the Nasdaq SmallCap Market, the Holding Company
intends to list the Common Stock over-the-counter through the National Daily
Quotation System "Pink Sheets" published by the National Quotation Bureau, Inc.,
and the Holding Company intends to request Trident Securities undertake to match
offers to buy and offers to sell the Common Stock. There can be no assurance
that timely or accurate quotations will be available in the "Pink Sheets." In
addition, the existence of a public trading market will depend upon the presence
in the market of both willing buyers and willing sellers at any given time. Due
to the small number of shares of Common Stock being offered in the Conversion
and the concentration of ownership, it is unlikely that an active or liquid
trading market for the Common Stock will develop and be maintained. Further,
the absence of an active and liquid trading market may make it difficult to sell
the Common Stock and may have an adverse effect on the price of the Common
Stock. Purchasers should consider the potentially illiquid and long-term nature
of their investment in the shares offered hereby.
CAPITALIZATION
The following tables present the historical capitalization of Home
Savings at June 30, 1996 and the pro forma capitalization of the Holding Company
at such date after giving effect to the sale of the Common Stock and application
of the assumptions set forth under "PRO FORMA DATA," assuming that 246,500,
290,000, 333,500 and 383,525 shares of Common Stock are sold at $50.00 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."
31
<PAGE>
<TABLE>
<CAPTION>
The Holding Company Pro Forma Capitalization at June 30, 1996
Based Upon Sale of
-----------------------------------------------------------------------------
246,500 290,000 333,500 383,525
shares at a shares at a shares at a shares at a
Historical price of price of price of price of
Capitalization $50.00 per share $50.00 per share $50.00 per share $50.00 per share(1)
-------------- ----------------- ---------------- ---------------- -------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits (2) $69,669 $69,669 $69,669 $69,669 $69,669
Stockholders' equity
Common stock, no par
value:
Authorized shares:
20,000,000
Assumed outstanding $ -- $11,631 $13,744 $15,858 $18,288
shares as shown in
column headings (3)
Preferred stock:
Authorized shares:
5,000,000
No shares outstanding -- -- -- -- --
Additional paid-in capital
Less: Common stock to be -- (493) (580) (667) (767)
acquired by the MRP (4)
Less: Common stock to be -- (986) (1,160) (1,334) (1,534)
acquired by the ESOP (4)
Retained earnings (5) 11,245 11,245 11,245 11,245 11,245
------ ------ ------ ------ ------
Total $11,245 $21,397 $23,249 $25,102 $27,232
======= ======= ======= ======= =======
Total deposits and $80,914 $91,066 $92,918 $94,771 $96,901
stockholders' equity ======= ======= ======= ======= =======
</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 Home Savings' stock option plan. See "MANAGEMENT OF
HOME 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 Home
Savings. The Common Stock acquired by both the ESOP and the MRP is
reflected as a reduction of stockholders' equity. See "MANAGEMENT OF HOME
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.
32
<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 $11,631,000 and $15,858,000 (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) 17.05%,
15.69%, 14.69% and 13.81% 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 (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 $366,000. 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 Home
Savings deposit accounts will not result in the receipt of new funds for
investment by Home 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 September 23, 1996 is from a minimum of $12,325,000 to a maximum of
$16,675,000 with a midpoint of $14,500,000. 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
$19,176,250, without a resolicitation and without any right to cancel, rescind
or change subscription orders, to reflect changes in market and financial
conditions following commencement of the Subscription Offering. See "THE
CONVERSION--Purchase Price of Common Stock and Number of Shares Offered."
Pro forma consolidated net earnings and book value of the Holding
Company at or for the year ended June 30, 1996 have been based upon the
following assumptions: (i) the sale of shares of Common Stock in connection with
the Conversion occurred at July 1, 1995 and yielded net proceeds available for
investment of $10,152,000, $12,004,000, $13,857,000 and $15,987,000 (based upon
the issuance of 246,500, 290,000, 333,500 and 383,525 shares, respectively, at
$50.00 per share) on such date; and (ii) such net proceeds were invested on a
consolidated basis at the beginning of the period at a yield of 5.82%, which
represents the average one-year treasury constant maturity rate for the last
week of June 1996. The Holding Company did not use the arithmetic average of
Home Savings' weighted-average yield on interest-earning assets and weighted-
average interest rate paid on deposits during the year ended June 30, 1996.
Management believes that the one-year Treasury rate is a more appropriate rate
for purposes of preparing the pro forma data because proceeds from the
Conversion are expected to be initially invested in instruments with similar
yields and maturities. The effect of withdrawals from deposit accounts for the
purchase of Common Stock has not been reflected. Such withdrawals have no
effect on pro forma stockholders' equity, and management does not believe that
such withdrawals will have a material impact on pro forma net earnings or pro
forma net earnings per share. In calculating pro forma net earnings, an
effective tax rate of 39% has been assumed, resulting in a yield after taxes of
3.55%. Historical and pro forma per share amounts have been calculated by
dividing Home 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.
33
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
--------------------------------------------------------------------------
246,500 290,000 333,500 383,525
shares at $50.00 shares at $50.00 shares at $50.00 shares at $50.00
per share per share per share per share
(Minimum) (Midpoint) (Maximum) (15% above Max.)
---------------- ---------------- ---------------- ----------------
(Dollars in Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds $ 12,325 $14,500 $ 16,675 $ 19,176
Less Offering expenses and
commissions (694) (756) (817) (888)
Estimated net conversion --------- --------- --------- --------
proceeds (1) 11,631 13,744 15,858 18,288
Less shares to be
acquired by ESOP (2) (986) (1,160) (1,334) (1,534)
Less shares to be
acquired by MRP (3) (493) (580) (667) (767)
--------- -------- -------- --------
Adjusted estimated net
conversion proceeds $ 10,152 $ 12,004 $ 13,857 $ 15,987
========= ======== ======== ========
Pro forma net income:
Historical net income $ 677 $ 677 $ 677 $ 677
Pro Forma adjustments:
Pro forma income on
net proceeds (1) 360 426 492 568
Pro forma ESOP
adjustments (2) (60) (71) (81) (94)
Pro forma MRP
adjustments (3) (60) (71) (81) (94)
--------- -------- -------- --------
Pro forma net income $ 917 $ 961 $ 1,007 $ 1,057
========= ======== ======== ========
Pro forma net income per
share (5):
Historical net income
per share $ 2.96 $ 2.52 $ 2.19 $ 1.90
Pro forma adjustments:
Pro forma income on
net proceeds 1.57 1.57 1.58 1.59
Pro forma ESOP
adjustments (2) (0.26) (0.26) (0.26) (0.26)
Pro forma MRP
adjustments (3) (0.26) (0.26) (0.26) (0.26)
--------- -------- -------- --------
Pro forma net income
per share $ 4.01 $ 3.57 $ 3.25 $ 2.97
========= ======== ======== ========
Ratio of price per share
to pro forma income per
share (5) 12.47 14.01 15.36 16.83
========= ======== ======== =========
Pro forma stockholders'
equity (book value) (4):
Historical retained
earnings $ 11,245 $ 11,245 $ 11,245 $ 11,245
Estimated net conversion
proceeds 11,631 13,744 15,858 18,288
Less shares to be
acquired by:
ESOP (2) (986) (1,160) (1,334) (1,534)
MRP (3) (493) (580) (667) (767)
--------- -------- -------- ---------
Pro forma stockholders'
equity (4) $ 21,397 $ 23,249 $ 25,102 $ 27,232
========= ======== ======== =========
Pro forma stockholders'
equity per share (4):
Historical retained
earnings $ 45.62 $ 38.78 $ 33.72 $ 29.32
Estimated net conversion
proceeds 47.18 47.39 47.55 47.68
Less shares to be
acquired by:
ESOP (2) (4.00) (4.00) (4.00) (4.00)
MRP (3) (2.00) (2.00) (2.00) (2.00)
--------- -------- -------- ---------
Pro forma stockholders'
equity per share (4) $ 86.80 $ 80.17 $ 75.27 $ 71.00
========= ======== ======== =========
Pro forma price to book value 57.60% 62.37% 66.43% 70.42%
========= ========= ======== =========
Number of shares used to
calculate income per
share (5) 228,752 269,120 309,488 355,911
======== ======== ======== =========
Number of shares used to
calculate stockholders'
equity per share (4) 246,500 290,000 333,500 383,525
======== ======== ======== =========
</TABLE>
34
<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 in the open
market to be delivered upon the exercise of options. 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 38,352 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 $50.00 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 383,525 to 421,877 and the pro forma earnings per share
of the outstanding Common Stock for the year ended June 30, 1996 (based on
shares released for the period pursuant to SOP 93-6) would have been $2.85
compared with $2.97 if the Stock Option Plan did not exist. See
"MANAGEMENT OF HOME 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 HOME 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 HOME SAVINGS--Proposed Management Recognition Plan."
(4) The retained earnings of Home Savings will be substantially restricted
after the Conversion. See "DIVIDEND POLICY," "SUPERVISION AND REGULATION -
- Regulation of Home 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.
(6) Pro forma net earnings per share have been annualized for purposes of this
ratio.
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
Home Savings is subject to the North Carolina savings bank requirement
that net worth, computed in accordance with the requirements of the
Administrator, equal or exceed 5% of total assets. As of June 30, 1996, Home
Savings' net worth, computed in accordance with such requirements, was 14.44% of
total assets. In addition, Home 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, Home Savings exceeds the FDIC
Tier I and risk-based capital requirements and North Carolina capital
requirements on a historical and pro forma basis.
The following table presents (i) Home Savings' historical regulatory
capital position on June 30, 1996 and (ii) Home Savings' pro forma regulatory
capital position on such date after giving effect to the assumptions set forth
35
<PAGE>
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.
36
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Regulatory Capital Position At June 30, 1996
-------------------------------------------------------------------------------------
Home Savings'
Historical 246,500 290,000 333,500 383,525
Regulatory Capital Shares sold at Shares sold at Shares sold at Shares sold at
Position at Price of $50.00 Price of $50.00 Price of $50.00 Price of $50.00
June 30, 1996 per share per share per share per share
-------------------- ------------------- ------------------- ------------------- -------------------
Percent of Percent of Percent of Percent of Percent of
Regulatory Regulatory Regulatory Regulatory Regulatory
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
-------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Tier 1 (leverage)
capital $11,208 13.79% $17,024 19.54% $18,080 20.50% $19,137 21.45% $20,352 22.50%
Tier 1 (leverage)
capital requirement (2) 3,252 4.00% 3,485 4.00% 3,527 4.00% 3,569 4.00% 4.00%
------- ------ ------- ------ ------- ------ ------- ------ -- -------
7,956 9.79% $13,539 15.54% 16.50% $15,568 17.45% 3,618 18.50%
Excess ======= ====== ======= ====== = ====== ======= ====== ------- ======
$14,553 =
======= $16,734
=======
Tier 1 risk based
capital $11,208 26.47% $17,024 31.64% $18,080 33.61% $19,137 35.57% $20,352 37.83%
Tier 1 risk based
capital requirement 1,694 4.00% 2,152 4.00% 4.00% 2,152 4.00% 2,152 4.00%
------- ------ ------- ------ -- ------ ------- ------ ------- ------
Excess $ 9,514 22.47% $14,872 27.64% 2,152 29.61% $16,985 31.57% 33.83%
======= ====== ======= ====== ------- ====== ======= ====== = ======
= $18,200
$15,928 =======
=======
Total risk based
capital $11,741 27.73% $17,557 32.64% $18,613 34.60% $19,670 36.57% $20,885 38.83%
Total risk based
capital requirement 3,388 8.00% 4,303 8.00% 4,303 8.00% 4,303 8.00% 4,303 8.00%
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Excess $ 8,353 19.73% $13,254 24.64% 26.60% $15,367 28.57% 30.83%
======= ====== ======= ====== = ====== ======= ====== = ======
$14,310 $16,582
======= =======
NC regulatory capital $11,741 14.44% $17,557 20.15% $18,613 21.11% $19,670 22.04% $20,885 23.09%
NC regulatory capital
requirement 4,065 5.00% 4,356 5.00% 4,409 5.00% 4,462 5.00% 4,522 5.00%
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Excess $ 7,676 9.44% $13,201 15.15% $14,204 16.11% $15,208 17.04% $16,363 18.09%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
________________________________
(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, Home Savings is subject to the capital requirements of the FDIC and the
Administrator. The FDIC requires state-chartered savings banks, including Home 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, Home Savings has assumed that its leverage capital requirement is 4% of total average assets.
</TABLE>
37
<PAGE>
STOCK PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
Directors, officers and employees of Home 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--$50.00--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 Home 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 Home 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 290,000 shares of Common Stock will be issued and that sufficient shares
will be available to satisfy the subscriptions of Home 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 Purchased (1) Issued
- ---- ---------- ------------- ---------
<S> <C> <C> <C>
Henry H. Darr, Director $ 250,000 5,000 1.72%
James G. Hudson, Jr., Director,
President, Chief Executive
Officer and Treasurer 100,000 2,000 0.69
John R. Hunnicutt, Director (2) 250,000 5,000 1.72
F. Stuart Kennedy, Director 250,000 5,000 1.72
Milton T. Riley, Jr., Director 250,000 5,000 1.72
Drema A. Michael, Secretary and
Assistant Treasurer 15,000 300 0.10
---------- ------ -----
Total $1,115,000 22,300 7.69%
========== ====== =====
</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 HOME 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. It is expected that the ESOP will acquire 8% of the shares
issued in the Conversion. Recipients of shares under the ESOP will have
voting control over the shares allocated to them, and trustees of the ESOP
(directors of Home Savings) will have voting control over unallocated
shares. See "MANAGEMENT OF HOME SAVINGS--Employee Stock Ownership Plan."
Under the proposed MRP, if approved by the stockholders of the Holding
Company, a number of shares equal to 4% of the shares issued in the
Conversion could be issued to directors and certain employees of Home
Savings. Such shares could be purchased in the open market or could be
issued out of authorized but unissued shares. Recipients of shares under
the MRP will have voting control over such shares regardless of whether
such shares have vested. See "MANAGEMENT OF HOME SAVINGS -- Proposed
Management Recognition Plan." Under the proposed Stock Option Plan, if
approved by the stockholders of the Holding Company, directors and certain
employees of Home Savings could receive options to purchase a number of
shares equal to 10% of the shares issued in the Conversion.
38
<PAGE>
Shares to fund such options could be acquired in the open market or could
be acquired through the issuance of authorized but unissued shares. If
shares are acquired in the open market and held by the Stock Option Plan
prior to the exercise of options under the Plan, holders of unexercised
options will have voting control over the shares held to fund their
options. See "MANAGEMENT OF HOME SAVINGS--Proposed Stock Option Plan."
(2) Mr. Hunnicutt, who became a director in 1995, was not a depositor as of
March 31, 1995, and is not an Eligible Account Holder entitled to first
priority in the Subscription Offering.
Without the prior written consent of the Administrator, shares of Common
Stock purchased by directors or executive officers of Home 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 Home 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 is intended to assist in understanding the financial condition and
results of operations of Home Savings. The information contained in this section
should be read in conjunction with the Financial Statements, the accompanying
Notes to 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 Home Savings for the purpose of acquiring and holding all of
the outstanding stock of Home Savings to be issued in the Conversion. The
Holding Company's principal business activities after the Conversion are
expected to be conducted solely through Home Savings.
Home 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. Home Savings'
operations are affected to a much lesser degree by non-interest income, such as
transaction and other service fee income, and other sources of income. Home
Savings' principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, office occupancy costs, data processing
expenses and federal deposit insurance premiums.
Capital Resources and Liquidity
The objective of Home 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 Home
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.
39
<PAGE>
Home 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 and
advances from the FHLB of Atlanta. In recent years, advances from the FHLB of
Atlanta have not been a primary source of liquidity for Home Savings.
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. Home 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 Home Savings and the loan it
will make to the ESOP. In order to provide sufficient funds for its operations,
the Holding Company expects to retain at the Holding Company level and invest
50% of the net proceeds of the Conversion remaining after making the loan to the
ESOP. 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 Home
Savings. As a North Carolina-chartered stock savings bank, Home Savings may not
declare or pay a cash dividend on or repurchase any of its capital stock if the
effect of such transaction would be to reduce the net worth of the institution
to an amount which is less than the minimum amount required by applicable
federal and state regulations. At June 30, 1996, Home Savings was in compliance
with all applicable capital requirements. In addition, for a period of five
years after the Conversion, Home 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 Home
Savings had been a stock institution at the end of fiscal 1996 and for the two
preceding years, it could not have paid a cash dividend in excess of $462,000
without approval of the Administrator. In connection with the Conversion, the
Holding Company and Home Savings have agreed with the FDIC that, within the
first year after completion of the Conversion, they will 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. In addition, after the
Conversion, Home 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 Home Savings'
profitability, monitor its capital position and enhance its banking franchise.
Home 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. Home Savings' operations are
affected to a much lesser degree by non-interest income, such as transaction and
other service fee income, and other sources of income. Home Savings' net income
is also affected by, among other things, provisions for loan losses and
operating expenses. Home Savings' principal operating expenses, aside from
interest expense, consist of compensation and employee benefits, office
occupancy costs, data processing expenses and federal deposit insurance
premiums. Home Savings' results of operations are also significantly affected
by general economic and competitive conditions, particularly changes in market
interest rates, government legislation and policies concerning monetary and
fiscal affairs, housing and financial institutions and the attendant actions of
regulatory authorities.
In guiding the operations of Home Savings, management has implemented
various strategies designed to continue the institution's profitability while
maintaining its safety and soundness. These strategies include: (i)
emphasizing one-to-four family residential lending; (ii) maintaining asset
quality; (iii) controlling operating expenses; and (iv) 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.
40
<PAGE>
Emphasis on One-to-Four Family Residential Housing. Historically,
Home Savings has been predominantly a one-to-four family residential lender.
As of June 30, 1996, approximately 75.4% of its loan portfolio, before net
items, was composed of permanent one-to-four family residential loans. As of
such date, an additional 8.0% of its loan portfolio, before net items, was
composed of construction loans and home equity loans. As a result, Home Savings
has developed expertise in mortgage loan underwriting and origination. Home
Savings has established methods to expand its loan originations through contacts
with realtors, homebuilders and past and present customers. The institution
also uses advertising and community involvement to gain exposure within the
communities it operates. As of June 30, 1996, approximately 29.6% of Home
Savings' loan portfolio, before net items, was composed of adjustable rate
loans.
Maintenance of Asset Quality. At June 30, 1996, Home Savings' ratio
of nonperforming assets to total assets was 0.76%. Since June 30, 1990, annual
net loan charge-offs have averaged 0.05% of average loans outstanding. Home
Savings has attempted to maintain asset quality through its underwriting and
collection procedures.
Monitoring of Interest-Rate Risk. Although Home Savings' has a
significant "negative gap" and its net interest income would likely be
negatively impacted by increases in interest rates, management considers its
interest rate exposure to be at an acceptable level, given Home Savings'
historical operating results and capital position. However, in order to reduce
the impact on Home Savings' net interest income resulting from changes in
interest rates, as described below, management has implemented several
strategies. See "--Interest Rate Risk."
Control of General and Administrative Expenses. Home Savings closely
monitors its general and administrative expenses and seeks to control them while
maintaining the necessary personnel to properly serve its customers. Since June
30, 1991, Home Savings' ratio of general and administrative expenses to average
assets has averaged 1.28%.
Interest Rate Risk
Home Savings' asset/liability management, or interest rate risk
management, program is focused primarily on evaluating and managing the
composition of its assets and liabilities in view of various interest rate
scenarios. Factors beyond Home Savings' control, such as market interest rates
and competition, may also have an impact on Home Savings' interest income and
interest expense.
In the absence of other factors, the yield or return associated with
Home Savings' earning assets generally will increase from existing levels when
interest rates rise over an extended period of time, and conversely interest
income will decrease when interest rates decrease. In general, interest expense
will increase when interest rates rise over an extended period of time, and
conversely interest expense will decrease when interest rates decrease.
Therefore, by controlling the increases and decreases in its interest income and
interest expense which are brought about by changes in market and interest
rates, Home Savings can significantly influence its net interest income.
Interest Rate Gap Analysis. As a part of Home Savings' interest rate
risk management policy, Home Savings calculates an interest rate "gap."
Interest rate "gap" analysis is a common, though imperfect, measure of interest
rate risk, which measures the relative dollar amounts of interest-earning assets
and interest-bearing liabilities which reprice within a specific time period,
either through maturity or rate adjustment. The "gap" is the difference between
the amounts 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 declining interest rate environment, an
institution with a negative gap would generally be expected, absent the effects
of other factors, to experience a lower decrease in the yield of its assets
relative to the cost of its liabilities and its income should be positively
affected. Conversely, the cost of funds for an institution with a negative gap
would generally be expected to increase more quickly than the yield on its
assets in a rising interest rate environment, and such institution's net
interest income generally would be expected to be adversely affected by rising
interest rates. Changes in interest rates generally have the opposite effect on
an institution with a "positive gap."
41
<PAGE>
Home Savings' one year interest sensitivity gap as a percentage of
total interest-earning assets at June 30, 1996 was a negative 48.86%. At
June 30, 1996, Home Savings' three year and five-year cumulative interest
sensitivity gaps as a percentage of total interest-earning assets were a
negative 49.45% and negative 40.77%, respectively.
The following table sets forth the amounts of interest-earning assets
and interest-bearing liabilities outstanding at June 30, 1996 which are
projected to reprice or mature in each of the future time periods shown. Except
as stated below, the amounts of assets and liabilities shown which reprice or
mature within a particular period were determined in accordance with the
contractual terms of the assets or liability. Loans with adjustable rates are
shown as being due at the end of the next upcoming adjustment period. Passbook
accounts, money market deposit accounts and negotiable order of withdrawal or
other transaction accounts are assumed to be subject to immediate repricing and
depositor availability and have been placed in the shortest period. In making
the gap computations, none of the assumptions sometimes made regarding
prepayment rates and deposit decay rates have been used for any other interest-
earning assets or interest-bearing liabilities. In addition, the table does not
reflect scheduled principal payments which will be received throughout the lives
of the loans. The interest rate sensitivity of Home Savings' assets and
liabilities illustrated in the following table would vary substantially if
different assumptions were used or if actual experience differs from that
indicated by such assumptions.
<TABLE>
<CAPTION>
Terms to Repricing at June 30, 1996
---------------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
-------- --------- ---------- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable:
Adjustable rate residential 1-4 family $ 10,129 $ 15 $ -- $ -- $10,144
Fixed rate residential 1-4 family 735 560 1,229 30,906 33,430
Other secured - real estate - fixed -- 45 45 4,582 4,672
Other secured - real estate - adjustable 6,930 -- -- -- 6,930
Other loans 50 257 242 -- 549
Interest-bearing deposits 3,645 -- -- -- 3,645
Investments 3,807 4,657 5,296 4,805 18,565
FHLB common stock -- -- -- 614 614
-------- -------- -------- ------- -------
Total interest-earning assets $ 25,296 $ 5,534 $ 6,812 $ 40,907 $78,549
======== ======== ======== ======= =======
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement accounts $ 4,984 $ -- $ -- $ -- $ 4,984
NOW and money market checking accounts 12,548 -- -- -- 12,548
Non-interest-bearing accounts 116 -- -- -- 116
Certificate accounts 46,026 5,995 -- -- 52,021
-------- -------- -------- ------- -------
Total interest-bearing liabilities $ 63,674 $ 5,995 $ -- $ -- $69,669
======== ======== ======== ======= =======
INTEREST SENSITIVITY GAP PER PERIOD $(38,378) $ (461) $ 6,812 $ 40,907 $ 8,880
CUMULATIVE INTEREST SENSITIVITY GAP $(38,378) $(38,839) $(32,027) $ 8,880 $ 8,880
CUMULATIVE GAP AS A PERCENTAGE OF TOTAL
INTEREST-EARNING ASSETS (48.86)% (49.45)% (40.77)% 11.31% 11.31%
CUMULATIVE INTEREST-EARNING ASSETS AS A
PERCENTAGE OF INTEREST-BEARING LIABILITIES 39.73% 44.25% 54.03% 112.75% 112.75%
</TABLE>
42
<PAGE>
Net Portfolio Value and Net Interest Income Analysis. In addition to
the interest rate gap analysis as discussed above, management monitors Home
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 Home Savings' NPV and net interest income of
instantaneous and permanent 100 to 400 basis point increases and decreases in
market interest rates.
The following table presents information regarding possible changes in
Home Savings' NPV as of June 30, 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
(Rate Shock) Amount $ Change % Change
--------------- ------ -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Up 400 $4,976 $(6,508) (57)%
Up 300 6,687 (4,797) (42)
Up 200 8,399 (3,085) (27)
Up 100 9,941 (1,543) (13)
Static 11,484 -- --
Down 100 12,918 1,434 12
Down 200 14,353 2,869 25
Down 300 15,470 3,986 35
Down 400 16,587 5,103 44
</TABLE>
The following table presents the predicted effects, based on the FHLB
of Atlanta's interest rate risk model, on Home Savings' net interest income as
of June 30, 1996 of instantaneous and permanent 100 to 400 basis point changes
in market interest rates.
43
<PAGE>
<TABLE>
<CAPTION>
Change in Net Interest Income
Interest Rates -----------------------------
in Basis Points
(Rate Shock) Amount $ Change % Change
---------------- ------ -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Up 400 $1,265 $(778) (38)%
Up 300 1,484 (559) (27)
Up 200 1,704 (339) (17)
Up 100 1,873 (170) (8)
Static 2,043 -- --
Down 100 2,213 170 8
Down 200 2,383 340 17
Down 300 2,509 466 23
Down 400 2,636 593 29
</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.
The tables set forth above indicate that, in the event of a 200 basis
point decrease in interest rates, Home Savings would be expected to experience a
25% increase in NPV and a 17% increase in net interest income. In the event of
a 200 basis point increase in interest rates, Home Savings would be expected to
experience a 27% decrease in NPV and a 17% 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 interest rate caps
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.
Home Savings' net income during recent periods has been negatively
impacted by increasing interest rates, and its net income in the near future is
likely to be reduced if interest rates increase. However, management did not
view Home Savings' interest rate sensitivity position at June 30, 1996 to be
unacceptable in view of Home Savings' historical results of operations and
highly capitalized position. Nevertheless, in order to maintain its interest
rate risk position within levels management believes to be acceptable, Home
Savings has begun (i) attempting to
44
<PAGE>
originate adjustable rate loans when market conditions permit, (ii) maintaining
a short-term investment portfolio; and (iii) attempting to lengthen deposit
maturities. In addition, checking and transaction accounts are generally
considered to be less interest rate sensitive deposits. As a result, Home
Savings has begun to emphasize the origination of those accounts - even though
an increase in such accounts will not improve Home Savings' one year interest
rate sensitivity gap, as Home Savings presently computes its interest rate gap,
because, for purposes of such computation, all of such accounts are assumed to
reprice within one year.
Home Savings does not originate its fixed rate or adjustable rate
loans for sale, or sell its loans, in the secondary market. This tends to
increase its exposure to interest rate risk.
Net Interest Income
Net interest income represents the difference between income derived
from interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is affected by both (i) the difference between
the rates of interest earned on interest-earning assets and the rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities ("net
earning balance"). The following table sets forth information relating to
average balances of Home Savings' assets and liabilities for the years ended
June 30, 1996, 1995 and 1994. For the periods indicated, the table reflects the
average yield on interest-earning assets and the average cost of interest-
bearing liabilities (derived by dividing income or expense by the monthly
average balance of interest-earning assets or interest-bearing liabilities,
respectively) as well as the net yield on interest-earning assets (which
reflects the impact of the net earning balance). Nonaccruing loans were
included in the computation of average balances.
45
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30, 1996 Year Ended June 30, 1995 Year Ended June 30, 1994
------------------------------- ------------------------------- ------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------- ------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-bearing balances $ 6,913 $ 336 4.86% $ 1,789 $ 82 4.59% $ 5,178 $ 154 2.99%
Investments 15,354 949 6.18% 15,974 879 5.50% 13,362 697 5.21%
Loans 54,066 4,584 8.48% 53,718 4,410 8.21% 53,301 4,486 8.42%
------- ------ ----- ------- ------ ----- ------- ------ -----
Total interest-earning
assets 76,333 5,869 7.69% 71,481 5,371 7.51% 71,841 5,337 7.43%
Other assets 2,084 2,083 1,747
------- ------- -------
Total assets $78,417 $73,564 $73,588
======= ======= =======
Interest-bearing
liabilities:
Deposits $67,042 3,540 5.28% $63,210 2,788 4.41% $64,074 2,487 3.88%
Other liabilities 440 ----- ----- 286 ----- ----- 370 ----- -----
Retained earnings 10,935 10,068 9,144
------- ------- -------
Total liabilities and
retained earnings $78,417 $73,564 $73,588
======= ======= =======
Net interest income and
interest rate spread $2,329 2.41% $2,583 3.10% $2,850 3.55%
====== ----- ====== ======
Net yield on average
interest-earning assets 3.05% 3.61% 3.97%
-----
Ratio of average interest-
earning assets to average
interest-bearing liabilities 113.86% 113.08% 112.12%
</TABLE>
46
<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.
47
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
June 30, 1996 vs. 1995 June 30, 1996 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 $ 242 $ 11 $ 253 $(129) $ 56 $ (73) $ (8) 6 $ (2)
Investments (36) 105 69 140 43 183 215 (69) 146
Loans 29 146 175 35 (111) (76) 87 (269) (209)
----- ------ ------ ------ ------ ------ ----- ----- -----
Total interest income 235 262 497 46 (12) 34 294 (359) (65)
Interest expense:
Deposits 186 566 752 (36) 337 301 138 (388) (250)
----- ------ ------ ------ ------ ------ ----- ---- -----
Net interest income $ 49 $(304) $(255) $ 82 $(349) $(267) $ 156 $ 29 $ 185
===== ====== ====== ====== ====== ====== ===== ===== =====
</TABLE>
48
<PAGE>
Comparison of Financial Condition at June 30, 1996, 1995 and 1994
Home Savings has experienced consistent moderate asset growth as total
assets have increased from $73.8 million at June 30, 1994 to $75.5 million at
June 30, 1995, to $81.3 million at June 30, 1996. Net loans receivable have
remained relatively unchanged, increasing from $53.8 million at June 30, 1994 to
$54.0 million at June 30, 1995, to $55.2 million at June 30, 1996, as loan
demand has not maintained pace with Home Savings' deposit growth. During the
same period, investments increased from $18.0 million at June 30, 1994 to $18.9
million at June 30, 1995, to $22.8 million at June 30, 1996.
Deposits increased from $63.9 million at June 30, 1994 to $64.4
million at June 30, 1995, to $69.7 million at June 30, 1996. This increase in
deposits provided funds to support the growth in investments described in the
preceding paragraph.
Retained earnings totalled $9.6 million, $10.6 million and $11.2
million at June 30, 1994, 1995 and 1996, respectively. At June 30, 1996, Home
Savings was required to maintain net worth to total assets of 5% under the
Administrator's regulations, and Home Savings had net worth of $11.7 million, or
net worth to total assets of 14.4%. Additionally, at June 30, 1996, Home Savings
had Tier 1 risk adjusted capital, leverage capital and total risk-based capital
of $11.2 million, $11.2 million and $11.7 million, respectively, exceeding the
regulatory capital requirements by $9.5 million, $8.0 million and $8.4 million,
respectively.
Comparison of Results of Operations for the Years Ended June 30, 1996, 1995, and
1994
Net Income. Home Savings' net income for the years ended June 30,
1996, 1995 and 1994 was $677,000, $921,000 and $1.2 million, respectively. Net
income was positively affected in 1994 by an overall sustained downward trend in
interest rates. Home Savings recorded its highest historical level of net
income in fiscal 1994, with net interest income also at an historic high, before
trending downward in fiscal 1995. This decline in net interest income, combined
with an increase in general and administrative expenses and losses arising from
the sales of certain investments, is primarily responsible for the decrease in
net income in fiscal 1995. During fiscal 1996, net interest income continued to
decline and, combined with another increase in general and administrative
expenses and an increase in the provision for loan losses, was responsible for a
decline in net income.
Net Interest Income. Net interest income decreased to $2.3 million in
fiscal 1996 from $2.6 million in fiscal 1995 and $2.9 million in fiscal 1994.
This trend in net interest income reflects the trend in interest rate spread,
which was 2.41% during fiscal 1996, 3.10% during fiscal 1995 and 3.55% during
fiscal 1994. Because Home Savings' deposits are more rate sensitive than are
its interest-earning assets, particularly its loan portfolio, interest margins
generally increase during periods of declining rates and decrease during periods
of increasing rates. During the second half of the fiscal 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 since that time. The reversal in the rate trend in fiscal 1994 had
begun to negatively impact or increase interest costs during the latter part of
that fiscal year, but on balance for fiscal 1994 the decrease in interest costs
was substantially larger than the decrease in interest income. The impact of
increasing rates was more dramatic in fiscal 1995, as an increase in interest
income of $34,000 was more than offset by an increase in interest costs of
$301,000. During fiscal 1996, interest costs increased by $752,000, while
interest income only increased by $497,000.
Provision for Loan Losses. The provision for loan losses was
$165,000, $105,000, and $114,000 for the years ended June 30, 1996, 1995, and
1994, respectively. The provisions and the resulting loan loss allowances are
amounts management believes will be adequate to absorb possible losses on
existing loans. At June 30, 1996, 1995, and 1994, Home Savings' loan loss
allowances totalled $533,000, $401,000 and $295,000, respectively, representing
187.0%, 47.68% and 18.38%, respectively, of nonperforming loans at such dates.
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
49
<PAGE>
are based both on prior loan loss experience and other factors, such as existing
loan levels and types of loans outstanding, nonperforming loans, industry
standards and general economic conditions. Home Savings experienced net loan
charge-offs of $33,000 and $18,000 during the years ended June 30, 1996, and
1994, respectively, as compared with a net recovery of loans previously charged
off of $1,000 during the year ended June 30, 1995.
Other Income. Other income decreased to $15,000 in fiscal 1995 from
$40,000 in fiscal 1994, principally as a result of losses of $37,000 from sales
of investments, as management sold certain lower yielding investments in light
of an expected continued rise in market interest rates. Other income increased
to $35,000 in fiscal 1996 as there were no losses from investments in fiscal
1996.
General and Administrative Expenses. General and administrative
expenses increased to $1,170,000 in fiscal 1996 from $979,000 in fiscal 1995 and
$910,000 in fiscal 1994, representing increases of $191,000 and $69,000 for
1996, and 1995, respectively. The primary reasons for the increase in 1996 was
an $80,000 provision for losses on foreclosed real estate and a $68,000 increase
in personnel costs. The 1995 increase was principally attributable to increases
in personnel costs of $53,000. Personnel costs rose in 1996 and 1995 as a
result of a combination of normal compensation adjustments and increased costs
for fringe benefits.
Income Taxes. Income tax expense decreased to $352,000 in fiscal 1996
from $593,000 in fiscal 1995 and $694,000 in fiscal 1994. The fluctuations were
primarily attributable to corresponding fluctuations in income before income
taxes.
Insurance Premium Surcharge
A comprehensive continuing appropriations bill which was passed by the
United States Congress and signed by the President on September 30, 1996,
provides for a one-time assessment to recapitalize the SAIF. The assessment is
estimated to equal 65.7 cents per each $100 of insured domestic deposits and is
expected to be payable prior to December 1, 1996. This assessment will have the
effect of reducing the capital of SAIF-member institutions by the amount of the
assessment, net of any income tax benefit, and is expected to reduce earnings
during the quarter ended December 31, 1996. The one-time assessment is expected
to equal approximately $409,000 before income taxes. See "RISK FACTORS --
Recapitalization of SAIF, its Impact on SAIF Premiums and One-Time
Recapitalization Fee" and "SUPERVISION AND REGULATION -- Regulation of Home
Savings -- Insurance of Deposit Accounts."
Recapture of Bad Debt Reserves
Recent enacted federal legislation has repealed the reserve method of
accounting for thrift loan debt reserves and would require thrifts to recapture
into income over a six-year period their post-1987 additions to their excess bad
debt tax reserves, thereby generating additional tax liability. Under the
legislation, a special provision suspends recapture of post-1987 excess reserves
for up to two years, to the first tax year beginning after December 31, 1997,
if, during those years, the institution satisfies a "residential loan
requirement." At June 30, 1996, Home Savings' post-1987 excess reserves
amounted to approximately $264,000. See "RISK FACTORS -- Increased Tax
Liability Resulting From Recapture of Bad Debt Reserves" and "TAXATION --
Federal Income Taxation."
Impact of Inflation and Changing Prices
The Financial Statements and Notes thereto presented herein 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 Home Savings' operations. Unlike most
industrial companies, nearly all the assets and liabilities of Home Savings are
monetary in nature. As a result, interest rates have a greater impact on Home
Savings' performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services
50
<PAGE>
Impact of New Accounting Standards
Accounting for Postretirement and Postemployment Benefits. Statement
of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," was issued by the Financial
Accounting Standards Board ("FASB") in December 1990. The statement is
effective for fiscal years beginning after December 15, 1992, except that the
application of the statement for certain small nonpublic enterprises such as
Home Savings and certain other entities is delayed to fiscal years beginning
after December 15, 1994. SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," was issued by the FASB in November 1992. The
statement is effective for fiscal years beginning after December 15, 1994. The
statements generally require a calculation of the actuarial present value of
anticipated benefits to be provided and an accrual and allocation of those
benefits through a charge to operating expense in the periods in which employees
must render the services to receive such benefits. Currently, Home Savings does
not offer any postretirement benefit plans or postemployment benefit plans.
However, in the future, such plans may be offered and the provisions of SFAS
Nos. 106 and 112 would apply.
Disclosure about Fair Value of Financial Instruments. SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments," was issued by the 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. Home Savings adopted the disclosure requirements of SFAS No. 107 on
June 30, 1996. [The adoption of SFAS No. 107 did not have a material impact on
Home 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. Home Savings
adopted 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 Home
Savings' financial position or results of operations.
Mortgage Servicing Rights. In May 1995, the FASB issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights." SFAS No. 122 is effective for years
beginning after December 15, 1995. The statement will require, among other
things, Home 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 loan. Management has determined that the effect of
adoption on Home Savings' financial condition and results of operations would be
immaterial.
In June, 1996, the FASB issued Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," which provides new accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities. Those standards are based on consistent application of a financial
components approach that focuses on control. Under the financial components
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
and derecognizes liabilities when extinguished. SFAS No. 125 supersedes SFAS
No. 122 and is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996. Management
does not believe that adoption of SFAS No. 125 will have a material impact on
Home Savings' financial condition or results of operations.
Accounting for Stock-Based Compensation. In November 1995, the FASB
issued SFAS 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 an employee stock option or similar
equity instrument, encourages all entities to adopt that method of accounting
for an employee stock option or similar equity instrument 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
51
<PAGE>
Opinion No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). Under
the fair value-based method, compensation cost is measured at the grant date
based on the value of the award and is recognized over the service period, which
is usually the vesting period. Under the intrinsic value-based method,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock. Most fixed stock option plans - the most common type of
stock compensation plan - have no intrinsic value at grant date, and under
Opinion 25 no compensation cost is recognized for them. Compensation cost is
recognized for other types of stock-based compensation plans under Opinion 25,
including plans with variable, usually performance-based, features. This
statement 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 Home Savings' financial condition or results of operations.
Accounting for Employee Stock Ownership Plans. The Accounting
Standards Division of the AICPA 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 such
shares. To the extent that the fair value of the ESOP shares, 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 Home 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 Home 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 Home 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 it 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 Home Savings.
Initially, the Holding Company will neither own nor lease any property, but will
instead use the premises, equipment and furniture of Home 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 Home 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 may 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 or their branches. The Holding
Company has no current plans with respect to any such acquisitions, however.
Existing management of the Holding Company believes that it is in the best
interest of the Holding Company and its shareholders for the Holding Company to
remain an independent company.
BUSINESS OF HOME SAVINGS
General
Home 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. Home Savings makes one-to-four family residential real
estate loans, loans secured by multi-family residential and commercial real
property, construction loans and home equity line of credit loans. Home 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. Home Savings' primary source of revenue is interest income from its
lending activities. Home Savings' other major sources of revenue are interest
and
52
<PAGE>
dividend income from investments and mortgage-backed securities, interest income
from its interest-earning deposit balances in other depository institutions, and
transaction and fee income from its lending and deposit activities. The major
expenses of Home Savings are interest on deposits and general and administrative
expenses such as employee compensation and benefits, federal deposit insurance
premiums, data processing expenses and occupancy expenses.
As a North Carolina-chartered savings bank, Home Savings is subject to
examination and regulation by the FDIC and the Administrator. Upon consummation
of the Conversion, Home Savings, as a subsidiary of the Holding Company, will be
subject to indirect regulation by the Federal Reserve. The business and
regulation of Home 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 Home Savings."
Market Area
Home Savings' primary market area consists of the communities in a
10-mile radius around its office in Thomasville, North Carolina. This area
includes portions of Davidson, Randolph and Guilford counties in North Carolina.
Employment in Home Savings' primary market area is diversified among
manufacturing, agricultural, retail and wholesale trade, government, services
and utilities. The High Point-Thomasville area of North Carolina is considered
to be the furniture capital of the world, so the economy of Home Savings'
primary market area is greatly affected by the furniture and home furnishings
industry. Thomasville Furniture Industries, Inc. is the largest employer in
Thomasville. Other major employers include Community General Hospital and
Parkdale Mills. Based upon 1995 comparative data, Home Savings had 15.7% of the
deposits in Thomasville and 5.5% of the deposits in Davidson County. Employment
in the Davidson County, North Carolina area as of April, 1996 was strong, with
an unemployment rate below that of North Carolina and national averages.
Comparative data indicates that the income levels in Davidson County and in
Thomasville are below national and North Carolina averages. From 1990 to 1994,
population in Davidson County increased by 6.4%, which was above national and
North Carolina averages, while the population of Thomasville increased by 5.3%
which was below the North Carolina average of 5.5%. Thomasville has a sizable
elderly population, and as a predominantly middle class manufacturing community,
Thomasville's residents have less formal education than residents of Davidson
County and North Carolina as a whole. As a result, comparative data indicates
that as of 1990 the medium home value in Thomasville was only $48,200, well
below the Davidson County average of $60,800, the North Carolina average of
$65,800 and the national average of $79,090.
Lending Activities
General. Home Savings' primary source of revenue is interest and fee
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. Home Savings also makes loans secured by
multi-family and commercial properties, construction loans, home equity loans,
savings account loans and various types of consumer loans. Only 1% of Home
Savings' loan portfolio, before net items, is not secured by real estate. On
June 30, 1996, Home Savings' largest single outstanding loan had a balance of
approximately $725,000. In addition to interest earned on loans, Home Savings
receives fees in connection with loan originations, loan servicing, loan
modifications, late payments, loan assumptions and other miscellaneous services.
Home Savings generally does not sell its loans; both fixed and adjustable rate
loans are originated with the intention that they will be held in Home Savings'
loan portfolio.
Loan Portfolio Composition. Home Savings' net loan portfolio totalled
approximately $55.2 million at June 30, 1996 representing 67.9% of Home Savings'
total assets at such date. At June 30, 1996, 75.4% of Home Savings' loan
portfolio, before net items, was composed of one-to four-family residential
mortgage loans. Multi-family residential and commercial real estate loans
represented 15.6% of Home Savings' loan portfolio, before net items, on such
date. Construction loans and home equity loans represented 6.2% and 1.8%,
respectively, of Home Savings' loan portfolio, before net items, on such date.
As of June 30, 1996, 29.6% of the loans in Home Savings' loan portfolio had
adjustable interest rates.
53
<PAGE>
The following table sets forth the composition of Home Savings' loan
portfolio by type of loan at the dates indicated.
54
<PAGE>
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
% of % of % of
Amount Total Amount Total Amount Total
------- ------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Type of loan:
Real estate loans:
One-to four-family residential $43,574 78.95% $41,006 75.91% $41,082 76.36%
Multi-family residential and commercial 9,012 16.33% 10,039 18.58% 9,990 18.57%
Construction 3,596 6.52% 3,111 5.76% 3,608 6.70%
Home equity lines of credit 1,021 1.85% 1,136 2.10% 924 1.72%
------- ------- ------- ------- ------- -------
Total real estate loans 57,203 103.65% 55,292 102.35% 55,604 103.35%
------- ------- ------- ------- ------- -------
Other loans:
Consumer loans 322 0.58% 335 0.62% 557 1.03%
Loans secured by deposits 227 0.41% 252 0.47% 358 0.67%
------- ------- ------- ------- ------- -------
Total other loans 549 0.99% 587 1.09% 915 1.70%
------- ------- ------- ------- ------- -------
Total loans 57,752 104.64% 55,879 103.44% 56,519 105.05%
Less:
Construction loans in process 1,764 3.19% 1,215 2.25% 2,178 4.05%
Deferred loan origination fees 263 0.48% 243 0.45% 244 0.45%
Allowance for loan losses 533 0.97% 401 0.74% 295 0.55%
------- ------- ------- ------- ------- -------
$55,192 100.00% $54,020 100.00% $53,802 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
55
<PAGE>
The following table sets forth the time to contractual maturity of
Home Savings' loan portfolio at June 30, 1996. Loans which have adjustable rates
are shown as being due in the period during which rates are next subject to
change, while fixed rate and other loans are shown as due in the period of
contractual maturity. Demand loans, loans having no stated maturity and
overdrafts are reported as due in one year or less. The table does not include
prepayments or scheduled principal repayments. Amounts in the table are net of
loans in process and are net of unamortized loan fees.
<TABLE>
<CAPTION>
At June 30, 1996
----------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
-------- --------- ---------- --------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Real estate loans:
Adjustable rate residential 1-4 family $10,129 $ 15 $ -- $ -- $10,144
Fixed rate residential 1-4 family 735 560 1,229 30,906 33,430
Other real estate loans - adjustable 6,930 -- -- -- 6,930
Other real estate loans - fixed -- 45 45 4,582 4,672
Other loans 50 257 242 -- 549
Less:
Allowance for loan losses (533) -- -- -- (533)
------- ---- ------ ------- -------
$17,311 $877 $1,516 $35,488 $55,192
======= ==== ====== ======= =======
</TABLE>
The following table sets forth the dollar amount at June 30, 1996 of
all loans maturing or repricing on or after June 30, 1997 which have fixed or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Adjustable
Rates Rates
------- ----------
<S> <C> <C>
(In Thousands)
Real estate loans $32,695 $15
Other loans 5,171 --
------- ---
$37,866 $15
======= ===
</TABLE>
Origination and Sale of Loans. Historically, Home Savings has
generally not originated its one-to-four family residential mortgage or other
loans with the intention that they will be sold in the secondary market.
Although Home Savings believes that many of its one-to-four family residential
loans could be sold in the secondary market, some of such loans could be sold
only after Home Savings incurred certain costs and/or discounted the purchase
price. As a result, Home Savings' loan portfolio is less liquid than would be
the case if it was composed entirely of loans originated in conformity with
secondary market requirements.
The table below sets forth Home Savings' loan origination, purchase
and sale activity and loan portfolio repayment experience during the periods
indicated.
56
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
1996 1995 1994
---------- ---------- ---------
(In Thousands)
<S> <C> <C> <C>
Loans receivable, net, beginning of period $ 54,020 $53,802 $ 53,566
-------- ------- --------
Loan originations:
One-to four-family residential 10,399 5,370 10,530
Multi-family residential and commercial 1,322 1,415 1,116
Construction 1,277 1,497 1,284
Home equity lines of credit 189 295 395
Consumer loans 229 272 279
Loans secured by deposits 212 224 383
-------- ------- --------
Total loan originations 13,628 9,073 13,987
-------- ------- --------
Loans purchased 0 0 0
Loan sales 0 0 0
Principal repayments (12,305) (8,750) (13,622)
Other changes, net (1) (151) (105) (129)
-------- ------- --------
Loans receivable, net, end of period $ 55,192 $54,020 $ 53,802
======== ======= ========
</TABLE>
(1)Includes changes in deferred loan fees and the allowance for loan losses.
57
<PAGE>
One-to-Four Family Residential Real Estate Lending. Home 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 Home Savings' emphasis on being a community-oriented financial
institution, it is and has been Home Savings' strategy to focus its lending
efforts in its primary market area. On June 30, 1996, approximately 75.4% of
Home 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,
23.3% had adjustable interest rates.
Home Savings originates conventional mortgage loans secured by owner
occupied property in amounts of up to 97% 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
maximum term for fixed rate loans is 15 years, and the maximum term for
adjustable rate loans is 25 years. Home Savings also makes fixed rate loans
requiring a balloon payment at the end of 10 years and having a 30-year
amortization schedule. The interest rates on adjustable rate loans are
generally adjustable every year and are tied to the one-year United States
treasury bill rate. The loans have rate caps which limit the amount of changes
at the time of each adjustment and over the lives of the loans. Home Savings
offers loans which require monthly payments and loans which require payments
every two weeks, in which event the payment is drafted from an existing Home
Savings deposit account.
Adjustable rate loans are generally considered to involve a greater
degree of credit 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 Home Savings' mortgage loan portfolio have due on sale provisions
allowing Home 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 25 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.
Home Savings generally requires title insurance for its one-to-four
family residential loans. Home Savings also generally requires that fire and
extended coverage casualty insurance (and, if appropriate, flood insurance) be
maintained in an amount at least equal to the loan amount or replacement cost of
the improvements on the property securing the loans, whichever is greater.
Multi-family Residential and Commercial Real Estate Lending. On June
30, 1996, Home Savings had $9.0 million outstanding in 79 loans secured by
multi-family residential and commercial properties, comprising approximately
15.6% of its loan portfolio, before net items, as of that date. These loans are
secured by apartments, office, retail and other commercial real estate and by
church properties in Home Savings' primary market area and have fixed and
adjustable interest rates. These loans generally do not exceed 75% of the
appraised value of the real estate securing the loans. Multi-family residential
loans have terms of up to 20 years, if the interest rate is adjustable, or 15
years, if the interest rate is fixed. Commercial real estate loans have terms
of up to 15 years if the interest rate is adjustable, or 10 years, if the
interest rate is fixed. The adjustable rate loans generally use the same index
and rate change limitations and are as used in one-to-four family residential
lending. See "-- One-to-Four Family Residential Real Estate Lending." Home
Savings generally requires title insurance in connection with its multi-family
residential and commercial real estate loans. Home 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 the replacement cost of the improvements on the property securing
the loans, whichever is greater.
Loans secured by multi-family and commercial real estate generally are
larger than one-to-four family residential loans and involve greater
concentration of assets and 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
58
<PAGE>
extent by adverse conditions in the real estate market or the economy in
general. Since commercial lending is frequently secured by leased or operating
commercial properties, repayment frequently depends upon the results of
operations of the tenant or operating entity. Multi-family and residential and
commercial loans also generally involve more specialized and complicated
underwriting decisions than one-to-four family residential real estate lending.
Home Savings intends to continue to make significant amounts of multi-family
residential and commercial real estate loans.
Construction Lending. Home Savings makes construction loans for the
construction of single-family dwellings, and for the construction of multi-
family and commercial buildings. The aggregate outstanding balance of such
loans on June 30, 1996 was approximately $3.6 million, representing
approximately 6.2% of Home Savings' loan portfolio, before net items, and
included construction loans in process of approximately $1.8 million. Some of
these loans were made to persons who are constructing properties for the purpose
of occupying them; others 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 one-to-four family residential loans.
Construction loans for one-to-four family real estate to be occupied
by the borrower generally have a maximum loan-to-value ratio of 80% of the
appraised value of the property. Other construction loans are made at loan to
value ratios of up to 75%. Title insurance is generally required for
construction loans. In addition, Home Savings generally requires builders risk
or casualty insurance (and, if appropriate, flood insurance) on such loans.
Construction loans are generally considered to involve a higher degree
of risk than long-term financing secured by real estate which is already
occupied. A lender's risk of loss on a construction loan is dependent largely
upon the accuracy of the initial estimate of the property's value at the
completion of construction and the estimated cost (including interest) of
construction. If the estimate of construction costs proves to be inaccurate,
the lender may be required to advance funds beyond the amount originally
committed in order to permit completion of construction. If the estimate of
anticipated value proves to be inaccurate, the lender may have security which
has value insufficient to assure full repayment. In addition, repayment of
loans made to builders to finance construction of properties is often dependent
upon the builder's ability to sell the property once construction is completed.
Home Equity Lending. At June 30, 1996, Home Savings had approximately
$1.0 million in home equity line of credit loans, representing approximately
1.8% of its loan portfolio, before net items. In addition, at such date, Home
Savings had unfunded home equity lines of credit totalling $523,000. Home
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 10 years. Home equity lines of credit are generally
secured by subordinate liens against residential real property. Home Savings
requires title opinions from attorneys in connection with these loans. Home
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 80% 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, Home 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.
Consumer Loans. Home Savings offers various consumer loans, including
home improvement loans, automobile loans and other secured loans. Home Savings
generally does not make unsecured loans. At June 30, 1996, Home Savings'
consumer loan portfolio totalled $322,000, representing 0.56% of its total 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. Home improvement loans are generally
secured by a
59
<PAGE>
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, and have terms of
no more than 10 years. 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.
Loans Secured by Deposits. Home Savings also offers loans secured by
deposit accounts. At June 30, 1996, such loans totalled $227,000, representing
0.39% of Home Savings' loan portfolio, before net items. The interest rates on
these loans are variable and are generally 2% above the interest rate being paid
on the deposit account serving as collateral. 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, Home Savings assesses the
applicant's ability to make principal and interest payments on the loan and the
value of the property securing the loan. Home 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 Home Savings analyzes the loan application and the
property involved, and an appraiser inspects and appraises the property. Home
Savings generally requires independent fee appraisals on loans originated
primarily on the basis of real estate collateral. Home Savings also obtains
information concerning the income, financial condition, employment and the
credit history of the applicant.
All real estate loans, except home equity loans, must be approved by
Home Savings' loan committee which includes three members of its Board of
Directors. Home equity and consumer loans, up to specified limits, may be
approved by loan officers. All loans must be reported to the Board of Directors
monthly.
Normally, upon approval of a residential mortgage loan application,
Home Savings gives a commitment to the applicant that it will make the approved
loan at a stipulated rate any time within a 45-day period. The loan is
typically funded at such rate of interest and on other terms which are based on
market conditions existing as of the date of the commitment. As of June 30,
1996, Home Savings had $1.8 million in such unfunded mortgage loan commitments.
In addition, on such date Home Savings had $1.8 million in undisbursed
construction loans and $523,000 in unfunded commitments for unused lines of
credit.
Interest Rates, Terms, Points and Fees. Interest rates and fees
charged on Home Savings' loans are affected primarily by the market demand for
loans, competition, the supply of money available for lending purposes and Home
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, Home 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 Home Savings.
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 Home 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. If a
delinquency is not cured, Home 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, Home 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
60
<PAGE>
disposed of by Home Savings in an effort to recover its investment. As of June
30, 1996, Home Savings recorded $333,000 in 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. See Note A to "Notes to
Financial Statements."
Interest on loans is recorded as borrowers' monthly payments become
due. Accrual of interest on loans is suspended when interest becomes 90 days
past due or earlier when, in management's judgment, doubts exist as to the
collectibility of additional interest. Interest more than 90 days past due is
reserved. Loans begin accruing interest again when interest is brought current.
The following table sets forth information with respect to
nonperforming assets identified by Home Savings, including nonaccrual loans and
real estate owned at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
----------------------------------------
1996 1995 1994 1993 1992
------ ------ ------- ------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Non-performing loans $ 285 $ 841 $1,605 $1,601 $ 557
Foreclosed real estate 333 71 111 193 161
----- ----- ------ ------ -----
Total non-performing assets $ 618 $ 912 $1,716 $1,794 $ 718
===== ===== ====== ====== =====
Non-performing assets to total assets 0.76% 1.21% 2.32% 2.53% 1.09%
===== ===== ====== ====== =====
</TABLE>
During the fiscal year ended June 30, 1996, gross interest income of $25,000
would have been recorded on nonperforming assets if such assets had been current
in accordance with their terms and had been outstanding throughout the period or
since origination, if held for part of such period. The amount of gross
interest income actually recorded on such nonperforming assets during such
period was $14,000.
Applicable regulations require Home 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 well-
defined weakness with possible risk of loss if the deficiency is 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." Assets classified
"loss" are those considered "uncollectible" and of such little value that their
continuance as assets without the establishment of a loss reserve is not
warranted.
As of June 30, 1996, Home Savings had approximately $284,000 of loans
internally classified as "substandard," no loans classified as "doubtful" and no
loans classified as "loss." Total classified loans as of June 30, 1995 and 1994
were approximately $931,000 and approximately $1.9 million, 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
61
<PAGE>
associated with particular problem assets. When an insured institution
classifies problem assets as "loss," it charges off, or writes down the balance
of, the asset. Home 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.
Home Savings also identifies assets which possess credit deficiencies
or potential weaknesses deserving close attention by management. These assets
are maintained on a "watch list" and do not yet warrant adverse classification.
At June 30, 1996, Home Savings' watch list consisted of four loans with an
aggregate outstanding balance of $65,000.
Allowance for Loan Losses. In originating loans, Home 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, Home Savings' historical loan loss experience,
evaluation of economic conditions and regular reviews of delinquencies and loan
portfolio quality. Specific allowances are provided for individual loans when
ultimate collection is considered questionable by management after reviewing the
current status of loans which are contractually past due and considering the net
realizable value of the security for the loans.
Management continues to actively monitor Home 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 Home Savings'
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------
1996 1995 1994
---------- ------------ ---------
<S> <C> <C> <C>
Balance at beginning of period $ 401 $ 295 $ 198
----- ----- -----
Loans charged off:
Real estate 32 1 90
Other 2 -- 14
----- ----- -----
Total loans charged off 34 1 104
Recoveries:
Real estate - 1 84
Other 1 1 3
----- ----- -----
Net loans charged off (recovered) 33 (1) 17
----- ----- -----
Provision for loan losses 165 105 114
----- ----- -----
Balance at end of period $ 533 $ 401 $ 295
===== ===== =====
Ratio of net charge-offs (recoveries) to
average loans outstanding during the 0.06% --% 0.03%
period ===== ===== =====
</TABLE>
62
<PAGE>
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.
63
<PAGE>
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------------- -------------------------------- -----------------------------
Percent of Amount Percent of Amount Percent of Amount
Allowance of Loans Allowance of Loans Allowance of Loans
Amount of to Total to Gross Amount of to Total to Gross Amount of to Total to Gross
Allowance Allowance Loans Allowance Allowance Loans Allowance Allowance Loans
--------- ----------- --------- --------- ----------- --------- --------- ----------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One-to four-family
residential $225 42.21% 75.45% $164 40.90% 73.38% $123 41.69% 72.69%
Multi-family resi-
dential and
commercial 110 20.64% 15.60% 100 24.94% 17.97% 75 25.42% 17.68%
Construction 17 3.19% 6.23% 19 4.74% 5.57% 14 4.75% 6.38%
Home equity lines
of credit 10 1.88% 1.77% 11 2.74% 2.03% 9 3.05% 1.63%
---- ------ ------- ---- ------- ------- ---- ------- -------
Total real estate loans 362 67.92% 99.05% 294 73.32% 98.95% 221 74.91% 98.38%
---- ------ ------- ---- ------- ------- ---- ------- -------
Other loans:
Consumer loans 11 2.06% 0.56% 12 2.99% 0.60% 13 4.41% 0.99%
Loans secured by deposits -- 0.00% 0.39% -- 0.00% 0.45% -- 0.00% 0.63%
---- ------ ------- ---- ------- ------- ---- ------- -------
Total other loans 11 2.06% 0.95% 12 2.99% 1.05% 13 4.41% 1.62%
---- ------ ------- ---- ------- ------- ---- ------- -------
Unallocated 160 30.02% -- 95 23.69% -- 61 20.68% --
---- ------ ------- ---- ------- ------- ---- ------- -------
Total allowance for loan
losses $533 100.00% 100.00% $401 100.00% 100.00% $295 100.00% 100.00%
==== ======= ======= ==== ======= ======= ==== ======= =======
</TABLE>
64
<PAGE>
Investment Securities
Interest and dividend income from investment securities generally
provides the second largest source of income to Home Savings after interest on
loans. In addition, Home Savings receives interest income from deposits in other
financial institutions. At June 30, 1996, Home Savings' investment portfolio
totalled approximately $22.8 million and consisted of U.S. government and agency
securities, mortgage-backed securities, municipal bonds, interest-earning
deposits in other financial institutions, and stock of the Federal Home Loan
Mortgage Corporation and Federal Home Loan Bank of Atlanta.
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 SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" which addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. These investments are to be classified
in three categories and accounted for as follows: (1) debt securities that the
entity has the positive intent and ability to hold to maturity are classified as
held-to-maturity and reported at amortized cost; (2) debt and equity securities
that are bought and held principally for the purpose of selling them in the near
term are classified as trading securities and reported at fair value, with net
unrealized gains and losses included in earnings; and (3) debt and equity
securities not classified as either held-to-maturity or trading securities are
classified as securities available-for-sale and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of equity. At June 30, 1996, Home Savings had no trading securities.
Home 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 $202,874, net of
related deferred tax assets of $104,511, reported as a separate component of
equity in its financial statements at July 1, 1994. See Note B of "Notes to
Consolidated Financial Statements."
The amortized cost of securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest income
from investments. Interest and dividends are included in interest income from
investments. Realized gains and losses, and declines in value judged to be other
than temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method. Prior to the
adoption of SFAS No. 115, Home 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, Home Savings is required to maintain
an investment in stock of the FHLB of Atlanta equal to the greater of 1% of Home
Savings' outstanding home loans or 5% of its outstanding advances from the FHLB
of Atlanta. No ready market exists for such stock, which is carried at cost. As
of June 30, 1996, Home Savings' investment in stock of the FHLB of Atlanta was
$614,000.
North Carolina regulations require Home Savings to maintain a minimum
amount of liquid assets which may be invested in specified short-term
securities. See "SUPERVISION AND REGULATION -- Regulation of Home Savings --
Liquidity." Home Savings is also permitted to make certain other securities
investments.
Home Savings' current investment policy provides that investment
decisions will be made by James G. Hudson, Jr., President, Chief Executive
Officer and Treasurer, and ratified by the Board of Directors. The investment
policy provides that the objectives of the investment portfolio are to: (i)
provide and maintain liquidity within regulatory guidelines, (ii) maintain a
balance of high quality, diversified investments, (iii) provide collateral for
pledging requirements, (iv) serve as a counter-cyclical balance to earnings, (v)
maximize returns without sacrificing liquidity and safety, (vi) purchase
securities and originate loans for investment purposes only, (vii) invest the
majority of Home
65
<PAGE>
Savings' funds in first mortgage loans, Federal Home Loan Mortgage Corporation
participation certificates and United States government and agency obligations,
and (viii) to hold securities until maturity unless it is financially feasible
to do otherwise.
The following table sets forth certain information regarding Home
Savings' investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
---------------------------------
1996 1995 1994
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Securities available for sale:
U.S. government and agency securities $ 6,988 $ 6,021 $ --
Mortgage-backed securities 3,801 2,389 --
Municipal bonds 603 -- --
FHLMC stock 315 254 --
------- ------- ------
Total securities available for sale 11,707 8,664 --
------- ------- ------
Securities held to maturity:
U.S. government and agency securities 6,477 4,756 13,059
Mortgage-backed securities -- -- 2,822
Municipal bonds 380 377 --
FHLMC stock -- -- 14
------- ------- ------
Total securities held to maturity 6,857 5,133 15,895
------- ------- ------
Total investment securities 18,564 13,797 15,895
Interest-earning balances in other banks 3,645 4,441 1,503
Federal Home Loan Bank stock 614 614 614
------- ------- ------
Total investments $22,823 $18,852 $18,012
======= ======= =======
</TABLE>
At June 30, 1996, the market value of Home Savings' investment securities
available for sale and held to maturity were $11.7 million and $6.8 million,
respectively.
The following table sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of Home Savings'
investment portfolio as of June 30, 1996.
66
<PAGE>
<TABLE>
<CAPTION>
After One Year After Five Years
One Year or Less Through Five Years Through Ten 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 $ 2,006 5.65% $ 4,982 6.38% $ -- $ --
Mortgage-backed
securities -- -- -- -- 2,492 7.06%
Municipal bonds -- -- 603 4.80% -- --
FHLMC stock -- -- -- -- -- --
Securities held to
maturity:
U.S. government and
agency securities 1,801 6.12% 4,676 6.52% -- --
Municipal bonds -- -- -- -- -- --
Other:
Interest-earning
balances in other banks 3,645 5.35% -- -- -- --
Federal Home Loan Bank
stock -- -- -- -- -- --
------- ----- ------- ----- ------ -----
$ 7,452 5.62% $10,261 6.35% $2,492 7.06%
======= ===== ======= ===== ====== =====
<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 $ -- -- $ 6,988 6.17%
Mortgage-backed
securities 1,309 7.51% 3,801 7.22%
Municipal bonds -- -- 603 4.86%
FHLMC stock 315 1.41% 315 1.41%
Securities held to
maturity:
U.S. government and
agency securities -- -- 6,477 6.41%
Municipal bonds 330 6.22% 380 6.22%
Other:
Interest-earning
balances in other banks -- -- 3,645 5.35%
Federal Home Loan Bank
stock 614 7.25% 614 7.25%
------ ----- ------- -----
$2,618 6.52% $22,823 6.21%
====== ===== ======= =====
</TABLE>
67
<PAGE>
Deposits and Borrowings
General. Deposits are the primary source of Home Savings' funds for
lending and other investment purposes. In addition to deposits, Home 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. Home Savings attracts both short-term and long-term deposits
from the general public by offering a variety of accounts and rates. Home
Savings offers passbook savings accounts, statement savings accounts, negotiable
order of withdrawal accounts, money market demand accounts, non-interest-bearing
accounts, and fixed interest rate certificates with varying maturities. At June
30, 1996, 74.67% of Home Savings' deposits consisted of certificate accounts,
7.15% consisted of passbook and statement savings accounts, 18.01% consisted of
interest-bearing transaction accounts and 0.17% 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. Home Savings' savings
deposits traditionally have been obtained primarily from its primary market
area. Home Savings utilizes traditional marketing methods to attract new
customers and savings deposits, including print media advertising and direct
mailings. Home Savings does not advertise for deposits outside of its local
market area or utilize the services of deposit brokers.
The following table sets forth information relating to Home Savings'
deposit flows during the periods shown and deposits at the end of such periods.
<TABLE>
<CAPTION>
At or for the Year
Ended June 30,
-----------------------------
1996 1995 1994
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Total deposits at beginning of period $64,448 $63,937 $62,129
Net increase (decrease) before
interest credited 3,224 (990) 405
Interest credited 1,997 1,501 1,403
------- ------- -------
Total deposits at end of period $69,669 $64,448 $63,937
======= ======= =======
</TABLE>
The following table sets forth certain other information regarding Home
Savings' savings deposits at the dates indicated.
68
<PAGE>
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995 June 30, 1994
----------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average % of Average % of Average % of
Amount Rate Total Amount Rate Total Amount Rate Total
------- -------- ----- ------ -------- ----- ------ -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand accounts:
Passbook and statement
accounts $ 4,984 3.00% 7.15% $ 5,248 3.00% 8.14% $ 5,660 3.00% 8.85%
NOW accounts 2,718 2.75% 3.90% 1,885 2.75% 2.93% 1,973 2.75% 3.09%
Money market demand
accounts 9,830 4.05% 14.11% 10,498 3.68% 16.29% 13,060 3.23% 20.43%
Non-interest bearing
accounts 116 -- 0.17% 299 -- 0.46% 106 --% .16%
------- ------- ------- ------- ------- -------
Total demand deposits 17,648 3.53% 25.33% 17,930 3.32% 27.82% 20,799 3.11% 32.53%
------- ------- ------- ------- ------- -------
Certificate accounts with
original maturities of:
6 months 9,698 5.09% 13.92% 10,026 5.93% 15.56% 9,248 3.69% 14.46%
12 months 16,043 5.64% 23.03% 13,944 5.54% 21.64% 14,593 4.08% 22.82%
18 months 967 5.92% 1.39% 969 5.23% 1.50% 915 4.26% 1.43%
24 months 1,867 5.86% 2.68% 1,781 5.45% 2.76% 964 4.89% 1.51%
30 months 889 5.87% 1.28% 984 5.03% 1.53% 1,088 4.95% 1.70%
36 months 4,380 5.62% 6.29% 3,725 5.38% 5.78% 3,414 5.32% 5.34%
IRA certificates 4,483 5.98% 6.43% 3,624 5.35% 5.62% 3,724 4.41% 5.83%
Jumbo ($100,000 or more) 13,694 5.74% 19.66% 11,465 6.01% 17.79% 9,192 4.20% 14.38%
------- ----- ------- ------- ------- ------- -------
Total certificates 52,021 5.61% 74.67% 46,518 5.69% 72.18% 43,138 4.19% 67.47%
------- ----- ------- ------- ------- ------- -------
Total deposits $69,669 5.09% 100.00% $64,448 5.03% 100.00% $63,937 3.84% 100.00%
======= ===== ======= ======= ===== ======= ======= ===== =======
</TABLE>
69
<PAGE>
The following table presents the maturities and weighted average rates
paid on all certificates of deposit as of June 30, 1996:
<TABLE>
<CAPTION>
Amount Due During the Year Ending June 30,
---------------------------------------------------------------------------
1997 1998 1999 Total
----------------- ---------------- ---------------- -----------------
Weighted Weighted Weighted Weighted
Amount Rate Amount Rate Amount Rate Amount Rate
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Certificate accounts with original maturities of:
6 months $ 9,698 5.09% $ -- -- $ -- -- $ 9,698 5.09%
12 months 16,043 5.64% -- -- -- -- 16,043 5.64%
18 months 701 6.11% 266 5.41% -- -- 967 5.92%
24 months 1,144 5.82% 723 5.93% -- -- 1,867 5.86%
30 months 48 5.25% 383 6.27% 458 5.60% 889 5.87%
36 months 2,491 4.78% 458 6.17% 1,431 6.90% 4,380 5.62%
IRA certificates 2,573 6.20% 1,910 5.68% -- -- 4,483 5.98%
Jumbo ($100,000 or more) 13,328 5.71% 66 6.61% 300 7.00% 13,694 5.74%
------- ------ ------ -------
$46,026 5.57% $3,806 5.84% $2,189 6.64% $52,021 5.61%
======= ==== ====== ===== ====== ===== ======= =====
</TABLE>
70
<PAGE>
Based upon historical experience, Home Savings expects that a substantial
percentage of its time deposits coming due within twelve months after June 30,
1996 will be renewed.
As of June 30, 1996, the aggregate amount of time certificates of deposit
in amounts greater than or equal to $100,000 outstanding was $13.7 million,
representing 26.3% of all certificates of deposit on such date. Management
believes that most of these deposits are held by long-time, local customers of
Home Savings. 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 $ 3,356
Over 3 months through 6 months 7,996
Over 6 months through 12 months 1,976
Over 12 months 366
-------
Total $13,694
=======
</TABLE>
Borrowings. Although it has not done so in several years, Home 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, Home Savings is required to own capital stock in the FHLB of
Atlanta and is authorized to apply for advances from the FHLB of Atlanta on the
security of that stock and a floating lien on certain of its real estate secured
loans and other assets. Each credit program has its own interest rate and range
of maturities. Depending on the program, limitations on the amount of advances
are based either on a fixed percentage of an institution's net worth or on the
FHLB of Atlanta's assessment of the institution's creditworthiness. At June 30,
1996, Home Savings had no outstanding borrowings.
Subsidiaries
As a North Carolina-chartered savings bank, Home 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 Home Savings
to exceed an investment of 3% of assets must receive prior approval of the FDIC.
Home Savings has one subsidiary which is not active and has never engaged in any
business.
Properties
The following table sets forth the location of Home Savings' headquarters
office in Thomasville, North Carolina, as well as certain other information
relating to this office as of June 30, 1996:
<TABLE>
<CAPTION>
Net Book
Value of
Property or Owned or
Improvements Leased
------------ ----------
<S> <C> <C>
22 Winston Street
Thomasville, North Carolina 27360 $624,380 Owned
</TABLE>
The total net book value of Home Savings' furniture, fixtures and
equipment at June 30, 1996 was $123,785.
Legal Proceedings
From time to time, Home Savings is a party to legal proceedings which
arise in the ordinary course of its business. Most commonly, such proceedings
are commenced by Home Savings to enforce obligations owed to it. From
71
<PAGE>
time to time, claims are asserted against Home Savings directly or as defenses
and counterclaims in actions filed by Home Savings. At this time, Home 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
Home 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. As of June 30, 1996, there were eight depository institutions with 13
offices in Thomasville, North Carolina. Based upon 1995 comparative data, Home
Savings had 15.7% of the deposits in Thomasville, and 5.5% of the deposits in
Davidson County. Home 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 Home 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.
Home Savings experiences strong competition for real estate loans from
other savings institutions, commercial banks, and mortgage banking companies.
Home 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.
Employees
As of June 30, 1996, Home Savings had 11 full-time employees. Home
Savings provides its employees with basic and major medical insurance, life
insurance, sick leave and vacation benefits. In addition, Home Savings
maintains a defined benefit pension plan which covers all full time employees of
at least 21 years of age who have completed five months continuous service. See
"MANAGEMENT OF HOME SAVINGS -- Pension Plan" and Note G of the "Notes to
Financial Statements."
In connection with the Conversion, Home Savings has adopted the ESOP,
which will provide benefits to employees of Home Savings. See "MANAGEMENT OF
HOME SAVINGS -- Employee Stock Ownership Plan." Also, the Boards of Directors
of the Holding Company and Home 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 HOME
SAVINGS -- Proposed Management Recognition Plan" and "--Proposed Stock Option
Plan."
Employees are not represented by any union or collective bargaining
group, and Home Savings considers its employee relations to be good.
TAXATION
Federal Income Taxation
Savings institutions such as Home Savings are subject to the taxing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), for
corporations, as modified by certain provisions specifically applicable for
financial or thrift institutions. Income is reported using the accrual method
of accounting. The maximum corporate federal income tax rate is 35%.
For fiscal years beginning prior to December 31, 1995, thrift
institutions which qualified under certain definitional tests and other
conditions of the Code were permitted certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. A reserve could be established for bad
72
<PAGE>
debts on qualifying real property loans (generally loans secured by interests in
real property improved or to be improved) under (i) a method based on a
percentage of the institution's taxable income, as adjusted (the "percentage of
taxable income method") or (ii) a method based on actual loss experience (the
"experience method"). The reserve for nonqualifying loans was computed using the
experience method.
The percentage of taxable income method was limited to 8% of taxable
income. This method could not raise the reserve to exceed 6% of qualifying real
property loans at the end of the year. Moreover, the additions for qualifying
real property loans, when added to nonqualifying loans, could not exceed 12% of
the amount by which total deposits or withdrawable accounts exceed the sum of
surplus, undivided profits and reserves at the beginning of the year. The
experience method was the amount necessary to increase the balance of the
reserve at the close of the year to the greater of (i) the amount which bore the
same ratio to loans outstanding at the close of the year as the total net bad
debts sustained during the current and five preceding years bore to the sum of
the loans outstanding at the close of such six years or (ii) the balance in the
reserve account at the close of the last taxable year beginning before 1988
(assuming that the loans outstanding have not declined since such date).
In order to qualify for the percentage of income method, an
institution had to have at least 60% of its assets as "qualifying assets" which
generally included, cash, obligations of the United States government or an
agency or instrumentality thereof or of a state or political subdivision,
residential real estate-related loans, or loans secured by savings accounts and
property used in the conduct of its business. In addition, it had to meet
certain other supervisory tests and operate principally for the purpose of
acquiring savings and investing in loans.
Institutions which became ineligible to use the percentage of income
method had to change to either the reserve method or the specific charge-off
method that applied to banks. Large thrift institutions, those generally
exceeding $500 million in assets, had to convert to the specific charge-off
method. In computing its bad debt reserve for federal income taxes, Home
Savings elected to use the reserve method in fiscal years 1994, 1995, and 1996.
Bad debt reserve balances in excess of the balance computed under the
experience method or amounts maintained in a supplemental reserve built up prior
to 1962 ("excess bad debt reserve") require inclusion in taxable income upon
certain distributions to shareholders. Distributions in redemption or
liquidation of stock or distributions with respect to its stock in excess of
earnings and profits accumulated in years beginning after December 31, 1951, are
treated as a distribution from the excess bad debt reserve. When such a
distribution takes place and it is treated as from the excess bad debt reserve,
the thrift is required to reduce its reserve by such amount and simultaneously
recognize the amount as an item of taxable income increased by the amount of
income tax imposed on the inclusion. Dividends not in excess of earnings and
profits accumulated since December 31, 1951 will not require inclusion of part
or all of the bad debt reserve in taxable income. Home 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, 1996
includes approximately $1.5 million for which no provision for federal income
tax has been made.
Legislation passed by the U.S. Congress and signed by the President in
August 1996 contains a provision that repeals the percentage of taxable income
method of accounting for thrift bad debt reserves for tax years beginning after
December 31, 1995. The legislation will trigger bad debt reserve recapture for
post-1987 excess reserves over a six-year period. At June 30, 1996, Home
Savings' post-1987 excess reserves amounted to approximately $264,000. 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 will be met if the principal amount of the
institution's residential loans exceeds a base year amount, which is determined
by reference to the average of the institution's residential loans during the
six taxable years ending before January 1, 1996. However, notwithstanding this
special provision, recapture must begin no later than the first taxable year
beginning after December 31, 1997. See "RISK FACTORS -- Increased Tax Liability
Resulting From Recapture of Bad Debt Reserves."
Home 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
73
<PAGE>
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. Home Savings has
not been subject to the AMT in recent years.
Home Savings' federal income tax returns have not been audited in the
last ten tax years.
State and Local Taxation
Under North Carolina law, the corporate income tax is 7.75% of federal
taxable income as computed under the Code, subject to certain prescribed
adjustments. In addition, for tax years beginning in 1991, 1992, 1993 and 1994,
corporate taxpayers were required to pay a surtax equal to 4%, 3%, 2% and 1%,
respectively, of the state income tax otherwise payable by it. An annual state
franchise tax is imposed at a rate of 0.15% applied to the greatest of the
institutions (i) capital stock, surplus and undivided profits, (ii) investment
in tangible property in North Carolina or (iii) appraised valuation of property
in North Carolina.
The North Carolina corporate tax rate will drop to 7.5% in 1997, 7.25%
in 1998, 7% in 1999, and 6.9% thereafter.
SUPERVISION AND REGULATION
Regulation of the Holding Company
General. The Holding Company was organized for the purpose of
acquiring and holding all of the capital stock of Home Savings to be issued in
the Conversion. As a 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
74
<PAGE>
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 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.
As a result of the Holding Company's ownership of Home 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. 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 and other
intangible assets. 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.
Dividend and Repurchase Limitations. In connection with the
Conversion, the FDIC has required the Holding Company and Home 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. In addition, the Holding Company must
75
<PAGE>
obtain Federal Reserve approval prior to repurchasing Common Stock for in excess
of 10% of its net worth during any 12 months period unless the Holding Company
(i) both before and after the redemption satisfies capital requirements for
"well capitalized" state member banks; (ii) received a one or two rating in its
last examination; and (iii) is not the subject of any unresolved supervisory
issues. Although the payment of dividends and repurchase of stock by the Holding
Company are subject to the requirements and limitations of North Carolina
corporate law, except as set forth in this paragraph, neither the Administrator
nor the FDIC have promulgated any regulations specifically limiting the right of
the Holding Company to pay dividends and repurchase shares. However, the ability
of the Holding Company to pay dividends or repurchase shares may be dependent
upon the Holding Company's receipt of dividends from Home Savings. Home Savings'
ability to pay dividends is limited. See " -- Regulation of Home Savings --
Restrictions on Dividends and Other Capital Distributions."
Capital Maintenance Agreement. In connection with the Administrator's
approval of the Holding Company's application to acquire control of Home
Savings, the Holding Company was required to execute a Capital Maintenance
Agreement whereby it has agreed to maintain Home Savings' capital in an amount
sufficient to enable Home 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.
Regulation of Home 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 Home Savings, will continue to be subject to changes in applicable
statutes and regulations from time to time.
Home 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.
Home 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 Home
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 Home Savings. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue
76
<PAGE>
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 Home Savings and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of Home 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, Home Savings will be an affiliate of
the Holding Company. Generally, Sections 23A and 23B (i) establish certain
collateral requirements for loans to affiliates; (ii) limit the extent to which
the savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such savings institution's
capital stock and surplus, and contain an aggregate limit on all such
transactions with all affiliates to an amount equal to 20% of such capital stock
and surplus and (iii) require that all such transactions be on terms
substantially the same, or at least as favorable, to the savings institution or
the subsidiary as those provided to a nonaffiliate. The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate, the purchase of assets from an affiliate, the purchase of, or an
investment in, the securities of an affiliate, the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person, or
issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate.
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,
directly or indirectly, own more than 10% of any class of voting securities 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 or 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 based on
underwriting standards not less stringent than those applied in comparable
transactions with other persons, and 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. Home Savings is
a member of the SAIF of the FDIC.
As a SAIF-insured institution, Home 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
77
<PAGE>
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.
As a result of subsequent changes to the assessment schedule,
financial institutions such as Home Savings which are members of the SAIF are
currently 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. This has created a disparity between SAIF and BIF
assessments. Annual assessments for BIF members in the lowest risk category are
now only $2,000. Home Savings paid deposit insurance premiums of $149,000 and
$145,000 in fiscal 1996 and 1995, respectively. The FDIC has noted that the
premium differential may have adverse consequences for SAIF members, including
reduced earnings and an impaired ability to raise funds in capital markets. In
addition, SAIF members, such as Home 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.
A comprehensive continuing appropriations bill enacted on September
30, 1996 reduced this premium differential between BIF- and SAIF-insured
institutions but did not eliminate it. As a result of this legislation, it is
now anticipated that, beginning on January 1, 1997, BIF-insured institutions,
except those in higher risk categories, will pay deposit insurance premiums
equal to approximately 1.3 cents per $100 of insured domestic deposits and SAIF-
insured institutions, except those in higher risk categories, will pay deposit
insurance premiums equal to approximately 6.4 cents per $100 of insured domestic
deposits. This premium differential is expected to exist until at least January
1, 1999.
The above-described comprehesive continuing appropriations bill
enacted on September 30, 1996 also provides for a one-time assessment on SAIF
members to recapitalize the SAIF. The assessment is estimated to equal 65.7
cents per each $100 of insured domestic deposits. Such premium will have the
effect of immediately reducing the capital of SAIF-member institutions by the
amount of the assessment. It is anticipated that SAIF-member institutions will
not be allowed to amortize the expense of the one-time assessment over a period
of years. The one-time assessment, which will based on Home Savings' deposits
as of March 31, 1995, is expected to equal approximately $409,000 on a before
tax basis be payable prior to December, 1996. This one-time assessment to
recapitalize the SAIF is expected to have an adverse effect on the operating
expenses and results of operations of Home Savings during the quarter ended
December 31, 1996.
Community Reinvestment Act. Home 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 Home Savings' last compliance examination, Home Savings
received a "satisfactory" rating with respect to CRA compliance. Home 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 Home 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."
78
<PAGE>
Capital Requirements Applicable to Home Savings. The FDIC requires
Home 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 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 Home Savings to have a ratio of total capital to risk-weighted
assets, including certain off-balance sheet activities, such as standby letters
of credit, of at least 8%. At least half of the total capital is required to be
Tier I capital. The remainder (Tier II capital) may consist of a limited amount
of subordinated debt, certain hybrid capital instruments, other debt securities,
certain types of preferred stock and a limited amount of general loan loss
allowance.
An institution which fails to meet minimum capital requirements may be
subject to a capital directive which is enforceable in the same manner and to
the same extent as a final cease and desist order, and must submit a capital
plan within 60 days to the FDIC. If the leverage ratio falls to 2% or less, the
institution may be deemed to be operating in an unsafe or unsound condition,
allowing the FDIC to take various enforcement actions, including possible
termination of insurance or placement of the institution in receivership.
The Administrator requires that net worth equal at least 5% of total
assets. Intangible assets must be deducted from net worth and assets when
computing compliance with this requirement.
At June 30, 1996, Home Savings complied with each of the capital
requirements of the FDIC and the Administrator. For a description of Home
Savings' required and actual capital levels on June 30, 1996, see "HISTORICAL
AND PRO FORMA CAPITAL COMPLIANCE."
The 1991 Banking Law required each federal banking agency to revise
its risk-based capital standards to ensure that those standards take adequate
account of interest rate risk, concentration of credit risk, and the risk of
nontraditional activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages. On August 2, 1995, the federal
banking agencies issued a joint notice of adoption of final risk based capital
rules to take account of interest rate risk. The final regulation required an
assessment of the need for additional capital on a case-by-case basis,
considering both the level of measured exposure and qualitative risk factors.
The final rule also stated an intent to, in the future, establish an explicit
minimum capital charge for interest rate risk based on the level of a bank's
measured interest rate risk exposure.
Effective June 26, 1996, the federal banking agencies issued a joint
policy statement announcing the agencies' election not to adopt a standardized
measure and explicit capital charge for interest rate risk at that time.
Rather, the policy statement (i) identifies the main elements of sound interest
rate risk management, (ii) describes prudent principles and practices for each
of those elements, and (iii) describes the critical factors affecting the
agencies' evaluation of a bank's interest rate risk when making a determination
of capital adequacy. The joint policy statement is not expected to have a
material impact on Home Savings' management of interest rate risk.
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. Home Savings does not
anticipate that this rule will have a material effect upon its financial
condition or results of operations.
Loans to One Borrower. Home 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
79
<PAGE>
also is authorized to make loans to one borrower to develop domestic residential
housing units, not to exceed the lesser of $30 million, or 30% of the savings
institution's net worth, provided that (i) the purchase price of each single-
family dwelling in the development does not exceed $500,000; (ii) the savings
institution is in compliance with its fully phased-in capital requirements;
(iii) the loans comply with applicable loan-to-value requirements; (iv) the
aggregate amount of loans made under this authority does not exceed 150% of net
worth; and (v) the institution's regulator issues an order permitting the
savings institution to use this higher limit. These limits also authorize a
savings bank to make loans-to-one borrower to finance the sale of real property
acquired in satisfaction of debts in an amount up to 50% of net worth.
As of June 30, 1996, the largest aggregate amount of loans which Home
Savings had to any one borrower was $1.1 million. Home 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 Home 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,
Home Savings is required to own capital stock in the FHLB of Atlanta in an
amount at least equal to the greater of 1% of the aggregate principal amount of
its unpaid residential mortgage loans, home purchase contracts and similar
obligations at the end of each calendar year, or 5% of its outstanding advances
(borrowings) from the FHLB of Atlanta. On June 30, 1996, Home Savings was in
compliance with this requirement with an investment in FHLB of Atlanta stock of
$614,000.
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 June 30, 1996, Home 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 an insured institution, such as Home Savings, 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 generally
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 Home
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,
80
<PAGE>
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
Home 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 Home Savings by a corporation whose ownership is or
will be substantially the same as the ownership of Home 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 Home Savings or the Boards of Directors of the Holding Company and
Home 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 Home Savings and the
public interests will not be adversely affected.
Liquidity. Home Savings is subject to the Administrator's requirement
that the ratio of liquid assets to total assets equal at least 10%. The
computation of liquidity under North Carolina regulation allows the inclusion of
mortgage-backed securities and investments which, in the judgment of the
Administrator, have a readily marketable value, including investments with
maturities in excess of five years. At June 30, 1996, Home Savings' liquidity
ratio, calculated in accordance with North Carolina regulations, was
approximately 24.3%.
Additional Limitations on Activities. Recent FDIC law and regulations
generally provide that Home 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 Home
Savings is and continues to be in compliance with fully phased-in capital
standards. National banks are generally not permitted to hold equity investments
other than shares of service corporations and certain federal agency securities.
Moreover, the activities in which service corporations for savings banks are
permitted to engage are limited to those of service corporations for national
banks.
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 Home 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
81
<PAGE>
institution has (i) a total risk-based capital ratio of less than 6%, (ii) a
Tier I risk-based capital ratio of less than 3% or (iii) a leverage ratio of
less than 3% and (C) "critically undercapitalized" if the institution has a
ratio of tangible equity to total assets equal to or less than 2%.
To facilitate the early identification of problems, the 1991 Banking
Law required the federal banking agencies to review and, under certain
circumstances, prescribe more stringent accounting and reporting requirements
than those required by generally accepted accounting principles. The FDIC issued
a final rule, effective July 2, 1993, implementing those provisions.
The 1991 Banking Law further requires the federal banking agencies to
develop regulations requiring disclosure of contingent assets and liabilities
and, to the extent feasible and practicable, supplemental disclosure of the
estimated fair market value of assets and liabilities. The 1991 Banking Law also
requires annual examinations of all insured depository institutions by the
appropriate federal banking agency, with some exceptions for small, well-
capitalized institutions and state chartered institutions examined by state
regulators. Moreover, the 1991 Banking Law, as modified by the Federal Housing
Enterprises Financial Security and Soundness Act, requires the federal banking
agencies to set operational and managerial, asset quality, earnings and stock
valuation standards for insured depository institutions and depository
institution holding companies, as well as compensation standards (but not dollar
levels of compensation) for insured depository institutions that prohibit
excessive compensation, fees or benefits to officers, directors, employees, and
principal stockholders. In July 1992, the federal banking agencies issued a
joint advance notice of proposed rulemaking soliciting comments on all aspects
of the implementation of these standards in accordance with the 1991 Banking
Law, including whether the compensation standards should apply to depository
institution holding companies. An interagency notice of proposed rulemaking was
issued in November 1993. However, sections of the Riegle Community Development
and Regulatory Improvement Act of 1994 will affect the nature and scope of the
proposed regulations, and eliminates the requirement that the regulations apply
to depository institution holding companies.
The foregoing necessarily is a general description of certain
provisions of the 1991 Banking Law and does not purport to be complete.
Interstate Banking. A bank holding company 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 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 permitted adequately
capitalized bank holding companies 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.
82
<PAGE>
It is anticipated that the Interstate Banking Act will increase
competition within the market in which Home 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, additional 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 Home Savings.
The Interstate Banking Act also modifies the controversial safety and
soundness provisions contained in Section 39 of the 1991 Banking Law which
required the banking regulatory agencies to promulgate regulations governing
such topics as internal controls, loan documentation, credit underwriting,
interest rate exposure, asset growth, compensation and fees and other matters
those agencies determine to be appropriate. The legislation exempts bank
holding companies from these provisions and requires the agencies to prepare
guidelines, as opposed to regulations, dealing with these areas. It also gives
more discretion to the banking regulatory agencies in prescribing standards for
banks' asset quality, earnings and stock valuation.
The Interstate Banking Act also expands current exemptions from the
requirement that banks be examined on a 12-month cycle. Exempted banks will be
inspected every 18 months. Other provisions address paperwork reduction and
regulatory improvements, small business and commercial real estate loan
securitization, truth-in-lending amendments regarding high cost mortgages,
strengthening of the independence of certain financial regulatory agencies,
money laundering, flood insurance reform and extension of certain statutes of
limitations.
Restrictions on Dividends and Other Capital Distributions. A North
Carolina-chartered stock savings bank may not declare or pay a cash dividend on,
or repurchase any of, its capital stock if the effect of such transaction would
be to reduce the net worth of the institution to an amount which is less than
the minimum amount required by applicable federal and state regulations. In
addition, a North Carolina-chartered stock savings bank, for a period of five
years after its conversion from mutual to stock form, must obtain the written
approval from the Administrator before declaring or paying a cash dividend on
its capital stock in an amount in excess of one-half of the greater of (i) the
institution's net income for the most recent fiscal year end, or (ii) the
average of the institution's net income after dividends for the most recent
fiscal year end and not more than two of the immediately preceding fiscal year
ends, if applicable.
Also, without the prior written approval of the Administrator, a North
Carolina-chartered stock savings bank, for a period of five years after its
conversion from mutual to stock form, may not repurchase any of its capital
stock. The Administrator will give approval to repurchase only upon a showing
that the proposed repurchase will not adversely affect the safety and soundness
of the institution. Under FDIC regulations, stock repurchases may be made
during the first year after the Conversion only after receipt of FDIC approval.
In addition, Home 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 Home Savings' conversion from
mutual to stock ownership.
In connection with the Conversion, the Holding Company and Home
Savings have agreed with the FDIC that, during the first year after the
Conversion, Home Savings will not pay any dividend or make any other
distribution to its stockholder which represents, is characterized as or is
treated for federal tax purposes as, a return of capital.
Restrictions on Benefit Plans. FDIC regulations provide that for a
period of one year from the date of the Conversion, Home 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.
83
<PAGE>
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 Office of Thrift Supervision ("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, Home 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 Home Savings maintain federal deposit insurance as a condition of
doing business.
The Administrator conducts regular examinations of North Carolina-
chartered savings banks. The purpose of such examinations is to assure that
institutions are being operated in compliance with applicable North Carolina law
and regulations and in a safe and sound manner. These examinations are usually
conducted on a joint basis with the FDIC. In addition, the Administrator is
required to conduct an examination of any institution when he has good reason to
believe that the standing and responsibility of the institution is of doubtful
character or when he otherwise deems it prudent. The Administrator is empowered
to order the revocation of the license of an institution if he finds that it has
violated or is in violation of any North Carolina law or regulation and that
revocation is necessary in order to preserve the assets of the institution and
protect the interests of its depositors. The Administrator has the power to
issue cease and desist orders if any person or institution is engaging in, or
has engaged in, any unsafe or unsound practice or unfair and discriminatory
practice in the conduct of its business or in violation of any other law, rule
or regulation.
A North Carolina-chartered savings bank must maintain net worth,
computed in accordance with the Administrator's requirements, of 5% of total
assets and liquidity of 10% of total assets, as discussed above. Additionally, 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,
84
<PAGE>
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
five directors: Henry H. Darr, James G. Hudson, Jr., John R. Hunnicutt, F.
Stuart Kennedy and Milton T. Riley, Jr. Each of these persons is also a
director of Home Savings, and biographical information with respect to each is
set forth under "MANAGEMENT OF HOME SAVINGS -- Directors." Each director is
elected for a one-year term. However, at such time, if any, 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 Home Savings, and each of whom serves at the
discretion of the Board of Directors of the Holding Company, are as follows:
<TABLE>
<CAPTION>
Age at Position Held
Name June 30, 1996 With the Holding Company
- ---------------------- ------------- ----------------------------------
<S> <C> <C>
James G. Hudson, Jr. 56 President, Chief Executive
Officer and Treasurer
John E. Todd 50 Vice President
Drema A. Michael 43 Secretary and Assistant Treasurer
</TABLE>
Biographical information with respect to each of these officers is set
forth below under "MANAGEMENT OF HOME SAVINGS -- Executive Officers." There are
no other employees of the Holding Company. 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 Home Savings to, the directors and
executive officers of the Holding Company is set forth under "MANAGEMENT OF HOME
SAVINGS." See "MANAGEMENT OF HOME SAVINGS -- Employment Agreement" and "--
Special Termination Agreements" for a description of certain agreements expected
to be entered into with the executive officers of the Holding Company and Home
Savings.
MANAGEMENT OF HOME SAVINGS
Directors
The direction and control of Home Savings, as a mutual North Carolina-
chartered savings bank, has been vested in its five-member Board of Directors
elected by the depositor and borrower members of Home Savings. Upon conversion
of Home Savings to capital stock form, each director of Home Savings immediately
prior to the Conversion will continue to serve as a director of Home Savings as
a stock institution. All directors currently serve for one-year terms. Home
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
85
<PAGE>
Company will own all of the issued and outstanding shares of capital stock of
Home Savings, and the Holding Company will elect the directors of Home Savings.
The Holding Company now plans to nominate and re-elect all members of Home
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 Home Savings.
86
<PAGE>
<TABLE>
<CAPTION>
Age on
June 30, Principal Occupation Director
Name 1996 During Last Five Years Since
---- -------- --------
<S> <C> <C> <C>
Henry H. Darr. 55 President, J. L. Darr & Son, 1980
Inc.
James G. Hudson, Jr. 56 President, Chief Executive 1972
Officer and Treasurer of Home
Savings
John R. Hunnicutt 60 President, McThom, Inc. and 1995
McLex, Inc., licensees of
McDonalds Corporation
F. Stuart Kennedy 70 Chairman of the Board, Rex Oil 1971
Company
Milton T. Riley, Jr. 59 Personal investments; until 1992
1992, partner with Dixon, Odom
& Co., certified public
accountants
Mr. Darr and Mr. Kennedy are cousins.
</TABLE>
Board Meetings and Committees
Home Savings' Board of Directors has regular monthly meetings, and
held 16 regular and special meetings in the fiscal year ended June 30, 1996.
The Board has also established three committees to whom certain responsibilities
have been delegated - an Executive Committee, an Audit Committee, and a Loan
Committee. No director except Henry H. Darr attended fewer than 75% of the
total number of Board meetings and meetings of Board committees on which he
served during the year ended June 30, 1996.
During fiscal 1996, Home Savings formed an Executive Committee which
is composed of directors Kennedy, Riley and Hudson. 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. The Executive Committee
met one time during the year ended June 30, 1996.
Home Savings' Audit Committee is composed of director Riley and Drema
H. Michael, Home Savings' Secretary and Assistant Treasurer. This committee is
responsible for meeting with and retaining independent auditors, overseeing the
adequacy of internal controls, insuring compliance with Home Savings' policies
and procedures and with generally accepted accounting principles. The Audit
Committee meets on an as needed basis, and during the fiscal year ended June 30,
1996, met two times.
Home Savings' Loan Committee is composed of any three directors of
Home Savings and meets on an as needed basis to approve loans underwritten by
Home Savings' loan officers. During the fiscal year ended June 30, 1996, the
loan committee met 17 times.
Directors' Fees
For their service on Home Savings' Board of Directors, all members of
Home Savings' Board of Directors receive $800 per meeting attended. In
addition, all non-employee directors who serve on Board committees receive $150
per meeting for their service. Board fees are subject to adjustment annually.
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."
87
<PAGE>
Executive Officers
Home Savings has three executive officers. The following table sets
forth certain information with respect to such executive officers:
<TABLE>
<CAPTION>
Age on Positions and Employed By
June 30, Occupations Home Savings
Name 1996 During Last Five Years Since
- ---- -------- ---------------------- -------------
<S> <C> <C> <C>
James G. Hudson, Jr. 56 President, Chief 1972
Executive Officer
and Treasurer
John E. Todd 50 Vice President 1979
Drema A. Michael 43 Secretary and 1974
Assistant Treasurer
</TABLE>
Executive Compensation
The following table sets forth for the fiscal year ended June 30, 1996
certain information as to the cash compensation earned by (i) the chief
executive officer of Home Savings and (ii) all other executive officers of Home
Savings whose cash compensation exceeded $100,000 (there were none), for
services in all capacities.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Other Annual
Name and Compensation All Other
Principal Position Salary Bonus ($)/2/ Compensation
------------------ ------- ----- ----------- ------------
James G. Hudson, Jr. $91,800 $13,745 /1/ --- $31,000/3/
President, Chief Executive
Officer, Treasurer and
Director
</TABLE>
____________________
/1/ Includes $10,283 in bonuses paid under Home Savings' bonus compensation
plan and $3,462 in holiday bonuses. See "--Bonus Compensation."
/2/ Under the "Other Annual Compensation" category, perquisites for the
fiscal year ended June 30, 1996 did not exceed the lesser of $50,000, or
10% of salary and bonus as reported for Mr. Hudson.
/3/ Includes (a) directors' fees of $9,000; and (b) $22,000 accrued under
supplemental income agreements established for the benefit of Mr.
Hudson.
The Board of Directors of Home Savings does not have a compensation
committee. Home Savings' full board of directors determines the compensation of
the executive officers. The salaries of each of the executive officers is
determined based upon the executive officer's contributions to Home Savings'
overall profitability, maintenance of regulatory compliance standards,
professional leadership, and management effectiveness in meeting the needs of
day to day operations. The compensation committee also compares the
compensation of Home Savings' executive officers with compensation paid to
executives of comparable financial institutions in North Carolina and executives
of other businesses in Home Savings' market area. Mr. Hudson participates in
the deliberations of the Board of Directors regarding compensation of executive
officers other than himself. He does not participate in the discussion or
decisions regarding his own compensation.
Bonus Compensation
Home Savings has approved a bonus compensation plan pursuant to which
James G. Hudson, Jr., President, Chief Executive Officer and Treasurer, receives
bonus compensation equal to 1% of Home Savings' income before taxes and John E.
Todd, Vice President, and Drema A. Michael, Secretary and Assistant Treasurer,
are each entitled to receive bonuses equal to 0.5% of Home Savings' income
before taxes. During the fiscal years ended June 30, 1996, 1995 and
88
<PAGE>
1994, the bonuses paid to Mr. Hudson totalled $10,283, $15,861 and $18,909,
respectively; and the bonuses paid to each of Mr. Todd and Ms. Michael totalled
$5,142, $7,932 and $9,454, respectively. In addition, employees receive annual
discretionary holiday bonuses, which during the fiscal years 1996, 1995 and 1994
totalled $13,000, $12,000 and $11,300, in the aggregate for all employees. As is
the case with Home Savings' compensation arrangements in general, Home Savings'
bonus compensation plan is subject to regulatory oversight and, therefore, could
be changed in the future in response to regulatory requirements or
otherwise.
Pension Plan
Home Savings maintains a non-contributory defined benefit pension plan
("Pension Plan") for the benefit of all of its employees who have completed five
(5) months of service and who are at least twenty-one (21) years of age. Under
the Pension Plan, Home Savings annually contributes an actuarially determined
amount to provide a benefit for each participant at retirement.
Participants are fully vested in amounts contributed to the Pension
Plan on their behalf by Home Savings after completing six (6) years of service,
as follows: 1 year of service, 0%; 2 years, 20%; 3 years, 40%; 4 years, 60%; 5
years, 80%; 6 years or more, 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 Pension Plan is the later of (a) age
65 or (b) the fifth anniversary of the date an employee first became a
participant in the Pension Plan ("Normal Retirement Age"). Subject to certain
restrictions on maximum benefits required by federal law, upon reaching Normal
Retirement Age, each participant will receive a retirement benefit in the form
of a straight life annuity, with 120 months guaranteed, determined pursuant to a
formula which takes into consideration a participant's "average monthly
compensation," years of service with Home Savings, and the participant's
expected benefits from Social Security. For purposes of the Pension Plan, a
participant's "average monthly compensation" is defined as his or her
compensation converted to a monthly amount and then averaged over the five (5)
consecutive plan years which produce the highest monthly average within the last
ten (10) completed years of participation. The plan also offers early
retirement to participants who have completed twenty (20) years of service and
who are at least fifty-five (55) years of age.
The following table shows the retirement benefit payable for a range
of compensation and years of service for a person who retires at Normal
Retirement Age. These are hypothetical benefits based upon the plan's normal
benefit formula.
<TABLE>
<CAPTION>
Earnings Credited for
Retirement Benefits Years of Service at Normal Retirement
- ----------------------- -------------------------------------
<S> <C> <C> <C> <C>
10 20 30 35
-- -- -- --
$ 25,000............... $ 3,453 $ 6,906 $10,359 $11,050
$ 35,000............... 5,269 10,537 15,806 16,860
$ 45,000............... 7,235 14,470 21,705 23,152
$ 55,000............... 9,201 18,402 27,603 29,444
$ 65,000............... 11,167 22,335 33,502 35,736
$ 75,000............... 13,134 26,267 39,401 42,028
$100,000............... 18,049 36,099 54,148 57,758
$125,000............... 22,965 45,930 68,895 73,488
</TABLE>
89
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
$150,000............... 28,173 55,761 83,934 89,218
</TABLE>
The benefits listed above are annual amounts and are based on the assumption
that the participant is age 65. As of June 30, 1996, James G. Hudson, Jr. had
23 years of service under the Pension Plan.
Supplemental Income Plans
Home Savings has entered into two separate Supplemental Income
Agreements with James G. Hudson, Jr., President, Chief Executive Officer and
Treasurer. These agreements provide that Mr. Hudson will receive certain
specified monthly payments for 15 years upon reaching 65 years of age. In the
event of Mr. Hudson's death before all payments have been made, benefits would
be payable to designated beneficiaries. In addition, if Mr. Hudson should die
prior to reaching 65 years of age, certain monthly payments would be made for a
15-year period to designated beneficiaries. In the event Mr. Hudson terminates
his employment, for reasons other than death, prior to reaching 65 years of age,
the monthly retirement benefit payment would be reduced. The benefits payable
under the Supplemental Income Agreements are funded by the purchase of life
insurance. During the fiscal year ended June 30, 1996, Home Savings accrued
$22,000 towards the cost of the benefits to be provided to Mr. Hudson under the
supplemental income plans.
Other Benefits
Home Savings provides its employees with group medical, dental, life
and disability insurance benefits. Employees are also provided with vacation,
holiday and sick leave.
Employment Agreement
In connection with the Conversion, Home Savings will enter into an
employment agreement with James G. Hudson, Jr., President, Chief Executive
Officer and Treasurer, in order to establish his duties and compensation and to
provide for his continued employment with Home Savings. The agreement will
provide for an initial annual base salary of $93,600. The agreement 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
agreement also provides 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), Mr. Hudson's base salary shall be increased by at least 6%
annually and the agreement will automatically be extended so that it will have a
three year term after the change in control. In addition, the employment
agreement provides for possible profitability and discretionary bonuses and
participation in all other pension, profit-sharing or retirement plans
maintained by Home Savings or by the Holding Company for employees of Home
Savings, as well as fringe benefits normally associated with Mr. Hudson's
office. It is now expected that Mr. Hudson will continue to be eligible to
receive bonuses under the existing bonus compensation plan for executive
officers, as such plan may be amended in the future. See " -- Bonus
Compensation." It is not now contemplated that Mr. Hudson will receive
additional discretionary bonuses, other than holiday bonuses computed on the
same basis as those paid to other employees. The employment agreement provides
that it may be terminated by Home Savings for cause, as defined in the
agreement, and that it may otherwise be terminated by Home Savings (subject to
vested rights) or by Mr. Hudson.
The employment agreement provides that the nature of Mr. Hudson's
compensation, duties or benefits cannot be diminished following a change in
control of Home 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 Home
Savings, or acquires in any manner control of the election of a majority of the
directors of either the Holding
90
<PAGE>
Company or Home Savings, (ii) either the Holding Company or Home Savings
consolidates or merges with or into another corporation, association or entity,
or is otherwise reorganized, where neither the Holding Company nor Home Savings
is the surviving corporation in such transaction, or (iii) all or substantially
all of the assets of either the Holding Company or Home Savings are sold or
otherwise transferred to, or are acquired by, any other entity or group.
The employment agreement could have the effect of making it less
likely that Home Savings or the Holding Company will be acquired by another
entity. See "ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND HOME
SAVINGS -- The Holding Company -- Anti-Takeover Effect of Employment Agreement,
Special Termination Agreements and Benefit Plans."
Special Termination Agreements
In connection with the Conversion, the Holding Company will enter into
special termination agreements with John E. Todd, Vice President of Home
Savings, and Drema A. Michael, Secretary and Assistant Treasurer of Home
Savings. Such agreements are intended to ensure that Home Savings will be able
to maintain a stable and competent management base after the Conversion. The
continued success of Home Savings depends, to a significant degree, on the skill
and competence of its officers.
The special termination agreements provide for payment to the covered
officer only in the event of a change in control of the Holding Company or Home
Savings followed by termination of the officer's employment by Home Savings
within 24 months for other than "cause," as such term is defined in the
agreements, or in the event there are certain specified changes in the officer's
employment circumstances within 24 months following a change in control of Home
Savings or the Holding Company and the officer terminates his or her employment.
In the event of such a termination of employment, the officer is entitled to
payment in an amount equal to two times his or her salary and bonuses for income
tax purposes for the most recent calendar year, payable in a lump sum or in
equal monthly payments. The initial term of each of these agreements is for a
period commencing upon the effective date of the Conversion and ending three
calendar years later. At the end of each anniversary date of the agreements,
they may be extended for another year so that the remaining term shall be three
years unless written notice of non-renewal is given by the Holding Company's
Board of Directors. For purposes of the special termination agreements, "change
in control" has the same meaning as in the employment agreement to be entered
into with Mr. Hudson. See "-- Employment Agreement." If a change in control
and such a termination occurred during calendar year 1996, Mr. Todd and Ms.
Michael would be entitled to receive $121,654 and $114,394, respectively, under
their special termination agreements.
The special termination agreements could have the effect of making it
less likely that Home Savings or the Holding Company will be acquired by another
entity. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND HOME
SAVINGS -- The Holding Company -- Anti-Takeover Effect of Employment Agreement,
Special Termination Agreements and Benefit Plans."
Severance Plan
In connection with the Conversion, Home 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 Home Savings or the Holding Company and (i) Home Savings
or any successor of Home Savings terminates the employment of any full time
employee of Home 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 Home 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 Home 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 the employee's annual salary.
91
<PAGE>
Officers of Home 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
Home Savings has established the ESOP for its eligible employees. The
ESOP will become effective upon the Conversion. Employees with one year of
service with Home 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 19,720 and 26,680 shares
assuming the issuance of between 246,500 and 333,500 shares. If, because of an
oversubscription for shares of Common Stock or for any other reason, the ESOP is
unable to purchase in the Conversion 8% of the total number of shares offered in
the Conversion, then the Board of Directors of the Holding Company intends to
approve the purchase by the ESOP in the open market after the Conversion of such
shares as are necessary for the ESOP to acquire a number of shares equal to 8%
of the shares of Common Stock issued in the Conversion.
Collateral for the Holding Company's loan to the ESOP will be the
Common Stock purchased by the ESOP. It is expected that the loan will be repaid
principally from Home Savings' discretionary contributions to the ESOP within 10
years. Dividends, if any, paid on shares held by the ESOP may also be used to
reduce the loan. It is anticipated that the interest rate for the loan will be
a commercially reasonable rate at the time of the loan inception. The loan will
not be guaranteed by Home 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. Home 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 Home 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 Home 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 certain employees of
Home Savings with an ownership interest in the Holding Company in a manner
designed to encourage such persons to continue their service to Home Savings.
All directors and certain employees of Home Savings would receive benefits under
the MRP. Upon stockholder approval of the MRP, the Holding Company and Home
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
92
<PAGE>
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. Recipients would not be required to pay for shares issued to them
under the MRP. Assuming the issuance of 333,500 shares in the Conversion and
receipt of stockholder approval, 13,340 shares would be issued pursuant to the
MRP. 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, (i) no employee of Home Savings (including Mr.
Hudson, Mr. Todd and Ms. Michael) could receive more than 25% of the shares
issued under the MRP, or 3,335 shares, assuming the issuance of 333,500 shares
in the Conversion, (ii) the four non-employee directors of Home Savings could
receive restricted stock grants for an aggregate of not more than 20% of the
shares issued under the MRP, or 2,668 shares, assuming the issuance of 333,500
shares in the Conversion and (iii) none of the four non-employee directors of
Home Savings could receive individually more than 5% of the shares issued under
the MRP, or 667 shares, assuming the issuance of 333,500 shares in the
Conversion. If the MRP is submitted to and approved by the Holding Company's
stockholders more than one year after consummation of the Conversion, the
regulatory percentage limitations set forth above would not apply.
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 Home Savings. In such event, it is expected that "change in control"
would have the same meaning as is set forth in the employment agreement with
James G. Hudson, Jr. See "-- Employment Agreement."
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 Home 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 recipient would be required to
repay all dividends received with respect to shares that did not become vested.
It is expected that the MRP will provide that it cannot be terminated upon a
change in control of the Holding Company or Home Savings unless the acquiror
provides for an equivalent benefit.
If the MRP is approved by the stockholders, Home 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 Home Savings and as an incentive for their continued
performance.
Proposed Stock Option Plan
The Boards of Directors of the Holding Company and Home 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
93
<PAGE>
after the options vest and upon their exercise. In lieu of purchasing shares in
the open market, the Holding Company could issue authorized but unissued shares
of Common Stock to satisfy options. The Holding Company will reserve for
issuance the maximum number of shares of Common Stock to be issued under the
Plan (less any shares acquired by the Stock Option Plan in the open market).
Assuming the issuance of between 246,500 and 333,500 shares in the Conversion,
an aggregate of between 24,650 and 33,350 shares of Common Stock would be
reserved for issuance and/or purchased in the open market to be issued 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, will not be
transferable except upon death and will 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 Home Savings. In such event, it is expected that "change
in control" would have the same meaning as is set forth in the employment
agreement with James G. Hudson, Jr. See "-- Employment Agreement." The Stock
Option Plan will provide that the Plan cannot be terminated upon a change in
control of the Holding Company or Home Savings unless the acquiror provides for
an equivalent benefit to holders of unvested options.
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, (i) no employee of Home Savings
(including Mr. Hudson, Mr. Todd and Ms. Michael) could receive more than 25% of
the options issued under the Stock Option Plan, or options to purchase 8,337
shares, assuming the issuance of 333,500 shares in the Conversion, (ii) the four
non-employee directors of Home Savings could receive not more than 20% of the
options issued under the Stock Option Plan, or options to purchase 6,670 shares,
assuming the issuance of 333,500 shares in the Conversion, and (iii) none of the
four non-employee directors of Home Savings could receive individually more than
5% of the options issued under the Stock Option Plan, or options to purchase
1,667 shares, assuming the issuance of 333,500 shares in the Conversion. 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
regulatory percentage limitations set forth above would not apply.
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 Home
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
94
<PAGE>
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 Home Savings) as to the voting of all shares of Common Stock
held by the trustees to satisfy vested and unvested options which have been
granted to the optionee. In the event a tender offer is made for shares held by
the trustees to satisfy vested and unvested options granted to an optionee, the
optionee will be able to instruct the trustees' response. Any shares held by
the trustees to satisfy options not yet granted shall be voted or tendered by
the trustees in their discretion.
It is expected that the Stock Option Plan will provide that any cash
dividends or other distributions paid or made with respect to shares of Common
Stock held by the trustees in trust under the Stock Option Plan, plus earnings
on such amounts, less amounts retained by the trustees to pay the expenses of
such trust, will be paid by the trustees to the Holding Company.
If the Stock Option Plan is approved by the stockholders of the
Holding Company, the options granted to employees and directors pursuant to the
Stock Option Plan would be issued in recognition of the recipients' past service
to Home Savings and as an incentive for their continued performance. No cash
consideration will be paid for the options.
Certain Indebtedness and Transactions of Management
Home Savings makes loans to executive officers and directors of Home
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 Home Savings from making loans to
executive officers and directors of Home Savings on terms more favorable than
could be obtained by persons not affiliated with Home Savings. Home Savings'
policy concerning loans to executive officers and directors complies with such
regulations. The aggregate unpaid principal balance of loans to directors and
officers and their affiliates outstanding at June 30, 1996 totals approximately
$415,000 and represents 1.7% of pro forma consolidated stockholders' equity of
the Holding Company at June 30, 1996, assuming the sale of 333,500 shares of
Common Stock.
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
95
<PAGE>
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 Home Savings.
See "DIVIDEND POLICY," "SUPERVISION AND REGULATION -- Regulation of Home Savings
- -- Restrictions on Dividends and Other Capital Distributions," and "TAXATION."
Stock Repurchases. The shares of Common Stock do not have any
redemption provisions. Stock repurchases are subject to North Carolina
corporate laws regarding capital distributions.
Voting Rights. Upon Conversion, the holders of Common Stock, as the
only class of capital stock of the Holding Company then outstanding, will
possess exclusive voting rights with respect to the Holding Company. Such
holders will have the right to elect the Holding Company's Board of Directors
and to act on such other matters as are required to be presented to stockholders
under North Carolina law or as are otherwise presented to them. Each holder of
Common Stock will be entitled to one vote per share. The holders of Common
Stock will have no right to vote their shares cumulatively in the election of
directors. As a result, the holders of a majority of the shares of Common Stock
will have the ability to elect all of the directors on the Holding Company's
Board of Directors.
Liquidation Rights. In the event of a liquidation, dissolution or
winding up of the Holding Company, the holders of Common Stock of the Holding
Company would be entitled to ratably receive, after payment of or making of
adequate provisions for, all debts and liabilities of the Holding Company and
after the rights, if any, of preferred stockholders of the Holding Company, all
remaining assets of the Holding Company available for distribution.
Preemptive Rights. Holders of the Common Stock of the Holding Company
will not be entitled to preemptive rights with respect to any shares which may
be issued by the Holding Company.
Shares Owned by Directors and Executive Officers. All shares of
Common Stock issued in the Conversion to directors and executive officers of the
Holding Company and Home 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
HOME 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 HOME SAVINGS -- The Holding Company
- -- Restrictions in Articles of Incorporation and Bylaws" and "-- Regulatory
Restrictions."
96
<PAGE>
Home Savings
Common Stock. After consummation of the Conversion, Home Savings will
be authorized to issue 100,000 shares of common stock, no par value ("Home
Savings Common Stock"). The Home 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 Home Savings is subject to
limitations which are imposed by North Carolina law and regulations. See
"DIVIDEND POLICY" and "SUPERVISION AND REGULATION -- Regulation of Home Savings
- -- Restrictions on Dividends and Other Capital Distributions." In addition,
federal income tax law considerations may affect the ability of Home Savings to
pay dividends and make other capital distributions. See "TAXATION." The
holders of Home Savings Common Stock will be entitled to receive and share
ratably in such dividends on the Home Savings Common Stock as may be declared by
the Board of Directors of Home Savings out of funds legally available therefor,
subject to applicable statutory and regulatory restrictions.
Voting Rights. As a mutual North Carolina-chartered savings bank,
Home Savings currently has no stockholders, and voting rights in Home Savings
are currently held by Home Savings' members (depositors and borrowers). Members
elect Home 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 Home
Savings, will possess the exclusive voting rights with respect to the Home
Savings Common Stock, will elect Home 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 Home
Savings' Board of Directors. The holders of Home Savings Common Stock will have
no right to vote their shares cumulatively in the election of directors of Home
Savings.
Liquidation Rights. After the Conversion, in the event of any
liquidation, dissolution or winding up of Home Savings, the Holding Company, as
holder of all of Home Savings' outstanding capital stock, would be entitled to
receive all remaining assets of Home Savings available for distribution, after
payment of or making of adequate provisions for, all debts and liabilities of
Home 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 Home Savings Common Stock will not
be entitled to preemptive rights with respect to any shares which may be issued
by Home Savings.
Restrictions on Acquisition. Acquisitions of Home 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 HOME SAVINGS -- Home Savings."
ANTI-TAKEOVER PROVISIONS AFFECTING THE HOLDING COMPANY AND HOME 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
97
<PAGE>
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. Therefore,
the existence of such anti-takeover provisions in fact may not always be in the
best interests of all shareholders. Stockholders who might desire to
participate in such a takeover not supported by management 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. Nevertheless, the
Boards of Directors of Home Savings and the Holding Company believe these
provisions are in the best interests of the stockholders because they will
assist the Holding Company's Board of Directors in managing the affairs of the
Holding Company in the manner they believe to be in the best interests of
stockholders generally and because a company's board of directors is often best
able in terms of knowledge regarding the company's business and prospects, as
well as resources, to negotiate the best transaction for its stockholders as a
whole.
The following description of certain of the provisions of the Articles
of Incorporation and Bylaws of the Holding Company is necessarily general and
reference should be made in each instance to such Articles of Incorporation and
Bylaws. See "ADDITIONAL INFORMATION" regarding how to obtain a copy of these
documents.
Board of Directors. The Bylaws of the Holding Company provide that
the number of directors shall not be less than five nor more than 15. The
initial number of directors is five, 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.
The Articles of Incorporation and Bylaws of the Holding Company
provide that directors may be removed prior to the end of their term only for
cause.
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.
98
<PAGE>
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 certain 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 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.
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 Agreement, Special Termination
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 HOME 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 Home Savings and for voting control by
directors and certain 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 HOME SAVINGS--Proposed
Management Recognition Plan" and "--Proposed Stock Option Plan."
If (i) the Stock Option Plan is approved by the stockholders of the
Holding Company within one year after the Conversion and all of the stock
options which could be granted to directors and executive officers under the
Stock Option Plan are granted and exercised or the shares for such options are
acquired by the Stock Option Plan and all option shares are acquired in the open
market, (ii) the MRP is approved by the stockholders of the
99
<PAGE>
Holding Company within one year after the Conversion, all of the MRP shares
which could be granted to directors and executive officers are granted and
issued and all such shares are acquired in the open market, (iii) the ESOP
acquires 8% of the shares issued in the Conversion and none of such shares are
allocated, and (iv) the Holding Company did not issue any additional shares of
its Common Stock, the shares held by directors and executive officers and their
associates as a group, including (a) shares purchased outright in the
Conversion, (b) shares purchased by the ESOP, (c) shares purchased pursuant to
the Stock Option Plan and (d) shares granted under the MRP, would give such
persons effective control over as much as 30.35% or 27.99%, at the minimum and
maximum of the Valuation Range, respectively, of the Common Stock issued and
outstanding.
The existence of the employment agreement and special termination
agreements with employees could make a business combination with Home Savings
more costly and could discourage such transactions. See "MANAGEMENT OF HOME
SAVINGS--Employment Agreement" and "MANAGEMENT OF HOME SAVINGS--Special
Termination Agreements."
Regulatory Restrictions. Applicable North Carolina regulations
provide that for a period of three years following the Conversion, the prior
written approval of the Administrator will be required before any person may,
directly or indirectly, acquire beneficial ownership of or make any offer to
acquire any stock or other equity security of the Holding Company if, after the
acquisition or consummation of such offer, such person would be the beneficial
owner of more than 10% of such class of stock or other class of equity security
of the Holding Company. If any person were to so acquire the beneficial
ownership of more than 10% of any class of any equity security without prior
written approval, the securities beneficially owned in excess of 10% would not
be counted as shares entitled to vote and would not be voted or counted as
voting shares in connection with any matter submitted to stockholders for a
vote. Approval is not required for (i) any offer with a view toward public
resale made exclusively to the Holding Company or its underwriters or the
selling group acting on its behalf or (ii) any offer to acquire or acquisition
of beneficial ownership of more than 10% of the common stock of the Holding
Company by a corporation whose ownership is or will be substantially the same as
the ownership of the Holding Company, provided that the offer or acquisition is
made more than one year following the consummation of the Conversion. The
regulation provides that within one year following the Conversion, the
Administrator would approve the acquisition of more than 10% of beneficial
ownership only to protect the safety and soundness of the institution. During
the second and third years after the Conversion, the Administrator may approve
such an acquisition upon a finding that (i) the acquisition is necessary to
protect the safety and soundness of the Holding Company and Home Savings or the
Board of Directors of the Holding Company and Home 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 Home 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 Home 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."
Home Savings
Upon consummation of the Conversion, Home Savings will become a
wholly-owned subsidiary of the Holding Company, and, consequently, restrictions
on the acquisition of Home Savings would have a more limited effect than if Home
Savings' common stock were held directly by the stockholders purchasing in the
Conversion. However,
100
<PAGE>
restrictions on the acquisition of Home Savings may discourage takeover attempts
of the Holding Company in order to gain immediate control of Home Savings.
Regulatory Restrictions. The Administrator and the Federal Reserve
have conditionally approved the Holding Company's acquisition of all of the
stock of Home 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
Home 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 Home 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 Home Savings by a corporation whose ownership is or
will be substantially the same as the ownership of Home 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 Home Savings. See "--The Holding
Company--Regulatory Restrictions."
Board of Directors. The amended Articles of Incorporation of Home
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
five, 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. Home 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 Home Savings to gain majority representation on the Board of Directors in a
relatively short period of time. Home Savings believes these provisions to be
important to continuity in the composition and policies of its Board of
Directors.
101
<PAGE>
THE CONVERSION
THE BOARD OF DIRECTORS OF HOME 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 HOME 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
Home Savings was organized and has operated 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 Home Savings has been
studying the environment in which it operates and its strategic options.
As a result of its study of its strategic options, Home Savings
adopted the Plan of Conversion. Home Savings believes that converting the bank
from the mutual to stock form and organizing the Holding Company will provide
increased flexibility for Home Savings and the Holding Company to react to
changes in their operating environment, regardless of the strategies ultimately
chosen.
The existing management of Home Savings and the Holding Company
believes that it will be in the best interests of Home Savings, the Holding
Company and the stockholders of the Holding Company for the Holding Company to
remain an independent financial institution. Assuming the consummation of the
Conversion, the Holding Company and Home Savings intend to pursue the business
strategy described in this Prospectus with the goal of enhancing shareholder
value over the long term. Neither the Holding Company nor Home Savings has any
existing plan to consider any business combination, and neither company has any
agreement or understanding with respect to any possible business combination.
The Board of Director's adoption of the Plan of Conversion is subject
to approval by the members of Home Savings and receipt of required regulatory
approvals. Pursuant to the Plan of Conversion, Home 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 Home Savings. By letter dated
_______________, 1996, the Administrator approved the Plan of Conversion,
subject to approval by the members of Home 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 Home 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 Home Savings'
Proxy Statement for the Special Meeting which has been delivered to all members
of Home Savings. The Plan of Conversion can also be obtained by written request
from Home Savings. See "ADDITIONAL INFORMATION."
102
<PAGE>
Purposes of Conversion
Home 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, Home 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 Home Savings, including (i) a
larger capital base for Home Savings' operations, (ii) an enhanced future access
to capital markets and (iii) an opportunity for depositors of Home Savings to
become stockholders of the Holding Company.
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 Home Savings. See "MANAGEMENT OF
HOME SAVINGS--Employee Stock Ownership Plan," "--Proposed Management
Recognition Plan" and "--Proposed Stock Option Plan."
Formation of the Holding Company will provide greater flexibility than
Home Savings would otherwise have to expand and 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 plans, arrangements,
understandings or agreements regarding any such business combinations.
Effects of Conversion
General. Each person with a deposit account in Home Savings has pro
rata rights, based upon the balance in his or her account, in the net worth of
Home 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, Home Savings' depositors can realize value with respect to their
interests only in the unlikely event that Home 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 Home Savings' conversion to stock form, its Certificate of
Incorporation will be amended to authorize the issuance of permanent
nonwithdrawable capital stock to represent the ownership of Home 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 Home 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 Home Savings.
Voting Rights. Under Home Savings' current Certificate of
Incorporation and Bylaws, deposit account holders and borrowers have voting
rights with respect to certain matters relating to Home Savings, including the
election of directors. After the Conversion, (i) neither deposit account
holders nor borrowers will have voting rights with respect to Home Savings and
will therefore not be able to elect directors of Home Savings or control its
affairs; (ii) voting rights with respect to Home Savings will be vested in the
Holding Company as the sole stockholder of Home 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 Home 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 Home Savings to withdraw funds to
pay for his or her Common Stock).
103
<PAGE>
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 Home Savings.
Continuity. Home 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 office
operated by the existing management and employees of Home Savings.
Liquidation Rights. In the unlikely event of a complete liquidation
of Home 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 Home Savings, each holder of a deposit
account in Home Savings would receive such holder's pro rata share of any assets
of Home 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
Home 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 Home 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, Home 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 Home
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 Home 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 Home 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 September 30, 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 Home 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 Home Savings.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with another FDIC-insured depository institution, whether or not
Home 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
104
<PAGE>
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 ($50.00) 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
Home 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 Home 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) Home Savings'
Eligible Account Holders, who are depositors as of March 31, 1995 who had
aggregate deposits at the close of business
105
<PAGE>
on such date of at least $50 ("Qualifying Deposits"); (ii) the ESOP; (iii) Home
Savings' Supplemental Eligible Account Holders, who are depositors as of
September 30, 1996 who had Qualifying Deposits on such date; (iv) Home 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 Home 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 20 shares of Common Stock or
the number of shares subscribed for by such Eligible Account Holder. Any shares
remaining after such allocation will be allocated among the subscribing Eligible
Account Holders whose subscriptions remain unsatisfied in the proportion that
each such Eligible Account Holder's Qualifying Deposits bears to the total of
the Qualifying Deposits of all such Eligible Account Holders.
ESOP. The ESOP has been granted, without payment therefor,
Subscription Rights to purchase a number of shares of Common Stock up to 8% of
the aggregate number of shares issued in the Conversion. The ESOP is expected
to purchase 8% of the number of shares to be issued in the Conversion. If,
because of an oversubscription for shares of Common Stock or for any other
reason, the ESOP is unable to purchase in the Conversion 8% of the total number
of shares offered in the Conversion, then the Board of Directors of the Holding
Company intends to approve the purchase by the ESOP in the open market after the
Conversion, of such shares as are necessary for the ESOP to acquire a number of
shares equal to 8% of the shares of Common Stock issued in the Conversion.
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 20 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 Home 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
106
<PAGE>
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 by
all Other Members whose subscriptions remain unsatisfied.
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, Home
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 Davidson County 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 at
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 Home 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 Home 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 Home 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 Home 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 Home Savings and the Holding Company in the
entire amount of such order up to a number of shares no greater than 5,000
shares, which number shall be determined by the Board of Directors of Home
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
107
<PAGE>
managed by Trident Securities acting as agent of the Holding Company in the sale
of the Common Stock. The Holding Company and Home 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 $50.00 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 Home 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 Home 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 Home
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 $50.00
per share. The purchase price was determined by the Boards of Directors of the
Holding Company and Home Savings in consultation with Home Savings' financial
advisor and sales agent, Trident Securities, and was based upon a number of
factors. 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
108
<PAGE>
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.
Home Savings has retained JMP Financial, 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
Home Savings and the Holding Company and to assist Home Savings in preparing a
business plan. For its services in determining such valuation and assisting
with the business plan, JMP Financial will receive an aggregate fee of $30,000,
plus $2,500 for each written opinion or update of its appraisal, and will be
reimbursed for its out-of-pocket expenses.
JMP Financial has informed Home Savings that its appraisal has been
made in reliance upon the information contained in this Prospectus, including
the financial statements of Home Savings. JMP Financial has further informed
Home 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 Home Savings; (ii) the economic
and demographic conditions in Home Savings' existing market area; (iii) certain
historical, financial and other information relating to Home Savings; (iv) the
proposed dividend policy of the Holding Company; (v) a comparative evaluation of
the operating and financial statistics of Home 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
JMP Financial believes to be comparable in relevant respects to the Holding
Company and Home Savings and general conditions in the markets for such
securities. In addition, JMP Financial has advised Home Savings that it has
considered the effect of the Conversion on the net worth and earnings potential
of the Holding Company and Home Savings.
On the basis of its consideration of the above factors, JMP Financial
has advised Home Savings that, in its opinion, at September 23, 1996, the
Valuation Range of Home Savings and the Holding Company was from a minimum of
$12,325,000 to a maximum of $16,675,000, with a midpoint of $14,500,000. Based
upon such valuation and a purchase price for shares offered in the Conversion of
$50.00 per share, the number of shares to be offered ranges from a minimum of
246,500 shares to a maximum of 333,500 shares, with a midpoint of 290,000
shares.
The Board of Directors of Home Savings has reviewed the methodology
and assumptions used by JMP Financial 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, JMP Financial will confirm or update
its valuation of the estimated aggregate pro forma market value of Home 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 $19,176,250 (383,525 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, JMP Financial confirms to Home 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 JMP Financial 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 Home Savings and the
Holding Company at the conclusion of the Offerings. If the aggregate pro forma
market value of Home 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 Home Savings and the Holding Company so that the aggregate pro
forma market value is below the minimum of the Valuation Range or more than 15%
above the maximum of the Valuation Range, a resolicitation of subscribers may
be made based
109
<PAGE>
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 Home 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 Home 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 JMP Financial is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
Common Stock. JMP Financial did not independently verify the financial
statements and other information provided by Home Savings, nor did JMP Financial
value independently the assets or liabilities of Home Savings. The valuation
considers Home Savings as a going concern and should not be considered as an
indication of the liquidation value of Home 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 JMP Financial 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
original signed 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 Home Savings deposit accounts (other
than negotiable order of withdrawal accounts or other demand deposit accounts),
must be received by Home Savings by the Expiration Time, which is 12:00 noon,
Eastern Time, on __________________, 1996. Subscription Rights (i) for which
Home Savings does not receive original signed 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 Home Savings has been able to locate the persons entitled to such rights.
Copies of the Stock Order Form, including copies sent by facsimile, will not be
accepted. 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 Home Savings deposit accounts (other than negotiable order of withdrawal
accounts or other demand deposit accounts), must be received by Home 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.
Persons wishing to use funds in a Home Savings IRA to purchase Common
Stock must visit the Stock Information Center on or before __________________,
1996 in order to complete that purchase so that the necessary forms may be
forwarded for execution and returned prior to the Expiration Time.
110
<PAGE>
An executed Stock Order Form once received by Home Savings, may not be
modified, amended or rescinded without the consent of Home Savings. Home
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. Complete payment must accompany all
completed Stock Order Forms submitted in the Subscription and Community
Offerings in order for subscriptions to be valid. See "-- Purchase Price of
Common Stock and Number of Shares Offered."
Payment for shares will be permitted to be made by any of the
following means: (i) in cash, if delivered in person to either office of Home
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 Home Savings (other than a negotiable order of withdrawal
account or other demand deposit account). Stock Order Forms directing that
payment for shares be made by authorization of withdrawal will be accepted only
if, at the time the Stock Order Form is received, there exists sufficient funds
in the account from which withdrawal is authorized to pay the full purchase
price for the number of shares ordered. Payment may not be made by wire
transfer. 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 Home 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 Home Savings on payments for Common Stock
made in cash or by check, bank draft, negotiable order of withdrawal or money
order at Home 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 Home Savings until consummation or termination of the Conversion.
Home 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. Home Savings may not knowingly lend funds or otherwise extend
credit to any person to purchase Common Stock. After amounts submitted for
payment are applied to the purchase price for shares sold, they will no longer
earn interest, and they will not be insured by the FDIC or any other government
agency or other entity.
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 Home 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 Home Savings' passbook savings rate.
Upon completion or termination of the Conversion, Home 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 Home Savings will
111
<PAGE>
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.
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, Home 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
Home Savings has retained Trident Securities to consult with and
advise Home 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
is headquartered in Raleigh, North Carolina, and its telephone number is
(919) 781-8900. Trident Securities will assist Home 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
Home 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, Home Savings has agreed to pay Trident
Securities (a) a management fee equal to 1% 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. Home Savings has also agreed to pay to
Selected Dealers, if any, negotiated commissions. Home Savings has paid Trident
Securities $10,000 toward amounts due to such agent.
Home 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 Home Savings is not
112
<PAGE>
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 $10,000. Total fees and
commissions to Trident Securities are expected to be between $328,000 and
$522,000 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 Home Savings may participate in
the solicitation of offers to purchase Common Stock. Other employees of Home
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 Home Savings'
office, in an area separate from Home Savings' banking operations. Employees
will inform prospective purchasers that their questions should be directed to
the Stock Information Center and will provide such persons with the telephone
number of the Stock Information Center. Stock orders will be accepted at Home
Savings' office 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, Home 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 Home 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 Home Savings employees to participate in the sale of Common Stock. No
officer, director or employee of the Holding Company or Home 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 10 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, or group of persons otherwise
acting in concert, is 5,000 shares; provided, however, that the ESOP may
purchase up to 8% of the number of shares offered in the Conversion (26,680
shares, assuming the issuance of 333,500 shares). In addition, no person or
entity, or group of persons or entities acting in concert, together with any
associates, may subscribe for more than 7,000 shares of Common Stock 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. The Board of Directors of Home Savings may
in its absolute discretion (i) reduce the above-described 5,000 and 7,000 share
maximum purchase limitations to an amount not less than 1% of the number of
shares offered and sold in the Conversion or (ii) increase such 5,000 and 7,000
share maximum purchase limitations 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 Home 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 5,000 or 7,000 share
maximum purchase limitation is increased, any subscriber or group of subscribers
in the Subscription, Community or Syndicated Community Offering who has
subscribed for the maximum amount which is increased, 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.
113
<PAGE>
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 Home Savings, the Holding Company or any
subsidiary of Home Savings or of the Holding Company;
(ii) any corporation or organization (other than Home Savings, the
Holding Company or a majority-owned subsidiary of Home Savings
or the Holding Company) of which the person is an officer or
partner or is, directly or indirectly, the beneficial owner of
10% or more of any class of equity security; and
(iii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as a trustee or in a similar fiduciary capacity, except
for any tax-qualified employee stock benefit plan or any
charitable trust which is exempt from federal taxation pursuant
to Section 501(c)(3) of the Code.
For purposes of the foregoing limitations, (i) directors and officers
of Home 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 Home 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 Home 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 Home 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, Home Savings will continue to operate
as a North Carolina-chartered mutual savings bank, all subscription funds will
be promptly returned with interest at Home 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 Home Savings.
All interpretations by Home 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. Home Savings and the Holding Company may reject Stock Order
Forms that are not properly completed. However, the Holding Company and Home
Savings retain the right, but will not be required, to waive
114
<PAGE>
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 Home Savings'
Board of Directors at any time prior to the Special Meeting, and at any time
thereafter by a two-thirds vote of Home Savings' Board of Directors with the
concurrence of the Administrator. If Home 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 Home Savings'
Board of Directors at any time prior to the Special Meeting and may be
terminated by a two-thirds vote of Home Savings' Board of Directors at any time
thereafter but prior to the completion of the Conversion with the concurrence of
the Administrator, notwithstanding approval of the Plan of Conversion by the
Members at the Special Meeting.
Certain Restrictions on Transfer of Subscription Rights; False or Misleading
Order Forms
The Subscription Rights granted under the Plan of Conversion are non-
transferable. Subscription Rights may be exercised only by the person to whom
they are issued and only for his or her own account. Persons exercising
Subscription Rights are required to certify that they are purchasing shares for
their own accounts within the purchase limitations set forth in the Plan of
Conversion and that they have no agreement or understanding for the sale or
transfer of such shares.
Home Savings reserves the right to make an independent investigation
of any facts or circumstances brought to its attention that indicate or tend to
indicate that one or more persons acting independently or as a group acting in
concert may be attempting to violate or circumvent the regulatory prohibition on
transferability of Subscription Rights. The nature and extent of such
investigation will be at Home Savings' sole discretion and Home Savings may
require a holder of Subscription Rights to provide certified affidavits and
other documentation to satisfy Home Savings that its Plan of Conversion and
North Carolina and federal conversion regulations regarding nontransferability
are not being subverted by actions of holders of Subscription Rights. In
extreme cases Home Savings reserves the right to seek legal advice from the
General Counsel for the Administrator as to compliance with all regulations
governing the Conversion, including the nontransferability of Subscription
Rights.
The Plan of Conversion provides that, if Home 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 Home 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
Home 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 Home Savings and no gain or
loss will be recognized by Home Savings either in its mutual or stock form; (ii)
no gain or loss will be recognized by Home Savings upon the purchase of Home
Savings' stock by the Holding Company or upon the sale by the Holding Company of
its Common Stock; (iii) no gain or loss will be recognized by Home Savings'
depositors with respect to their deposit accounts at Home Savings as a
consequence of the Conversion; (iv) the tax basis of depositors' deposit
accounts at Home Savings will not be changed as a result of the Conversion; (v)
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 Home Savings upon either
the issuance to them of the Subscription Rights or the exercise or lapse
thereof; (vi) 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; (vii) assuming the Subscription Rights have no
value, the tax basis for Common Stock purchased in the Conversion will be the
amount paid therefor; and (viii) the tax
115
<PAGE>
basis of interests in the Liquidation Account will be zero. Home 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. Home Savings has been advised
by JMP Financial that, in its opinion, the Subscription Rights will not have any
ascertainable 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 JMP
Financial 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.
LEGAL OPINIONS
The validity of the issuance of the Common Stock in the Conversion has
been 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 Home 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 Thacher Proffitt & Wood, Washington, D.C.
EXPERTS
The Financial Statements of Home Savings as of June 30, 1996 and 1995
and for each of the years in the three-year period ended June 30, 1996 included
herein have been included herein in reliance upon the report of Dixon, Odom &
Co., L.L.P., independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
JMP Financial 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 Home 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.
116
<PAGE>
ADDITIONAL INFORMATION
The Holding Company has filed a registration statement with the SEC on
Form S-1 under the Securities Act, with respect to the Common Stock offered
hereby. As permitted by the rules and regulations of the SEC, this Prospectus
does not contain all of the information set forth in the registration statement.
Such information can be examined and copied at the public reference facilities
of the SEC located at Room 1024, 450 Fifth Street, N. W., Washington, D.C.
20549, and at the regional offices of the SEC at 75 Park Place, Fourteenth
Floor, New York, New York 10007 and Room 3190, John C. Kluczynski Building, 230
South Dearborn Street, Chicago, Illinois 60604. Copies of such material can be
obtained by mail from the SEC at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N. W., Washington, D.C. 20549. In
addition, the SEC maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC, including the Holding Company; the address is
(http://www.sec.gov.). The statements contained in this Prospectus as to the
contents of any contract or other document filed as an exhibit to the
registration statement are, of necessity, brief descriptions thereof and are not
necessarily complete; each such statement is qualified by reference to such
contract or document.
Home 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 JMP
Financial's 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 Home 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 Home Savings and may be obtained by writing to Home Savings at
Post Office Box 989, Thomasville, North Carolina 27361-0989; Attention: James
G. Hudson, Jr., President, or by telephoning Home Savings at (910) 475-4663. A
copy of JMP Financial's independent appraisal is also available for inspection
at the Stock Information Center.
117
<PAGE>
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-1
Financial Statements:
Statements of Financial Condition at June 30, 1996 and 1995 F-2
Statements of Operations for the Years Ended June 30, 1996, 1995 and
1994 F-3
Statements of Retained Earnings for the Years Ended June 30, 1996,
1995 and 1994 F-4
Statements of Cash Flows for the Years Ended June 30, 1996, 1995 and
1994 F-5
Notes to Financial Statements for the Years Ended June 30, 1996, 1995
and 1994 F-7
</TABLE>
All schedules are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
Financial Statements of Home 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.
118
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Home Savings, SSB
Thomasville, North Carolina
We have audited the accompanying statements of financial condition of Home
Savings, SSB as of June 30, 1996 and 1995 and the related statements of
operations, retained earnings, and cash flows for each of the three years in the
period ended June 30, 1996. These financial statements are the responsibility
of the Bank's management. Our responsibility is to express an opinion on these
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 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 financial statements referred to above present fairly, in
all material respects, the financial position of Home Savings, SSB at June 30,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended June 30, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note A to the financial statements, on July 1, 1994, the Bank
changed its method of accounting for investment securities to adopt the
provisions of Statement of Financial Accounting Standards No. 115.
Dixon, Odom & Co., L.L.P.
July 17, 1996
--------
Page F-1
<PAGE>
HOME SAVINGS, SSB
STATEMENTS OF FINANCIAL CONDITION
June 30, 1996 and 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
Cash on hand and in banks $ 1,342,518 $ 1,172,327
Interest-bearing balances in other banks 3,644,859 4,441,361
Investment securities available for sale, at fair
value (amortized cost of $11,646,081 and $8,485,774
at June 30, 1996 and 1995, respectively) (Note B) 11,707,105 8,664,147
Investment securities held to maturity, at amortized
cost (fair value of $6,839,969 and $5,165,480 at
June 30, 1996 and 1995, respectively) (Note B) 6,857,506 5,133,282
Loans receivable, net (Note C) 55,192,567 54,019,888
Accrued interest receivable 556,670 508,978
Premises and equipment, net (Note D) 748,165 758,851
Stock in the Federal Home Loan Bank of Atlanta, at
cost 613,700 613,700
Foreclosed real estate 332,874 71,002
Other assets 308,118 123,986
----------- -----------
$81,304,082 $75,507,522
=========== ===========
LIABILITIES AND RETAINED EARNINGS
LIABILITIES
Deposit accounts (Note F) $69,669,236 $64,448,183
Accrued interest payable 116,236 103,543
Advance payment by borrowers for property taxes and
insurance 105,870 99,976
Deferred income taxes - 23,132
Accrued expenses and other liabilities 167,494 192,768
----------- -----------
TOTAL LIABILITIES 70,058,836 64,867,602
Commitments and contingencies (Notes C and K)
Retained earnings - substantially restricted (Notes I
and J) 11,245,246 10,639,920
----------- -----------
$81,304,082 $75,507,522
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes. Page F-2
<PAGE>
HOME SAVINGS, SSB
STATEMENTS OF OPERATIONS
Years Ended June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Loans $4,584,446 $4,409,784 $4,485,940
Investments and deposits in other banks 1,284,181 961,373 851,388
---------- ---------- ----------
TOTAL INTEREST INCOME 5,868,627 5,371,157 5,337,328
INTEREST EXPENSE ON DEPOSIT
ACCOUNTS (Note F) 3,540,406 2,788,018 2,487,128
---------- ---------- ----------
NET INTEREST INCOME 2,328,221 2,583,139 2,850,200
PROVISION FOR LOAN LOSSES (Note C) 165,000 105,000 114,274
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,163,221 2,478,139 2,735,926
---------- ---------- ----------
OTHER INCOME (EXPENSES)
Service charges and other fees 29,846 31,776 35,491
Loss on sale of investments - (36,735) (5,194)
Gain on sale of foreclosed real estate - 1,656 6,948
Other 5,124 18,357 3,238
---------- ---------- ----------
34,970 15,054 40,483
---------- ---------- ----------
TOTAL INCOME 2,198,191 2,493,193 2,776,409
---------- ---------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES
Compensation and benefits 570,773 503,094 449,614
Occupancy 81,021 84,694 85,358
Data processing expenses 91,444 87,400 87,540
Federal deposit insurance premiums 149,485 145,201 144,454
Provision for loss on foreclosed real
estate 80,000 - -
Other expenses 197,096 158,988 143,472
---------- ---------- ----------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 1,169,819 979,377 910,438
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 1,028,372 1,513,816 1,865,971
INCOME TAXES (Note I) 351,600 592,600 694,300
---------- ---------- ----------
NET INCOME $ 676,772 $ 921,216 $1,171,671
========== ========== ==========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes. Page F-3
<PAGE>
HOME SAVINGS, SSB
STATEMENTS OF RETAINED EARNINGS
Years Ended June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ----------
<S> <C> <C> <C>
BALANCE, BEGINNING $10,639,920 $ 9,610,272 $8,438,601
Initial effect of adoption of
accounting change, net of deferred
income tax benefit of $104,511 (Note B) - (202,874) -
Unrealized gain (loss) on available for
sale securities, net of deferred
income tax benefit (charge) of $45,903
and $(174,452), respectively (Note B) (71,446) 311,306 -
Net income 676,772 921,216 1,171,671
----------- ----------- ----------
BALANCE, ENDING $11,245,246 $10,639,920 $9,610,272
=========== =========== ==========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes. Page F-4
<PAGE>
HOME SAVINGS, SSB
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 676,772 $ 921,216 $ 1,171,671
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 44,429 35,661 44,668
Deferred income taxes (73,167) (38,469) (73,738)
Deferred compensation 22,000 25,000 25,000
Amortization of discounts and
premiums on securities (5,414) 49,382 (58,019)
Provision for loan losses 165,000 105,000 114,274
Provision for loss on foreclosed
real estate 80,000 - -
Loss on sale of investment
securities - 36,735 5,194
Gain on sale of real estate acquired
in foreclosure - (1,656) (6,948)
(Gain) loss on disposal of fixed
assets (5,000) - 830
Stock dividends from Federal Home
Loan Bank - - (23,900)
Change in assets and liabilities
Increase in accrued interest
receivable (47,692) (22,931) (15,761)
Increase in accrued interest on
savings accounts 12,693 31,300 23,178
Other (95,019) (94,107) 38,798
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 774,602 1,047,131 1,245,247
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of:
Available for sale investment
securities (6,142,789) (2,481,094) -
Held to maturity investment
securities (4,051,719) (1,445,216) (9,498,855)
Proceeds from maturities and calls
of:
Available for sale investment
securities 2,965,391 853,295 -
Held to maturity investment
securities 2,350,000 3,300,000 4,092,528
Proceeds from sales of:
Available for sale investment
securities - 1,962,500 -
Held to maturity investment
securities - - 494,806
Net increase in loans (1,738,848) (348,024) (491,978)
Purchases of property and equipment (33,743) (23,012) (14,462)
Proceeds from sale of property and
equipment 5,000 - -
Proceeds from sale of real estate
acquired in settlement of loans 59,297 66,156 154,374
----------- ----------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (6,587,411) 1,884,605 (5,263,587)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand
deposits (281,884) (2,868,840) 175,479
Net increase in certificate accounts 5,502,937 3,379,977 1,632,126
Increase in advances from borrowers 5,894 27,297 9,627
Stock conversion costs incurred (40,449) - -
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 5,186,498 538,434 1,817,232
----------- ----------- -----------
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes. Page F-5
<PAGE>
HOME SAVINGS, SSB
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ (626,311) $3,470,170 $(2,201,108)
CASH AND CASH EQUIVALENTS,
BEGINNING 5,613,688 2,143,518 4,344,626
---------- ---------- -----------
CASH AND CASH
EQUIVALENTS, ENDING $4,987,377 $5,613,688 $ 2,143,518
========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $3,527,713 $2,756,718 $ 2,463,950
========== ========== ===========
Income taxes $ 417,900 $ 718,925 $ 724,652
========== ========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES
Loans receivable transferred to real
estate acquired in settlement of
loans. $ 401,169 $ 25,002 $ 163,611
========== ========== ===========
Unrealized gain (loss) on investment
securities available for sale, net of
deferred income tax benefit (charge)
of $45,903 and $(69,941),
respectively. $ (71,446) $ 108,432 $ -
========== ========== ===========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes. Page F-6
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Home Savings, SSB (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
financial statements.
Organization and Operations
- ---------------------------
Home Savings, SSB was chartered by the State of North Carolina in 1915. The
Bank maintains offices and conducts its primary business in Thomasville,
Davidson County, North Carolina. The Bank primarily engages in attracting
savings deposits from the general public and uses the funds to originate loans
for the purchase, financing or improvement of residential real estate. The Bank
also makes loans secured by deposit accounts, commercial real estate and
consumer products.
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 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.
Material estimates that are particularly sensitive to significant change relate
to the determination of the allowance for losses on loans and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for losses on
loans and foreclosed real estate, management obtains independent appraisals for
significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Bank to recognize additions to the allowances based on
their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change materially
in the near term.
Investment 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.
- -------------------------------------------------------------------------------
Page F-7
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment Securities (Continued)
- --------------------------------
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, the Bank stated its debt securities at
amortized cost and its marketable equity securities (mutual funds) at the lower
of aggregate cost or market. Accumulated changes in net unrealized losses on
marketable equity securities were included in retained earnings.
Note B to the financial statements provides further information about the
effect of adopting SFAS No. 115.
Loans Receivable
- ----------------
Loans receivable are stated at unpaid balances, less the allowance for loan
losses and net deferred loan fees.
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized as a yield adjustment over the lives of the
related loans using the interest method. Amortization of deferred loan fees is
discontinued when a loan is placed on nonaccrual status.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other nonaccrual loans is recognized only to the extent of interest payments
received.
Allowance for Loan Losses
- -------------------------
The Bank provides for loan losses on the allowance method. Accordingly, all
loan losses are charged to the related allowance and all recoveries are credited
to it. Additions to the allowance for loan losses are provided by charges to
operations based on various factors which, in management's judgment, deserve
current recognition in estimating possible losses. Such factors considered by
management include the market value of the underlying collateral, growth and
composition of the loan portfolio, the relationship of the allowance for loan
losses to outstanding loans, delinquency trends, and economic conditions.
Management evaluates the carrying value of loans periodically and the allowance
is adjusted accordingly. While management uses the best information available
to make evaluations, future adjustments to the allowance may be necessary if
conditions differ substantially from the assumptions used in making the
evaluations.
- -------------------------------------------------------------------------------
Page F-8
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses (Continued)
- ------------------------------------
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on their judgments of information available to them at the time of their
examination.
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," which is effective for
fiscal years beginning after December 15, 1994. The Statement addresses the
accounting by creditors for impairment of certain loans. It is generally
applicable for all loans except large groups of smaller balance homogeneous
loans that are collectively evaluated for impairment including residential
mortgage loans and consumer installment loans.
SFAS No. 114 requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate, or at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is considered impaired
when, based on current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the contractual terms of
the loan agreements.
In October 1994, the FASB issued SFAS No. 118, which is effective concurrent
with the effective date of SFAS No. 114. This Statement amends SFAS No. 114 to
allow a creditor to use existing methods for recognizing interest income on
impaired loans. Also, this Statement requires disclosure about the recorded
investment in certain impaired loans and how the creditor recognizes interest
income related to those impaired loans.
The Bank adopted the provisions of SFAS Nos. 114 and 118 as of July 1, 1995 and
the impact of the adoption of SFAS Nos. 114 and 118 was immaterial.
Premises and Equipment
- ----------------------
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation of premises and equipment is recorded on a straight-line basis over
the estimated useful lives of the related assets.
Expenditures for maintenance and repairs are charged to expense as incurred,
while those for improvements are capitalized. The costs and accumulated
depreciation relating to premises and equipment retired or otherwise disposed of
are eliminated from the accounts, and any resulting gains or losses are credited
or charged to earnings.
- -------------------------------------------------------------------------------
Page F-9
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
===============================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment in Federal Home Loan Bank Stock
- ------------------------------------------
As a requirement for membership, the Bank invests in stock of the Federal Home
Loan Bank of Atlanta (FHLB) in the amount of 1% of its outstanding residential
loans or 5% of its outstanding advances from the FHLB, whichever is greater. At
June 30, 1996, the Bank owned 6,137 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 statements of operations, with differences between
taxes so computed and taxes payable under applicable statutes and regulations
classified as deferred taxes arising from timing differences.
Retirement Plan
- ---------------
The Bank has a noncontributory defined benefit pension plan covering
substantially all of its employees. The Bank's funding policy is to make the
annual contribution that is required by applicable regulations.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand and in banks and interest-
bearing balances in other banks with original maturities of three months or
less.
- -------------------------------------------------------------------------------
Page F-10
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Pronouncements
- -----------------------------
The FASB has issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
evaluating recoverability, if estimated future cash flows, undiscounted and
without interest charges, are less than the carrying amount of the asset, an
impairment loss is recognized. SFAS No. 121 also requires that certain long-
lived assets and certain identifiable intangibles to be disposed of be reported
at the lower of carrying amount or fair value less cost to sell. SFAS No. 121
applies prospectively for fiscal years beginning after December 15, 1995.
Management does not expect that adoption of SFAS No. 121 will have a material
impact on the Bank's 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 the Bank's fiscal
year beginning July 1, 1996. Management has not assessed the impact that
adoption of SFAS No. 122 will have on the Bank's financial statements.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," which provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities. Those standards are based on
consistent application of a financial components approach that focuses on
control. Under the financial components approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. This
statement supersedes SFAS No. 122 and is effective for transfers and servicing
of financial assets and extinguishment of liabilities occurring after December
31, 1996. Management of the Bank has not yet determined the impact of the
adoption of SFAS No. 125.
- -------------------------------------------------------------------------------
Page F-11
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE B - INVESTMENT SECURITIES
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities." This statement addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. These
investments are to be classified in three categories and accounted for as
follows: (1) debt securities that the entity has the positive intent and
ability to hold to maturity are classified as held-to-maturity and reported at
amortized cost; (2) debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with net unrealized gains and
losses included in earnings; and (3) debt and equity securities not classified
as either held-to-maturity or trading securities are classified as securities
available-for-sale and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of retained
earnings.
The Bank adopted SFAS No. 115 on July 1, 1994. The adoption affected only the
held-to-maturity and available-for-sale classifications, with the net unrealized
securities losses on the securities available-for-sale of $202,874, net of
deferred tax benefits of $104,511, reported as a separate decrease in retained
earnings. The adoption had no effect on previously reported net income. The
Bank has no trading securities.
The following is a summary of the securities portfolios by major classification:
<TABLE>
<CAPTION>
June 30, 1996
------------------------------------------------
Gross Gross 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 $ 7,029,658 $ - $ 42,118 $ 6,987,540
Mortgage-backed securities 3,977,141 - 176,448 3,800,693
Equity securities 14,452 301,043 - 315,495
Municipal bonds 624,830 - 21,453 603,377
----------- -------- -------- -----------
$11,646,081 $301,043 $240,019 $11,707,105
=========== ======== ======== ===========
Securities held-to-maturity:
U. S. government securities
and obligations of U. S.
government agencies $ 6,476,811 $ 1,949 $ 40,930 $ 6,437,830
Municipal bonds 380,695 21,444 - 402,139
----------- -------- -------- -----------
$ 6,857,506 $ 23,393 $ 40,930 $ 6,839,969
=========== ======== ======== ===========
</TABLE>
- -------------------------------------------------------------------------------
Page F-12
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE B - INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
June 30, 1995
----------------------------------------------
Gross 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 $6,017,028 $ 4,357 $ - $6,021,385
Mortgage-backed securities 2,454,294 314 65,534 2,389,074
Equity securities 14,452 239,236 - 253,688
---------- -------- ------- ----------
$8,485,774 $243,907 $65,534 $8,664,147
========== ======== ======= ==========
Securities held-to-maturity:
U. S. government securities
and obligations of U. S.
government agencies $4,756,312 $ 12,500 $15,234 $4,753,578
Municipal bonds 376,970 34,932 - 411,902
---------- -------- ------- ----------
$5,133,282 $ 47,432 $15,234 $5,165,480
========== ======== ======= ==========
</TABLE>
The amortized cost and fair values of debt securities available for sale and
held to maturity at June 30, 1996 by contractual maturity are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Securities Available Securities Held to
for Sale Maturity
--------------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Due within one year $ 2,007,534 $ 2,005,935 $1,801,191 $1,801,995
Due after one year
through five years 5,646,954 5,584,982 4,675,620 4,635,835
Due after ten years - - 380,695 402,139
Mortgage-backed
securities 3,977,141 3,800,693 - -
----------- ----------- ---------- ----------
$11,631,629 $11,391,610 $6,857,506 $6,839,969
=========== =========== ========== ==========
</TABLE>
- -------------------------------------------------------------------------------
Page F-13
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE B - INVESTMENT SECURITIES (Continued)
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 $(307,385) $ 104,511 $(202,874)
Unrealized appreciation on
available-for-sale
securities during the year 485,758 (174,452) 311,306
--------- --------- ---------
$ 178,373 $ (69,941) $ 108,432
========= ========= =========
</TABLE>
Proceeds from maturities of investment securities available for sale during the
year ended June 30, 1996 were $2,965,391.
Proceeds from maturities of investments securities held to maturity during the
year ended June 30, 1996 were $2,350,000.
Proceeds from sales and maturities of investment securities available for sale
during the year ended June 30, 1995 were $2,815,795. Gross losses of $36,735
were realized on those sales.
Proceeds from maturities of investments securities held to maturity during the
year ended June 30, 1995 were $3,300,000.
During the year ended June 30, 1994, the Bank sold securities for total
proceeds of $494,806, resulting in gross realized losses of $5,194.
Securities with a carrying value of $2,784,715 and $2,816,841 and a fair value
of $2,785,410 and $2,813,094 at June 30, 1996 and 1995, respectively, were
pledged to secure public monies on deposit as required by law.
- -------------------------------------------------------------------------------
Page F-14
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE C - LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Type of loan:
Real estate loans:
One-to-four family residential $43,573,972 $41,006,594
Multi-family residential and commercial 9,012,000 10,039,100
Construction 3,595,650 3,110,600
Home equity lines of credit 1,021,508 1,135,685
----------- -----------
Total real estate loans 57,203,130 55,291,979
----------- -----------
Other loans:
Consumer loans 322,204 335,052
Loans secured by deposits 226,796 252,013
----------- -----------
Total other loans 549,000 587,065
----------- -----------
Total loans 57,752,130 55,879,044
Less:
Construction loans in process 1,764,112 1,214,802
Net deferred loan fees 262,548 243,307
Allowance for loan losses 532,903 401,047
----------- -----------
$55,192,567 $54,019,888
=========== ===========
</TABLE>
The allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 401,047 $ 294,562 $ 198,362
Provision for loan losses 165,000 105,000 114,274
Charge-offs (34,574) - (104,176)
Recoveries 1,430 1,485 86,102
----------- ----------- -----------
Balance at end of year $ 532,903 $ 401,047 $ 294,562
=========== =========== ===========
</TABLE>
At June 30, 1996 and 1995, respectively, the Bank had loans totaling
approximately $285,000 and $841,000 which were in a nonaccrual status.
- -------------------------------------------------------------------------------
Page F-15
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE C - LOANS RECEIVABLE (Continued)
At June 30, 1996, the Bank had mortgage loan commitments outstanding of
$1,804,400 and pre-approved but unused lines of credit totaling $523,271. 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.
The Bank has had loan transactions with its directors and executive officers.
Such loans were made in the ordinary course of business and also on
substantially the same terms and collateral as those comparable transactions
prevailing at the time and did not involve more than the normal risk of
collectibility or present other unfavorable features. A summary of related
party loan transactions is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Balance at beginning of year $ 415,028 $309,004
Additional borrowings 183,000 161,232
Loan repayments (182,771) (55,208)
--------- --------
Balance at end of year $ 415,257 $415,028
========= ========
</TABLE>
NOTE D - PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Land $ 61,203 $ 61,703
Building and improvements 735,416 735,416
Office furniture, fixtures and equipment 216,593 212,122
Automotive equipment 29,772 24,475
---------- ---------
1,042,984 1,033,716
Accumulated depreciation (294,819) (274,865)
---------- ---------
$ 748,165 $ 758,851
========== =========
</TABLE>
NOTE E - FEDERAL INSURANCE OF DEPOSITS
Eligible deposit accounts are insured up to $100,000 by the Federal Deposit
Insurance Corporation.
- -------------------------------------------------------------------------------
Page F-16
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- -------------------------------------------------------------------------------
NOTE F - DEPOSIT ACCOUNTS
A comparative summary of deposit accounts at June 30, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- -------------------------
Weighted Weighted
Balance Avg. Rate Balance Avg. Rate
----------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Demand deposits:
Negotiable orders of withdrawal $ 2,718,489 2.75% $ 1,885,180 2.75%
Passbook and statement accounts 4,983,937 3.00 5,248,439 3.00
Money market checking 9,829,868 4.05 10,497,681 3.68
Non-interest-bearing checking 116,085 - 298,963 -
----------- -----------
17,648,379 3.53 17,930,263 3.32
Certificates of deposit 52,020,857 5.61 46,517,920 5.69
----------- -----------
Total deposit accounts $69,669,236 5.09% $64,448,183 5.03%
=========== ===========
</TABLE>
A summary of certificate accounts by maturity as of June 30, 1996 follows:
<TABLE>
<CAPTION>
Less than $100,000
$100,000 or More Total
----------- ----------- -----------
<S> <C> <C> <C>
July 1, 1996 - June 30, 1997 $32,011,695 $14,010,519 $46,022,214
July 1, 1997 - June 30, 1998 3,320,627 488,448 3,809,075
July 1, 1998 - June 30, 1999 1,756,776 432,792 2,189,568
----------- ----------- -----------
Total certificate accounts $37,089,098 $14,931,759 $52,020,857
=========== =========== ===========
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Passbook and statement accounts $ 155,335 $ 160,155 $ 175,542
NOW accounts 49,077 46,579 44,102
Money market accounts 414,404 429,681 462,896
Certificates of deposit 2,927,930 2,157,269 1,810,072
----------- ----------- -----------
3,546,746 2,793,684 2,492,612
Penalties for early withdrawal 6,340 5,666 5,484
----------- ----------- -----------
$ 3,540,406 $ 2,788,018 $ 2,487,128
=========== =========== ===========
</TABLE>
- -------------------------------------------------------------------------------
Page F-17
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
NOTE G - PENSION PLAN
The Bank established a pension plan for the benefit of its employees on March
1, 1973. The pension plan covers all full-time employees who have completed
five months continuous service with the Bank. The plan is funded by the
purchase of level premium insurance policies and an annual contribution to an
auxiliary fund.
The following is a summary of the plan's funded status as of June 30, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits $ 310,252 $258,065
========= ========
Accumulated benefits $ 310,877 $258,585
========= ========
Projected benefits $ 603,526 $405,389
Plan assets, at fair value 360,060 164,120
--------- --------
Projected benefit obligation in excess of
plan assets (243,466) (241,269)
Unrecognized transition account 183,214 191,002
Unrecognized prior service cost 75,590 (29,530)
Unrecognized net loss 43,928 33,484
--------- --------
Net pension asset (liability) $ 59,266 $(46,313)
========= ========
</TABLE>
Assumptions used in determining the funded status of the pension plan are as
follows for June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Discount rate 7.0% 7.0%
Rates of increase in compensation levels 6.0% 6.0%
Expected long-term rate of return on plan
assets 7.0% 7.0%
</TABLE>
Net pension cost includes the following components:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Service cost $ 33,149 $ 25,899
Interest cost on projected benefit
obligation 37,072 24,825
Actual return on assets (51,833) (1,415)
Other - net 44,248 (4,606)
--------- --------
Net periodic pension cost $ 62,636 $ 44,703
========= ========
</TABLE>
- -------------------------------------------------------------------------------
Page F-18
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
NOTE H - DEFERRED COMPENSATION
The Bank has a deferred compensation plan for its chief executive officer. 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 financial statements. Expenses associated with this plan were
$22,000, $25,000 and $25,000 for the years ended June 30, 1996, 1995 and 1994,
respectively.
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 operations, with
differences between taxes so computed and taxes payable under applicable
statutes and regulations classified as deferred taxes arising from timing
differences (the deferred method as required by the American Institute of
Certified Public Accountants Accounting Principles Board Opinion No. 11). SFAS
No. 109 requires the use of the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of temporary differences, by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities. Temporary differences giving rise to deferred taxes relate to
property and equipment, deferred loan fees and costs, FHLB of Atlanta stock
dividends, deferred compensation, bad debt reserves, and unrealized gains
(losses) on investment securities available for sale.
The components of income tax expense are as follows for the years ended June
30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Current tax expense $ 424,767 $631,069 $768,038
--------- -------- --------
Deferred tax expense (benefit)
Tax on temporary differences (119,070) 31,472 (73,738)
Less (benefit) charge on change in
unrealized gain on investment
securities available for sale allocated
directly to retained earnings 45,903 (69,941) -
--------- -------- --------
Net deferred tax benefit included in
operations (73,167) (38,469) (73,738)
--------- -------- --------
$ 351,600 $592,600 $694,300
========= ======== ========
</TABLE>
- -------------------------------------------------------------------------------
Page F-19
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
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, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income tax at federal statutory rate $349,600 $515,000 $634,000
State income tax, net of federal tax benefit 2,000 52,000 60,300
Other - 25,600 -
-------- -------- --------
$351,600 $592,600 $694,300
======== ======== ========
</TABLE>
Deferred tax assets and liabilities arising from temporary differences at June
30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets relating to:
Loan fees and costs $ 43,840 $ 74,013
Deferred compensation 65,322 58,000
Bad debt reserves 159,361 38,659
--------- ---------
Gross deferred tax assets 268,523 170,672
Valuation allowance - -
--------- ---------
Net deferred tax assets 268,523 170,672
--------- ---------
Deferred tax liabilities relating to:
Property and equipment (43,715) (19,031)
FHLB stock dividends (104,832) (104,832)
Net unrealized gain on securities available for sale (24,038) (69,941)
--------- ---------
Total deferred tax liabilities (172,585) (193,804)
--------- ---------
Net deferred tax asset (liability) $ 95,938 $ (23,132)
========= =========
</TABLE>
Retained earnings at June 30, 1996 include approximately $1,534,000 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 $598,000, has not been provided on such reserve.
- -------------------------------------------------------------------------------
Page F-20
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
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 13.8% at
June 30, 1996. In addition, the Bank is subject to the capital requirements of
the FDIC. The FDIC requires the Bank to maintain (i) a Tier 1 capital to risk-
weighted assets ratio of 4% and (ii) a risk-based capital requirement of 8%.
The FDIC also imposes a minimum leverage ratio requirement which varies from 3%
to 5%, depending on the institution. At June 30, 1996, the Bank exceeded the
maximum requirement.
NOTE K - CONCENTRATION OF CREDIT RISK AND OFF-BALANCE SHEET RISK
The Bank generally originates single-family residential loans within its
primary lending area of Davidson County. 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 statements of financial condition. The contract
or notional amounts of those instruments reflect the extent of involvement the
Bank has in particular classes of financial instruments.
A summary of the contract amount of the Bank's exposure to off-balance sheet
risk as of June 30, 1996 is as follows:
Financial instruments whose contract amounts represent credit risk:
<TABLE>
<S> <C>
Commitments to extend credit, mortgage loans $1,804,400
Undisbursed construction loans 1,764,112
Undisbursed lines of credit 523,271
</TABLE>
NOTE L - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The Bank has implemented Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments ("SFAS 107"), which
requires disclosure of the estimated fair values of the Bank's financial
instruments whether or not recognized in the balance sheet, where it is
practical to estimate that value. Such instruments include cash and cash
equivalents, investment securities, loans, accrued interest receivable, stock in
the Federal Home Loan Bank of Atlanta, deposit accounts, and commitments. Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Bank's entire holdings of a particular financial instrument.
Because no active market readily exists for a portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
- -------------------------------------------------------------------------------
Page F-21
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
NOTE L - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents
The carrying amounts for cash and cash equivalents approximate fair value
because of the short maturities of those instruments.
Investment Securities
Fair value for investment securities equals quoted market price if such
information is available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
Loans
For certain homogenous categories of loans, such as residential mortgages,
fair value is estimated using the quoted market prices for securities
backed by similar loans, adjusted for differences in loan characteristics.
The fair value of other types of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities.
Accrued Interest Receivable
The carrying amounts of accrued interest approximate fair values.
Stock in Federal Home Loan Bank of Atlanta
The fair value for FHLB stock is its carrying value, since this is the
amount for which it could be redeemed. There is no active market for this
stock and the Bank is required to maintain a minimum balance based on the
unpaid principal of home mortgage loans.
Deposit Liabilities
The fair value of demand deposits is the amount payable on demand at the
reporting date. The fair value of certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
Financial Instruments with Off-Balance Sheet Risk
With regard to financial instruments with off-balance sheet risk discussed
in Note K, it is not practicable to estimate the fair value of future
financing commitments.
- -------------------------------------------------------------------------------
Page F-22
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
================================================================================
NOTE L - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
The carrying amounts and estimated fair values of the Bank's financial
instruments, none of which are held for trading purposes, are as follows at June
30, 1996:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 4,987,377 $ 4,987,377
Investment securities 18,564,611 18,547,074
Loans 55,192,567 54,105,000
Accrued interest receivable 556,670 556,670
Stock in Federal Home Loan Bank of Atlanta 613,700 613,700
Financial liabilities:
Deposits $69,669,236 $69,274,000
</TABLE>
NOTE M - PLAN OF CONVERSION
On May 7, 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.
- -------------------------------------------------------------------------------
Page F-23
<PAGE>
HOME SAVINGS, SSB
NOTES TO FINANCIAL STATEMENTS
June 30, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
NOTE M - PLAN OF CONVERSION (Continued)
The Bank may not declare or pay a cash dividend on or repurchase any of its
common stock if its net worth would thereby be reduced below either the
aggregate amount then required for the liquidation account or the minimum
regulatory capital requirements imposed by federal and state regulations.
Conversion costs of approximately $40,000 have been incurred and are included
in prepaid expenses and other assets as of June 30, 1996. If the conversion is
ultimately successful, conversion costs will be accounted for as a reduction of
the stock proceeds. If the conversion is unsuccessful, conversion costs will be
charged to the Bank's operations.
- --------------------------------------------------------------------------------
Page F-24
<PAGE>
<TABLE>
<S> <C>
=============================================== =====================================
No dealer, salesperson or any other individual
or entity has been authorized to give any Up To
information or to make any representation not 383,525 Shares
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 Century Bancorp,
Inc. or Home Savings, SSB. This Prospectus
does not constitute an offer to sell, or a
solicitation of an offer to buy, any of the CENTURY
securities offered hereby, or any other BANCORP, INC.
securities, to any person in any jurisdiction (Proposed Holding Company for
in which such offer or solicitation is not Home Savings, SSB)
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
Century Bancorp, Inc. or Home Savings, SSB
since any of the dates as of which
information is furnished herein or since the
date hereof.
_____________________________
TABLE OF CONTENTS
Page
----
Summary...................................... 5
Selected Financial and Other Data
of Home Savings............................ 18
Risk Factors................................. 20
Century Bancorp, Inc......................... 27 Common Stock
Home Savings, SSB............................ 28
Use of Proceeds.............................. 28
Dividend Policy.............................. 30
Market for Common Stock...................... 31 PROSPECTUS
Capitalization............................... 31
Pro Forma Data............................... 33
Historical and Pro Forma Capital Compliance.. 35
Stock Purchases by Directors and Executive
Officers................................... 38
Management's Discussion and Analysis of Trident Securities, Inc.
Financial Condition and Results of
Operations.................................. 39
Business of the Holding Company.............. 52
Business of Home Savings..................... 52
Taxation..................................... 72
Supervision and Regulation................... 74
Management of the Holding Company............ 85
Management of Home Savings................... 85 ________________, 1996
Description of Capital Stock................. 96
Anti-Takeover Provisions Affecting the
Holding Company and Home Savings............ 98
The Conversion............................... 102
Legal Opinions............................... 116
Experts...................................... 116
Registration Requirements.................... 117
Additional Information....................... 117
Index to Consolidated Financial Statements... 118
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.
============================================== =====================================
</TABLE>
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses
(other than fees and commissions payable to the selling agent) to be incurred in
connection with the issuance and distribution of the shares.
<TABLE>
<CAPTION>
<S> <C>
Registration and Filing Fees.................................... $ 22,000
Postage and Printing............................................ 50,000
Accounting Fees and Expenses.................................... 50,000
Fees and Expenses Payable to Appraiser
and Business Plan Consultant.................................. 36,000
Legal Fees...................................................... 125,000
Sales Agent Expenses............................................ 40,000
Conversion Data Processing...................................... 8,000
Stock Transfer Agent Fees and Costs
of Stock Certificates......................................... 10,000
Miscellaneous................................................... 25,000
--------
$366,000
========
</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 July, 1996, Registrant sold one share of common stock, no par value
per share, to James G. Hudson, Jr. for an aggregate purchase price of $10.00.
Such sale was exempt from registration under Section 4(2) of Securities Act of
1933.
Item 16. Exhibits.
The following exhibits and financial statement schedules are filed
herewith or will, as noted, be filed by amendment.
II-2
<PAGE>
(a) Exhibits
Exhibit No.
(Per Exhibit
Tables in
Item 601 of
Regulation S-K) Description
--------------- -----------
1.1 Engagement letter dated May 23, 1996 between Home Savings,
SSB and Trident Securities, Inc.*
1.2 Form of Sales Agency Agreement among Century Bancorp, Inc.,
Home Savings, SSB and Trident Securities, Inc.
2.1 Revised Amended and Restated Plan of Holding Company
Conversion of Home Savings, SSB
3.1 Articles of Incorporation of Century Bancorp, Inc.*
3.2 Bylaws of Century Bancorp, Inc.*
4.1 Forms of Stock Certificate for Century Bancorp, Inc. and
Home Savings, Inc., SSB
5.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to legality of securities to be registered hereby*
8.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to federal and state tax consequences*
8.2 Opinion of JMP Financial, Inc. as to the value of
subscription rights*
10.1 Letter Agreement dated April 10, 1996 between Home Savings,
SSB and JMP Financial, Inc. for appraisal services*
10.2 Form of Employment Agreement to be entered into between Home
Savings, Inc., SSB and James G. Hudson, Jr.*
10.3 Forms of Special Termination Agreements to be entered into
between Century Bancorp, Inc. and John E. Todd and Drema A.
Michael*
10.4 Forms of Employee Stock Ownership Plan and Trust of Home
Savings, Inc., SSB*
II-3
<PAGE>
10.5 Form of the Management Recognition Plan of Home Savings,
Inc., SSB if the Plan is adopted and approved by the
stockholders of Century Bancorp, Inc. within one year after
the conversion of Home Savings, SSB to stock form*
10.6 Form of Registrant's Stock Option Plan and Trust if the Plan
and Trust are adopted and approved by the stockholders of
Century Bancorp, Inc. within one year after the conversion
of Home Savings, SSB to stock form*
10.7 Revised Form of Home Savings, SSB Severance Plan
10.8 Form of Capital Maintenance Agreement between Century
Bancorp, Inc. and Home Savings, Inc., SSB*
24.1 Consent of Dixon, Odom & Co., L.L.P.
24.2 Consent of JMP Financial, Inc.
24.3 Consent of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P.
28.1 Appraisal Report of JMP Financial, Inc. as of July 18, 1996*
28.2 Appraisal Update Report of JMP Financial, Inc. as of
September 23, 1996
28.3 Form of Stock Order Form
*Filed previously.
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director,
II-4
<PAGE>
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of Regulation S-X at the start of any delayed
offering or throughout a continuous offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Thomasville, State of North Carolina, on the 2nd day of October, 1996.
CENTURY BANCORP, INC.
By: /s/ James G. Hudson, Jr.
--------------------------------
James G. Hudson, Jr.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Date: October 2, 1996 By: /s/ James G. Hudson, Jr.
--------------------------------------------
James G. Hudson, Jr., President and Director
(Chief Executive Officer and Treasurer)
Date: October 2, 1996 By: /s/ Drema A. Michael
--------------------------------------------
Drema A. Michael, Secretary and Assistant
Treasurer (Principal Accounting Officer and
Principal Financial Officer)
Date: October 2, 1996 By: /s/ John R. Hunnicutt
--------------------------------------------
John R. Hunnicutt, Director
Date: October 2, 1996 By: /s/ F. Stuart Kennedy
--------------------------------------------
F. Stuart Kennedy, Director
Date: October 2, 1996 By: /s/ Milton T. Riley Jr.
--------------------------------------------
Milton T. Riley, 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>
1.1 Engagement letter dated May 23, 1996 between Home
Savings, SSB and Trident Securities, Inc.*
1.2 Form of Sales Agency Agreement among Century Bancorp, Inc.,
Home Savings, SSB and Trident Securities, Inc.
2.1 Revised Amended and Restated Plan of Holding Company Conversion
of Home Savings, SSB
3.1 Articles of Incorporation of Century Bancorp, Inc.*
3.2 Bylaws of Century Bancorp, Inc.*
4.1 Forms of Stock Certificate for Century Bancorp, Inc. and
Home Savings, Inc., SSB
5.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to legality of securities to be registered hereby*
8.1 Opinion of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to federal and state tax consequences*
8.2 Opinion of JMP Financial, Inc. as to the value of subscription
rights*
10.1 Letter Agreement dated April 10, 1996 between Home
Savings, SSB and JMP Financial, Inc. for appraisal services*
10.2 Form of Employment Agreement to be entered into between
Home Savings, Inc., SSB and James G. Hudson, Jr.*
10.3 Forms of Special Termination Agreements to be entered into
between Century Bancorp, Inc. and John E. Todd and Drema
A. Michael*
10.4 Forms of Employee Stock Ownership Plan and Trust of Home
Savings, Inc., SSB*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Page No.
----------
<S> <C>
10.5 Form of the Management Recognition Plan of Home Savings, Inc.,
SSB if the Plan is adopted and approved by the stockholders of
Century Bancorp, Inc. within one year after the conversion of
Home Savings, SSB to stock form*
10.6 Form of Registrant's Stock Option Plan and Trust if the Plan
and Trust are adopted and approved by the stockholders of
Century Bancorp, Inc. within one year after the conversion of
Home Savings, SSB to stock form*
10.7 Revised Form of Home Savings, SSB Severance Plan
10.8 Form of Capital Maintenance Agreement between Century
Bancorp, Inc. and Home Savings, Inc., SSB*
24.1 Consent of Dixon, Odom & Co., L.L.P.
24.2 Consent of JMP Financial, Inc.
24.3 Consent of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P.
28.1 Appraisal Report of JMP Financial, Inc. as of July 18, 1996*
28.2 Appraisal Update Report of JMP Financial, Inc. as of September 23, 1996
28.3 Form of Stock Order Form
</TABLE>
*Filed previously.
<PAGE>
Exhibit 1.2
CENTURY BANCORP, INC.
Up to 383,525 Shares
COMMON STOCK
(No Par Value Per Share)
Subscription Price $50.00 Per Share
SALES AGENCY AGREEMENT
----------------------
_____________, 1996
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Gentlemen:
Century Bancorp, Inc., Thomasville, North Carolina (the "Company"), a North
Carolina corporation, and Home Savings, SSB, Thomasville, North Carolina (the
"Bank"), a North Carolina-chartered, federally-insured savings bank, hereby
confirm their respective agreements with Trident Securities, Inc., Raleigh,
North Carolina ("Trident") as follows:
1. Introduction. The Bank, in accordance with its plan of conversion (the
------------
"Plan"), pursuant to which the Bank intends to convert from a North Carolina-
chartered mutual savings bank to a North Carolina-chartered stock savings bank
(the "Conversion"), is offering to certain depositors and borrowers, the Bank's
employee stock ownership plan (the "ESOP") and to directors, officers and
employees of the Bank nontransferable rights to subscribe for a minimum of
246,500 and a maximum of 333,500 shares, with the possibility of increasing the
number of such shares offered to 383,525 shares without a resolicitation of
subscribers, of the Company's common stock, no par value per share (the "Shares"
and the "Common Stock"), or such lesser amount of Common Stock as the
Administrator of the Savings Institutions Division of the North Carolina
Department of Commerce (the "Administrator") permits to be offered, in a
subscription offering (the "Subscription Offering"). Shares for which
subscriptions are not received in the Subscription Offering may be offered to
members of the general public in a community offering with priority being given
to natural persons or trusts of natural persons who are residents of Davidson
County, North Carolina, subject to the priorities and limitations described in
the Plan (the "Community Offering") and Shares for which subscriptions are not
received in the Subscription Offering or purchased in the Community Offering may
be offered to the general public in a syndicated community offering (the
"Syndicated Community Offering"), subject to the priorities and limitations
described in the Plan. The Subscription Offering, the Community
<PAGE>
Trident Securities, Inc.
Page 2
Offering, if any, and the Syndicated Community Offering, if any, are referred to
collectively as the "Offerings."
The Company and the Bank have been advised by Trident that it desires to
utilize its best efforts in assisting the Company and the Bank with their sale
of the Common Stock in the Offerings. Prior to the execution of this Agreement,
the Company and the Bank have delivered to Trident the prospectus dated
________________, 1996 (the "Prospectus") and the proxy statement dated
__________________, 1996 (the "Proxy Statement"), and all supplements and
amendments thereto, if any, to be used in the Conversion and the Offerings.
Such Prospectus and such Proxy Statement contain information with respect to the
Company, the Bank and the Common Stock.
2. Representations and Warranties. The Company and the Bank jointly and
------------------------------
severally represent and warrant to Trident that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1, including exhibits and
all amendments and supplements thereto (No. 333-8625), including the Prospectus,
for the registration of the Offerings under the Securities Act of 1933, as
amended ("1933 Act"). Such registration statement has become effective under
the 1933 Act and no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the best of its knowledge,
threatened by the Commission. Except as the context may otherwise require, such
registration statement, as amended or supplemented, if amended or supplemented,
on file with the Commission at the time the registration statement becomes
effective, including the Prospectus, financial statements, schedules, exhibits
and all other documents filed as part thereof, is herein called the
"Registration Statement," and the prospectus, as amended or supplemented, if
amended or supplemented, on file with the Commission at the time the
Registration Statement becomes effective is herein called the "Prospectus,"
except that if the prospectus filed by the Company with the Commission pursuant
to Rule 424(b) of the General Rules and Regulations of the Commission under the
1933 Act ("1933 Act Regulations") differs from the form of prospectus on file at
the time the Registration Statement becomes effective, the term "Prospectus"
shall refer to the Rule 424(b) prospectus from and after the time it is filed
with or mailed for filing with the Commission and shall include any amendments
or supplements thereto from and after their dates of effectiveness or use,
respectively. If any Shares remain unsubscribed following completion of the
Subscription Offering, the Company, if required under the 1933 Act, (i) will
promptly file with the Commission a post-effective amendment to the Registration
<PAGE>
Trident Securities, Inc.
Page 3
Statement relating to the results of the Offerings, any additional information
with respect to the proposed plan of distribution and any revised pricing
information or (ii) will file with, or mail for filing to, the Commission a
prospectus or prospectus supplement containing information relating to the
results of the Offerings and pricing information pursuant to Rule 424(c) of the
1933 Act Regulations.
(b) The Bank has filed an Application to Convert a Mutual Savings Bank
to a Stock Owned Savings Bank, including exhibits (as amended or supplemented,
the "Conversion Application") with the Administrator, which has been
conditionally approved by the Administrator; and the Prospectus and the Proxy
Statement included as part of the Conversion Application has been conditionally
approved for use by the Administrator. No order has been issued by the
Administrator preventing or suspending the use of the Prospectus or the Proxy
Statement; and no action by or before the Administrator revoking such approvals
is pending or, to the Bank's best knowledge, threatened. The Bank also has
filed a Notice of Intent to Convert to Stock Form (as amended or supplemented,
the "Notice") with the Federal Deposit Insurance Corporation (the "FDIC") and
the FDIC has issued a conditional Notice of Intent Not to Object to the
Conversion. The Company has filed holding company applications, including
exhibits (as amended or supplemented, the "Holding Company Applications"), with
the Board of Governors of the Federal Reserve System (the "Federal Reserve") and
the Administrator, which have been approved by them. No action by or before the
Federal Reserve or the Administrator revoking such approvals is pending or, to
the Bank's best knowledge, threatened.
(c) As of the date of the Prospectus, and at all times subsequent
thereto through and including the "Closing Date" (as defined in Section 3
hereof), (i) the Registration Statement and Prospectus (as amended and
supplemented, if amended and supplemented) complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations, (ii) the Prospectus and the Proxy Statement (as amended and
supplemented, if amended and supplemented) complied and will comply in all
material respects with Chapter 54C-33 of the North Carolina General Statutes, as
amended, and the rules and regulations of the Administrator and other applicable
North Carolina law (collectively the "Administrator's Regulations") and with the
Federal Deposit Insurance Act, as amended, and the rules and regulations of the
FDIC and other applicable federal law (collectively the "FDIC's Regulations"),
(iii) the Registration Statement (as amended and supplemented, if amended and
supplemented) did not and will not contain any untrue statement of a material
fact or omit to state
<PAGE>
Trident Securities, Inc.
Page 4
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (iv) the Prospectus and the Proxy Statement (each as amended
or supplemented, if amended or supplemented) did not and will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Representations or warranties in this subsection
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company or the Bank
relating to Trident by or on behalf of Trident expressly for use in the
Registration Statement, the Prospectus or the Proxy Statement.
(d) The Company is duly organized as a business corporation under the
laws of the State of North Carolina and the Bank is duly organized as a mutual
savings bank under the laws of the State of North Carolina, and each of them is
validly existing and has a corporate existence under all applicable laws with
full power and authority to own its property and conduct its business as
described in the Prospectus and the Proxy Statement; the Bank is a member in
good standing of the Federal Home Loan Bank of Atlanta ("FHLB-Atlanta"); and the
deposit accounts of the Bank are insured by the Savings Association Insurance
Fund ("SAIF") administered by the FDIC up to the applicable legal limits. Each
of the Company and the Bank is qualified to do business as a foreign corporation
in any jurisdiction where non-qualification has or would have a material adverse
effect on the condition (financial or otherwise), operations, business, assets,
earnings or properties ("Material Adverse Effect") of the Company and the Bank,
taken as a whole. The Bank does not own equity securities of or any equity
interest in any other business enterprise except for the Subsidiary (as
hereinafter defined) or as described in the Prospectus and the Proxy Statement.
Upon amendment of the Bank's charter and bylaws as provided in the
Administrator's Regulations and completion of the sale by the Company of the
Shares as contemplated by the Prospectus, (i) the Bank will be converted
pursuant to the Plan to a North Carolina-chartered capital stock savings bank
with full power and authority to own its properties and conduct its business as
described in the Prospectus and the Proxy Statement, (ii) all of the outstanding
shares of capital stock of the Bank will be owned of record and beneficially by
the Company, and (iii) the Company will have no direct subsidiaries other than
the Bank.
(e) The Bank has one direct wholly-owned subsidiary (the
"Subsidiary"). The Subsidiary has been duly organized and is validly existing
and in good standing under the laws of the State of North Carolina with full
power and authority to own its
<PAGE>
Trident Securities, Inc.
Page 5
properties and conduct its business, if any, as described in the Prospectus, and
the Subsidiary is not required to be qualified to do business as a foreign
corporation in any jurisdiction where non-qualification would have a Material
Adverse Effect on the Bank, the Subsidiary and the Company taken as a whole.
The Subsidiary holds all material licenses, certificates and permits from
governmental authorities necessary for the conduct of its business, if any, as
described in the Prospectus, and all such licenses, certificates and permits are
in full force and effect and the Subsidiary is in all material respects
complying therewith. All of the outstanding stock of the Subsidiary has been
duly authorized and is fully paid and nonassessable, and such stock is owned
directly or indirectly by the Bank free and clear of any liens or encumbrances.
The activities of the Subsidiary, if any, are permitted to subsidiaries of a
North Carolina-chartered savings bank by virtue of the applicable rules and
regulations of the Administrator, the FDIC and/or the Federal Reserve (except as
to such specific exceptions as may have been granted by any of such agencies).
The Subsidiary has good and marketable title to all assets material to its
business, if any, and to those assets described in the Prospectus, if any, free
and clear of all material liens, charges, encumbrances or restrictions.
(f) The Bank has good and marketable title to all assets material to
the business of the Bank and to those assets described in the Prospectus as
owned by the Bank, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Prospectus or are not expected
to have a Material Adverse Effect on the Bank and the Company, taken as a whole;
and all of the leases and subleases material to the operations and financial
condition of the Bank under which the Bank holds properties, including those
described in the Prospectus, are in full force and effect as described therein.
(g) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of each of the Company and the Bank, and this
Agreement is a valid and binding obligation of each of the Company and the Bank,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship or other laws affecting creditors' rights generally, except as
may be limited by the exercise of judicial discretion in applying principles of
equity and except to the extent that the provisions of Section 8 and 9 hereof
may be unenforceable as against public policy or Section 23A of the Federal
Reserve Act, 12 U.S.C. (S) Section 371c ("Section 23A").
<PAGE>
Trident Securities, Inc.
Page 6
(h) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company or the Bank, threatened against or involving the
Company, the Bank, the Subsidiary or any of their respective assets which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect on the Company and the Bank, taken as a whole, except as referred
to in the Prospectus and the Proxy Statement.
(i) The Conversion of the Bank from mutual to stock form will
constitute a tax-free reorganization under the Internal Revenue Code of 1986, as
amended, and will not be a taxable transaction under the laws of the State of
North Carolina to the Company or the Bank; and the Bank has received the opinion
of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Greensboro, North
Carolina, with respect to North Carolina and federal income tax consequences of
the Conversion, which opinion is filed as an exhibit to the Registration
Statement and the Conversion Application, and the facts relied upon in such
opinion are true, accurate and complete.
(j) The Company and Bank each has all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to carry out the provisions and conditions hereof (subject to the
limitations set forth herein and subject to post-Conversion conditions imposed
by the Administrator, the FDIC and/or the Federal Reserve in connection with
their respective approvals, or nonobjection, as the case may be, of the
Conversion Application, the Notice, and the Holding Company Applications) and,
in the case of the Company, as of the Closing Date to issue and sell the Shares
to be sold by it as provided herein, and in the case of the Bank, as of the
Closing Date to issue and sell the shares of its capital stock to be sold to the
Company as provided in the Plan (subject to the issuance of an amended charter
in the form required for a North Carolina-chartered stock savings bank (the
"Stock Charter"), the form of which Stock Charter has been filed as an exhibit
to the Conversion Application).
(k) The Bank is not in violation of any rule or regulation of the
Administrator or the FDIC that would result in any enforcement action against
the Bank or its officers or directors that has or may have a Material Adverse
Effect on the Company and the Bank, taken as a whole.
(l) The financial statements of the Bank and any related notes or
schedules which are included in the Registration Statement and the Conversion
Application and are part of the Prospectus fairly present the financial
condition, results of operations,
<PAGE>
Trident Securities, Inc.
Page 7
retained earnings and cash flows of the Bank at the respective dates thereof and
for the respective periods covered thereby and comply as to form in all material
respects with the applicable accounting requirements of both the 1993 Act
Regulations and the Administrator's Regulations. Such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set forth
therein. The tables and other financial, statistical and pro forma information
and related notes in the Prospectus accurately present the information purported
to be shown thereby at the respective dates thereof and for the respective
periods covered thereby.
(m) There has been no material adverse change in the condition
(financial or otherwise), results of operations, business, assets, properties or
earnings of the Company or the Bank since the latest date as of which such
condition is set forth in the Prospectus except as referred to therein; and the
capitalization, assets, properties and businesses of the Company and the Bank
conform to the descriptions thereof contained in the Prospectus as of the date
specified and, since such date, there has been no Material Adverse Effect on the
Company and the Bank, taken as a whole. Neither the Company nor the Bank have
any material liabilities, contingent or otherwise, of any kind, except as
specifically set forth in the Prospectus.
(n) No material default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a material default, on the
part of the Company, the Bank or, to the best knowledge of the Company and Bank,
on the part of any other party in the due performance and observance of any
term, obligation, covenant or condition of any agreement, contract, indenture,
bond, debenture, note, instrument or any other evidence of indebtedness which
would result in a Material Adverse Effect on the Company and the Bank, taken as
a whole; said agreements are in full force and effect; and no other party to any
such agreement has instituted or, to the best knowledge of the Company or the
Bank, threatened any action or proceeding wherein the Company or the Bank would
or might be alleged to be in default thereunder.
(o) Neither the Company nor the Bank is in violation of their
respective charters, certificate of incorporation or bylaws. The execution and
delivery of this Agreement, the fulfillment of the terms set forth herein and
the consummation of the transactions contemplated hereby shall not violate or
conflict with the respective charter, certificate of incorporation or bylaws of
the Company or the Bank, or, in any material respect, violate, conflict with or
constitute a breach of, or default (or an event which, with
<PAGE>
Trident Securities, Inc.
Page 8
notice or lapse of time, or both, would constitute a default) under, any
agreement, indenture or other instrument by which any of the Company or the Bank
is bound and which is material to the Company and the Bank, taken as a whole, or
under any governmental license or permit or any law, administrative regulation
or authorization, approval, court decree, injunction or order which is material
to the Company and the Bank, taken as whole, subject to the satisfaction of
certain conditions imposed by the Administrator, the FDIC and the Federal
Reserve in connection with their approvals of the Conversion Application, the
Notice and the Holding Company Applications, and except as may be required under
the blue sky laws and regulations (collectively the "Blue Sky Laws") of various
jurisdictions.
(p) Subsequent to the respective dates as of which information is
given in the Prospectus or the Proxy Statement and prior to the Closing Date,
except as otherwise may be indicated or contemplated therein, neither the
Company nor the Bank has issued any securities or incurred any liabilities or
obligations, direct or contingent, for borrowed money, except borrowings by the
Bank in the ordinary course of business, or entered into any transaction other
than in the ordinary course of business which is material in light of the
businesses and properties of the Company and the Bank.
(q) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company shall be as set forth in the
Prospectus under the caption "Capitalization", and no equity or debt securities
of the Company have been or shall be issued and outstanding prior to the Closing
Date (except for one share of Common Stock issued in connection with the
organization of the Company, which share shall be canceled effective as of the
Closing Date); the issuance and the sale of the Shares have been, or as of the
Closing Date will be, duly authorized by all necessary action of the Company and
approved by the Administrator and received the order of non-objection from the
FDIC (subject to the satisfaction of post-Conversion conditions imposed by the
Administrator and the FDIC) and, when issued in accordance with the terms of the
Plan, shall be validly issued, fully paid and nonassessable and shall conform to
the description thereof contained in the Prospectus; the issuance of the Shares
is not subject to preemptive rights; and good title to the Shares will be
transferred to the purchasers thereof upon issuance thereof against payment
therefor, free and clear of all claims, encumbrances, security interests and
liens whatsoever, with respect to the Company's interest in such shares. The
certificates representing the Shares will conform with the requirements of
applicable laws and regulations. The issuance and sale of the common stock of
the Bank to the Company has been, or as of the Closing Date will be,
<PAGE>
Trident Securities, Inc.
Page 9
duly authorized by all necessary action of the Bank and the Company and
appropriate regulatory authorities (subject to the satisfaction of post-
Conversion conditions imposed by the Administrator, the FDIC and/or the Federal
Reserve) and such common stock, when issued in accordance with the terms of the
Plan, will be fully paid and nonassessable and will conform, in all material
respects, to the description thereof contained in the Prospectus.
(r) No further approval of any regulatory or supervisory or other
public authority is required in connection with the execution and delivery of
this Agreement or the issuance of the Shares, except for the declaration of
effectiveness of any required post-effective amendment by the Commission and
approval or non-objection thereof or thereto by the Administrator and the FDIC,
the issuance of the Stock Charter by the Administrator, the form of which has
been approved by the Administrator and except as may be required under the Blue
Sky Laws.
(s) All contracts and other documents required to be filed as exhibits
to the Registration Statement, the Conversion Application, the Notice or the
Holding Company Applications have been filed with the Administrator, the FDIC,
the Commission or the Federal Reserve, as the case may be.
(t) Dixon, Odom & Co., L.L.P., which audited the financial statements
of the Bank at June 30, 1996 and for the fiscal years ended June 30, 1994, 1995
and 1996 included in the Prospectus are, and were during the periods covered in
its report in the Prospectus, independent public accountants within the meaning
of the 1933 Act, the 1933 Act Regulations, and the Code of Professional Ethics
of the American Institute of Certified Public Accountants.
(u) JMP Financial, Inc., which has prepared the Conversion appraisal
dated as of September 23, 1996 described in the Prospectus is independent of the
Company and the Bank within the meaning of the Administrator's Regulations and
the FDIC's Regulations, is believed by the Company and the Bank to be
experienced and expert in rendering corporate appraisals of thrift institutions,
and the Company and the Bank have no reason to believe that JMP Financial, Inc.
has not prepared the pricing information set forth in the Prospectus in
accordance with the requirements of the Administrator's Regulations and the
FDIC's Regulations.
(v) The Company and the Bank have timely filed all required federal
and state tax returns and no deficiency has been asserted with respect to such
returns by any taxing authorities,
<PAGE>
Trident Securities, Inc.
Page 10
have paid all taxes that have become due and, to the best of their knowledge,
have made adequate reserves for similar future tax liabilities, except where any
failure to make such filings, payments and reserves, or the assertion of such a
deficiency, would not have a Material Adverse Effect on the Company and the
Bank, taken as a whole.
(w) The records of account holders, depositors, borrowers and other
members of the Bank delivered to Trident by the Bank or its agent for use during
the Conversion are reliable, accurate and complete, and Trident shall have no
liability to any person relating to the reliability, accuracy or completeness of
such records or for any denial or allocation of a subscription to purchase
Shares to any person based upon such records.
(x) To the best knowledge of the Company and the Bank, all the loans
represented as assets on the most recent financial statements of the Bank
included in the Prospectus meet or are exempt from all requirements of any
federal, state or local law pertaining to lending including, without limitation,
truth-in-lending (including the requirements of Regulation Z, 12 C.F.R. Part
226, and 12 C.F.R. (S) 563.99), real estate settlement procedures, consumer
credit protection, equal credit opportunity and disclosure laws applicable to
such loans, except for violations which, if asserted, would not have a Material
Adverse Effect on the Bank and the Company, taken as a whole.
(y) To the best knowledge of the Company and the Bank, none of the
Company, the Bank or employees of the Company or the Bank have made any payment
of funds of the Company or the Bank prohibited by law, and no funds of the
Company or the Bank have been set aside to be used for any payment prohibited by
law.
(z) To the best knowledge of the Company and the Bank, the Company and
the Bank are in compliance in all material respects with all Environmental Law
(as hereinafter defined), and neither the Company nor the Bank have been
notified or is otherwise aware that either of them is potentially liable, or is
considered potentially liable, under any Environmental Law, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S) 9601 et seq. or any similar state or local law. There are no actions, suits,
regulatory investigations or other proceedings pending or, to the best knowledge
of the Company or the Bank, threatened against the Company or the Bank relating
to Environmental Law matters, nor does the Company or the Bank have any reason
to believe any such proceedings may be brought against either of them. To the
best knowledge of the Company and the Bank, no disposal, release or discharge of
hazardous waste, hazardous
<PAGE>
Trident Securities, Inc.
Page 11
substances, toxic substances, pollutants, irritants or contaminants, including
petroleum and gas products, as any of such terms may be defined under any
Environmental Law, has occurred on, in, at or about any of the facilities or
properties of the Company or the Bank in violation of Environmental Law, or, to
the best knowledge of the Company or the Bank, has occurred on, in, at or about
any of the facilities or properties pledged to the Bank as collateral for any
loan or extension of credit by the Bank, except such disposal, release or
discharge as could not be reasonably deemed to have a Material Adverse Effect on
the Company and the Bank, taken as a whole.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
agency (i.e., any federal, state or local agency responsible for regulating or
enforcing the matters identified herein) relating to (i) the protection,
preservation or restoration of the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water supply, surface
soil, subsurface soil, plant and animal life or any other natural resource),
and/or (ii) the usage, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of any substance presently listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by
type or by quantity, including any material containing any such substance as a
component.
(aa) At the Closing Date, the Company and the Bank will have completed
the conditions precedent to, and prior to the Closing Date, shall have conducted
the Conversion in all material respects in accordance with the Plan, the
Administrator's Regulations, the FDIC's Regulations and all other applicable
laws, regulations, decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed upon it by the
Administrator, the FDIC and the Federal Reserve.
(bb) Neither the Company nor the Bank is in violation of any directive
from the Administrator, the FDIC, the Federal Reserve, or any other agency to
make any material change in the method of conducting its business so as to
comply in all material respects with all applicable statutes and regulations
(including, without limitation, regulations, decisions, directives and orders of
the Administrator, the FDIC or the Federal Reserve), and except as set forth in
the Prospectus there is no suit, proceeding, charge, investigation or action
before or by any court, regulatory authority or governmental agency or body
pending or, to the best
<PAGE>
Trident Securities, Inc.
Page 12
knowledge of the Company or the Bank, threatened, which might materially and
adversely affect the Conversion, the performance of this Agreement or the
consummation of the transactions contemplated in the Plan and as described in
the Prospectus, which might have a Material Adverse Effect on the Company and
the Bank, taken as a whole.
(cc) Prior to the Conversion, the Bank was not authorized to issue
shares of capital stock; the Company and the Bank have not: (i) placed any
securities within the last eighteen (18) months (except for the sale of one
share of the Common Stock as described in (q) above); (ii) had any material
dealings within the twelve (12) months prior to the date hereof with any member
of the National Association of Securities Dealers, Inc. ("NASD"), or any person
related to or associated with such member, other than discussions and meetings
relating to the Offerings and routine purchases and sales of U.S. government
securities; (iii) entered into a financial or management consulting agreement
except as contemplated hereunder; or (iv) engaged any intermediary between
Trident and the Company and the Bank in connection with the offering of the
Common Stock, and no person is being compensated in any manner for such service.
(dd) All documents delivered by the Bank or the Company or their
representatives in connection with the issuance and sale of the Common Stock,
including records of account holders, depositors, borrowers and other members of
the Bank, or in connection with Trident's exercise of due diligence, except for
those documents which were prepared by parties other than the Bank, the Company
or their representatives were on the dates on which they were delivered, true,
complete and correct.
2A. Representations and Warranties of Trident. Trident represents and
-----------------------------------------
warrants to the Company and the Bank that:
(a) Trident is registered as a broker-dealer with the Commission and
is in good standing with the NASD.
(b) Trident is validly existing as a corporation under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
provide the services to be furnished to the Company and the Bank hereunder.
(c) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of Trident, and this Agreement is a legal,
valid and binding obligation of Trident, enforceable in accordance with its
terms
<PAGE>
Trident Securities, Inc.
Page 13
(except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors of
registered broker-dealers the accounts of whom may be insured by the Securities
Investor Protection Corporation or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in equity or at law,
and except to the extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or Section 23A).
(d) Each of Trident and, to Trident's knowledge, its employees, agents
and representatives who shall perform any of the services required hereunder to
be performed by Trident shall be duly authorized and shall have all licenses,
approvals and permits necessary to perform such services; and Trident is a
registered selling agent in such jurisdictions in which the Company is relying
on such registration for the sale of the Shares, and will remain registered in
such jurisdictions until the Conversion is consummated or terminated.
(e) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not conflict with the corporate charter
or bylaws of Trident or constitute a breach of, or default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, any
material agreement, indenture or other instrument by which Trident is bound or
under any governmental license or permit or any law, administrative regulation,
authorization, approval or order or court decree in injunction by which Trident
is bound.
(f) Any funds received by Trident to purchase Common Stock will be
handled in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934, as amended ("1934 Act").
(g) There is not now pending or, to Trident's knowledge, threatened
against Trident any action or proceeding before the SEC, NASD, any state
securities commission or any state or federal court concerning Trident's
activities as a broker-dealer.
3. Employment of Trident; Sale and Delivery of the Shares.
------------------------------------------------------
On the basis of the representations and warranties herein contained, but
subject to the terms and conditions herein set forth, the Company and the Bank
hereby employ Trident as their agent to utilize its best efforts in assisting
the Company with the Company's sale of the Shares in the Offerings. The
employment of
<PAGE>
Trident Securities, Inc.
Page 14
Trident hereunder shall terminate (a) forty-five (45) days after the
Subscription Offering closes, unless the Company and the Bank, with the approval
of the Administrator, are permitted to extend such period of time, or (b) upon
consummation of the Conversion, whichever date shall first occur.
In the event the Company is unable to sell a minimum of 246,500 Shares (or
such lesser amount as the Administrator and the FDIC may permit) within the
period herein provided, this Agreement shall terminate, and the Company and the
Bank shall refund promptly to any persons who have subscribed for any of the
Shares, the full amount which it may have received with interest from such
persons; and neither party to this Agreement shall have any obligation to the
other parties hereunder, except as set forth in Sections 6, 8 and 9 hereof.
Appropriate arrangements for placing the funds received from subscriptions for
Shares in special interest-bearing accounts with the Bank until all Shares are
sold and paid for were made prior to the commencement of the Subscription
Offering, with provision for prompt refund to the purchasers as set forth above,
or for delivery to the Company if all Shares are sold.
If all Shares are sold and all other conditions precedent to consummation
of the Conversion are satisfied, the Company agrees to issue or have issued such
Shares and to release for delivery certificates to subscribers thereof for such
Shares as soon as practicable after the Closing Date. Such release for delivery
shall be against payment to the Company by any means authorized pursuant to the
Prospectus, at the office of the Company at 22 Winston Street, Thomasville,
North Carolina 27361-0989, or at such other place as shall be agreed upon among
the parties hereto. The date upon which Trident is paid the compensation due to
it hereunder is herein called the "Closing Date".
Trident shall receive the following compensation for its services
hereunder:
(a) (i) a management fee in the amount of one percent (1.00%) of the
aggregate dollar amount of the Shares sold in the Subscription Offering and in
the Community Offering, (ii) a commission equal to two percent (2.00%) of the
aggregate dollar amount of any Shares sold in the Subscription Offering and the
Community Offering, excluding any shares sold to the ESOP, the Bank's executive
officers, directors and their "Associates" (as such term is defined in the Plan)
and excluding shares sold by other NASD member firms under Selected Dealer (as
such term is defined in the Prospectus) arrangements. For stock sold by other
NASD member firms under Selected Dealer Agreements, the commission payable shall
be as agreed upon by the Company and Trident to
<PAGE>
Trident Securities, Inc.
Page 15
reflect market requirements at the time of the stock allocation in the
Syndicated Community Offering. All such fees payable to Trident are to be
payable in next day funds to Trident in Raleigh, North Carolina, on the Closing
Date.
(b) Trident shall be reimbursed for all allocable expenses, including
legal fees, incurred by it whether or not the Offerings are successfully
completed; provided, however, that Trident's legal fees shall not exceed $30,000
and its other allocable expenses shall not exceed $10,000. Full payment of
Trident's allocable expenses, including legal fees, shall be made in next day
funds on the Closing Date or, if the Conversion is not completed and is
terminated for any reason, within ten (10) calendar days of receipt by the
Company of the detailed listing from Trident of its allocable expenses. Trident
acknowledges receipt of a $10,000 advance payment from the Bank which shall be
credited against the total reimbursement due Trident hereunder.
(c) Notwithstanding the limitations on reimbursement of Trident for
allocable expenses provided above, in the event that a resolicitation or other
event causes the Offerings to be extended beyond their original expiration
dates, Trident shall be reimbursed for its allocable expenses (including legal
expenses) incurred during such extended period provided that the applicable
allowance for allocable expenses provided above have been exhausted. Such
reimbursement shall be in an amount equal to the product obtained by dividing
$7500 (in the case of the reimbursement for legal fees) or $2500 (in the case of
the reimbursement of other allocable expenses) by the total number of days of
the unextended Subscription Offering (calculated from the date of the Prospectus
to the intended close of the Subscription Offering as stated in the Prospectus)
and then multiplying such product by the number of days of the extension (that
number of days from the date of the supplement to the Prospectus to the closing
of the extension of the Subscription Offering); provided, however, that the
aggregate additional reimbursement for allocable expenses (including legal fees)
shall not exceed $10,000.
(d) The Company shall pay any stock issue and transfer taxes which may
be payable with respect to the sale of the Shares. The Company and the Bank also
shall pay all expenses of the Conversion including, but not limited to, their
attorneys' fees, NASD filing fees, filing and registration fees, and attorneys'
fees relating to any required state securities laws research and filings,
transfer agent charges, fees relating to auditing and accounting, telephone
charges, air freight expenses, courier service costs, rental equipment costs,
costs of supplies and costs of printing all necessary documents in connection
with the
<PAGE>
Trident Securities, Inc.
Page 16
Conversion.
4. Offerings. Subject to the provisions of Section 7 hereof, Trident is
---------
offering on behalf of the Company and on a best efforts basis a minimum of
246,500 Shares and a maximum of 333,500 Shares with the possibility of
increasing the number of Shares to 383,528, or such lesser amount of Common
Stock as the Administrator and the FDIC permit to be offered, in a Subscription
Offering and, if necessary, any Shares which remain unsubscribed at the
conclusion of the Subscription Offering, in a Community Offering and a
Syndicated Community Offering. The Shares are to be initially offered to the
public at the price set forth on the cover page of the Prospectus and the first
page of this Agreement.
(a) Subscriptions shall be offered in the Subscription Offering only
during the subscription period by means of Order Forms as described in the
Prospectus and may be offered in the Syndicated Community Offering by means of
solicitations of indications of interest from customers of Trident or Selected
Dealers (as defined in the Prospectus) residing in those states in which the
Shares may be qualified for offer and sale. The Bank and the Company shall
notify Trident promptly after the expiration of the Subscription Offering of the
number of Shares sold in the Subscription Offering and the aggregate number of
Shares remaining available to be sold in the Syndicated Community Offering. The
Bank and the Company shall provide Trident with any information (which shall be
accurate and reliable) necessary to assist Trident in allocating the Shares in
the event of an oversubscription. The Bank and the Company, jointly and
severally, shall indemnify and hold harmful each of Trident and the Selected
Dealers against any losses, claims, damages or liabilities resulting from
reliance under any records of depositors, borrowers and other members of the
Bank delivered to Trident by the Bank or its agents for use during the
Conversion.
(b) Trident agrees that any Selected Dealer Agreements between Trident
and Selected Dealers will provide that Selected Dealers will solicit indications
of interest from their customers to place orders for the purchase of Shares as
of a certain date (the "Order Date") and, upon request by Trident, (i) submit
orders to purchase Shares, for which they have previously received indication1s
of interest from their customers, (ii) mail confirmations of orders to each
subscriber on the business day following the Order Date, (iii) debit accounts of
such subscribers on the third business day from the Order Date ("Debit Date"),
and (iv) forward completed Order Forms together with such funds to the Company
on the next business day following the Debit Date for deposit in an account
established by the Company for each Selected
<PAGE>
Trident Securities, Inc.
Page 17
Dealer.
5. Further Agreements. The Company and the Bank jointly and severally
------------------
covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident reasonably may request. The
Company authorizes Trident to use the Prospectus in connection with the offer
and sale of the Shares.
(b) The Company shall notify Trident immediately upon discovery, and
confirm the notice in writing, if requested, (i) when any post-effective
amendment to the Registration Statement becomes effective or any supplement to
the Prospectus or the Proxy Statement has been filed, (ii) of the issuance by
the Commission, the Administrator, the FDIC or the Federal Reserve of any stop
order relating to the Registration Statement, the Conversion Application, the
Notice, the Holding Company Applications, the Prospectus or the Proxy Statement
or of the initiation or the threat of any proceedings for that purpose, (iii) of
the receipt of any notice with respect to the suspension of the qualification of
the Shares for offering or sale in any jurisdiction, and (iv) of the receipt of
any comments from the Commission, the Administrator, the FDIC or the Federal
Reserve relating to the Registration Statement, the Conversion Application, the
Notice, the Holding Company Applications, the Prospectus or the Proxy Statement.
If the Commission, the Administrator, the FDIC or the Federal Reserve enters a
stop order relating to the Registration Statement, the Conversion Application,
the Notice, the Holding Company Applications, the Prospectus or the Proxy
Statement at any time, the Company and the Bank will make any reasonable effort
to obtain the lifting of such order as soon as possible.
(c) During the time when a prospectus is required to be delivered
under the 1933 Act, the Administrator's Regulations and the FDIC's Regulations,
the Company will comply with all requirements imposed upon it by the 1933 Act,
the 1933 Act Regulations, the Administrator's Regulations and the FDIC's
Regulations, as from time to time in force, so far as necessary to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is used in connection with the offer and sale of the Shares any event
relating to or affecting the Company or the Bank shall occur as a result of
which it is necessary, in the opinion of counsel for Trident, to amend or
supplement the Prospectus in order to make the Prospectus not false or
misleading in light of the circumstances existing at the time it
<PAGE>
Trident Securities, Inc.
Page 18
is delivered to a purchaser of the Shares, the Company forthwith shall prepare
and furnish to Trident a reasonable number of copies of an amendment or
amendments or of a supplement or supplements to the Prospectus (in form and
substance satisfactory to counsel for Trident) which shall amend or supplement
the Prospectus so that, as amended or supplemented, the Prospectus shall not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
existing at the time the Prospectus is delivered to a purchaser of the Shares,
not misleading. The Company will not file or use any amendment or supplement to
the Registration Statement or the Prospectus of which Trident has not first been
furnished a copy or to which Trident reasonably shall object after having been
furnished such copy. For the purposes of this subsection the Company and the
Bank shall furnish such information with respect to themselves as Trident from
time to time reasonably may request.
(d) The Company shall take all reasonably necessary action and furnish
to whomever Trident may direct, such information as may be required to qualify
or register the Shares for offer and sale by the Company under the Blue Sky Laws
of such jurisdictions as Trident and the Company or its counsel may reasonably
agree upon; provided, however, that the Company shall not be obligated to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction. In each jurisdiction where such qualification or registration
shall be effected, the Company, unless Trident agrees that such action is not
necessary or advisable in connection with the distribution of the Shares, shall
file and make such statements or reports as are, or reasonably may be, required
by the laws of such jurisdiction.
(e) Appropriate entries will be made in the financial records of the
Bank to establish a liquidation account for the benefit of account holders
according to the Administrator's Regulations.
(f) The Company will file a registration statement for the Common
Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), prior to completion of the Offerings pursuant to the Plan and
shall request that such registration statement be effective upon or prior to
completion of the Conversion. The Company shall maintain the effectiveness of
such registration for not less than three (3) years following completion of the
Conversion.
(g) For a period of three (3) years from the date of this Agreement,
the Company will furnish to Trident, as soon as
<PAGE>
Trident Securities, Inc.
Page 19
publicly available after the end of each fiscal year, a copy of its annual
report to shareholders for such year; and the Company will furnish to Trident
(i) as soon as publicly available, a copy of each report or definitive proxy
statement of the Company filed with the Commission under the 1934 Act or mailed
to shareholders, and (ii) from time to time, such other public information
concerning the Company as Trident may reasonably request.
(h) The Company shall use the net proceeds from the sale of the Shares
in the manner set forth in the Prospectus under the caption "Use of Proceeds".
(i) The Company shall not deliver the Shares until it has satisfied or
caused to be satisfied each and every condition set forth in Section 7 hereof,
unless such condition is waived in writing by Trident.
(j) The Company and the Bank shall advise Trident, if necessary, as to
the allocation of the Shares in the event of an oversubscription and shall
provide Trident final instructions as to the allocations of the Shares in such
event and such instructions shall be accurate, reliable and complete. Trident
shall be entitled to rely completely and without independent investigation on
such instructions and shall have no liability to any person in respect of its
reliance thereon, including without limitation, no liability to any person for
or related to any denial or grant of a subscription for Shares. The Company
shall indemnify and hold Trident harmless for any liability arising out of such
instructions or any records of account holders, depositors, borrowers and other
members of the Bank delivered to Trident by the Company, the Bank or their
agents for use during the Offerings and the Conversion.
(k) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
ensure compliance with the NASD's "Interpretation Relating to Free-Riding and
Withholding."
(l) The Company will not sell or issue, contract to sell or otherwise
dispose of, for a period of 90 days after the Closing Date, without Trident's
prior written consent, any shares of the Company's common stock other than the
Common Stock.
(m) Upon consummation of the Conversion, the Company will use its best
efforts to list the Common Stock on the Nasdaq SmallCap Market. In the event
that the Common Stock does not qualify for quotation on the SmallCap Market, the
Company will list the Common Stock over-the-counter through the National Daily
Quotation System "Pink Sheets" published by the National Quotation
<PAGE>
Trident Securities, Inc.
Page 20
Bureau, Inc.
(n) The Company will maintain appropriate arrangements for depositing
all funds received from persons mailing subscriptions for or orders to purchase
Common Stock in the Offerings on an interest-bearing basis at the rate described
in the Prospectus until the Closing Date and satisfaction of all conditions
precedent to the release of the Company's obligation to refund payments received
from persons subscribing for or ordering Common Stock in the Offerings in
accordance with the Plan as described in the Prospectus or until refunds of such
funds have been made to the persons entitled thereto in accordance with the Plan
and as described in the Prospectus.
6. Payment of Expenses. Whether or not the Conversion is completed or the
-------------------
sale of the Shares by the Company is consummated, the Company or the Bank shall
pay or reimburse Trident for (a) all filing fees paid or incurred by Trident in
connection with all filings with the NASD; and, (b) in addition, if the
Agreement does not become effective, the Company is unable to sell a minimum of
246,500 Shares (or such lesser number as may be permitted by the Administrator
and FDIC), or the Offerings or Conversion are otherwise terminated, the Company
or the Bank shall reimburse Trident for all allocable expenses incurred by
Trident relating to the offering of the Shares, subject to Section 3 hereof;
provided, however, that the Company and the Bank shall not pay or reimburse
Trident for any of the foregoing expenses accrued after Trident shall have
notified the Company and the Bank of its election to terminate this Agreement
pursuant to Section 11 hereof or after such time as the Company and the Bank
shall have given notice in accordance with Sections 11 and 12 hereof that
Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived by
-----------------------------------
Trident, the obligations of Trident as provided herein shall be subject to the
accuracy of the representations and warranties contained in Section 2 hereof as
of the date hereof and as of the Closing Date, to the accuracy of the statements
of officers and directors of the Company and the Bank made pursuant to the
provisions hereof, to the performance by the Company and the Bank of their
obligations hereunder and to the following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion
of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., special counsel for the
Company and the Bank, dated the Closing Date, addressed to Trident, in form and
substance satisfactory to counsel for Trident and to the effect that:
<PAGE>
Trident Securities, Inc.
Page 21
(i) the Company is incorporated and is validly existing as a
corporation under the laws of the State of North Carolina and the Bank
is duly organized and validly existing as a mutual savings bank with a
corporate existence under the laws of the State of North Carolina, each
with full power and authority to own its property and conduct its
business as described in the Prospectus;
(ii) the Company and the Bank are each duly qualified to do
business and each are in good standing as a foreign corporation in each
jurisdiction where the ownership or leasing of its properties of which
such counsel has Actual Knowledge or the conduct of its business of
which such counsel has Actual Knowledge requires such qualification
unless the failure to be so qualified would not have a Material Adverse
Effect on the Company and the Bank, taken as a whole;
(iii) the Bank is a member of the FHLB-Atlanta and the deposit
accounts of the Bank are insured by the SAIF of the FDIC up to the
applicable limits;
(iv) the Bank has only one subsidiary corporation;
(v) to the Actual Knowledge of such counsel, (a) the Bank has
obtained all licenses, permits and other governmental authorizations
currently required for the conduct of its business except where the
failure to obtain such licenses, permits and governmental authorizations
would not have a Material Adverse Effect on the Bank and the Company,
taken as a whole, (b) all such licenses, permits and other governmental
authorizations are in full force and effect and (c) the Bank is in all
material respects complying therewith;
(vi) the Plan complies with, and, to the Actual Knowledge of such
counsel, the Conversion of the Bank from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered stock savings bank and
the creation of the Company as the holding company of the Bank have been
effected in all material respects in accordance with all applicable
laws, rules, regulations, decisions and orders (with such modifications
as were disclosed to and approved by the Administrator and FDIC, as
evidenced by their approval and conditional notice of intent not to
object and were in such counsel's opinion
<PAGE>
Trident Securities, Inc.
Page 22
appropriate for the transactions described in the Conversion
Application); to such counsel's Actual Knowledge, all of the terms,
conditions, requirements and provisions with respect to the Plan and the
Conversion imposed by the Administrator, the FDIC and the Federal
Reserve, except with respect to filing certain post-Conversion reports,
have been complied with in all material respects by the Company and the
Bank or appropriate waivers have been obtained; and, to the Actual
Knowledge of such counsel, no person has sought to obtain regulatory or
judicial review of the final action of the Administrator in approving
the Plan or the FDIC order of non-objection to the Plan;
(vii) As of the Closing Date, the Company has authorized Common
Stock as set forth in the Registration Statement and the Prospectus; the
Bank has authorized capital stock as set forth in the Conversion
Application and the Prospectus and the description of such capital stock
in the Registration Statement, the Conversion Application and the
Prospectus is accurate and complete in all material respects;
(viii) the issuance and sale of the Shares have been duly and
validly authorized by all necessary corporate action on the part of the
Company and have received requisite regulatory approvals or non-
objection; the Shares, upon receipt of payment and issuance in
accordance with the terms of the Plan and this Agreement, will be
validly issued, fully paid, nonassessable and the purchasers of the
Shares from the Company, upon issuance thereof against payment therefor,
will acquire such Shares free and clear of all claims, encumbrances,
security interests and liens whatsoever created or suffered to be
created by the Company;
(ix) the certificates for the Common Stock are in due and proper
form and comply with applicable requirements of federal and North
Carolina law and the rules and regulations of the Administrator;
(x) the issuance and sale of the capital stock of the Bank to the
Company has been duly authorized by all necessary action of the Bank and
the Company and has received the approval of the Administrator, and such
capital stock, when paid for and issued in accordance with the terms of
the Plan, will be validly issued, fully paid and nonassessable and owned
of record and beneficially by the Company;
(xi) subject to the satisfaction of the post-Conversion conditions
in the approvals of the Conversion Application, the Holding Company
Applications and the Notice, no further approval, authorization, consent
or other order of any public board or body is required in
<PAGE>
Trident Securities, Inc.
Page 23
connection with the execution and delivery of this Agreement, the
issuance of the Shares and consummation of the Conversion except as may
be required under the Blue Sky Laws (as to which no opinion need be
given);
(xii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action, corporate or otherwise, on
the part of each of the Company and the Bank; and this Agreement is a
legal, valid and binding obligation of each of the Company and the Bank,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship or other laws affecting creditors' rights generally and
as may be limited by the exercise of judicial discretion in applying
principles of equity and except to the extent that the provisions of
Sections 8 and 9 hereof may be unenforceable as against public policy or
Section 23A;
(xiii) to the Actual Knowledge of such counsel, except as set forth
in the Prospectus, there are no legal or governmental proceedings
pending or threatened against or involving the assets of the Company or
the Bank required to be disclosed in the Prospectus (provided, however,
that no litigation or governmental proceeding is considered to be
threatened unless the potential litigant or governmental authority has
manifested to the management of the Bank, or to such counsel, a present
intention to initiate such litigation or proceeding), nor are there any
statutes or regulations, and, to the Actual Knowledge of such counsel,
any contracts or other documents required to be described or disclosed
in the Prospectus which are not so described or disclosed; and the
description in the Prospectus of such statutes, regulations, contracts
and other documents therein described are in all material respects
accurate summaries and in all material respects fairly present the
information required to be shown;
(xiv) the statements in the Prospectus under the captions
"Taxation," "Supervision and Regulation," "Dividend Policy," "Anti-
Takeover Provisions Affecting the Holding Company and Home Savings" and
"Description of Capital Stock," insofar as they are, or refer to,
statements of law or legal conclusions thereon (excluding financial data
included therein, as to which an opinion
<PAGE>
Trident Securities, Inc.
Page 24
need not be expressed), have been prepared or reviewed by them and are
correct in all material respects;
(xv) the Conversion Application has been approved by the
Administrator, the FDIC has given its non-objection to the Conversion
Application, and the Prospectus and Proxy Statement have been approved
and authorized for distribution to members of the Bank and others
pursuant to the Plan by the Administrator; the Stock Charter when issued
to the Bank by the Administrator and filed with the North Carolina
Secretary of State's office will be in full force and effect; the
Registration Statement and any post-effective amendment thereto have
been declared effective by the Commission; the Administrator and the
Federal Reserve have issued their orders of approval for the Company to
acquire the Bank; and to such counsel's Actual Knowledge no proceedings
are pending, contemplated or threatened by or before the Commission, the
Administrator or the FDIC seeking to revoke or rescind the orders
declaring the Registration Statement, the Prospectus or the Proxy
Statement effective or, authorizing their use, provided, however, that
no such action or proceeding is considered to be "threatened" unless the
applicable governmental authority has manifested to the management of
the Company or the Bank, or to such counsel, a present intention to
initiate such proceeding;
(xvi) the execution and delivery of this Agreement, the incurring
of the obligations herein set forth and the consummation of the
transactions contemplated hereby shall not conflict with nor result in a
material breach of the certificate of incorporation, charter or bylaws
of the Company or the Bank (in either mutual or stock form), nor to the
Actual Knowledge of such counsel, constitute a material breach of or
default (or an event which, with notice or lapse of time or both, would
constitute a material default) under, or give rise to any right of
termination, cancellation or acceleration contained in, or result in the
creation or imposition of any lien, charge or other encumbrance upon any
of the properties or assets of the Company or the Bank pursuant to any
of the terms, provisions or conditions of any material agreement,
contract, indenture, bond, debenture, note, instrument or obligation to
which the Company or the Bank is a party or by which it or its assets or
properties may be bound or is subject, or any governmental license or
permit (subject to the
<PAGE>
Trident Securities, Inc.
Page 25
satisfaction of any post-Conversion conditions imposed by the
Administrator, the FDIC and/or the Federal Reserve), which in any such
event would have a Material Adverse Effect on the Company and the Bank,
taken as a whole; nor will any such actions violate any material law,
administrative regulation or order, court order, writ, injunction or
decree, which breach, default, encumbrance or violation would have a
Material Adverse Effect on the Company and the Bank, taken as a whole;
(xvii) to the Actual Knowledge of such counsel, there has been no
material breach of the Company's or Bank's certificate of incorporation
or charter or bylaws or a breach or default (or the occurrence of any
event which, with the lapse of time or action, or both, by a third
party, would result in a breach or a default) under any agreement,
contract, indenture, bond, debenture, note, instrument or obligation to
which the Company or the Bank is a party or by which any of them or
their respective assets or properties may be bound, or any governmental
license or permit, or a violation of any law, administrative regulation
or order, court order, writ, injunction or decree which breach or
default would have a Material Adverse Effect on the Company and the
Bank, taken as a whole;
(xviii) the Conversion Application, the Notice, the Holding Company
Applications, the Registration Statement, the Prospectus and the Proxy
Statement (in each case as amended or supplemented, if so amended or
supplemented) comply as to form in all material respects with the
requirements of all applicable laws (including the 1933 Act) and the
rules, regulations, and all written and published decisions and orders
of the Administrator, the FDIC, the Federal Reserve or the Commission,
as the case may be (except as to financial statements, notes to
financial statements, financial tables and other financial and
statistical data, including the appraisal included therein, as to which
no opinion need be expressed); to the Actual Knowledge of such counsel,
all documents and exhibits required to be filed with the Conversion
Application and the Registration Statement (in each case as amended or
supplemented, if so amended or supplemented) have been so filed; the
description in the Conversion Application, the Holding Company
Applications and the Registration Statement of such documents and
exhibits is in all material respects accurate and complete and presents
fairly the information required to
<PAGE>
Trident Securities, Inc.
Page 26
be shown; to the Actual Knowledge of such counsel, there are no
contracts or other documents of a character required to be described
which are not described, and there are no statutes or regulations
applicable to, certificates, permits or other authorizations from
governmental regulatory officials or bodies required to be obtained or
maintained by, or legal or governmental proceedings, past, pending or
threatened, against the Company or the Bank of a character required to
be disclosed in the Conversion Application, the Holding Company
Applications, the Registration Statement or the Prospectus which have
not been so disclosed and properly described therein;
(xix) to the Actual Knowledge of such counsel, neither the Company
nor the Bank is in violation of any directive from the Administrator,
the FDIC or the Federal Reserve to make any change in the method of
conducting their respective businesses; and,
(xx) the Company is not required to be registered as an investment
company under the Investment Company Act of 1940 and will not be
required to be so registered as a result of the consummation of the
Conversion and the receipt and use of the proceeds from the sale of the
Shares, as such use of proceeds is described in the Prospectus under the
caption "Use of Proceeds."
In giving such opinion, such counsel may rely as to all matters of fact
on certificates of officers and directors of the Company and the Bank and
certificates of public officials delivered pursuant hereto.
As used in such counsel's opinion, the phrase "Actual Knowledge" shall mean
the conscious awareness of facts or other information by Edward C. Winslow III,
Randall A. Underwood, Jean C. Brooks and John M. Cross, Jr., who are all the
lawyers employed by such counsel who have had active involvement with the
Conversion, and except to the extent stated in such opinion, such counsel will
not be deemed to have undertaken any independent investigation or inquiry to
determine the existence or absence of any facts.
(b) At the Closing Date, Trident shall receive the letter of Brooks,
Pierce, McLendon, Humphrey & Leonard, L.L.P., special counsel for the Company
and the Bank, addressed to Trident, dated the Closing Date and in form and
substance satisfactory to special counsel for Trident to the effect that, in
connection with
<PAGE>
Trident Securities, Inc.
Page 27
the preparation of the Registration Statement, the Prospectus and the Proxy
Statement, such counsel participated in conferences with directors, officers,
employees and other representatives of the Company and the Bank, representatives
of the independent public accountants for the Company and the Bank and with
representatives of Trident and Trident's special counsel as well as reviewed
various documents and other information deemed relevant and, based on such
conferences and reviews, nothing has come to such counsel's attention that would
lead it to believe that, the Registration Statement, as amended or supplemented,
if amended or supplemented (except as to financial statements, notes to
financial statements, financial tables and other financial and statistical data,
including the appraisal contained therein, with respect to which such counsel
need make no statement), at the time it became effective and at the time any
post-effective amendment thereto became effective, or that the Prospectus, as
amended or supplemented, if amended or supplemented (except as to financial
statements, notes to financial statements, financial tables and other financial
and statistical data, including the appraisal contained therein, with respect to
which such counsel need make no statement), at the time it was approved for
final use by the Administrator and the FDIC, as of the date of such document set
forth thereon and as of the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein in light of the circumstances
under which they were made not misleading (in making this statement counsel may
state that it has not undertaken to verify independently the information set
forth in the Registration Statement or Prospectus, and, therefore, does not
assume any responsibility for the accuracy or completeness thereof).
(c) Counsel for Trident shall have been furnished such documents as
they reasonably may require for the purpose of enabling them to review or pass
upon the matters required by Trident, and for the purpose of evidencing the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained, including, but not limited to, resolutions of
the Boards of Directors of the Company and the Bank regarding the authorization
of this Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material adverse change in the condition
or affairs, financial or otherwise, of the Company or the Bank from that as of
the latest date as of which such condition is set forth in the Prospectus except
as referred to therein; (ii) there shall have been no material transactions
<PAGE>
Trident Securities, Inc.
Page 28
entered into by the Company or the Bank from the latest date as of which the
financial condition of the Company and the Bank is set forth in the Prospectus
other than transactions referred to or contemplated therein and transactions in
the ordinary course of business; (iii) neither the Company nor the Bank shall
have received from the Administrator, the FDIC or the Federal Reserve any
direction (oral or written) to make any material change in the method of
conducting their respective businesses with which they have not complied; (iv)
no action, suit or proceeding, at law or in equity or before or by any federal
or state commission, board or other administrative agency, shall be pending or
threatened against the Company or the Bank or affecting any of their respective
assets wherein an unfavorable decision, ruling or finding would result in a
Material Adverse Effect on the Company and the Bank, taken as a whole; and (v)
the Shares shall have been qualified or registered for offering and sale by the
Company under the Blue Sky Laws of such jurisdictions as Trident and the Company
shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
President and of the principal financial officer of each of the Company and the
Bank, dated the Closing Date, to the effect that: (i) each has carefully
examined the Prospectus and the Proxy Statement and in their opinion, at the
time the Prospectus and the Proxy Statement became authorized for final use,
neither the Prospectus nor the Proxy Statement contained an untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; (ii) since the date the Prospectus or the Proxy Statement
became authorized for final use, no event has occurred which should have been
set forth in an amendment or supplement to the Prospectus or the Proxy Statement
which has not been so set forth, including specifically, but without limitation,
any event or change that has or may have a Material Adverse Effect on the
Company or the Bank and, the conditions set forth in clauses (ii) through (iv)
inclusive of subsection (d) of this Section 7 have been satisfied; (iii) no
order has been issued by the Administrator, the FDIC or the Commission to
suspend the Offerings or the effectiveness or the authorization for final use of
the Prospectus and the Proxy Statement and, to the best knowledge of such
officers, no action for such purposes has been instituted or threatened by the
Administrator, the FDIC or the Commission; (iv) to the best knowledge of such
officers, no person has sought to obtain review of the final action of the
Administrator or the FDIC approving the Plan; and, (v) all of the
representations and warranties contained in Section 2 of this Agreement are true
and correct, with the same force and effect as though expressly made on the
Closing Date.
<PAGE>
Trident Securities, Inc.
Page 29
(f) At the Closing Date, Trident shall receive, among other documents,
(i) a copy of the letter from the Administrator authorizing the use of the
Prospectus, the Proxy Statement and related materials, (ii) a copy of the order
of the Commission declaring the Registration Statement effective; (iii) a copy
of a letter from the Administrator evidencing the corporate existence of the
Bank; (iv) a copy of a letter from the North Carolina Secretary of State
evidencing the corporate existence of the Company; (v) a copy of the Company's
certificate of incorporation certified by the North Carolina Secretary of
State's office; (vi) if available, a copy of the letter from the Administrator
approving the Bank's Stock Charter; (vii) a copy of the order of the Federal
Reserve approving the Holding Company Application; and (viii) a copy of the
order of the FDIC granting its non-objection to the Conversion.
(g) As soon as available after the Closing Date, Trident shall receive
a certified copy of the Bank's Stock Charter executed by the Administrator.
(h) Concurrently with the execution of this Agreement, Trident shall
have received a letter from Dixon, Odom & Co., L.L.P., independent certified
public accountants, dated the date hereof and addressed to Trident: (i)
confirming that Dixon, Odom & Co., L.L.P. is a firm of independent public
accountants within the meaning of the 1933 Act and the 1933 Act Regulations and
stating in effect that in Dixon, Odom & Co.'s opinion the financial statements
of the Bank as are included in the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act Regulations
and generally accepted accounting principles; (ii) stating in effect that, on
the basis of certain agreed upon procedures (but not an audit examination in
accordance with generally accepted auditing standards) consisting of a reading
of the latest available unaudited interim financial statements of the Bank
prepared by the Bank, a reading of the minutes of the meetings of the Board of
Directors of the Bank, meetings of members of the Bank and consultations with
officers of the Bank responsible for financial and accounting matters, nothing
came to their attention which caused them to believe that, except as set forth
in such letter: (A) such unaudited financial statements are not in conformity
with generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Prospectus; or (B) during the period from the date of the latest unaudited
financial statements included in the Prospectus to a specified date not more
than three business days prior to the date hereof, there was any material
increase in borrowings, defined as advances from the FHLB-Atlanta, securities
sold under agreements to repurchase and any other form of debt other than
deposits of the Bank (increases in
<PAGE>
Trident Securities, Inc.
Page 30
borrowings will not be deemed to be material if such increase in total
borrowings outstanding does not exceed $1,000,000); (C) there was any decrease
in retained earnings of the Bank at the date of such letter as compared with
amounts shown in the latest unaudited statement of condition included in the
Prospectus; or (D) there was any decrease in net income or net interest income
of the Bank for the number of full months commencing immediately after the
period covered by the latest unaudited income statement included in the
Prospectus, and ended on the latest month end prior to the date of the
Prospectus or of such letter as compared to the corresponding period in the
preceding year; and (iii) stating that, in addition to the audit examination of
the Bank referred to in its opinion included in the Prospectus and the
performance of the procedures referred to in clause (ii) of this subsection (h),
they have compared with the general accounting records of the Bank, which are
subject to the internal controls of the Bank, accounting system and other data
prepared by the Bank, directly from such accounting records, to the extent
specified in such letter, such amounts and/or percentages set forth in the
Prospectus as Trident may reasonably request; and they have found such amounts
and percentages to be in agreement therewith (subject to rounding).
(i) At the Closing Date, Trident shall receive a letter in form and
substance satisfactory to counsel for Trident from Dixon, Odom & Co., L.L.P.,
independent certified public accountants, dated the Closing Date and addressed
to Trident, confirming the statements made by them in the letter delivered by
them pursuant to the preceding subsection as of a specified date not more than
five (5) business days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel.
Any certificates signed by an officer or director of the Company or the Bank and
delivered to Trident or to counsel for Trident shall be deemed a representation
and warranty by the Company or the Bank to Trident as to the statements made
therein. If any condition to Trident's obligations hereunder to be fulfilled
prior to or at the Closing Date is not so fulfilled, Trident may terminate this
Agreement or, if Trident so elects, may waive any such conditions which have not
been fulfilled or may extend the time of their fulfillment. If Trident
terminates this Agreement as aforesaid, the Company or the Bank shall reimburse
Trident for its allocable expenses as provided in Section 3 hereof.
8. Indemnification.
---------------
(a) The Company and the Bank jointly and severally agree
<PAGE>
Trident Securities, Inc.
Page 31
to indemnify and hold harmless Trident, its officers, directors and employees
and each person, if any, who controls Trident within the meaning of Section 15
of the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss,
liability, claim, damage and expense whatsoever that such indemnified person(s)
shall suffer and shall further promptly reimburse such persons for any legal or
other expenses reasonably incurred by each or any of them in investigating,
preparing to defend or defending against any such action, proceeding or claim
(whether commenced or threatened) arising out of any misrepresentation by the
Company or the Bank in this Agreement or any breach of warranty by the Company
or the Bank with respect to this Agreement or arising out of or based upon any
untrue or alleged untrue statement of a material fact or the omission or alleged
omission of a material fact required to be stated or necessary to make not
misleading any statements contained in (i) the Registration Statement, the
Prospectus or the Proxy Statement (as from time to time amended and
supplemented) or (ii) any application (including the Conversion Application and
the Holding Company Applications) or other document or communication (in this
Section 8 collectively called "Application") executed by or on behalf of the
Company or the Bank or based upon written information furnished by or on behalf
of the Company or the Bank to effect the Conversion or qualify the Shares under
the Blue Sky Laws thereof or filed with the Administrator, the FDIC, the Federal
Reserve or the Commission unless such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company or the
Bank with respect to Trident by or on behalf of Trident expressly for use in the
Prospectus, the Proxy Statement or any amendment or supplement thereof or in any
Application, or (iii) any unwritten statement made with the Company's consent to
a purchaser of the Shares by any director or officer or any person employed by
or associated with the Company or the Bank other than Trident, its officers,
directors, employees or agents. This indemnity shall be in addition to any
liability the Company or the Bank may have to Trident otherwise.
(b) The Company and the Bank shall indemnify and hold Trident harmless
from any liability whatsoever arising out of the Company's or the Bank's
instructions with respect to allocation of Shares in the event of an
oversubscription as described in Section 5 hereof or any records of account
holders, depositors, borrowers and other members of the Bank delivered to
Trident by the Bank or its agents for use in the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company and the
Bank and each person, if any, who control the Company and the Bank within the
meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, to the
same extent as the
<PAGE>
Trident Securities, Inc.
Page 32
foregoing indemnity from the Company and the Bank to Trident, but only with
respect to statements or omissions, if any, made in the Prospectus, the Proxy
Statement or any amendment or supplement thereof or in any Application in
reliance upon, and in conformity with, written information furnished to the
Company or the Bank with respect to Trident by or on behalf of Trident expressly
for use in the Prospectus, the Proxy Statement or any amendment or supplement
thereof or in any Application.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party of the commencement thereof, but
the omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party or parties to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party or parties shall not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified party, the indemnified party may
retain additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such suit
include such indemnifying party and the indemnified party, and such indemnified
party shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be available to
the indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the indemnifying
party's obligation to bear the fees and expenses of such counsel. An
indemnifying party against whom indemnity may be sought shall not be liable to
indemnify an indemnified party under this Section 8 if any settlement of any
such action is effective without such indemnifying party's consent.
9. Contribution. In order to provide for just and equitable
------------
<PAGE>
Trident Securities, Inc.
Page 33
contribution in circumstances in which the indemnity agreement provided for in
Section 8 above is for any reason held to be unavailable to the Company, the
Bank or Trident other than in accordance with its terms, the Company or the Bank
and Trident shall contribute to the aggregate losses, liabilities, claims,
damages, and expenses of the nature contemplated by said indemnity agreement
incurred by the Company or the Bank and Trident (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Bank on the one hand and Trident on the other from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Bank on the one hand and Trident on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Bank on
the one hand and Trident on the other shall be deemed to be in the same
proportions as the total proceeds from the Conversion (before deducting
expenses) received by the Company and the Bank bear to the total fees received
by Trident under this Agreement. The relative fault of the Company and the Bank
on the one hand and Trident on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Bank or by Trident and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Bank and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which fees owed Trident
pursuant to this Agreement exceed the amount of any damages which Trident has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission for which Trident would be provided
<PAGE>
Trident Securities, Inc.
Page 34
indemnification under the Section 8 hereof. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation.
10. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company, the Bank and Trident and the
representations and warranties of the Company, the Bank and Trident set forth in
or made pursuant to this Agreement shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company and the Bank or any
controlling person referred to in Section 8 hereof, and shall survive any
termination or consummation of this Agreement and/or the issuance of the Shares,
and any legal representative of Trident, the Company, the Bank and any such
controlling persons shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
11. Termination. The Company, the Bank or Trident may terminate this
-----------
Agreement by giving the notice indicated below in this Section 11 at any time
after this Agreement becomes effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make it, in
Trident's opinion, impracticable to proceed with the Offerings; or if trading on
the New York Stock Exchange shall have been suspended; or if the United States
shall have become involved in a war or major hostilities; or if a general
banking moratorium has been declared by a state or federal authority; or if a
moratorium in foreign exchange trading by major international banks or persons
has been declared; or if there shall have been a material adverse change in the
capitalization, condition or business of the Company or the Bank; or if the Bank
shall have sustained a material or, in the reasonable opinion of Trident,
significant loss by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act, whether or not said loss shall have
been insured.
(b) The Company and the Bank may terminate this Agreement with respect
to Trident upon a material breach of this Agreement by Trident.
(c) Trident may terminate this Agreement with respect to the Company
and the Bank upon a material breach of this Agreement by the Company or the
Bank.
<PAGE>
Trident Securities, Inc.
Page 35
(d) If any party elects to terminate this Agreement as provided in
this Section 11, such party shall notify the other parties hereto promptly by
telephone, telegram or telecopy, confirmed by letter sent as provided in Section
12.
(e) If this Agreement is terminated for any of the reasons set forth
in subsection (a) above, to fulfill its obligations pursuant to Sections 3(b),
3(c), 3(d), 6, 8(a) and 9 of this Agreement and upon demand, the Company or the
Bank shall pay Trident the full amount owed to Trident under such Sections.
(f) The Bank may terminate the Conversion in accordance with the terms
of the Plan. Such termination shall be without liability to any party, except
that the Company or the Bank shall be required to fulfill its obligations
pursuant to Sections 3(b), 3(c), 3(d), 6, 8(a) and 9 of this Agreement.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. R. Lee
Burrows, Jr. (with a copy to Thacher Proffitt & Wood, 1500 K Street, N.W., Suite
200, Washington, D.C. 20005, Attention: Richard A. Schaberg, Esq.), or if sent
to the Company or the Bank shall be mailed, delivered or telegraphed and
confirmed to the Company or the Bank, 22 Winston Street, Thomasville, North
Carolina 27361-0989, Attention: James G. Hudson, Jr., President (with a copy to
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., 230 North Elm Street, 2000
Renaissance Plaza, Post Office Box 26000, Greensboro, North Carolina 27420,
Attention: Randall A. Underwood, Esq.).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company and the Bank and the controlling and
other persons referred to in Section 8 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Severability. Any provision of this Agreement found to be invalid,
------------
unenforceable, or otherwise limited by law or regulation shall not effect the
validity or enforceability of the remaining terms of this Agreement.
15. Construction. Unless governed by preemptive federal law, this
------------
Agreement shall be governed by and construed in accordance with the substantive
laws of North Carolina.
<PAGE>
Trident Securities, Inc.
Page 36
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
If the foregoing correctly sets forth the understanding between you and the
Company and the Bank, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.
Yours very truly,
CENTURY BANCORP, INC.
By:
-------------------------------
James G. Hudson, Jr.
President
HOME SAVINGS, SSB
By:
-------------------------------
James G. Hudson, Jr.
President
Agreed to and accepted this _____ day
of ___________, 1996.
TRIDENT SECURITIES, INC.
By:
---------------------------------------
<PAGE>
Exhibit 2.1
AMENDED AND RESTATED
PLAN OF HOLDING COMPANY CONVERSION
OF
HOME SAVINGS, SSB
Thomasville, North Carolina
From Mutual to Stock Organization
I. General
On May 7, 1996, the Board of Directors of Home Savings, SSB, Thomasville,
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 Century Bancorp, Inc., a
savings bank holding company organized under North Carolina law. On July 18,
1996 the Board of Directors of the Savings Bank amended such Plan of Holding
Company Conversion by adopting an Amended and Restated Plan of Holding Company
Conversion.
This Amended and Restated Plan of Holding Company Conversion adopted by the
Board of Directors of the Savings Bank on October 2, 1996 (the "Plan") amends,
supercedes and replaces the Amended and Restated Plan of Holding Company
Conversion previously adopted on July 18, 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.
<PAGE>
B. Actual Purchase Price: The actual price per share, determined as
provided in Article VI hereof, at which the shares of common stock of the
Holding Company will be issued and sold by the Holding Company to subscribers.
C. Administrator: Administrator, Savings Institutions Division, North
Carolina Department of Commerce.
D. Affiliate: The term "affiliate" of, or a person "affiliated with," a
specified person, means a person that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
E. Aggregate Valuation Range: The range of value for the aggregate number
of shares of common stock of the Holding Company to be offered in the
Conversion, which range is established pursuant to Article VI hereof and which
shall be from a low of 15 percent below the estimated aggregate pro forma market
value of the Savings Bank and the Holding Company to a high of 15 percent above
the estimated aggregate pro forma market value of the Savings Bank and the
Holding Company, as such range may be amended from time to time by an
independent appraiser.
F. Amended Charter: The Savings Bank's North Carolina stock savings bank
charter in the form permitted by the Administrator.
G. Applications: The Savings Bank's Application to Convert a Mutual
Savings Bank to a Stock Owned Savings Bank and the Holding Company's Acquisition
Application, including amendments thereto, as filed with the Administrator
pursuant to the Regulations.
H. Associate: The term "Associate," when used to indicate a relationship
with any Person, means (i) any corporation or organization (other than the
Savings Bank, the Holding Company or any of their majority-owned subsidiaries)
of which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (ii)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, except for a tax-qualified employee stock benefit plan or a charitable
trust which is exempt from federal taxation pursuant to Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, and (iii) any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person or who is a director or officer of the Savings Bank, the Holding Company,
or any of their parents or subsidiaries.
I. Charter: The North Carolina mutual savings bank charter of Home
Savings, 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).
2
<PAGE>
K. Conversion: The conversion of the Savings Bank to a North Carolina-
chartered stock savings bank, the deposit accounts of which will be insured by
the SAIF of the FDIC, pursuant to, and in accordance with, the Regulations, the
Plan and the Applications.
L. Conversion Stock: The shares of common stock of the Holding Company to
be issued and sold in the Conversion.
M. Converted Savings Bank: Home Savings, 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
Century Bancorp, 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: Davidson County 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)
3
<PAGE>
furnishes bona fide competitive bid and offer quotations on request; and (iii)
is ready, willing, and able to effect transactions in reasonable quantities at
its quoted prices with other brokers or dealers.
Z. Members: All persons or entities who qualify as members of the Savings
Bank pursuant to its Charter and bylaws prior to the Conversion, including
beneficial owners of Retirement Accounts at the Savings Bank.
AA. Notice: The Savings Bank's Notice of Intent to Convert to Stock Form,
including amendments thereto, as filed with the FDIC pursuant to 12 C.F.R. Part
303.
BB. Order Forms: The order forms to be used to subscribe for Conversion
Stock in the Subscription and Community Offerings pursuant to the Plan.
CC. Other Members: The following as of the Voting Record Date: (1)
holders of Savings Accounts at the Savings Bank (other than Eligible Account
Holders and Supplemental Eligible Account Holders), with the beneficial owners
of Retirement Accounts being deemed the holders of such accounts, and (2) those
Persons or entities (other than Eligible Account Holders and Supplemental
Eligible Account Holders) who are borrowers from the Savings Bank whose
borrowings are still in existence as of the Voting Record Date.
DD. Person: An individual, a corporation, a partnership, an association,
a joint stock company, a trust, an unincorporated organization, or a government
or political subdivision thereof.
EE. Plan: This Plan of Holding Company Conversion and any duly adopted
amendments thereto.
FF. Prospectus: The document containing information about and a
description of the Savings Bank, the Holding Company, this Plan and the process
of issuing the Conversion Stock, which may be combined with proxy statements for
the Members and distributed in the Subscription Offering and which may be
distributed to the general public in the Community Offering and Syndicated
Community Offering.
GG. Proxy Statement: The written information distributed by the Savings
Bank to the Members in its solicitation of their votes in connection with
consideration of the Plan at the Special Meeting, which written information may
be in summary form.
HH. Qualifying Deposit: A balance of $50 or more in any Savings Account
in the Savings Bank as of the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable. Each deposit account which is deemed to
be a separate account for purposes of FDIC insurance shall be deemed to be a
separate account for purposes of determining whether a Qualifying Deposit
exists.
II. Regulations: The Rules and Regulations of the Administrator set forth
in North Carolina Administrative Code Title 4, Chapter 16, Subchapter 16G.
JJ. Retirement Accounts: Individual retirement accounts, Keogh savings
accounts or similar retirement accounts.
4
<PAGE>
KK. SAIF: The Savings Association Insurance Fund of the FDIC.
LL. Savings Accounts: Withdrawable deposits, certificates or other
savings and deposit accounts of the Savings Bank, including money market deposit
accounts and negotiable order of withdrawal accounts, held by Members. Each such
deposit, certificate or other deposit account which is deemed to be a separate
account for FDIC insurance shall be deemed to be a separate Savings Account for
purposes of the Plan.
MM. Savings Bank: Home Savings, SSB, Thomasville, North Carolina, a North
Carolina-chartered mutual savings bank.
NN. SEC: The Securities and Exchange Commission.
OO. Special Meeting: The Special Meeting of Members called for the
purpose of considering approval of the Plan.
PP. Subscription Offering: The offering of shares of Conversion Stock to
Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders, Other
Members, and Directors, officers and employees of the Savings Bank pursuant to
the Plan.
QQ. Subscription Rights: Non-transferable, non-negotiable, personal
rights distributed, without payment, to Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders, Other Members, and Directors, officers
and employees of the Savings Bank to subscribe for shares of Conversion Stock in
the Subscription Offering pursuant to the Plan.
RR. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Applications by the Administrator, if the
establishment of such date is required by the Regulations.
SS. Supplemental Eligible Account Holder: The holder of a Qualifying
Deposit (other than an Executive Officer or Director of the Savings Bank or any
Associate of such Person), on the Supplemental Eligibility Record Date, with the
beneficial owner of a Retirement Account being deemed the holder thereof.
TT. Syndicated Community Offering: The offering for sale of shares of
Conversion Stock to the general public through a syndicate of registered broker-
dealers to be formed and managed by the sales agent in the Subscription Offering
and Community Offering.
UU. Voting Record Date: The date fixed by the Board of Directors of the
Savings Bank for determining Members entitled to vote at the Special Meeting.
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
5
<PAGE>
objection shall have expired without objection by the FDIC. The following steps
must be taken prior to such regulatory approvals:
A. The Board of Directors of the Savings Bank shall adopt and approve the
Plan by the affirmative vote of not less than two-thirds of its members.
B. The Savings Bank shall notify its members of the adoption of the Plan
by publishing a statement in a newspaper having a general circulation in the
communities in which the Savings Bank maintains offices or by mailing a letter
to each of its Members.
C. Copies of the Plan shall be made available for inspection at each
office of the Savings Bank.
D. The Holding Company shall submit an application to the Federal Reserve
Board pursuant to Federal law for permission to become a savings bank holding
company in order to enable it to acquire 100% of the capital stock of the
Converted Savings Bank, and such application shall be approved and any required
waiting period shall have expired.
E. The Savings Bank shall submit the requisite number of copies of the
Applications to the Administrator and the requisite number of copies of the
Notice to the FDIC. Upon receipt of advice from the Administrator that the
Applications have been received, are properly executed and not materially
incomplete, the Savings Bank shall publish a "Notice of Filing of an Application
for Holding Company Conversion" in a newspaper of general circulation in each
community in which the Savings Bank maintains an office. The Savings Bank also
shall prominently display a copy of such notice in each of its offices.
F. The Savings Bank shall obtain an opinion of counsel or tax advisor or a
favorable ruling from the Internal Revenue Service to the effect that the
Conversion of the Savings Bank from a North Carolina-chartered mutual savings
bank to a North Carolina-chartered capital stock savings bank, the sale of the
Conversion Stock to subscribers in the Subscription, Community and Syndicated
Community Offerings and the issuance of the shares of common stock of the
Converted Savings Bank to the Holding Company, all in accordance with the terms
of the Plan, should not result in any gain or loss for federal or North Carolina
income tax purposes, to the Savings Bank, the Converted Savings Bank, the
Holding Company or the Members of the Savings Bank. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
G. The Holding Company shall file a registration statement with the SEC
with respect to the Conversion Stock to be offered pursuant to the Plan and such
registration statement shall be declared effective.
IV. Meeting of Members
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
6
<PAGE>
the purpose of voting on approval of the Plan. Promptly after receipt of
Administrator approval and at least 20 days, but not more than 45 days, prior to
the Special Meeting, the Savings Bank will distribute proxy solicitation
materials to all Members as of the Voting Record Date. The proxy materials will
include the Proxy Statement and the Prospectus and other documents authorized
for use by the regulatory authorities and may also include a copy of the Plan,
the Amended Charter and other materials as provided in Article VII hereof.
At the Special Meeting, an affirmative vote of not less than a majority of
the total votes entitled to be cast by the Savings Bank's Members will be
required for approval of the Plan. Voting may be in person or by proxy. The
Administrator shall be promptly notified of the results of the vote of the
Members at the Special Meeting.
V. Procedure
The Conversion Stock shall be offered for sale in the Subscription Offering
to Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders,
Other Members, and Directors, officers and employees of the Savings Bank. The
Subscription Offering may commence concurrently with or during the solicitation
of proxies for the Special Meeting. The Community Offering may commence at any
time following commencement of the Subscription Offering. The Syndicated
Community Offering, if any, may commence concurrently with or during the
Community Offering or as promptly thereafter as is practicable. The
Subscription Offering may be closed before the Special Meeting, provided that
the offer and sale of the Conversion Stock shall be conditioned upon approval of
the Plan by the Members at the Special Meeting.
The period for the Subscription Offering shall not be less than 20 days nor
more than 45 days, unless extended by the Savings Bank and the Holding Company.
Any unsubscribed shares of Conversion Stock are to be offered for sale to the
general public in the Community Offering with priority being given to natural
persons and trusts of natural persons residing in the Local Community, including
Retirement Accounts established for the benefit of natural persons who reside in
such area. The Community Offering may commence, subject to the availability of
shares, at any time following commencement of the Subscription Offering. Any
shares of Conversion Stock offered but not subscribed for in the Subscription
and Community Offerings may, in the discretion of the Savings Bank and the
Holding Company, be offered for sale in the Syndicated Community Offering.
Completion of the sale of all shares of Conversion Stock not sold in the
Subscription Offering shall occur within 45 days after termination of the
Subscription Offering, subject to extension of such 45-day period by the Savings
Bank and the Holding Company with the approval of the Administrator. The Boards
of Directors of the Savings Bank and the Holding Company may seek one or more
extensions of such 45-day period if necessary to complete the sale of all shares
of Conversion Stock. In connection with any such extension, subscribers shall be
permitted to increase, decrease or rescind their subscriptions to the extent
required by the Administrator in approving the extensions. As provided in
Article XIII hereof, completion of the sale of all shares of Conversion Stock
must occur in any event within 24 months after the date of the Special Meeting.
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. In
the event of an oversubscription for the Conversion Stock among Eligible Account
Holders, shares shall be allocated among Eligible Account Holders as follows.
The Conversion Stock shall be allocated among subscribing Eligible Account
Holders so as to permit each such Eligible Account Holder, to the extent
possible, to purchase the lesser of (a) the number of shares for which such
Eligible Account Holder subscribed, or (b) 100 shares. Any shares remaining
after that allocation shall be allocated among subscribing Eligible Account
Holders whose subscriptions remain unsatisfied in the proportion that the amount
of Qualifying Deposits of each such Eligible Account Holder bears to the total
amount of Qualifying Deposits of all Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds the amount
subscribed for by any one or more Eligible Account Holders, the excess shall be
reallocated (one or more times as necessary) among those Eligible Account
Holders whose subscriptions are still not fully satisfied on the same principle
described above until all available shares have been allocated or all
subscriptions satisfied. All computations shall be rounded down to the nearest
whole share.
2. Category No. 2: ESOP
The ESOP shall receive, without payment, Subscription Rights to purchase a
number of shares of Conversion Stock equal to eight percent (8%) of the total
number of shares of Conversion Stock offered and sold in the Conversion.
Subscription Rights received pursuant to this Category shall be subordinated to
all Subscription Rights received pursuant to Category No. 1 above. In the event
there is an oversubscription of shares of Conversion Stock and, as a result, the
ESOP is unable to purchase in the Conversion eight percent (8%) of the total
number of shares offered and sold in the Conversion, then the Board of Directors
of the Holding Company intends to, and shall be authorized to, approve the
purchase by the ESOP in the open market after the Conversion, of such shares as
are necessary for the ESOP to purchase a number of shares equal to eight percent
(8%) of the total number of shares of Conversion Stock issued in the Conversion.
Any purchases made by the ESOP may be purchased with funds borrowed by the ESOP
from the Holding Company.
3. Category No. 3: Supplemental Eligible Account Holders
In the event that the Eligibility Record Date is more than 15 months prior
to the date of the latest amendment of the Applications filed prior to
Administrator approval, then, and only in that event, each Supplemental Eligible
Account Holder of the Savings Bank shall receive, without payment, Subscription
Rights to purchase an amount of Conversion Stock equal to the maximum purchase
limitation set forth in Section D.1 of this Article. Subscription Rights
received pursuant to this Category shall be subordinated to all Subscription
Rights received pursuant to Category Nos. 1 and 2. Any Subscription Rights
received by an Eligible Account Holder in accordance with Category No. 1 shall
reduce, to the extent thereof, the Subscription Rights to be distributed to such
account holder pursuant to this Category.
In the event of an oversubscription for the Conversion Stock, shares shall
be allocated among the Supplemental Eligible Account Holders as follows. The
Conversion Stock shall be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase the lesser of (including the number of
9
<PAGE>
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.
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.
10
<PAGE>
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.
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
11
<PAGE>
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 (or Persons exercising Subscription Rights through a single account),
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.5 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. Notwithstanding anything in Section D.1 of this Article to the
contrary, no Person, or group of Persons acting in concert, together with all
Associates thereof, shall purchase shares of Common Stock having an aggregate
purchase price of more than $350,000 (which limit may be increased or decreased
by the Board of Directors of the Savings Bank in accordance with Section D.5 of
this Article).
3. 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.
4. 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.
5. 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 purchase limitations set forth in Sections D.1 and D.2 of this Article
to an amount not greater than five percent (5%) of the aggregate purchase price
of shares of Conversion Stock offered and sold in the Conversion or (ii) reduce
such maximum purchase limitations to an amount not less than one percent (1%) of
the aggregate purchase price
12
<PAGE>
of shares of Conversion Stock offered and sold in the Conversion, each without
further approval of the Members.
6. 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.
7. 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
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
13
<PAGE>
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 properly completed and executed Order Form with
full payment for all shares subscribed for within
14
<PAGE>
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.
The Savings Bank reserves the right to make an independent investigation of
any facts or circumstances brought to its attention that indicate or tend to
indicate that one or more persons acting independently or as a group acting in
concert may be attempting to violate or circumvent the regulatory prohibition on
transferability of Subscription Rights. The nature and extent of such
investigation will be at the Savings Bank's sole discretion and the Savings Bank
may require a holder of Subscription Rights to provide certified affidavits and
other documentation to satisfy the Savings Bank that its Plan of Conversion and
North Carolina and federal conversion regulations regarding nontransferability
are not being subverted by actions of holders of Subscription Rights. In extreme
cases the Savings Bank reserves the right to seek legal advice from the General
Counsel for the Administrator as to compliance with all regulations governing
the Conversion, including the nontransferability of Subscription Rights.
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
15
<PAGE>
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
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
16
<PAGE>
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.
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
Home Savings, 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.
17
<PAGE>
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.
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.
18
<PAGE>
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 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
19
<PAGE>
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 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.
20
<PAGE>
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.
21
<PAGE>
ANNEX I
Second Amended and Restated Certificate of Incorporation
of
Home Savings, Inc., SSB
ARTICLE I
The name of the corporation is Home Savings, Inc., SSB (the "Savings
Bank").
ARTICLE II
The principal office of the Savings Bank shall be located at 22 Winston
Street, Thomasville, Davidson County, North Carolina. The street address of the
registered office of the Savings Bank is 22 Winston Street, Thomasville, North
Carolina, the mailing address of the registered office of the Savings Bank is
P.O. Box 989, Thomasville, North Carolina 27361-0989, and the name of the
registered agent at the address is James G. Hudson, Jr.
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.
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.
HOME SAVINGS, INC., SSB
ATTEST:
By: ____________________________________
By:______________________________ James G. Hudson, Jr., President
______________ Secretary
STATE OF NORTH CAROLINA
COUNTY OF _________________
This is to certify that on this ________ day of __________________, 1996,
before me, a Notary Public, personally appeared James G. Hudson, Jr. 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 ____________________,
1996.
______________________________________________
Notary Public
(OFFICIAL SEAL)
My Commission Expires: _______________________
3
<PAGE>
ANNEX II
BYLAWS
OF
HOME SAVINGS, INC., SSB
ARTICLE I.
OFFICES
-------
Section 1. Principal Office. The principal office of the Savings Bank
--------- ----------------
shall be located at 22 Winston Street, Thomasville, North Carolina 27360.
Section 2. Registered Office. The registered office of the Savings Bank
--------- -----------------
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
ARTICLE II.
MEETING OF SHAREHOLDERS
-----------------------
Section 1. Place of Meetings. All meetings of shareholders shall be held
--------- -----------------
at the principal office of the Savings Bank, or at such other place, either
within or without the State of North Carolina, as shall be designated in the
notice of the meeting or agreed upon by a majority of the shareholders entitled
to vote thereat.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
--------- ---------------
held during the first five calendar months following the end of the Savings
Bank's fiscal year, or any day (except Saturday, Sunday or a legal holiday)
during that period as shall be determined by the Board of Directors, for the
purpose of electing directors of the Savings Bank, receiving annual reports of
officers, and transacting such other business as may be properly brought before
the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
--------- -------------------------
held on the date designated by these Bylaws, a substitute annual meeting may be
called in accordance with the provisions of Section 4 of this Article II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
Section 4. Special Meetings. Special meetings of the shareholders may be
--------- ----------------
called at any time by the President, or a majority of the Board of Directors by
giving notice as hereinafter provided, and, unless the Savings Bank shall at
such time have a class of shares registered under
<PAGE>
Section 12 of the Securities Exchange Act of 1934, as amended, shall be called
by any of the foregoing pursuant to the written request of the holders of not
less than one-tenth of all votes entitled to be cast on any issue proposed to be
considered at the meeting.
Section 5. Notice of Meetings. Written or printed notice stating the
--------- ------------------
time, place and date of the meeting shall be delivered not less than ten (10)
nor more than fifty (50) days before the date thereof, either in person or by
mail, by or at the direction of the Board of Directors, the President or the
Secretary to each shareholder of record entitled to vote at such meeting unless
applicable law or the Saving Bank's articles of incorporation require that such
notice shall be given to all shareholders with respect to such meeting. If
mailed, such notice shall be deemed to be effective when deposited in the United
States mail, correctly addressed to the shareholder at the shareholder's address
as it appears on the current record of shareholders of the Savings Bank, with
postage thereon prepaid.
In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
such a statement expressly is required by the provisions of the North Carolina
Business Corporation Act. In the case of a special meeting, the notice of
meeting specifically shall state the purpose or purposes for which the meeting
is called.
If any meeting of shareholders is adjourned to a different date, time or
place, notice need not be given of the new date, time or place if the new date,
time or place is announced at the meeting before adjournment and if a new record
date is not fixed for the adjourned meeting. If a new record date for the
adjourned meeting is or must be fixed pursuant to North Carolina law, notice of
the adjourned meeting must be given as provided in this Section to persons who
are shareholders as of the new record date.
Section 6. Waiver of Notice. Any shareholder may waive notice of any
--------- ----------------
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder, and delivered to the Savings Bank for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance, in person or
by proxy, at a meeting (a) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder or the shareholder's proxy at the
beginning of the meeting objects to holding the meeting or transacting business
thereat, and (b) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder or his proxy objects to considering the matter
before it is voted upon.
Section 7. Voting List. Before each meeting of shareholders, an
--------- -----------
alphabetical list of the shareholders entitled to notice of such meeting shall
be prepared by the Secretary of the Savings Bank. The list shall be arranged by
voting group and within each voting group by class or series of shares and show
the address of and number of shares held by each shareholder. The list shall be
kept on file at the principal office of the Savings Bank for the period
beginning two (2) business days after notice of the meeting is given and
continuing through the meeting, and shall be available for inspection by any
shareholder or the agent or attorney of any shareholder at any time prior to the
meeting during regular business hours and at any time during the meeting or any
adjournment thereof.
2
<PAGE>
Section 8. Voting Group. All shares of one or more classes or series
--------- ------------
that under the Savings Bank's articles of incorporation or the North Carolina
Business Corporation Act are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders constitute a voting group.
All shares entitled by the Savings Bank's articles of incorporation or the North
Carolina Business Corporation Act to vote generally on a matter are for that
purpose a single voting group. Classes or series of shares shall not be
entitled to vote separately by voting group unless expressly authorized by the
Savings Bank's articles of incorporation or specifically required by law.
Section 9. Quorum. Shares entitled to vote generally as a single
--------- ------
voting group or as a separate voting group may take action on a matter at the
meeting of shareholders only if a quorum of those shares is present at the
meeting. A majority of the votes entitled to be cast on the matter by the voting
group shall constitute a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by a vote of a majority of the
votes cast on the motion to adjourn; and at any adjourned meeting any business
may be transacted which might have been transacted at the original meeting if a
quorum exists with respect to the matter proposed.
Section 10. Proxies. Shares may be voted either in person or by one or
---------- -------
more agents authorized by a written proxy executed by the shareholder or by the
shareholder's duly authorized attorney-in-fact. A proxy shall not designate as
a holder any corporation or partnership including any person acting on behalf of
any corporation or partnership, or any person other than a living natural
person. However, a proxy may designate the holder of a specified title or
office, if a natural person, or a committee composed solely of natural persons,
including a committee composed of the Board of Directors of the Savings Bank.
Section 11. Voting of Shares. Subject to the provisions of the Savings
---------- ----------------
Bank's articles of incorporation, each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
Except in the election of directors as provided in Section 3 of Article
III, if a quorum exists, action on a matter by a voting group at a meeting of
shareholders is approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action, unless a greater vote is
required by law or the Savings Bank's articles of incorporation or these Bylaws.
Section 12. Informal Action by Shareholders. Any action which may be
---------- -------------------------------
taken at a meeting of shareholders may be taken without a meeting if one or more
written consents, setting forth the action so taken, shall be signed by all of
the persons who would be entitled to vote upon such action at a meeting, and
delivered to the Secretary of the Savings Bank for inclusion in the minutes or
filing with the corporate records.
3
<PAGE>
If the Savings Bank is required by law to give notice to nonvoting
shareholders of action to be taken by unanimous written consent of the voting
shareholders, then the Savings Bank shall give the nonvoting shareholders, if
any, written notice of the proposed action at least ten (10) days before the
action is taken.
ARTICLE III.
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the Savings Bank
--------- --------------
shall be managed by the Board of Directors or by such Executive Committee as the
Board may establish.
Section 2. Number, Term and Qualifications. The number of Directors of
--------- -------------------------------
the Savings Bank shall be no less than five (5) and no more than nine (9), 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 at any time with or
--------- -------
without cause by a vote of shareholders holding a majority of the votes entitled
to be cast at an election of the directors. 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.
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.
4
<PAGE>
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 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
5
<PAGE>
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 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.
6
<PAGE>
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.
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.
7
<PAGE>
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 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
8
<PAGE>
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.
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.
9
<PAGE>
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.
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
10
<PAGE>
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 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.
11
<PAGE>
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.
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.
12
<PAGE>
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.
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.
13
<PAGE>
The shareholders may amend or repeal these Bylaws even though these
Bylaws also may be amended or repealed by the Board of Directors.
Adopted this _____ day of _____________, 1996.
____________________________________________
Secretary
14
<PAGE>
Exhibit 4.1
NUMBER SHARES
Home Savings, Inc., SSB
Thomasville, North Carolina
COMMON STOCK
The security evidenced by this Certificate is not a deposit account or savings
account and is not federally insured or guaranteed.
This Certifies that is the
-----------------------------------------------------
registered holder of Shares
----------------------------------------------------
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this day of A.D. 19
-------------- ------------------ ----
<PAGE>
The Corporation will furnish to any stockholder upon request and without a
charge a copy of the Charter and Bylaws of the Corporation, which set forth
certain other provisions with respect to acquisition of shares of the
Corporation, as well as a description of the Corporation's authorized common and
preferred stock and other provisions affecting stockholder rights and corporate
governance.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C> <C>
TEN COM --as tenants in common UNIF GIFT MIN ACT --.............Custodian................
TEN ENT --as tenants by the entireties (Cust) (Minor)
JT TEN --as joint tenants with right of under Uniform Gifts To Minors
survivorship and not as tenants Act.....................
in common. (State)
Additional abbreviations may also be used though not in the above list.
For value received,________________________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
INDENTIFYING NUMBER OF ASSIGNEE
----------------------------------------
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint
---------------------------
--------------------------------------------------------------------------------------------------------------------------
Attorney to transfer the said shares on the books of the within-named Corporation with full power of substitution in the
premises.
Dated,
--------------------------------
-----------------------------------------------------------
In presence of
------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
</TABLE>
<PAGE>
[PICTURE OF AMERICAN BALD EAGLE APPEARS HERE]
NUMBER SHARES
CB
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN CRANFORD, N.J. OR IN NEW YORK, N.Y. CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
CENTURY BANCORP, INC.
THOMASVILLE, N.C.
THIS IS TO CERTIFY THAT CUSIP 156433 10 4
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE OF
---------------------- -------------------------
- -------------------------- CENTURY BANCORP, INC. -----------------------------
---------------------- -------------------------
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed. The security evidenced by this certificate is not a deposit account
or savings account and is not federally insured or guaranteed. This certificate
is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Drema A. Michael /s/ James G. Hudson, Jr.
SECRETARY PRESIDENT
[CORPORATE SEAL OF
CENTURY BANCORP, INC.
APPEARS HERE]
(C) SECURITY XXXXXXXX UNITED STATES BANKNOTE COMPANY 1960
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ COUNTERSIGNED AND REGISTERED: +
+ REGISTRAR AND TRANSFER COMPANY +
+ (CRANFORD, NEW JERSEY) TRANSFER AGENT +
+ AND REGISTRAR +
+ +
+ BY +
+ +
+ AUTHORIZED SIGNATURE +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++
+------------------------------------------------+
+ AMERICAN BANK NOTE COMPANY SEPT 24, 1996 dw +
+ 3504 ATLANTIC AVENUE +
+ SUITE 12 046527fc +
+ (310) 989-2333 +
+ (FAX) (310) 428-7450 270-19X proof___ NEW +
+------------------------------------------------+
++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
CENTURY BANCORP, INC.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED, THE
CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
The Corporation will furnish to any shareholder upon request and without charge
a copy of the Articles of Incorporation and Bylaws of the Corporation, which set
forth certain other provisions with respect to acquisition of shares of the
Corporation, as well as a description of the Corporation's authorized common and
preferred stock and other provisions affecting stockholder rights and corporate
governance.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM-- as tenants in common UNIF GIFT MIN ACT--____________Custodian______________________________
TEN ENT-- as tenants by the entireties (Cust.) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act________________________________________________
in common (State)
</TABLE>
. Additional abbreviations may also be used though not in the above list.
For value received,__________________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________shares
of the Capital Stock represented by the within Certificate; and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated__________________________________________
___________________________________________________
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE PAGE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
NOTICE: OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:__________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
<PAGE>
Exhibit 10.7
HOME SAVINGS, SSB
SEVERANCE PLAN
THIS IS THE SEVERANCE PLAN ("PLAN") OF HOME SAVINGS, SSB (THE "BANK"), A
NORTH CAROLINA-CHARTERED SAVINGS BANK, WITH ITS PRINCIPAL OFFICE IN THOMASVILLE,
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 and excluding any person employed by the Bank on
such date who has received a special termination agreement or other similar
agreement from the Savings Bank or any parent holding company of the Bank which
agreement provides for the payment of a specified amount of severance pay to
such person in the event his or her employment is terminated or changed after a
change in control of the Bank.
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 one-half of 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>
Exhibit 24.1
[LETTERHEAD OF DIXON, ODOM & CO., L.L.P. APPEARS HERE]
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors To the Board of Directors
Home Savings, SSB Century Bancorp, Inc.
Thomasville, North Carolina Thomasville, 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
July 18, 1996
October 1, 1996
- ---------
<PAGE>
Exhibit 24.2
[LETTERHEAD OF JMP FINANCIAL, INC.]
October 1, 1996
Board of Directors
Home Savings Bank, SSB
Box 989
22 Winston Street
Thomasville, NC 27361-0989
Dear Sirs:
We hereby consent to the use of our firm's name in (i) the applications for
conversion of Home Savings, SSB, Thomasville, North Carolina, and any amendments
thereto, filed with the Division of Savings Institutions, North Carolina
Department of Commerce (the "Division"), and the Federal Deposit Insurance
Corporation, (ii) the Registration Statement of Century Bancorp, Inc. on Form S-
1 and any amendments thereto with the Securities Exchange Commission, and (iii)
the Acquisition Application and the Holding Company Application of Century
Bancorp, Inc., and any amendments thereto, 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 Century Bancorp, Inc., and the Proxy Statement of Home Savings,
SSB.
Sincerely,
/s/ JMP Financial, Inc.
JMP Financial, Inc.
<PAGE>
Exhibit 24.3
[LETTERHEAD OF
BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P.]
October 1, 1996
Board of Directors
Century Bancorp, Inc.
22 Winston Street
P.O. Box 989
Thomasville, North Carolina 27361-0989
Gentlemen:
We hereby consent to reference to our firm in the "Legal Opinions" section
of the Prospectus included in the Registration Statement of Century Bancorp,
Inc. on Form S-1, as amended (the "Registration Statement") and to the reference
to the opinions rendered by our firm which are described in such section of the
Registration Statement, as amended.
Very truly yours,
BROOKS, PIERCE, MCLENDON,
HUMPHREY & LEONARD, L.L.P.
By: /s/ Randall A. Underwood
-------------------------------
Randall A. Underwood
RAU/arb
<PAGE>
Exhibit 28.2
CONVERSION VALUATION APPRAISAL
UPDATE REPORT
Prepared For:
HOME SAVINGS, SSB
A STATE SAVINGS BANK
and
CENTURY BANCORP, INC.
Thomasville, North Carolina
PREPARED IN ACCORDANCE WITH
FEDERAL DEPOSIT INSURANCE CORPORATION
REGULATIONS
September 23, 1996
By:
JMP Financial, Inc.
753 Grand Marais
Grosse Pointe Park, Michigan 48230
(313) 824-1711
<PAGE>
JMP Financial, Inc.
- -------------------
753 Grand Marais
Grosse Pointe, MI 48236
Tel/Fax: (313) 824-1711
September 23, 1996
Board of Directors
Home Savings Bank
22 Winston Street
Thomasville, North Carolina 27361
Gentlemen:
At your request, JMP Financial, Inc. ("JMP") hereby provides its updated
appraisal of the estimated pro forma market value of the Common Stock ("the
Stock") of Home Savings, SSB ("the Bank"). The Stock will be distributed in
connection with the conversion of the Bank from the mutual to the stock form of
organization. This appraisal has been updated to reflect the Bank's financial
condition and performance through June 30, 1996 and changes in the equity
markets since the date our original appraisal report dated July 8, 1996.
Our appraisal is based on the Bank's representation that the financial data
and information contained in the Preliminary Subscription Offering Prospectus
and additional evidence furnished to us by the Bank are truthful, accurate, and
complete. We did not independently verify such financial data and other
information provided by the Bank nor did we independently value the assets or
liabilities of the Bank, nor did we obtain any appraisal of the assets or
liabilities of the Bank.
Our valuation is not intended, and must not be construed as, a
recommendation of any kind as to the advisability of purchasing shares of common
stock. 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 who purchase shares of common
stock in the conversion will thereafter be able to sell such shares at prices
related to the foregoing valuation of the pro forma market value thereof.
The valuation will be updated as required under the normal conversion
process. Any updates will consider, among other factors, any developments or
changes in the Bank's policies, and current conditions in the equities markets
for thrift institutions' common stock. Should any such new developments or
changes be material, in our opinion, to the valuation of the Bank's common
stock, appropriate adjustments to the estimated pro forma market value will be
made at these times.
<PAGE>
Board of Directors
September 23, 1996
Page Two
It is our opinion that, as of September 23, 1996 the estimated pro forma
market value of the Bank's to-be-outstanding common stock is $14,500,000 which
yields an effective valuation range of $12,325,000 to $16,675,000 at the maximum
and $19,176,250 at the super maximum. The Bank will issue a minimum of 246,500
shares and a maximum of 383,525 shares at a uniform price of $50.00.
Respectfully,
/s/ JMP Financial, Inc.
JMP FINANCIAL, INC.
/s/ John Michael Palffy
John Michael Palffy
President
<PAGE>
Financial Condition and Performance
Home Savings Bank
Tables I and II present summary balance sheet and income statement data for
the Bank at and for the trailing twelve months as of June 30, 1995 and March 31,
1996 and updated financial information through June 30, 1996. In general, the
financial performance of the Bank deteriorated from June 30, 1995 to June 30,
1996. However, the financial condition of the Bank has remained fairly
consistent throughout the time period and the Bank's financial performance for
the twelve months ended June 30, 1996 was generally consistent with the twelve
months ended March 31, 1996.
Table I
Recent Financial Condition and Performance Data
<TABLE>
<CAPTION>
`(,000) At of the twelve months ended,
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance Sheet Data June 30, 1996 March 31, 1996 June 30, 1995
- --------------------------------------------------------------------------------
Total assets $81,304 $80,386 $75,508
- --------------------------------------------------------------------------------
Investments $22,823 $23,702 $18,852
- --------------------------------------------------------------------------------
Loans Rcvble, net $55,193 $53,741 $54,020
- --------------------------------------------------------------------------------
Deposits $69,669 $68,907 $64,448
- --------------------------------------------------------------------------------
Retained Earnings $11,245 $11,136 $10,640
- --------------------------------------------------------------------------------
Summary Income Statement
- --------------------------------------------------------------------------------
Net Interest Income $2,328 $2,321 $2,583
- --------------------------------------------------------------------------------
Provision for loan losses $165 $160 $105
- --------------------------------------------------------------------------------
Net Interest Income after $2,163 $2,161 $2,478
provision for loan losses
- --------------------------------------------------------------------------------
Non-interest income $35 $52 $15
- --------------------------------------------------------------------------------
Non-interest expense $1,169 $1,195 $979
- --------------------------------------------------------------------------------
Net income $677 $664 $921
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Table II
Recent Financial Condition and Performance Ratios
<TABLE>
<CAPTION>
At of the twelve months ended,
- ------------------------------------------------------------------------------
June 30, 1996 March 31, 1996 June 30, 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Return on average assets 0.86% 0.81% 1.25%
- ------------------------------------------------------------------------------
Return on average equity 6.19% 5.83% 9.15%
- ------------------------------------------------------------------------------
Interest rate spread 2.41% 2.36% 3.10%
- ------------------------------------------------------------------------------
Yield on interest-earning 7.69% 7.66% 7.51%
assets
- ------------------------------------------------------------------------------
Cost of interest-bearing 5.28% 5.29% 4.41%
liabilities
- ------------------------------------------------------------------------------
Non-interest expense/avg. 1.48% 1.55% 1.33%
assets
- ------------------------------------------------------------------------------
Non-interest income/avg. 0.04% 0.07% 0.02%
assets
- ------------------------------------------------------------------------------
Average interest-earning 113.86% 113.86% 113.08%
assets to average
interest-bearing liabilities
- ------------------------------------------------------------------------------
NPA/Assets 0.76% 1.03% 1.21%
- ------------------------------------------------------------------------------
Reserves/NPA 187.02% 100.80% 47.68%
- ------------------------------------------------------------------------------
One Year Interest Rate Gap (48.86)% (45.54)%
- ------------------------------------------------------------------------------
Equity/Assets 13.83% 13.85% 14.09%
- ------------------------------------------------------------------------------
</TABLE>
Growth and Composition
Home Savings' growth for the quarter ended June 30, 1996 was moderate and
not inconsistent with historical growth. The Bank's loan and asset composition
remained substantially similar to that of recent periods.
Home Savings' deposit base increased 1.11 percent, or at an annualized rate
of 4.50 percent, during the quarter ended June 30, 1996. This growth, and
continued earnings, were reflected in total asset growth of 1.14 percent, or
4.65 percent on an annualized basis, during the period. There was a marginal
shift in asset composition as loans receivable increased at higher than
historical rates, due to a combination of seasonal increases in mortgage lending
and renewed concentration on loan marketing by the bank. Loans increased 2.70
percent, or 11.25 percent on annualized basis, during the quarter, requiring a
5.99 percent decrease in the Bank's investment portfolio.
The composition of deposits by maturity, and of loans by maturity and type,
did not change substantially during the quarter. Retained earnings increased
0.98 percent, or 3.97 percent on an annualized basis, during the quarter due to
continued earnings. The Bank's ratio of retained earnings to total assets
decreased negligibly from 13.85 percent to 13.83 percent during the quarter
since assets increased faster than retained earnings.
2
<PAGE>
Earnings Growth and Composition
The Bank reported net income of $677 thousand for the twelve months ended
June 30, 1996, down 26 percent from the previous fiscal year, but up 1.96
percent from the twelve months ended March 31, 1996.
The decrease in the Bank's earnings between fiscal year ended 1995 and 1996
is primarily due to a 22 percent decline in interest rate spread from 3.10
percent for the year ended June 30, 1995 to 2.41 percent for the year ended June
30, 1996, primarily due to an increase in deposit costs brought on by a higher
interest rate environment. The Bank's non-interest expenses increased
marginally, from 1.33 percent to 1.48 percent of average assets during the year,
but its non-interest income increased from 0.02 percent to 0.04 percent of
average assets. As a result of deterioration in the Bank's earnings, its return
on average assets declined from 1.25 percent to 0.86 percent and its return on
average equity also declined from 9.15 percent to 6.19 percent during the fiscal
year just ended.
The Bank's earnings erosion was halted during the most recent quarter. Due
to stabilizing interest rates the Bank's interest rate spread increased
marginally from 2.36 percent to 2.41 percent. The Bank's ratio of non-interest
expense to average assets declined from 1.55 percent to 1.48 percent, but its
ratio of non-interest income ratio declined from 0.07 percent to 0.04 percent.
As a result of these factors the Bank's trailing twelve month return on average
assets increased from 0.81 percent to 0.86 percent during the quarter and its
return on average equity increased from 5.83 percent to 6.19 percent.
Risk Factors
The Bank's credit quality continued to improve during the latest quarter.
Such improvement in credit quality was only negligibly offset by an increase in
interest rate risk during the period.
The Bank's ratio of non-performing assets to total assets declined from
1.21 percent at June 30, 1995 to 1.03 percent at March 31, 1996 and to 0.76
percent at June 30, 1996, primarily due to positive resolution of one major loan
problem. Due to continued increases in the Bank's reserves the ratio of
allowance for loan losses to non-performing assets has increased from 47.68
percent at June 30, 1995 to 100.08 percent at March 31 to 187.02 percent at June
30, 1996.
The Bank's one-year interest rate gap increased from (45.45) to (48.88)
percent during the quarter. In addition, the projected change in net interest
income assuming a 200 basis point increase in interest rates nearly doubled from
(10) to (17) percent, reflecting a general increase in the Bank's income
exposure to an increase in interest rates. On the other hand, the percentage
change in the Bank's net portfolio value assuming a 200 basis point increase in
interest rates actually declined, albeit marginally, from (32) to (27) percent.
3
<PAGE>
Financial Condition and Performance
The Comparative Group
Exhibits 2-11 present extensive financial summary data on the Comparative
Group. Two institutions, Classic and Piedmont, were deleted from the Comparative
Group since the original appraisal because it was determined that their history
as a public company was insufficient to provide reliable data for the valuation.
The exclusion of these companies did not make a material difference in most
composite financial and market averages of the Comparative Group in the original
appraisal and changes in these ratios since the original appraisal substantially
reflect changes in the performance and market of the revised Comparative Group
and not the deletion of these institutions. In summary, the financial condition
and performance of the Comparative Group remains substantially similar to the
original appraisal.
The return on average assets and return on average equity of the
Comparative Group remained substantially constant. The median return on average
assets of 1.11 percent and return on average equity of 4.91 percent remain
marginally above the pro forma ratios of the Bank. The composition of
profitability for the Comparative Group also did not change materially. The
Comparative Group continues to maintain a significant advantage in net interest
income and non-interest income over the Bank, an advantage which is largely
offset by the Bank's continued low operating expenses.
The equity to asset ratios of the Comparative Group declined from an
average of 23.46 percent to 21.83 percent, largely due to the exclusion of
Classic and Piedmont which were highly capitalized. The Comparative Group's
capital ratio remains substantially similar to the Bank's pro forma capital to
asset ratio, however. Asset and loan composition of the Comparative Group
remained relatively consistent since the original appraisal and remains
comparable to the Bank. Despite the Bank's small spurt in loan growth during
that last quarter the Comparative Group's year-to-year loan growth is
substantially higher than the Bank's. However, asset and deposit group for the
Comparative Group has moderated considerably, largely as they become more
"mature" and temporally distant from their conversions.
The loan quality of the Comparative Group, which was substantially superior
to the Bank at the original appraisal continued to improve. Though the
improvement in the Bank's credit quality was more dramatic than that of the
Comparative Group, the Comparative Group retains a significant credit quality
advantage. The interest rate risk of the Comparative Group improved marginally
while that of the Bank declined marginally. The Comparative Group interest rate
risk data and its overall reliability is limited, however. Nevertheless, the
Bank's interest rate sensitivity remains one of the highest in the country.
Nearly all components of the Comparative Groups yield-cost analysis
remained consistent since the first appraisal, as did those of the Bank.
4
<PAGE>
In summary, the financial condition and performance of the Comparative
Group has remained substantially consistent.
5
<PAGE>
Market Performance of Comparative Group
Table III presents a comparison of the most recent pricing ratios and
market capitalization of the Comparative Group, on both an average and median
basis, compared to data as of July 8, 1996. The market capitalization data is
historically adjusted to exclude Classic and Piedmont, though such exclusion
does not make a material difference, and indicates that the prices of the
Comparative Group stock have fallen 4.76 to 6.89 percent on a composite basis
since July 8. Such price depreciation is reflected in the pricing ratios of the
Comparative Group which also lagged significantly behind that of the market in
general. The price-to-earnings ratio of the Comparative Group increased
approximately 2 percent. However, the increase in the Group's average price-to-
book value ratio was offset by a similar decline in the median price-to-book
value ratio and the price-to-assets ratio declined substantially.
Table III
Change in Comparative Group Pricing Ratios
<TABLE>
<CAPTION>
Averages Sept. 20, 1996 July 5, 1996 Percent Change
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Price/Earnings 18.49 18.15 1.87%
- -----------------------------------------------------------------------
Price/Book Value 91.9% 90.6% 1.38%
- -----------------------------------------------------------------------
Price/Assets 20.5% 21.7% -5.48%
- -----------------------------------------------------------------------
Market Capitalization $21.2m $22.3m -4.76%
- -----------------------------------------------------------------------
<CAPTION>
Medians Sept. 20, 1996 July 5, 1996 Percent Change
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Price/Earnings 18.38 17.95 2.40%
- -----------------------------------------------------------------------
Price/Book Value 89.7% 91.0% -1.47%
- -----------------------------------------------------------------------
Price/Assets 18.4% 20.6% -10.49%
- -----------------------------------------------------------------------
Market Capitalization $15.0m $16.1m -6.89%
- -----------------------------------------------------------------------
</TABLE>
6
<PAGE>
Market Performance of Thrift Equities
Tables IV and V present the average pricing ratios of thrift equities
grouped by trading exchange and geographical region. Table VI and VII present
pricing ratios for North Carolina public thrifts and SNL Securities Thrift Index
performance.
Average and median price to book value ratios of thrift equities increased
5.40 and 3.80 percent respectively since July 8, 1996 as overall market
capitalization increased faster than thrift equity. Earnings kept more apace
with market capitalization. The average price earnings ratio declined only 0.25
percent, but the median price-to-earnings ratio actually increased 2.85 percent.
The pricing ratios of North Carolina thrifts decreased as the market
performance of the North Carolina thrifts did not keep pace with their financial
performance. Overall thrift equity prices in the state increased only
approximately 5 percent since July 5, 1996. Due to more substantial increases in
earnings the price-to-book value and price-to-earnings ratios actually declined
marginally.
Table IV
Pricing Ratios by Trading Exchange
<TABLE>
<CAPTION>
(Prices as of July 5, 1996)
Price Divided by________________________________
------------------------------------------------
AMSE (22) TBV BV EPS Core EPS Assets
- ----------- -------- -------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Average 96.03 90.02 14.49 18.67 13.76
Median 91.84 88.17 17.45 17.98 13.50
NASDAQ (389)
- -----------
Average 112.01 108.44 16.07 17.21 12.58
Median 108.02 104.19 13.48 14.94 10.99
NYSE (16)
- -----------
Average 144.60 134.27 19.53 19.74 8.56
Median 144.03 132.52 12.38 13.86 7.62
ALL PUBLIC
- ----------
THRIFTS
- -------
Average 112.64 108.60 16.20 17.37 12.47
Median 108.10 103.79 13.35 14.94 10.89
</TABLE>
7
<PAGE>
Pricing Ratios by Trading Exchange
<TABLE>
<CAPTION>
(Prices as of September 20, 1996)
Price Divided by
------------------------------------------------
AMSE TBV BV EPS Core EPS Assets
- ---- --- -- --- -------- ------
<S> <C> <C> <C> <C> <C>
Average 98.19 110.76 13.45 16.64 15.74
Median 93.80 93.80 13.25 15.59 13.46
NASDAQ
- ------
Average 117.59 113.37 16.27 17.26 13.64
Median 111.18 107.73 13.77 14.84 11.78
NYSE
- ----
Average 158.39 145.27 15.63 17.4 9.36
Median 151.00 137.28 12.98 14.09 8.43
ALL PUBLIC
- ----------
THRIFTS
- -------
Average 118.18 114.46 16.16 17.25 13.58
Median 111.13 107.73 13.73 14.84 11.73
</TABLE>
Pricing Ratios (Percentage Change) by Trading Exchange
<TABLE>
<CAPTION>
(July 5, 1996 to September 20, 1996)
Price Divided by
------------------------------------------------
AMSE TBV BV EPS Core EPS Assets
- ---- --- -- --- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Average 2.25 23.04 -7.18 -10.87 14.39
Median 2.13 6.39 -24.07 -13.29 -0.30
NASDAQ
- ------
Average 4.98 4.55 1.24 0.29 8.43
Median 2.93 3.40 2.15 -0.67 7.19
NYSE
- ----
Average 9.54 8.19 -19.97 -11.85 9.35
Median 4.84 3.59 4.85 1.66 10.63
ALL PUBLIC
- ----------
THRIFTS
- -------
Average 4.92 5.40 -0.25 -0.69 8.90
Median 2.80 3.80 2.85 -0.67 7.71
</TABLE>
8
<PAGE>
Table V
Pricing Ratios by Geographical Region
(Prices as of July 5, 1996)
<TABLE>
<CAPTION>
Price Divided by
---------------------------------------------
Mid-Atlantic TBV BV EPS Core EPS Assets
- ------------ ------ -------- ------- -------- ------
(94)
- ----
<S> <C> <C> <C> <C> <C>
Average 114.22 107.62 13.74 14.43 11.43
Median 112.88 108.12 12.46 13.46 10.13
Mid West
- --------
(59)
- ----
Average 108.21 106.09 17.37 18.91 14.24
Median 98.25 98.25 15.00 16.33 13.04
New England
- -----------
(54)
- ----
Average 118.43 112.55 14.78 13.81 9.80
Median 118.56 108.06 11.82 13.79 9.57
Southeast
- ---------
(59)
- ----
Average 118.92 114.30 16.35 18.97 13.51
Median 113.72 111.54 13.21 15.08 11.88
Southwest
- ---------
(16)
- ----
Average 101.31 99.23 13.35 14.09 13.21
Median 92.94 92.94 13.28 13.72 15.21
West
- ----
(48)
- ----
Average 113.68 109.96 19.66 21.52 10.23
Median 107.63 105.46 13.71 16.94 8.30
</TABLE>
Pricing Ratios by Geographical Region
(Prices as of September 20, 1996)
<TABLE>
<CAPTION>
Price Divided by
---------------------------------------------
Mid-Atlantic TBV BV EPS Core EPS Assets
- ------------ ------ -------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Average 120.23 112.79 14.82 15.07 12.20
Median 119.19 113.37 13.77 13.93 10.91
Mid West
- --------
Average 111.69 108.86 17.43 18.97 15.67
Median 98.86 98.82 15.57 16.04 13.34
New England
- -----------
Average 127.25 121.22 13.16 15.05 10.35
Median 122.96 117.39 12.24 14.49 9.71
Southeast
- ---------
Average 123.86 126.44 16.23 18.24 15.42
Median 111.78 111.79 13.27 14.83 12.85
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Southwest
- ---------
<S> <C> <C> <C> <C> <C>
Average 108.41 106.21 13.75 14.87 13.74
Median 96.75 93.94 14.36 14.51 15.30
West
- ----
Average 121.60 116.48 19.00 17.88 10.71
Median 114.28 111.05 13.74 15.94 8.46
</TABLE>
Pricing Ratios (Percentage Change) by Geographical Region
(July 5, 1996 to September 20, 1996)
<TABLE>
<CAPTION>
Price Divided by
---------------------------------------------
Mid-Atlantic TBV BV EPS Core EPS Assets
- ------------ ----- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Average 5.26 4.80 7.86 4.44 6.74
Median 5.59 4.86 10.51 3.49 7.70
Mid West
- --------
Average 3.22 2.61 0.35 0.32 10.04
Median 0.62 0.58 3.80 -1.78 2.30
New England
- -----------
Average 7.45 7.70 -10.96 8.98 5.61
Median 3.71 8.63 3.55 5.08 1.46
Southeast
- ---------
Average 4.15 10.62 -0.73 -3.85 14.14
Median -1.71 0.22 0.45 -1.66 8.16
Southwest
- ---------
Average 7.01 7.03 3.00 5.54 4.01
Median 4.10 1.08 8.13 5.76 0.59
West
- ----
Average 6.97 5.93 -3.36 -16.91 4.69
Median 6.18 5.30 0.22 -5.90 1.93
</TABLE>
Table VI
Change in North Carolina Pricing Ratios
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Averages Sept. 20, 1996 July 5, 1996 Percent Change
- ----------------------------------------------------------------
<S> <C> <C> <C>
Price/Earnings 18.28 19.63 -6.88
- ----------------------------------------------------------------
Price/Book Value 102.9 107.0 -1.43
- ----------------------------------------------------------------
Medians Sept. 20, 1996 July 5, 1996 Percent Change
- ----------------------------------------------------------------
Price/Earnings 17.50 17.45 0.29%
- ----------------------------------------------------------------
Price/Book Value 101.1 101.7 -0.59%
- ----------------------------------------------------------------
</TABLE>
Overall thrift equities increased 9.3 percent since July 5, 1996; nearly
double that of the Dow Jones and S & P. As previously noted, however, price
appreciation of North Carolina thrifts was about half the All Publicly Traded
Index and the Comparative Group actually declined. In addition, small thrifts,
under $250 million of assets, increased only
10
<PAGE>
3.6 percent, substantially less than the All Publicly Traded Index. This
performance was also reflected in the performance of the Comparative Group
because it is comprised of similarly sized institutions.
Table VI
SNL THRIFT INDICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
20-Sept- 5-July- 30-April- 30-Dec- 30-Dec- Percent Change Since
1996 1996 1996 1995 1994 5-July-96
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
All Publicly Traded 419.5 383.9 380.3 376.5 244.7 9.3
- -------------------------------------------------------------------------------------------------------------------------
SAIF 384.2 355.6 356.1 356.8 228.0 8.0
- -------------------------------------------------------------------------------------------------------------------------
AMEX 145.0 133.9 134.1 137.7 105.1 8.3
- -------------------------------------------------------------------------------------------------------------------------
NYSE 235.0 215.8 249.9 257.6 158.5 8.9
- -------------------------------------------------------------------------------------------------------------------------
OTC 501.6 460.6 460.3 449.5 296.8 8.9
- -------------------------------------------------------------------------------------------------------------------------
SE 420.8 378.6 381.8 367.2 230.1 11.2
- -------------------------------------------------------------------------------------------------------------------------
Assets (less than) $250m 566.3 546.5 545.1 538.4 394.9 3.6
- -------------------------------------------------------------------------------------------------------------------------
DJIA 5888 5588 5569 5117 3834 5.4
- -------------------------------------------------------------------------------------------------------------------------
S & P 687.0 657.4 654.2 615.9 459.3 4.5
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Recent Conversions
As Exhibit 12 illustrates, the thrift conversion market has slowed
considerably. Only five thrifts have converted since July 8, 1996. The pro forma
price-to-book value ratios of thrifts converting since July 8, 1996 has averaged
66.3 percent compared to 69.4 percent for those thrifts converting between
January 1 and July 5, 1996. Substantially all of the thrifts converting in 1996
sold the super maximum number of shares, reflecting midpoint price-to-book
values 10 to 12 percent lower than the final conversion ratios. Pro forma price-
to-earnings ratios have not reflected the same consistent trends, primarily due
to the divergent earnings performance of some of the thrifts. Leaving aside
thrifts with extreme price-to-earnings ratios, however, the trend toward
marginally lower valuations is not invalidated.
While the pricing ratios of converted thrifts have declined only marginally
the after-market performance of these thrifts is down considerably, despite the
obvious general appreciation in the thrift market. The average one day "pop" for
converting thrifts since July 8, 1996 has been only 1.56 percent, compared to
11.10 percent for thrifts converting between January 1, 1996 and July 5, 1996, a
relative comparison which is maintained for the one week "pop". The prices of
thrifts which converted since July 5, 1996 increased an average of only 2.96
percent in the one week after conversion, compared to 11.17 percent for those
1996 conversions prior to that date. Thrifts earlier in the year experienced
significant short-term "pops" and then experienced little or no price
appreciation in general. The after-market performance of recent thrifts has been
more stable. There has been significantly less "pop" in the first weeks and
month after conversion, but unlike earlier conversions more recent thrifts seem
to be sustaining longer term, albeit moderate appreciation. It is not clear if
this sustained appreciation reflects the nature of the thrifts converting, the
fact that less "pop" was exhausted in the IPO, or the general appreciation of
thrift equities. In any case, it appears that on balance more recent converting
thrifts enjoy substantially less price appreciation in the first day and weeks
after conversion, as compared to such conversions in the first half of the year,
but slightly better appreciation in the more intermediate term. On balance more
recently converted thrifts seem to have similar longer term price appreciation
to thrifts which converted earlier in the year. The overall result, is that the
incentive to purchase thrifts in the initial public offering has apparently been
substantially reduced since the overall thrift market has exhibited substantial
appreciation also and because investors have been able to profit from purchasing
recent conversions in the after-market.
12
<PAGE>
Summary of Discounts
The financial condition and performance of the Comparative Group and that
of the Bank have remained relatively consistent since July 8, 1996. The Bank's
capital ratios and loan quality have increased marginally relatively to the
Comparative Group. However, the Bank's loan quality still remains marginally
inferior to that of the Comparative Group. Since both the Comparative Group and
the Bank have pro forma capital-to-asset ratios in excess of 20 percent the
marginal differences in capital at that level are not material. As a result, we
continue to give no premium or discount based on financial condition and a
marginal discount for asset quality.
While the Bank seems to have improved its core asset and deposit growth
relative to the Comparative Group its primary exposure remains interest rate
risk, which did not improve during the period. The Bank also continues to
maintain a negligible level of non-interest income. As a result, the Bank's net
income is extremely sensitive to changes in interest rates and we maintain a
sizable discount for overall growth and predictability of earnings.
While overall market conditions for equities and thrift equities seem to
remain generally very healthy there are important contradictions especially
relevant to the Bank. Specifically, the North Carolina market has trailed the
national thrift market substantially in price appreciation, as have small
thrifts in general, and the Comparative Group actually declined in value. In
addition, the pricing ratios of recently converted thrifts are stable or
modestly declining, but the reward for purchasing in the initial public offering
has been substantially eroded. We believe that these factors, which are specific
to this Bank, offset the overall health of the thrift and equity markets and
thereby warrant an increased discount for marketing of the issue relative to the
original appraisal.
We have reduced the discounts applied in the original appraisal for
liquidity of the issue and return on equity. The difference between the Bank's
pro forma return on average equity and that of the Comparative group has
decreased and, we believe, is now insubstantial.
13
<PAGE>
<TABLE>
<CAPTION>
Summary of Discounts
- ----------------------------------------------------------
July 8, 1996 September 23, 1996
- ----------------------------------------------------------
<S> <C> <C>
Financial Condition None None
- ----------------------------------------------------------
Asset Quality Marginal Marginal
- ----------------------------------------------------------
Profitability Levels None None
- ----------------------------------------------------------
Return on Equity Marginal None
- ----------------------------------------------------------
Growth, Predictability Discount Discount
- ----------------------------------------------------------
Deposit Composition Marginal Marginal
- ----------------------------------------------------------
Management None None
- ----------------------------------------------------------
Dividend Payments None None
- ----------------------------------------------------------
Liquidity of Issue Discount Marginal
- ----------------------------------------------------------
Marketing of Issue Marginal Discount
- ----------------------------------------------------------
Market Area Marginal Marginal
- ----------------------------------------------------------
</TABLE>
14
<PAGE>
Valuation Conclusion
In light of the factors discussed herein the valuation of Home Savings has
been increased from $13.5 million at the midpoint as of July 8, 1996 to $14.5
million at the midpoint as of September 23, 1996, an increase of approximately
7.4 percent. Such increase is essentially consistent with appreciation in the
thrift equity market in general and results in increases in the Bank's pro forma
pricing ratios that are also consistent with the thrift market in general.
The appreciation reflected in the new valuation is approximately 50 percent
greater than the price appreciation displayed by other North Carolina thrifts
and more than double the appreciation exhibited by small (under $250 million in
assets) thrifts throughout the country, based on the SNL Small Thrift Index and
is contrary to the price depreciation suffered by the Comparative Group. The
value has also been increased substantially despite a continued and perhaps
increasingly "sluggish" conversion market.
As a result of the new valuation the super maximum price for Home Savings
is $19,176,250 or 18.1 times pro forma earnings and 70.4 percent of book value.
It should be noted that none of the last eight thrifts which converted did so at
a price-to-book value ratio in excess of 70 percent. The last time a thrift
converted in excess of 70 percent of book value was July 1, 1996 and only 2 of
the last 17 thrifts that converted since May 3, 1996 converted at price-to-book
value ratios in excess of 70 percent. The after-market appreciation of recent
conversions suggests that they have not been offered at substantial discounts.
While the price-to-book value ratio of the Bank at the super maximum allows
for a 23 percent discount to the Comparative Group, the price-to-assets discount
is 3.9 percent and the price-to-earnings discount is only 1.9 percent. Given
that the earnings of Home Savings are considerably more at risk than the
Comparative Group one would expect that Home should receive a sizable discount
to the Comparative Group as compensation. Such a discount does not exist at the
super maximum in this case and thus offsets any price-to-book value ratio the
investor may enjoy.
Exhibit 15 provides a summary of the valuation premium or discount for each
of the valuation ranges when compared to the Comparative Group.
Price to Earnings Method
The price\earnings approach is the standard method of stock valuation and
assumes that the value of a company's stock is a function of the discounted
value of its future earnings stream.
15
<PAGE>
The basis of the price\earnings approach is the subject's trailing twelve
month's earnings, generally adjusted for non-recurring or abnormal expenses or
gains. The standard measurement of adjusted earnings in the thrift industry is
"core" earnings which is based on reported earnings adjusted for losses or gains
on sale of assets, extra-ordinary income and other non-recurring events. The
trailing twelve months reported net income after taxes for Home Savings
increased from $664 thousand as of March 31, 1996 to $677 thousand at June 30,
1996. The Bank's core earnings is essentially the same amount so that this
figure is used for our calculations.
Based on the above analysis we have determined that the appropriate
price\earnings ratio for Home Savings is 15.1 which, when multiplied by the
Bank's pro forma earnings (adjusted to reflect earnings on net conversion
proceeds) yields a pro forma market valuation of $14,500,000 at the midpoint.
The price\earnings multiplies range from a low of 13.4 at the minimum of the
offering range to 16.6 at the maximum and 18.1 at the super maximum of the
offering range.
The price-to-earnings ratio of 18.1 at the super maximum is 10 to 12
percent higher than the comparable ratios for all publicly traded thrifts and
all publicly traded southeastern thrifts. It is generally comparable to the
price-to-earnings ratios of North Carolina thrifts and represents less than a 2
percent discount to the Comparative Group. Though traditional analysis places
significant emphasis on price-to-book value ratios in the fundamental valuation
of thrift equities we believe that the value and associated risk of a company's
income stream is a more accurate determinant of its value. It has been duly
noted that the earnings of the Bank have been stagnant or declining in recent
periods and its substantial interest rate risk exposure, combined with
negligible non-interest income, put its future income stream at considerable
risk of further decline in the event of an increase in interest rates. The
exposure of Home Savings' net income to changes in interest rates is among the
highest in the country. Accordingly, Home Savings should be valued at a
substantial discount to other thrifts for this factor alone. Despite this factor
and the considerable weight our valuation places on the price-to-earnings method
the price-to-earnings ratio of the Bank do not reflect such discounts, primarily
because of commensurate substantial discounts for other ratios as described
below.
Price to Book Value Method
Historically, the financial markets have placed significant weight on
price\book value methods for valuing financial institutions. As thrifts
diversify it is becoming more apparent that the real earnings power of each
bank's book value (return on equity) can vary significantly depending on the
risk and return of these particular assets, thereby shifting emphasis away from
the price\book value method towards more traditional price\earnings methods. As
a consequence, our valuation has been heavily weighted towards the latter
valuation method. Nevertheless, this valuation approach retains significance for
this industry.
16
<PAGE>
The basis of the price\book value approach is the subject's current GAAP or
tangible book value of $11.245 million at June 30, 1996. The price\book value
multiplies range from 57.6 percent at the minimum of the offering range to 66.4
percent at the maximum and 70.4 percent at the super maximum of the offering
range, which represents a 23.3 percent discount to the Comparative Group at the
super maximum.
Price to Assets Method
We have used a price\asset ratio of 14.8 percent to develop the pro forma
market value of the Bank. At the minimum of the offering range the price to
asset ratio is 13.5 percent, at the maximum it is 17.5 percent and at the super
maximum it is 19.7 percent.
17
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Tangible
Total Total Total Equity/ Equity/
Assets Deposits Equity Assets Tang Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. WA 03/11/83 22,323,472 11,026,719 1,647,073 7.38 6.76
WAYN Wayne Savings & Loan Co. MHC OH 06/25/93 250,266 212,178 23,186 9.26 9.26
WBST Webster Financial Corporation CT 12/12/86 3,837,220 3,105,562 214,669 5.59 4.43
WCBI Westco Bancorp IL 06/26/92 312,158 256,344 48,236 15.45 15.45
WCFB Webster City Federal SB, MHC IA 08/15/94 97,391 74,379 21,805 22.39 22.39
WCHI Workingmens Capital Holdings IN 06/07/90 208,203 149,721 26,459 12.71 12.71
WEFC Wells Financial Corp. MN 04/11/95 191,787 147,792 27,760 14.47 14.47
WES Westcorp CA 05/01/86 3,027,248 1,789,556 312,836 10.33 10.31
WFCO Winton Financial Corp. OH 08/04/88 282,833 215,251 21,083 7.45 7.28
WFSL Washington Federal, Inc. WA 11/17/82 5,040,588 2,435,828 597,495 11.85 11.36
WHGB WHG Bancshares Corp. MD 04/01/96 111,704 73,351 23,008 20.60 20.60
WLDN Walden Bancorp, Inc. MA 12/04/85 1,051,743 768,229 97,255 9.25 8.07
WOFC Western Ohio Financial Corp. OH 07/29/94 332,524 186,477 55,632 16.73 15.90
WRNB Warren Bancorp, Inc. MA 07/09/86 349,421 310,756 31,546 9.03 9.03
WSB Washington Savings Bank, FSB MD 254,968 232,278 20,959 8.22 8.22
WSFS WSFS Financial Corporation DE 11/26/86 1,312,864 746,785 74,125 5.65 5.59
WSTR WesterFed Financial Corp. MT 01/10/94 563,931 350,212 78,607 13.94 13.94
WVFC WVS Financial Corporation PA 11/29/93 259,622 170,843 34,038 13.11 13.11
WWFC Westwood Financial Corporation NJ 06/07/96 84,779 78,667 5,978 7.05 5.65
WYNE Wayne Bancorp, Inc. NJ 06/27/96 211,717 171,437 36,679 17.32 17.32
YFCB Yonkers Financial Corporation NY 04/18/96 242,826 192,013 49,021 20.19 20.19
YFED York Financial Corp. PA 02/01/84 1,109,804 908,123 93,540 8.43 8.43
</TABLE>
<TABLE>
<CAPTION>
Risk-Based NPAs + Loans One Year
Capital/ 90+ Pst Due/ Return on Return on Cum Gap/
Risk-Weightd Assets Avg Assets Avg Equity Assets
Ticker Institution State IPO Date Assets (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. WA 03/11/83 10.27 0.55 1.04 14.25 (12.53)
WAYN Wayne Savings & Loan Co. MHC OH 06/25/93 17.37 0.42 0.62 6.73
WBST Webster Financial Corporation CT 12/12/86 10.09 1.45 0.60 10.69 5.62
WCBI Westco Bancorp IL 06/26/92 30.30 0.30 1.30 8.37
WCFB Webster City Federal SB, MHC IA 08/15/94 51.19 1.08 1.16 5.24
WCHI Workingmens Capital Holdings IN 06/07/90 21.24 0.32 0.86 7.04
WEFC Wells Financial Corp. MN 04/11/95 18.42 0.37 0.84 5.71
WES Westcorp CA 05/01/86 8.73 1.25 1.28 13.55 (0.78)
WFCO Winton Financial Corp. OH 08/04/88 0.44 0.94 12.39
WFSL Washington Federal, Inc. WA 11/17/82 20.73 0.64 1.78 14.47 (51.32)
WHGB WHG Bancshares Corp. MD 04/01/96 34.00 0.35
WLDN Walden Bancorp, Inc. MA 12/04/85 14.09 0.93 1.03 11.09 (3.51)
WOFC Western Ohio Financial Corp. OH 07/29/94 31.26 0.65 0.89 3.88
WRNB Warren Bancorp, Inc. MA 07/09/86 13.13 1.72 1.70 19.56 (12.20)
WSB Washington Savings Bank, FSB MD 21.17 0.94 12.56
WSFS WSFS Financial Corporation DE 11/26/86 10.53 2.83 2.20 37.91 6.37
WSTR WesterFed Financial Corp. MT 01/10/94 20.61 0.13 0.79 5.90
WVFC WVS Financial Corporation PA 11/29/93 27.19 0.38 1.51 10.19 (18.03)
WWFC Westwood Financial Corporation NJ 06/07/96 13.16 0.02 0.67 9.40
WYNE Wayne Bancorp, Inc. NJ 06/27/96 30.38 1.50
YFCB Yonkers Financial Corporation NY 04/18/96 37.29 1.27 1.43
YFED York Financial Corp. PA 02/01/84 11.47 1.96 0.99 11.57 0.39
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Total Total Total Equity/
Assets Deposits Equity Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%)
- ----- ----------- ----- -------- ------ ------ ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
SFBM Security Bancorp MT 11/20/86 372,239 289,628 30,704 8.25
SFED SFS Bancorp, Inc. NY 06/30/95 164,366 139,387 22,287 13.56
SFFC StateFed Financial Corporation IA 01/05/94 76,705 45,732 14,928 19.46
SFIN Statewide Financial Corp. NJ 10/02/95 678,406 446,404 67,168 9.90
SFNB Security First Network Bank KY 106,971 46,860 55,277 51.67
SFSB SuburbFed Financial Corp. IL 03/04/92 378,388 304,799 26,045 6.88
SFSL Security First Corp. OH 01/22/88 588,592 416,314 55,732 9.47
SGVB SGV Bancorp, Inc. CA 06/29/95 333,064 223,148 32,581 9.78
SHEN First She ngo Bancorp, Inc. PA 04/06/93 369,279 261,875 46,836 12.68
SHFC Seven Hills Financial Corp. OH 12/31/93 45,511 35,461 9,651 21.21
SISB SIS Bancorp, Inc. MA 02/08/95 1,209,843 927,298 86,996 7.19
SJSB SJS Bancorp MI 02/16/95 150,752 109,330 17,587 11.67
SMBC Southern Missouri Bancorp, Inc MO 04/13/94 161,992 121,883 26,572 16.40
SMFC Sho-Me Financial Corp. MO 07/01/94 280,027 168,849 30,787 10.99
SOBI Sobieski Bancorp, Inc. IN 03/31/95 76,362 61,349 14,120 18.49
SOPN First Savings Bancorp, Inc. NC 01/06/94 256,986 187,424 66,811 26.00
SOSA Somerset Savings Bank MA 07/09/86 511,390 446,300 28,430 5.56
SPBC St. Paul Bancorp, Inc. IL 05/18/87 4,337,546 3,259,369 375,542 8.66
SRN Southern Banc Company, Inc AL 10/05/95 109,768 86,778 22,293 20.31
SSB Scotland Bancorp, Inc NC 04/01/96 70,488 41,673 24,706 35.05
SSBK Strongsville Savings Bank OH 529,187 458,658 42,554 8.04
SSM Stone Street Bancorp, Inc. NC 04/01/96 107,991 68,447 38,328 35.49
STFR St. Francis Capital Corp. WI 06/21/93 1,329,903 826,895 130,656 9.82
STND Standard Financial, Inc. IL 08/01/94 2,274,536 1,670,871 266,294 11.71
STSA Sterling Financial Corp. WA 1,477,699 898,394 85,745 5.80
SVRN Sovereign Bancorp, Inc. PA 08/12/86 9,183,447 4,941,897 461,466 5.02
SWBI Southwest Bancshares IL 06/24/92 356,692 250,166 40,010 11.22
SWCB Sandwich Co-operative Bank MA 07/25/86 449,889 380,449 37,025 8.23
SZB SouthFirst Bancshares, Inc. AL 02/14/95 90,542 65,290 13,050 14.41
TBK Tolland Bank CT 12/19/86 223,978 198,539 13,649 6.09
TCB TCF Financial Corp. MN 06/17/86 7,000,871 5,052,557 523,788 7.48
THBC Troy Hill Bancorp, Inc. PA 06/27/94 80,484 52,775 17,865 22.20
THIR Third Financial Corp. OH 03/25/93 155,911 114,043 28,655 18.38
THR Three Rivers Financial Corp. MI 08/24/95 85,138 62,957 13,044 15.32
THRD TF Financial Corporation PA 07/13/94 528,910 341,872 75,122 14.20
TPNZ Tappan Zee Financial, Inc. NY 10/05/95 119,167 89,869 21,499 18.04
TRIC Tri-County Bancorp, Inc. WY 09/30/93 76,718 45,454 12,408 16.17
TSBS Trenton SB, MHC NJ 08/03/95 517,363 412,433 100,050 19.34
TSH Teche Holding Co. LA 04/19/95 370,722 242,460 56,978 15.37
TWIN Twin City Bancorp TN 01/04/95 103,300 82,891 14,113 13.66
UBMT United Financial Corp. MT 09/23/86 104,195 78,604 24,507 23.52
UFRM United Federal Savings Bank NC 07/01/80 255,485 216,480 20,634 8.08
VABF Virginia Beach Fed. Financial VA 11/01/80 608,832 443,962 41,206 6.77
VAFD Valley Federal Savings Bank AL 10/15/87 118,525 104,273 9,593 8.09
VFFC Virginia First Financial Corp. VA 01/01/78 746,867 573,536 60,996 8.17
<CAPTION>
Tangible Risk-Based NPAs + Loans
Equity/ Capital/ 90+ Pst Due/
Tang Assets Risk-Weightd Assets
Ticker Institution State IPO Date (%) Assets (%) (%)
- ----- ----------- ----- -------- --- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
SFBM Security Bancorp MT 11/20/86 7.16 14.11 0.23
SFED SFS Bancorp, Inc. NY 06/30/95 13.56 20.48 0.71
SFFC StateFed Financial Corporation IA 01/05/94 19.46
SFIN Statewide Financial Corp. NJ 10/02/95 9.88 30.27 1.25
SFNB Security First Network Bank KY 51.39
SFSB SuburbFed Financial Corp. IL 03/04/92 6.85 13.71 0.32
SFSL Security First Corp. OH 01/22/88 9.30 11.15 0.31
SGVB SGV Bancorp, Inc. CA 06/29/95 9.78 15.74 1.84
SHEN First She ngo Bancorp, Inc. PA 04/06/93 12.68 18.65 0.46
SHFC Seven Hills Financial Corp. OH 12/31/93 21.21 37.71 0.22
SISB SIS Bancorp, Inc. MA 02/08/95 7.19 12.25 0.87
SJSB SJS Bancorp MI 02/16/95 11.67 18.88 0.29
SMBC Southern Missouri Bancorp, Inc MO 04/13/94 16.40 25.42 0.95
SMFC Sho-Me Financial Corp. MO 07/01/94 10.99 15.98 0.06
SOBI Sobieski Bancorp, Inc. IN 03/31/95 18.49 0.08
SOPN First Savings Bancorp, Inc. NC 01/06/94 26.00 60.02 0.05
SOSA Somerset Savings Bank MA 07/09/86 5.56 7.78 9.10
SPBC St. Paul Bancorp, Inc. IL 05/18/87 8.63 15.81 0.49
SRN Southern Banc Company, Inc AL 10/05/95 20.14 74.22 0.00
SSB Scotland Bancorp, Inc NC 04/01/96 35.05 79.09 0.00
SSBK Strongsville Savings Bank OH 7.89 12.77 0.40
SSM Stone Street Bancorp, Inc. NC 04/01/96 35.49 53.51 0.22
STFR St. Francis Capital Corp. WI 06/21/93 9.42 13.68 0.27
STND Standard Financial, Inc. IL 08/01/94 11.69 21.87 0.13
STSA Sterling Financial Corp. WA 5.06 10.50 0.57
SVRN Sovereign Bancorp, Inc. PA 08/12/86 3.79 8.40 0.50
SWBI Southwest Bancshares IL 06/24/92 11.22 15.23 0.13
SWCB Sandwich Co-operative Bank MA 07/25/86 7.77 13.12 1.07
SZB SouthFirst Bancshares, Inc. AL 02/14/95 14.41 22.23 0.52
TBK Tolland Bank CT 12/19/86 5.84 10.17 5.37
TCB TCF Financial Corp. MN 06/17/86 7.18 12.15 0.82
THBC Troy Hill Bancorp, Inc. PA 06/27/94 22.20 26.00 2.95
THIR Third Financial Corp. OH 03/25/93 18.38 18.91 1.21
THR Three Rivers Financial Corp. MI 08/24/95 15.26 24.12 0.72
THRD TF Financial Corporation PA 07/13/94 14.20 24.94 0.37
TPNZ Tappan Zee Financial, Inc. NY 10/05/95 18.04 29.53 1.51
TRIC Tri-County Bancorp, Inc. WY 09/30/93 16.17 38.34 0.22
TSBS Trenton SB, MHC NJ 08/03/95 19.00 36.01 0.39
TSH Teche Holding Co. LA 04/19/95 15.37 21.61 0.15
TWIN Twin City Bancorp TN 01/04/95 13.66 21.50 0.42
UBMT United Financial Corp. MT 09/23/86 23.52 49.44 0.80
UFRM United Federal Savings Bank NC 07/01/80 8.08 13.73 1.17
VABF Virginia Beach Fed. Financial VA 11/01/80 6.77 11.84 1.53
VAFD Valley Federal Savings Bank AL 10/15/87 8.09 14.65 1.31
VFFC Virginia First Financial Corp. VA 01/01/78 7.93 11.08 2.18
<CAPTION>
One Year
Return on Return on Cum Gap/
Avg Assets Avg Equity Assets
Ticker Institution State IPO Date (%) (%) (%)
- ----- ----------- ----- -------- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
SFBM Security Bancorp MT 11/20/86 0.71 8.22
SFED SFS Bancorp, Inc. NY 06/30/95 0.69 4.88
SFFC StateFed Financial Corporation IA 01/05/94 1.19 5.99
SFIN Statewide Financial Corp. NJ 10/02/95
SFNB Security First Network Bank KY
SFSB SuburbFed Financial Corp. IL 03/04/92 0.50 6.91
SFSL Security First Corp. OH 01/22/88 1.21 13.36 2.42
SGVB SGV Bancorp, Inc. CA 06/29/95 0.12 1.10
SHEN First She ngo Bancorp, Inc. PA 04/06/93 1.03 7.45
SHFC Seven Hills Financial Corp. OH 12/31/93 0.36 1.69
SISB SIS Bancorp, Inc. MA 02/08/95 1.38 19.41 4.61
SJSB SJS Bancorp MI 02/16/95 0.63 5.00
SMBC Southern Missouri Bancorp, Inc MO 04/13/94 0.87 4.98
SMFC Sho-Me Financial Corp. MO 07/01/94 0.85 6.89
SOBI Sobieski Bancorp, Inc. IN 03/31/95 0.42 2.24
SOPN First Savings Bancorp, Inc. NC 01/06/94 1.53 5.86 (32.47)
SOSA Somerset Savings Bank MA 07/09/86 0.42 7.83 7.21
SPBC St. Paul Bancorp, Inc. IL 05/18/87 0.91 9.81 0.33
SRN Southern Banc Company, Inc AL 10/05/95 0.54 3.96
SSB Scotland Bancorp, Inc NC 04/01/96
SSBK Strongsville Savings Bank OH 0.99 11.83
SSM Stone Street Bancorp, Inc. NC 04/01/96
STFR St. Francis Capital Corp. WI 06/21/93 1.18 10.78 (11.23)
STND Standard Financial, Inc. IL 08/01/94 0.81 6.06 (6.94)
STSA Sterling Financial Corp. WA 0.45 7.73 (14.87)
SVRN Sovereign Bancorp, Inc. PA 08/12/86 0.79 14.64 (5.62)
SWBI Southwest Bancshares IL 06/24/92 1.15 8.95 (19.84)
SWCB Sandwich Co-operative Bank MA 07/25/86 0.87 10.76 (5.38)
SZB SouthFirst Bancshares, Inc. AL 02/14/95 0.57 3.50
TBK Tolland Bank CT 12/19/86 0.61 9.94 2.68
TCB TCF Financial Corp. MN 06/17/86 1.43 20.06 (4.24)
THBC Troy Hill Bancorp, Inc. PA 06/27/94 1.38 6.09
THIR Third Financial Corp. OH 03/25/93 1.37 7.66
THR Three Rivers Financial Corp. MI 08/24/95
THRD TF Financial Corporation PA 07/13/94 0.91 5.94 5.96
TPNZ Tappan Zee Financial, Inc. NY 10/05/95 0.80 5.22
TRIC Tri-County Bancorp, Inc. WY 09/30/93 0.95 5.13
TSBS Trenton SB, MHC NJ 08/03/95 1.80 9.97
TSH Teche Holding Co. LA 04/19/95 1.10 6.08
TWIN Twin City Bancorp TN 01/04/95 1.09 7.94
UBMT United Financial Corp. MT 09/23/86 1.52 6.66
UFRM United Federal Savings Bank NC 07/01/80 0.79 10.03 (0.31)
VABF Virginia Beach Fed. Financial VA 11/01/80 0.29 4.81
VAFD Valley Federal Savings Bank AL 10/15/87 0.17 2.13
VFFC Virginia First Financial Corp. VA 01/01/78 1.74 22.49 9.83
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Total Total Total Equity/
Assets Deposits Equity Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%)
- ------ ----------- ----- -------- ----- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. WI 03/23/92 996,245 695,815 94,116 9.45
ABBK Abington Savings Bank MA 06/10/86 483,549 293,897 31,436 6.50
ABCW Anchor BanCorp Wisconsin WI 07/16/92 1,822,248 1,270,622 117,895 6.47
AFCB Affiliated Community Bancorp MA 10/19/95 983,904 621,338 96,871 9.85
AFFFZ America First Financial Fund CA 2,274,053 1,795,529 161,228 7.09
AHCI Ambanc Holding Co., Inc. NY 12/27/95 458,988 305,355 74,822 16.30
AHM Ahmanson & Company (H.F.) CA 10/25/72 49,506,630 33,281,931 2,777,356 5.61
ALBC Albion Banc Corp. NY 07/26/93 57,784 47,506 5,973 10.34
ALBK ALBANK Financial Corporation NY 04/01/92 3,325,592 2,872,407 316,703 9.52
AMFB American Federal Bank, FSB SC 01/19/89 1,382,171 992,031 107,260 7.76
AMFC AMB Financial Corp. IN 04/01/96 79,408 59,989 16,209 20.41
A Acadia Bancshares, Inc. LA 07/16/96 274,304 211,965 17,751 6.47
ANBK American tio I Bancorp MD 10/31/95 461,271 313,083 47,270 10.25
ANDB Andover Bancorp, Inc. MA 05/08/86 1,173,956 780,500 88,702 7.56
ASBI Ameria Bancorp IN 03/02/87 402,051 318,328 44,609 11.10
ASBP ASB Financial Corp. OH 05/11/95 112,988 83,395 25,643 22.70
ASFC Astoria Financial Corporation NY 11/18/93 7,078,383 4,478,148 561,667 7.93
ATSB AmTrust Capital Corp. IN 03/28/95 73,072 50,807 7,553 10.34
AVND Avondale Financial Corp. IL 04/07/95 592,771 324,318 58,842 9.93
BANC BankAtlantic Bancorp, Inc. FL 11/29/83 1,975,287 1,361,992 141,651 7.17
BDJI First Federal Bancorporation MN 04/04/95 104,969 79,860 13,918 13.26
BFD BostonFed Bancorp, Inc. MA 10/24/95 777,997 432,205 88,947 11.43
BFSB Bedford Bancshares, Inc. VA 08/22/94 121,783 94,130 18,530 15.22
BFSI BFS Bankorp, Inc. NY 05/12/88 621,324 399,629 48,620 7.83
BKC American Bank of Connecticut CT 12/01/81 531,638 383,320 45,058 8.48
BKCO Bankers Corp. NJ 03/16/90 2,208,543 1,639,750 184,792 8.37
BKCT Bancorp Connecticut, Inc. CT 07/03/86 405,761 301,822 42,836 10.56
BKU BankUnited Financial Corp. FL 12/11/85 801,531 470,237 69,660 8.69
BNKU Bank United Corp. TX 11,002,448 5,053,605 804,627 7.31
BPLS Bank Plus Corp. CA 3,296,633 2,552,946 174,998 5.31
BRFC Bridgeville Savings Bank PA 10/07/94 56,109 33,701 16,004 28.52
BSBC Branford Savings Bank CT 11/04/86 178,121 157,078 15,584 8.75
BVFS Bay View Capital Corp. CA 05/09/86 3,388,847 2,201,604 206,177 6.08
BWFC Bank West Financial Corp. MI 03/30/95 139,217 88,677 27,540 19.78
BYFC Broadway Financial Corp. CA 01/09/96 111,863 96,249 13,954 12.47
CAFI Camco Financial Corporation OH 352,576 291,288 29,337 8.32
CAL Cal Fed Bancorp, Inc. CA 03/01/83 14,045,400 8,844,200 683,200 4.86
CAPS Capital Savings Bancorp, Inc. MO 12/29/93 202,554 150,636 21,136 10.43
CARV Carver Federal Savings Bank NY 10/25/94 362,369 261,494 34,875 9.62
CASB Cascade Financial Corp. WA 09/16/92 334,431 218,063 20,815 6.22
CASH First Midwest Financial, Inc. IA 09/20/93 342,095 203,914 39,029 11.41
CATB Catskill Financial Corp. NY 04/18/96 283,258 198,601 80,691 28.49
CBCI Calumet Bancorp, Inc. IL 02/20/92 500,814 369,612 80,507 16.08
CBCO CB Bancorp, Inc. IN 12/28/92 195,658 128,127 19,319 9.87
<CAPTION>
Tangible Risk-Based NPAs + Loans
Equity/ Capital/ 90+ Pst Due/
Tang Assets Risk-Weightd Assets
Ticker Institution State IPO Date (%) Assets (%) (%)
- ------ ----------------------------- ----- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. WI 03/23/92 8.32 14.87 0.55
ABBK Abington Savings Bank MA 06/10/86 5.78 12.58 0.32
ABCW Anchor BanCorp Wisconsin WI 07/16/92 6.31 9.62 0.67
AFCB Affiliated Community Bancorp MA 10/19/95 9.78 18.68 0.69
AFFFZ America First Financial Fund CA 6.95 15.10 0.77
AHCI Ambanc Holding Co., Inc. NY 12/27/95 16.30 22.45 3.65
AHM Ahmanson & Company (H.F.) CA 10/25/72 5.34 9.70 2.29
ALBC Albion Banc Corp. NY 07/26/93 10.34 16.42 0.76
ALBK ALBANK Financial Corporation NY 04/01/92 8.51 13.04 1.10
AMFB American Federal Bank, FSB SC 01/19/89 7.20 12.92 0.54
AMFC AMB Financial Corp. IN 04/01/96 20.41 27.46 0.51
A Acadia Bancshares, Inc. LA 07/16/96 6.47 13.44 0.71
ANBK American tio I Bancorp MD 10/31/95 10.25
ANDB Andover Bancorp, Inc. MA 05/08/86 7.56 13.30 1.43
ASBI Ameria Bancorp IN 03/02/87 11.08 19.15 0.41
ASBP ASB Financial Corp. OH 05/11/95 22.70 36.32 1.61
ASFC Astoria Financial Corporation NY 11/18/93 6.55 17.50 0.78
ATSB AmTrust Capital Corp. IN 03/28/95 10.24 16.94 1.31
AVND Avondale Financial Corp. IL 04/07/95 9.93 23.12 0.75
BANC BankAtlantic Bancorp, Inc. FL 11/29/83 6.66 11.24 0.85
BDJI First Federal Bancorporation MN 04/04/95 13.26 19.56 0.40
BFD BostonFed Bancorp, Inc. MA 10/24/95 11.43 16.33 1.15
BFSB Bedford Bancshares, Inc. VA 08/22/94 15.22 23.22 0.87
BFSI BFS Bankorp, Inc. NY 05/12/88 7.83 12.67 1.21
BKC American Bank of Connecticut CT 12/01/81 8.09 12.64 2.66
BKCO Bankers Corp. NJ 03/16/90 8.21 16.99 1.33
BKCT Bancorp Connecticut, Inc. CT 07/03/86 10.56 16.56 1.59
BKU BankUnited Financial Corp. FL 12/11/85 8.41 13.15 0.79
BNKU Bank United Corp. TX 7.18 11.88 1.02
BPLS Bank Plus Corp. CA 5.30 11.32 3.67
BRFC Bridgeville Savings Bank PA 10/07/94 28.52 84.02 0.20
BSBC Branford Savings Bank CT 11/04/86 8.75 14.27 2.05
BVFS Bay View Capital Corp. CA 05/09/86 5.41 9.73 1.00
BWFC Bank West Financial Corp. MI 03/30/95 19.78 30.52 0.08
BYFC Broadway Financial Corp. CA 01/09/96 12.47 2.42
CAFI Camco Financial Corporation OH 8.32 14.21 0.55
CAL Cal Fed Bancorp, Inc. CA 03/01/83 4.86 10.28 1.33
CAPS Capital Savings Bancorp, Inc. MO 12/29/93 10.43 18.66 0.20
CARV Carver Federal Savings Bank NY 10/25/94 9.22 27.42 0.72
CASB Cascade Financial Corp. WA 09/16/92 6.22 12.44 1.58
CASH First Midwest Financial, Inc. IA 09/20/93 10.74 15.22 0.20
CATB Catskill Financial Corp. NY 04/18/96 28.49 56.90 0.54
CBCI Calumet Bancorp, Inc. IL 02/20/92 16.08 16.08 1.44
CBCO CB Bancorp, Inc. IN 12/28/92 9.87 15.98 1.51
<CAPTION>
One Year
Return on Return on Cum Gap/
Avg Assets Avg Equity Assets
Ticker Institution State IPO Date (%) (%) (%)
- ------ ----------- ----- -------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. WI 03/23/92 0.90 9.41
ABBK Abington Savings Bank MA 06/10/86 0.39 5.86 (43.35)
ABCW Anchor BanCorp Wisconsin WI 07/16/92 0.90 12.75 3.21
AFCB Affiliated Community Bancorp MA 10/19/95 0.74 6.71
AFFFZ America First Financial Fund CA 0.89 13.53 2.43
AHCI Ambanc Holding Co., Inc. NY 12/27/95 0.32 2.35
AHM Ahmanson & Company (H.F.) CA 10/25/72 0.92 15.84 8.96
ALBC Albion Banc Corp. NY 07/26/93 0.24 2.33
ALBK ALBANK Financial Corporation NY 04/01/92 0.97 9.50 4.21
AMFB American Federal Bank, FSB SC 01/19/89 1.42 17.60 (7.83)
AMFC AMB Financial Corp. IN 04/01/96 0.63 4.65
A Acadia Bancshares, Inc. LA 07/16/96
ANBK American tio I Bancorp MD 10/31/95 0.35 4.06
ANDB Andover Bancorp, Inc. MA 05/08/86 0.97 12.72 (7.64)
ASBI Ameria Bancorp IN 03/02/87 0.92 7.38
ASBP ASB Financial Corp. OH 05/11/95 1.01 4.30
ASFC Astoria Financial Corporation NY 11/18/93 0.74 8.56 15.90
ATSB AmTrust Capital Corp. IN 03/28/95 0.31 2.75
AVND Avondale Financial Corp. IL 04/07/95 0.62 5.82
BANC BankAtlantic Bancorp, Inc. FL 11/29/83 1.12 15.74 (11.90)
BDJI First Federal Bancorporation MN 04/04/95 0.70 4.74 4.00
BFD BostonFed Bancorp, Inc. MA 10/24/95 0.49 4.63 (1.79)
BFSB Bedford Bancshares, Inc. VA 08/22/94 1.29 7.96 15.63
BFSI BFS Bankorp, Inc. NY 05/12/88 1.84 24.09
BKC American Bank of Connecticut CT 12/01/81 1.24 13.70 (14.15)
BKCO Bankers Corp. NJ 03/16/90 1.13 11.82 (7.17)
BKCT Bancorp Connecticut, Inc. CT 07/03/86 1.18 10.70 (10.38)
BKU BankUnited Financial Corp. FL 12/11/85 1.16 14.30 (1.96)
BNKU Bank United Corp. TX 1.31 18.87
BPLS Bank Plus Corp. CA (1.74) (31.62) (3.13)
BRFC Bridgeville Savings Bank PA 10/07/94 1.27 4.34 11.35
BSBC Branford Savings Bank CT 11/04/86 0.86 10.00 0.91
BVFS Bay View Capital Corp. CA 05/09/86 0.14 2.04
BWFC Bank West Financial Corp. MI 03/30/95 0.69 3.41
BYFC Broadway Financial Corp. CA 01/09/96 0.28 3.60
CAFI Camco Financial Corporation OH 1.22 15.13
CAL Cal Fed Bancorp, Inc. CA 03/01/83 0.82 14.79 3.12
CAPS Capital Savings Bancorp, Inc. MO 12/29/93 0.95 8.96
CARV Carver Federal Savings Bank NY 10/25/94 0.21 2.15 27.13
CASB Cascade Financial Corp. WA 09/16/92 0.71 11.28 (15.17)
CASH First Midwest Financial, Inc. IA 09/20/93 1.06 8.14
CATB Catskill Financial Corp. NY 04/18/96 19.03
CBCI Calumet Bancorp, Inc. IL 02/20/92 1.31 7.85
CBCO CB Bancorp, Inc. IN 12/28/92 1.38 14.66
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Tangible
Total Total Total Equity/ Equity/
Assets Deposits Equity Assets Tang Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%) (%)
- ----- ----------- ----- -------- ---- ---- ---- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares IN 04/10/95 233,347 189,199 25,792 11.05 11.05
CBK Citizens First Financial Corp. IL 05/01/96 247,882 204,507 40,669 16.41 16.41
CBNH Community Bankshares, Inc. NH 05/08/86 546,725 400,184 37,938 6.94 6.94
CBSA Coastal Bancorp, Inc. TX 2,796,568 1,278,985 95,091 3.40 2.83
CBSB Charter Financial, Inc. IL 12/29/95 366,983 251,810 63,777 17.38 16.36
CCFH CCF Holding Company GA 07/12/95 79,325 60,696 16,807 21.19 21.19
CEBK Central Co-Operative Bank MA 10/24/86 319,162 259,500 31,327 9.82 8.70
CENF CENFED Financial Corp. CA 10/25/91 2,148,344 1,560,862 107,221 4.99 4.98
CFB Commercial Federal Corporation NE 12/31/84 6,607,670 4,304,576 413,277 6.25 5.67
CFCP Coastal Financial Corp. SC 09/26/90 452,809 291,894 27,641 6.10 6.10
CFCX Center Financial Corporation CT 08/13/86 4,018,341 2,558,684 233,936 5.82 5.48
CFFC Community Financial Corp. VA 03/30/88 158,835 110,008 22,297 14.04 14.04
CFHC California Financial Holding CA 04/01/83 1,327,178 946,632 86,924 6.55 6.51
CFSB CFSB Bancorp, Inc. MI 06/22/90 791,610 537,526 65,067 8.22 8.22
CFTP Community Federal Bancorp MS 03/26/96 201,650 130,499 66,523 32.99 32.99
CFX CFX Corporation NH 02/12/87 1,025,771 729,895 92,831 9.05 8.19
CIBI Community Investors Bancorp OH 02/07/95 85,785 71,548 11,869 13.84 13.84
CJFC Central Jersey Financial NJ 09/01/84 469,289 385,556 55,989 11.93 11.23
CKFB CKF Bancorp, Inc. KY 01/04/95 58,734 42,047 15,636 26.62 26.62
CLAS Classic Bancshares, Inc. KY 12/29/95 68,754 46,419 19,505 28.37 28.37
CMRN Cameron Financial Corp MO 04/03/95 175,841 123,243 46,337 26.35 26.35
CMSB Commonwealth Bancorp, Inc. PA 06/17/96 2,049,062 1,484,757 227,521 11.10 8.68
CMSV Community Savings, MHC FL 10/24/94 626,045 495,135 75,066 11.99 11.99
CNIT CENIT Bancorp, Inc. VA 08/06/92 655,771 437,431 47,716 7.28 7.03
CNSB CNS Bancorp, Inc. MO 06/12/96 98,326 73,787 24,196 24.61 24.61
CNSK Covent Bank for Savings NJ 354,822 233,421 24,595 6.93 6.93
COFD Collective Bancorp, Inc. NJ 02/07/84 5,145,471 3,254,387 364,304 7.08 6.64
COFI Charter One Financial OH 01/22/88 13,951,846 7,817,126 934,478 6.70 6.22
COOP Cooperative Bankshares, Inc. NC 08/21/91 316,654 273,775 29,494 9.31 8.31
CRCL Circle Financial Corp. OH 08/06/91 241,758 213,387 24,742 10.23 9.05
CRZY Crazy Woman Creek Bancorp WY 03/29/96 50,324 28,458 15,453 30.71 30.71
CSA Coast Savings Financial CA 12/23/85 8,350,710 6,208,430 429,883 5.15 5.07
CSBF CSB Financial Group, Inc. IL 10/09/95 41,524 28,465 12,837 30.91 30.91
CTBK Center Banks Incorporated NY 06/02/86 220,373 182,753 15,499 7.03 7.03
CTZN CitFed Bancorp, Inc. OH 01/23/92 2,661,006 1,626,646 175,271 6.59 5.79
CVAL Chester Valley Bancorp Inc. PA 03/27/87 272,932 228,206 25,564 9.37 9.37
CZF CitiSave Financial Corp LA 07/14/95 76,128 61,752 12,738 16.73 16.72
DFIN Damen Financial Corp. IL 10/02/95 237,296 125,518 54,955 23.16 23.16
DIBK Dime Financial Corp. CT 07/09/86 688,993 563,043 56,530 8.20 7.86
DIME Dime Community Bancorp, Inc. NY 06/26/96 1,371,821 950,114 213,071 15.53 13.76
DME Dime Bancorp, Inc. NY 08/19/86 19,544,289 12,661,587 992,368 5.08 5.03
DNFC D & N Financial Corp. MI 02/13/85 1,364,024 934,831 78,954 5.79 5.71
DSBC DS Bancor, Inc. CT 12/11/85 1,257,432 1,030,993 84,248 6.70 6.51
DSL Downey Financial Corp. CA 01/01/71 4,712,294 3,854,545 391,919 8.32 8.19
EBCP Eastern Bancorp NH 11/17/83 840,534 643,057 64,880 7.72 7.32
EBSI Eagle Bancshares GA 04/01/86 621,474 386,726 57,231 9.21 9.21
EFBI Enterprise Federal Bancorp OH 10/17/94 213,876 139,993 31,594 14.77 14.75
<CAPTION>
Risk-Based NPAs + Loans One Year
Capital/ 90+ Pst Due/ Return on Return on Cum Gap/
Risk-Weightd Assets Avg Assets Avg Equity Assets
Assets (%) (%) (%) (%) (%)
---------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares IN 04/10/95 22.38 0.12 0.88 7.36
CBK Citizens First Financial Corp. IL 05/01/96 20.39 0.56 0.53 6.57
CBNH Community Bankshares, Inc. NH 05/08/86 10.71 0.45 0.81 11.11
CBSA Coastal Bancorp, Inc. TX 12.42 0.59 0.40 11.70
CBSB Charter Financial, Inc. IL 12/29/95 23.61 0.52 1.18 7.39
CCFH CCF Holding Company GA 07/12/95 0.92 0.97 4.91
CEBK Central Co-Operative Bank MA 10/24/86 1.79 0.46 4.69
CENF CENFED Financial Corp. CA 10/25/91 10.59 1.39 0.57 11.69 18.81
CFB Commercial Federal Corporation NE 12/31/84 12.56 1.01 0.84 14.74
CFCP Coastal Financial Corp. SC 09/26/90 9.26 0.15 1.04 17.09
CFCX Center Financial Corporation CT 08/13/86 8.92 2.58 0.73 12.12 (17.72)
CFFC Community Financial Corp. VA 03/30/88 17.17 0.49 1.31 9.68
CFHC California Financial Holding CA 04/01/83 11.79 1.26 0.57 8.53
CFSB CFSB Bancorp, Inc. MI 06/22/90 13.61 0.09 0.96 11.70 (10.90)
CFTP Community Federal Bancorp MS 03/26/96 75.71 0.46 1.29 6.12
CFX CFX Corporation NH 02/12/87 13.56 0.93 1.00 10.23 (8.37)
CIBI Community Investors Bancorp OH 02/07/95 23.47 0.73 1.01 6.98
CJFC Central Jersey Financial NJ 09/01/84 23.43 1.68 1.11 9.69
CKFB CKF Bancorp, Inc. KY 01/04/95 34.63 1.50 1.19 4.26
CLAS Classic Bancshares, Inc. KY 12/29/95 44.08 0.64 0.72 3.14
CMRN Cameron Financial Corp MO 04/03/95 29.87 0.96 1.60 5.77 0.41
CMSB Commonwealth Bancorp, Inc. PA 06/17/96 13.25 0.40 0.74 8.08 (7.42)
CMSV Community Savings, MHC FL 10/24/94 24.56 0.53 0.88 7.10 0.53
CNIT CENIT Bancorp, Inc. VA 08/06/92 0.48 0.48 6.76
CNSB CNS Bancorp, Inc. MO 06/12/96 53.50
CNSK Covent Bank for Savings NJ 12.45 2.02 0.76 9.79 (30.14)
COFD Collective Bancorp, Inc. NJ 02/07/84 16.96 0.52 1.07 15.71 (26.15)
COFI Charter One Financial OH 01/22/88 11.95 0.38 0.42 6.39 (4.86)
COOP Cooperative Bankshares, Inc. NC 08/21/91 16.35 0.23 0.29 3.14 (6.28)
CRCL Circle Financial Corp. OH 08/06/91 18.76 0.15 0.51 4.66
CRZY Crazy Woman Creek Bancorp WY 03/29/96 51.40 0.28
CSA Coast Savings Financial CA 12/23/85 8.96 1.59 0.49 9.90 4.25
CSBF CSB Financial Group, Inc. IL 10/09/95 0.70 0.89 3.67
CTBK Center Banks Incorporated NY 06/02/86 11.44 1.10 0.57 8.15 4.83
CTZN CitFed Bancorp, Inc. OH 01/23/92 13.83 0.93 0.71 10.20 (14.75)
CVAL Chester Valley Bancorp Inc. PA 03/27/87 15.28 0.86 0.91 9.88 2.26
CZF CitiSave Financial Corp LA 07/14/95 30.35 0.23 1.21 6.68
DFIN Damen Financial Corp. IL 10/02/95 48.37 0.20 0.89 4.28
DIBK Dime Financial Corp. CT 07/09/86 16.94 0.93 1.64 21.02 (1.25)
DIME Dime Community Bancorp, Inc. NY 06/26/96 0.72 5.03
DME Dime Bancorp, Inc. NY 08/19/86 11.75 2.59 0.38 7.94 (12.13)
DNFC D & N Financial Corp. MI 02/13/85 8.62 0.72 1.08 19.53 (10.57)
DSBC DS Bancor, Inc. CT 12/11/85 11.21 1.84 0.72 10.98 (7.68)
DSL Downey Financial Corp. CA 01/01/71 13.35 1.33 0.69 8.44 2.39
EBCP Eastern Bancorp NH 11/17/83 11.93 1.51 0.74 9.85
EBSI Eagle Bancshares GA 04/01/86 13.65 1.45 0.93 11.91
EFBI Enterprise Federal Bancorp OH 10/17/94 0.03 0.92 5.39
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Tangible
Total Total Total Equity/ Equity/
Assets Deposits Equity Assets Tang Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. CT 02/03/87 1,402,417 1,069,372 102,356 7.30 5.44
EGLB Eagle BancGroup, Inc. IL 07/01/96 162,519 136,735 22,345 13.75 13.75
EQSB Equitable Federal Savings Bank MD 09/10/93 267,776 209,145 14,182 5.30 5.30
ESBK Elmira Savings Bank (The) NY 03/01/85 223,165 206,408 13,904 6.23 5.97
ESX Essex Bancorp, Inc. VA 305,223 259,824 15,573 5.10 4.42
ETFS East Texas Financial Services TX 01/10/95 115,339 92,457 21,815 18.91 18.91
FBBC First Bell Bancorp, Inc. PA 06/29/95 570,649 433,651 116,265 20.37 20.37
FBCI Fidelity Bancorp, Inc. IL 12/15/93 456,896 285,940 49,801 10.90 10.87
FBCV 1ST Bancorp IN 04/07/87 263,483 137,148 21,729 8.25 8.25
FBER 1st Bergen Bancorp NJ 04/01/96 252,095 207,318 42,986 17.05 17.05
FBHC Fort Bend Holding Corp. TX 06/30/93 254,739 204,875 18,008 7.07 7.07
FBSI First Bancshares, Inc. MO 12/22/93 143,671 105,960 23,729 16.52 16.49
FCB Falmouth Co-Operative Bank MA 03/28/96 88,498 65,381 21,741 24.57 24.57
FCBF FCB Financial Corp. WI 09/24/93 265,172 153,431 46,655 17.59 17.59
FCIT First Citizens Financial Corp. MD 12/17/86 645,824 505,422 39,728 6.15 6.15
FDEF First Defiance Financial OH 10/02/95 520,666 384,604 126,605 24.32 24.32
FED FirstFed Financial Corp. CA 12/16/83 4,104,854 2,158,268 188,766 4.60 4.53
FESX First Essex Bancorp, Inc. MA 08/04/87 842,903 508,080 62,347 7.40 7.40
FFBA First Colorado Bancorp, Inc. CO 01/02/96 1,501,330 1,103,392 245,056 16.32 16.16
FFBH First Federal Bancshares of AR AR 05/03/96 504,939 419,611 83,431 16.52 16.52
FFBI First Financial Bancorp, Inc. IL 10/04/93 94,486 67,354 7,873 8.33 8.33
FFBS FFBS BanCorp, Inc. MS 07/01/93 125,228 99,407 24,639 19.68 19.68
FFBZ First Federal Bancorp, Inc. OH 07/13/92 177,778 130,547 14,022 7.89 7.88
FFCH First Financial Holdings Inc. SC 11/10/83 1,523,224 1,062,649 97,330 6.39 6.39
FFDF FFD Financial Corp. OH 04/03/96 76,159 67,104 8,302 10.90 10.90
FFDP FirstFed Bancshares IL 07/01/92 635,096 459,403 54,810 8.63 8.27
FFEC First Fed Bncshrs Eau Claire WI 10/12/94 706,672 377,988 97,457 13.79 13.32
FFED Fidelity Federal Bancorp IN 08/31/87 262,216 181,702 14,295 5.45 5.45
FFES First Federal of East Hartford CT 06/23/87 947,807 531,662 57,007 6.01 6.00
FFFC FFVA Financial Corp. VA 10/12/94 522,811 386,243 81,442 15.58 15.31
FFFD North Central Bancshares, Inc. IA 03/21/96 194,283 129,021 55,736 28.69 28.69
FFFG F.F.O. Financial Group, Inc. FL 10/13/88 307,055 262,755 19,105 6.22 6.22
FFFL Fidelity FSB of Florida, MHC FL 01/07/94 816,869 620,203 80,577 9.86 9.76
FFHC First Financial Corp. WI 12/24/80 5,579,294 4,446,052 407,905 7.31 7.00
FFHH FSF Financial Corp. MN 10/07/94 331,395 188,386 47,624 14.37 14.37
FFHS First Franklin Corporation OH 01/26/88 216,508 188,336 20,287 9.37 9.28
FFIC Flushing Financial Corp NY 11/21/95 766,632 566,845 137,938 17.99 17.99
FFKY First Federal Financial Corp. KY 07/15/87 352,671 264,946 49,946 14.16 13.36
FFLC FFLC Bancorp, Inc. FL 01/04/94 332,087 273,304 56,404 16.98 16.98
FFML First Family Financial Corp. FL 10/22/92 155,890 143,362 9,222 5.92 5.92
FFOH Fidelity Financial of Ohio OH 03/04/96 251,188 184,479 51,087 20.34 20.34
FFPB First Palm Beach Bancorp, Inc. FL 09/29/93 1,438,024 1,081,595 113,606 7.90 7.72
FFPC Florida First Bancorp, Inc. FL 11/06/86 302,689 245,652 21,349 7.05 7.05
FFRV Fidelity Financial Bankshares VA 05/01/86 325,814 245,359 28,010 8.60 8.59
<CAPTION>
Risk-Based NPAs + Loans One Year
Capital/ 90+ Pst Due/ Return on Return on Cum Gap/
Risk-Weightd Assets Avg Assets Avg Equity Assets
Ticker Institution State IPO Date Assets (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ---------- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. CT 02/03/87 11.60 1.17 1.27 17.56
EGLB Eagle BancGroup, Inc. IL 07/01/96 0.74
EQSB Equitable Federal Savings Bank MD 09/10/93 11.07 1.00 0.78 14.98
ESBK Elmira Savings Bank (The) NY 03/01/85 9.41 0.85 0.15 2.40 29.04
ESX Essex Bancorp, Inc. VA 7.70 2.34 (2.46) (39.24)
ETFS East Texas Financial Services TX 01/10/95 43.91 0.23 0.81 4.17 (10.77)
FBBC First Bell Bancorp, Inc. PA 06/29/95 30.82 0.08 1.62 7.34 (31.82)
FBCI Fidelity Bancorp, Inc. IL 12/15/93 17.86 0.61 0.74 5.68
FBCV 1ST Bancorp IN 04/07/87 17.86 0.35 2.05 29.45 (4.05)
FBER 1st Bergen Bancorp NJ 04/01/96 43.18 3.36
FBHC Fort Bend Holding Corp. TX 06/30/93 17.49 1.21 0.70 9.62 7.62
FBSI First Bancshares, Inc. MO 12/22/93 20.26 0.57 0.85 4.90
FCB Falmouth Co-Operative Bank MA 03/28/96 55.18 0.00 0.67 3.88 (16.86)
FCBF FCB Financial Corp. WI 09/24/93 16.38 0.12 1.09 5.71
FCIT First Citizens Financial Corp. MD 12/17/86 9.80 2.96 0.71 11.59 (15.62)
FDEF First Defiance Financial OH 10/02/95 32.29 0.18 1.21 5.29
FED FirstFed Financial Corp. CA 12/16/83 10.12 2.52 0.23 4.98 7.16
FESX First Essex Bancorp, Inc. MA 08/04/87 12.60 0.61 0.99 13.34 1.47
FFBA First Colorado Bancorp, Inc. CO 01/02/96 23.89 0.24 1.09 8.16 (24.93)
FFBH First Federal Bancshares of AR AR 05/03/96 23.81 0.17
FFBI First Financial Bancorp, Inc. IL 10/04/93 14.52 0.27 0.68 6.79 (10.61)
FFBS FFBS BanCorp, Inc. MS 07/01/93 30.10 1.62 1.37 6.88 (15.96)
FFBZ First Federal Bancorp, Inc. OH 07/13/92 10.84 0.56 1.14 15.12
FFCH First Financial Holdings Inc. SC 11/10/83 10.72 1.32 0.78 11.81 (10.35)
FFDF FFD Financial Corp. OH 04/03/96 21.17 0.15 0.87 6.92
FFDP FirstFed Bancshares IL 07/01/92 17.30 0.12 0.58 6.32 (12.39)
FFEC First Fed Bncshrs Eau Claire WI 10/12/94 20.07 0.04 0.87 5.70 (18.70)
FFED Fidelity Federal Bancorp IN 08/31/87 10.03 0.17 1.18 23.76 13.34
FFES First Federal of East Hartford CT 06/23/87 21.31 0.79 0.57 8.65 (10.85)
FFFC FFVA Financial Corp. VA 10/12/94 25.79 0.51 1.24 7.51 0.57
FFFD North Central Bancshares, Inc. IA 03/21/96 40.67 0.21 1.65 8.13
FFFG F.F.O. Financial Group, Inc. FL 10/13/88 11.43 2.83 0.50 7.76
FFFL Fidelity FSB of Florida, MHC FL 01/07/94 19.17 0.34 0.67 6.57 (8.20)
FFHC First Financial Corp. WI 12/24/80 14.35 0.43 1.32 18.73 (3.03)
FFHH FSF Financial Corp. MN 10/07/94 33.44 0.07 0.64 3.79 15.08
FFHS First Franklin Corporation OH 01/26/88 14.52 0.50 0.62 6.56
FFIC Flushing Financial Corp NY 11/21/95 25.71 0.86 0.94 6.35
FFKY First Federal Financial Corp. KY 07/15/87 20.67 0.49 1.60 11.28
FFLC FFLC Bancorp, Inc. FL 01/04/94 27.50 0.13 0.94 5.51
FFML First Family Financial Corp. FL 10/22/92 0.90 16.56
FFOH Fidelity Financial of Ohio OH 03/04/96 31.99 0.55 0.87 5.60
FFPB First Palm Beach Bancorp, Inc. FL 09/29/93 12.68 0.64 0.74 8.92 (8.74)
FFPC Florida First Bancorp, Inc. FL 11/06/86 13.94 0.76 0.90 13.27 (7.52)
FFRV Fidelity Financial Bankshares VA 05/01/86 11.32 1.11 1.00 12.03 6.91
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Total Total Total Equity/
Assets Deposits Equity Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%)
- ----- ----------- ----- -------- ------ ------ ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
FFSL First Independence Corp. KS 10/08/93 105,771 68,845 13,050 12.34
FFSW FirstFederal Financial Svcs OH 03/31/87 1,044,608 630,980 82,838 7.93
FFSX First Fed SB of Siouxland, MHC IA 07/13/92 443,632 335,223 36,857 8.31
FFWC FFW Corp. IN 04/05/93 150,467 92,490 15,458 10.27
FFWD Wood Bancorp, Inc. OH 08/31/93 146,249 115,830 20,122 13.76
FFWM First Financial-W. Maryland MD 02/11/92 321,994 274,756 41,707 12.95
FFYF FFY Financial Corp. OH 06/28/93 575,602 456,541 101,921 17.71
FGHC First Georgia Holding, Inc. GA 02/11/87 144,022 118,877 11,955 8.30
FIBC Financial Bancorp, Inc. NY 08/17/94 262,497 200,646 26,224 9.99
FISB First India Corporation IN 08/02/83 1,473,094 1,110,479 136,048 9.24
FKFS First Keystone Financial PA 01/26/95 290,549 221,663 22,920 7.89
FKKY Frankfort First Bancorp, Inc. KY 07/10/95 138,616 85,359 47,836 34.51
FLAG FLAG Financial Corp. GA 12/11/86 228,710 176,201 21,840 9.55
FLFC First Liberty Financial Corp. GA 12/06/83 991,226 751,396 75,953 7.66
FLKY First Lancaster Bancshares KY 07/01/96 33,812 24,187 4,643 13.73
FMBD First Mutual Bancorp, Inc. IL 07/05/95 301,690 201,335 69,445 23.02
FMCO FMS Financial Corporation NJ 12/14/88 517,943 433,582 34,327 6.63
FMCT Farmers & Mechanics Bank CT 12/10/93 529,692 499,627 29,219 5.52
FMLY Family Bancorp MA 11/07/86 925,239 761,551 69,952 7.56
FMSB First Mutual Savings Bank WA 12/17/85 386,366 283,729 25,560 6.62
FNGB First Northern Capital Corp. WI 12/29/83 580,128 455,387 70,754 12.20
FNSC Financial Security Corp. IL 12/29/92 258,452 185,679 39,841 15.42
FOBC Fed One Bancorp WV 01/19/95 343,028 246,374 41,188 12.01
FRC First Republic Bancorp CA 2,064,209 1,254,523 114,529 5.55
FSBC First Savings Bank, FSB NM 08/08/86 112,436 106,261 5,551 4.94
FSBI Fidelity Bancorp, Inc. PA 06/24/88 317,315 240,026 21,544 6.79
FSBS First Ashland Financial Corp KY 04/07/95 87,422 61,308 23,921 27.36
FSFC First Southeast Financial Corp SC 10/08/93 326,573 288,213 33,669 10.31
FSFI First State Financial Services NJ 12/18/87 665,937 589,509 39,955 6.00
FSLA First Savings Bank, MHC NJ 07/10/92 962,343 810,541 91,613 9.52
FSNJ First Savings Bk of NJ, MHC NJ 01/09/95 650,650 445,104 49,020 7.53
FSPG First Home Bancorp, Inc. NJ 04/20/87 479,314 277,134 30,836 6.43
FSSB First FS&LA of San Bernardino CA 02/02/93 102,436 97,121 4,737 4.62
FTF Texarka First Financial Corp AR 07/07/95 164,064 128,641 33,043 20.14
FTFC First Federal Capital Corp. WI 11/02/89 1,389,163 998,968 95,278 6.86
FTSB Fort Thomas Financial Corp. KY 06/28/95 88,874 61,946 21,638 24.35
FWWB First SB of Washington Bancorp WA 11/01/95 764,685 375,343 148,840 19.46
GAF GA Financial, Inc. PA 03/26/96 562,351 425,830 128,420 22.84
GBCI Glacier Bancorp, Inc. MT 03/30/84 408,467 207,447 38,472 9.42
GDVS Greater Delaware Valley SB,MHC PA 03/03/95 231,971 192,001 28,202 12.16
GDW Golden West Financial CA 05/29/59 35,775,375 21,040,598 2,362,246 6.60
GFCO Glenway Financial Corp. OH 11/30/90 273,890 221,647 26,485 9.67
GFED Guaranty Federal SB, MHC MO 04/10/95 185,546 156,806 27,165 14.64
GFSB GFS Bancorp, Inc. IA 01/06/94 83,305 53,122 9,945 11.94
GLBK Glendale Co-Operative Bank MA 01/10/94 36,677 30,695 5,803 15.82
GLN Glendale Federal Bank, FSB CA 10/01/83 14,456,564 8,723,976 957,451 6.62
GPT GreenPoint Financial Corp. NY 01/28/94 14,150,594 12,157,442 1,466,254 10.36
<CAPTION>
Tangible Risk-Based NPAs + Loans
Equity/ Capital/ 90+ Pst Due/ Return on
Tang Assets Risk-Weightd Assets Avg Assets
Ticker Institution State IPO Date (%) Assets (%) (%) (%)
- ------ ----------- ----- -------- --- ---------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FFSL First Independence Corp. KS 10/08/93 12.34 23.47 0.37 1.10
FFSW FirstFederal Financial Svcs OH 03/31/87 6.93 12.11 0.12 1.12
FFSX First Fed SB of Siouxland, MHC IA 07/13/92 8.23 17.64 0.17 0.70
FFWC FFW Corp. IN 04/05/93 10.27 14.52 0.06 1.09
FFWD Wood Bancorp, Inc. OH 08/31/93 13.76 15.57 0.17 1.19
FFWM First Financial-W. Maryland MD 02/11/92 12.95 20.36 1.99 1.11
FFYF FFY Financial Corp. OH 06/28/93 17.71 16.73 0.81 1.20
FGHC First Georgia Holding, Inc. GA 02/11/87 7.46 9.85 1.34 0.89
FIBC Financial Bancorp, Inc. NY 08/17/94 9.94 18.73 2.78 0.66
FISB First India Corporation IN 08/02/83 9.12 11.31 1.59 1.19
FKFS First Keystone Financial PA 01/26/95 7.89 17.00 2.53 0.56
FKKY Frankfort First Bancorp, Inc. KY 07/10/95 34.51 55.55 0.10 1.12
FLAG FLAG Financial Corp. GA 12/11/86 9.55 13.31 3.56 0.87
FLFC First Liberty Financial Corp. GA 12/06/83 6.67 8.57 1.22 1.03
FLKY First Lancaster Bancshares KY 07/01/96 13.73 24.80 1.23 1.50
FMBD First Mutual Bancorp, Inc. IL 07/05/95 23.02 43.40 0.34 0.98
FMCO FMS Financial Corporation NJ 12/14/88 6.48 15.19 0.83
FMCT Farmers & Mechanics Bank CT 12/10/93 5.52 0.20
FMLY Family Bancorp MA 11/07/86 6.99 11.77 0.90 0.90
FMSB First Mutual Savings Bank WA 12/17/85 6.62 10.84 0.11 1.03
FNGB First Northern Capital Corp. WI 12/29/83 12.20 19.56 0.17 0.78
FNSC Financial Security Corp. IL 12/29/92 15.42 20.67 2.81 0.76
FOBC Fed One Bancorp WV 01/19/95 11.46 25.67 0.30 1.00
FRC First Republic Bancorp CA 5.54 8.56 2.44 0.46
FSBC First Savings Bank, FSB NM 08/08/86 4.94 15.38 1.49 0.34
FSBI Fidelity Bancorp, Inc. PA 06/24/88 6.76 14.49 0.43 0.65
FSBS First Ashland Financial Corp KY 04/07/95 27.36 41.70 0.79 0.99
FSFC First Southeast Financial Corp SC 10/08/93 10.31 22.05 0.19 0.26
FSFI First State Financial Services NJ 12/18/87 5.69 8.34 4.24 0.02
FSLA First Savings Bank, MHC NJ 07/10/92 8.40 20.79 0.93 0.85
FSNJ First Savings Bk of NJ, MHC NJ 01/09/95 7.53 25.97 0.96 0.19
FSPG First Home Bancorp, Inc. NJ 04/20/87 6.28 15.10 0.94 0.97
FSSB First FS&LA of San Bernardino CA 02/02/93 4.40 7.98 3.31 (1.10)
FTF Texarka First Financial Corp AR 07/07/95 20.14 0.33 1.83
FTFC First Federal Capital Corp. WI 11/02/89 6.49 0.11 0.97
FTSB Fort Thomas Financial Corp. KY 06/28/95 24.35 1.27 1.33
FWWB First SB of Washington Bancorp WA 11/01/95 19.46 25.45 0.21 1.23
GAF GA Financial, Inc. PA 03/26/96 22.84 63.59 0.17 0.78
GBCI Glacier Bancorp, Inc. MT 03/30/84 9.41 17.14 0.26 1.59
GDVS Greater Delaware Valley SB,MHC PA 03/03/95 12.16 28.30 3.52 0.31
GDW Golden West Financial CA 05/29/59 6.24 12.54 1.40 0.81
GFCO Glenway Financial Corp. OH 11/30/90 9.46 0.66 0.56
GFED Guaranty Federal SB, MHC MO 04/10/95 14.64 25.61 0.07 1.02
GFSB GFS Bancorp, Inc. IA 01/06/94 11.94 17.90 1.15 1.16
GLBK Glendale Co-Operative Bank MA 01/10/94 15.82 0.00 0.77
GLN Glendale Federal Bank, FSB CA 10/01/83 6.24 10.74 1.96 0.28
GPT GreenPoint Financial Corp. NY 01/28/94 6.07 16.35 2.86 0.89
<CAPTION>
One Year
Return on Cum Gap/
Avg Equity Assets
Ticker Institution State IPO Date (%) (%)
- ------ ----------- ----- -------- --- ---
<S> <C> <C> <C> <C> <C>
FFSL First Independence Corp. KS 10/08/93 8.51 (13.94)
FFSW FirstFederal Financial Svcs OH 03/31/87 13.85
FFSX First Fed SB of Siouxland, MHC IA 07/13/92 8.44 (11.65)
FFWC FFW Corp. IN 04/05/93 9.89 12.47
FFWD Wood Bancorp, Inc. OH 08/31/93 8.40
FFWM First Financial-W. Maryland MD 02/11/92 8.98 7.83
FFYF FFY Financial Corp. OH 06/28/93 6.58 (16.51)
FGHC First Georgia Holding, Inc. GA 02/11/87 10.65 11.27
FIBC Financial Bancorp, Inc. NY 08/17/94 5.75
FISB First India Corporation IN 08/02/83 13.57 3.74
FKFS First Keystone Financial PA 01/26/95 6.48
FKKY Frankfort First Bancorp, Inc. KY 07/10/95 4.04
FLAG FLAG Financial Corp. GA 12/11/86 9.35 (0.43)
FLFC First Liberty Financial Corp. GA 12/06/83 13.29
FLKY First Lancaster Bancshares KY 07/01/96 11.24
FMBD First Mutual Bancorp, Inc. IL 07/05/95 3.80 (18.89)
FMCO FMS Financial Corporation NJ 12/14/88 12.68
FMCT Farmers & Mechanics Bank CT 12/10/93 3.46 (10.01)
FMLY Family Bancorp MA 11/07/86 11.79
FMSB First Mutual Savings Bank WA 12/17/85 15.44
FNGB First Northern Capital Corp. WI 12/29/83 6.12 0.90
FNSC Financial Security Corp. IL 12/29/92 5.47
FOBC Fed One Bancorp WV 01/19/95 7.93 2.89
FRC First Republic Bancorp CA 7.94 11.66
FSBC First Savings Bank, FSB NM 08/08/86 7.13
FSBI Fidelity Bancorp, Inc. PA 06/24/88 8.66 (18.70)
FSBS First Ashland Financial Corp KY 04/07/95 3.70
FSFC First Southeast Financial Corp SC 10/08/93 1.37
FSFI First State Financial Services NJ 12/18/87 0.23
FSLA First Savings Bank, MHC NJ 07/10/92 9.06 (9.46)
FSNJ First Savings Bk of NJ, MHC NJ 01/09/95 2.24
FSPG First Home Bancorp, Inc. NJ 04/20/87 14.89 (6.80)
FSSB First FS&LA of San Bernarrdino CA 02/02/93 (19.76)
FTF Texarka First Financial Corp AR 07/07/95 9.59
FTFC First Federal Capital Corp. WI 11/02/89 13.98 (28.58)
FTSB Fort Thomas Financial Corp. KY 06/28/95 5.39
FWWB First SB of Washington Bancorp WA 11/01/95 6.56
GAF GA Financial, Inc. PA 03/26/96 5.90 0.25
GBCI Glacier Bancorp, Inc. MT 03/30/84 16.40 (11.59)
GDVS Greater Delaware Valley SB,MHC PA 03/03/95 2.50 6.61
GDW Golden West Financial CA 05/29/59 12.46 6.71
GFCO Glenway Financial Corp. OH 11/30/90 5.82
GFED Guaranty Federal SB, MHC MO 04/10/95 7.11
GFSB GFS Bancorp, Inc. IA 01/06/94 9.19 13.67
GLBK Glendale Co-Operative Bank MA 01/10/94 4.83 (7.42)
GLN Glendale Federal Bank, FSB CA 10/01/83 4.45 21.08
GPT GreenPoint Financial Corp. NY 01/28/94 7.42 (1.77)
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Total Total Total Equity/
Assets Deposits Equity Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
GROV Grove Bank MA 08/07/86 590,405 491,895 37,575 6.36
GRTR Greater New York Savings Bank NY 06/17/87 2,540,811 1,709,571 200,672 7.90
GSBC Great Southern Bancorp, Inc. MO 12/14/89 668,105 397,055 67,808 10.15
GSFC Green Street Financial Corp. NC 04/04/96 178,965 114,122 62,755 35.07
GSLC Guaranty Financial Corp. VA 102,967 70,145 6,373 6.19
GTFN Great Financial Corporation KY 03/31/94 2,808,092 1,763,556 274,841 9.79
GTPS Great American Bancorp IL 06/30/95 119,662 85,119 33,331 27.85
GUPB GFSB Bancorp, Inc. NM 06/30/95 70,422 43,256 16,216 23.03
GWBC Gateway Bancorp, Inc. KY 01/18/95 71,260 53,396 17,714 24.86
GWF Great Western Financial CA 43,719,958 28,879,819 2,834,725 6.48
HALL Hallmark Capital Corp. WI 01/03/94 377,157 229,675 27,011 7.16
HARB Harbor Federal Savings Bk, MHC FL 01/06/94 1,014,013 835,219 85,062 8.39
HARL Harleysville Savings Bank PA 08/04/87 298,172 238,993 19,826 6.65
HARS Harris Savings Bank, MHC PA 01/25/94 1,541,717 1,227,261 149,403 9.69
HAVN Haven Bancorp, Inc. NY 09/23/93 1,550,275 1,121,466 94,068 6.07
HBBI Home Building Bancorp IN 02/08/95 43,135 32,715 6,015 13.94
HBFW Home Bancorp IN 03/30/95 315,901 264,332 48,974 15.50
HBNK Highland Federal Bank FSB CA 441,245 367,188 34,897 7.91
HBS Haywood Bancshares, Inc. NC 12/18/87 131,888 108,804 20,318 15.41
HEMT HF Bancorp, Inc. CA 06/30/95 826,916 669,725 81,072 9.80
HFFB Harrodsburg First Fin Bancorp KY 10/04/95 109,578 77,845 30,828 28.13
HFFC HF Financial Corp. SD 04/08/92 555,189 398,166 51,793 9.33
HFGI Harrington Financial Group IN 418,196 135,143 23,117 5.53
HFMD Home Federal Corp. MD 02/10/84 219,737 165,820 19,224 8.75
HFNC HFNC Financial Corp. NC 12/29/95 716,277 462,856 244,362 34.12
HFSA Hardin Bancorp, Inc. MO 09/29/95 86,949 66,091 14,932 17.17
HHFC Harvest Home Financial Corp. OH 10/10/94 76,399 58,226 12,769 16.71
HIFS Hingham Instit. for Savings MA 12/20/88 186,724 143,987 18,228 9.76
HMCI HomeCorp, Inc. IL 06/22/90 338,985 314,811 21,133 6.23
HMNF HMN Financial, Inc. MN 06/30/94 554,979 363,195 87,263 15.72
HNFC Hinsdale Financial Corp. IL 07/07/92 662,482 466,109 55,463 8.37
HOFL Home Financial Corp. FL 10/25/94 1,215,712 888,326 301,582 24.81
HOMF Home Federal Bancorp IN 01/23/88 630,015 489,573 51,517 8.18
HPBC Home Port Bancorp, Inc. MA 08/25/88 180,451 118,218 19,218 10.65
HRBF Harbor Federal Bancorp, Inc. MD 08/12/94 201,030 161,259 27,782 13.82
HRZB Horizon Financial Corp. WA 08/01/86 493,499 406,172 79,961 16.20
HSBK Hibernia Savings Bank, (The) MA 09/08/86 372,978 293,865 24,782 6.64
HTHR Hawthorne Financial Corp. CA 761,162 621,965 46,137 6.06
HVFD Haverfield Corporation OH 03/19/85 334,226 289,063 28,414 8.50
HWEN Home Financial Bancorp IN 07/02/96 39,426 28,726 3,410 8.65
HZFS Horizon Financial Svcs Corp. IA 06/30/94 73,464 54,759 8,390 11.42
</TABLE>
<TABLE>
<CAPTION>
Tangible Risk-Based NPAs + Loans One Year
Equity/ Capital/ 90+ Pst Due/ Return on Return on Cum Gap/
Tang Assets Risk-Weightd Assets Avg Assets Avg Equity Assets
Ticker Institution (%) Assets (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
GROV Grove Bank 6.36 11.06 0.70 0.87 13.91
GRTR Greater New York Savings Bank 7.90 11.64 8.83 0.73 9.63 (2.20)
GSBC Great Southern Bancorp, Inc. 10.00 11.77 2.36 1.75 17.28 12.83
GSFC Green Street Financial Corp. 35.07 78.46 0.20 6.16
GSLC Guaranty Financial Corp. 6.19 12.62 3.14 0.68 10.91
GTFN Great Financial Corporation 9.45 17.83 3.46 1.00 8.68
GTPS Great American Bancorp 27.85 0.19 0.70 2.44
GUPB GFSB Bancorp, Inc. 23.03 41.58 0.18 1.25 4.87
GWBC Gateway Bancorp, Inc. 24.86 80.81 0.31 1.05 4.05
GWF Great Western Financial 5.83 10.07 1.76 0.72 11.60 4.46
HALL Hallmark Capital Corp. 7.16 11.21 0.03 0.60 7.17 (13.66)
HARB Harbor Federal Savings Bk, MHC 8.10 15.16 0.57 1.18 13.57
HARL Harleysville Savings Bank 6.65 12.75 0.06 0.81 11.83 (9.37)
HARS Harris Savings Bank, MHC 8.27 13.71 0.82 0.46 3.94 (11.87)
HAVN Haven Bancorp, Inc. 6.03 12.65 1.02 0.74 11.42
HBBI Home Building Bancorp 13.94 21.15 0.27 0.41 2.86
HBFW Home Bancorp 15.50 28.18 0.04 0.84 4.99 (27.57)
HBNK Highland Federal Bank FSB 7.91 11.27 3.41 0.30 4.69
HBS Haywood Bancshares, Inc. 14.89 2.44 1.02 6.83
HEMT HF Bancorp, Inc. 0.26 2.31
HFFB Harrodsburg First Fin Bancorp 28.13 40.81 0.58 1.17 4.52
HFFC HF Financial Corp. 9.30 12.19 0.41 0.85 9.35 13.26
HFGI Harrington Financial Group 5.53 29.97 0.32 0.37 9.49
HFMD Home Federal Corp. 8.65 13.78 4.89 0.73 8.56
HFNC HFNC Financial Corp. 34.12 1.62
HFSA Hardin Bancorp, Inc. 17.17 32.08 0.15 0.76 4.25 (0.63)
HHFC Harvest Home Financial Corp. 16.71 0.19 0.75 4.14
HIFS Hingham Instit. for Savings 9.76 15.88 0.51 1.10 10.64 (8.55)
HMCI HomeCorp, Inc. 6.23 8.24 3.12 0.40 6.66 (7.27)
HMNF HMN Financial, Inc. 15.72 31.79 0.09 1.11 6.48 (4.54)
HNFC Hinsdale Financial Corp. 8.15 13.37 0.13 0.63 8.18 (16.85)
HOFL Home Financial Corp. 24.81 62.36 0.38 1.63 6.36
HOMF Home Federal Bancorp 7.90 11.75 0.48 1.23 15.14 (2.98)
HPBC Home Port Bancorp, Inc. 10.65 17.47 0.23 1.79 15.72 1.43
HRBF Harbor Federal Bancorp, Inc. 13.82 28.50 0.42 0.56 3.19 (2.39)
HRZB Horizon Financial Corp. 16.20 29.16 0.00 1.54 9.56 (36.32)
HSBK Hibernia Savings Bank, (The) 6.64 11.25 0.39 0.61 9.15 (11.51)
HTHR Hawthorne Financial Corp. 6.04 10.36 10.26 0.61 12.77 3.81
HVFD Haverfield Corporation 8.48 10.25 0.71 8.57 1.03
HWEN Home Financial Bancorp 8.65 19.88 1.03 0.82 8.77 11.49
HZFS Horizon Financial Svcs Corp. 11.42 0.53 4.38
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Tangible Risk-Based
Total Total Total Equity/ Equity/ Capital/
Assets Deposits Equity Assets Tang Assets Risk-Weightd
Ticker Institution State IPO Date ($000) ($000) ($000) (%) (%) Assets (%)
- ----- ----------- ----- -------- ------ ------ ------ --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. NJ 10/13/94 748,745 574,687 149,085 19.91 19.91 77.60
IFSB Independence Federal Savings DC 06/06/85 252,970 223,553 17,194 6.80 5.95 14.67
IFSL India Federal Corporation IN 02/04/87 742,269 564,217 70,283 9.47 8.87 11.71
INBI Industrial Bancorp OH 08/01/95 313,563 249,387 60,799 19.39 19.39 32.48
INCB India Community Bank, SB IN 12/15/94 90,603 76,953 11,471 12.66 12.66 18.10
IPSW Ipswich Savings Bank MA 05/26/93 150,962 121,586 8,694 5.76 5.76 11.41
IROQ Iroquois Bancorp NY 01/22/86 470,710 412,513 33,284 7.07 6.48 7.91
ISBF ISB Financial Corporation LA 04/07/95 686,549 515,309 117,545 17.12 16.71 23.05
ITLA Imperial Thrift and Loan CA 10/24/95 669,534 527,035 83,867 12.53 12.53 15.30
IWBK InterWest Bancorp, Inc. WA 1,413,926 887,385 96,338 6.81 6.64
JEBC Jefferson Bancorp, Inc. LA 08/18/94 265,594 227,495 36,060 13.58 13.58 40.58
JOAC Joachim Bancorp, Inc. MO 12/28/95 36,492 25,243 10,792 29.57 29.57 45.04
JSBA Jefferson Savings Bancorp MO 04/08/93 1,125,393 875,823 82,243 7.31 6.09 9.92
JSBF JSB Financial, Inc. NY 06/27/90 1,526,060 1,164,424 332,717 21.80 21.80 19.56
JXSB Jacksonville Savings Bank, MHC IL 04/21/95 143,044 124,268 16,931 11.84 11.84 16.55
JXVL Jacksonville Bancorp, Inc. TX 04/01/96 217,730 174,371 35,616 16.36 16.36 26.21
KFBI Klamath First Bancorp OR 10/05/95 629,943 393,982 161,804 25.69 25.69 44.79
KNK Kankakee Bancorp, Inc. IL 01/06/93 359,171 294,622 35,498 9.88 9.25 14.22
KSAV KS Bancorp, Inc. NC 12/30/93 93,536 75,990 13,835 14.79 14.78
KSBK KSB Bancorp, Inc. ME 06/24/93 132,533 108,005 9,044 6.82 6.35
KYF Kentucky First Bancorp, Inc. KY 08/29/95 88,296 51,778 19,225 21.77 21.77 37.05
LARK Landmark Bancshares, Inc. KS 03/28/94 200,469 147,353 33,050 16.49 16.49 32.66
LARL Laurel Capital Group, Inc. PA 02/20/87 196,947 164,683 21,086 10.71 10.71 20.78
LBCI Liberty Bancorp, Inc. IL 12/24/91 651,198 508,644 64,017 9.83 9.81 16.45
LBFI L & B Financial, Inc. TX 10/11/94 144,130 104,565 24,783 17.19 17.19 23.16
LFBI Little Falls Bancorp, Inc. NJ 01/05/96 282,232 237,515 43,813 15.52 14.49 29.20
LFCT Leader Financial Corp. TN 09/30/93 3,211,064 1,569,722 266,390 8.30 8.30 13.45
LFED Leeds Federal Savings Bk, MHC MD 05/02/94 266,658 217,222 43,610 16.35 16.35 39.12
LIFB Life Bancorp, Inc. VA 10/11/94 1,240,520 705,796 148,718 11.99 11.60 22.45
LISB Long Island Bancorp, Inc. NY 04/18/94 5,221,019 3,631,157 521,711 9.99 9.99 15.92
LOAN Horizon Bancorp TX 130,930 117,653 11,195 8.55 8.29 11.46
LOGN Logansport Financial Corp. IN 06/14/95 77,195 54,772 19,821 25.68 25.68 49.75
LONF London Financial Corporation OH 04/01/96 37,189 28,780 7,945 21.36 21.36 29.59
LSBI LSB Financial Corp. IN 02/03/95 172,006 114,364 16,588 9.64 9.64 12.83
LSBX Lawrence Savings Bank MA 05/02/86 332,956 237,768 25,255 7.59 7.59 15.43
LVSB Lakeview Financial NJ 12/22/93 455,155 353,893 45,287 9.95 7.82 15.70
LXMO Lexington B&L Financial Corp. MO 06/06/96 61,294 42,190 18,738 30.57 30.57 49.92
MAFB MAF Bancorp, Inc. IL 01/12/90 3,117,149 2,256,277 242,226 7.77 6.70 14.23
MARN Marion Capital Holdings IN 03/18/93 177,767 126,260 41,511 23.35 23.35 29.42
MASB MASSBANK Corp. MA 05/28/86 880,534 778,406 86,197 9.79 9.79 33.74
MBBC Monterey Bay Bancorp, Inc. CA 02/15/95 317,347 219,051 46,799 14.75 14.61 23.68
MBLF MBLA Financial Corp. MO 06/24/93 195,074 87,293 28,365 14.54 14.54 38.72
MBSP Mitchell Bancorp, Inc. NC 07/12/96 27,596 20,940 6,078 22.02 22.02 49.14
MCBN Mid-Coast Bancorp, Inc. ME 11/02/89 55,048 41,207 4,976 9.04 9.04 15.29
MCBS Mid Continent Bancshares Inc. KS 06/27/94 313,759 215,213 36,704 11.70 11.69 26.92
MDBK Medford Savings Bank MA 03/18/86 993,467 805,168 88,340 8.89 8.17 14.96
MECH Mechanics Savings Bank CT 06/26/96 727,720 644,483 68,260 9.38 9.38 15.65
MERI Meritrust Federal SB LA 228,419 207,996 17,338 7.59 7.59 18.32
MFBC MFB Corp. IN 03/25/94 210,559 153,962 37,691 17.90 17.90
MFCX Marshalltown Financial Corp. IA 03/31/94 125,308 105,043 19,563 15.61 15.61 35.16
<CAPTION>
NPAs + Loans One Year
90+ Pst Due/ Return on Return on Cum Gap/
Assets Avg Assets Avg Equity Assets
Ticker Institution State IPO Date (%) (%) (%) (%)
- ------ ----------- ----- -------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. NJ 10/13/94 0.07 1.05 4.99 (10.37)
IFSB Independence Federal Savings DC 06/06/85 0.00 0.43 6.58
IFSL India Federal Corporation IN 02/04/87 1.42 0.91 9.37 (11.21)
INBI Industrial Bancorp OH 08/01/95 0.47 1.57 7.13
INCB India Community Bank, SB IN 12/15/94 1.23 0.55 3.89 25.59
IPSW Ipswich Savings Bank MA 05/26/93 2.00 1.30 21.10 9.87
IROQ Iroquois Bancorp NY 01/22/86 1.17 0.96 13.57 2.19
ISBF ISB Financial Corporation LA 04/07/95 1.17 6.04
ITLA Imperial Thrift and Loan CA 10/24/95 2.62 1.10 12.12
IWBK InterWest Bancorp, Inc. WA 0.62 1.11 15.69
JEBC Jefferson Bancorp, Inc. LA 08/18/94 0.44 0.94 7.22 (17.18)
JOAC Joachim Bancorp, Inc. MO 12/28/95 0.29 0.74 3.07
JSBA Jefferson Savings Bancorp MO 04/08/93 0.93 0.63 9.07
JSBF JSB Financial, Inc. NY 06/27/90 1.30 1.63 7.45
JXSB Jacksonville Savings Bank, MHC IL 04/21/95 0.45 0.48 4.16 (19.92)
JXVL Jacksonville Bancorp, Inc. TX 04/01/96 0.82 0.93 7.63
KFBI Klamath First Bancorp OR 10/05/95 0.05 1.43 6.07 (20.88)
KNK Kankakee Bancorp, Inc. IL 01/06/93 0.44 0.56 5.37 8.11
KSAV KS Bancorp, Inc. NC 12/30/93 0.52 1.11 6.88
KSBK KSB Bancorp, Inc. ME 06/24/93 0.89 13.42 (12.60)
KYF Kentucky First Bancorp, Inc. KY 08/29/95 0.14 1.12 6.44
LARK Landmark Bancshares, Inc. KS 03/28/94 0.06 0.93 5.45 4.70
LARL Laurel Capital Group, Inc. PA 02/20/87 0.62 1.39 13.29
LBCI Liberty Bancorp, Inc. IL 12/24/91 0.06 0.55 5.61 3.41
LBFI L & B Financial, Inc. TX 10/11/94 0.42 1.02 5.70 (27.42)
LFBI Little Falls Bancorp, Inc. NJ 01/05/96 1.57
LFCT Leader Financial Corp. TN 09/30/93 15.32 1.48 18.45
LFED Leeds Federal Savings Bk, MHC MD 05/02/94 0.01 1.03 6.32
LIFB Life Bancorp, Inc. VA 10/11/94 0.41 0.87 6.25
LISB Long Island Bancorp, Inc. NY 04/18/94 1.16 0.93 8.78 6.31
LOAN Horizon Bancorp TX 0.20 1.47 16.04 21.18
LOGN Logansport Financial Corp. IN 06/14/95 0.39 1.50 5.55
LONF London Financial Corporation OH 04/01/96 0.21
LSBI LSB Financial Corp. IN 02/03/95 1.60 0.52 4.62
LSBX Lawrence Savings Bank MA 05/02/86 1.04 1.24 15.92
LVSB Lakeview Financial NJ 12/22/93 1.89 1.15 10.25
LXMO Lexington B&L Financial Corp. MO 06/06/96 0.98
MAFB MAF Bancorp, Inc. IL 01/12/90 0.44 0.88 14.60
MARN Marion Capital Holdings IN 03/18/93 1.07 1.41 5.86 16.21
MASB MASSBANK Corp. MA 05/28/86 0.29 1.06 10.40
MBBC Monterey Bay Bancorp, Inc. CA 02/15/95 0.61 0.32 2.16 (6.93)
MBLF MBLA Financial Corp. MO 06/24/93 0.33 0.70 4.83 16.10
MBSP Mitchell Bancorp, Inc. NC 07/12/96 1.41 0.92 4.24
MCBN Mid-Coast Bancorp, Inc. ME 11/02/89 0.64 0.60 6.65
MCBS Mid Continent Bancshares Inc. KS 06/27/94 0.10 1.27 9.59
MDBK Medford Savings Bank MA 03/18/86 0.51 1.04 11.68 (10.44)
MECH Mechanics Savings Bank CT 06/26/96 2.38
MERI Meritrust Federal SB LA 0.22 1.01 13.70 (6.60)
MFBC MFB Corp. IN 03/25/94 0.73 3.69
MFCX Marshalltown Financial Corp. IA 03/31/94 0.00 0.38 2.43 (15.14)
</TABLE>
<PAGE>
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Tangible
Total Total Total Equity/ Equity/
Assets Deposits Equity Assets Tang Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%) (%)
- ----- ----------- ----- -------- ------ -------- ----- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MFFC Milton Federal Financial Corp. OH 10/07/94 178,289 127,456 33,756 18.93 18.93
MFLR Mayflower Co-operative Bank MA 12/23/87 114,873 95,849 11,131 9.69 9.49
MFSB Mutual Bancompany MO 02/02/95 53,311 45,818 6,236 11.70 11.70
MFSL Maryland Federal Bancorp MD 06/02/87 1,128,449 781,528 94,654 8.39 8.27
MGNL Mag Bancorp, Inc. MS 03/13/91 1,308,658 922,370 125,819 9.61 9.14
MIDC MidConn Bank CT 09/11/86 367,212 315,857 34,915 9.51 8.10
MIFC Mid-Iowa Financial Corp. IA 10/14/92 115,260 78,705 10,807 9.38 9.36
MIVI Mississippi View Holding Co. MN 03/24/95 69,322 55,988 12,752 18.40 18.40
MLBC ML Bancorp, Inc. PA 08/11/94 1,876,018 842,459 141,239 7.53 7.25
MORG Morgan Financial Corp. CO 01/11/93 74,130 44,190 10,358 13.97 13.97
MSBB MSB Bancorp, Inc. NY 09/03/92 840,552 756,996 69,019 8.21 4.26
MSBF MSB Financial, Inc. MI 02/06/95 60,130 40,452 12,594 20.94 20.94
MSBK Mutual Savings Bank, FSB MI 07/17/92 680,033 413,660 38,616 5.68 5.68
MSEA Metropolitan Bancorp WA 01/09/90 761,014 424,031 51,166 6.72 6.14
MWBI Midwest Bancshares, Inc. IA 11/12/92 138,628 100,258 9,244 6.67 6.67
MWBX MetroWest Bank MA 10/10/86 490,130 423,305 36,997 7.55 7.55
MWFD Midwest Federal Financial WI 07/08/92 187,601 151,228 16,901 9.01 8.65
SB North American Savings Bank MO 09/27/85 740,298 530,697 50,380 6.81 6.57
NBSI North Bancshares, Inc. IL 12/21/93 119,436 75,547 18,514 15.50 15.50
NEBC Northeast Bancorp ME 08/19/87 218,187 146,618 18,509 8.48 7.36
NEIB Northeast India Bancorp IN 06/28/95 154,128 74,240 29,125 18.90 18.90
NFSL New n Savings Bank, FSB GA 03/01/86 162,199 131,717 20,752 12.79 12.74
NHSL NHS Financial, Inc. CA 284,191 225,818 25,033 8.81 8.79
NHTB New Hampshire Thrift Bncshrs NH 05/22/86 258,526 200,303 19,475 7.53 7.53
NMSB NewMil Bancorp, Inc. CT 02/01/86 309,363 259,267 31,892 10.31 10.31
NSBK North Side Savings Bank NY 04/15/86 1,654,624 1,225,179 123,531 7.47 7.40
NSLB NS&L Bancorp, Inc. MO 06/08/95 57,288 42,997 13,351 23.31 23.31
NSSB Norwich Financial Corp. CT 11/14/86 731,193 616,801 73,269 10.02 9.13
NSSY Norwalk Savings Society CT 06/16/94 609,522 426,316 44,350 7.28 7.28
NTMG Nutmeg Federal S&LA CT 91,158 77,999 5,672 6.22 6.22
NWEQ Northwest Equity Corp. WI 10/11/94 91,804 59,835 11,720 12.77 12.77
NWSB Northwest Savings Bank, MHC PA 11/07/94 1,877,529 1,450,047 190,651 10.15 9.69
NYB New York Bancorp Inc. NY 01/28/88 2,918,120 1,746,975 158,374 5.43 5.43
OCFC Ocean Financial Corp. NJ 07/03/96 1,191,812 939,147 92,088 7.73 7.73
OFCP Ottawa Financial Corp. MI 08/19/94 782,145 601,747 80,338 10.27 8.41
OHSL OHSL Financial Corp. OH 02/10/93 209,037 165,035 25,494 12.20 12.20
OSBF OSB Financial Corp. WI 07/01/92 250,003 161,415 31,400 12.56 12.56
PALM Palfed, Inc. SC 12/15/85 638,002 517,668 53,666 8.41 8.05
PBCI Pamrapo Bancorp, Inc. NJ 11/14/89 365,553 302,540 56,543 15.47 15.36
PBCT People's Bank, MHC CT 07/06/88 7,441,500 5,058,800 580,300 7.80 7.79
PBIX Patriot Bank Corp. PA 12/04/95 417,746 218,688 54,003 12.93 12.93
PBKB People's Bancshares, Inc. MA 10/23/86 524,443 330,399 27,772 5.30 5.04
PBNB People's Savings Financial Cp. CT 08/20/86 437,034 354,606 44,232 10.12 9.46
PCBC Perry County Financial Corp. MO 02/13/95 80,394 62,522 15,088 18.77 18.77
PCCI Pacific Crest Capital CA 290,443 264,780 23,423 8.06 8.06
<CAPTION>
Risk-Based NPAs + Loans One Year
Capital/ 90+ Pst Due/ Return on Return on Cum Gap/
Risk-Weightd Assets Avg Assets Avg Equity Assets
Ticker Institution Assets (%) (%) (%) (%) (%)
- ----- ----------- ------------ ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MFFC Milton Federal Financial Corp. OH 10/07/94 31.77 0.40 1.04 4.80
MFLR Mayflower Co-operative Bank MA 12/23/87 16.15 1.13 0.91 9.01 (25.71)
MFSB Mutual Bancompany MO 02/02/95 23.20 0.01 0.20 1.84
MFSL Maryland Federal Bancorp MD 06/02/87 14.60 0.48 0.79 9.60 (30.74)
MGNL Mag Bancorp, Inc. MS 03/13/91 14.74 4.01 1.71 17.51 7.49
MIDC MidConn Bank CT 09/11/86 13.85 2.14 0.37 3.87 (3.68)
MIFC Mid-Iowa Financial Corp. IA 10/14/92 20.30 0.05 0.93 10.00 (3.02)
MIVI Mississippi View Holding Co. MN 03/24/95 31.77 0.51 1.31 6.73
MLBC ML Bancorp, Inc. PA 08/11/94 13.98 0.50 0.72 8.30 (19.46)
MORG Morgan Financial Corp. CO 01/11/93 26.33 0.35 1.02 6.82
MSBB MSB Bancorp, Inc. NY 09/03/92 0.63 0.44 5.36
MSBF MSB Financial, Inc. MI 02/06/95 24.47 0.86 1.83 7.66
MSBK Mutual Savings Bank, FSB MI 07/17/92 16.54 0.12 0.01 0.18 (19.63)
MSEA Metropolitan Bancorp WA 01/09/90 17.01 0.83 12.23
MWBI Midwest Bancshares, Inc. IA 11/12/92 15.03 0.28 1.01 14.64 (9.52)
MWBX MetroWest Bank MA 10/10/86 10.19 2.13 1.30 17.23 (9.16)
MWFD Midwest Federal Financial WI 07/08/92 11.92 0.19 1.28 13.41
SB North American Savings Bank MO 09/27/85 10.88 3.12 1.26 17.33
NBSI North Bancshares, Inc. IL 12/21/93 40.54 0.00 0.59 3.19
NEBC Northeast Bancorp ME 08/19/87 12.60 0.68 7.97
NEIB Northeast India Bancorp IN 06/28/95 21.73 0.25 1.19 5.46
NFSL New n Savings Bank, FSB GA 03/01/86 1.26 2.25 19.85
NHSL NHS Financial, Inc. CA 13.71 2.27 0.45 5.34
NHTB New Hampshire Thrift Bncshrs NH 05/22/86 12.76 1.41 0.65 8.48
NMSB NewMil Bancorp, Inc. CT 02/01/86 19.66 2.09 0.75 6.71 (10.11)
NSBK North Side Savings Bank NY 04/15/86 17.29 0.32 1.19 15.97
NSLB NS&L Bancorp, Inc. MO 06/08/95 49.39 0.02 0.97 4.08
NSSB Norwich Financial Corp. CT 11/14/86 13.75 1.71 0.83 7.62
NSSY Norwalk Savings Society CT 06/16/94 14.59 2.17 0.81 9.66 (11.31)
NTMG Nutmeg Federal S&LA CT 9.83 0.67 10.72
NWEQ Northwest Equity Corp. WI 10/11/94 12.26 0.92 1.00 6.91 (4.97)
NWSB Northwest Savings Bank, MHC PA 11/07/94 18.61 0.81 1.05 9.48 (13.00)
NYB New York Bancorp Inc. NY 01/28/88 10.27 1.38 1.27 21.77 (13.69)
OCFC Ocean Financial Corp. NJ 07/03/96 19.28 0.94
OFCP Ottawa Financial Corp. MI 08/19/94 10.27 0.20 0.91 5.72
OHSL OHSL Financial Corp. OH 02/10/93 19.99 0.12 0.95 7.55
OSBF OSB Financial Corp. WI 07/01/92 23.31 0.22 0.21 1.63
PALM Palfed, Inc. SC 12/15/85 10.35 3.77 0.69 8.53
PBCI Pamrapo Bancorp, Inc. NJ 11/14/89 25.96 3.38 1.34 8.52
PBCT People's Bank, MHC CT 07/06/88 10.20 1.37 1.13 14.14
PBIX Patriot Bank Corp. PA 12/04/95 26.46 0.13 0.63 4.91 (10.34)
PBKB People's Bancshares, Inc. MA 10/23/86 10.73 1.12 0.79 13.08
PBNB People's Savings Financial Cp. CT 08/20/86 18.56 0.47 0.97 8.89 (12.52)
PCBC Perry County Financial Corp. MO 02/13/95 78.76 0.88 4.36
PCCI Pacific Crest Capital CA 10.90 2.76 1.31 15.81 (16.21)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT I-A
ALL PUBLICLY TRADED THRIFTS
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Tangible
Total Total Total Equity/ Equity/
Assets Deposits Equity Assets Tang Assets
Ticker Institution State IPO Date ($000) ($000) ($000) (%) (%)
- ------ ----------- ----- -------- ------ ------ ------ --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PDB Piedmont Bancorp, Inc. NC 12/08/95 128,711 73,361 37,050 28.79 28.79
PEEK Peekskill Financial Corp. NY 12/29/95 191,323 128,304 59,774 31.24 31.24
PERM Permanent Bancorp, Inc. IN 04/04/94 411,213 273,852 40,231 9.78 9.67
PETE Primary Bank NH 10/14/93 408,086 304,231 25,052 6.14 6.12
PFDC Peoples Bancorp IN 07/07/87 277,958 233,416 43,298 15.58 15.58
PFED Park Bancorp, Inc. IL 08/12/96 155,216 133,079 17,658 11.38 11.38
PFFB PFF Bancorp, Inc. CA 03/29/96 2,146,293 1,660,654 290,480 13.53 13.40
PFFC Peoples Financial Corp. OH 09/13/96 78,252 67,543 10,080 12.88 12.88
PFNC Progress Financial Corporation PA 07/18/83 347,858 295,004 19,508 5.61 5.57
PFSB PennFed Financial Services, Inc NJ 07/15/94 1,086,524 836,416 90,564 8.34 6.75
PFSL Pocahontas FS&LA, MHC AR 04/05/94 377,236 114,114 22,374 5.93 5.93
PHBK Peoples Heritage Finl Group ME 12/04/86 4,371,709 3,383,083 366,260 8.38 7.56
PHFC Pittsburgh Home Financial Corp. PA 04/01/96 184,002 114,881 30,406 16.52 16.52
PKPS Poughkeepsie Savings Bank, FSB NY 11/19/85 840,491 543,365 70,958 8.44 8.44
PLE Pin cle Bank AL 12/17/86 186,475 165,234 15,165 8.13 7.87
PMFI Perpetual Midwest Financial IA 03/31/94 383,273 261,497 35,588 9.29 9.29
POBS Portsmouth Bank Shares NH 02/09/88 266,877 197,475 66,763 25.02 25.02
PRBC Prestige Bancorp, Inc. PA 06/27/96 102,609 82,629 15,273 14.88 14.88
PROV Provident Financial Holdings CA 06/28/96 567,186 486,585 37,323 6.58 6.58
PSAB Prime Bancorp, Inc. PA 11/21/88 644,560 499,781 58,048 9.01 8.49
PSBK Progressive Bank, Inc. NY 08/01/84 901,690 821,781 71,839 7.97 7.00
PSSB Palm Springs Savings Bank CA 187,327 170,755 11,992 6.40 6.40
PTRS Potters Financial Corp. OH 12/31/93 114,714 100,594 10,594 9.24 9.24
PULB Pulaski Bank, Savings Bk, MHC MO 05/11/94 179,457 149,732 22,881 12.75 12.75
PULS Pulse Bancorp NJ 09/18/86 505,034 398,099 39,338 7.79 7.79
PVFC PVF Capital Corp. OH 12/30/92 318,100 270,638 21,325 6.70 6.70
PVSA Parkvale Financial Corporation PA 07/16/87 919,242 807,087 69,765 7.59 7.56
PWBC PennFirst Bancorp, Inc. PA 06/13/90 696,467 335,648 48,456 6.96 6.33
PWBK Pennwood Savings Bank PA 07/15/96 42,366 37,483 4,081 9.63 9.63
QCBC Quaker City Bancorp, Inc. CA 12/30/93 725,085 512,517 67,926 9.37 9.33
QCFB QCF Bancorp, Inc. MN 04/03/95 145,608 105,083 31,760 21.81 21.81
QCSB Queens County Bancorp, Inc. NY 11/23/93 1,302,281 977,042 215,971 16.58 16.58
RARB Raritan Bancorp Inc. NJ 03/01/87 344,710 313,682 25,388 7.37 7.20
RCSB RCSB Financial Inc. NY 04/29/86 4,048,684 2,337,884 349,590 8.63 8.42
REDF RedFed Bancorp Inc. CA 04/08/94 840,142 762,203 49,425 5.88 5.88
RELI Reliance Bancshares, Inc. WI 04/19/96 47,752 18,200 29,348 61.46
RELY Reliance Bancorp, Inc. NY 03/31/94 1,782,550 1,345,626 153,619 8.62 6.01
RFED Roosevelt Financial Group MO 01/23/87 9,327,772 4,995,371 516,317 5.54 5.30
ROSE TR Financial Corp. NY 06/29/93 3,073,458 2,165,974 190,929 6.21 6.21
RVSB Riverview Savings Bank, MHC WA 10/26/93 213,868 159,206 23,567 11.02 9.94
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 126,210 25,639 13.01 13.01
SBFL SB of the Finger Lakes, MHC NY 11/11/94 197,438 147,701 20,189 10.23 10.23
SCCB S. Caroli Community Bancshrs SC 07/07/94 44,161 31,274 12,309 27.87 27.87
SCSL Suncoast Savings and Loan FL 07/30/85 402,569 301,201 25,538 6.34 6.33
SECP Security Capital Corporation WI 01/03/94 3,437,317 2,200,411 559,048 16.26 16.26
SFB Standard Federal Bancorp MI 01/21/87 15,239,983 10,932,352 962,935 6.32 5.02
<CAPTION>
Risk-Based NPAs + Loans One Year
Capital/ 90+ Past Due/ Return on Return on Cum Gap/
Risk-Weighted Assets Avg Assets Avg Equity Assets
Ticker Institution State IPO Date Assets (%) (%) (%) (%) (%)
- ------ ----------- ----- -------- ---------- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PDB Piedmont Bancorp, Inc. NC 12/08/95 35.90 0.82 1.46 6.69 1.19
PEEK Peekskill Financial Corp. NY 12/29/95 103.16 0.65 1.27 5.09
PERM Permanent Bancorp, Inc. IN 04/04/94 19.78 1.66 0.38 3.47 (8.04)
PETE Primary Bank NH 10/14/93 11.65 1.70 (0.03) (0.43) (9.39)
PFDC Peoples Bancorp IN 07/07/87 27.67 0.34 1.45 9.51
PFED Park Bancorp, Inc. IL 08/12/96 36.56 0.17
PFFB PFF Bancorp, Inc. CA 03/29/96 17.99 2.53 0.22 2.74 11.83
PFFC Peoples Financial Corp. OH 09/13/96 30.92
PFNC Progress Financial Corporation PA 07/18/83 9.29 1.48 0.91 18.78
PFSB PennFed Financial Services, Inc NJ 07/15/94 13.05 0.88 0.82 8.36 (13.97)
PFSL Pocahontas FS&LA, MHC AR 04/05/94 15.51 0.37 0.56 9.42
PHBK Peoples Heritage Finl Group ME 12/04/86 1.14 1.15 13.42
PHFC Pittsburgh Home Financial Corp. PA 04/01/96 30.71 1.31 0.51 6.53
PKPS Poughkeepsie Savings Bank, FSB NY 11/19/85 10.65 2.14 1.70 21.07 (4.46)
PLE Pin cle Bank AL 12/17/86 0.18 0.85 10.96
PMFI Perpetual Midwest Financial IA 03/31/94 12.02 0.39 0.41 4.16
POBS Portsmouth Bank Shares NH 02/09/88 0.21 2.30 9.38 13.65
PRBC Prestige Bancorp, Inc. PA 06/27/96 34.99 0.35 1.37
PROV Provident Financial Holdings CA 06/28/96 10.00 2.22 (0.72) (9.81)
PSAB Prime Bancorp, Inc. PA 11/21/88 11.58 1.07 1.02 10.90
PSBK Progressive Bank, Inc. NY 08/01/84 13.28 1.05 1.10 12.30 (6.56)
PSSB Palm Springs Savings Bank CA 10.39 2.95 0.64 10.87
PTRS Potters Financial Corp. OH 12/31/93 21.74 2.33 0.51 5.27
PULB Pulaski Bank, Savings Bk, MHC MO 05/11/94 29.59 0.88 7.15
PULS Pulse Bancorp NJ 09/18/86 24.05 1.33 1.19 10.28
PVFC PVF Capital Corp. OH 12/30/92 1.23 1.13 17.86
PVSA Parkvale Financial Corporation PA 07/16/87 13.60 0.14 1.06 15.13 0.24
PWBC PennFirst Bancorp, Inc. PA 06/13/90 17.18 0.58 0.62 7.68 (14.42)
PWBK Pennwood Savings Bank PA 07/15/96 17.18 2.65
QCBC Quaker City Bancorp, Inc. CA 12/30/93 11.53 2.06 0.53 5.25
QCFB QCF Bancorp, Inc. MN 04/03/95 35.65 0.14 1.51 7.61
QCSB Queens County Bancorp, Inc. NY 11/23/93 21.56 0.65 1.82 10.45 22.34
RARB Raritan Bancorp Inc. NJ 03/01/87 13.18 0.81 0.87 11.45 (5.22)
RCSB RCSB Financial Inc. NY 04/29/86 11.88 0.78 1.01 10.78 (6.24)
REDF RedFed Bancorp Inc. CA 04/08/94 7.53 4.43 (0.22) (3.88)
RELI Reliance Bancshares, Inc. WI 04/19/96 1.28 2.64
RELY Reliance Bancorp, Inc. NY 03/31/94 14.06 0.84 0.83 7.61 1.97
RFED Roosevelt Financial Group MO 01/23/87 14.03 0.85 0.64 12.31
ROSE TR Financial Corp. NY 06/29/93 16.58 0.70 0.92 13.93 (12.62)
RVSB Riverview Savings Bank, MHC WA 10/26/93 21.02 0.22 1.32 12.07
SBCN Suburban Bancorporation, Inc. OH 09/30/93 19.65 0.20 0.39 2.95
SBFL SB of the Finger Lakes, MHC NY 11/11/94 24.07 1.42
SCCB S. Caroli Community Bancshrs SC 07/07/94 1.44 1.11 3.80
SCSL Suncoast Savings and Loan FL 07/30/85 0.56 9.55
SECP Security Capital Corporation WI 01/03/94 0.11 0.99 5.85
SFB Standard Federal Bancorp MI 01/21/87 10.63 0.54 0.95 14.09 (1.34)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/ Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. NASDAQ 110.26 32.500 13.66 125.14 143.81 0.985
ABBK Abington Savings Bank NASDAQ 31.84 16.875 18.96 101.29 114.72 2.370
ABCW Anchor BanCorp Wisconsin NASDAQ 169.38 35.000 12.03 143.68 147.49 1.429
AFCB Affiliated Community Bancorp NASDAQ 102.25 20.125 104.27 105.04 2.385
AFFFZ America First Financial Fund NASDAQ 181.82 30.250 9.63 116.98 119.52 5.289
AHCI Ambanc Holding Co., Inc. NASDAQ 51.85 10.625 76.99 76.99 0.000
AHM Ahmanson & Company (H.F.) NYSE 2,813.69 26.250 7.77 132.71 142.12 3.352
ALBC Albion Banc Corp. NASDAQ 4.09 16.500 30.56 69.71 69.71 1.860
ALBK ALBANK Financial Corporation NASDAQ 380.37 28.625 13.76 120.12 135.99 1.677
AMFB American Federal Bank, FSB NASDAQ 194.04 17.750 11.75 180.75 196.13 2.254
AMFC AMB Financial Corp. NASDAQ 12.51 11.125 77.15 77.15 2.157
A Acadia Bancshares, Inc. AMSE 37.21 13.625 0.000
ANBK American tio l Bancorp NASDAQ 43.11 12.000 95.62 95.62 0.000
ANDB Andover Bancorp, Inc. NASDAQ 105.86 24.875 9.75 119.19 119.19 2.412
ASBI Ameria Bancorp NASDAQ 44.59 13.500 13.78 99.93 100.07 4.148
ASBP ASB Financial Corp. NASDAQ 24.64 14.375 20.83 90.24 90.24 2.783
ASFC Astoria Financial Corporation NASDAQ 594.20 27.625 12.12 105.80 130.06 1.593
ATSB AmTrust Capital Corp. NASDAQ 5.17 9.125 25.35 68.51 69.23 0.000
AVND Avondale Financial Corp. NASDAQ 52.24 14.500 15.59 88.79 88.79 0.000
BANC BankAtlantic Bancorp, Inc. NASDAQ 196.70 13.250 10.77 139.62 151.08 1.099
BDJI First Federal Bancorporation NASDAQ 11.77 15.125 17.19 84.59 84.59 0.000
BFD BostonFed Bancorp, Inc. AMSE 85.67 13.000 89.35 89.35 1.538
BFSB Bedford Bancshares, Inc. NASDAQ 19.74 17.000 12.88 100.24 100.24 2.588
BFSI BFS Bankorp, Inc. NASDAQ 89.13 54.500 9.14 183.32 183.32 0.000
BKC American Bank of Connecticut AMSE 59.74 26.125 10.17 132.61 139.56 5.206
BKCO Bankers Corp. NASDAQ 223.59 18.063 10.88 121.23 123.72 3.543
BKCT Bancorp Connecticut, Inc. NASDAQ 60.91 22.875 14.21 141.90 141.90 3.322
BKU BankUnited Financial Corp. NASDAQ 44.29 8.125 5.80 102.20 108.19 0.000
BNKU Bank United Corp. NASDAQ 253.31 24.125 NM 0.000
BPLS Bank Plus Corp. NASDAQ 191.55 10.500 NM 109.95 110.18 0.000
BRFC Bridgeville Savings Bank NASDAQ 17.14 15.250 24.21 107.09 107.09 2.098
BSBC Branford Savings Bank NASDAQ 17.48 3.375 14.67 141.81 141.81 0.000
BVFS Bay View Capital Corp. NASDAQ 253.03 36.750 126.72 122.75 139.10 1.633
BWFC Bank West Financial Corp. NASDAQ 23.45 10.750 23.89 89.66 89.66 2.605
BYFC Broadway Financial Corp. NASDAQ 8.59 9.625 65.88 65.88 2.078
CAFI Camco Financial Corporation NASDAQ 38.92 18.750 9.24 132.70 132.70 2.336
CAL Cal Fed Bancorp, Inc. NYSE 1,136.11 23.000 11.17 166.31 166.31 0.000
CAPS Capital Savings Bancorp, Inc. NASDAQ 19.23 20.500 11.33 100.79 100.79 1.756
CARV Carver Federal Savings Bank NASDAQ 17.94 7.750 22.14 51.56 54.08 0.000
CASB Cascade Financial Corp. NASDAQ 33.50 16.375 16.54 161.01 161.01 0.000
CASH First Midwest Financial, Inc. NASDAQ 41.57 23.375 13.36 106.54 114.08 1.882
CATB Catskill Financial Corp. NASDAQ 69.66 12.250 79.44 79.44 0.000
CBCI Calumet Bancorp, Inc. NASDAQ 66.83 28.125 12.02 84.64 84.64 0.000
CBCO CB Bancorp, Inc. NASDAQ 23.80 20.250 9.64 123.18 123.18 6.420
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/ Price Change over:
Shares Out LTM Core EPS Assets Shares ------------------
Ticker Institution Exchange (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- --- ----------- --------- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. NASDAQ 0.91 15.19 11.07 3,392,694 (2.26) (3.35)
ABBK Abington Savings Bank NASDAQ 2.00 26.79 6.59 1,887,000 (2.17) 10.66
ABCW Anchor BanCorp Wisconsin NASDAQ 1.06 12.46 9.30 4,839,392 (1.06) 3.32
AFCB Affiliated Community Bancorp NASDAQ 6.15 10.39 5,080,666 1.90 16.67
AFFFZ America First Financial Fund NASDAQ 0.76 9.70 8.00 6,010,589 4.31 14.15
AHCI Ambanc Holding Co., Inc. NASDAQ 3.01 12.55 5,422,250 7.59 11.14
AHM Ahmanson & Company (H.F.) NYSE 1.19 33.65 5.68 107,188,014 (0.94) 0.00
ALBC Albion Banc Corp. NASDAQ 0.63 31.13 7.20 252,314 (2.94) 0.00
ALBK ALBANK Financial Corporation NASDAQ 1.63 13.76 11.44 13,287,933 2.69 8.02
AMFB American Federal Bank, FSB NASDAQ 1.08 10.82 14.04 10,931,985 5.19 14.52
AMFC AMB Fi ncial Corp. NASDAQ 0.61 15.75 1,124,125 7.23 9.88
A Acadia Bancshares, Inc. AMSE 10.10
ANBK American tio l Bancorp NASDAQ 6.82 9.84 3,781,475 17.07 17.07
ANDB Andover Bancorp, Inc. NASDAQ 2.96 10.19 9.00 4,249,839 1.02 (4.78)
ASBI Ameria Bancorp NASDAQ 0.31 14.06 11.09 3,303,130 0.00 1.89
ASBP ASB Financial Corp. NASDAQ 0.16 20.83 21.81 1,713,960 0.88 0.88
ASFC Astoria Financial Corporation NASDAQ 1.92 13.28 8.39 21,509,444 3.76 2.31
ATSB AmTrust Capital Corp. NASDAQ 0.38 101.39 7.08 566,964 2.82 (1.35)
AVND Avondale Financial Corp. NASDAQ 2.01 21.64 8.81 3,602,968 4.50 9.43
BANC BankAtlantic Bancorp, Inc. NASDAQ 1.09 13.95 10.01 14,926,166 9.28 28.64
BDJI First Federal Bancorporation NASDAQ 2.62 17.19 11.22 778,406 10.00 16.35
BFD BostonFed Bancorp, Inc. AMSE 1.52 11.01 6,589,617 4.00 6.12
BFSB Bedford Bancshares, Inc. NASDAQ 0.72 12.88 16.21 1,161,169 2.26 3.03
BFSI BFS Bankorp, Inc. NASDAQ 1.77 9.46 14.35 1,635,488 30.54 45.33
BKC American Bank of Connecticut AMSE 0.27 16.64 11.24 2,286,750 (3.24) 7.18
BKCO Bankers Corp. NASDAQ 1.11 10.44 10.14 12,398,491 0.35 3.96
BKCT Bancorp Connecticut, Inc. NASDAQ 0.45 14.66 14.98 2,656,781 (3.68) 12.96
BKU BankUnited Financial Corp. NASDAQ 1.39 NM 5.78 5,702,523 10.17 1.56
BNKU Bank United Corp. NASDAQ NM 0.52
BPLS Bank Plus Corp. NASDAQ 1.10 NM 5.81 18,242,465 6.33 16.67
BRFC Bridgeville Savings Bank NASDAQ 0.12 24.21 30.55 1,124,125 0.00 10.91
BSBC Branford Savings Bank NASDAQ 0.58 14.67 12.43 6,559,396 (3.57) 0.00
BVFS Bay View Capital Corp. NASDAQ 3.80 23.71 7.47 6,885,242 (2.65) 8.89
BWFC Bank West Financial Corp. NASDAQ 5.58 41.35 17.73 2,296,040 (9.47) (1.15)
BYFC Broadway Financial Corp. NASDAQ 0.44 7.68 892,688 (3.75) (3.75)
CAFI Camco Financial Corporation NASDAQ 0.19 11.79 11.04 2,075,641 4.17 0.32
CAL Cal Fed Bancorp, Inc. NYSE 2.57 12.78 8.09 49,395,947 1.66 30.50
CAPS Capital Savings Bancorp, Inc. NASDAQ 1.77 11.33 10.52 1,039,079 5.13 13.89
CARV Carver Federal Savings Bank NASDAQ 1.17 24.22 4.95 2,314,375 (6.06) 3.33
CASB Cascade Financial Corp. NASDAQ 0.09 29.24 10.02 2,045,894 2.34 (0.76)
CASH First Midwest Financial, Inc. NASDAQ 0.11 13.51 12.15 1,778,577 (3.61) 3.89
CATB Catskill Financial Corp. NASDAQ 2.41 24.59 5,686,750 13.95 20.99
CBCI Calumet Bancorp, Inc. NASDAQ 1.22 12.02 13.61 2,422,678 1.35 0.23
CBCO CB Bancorp, Inc. NASDAQ 2.89 9.74 12.16 1,175,226 15.71 14.08
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/ Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares NASDAQ 24.80 12.500 13.16 96.15 96.15 2.720
CBK Citizens First Financial Corp. AMSE 32.40 11.500 79.70 79.70 0.000
CBNH Community Bankshares, Inc. NASDAQ 46.94 19.375 11.20 124.28 124.28 3.097
CBSA Coastal Bancorp, Inc. NASDAQ 97.39 19.625 9.17 103.89 125.56 2.038
CBSB Charter Financial, Inc. NASDAQ 61.14 12.938 98.91 106.31 1.855
CCFH CCF Holding Company NASDAQ 13.17 12.938 87.07 87.07 3.092
CEBK Central Co-Operative Bank NASDAQ 30.95 15.750 21.00 98.81 112.82 0.000
CENF CENFED Financial Corp. NASDAQ 122.23 24.250 10.78 114.01 114.28 1.485
CFB Commercial Federal Corporation NYSE 574.53 41.500 11.13 151.52 168.08 0.964
CFCP Coastal Financial Corp. NASDAQ 71.31 20.750 16.73 258.08 258.08 2.120
CFCX Center Financial Corporation NASDAQ 377.17 25.000 13.66 160.46 171.00 1.120
CFFC Community Financial Corp. NASDAQ 27.35 21.500 13.27 122.65 122.65 2.419
CFHC California Financial Holding NASDAQ 106.67 22.750 14.87 122.71 123.44 1.934
CFSB CFSB Bancorp, Inc. NASDAQ 92.85 19.000 13.10 143.40 143.40 2.526
CFTP Community Federal Bancorp NASDAQ 63.07 13.625 94.82 94.82 2.202
CFX CFX Corporation AMSE 114.44 15.125 12.40 123.27 137.38 5.289
CIBI Community Investors Bancorp NASDAQ 11.40 16.250 12.90 95.98 95.98 2.462
CJFC Central Jersey Financial NASDAQ 90.39 33.875 17.92 161.46 172.92 3.306
CKFB CKF Bancorp, Inc. NASDAQ 18.53 19.500 26.35 112.46 112.46 2.256
CLAS Classic Bancshares, Inc. NASDAQ 15.54 11.750 79.66 79.66 2.043
CMRN Cameron Financial Corp NASDAQ 42.04 14.750 14.75 90.71 90.71 1.898
CMSB Commonwealth Bancorp, Inc. NASDAQ 210.94 11.750 92.74 121.76 2.121
CMSV Community Savings, MHC NASDAQ 81.75 16.750 15.51 108.91 108.91 4.776
CNIT CENIT Bancorp, Inc. NASDAQ 62.52 38.750 20.83 131.00 135.87 2.065
CNSB CNS Bancorp, Inc. NASDAQ 21.08 12.750 87.09 87.09 0.000
CNSK Covent Bank for Savings NASDAQ 26.46 13.500 16.88 156.07 156.07 0.000
COFD Collective Bancorp, Inc. NASDAQ 557.74 27.375 10.25 153.10 164.02 3.653
COFI Charter One Financial NASDAQ 1,754.54 37.125 34.06 187.78 203.20 2.360
COOP Cooperative Bankshares, Inc. NASDAQ 27.22 18.250 32.02 92.31 104.58 0.000
CRCL Circle Financial Corp. NASDAQ 26.81 37.500 24.04 108.38 124.21 1.813
CRZY Crazy Woman Creek Bancorp NASDAQ 12.03 11.375 77.86 77.86 3.516
CSA Coast Savings Financial NYSE 585.38 31.500 14.65 136.19 138.34 0.000
CSBF CSB Financial Group, Inc. NASDAQ 9.96 9.625 77.62 77.62 0.000
CTBK Center Banks Incorporated NASDAQ 13.10 13.875 10.76 84.55 84.55 1.730
CTZN CitFed Bancorp, Inc. NASDAQ 216.27 38.000 12.79 123.38 141.53 0.842
CVAL Chester Valley Bancorp Inc. NASDAQ 32.14 19.500 13.27 125.73 125.73 2.150
CZF CitiSave Financial Corp AMSE 13.63 14.125 99.05 99.12 2.124
DFIN Damen Financial Corp. NASDAQ 44.53 11.875 85.74 85.74 2.021
DIBK Dime Financial Corp. NASDAQ 84.18 16.500 7.78 148.92 156.10 1.939
DIME Dime Community Bancorp, Inc. NASDAQ 198.21 13.625 93.00 107.20 0.000
DME Dime Bancorp, Inc. NYSE 1,368.72 12.875 17.88 138.00 139.34 0.000
DNFC D & N Financial Corp. NASDAQ 105.44 13.938 7.96 135.32 137.19 0.000
DSBC DS Bancor, Inc. NASDAQ 112.55 37.125 13.16 133.59 137.86 0.646
DSL Downey Financial Corp. NYSE 413.71 24.375 12.76 105.57 107.38 1.969
EBCP Eastern Bancorp NASDAQ 73.03 20.000 12.66 112.55 119.19 2.800
EBSI Eagle Bancshares NASDAQ 72.84 16.000 10.88 127.29 127.29 3.750
EFBI Enterprise Federal Bancorp NASDAQ 28.52 13.750 14.63 90.28 90.46 0.000
</TABLE>
<TABLE>
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/ Price Change over:
Shares Out LTM Core EPS Assets Shares -----------------
Ticker Institution (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- --- --- --- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares 0.28 13.44 10.63 1,983,722 (5.66) (7.41)
CBK Citizens First Financial Corp. 1.87 13.07 2,817,500 6.98 15.00
CBNH Community Bankshares, Inc. 0.29 13.55 8.59 2,422,864 1.97 9.15
CBSA Coastal Bancorp, Inc. 5.44 9.53 3.48 4,962,344 7.53 8.28
CBSB Charter Financial, Inc. 1.41 17.18 4,874,380 12.50 13.74
CCFH CCF Holding Company 2.43 18.44 1,130,738 4.55 5.62
CEBK Central Co-Operative Bank 0.82 19.69 9.70 1,965,000 (3.08) (7.35)
CENF CENFED Financial Corp. 0.33 14.88 5.69 5,040,437 7.78 12.79
CFB Commercial Federal Corporation 1.69 11.25 9.48 15,089,701 8.14 9.93
CFCP Coastal Financial Corp. 0.15 19.04 15.75 3,436,403 1.22 25.76
CFCX Center Financial Corporation 1.44 21.74 9.34 15,013,864 1.01 3.56
CFFC Community Financial Corp. 4.27 13.27 17.22 1,272,048 4.88 7.50
CFHC California Financial Holding 0.86 16.61 8.04 4,688,652 0.00 8.98
CFSB CFSB Bancorp, Inc. 0.29 13.97 11.79 4,913,415 5.16 1.95
CFTP Community Federal Bancorp 1.74 31.28 4,628,750 3.81 (0.91)
CFX CFX Corporation 0.91 15.13 11.16 7,566,236 15.24 13.08
CIBI Community Investors Bancorp 1.45 13.66 13.28 701,246 6.56 8.33
CJFC Central Jersey Financial 2.46 18.41 19.26 2,668,269 3.83 10.16
CKFB CKF Bancorp, Inc. 0.84 26.35 31.97 962,899 0.00 0.00
CLAS Classic Bancshares, Inc. 0.89 22.60 1,322,500 1.08 10.59
CMRN Cameron Financial Corp 2.36 15.05 23.91 2,850,180 5.36 9.26
CMSB Commonwealth Bancorp, Inc. 2.45 10.29 17,952,693 11.90 13.25
CMSV Community Savings, MHC 0.69 15.23 13.06 4,880,888 3.88 8.94
CNIT CENIT Bancorp, Inc. 2.31 18.72 9.53 1,612,952 17.87 13.97
CNSB CNS Bancorp, Inc. 21.44 1,653,125 9.68 6.25
CNSK Covent Bank for Savings 2.11 16.88 7.46 1,959,766 8.00 12.50
COFD Collective Bancorp, Inc. 3.19 10.37 10.84 20,374,141 12.31 16.49
COFI Charter One Financial 2.51 12.46 12.58 47,260,252 0.27 11.38
COOP Cooperative Bankshares, Inc. 2.65 32.59 8.60 1,491,698 7.35 4.29
CRCL Circle Financial Corp. 0.33 24.04 11.09 715,033 7.14 10.29
CRZY Crazy Woman Creek Bancorp 2.12 23.91 1,058,000 8.33 13.75
CSA Coast Savings Financial 1.08 15.99 7.01 18,583,617 (4.55) (1.56)
CSBF CSB Financial Group, Inc. 0.11 23.99 1,035,000 5.48 5.48
CTBK Center Banks Incorporated 0.20 10.59 5.95 944,263 2.78 0.91
CTZN CitFed Bancorp, Inc. 0.43 13.87 8.13 5,691,322 (0.33) 1.33
CVAL Chester Valley Bancorp Inc. 0.20 13.93 11.78 1,648,185 10.68 7.76
CZF CitiSave Financial Corp 0.81 17.90 964,707 0.89 0.89
DFIN Damen Financial Corp. 2.23 19.85 3,967,500 5.56 0.00
DIBK Dime Financial Corp. 1.34 7.17 12.22 5,101,601 8.20 14.78
DIME Dime Community Bancorp, Inc. 14.45 14,547,500 6.86
DME Dime Bancorp, Inc. 1.06 13.70 7.00 106,308,482 0.00 (1.90)
DNFC D & N Financial Corp. 1.07 8.71 7.73 7,564,730 6.19 4.21
DSBC DS Bancor, Inc. 2.10 14.56 8.95 3,031,527 (1.66) 7.61
DSL Downey Financial Corp. 1.11 14.34 8.78 16,972,905 (2.01) 18.90
EBCP Eastern Bancorp 1.14 17.54 8.69 3,651,534 14.29 15.94
EBSI Eagle Bancshares 0.38 11.03 11.72 4,552,200 0.00 (0.78)
EFBI Enterprise Federal Bancorp 0.42 21.15 13.34 2,074,328 7.84 (1.79)
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/ Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. NASDAQ 114.05 25.250 7.11 111.43 152.57 3.644
EGLB Eagle BancGroup, Inc. NASDAQ 15.96 12.250 0.000
EQSB Equitable Federal Savings Bank NASDAQ 15.15 25.250 8.04 106.81 106.81 0.000
ESBK Elmira Savings Bank (The) NASDAQ 11.65 16.500 33.67 83.84 87.77 3.879
ESX Essex Bancorp, Inc. AMSE 2.37 2.250 NM 416.67 NM 0.000
ETFS East Texas Financial Services NASDAQ 15.62 14.500 17.26 75.36 75.36 1.379
FBBC First Bell Bancorp, Inc. NASDAQ 115.40 14.875 13.52 104.46 104.46 2.689
FBCI Fidelity Bancorp, Inc. NASDAQ 47.62 16.250 16.58 95.64 95.98 1.477
FBCV 1ST Bancorp NASDAQ 20.33 30.500 3.53 93.56 93.56 1.311
FBER 1st Bergen Bancorp NASDAQ 35.51 11.188 82.63 82.63 1.073
FBHC Fort Bend Holding Corp. NASDAQ 14.54 17.750 9.97 80.76 80.76 1.577
FBSI First Bancshares, Inc. NASDAQ 20.93 16.500 17.37 88.24 88.38 1.212
FCB Falmouth Co-Operative Bank AMSE 18.18 12.500 83.61 83.61 0.000
FCBF FCB Fincial Corp. NASDAQ 42.12 17.125 15.57 90.27 90.27 4.204
FCIT First Citizens Financial Corp. NASDAQ 50.27 17.188 12.37 126.10 126.10 0.000
FDEF First Defiance Financial NASDAQ 110.85 10.625 87.52 87.52 2.635
FED FirstFed Financial Corp. NYSE 206.24 19.625 21.57 109.27 111.13 0.000
FESX First Essex Bancorp, Inc. NASDAQ 71.04 11.750 8.90 113.97 113.97 4.085
FFBA First Colorado Bancorp, Inc. NASDAQ 309.56 15.375 126.34 127.81 2.081
FFBH First Federal Bancshares of AR NASDAQ 76.02 14.750 91.11 91.11 0.000
FFBI First Financial Bancorp, Inc. NASDAQ 7.34 15.750 13.35 93.20 93.20 0.000
FFBS FFBS BanCorp, Inc. NASDAQ 33.80 21.500 19.72 129.52 129.52 2.326
FFBZ First Federal Bancorp, Inc. NASDAQ 20.79 26.500 11.42 157.36 157.55 1.660
FFCH First Financial Holdings Inc. NASDAQ 122.76 19.250 11.00 126.15 126.15 3.325
FFDF FFD Financial Corp. NASDAQ 16.18 11.125 1.798
FFDP FirstFed Bancshares NASDAQ 56.09 16.500 17.74 102.36 107.21 2.424
FFEC First Fed Bncshrs Eau Claire NASDAQ 123.40 18.000 20.93 126.58 131.77 1.556
FFED Fidelity Federal Bancorp NASDAQ 28.07 11.250 9.62 196.34 196.34 7.111
FFES First Federal of East Hartford NASDAQ 51.55 19.750 10.39 89.98 90.22 3.038
FFFC FFVA Financial Corp. NASDAQ 93.26 18.000 14.88 106.64 108.89 2.222
FFFD North Central Bancshares, Inc. NASDAQ 49.64 12.375 89.03 89.03 2.020
FFFG F.F.O. Financial Group, Inc. NASDAQ 22.66 2.688 15.81 118.41 118.41 0.000
FFFL Fidelity FSB of Florida, MHC NASDAQ 104.16 15.500 19.62 128.10 129.60 5.161
FFHC First Financial Corp. NASDAQ 699.13 23.375 9.95 171.37 179.67 2.567
FFHH FSF Financial Corp. NASDAQ 45.21 13.000 22.81 83.44 83.44 3.846
FFHS First Franklin Corporation NASDAQ 16.90 14.500 13.55 83.29 84.16 2.207
FFIC Flushing Financial Corp. NASDAQ 164.82 18.500 119.51 119.51 0.865
FFKY First Federal Financial Corp. NASDAQ 83.12 19.750 15.19 166.39 178.09 2.430
FFLC FFLC Bancorp, Inc. NASDAQ 48.77 18.625 15.92 86.47 86.47 2.148
FFML First Family Financial Corp. NASDAQ 11.72 21.500 8.27 127.07 127.07 0.744
FFOH Fidelity Financial of Ohio NASDAQ 40.74 10.000 79.74 79.74 2.000
FFPB First Palm Beach Bancorp, Inc. NASDAQ 119.17 23.000 12.04 104.88 107.58 1.739
FFPC Florida First Bancorp, Inc. NASDAQ 38.08 11.250 13.89 178.29 178.29 2.133
FFRV Fidelity Financial Bankshares NASDAQ 53.28 23.250 16.97 190.26 190.42 0.860
</TABLE>
<TABLE>
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/
Shares Out LTM Core EPS Assets Shares Price Change over:
Ticker Institution (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- --- --- --- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. 0.40 14.11 8.13 4,516,744 4.12 0.00
EGLB Eagle BancGroup, Inc. 4.26
EQSB Equitable Federal Savings Bank 1.04 8.07 5.66 600,000 3.06 3.06
ESBK Elmira Savings Bank (The) 1.05 40.24 5.22 706,361 (2.59) (2.22)
ESX Essex Bancorp, Inc. 1.37 NM 0.78 1,051,790 20.00 9.22
ETFS East Texas Financial Services 0.03 19.08 14.25 1,133,890 0.00 0.00
FBBC First Bell Bancorp, Inc. 2.46 13.65 21.29 8,166,450 7.21 7.71
FBCI Fidelity Bancorp, Inc. 0.83 16.58 10.42 2,930,608 (2.99) (1.52)
FBCV 1ST Bancorp 0.82 NM 7.72 666,561 5.17 12.96
FBER 1st Bergen Bancorp 4.44 14.09 3,174,000 13.30 22.61
FBHC Fort Bend Holding Corp. 2.13 11.31 5.71 819,198 4.41 0.00
FBSI First Bancshares, Inc. 1.04 17.55 14.57 1,268,686 3.13 8.20
FCB Falmouth Co-Operative Bank 2.10 20.55 1,454,750 13.64 21.95
FCBF FCB Financial Corp. 0.21 15.71 15.88 2,459,614 0.74 (3.52)
FCIT First Citizens Financial Corp. 0.95 15.48 7.76 2,915,238 2.61 (4.51)
FDEF First Defiance Financial 2.84 21.29 10,432,476 (1.74) 0.62
FED FirstFed Financial Corp. 2.04 22.30 5.02 10,508,897 10.56 16.30
FESX First Essex Bancorp, Inc. 1.57 10.68 8.43 6,045,901 2.17 8.05
FFBA First Colorado Bancorp, Inc. 1.79 20.62 20,134,256 11.82 17.73
FFBH First Federal Bancshares of AR 3.65 15.05 5,153,751 5.36 5.36
FFBI First Financial Bancorp, Inc. 1.62 15.14 7.77 465,896 1.61 (1.56)
FFBS FFBS BanCorp, Inc. 0.08 19.72 26.99 1,572,183 6.17 (6.52)
FFBZ First Federal Bancorp, Inc. 0.13 11.62 11.70 784,658 12.77 8.72
FFCH First Financial Holdings Inc. 0.54 10.81 8.06 6,377,369 (4.94) 1.99
FFDF FFD Financial Corp. 2.45 9.88 9.88
FFDP FirstFed Bancshares 1.18 33.67 8.83 3,399,116 (2.94) (1.49)
FFEC First Fed Bncshrs Eau Claire 13.44 20.00 17.46 6,855,379 20.00 16.13
FFED Fidelity Federal Bancorp 0.79 11.25 10.71 2,495,040 9.76 0.00
FFES First Federal of East Hartford 0.80 10.51 5.41 2,597,010 5.33 14.49
FFFC FFVA Financial Corp. 0.70 15.13 17.84 5,180,952 2.86 (1.37)
FFFD North Central Bancshares, Inc. 2.54 25.55 4,011,057 6.45 8.79
FFFG F.F.O. Financial Group, Inc. 0.13 12.80 7.38 8,430,000 2.40 (5.35)
FFFL Fidelity FSB of Florida, MHC 0.91 20.95 12.75 6,720,252 21.57 12.73
FFHC First Financial Corp. 0.84 10.30 12.53 29,905,406 0.00 6.86
FFHH FSF Financial Corp. 1.75 22.81 13.64 3,477,694 10.64 10.64
FFHS First Franklin Corporation 0.70 13.81 7.80 1,165,318 1.75 (3.33)
FFIC Flushing Financial Corp 2.00 21.50 8,909,100 0.68 14.73
FFKY First Federal Financial Corp. 0.02 16.74 23.57 4,208,490 (8.14) (10.23)
FFLC FFLC Bancorp, Inc. 0.87 15.92 14.69 2,618,763 1.36 3.47
FFML First Family Financial Corp. 0.01 14.83 7.52 545,000 (1.15) 2.38
FFOH Fidelity Financial of Ohio 1.10 16.22 4,073,589 1.27 (1.23)
FFPB First Palm Beach Bancorp, Inc. 2.91 12.78 8.29 5,181,187 6.05 4.83
FFPC Florida First Bancorp, Inc. 0.52 15.00 12.58 3,384,645 1.12 0.54
FFRV Fidelity Financial Bankshares 6.05 17.48 16.35 2,291,681 75.47 72.22
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFSL First Independence Corp. NASDAQ 11.08 19.000 10.33 84.94 84.94 2.105
FFSW FirstFederal Financial Svcs NASDAQ 110.65 30.875 15.75 204.61 252.25 1.555
FFSX First Fed SB of Siouxland, MHC NASDAQ 43.53 25.500 14.25 118.11 119.27 2.824
FFWC FFW Corp. NASDAQ 14.04 19.750 9.27 90.85 90.85 3.038
FFWD Wood Bancorp, Inc. NASDAQ 22.84 15.250 14.25 113.47 113.47 1.574
FFWM First Financial-W. Maryland NASDAQ 61.49 28.250 17.12 147.44 147.44 1.699
FFYF FFY Financial Corp. NASDAQ 121.95 24.000 17.52 119.64 119.64 2.500
FGHC First Georgia Holding, Inc. NASDAQ 13.66 6.750 11.64 114.02 128.08 0.000
FIBC Financial Bancorp, Inc. NASDAQ 26.86 15.000 17.44 102.74 103.31 2.000
FISB First India Corporation NASDAQ 206.33 24.875 12.19 151.68 153.74 2.251
FKFS First Keystone Financial NASDAQ 22.94 17.750 14.09 100.11 100.11 0.000
FKKY Frankfort First Bancorp, Inc. NASDAQ 37.09 10.750 77.51 77.51 3.349
FLAG FLAG Financial Corp. NASDAQ 22.14 10.875 11.69 101.45 101.45 3.126
FLFC First Liberty Financial Corp. NASDAQ 100.12 25.000 11.36 146.28 172.77 2.080
FLKY First Lancaster Bancshares NASDAQ 13.42 14.000 0.000
FMBD First Mutual Bancorp, Inc. NASDAQ 54.68 13.250 78.73 78.73 2.113
FMCO FMS Financial Corporation NASDAQ 38.25 15.500 9.51 111.43 114.22 1.290
FMCT Farmers & Mechanics Bank NASDAQ 51.51 31.000 50.00 176.34 176.34 0.000
FMLY Family Bancorp NASDAQ 119.08 28.250 15.03 170.18 185.12 1.699
FMSB First Mutual Savings Bank NASDAQ 29.74 15.000 10.27 143.95 143.95 1.333
FNGB First Northern Capital Corp. NASDAQ 72.51 16.500 17.37 102.48 102.48 3.636
FNSC Financial Security Corp. NASDAQ 39.93 25.750 19.36 100.23 100.23 0.000
FOBC Fed One Bancorp NASDAQ 39.65 15.500 12.50 92.65 97.67 3.742
FRC First Republic Bancorp NYSE 109.38 14.875 14.73 95.60 95.72 0.000
FSBC First Savings Bank, FSB NASDAQ 4.03 5.500 10.00 68.92 68.92 0.000
FSBI Fidelity Bancorp, Inc. NASDAQ 26.71 19.500 14.34 123.97 124.60 1.641
FSBS First Ashland Financial Corp NASDAQ 27.82 19.016 28.81 116.31 116.31 0.000
FSFC First Southeast Financial Corp NASDAQ 41.69 9.500 43.18 123.86 123.86 1.684
FSFI First State Financial Services NASDAQ 52.19 13.281 NM 130.59 138.20 1.657
FSLA First Savings Bank, MHC NASDAQ 105.82 16.250 13.54 115.49 132.54 2.462
FSNJ First Savings Bk of NJ, MHC NASDAQ 49.00 16.000 43.24 99.94 99.94 3.125
FSPG First Home Bancorp, Inc. NASDAQ 36.54 18.000 8.37 118.50 121.46 2.667
FSSB First FS&LA of San Berrdino NASDAQ 3.20 9.750 NM 67.57 71.12 0.000
FTF Texarka First Financial Corp AMSE 27.09 13.875 81.96 81.96 3.243
FTFC First Federal Capital Corp. NASDAQ 126.92 20.500 10.51 134.07 142.16 3.122
FTSB Fort Thomas Financial Corp. NASDAQ 21.44 13.625 16.62 99.09 99.09 1.835
FWWB First SB of Washington Bancorp NASDAQ 176.10 16.813 109.03 109.03 1.190
GAF GA Financial Inc. AMSE 116.81 13.125 90.96 90.96 1.524
GBCI Glacier Bancorp, Inc. NASDAQ 84.03 25.000 13.74 218.34 218.53 2.560
GDVS Greater Delaware Valley SB,MHC NASDAQ 32.73 10.000 47.62 116.01 116.01 3.600
GDW Golden West Financial NYSE 3,265.45 56.375 11.70 138.24 146.81 0.674
GFCO Glenway Financial Corp. NASDAQ 22.05 19.250 14.26 83.26 85.29 3.364
GFED Guaranty Federal SB, MHC NASDAQ 30.47 9.750 112.20 112.20 0.000
GFSB GFS Bancorp, Inc. NASDAQ 10.45 20.500 11.92 105.02 105.02 1.951
GLBK Glendale Co-Operative Bank NASDAQ 5.13 20.750 18.36 88.41 88.41 0.000
GLN Glendale Federal Bank, FSB NYSE 835.29 17.875 51.07 119.41 128.78 0.000
GPT GreenPoint Financial Corp. NYSE 1,890.87 37.875 15.21 112.56 201.46 2.112
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/ Price Change over:
Shares Out LTM Core EPS Assets Shares ------------------
Ticker Institution Exchange (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- --- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFSL First Independence Corp. NASDAQ 0.13 12.03 10.48 583,421 2.70 7.04
FFSW FirstFederal Fi ncial Svcs NASDAQ 0.70 19.06 10.59 3,583,829 4.66 8.81
FFSX First Fed SB of Siouxland, MHC NASDAQ 0.16 15.27 9.81 1,707,209 (0.97) 0.00
FFWC FFW Corp. NASDAQ 0.32 9.63 9.33 711,060 1.28 2.60
FFWD Wood Bancorp, Inc. NASDAQ 0.41 14.81 15.62 1,497,705 12.96 20.39
FFWM First Financial-W. Maryland NASDAQ 1.37 17.66 19.10 2,176,739 16.49 43.04
FFYF FFY Financial Corp. NASDAQ 1.05 17.02 21.19 5,081,198 0.52 2.67
FGHC First Georgia Holding, Inc. NASDAQ 0.37 12.50 9.48 2,023,711 8.00 12.50
FIBC Fi ncial Bancorp, Inc. NASDAQ 1.91 17.86 10.26 1,796,122 (7.69) 20.00
FISB First India Corporation NASDAQ 0.81 14.63 14.01 8,294,482 7.57 4.74
FKFS First Keystone Financial NASDAQ 0.49 13.05 7.90 1,292,500 5.97 1.43
FKKY Frankfort First Bancorp, Inc. NASDAQ 1.17 26.75 3,450,000 (5.49) (10.42)
FLAG FLAG Financial Corp. NASDAQ 1.18 13.77 9.68 2,035,740 (3.33) (13.00)
FLFC First Liberty Financial Corp. NASDAQ 0.43 13.59 10.09 4,002,190 16.28 14.94
FLKY First Lancaster Bancshares NASDAQ (3.45)
FMBD First Mutual Bancorp, Inc. NASDAQ 3.73 18.12 4,126,600 1.92 6.00
FMCO FMS Financial Corporation NASDAQ 0.02 9.51 7.38 2,467,593 (2.36) (8.82)
FMCT Farmers & Mechanics Bank NASDAQ 0.74 56.36 9.72 1,661,625 0.81 2.06
FMLY Family Bancorp NASDAQ 3.20 15.61 12.87 4,215,211 9.71 11.88
FMSB First Mutual Savings Bank NASDAQ 0.33 10.79 9.52 2,452,927 11.11 11.11
FNGB First Northern Capital Corp. NASDAQ 0.77 18.13 12.50 4,394,725 8.20 7.32
FNSC Financial Security Corp. NASDAQ 2.42 16.30 15.45 1,550,846 (0.96) 0.98
FOBC Fed One Bancorp NASDAQ 1.55 12.50 11.56 2,558,191 8.77 6.90
FRC First Republic Bancorp NYSE 3.66 15.18 5.30 7,352,991 15.53 0.85
FSBC First Savings Bank, FSB NASDAQ 0.00 12.79 3.40 695,698 (2.22) 0.00
FSBI Fidelity Bancorp, Inc. NASDAQ 0.70 14.44 8.42 1,369,511 13.04 16.42
FSBS First Ashland Financial Corp NASDAQ 0.70 28.81 31.83 1,463,039 4.92 5.64
FSFC First Southeast Financial Corp NASDAQ 0.99 14.62 12.77 4,388,231 0.00 (47.22)
FSFI First State Financial Services NASDAQ 3.51 NM 7.84 3,929,455 (0.70) 26.49
FSLA First Savings Bank, MHC NASDAQ 0.17 13.21 11.00 6,511,756 3.17 0.00
FSNJ First Savings Bk of NJ, MHC NASDAQ 0.12 18.60 7.53 3,062,321 10.34 12.28
FSPG First Home Bancorp, Inc. NASDAQ 0.13 8.57 7.62 2,030,009 1.41 1.41
FSSB First FS&LA of San Ber rdino NASDAQ 4.01 NM 3.12 328,296 0.00 (2.50)
FTF Texarka First Financial Corp AMSE 1.55 16.51 1,952,263 (11.20) (13.28)
FTFC First Federal Capital Corp. NASDAQ 0.35 14.14 9.20 6,231,168 0.00 (2.38)
FTSB Fort Thomas Financial Corp. NASDAQ 0.80 16.62 24.13 1,573,775 (0.91) (19.85)
FWWB First SB of Washington Bancorp NASDAQ 1.43 23.03 10,474,200 3.46 16.43
GAF GA Financial, Inc. AMSE 4.31 20.77 8,900,000 11.70 17.98
GBCI Glacier Bancorp, Inc. NASDAQ 0.27 13.74 20.57 3,361,133 7.53 15.26
GDVS Greater Delaware Valley SB,MHC NASDAQ 0.01 40.00 14.11 3,272,500 5.26 (2.44)
GDW Golden West Finacial NYSE 0.55 11.92 9.13 57,923,709 (1.53) 3.68
GFCO Glenway Financial Corp. NASDAQ 0.10 14.47 8.05 1,145,431 (2.53) (4.88)
GFED Guaranty Federal SB, MHC NASDAQ 0.07 16.42 3,125,000 (4.88) (13.33)
GFSB GFS Bancorp, Inc. NASDAQ 0.26 12.28 12.54 509,600 0.00 1.23
GLBK Glendale Co-Operative Bank NASDAQ 2.02 21.84 13.99 247,250 25.76 25.76
GLN Glendale Federal Bank, FSB NYSE 1.29 27.08 5.78 46,729,698 1.42 0.70
GPT GreenPoint Finacial Corp. NYSE 1.48 16.19 13.36 49,924,065 5.21 32.31
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/ Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ------ ------ ------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GFSB GFS Bancorp, Inc. NASDAQ 10.45 20.500 11.92 105.02 105.02 1.951
GLBK Glendale Co-Operative Bank NASDAQ 5.13 20.750 18.36 88.41 88.41 0.000
GLN Glendale Federal Bank, FSB NYSE 835.29 17.875 51.07 119.41 128.78 0.000
GPT GreenPoint Financial Corp. NYSE 1,890.87 37.875 15.21 112.56 201.46 2.112
GROV Grove Bank NASDAQ 50.89 33.000 10.51 135.47 135.64 2.182
GRTR Greater New York Savings Bank NASDAQ 174.04 13.000 16.67 119.49 119.49 0.000
GSBC Great Southern Bancorp, Inc. NASDAQ 131.63 29.875 12.19 194.12 197.32 2.343
GSFC Green Street Financial Corp. NASDAQ 65.01 15.125 103.60 103.60 2.645
GSLC Guaranty Financial Corp. NASDAQ 7.81 8.500 10.37 122.66 122.66 1.176
GTFN Great Financial Corporation NASDAQ 413.10 29.125 17.55 150.28 156.17 1.648
GTPS Great American Bancorp NASDAQ 23.80 13.625 32.44 75.65 75.65 2.936
GUPB GFSB Bancorp, Inc. NASDAQ 12.81 13.500 78.99 78.99 2.963
GWBC Gateway Bancorp, Inc. NASDAQ 15.00 13.250 20.08 84.72 84.72 3.019
GWF Great Western Financial NYSE 3,469.16 25.250 12.02 136.56 155.19 3.960
HALL Hallmark Capital Corp. NASDAQ 24.31 17.203 12.93 91.90 91.90 0.000
HARB Harbor Federal Savings Bk, MHC NASDAQ 145.57 29.500 13.41 171.11 177.71 4.068
HARL Harleysville Savings Bank NASDAQ 24.20 18.750 11.03 121.91 121.91 2.133
HARS Harris Savings Bank, MHC NASDAQ 176.66 15.750 29.72 118.24 140.75 3.683
HAVN Haven Bancorp, Inc. NASDAQ 118.26 27.375 11.41 125.75 126.50 2.192
HBBI Home Building Bancorp NASDAQ 5.80 17.500 30.17 86.93 86.93 1.714
HBFW Home Bancorp NASDAQ 46.07 16.500 18.75 97.29 97.29 1.212
HBNK Highland Federal Bank FSB NASDAQ 32.72 14.250 19.52 93.75 93.75 0.000
HBS Haywood Bancshares, Inc. AMSE 23.12 19.250 17.50 114.31 119.05 2.701
HEMT HF Bancorp, Inc. NASDAQ 61.25 9.750 29.55 75.52 0.000
HFFB Harrodsburg First Fin Bancorp NASDAQ 36.16 16.750 108.27 108.27 4.776
HFFC HF Financial Corp. NASDAQ 48.06 15.750 10.57 92.81 93.09 2.286
HFGI Harrington Financial Group NASDAQ 32.97 10.125 17.76 142.61 142.61 0.000
HFMD Home Federal Corp. NASDAQ 26.45 10.500 16.94 137.61 139.26 0.000
HFNC HFNC Financial Corp. NASDAQ 311.61 18.125 127.55 127.55 1.103
HFSA Hardin Bancorp, Inc. NASDAQ 11.55 12.000 81.36 81.36 3.333
HHFC Harvest Home Financial Corp. NASDAQ 9.35 10.000 15.87 73.21 73.21 4.000
HIFS Hingham Instit. for Savings NASDAQ 19.79 15.250 10.37 108.54 108.54 2.361
HMCI HomeCorp, Inc. NASDAQ 20.88 18.500 16.09 98.82 98.82 0.000
HMNF HMN Financial, Inc. NASDAQ 74.77 16.000 12.80 90.24 90.24 0.000
HNFC Hinsdale Financial Corp. NASDAQ 63.22 23.500 15.16 113.97 117.44 0.000
HOFL Home Financial Corp. NASDAQ 355.30 14.375 22.12 111.78 111.78 5.565
HOMF Home Federal Bancorp NASDAQ 64.01 28.750 8.93 124.24 128.98 1.739
HPBC Home Port Bancorp, Inc. NASDAQ 29.47 16.000 9.76 153.40 153.40 5.000
HRBF Harbor Federal Bancorp, Inc. NASDAQ 24.56 14.000 25.45 88.38 88.38 2.857
HRZB Horizon Financial Corp. NASDAQ 85.73 13.000 11.50 107.26 107.26 3.077
HSBK Hibernia Savings Bank, (The) NASDAQ 25.76 15.500 11.74 103.96 103.96 1.806
HTHR Hawthorne Financial Corp. NASDAQ 22.09 8.500 NM 63.96 64.25 0.000
HVFD Haverfield Corporation NASDAQ 34.80 18.250 14.15 122.48 122.73 2.959
HWEN Home Financial Bancorp NASDAQ 6.20 12.250 0.000
HZFS Horizon Financial Svcs Corp. NASDAQ 6.72 15.000 17.86 80.09 80.09 2.133
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/
Shares Out LTM Core EPS Assets Shares Price Change over:
Ticker Institution Exchange (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- ---------- ------------- ------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GFSB GFS Bancorp, Inc. NASDAQ 0.26 12.28 12.54 509,600 0.00 1.23
GLBK Glendale Co-Operative Bank NASDAQ 2.02 21.84 13.99 247,250 25.76 25.76
GLN Glendale Federal Bank, FSB NYSE 1.29 27.08 5.78 46,729,698 1.42 0.70
GPT GreenPoint Financial Corp. NYSE 1.48 16.19 13.36 49,924,065 5.21 32.31
GROV Grove Bank NASDAQ 2.66 11.22 8.62 1,542,240 10.92 26.92
GRTR Greater New York Savings Bank NASDAQ 4.21 16.88 6.85 13,388,040 13.04 18.18
GSBC Great Southern Bancorp, Inc. NASDAQ 0.30 13.10 19.70 4,406,048 8.64 10.65
GSFC Green Street Financial Corp. NASDAQ 3.14 36.32 4,298,125 13.08 16.35
GSLC Guaranty Financial Corp. NASDAQ 1.13 16.67 7.59 919,168 9.68 4.62
GTFN Great Financial Corporation NASDAQ 0.91 22.40 14.71 14,183,732 4.02 8.11
GTPS Great American Bancorp NASDAQ 1.32 33.23 21.07 1,850,247 2.83 (5.22)
GUPB GFSB Bancorp, Inc. NASDAQ 1.79 18.19 948,750 (3.14) 0.00
GWBC Gateway Bancorp, Inc. NASDAQ 0.66 20.08 21.06 1,132,372 1.92 (4.50)
GWF Great Western Financial NYSE 1.78 12.88 7.94 137,392,481 1.51 6.88
HALL Hallmark Capital Corp. NASDAQ 1.85 13.65 6.45 1,413,280 15.65 16.63
HARB Harbor Federal Savings Bk, MHC NASDAQ 1.97 13.41 14.35 4,932,854 20.41 12.38
HARL Harleysville Savings Bank NASDAQ 0.11 10.47 8.11 1,289,442 7.14 4.17
HARS Harris Savings Bank, MHC NASDAQ 0.16 20.72 11.46 11,216,400 1.61 (2.72)
HAVN Haven Bancorp, Inc. NASDAQ 4.92 11.80 7.63 4,320,060 (0.90) (2.23)
HBBI Home Building Bancorp NASDAQ 1.55 32.41 13.46 331,660 (4.11) (1.41)
HBFW Home Bancorp NASDAQ 0.71 18.75 15.08 2,886,815 2.72 10.00
HBNK Highland Federal Bank FSB NASDAQ 0.22 19.79 7.41 2,295,983 (3.39) (12.31)
HBS Haywood Bancshares, Inc. AMSE 0.03 17.50 17.61 1,206,556 2.67 6.94
HEMT HF Bancorp, Inc. NASDAQ 1.61 29.55 7.41 6,281,875 2.63 2.63
HFFB Harrodsburg First Fin Bancorp NASDAQ 0.32 33.00 2,159,085 1.52 9.84
HFFC HF Financial Corp. NASDAQ 0.16 12.91 8.66 3,051,739 3.28 3.28
HFGI Harrington Financial Group NASDAQ 0.51 16.60 7.88 3,256,738 1.25 (7.95)
HFMD Home Federal Corp. NASDAQ 0.44 17.50 12.04 2,519,010 (1.18) 2.44
HFNC HFNC Financial Corp. NASDAQ 4.82 43.51 17,192,500 2.11 12.40
HFSA Hardin Bancorp, Inc. NASDAQ 0.73 13.97 1,012,180 5.49 2.13
HHFC Harvest Home Financial Corp. NASDAQ 1.03 15.87 12.24 934,857 (16.67) (20.00)
HIFS Hingham Instit. for Savings NASDAQ 0.44 10.45 10.60 1,297,500 4.27 7.02
HMCI HomeCorp, Inc. NASDAQ 0.14 25.34 6.16 1,128,579 0.00 2.78
HMNF HMN Financial, Inc. NASDAQ 1.16 14.81 14.19 4,921,200 1.59 1.20
HNFC Hinsdale Financial Corp. NASDAQ 2.65 16.91 9.54 2,690,155 (1.05) (6.93)
HOFL Home Financial Corp. NASDAQ 2.30 17.75 29.22 24,716,619 0.43 13.86
HOMF Home Federal Bancorp NASDAQ 0.25 10.53 10.16 2,226,282 10.58 8.49
HPBC Home Port Bancorp, Inc. NASDAQ 1.68 9.70 16.33 1,841,890 12.28 28.00
HRBF Harbor Federal Bancorp, Inc. NASDAQ 1.24 25.45 12.22 1,754,420 8.74 6.67
HRZB Horizon Financial Corp. NASDAQ 1.00 11.61 17.37 6,594,886 (1.89) 4.00
HSBK Hibernia Savings Bank, (The) NASDAQ 2.74 11.74 6.91 1,662,090 6.90 3.33
HTHR Hawthorne Financial Corp. NASDAQ 0.28 NM 2.90 2,599,000 13.33 1.49
HVFD Haverfield Corporation NASDAQ 0.61 14.04 10.41 1,906,591 (2.01) 0.00
HWEN Home Financial Bancorp NASDAQ (10.91)
HZFS Horizon Financial Svcs Corp. NASDAQ 0.29 22.06 9.15 447,937 7.14 (1.64)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/ Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. NASDAQ 162.29 14.750 20.21 108.86 108.86 1.627
IFSB Independence Federal Savings NASDAQ 9.59 7.500 8.72 55.80 64.38 2.933
IFSL India Federal Corporation NASDAQ 99.46 21.000 15.44 141.51 151.95 3.429
INBI Industrial Bancorp NASDAQ 66.65 12.000 109.59 109.59 3.333
INCB India Community Bank, SB NASDAQ 13.14 14.250 26.39 114.55 114.55 2.456
IPSW Ipswich Savings Bank NASDAQ 12.11 10.250 7.48 138.89 138.89 1.951
IROQ Iroquois Bancorp NASDAQ 36.53 15.500 9.45 127.68 142.59 2.065
ISBF ISB Financial Corporation NASDAQ 109.29 15.500 14.62 93.94 96.75 2.194
ITLA Imperial Thrift and Loan NASDAQ 103.14 13.188 123.02 123.02 0.000
IWBK InterWest Bancorp, Inc. NASDAQ 224.63 28.500 12.84 190.76 196.15 1.825
JEBC Jefferson Bancorp, Inc. NASDAQ 48.99 22.313 18.59 135.89 135.89 1.345
JOAC Joachim Bancorp, Inc. NASDAQ 10.27 13.500 95.14 95.14 3.704
JSBA Jefferson Savings Bancorp NASDAQ 96.18 23.000 12.50 105.41 128.21 1.391
JSBF JSB Financial, Inc. NASDAQ 341.90 35.000 15.28 105.74 105.74 3.429
JXSB Jacksonville Savings Bank, MHC NASDAQ 15.35 12.063 22.76 90.63 90.63 3.316
JXVL Jacksonville Bancorp, Inc. NASDAQ 33.06 12.500 93.49 93.49 4.000
KFBI Klamath First Bancorp NASDAQ 165.48 14.250 94.81 94.81 1.825
KNK Kankakee Bancorp, Inc. AMSE 29.21 20.375 16.04 82.29 88.55 1.963
KSAV KS Bancorp, Inc. NASDAQ 12.02 18.125 13.04 86.89 86.97 3.310
KSBK KSB Bancorp, Inc. NASDAQ 8.63 21.000 7.14 95.45 103.09 0.952
KYF Kentucky First Bancorp, Inc. AMSE 18.57 13.375 96.64 96.64 3.738
LARK Landmark Bancshares, Inc. NASDAQ 30.86 16.125 17.15 93.37 93.37 2.481
LARL Laurel Capital Group, Inc. NASDAQ 23.45 15.500 9.01 111.19 111.19 2.839
LBCI Liberty Bancorp, Inc. NASDAQ 59.45 24.000 18.05 92.88 93.13 2.500
LBFI L & B Financial, Inc. NASDAQ 26.63 16.813 18.08 107.50 107.50 2.379
LFBI Little Falls Bancorp, Inc. NASDAQ 32.15 11.125 77.26 83.77 0.899
LFCT Leader Financial Corp. NASDAQ 525.99 52.875 12.10 197.44 197.44 1.362
LFED Leeds Federal Savings Bk, MHC NASDAQ 47.41 13.750 17.19 108.70 108.70 4.945
LIFB Life Bancorp, Inc. NASDAQ 152.63 15.500 15.98 105.23 109.31 2.839
LISB Long Island Bancorp, Inc. NASDAQ 699.21 28.188 15.07 134.04 134.04 1.419
LOAN Horizon Bancorp NASDAQ 22.19 16.000 14.95 208.06 215.05 1.000
LOGN Logansport Financial Corp. NASDAQ 19.51 14.750 17.35 98.40 98.40 2.712
LONF London Financial Corporation NASDAQ 5.89 11.125 74.07 74.07 2.157
LSBI LSB Financial Corp. NASDAQ 15.14 16.500 19.64 85.76 85.76 1.939
LSBX Lawrence Savings Bank NASDAQ 29.45 6.938 7.88 116.61 116.61 0.000
LVSB Lakeview Financial NASDAQ 51.83 22.875 10.89 114.43 149.02 1.093
LXMO Lexington B&L Financial Corp. NASDAQ 13.28 10.500 70.90 70.90 0.000
MAFB MAF Bancorp, Inc. NASDAQ 268.86 26.000 9.42 111.02 130.13 1.385
MARN Marion Capital Holdings NASDAQ 39.88 20.625 16.91 96.06 96.06 3.879
MASB MASSBANK Corp. NASDAQ 89.00 33.000 10.09 104.13 104.13 2.909
MBBC Monterey Bay Bancorp, Inc. NASDAQ 44.23 13.375 40.53 87.53 88.46 0.748
MBLF MBLA Financial Corp. NASDAQ 29.15 21.250 22.14 102.76 102.76 1.882
MBSP Mitchell Bancorp, Inc. NASDAQ 12.49 12.750 0.000
MCBN Mid-Coast Bancorp, Inc. NASDAQ 4.36 19.000 13.67 87.68 87.68 2.632
MCBS Mid Continent Bancshares Inc. NASDAQ 38.10 18.750 10.65 99.00 99.10 2.133
MDBK Medford Savings Bank NASDAQ 104.22 23.000 10.85 117.95 129.36 2.957
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/ Price Change over:
Shares Out LTM Core EPS Assets Shares ------------------
Ticker Institution Exchange (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- --- ----------- --------- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. NASDAQ 1.14 19.67 21.68 11,002,393 (1.26) 5.36
IFSB Independence Federal Savings NASDAQ 0.41 19.23 3.79 1,278,935 3.45 (6.25)
IFSL India Federal Corporation NASDAQ 0.58 14.58 13.38 4,730,329 5.00 (1.18)
INBI Industrial Bancorp NASDAQ 0.82 21.26 5,554,500 14.29 2.13
INCB India Community Bank, SB NASDAQ 2.40 26.39 14.50 922,039 7.55 7.55
IPSW Ipswich Savings Bank NASDAQ 0.54 9.49 8.00 1,178,492 2.50 (2.94)
IROQ Iroquois Bancorp NASDAQ 0.34 9.51 7.76 2,356,564 0.81 0.00
ISBF ISB Financial Corporation NASDAQ 0.91 14.76 16.08 7,122,183 3.33 (0.39)
ITLA Imperial Thrift and Loan NASDAQ 2.17 15.40 7,820,500 (4.95) (8.26)
IWBK InterWest Bancorp, Inc. NASDAQ 1.06 13.64 13.00 6,450,308 10.14 18.13
JEBC Jefferson Bancorp, Inc. NASDAQ 0.04 18.59 18.45 2,195,635 (0.83) 0.85
JOAC Joachim Bancorp, Inc. NASDAQ 0.27 28.13 760,437 4.85 6.93
JSBA Jefferson Savings Bancorp NASDAQ 0.36 13.77 8.55 4,181,563 (2.13) (9.80)
JSBF JSB Financial, Inc. NASDAQ 2.27 15.35 23.05 10,051,904 4.48 6.06
JXSB Jacksonville Savings Bank, MHC NASDAQ 0.14 28.05 10.73 1,272,300 (8.96) (7.21)
JXVL Jacksonville Bancorp, Inc. NASDAQ 1.81 15.30 2,664,405 13.64 17.65
KFBI Klamath First Bancorp NASDAQ 5.63 27.68 12,233,125 3.64 2.22
KNK Kankakee Bancorp, Inc. AMSE 0.77 16.04 8.13 1,433,718 3.16 6.54
KSAV KS Bancorp, Inc. NASDAQ 0.35 12.85 12.85 663,263 (9.38) 0.69
KSBK KSB Bancorp, Inc. NASDAQ 0.01 7.17 6.51 411,125 (4.55) 5.00
KYF Kentucky First Bancorp, Inc. AMSE 0.38 21.03 1,388,625 (4.46) 0.00
LARK Landmark Bancshares, Inc. NASDAQ 0.81 19.20 15.40 1,914,022 0.78 2.38
LARL Laurel Capital Group, Inc. NASDAQ 0.09 9.23 11.90 1,512,667 0.00 5.08
LBCI Liberty Bancorp, Inc. NASDAQ 1.59 18.05 9.13 2,477,022 1.05 (4.00)
LBFI L & B Financial, Inc. NASDAQ 0.80 19.33 18.48 1,584,125 3.46 2.67
LFBI Little Falls Bancorp, Inc. NASDAQ 2.25 11.99 3,041,750 7.23 12.66
LFCT Leader Financial Corp. NASDAQ 2.67 12.38 16.38 9,947,794 8.46 16.21
LFED Leeds Federal Savings Bk, MHC NASDAQ 0.11 16.98 17.78 3,448,000 0.92 0.00
LIFB Life Bancorp, Inc. NASDAQ 2.85 15.20 12.62 10,097,094 3.33 7.83
LISB Long Island Bancorp, Inc. NASDAQ 2.09 16.58 13.39 24,805,349 0.22 (6.04)
LOAN Horizon Bancorp NASDAQ 5.74 18.60 16.95 1,386,757 16.36 52.38
LOGN Logansport Financial Corp. NASDAQ 1.38 18.44 25.27 1,322,500 15.69 10.28
LONF London Financial Corporation NASDAQ 2.20 15.83 529,000 11.25 7.90
LSBI LSB Financial Corp. NASDAQ 0.56 22.00 8.94 931,495 4.76 1.54
LSBX Lawrence Savings Bank NASDAQ 4.64 7.88 8.85 4,245,250 8.83 29.08
LVSB Lakeview Financial NASDAQ 1.83 17.87 11.39 2,265,704 3.98 11.59
LXMO Lexington B&L Financial Corp. NASDAQ 21.67 1,265,000 3.70 7.69
MAFB MAF Bancorp, Inc. NASDAQ 0.55 9.35 8.62 10,340,673 2.97 6.67
MARN Marion Capital Holdings NASDAQ 0.29 16.91 22.43 1,933,613 0.61 1.85
MASB MASSBANK Corp. NASDAQ 0.68 10.54 10.19 2,719,860 1.54 0.76
MBBC Monterey Bay Bancorp, Inc. NASDAQ 1.56 41.80 13.94 3,307,063 (0.93) 12.63
MBLF MBLA Financial Corp. NASDAQ 0.03 22.14 14.94 1,371,738 0.00 (10.53)
MBSP Mitchell Bancorp, Inc. NASDAQ 10.87
MCBN Mid-Coast Bancorp, Inc. NASDAQ 0.10 14.84 7.92 229,588 (5.00) (0.65)
MCBS Mid Continent Bancshares Inc. NASDAQ 0.48 10.65 12.14 2,031,750 0.67 0.00
MDBK Medford Savings Bank NASDAQ 1.40 11.17 10.49 4,531,148 2.22 (1.08)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MECH Mechanics Savings Bank NASDAQ 72.08 13.625 105.62 105.62 0.000
MERI Meritrust Federal SB NASDAQ 24.00 31.000 11.15 138.39 138.39 1.935
MFBC MFB Corp. NASDAQ 33.56 17.000 23.94 89.05 89.05 1.412
MFCX Marshalltown Financial Corp. NASDAQ 22.94 16.250 50.78 117.24 117.24 0.000
MFFC Milton Federal Financial Corp. NASDAQ 31.63 14.000 18.92 93.90 93.90 3.714
MFLR Mayflower Co-operative Bank NASDAQ 13.11 14.750 13.29 117.81 120.51 3.254
MFSB Mutual Bancompany NASDAQ 7.00 21.000 61.76 112.30 112.30 0.000
MFSL Maryland Federal Bancorp NASDAQ 105.49 34.250 12.36 114.36 116.18 1.927
MGNL Mag Bancorp, Inc. NASDAQ 267.21 19.500 13.00 212.42 224.40 3.077
MIDC MidConn Bank NASDAQ 36.77 19.250 27.90 105.31 125.49 3.117
MIFC Mid-Iowa Financial Corp. NASDAQ 10.10 6.000 10.00 93.46 93.60 1.333
MIVI Mississippi View Holding Co. NASDAQ 11.60 12.750 12.50 90.94 90.94 1.255
MLBC ML Bancorp, Inc. NASDAQ 164.69 13.875 14.30 114.20 118.89 2.739
MORG Morgan Financial Corp. NASDAQ 9.59 11.500 13.37 92.59 92.59 2.087
MSBB MSB Bancorp, Inc. NASDAQ 48.18 17.000 14.91 85.17 220.21 3.529
MSBF MSB Financial, Inc. NASDAQ 12.46 19.000 12.42 98.91 98.91 2.632
MSBK Mutual Savings Bank, FSB NASDAQ 22.44 5.250 NM 58.14 58.14 0.000
MSEA Metropolitan Bancorp NASDAQ 64.23 17.313 11.17 125.55 138.39 0.000
MWBI Midwest Bancshares, Inc. NASDAQ 9.08 26.000 7.26 98.26 98.26 2.000
MWBX MetroWest Bank NASDAQ 53.79 3.875 8.61 145.13 145.13 2.581
MWFD Midwest Federal Financial NASDAQ 28.46 17.500 13.67 169.25 176.95 1.714
SB North American Savings Bank NASDAQ 70.31 31.000 8.49 139.58 145.06 2.017
NBSI North Bancshares, Inc. NASDAQ 17.68 15.875 28.86 95.52 95.52 2.520
NEBC Northeast Bancorp NASDAQ 15.45 12.750 13.28 93.00 110.77 2.510
NEIB Northeast India Bancorp NASDAQ 24.72 12.625 15.78 89.35 89.35 2.376
NFSL New n Savings Bank, FSB NASDAQ 30.28 20.750 8.47 145.92 146.64 2.120
NHSL NHS Financial, Inc. NASDAQ 28.07 11.125 21.39 112.15 112.37 1.438
NHTB New Hampshire Thrift Bncshrs NASDAQ 18.61 11.000 11.46 95.57 95.57 4.545
NMSB NewMil Bancorp, Inc. NASDAQ 29.51 7.250 14.50 92.47 92.47 2.759
NSBK North Side Savings Bank NASDAQ 227.20 47.000 12.43 183.95 185.62 2.128
NSLB NS&L Bancorp, Inc. NASDAQ 9.49 12.500 18.38 74.81 74.81 4.000
NSSB Norwich Financial Corp. NASDAQ 88.97 16.500 16.34 121.41 134.69 2.909
NSSY Norwalk Savings Society NASDAQ 53.96 22.625 12.71 121.64 121.64 0.884
NTMG Nutmeg Federal S&LA NASDAQ 5.15 7.250 12.08 98.64 98.64 0.000
NWEQ Northwest Equity Corp. NASDAQ 10.28 10.875 11.82 80.86 80.86 3.678
NWSB Northwest Savings Bank, MHC NASDAQ 277.59 11.875 15.42 143.42 151.08 2.695
NYB New York Bancorp Inc. NYSE 347.63 30.250 10.65 219.52 219.52 2.645
OCFC Ocean Financial Corp. NASDAQ 191.88 22.875 0.000
OFCP Ottawa Financial Corp. NASDAQ 84.81 16.375 18.82 110.34 137.61 2.198
OHSL OHSL Financial Corp. NASDAQ 24.96 20.500 13.49 97.90 97.90 3.707
OSBF OSB Financial Corp. NASDAQ 26.39 23.750 48.47 84.04 84.04 2.695
PALM Palfed, Inc. NASDAQ 70.55 13.500 15.88 131.45 137.90 0.593
PBCI Pamrapo Bancorp, Inc. NASDAQ 64.80 19.750 13.53 114.63 115.63 4.557
PBCT People's Bank, MHC NASDAQ 961.45 24.125 12.70 167.30 167.53 3.316
PBIX Patriot Bank Corp. NASDAQ 55.25 14.875 103.80 103.80 2.151
PBKB People's Bancshares, Inc. NASDAQ 35.36 10.500 10.00 127.27 134.10 2.667
PBNB People's Savings Financial Cp. NASDAQ 53.69 28.250 14.13 121.40 130.79 3.257
PCBC Perry County Financial Corp. NASDAQ 15.31 17.875 21.03 101.45 101.45 1.678
PCCI Pacific Crest Capital NASDAQ 24.17 8.250 6.71 104.30 104.30 0.000
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/ Price Change over:
Shares Out LTM Core EPS Assets Shares -----------------
Ticker Institution Exchange (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- --- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MECH Mechanics Savings Bank NASDAQ 9.90 5,290,000 7.92
MERI Meritrust Federal SB NASDAQ 0.82 11.44 10.51 774,176 (1.59) (8.82)
MFBC MFB Corp. NASDAQ 0.95 24.64 15.94 1,973,980 6.25 21.43
MFCX Marshalltown Financial Corp. NASDAQ 1.21 54.17 18.30 1,411,475 3.17 4.43
MFFC Milton Federal Financial Corp. NASDAQ 0.83 20.90 17.78 2,263,797 4.67 14.29
MFLR Mayflower Co-operative Bank NASDAQ 0.17 14.18 11.41 889,000 (1.67) 6.31
MFSB Mutual Bancompany NASDAQ 0.18 53.85 13.14 333,500 (1.18) 0.00
MFSL Maryland Federal Bancorp NASDAQ 3.49 17.47 9.59 3,160,068 14.64 19.65
MGNL Mag Bancorp, Inc. NASDAQ 0.20 13.09 20.42 13,702,868 (11.36) 7.59
MIDC MidConn Bank NASDAQ 0.82 29.17 10.01 1,910,061 2.67 17.56
MIFC Mid-Iowa Financial Corp. NASDAQ 0.01 10.17 8.76 1,682,880 0.00 0.00
MIVI Mississippi View Holding Co. NASDAQ 3.26 14.01 16.73 909,714 9.09 13.33
MLBC ML Bancorp, Inc. NASDAQ 0.80 18.75 9.24 12,493,800 7.77 15.63
MORG Morgan Financial Corp. NASDAQ 2.52 13.86 12.94 834,058 (6.12) (6.12)
MSBB MSB Bancorp, Inc. NASDAQ 2.60 14.78 5.73 2,833,936 5.43 (1.45)
MSBF MSB Financial, Inc. NASDAQ 0.06 12.67 20.72 655,566 10.14 15.15
MSBK Mutual Savings Bank, FSB NASDAQ 0.55 NM 3.30 4,274,154 (2.33) (4.55)
MSEA Metropolitan Bancorp NASDAQ 3.16 10.43 8.44 3,710,205 1.84 24.78
MWBI Midwest Bancshares, Inc. NASDAQ 0.27 10.44 6.55 349,379 4.00 0.97
MWBX MetroWest Bank NASDAQ 0.53 8.61 10.97 13,882,235 3.33 (6.06)
MWFD Midwest Federal Financial NASDAQ 1.81 16.83 15.25 1,634,880 12.90 11.11
SB North American Savings Bank NASDAQ 0.05 8.99 9.50 2,267,984 0.40 5.08
NBSI North Bancshares, Inc. NASDAQ 0.75 31.75 14.80 1,113,631 (2.31) 0.79
NEBC Northeast Bancorp NASDAQ 0.16 17.23 7.03 1,203,486 0.00 2.00
NEIB Northeast India Bancorp NASDAQ 1.11 15.78 16.89 2,061,670 1.00 6.32
NFSL New n Savings Bank, FSB NASDAQ 0.41 9.70 18.67 1,459,407 (5.68) 5.06
NHSL NHS Financial, Inc. NASDAQ 0.24 21.39 9.88 2,522,827 (1.11) 3.49
NHTB New Hampshire Thrift Bncshrs NASDAQ 0.84 12.22 7.20 1,691,803 10.69 12.82
NMSB NewMil Bancorp, Inc. NASDAQ 1.08 14.80 9.54 4,069,890 3.57 5.45
NSBK North Side Savings Bank NASDAQ 1.41 14.33 13.73 4,833,997 4.44 30.56
NSLB NS&L Bancorp, Inc. NASDAQ 0.78 21.19 17.43 799,034 2.04 0.00
NSSB Norwich Financial Corp. NASDAQ 2.20 16.84 12.17 5,392,191 6.45 16.81
NSSY Norwalk Savings Society NASDAQ 3.33 21.75 8.85 2,384,893 2.26 7.43
NTMG Nutmeg Federal S&LA NASDAQ 1.66 21.97 5.65 710,169 (9.38) 0.00
NWEQ Northwest Equity Corp. NASDAQ 0.82 12.50 11.20 945,392 6.10 6.10
NWSB Northwest Savings Bank, MHC NASDAQ 0.21 14.84 14.78 23,376,000 10.47 (1.04)
NYB New York Bancorp Inc. NYSE 0.37 11.33 11.91 11,491,858 (5.10) 20.40
OCFC Ocean Financial Corp. NASDAQ 5.78
OFCP Ottawa Financial Corp. NASDAQ 1.63 19.26 11.34 5,414,546 1.55 0.00
OHSL OHSL Financial Corp. NASDAQ 0.16 13.76 11.94 1,217,386 2.50 1.86
OSBF OSB Financial Corp. NASDAQ 0.34 29.32 10.55 1,110,984 3.83 (1.25)
PALM Palfed, Inc. NASDAQ 3.23 18.75 11.06 5,225,571 5.88 6.93
PBCI Pamrapo Bancorp, Inc. NASDAQ 0.52 13.53 17.73 3,280,964 3.95 (1.25)
PBCT People's Bank, MHC NASDAQ 1.00 15.67 12.91 39,812,942 10.29 9.04
PBIX Patriot Bank Corp. NASDAQ 1.65 13.92 3,908,995 12.26 14.42
PBKB People's Bancshares, Inc. NASDAQ 1.30 14.79 6.74 3,367,395 5.00 6.33
PBNB People's Savings Financial Cp. NASDAQ 8.73 14.41 12.29 1,900,613 13.00 35.33
PCBC Perry County Financial Corp. NASDAQ 2.16 19.02 19.04 856,452 2.14 2.14
PCCI Pacific Crest Capital NASDAQ 0.98 8.97 8.41 2,959,698 0.00 (1.49)
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current
Market Stock Price/ Price/ Price/Tang Dividend
Value Price LTM EPS Book Value Book Value Yield
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PDB Piedmont Bancorp, Inc. AMSE 42.32 16.000 114.20 114.20 3.000
PEEK Peekskill Financial Corp. NASDAQ 52.09 13.375 91.74 91.74 2.692
PERM Permanent Bancorp, Inc. NASDAQ 34.70 16.250 25.00 86.34 87.46 1.846
PETE Primary Bank NASDAQ 24.94 12.750 NM 99.53 99.84 0.000
PFDC Peoples Bancorp NASDAQ 45.15 19.250 11.26 104.28 104.28 3.117
PFED Park Bancorp, Inc. NASDAQ 29.38 10.875 0.000
PFFB PFF Bancorp, Inc. NASDAQ 251.70 12.688 86.67 87.68 0.000
PFFC Peoples Financial Corp. NASDAQ 17.15 11.500 0.000
PFNC Progress Financial Corporation NASDAQ 23.31 6.250 7.02 119.50 120.42 1.280
PFSB PennFed Financial Services, Inc NASDAQ 86.83 18.000 11.61 87.80 110.23 0.000
PFSL Pocahontas FS&LA, MHC NASDAQ 24.36 15.000 12.40 108.85 108.85 5.600
PHBK Peoples Heritage Finl Group NASDAQ 585.32 23.250 11.57 159.79 178.71 2.925
PHFC Pittsburgh Home Financial Corp NASDAQ 25.91 11.875 85.25 85.25 1.684
PKPS Poughkeepsie Savings Bank, FSB NASDAQ 62.75 5.000 4.67 88.50 88.50 2.000
PLE Pinacle Bank AMSE 16.02 18.000 9.78 105.63 109.49 4.000
PMFI Perpetual Midwest Financial NASDAQ 36.28 18.250 24.66 101.96 101.96 1.644
POBS Portsmouth Bank Shares NASDAQ 73.15 12.750 12.62 109.54 109.54 4.706
PRBC Prestige Bancorp, Inc. NASDAQ 11.32 11.750 74.09 74.09 0.000
PROV Provident Financial Holdings NASDAQ 62.14 12.125 0.000
PSAB Prime Bancorp, Inc. NASDAQ 70.78 19.000 11.73 121.95 130.05 3.579
PSBK Progressive Bank, Inc. NASDAQ 83.38 31.500 9.81 116.06 133.59 2.540
PSSB Palm Springs Savings Bank NASDAQ 15.87 14.031 13.11 132.37 132.37 0.000
PTRS Potters Financial Corp. NASDAQ 7.85 15.500 14.22 74.06 74.06 1.548
PULB Pulaski Bank, Savings Bk, MHC NASDAQ 26.70 12.750 16.78 116.65 116.65 6.275
PULS Pulse Bancorp NASDAQ 52.60 17.250 12.50 133.72 133.72 4.058
PVFC PVF Capital Corp. NASDAQ 36.59 15.750 11.01 171.57 171.57 0.000
PVSA Parkvale Financial Corporation NASDAQ 91.41 28.250 9.88 131.03 131.58 2.301
PWBC PennFirst Bancorp, Inc. NASDAQ 53.11 13.500 13.37 109.76 121.40 2.667
PWBK Pennwood Savings Bank NASDAQ 6.71 11.000 0.000
QCBC Quaker City Bancorp, Inc. NASDAQ 55.30 14.500 15.76 81.41 81.78 0.000
QCFB QCF Bancorp, Inc. NASDAQ 25.27 15.750 88.38 88.38 0.000
QCSB Queens County Bancorp, Inc. NASDAQ 299.73 37.250 12.98 138.79 138.79 2.685
RARB Raritan Bancorp Inc. NASDAQ 33.30 21.625 11.75 121.15 124.14 2.775
RCSB RCSB Financial Inc. NASDAQ 333.49 26.875 12.50 131.29 135.94 1.786
REDF RedFed Bancorp Inc. NASDAQ 76.48 10.813 NM 89.29 89.29 0.000
RELI Reliance Bancshares, Inc. NASDAQ 22.10 8.625 75.33 0.000
RELY Reliance Bancorp, Inc. NASDAQ 165.46 18.125 13.84 107.69 158.85 3.090
RFED Roosevelt Financial Group NASDAQ 737.55 17.500 13.89 159.38 168.11 3.543
ROSE TR Financial Corp. NASDAQ 255.20 28.625 9.80 123.33 123.33 2.515
RVSB Riverview Savings Bank, MHC NASDAQ 33.76 15.375 12.30 143.29 160.83 1.431
SBCN Suburban Bancorporation, Inc. NASDAQ 24.43 16.500 31.13 94.39 94.39 3.636
SBFL SB of the Finger Lakes, MHC NASDAQ 27.44 15.375 135.94 135.94 2.602
SCCB S. Caroli Community Bancshrs NASDAQ 11.03 15.000 22.39 89.66 89.66 4.000
SCSL Suncoast Savings and Loan NASDAQ 14.35 7.188 11.78 107.93 108.25 0.000
SECP Security Capital Corporation NASDAQ 591.46 63.500 18.68 112.13 112.13 0.945
SFB Standard Federal Bancorp NYSE 1,367.11 43.750 11.02 142.32 181.76 1.829
<CAPTION>
1 Month Avg
Weekly Vol/ Price/ Price/
Shares Out LTM Core EPS Assets Shares Price Change over:
Ticker Institution Exchange (%) (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- --- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PDB Piedmont Bancorp, Inc. AMSE 0.58 32.88 2,645,000 13.27 19.63
PEEK Peekskill Financial Corp. NASDAQ 1.32 28.66 4,099,750 4.90 13.83
PERM Permanent Bancorp, Inc. NASDAQ 0.93 25.00 8.46 2,140,672 (1.52) 1.18
PETE Primary Bank NASDAQ 1.40 NM 6.11 1,955,688 7.37 4.08
PFDC Peoples Bancorp NASDAQ 0.18 11.26 16.24 2,345,512 0.00 (4.94)
PFED Park Bancorp, Inc. NASDAQ 2.95
PFFB PFF Bancorp, Inc. NASDAQ 5.47 11.73 19,837,500 11.54 11.54
PFFC Peoples Financial Corp. NASDAQ
PFNC Progress Financial Corporation NASDAQ 0.56 8.68 6.70 3,730,000 4.17 0.00
PFSB PennFed Financial Services, Inc NASDAQ 2.02 11.69 7.99 4,823,665 1.41 14.29
PFSL Pocahontas FS&LA, MHC NASDAQ 0.01 12.10 6.46 1,624,088 3.45 1.69
PHBK Peoples Heritage Finl Group NASDAQ 2.52 11.02 13.39 25,174,884 10.71 12.05
PHFC Pittsburgh Home Financial Corp NASDAQ 3.58 14.08 2,182,125 13.10 17.28
PKPS Poughkeepsie Savings Bank, FSB NASDAQ 1.72 3.45 7.47 12,549,325 (2.44) (4.76)
PLE Pinacle Bank AMSE 0.39 10.98 8.59 889,824 4.35 9.92
PMFI Perpetual Midwest Financial NASDAQ 0.83 27.65 9.47 1,988,082 5.80 4.29
POBS Portsmouth Bank Shares NASDAQ 0.81 14.83 27.41 5,736,913 (0.97) (6.42)
PRBC Prestige Bancorp, Inc. NASDAQ 11.03 963,023 10.59
PROV Provident Financial Holdings NASDAQ 11.49
PSAB Prime Bancorp, Inc. NASDAQ 0.36 12.58 10.98 3,725,056 1.33 5.20
PSBK Progressive Bank, Inc. NASDAQ 0.29 9.49 9.25 2,646,833 8.27 6.78
PSSB Palm Springs Savings Bank NASDAQ 0.02 15.94 8.47 1,130,946 0.67 1.12
PTRS Potters Financial Corp. NASDAQ 0.14 14.35 6.84 506,169 0.00 (3.49)
PULB Pulaski Bank, Savings Bk, MHC NASDAQ 0.07 20.24 14.88 2,094,000 3.03 (8.93)
PULS Pulse Bancorp NASDAQ 0.03 12.50 10.42 3,049,378 0.73 (1.43)
PVFC PVF Capital Corp. NASDAQ 0.15 12.50 11.50 2,323,436 12.50 27.71
PVSA Parkvale Financial Corporation NASDAQ 0.46 10.58 9.94 3,235,643 4.63 7.11
PWBC PennFirst Bancorp, Inc. NASDAQ 0.25 14.06 7.63 3,938,712 (1.82) 3.85
PWBK Pennwood Savings Bank NASDAQ 14.29
QCBC Quaker City Bancorp, Inc. NASDAQ 1.75 16.29 7.63 3,813,600 (0.85) 1.75
QCFB QCF Bancorp, Inc. NASDAQ 1.40 19.28 1,782,750 6.78 5.00
QCSB Queens County Bancorp, Inc. NASDAQ 0.73 13.02 23.02 8,046,433 5.67 6.24
RARB Raritan Bancorp Inc. NASDAQ 0.22 11.82 8.93 1,422,689 2.37 4.22
RCSB RCSB Financial Inc. NASDAQ 3.61 12.80 8.24 12,408,986 2.38 4.37
REDF RedFed Bancorp Inc. NASDAQ 3.21 NM 5.25 4,082,511 10.90 18.50
RELI Reliance Bancshares, Inc. NASDAQ 2.03 46.27 2,562,344 7.81 11.29
RELY Reliance Bancorp, Inc. NASDAQ 7.88 14.62 9.28 9,128,739 4.32 17.89
RFED Roosevelt Financial Group NASDAQ 2.56 10.12 7.91 42,145,561 2.19 (2.78)
ROSE TR Financial Corp. NASDAQ 3.89 12.34 8.30 8,915,189 3.15 8.53
RVSB Riverview Savings Bank, MHC NASDAQ 0.12 13.37 15.79 2,195,781 2.50 2.50
SBCN Suburban Bancorporation, Inc. NASDAQ 1.11 21.43 12.39 1,480,732 (1.49) 15.79
SBFL SB of the Finger Lakes, MHC NASDAQ 0.05 13.90 1,785,000 (5.38) (3.91)
SCCB S. Caroli Community Bancshrs NASDAQ 0.68 22.39 24.98 735,410 (9.09) (9.09)
SCSL Suncoast Savings and Loan NASDAQ 2.25 NM 3.57 1,996,930 4.55 18.61
SECP Security Capital Corporation NASDAQ 0.85 17.84 17.21 9,314,365 4.53 2.11
SFB Standard Federal Bancorp NYSE 0.63 12.64 8.99 31,324,268 2.94 14.01
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current 1 Month Avg
Market Stock Price/ Price/ Price/ Tang Dividend Weekly Vol/
Value Price LTM EPS Book Value Book Value Yield Shares Out
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
SFBM Security Bancorp NASDAQ 31.80 21.750 12.95 103.57 120.77 3.034 0.51
SFED SFS Bancorp, Inc. NASDAQ 17.42 13.000 15.48 75.41 75.41 1.846 1.71
SFFC StateFed Financial Corporation NASDAQ 13.42 16.500 14.86 89.92 89.92 2.424 0.86
SFIN Statewide Financial Corp. NASDAQ 65.28 12.500 94.13 94.41 3.200 1.90
SFNB Security First Network Bank NASDAQ 202.75 25.000 379.94 384.62 0.000 2.36
SFSB SuburbFed Financial Corp. NASDAQ 21.68 17.250 12.87 83.25 83.74 1.855 0.10
SFSL Security First Corp. NASDAQ 70.25 14.250 10.88 125.99 128.49 3.088 0.54
SGVB SGV Bancorp, Inc. NASDAQ 24.78 9.563 80.09 80.09 0.000 1.03
SHEN First Shengo Bancorp, Inc. NASDAQ 46.56 20.500 13.49 99.85 99.85 2.341 0.26
SHFC Seven Hills Financial Corp. NASDAQ 9.52 17.750 59.17 98.67 98.67 2.028 0.00
SISB SIS Bancorp, Inc. NASDAQ 127.33 22.250 8.00 139.32 139.32 0.000 5.50
SJSB SJS Bancorp NASDAQ 20.88 21.250 23.10 118.72 118.72 2.071 0.62
SMBC Southern Missouri Bancorp, Inc NASDAQ 24.24 14.250 18.04 92.47 92.47 3.509 0.16
SMFC Sho-Me Financial Corp. NASDAQ 33.95 20.625 16.37 105.28 105.28 0.000 5.02
SOBI Sobieski Bancorp, Inc. NASDAQ 10.25 12.250 33.11 72.61 72.61 0.000 2.22
SOPN First Savings Bancorp, Inc. NASDAQ 65.52 17.500 17.86 98.09 98.09 3.886 0.32
SOSA Somerset Savings Bank NASDAQ 33.30 2.000 15.38 116.96 116.96 0.000 5.55
SPBC St. Paul Bancorp, Inc. NASDAQ 456.45 25.375 13.22 121.53 121.94 1.892 2.58
SRN Southern Banc Company, Inc AMSE 18.91 13.000 84.86 85.75 2.692 0.31
SSB Scotland Bancorp, Inc AMSE 24.38 13.250 98.66 98.66 2.264 0.92
SSBK Strongsville Savings Bank NASDAQ 56.31 22.250 11.59 132.36 135.09 2.157 0.12
SSM Stone Street Bancorp, Inc. AMSE 32.62 17.875 85.12 85.12 2.462 0.88
STFR St. Francis Capital Corp. NASDAQ 143.86 25.750 10.43 110.09 115.32 1.553 0.78
STND Standard Financial, Inc. NASDAQ 265.62 16.250 15.93 99.75 99.94 1.969 0.60
STSA Sterling Financial Corp. NASDAQ 73.26 13.500 15.00 122.62 151.35 0.000 2.05
SVRN Sovereign Bancorp, Inc. NASDAQ 539.11 10.875 10.16 140.32 206.75 0.772 2.23
SWBI Southwest Bancshares NASDAQ 47.98 26.875 13.71 120.52 120.52 4.019 0.20
SWCB Sandwich Co-operative Bank NASDAQ 43.26 23.000 11.86 116.81 124.39 4.348 1.23
SZB SouthFirst Bancshares, Inc. AMSE 10.48 12.500 21.19 82.67 82.67 4.000 0.73
TBK Tolland Bank AMSE 13.60 11.750 10.78 99.66 104.26 0.000 0.84
TCB TCF Financial Corp. NYSE 1,315.46 37.625 13.20 251.17 262.56 1.993 0.84
THBC Troy Hill Bancorp, Inc. NASDAQ 21.09 19.750 18.46 118.05 118.05 2.025 5.81
THIR Third Financial Corp. NASDAQ 36.63 32.250 18.22 127.82 127.82 2.357 0.11
THR Three Rivers Financial Corp. AMSE 11.07 12.875 84.87 85.26 2.330 0.70
THRD TF Financial Corporation NASDAQ 62.85 14.625 14.48 81.39 81.39 2.188 1.63
TPNZ Tappan Zee Financial, Inc. NASDAQ 19.05 12.375 89.41 89.41 1.616 2.42
TRIC Tri-County Bancorp, Inc. NASDAQ 11.19 18.375 17.84 90.16 90.16 2.721 0.00
TSBS Trenton SB, MHC NASDAQ 133.69 15.000 133.57 136.61 2.333 0.52
TSH Teche Holding Co. AMSE 50.60 13.250 14.10 90.01 90.01 3.774 0.72
TWIN Twin City Bancorp NASDAQ 15.02 16.750 12.98 106.42 106.42 3.821 0.26
UBMT United Financial Corp. NASDAQ 22.33 18.250 13.62 91.11 91.11 4.822 0.21
UFRM United Federal Savings Bank NASDAQ 22.22 7.250 10.98 107.73 107.73 2.759 0.21
VABF Virginia Beach Fed. Financial NASDAQ 40.96 8.250 20.63 99.40 99.40 1.939 0.90
VAFD Valley Federal Savings Bank NASDAQ 14.49 39.500 69.30 151.05 151.05 1.519 0.43
VFFC Virginia First Financial Corp. NASDAQ 77.86 13.563 6.49 127.59 131.68 0.737 0.27
<CAPTION>
Price/ Price/
LTM Core EPS Assets Shares Price Change over:
------------------
Ticker Institution Exchange (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- ----------- --------- --------
<C> <S> <C> <C> <C> <C> <C> <C>
SFBM Security Bancorp NASDAQ 17.26 8.54 1,462,182 1.16 7.41
SFED SFS Bancorp, Inc. NASDAQ 15.29 10.22 1,292,450 (1.89) 7.22
SFFC StateFed Financial Corporation NASDAQ 14.86 17.50 813,485 6.45 2.33
SFIN Statewide Financial Corp. NASDAQ 9.32 5,058,152 4.17 2.04
SFNB Security First Network Bank NASDAQ 189.11 8,092,792 (7.41) (32.89)
SFSB SuburbFed Financial Corp. NASDAQ 14.74 5.73 1,257,019 0.00 0.00
SFSL Security First Corp. NASDAQ 10.33 11.93 4,929,612 (1.72) 0.00
SGVB SGV Bancorp, Inc. NASDAQ 7.83 2,727,656 9.29 7.75
SHEN First She ngo Bancorp, Inc. NASDAQ 14.14 12.66 2,281,250 (1.20) (4.65)
SHFC Seven Hills Financial Corp. NASDAQ 61.21 20.92 536,472 0.00 10.94
SISB SIS Bancorp, Inc. NASDAQ 7.92 10.52 5,722,600 10.56 27.14
SJSB SJS Bancorp NASDAQ 23.61 13.85 982,622 6.25 4.94
SMBC Southern Missouri Bancorp, Inc NASDAQ 19.52 15.17 1,724,013 3.64 (3.39)
SMFC Sho-Me Financial Corp. NASDAQ 16.91 12.76 1,732,674 21.32 30.95
SOBI Sobieski Bancorp, Inc. NASDAQ 33.11 13.42 836,860 4.26 2.08
SOPN First Savings Bancorp, Inc. NASDAQ 17.86 25.50 3,744,000 2.94 (7.89)
SOSA Somerset Savings Bank NASDAQ 15.38 6.51 16,651,602 33.33 33.33
SPBC St. Paul Bancorp, Inc. NASDAQ 13.50 10.52 17,988,321 1.75 10.33
SRN Southern Banc Company, Inc AMSE 17.23 1,454,750 (1.89) (1.89)
SSB Scotland Bancorp, Inc AMSE 34.59 1,840,000 8.16 8.16
SSBK Strongsville Savings Bank NASDAQ 13.01 10.64 2,530,800 4.71 2.30
SSM Stone Street Bancorp, Inc. AMSE 30.21 1,825,050 5.93 5.93
STFR St. Francis Capital Corp. NASDAQ 14.07 10.82 5,586,837 0.00 1.48
STND Standard Financial, Inc. NASDAQ 17.47 11.68 16,345,875 (1.14) 6.56
STSA Sterling Financial Corp. NASDAQ 15.88 4.96 5,426,398 0.00 (3.57)
SVRN Sovereign Bancorp, Inc. NASDAQ 10.56 5.87 49,573,278 6.10 8.10
SWBI Southwest Bancshares NASDAQ 13.78 13.52 1,794,474 0.00 (0.46)
SWCB Sandwich Co-operative Bank NASDAQ 12.85 9.62 1,880,769 9.52 16.46
SZB SouthFirst Bancshares, Inc. AMSE 36.76 11.92 863,200 (1.96) (0.99)
TBK Toll and Bank AMSE 10.59 6.07 1,157,500 13.25 20.51
TCB TCF Financial Corp. NYSE 13.83 18.79 34,960,450 1.01 16.22
THBC Troy Hill Bancorp, Inc. NASDAQ 20.15 26.20 1,067,917 42.34 46.30
THIR Third Financial Corp. NASDAQ 20.28 23.50 1,135,954 0.00 0.78
THR Three Rivers Financial Corp. AMSE 13.00 859,625 0.00 (2.83)
THRD TF Financial Corporation NASDAQ 14.92 12.48 4,514,057 (0.43) 0.86
TPNZ Tappan Zee Financial, Inc. NASDAQ 16.13 1,553,062 (3.88) 2.61
TRIC Tri-County Bancorp, Inc. NASDAQ 18.19 14.58 608,749 0.00 (0.68)
TSBS Trenton SB, MHC NASDAQ 25.84 8,912,500 10.09 7.60
TSH Teche Holding Co. AMSE 14.25 13.84 3,871,000 2.91 0.95
TWIN Twin City Bancorp NASDAQ 14.57 14.54 896,564 1.52 1.52
UBMT United Financial Corp. NASDAQ 14.37 21.43 1,223,312 (0.68) 0.00
UFRM United Federal Savings Bank NASDAQ 12.95 8.70 3,065,064 (6.45) (12.12)
VABF Virginia Beach Fed. Financial NASDAQ 63.46 6.73 4,965,094 0.00 10.00
VAFD Valley Federal Savings Bank NASDAQ 80.61 12.23 366,860 17.91 23.44
VFFC Virginia First Financial Corp. NASDAQ 13.56 10.43 5,740,503 13.03 (3.12)
</TABLE>
<PAGE>
EXHIBIT I-b
ALL PUBLICLY TRADED THRIFTS
MARKET DATA
<TABLE>
<CAPTION>
Current Current Current Current Current Current 1 Month Avg
Market Stock Price/ Price/ Price/Tang Dividend Weekly Vol/
Value Price LTM EPS Book Value Book Value Yield Shares Out
Ticker Institution Exchange ($M) ($) (x) (%) (%) (%) (%)
- ------ ----------- -------- ---- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. NASDAQ 2,541.06 35.250 12.41 178.66 199.83 2.610 2.52
WAYN Wayne Savings & Loan Co. MHC NASDAQ 28.42 19.000 18.27 122.58 122.58 4.632 0.18
WBST Webster Financial Corporation NASDAQ 277.47 34.250 14.04 140.25 183.84 2.102 1.82
WCBI Westco Bancorp NASDAQ 57.02 21.750 15.76 118.21 118.21 2.207 0.06
WCFB Webster City Federal SB, MHC NASDAQ 28.35 13.500 25.00 130.06 130.06 5.926 0.09
WCHI Workingmens Capital Holdings NASDAQ 39.11 21.625 21.20 147.81 147.81 1.665 2.26
WEFC Wells Financial Corp. NASDAQ 25.98 12.500 15.43 93.56 93.56 0.000 2.87
WES Westcorp NYSE 529.30 20.375 13.49 169.23 169.79 1.963 0.25
WFCO Winton Financial Corp. NASDAQ 24.46 12.313 9.93 116.05 119.08 3.411 0.11
WFSL Washington Federal, Inc. NASDAQ 929.42 22.000 11.11 155.59 163.33 4.182 1.05
WHGB WHG Bancshares Corp. NASDAQ 19.64 12.125 0.000 0.75
WLDN Walden Bancorp, Inc. NASDAQ 163.58 30.750 16.10 168.22 195.36 2.081 6.70
WOFC Western Ohio Financial Corp. NASDAQ 45.05 20.000 21.05 83.02 88.26 5.000 0.71
WRNB Warren Bancorp, Inc. NASDAQ 48.35 13.250 8.60 154.79 154.79 3.321 1.05
WSB Washington Savings Bank, FSB AMSE 21.10 5.000 9.09 100.60 100.60 2.000 0.13
WSFS WSFS Financial Corporation NASDAQ 115.84 8.375 4.48 156.25 158.02 0.000 0.76
WSTR WesterFed Financial Corp. NASDAQ 67.03 15.250 14.25 85.29 85.29 2.361 1.17
WVFC WVS Financial Corporation NASDAQ 38.21 22.000 10.68 112.24 112.24 1.818 0.34
WWFC Westwood Financial Corporation NASDAQ 8.57 13.250 0.000
WYNE Wayne Bancorp, Inc. NASDAQ 30.96 13.875 84.40 84.40 0.000
YFCB Yonkers Financial Corporation NASDAQ 42.85 12.000 87.40 87.40 1.667 6.69
YFED York Financial Corp. NASDAQ 110.34 18.125 11.12 117.92 117.92 3.310 0.34
Average 133.99 18.079 16.16 114.46 118.18 1.96 1.39
<CAPTION>
Price/ Price/ Price Change over:
LTM Core EPS Assets Shares --------------------
Ticker Institution Exchange (x) (%) Outstanding One Month 3 Months
- ------ ----------- -------- --- --- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. NASDAQ 12.46 11.38 72,086,750 (3.75) 21.55
WAYN Wayne Savings & Loan Co. MHC NASDAQ 19.19 11.36 1,495,707 (3.80) (8.43)
WBST Webster Financial Corporation NASDAQ 13.33 7.23 8,101,382 6.20 19.65
WCBI Westco Bancorp NASDAQ 15.54 18.27 2,621,643 0.00 0.00
WCFB Webster City Federal SB, MHC NASDAQ 25.96 29.11 2,100,000 8.00 1.89
WCHI Workingmens Capital Holdings NASDAQ 21.00 18.78 1,808,560 2.98 8.13
WEFC Wells Financial Corp. NASDAQ 15.24 13.54 2,078,125 2.04 9.89
WES Westcorp NYSE 33.40 17.48 25,977,094 10.14 13.19
WFCO Winton Financial Corp. NASDAQ 11.84 8.65 1,986,152 9.45 (8.79)
WFSL Washington Federal, Inc. NASDAQ 11.58 18.44 42,246,383 (1.68) 5.39
WHGB WHG Bancshares Corp. NASDAQ 10.23 10.23
WLDN Walden Bancorp, Inc. NASDAQ 15.45 15.55 5,319,700 51.85 59.74
WOFC Western Ohio Financial Corp. NASDAQ 33.33 13.89 2,309,342 (4.76) (11.11)
WRNB Warren Bancorp, Inc. NASDAQ 8.95 13.97 3,683,427 10.42 7.07
WSB Washington Savings Bank, FSB AMSE 11.90 8.28 4,220,206 0.00 (8.09)
WSFS WSFS Financial Corporation NASDAQ 6.75 8.82 13,832,198 8.06 13.56
WSTR WesterFed Financial Corp. NASDAQ 15.10 11.89 4,395,204 5.17 6.57
WVFC WVS Financial Corporation NASDAQ 11.58 14.72 1,736,760 7.98 7.32
WWFC Westwood Financial Corporation NASDAQ 21.84 23.26
WYNE Wayne Bancorp, Inc. NASDAQ 14.62 2,231,383 11.00
YFCB Yonkers Financial Corporation NASDAQ 17.65 3,570,750 16.36 21.52
YFED York Financial Corp. NASDAQ 12.50 9.94 6,087,722 12.40 6.62
Average 17.25 13.58 6,294,261 4.36 6.32
</TABLE>
<PAGE>
EXHIBIT 2
COMPARATIVE GROUP
GENERAL DATA
<TABLE>
<CAPTION>
Number Equity/
of FTE Assets Deposits Assets Holding
Ticker Institution City State Offices Employees ($000) ($000) (%) Company
- ------ ----------- ---- ----- -------- --------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc Gadsden AL 4 29 109,768 86,778 20.31 Y
CCFH CCF Holding Company Jonesboro GA 3 79,325 60,696 21.19 Y
GWBC Gateway Bancorp, Inc. Catlettsburg KY 2 9 71,260 53,396 24.86 Y
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY 2 15 109,578 77,845 28.13 Y
KYF Kentucky First Bancorp, Inc. Cynthia KY 2 21 88,296 51,778 21.77 Y
CZF CitiSave Financial Corp Baton Rouge LA 5 43 76,128 61,752 16.73 Y
NSLB NS&L Bancorp, Inc. Neosho MO 2 57,288 42,997 23.31 Y
KSAV KS Bancorp, Inc. Kenly NC 5 39 256,986 187,424 26.00 Y
SOPN First Savings Bancorp, Inc. Southern Pines NC 3 24 93,536 75,990 14.79 Y
SCCB S. Carolina Community Bancshrs Winnsboro SC 1 44,161 31,274 27.87 Y
BFSB Bedford Bancshares, Inc. Bedford VA 3 36 121,783 94,130 15.22 Y
Comp Group Average 3 27 100,737 74,915 21.83
Comp Group Median 3 27 88,296 61,752 21.77
North Carolina Average 5 52 207,689 149,443 24.01
North Carolina Median 3 30 131,888 108,804 26.00
Southeast Region Average 11 189 515,520 360,239 13.96
All Publicly Traded Thrifts Average 17 338 1,345,969 900,683 12.45
Home Savings 1 11 81,304 69,669 13.83 Y
</TABLE>
<PAGE>
EXHIBIT 3
COMPARATIVE GROUP
FINANCIAL PERFORMANCE
---------------------
<TABLE>
<CAPTION>
Net Interest
Core Earnings Income/ Noninterest
Return on Return on Return on Return on Avg Assets Income/
Avg Assets Avg Equity Avg Assets Avg Equity (%) Avg Assets
Ticker Institution (%) (%) (%) (%) LTM (%)
- ------ ----------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 0.54 3.96 2.70 0.07
CCFH CCF Holding Company 0.97 4.91 0.97 4.91 3.79 0.46
GWBC Gateway Bancorp, Inc. 1.05 4.05 1.05 4.05 2.79 0.04
HFFB Harrodsburg First Fin Bancorp 1.17 4.52 3.29 0.12
KYF Kentucky First Bancorp, Inc. 1.12 6.44 3.62 0.16
CZF CitiSave Financial Corp 1.21 6.68 3.83 1.41
NSLB NS&L Bancorp, Inc. 0.97 4.08 3.17 0.27
KSAV KS Bancorp, Inc. 1.53 5.86 1.51 5.77 3.65 0.14
SOPN First Savings Bancorp, Inc. 1.11 6.90 1.11 6.90 3.72 0.16
SCCB S. Carolina Community Bancshrs 1.11 3.80 1.11 3.80 4.00 0.09
BFSB Bedford Bancshares, Inc. 1.29 7.96 1.29 7.96 3.99 0.52
Comp Group Average 1.10 5.38 1.17 5.57 3.50 0.31
Comp Group Median 1.11 4.91 1.11 5.34 3.65 0.16
North Carolina Average 1.02 6.24 0.92 6.32 3.64 0.27
North Carolina Median 1.02 6.69 0.92 6.32 3.65 0.18
Southeast Region Average 0.94 8.73 0.92 6.32 3.35 0.56
All Publicly Traded Thrifts Avera 0.89 8.52 0.92 6.32 3.27 0.43
Home Savings 0.86 6.19 0.86 6.19 2.92 0.05
Home Savings Pro Forma 1.03 4.14 1.03 4.14
<CAPTION>
Noninterest
Expense/
Avg Assets
Ticker Institution (%)
- ------ ----------- ----
<S> <C> <C>
SRN Southern Banc Company, Inc 1.89
CCFH CCF Holding Company 2.82
GWBC Gateway Bancorp, Inc. 1.23
HFFB Harrodsburg First Fin Bancorp 1.60
KYF Kentucky First Bancorp, Inc. 2.12
CZF CitiSave Financial Corp 3.55
NSLB NS&L Bancorp, Inc. 2.22
KSAV KS Bancorp, Inc. 1.44
SOPN First Savings Bancorp, Inc. 2.04
SCCB S. Carolina Community Bancshrs 2.26
BFSB Bedford Bancshares, Inc. 2.44
Comp Group Average 2.15
Comp Group Median 2.12
North Carolina Average 2.32
North Carolina Median 2.14
Southeast Region Average 2.45
All Publicly Traded Thrifts Average 2.32
Home Savings 1.48
Home Savings Pro Forma
</TABLE>
<PAGE>
EXHIBIT 4
COMPARATIVE GROUP
CAPITAL RATIOS
<TABLE>
<CAPTION>
Tangible Regulatory Core Cap/
Equity/ Equity/ Core Cap/ Risk-Adj
Assets Tang Assets Assets Assets
Ticker Institution (%) (%) (%) (%)
- ------ ----------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 20.31 20.14 14.34 74.22
CCFH CCF Holding Company 21.19 21.19
GWBC Gateway Bancorp, Inc. 24.86 24.86 23.62 80.81
HFFB Harrodsburg First Fin Bancorp 28.13 28.13 20.00 40.81
KYF Kentucky First Bancorp, Inc. 21.77 21.77 19.40 37.05
CZF CitiSave Financial Corp 16.73 16.72 13.72 30.35
NSLB NS&L Bancorp, Inc. 23.31 23.31 18.60 49.39
KSAV KS Bancorp, Inc. 26.00 26.00 26.00 60.02
SOPN First Savings Bancorp, Inc. 14.79 14.78
SCCB S. Caroli Community Bancshrs 27.87 27.87
BFSB Bedford Bancshares, Inc. 15.22 15.22 12.78 23.22
Comp Group Average 21.83 21.82 18.56 49.48
Comp Group Median 21.77 21.77 19.00 45.10
North Carolina Average 24.01 23.87 21.63 48.28
North Carolina Median 26.00 26.00 21.50 51.33
Southeast Region Average 13.96 13.81 12.14 25.17
All Publicly Traded Thrifts Average 12.45 12.13 10.59 21.59
Home Savings 13.79 13.79 14.44 27.73
Home Savings Pro Forma 24.90 24.90 24.90 50.45
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 5
COMPARATIVE GROUP
LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
1-4 Family 5+ Family Total Total
First Perm Permanent Nonresidentl Construction Mortgage Commercial
Mort Loans/ Mort Loans/ Mort Loans/ Mort Loans/ Loans/ Nonmort Lns/
Ticker Institution Assets (%) Assets (%) Assets (%) Assets (%) Assets (%) Assets (%)
- ------ ----------- ---------- ---------- ---------- ---------- ---------- ----------
SRN Southern Banc Company, Inc 26.18 0.00 0.17 0.00 26.35 0.07
CCFH CCF Holding Company 52.88 0.00 2.13 7.53 64.05 0.00
GWBC Gateway Bancorp, Inc. 22.76 0.12 0.63 0.00 23.54 0.00
HFFB Harrodsburg First Fin Bancorp 57.22 1.46 4.90 1.33 65.44 0.13
KYF Kentucky First Bancorp, Inc. 28.42 5.63 11.53 0.27 45.97 2.53
CZF CitiSave Financial Corp 45.60 0.47 5.20 3.64 55.14 0.97
NSLB NS&L Bancorp, Inc. 44.76 0.00 0.30 2.04 47.10 0.00
KSAV KS Bancorp, Inc. 61.63 1.26 4.00 69.69 0.00
SOPN First Savings Bancorp, Inc. 69.02 0.34 0.59 82.71 0.00
SCCB S. Caroli Community Bancshrs 74.34 0.06 2.62 0.19 79.87 0.00
BFSB Bedford Bancshares, Inc. 64.56 0.18 3.79 8.54 80.22 1.66
Comp Group Average 49.76 0.87 3.26 2.62 58.19 0.49
Comp Group Median 52.88 0.18 2.62 1.16 64.05 0.00
North Carolina Average 57.62 1.16 5.03 9.05 70.73 0.41
North Carolina Median 61.63 0.57 4.49 8.33 73.38 0.00
Southeast Region Average 48.05 1.87 6.46 6.34 64.61 1.72
All Publicly Traded Thrifts Average 44.81 4.23 6.30 3.15 60.33 1.56
Home Savings 51.88 4.09 68.39 0.00
<CAPTION> Total
Total Total High-Risk Loan Loan Loan
Consumer Nonmortgage Real Estate Originations Purchases Sales
Nonmort Lns/ Loans/ Loans/ ($000) ($000) ($000)
Ticker Institution Assets (%) Assets (%) Assets (%) LTM Mst RctY Mst RctY
- ------ ----------- ---------- ---------- ---------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 2.46 2.54 0.17
CCFH CCF Holding Company 1.18 1.18 9.87
GWBC Gateway Bancorp, Inc. 0.95 0.95 0.78 0
HFFB Harrodsburg First Fin Bancorp 2.15 2.28 8.22 0 0
KYF Kentucky First Bancorp, Inc. 2.25 4.78 17.55 7,869 1,394 0
CZF CitiSave Financial Corp 2.64 3.61 9.54 26,784 22 9,695
NSLB NS&L Bancorp, Inc. 3.55 3.55 2.35
KSAV KS Bancorp, Inc. 0.52 0.52 5.92 0
SOPN First Savings Bancorp, Inc. 0.26 0.26 5.76 22,345 0 0
SCCB S. Caroli Community Bancshrs 0.59 0.59 5.53 0 0
BFSB Bedford Bancshares, Inc. 5.85 7.51 15.66 26,888 75 280
Comp Group Average 2.04 2.52 7.40 20,972 249 1,247
Comp Group Median 2.15 2.28 5.92 24,565 11 0
North Carolina Average 1.67 1.67 10.43 25,223 480 829
North Carolina Median 0.62 0.62 8.99 24,060 0 0
Southeast Region Average 6.11 6.11 15.39 187,723 45,052 48,075
All Publicly Traded Thrifts Average 6.04 6.04 14.02 363,386 54,611 78,537
Home Savings 0.67 0.67 13,628 0 0
</TABLE>
<PAGE>
EXHIBIT 6
COMPARATIVE GROUP
BALANCE SHEET RATIOS
<TABLE>
<CAPTION>
Loans/ Loans/ Deposits/ Borrowings/
Deposits Assets Assets Assets
Ticker Institution (%) (%) (%) (%)
- ------ ----------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 36.46 28.82 79.06 0.00
CCFH CCF Holding Company 79.96 61.18 76.52 0.63
GWBC Gateway Bancorp, Inc. 32.41 24.28 74.93 0.00
HFFB Harrodsburg First Fin Bancorp 97.35 69.16 71.04 0.00
KYF Kentucky First Bancorp, Inc. 83.80 49.14 58.64 18.72
CZF CitiSave Financial Corp 70.95 57.55 81.12 0.00
NSLB NS&L Bancorp, Inc. 69.21 51.94 75.05 0.00
KSAV KS Bancorp, Inc. 94.99 69.28 72.93 0.16
SOPN First Savings Bancorp, Inc. 100.97 82.03 81.24 3.21
SCCB S. Caroli Community Bancshrs 107.53 76.15 70.82 0.00
BFSB Bedford Bancshares, Inc. 110.58 85.47 77.29 6.57
Comp Group Average 80.38 59.55 74.42 2.66
Comp Group Median 83.80 61.18 75.05 0.00
North Carolina Average 102.20 72.59 71.97 2.61
North Carolina Median 101.44 71.32 72.93 0.61
Southeast Region Average 94.75 68.97 73.79 10.64
All Publicly Traded Thrifts Average 90.58 65.18 73.21 12.86
Home Savings 82.79 67.88 85.69 0.00
<CAPTION>
Cash, Goodwill &
Deposits & Other
Invest Secs/ MBS REO & REI Intangibles/
Ticker Institution Assets (%) Assets (%) Assets (%) Assets (%)
- ------ ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 23.47 45.72 0.00 0.21
CCFH CCF Holding Company 24.34 12.64 0.00 0.00
GWBC Gateway Bancorp, Inc. 33.51 40.42 0.00 0.00
HFFB Harrodsburg First Fin Bancorp 31.00 0.10 0.00 0.00
KYF Kentucky First Bancorp, Inc. 26.25 20.53 0.00 0.00
CZF CitiSave Financial Corp 37.48 3.15 0.00 0.00
NSLB NS&L Bancorp, Inc. 37.88 10.25 0.00 0.00
KSAV KS Bancorp, Inc. 27.15 1.44 0.03 0.00
SOPN First Savings Bancorp, Inc. 13.16 1.80 0.00 0.02
SCCB S. Caroli Community Bancshrs 18.97 0.16 0.10 0.00
BFSB Bedford Bancshares, Inc. 12.03 0.45 0.00 0.00
Comp Group Average 25.93 12.42 0.01 0.02
Comp Group Median 26.25 3.15 0.00 0.00
North Carolina Average 23.62 2.98 0.20 0.16
North Carolina Median 20.69 1.44 0.02 0.00
Southeast Region Average 18.67 9.29 0.25 0.21
All Publicly Traded Thrifts Average 19.39 12.17 0.27 0.21
Home Savings 28.97 5.08 0.41 0.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EXHIBIT 7
COMPARATIVE GROUP
ANNUALIZED GROWTH RATES
Asset Loan Deposit
Growth Growth Growth
Rate Rate Rate
Ticker Institution (%) (%) (%)
- ------ ----------- --- --- ---
<C> <S> <C> <C> <C>
SRN Southern Banc Company, Inc
CCFH CCF Holding Company (2.96) 7.68 (17.83)
GWBC Gateway Bancorp, Inc. (4.73) 18.15 (0.40)
HFFB Harrodsburg First Fin Bancorp
KYF Kentucky First Bancorp, Inc. 40.88 7.28 (2.50)
CZF CitiSave Financial Corp (2.98) 15.08 (3.99)
NSLB NS&L Bancorp, Inc. 1.33 16.68 2.20
KSAV KS Bancorp, Inc. 2.06 11.01 2.37
SOPN First Savings Bancorp, Inc. 7.00 11.54 10.35
SCCB S. Carolina Community Bancshares 0.49 0.87 3.88
BFSB Bedford Bancshares, Inc. 8.92 6.96 8.45
Comp Group Average 5.56 10.58 0.28
Comp Group Median 1.33 11.01 2.20
North Carolina Average 3.59 8.62 0.25
North Carolina Median 0.49 7.71 0.18
Southeast Region Average 6.58 13.41 5.01
All Publicly Traded Thrifts Average 11.32 14.64 7.69
Home Savings 7.68 2.17 9.80
</TABLE>
<PAGE>
EXHIBIT 8
COMPARATIVE GROUP
ASSET AND RISK RATIOS
<TABLE>
<CAPTION>
NPAs + Loans Net Loan One Year
NPAs/ 90+ Pst Due/ Reserves/ Chargeoffs/ Cum Gap/
Assets Assets NPAs + 90 Avg Loans Assets
Ticker Institution (%) (%) (%) (%) (%)
- ------ ----------- ------ ------------ --------- ----------- --------
<S> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 0.00 0.00 0.00
CCFH CCF Holding Company 0.92 0.92 60.06
GWBC Gateway Bancorp, Inc. 0.08 0.31 36.99 0.00
HFFB Harrodsburg First Fin Bancorp 0.00 0.58 46.70 0.00
KYF Kentucky First Bancorp, Inc. 0.00 0.14 301.64 0.00
CZF CitiSave Financial Corp 0.23 0.23 40.11 0.24
NSLB NS&L Bancorp, Inc. 0.00 0.02 390.91 0.00
KSAV KS Bancorp, Inc. 0.05 0.05 454.48 0.00 (32.47)
SOPN First Savings Bancorp, Inc. 0.52 0.52 56.47 0.00
SCCB S. Carolina Community Bancshares 1.44 46.00 0.00
BFSB Bedford Bancshares, Inc. 0.00 0.87 60.30 0.00 15.63
Comp Group Average 0.18 0.46 149.37 0.02 (8.42)
Comp Group Median 0.03 0.31 60.06 0.00 (8.42)
North Carolina Average 0.71 0.79 114.16 0.02 1.02
North Carolina Median 0.52 0.52 66.01 0.00 1.02
Southeast Region Average 0.91 1.28 105.57 0.13 0.94
All Publicly Traded Thrifts Average 0.95 1.06 117.48 0.19 0.89
Home Savings 0.76 0.76 187.02 0.06 (48.88)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 9
COMPARATIVE GROUP
YIELD-COST SPREAD ANALYSIS
Interest Net Interest Earn Assets/ Yield on
Interest Expense/ Income/ Int Bearing Int Earning
Income/ Avg Assets Avg Assets Liabilities Assets
Avg Assets (%) (%) (%) (%)
Ticker Institution (%) LTM LTM LTM LTM
- ------ ----------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc. 7.10 4.39 2.70 114.55 7.22
CCFH CCF Holding Company 7.04 3.25 3.79 124.48 7.18
GWBC Gateway Bancorp, Inc. 6.59 3.79 2.79 135.12 6.66
HFFB Harrodsburg First Fin Bancorp 7.07 3.79 3.29 135.12 7.16
KYF Kentucky First Bancorp, Inc. 7.12 3.50 3.62 117.91 7.38
CZF CitiSave Financial Corp. 7.13 3.30 3.83 124.72 7.44
NSLB NS&L Bancorp, Inc. 6.37 3.20 3.17 130.34 6.54
KSAV KS Bancorp, Inc. 7.25 3.60 3.65 134.63 7.43
SOPN First Savings Bancorp, Inc. 8.03 4.31 3.72 120.11 8.54
SCCB S. Carolina Community Bancshares 7.73 3.73 4.00 140.20 7.92
BFSB Bedford Bancshares, Inc. 7.76 3.77 3.99 122.35 8.08
Comp Group Average 7.20 3.69 3.50 127.23 7.41
Comp Group Median 7.12 3.73 3.65 124.72 7.38
North Carolina Average 7.68 4.04 3.64 120.20 7.94
North Carolina Median 7.80 3.95 3.65 120.11 8.08
Southeast Region Average 7.58 4.23 3.35 112.75 7.94
All Publicly Traded Thrifts Average 7.42 4.15 3.27 113.03 7.73
Home Savings 7.45 4.50 2.96 113.86 7.69
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of Interest Net
Int Bearing Yield Interest
Liabilities Spread Margin
(%) (%) (%)
Ticker Institution LTM LTM LTM
- ------ ----------- --- --- ---
<S> <C> <C> <C> <C>
SRN Southern Banc Company, Inc. 5.12 2.10 2.75
CCFH CCF Holding Company 4.13 3.05 3.87
GWBC Gateway Bancorp, Inc. 5.18 1.48 2.83
HFFB Harrodsburg First Fin Bancorp 5.18 1.98 3.33
KYF Kentucky First Bancorp, Inc. 4.28 3.10 3.76
CZF CitiSave Financial Corp. 4.30 3.14 4.00
NSLB NS&L Bancorp, Inc. 4.28 2.26 3.26
KSAV KS Bancorp, Inc. 4.97 2.46 3.74
SOPN First Savings Bancorp, Inc. 5.50 3.04 3.96
SCCB S. Carolina Community Bancshares 5.35 2.57 4.10
BFSB Bedford Bancshares, Inc. 4.80 3.28 4.16
Comp Group Average 4.83 2.59 3.61
Comp Group Median 4.97 2.57 3.76
North Carolina Average 4.99 2.95 3.76
North Carolina Median 4.90 3.04 3.74
Southeast Region Average 4.95 2.98 3.51
All Publicly Traded Thrifts Average 4.85 2.88 3.41
Home Savings 5.28 2.41 3.05
</TABLE>
<PAGE>
EXHIBIT 10
COMPARATIVE GROUP
CAPITAL MARKET ISSUES
<TABLE>
<CAPTION>
Current Latest Three Month
Market Stock Average
Value Price Daily Volume/ Shares
Ticker Institution IPO Date Exchange ($M) ($) Prcn Shares Outstanding
- ------ ----------- -------- -------- ------ ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 10/05/95 AMSE 18.91 13.000 0.64 1,454,750
CCFH CCF Holding Company 07/12/95 NASDAQ 13.17 12.938 3.44 1,017,665
GWBC Gateway Bancorp, Inc. 01/18/95 NASDAQ 15.00 13.250 0.33 1,132,372
HFFB Harrodsburg First Fin Bancorp 10/04/95 NASDAQ 36.16 16.750 0.29 2,159,085
KYF Kentucky First Bancorp, Inc. 08/29/95 AMSE 18.57 13.375 0.46 1,388,625
CZF CitiSave Financial Corp 07/14/95 AMSE 13.63 14.125 0.87 964,707
NSLB NS&L Bancorp, Inc. 06/08/95 NASDAQ 9.49 12.500 2.48 759,082
KSAV KS Bancorp, Inc. 12/30/93 NASDAQ 65.52 17.500 0.29 3,744,000
SOPN First Savings Bancorp, Inc. 01/06/94 NASDAQ 12.02 18.125 0.13 663,263
SCCB S. Carolina Community Bancshares 07/07/94 NASDAQ 11.03 15.000 0.27 735,410
BFSB Bedford Bancshares, Inc. 08/22/94 NASDAQ 19.74 17.000 0.61 1,161,169
Comp Group Average 21.20 14.869 0.89 1,380,012
Comp Group Median 15.00 14.125 0.46 1,132,372
North Carolina Average 58.05 0.95 3,540,496
North Carolina Median 27.22 0.60 1,840,000
Southeast Region Average 67.38 1.06 3,694,764
All Publicly Traded Thrifts Average 130.58 1.33 5,740,604
<CAPTION>
Current Dividend
Dividend Payout Insider Institut'l
Yield Ratio Ownership Ownership
Ticker Institution IPO Date Exchange (%) (%) (%) (%)
- ------ ----------- -------- -------- ------ ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 10/05/95 AMSE 2.692 7.13 13.18
CCFH CCF Holding Company 07/12/95 NASDAQ 3.092 4.18 27.74
GWBC Gateway Bancorp, Inc. 01/18/95 NASDAQ 3.019 227.27 7.00 11.86
HFFB Harrodsburg First Fin Bancorp 10/04/95 NASDAQ 4.776 8.27 0.00
KYF Kentucky First Bancorp, Inc. 08/29/95 AMSE 3.738 8.63 6.43
CZF CitiSave Fianncial Corp 07/14/95 AMSE 2.124 11.20 17.35
NSLB NS&L Bancorp, Inc. 06/08/95 NASDAQ 4.000 66.18 7.30 19.76
KSAV KS Bancorp, Inc. 12/30/93 NASDAQ 3.886 55.10 20.96 3.24
SOPN First Savings Bancorp, Inc. 01/06/94 NASDAQ 3.310 79.14 31.77 10.75
SCCB S. Carolina Community Bancshares 07/07/94 NASDAQ 4.000 89.55 9.90 0.00
BFSB Bedford Bancshares, Inc. 08/22/94 NASDAQ 2.588 32.58 14.12 2.65
Comp Group Average 3.38 91.64 11.86 10.27
Comp Group Median 3.31 72.66 8.63 10.75
North Carolina Average 2.19 41.57 13.87 6.94
North Carolina Median 2.65 46.36 7.28 6.88
Southeast Region Average 2.31 43.57 16.48 11.62
All Publicly Traded Thrifts Average 1.96 37.28 14.29 18.09
</TABLE>
<PAGE>
EXHIBIT 11
COMPARATIVE GROUP
CAPITAL MARKET ISSUES
<TABLE>
<CAPTION>
Price/ Price/ Price/ Tang Price/ Price/Core
Earnings Book Value Book Value Assets Earnings
Ticker Institution (x) (%) (%) (%) (x)
- ------ ----------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
SRN Southern Banc Company, Inc 21.67 84.86 85.75 17.23
CCFH CCF Holding Company 17.97 87.07 87.07 18.44 17.97
GWBC Gateway Bancorp, Inc. 20.08 84.72 84.72 21.06 20.08
HFFB Harrodsburg First Fin Bancorp 22.04 108.27 108.27 33.00
KYF Kentucky First Bancorp, Inc. 22.29 96.64 96.64 21.03
CZF CitiSave Financial Corp 15.35 99.05 99.12 17.90
NSLB NS&L Bancorp, Inc. 18.38 74.81 74.81 17.43
KSAV KS Bancorp, Inc. 13.04 86.89 86.97 12.85 12.85
SOPN First Savings Bancorp, Inc. 17.86 98.09 98.09 25.50 17.86
SCCB S. Carolina Community Bancshares 22.39 89.66 89.66 24.98 22.39
BFSB Bedford Bancshares, Inc. 12.88 100.24 100.24 16.21 12.88
Comp Group Average 18.49 91.85 91.94 20.51 17.34
Comp Group Median 18.38 89.66 89.66 18.44 17.92
North Carolina Average 18.28 102.85 104.56 19.10 25.08
North Carolina Median 17.50 101.13 104.09 18.13 27.86
Southeast Region Average 16.23 126.44 123.86 16.07 15.42
All Publicly Traded Thrifts Average 16.16 114.46 118.18 16.66 13.58
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
EXHIBIT 12
RECENT CONVERSIONS
PRICING INFORMATION
Pro Forma Pricing Ratios
-----------------------------------------------------
Price/ Price/ Price/ Price/
Gross Pro-Forma Pro-Forma Pro-Forma Adjusted Offering
Proceeds Book Value Tang. Book Earnings Assets Price
Ticker Institution IPO Date ($000) (%) (%) (x) (%) ($)
- ------ ----------- --------- -------- ---------- ---------- --------- -------- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
PFFC Peoples Financial Corp. 13-Sep-96 $14,910 62.7 62.7 26.7 16.0 $10.00
PFED Park Bancorp, Inc. 12-Aug-96 $27,014 64.9 64.9 17.8 14.5 $10.00
A Acadiana Bancshares, Inc. 16-Jul-96 $32,775 69.9 69.9 12.7 $12.00
PWBK Pennwood Savings Bank 15-Jul-96 $6,101 65.8 65.8 13.3 12.8 $10.00
MBSP Mitchell Bancorp, Inc. 12-Jul-96 $9,799 68.1 68.1 94.5 25.8 $10.00
OCFC Ocean Financial Corp. 03-Jul-96 $167,762 69.2 69.2 13.8 13.9 $20.00
HWEN Home Financial Bancorp 02-Jul-96 $5,059 66.2 66.2 12.4 13.1 $10.00
EGLB Eagle BancGroup, Inc. 01-Jul-96 $13,027 57.1 57.1 58.1 7.9 $10.00
FLKY First Lancaster Bancshares 01-Jul-96 $9,588 72.5 72.5 19.0 21.3 $10.00
PROV Provident Financial Holdings 28-Jun-96 $51,252 60.9 60.9 18.2 8.2 $10.00
PRBC Prestige Bancorp, Inc. 27-Jun-96 $9,630 61.9 61.9 24.6 9.5 $10.00
WYNE Wayne Bancorp, Inc. 27-Jun-96 $22,314 60.9 60.9 16.7 9.7 $10.00
DIME Dime Community Bancorp, Inc. 26-Jun-96 $145,475 69.1 69.2 15.7 17.9 $10.00
MECH Mechanics Savings Bank 26-Jun-96 $52,900 72.0 72.0 7.4 $10.00
CMSB Commonwealth Bancorp, Inc. 17-Jun-96
CNSB CNS Bancorp, Inc. 12-Jun-96 $16,531 69.3 69.4 26.1 16.2 $10.00
WWFC Westwood Financial Corporation 07-Jun-96
LXMO Lexington B&L Financial Corp. 06-Jun-96 $12,650 69.1 69.1 14.4 20.2 $10.00
FFBH First Federal Bancshares of AR 03-May-96 $51,538 63.4 63.4 9.8 10.2 $10.00
CBK Citizens First Financial Corp. 01-May-96 $28,175 73.1 73.1 15.3 11.0 $10.00
RELI Reliance Bancshares, Inc. 19-Apr-96 $20,499 72.5 72.5 22.5 38.9 $8.00
CATB Catskill Financial Corp. 18-Apr-96 $56,868 71.9 71.9 19.0 19.8 $10.00
YFCB Yonkers Financial Corporation 18-Apr-96 $35,708 74.9 74.9 16.1 14.6 $10.00
GSFC Green Street Financial Corp. 04-Apr-96 $42,981 71.0 71.0 14.8 22.2 $10.00
FFDF FFD Financial Corp. 03-Apr-96 $14,548 69.9 69.9 17.4 19.8 $10.00
FBER 1st Bergen Bancorp 01-Apr-96 $31,740 74.8 74.8 21.7 12.5 $10.00
AMFC AMB Financial Corp. 01-Apr-96 $11,241 70.8 70.8 18.2 14.0 $10.00
LONF London Financial Corporation 01-Apr-96 $5,290 68.5 68.5 22.4 13.4 $10.00
PHFC Pittsburgh Home Financial Corp 01-Apr-96 $21,821 72.8 72.8 17.5 12.2 $10.00
SSB Scotland Bancorp, Inc 01-Apr-96 $18,400 74.8 74.8 16.2 24.2 $10.00
SSM Stone Street Bancorp, Inc. 01-Apr-96 $27,376 74.9 74.9 19.7 24.4 $15.00
WHGB WHG Bancshares Corp. 01-Apr-96 $16,201 71.1 71.1 15.5 16.0 $10.00
CRZY Crazy Woman Creek Bancorp 29-Mar-96 $10,580 69.7 69.7 16.4 22.0 $10.00
PFFB PFF Bancorp, Inc. 29-Mar-96 $198,375 69.0 69.0 26.6 9.5 $10.00
FCB Falmouth Co-Operative Bank 28-Mar-96 $14,548 68.7 68.7 19.9 16.5 $10.00
CFTP Community Federal Bancorp 26-Mar-96 $46,288 71.4 71.4 14.0 22.2 $10.00
GAF GA Financial, Inc. 26-Mar-96 $89,000 70.5 70.5 13.8 15.7 $10.00
BYFC Broadway Financial Corp. 09-Jan-96 $8,927 68.5 68.5 13.3 8.0 $10.00
LFBI Little Falls Bancorp, Inc. 05-Jan-96 $30,418 71.4 71.4 31.9 13.4 $10.00
FFBA First Colorado Bancorp, Inc. 02-Jan-96
Average Average $37,225 69.0 69.0 21.5 15.9 $10.41
Median Median $21,821 69.7 69.7 17.5 14.5 $10.00
<CAPTION>
Change in Price from IPO to:
------------------------------------------------------------------
One One One Three Current
Day After Week After Month After Months After Stock
Ticker Institution IPO Date Conversion Conversion Conversion Conversion Price
- ------ ----------- --------- ---------- ---------- ----------- ------------ -------
<C> <S> <C> <C> <C> <C> <C> <C>
PFFC Peoples Financial Corp. 13-Sep-96 8.75% 15.00% 15.00%
PFED Park Bancorp, Inc. 12-Aug-96 2.50% 4.38% 5.00% 8.75%
A Acadiana Bancshares, Inc. 16-Jul-96 0.00% -2.08% 3.13% 13.54%
PWBK Pennwood Savings Bank 15-Jul-96 -5.00% -8.75% -3.75% 10.00%
MBSP Mitchell Bancorp, Inc. 12-Jul-96 6.25% 10.00% 27.50%
OCFC Ocean Financial Corp. 03-Jul-96 6.25% 0.63% 5.00% 14.38%
HWEN Home Financial Bancorp 02-Jul-96 2.50% -1.25% 5.00% 22.50%
EGLB Eagle BancGroup, Inc. 01-Jul-96 12.50% 12.50% 11.25% 22.50%
FLKY First Lancaster Bancshares 01-Jul-96 35.00% 33.75% 37.50% 40.00%
PROV Provident Financial Holdings 28-Jun-96 9.70% 8.10% 1.25% 21.25%
PRBC Prestige Bancorp, Inc. 27-Jun-96 3.75% 2.50% -2.50% 17.50%
WYNE Wayne Bancorp, Inc. 27-Jun-96 11.25% 13.75% 12.50% 38.75%
DIME Dime Community Bancorp, Inc. 26-Jun-96 16.87% 20.00% 18.75% 36.25%
MECH Mechanics Savings Bank 26-Jun-96 15.00% 15.00% 12.50% 36.25%
CMSB Commonwealth Bancorp, Inc. 17-Jun-96
CNSB CNS Bancorp, Inc. 12-Jun-96 10.00% 16.25% 15.00% 30.00% 27.50%
WWFC Westwood Financial Corporation 07-Jun-96
LXMO Lexington B&L Financial Corp. 06-Jun-96 -5.00% -2.50% 1.25% 0.63% 5.00%
FFBH First Federal Bancshares of AR 03-May-96 30.00% 32.50% 36.90% 36.25% 47.50%
CBK Citizens First Financial Corp. 01-May-96 5.00% 0.00% 1.25% -1.25% 15.00%
RELI Reliance Bancshares, Inc. 19-Apr-96 4.69% 3.13% -0.75% 3.13% 7.81%
CATB Catskill Financial Corp. 18-Apr-96 3.75% 6.25% 3.75% 0.00% 22.50%
YFCB Yonkers Financial Corporation 18-Apr-96 -2.50% 1.25% -0.60% -2.50% 20.00%
GSFC Green Street Financial Corp. 04-Apr-96 28.75% 22.50% 23.10% 30.60% 51.25%
FFDF FFD Financial Corp. 03-Apr-96 5.00% 5.00% 3.10% 1.25% 11.25%
FBER 1st Bergen Bancorp 01-Apr-96 0.00% -5.00% -3.75% -7.50% 11.88%
AMFC AMB Financial Corp. 01-Apr-96 5.00% 5.00% 5.00% 5.00% 11.25%
LONF London Financial Corporation 01-Apr-96 8.12% 6.25% 1.25% 3.10% 11.25%
PHFC Pittsburgh Home Financial Corp 01-Apr-96 10.00% 10.00% 6.25% 1.90% 18.75%
SSB Scotland Bancorp, Inc 01-Apr-96 22.50% 25.00% 17.50% 23.75% 32.50%
SSM Stone Street Bancorp, Inc. 01-Apr-96 16.67% 20.00% 18.33% 12.50% 19.17%
WHGB WHG Bancshares Corp. 01-Apr-96 11.25% 10.60% 12.50% 10.00% 21.25%
CRZY Crazy Woman Creek Bancorp 29-Mar-96 7.50% 5.00% 1.25% 13.75%
PFFB PFF Bancorp, Inc. 29-Mar-96 13.75% 16.25% 16.25% 11.25% 26.88%
FCB Falmouth Co-Operative Bank 28-Mar-96 7.50% 12.50% 7.50% 3.75% 25.00%
CFTP Community Federal Bancorp 26-Mar-96 26.25% 28.75% 26.25% 33.75% 36.25%
GAF GA Financial, Inc. 26-Mar-96 13.75% 15.00% 10.00% 10.00% 31.25%
BYFC Broadway Financial Corp. 09-Jan-96 3.75% 2.50% 2.50% 3.75% -3.75%
LFBI Little Falls Bancorp, Inc. 05-Jan-96 13.13% 13.75% 10.00% 8.10% 11.25%
FFBA First Colorado Bancorp, Inc. 02-Jan-96
Average Average 10.01% 10.06% 9.26% 9.51% 21.59%
Median Median 8.75% 8.10% 5.62% 3.75% 20.00%
</TABLE>
<PAGE>
Exhibit 13
Pro Forma Analysis Sheet
------------------------
Name of Institution: Home Savings SSB/Century Bancorp, Inc.
Date of Letter to Association: September 23, 1996
Date of Market Prices: September 23, 1996
<TABLE>
<CAPTION>
Comparable All Publicly
Companies Traded Thrifts
--------------------------------------
Symbols Subject Mean Median Mean Median
<S> <C> <C> <C> <C> <C> <C>
Price\Earnings Mutliples P\E 15.1 18.5 18.4 16.2 13.4
Price\Book Value Ratio P\BV 62% 91.9% 89.7% 10860% 103.8%
Price\Assets Ratio P\A 15.5% 20.5% 18.4% 12.5% 10.9%
Valuation Parameters
- ------------------------------------------------
Pre-Conversion Earnings Y $677,000
Pre-Conversion Book Value B $11,245,000
Pre-Conversion Assets A $81,304,000
Reinvestment Rate R 5.82%
Estimated Conversion Expenses X $755,500
Proceeds Not Reinvested Z
Estimated ESOP Borrowings E 8.00%
Cost of ESOP Borrowings S 0.00%
Amortization of ESOP Borrowings T 10
MRP M 4.00%
MRP Vesting N 5
Tax Rate t 39.00%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
- --------------------------------------------------------------
<S> <C> <C>
P\E (Y- RX)
V = ---------------------------------------- = $14,500,000
1 - P/E (R - (PE/T*(1-t)) - M/N*(1-t))
P\B (B - X)
V = ------------------------------------------ = $14,500,000
1 - (P/B (1- M - E)
P\A (A - E)
V = ------------------------------------------ = $14,500,000
1 - (P/A)
</TABLE>
<TABLE>
<CAPTION>
Total Price
Conclusion Shares Per Share Value
- -------- ---------- X -------- = ----------
<S> <C> <C> <C>
Appraised Value 290,000 $50.00 $14,500,000
Range
- --------
Minium 246,500 $50.00 $12,325,000
Maximum 333,500 $50.00 $16,675,000
Supermax 383,525 $50.00 $19,176,250
</TABLE>
<PAGE>
EXHIBIT 14
PRO FORMA EFFECT ON CONVERSION PROCEEDS
CENTURY BANCORP, INC.
-----------------------------------------
<TABLE>
<CAPTION>
Minimum Midpoint Maximum Super Max
------- -------- ------- ---------
<S> <C> <C> <C> <C>
Conversion Proceeds
Pro Forma Market Value $12,325,000 $14,500,000 $16,675,000 $19,176,250
Less: ESOP $986,000 $1,160,000 $1,334,000 $1,534,100
MRP $493,000 $580,000 $667,000 $767,050
Estimated Expenses $693,720 $755,500 $817,270 $888,298
----------- ----------- ----------- -----------
Net Proceeds $10,152,280 $12,004,500 $13,856,730 $15,986,802
Pro Forma Adjusted Earnings
(Twelve Months Ended 06/30/96)
Reported Earnings $677,000 $677,000 $677,000 $677,000
Earnings on Proceeds $360,426 $426,184 $491,942 $567,563
Pro Forma MRP Adjustments $60,146 $70,760 $81,374 $93,580
Pro Forma ESOP Adjustments $60,146 $70,760 $81,374 $93,580
----------- ----------- ----------- -----------
Pro Forma Earnings $917,134 $961,664 $1,006,194 $1,057,403
Pro Forma Net Worth
Net Worth $11,245,000 $11,245,000 $11,245,000 $11,245,000
Conversion Proceeds $10,152,280 $12,004,500 $13,856,730 $15,986,802
----------- ----------- ----------- -----------
Pro Forma Net Worth $21,397,280 $23,249,500 $25,101,730 $27,231,802
Pro Forma Total Assets
Total Assets $81,304,000 $81,304,000 $81,304,000 $81,304,000
Conversion Proceeds $10,152,280 $12,004,500 $13,856,730 $15,986,802
----------- ----------- ----------- -----------
Pro Forma Assets $91,456,280 $93,308,500 $95,160,730 $97,290,802
</TABLE>
<PAGE>
EXHIBIT 15
----------
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
----------------------------------------
<TABLE>
<CAPTION>
Discount or (premium)
from Comparative Group
----------------------
Minimum Home Savings Average Median
- ------- ------------- --------- --------
<S> <C> <C> <C>
Price/earnings 13.4 27.3% 26.9%
Price/core earnings 13.4 27.3% 26.9%
Price/Book Value 57.6% 37.3% 35.8%
Price Tangible Book Value 57.6% 37.3% 35.8%
Price/assets 13.5% 34.3% 26.8%
<CAPTION>
Midpoint Home Savings Average Median
- -------- ------------ --------- --------
<S> <C> <C> <C>
Price/earnings 15.1 18.5% 18.0%
Price/core earnings 15.1 18.5% 18.0%
Price/Book Value 62.4% 32.1% 30.5%
Price Tangible Book Value 62.4% 32.1% 30.5%
Price/assets 15.5% 24.2% 15.5%
<CAPTION>
Maximum Home Savings Average Median
- ------- ------------ --------- --------
<S> <C> <C> <C>
Price/earnings 16.6 10.4% 9.8%
Price/core earnings 16.6 10.4% 9.8%
Price/Book Value 66.4% 27.7% 25.9%
Price Tangible Book Value 66.4% 27.7% 25.9%
Price/assets 17.5% 14.5% 4.8%
<CAPTION>
Super maximum Home Savings Average Median
- ------------- ------------ --------- --------
<S> <C> <C> <C>
Price/earnings 18.1 1.9% 1.3%
Price/core earnings 18.1 1.9% 1.3%
Price/Book Value 70.4% 23.3% 21.5%
Price Tangible Book Value 70.4% 23.3% 21.5%
Price/assets 19.7% 3.9% -7.1%
<CAPTION>
Comparative Group Ratios
------------------------
<S> <C> <C>
Price/earnings 18.49 18.38
Price/core earnings 18.49 18.38
Price/Book Value 91.9% 89.7%
Price Tangible Book Value 91.9% 89.7%
Price/assets 20.5% 18.4%
</TABLE>
<PAGE>
Exhibit 28.3
- - - CENTURY BANCORP, INC.
------------------------------
HOLDING COMPANY FOR HOME SAVINGS, SSB
STOCK ORDER FORM
- - - NOTE: Please read the Stock Order Form
Instructions and Guide on the back as
you complete this form.
DEADLINE: The Subscription Offering will expire at 12:00 noon, Eastern Time,
on , 1996, unless extended.
- -----------------------------------------------------------------------------
(1) Number of Subscription Price (2) Total Payment
Shares Due
----------------------- X$50.00= --------------------
----------------------- --------------------
The minimum number of shares that may be subscribed for is 10 shares and the
maximum is 5,000, except for purchases by the Employee Stock Ownership Plan
of Home Savings, SSB ("Home Savings"). The maximum purchase limit is subject
to possible change. See the Stock Order Form Instructions and Guide on the
back of this form and the Prospectus.
- --------------------------------------------------------------------------------
METHOD OF PAYMENT IMPORTANT PURCHASER INFORMATION
(3) [_] Enclosedis a check, (5) a [_] Check here if you were a depositor
bank draft or money of Home Savings on March 31, 1995
order made payable to (the Eligibility Record Date).
Century Bancorp, Inc. Enter information below for all
in the amount of: deposit accounts that you had at
Home Savings on March 31, 1995.
----------- Cash can be (5) b [_] Check here if you were a depositor
$ used only of Home Savings on September 30,
----------- if presented 1996 (the Supplemental Eligibility
in person at Record Date). Enter information
Home Savings' below for all deposit accounts that
office. you had at Home Savings on
(4) [_] The undersigned September 30, 1996.
authorizes withdrawal (5) c [_] Check here if you were a borrower
from this (these) from Home Savings on , 1996 (the
account(s) at Home Voting Record Date) or a
Savings. Please depositor of Home Savings
------ on , 1996 who did
contact the Stock not have a deposit on March 31,
----------------- 1995 or September 30, 1996. Enter
Information Center information below for all loan and
------------------ deposit accounts that you had at
prior to , Home Savings on , 1996 (the
------------------ Voting Record Date).
1996 if you wish to (5) d [_] State in which you reside:
-------------------
use your Home Savings -----------------------------------
---------------------
IRA for stock Account Title
------------- (Names on Deposit Loan Account
purchase. Accounts) Account Account Number
--------- --------------------------------------------
Account Number Amount [_] [_]
- ---------------------------- --------------------------------------------
$ [_] [_]
- ---------------------------- --------------------------------------------
$ [_] [_]
- ---------------------------- --------------------------------------------
$ [_] [_]
- ---------------------------- --------------------------------------------
Total Withdrawal
Amount $
------------
There is no penalty for early
withdrawals used for stock payment.
STOCK REGISTRATION (SEE BACK UNDER STOCK OWNERSHIP GUIDE)
(6) Form of Stock Ownership:
[_] Individual [_] Joint tenants with [_] Tenants in common [_] Uniform
right of survivorship Transfer
[_] Fiduciary [_] Corporation or [_] Other to
(i.e., trust, or Partnership ------------- Minors
estate, etc.)
(7) Name(s) in which your stock is to be registered (Please Print Clearly)
- --------------------------------------------------------------------------------
Name(s) continued
- --------------------------------------------------------------------------------
Street Address City County State Zip
Code
- --------------------------------------------------------------------------------
Social Security No. or Tax ID No.
- -------------------------------------------------------------------------------
------------------------- ----------------------
Daytime Phone Evening Phone
(8)Telephone Information ( ) ( )
------------------------- ----------------------
NASD AFFILIATION
(9) [_] Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with a NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which a
NASD member or person associated with a NASD member has a beneficial interest.
To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD Affiliation box: (i) that you are an
eligible purchaser in Home Savings' mutual to stock conversion, (ii) not to
sell, transfer or hypothecate the stock for a period of three months following
issuance, and (iii) to report this subscription in writing to the applicable
NASD member within one day of payment therefor.
ACKNOWLEDGMENT
(10) To be effective in the Subscription Offering, this fully completed Stock
Order Form must be actually received by Home Savings no later than 12:00 noon,
Eastern time on , 1996, unless extended; otherwise this Stock Order
Form and all subscription rights will be void. Completed Stock Order Forms,
together with the required payment or withdrawal authorization, may be
delivered to any Home Savings' office or may be mailed to the Post Office Box
indicated on the enclosed business reply envelope. All rights exercisable
hereunder are not transferable and shares purchased upon exercise of such
rights must be purchased for the account of the person exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Amended and Restated
Plan of Holding Company Conversion ("Plan of Conversion") of Home Savings
described in the accompanying Prospectus. If the Plan of Conversion is not
approved by the voting members of Home Savings at a Special Meeting to be held
on , 1996, or any adjournment thereof, all orders will be cancelled and
funds received as payment, with accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Home Savings, this Stock Order
Form may not be modified, withdrawn or cancelled (unless the Conversion is not
completed within 45 days of the completion of the Subscription Offering)
without Home Savings' consent and if authorization to withdraw from deposit
accounts at Home Savings has been given as payment for shares, the amount
authorized for withdrawal shall not otherwise be available for withdrawal by
the undersigned.
APPLICABLE FEDERAL REGULATIONS PROHIBIT ANY PERSON FROM TRANSFERRING OR
ENTERING INTO ANY AGREEMENT DIRECTLY OR INDIRECTLY TO TRANSFER THE LEGAL OR
BENEFICIAL OWNERSHIP OF CONVERSION SUBSCRIPTION RIGHTS, OR THE UNDERLYING
SECURITIES TO THE ACCOUNT OF ANOTHER. HOME SAVINGS AND CENTURY BANCORP, INC.
WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT THEY BECOME
AWARE OF THE TRANSFER OF CONVERSION SUBSCRIPTION RIGHTS AND WILL NOT HONOR
ORDERS KNOWN BY THEM TO INVOLVE SUCH TRANSFER.
I ACKNOWLEDGE THAT THE COMMON STOCK OFFERED IS NOT A SAVINGS OR DEPOSIT
ACCOUNT AND IS NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE BANK
INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER
GOVERNMENT AGENCY, MAY LOSE VALUE AND IS NOT GUARANTEED BY CENTURY BANCORP,
INC. OR HOME SAVINGS.
I ALSO ACKNOWLEDGE RECEIPT OF A PROSPECTUS DATED , 1996.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED BELOW
Under penalty of perjury, I certify that the Social Security or Tax ID Number
and the information provided in this Stock Order Form are true, correct and
complete, that I am not subject to back-up withholding, that I am purchasing
for my own account, that there is no agreement or understanding regarding the
transfer of my subscription rights or the sale or transfer of these shares and
that I have received a copy of the Prospectus and am aware of the risks
associated with an investment in Century Bancorp, Inc.
SIGNATURE(S)
- ----------------------------------------------------------------------------
(11)Signature Date Signature Date
- ----------------------------------------------------------------------------
FOR OFFICE USE ONLY
- ----------------------------------------- STOCK INFORMATION CENTER
Date Category # ___________ HOME SAVINGS, SSB
Received __ /__ /__
Batch # _________ Deposit ______________ P. O. BOX 989 (27361-0989)
Order # _________ Date Input /_ / 22 WINSTON STREET
- ----------------------------------------- THOMASVILLE, NORTH CAROLINA 27360
(910) -
<PAGE>
CENTURY BANCORP, INC.
===============================================================================
SUBSCRIPTION OFFERING
STOCK ORDER FORM
INSTRUCTIONS AND GUIDE
- -------------------------------------------------------------------------------
- ---------------------
STOCK OWNERSHIP GUIDE
- ---------------------
INDIVIDUAL
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of
the deceased co-tenant. All parties must agree to the transfer or sale of
shares held by tenants in common.
UNIFORM TRANSFER TO MINORS
Stock may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Acts of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for
Custodian is "CUST", while the Uniform Transfer to Minors Act is "Unif Tran
Min Act". Standard U.S. Postal Service state abbreviations should be used to
describe the appropriate state. For example, stock held by John Doe as
custodian for Susan Doe under the North Carolina Uniform Transfer to Minors
Act will be abbreviated John Doe, CUST Susan Doe Unif Tran Min Act, NC (use
minor's social security number).
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
* The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
* The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
* A copy and description of the document governing the fiduciary
relationship, such as living trust agreement or court order. Without
documentation establishing a fiduciary relationship, your stock may not be
registered in a fiduciary capacity.
* The date of the document governing the relationship except that the date of
a trust created by a will need not be included in the description.
* The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John
Doe, Trustee Under Agreement Dated 10-1-87 for Susan Doe.
You may mail your completed Stock Order Form in the envelope that has been
provided, or you may deliver your Stock Order Form to Home Savings' Office. In
order to purchase stock in the Subscription Offering, your Stock Order Form,
properly completed, and payment in full (or withdrawal authorization) at the
Subscription Price of $50 per share must be received by Home Savings no later
than 12:00 noon, Eastern Time, on , 1996, unless such date is extended,
or your Stock Order Form will become void. Stock Order Forms shall be deemed
received only upon actual receipt at Home Savings' office.
If you need further assistance, please call the Stock Information Center at
(910) . We will be pleased to help you with the completion of your Stock
Order Form or answer any questions you may have.
ITEM INSTRUCTIONS
- -----------------
ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares
purchased by the Subscription Price of $50.00 per share. The minimum purchase
is 10 shares. The maximum purchase by (i) any person or entity (other than
Home Savings' Employee Stock Ownership Plan), or (ii) persons or entities
exercising subscription rights through a single account, or (iii) persons
acting in concert is 5,000 shares. In addition, no person or entity, or group
of persons acting in concert, together with any Associates (as defined in the
Prospectus), may subscribe for more than 7,000 shares. The Board of Directors
of Home Savings has the right to (i) reduce the 5,000 and 7,000 share maximum
purchase limitations to an amount not less than one percent of the shares of
common stock issued in the Conversion or (ii) increase the 5,000 and 7,000
share maximum purchase limitations to an amount of up to five percent of the
shares of common stock issued in the Conversion. Any change in the maximum
purchase limitation may occur at any time prior to consummation of the
Conversion, either before or after , 1996. If any maximum purchase
limitation is increased, any subscriber or group of subscribers who has
subscribed for the maximum amount which is increased, and certain other large
subscribers in the discretion of Century Bancorp, Inc.,, will be given the
opportunity to increase their subscriptions up to the higher maximum purchase
limitation. Century Bancorp, Inc. and Home Savings reserve the right to reject
any order received in the Community Offering, in whole or in part.
Century Bancorp, Inc. and Home Savings also have the right to reject the order
of any subscriber who (i) submits false or misleading information on a Stock
Order Form or otherwise, (ii) attempts to purchase shares in violation of the
Plan of Conversion or applicable law or (iii) fails to cooperate with attempts
to verify information with respect to purchase rights.
ITEM 3--
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order made payable to Century Bancorp, Inc. Your
funds will earn interest at the Home Savings' current passbook savings rate
until the Conversion is completed or terminated. DO NOT MAIL CASH TO PURCHASE
STOCK! Please check this box if your method of payment is by cash, check, bank
draft or money order.
ITEM 4--
If you pay for your stock by a withdrawal from a Home Savings deposit account,
insert the account number(s) and the amount of your withdrawal authorization
for each account. The total amount withdrawn should equal the amount of your
stock purchase. Your order will be rejected if, on the date your order is
received, the accounts designated by you do not contain sufficient funds to
complete your purchase. There will be no penalty assessed for early
withdrawals from certificate accounts used for stock purchases. This form of
payment may not be used if your account is an Individual Retirement Account.
If you wish to use your IRA currently at Home Savings, you must call the Stock
Information Center prior to , 1996 and complete all paperwork required
no later than , 1996.
ITEM 5--
a. Please check this box if you were a depositor of Home Savings on March 31,
1995 (the Eligibility Record Date). You must list the full title and account
numbers of all accounts you had on this date in order to insure proper
identification of your purchase rights and preferences.
b. Please check this box if you were a depositor of Home Savings on September
30, 1996 (the Supplemental Eligibility Record Date). You must list the full
title and account numbers of all accounts you had on this date in order to
insure proper identification of your purchase rights and preferences.
c. Please check this box if you are a borrower from Home Savings as of ,
1996 (the "Voting Record Date") or a depositor at Home Savings on the Voting
Record Date and you were not a depositor on March 31, 1995 or September 30,
1996. If you were a borrower from Home Savings on , 1996 (the Voting
Record Date), you must list the name of all borrowers on your loan accounts
and the loan account number for all loan accounts that you had at such date in
order to insure proper identification of your purchase rights and preferences.
If you were a depositor, you must list the full title and account numbers of
all accounts you had on this date in order to insure proper identification of
your purchase rights and preferences.
d. You must list the state in which you reside.
ITEMS 6,7 AND 8--
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your common stock. Please
complete items 6, 7 and 8 as fully and accurately as possible, and be certain
to supply your social security number or tax identification number and your
daytime and evening telephone number(s). We will need to call you if we cannot
execute your order as given. If you have any questions or concerns regarding
the registration of your stock, please consult your legal advisor. Stock
ownership must be registered in one of the ways described under "Stock
Ownership Guide."
ITEM 9--
Please check this box if you are a member of the NASD or if this item
otherwise applies to you.
ITEMS 10 AND 11--
Please sign and date the Stock Order Form where indicated. Review the Stock
Order Form carefully before you sign, including the acknowledgement. Normally,
one signature is required. An additional signature is required only when
payment is to be made by withdrawal from a deposit account that requires
multiple signatures to withdraw funds. If you have any remaining questions, or
if you would like assistance in completing your Stock Order Form, you may call
the Stock Information Center. The Stock Information Center phone number is
(910) .
