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As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 333-23015
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
FIRSTSPARTAN FINANCIAL CORP.
(Exact name of registrant as specified in charter)
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Delaware 6035 56-2015272
<S> <C> <C>
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
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380 E. MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29302
(864) 582-2391
(Address and telephone number of principal executive offices)
Paul M. Aguggia, Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
(Name and address of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF 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]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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====================================================================================================================================
Calculation of Registration Fee
====================================================================================================================================
Title of Each Class of Securities Proposed Maximum Proposed Offering Proposed Maximum Amount of
Being Registered Amount Being Price(1) Aggregate Offering Registration Fee
Registered(1) Price(1)
- ------------------------------------------------------------------------------------------------------------------------------------
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Common Stock, $0.01 Par Value 3,852,500 $20.00 $88,607,500 $26,851(2)
====================================================================================================================================
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(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and sold
is subject to adjustment based upon the estimated pro forma market value of the
registrant and market and financial conditions. Pursuant to Rule 416(c), the
Registration Statement also includes an indeterminate number of participation
interests in the First Federal Savings and Loan Association of Spartanburg
401(k) Plan.
(2) Previously paid.
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>
Cross Reference Sheet showing the location in the Prospectus
of the Items of Form S-1
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1. Forepart of the Registration Forepart of the Registration Statement;
Statement and Outside Front Outside Front Cover Page
Cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back
Cover Pages of Prospectus Cover Page
3. Summary Information, Risk Factors Prospectus Summary; Risk Factors
and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Use of Proceeds; Capitalization
5. Determination of Offering Price Market for Common Stock
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution The Conversion
9. Description of Securities to be Description of Capital Stock
Registered
10. Interests of Named Experts and Legal and Tax Opinions; Experts
Counsel
11. Information with Respect to the
Registrant
(a) Description of Business Business of the Holding Company;
Business of the Association
(b) Description of Property Business of the Association -- Properties
(c) Legal Proceedings Business of the Association -- Legal
Proceedings
(d) Market Price of and Dividends Outside Front Cover Page; Market for
on the Registrant's Common Equity Common Stock; Dividend Policy
and Related Stockholder Matters
(e) Financial Statements Financial Statements; Pro Forma Data
(f) Selected Financial Data Selected Financial and Other Data
(g) Supplementary Financial *
Information
<PAGE>
(h) Management's Discussion and Management's Discussion and Analysis of
Analysis of Financial Condition Financial Condition and Results of Operations
and Results of Operations
(i) Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure
(j) Directors and Executive Management of the Holding Company; Management of
Officers the Association
(k) Executive Compensation Management of the Holding Company; Management of
the Association -- Benefits -- Executive Compensation
(l) Security Ownership of Certain *
Beneficial Owners and Management
(m) Certain Relationships and Management of the Association -- Transactions with
Related Transactions the Association
12. Disclosure of Commission Position Part II - Item 17
on Indemnification for Securities
Act Liabilities
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*Item is omitted because answer is negative or item inapplicable.
<PAGE>
PROSPECTUS SUPPLEMENT
FIRSTSPARTAN FINANCIAL CORP.
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
401(K) PLAN
This Prospectus Supplement relates to the offer and sale to
participants (the "Participants") in the First Federal Savings and Loan
Association of Spartanburg 401(k) Plan (the "Plan" or the "401(k) Plan") of
participation interests and shares of FirstSpartan Financial Corp. common stock,
par value $.01 per share (the "Common Stock"), as set forth herein.
In connection with the proposed conversion of First Federal Savings and
Loan Association of Spartanburg (the "Association" or "Employer") from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association, a holding company, FirstSpartan Financial
Corp. (the "Holding Company"), has been formed. The simultaneous conversion of
the Association to stock form, the issuance of the Association's common stock to
the Holding Company and the offer and sale of the Holding Company's Common Stock
to the public are herein referred to as the "Conversion." Applicable provisions
of the 401(k) Plan to permit the investment of the Plan assets in Common Stock
of the Holding Company at the direction of a Plan Participant. This Prospectus
Supplement relates to the election of a Participant to direct the purchase of
Common Stock in connection with the Conversion.
The Prospectus dated ___________, 1997 of the Holding Company (the
"Prospectus") which is attached to this Prospectus Supplement includes detailed
information with respect to the Conversion, the Common Stock and the financial
condition, results of operation and business of the Association and the Holding
Company. This Prospectus Supplement, which provides detailed information with
respect to the Plan, should be read only in conjunction with the Prospectus.
Terms not otherwise defined in this Prospectus Supplement are defined in the
Plan or the Prospectus.
A PARTICIPANT'S ELIGIBILITY TO PURCHASE COMMON STOCK IN THE CONVERSION
THROUGH THE PLAN IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE
SHARES OF COMMON STOCK IN THE CONVERSION AND THE MAXIMUM AND MINIMUM LIMITATIONS
SET FORTH IN THE PLAN OF CONVERSION. SEE "THE CONVERSION" AND "-- LIMITATIONS ON
PURCHASES OF SHARES" IN THE PROSPECTUS.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PARTICIPANT, SEE "RISK FACTORS" IN THE PROSPECTUS.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT
SUPERVISION ("OTS"), THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus Supplement is___________, 1997.
S-2
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No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Association or the Plan. This Prospectus
Supplement does not constitute an offer to sell or solicitation of an offer to
buy any securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus Supplement and the Prospectus nor any sale made hereunder shall
under any circumstances create any implication that there has been no change in
the affairs of the Association or the Plan since the date hereof, or that the
information herein contained or incorporated by reference is correct as of any
time subsequent to the date hereof. This Prospectus Supplement should be read
only in conjunction with the Prospectus that is attached herein and should be
retained for future reference.
S-3
<PAGE>
TABLE OF CONTENTS
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PAGE
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The Offering
Securities Offered.....................................................................................S-5
Election to Purchase Common Stock in the Conversion....................................................S-5
Value of Participation Interests.......................................................................S-5
Method of Directing Transfer...........................................................................S-6
Time for Directing Transfer............................................................................S-6
Irrevocability of Transfer Direction...................................................................S-6
Direction to Purchase Common Stock After the Conversion................................................S-6
Purchase Price of Common Stock.........................................................................S-6
Nature of a Participant's Interest in the Holding Company Common Stock.................................S-7
Voting and Tender Rights of Common Stock...............................................................S-7
Description of the Plan
Introduction...........................................................................................S-7
Eligibility and Participation..........................................................................S-8
Contributions Under the Plan...........................................................................S-8
Limitations on Contributions...........................................................................S-9
Investment of Contributions...........................................................................S-11
The Employer Stock Fund...............................................................................S-12
Benefits Under the Plan...............................................................................S-13
Withdrawals and Distributions from the Plan...........................................................S-13
Administration of the Plan............................................................................S-14
Reports to Plan Participants..........................................................................S-15
Plan Administrator....................................................................................S-15
Amendment and Termination.............................................................................S-15
Merger, Consolidation or Transfer.....................................................................S-15
Federal Income Tax Consequences.......................................................................S-15
Restrictions on Resale................................................................................S-18
Legal Opinions.................................................................................................S-19
Investment Form................................................................................................S-20
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S-4
<PAGE>
THE OFFERING
SECURITIES OFFERED
The securities offered hereby are participation interests in the Plan
and up to 3,852,500 shares, at the actual purchase price of $20.00 per share, of
Common Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan. The Holding Company is the issuer of the Common
Stock. Only employees and former employees of the Association and their
beneficiaries may participate in the Plan. Information with regard to the Plan
is contained in this Prospectus Supplement and information with regard to the
Conversion and the financial condition, results of operation and business of the
Association and the Holding Company is contained in the attached Prospectus. The
address of the principal executive office of the Association is 380 E. Main
Street, Spartanburg, South Carolina 29302-1944. The Association's telephone
number is (864) 582-2391.
ELECTION TO PURCHASE COMMON STOCK IN THE CONVERSION
In connection with the Association's Conversion, each Participant in
the 401(k) plan may direct the trustee of the Plan ("Trustee") to transfer up to
100% of a Participant's beneficial interest in the assets of the Plan at
___________, 1997 to a newly created Employer Stock Fund and to use such funds
to purchase Common Stock issued in connection with the Conversion. Amounts
transferred will include salary deferral, Employer Matching, profit sharing
contributions and account balances transferred from the First Federal Savings
and Loan Association of Spartanburg Employee Retirement and Savings Fund (the
"Savings Fund"), which was merged with the Plan on _______, 1997. The Employer
Stock Fund will consist of investments in the Common Stock made on or after the
effective date of the Conversion. Funds not transferred to the Employer Stock
Fund will be invested at the Participant's discretion in the other investment
options available under the Plan. See "INVESTMENT OF CONTRIBUTIONS" below. A
PARTICIPANT'S ABILITY TO TRANSFER FUNDS TO THE EMPLOYER STOCK FUND IN THE
CONVERSION IS SUBJECT TO THE PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE
SHARES OF COMMON STOCK IN THE CONVERSION. FOR GENERAL INFORMATION AS TO THE
ABILITY OF THE PARTICIPANTS TO PURCHASE SHARES IN THE CONVERSION, SEE "THE
CONVERSION -- THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY
OFFERINGS" IN THE ATTACHED PROSPECTUS.
VALUE OF PARTICIPATION INTERESTS
The assets of the Plan are valued on an ongoing basis and each
Participant is informed of the value of his or her beneficial interest in the
Plan on an quarterly basis. This value represents the market value of past
contributions to the Plan by the Association and by the Participants and
earnings thereon, less previous withdrawals, and transfers from the Savings
Fund.
S-5
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METHOD OF DIRECTING TRANSFER
The last page of this Prospectus Supplement is an investment form to
direct a transfer to the Employer Stock Fund (the "Investment Form"). If a
Participant wishes to transfer funds to the Employer Stock Fund to purchase
Common Stock issued in connection with the Conversion, the Participant should
indicate that decision in Part 2 of the Investment Form. If a Participant does
not wish to make such an election, he or she does not need to take any action.
TIME FOR DIRECTING TRANSFER
THE DEADLINE FOR SUBMITTING A DIRECTION TO TRANSFER AMOUNTS TO THE
EMPLOYER STOCK FUND IN ORDER TO PURCHASE COMMON STOCK ISSUED IN CONNECTION WITH
THE CONVERSION IS ____________, 1997. The Investment Form should be returned to
the Stock Information Center at the Association no later than the close of
business on such date.
IRREVOCABILITY OF TRANSFER DIRECTION
A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion shall be
irrevocable. Participants, however, will be able to direct the sale of Common
Stock, as explained below.
DIRECTION TO PURCHASE COMMON STOCK AFTER THE CONVERSION
After the Conversion, a Participant will be able to direct that a
certain percentage of such Participant's interests in the trust assets ("Trust")
be transferred to the Employer Stock Fund and invested in Common Stock, or to
the other investment funds available under the Plan. Alternatively, a
Participant may direct that a certain percentage of such Participant's interest
in the Employer Stock Fund be transferred from the Employer Stock Fund to other
investment funds available under the Plan. Participants will be permitted to
direct that future contributions made to the Plan by or on their behalf be
invested in Common Stock. Following the initial election, the allocation of
Participant's interest in the Employer Stock Fund may be changed by the
Participant on a quarterly basis. Special restrictions may apply to transfers
directed by those Participants who are executive officers, directors and
principal stockholders of the Holding Company who are subject to the provisions
of Section 16(b) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act").
PURCHASE PRICE OF COMMON STOCK
The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in connection with the Conversion will be used by the Trustee to
purchase shares of Common Stock. The price paid for such shares of Common Stock
will be the same price as is paid by all other persons who purchase shares of
Common Stock in the Conversion.
S-6
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NATURE OF A PARTICIPANT'S INTEREST IN THE HOLDING COMPANY STOCK
The Holding Company Stock purchased for an account of a Participant
will be held in the name of the Trustee of the Plan in the Employer Stock Fund.
Any earnings, losses or expenses with respect to the Holding Company Stock,
including dividends and appreciation or depreciation in value, will be credited
or debited to the account and will not be credited to or borne by any other
accounts.
VOTING AND TENDER RIGHTS OF COMMON STOCK
The Trustee generally will exercise voting and tender rights
attributable to all Common Stock held by the Trust as directed by Participants
with an interest in the Employer Stock Fund. With respect to each matter as to
which holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund. The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.
DESCRIPTION OF THE PLAN
INTRODUCTION
The Association adopted the Plan on _____________, 1995. The Savings
Fund was merged with and into the Plan, effective _______, 1997. The Plan is a
cash or deferred arrangement established in accordance with the requirement
under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code").
The Association intends that the Plan, in operation, will comply with
the requirements under Section 401(a) and Section 401(k) of the Code. The
Association will adopt any amendments to the Plan that may be necessary to
ensure the qualified status of the Plan under the Code and applicable Treasury
Regulations. The Association has received a determination from the Internal
Revenue Service ("IRS") that the Plan is qualified under Section 401(a) of the
Code and that it satisfies the requirements for a qualified cash or deferred
arrangement under Section 401(k) of the Code.
EMPLOYEE RETIREMENT INCOME SECURITY ACT. The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As
such, the Plan is subject to all of the provisions of Title I (Protection of
Employee Benefit Rights) and Title II (Amendments to the Internal Revenue Code
Relating to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by their terms do not apply to an
individual account plan (other than a money purchase pension plan). The Plan is
not subject to Title IV
S-7
<PAGE>
(Plan Termination Insurance) of ERISA. Neither the funding requirements
contained in Title IV of ERISA nor the plan termination insurance provisions
contained in Title IV will be extended to Participants or beneficiaries under
the Plan.
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
OR HER BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF
EMPLOYMENT WITH THE ASSOCIATION. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE
IMPOSED ON WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2,
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE ASSOCIATION OR
AFTER TERMINATION OF EMPLOYMENT.
REFERENCE TO FULL TEXT OF PLAN. THE FOLLOWING STATEMENTS ARE SUMMARIES
OF THE MATERIAL PROVISIONS OF THE PLAN. THEY ARE NOT COMPLETE AND ARE QUALIFIED
IN THEIR ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT FILED WITH THE SEC. COPIES OF THE PLAN ARE AVAILABLE
TO ALL EMPLOYEES BY FILING A REQUEST WITH THE PLAN ADMINISTRATOR. EACH EMPLOYEE
IS URGED TO READ CAREFULLY THE FULL TEXT OF THE PLAN.
ELIGIBILITY AND PARTICIPATION
Any employee of the Association is eligible to participate and will
become a Participant in the Plan following completion of a minimum of 1,000
hours of service with the Association within a consecutive 12 month period of
employment and the attainment of age 21. The Plan fiscal year is the calendar
year ("Plan Year"). Directors who are not employees of the Association are not
eligible to participate in the Plan.
During 1996, approximately 77 employees participated in the Plan.
CONTRIBUTIONS UNDER THE PLAN
PARTICIPANT CONTRIBUTIONS. Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement and have that amount contributed to the Plan on such
Participant's behalf. Such amounts are credited to the Participant's deferral
contributions account. For purposes of the Plan, "Compensation" means a
Participant's total amount of earnings reportable W-2 wages for federal income
tax withholding purposes plus a Participant's elective deferrals pursuant to a
salary reduction agreement under the Plan or any elective deferrals to a Section
125 plan. Due to recent statutory changes, the annual Compensation of each
Participant taken into account under the Plan is limited to $160,000 as adjusted
periodically (adjusted as permitted by the Code). A Participant may elect to
modify the amount contributed to the Plan under the participant's salary
reduction agreement
S-8
<PAGE>
during the Plan Year. Deferral contributions are transferred by the Association
to the Trustee on a periodic basis.
EMPLOYER CONTRIBUTIONS. The Association currently makes a discretionary
matching contribution to the Plan in an amount equal to a percentage of each
Participant's annual salary reduction contributions, in an amount not in excess
of 5% of the Participant's Compensation.
DISCRETIONARY CONTRIBUTIONS. The Association may also make
discretionary nonmatching contributions to the Plan for each Plan Year.
Participants who are in service on the last day of the Plan Year and have
completed 1,000 hours of service during the Plan Year are eligible to share in
the allocation of the discretionary contributions (if any) for the Plan Year.
The Association's discretionary contributions are allocated among Participants
eligible to share in the allocation according to the relationship of each such
Participant's Compensation for the Plan Year to the total Compensation of all
such Participants for such Plan Year. In addition, the Association may make
discretionary contributions on behalf of certain non-highly compensated
employees to the extent necessary to satisfy the Code's nondiscrimination
requirements (see below).
LIMITATIONS ON CONTRIBUTIONS
LIMITATIONS ON ANNUAL ADDITIONS AND BENEFITS. Pursuant to the
requirements of the Code, the Plan provides that the amount of contributions
allocated to each Participant's Account during any Plan Year may not exceed the
lesser of 25% of the Participant's "Section 415 Compensation" for the Plan Year
or $30,000 (as adjusted periodically as permitted by the Code). A Participant's
"Section 415 Compensation" is a Participant's Compensation, excluding any amount
contributed to the Plan under a salary reduction agreement or any employer
contribution to the Plan or to any other plan or deferred compensation or any
distributions from a plan of deferred compensation. In addition, annual
additions are limited to the extent necessary to prevent the limitations for the
combined plans of the Association from being exceeded. To the extent that these
limitations would be exceeded by reason of excess annual additions to the Plan
with respect to a Participant, the excess must be reallocated to the remaining
Participants who are eligible for an allocation of Employer contributions for
the Plan Year.
LIMITATION ON 401(K) PLAN CONTRIBUTIONS. The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $9,500 (as adjusted periodically
as permitted by the Code). Contributions in excess of this limitation ("excess
deferrals") will be included in the Participant's gross federal income tax
purposes in the year they are made. In addition, any such excess deferral will
again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for
S-9
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federal income tax purposes, as earned and received by the Participant in the
taxable year in which the excess deferral is made.
LIMITATION ON PLAN CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES.
Sections 401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan in any Plan Year on behalf of Highly Compensated
Employees (defined below) in relation to the amount of deferred compensation
contributed by or on behalf of all other employees eligible to participate in
the Plan. Specifically, the actual deferral percentage for a Plan Year (I.E.,
the average of the ratios, calculated separately for each eligible employee in
each group, by dividing the amount of salary reduction contributions credited to
the salary reduction contribution account of such eligible employee by such
employee's compensation for the Plan Year) of the Highly Compensated Employees
may not exceed the greater of (a) 125% of the actual deferred percentage of all
other eligible employees, or (b) the lesser of (i) 200% of the actual deferred
percentage of all other eligible employees, or (ii) the actual deferral
percentage of all other eligible employees plus two percentage points. In
addition, the actual contribution percentage for a Plan Year (I.E., the average
of the ratios calculated separately for each eligible employee in each group, by
dividing the amount of employer contributions credited to the Matching
contributions account of such eligible employee by each eligible employee's
compensation for the Plan Year) of the Highly Compensated Employees may not
exceed the greater of (a) 125% of the actual contribution percentage of all
other eligible employees, or (b) the lesser of (i) 200% of the actual
contributions percentage of all other eligible employees, or (ii) the actual
contribution percentage of all other eligible employees plus two percentage
points.
In general, a Highly Compensated Employee includes any employee who,
during the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner
(I.E., owns directly or indirectly more than 5% of the stock of the Employer, or
stock possessing more than 5% of the total combines voting power of all stock of
the Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted periodically as permitted by the
Code) and, if elected by the Association, was in the top paid group of employees
for such Plan Year.
In order to prevent disqualification of the Plan, any amounts
contributed by Highly Compensated Employees that exceed the average deferral
limitation in any Plan Year ("excess contributions"), together with any income
allocable thereto, must be distributed to such Highly Compensated Employees
before the close of the following Plan Year. However, the Association will be
subject to a 10% excise tax on any excess contributions unless such excess
contributions, together with any income allocable thereto, either are
recharacterized or are distributed before the close of the first 2 1/2 months
following the Plan Year to which such excess contributions relate. In addition,
in order to avoid disqualification of the Plan, any contributions by Highly
Compensated Employees that exceed the average contribution limitation in any
Plan Year ("excess aggregate contributions") together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the 10% excise tax will be imposed on
the Association with respect to any excess aggregate
S-10
<PAGE>
contributions, unless such amounts, plus any income allocable thereto, are
distributed within 2 1/2 months following the close of the Plan Year in which
they arose.
TOP-HEAVY PLAN REQUIREMENTS. If, for any Plan Year, the Plan is a
Top-Heavy Plan (as defined below), then (i) the Association may be required to
make certain minimum contributions to the Plan on behalf of non-key employees
(as defined below), and (ii) certain additional restrictions would apply with
respect to the combination of annual additions to the Plan and projected annual
benefits under any defined plan maintained by the Association.
In general, the Plan will be regarded as a "Top-Heavy Plan" for any
Plan Year, if as of the last day of the preceding Plan Year, the aggregate
balance of the accounts of all Participants who are key Employees exceeds 60% of
the aggregate balance of the Accounts of the Participants. "Key Employees"
generally include any employee, who at any time during the Plan Year or any
other the four preceding Plan Years, if (1) an officer of the Association having
annual compensation in excess of $60,000 who is in administrative or
policy-making capacity, (2) one of the ten employees having annual compensation
in excess of $30,000 and owing, directly or indirectly, the largest interest in
the employer, (3) a 5% owner of the employer (I.E., owns directly or indirectly
more than 5% of the stock of the employer, or stock possessing more than 5% of
the total combined voting power of all stock of the employer), or (4) a 1% of
owner of the employer having compensation in excess of $150,000.
INVESTMENT OF CONTRIBUTIONS
All amounts credited to Participant's Accounts under the Plan are held
in the Trust which is administered by the Trustee. The Trustee is appointed by
the Association's Board of Directors. The Plan provides that a Participant may
direct the Trustee to invest all or a portion of his Accounts in various managed
investment portfolios, as described below, A Participant may periodically elect
to change his investment directions with respect to both past contributions and
for more additions to the Participant's accounts invested in these investment
alternatives.
Under the Plan, prior to the effective date of the Conversion, the
Accounts of Participant held in the Trust will be invested by the Trustee at the
direction of the Participant in the following managed portfolios:
CERTIFICATES OF DEPOSIT -
MONEY MARKET FUND -
STOCK FUND -
BOND FUND -
AGGRESSIVE GROWTH FUND -
S-11
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BROKERAGE ACCOUNT -
Effective upon the Conversion, a Participant may invest all or a
portion of his or her Accounts in the portfolios described above and in Fund __,
described below:
EMPLOYER STOCK FUND - Invest in common stock of the Holding Company.
A Participant may elect (in increments of 1%), to have both past and
future contributions and additions to the Participant's Account invested either
in the Employer Stock Fund or in any of the other managed portfolios listed
above. Any amounts credited to a Participant's Accounts for which investment
directions are not given will be invested in _____________. Because investment
allocations only are required to be made in increments of 1%, Participants can
invest their Accounts in each of the seven available investment funds.
The net gain (or loss) in the Accounts from investments (including
interest payments, dividends, realized and unrealized gains and losses on
securities, and expenses paid from the Trust) are determined monthly on a
quarterly basis. For purposes of such allocation, all assets of the Trust are
valued at their fair market value.
THE EMPLOYER STOCK FUND
The Employer Stock Fund will consist of investments in Common Stock
made on and after the effective date of the Conversion. In connection with the
Conversion, pursuant to the attached Investment Form, Participants will be able
to change their investments at a time other than the normal election intervals.
Any cash dividends paid on Common Stock held in the Employer Stock Fund will be
credited to a cash dividend subaccount for each Participant investing in the
Employer Stock Fund. The Trustee will, to the extent practicable, use all
amounts held by it in the Employer Stock Fund (except the amounts credited to
cash dividend subaccounts) to purchase shares of Common Stock. It is expected
that all purchases will be made at prevailing market prices. Under certain
circumstances, the Trustee may be required to limit the daily volume of shares
purchased. Pending investment in Common Stock, assets held in the Employer Stock
Fund will be placed in bank deposits and other short-term investments.
When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale. A Participant's Account will be adjusted to reflect changes in the value
of shares of Common Stock resulting from stock dividends, stock splits and
similar changes.
To the extent dividends are not paid on Common Stock held in the
Employer Stock Fund, the return on any investment in the Employer Stock Fund
will consist only of the market value appreciation of the Common Stock
subsequent to its purchase. Following the conversion, the Board of the Holding
Company may consider a policy of paying dividends on the Common
S-12
<PAGE>
Stock, however, no decision has been made by the Board of the Holding Company
regarding the amount or timing of dividends, if any.
As of the date of this Prospectus Supplement, none of the shares of
Common Stock have been issued or are outstanding and there is no established
market for the Common Stock. Accordingly, there is no record of the historical
performance of the Employer Stock Fund.
INVESTMENTS IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISK FACTORS
ASSOCIATED WITH INVESTMENTS IN COMMON STOCK OF THE HOLDING COMPANY. FOR A
DISCUSSION OF THESE RISK FACTORS, SEE "RISK FACTORS" ON PAGES 1 THROUGH 6 IN THE
PROSPECTUS.
BENEFITS UNDER THE PLAN
VESTING. A Participant, has at all times a fully vested, nonforfeitable
interest in all of his or her Deferred Contributions and the earnings thereon
under the Plan. A Participant is 100% vested in his or her Matching
Contributions Account and employer discretionary contributions after the
completion of five years of service under the Plan's five-year, graded vesting
schedule (20% per year beginning upon completion of one year of service).
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
OR HER BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59
1/2 UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF
WHETHER SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE
ASSOCIATION.
DISTRIBUTION UPON RETIREMENT, DISABILITY OR TERMINATION OF EMPLOYMENT.
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment. At the request of the Participant, the distribution may include an
in-kind distribution of Common Stock of the Holding Company credited to the
Participant's Account. A Participant whose total vested account balance equals
or exceeds $3,500 at the time of termination, may elect, in lieu of a lump sum
payments, to be paid in annual installments over a period not exceeding the life
expectancy of the Participant or the joint life expectancies of the Participant
and his or her designated beneficiary. Benefits payments ordinarily shall be
made not later than 60 days following the end of the Plan Year in which occurs
later of the Participant's: (i) termination of employment; (ii) attainment of
age 65; or (iii) tenth anniversary of commencement of participation in the Plan;
but in no event later than April 1 following the calendar year in which the
Participant attains age 70 1/2 (if the Participant is retired). However, if the
vested portion of the Participant's Account balances exceeds $3,500, no
distribution shall be made from the Plan prior to the Participant's attaining
age 65 unless the Participant consents to an earlier distribution. Special
restrictions may apply to the distribution
S-13
<PAGE>
of Common Stock of the Holding Company to those Participants who are executive
officers, directors and principal shareholders of the Holding Company who are
subject to the provisions of Section 16(b) of the Exchange Act.
DISTRIBUTION UPON DEATH. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of his or her benefits had commenced
before his or her death, in accordance with the distribution method in effect at
his or her death. With respect to an unmarried Participant, and in the case of a
married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary, payments of benefits to the
beneficiary of a deceased Participant shall be made in the form of a lump sum
payment in cash or in Common Stock, or if the payment of his or her benefit had
commenced before his or her death, in accordance with the distribution method if
effect at death.
NONALIENATION OF BENEFITS. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
ADMINISTRATION OF THE PLAN
TRUSTEES. The Trustee with respect to the Plan is currently
Southeastern Trust Company.
Pursuant to the terms of the Plan, the Trustee receives and holds
contributions to the Plan in trust and has exclusive authority and discretion to
manage and control the assets of the Plan pursuant to the terms of the Plan and
to manage, invest and reinvest the Trust and income therefrom. The Trustee has
the authority to invest and reinvest the Trust and may sell or otherwise dispose
of Trust investments at any time and may hold trust funds uninvested. The
Trustee has authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.
The Trustee has full power to vote any corporate securities in the
Trust in person or by proxy; provided, however, that the Participants will
direct the Trustee as to voting and tendering of all Common Stock held in the
Employer Stock Fund.
The Trustee is entitled to reasonable compensation for its services and
is also entitled to reimbursement for expenses properly and actually incurred in
the administration of the Trust. The expenses of the Trustee and the
compensation of the persons so employed is paid out of the Trust except to the
extent such expenses and compensation are paid by the Association.
S-14
<PAGE>
The Trustee must render at least annual reports to the Association and
to the Participants in such form and containing information that the Trustee
deems necessary.
REPORTS TO PLAN PARTICIPANTS
The administrator will furnish to each Participant a statement at least
semiannually showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).
PLAN ADMINISTRATOR
A committee of the Association has been designated by the Board of
Directors of the Association to act on the Association's behalf as the Plan
Administrator. The Administrator is responsible for the administration of the
Plan, interpretation of the provisions of the Plan, prescribing procedures for
filing applications for benefits, preparation and distribution of information
explaining the Plan, maintenance of plan records, books of account and all other
data necessary for the proper administration of the Plan, and preparation and
filing of all returns and reports relating to the Plan which are required to be
filed with the U.S. Department of Labor and the IRS, and for all disclosures
required to be made to Participants, beneficiaries and others under Sections 104
and 105 of ERISA.
AMENDMENT AND TERMINATION
The Association may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee who ceases to be a Participant shall have a fully vested interest
in his or her Account. Participant accounts are also fully vested upon a Change
in Control of the Association or the Holding Company. The Association reserves
the right to make, from time to time, any amendment or amendments to the Plan
which do not cause any part of the Trust to be used for, or diverted to, any
purpose other than the exclusive benefit of the Participants or their
beneficiaries.
MERGER, CONSOLIDATION OR TRANSFER
In the event of the merger or consolidation of the Plan with another
plan, or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT
INTENDED TO BE A COMPLETE
S-15
<PAGE>
OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF
PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN. THE SUMMARY IS
NECESSARILY GENERAL IN NATURE AND DOES NOT PURPORT TO BE COMPLETE. MOREOVER,
STATUTORY PROVISIONS ARE SUBJECT TO CHANGE, AS ARE THEIR INTERPRETATIONS, AND
THEIR APPLICATION MAY VARY IN INDIVIDUAL CIRCUMSTANCES. FINALLY, THE
CONSEQUENCES UNDER APPLICABLE STATE AND LOCAL INCOME TAX LAWS MAY NOT BE THE
SAME AS UNDER THE FEDERAL INCOME TAX LAWS.
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO ANY DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE
PLAN.
The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code. A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Association expects to timely adopt
any amendments to the Plan that may be necessary to maintain the qualified
status of the Plan under the Code. Following such an amendment, the Plan will be
submitted to the IRS for a determination that the Plan, as amended, continues to
qualify under Sections 401(a) and 501(a) of the Code and that it continues to
satisfy the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.
Assuming that the Plan is administered in accordance with the
requirements of the Code, participation in the Plan under existing federal
income tax laws will have the following effects:
(a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan. Special
tax treatment may apply to the taxable portion of any distribution that includes
Common Stock or qualified as a "Lump Sum Distribution" (as described below).
(b) Income earned on assets held by the Trust will not be taxable to
the Trust.
LUMP SUM DISTRIBUTION. A distribution from the Plan to a Participant or
the beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it
is made: (i) within a single taxable year of the Participant or beneficiary;
(ii) on account of the Participant's death or separation from service, or after
the Participant attains age 59 1/2; and (iii) consists of the balance to the
credits of the Participant under the Plan and all other profit sharing plans, if
any, maintained by the Association. The portion of any Lump Sum Distribution
that is required to be included in the Participant's or beneficiary's taxable
income for federal income tax purposes (the "total taxable amount") consists of
the entire amount of such Lump Sum Distribution less
S-16
<PAGE>
the amount of after-tax contributions, if any, made by the Participant to any
other profit sharing plans maintained by the Association which is included in
such distribution.
AVERAGING RULES. The portion of the total taxable amount of a Lump Sum
Distribution (the "ordinary income portion") will be taxable generally as
ordinary income for federal income tax purposes. However, for distributions
occurring prior to January 1, 2000, a Participant who has completed at least
five years of participation in the Plan before the taxable year in which the
distribution is made, or a beneficiary who receives a Lump Sum Distribution on
account of the Participant's death (regardless of the period of the
Participant's participation in the Plan or any other profit sharing plan
maintained by the Employer), may elect to have the ordinary income portion of
such Lump Sum Distribution taxed according to a special averaging rule
("five-year averaging"). The election of the special averaging rules may apply
only to one Lump Sum Distribution received by the Participant or beneficiary,
provided such amount is received on or after the Participant turns 59 1/2 and
the recipient elects to have any other Lump Sum Distribution from a qualified
plan received in the same taxable year taxed under the special averaging rule.
The special five-year averaging rule has been repealed for distributions
occurring after December 31, 1999. Under a special grandfather rule, individuals
who turned 50 by 1986 may elect to have their Lump Sum Distribution taxed under
either the five-year averaging rule (if available) or the prior law ten-year
averaging rule. Such individuals also may elect to have that portion of the Lump
Sum Distribution attributable to the Participant's pre-1974 participation in the
Plan taxed at a flat 20% rate as gain from the sale of a capital asset.
COMMON STOCK INCLUDED IN LUMP SUM DISTRIBUTION. If a Lump Sum
Distribution includes Common Stock, the distribution generally will be taxed in
the manner described above, except that the total taxable amount will be reduced
by the amount of any net unrealized appreciation with respect to such Common
Stock, I.E., the excess of the value of such Common Stock at the time of the
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation. Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock. Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short-term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock. The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations by the IRS.
DISTRIBUTIONS: ROLLOVERS AND DIRECT TRANSFERS TO ANOTHER QUALIFIED PLAN
OR TO AN IRA. Pursuant to a change in the law, effective January 1, 1993,
virtually all distributions from the Plan may be rolled over to another
qualified Plan or to an individual retirement account ("IRA") without regard to
whether the distribution is a Lump Sum Distribution or Partial Distribution.
Effective January 1, 1993, Participants have the right to elect to have the
Trustee
S-17
<PAGE>
transfer all or any portion of an "eligible rollover distribution" directly to
another plan qualified under Section 401(a) of the Code or to an IRA. If the
Participant does not elect to have an "eligible rollover distribution"
transferred directly to another qualified plan of to an IRA, the distribution
will be subject to a mandatory federal withholding tax equal to 20% of the
taxable distribution. An "eligible rollover distribution" means any amount
distributed from the Plan except: (1) a distribution that is (a) one of a series
of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, I.E., forward averaging, capital gains tax treatment and the
nonrecognition of net unrealized appreciation, discussed earlier.
ADDITIONAL TAX ON EARLY DISTRIBUTIONS. A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled or onto an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate of a Participant) on
or after the death of the Participant, (ii) attributable to the Participant's
being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and his or her
beneficiary, (iv) made to the Participant after separation from service on
account of early retirement under the Plan after attainment of age 55, (v) made
to pay medical expenses to the extent deductible for federal income tax
purposes, (vi) pursuant to a qualified domestic relations order, or (vii) made
to effect the distribution of excess contributions or excess deferrals.
THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT
INTENDED TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.
RESTRICTIONS ON RESALE
Any person receiving shares of the Common Stock under the Plan who is
an "affiliate" of the Association or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Association) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Association
S-18
<PAGE>
having no obligation to file such registration statement) or, assuming the
availability thereof, pursuant to Rule 144 or some other exemption from the
registration requirements of the Securities Act. Any person who may be an
"affiliate" of the Association of the Holding Company may wish to consult with
counsel before transferring any Common Stock owned by him. In addition,
Participants are advised to consult with counsel as to the applicability of the
reporting and short-swing profit liability rules of Section 16 of the Exchange
Act which may affect the purchase and sale of the Common Stock where acquired
under the Plan, or other sales of the Common Stock.
LEGAL OPINIONS
The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Association's Conversion from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association and the concurrent formation of the Holding
Company.
S-19
<PAGE>
Investment Form
(Employer Stock Fund)
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
401(K) PLAN
Name of Participant:
Social Security Number:
1. INSTRUCTIONS. In connection with the proposed conversion of First
Federal Savings and Loan Association of Spartanburg (the "Association") to a
stock savings and loan association and the simultaneous formation of a holding
company (the "Conversion"), participants in the First Federal Savings and Loan
Association of Spartanburg 401(k) Plan (the "Plan") may make a one-time election
to direct the investment of up to 100% of their ___________, 1997 account
balances into the Employer Stock Fund (the "Employer Stock Fund"). Amounts
transferred at the direction of Participants into the Employer Stock Fund will
be used to purchase shares of the common stock of FirstSpartan Financial Corp.
(the "Common Stock"), the proposed holding company for the Association. A
PARTICIPANT'S ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IS SUBJECT TO THE
PARTICIPANT'S GENERAL ELIGIBILITY TO PURCHASE SHARES OF COMMON STOCK IN THE
CONVERSION AND THE MAXIMUM AND MINIMUM LIMITATIONS SET FORTH IN THE PLAN
CONVERSION. SEE THE PROSPECTUS FOR ADDITIONAL INFORMATION.
You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion.
To direct such a transfer to the Employer Stock Fund, you should complete this
form and return it to ______ _____ at the Association, no later than the close
of business on ____________, 1997. The Association will keep a copy of this form
and return a copy to you. (If you need assistance in completing this form,
please contact ____________.
2. TRANSFER DIRECTION. I hereby direct the Plan Administrator to
transfer $__________ (in increments of $20) from my Plan account to the Employer
Stock Fund.
3. EFFECTIVENESS OF DIRECTION. I understand that this Investment Form
shall be subject to all of the terms and conditions of the Plan and the terms
and conditions of the Conversion. I acknowledge that I have received a copy of
the Prospectus and the Prospectus Supplement.
_________________ Signature
Date
* * * * *
4. ACKNOWLEDGEMENT OF RECEIPT. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.
- --------------------- -------------------------Plan
Administrator Date
S-20
<PAGE>
PROSPECTUS FIRSTSPARTAN FINANCIAL CORP.
(PROPOSED HOLDING COMPANY FOR FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SPARTANBURG)
UP TO 3,852,500 SHARES OF COMMON STOCK
$20.00 PURCHASE PRICE PER SHARE
FirstSpartan Financial Corp. ("Holding Company"), a Delaware
corporation, is offering between 2,847,500 and 3,852,500 shares of its common
stock, $.01 par value per share ("Common Stock"), in connection with the
conversion of First Federal Savings and Loan Association of Spartanburg
("Association") from a federally chartered mutual savings and loan association
to a federally chartered capital stock savings and loan association and the
simultaneous issuance of all of the Association's outstanding capital stock to
the Holding Company. The simultaneous conversion of the Association to stock
form, the issuance of all of its outstanding capital stock to the Holding
Company, and the offer and sale of the Common Stock by the Holding Company
hereby are undertaken pursuant to a plan of conversion ("Plan of Conversion")
and are referred to herein as the "Conversion."
Pursuant to the Plan of Conversion, nontransferable rights to subscribe
for the Common Stock ("Subscription Rights") have been granted, in order of
priority, to (i) depositors with $50.00 or more on deposit at the Association as
of December 31, 1995 ("Eligible Account Holders"), (ii) the Association's
employee stock ownership plan ("ESOP"), a tax-qualified employee benefit plan,
(iii) depositors with $50.00 or more on deposit at the Association as of March
31, 1997 ("Supplemental Eligible Account Holders"), and (iv) depositors of the
Association as of May 1, 1997 ("Voting Record Date") and borrowers of the
Association with loans outstanding as of March 12, 1997 which continue to be
outstanding as of the Voting Record Date ("Other Members"), subject to the
priorities and purchase limitations set forth in the Plan of Conversion
("Subscription Offering"). SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS
SELLING OR OTHERWISE TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN
THE SUBSCRIPTION OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER
PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER
SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION ("OTS") OR
ANOTHER AGENCY OF THE U.S. GOVERNMENT. THE SUBSCRIPTION OFFERING WILL EXPIRE AT
____ _.M., EASTERN TIME, ON ______, 1997 ("EXPIRATION DATE"), UNLESS EXTENDED BY
THE ASSOCIATION AND THE HOLDING COMPANY FOR UP TO __ DAYS TO , 1997. SUCH
EXTENSION MAY BE GRANTED WITHOUT ADDITIONAL NOTICE TO SUBSCRIBERS. See "THE
CONVERSION -- The Subscription, Direct Community and Syndicated Community
Offerings" and "-- Limitations on Purchases of Shares."
FOR INFORMATION ON HOW TO SUBSCRIBE FOR
SHARES OF COMMON STOCK, CALL THE STOCK
INFORMATION CENTER AT .
FORA DISCUSSION OF CERTAIN RISKS THAT SHOULD
BE CONSIDERED BY EACH PROSPECTIVE INVESTOR,
SEE "RISK FACTORS" BEGINNING ON PAGE 1.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE SAVINGS
ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OTS, THE FDIC OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(COVER CONTINUED ON FOLLOWING PAGE)
TRIDENT SECURITIES, INC.
The date of this Prospectus is May , 1997.
<PAGE>
<TABLE>
<CAPTION>
Estimated Underwriting
Purchase Commissions and Estimated Net
Price(1) Other Fees and Expenses(2) Proceeds(3)
<S> <C> <C> <C>
Minimum Price Per Share.................................. $20.00 $0.45 $19.55
- -------------------------------------------------------------------------------------------------------------------------------
Midpoint Price Per Share................................. $20.00 $0.42 $19.58
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share.................................. $20.00 $0.42 $19.58
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(4).................. $20.00 $0.42 $19.58
- -------------------------------------------------------------------------------------------------------------------------------
Minimum Total(5)......................................... $56,950,000 $1,275,000 $55,675,000
- -------------------------------------------------------------------------------------------------------------------------------
Midpoint Total(6)........................................ $67,000,000 $1,400,000 $65,600,000
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Total(7)......................................... $77,050,000 $1,400,000 $75,650,000
- -------------------------------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(4)(8)......................... $88,607,500 $1,400,000 $87,207,500
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC. ("RP Financial") as of February 21, 1997, which states
that the estimated aggregate pro forma market value of the Holding
Company and the Association as converted ranged from $56,950,000 to
$77,050,000, with a midpoint of $67,000,000 ("Estimated Valuation
Range"). See "THE CONVERSION -- Stock Pricing and Number of Shares to
be Issued."
(2) Includes estimated expenses to the Holding Company and the Association
arising from the Conversion, including fees to be paid to Trident
Securities, Inc. ("Trident Securities") in connection with the
Offerings. Trident Securities fees amount to $672,000, $797,000,
$797,000 and $797,000 at the minimum, midpoint, maximum and 15% above
the Estimated Valuation Range, respectively. Such fees may be deemed to
be underwriting fees and Trident Securities may be deemed to be an
underwriter. Expenses, other than fees to be paid to Trident
Securities, are estimated to total approximately $603,000 at each of
the minimum, midpoint, maximum and maximum, as adjusted, of the
Estimated Valuation Range. Actual expenses may be more or less than
estimated amounts. The Holding Company and the Association have agreed
to indemnify Trident Securities against certain liabilities, including
liabilities that might arise under the Securities Act of 1933, as
amended ("Securities Act"). See "USE OF PROCEEDS" and "THE CONVERSION
-- Plan of Distribution for the Subscription, Direct Community and
Syndicated Community Offerings."
(3) Actual net proceeds can vary substantially from the estimated amounts
depending upon actual expenses and the relative number of shares sold
in the Offerings. See "USE OF PROCEEDS" and "PRO FORMA DATA."
(4) Gives effect to an increase in the number of shares that could be sold
in the Offerings due to an increase in the pro forma market value of
the Holding Company and the Association as converted up to 15% above
the maximum of the Estimated Valuation Range, without the
resolicitation of subscribers or any right of cancellation. The ESOP
shall have a first priority right to subscribe for such additional
shares up to an aggregate of 8% of the Common Stock issued in the
Conversion. The issuance of such additional shares will be conditioned
on a determination of RP Financial that such issuance is compatible
with its determination of the estimated pro forma market value of the
Holding Company and the Association as converted. See "THE CONVERSION
-- Stock Pricing and Number of Shares to be Issued."
(5) Assumes the issuance of 2,847,500 shares at $20.00 per share.
(6) Assumes the issuance of 3,350,000 shares at $20.00 per share.
(7) Assumes the issuance of 3,852,500 shares at $20.00 per share.
(8) Assumes the issuance of 4,430,375 shares at $20.00 per share.
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered for sale to members of the general public through a
direct community offering ("Direct Community Offering") with preference being
given to natural persons and trusts of natural persons who are permanent
residents of Spartanburg County, South Carolina ("Local Community"), subject to
the right of the Holding Company to accept or reject orders in the Direct
Community Offering in whole or in part. The Direct Community Offering, if one is
held, is expected to begin immediately after the Expiration Date, but may begin
at any time during the Subscription Offering. The Direct Community Offering may
terminate on or after the Expiration Date, but not later than , 1997 (or , 1997
if the Subscription Offering is fully extended), unless further extended with
the consent of the
<PAGE>
OTS. It is anticipated that shares of Common Stock not subscribed for or
purchased in the Subscription Offering and the Direct Community Offering will be
offered to eligible members of the general public on a best efforts basis by a
selling group of broker-dealers managed by Trident Securities in a syndicated
offering ("Syndicated Community Offering"). The Subscription Offering, Direct
Community Offering and Syndicated Community Offering are referred to
collectively as the "Offerings." If the Conversion is not consummated within 45
days after the last day of the Subscription Offering (which date will be no
later than ________ __, 1997) and the OTS consents to an extension of time to
complete the Conversion, subscribers will be given the right to increase,
decrease or rescind their orders.
Such extensions may not go beyond , 1999.
With the exception of the ESOP, which is expected to subscribe for 8%
of the shares of Common Stock issued in the Conversion, the Plan of Conversion
provides for the following purchase limitations: (i) No Eligible Account Holder,
Supplemental Account Holder or Other Member, including, in each case, all
persons on a joint account, may purchase shares of Common Stock with an
aggregate purchase price of more than $325,000, (ii) no person, either alone or
together with associates of or persons acting in concert with such person, may
purchase in the Direct Community Offering, if any, or in the Syndicated
Community Offering, if any, shares of Common Stock with an aggregate purchase
price of more than $325,000, and (iii) no person (including all persons on a
joint account), either alone or together with associates of or persons acting in
concert with such person, may purchase in the aggregate more than the overall
maximum purchase limitation of 1% of the total number of shares of Common Stock
issued in the Conversion (exclusive of any shares issued pursuant to an increase
in the Estimated Valuation Range of up to 15%), or shares with an aggregate
purchase price of more than $770,500. If market conditions are such that an
increase in the maximum purchase limitation is necessary to sell a number of
shares in excess of the minimum of the Estimated Valuation Range, the maximum
purchase limitation may be increased at the sole discretion of the Association
and the Holding Company subject to any required regulatory approval. See "THE
CONVERSION -- The Subscription, Direct Community and Syndicated Community
Offerings," "-- Limitations on Purchases of Shares" and "-- Procedure for
Purchasing Shares in the Subscription and Direct Community Offerings" for other
purchase and sale limitations. The minimum order is 25 shares.
The Holding Company must receive a properly completed and signed stock
order form and certification ("Order Form") along with full payment (or
appropriate instructions authorizing a withdrawal of the full payment from a
deposit account at the Association) of $20.00 per share for all shares
subscribed for or ordered. Funds so received will be placed in segregated
accounts created for this purpose at the Association and will earn interest at
the Association's passbook rate from the date payment is received until the
Conversion is consummated or terminated; these funds will be otherwise
unavailable to the depositor until such time. Payments authorized by withdrawals
from deposit accounts will continue to earn interest at the contractual rate
until the Conversion is consummated or terminated, although such funds will be
unavailable for withdrawal until the Conversion is consummated or terminated.
ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT THE CONSENT OF THE
ASSOCIATION AND THE HOLDING COMPANY. The Holding Company is not obligated to
accept orders submitted on photocopied or telecopied Order Forms.
The Association and the Holding Company have engaged Trident Securities
as their financial advisor and to assist the Holding Company in the sale of the
Common Stock in the Offerings. Trident Securities is a registered broker-dealer
and a member of the National Association of Securities Dealers, Inc. ("NASD").
Neither Trident Securities nor any other registered broker-dealer is obligated
to take or purchase any shares of Common Stock in the Offerings. The Holding
Company and the Association reserve the right, in their absolute discretion, to
accept or reject, in whole or in part, any or all orders in the Direct Community
or Syndicated Community Offerings either at the time of receipt of an order or
as soon as practicable following the termination of the Offerings. See "THE
CONVERSION -- Plan of Distribution for the Subscription, Direct Community and
Syndicated Community Offerings."
Offering materials for the Subscription Offering initially will be
distributed to certain persons by mail, with copies also available by request or
at the Stock Information Center. The Association has established the Stock
Information Center for purposes of coordinating the Offerings, including
tabulating orders and answering questions about the Offerings by telephone. All
subscribers for or purchasers of the shares to be offered in the Subscription
<PAGE>
Offering will be instructed to send payment directly to the Association, where
such funds will be held in a segregated account and not released until all
shares are sold or the Offerings are terminated. See "THE CONVERSION."
Prior to the Offerings, the Holding Company has not issued any capital
stock and accordingly there has been no market for the shares offered hereby.
There can be no assurance that an active and liquid trading market for the
Common Stock will develop or, if developed, will be maintained. The Holding
Company has received conditional approval to list the Common Stock the Nasdaq
National Market under the symbol "FSPT." Trident Securities has agreed to act as
a market maker for the Common Stock following consummation of the Conversion.
See "RISK FACTORS -- Absence of Prior Market for the Common Stock" and "MARKET
FOR COMMON STOCK."
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
SPARTANBURG, SOUTH CAROLINA
(Map appears here depicting the First Federal Savings and Loan Association
Office Locations with the following legend.)
OFFICE LOCATIONS:
Greenville County
Greenville
(Loan Production Office)
Spartanburg County
Inman
(Under Construction)
Boiling Springs
Duncan
(Under Construction)
Spartanburg*
*4 OFFICES IN SPARTANBURG
THE CONVERSION IS CONTINGENT UPON APPROVAL OF THE ASSOCIATION'S PLAN OF
CONVERSION BY AT LEAST A MAJORITY OF THE ELIGIBLE VOTING MEMBERS, THE SALE OF AT
LEAST 2,847,500 SHARES OF COMMON STOCK PURSUANT TO THE PLAN OF CONVERSION, AND
RECEIPT OF ALL REGULATORY APPROVALS.
<PAGE>
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT
AGENCY.
PROSPECTUS SUMMARY
THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH AND
IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) PRESENTED ELSEWHERE IN THIS
PROSPECTUS. THE PURCHASE OF COMMON STOCK IS SUBJECT TO CERTAIN RISKS. SEE "RISK
FACTORS."
FIRSTSPARTAN FINANCIAL CORP.
The Holding Company was organized on February 4, 1997 under Delaware
law at the direction of the Association to acquire all of the capital stock that
the Association will issue upon its conversion from the mutual to stock form of
ownership. The Holding Company has only engaged in organizational activities to
date. The Holding Company has received conditional OTS approval to become a
savings and loan holding company through the acquisition of 100% of the capital
stock of the Association. Immediately following the Conversion, the only
significant assets of the Holding Company will be the outstanding capital stock
of the Association, 50% of the net proceeds of the Offerings as permitted by the
OTS to be retained by it and a note receivable from the ESOP evidencing a loan
to enable the ESOP to purchase 8% of the Common Stock issued in the Conversion.
Funds retained by the Holding Company will be used for general business
activities. See "USE OF PROCEEDS." Upon Conversion, the Holding Company will be
classified as a unitary savings and loan holding company subject to OTS
regulation. See "REGULATION -- Savings and Loan Holding Company Regulations."
The main office of the Holding Company is located at 380 E. Main Street,
Spartanburg, South Carolina 29302 and its telephone number is (864) 582-2391.
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
Chartered in 1935, the Association is a federal mutual savings and loan
association headquartered in Spartanburg, South Carolina. As a result of the
Conversion, the Association will convert to a federal capital stock savings and
loan association and will become a wholly-owned subsidiary of the Holding
Company. The Association is regulated by the OTS, its primary regulator, and by
the FDIC, the insurer of its deposits. The Association's deposits have been
federally-insured since 1935 and are currently insured by the FDIC under the
SAIF. The Association has been a member of the Federal Home Loan Bank ("FHLB")
System since 1935. At December 31, 1996, the Association had total assets of
$375.5 million, total deposits of $324.0 million and total equity of $44.8
million on a consolidated basis.
The Association is a community oriented financial institution whose
primary business is attracting retail deposits from the general public and using
these funds to originate primarily one- to- four family residential mortgage
loans within its primary market area. The Association is an approved Federal
Housing Administration ("FHA") and Veterans Administration ("VA") lender and
participates in the Spartanburg Residential Development Program, an affordable
housing program. The Association also actively originates construction loans and
consumer loans. To a lesser extent, the Association originates land loans,
commercial real estate loans and commercial business loans. The Association
expects to hire an experienced commercial loan officer familiar with the
Association's primary market area in an attempt to augment its commercial real
estate and commercial business lending. At December 31, 1996, one- to- four
family residential mortgage loans, consumer loans (including commercial business
loans), construction loans, commercial real estate loans and land loans amounted
to 77.3%, 11.5%, 9.2%, 1.3% and 0.7% of its total loan portfolio, respectively.
Loans receivable, net, constituted 88.3% of total assets at December 31, 1996.
(i)
<PAGE>
See "RISK FACTORS -- Certain Lending Considerations" and "BUSINESS OF THE
ASSOCIATION -- Lending Activities."
The Association considers Spartanburg County and adjacent counties in
Northwest South Carolina to be its primary market area because a large number of
its depositors reside, and a substantial portion of its loan portfolio is
secured by properties located, in that geographic area. See "RISK FACTORS --
Concentration of Credit Risk." Since August 1996, the Association has purchased
a limited number of one- to- four family residential mortgage loans and
residential construction loans from a regional start-up mortgage banking company
in which the Association's service corporation subsidiary has an equity
investment. At December 31, 1996, a substantial portion of these purchased loans
were secured by properties located in the Association's primary market area.
Such loan purchases are expected to continue and increase in volume as that
company's mortgage banking operations expand, and are likely to include
purchases of loans, including commercial loans and home equity loans, secured by
properties inside and outside of the Association's primary market area. See
"FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG," "BUSINESS OF THE
ASSOCIATION -- Lending Activities -- Loan Originations, Sales and Purchases" and
"-- Subsidiary Activities."
In addition to its lending activities, the Association invests excess
liquidity in short term U.S. Government and agency securities, a mutual fund
that invests in adjustable rate mortgage loans and, to a substantially lesser
extent, short term mortgage-backed securities issued by U.S. Government
agencies. Investment securities and mortgage-backed securities, which
constituted 3.6% of total assets at December 31, 1996, had an amortized cost and
a fair value of $13.6 million at December 31, 1996. See "BUSINESS OF THE
ASSOCIATION -- Investment Activities."
The Association conducts its operations from its main office and three
branch offices located in Spartanburg, South Carolina, a branch office in
Boiling Springs, South Carolina (Spartanburg County) and a loan production
office in Greenville, South Carolina, in adjacent Greenville County. Two
additional branch offices are under construction in Inman, South Carolina
(Spartanburg County), and in Duncan, South Carolina (Spartanburg County). Both
offices are scheduled to open by the end of the first half of calendar 1997. See
"BUSINESS OF THE ASSOCIATION -- Properties." The main office is located at 380
E. Main Street, Spartanburg, South Carolina 29302, and its telephone number is
(864) 582-2391.
THE CONVERSION
The Association proposes to convert from a federally chartered mutual
savings and loan association to a federally chartered capital stock savings and
loan association and become a wholly-owned subsidiary of the Holding Company by
issuing all of its capital stock to the Holding Company in exchange for 50% of
the net proceeds of the Offerings. Simultaneously, the Holding Company will sell
its Common Stock in the Offerings. The Conversion has been approved by the OTS,
subject to approval by the Association's members at a special meeting to be held
on June 25, 1997. AFTER CONSUMMATION OF THE CONVERSION, DEPOSITORS AND BORROWERS
OF THE ASSOCIATION WILL HAVE NO VOTING RIGHTS IN THE HOLDING COMPANY UNLESS THEY
BECOME STOCKHOLDERS.
The Plan of Conversion requires that the aggregate purchase price of
the Common Stock to be issued in the Conversion be based upon an independent
appraisal of the estimated pro forma market value of the Holding Company and the
Association, as converted. RP Financial has advised the Association that in its
opinion, at February 21, 1997, the aggregate estimated pro forma market value of
the Holding Company and the Association, as converted, ranged from $56,950,000
to $77,050,000 or from 2,847,500 shares to 3,852,500 shares, assuming a $20.00
per share Purchase Price. The appraisal of the pro forma market value of the
Holding Company and the Association as converted is based on a number of factors
and should not be considered a recommendation to buy shares of the Common Stock
or any assurance that after the Conversion shares of Common Stock will be able
to be resold at or above the Purchase Price. The appraisal will be updated or
confirmed prior to consummation of the Conversion.
(ii)
<PAGE>
The Board of Directors and management believe that the Conversion is in
the best interests of the Association, its members and the communities it
serves. The capital raised in the Conversion is intended to support the
Association's current lending and investment activities and may also support
possible future expansion and diversification of operations, although there are
no current specific plans, arrangements or understandings, written or oral,
regarding any such expansion or diversification. The Conversion is also expected
to afford the Association's members and others the opportunity to become
stockholders of the Holding Company and participate more directly in, and
contribute to, any future growth of the Holding Company and the Association. The
Conversion will also enable the Holding Company and the Association to raise
additional capital in the public equity or debt markets should the need arise,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any such financing activities. As a mutual
institution, the Association is unable to raise equity capital or issue debt
instruments (other than by accepting deposits). See "THE CONVERSION -- Purposes
of Conversion."
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
The Holding Company is offering up to 3,852,500 shares of Common Stock
at $20.00 per share to holders of Subscription Rights in the following order of
priority: (i) Eligible Account Holders; (ii) the Association's ESOP; (iii)
Supplemental Eligible Account Holders; and (iv) Other Members. In the event the
number of shares offered in the Conversion is increased above the maximum of the
Estimated Valuation Range, the Association's ESOP shall have a priority right to
purchase any such shares exceeding the maximum of the Estimated Valuation Range
up to an aggregate of 8% of the Common Stock. ONCE TENDERED, ORDERS ARE
IRREVOCABLE WITHOUT THE CONSENT OF THE ASSOCIATION AND THE HOLDING COMPANY. Any
shares of Common Stock not subscribed for in the Subscription Offering may be
offered in the Direct Community Offering to the general public with preference
being given to natural persons and trusts of natural persons who are permanent
residents of the Local Community. The Association has engaged Trident Securities
to consult with and advise the Holding Company and the Association in the
Offerings, and Trident Securities has agreed to use its best efforts to assist
the Holding Company with the solicitation of subscriptions and purchase orders
for shares of Common Stock in the Offerings. Trident Securities is not obligated
to take or purchase any shares of Common Stock in the Offerings. If all shares
of Common Stock to be issued in the Conversion are not sold through the
Subscription Offering and the Direct Community Offering, then the Holding
Company expects to offer the remaining shares in a Syndicated Community Offering
managed by Trident Securities, which would occur as soon as practicable
following the close of the Subscription and Direct Community Offerings. All
shares of Common Stock will be sold at the same price per share in the
Syndicated Community Offering as in the Subscription Offering and the Direct
Community Offering. See "USE OF PROCEEDS," "PRO FORMA DATA" and "THE CONVERSION
- -- Stock Pricing and Number of Shares to be Issued." The Subscription Offering
will expire at ____ _.m., Eastern Time, on the Expiration Date, unless extended
by the Association and the Holding Company for up to __ days. The Direct
Community Offering and Syndicated Community Offering, if any, may terminate on
the Expiration Date or on any date thereafter, however, in no event later than
________, 1997, unless further extended with the consent of the OTS.
BENEFITS OF THE CONVERSION TO MANAGEMENT
ESOP. In connection with the Conversion, the Association will adopt the
ESOP, a tax-qualified employee benefit plan for officers and employees of the
Holding Company and the Association, which intends to purchase 8% of the shares
of Common Stock issued in the Offerings (308,200 shares of Common Stock, based
on the issuance of the maximum of the Estimated Valuation Range). In the event
the number of shares offered in the Conversion is increased above the maximum of
the Estimated Valuation Range, the Association's ESOP shall have a priority
(iii)
<PAGE>
right to purchase any such shares exceeding the maximum of the Estimated
Valuation Range up to an aggregate of 8% of the Common Stock. In the event that
the ESOP's subscription is not filled in its entirety, the ESOP may purchase
additional shares in the open market or may purchase additional authorized but
unissued shares with cash contributed to it by the Association. For additional
information concerning the ESOP, see "MANAGEMENT OF THE ASSOCIATION -- Benefits
- -- Employee Stock Ownership Plan." As a result of the adoption of the ESOP, the
Holding Company will recognize compensation expense in an amount equal to the
fair market value of the ESOP shares when such shares are committed to be
released to participants' accounts. See "PRO FORMA DATA."
MRP. The Holding Company expects to seek stockholder approval of the
FirstSpartan Financial Corp. 1997 Management Recognition Plan and Trust ("MRP"),
which will reserve a number of shares equal to 4% of the number of shares issued
in the Conversion. Under current OTS regulations, the approval of a majority
vote of the Holding Company's outstanding shares of Common Stock is required
prior to the implementation of the MRP within one year of the consummation of
the Conversion. If stockholder approval of the MRP is obtained, it is expected
that awards of up to 154,100 shares of Common Stock (based on the issuance of
the maximum of the Estimated Valuation Range)will be made to key employees and
directors of the Holding Company and the Association at no cost to the
recipient. Although no specific award determinations have been made at this
time, the Holding Company and the Association anticipate that if stockholder
approval is obtained it would provide awards to its directors, officers and
employees to the extent permitted by applicable regulations. Under current OTS
regulations, if the MRP is implemented within one year of the consummation of
the Conversion, (i) no officer or employees could receive an award covering in
excess of 25%, (ii) no nonemployee director could receive in excess of 5% and
(iii) nonemployee directors, as a group, could not receive in excess of 30%, of
the number of shares reserved for issuance under the MRP. In addition, all
awards would be subject to vesting at a minimum rate of 20% per year. The size
of individual awards will be determined prior to submitting the MRP for
stockholder approval, and disclosure of anticipated awards will be included in
the proxy materials for such meeting. See "PRO FORMA DATA" and "MANAGEMENT OF
THE ASSOCIATION -- Benefits -- Management Recognition Plan."
STOCK OPTION PLAN. The Holding Company expects to seek stockholder
approval of the FirstSpartan Financial Corp. 1997 Stock Option Plan ("Stock
Option Plan"), which will reserve a number of shares equal to 10% of the number
of shares issued in the Conversion. Under current OTS regulations, the approval
of a majority vote of the Holding Company's outstanding shares of Common Stock
is required prior to the implementation of the Stock Option Plan within one year
of the consummation of the Conversion. If stockholder approval of the Stock
Option Plan is obtained, it is expected that options to acquire up to 385,250
shares of Common Stock of the Holding Company will be awarded to key employees
and directors of the Holding Company and the Association (based on the issuance
of the maximum of the Estimated Valuation Range). The exercise price of such
options will be 100% of the fair market value of the Common Stock on the date
the option is granted. Although no specific award determinations have been made
at this time, the Holding Company and the Association anticipate that if
stockholder approval is obtained it would provide awards to its directors,
officers and employees to the extent permitted by applicable regulations. Under
current OTS regulations, if the Stock Option Plan is implemented within one year
of the consummation of the Conversion, (i) no officer or employees could receive
an award of options covering in excess of 25%, (ii) no nonemployee director
could receive in excess of 5% and (iii) nonemployee directors, as a group, could
not receive in excess of 30%, of the number of shares reserved for issuance
under the Stock Option Plan. In addition, all awards would be subject to vesting
at a minimum rate of 20% per year. The size of individual awards will be
determined prior to submitting the Stock Option Plan for stockholder approval,
and disclosure of anticipated awards will be included in the proxy materials for
such meeting. Options are valuable only to the extent that they are exercisable
and the market price for the underlying share of Common Stock is in excess of
the exercise price. An option effectively eliminates the market risk of holding
the underlying security since no consideration is paid for the option until it
is exercised. Therefore, the recipient may, within the limits of the term of the
option, wait to exercise the option until the market price exceeds the exercise
price. See "MANAGEMENT OF THE ASSOCIATION -- Benefits -- 1997 Stock Option
Plan."
EMPLOYMENT AND SEVERANCE AGREEMENTS. The Holding Company and the
Association have agreed to enter into employment agreements with three of the
Association's executive officers, which provides certain benefits in
(iv)
<PAGE>
the event of their termination following a change in control of the Holding
Company or the Association. In the event of a change in control of the Holding
Company or the Association, as defined in the agreement, each executive officer
will be entitled to a cash severance benefit equal to 2.99 times their average
annual compensation during the five-year period preceding the change in control.
Assuming a change of control occurred as of December 31, 1996, the aggregate
amount payable to these executive officers under the agreements would have been
approximately $921,000. See "MANAGEMENT OF THE ASSOCIATION -- Executive
Compensation -- Employment Agreements."
The Holding Company and the Association have agreed to enter into
severance agreements with three of the Association's senior officers, none of
whom will be covered by an employment agreement. The severance agreements
provide for certain benefits in the event of their termination following a
change in control of the Holding Company or the Association. In the event of a
change in control of the Holding Company or the Association, as defined in the
agreements, such officers will each be entitled to a cash severance benefit.
Assuming a change of control occurred as of December 31, 1996, the aggregate
severance benefits payable to these officers under the agreements would have
been approximately $438,000. See "MANAGEMENT OF THE ASSOCIATION -- Executive
Compensation -- Severance Agreements."
EMPLOYEE SEVERANCE COMPENSATION PLAN. In connection with the
Conversion, the Board of Directors of the Association intends to adopt an
Employee Severance Compensation Plan ("Severance Plan") to provide benefits to
eligible employees in the event of a change in control of the Holding Company or
the Association. Officers who enter into separate employment or severance
agreements with the Holding Company and the Association will not be eligible to
participate in the Severance Plan. The Severance Plan provides that, in the
event of a change in control of the Holding Company or the Association, eligible
employees who are terminated or who terminate employment (but only upon the
occurrence of events specified in the Severance Plan) within 12 months of the
effective date of a change in control will be entitled to a payment based on
years of service and/or position with the Association, subject to certain
limits. Assuming that a change in control had occurred at December 31, 1996 and
the termination of all eligible employees, the maximum aggregate payment due
under the Severance Plan would be approximately $1.2 million. See "MANAGEMENT OF
THE ASSOCIATION -- Executive Compensation -- Employee Severance Compensation
Plan."
For information concerning the possible voting control of officers,
directors and employees following the Conversion, see "RISK FACTORS --
Anti-takeover Considerations -- Voting Control by Insiders."
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING COMMON STOCK
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date, in accordance with Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), no Prospectus will
be mailed later than five days or hand delivered any later than two days prior
to the Expiration Date. Execution of the Stock Order Form will confirm receipt
or delivery of a Prospectus in accordance with Rule 15c2-8. Stock Order Forms
will be distributed only with a Prospectus. Neither the Holding Company, the
Association nor Trident Securities is obligated to deliver a Prospectus and a
Stock Order Form by any means other than the U.S.
Postal Service.
To ensure that Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members are properly identified as to their stock purchase
priorities, such parties must list all deposit accounts, or in the case of Other
Members who are only borrowers, loans held at the Association, on the Stock
Order Form giving all names on each deposit account and/or loan and the account
and/or loan numbers at the applicable eligibility date.
Full payment by check, cash (except by mail), money order, bank draft
or withdrawal authorization (payment by wire transfer will not be accepted) must
accompany an original Stock Order Form (facsimile copies and photocopies will
not be accepted). ORDERS CANNOT AND WILL NOT BE ACCEPTED WITHOUT THE EXECUTION
OF THE
(v)
<PAGE>
CERTIFICATION APPEARING ON THE REVERSE SIDE OF THE STOCK ORDER FORM. See "THE
CONVERSION -- Procedure for Purchasing Shares in the Subscription and Direct
Community Offering."
PURCHASE LIMITATIONS
With the exception of the ESOP, which is expected to subscribe for 8%
of the shares of Common Stock issued in the Conversion, the Plan of Conversion
provides for the following purchase limitations: (i) No Eligible Account Holder,
Supplemental Account Holder or Other Member, including, in each case, all
persons on a joint account, may purchase shares of Common Stock with an
aggregate purchase price of more than $325,000, (ii) no person, either alone or
together with associates of or persons acting in concert with such person, may
purchase in the Direct Community Offering, if any, or in the Syndicated
Community Offering, if any, shares of Common Stock with an aggregate purchase
price of more than $325,000, and (iii) no person (including all persons on a
joint account), either alone or together with associates of or persons acting in
concert with such person, may purchase in the aggregate more than the overall
maximum purchase limitation of 1% of the total number of shares of Common Stock
issued in the Conversion (exclusive of any shares issued pursuant to an increase
in the Estimated Valuation Range of up to 15%), or shares with an aggregate
purchase price of more than $770,500. THIS MAXIMUM PURCHASE LIMITATION MAY BE
INCREASED CONSISTENT WITH OTS REGULATIONS IN THE SOLE DISCRETION OF THE HOLDING
COMPANY AND THE ASSOCIATION SUBJECT TO ANY REQUIRED REGULATORY APPROVAL. The
minimum purchase is 25 shares.
The term "acting in concert" is defined in the Plan of Conversion 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; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. The Holding Company and the Association 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 Securities and Exchange Commission ("SEC") with respect to other companies.
The term "associate" of a person is defined in the Plan of Conversion to mean:
(i) any corporation or organization (other than the Association or a
majority-owned subsidiary of the Association) 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 (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 the Association or any of its parents or subsidiaries.
Stock orders received either through the Direct Community Offering or
the Syndicated Community Offering, if held, may be accepted or rejected, in
whole or in part, at the discretion of the Holding Company and the Association.
See "THE CONVERSION -- Limitations on Purchases of Shares." If an order is
rejected in part, the purchaser does not have the right to cancel the remainder
of the order. In the event of an oversubscription, shares will be allocated in
accordance with the Plan of Conversion. See "THE CONVERSION -- The Subscription,
Direct Community and Syndicated Community Offerings."
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
The Purchase Price in the Subscription Offering is a uniform price
established by the Board of Directors for all subscribers, including members of
the Holding Company's and the Association's Boards of Directors, their
management and tax-qualified employee plans. The number of shares to be offered
at the Purchase Price is based upon an independent appraisal of the aggregate
pro forma market value of the Holding Company and the Association, as converted.
The aggregate pro forma market value was estimated by RP Financial to range from
$56,950,000 to $77,050,000 as of February 21, 1997, or from 2,847,500 to
3,852,500 shares based on the Purchase Price. See "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued." The appraisal of the pro forma value
of the Holding Company and the Association, as converted, will be updated or
confirmed at the completion of the Offerings. The maximum of the Estimated
Valuation Range may be increased by up to 15% and the number of
(vi)
<PAGE>
shares of Common Stock to be issued in the Conversion may be increased to
4,430,375 shares due to material changes in the financial condition or results
of operations of the Association or changes in market conditions or general
financial, economic or regulatory conditions. No resolicitation of subscribers
will be made and subscribers will not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Common Stock are
less than the minimum or more than 15% above the maximum of the current
Estimated Valuation Range. THE APPRAISAL IS NOT INTENDED TO BE AND SHOULD NOT BE
CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING
COMMON STOCK IN THE OFFERINGS NOR CAN ASSURANCE BE GIVEN THAT PURCHASERS OF THE
COMMON STOCK IN THE OFFERINGS WILL BE ABLE TO SELL SUCH SHARES AFTER
CONSUMMATION OF THE CONVERSION AT A PRICE THAT IS EQUAL TO OR ABOVE THE PURCHASE
PRICE. Furthermore, the pro forma stockholders' equity is not intended to
represent the fair market value of the Common Stock and may be greater than
amounts that would be available for distribution to stockholders in the event of
liquidation.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock are estimated to
range from $55.7 million to $75.7 million, or to $87.2 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion. The Holding Company has received conditional
OTS approval to purchase all of the capital stock of the Association to be
issued in the Conversion in exchange for 50% of the net proceeds of the
Offerings. This will result in the Holding Company retaining approximately $27.9
million to $37.9 million of the net proceeds, or up to $43.6 million if the
Estimated Valuation Range is increased by 15%, and the Association receiving an
equal amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Association's capital and will support the expansion of the
Association's existing business activities. The Association will use the funds
contributed to it for general corporate purposes, including, initially, local
lending and investment in short-term U.S. Government and agency obligations. The
Association also intends to use a portion of the funds (up to approximately $1.5
million) to contribute to the ongoing construction of two branch offices and the
renovation of an existing branch office.
A portion of the net proceeds retained by the Holding Company will be
used for a loan by the Holding Company to the ESOP to enable it to purchase 8%
of the shares of Common Stock issued in the Conversion. Such loan would fund the
entire purchase price of the ESOP shares ($6,164,000 at the maximum of the
Estimated Valuation Range) and would be repaid principally from the
Association's contributions to the ESOP and from dividends payable on the Common
Stock held by the ESOP. The remaining proceeds retained by the Holding Company
initially will be invested primarily in short-term U.S. Government and agency
obligations. Such proceeds will be available for additional contributions to the
Association in the form of debt or equity, to support future growth and
diversification activities, as a source of dividends to the stockholders of the
Holding Company and for future repurchases of Common Stock (including possible
repurchases to fund the MRP or to provide shares to be issued upon exercise of
stock options) to the extent permitted under Delaware law and OTS regulations.
The Holding Company will consider exploring opportunities to use such funds to
expand operations through acquiring or establishing additional branch offices
and the acquisition of other financial institutions. Currently, there are no
specific plans, arrangements, agreements or understandings, written or oral,
regarding any such activities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market System under the symbol "FSPT." Trident Securities has
agreed to act as a market maker for the Holding Company's Common Stock following
consummation of the Conversion. No assurance can be given that an active and
liquid trading market for the Common Stock will develop. Further, no assurance
can be given that purchasers will be able to sell their shares at or above the
Purchase Price after the Conversion. See "RISK FACTORS -- Absence of Prior
Market for the Common Stock" and "MARKET FOR COMMON STOCK."
(vii)
<PAGE>
DIVIDEND POLICY
The Holding Company's Board of Directors anticipates declaring and
paying quarterly cash dividends on the Common Stock at an annual rate of 3%
($0.60 per share per year based on the Purchase Price). The first quarterly cash
dividend is expected to be declared and paid during the first full quarter
following the consummation of the Conversion. In addition, the Board of
Directors may determine to pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. Declarations and payments of any
dividends (regular and special) by the Board of Directors will depend upon a
number of factors, including the amount of the net proceeds retained by the
Holding Company, capital requirements, regulatory limitations, the Association's
and the Holding Company's financial condition and results of operations, tax
considerations and general economic conditions. In order to pay such cash
dividends, however, the Holding Company must have available cash either from the
net proceeds raised in the Offerings and retained by the Holding Company,
dividends received from the Association or earnings on Holding Company assets.
There are certain limitations on the payment of dividends from the Association
to the Holding Company. See "REGULATION -- Federal Regulation of Savings
Associations -- Limitations on Capital Distributions." No assurances can be
given that any dividends will be declared or, if declared, what the amount of
dividends will be or whether such dividends, if commenced, will continue. See
"DIVIDEND POLICY."
OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP
Officers and directors of the Association (15 persons) are expected to
subscribe for an aggregate of approximately 129,750 shares of Common Stock, or
4.6% and 3.4% of the shares based on the minimum and the maximum of the
Estimated Valuation Range, respectively. See "SHARES TO BE PURCHASED BY
MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS." In addition, purchases by the ESOP,
allocations under the MRP, and the exercise of stock options issued under the
Stock Option Plan, will increase the number of shares beneficially owned by
directors, officers and employees. Assuming (i) the receipt of stockholder
approval for the MRP and the Stock Option Plan, (ii) the open market purchase of
shares on behalf of the MRP, (iii) the purchase by the ESOP of 8% of the Common
Stock sold in the Offerings, and (iv) the exercise of stock options equal to 10%
of the number of shares of Common Stock issued in the Conversion, directors,
officers and employees of the Holding Company and the Association would have
voting control, on a fully diluted basis, of 24.14% and 23.06% of the Common
Stock, based on the issuance of the minimum and maximum of the Estimated
Valuation Range, respectively. See "RISK FACTORS -- Anti-takeover Considerations
- -- Voting Control by Insiders." The MRP and Stock Option Plan are subject to
approval by the stockholders of the Holding Company at a meeting to be held no
earlier than six months following consummation of the Conversion.
RISK FACTORS
See "RISK FACTORS" beginning on page 1 for a discussion of certain
risks related to the Offerings that should be considered by all prospective
investors.
(viii)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
THE FOLLOWING TABLES SET FORTH CERTAIN INFORMATION CONCERNING THE
CONSOLIDATED FINANCIAL POSITION AND RESULTS OF OPERATIONS OF THE ASSOCIATION AND
ITS SUBSIDIARIES AT THE DATES AND FOR THE PERIODS INDICATED. INFORMATION AT
DECEMBER 31, 1996 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 ARE
UNAUDITED, BUT, IN THE OPINION OF MANAGEMENT, REFLECT ALL ADJUSTMENTS (NONE OF
WHICH ARE OTHER THAN NORMAL RECURRING ENTRIES) NECESSARY FOR A FAIR
PRESENTATION. THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31,
1996 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS OF OPERATIONS THAT MAY BE
EXPECTED FOR THE ENTIRE FISCAL YEAR. THIS INFORMATION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION CONTAINED IN THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO PRESENTED ELSEWHERE IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
At December 31, At June 30,
---------------------------------------------------
1996 1996 1995 1994 1993 1992
------------ ---- ---- ---- ---- ----
(Dollars in thousands)
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C> <C> <C> <C> <C>
Total assets................................... $375,526 $356,966 $322,735 $309,879 $302,516 $283,332
Loans receivable, net.......................... 331,654 314,936 267,393 247,195 231,168 227,722
Loans held-for-sale............................ 1,444 1,911 15,324 16,892 23,837 20,394
Investment securities held-to-maturity......... -- -- 5,502 22,854 20,327 12,152
Investment securities available-for-sale....... 13,492 18,155 8,228 -- -- --
Mortgage-backed securities held-to-maturity.... 128 195 383 470 930 1,444
Cash, federal funds sold and overnight
interest-bearing deposits .................... 17,104 10,784 15,967 11,728 17,236 12,912
Deposit accounts............................... 323,951 305,831 275,915 270,182 267,461 253,616
Total equity, substantially restricted......... 44,833 44,154 40,660 36,455 32,088 26,689
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
----------------- ---------------------------------------
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
SELECTED OPERATING DATA: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income.................... $14,157 $13,037 $26,445 $23,835 $23,153 $24,167 $24,825
Interest expense..................... 7,568 7,332 14,669 11,302 10,387 11,623 14,816
-------- -------- ---------------- -------- -------- --------
Net interest income.................. 6,589 5,705 11,776 12,533 12,766 12,544 10,009
Provision for loan losses............ 675 4 419 9 -- 208 503
-------- -------- ------------------------- -------- --------
Net interest income
after provision for loan losses..... 5,914 5,701 11,357 12,524 12,766 12,336 9,506
-------- -------- ---------------- -------- -------- --------
Gains (losses) from sale of mortgage
loans and investments............... 21 -- -- (1,474) (335) 405 581
Other income......................... 681 599 1,319 1,808 419 1,160 1,318
Other expenses....................... 5,644 3,326 7,028 6,222 5,671 5,061 5,345
-------- -------- ---------------- -------- -------- --------
Income before income taxes........... 972 2,974 5,648 6,636 7,179 8,840 6,060
Provision for income taxes........... 365 1,115 2,111 2,495 2,707 3,446 1,963
-------- -------- ---------------- -------- -------- --------
Net income........................... $ 607 $ 1,859 $ 3,537 $ 4,141 $ 4,472 $ 5,394 $ 4,097
======= ======= ======= ======= ======= ======= =======
</TABLE>
(ix)
<PAGE>
<TABLE>
<CAPTION>
At December 31, At June 30,
-------------------------------------
1996 1996 1995 1994 1993 1992
------------------ ---- ---- ---- ---- ----
SELECTED OTHER DATA:
<S> <C> <C> <C> <C> <C> <C>
Number of:
Mortgage loans outstanding..... 4,684 4,425 4,319 4,340 4,332 4,454
Deposit accounts............... 37,739 35,687 30,258 27,267 26,454 25,907
Full-service offices........... 5 5 5 4 4 4
</TABLE>
<TABLE>
<CAPTION>
At or For Six
Months Ended At or For
December 31, Year Ended June 30,
--------------- --------------------------------------
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
SELECTED FINANCIAL RATIOS(1):
PERFORMANCE RATIOS:
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets(2) ........... 0.33% 1.10% 1.03% 1.32% 1.45% 1.83% 1.49%
Return on average equity(3)............ 2.68 8.86 8.23 10.74 12.88 18.17 16.73
Interest rate spread(4)................ 3.21 2.92 3.01 3.71 3.94 4.14 3.42
Net interest margin(5)................. 3.74 3.49 3.55 4.15 4.30 4.46 3.81
Average interest-earning assets
to average interest-bearing liabilities 1.12 1.13 1.12 1.12 1.10 1.08 1.07
Noninterest expense as a
percentage of average total assets.... 3.08 1.96 2.05 1.98 1.84 1.71 1.94
Efficiency ratio(6).................... 0.53 0.53 0.54 0.48 0.44 0.36 0.45
ASSET QUALITY RATIOS:
Nonperforming loans as a percentage
of loans receivable, net(7)........... 1.32 0.66 1.87 1.79 0.96 0.93 1.22
Nonperforming assets as a
percentage of total assets(8)......... 1.20 0.54 1.66 1.50 0.77 0.84 1.19
Allowance for losses as a percentage
of gross loans receivable............. 0.48 0.20 0.30 0.21 0.23 0.25 0.17
Allowance for losses as a
percentage of nonperforming loans..... 37.55 31.70 17.02 12.52 25.20 27.91 14.42
Net charge-offs as a percentage of
average outstanding loans............. 0.01 -- 0.01 -- -- -- 0.21
CAPITAL RATIOS:
Total equity to total assets........... 11.94 12.22 12.37 12.60 11.76 10.61 9.40
Average equity to average assets....... 12.37 12.38 12.47 12.28 11.24 10.04 8.91
</TABLE>
(1) Annualized, where appropriate, for the six months ended December 31,
1996 and 1995.
(2) Net income as a percentage of average total assets.
(3) Net income as a percentage of average total equity.
(4) Difference between weighted average yield on interest-earning assets
and weighted average cost of interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Other expenses (excluding the one-time SAIF assessment with respect to
the six months ended December 31, 1996) divided by the sum of net
interest income and other income.
(7) Nonperforming loans consist of loans accounted for on a nonaccrual
basis and accruing loans contractually past due 90 days or more.
(8) Nonperforming assets consist of nonperforming loans and real estate
acquired in settlement of loans, but exclude restructured loans. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities -- Nonperforming
Assets and Delinquencies."
(x)
<PAGE>
RECENT DEVELOPMENTS
THE FOLLOWING TABLES SET FORTH CERTAIN INFORMATION CONCERNING THE CONSOLIDATED
FINANCIAL POSITION AND RESULTS OF OPERATIONS OF THE ASSOCIATION AT THE DATES AND
FOR THE PERIODS INDICATED. INFORMATION AT MARCH 31, 1997 AND DECEMBER 31, 1996,
AND FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996 ARE
UNAUDITED, BUT, IN THE OPINION OF MANAGEMENT, CONTAIN ALL ADJUSTMENTS (NONE OF
WHICH WERE OTHER THAN NORMAL RECURRING ENTRIES) NECESSARY FOR A FAIR
PRESENTATION OF THE RESULTS OF SUCH PERIODS. THE SELECTED OPERATIONS DATA FOR
THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1997 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS OF OPERATIONS FOR THE ENTIRE FISCAL YEAR. THIS
INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO PRESENTED ELSEWHERE IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
At At At
March 31, December 31, June 30,
1997 1996 1996
------------ --------------- -------
(In Thousands)
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C> <C>
Total assets.................................. $388,311 $375,526 $356,966
Loans receivable, net ........................ 346,019 331,654 314,936
Loans held-for-sale........................... 877 1,444 1,911
Investment securities available-for-sale...... 13,521 13,492 18,155
Mortgage-backed securities held-to-maturity... 128 128 195
Cash, federal funds sold and
overnight interest-bearing deposits.......... 15,263 17,104 10,784
Deposit accounts.............................. 338,174 323,951 305,831
Total equity, substantially restricted........ 45,846 44,833 44,154
</TABLE>
Three Months Nine Months
Ended March 31, Ended March 31,
-------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands)
SELECTED OPERATING DATA:
Investment income...................... $7,292 $6,665 $21,449 $19,702
Interest expense....................... 3,938 3,685 11,506 11,017
------ ------ ------- -------
Net interest income.................... 3,354 2,980 9,943 8,685
Provision for loan losses.............. 75 14 750 18
------ ------ ------- -------
Net interest income after provision
for loan losses....................... 3,279 2,966 9,193 8,667
Gains from sale of mortgage
loans and investments................. -- -- 21 --
Other income........................... 389 346 1,070 945
Other expenses......................... 1,997 1,717 7,641 5,043
------ ------ ------ ------
Income before income taxes............. 1,671 1,595 2,643 4,569
Provision for income taxes............. 625 598 990 1,713
------- ------- ------- -------
Net income............................. $1,046 $ 997 $1,653 $2,856
====== ====== ====== ======
(xi)
<PAGE>
<TABLE>
<CAPTION>
At or For the At or For the
Three Months Nine Months
Ended March 31, Ended March 31,
----------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
SELECTED FINANCIAL RATIOS(1):
PERFORMANCE RATIOS:
<S> <C> <C> <C> <C>
Return on average assets(2)...................... 1.10% 1.15% 0.59% 1.12%
Return on average equity(3)...................... 9.13 9.16 4.85 8.97
Interest rate spread(4).......................... 3.19 3.02 3.20 2.95
Net interest margin(5)........................... 3.68 3.57 3.72 3.52
Average interest-earning assets to average
interest-bearing liabilities.................... 1.11 1.12 1.12 1.13
Noninterest expense as a percentage
of average total assets......................... 2.10 1.98 2.75 1.97
Efficiency ratio(6).............................. 0.53 0.52 0.53 0.52
ASSET QUALITY RATIOS:
Nonperforming loans as a percentage
of loans receivable, net(7)..................... 0.81 1.74 0.81 1.74
Nonperforming assets as a
percentage of total assets(8)................... 0.75 1.43 0.75 1.43
Allowance for losses as a percentage
of gross loans receivable....................... 0.50 0.21 0.50 0.21
Allowance for losses as a percentage
of nonperforming loans.......................... 61.69 12.01 61.69 12.01
Net charge-offs as a percentage of
average outstanding loans....................... -- -- 0.01 0.01
CAPITAL RATIOS:
Total equity to total assets..................... 11.81 12.43 11.81 12.43
Average equity to average assets................. 12.06 12.58 12.27 12.45
</TABLE>
(1) Annualized, where appropriate.
(2) Net income as a percentage of average total assets.
(3) Net income as a percentage of average total equity.
(4) Difference between weighted average yield on interest-earning assets
and weighted average cost of interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Other expenses (excluding the one-time SAIF assessment with respect to
the nine months ended March 31, 1997) divided by the sum of net
interest income and other income.
(7) Nonperforming loans consist of loans accounted for on a nonaccrual
basis and accruing loans contractually past due 90 days or more.
(8) Nonperforming assets consist of nonperforming loans and real estate
acquired in settlement of loans, but excludes restructured loans. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities -- Nonperforming
Assets and Delinquencies."
(xii)
<PAGE>
REGULATORY CAPITAL
The table below sets forth the Association's capital position relative to its
OTS capital requirements at the date indicated. The definitions of the terms
used in the table are those provided in the capital regulations issued by the
OTS. See "REGULATION -- Federal Regulation of Savings Associations -- Capital
Requirements."
At March 31, 1997
----------------------------------
Percentage of Adjusted
Amount Total Assets(1)
------ ----------------
(In Thousands)
Tangible capital...................... $45,890 11.8%
Tangible capital requirement.......... 5,826 1.5
------ ----
Excess................................ $40,064 10.3%
====== ====
Core capital.......................... $45,890 11.8%
Core capital requirement(2)........... 11,652 3.0
------ ----
Excess................................ $34,238 8.8%
====== ====
Risk-based capital(3)................. $47,559 20.3%
Risk-based capital requirement........ 18,734 8.0
------ ----
Excess................................ $28,825 12.3%
====== ====
- -----------------------
(1) Based on adjusted total assets of $388.4 million for purposes of the
tangible and core capital requirements, and risk-weighted assets of
$234.1 million for purposes of the risk-based capital requirement.
(2) The current OTS core capital requirement for savings associations is 3%
of total adjusted assets. The OTS has proposed core capital
requirements that would require a core capital ratio of 3% of total
adjusted assets for thrifts that receive the highest supervisory rating
for safety and soundness and a core capital ratio of 4% to 5% for all
other thrifts.
(3) Percentage represents total core and supplementary capital divided by
total risk-weighted assets.
NON-PERFORMING ASSETS AND DELINQUENCIES
At March 31, 1997, the Association had $1.5 million of loans accounted
for on a nonaccrual basis ($721,000 in one- to- four family mortgage loans,
$684,000 in construction loans, and $121,000 in consumer and other loans)
compared to $1.5 million at December 31, 1996. Classified assets at March 31,
1997 totalled $5.3 million ($13,000 classified as loss, $43,000 classified as
doubtful, $3.2 million classified as substandard and $2.1 million designated as
"special mention") compared to $4.9 million at December 31, 1996. At March 31,
1997, the Association had $1.3 million of accruing loans which were
contractually past due 90 days or more, $918,000 of restructured loans and
$106,000 of real estate acquired in settlement of loans compared to $2.9
million, $1.0 million and $102,000, respectively, at December 31, 1996.
The allowance for loan losses was $1.7 million at March 31, 1997. There
were no charge-offs for the three months ended March 31, 1997 and $25,000 of
charge-offs for the nine months ended March 31, 1997, compared to $14,000 and
$20,000 for the three months and nine months ended March 31, 1996, respectively.
There were no recoveries for either the three months or nine months ended March
31, 1997 and for the three months ended March 31, 1996. Recoveries for the nine
months ended March 31, 1996 were $2,000.
(xiii)
<PAGE>
The following table sets forth the breakdown of the allowance for loan losses
by category at March 31, 1997.
Percent of
Loans in Each
Category to
Amount Total Loans
(In thousands)
-------------- -------------
Mortgage loans:
Residential........................ $1,395 85.8%
Nonresidential..................... 181 2.2
Consumer and other loans............ 149 12.0
----- -----
Total allowance for loan losses... $1,725 100.0%
===== =====
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1997 AND DECEMBER 31, 1996
Total assets were $388.3 million at March 31, 1997 and $375.5 million
at December 31, 1996. This increase resulted primarily from growth in the loan
portfolio, which was funded primarily by deposit growth. Loans receivable, net,
increased to $346.0 million at March 31, 1997 from $331.7 million at December
31, 1996. Deposit accounts increased to $338.2 million at March 31, 1997 from
$324.0 million at December 31, 1996.
Cash and cash equivalents decreased to $15.3 million at March 31, 1997
from $17.1 million at December 31, 1996. Loans held for sale also decreased, to
$877,000 from $1.4 million at December 31, 1996. The proceeds from the sale of
loans and such cash and cash equivalents were used primarily to fund
construction at the new Inman, South Carolina, branch office (see "BUSINESS OF
THE ASSOCIATION -- Properties") and reduce various other liabilities.
Total equity increased to $45.8 million at March 31, 1997 from $44.8
million at December 31, 1996 primarily as a result of retained earnings.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
1996
NET INCOME. Net income increased from $997,000 for the three months
ended March 31, 1996 to $1.0 million for the three months ended March 31, 1997
primarily as a result of increased net interest income offset by increased
provision for loan losses and increased other expenses.
NET INTEREST INCOME. Net interest income increased 12.6% from $3.0
million for the three months ended March 31, 1996 to $3.4 million for the three
months ended March 31, 1997. Investment income increased 9.4% from $6.7 million
for the three months ended March 31, 1996 to $7.3 million for the three months
ended March 31, 1997 as a result of an increase in the average balance of
interest-earning assets from $333.5 million to $364.9 million. The average yield
on interest earning-assets was 7.99% for the three months ended March 31, 1997
and 1996 as a result of stable market interest rates. Interest expense increased
6.9% from $3.7 million for the three months ended March 31, 1996 to $3.9 million
for the three months ended March 31, 1997 as a result of an increase in the
average balance of deposits from $296.7 million to $328.4 million. The increase
in the average balance of deposits more than offset a decrease in the average
cost of deposits from 4.97% for the three months ended March 31, 1996 to 4.80%
for the three months ended March 31, 1997. The decrease in the average cost of
deposits resulted from a combination of a change in the mix of deposits from
higher cost certificates of deposit to lower cost negotiable order of withdrawal
("NOW") and passbook accounts as a result of promotions of NOW and passbook
accounts. The weighted average cost of certificates of deposit also decreased as
a result of the Association's focus on the NOW and passbook account promotions
rather than certificate of deposit promotions. Interest rate spread
(xiv)
<PAGE>
increased to 3.19% for the three months ended March 31, 1997 from 3.02% for the
three months ended March 31, 1996.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered by
management as adequate to provide for estimated loan losses based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans and economic conditions. Management also
considers the level of problem assets that the Association classifies according
to OTS regulations. The Association gives greater weight to the level of
classified assets than to the level of nonperforming assets (nonaccrual loans,
accruing loans contractually past due 90 days or more, and real estate acquired
in settlement of loans) because classified assets include not only nonperforming
assets but also performing assets that otherwise exhibit, in management's
judgment, potential credit weaknesses. See "BUSINESS OF THE ASSOCIATION --
Lending Activities -- Nonperforming Assets and Delinquencies" and "-- Lending
Activities -- Asset Classification."
The provision for loan losses was $75,000 for the three months ended
March 31, 1997 compared to $14,000 for the three months ended March 31, 1996.
Management deemed the increase in the provision for loan losses necessary in
light of the increase in the relative level of estimated losses caused by the
growth of the loan portfolio and a continuing increase in classified assets
between December 31, 1996 and March 31, 1997. The increase in classified assets
resulted primarily from an increase in construction loan delinquencies, which
management attributes to slower sales of homes of the type sold by the
Association's construction loan borrowers in the Association's primary market
area. See "RISK FACTORS -- Certain Lending Risks." Although no assurances can be
given, management expects the trend of increased classified assets to continue
moderately based upon its expectation for continued loan growth, particularly in
the areas of construction, commercial real estate and consumer lending.
Management deemed the allowance for loan losses adequate at March 31, 1997.
OTHER INCOME. Other income increased from $346,000 for the three months
ended March 31, 1996 to $389,000 for the three months ended March 31, 1997,
primarily as a result of an increase in service charges and fees. Service
charges and fees increased from $243,000 for the three months ended March 31,
1996 to $288,000 for the same period in 1997 primarily as a result of increased
income associated with the origination and sale of FHA and VA mortgage loans and
increased deposit account fees, particularly on the increased number of NOW
accounts. Other income, net, decreased from $103,000 for the three months ended
March 31, 1996 to $101,000 for the three months ended March 31, 1997, which was
attributable partially to a $13,000 loss representing the Association's share of
losses incurred by the mortgage banking company in which the Association's
service corporation subsidiary has an equity investment. See "BUSINESS OF THE
ASSOCIATION -- Subsidiary Activities" and Note 1 to the Notes to Consolidated
Financial Statements.
OTHER EXPENSES. Other expenses were $2.0 million for the three months
ended March 31, 1997 compared to $1.7 million for the same period in 1996. This
increase resulted primarily from employee compensation and benefits, which
increased from $800,000 for the three months ended March 31, 1996 to $1.0
million for the same period in 1997 as a result of the hiring of additional
operations personnel to service the increased number of NOW accounts and the
hiring of the Association's current Chief Financial Officer in June 1996. The
increases in other categories of other operating expenses generally are
attributable to the growth of the Association and to inflation. The Association
anticipates that other operating expenses will increase in subsequent periods
following the consummation of the Conversion as a result of increased costs
associated with operating as a public company and increased compensation expense
as a result of the adoption of the ESOP and, if approved by the Holding
Company's stockholders, the MRP. See "RISK FACTORS -- New Expenses Associated
With ESOP and MRP." The opening of the new branch offices also will contribute
to increased operating expenses in future periods. See "RISK FACTORS -- Return
on Equity After Conversion" and "BUSINESS OF THE ASSOCIATION -- Properties."
INCOME TAXES. The provision for income taxes was $625,000 for the three
months ended March 31, 1997 compared to $598,000 for the three months ended
March 31, 1996 as a result of higher income before taxes.
(xv)
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COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND
1996
NET INCOME. Net income decreased 42.1% from $2.9 million for the nine
months ended March 31, 1996 to $1.7 million for the nine months ended March 31,
1997, primarily as a result of increases in the provision for loan losses and in
other expenses. The increase in other expenses was primarily the result of the
legislatively-mandated, one-time assessment levied by the FDIC on all
SAIF-insured institutions to recapitalize the SAIF. Without this assessment,
which amounted to approximately $1.1 million after tax, net income would have
been $2.8 million for the nine months ended March 31, 1997.
NET INTEREST INCOME. Net interest income increased 14.5% from $8.7
million for the nine months ended March 31, 1996 to $9.9 million for the nine
months ended March 31, 1997. Investment income increased 8.9% from $19.7 million
for the nine months ended March 31, 1996 to $21.4 million for the nine months
ended March 31, 1997 as a result of an increase in the average balance of
interest-earning assets from $329.0 million to $356.5 million and in the average
yield on interest earning-assets from 7.98% to 8.02%. While market interest
rates were slightly lower during the nine months ended March 31, 1997, the
weighted average yield on interest-earning assets remained relatively stable
because of the Association's emphasis on higher yielding construction loans,
commercial real estate loans and consumer and other loans, as well as the
stabilizing effect that fixed-rate loans in the portfolio have on the weighted
average yield. Interest expense increased 4.4% from $11.0 million for the nine
months ended March 31, 1996 to $11.5 million for the nine months ended March 31,
1997 as a result of an increase in the average balance of deposits from $292.1
million to $318.5 million. The increase in the average balance of deposits more
than offset a decrease in the average cost of deposits from 5.03% for the nine
months ended March 31, 1996 to 4.82% for the nine months ended March 31, 1997.
The decrease in the average cost of deposits resulted from a combination of a
change in the mix of deposits from higher cost certificates of deposit to lower
cost NOW and passbook accounts as a result of promotions of NOW and passbook
accounts. The weighted average cost of certificates of deposit also decreased as
a result of the Association's focus on the NOW and passbook account promotions.
Interest rate spread increased to 3.20% for the nine months ended March 31, 1997
from 2.95% for the nine months ended March 31, 1996.
PROVISION FOR LOAN LOSSES. The provision for loan losses increased from
$18,000 for the nine months ended March 31, 1996 to $750,000 for the nine months
ended March 31, 1997. Management deemed the increase in the provision for loan
losses necessary in light of the increase in the relative level of estimated
losses caused by the growth of the loan portfolio and a continuing increase in
classified assets between June 30, 1996 and March 31, 1997. The increase in
classified assets resulted primarily from an increase in construction loan
delinquencies, which management attributes to slower sales of homes of the type
sold by the Association's construction loan borrowers in the Association's
primary market area. See "RISK FACTORS -- Certain Lending Risks." Although no
assurances can be given, management expects the trend of increased classified
assets to continue moderately based upon its expectation for continued loan
growth, particularly in the areas of construction, commercial real estate and
consumer lending. Management deemed the allowance for loan losses adequate at
March 31, 1997.
OTHER INCOME. Other income increased from $945,000 for the nine months
ended March 31, 1996 to $1.1 million for the nine months ended March 31, 1997,
primarily as a result of the increase in service charges and fees offset by a
decrease in other income. Service charges and fees increased from $656,000 for
the nine months ended March 31, 1996 to $884,000 for the same period in 1997
primarily as a result of increased income associated with the origination and
sale of FHA and VA loans and increased deposit account fees, particularly on the
increased number of NOW accounts. Other income, net, decreased from $289,000 for
the nine months ended March 31, 1996 to $186,000 for the nine months ended March
31, 1997 primarily as a result of a $113,000 loss representing the Association's
share of the losses incurred by the mortgage banking company in which the
Association's service corporation subsidiary has an equity investment. See
"BUSINESS OF THE ASSOCIATION -- Subsidiary Activities" and Note 1 to Notes to
Consolidated Financial Statements.
OTHER EXPENSES. Other expenses increased from $5.0 million for the nine
months ended March 31, 1996 to $7.6 million for the nine months ended March 31,
1997. This increase resulted primarily from the FDIC special
(xvi)
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assessment on all SAIF-insured institutions to recapitalize the SAIF. The
Association's assessment amounted to $1.8 million and was accrued during the
quarter ended September 30, 1996. Prior to the SAIF recapitalization, the
Association's total annual deposit insurance premiums amounted to 0.23% of
assessable deposits. Effective January 1, 1997, the rate decreased to 0.065% of
assessable deposits. See "REGULATION -- Federal Regulation of Savings
Associations -- Federal Deposit Insurance Corporation" and Note 10 to Notes to
Consolidated Financial Statements. Additionally, employee compensation and
benefits increased from $2.3 million for the nine months ended March 31, 1996 to
$2.7 million for the same period in 1997 as a result of the hiring of additional
operations personnel to service the increased number of NOW accounts and the
hiring of the Association's current Chief Financial Officer in June 1996. The
increases in other categories of other operating expenses generally are
attributable to the growth of the Association and to inflation. The Association
anticipates that other operating expenses will increase in subsequent periods
following the consummation of the Conversion as a result of increased costs
associated with operating as a public company and increased compensation expense
as a result of the adoption of the ESOP and, if approved by the Holding
Company's stockholders, the MRP. The opening of the new branch offices also will
contribute to increased operating expenses in future periods. See "RISK FACTORS
- -- Return on Equity After Conversion," "-- New Expenses Associated with the ESOP
and MRP" and "BUSINESS OF THE ASSOCIATION -- Properties."
INCOME TAXES. The provision for income taxes was $1.7 million for the
nine months ended March 31, 1996 compared to $990,000 for the nine months ended
March 31, 1997 as a result of lower income before taxes.
(xvii)
<PAGE>
RISK FACTORS
BEFORE INVESTING IN SHARES OF THE COMMON STOCK OFFERED HEREBY,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS PRESENTED BELOW, IN
ADDITION TO MATTERS DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
INTEREST RATE RISK
GENERAL. Like all financial institutions, the Association's financial
condition and operations are influenced significantly by general economic
conditions, the related monetary and fiscal policies of the federal government
and government regulations. Deposit flows and the cost of funds are influenced
by interest rates of competing investments and general market interest rates.
Lending activities are affected by the demand for mortgage financing and for
consumer and other types of loans, which in turn is affected by the interest
rates at which such financing may be offered and by other factors affecting the
supply of housing and the availability of funds. The Association's
profitability, like that of most financial institutions, depends largely on its
net interest income, which is the difference between the interest income
received from its interest-earning assets and the interest expense incurred in
connection with its interest-bearing liabilities. To better control the impact
of changes in interest rates, the Association has sought to improve the match
between asset and liability maturities or repricing periods and rates by
emphasizing the origination and purchase of adjustable-rate mortgage ("ARM")
loans and shorter term construction, commercial real estate, and consumer loans.
POTENTIAL ADVERSE IMPACT ON RESULTS OF OPERATIONS. The Association's
results of operations would be adversely affected by a material prolonged
increase in market interest rates. At December 31, 1996, assuming, for example,
an instantaneous 200 basis point increase in market interest rates, the
Association's net portfolio value ("NPV") (the present value of expected cash
flows from assets, liabilities and off-balance sheet contracts) would decrease
by approximately $12.9 million, or 22.5%. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and Liability
Management."
POTENTIAL ADVERSE IMPACT ON FINANCIAL CONDITION. Changes in the level
of interest rates also affect the volume of loans originated or purchased by the
Association and, thus, the amount of loan and commitment fees, as well as the
market value of the Association's investment securities and other
interest-earning assets. Changes in interest rates also can affect the average
life of loans. Decreases in interest rates may result in increased prepayments
of loans, as borrowers refinance to reduce borrowing costs. Under these
circumstances, the Association is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities. Moreover, volatility in
interest rates also can result in disintermediation, or 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 insurance premiums and reserve requirements, generally pay higher
rates of return than savings institutions.
At December 31, 1996, out of total gross loans of $346.3 million in the
Association's portfolio, $96.3 million were ARM loans, the majority of which
reprice every year. Furthermore, the Association's ARM loans contain periodic
and lifetime interest rate adjustment limits which, in a rising interest rate
environment, may prevent such loans from repricing to market interest rates.
While management anticipates that ARM loans will better offset the adverse
effects of an increase in interest rates as compared to fixed-rate mortgages,
the increased mortgage payments required of ARM borrowers in a rising interest
rate environment could potentially cause an increase in delinquencies and
defaults. The Association has not historically had an increase in such
delinquencies and defaults on ARM loans, but no assurance can be given that such
delinquencies or defaults would not occur in the future. The marketability of
the underlying property also may be adversely affected in a high interest rate
environment. Moreover, the Association's ability to originate or purchase ARM
loans may be affected by changes in the level of interest rates and by market
acceptance of the terms of such loans. In a relatively low interest rate
environment, as currently exists, borrowers generally tend to favor fixed-rate
loans over ARM loans to hedge against future increases in interest rates.
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CERTAIN LENDING RISKS
While the Association's loan portfolio at December 31, 1996 consisted
primarily of one- to- four family mortgage loans, the portfolio also included
construction loans (both custom and speculative), consumer loans and, to a
lesser extent, commercial real estate loans, land loans for the purpose of
developing residential sub-divisions and commercial business loans. At December
31, 1996, construction loans, consumer loans (including commercial business
loans), commercial real estate loans and land loans totalled $31.9 million,
$39.8 million, $4.6 million and $2.4 million, or 9.2%, 11.5%, 1.3%and 0.7%, of
total loans, respectively. These forms of lending are generally viewed to
involve greater risk of loss than one- to- four family mortgage lending. This
risk is exacerbated in the case of construction loans, land loans and commercial
real estate loans because they generally have higher individual loan balances
than one- to- four family mortgage loans. Subject to market conditions, the
Association intends to continue originating these types of loans and, with
respect to consumer lending, continue to actively seek to expand it through
advertising campaigns and other promotions. A significant increase in the volume
of such originations would be a material factor in management's ongoing
evaluation of the adequacy of the Association's allowance for loan losses and
may, in management's judgment in future periods, warrant additional provisions
for loan losses, which could have a material adverse effect on net income. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities."
Construction loan delinquencies, particularly speculative loan
delinquencies, have increased in recent periods. At December 31, 1996,
construction loans accounted for on a nonaccrual basis totaled $847,000, all of
which were speculative loans, and accruing construction loans contractually past
due 90 days or more totalled $2.9 million, all of which were speculative loans.
The Association attributes this increase principally to slower home sales in
certain price ranges of homes as national home builders have become increasingly
active in the Association's primary market area. In addition, competition from
national home builders may have a further adverse impact on local home builders
by, among other things, lengthening the marketing for completed homes in certain
price ranges and in certain segments of the Association's primary market area.
Consequently, the risk of materially increased delinquencies and, although not
expected, the risk of material loss exist. The Association, however, has
implemented procedures to mitigate these risks. See "BUSINESS OF THE ASSOCIATION
- -- Lending Activities -- Construction Lending" and " -- Nonperforming Assets and
Delinquencies."
COMPETITION
The Association has faced, and will continue to face, intense
competition both in making loans and attracting deposits. The Association's
primary market area of Spartanburg County has a high density of financial
institutions, many of which are branches of large Southeastern bank holding
companies which have greater financial resources than the Association and all of
which compete with the Association in varying degrees. Competition for loans is
principally comes from commercial banks, thrift institutions, credit unions,
mortgage banking companies and insurance companies. Historically, commercial
banks, thrift institutions and credit unions have been the Association's most
direct competition for deposits. The Association also competes with short-term
money market funds and with other financial institutions, such as brokerage
firms and insurance companies, for deposits. In competing for loans, the
Association may be forced to offer lower loan interest rates. Conversely, in
competing for deposits, the Association may be forced to offer higher deposit
interest rates. Either case or both cases could adversely effect net interest
income. See "BUSINESS OF THE ASSOCIATION -- Competition."
CONCENTRATION OF CREDIT RISK
The Association has no significant concentration of credit risk other
than that a substantial portion of its loan portfolio is secured by real estate,
either as primary or secondary collateral, located in Spartanburg County. This
concentration of credit risk could have a material adverse effect on the
Association's financial condition and results of operations to the extent there
is a material deterioration in that county's economy and real estate values. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities."
2
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RETURN ON EQUITY AFTER CONVERSION
Return on equity (net income for a given period divided by average
equity during that period) is a ratio used by many investors to compare the
performance of a particular financial institution to its peers. The
Association's return on equity for the year ended June 30, 1996 was, and the
Holding Company's post-Conversion return on equity will be, less than the
average return on equity for publicly traded thrift institutions and their
holding companies. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" for
numerical information regarding the Association's historical return on equity
and "CAPITALIZATION" for a discussion of the Holding Company's estimated pro
forma consolidated capitalization as a result of the Conversion. In order for
the Company to achieve a return on equity comparable to the historical levels of
the Association, the Company would have to either increase net income or reduce
stockholders' equity, or both, commensurate with the increase in equity
resulting from the Conversion. Reductions in equity could be achieved by, among
other things, the payment of regular or special cash dividends (although no
assurances can be given as to their payment or, if paid, their amount and
frequency), the repurchase of shares of Common Stock subject to applicable
regulatory restrictions, or the acquisition of branch offices, other financial
institutions or related businesses (neither the Holding Company nor the
Association has any present plans, arrangements, or understandings, written or
oral, regarding any repurchase or acquisitions). See "DIVIDEND POLICY" and "USE
OF PROCEEDS." Achievement of increased net income levels will depend on several
important factors outside management's control, such as general economic
conditions, including the level of market interest rates, competition and
related factors, among others. In addition, the expenses associated with the
ESOP and the MRP (see "-- New Expenses Associated with ESOP and MRP"), along
with other post-Conversion expenses, as well as operating expenses associated
with the new branch offices, are expected to contribute initially to reduced
earnings levels. Subject to market conditions, the Association intends to
initially deploy the net proceeds of the Offerings to support its core lending
activities to increase earnings per share and book value per share, without
assuming undue risk, with the goal of achieving a return on equity comparable to
the average for publicly traded thrift institutions and their holding companies.
This goal will likely take a number of years to achieve and no assurances can be
given that this goal can be attained. Consequently, for the foreseeable future,
investors should not expect a return on equity which will meet or exceed the
average return on equity for publicly traded thrift institutions, many of which
are not newly converted institutions and have had time to deploy their
conversion capital.
NEW EXPENSES ASSOCIATED WITH ESOP AND MRP
The Association will recognize additional material employee
compensation and benefit expenses assuming the ESOP and the MRP are implemented.
The actual aggregate amount of these new expenses cannot be currently predicted
because applicable accounting practices require that they be based on the fair
market value of the shares of Common Stock when the expenses are recognized,
which would occur when shares are committed to be released in the case of the
ESOP and when awards are made to recipients in the case of the MRP. These
expenses have been reflected in the pro forma financial information under "PRO
FORMA DATA" assuming the Purchase Price ($20.00 per share) as fair market value.
Actual expenses, however, will be based on the fair market value of the Common
Stock at the time of recognition, which may be higher or lower than the Purchase
Price. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Accounting for Employee Stock Ownership Plans," "--
Accounting for Stock-Based Compensation," "MANAGEMENT OF THE ASSOCIATION --
Benefits -- Employee Stock Ownership Plan" and "-- Benefits -- Management
Recognition Plan."
ANTI-TAKEOVER CONSIDERATIONS
PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE
AND FEDERAL LAW. Certain provisions included in the Holding Company's
Certificate of Incorporation and in the Delaware General Corporation Law
("DGCL") might discourage potential proxy contests and other potential takeover
attempts, particularly those that have not been negotiated with the Board of
Directors. As a result, these provisions might preclude takeover attempts that
certain stockholders may deem to be in their best interest and might tend to
perpetuate existing management. These provisions include, among other things, a
provision limiting voting rights of beneficial owners
3
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of more than 10% of the Common Stock and supermajority voting requirements for
certain business combinations. In addition, the Certificate of Incorporation
provides for the election of directors to staggered terms of three years,
eliminates cumulative voting for directors, and permits the removal of directors
without cause only upon the vote of holders of 80% of the outstanding voting
shares. Certain provisions of the Certificate of Incorporation of the Holding
Company cannot be amended by stockholders unless an 80% stockholder vote is
obtained. The Certificate of Incorporation of the Holding Company also contains
provisions regarding the timing and content of stockholder proposals and
nominations and limiting the calling of special meetings. The existence of these
anti-takeover provisions could result in the Holding Company being less
attractive to a potential acquiror and in stockholders receiving less for their
shares than otherwise might be available in the event of a takeover attempt.
Furthermore, federal regulations prohibit for three years after consummation of
the Conversion the ownership of more than 10% of the Association or the Holding
Company without prior OTS approval. Federal law also requires OTS approval prior
to the acquisition of "control" (as defined in OTS regulations) of an insured
institution. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
VOTING CONTROL BY INSIDERS. Directors and officers of the Association
and the Holding Company (and their associates) expect to purchase 129,750 shares
of Common Stock, or 4.6% and 3.4% of the shares issued in the Offerings at the
minimum and the maximum of the Estimated Valuation Range, respectively.
Directors and officers are also expected to control indirectly the voting of
approximately 8% of the shares of Common Stock issued in the Conversion through
the ESOP (assuming shares have been allocated under the ESOP). Under the terms
of the ESOP, the unallocated shares will be voted by the ESOP trustees in the
same proportion as the votes cast by participants with respect to the allocated
shares. Three current non-employee directors of the Holding Company and the
Association will serve as the ESOP trustees.
At a meeting of stockholders to be held no earlier than six months
following the consummation of the Conversion, the Holding Company expects to
seek approval of the Holding Company's MRP, which is a non-tax- qualified
restricted stock plan for the benefit of key employees and directors of the
Holding Company and the Association. Assuming the receipt of stockholder
approval, the Holding Company expects to acquire common stock of the Holding
Company on behalf of the MRP in an amount equal to 4% of the Common Stock issued
in the Conversion, or 113,900 and 154,100 shares at the minimum and the maximum
of the Estimated Valuation Range, respectively. These shares will be acquired
either through open market purchases through a trust established in conjunction
with the MRP or from authorized but unissued shares of Common Stock. Under the
terms of the MRP, the MRP committee or the MRP trustees, will have the power to
vote unallocated and unvested shares. A committee of the Board of Directors of
the Holding Company will administer the MRP, the members of which would also
serve as trustees of the MRP trust, if formed. In addition, the Holding Company
intends to reserve for future issuance pursuant to the Stock Option Plan a
number of authorized shares of Common Stock equal to 10% of the Common Stock
issued in the Conversion (284,750 and 385,250 shares at the minimum and the
maximum of the Estimated Valuation Range, respectively). The Holding Company
also intends to seek approval of the Stock Option Plan at a meeting of
stockholders to be held no earlier than six months following the consummation of
the Conversion.
Assuming (i) the receipt of stockholder approval for the MRP and the
Stock Option Plan, (ii) the open market purchase of shares on behalf of the MRP,
(iii) the purchase by the ESOP of 8% of the Common Stock sold in the Offerings,
and (iv) the exercise of stock options equal to 10% of the number of shares of
Common Stock issued in the Conversion, directors, officers and employees of the
Holding Company and the Association would have voting control, on a fully
diluted basis, of an additional 24.14% and 23.06% of the Common Stock, based on
the issuance of the minimum and maximum of the Estimated Valuation Range,
respectively. Management's potential voting control alone, as well as together
with additional stockholder support, might preclude or make more difficult
takeover attempts that certain stockholders deem to be in their best interest
and might tend to perpetuate existing management.
PROVISIONS OF EMPLOYMENT AND SEVERANCE AGREEMENTS. The employment and
severance agreements with Mr. Painter and other senior officers of the
Association provide for a cash severance benefit in the event of a change in
control of the Holding Company or the Association, which would include the value
of
4
<PAGE>
the continuation of employee welfare benefits for a three-year period following
the change in control as required by the terms of the agreements. These
provisions may have the effect of increasing the cost of acquiring the Holding
Company, thereby discouraging future attempts to take over the Holding Company
or the Association.
See "MANAGEMENT OF THE ASSOCIATION -- Benefits," "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE
HOLDING COMPANY."
POSSIBLE DILUTIVE EFFECT OF BENEFIT PROGRAMS
If approved by the Holding Company's stockholders after the
consummation of the Conversion, the MRP intends to acquire an amount of Common
Stock of the Holding Company equal to 4% of the shares issued in the Conversion.
Such shares of Common Stock of the Holding Company may be acquired by the
Holding Company in the open market or from authorized but unissued shares of
Common Stock of the Holding Company. In the event that the MRP acquires
authorized but unissued shares of Common Stock from the Holding Company, the
voting interests of existing stockholders will be diluted and net income per
share and stockholders' equity per share will be decreased. See "PRO FORMA DATA"
and "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Management Recognition Plan."
If approved by the Holding Company's stockholders after the
consummation of the Conversion, the Stock Option Plan will provide for options
for up to a number of shares of Common Stock of the Holding Company equal to 10%
of the shares issued in the Conversion. Such shares may be authorized but
unissued shares of Common Stock of the Holding Company and, upon exercise of the
options, will result in the dilution of the voting interests of existing
stockholders and may decrease net income per share and stockholders' equity per
share. See "MANAGEMENT OF THE ASSOCIATION -- Benefits -- 1997 Stock Option
Plan."
If the ESOP is not able to purchase 8% of the shares of Common Stock
issued in the Offerings, the ESOP may purchase newly issued shares from the
Holding Company. In such event, the voting interests of existing stockholders
will be diluted and net income per share and stockholders' equity per share will
be decreased. See "MANAGEMENT OF THE ASSOCIATION -- Benefits -- Employee Stock
Ownership Plan."
ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK
The Holding Company has never issued capital stock and, consequently,
there is no existing market for the Common Stock. Although the Holding Company
has received conditional approval to list the Common Stock on the Nasdaq
National Market under the symbol "FSPT," there can be no assurance that an
active and liquid trading market for the Common Stock will develop, or once
developed, will continue. Furthermore, there can be no assurance that purchasers
will be able to sell their shares at or above the Purchase Price. See "MARKET
FOR COMMON STOCK."
POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED
The Estimated Valuation Range may be increased up to 15% to reflect
material changes in the financial condition or results of operations of the
Association or changes in market conditions or general financial, economic or
regulatory conditions following the commencement of the Offerings. If the
Estimated Valuation Range is increased, it is expected that the Holding Company
would increase the Estimated Price Range so that up to 4,430,375 shares of
Common Stock at the Purchase Price would be issued for an aggregate price of up
to $88,607,500. This increase in the number of shares would decrease a
subscriber's pro forma net earnings per share and stockholders' equity per
share, increase the Holding Company's pro forma consolidated stockholders'
equity and net earnings, and increase the Purchase Price as a percentage of pro
forma stockholders' equity per share and net earnings per share. See "PRO FORMA
DATA."
5
<PAGE>
POTENTIAL DELAY IN CONSUMMATING THE CONVERSION
Once tendered, subscription orders cannot be revoked during the
Offerings without the consent of the Holding Company and the Association, unless
the Conversion is terminated or there is a resolicitation offering. If the
Conversion is not completed by ___________, 1997 as a result of changes in
market conditions or general financial, economic or regulatory changes that lead
to a material revision in the Estimated Valuation Range, among other things, and
the OTS consents to a extension of time to complete the Conversion, there would
be a resolicitation offering, which could last for as long as ___ days. In the
resolicitation offering, all subscribers would be mailed a supplement to this
Prospectus and given the opportunity to confirm, modify or cancel their
subscriptions. Failure to affirmatively confirm or modify would be deemed a
cancellation and all subscription funds, together with accrued interest, would
be returned to the subscriber, or if the subscriber authorized payment by
withdrawal of funds on deposit at the Association, that authorization would
terminate. If a subscriber affirmatively confirms his subscription order during
the resolicitation offering, the Holding Company and the Association would
continue to hold all subscription orders and all subscription funds until the
expiration of the resolicitation offering. All subscriptions held by the Holding
Company and the Association when the resolicitation offering expires would be
irrevocable without the consent of the Holding Company and the Association until
the completion or termination of the Conversion.
RECENT LEGISLATION AND THE FUTURE OF THE THRIFT INDUSTRY
The Association is, and the Holding Company upon consummation of the
Conversion will be, subject to extensive government regulation designed
primarily to protect the federal deposit insurance fund and depositors. Such
regulation often has a material impact on the Association's financial condition
and results of operations. For example, recent legislation required the
Association to pay a one-time assessment of $1.1 million, after-tax, to the FDIC
to recapitalize the SAIF. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Comparison of Operating Results for the
Six Months Ended December 31, 1996 and 1995."
The U.S. Congress is expected to consider legislation that may
eliminate the thrift industry as a separate industry. The Deposit Insurance
Funds Act of 1996 ("DIF Act") provides that the SAIF will be merged with the
Bank Insurance Fund ("BIF") on January 1, 1999, but only if there are no thrift
institutions in existence. The DIF Act requires the Treasury Department to study
the development of a common charter for banks and thrifts and to submit a report
of its finding to Congress. The Association cannot predict what the attributes
of such common charter would be or whether any legislation will result from this
study. If developed, the common charter may not offer all the advantages that
the Association now enjoys (E.G., unrestricted nationwide branching) or that the
Holding Company, as a unitary savings and loan holding company, will enjoy upon
consummation of the Conversion (E.G., the absence of non-banking activities
restrictions). If Congress fails to create a common charter, or does not act
otherwise to end the thrift industry's separate existence, the merger of the
SAIF and BIF contemplated by the DIF Act would not likely occur. Although the
SAIF currently meets its statutory reserve ratios, there can be no assurance
that it will continue to do so. The financial burden of any future
recapitalization would likely fall on a smaller assessment base, potentially
increasing the burden on individual institutions, including the Association. See
"REGULATION."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members of the Association are
deemed to have an ascertainable value, receipt of such rights may be a taxable
event (either as capital gain or ordinary income), to those Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members who receive
and/or exercise the Subscription Rights in an amount equal to such value.
Additionally, the Association could be required to recognize a gain for tax
purposes on such distribution. Whether Subscription Rights are considered to
have ascertainable value is an inherently factual determination. The Association
has been advised by RP Financial that such rights have no value; however, RP
Financial's conclusion
6
<PAGE>
is not binding on the Internal Revenue Service ("IRS"). See "THE CONVERSION --
Effects of Conversion to Stock Form on Depositors and Borrowers of the
Association -- Tax Effects."
FIRSTSPARTAN FINANCIAL CORP.
The Holding Company was organized on February 4, 1997 under Delaware
law at the direction of the Association to acquire all of the capital stock that
the Association will issue upon its conversion from the mutual to stock form of
ownership. The Holding Company has received conditional OTS approval to become a
savings and loan holding company through the acquisition of 100% of the capital
stock of the Association. Prior to the Conversion, the Holding Company will not
engage in any material operations. After the Conversion, the Holding Company
will be classified as a unitary savings and loan holding company subject to
regulation by the OTS, and its principal business will be the ownership of the
Association. Immediately following the Conversion, the only significant assets
of the Holding Company will be the capital stock of the Association, 50% of the
net proceeds of the Offerings as permitted by the OTS to be retained by it and a
note receivable from the ESOP evidencing a loan to enable the ESOP to purchase
8% of the Common Stock issued in the Conversion. See "BUSINESS OF THE HOLDING
COMPANY." The Holding Company's main office is located at 380 E. Main Street,
Spartanburg, South Carolina 29302, and its telephone number is (864) 582-2391.
The holding company structure will permit the Holding Company to expand
the financial services currently offered through the Association. Management
believes that the holding company structure and retention of a portion of the
proceeds of the Offerings will, should it decide to do so, facilitate the
expansion and diversification of its operations. The holding company structure
will also enable the Holding Company to repurchase its stock without adverse tax
consequences, subject to applicable regulatory restrictions, including waiting
periods. There are no present plans, arrangements, agreements, or
understandings, written or oral, regarding any such activities or repurchases.
See "REGULATION -- Savings and Loan Holding Company Regulations."
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
Chartered in 1935, the Association is a federal mutual savings and loan
association located in Spartanburg, South Carolina. As a result of the
Conversion, the Association will convert to a federal capital stock savings and
loan association and will become a wholly-owned subsidiary of the Holding
Company. The Association is regulated by the OTS, its primary regulator, and by
the FDIC, the insurer of its deposits. The Association's deposits have been
federally-insured since 1935 and are currently insured by the FDIC under the
SAIF. The Association has been a member of the Federal Home Loan Bank ("FHLB")
System since 1935. At December 31, 1996, the Association had total assets of
$375.5 million, total deposits of $324.0 million and total equity of $44.8
million on a consolidated basis.
The Association is a community oriented financial institution whose
primary business is attracting retail deposits from the general public and using
these funds to originate one- to- four family residential mortgage loans within
its primary market area. The Association is an approved Federal Housing
Administration ("FHA") and Veterans Administration ("VA") lender and
participates in the Spartanburg Residential Development Program, an affordable
housing program. The Association also actively originates construction loans and
consumer loans. To a lesser extent, the Association originates land loans and
commercial real estate loans. The Association expects to hire an experienced
commercial loan officer familiar with the Association's primary market area in
an attempt to augment its commercial real estate and commercial business
lending. At December 31, 1996, one- to- four family residential mortgage loans,
consumer loans (including commercial business loans), construction loans,
commercial real estate loans and land loans amounted to 77.3%, 11.5%, 9.2%, 1.3%
and 0.7% of its total loan portfolio, respectively. Loans receivable, net,
constituted 88.3% of total assets at December 31, 1996. See "RISK FACTORS - -
Certain Lending Considerations" and "BUSINESS OF THE ASSOCIATION -- Lending
Activities."
The Association considers Spartanburg County and adjacent counties in
Northwest South Carolina to be its primary market area because a large number of
its depositors reside, and a substantial portion of its loan portfolio
7
<PAGE>
is secured by properties located, in that geographic area. See "RISK FACTORS --
Concentration of Credit Risk." Since August 1996, the Association has also
purchased a limited number of one- to- four family residential mortgage loans
and residential construction loans from a regional start-up mortgage banking
company in which the Association's service corporation subsidiary has an equity
investment. At December 31, 1996, a substantial portion of these purchased loans
were secured by properties located in the Association's primary market area.
Such loan purchases are expected to continue and increase in volume as that
company's mortgage banking operations expand, and are likely to include
purchases of loans, including commercial loans and home equity loans, secured by
properties inside and outside of the Association's primary market area. See
"BUSINESS OF THE ASSOCIATION - - Lending Activities -- Loan Originations, Sales
and Purchases" and "-- Subsidiary Activities."
The Association's business strategy is to operate as an independent
community-based financial institution. In light of recent consolidations of
thrift institutions with large regional commercial banks in the Association's
primary market area, the Board of Directors believes than an independent
community-based financial institutions such as the Association enjoys a
competitive advantage. The Association's goal is to position itself to preserve
and enhance this current competitive advantage. As discussed above, the
Association has made an equity investment in a regional mortgage banking
company. The Association also is expanding its branch office network, as
discussed below. Furthermore, the Association offers various loan products to
meet the varied financial needs of its customers, in addition to residential
mortgage financing. Although constituting a small portion of the Association's
loan portfolio, and expected to remain so for the foreseeable future, the
Association offers automobile loans and, more recently, VISA credit cards, to
its local community residents. Finally, the Association has introduced various
deposit products to supplement its traditional savings accounts and certificate
accounts, including commercial deposits to complement its commercial real estate
and commercial business lending activities, as well as check imaging services.
As of June 30, 1996, the latest date for which published data are available, the
Association had a 15.6% share of all deposits in Spartanburg County. See
"BUSINESS OF THE ASSOCIATION -- Deposit Activities and Other Sources of Funds."
The Association believes that the capital raised in the Offerings will enhance
its ability to continue implementing this business strategy.
In addition to its lending activities, the Association invests excess
liquidity in short term U.S. Government and agency securities, a mutual fund
that invests in adjustable rate mortgage loans and, to a substantially lesser
extent, short term mortgage-backed securities issued by U.S. Government
agencies. Investment securities and mortgage-backed securities, which
constituted 3.6% of total assets at December 31, 1996, had an amortized cost and
a fair value of $13.6 million at December 31, 1996. See "BUSINESS OF THE
ASSOCIATION -- Investment Activities."
The Association conducts its operations from its main office and three
branch offices located in Spartanburg, South Carolina, a branch office in
Boiling Springs, South Carolina (Spartanburg County) and a loan production
office in Greenville, South Carolina, in adjacent Greenville County. Two
additional branch offices are under construction in Inman, South Carolina
(Spartanburg County), and in Duncan, South Carolina (Spartanburg County). Both
offices are scheduled to open by the end of the first half of calendar 1997. See
"BUSINESS OF THE ASSOCIATION -- Properties." The main office is located at 380
E. Main Street, Spartanburg, South Carolina 29302, and its telephone number is
(864) 582-2391.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $55.7 million to $75.7 million, or up to $87.2 million
if the Estimated Valuation Range is increased by 15%. See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts. The Holding Company has received
conditional OTS approval to purchase all of the capital stock of the Association
to be issued in the Conversion in exchange for 50% of the net proceeds of the
Offerings. This will result in the Holding Company retaining approximately $27.9
million to $37.9 million of net proceeds, or up to $43.6 million if the
Estimated Valuation Range is increased by 15%, and the Association receiving an
equal amount.
8
<PAGE>
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Association's capital and will support the expansion of the
Association's existing business activities. The Association will use the funds
contributed to it for general corporate purposes, including, initially, local
lending and investment in short-term U.S. Government and agency obligations. The
Association also intends to use a portion of the funds (up to approximately $1.5
million) to contribute to the ongoing construction of two branch offices and the
renovation of an existing branch office.
In connection with the Conversion and the establishment of the ESOP,
the Holding Company intends to loan the ESOP the amount necessary to purchase 8%
of the shares of Common Stock sold in the Conversion. The Holding Company's loan
to fund the ESOP may range from $4,556,000 to $6,164,000 based on the sale of
227,800 shares to the ESOP (at the minimum of the Estimated Valuation Range) and
308,200 shares (at the maximum of the Estimated Valuation Range), respectively,
at $20.00 per share. If 15% above the maximum of the Estimated Valuation Range,
or 4,430,375 shares, are sold in the Conversion, the Holding Company's loan to
the ESOP would be approximately $7,088,600. It is anticipated that the ESOP loan
will have a 12-year term with interest payable at the prime rate as published in
THE WALL STREET JOURNAL on the closing date of the Conversion. The loan will be
repaid principally from the Association's contributions to the ESOP and from any
dividends paid on shares of Common Stock held by the ESOP.
The remaining net proceeds retained by the Holding Company initially
will be invested primarily in short-term U.S. Government and agency obligations.
Such proceeds will be available for additional contributions to the Association
in the form of debt or equity, to support future diversification or acquisition
activities, as a source of dividends to the stockholders of the Holding Company
and for future repurchases of Common Stock to the extent permitted under
Delaware law and federal regulations. The Holding Company will consider
exploring opportunities to use such funds to expand operations through acquiring
or establishing additional branch offices and the acquisition of other financial
institutions. Currently, there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any diversification activities.
Following consummation of the Conversion, the Board of Directors will
have the authority to adopt plans for repurchases of Common Stock, subject to
statutory and regulatory requirements. Since the Holding Company has not yet
issued stock, there currently is insufficient information upon which an
intention to repurchase stock could be based. The facts and circumstances upon
which the Board of Directors may determine to repurchase stock in the future
would include but are not limited to: (i) market and economic factors such as
the price at which the stock is trading in the market, the volume of trading,
the attractiveness of other investment alternatives in terms of the rate of
return and risk involved in the investment, the ability to increase the book
value and/or earnings per share of the remaining outstanding shares, and the
ability to improve the Holding Company's return on equity; (ii) the avoidance of
dilution to stockholders by not having to issue additional shares to cover the
exercise of stock options or to fund employee stock benefit plans; and (iii) 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 a
determination by the Board of Directors that both the Holding Company and the
Association will be capitalized in excess of all applicable regulatory
requirements after any such repurchases and that capital will be adequate,
taking into account, among other things, the level of nonperforming and
classified assets, the Holding Company's and the Association's current and
projected results of operations and asset/liability structure, the economic
environment and tax and other regulatory considerations. For a discussion of the
regulatory limitations applicable to stock repurchases and current OTS policy
respect thereto, see "THE CONVERSION -- Restrictions on Repurchase of Stock."
9
<PAGE>
DIVIDEND POLICY
GENERAL
The Holding Company's Board of Directors anticipates declaring and
paying a quarterly cash dividends on the Common Stock at an annual rate of 3%
($0.60 per share per year based on the Purchase Price). The first quarterly cash
dividend is expected to be declared and paid during the first full quarter
following the consummation of the Conversion. In addition, the Board of
Directors may determine to pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. Declarations or payments of any dividends
(regular and special) will be subject to determination by the Holding Company's
Board of Directors, which will take into account the amount of the net proceeds
retained by the Holding Company, the Holding Company's financial condition,
results of operations, tax considerations, capital requirements, industry
standards, economic conditions and other factors, including the regulatory
restrictions that affect the payment of dividends by the Association to the
Holding Company discussed below. Under Delaware law, the Holding Company will be
permitted to pay cash dividends after the Conversion either out of surplus or,
if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. In order to pay such cash
dividends, however, the Holding Company must have available cash either from the
net proceeds raised in the Offerings and retained by the Holding Company,
dividends received from the Association or earnings on Holding Company assets.
No assurances can be given that any dividends, either regular or special, will
be declared or, if declared, what the amount of dividends will be or whether
such dividends, if commenced, will continue.
CURRENT RESTRICTIONS
Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Association because the Holding Company initially will have
no source of income other than dividends from the Association and earnings from
the investment of the net proceeds from the Offerings retained by the Holding
Company. OTS regulations require the Association to give the OTS 30 days'
advance notice of any proposed declaration of dividends to the Holding Company,
Association does not offer such accounts, it will allow such a depositor to make
a trustee-to-trustee transfer of the IRA funds to a trustee offering a
self-directed IRA program with the agreement that such funds will be used to
purchase the Holding Company's Common Stock in the Offerings. There will be no
early withdrawal or IRS interest penalties for such transfers. The new trustee
would hold the Common Stock in a self-directed account in the same manner as the
Association now holds the depositor's IRA funds. An annual administrative fee
may be payable to the new trustee. Depositors interested in using funds in an
Association IRA to purchase Common Stock should contact the Stock Information
Center at (205) 718-4229 as soon as possible so that the necessary forms may be
forwarded for execution and returned prior to the Subscription Expiration Date.
Once such a withdrawal has been authorized and prior to termination of the
Offerings, none of the designated withdrawal amount may be used by a subscriber
for any purpose other than to purchase the subscribed shares. In the case of
payments made in cash, by check or by money order, such funds will be placed in
a segregated savings account established for each subscription specifically for
this purpose (each insured by the FDIC up to the applicable $100,000 limit) and
interest will be paid by the Association at the Passbook Rate from the date
payment is received, whether or not the Conversion is completed, until the
Conversion is completed or terminated. At the completion of the Stock Conversion
the funds received in the Offerings will be used to purchase the shares of
Common Stock ordered.e Consolidated Financial Statements included elsewhere
herein.
Under Delaware law, the Holding Company is generally limited to paying
dividends in an amount equal to the excess of its net assets (total assets minus
total liabilities) over its statutory capital or, if no such excess exists, to
its net profits for the current and/or immediately preceding fiscal year.
The Holding Company has committed to the OTS not to make any tax-free
distributions to stockholders in the form of a return of capital, or take any
action in contemplation of any such distributions, within the first year
following the consummation of the Conversion.
10
<PAGE>
TAX CONSIDERATIONS
In addition to the foregoing, retained earnings of the Association
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Association to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Association at the then
current income tax rate on the amount deemed distributed, which would include
the amount of any federal income taxes attributable to the distribution. See
"TAXATION -- Federal Taxation" and Note 6 of Notes to the Consolidated Financial
Statements included elsewhere herein. The Holding Company does not contemplate
any distribution by the Association that would result in a recapture of the
Association's bad debt reserve or create the above-mentioned federal tax
liabilities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently,
there is no existing market for the Common Stock. Although the Holding Company
has received conditional approval to list the Common Stock on the Nasdaq
National Market System under the symbol "FSPT," there can be no assurance that
the Holding Company will meet Nasdaq National Market System listing
requirements, which include a minimum market capitalization, at least two market
makers and a minimum number of record holders. Trident Securities has agreed to
make a market for the Holding Company's Common Stock following consummation of
the Conversion and will assist the Holding Company in seeking to encourage at
least one additional market maker to establish and maintain a market in the
Common Stock. Making a market involves maintaining bid and ask quotations and
being able, as principal, to effect transactions in reasonable quantities at
those quoted prices, subject to various securities laws and other regulatory
requirements. The Holding Company anticipates that prior to the completion of
the Conversion it will be able to obtain the commitment from at least one
additional broker-dealer to act as market maker for the Common Stock.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within the control
of the Holding Company, the Association or any market maker. There can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue. The number of active buyers and
sellers of the Common Stock at any particular time may be limited. Under such
circumstances, investors in the Common Stock could have difficulty disposing of
their shares on short notice and should not view the Common Stock as a
short-term investment. Furthermore, there can be no assurance that purchasers
will be able to sell their shares at or above the Purchase Price or that
quotations will be available on the Nasdaq National Market System as
contemplated.
11
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the
Association at December 31, 1996, and the pro forma consolidated capitalization
of the Holding Company after giving effect to the assumptions set forth under
"PRO FORMA DATA," based on the sale of the number of shares of Common Stock at
the minimum, midpoint, maximum and maximum, as adjusted, of the Estimated
Valuation Range. The shares that would be issued at the maximum, as adjusted, of
the Estimated Valuation Range would be subject to receipt and OTS approval of an
updated appraisal confirming such valuation. A CHANGE IN THE NUMBER OF SHARES TO
BE ISSUED IN THE CONVERSION MAY MATERIALLY AFFECT PRO FORMA CONSOLIDATED
CAPITALIZATION.
<TABLE>
<CAPTION>
Holding Company
Pro Forma Consolidated Capitalization
Based Upon the Sale of
2,847,500 3,350,000 3,852,500 4,430,375
Capitalization Shares at Shares at Shares at Shares at
as of $20.00 $20.00 $20.00 $20.00
December 31, 1996 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(3)...................... $323,951 $323,951 $323,951 $323,951 $323,951
FHLB advances.................... -- -- -- -- --
------------ ----------- ----------- ----------- -----------
Total deposits and
borrowed funds.................. $323,951 $323,951 $323,951 $323,951 $323,951
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
250,000 shares, $.01
par value per share,
authorized; none issued
or outstanding.............. -- -- -- -- --
Common Stock:
12,000,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(4).............. -- 28 34 39 44
Additional paid-in capital.... -- 55,647 65,566 75,611 87,164
Retained earnings(5).......... 44,833 44,833 44,833 44,833 44,833
Less:
Common Stock acquired
by ESOP(6)................ -- (4,556) (5,360) (6,164) (7,089)
Common Stock to be acquired
by MRP(7)................. -- (2,278) (2,680) (3,082) (3,544)
--------- -------- --------- --------- ---------
Total stockholders' equity....... $44,833 $93,674 $102,393 $111,237 $121,408
======= ======= ======== ======== ========
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
12
<PAGE>
- ---------------
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect material changes in the financial condition or performance of the
Association or changes in market conditions or general financial, economic
and regulatory conditions, or the issuance of additional shares under the
Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
in the event the aggregate number of shares of Common Stock issued in the
Conversion is 15% above the maximum of the Estimated Valuation Range. See
"PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Common Stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(4) The Association's authorized capital will consist solely of 1,000 shares
of common stock, par value $1.00 per share, 1,000 shares of which will be
issued to the Holding Company, and 9,000 shares of preferred stock, no par
value per share, none of which will be issued in connection with the
Conversion.
(5) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Association will be prohibited
from paying any dividend that would reduce its regulatory capital below
the amount in the liquidation account, which will be established for the
benefit of the Association's Eligible Account Holders and Supplemental
Eligible Account Holders at the time of the Conversion and adjusted
downward thereafter as such account holders reduce their balances or cease
to be depositors. See "THE CONVERSION -- Effects of Conversion to Stock
Form on Depositors and Borrowers of the Association -- Liquidation
Account."
(6) Assumes that 8% of the Common Stock sold in the Conversion will be
acquired by the ESOP in the Conversion with funds borrowed from the
Holding Company. Under generally accepted accounting principles ("GAAP"),
the amount of Common Stock to be purchased by the ESOP represents unearned
compensation and is, accordingly, reflected as a reduction of capital. As
shares are released to ESOP participants' accounts, a corresponding
reduction in the charge against capital will occur. Since the funds are
borrowed from the Holding Company, the borrowing will be eliminated in
consolidation and no liability will be reflected in the consolidated
financial statements of the Holding Company. See "MANAGEMENT OF THE
ASSOCIATION - - Benefits -- Employee Stock Ownership Plan."
(7) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed MRP, of a number of shares equal to 4% of the shares of
Common Stock issued in the Conversion at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range. The issuance
of an additional 4% of the shares of Common Stock for the MRP from
authorized but unissued shares of Holding Company Common Stock would
dilute the ownership interest of stockholders by 3.85%. The shares are
reflected as a reduction of stockholders' equity. See "RISK FACTORS --
Possible Dilutive Effect of Benefit Programs," "PRO FORMA DATA" and
"MANAGEMENT OF THE ASSOCIATION -- Benefits -- Management Recognition
Plan." The MRP is subject to stockholder approval, which is expected to be
sought at a meeting to be held no earlier than six months following
consummation of the Conversion.
13
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Association's historical and pro forma
capital position relative to its capital requirements at December 31, 1996. The
amount of capital infused into the Association for purposes of the following
table is 50% of the net proceeds of the Offerings. For purpose of the table
below, the amount expected to be borrowed by the ESOP and the cost of the shares
expected to be acquired by the MRP are deducted from pro forma regulatory
capital. For a discussion of the assumptions underlying the pro forma capital
calculations presented below, see "USE OF PROCEEDS," "CAPITALIZATION" and "PRO
FORMA DATA." The definitions of the terms used in the table are those provided
in the capital regulations issued by the OTS. For a discussion of the capital
standards applicable to the Association, see "REGULATION -- Federal Regulation
of Savings Associations -- Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1996
---------------------------------------------------------------------
Minimum of Estimated Midpoint of Estimated Maximum of Estimated
Valuation Range Valuation Range Valuation Range
------------------- ------------------- -------------------
2,847,500 Shares 3,350,000 Shares 3,852,500 Shares
December 31, 1996 at $20.00 Per Share at $20.00 Per Share at $20.00 Per Share
----------------------- -------------------------- ------------------------------ -----------------
Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted
Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
------ ----------- ------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital(2).......... $44,833 11.94% $65,837 16.41% $69,593 17.16% $73,412 17.89%
======= ====== ======= ====== ======= ====== ======= ======
Tangible capital(2)...... $44,845 11.94% $65,849 16.42% $69,605 17.16% $73,424 17.90%
Tangible capital
requirement............ 5,633 1.50 6,016 1.50 6,085 1.50 6,154 1.50
------- ------ ------- ------ ------- ------ ------- ------
Excess................... $39,212 10.44% $59,833 14.92% $63,520 15.66% $67,270 16.40%
======= ===== ======= ===== ======= ===== ======= =====
Core capital(2).......... $44,845 11.94% $65,849 16.42% $69,605 17.16% $73,424 17.90%
Core capital requirement(3) 11,266 3.00 12,033 3.00 12,169 3.00 12,308 3.00
------- ------ ------- ------ ------- ------ ------- ------
Excess................... $33,579 8.94% $53,816 13.42% $57,436 14.16% $61,116 14.90%
======= ==== ======= ===== ======= ===== ======= =====
Total capital(4)......... $46,495 20.78% $67,499 29.50% $71,255 31.02% $75,074 32.55%
Risk-based
capital requirement..... 17,897 8.00 18,306 8.00 18,379 8.00 18,453 8.00
------- ------ ------- ------ ------- ------ ------- ------
Excess................... $28,598 12.78% $49,193 21.50% $52,876 23.02% $56,621 24.55%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
PRO FORMA AT DECEMBER 31, 1996
15% above
Maximum of Estimated
Valuation Range
4,430,375 Shares
at $20.00 Per Share
--------------- ---------
Percent of
Adjusted
Total
Amount Assets (1)
------ --------
GAAP capital(2).......... $77,804 18.72%
======= =====
Tangible capital(2)...... $77,816 18.72%
Tangible capital
requirement............ 6,234 1.50
------- ------
Excess................... $71,582 17.22%
======= =====
Core capital(2).......... $77,816 18.72%
Core capital requirement(3) 12,468 3.00
------- ------
Excess................... $65,348 15.72%
======= =====
Total capital(4)......... $79,466 34.29%
Risk-based
capital requirement..... 18,538 8.00
------- ------
Excess................... $60,928 26.29%
======= =====
- ------------------
(1) Based upon total adjusted assets of $375.7 million at December 31, 1996
and $401.3 million, $405.9 million, $410.5 million and $415.8 million at
the minimum, midpoint, maximum, and maximum, as adjusted, of the
Estimated Valuation Range, respectively, for purposes of the tangible and
core capital requirements, and upon risk-weighted assets of $223.7
million at December 31, 1996 and $228.8 million, $229.7 million, $230.7
million and $231.7 million at the minimum, midpoint, maximum, and
maximum, as adjusted, of the Estimated Valuation Range, respectively, for
purposes of the risk-based capital requirement.
(2) An unrealized loss on securities available-for-sale, net of taxes, of
$12,000 accounts for the difference between GAAP capital and each of
tangible capital and core capital.
(3) The current OTS core capital requirement for savings associations is 3%
of total adjusted assets. The OTS has proposed core capital requirements
which would require a core capital ratio of 3% of total adjusted assets
for thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.
(4) Percentage represents total core and supplementary capital divided by
total risk-weighted assets. Assumes net proceeds are invested in assets
that carry a 20% risk-weighting.
14
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Common Stock must be sold at a price
equal to the estimated pro forma market value of the Holding Company and the
Association as converted, based upon an independent valuation. The Estimated
Valuation Range as of February 21, 1997 is from a minimum of $56,950,000 to a
maximum of $77,050,000 with a midpoint of $67,000,000 or, at a price per share
of $20.00, a minimum number of shares of 2,847,500, a maximum number of shares
of 3,852,500 and a midpoint number of shares of 3,350,000. The actual net
proceeds from the sale of the Common Stock cannot be determined until the
Conversion is completed. However, net proceeds set forth on the following table
are based upon the following assumptions: (i) Trident Securities will receive
fees of $672,000, $797,000, $797,000 and $797,000 at the minimum, midpoint,
maximum and 15% above the Estimated Valuation Range, respectively, assuming all
shares are sold to investors residing in South Carolina (see "THE CONVERSION --
Plan of Distribution for the Subscription, Direct Community and Syndicated
Community Offerings); (ii) all of the Common Stock will be sold in the
Subscription and Direct Community Offerings; and (iii) Conversion expenses,
excluding the fees paid to Trident Securities, will total approximately $603,000
at each of the minimum, midpoint, maximum and 15% above the Estimated Valuation
Range. Actual expenses may vary from this estimate, and the fees paid will
depend upon the percentages and total number of shares sold in the Subscription,
Direct Community and Syndicated Community Offerings and other factors.
The pro forma consolidated net income of the Association for the six
months ended December 31, 1996 and the year ended June 30, 1996 have been
calculated as if the Conversion had been consummated at the beginning of the
respective periods and the estimated net proceeds received by the Holding
Company and the Association had been invested at 6.44% and 6.48% at the
beginning of the respective periods, which represent the arithmetic average of
the Association's yield on interest-earning assets and interest-bearing deposits
as of December 31, 1996 and June 30, 1996, respectively. As discussed under "USE
OF PROCEEDS," the Holding Company expects to retain 50% of the net proceeds of
the Offerings from which it will fund the ESOP loan. For purposes of calculating
pro forma income on net proceeds, it is assumed that there will be no return on
approximately $1.5 million of net proceeds that will be used to contribute to
the construction of the Inman and Duncan branch offices and the renovation of an
existing branch office. See "USE OF PROCEEDS." A pro forma after-tax return of
3.99% and 4.02% are used for both the Holding Company and the Association for
the periods, after giving effect to an incremental combined federal and state
income tax rate of 38.0% for both periods. Historical and pro forma per share
amounts have been calculated by dividing historical and pro forma amounts by the
number of shares of Common Stock indicated in the footnotes to the table. Per
share amounts have been computed as if the Common Stock had been outstanding at
the beginning of the respective periods or at December 31, 1996 or June 30,
1996, but without any adjustment of per share historical or pro forma
stockholders' equity to reflect the earnings on the estimated net proceeds.
The following tables summarize the historical net income and retained
earnings of the Association and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the dates
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range. No effect has been given to: (i) the shares to be reserved for issuance
under the Holding Company's Stock Option Plan, which is expected to be voted
upon by stockholders at a meeting to be held no earlier than six months
following consummation of the Conversion; (ii) withdrawals from deposit accounts
for the purpose of purchasing Common Stock in the Conversion; (iii) the issuance
of shares from authorized but unissued shares to the MRP, which is expected to
be voted upon by stockholders at a meeting to be held no earlier than six months
following consummation of the Conversion; or (iv) the establishment of a
liquidation account for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. See "MANAGEMENT OF THE ASSOCIATION -- Benefits -- 1997
Stock Option Plan" and "THE CONVERSION - - Stock Pricing and Number of Shares
Issued." Shares of Common Stock may be purchased with funds on deposit at the
Association, which will reduce deposits by the amounts of such purchases.
Accordingly, the net amount of funds available for investment will be reduced by
the amount of deposit withdrawals used to fund stock purchases.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AT THE DATE ON WHICH THE CONVERSION ACTUALLY
OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE RESULTS OF OPERATIONS.
STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE BETWEEN THE STATED AMOUNTS OF
CONSOLIDATED ASSETS AND LIABILITIES OF THE HOLDING COMPANY COMPUTED IN
ACCORDANCE WITH GAAP. STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED OR DECREASED
TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND OTHER ASSETS
AND MARKET VALUE. STOCKHOLDERS' EQUITY IS NOT INTENDED TO REPRESENT FAIR MARKET
VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO
STOCKHOLDERS IN THE EVENT OF LIQUIDATION.
15
<PAGE>
<TABLE>
<CAPTION>
At or For the Six Months Ended December 31, 1996
--------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
2,847,500 3,350,000 3,852,500 4,430,375(1)
Shares Shares Shares Shares
at $20.00 at $20.00 at $20.00 at $20.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds.............................. $56,950 $67,000 $77,050 $88,608
Less: estimated expenses.................... 1,275 1,400 1,400 1,400
----- ----- ----- -----
Estimated net proceeds...................... $55,675 $65,600 $75,650 $87,208
Less: Common Stock acquired by ESOP ........ (4,556) (5,360) (6,164) (7,089)
Less: Common Stock to be acquired by MRP ... (2,278) (2,680) (3,082) (3,544)
------ ------ ------ ------
Net investable proceeds................ $48,841 $57,560 $66,404 $76,575
======= ======= ======= =======
Consolidated net income:
Historical................................. $607 $607 $607 $607
Pro forma income on net proceeds(2)........ 945 1,119 1,296 1,499
Pro forma ESOP adjustments(3).............. (118) (138) (159) (183)
Pro forma MRP adjustments(4)............... (141) (166) (191) (220)
------- ------- ------- -------
Pro forma net income..................... $1,293 $1,422 $1,553 $1,703
====== ====== ====== ======
Consolidated net income per share (5)(6):
Historical................................. $0.23 $0.20 $0.17 $0.15
Pro forma income on net proceeds........... 0.36 0.36 0.36 0.37
Pro forma ESOP adjustments(3).............. (0.04) (0.04) (0.04) (0.04)
Pro forma MRP adjustments(4)............... (0.05) (0.05) (0.05) (0.05)
----- ----- ----- -----
Pro forma net income per share........... $0.50 $0.47 $0.44 $0.43
===== ===== ===== =====
Consolidated stockholders' equity (book value):
Historical................................. $44,833 $44,833 $44,833 $44,833
Estimated net proceeds..................... 55,675 65,600 75,650 87,208
Less: Common Stock acquired by ESOP........ (4,556) (5,360) (6,164) (7,089)
Less: Common Stock to be acquired by MRP(4) (2,278) (2,680) (3,082) (3,544)
------- -------- -------- --------
Pro forma stockholders' equity(7)........ $93,674 $102,393 $111,237 $121,408
======= ======== ======== ========
Consolidated stockholders' equity per share(6)(8):
Historical(6).............................. $15.74 $13.38 $11.64 $10.12
Estimated net proceeds..................... 19.55 19.58 19.64 19.68
Less: Common Stock acquired by ESOP........ (1.60) (1.60) (1.60) (1.60)
Less: Common Stock to be acquired by MRP(4) (0.80) (0.80) (0.80) (0.80)
------ ------ ------ ------
Pro forma stockholders' equity per share(9)$32.89 $30.56 $28.88 $27.40
====== ====== ====== ======
Purchase Price as a percentage of pro forma
stockholders' equity per share............. 60.81% 65.45% 69.25% 72.99%
===== ===== ===== =====
Purchase Price as a multiple of pro forma
net income per share....................... 20.00x 21.28x 22.73x 23.26x
===== ===== ===== =====
</TABLE>
(FOOTNOTES ON SECOND FOLLOWING PAGE)
16
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1996
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
2,847,500 3,350,000 3,852,500 4,430,375(1)
Shares Shares Shares Shares
at $20.00 at $20.00 at $20.00 at $20.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds.............................. $56,950 $67,000 $77,050 $88,608
Less: estimated expenses.................... 1,275 1,400 1,400 1,400
----- ----- ----- -----
Estimated net proceeds...................... $55,675 $65,600 $75,650 $87,208
Less: Common Stock acquired by ESOP......... (4,556) (5,360) (6,164) (7,089)
Less: Common Stock to be acquired by MRP.... (2,278) (2,680) (3,082) (3,544)
------ ------ ------ ------
Net investable proceeds................ $48,841 $57,560 $66,404 $76,575
======= ======= ======= =======
Consolidated net income:
Historical................................. $3,537 $3,537 $3,537 $3,537
Pro forma income on net proceeds(2)........ 1,902 2,252 2,608 3,016
Pro forma ESOP adjustments(3).............. (235) (277) (318) (366)
Pro forma MRP adjustments(4)............... (282) (332) (382) (439)
------ ------ ------ ------
Pro forma net income..................... $4,922 $5,180 $5,445 $5,748
====== ====== ====== ======
Consolidated net income per share (5)(6):
Historical................................. $1.35 $1.14 $0.99 $0.86
Pro forma income on net proceeds........... 0.72 0.73 0.73 0.74
Pro forma ESOP adjustments(3).............. (0.09) (0.09) (0.09) (0.09)
Pro forma MRP adjustments(4)............... (0.11) (0.11) (0.11) (0.11)
----- ----- ----- -----
Pro forma net income per share........... $1.87 $1.67 $1.52 $1.40
===== ===== ===== =====
Consolidated stockholders' equity (book value):
Historical................................. $44,154 $44,154 $44,154 $44,154
Estimated net proceeds..................... 55,675 65,600 75,650 87,208
Less: Common Stock acquired by ESOP........ (4,556) (5,360) (6,164) (7,089)
Less: Common Stock to be acquired by MRP(4) (2,278) (2,680) (3,082) (3,544)
------- -------- -------- --------
Pro forma stockholders' equity(7)........ $92,995 $101,714 $110,558 $120,729
======= ======== ======== ========
Consolidated stockholders' equity per share(6)(8):
Historical(6).............................. $15.51 $13.18 $11.46 $9.97
Estimated net proceeds..................... 19.55 19.58 19.64 19.68
Less: Common Stock acquired by ESOP........ (1.60) (1.60) (1.60) (1.60)
Less: Common Stock to be acquired by MRP(4) (0.80) (0.80) (0.80) (0.80)
------ ------ ------ ------
Pro forma stockholders' equity per share(9)$32.66 $30.36 $28.70 $27.25
====== ====== ====== ======
Purchase Price as a percentage of pro forma
stockholders' equity per share............. 61.24% 65.88% 69.69% 73.39%
===== ===== ===== =====
Purchase Price as a multiple of pro forma
net income per share....................... 10.70x 11.98x 13.16x 14.29x
===== ===== ===== =====
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
17
<PAGE>
- -------------------
(1) Gives effect to the sale of an additional 577,875 shares in the
Conversion, which may be issued to cover an increase in the pro forma
market value of the Holding Company and the Association as converted,
without the resolicitation of subscribers or any right of cancellation.
The issuance of such additional shares will be conditioned on a
determination by RP Financial that such issuance is compatible with its
determination of the estimated pro forma market value of the Holding
Company and the Association as converted. See "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Stock in the Conversion. Since funds on
deposit at the Association may be withdrawn to purchase shares of Common
Stock (which will reduce deposits by the amount of such purchases), the
net amount of funds available to the Association for investment following
receipt of the net proceeds of the Offerings will be reduced by the amount
of such withdrawals.
(3) It is assumed that 8% of the shares of Common Stock offered in the
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP (at an interest rate equal to the
prime rate as published in THE WALL STREET JOURNAL on the closing date of
the Conversion, which rate is currently 8.25%) from the net proceeds from
the Offerings retained by the Holding Company. The amount of this
borrowing has been reflected as a reduction from gross proceeds to
determine estimated net investable proceeds. The Association intends to
make contributions to the ESOP in amounts at least equal to the principal
and interest requirement of the debt. As the debt is paid down,
stockholders' equity will be increased. The Association's payment of the
ESOP debt is based upon equal installments of principal over a 12-year
period, assuming a combined federal and state income tax rate of 38%.
Interest income earned by the Holding Company on the ESOP debt offsets
the interest paid by the Association on the ESOP loan. No reinvestment is
assumed on proceeds contributed to fund the ESOP. The ESOP expense
reflects adoption of Statement of Position ("SOP") 93-6, which will
require recognition of expense based upon shares committed to be released
and the exclusion of unallocated shares from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $20.00
per share Purchase Price. See "MANAGEMENT OF THE ASSOCIATION -- Benefits
-- Employee Stock Ownership Plan."
(4) In calculating the pro forma effect of the MRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount
contributed was an amortized expense during such period, and that the
combined federal and state income tax rate is 38%. The issuance of
authorized but unissued shares of the Common Stock instead of open market
purchases would dilute the voting interests of existing stockholders by
approximately 3.85% and pro forma net income per share would be $0.49,
$0.46, $0.44 and $0.42 at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range for the six months ended
December 31, 1996, respectively, and $1.83, $1.64, $1.50 and $1.38 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the year ended June 30, 1996, respectively, and pro
forma stockholders' equity per share would be $32.40, $30.16, $28.53 and
$27.12 at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range at December 31, 1996, respectively, and $32.17,
$29.96 $28.36 and $26.97 at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range at June 30, 1996,
respectively. Shares issued under the MRP vest 20% per year and, for
purposes of this table, compensation expense is recognized on a
straight-line basis over each vesting period. In the event the fair
market value per share is greater than $20.00 per share on the date of
stockholder approval of the MRP, total MRP expense would increase. The
total estimated MRP expense was multiplied by 20% (the total percent of
shares for which expense is recognized in the first year) resulting in
pre-tax MRP expense of $227,000, $268,000, $308,000 and $355,000 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the six months ended December 31, 1996, respectively,
and $455,000, $535,000, $616,000 and $708,000 at the minimum, midpoint
maximum and 15% above the maximum of the Estimated Valuation Range for
the year ended June 30, 1996, respectively. No effect has been given to
the shares reserved for issuance under the proposed Stock Option Plan. If
stockholders approve the Stock Option Plan following the Conversion, the
18
<PAGE>
Holding Company will have reserved for issuance under the Stock Option
Plan authorized but unissued shares of Common Stock representing an amount
of shares equal to 10% of the shares sold in the Conversion. If all of the
options were to be exercised utilizing these authorized but unissued
shares rather than treasury shares which could be acquired, the voting and
ownership interests of existing stockholders would be diluted by
approximately 9.1%. Assuming stockholder approval of the Stock Option Plan
and that all options were exercised at the end of the six months ended
December 31, 1996 and the year ended June 30, 1996, respectively, at an
exercise price of $20.00 per share, pro forma net earnings per share would
be $0.48, $0.46, $0.43 and $0.41, respectively, for the six months ended
December 31, 1996, and $1.76, $1.59, $1.46 and $1.34, respectively, for
the year ended June 30, 1996, and pro forma stockholders' equity per share
would be $31.72, $29.61, $28.07 and $26.73, respectively, for the six
months ended December 31, 1996, and $31.51, $29.42, $27.91 and $26.59,
respectively for the year ended June 30, 1996 at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. See
"MANAGEMENT OF THE ASSOCIATION -- Benefits -- 1997 Stock Option Plan" and
"-- Benefits -- Management Recognition Plan" and "RISK FACTORS -- Possible
Dilutive Effect of Benefit Programs."
(5) Per share amounts are based upon shares outstanding of 2,624,446,
3,087,583, 3,550,721 and 4,083,329 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range for the six months
ended December 31, 1996, respectively and 2,629,192, 3,093,167, 3,557,142
and 4,090,713 for the year ended June 30, 1996, respectively, which
includes the shares of Common Stock sold in the Conversion less the
number of shares assumed to be held by the ESOP not committed to be
released within the first year following the Conversion.
(6) Historical per share amounts have been computed as if the shares of Common
Stock expected to be issued in the Conversion had been outstanding at the
beginning of the period or on the date shown, but without any adjustment
of historical net income or historical retained earnings to reflect the
investment of the estimated net proceeds of the sale of shares in the
Conversion, the additional ESOP expense or the proposed MRP expense, as
described above.
(7) "Book value" represents the difference between the stated amounts of the
Association's assets and liabilities. The amounts shown do not reflect
the liquidation account which will be established for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders in the
Conversion, or the federal income tax consequences of the restoration to
income of the Association's special bad debt reserves for income tax
purposes which would be required in the unlikely event of liquidation.
See "THE CONVERSION -- Effects of Conversion to Stock Form on Depositors
and Borrowers of the Association" and "TAXATION." The amounts shown for
book value do not represent fair market values or amounts distributable
to stockholders in the unlikely event of liquidation.
(8) Per share amounts are based upon shares outstanding of 2,847,500,
3,350,000, 3,852,500 and 4,430,375 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of
the Common Stock.
19
<PAGE>
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information as to the
approximate purchases of Common Stock by each director and executive officer of
the Association, including their associates, as defined by applicable
regulations. No individual has entered into a binding agreement with respect to
such intended purchases. Directors and officers of the Association and their
associates may not purchase in excess of 28% of the shares sold in the
Conversion and, therefore, actual purchases could be more or less than indicated
below. For purposes of the following table, it has been assumed that sufficient
shares will be available to satisfy subscriptions in all categories. Directors,
officers and employees will pay the same price for the shares for which they
subscribe as the price that will be paid by all other subscribers.
<TABLE>
<CAPTION>
Percent of Percent of
Shares at Shares at
Minimum of Maximum of
Name and Anticipated Number of Anticipated Dollar Estimated Estimated
Position Shares Purchased (1) Amount Purchased Valuation Range Valuation Range
-------- ------------------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Robert R. Odom 6,250 $125,000 0.22% 0.16%
Chairman of the Board
Billy L. Painter 16,250 325,000 0.57 0.42
President and Director
Robert L. Handell 5,000 100,000 0.18 0.13
Secretary and Director
R. Wesley Hammond 5,000 100,000 0.18 0.13
Director
E. Lea Salter 7,500 150,000 0.26 0.19
Director
E.L. Sanders 15,000 300,000 0.53 0.39
Director
David E. Tate 5,000 100,000 0.18 0.13
Director
J. Stephen Sinclair 16,250 325,000 0.57 0.42
Executive Vice President
Hugh H. Brantley 16,250 325,000 0.57 0.42
Executive Vice President
R. Lamar Simpson 2,500 50,000 0.09 0.06
Chief Financial Officer
Other officers (5 persons) 34,750 695,000 1.22 0.90
------- ---------- ---- ----
Total 129,750 $2,595,000 4.56% 3.37%
======= ========== ==== ====
</TABLE>
(1) Excludes any shares awarded pursuant to the ESOP and MRP and options to
acquire shares pursuant to the Stock Option Plan. For a description of
the number of shares to be purchased by the ESOP and intended awards
under the MRP and Stock Option Plan, see "MANAGEMENT OF THE ASSOCIATION
-- Benefits -- Employee Stock Ownership Plan," "-- Benefits -- 1997
Stock Option Plan" and "-- Benefits -- Management Recognition Plan."
20
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THE FOLLOWING CONSOLIDATED STATEMENTS OF INCOME OF FIRST FEDERAL
SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG AND SUBSIDIARY FOR THE FISCAL YEARS
ENDED JUNE 30, 1996, 1995 AND 1994 HAVE BEEN AUDITED BY DELOITTE & TOUCHE LLP,
GREENVILLE, SOUTH CAROLINA, INDEPENDENT AUDITORS, WHOSE REPORT THEREON APPEARS
ELSEWHERE IN THIS PROSPECTUS. THE CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX
MONTHS ENDED DECEMBER 31, 1996 AND 1995 WERE NOT AUDITED BY DELOITTE & TOUCHE
LLP, BUT, IN THE OPINION OF MANAGEMENT, REFLECT ALL ADJUSTMENTS (NONE OF WHICH
ARE OTHER THAN NORMAL RECURRING ENTRIES) NECESSARY FOR A FAIR PRESENTATION. THE
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS OF OPERATIONS THAT MAY BE EXPECTED FOR THE
ENTIRE FISCAL YEAR. THESE STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE HEREIN.
<TABLE>
<CAPTION>
Six Months
Ended December 31, Years Ended June 30,
------------------ ------------------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited)
(In Thousands)
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest on loans............................. $13,305 $11,946 $ 24,421 $ 22,086 $ 21,414
Interest and dividends on investment
securities, mortgage-backed securities
and other................................... 852 1,091 2,024 1,749 1,739
-------- -------- -------- -------- --------
Total investment income...................... 14,157 13,037 26,445 23,835 23,153
INTEREST EXPENSE:
Deposit accounts.............................. 7,568 7,332 14,669 11,302 10,387
-------- -------- -------- -------- --------
NET INTEREST INCOME............................ 6,589 5,705 11,776 12,533 12,766
PROVISION FOR LOAN LOSSES (Note 3)............. 675 4 419 9 --
-------- --------- --------- --------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.................... 5,914 5,701 11,357 12,524 12,766
-------- --------- -------- -------- --------
OTHER INCOME (EXPENSE):
Service charges and fees...................... 596 413 924 674 654
Gain (loss) of sale of mortgage loans......... 37 -- -- (1,078) (226)
Unrealized gain (loss) on loans held for sale. -- -- -- 668 (668)
Loss on sale of investments................... (16) -- -- (396) (109)
Other income, net............................. 85 186 395 466 433
-------- -------- --------- --------- ---------
Total other income, net...................... 702 599 1,319 334 84
-------- -------- --------- --------- ---------
OTHER OPERATING EXPENSES:
Employee compensation and benefits............ 1,733 1,516 3,131 3,020 2,728
Federal deposit insurance premium............. 2,131 354 737 701 690
Occupancy and equipment expense............... 497 366 731 631 553
Computer services............................. 250 192 449 388 365
Advertising and promotions.................... 235 204 418 286 197
Office supplies, postage, printing, etc....... 246 219 502 334 311
Other......................................... 552 475 1,060 862 827
-------- -------- --------- --------- ---------
Total other operating expenses............... 5,644 3,326 7,028 6,222 5,671
-------- -------- --------- --------- ---------
INCOME BEFORE INCOME TAXES..................... 972 2,974 5,648 6,636 7,179
PROVISION FOR INCOME TAXES
(Note 6)...................................... 365 1,115 2,111 2,495 2,707
-------- -------- --------- --------- ---------
NET INCOME..................................... $ 607 $ 1,859 $ 3,537 $ 4,141 $ 4,472
======== ======== ========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE>
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 the Association. The information contained in this
section should be read in conjunction with the Consolidated Financial Statements
and accompanying Notes thereto and the other sections contained in this
Prospectus.
OPERATING STRATEGY
The Association's business consists primarily of attracting retail
deposits from the general public and using these funds to originate mortgage
loans secured primarily by one- to- four family residences located in its
primary market area. To a lesser extent, the Association also originates, in
order of magnitude, construction loans, consumer loans (including commercial
business loans), commercial real estate loans and land loans. In addition, the
Association invests in U.S. Government and federal agency obligations, mutual
funds and, and to a substantially lesser extent, mortgage-backed securities. The
Association intends to continue to fund its assets primarily with retail
deposits, although FHLB-Atlanta advances may be used as a supplemental source of
funds.
The Association's profitability depends primarily on its net interest
income, which is the difference between the income it receives on its loan and
investment portfolio and its cost of funds, which consists of interest paid on
deposits. Net interest income is also affected by the relative amounts of
interest-earning assets and interest-bearing liabilities. When interest-earning
assets equal or exceed interest-bearing liabilities, any positive interest rate
spread will generate net interest income. The Association's profitability is
also affected by the level of other income and expenses. Other income, net,
includes income associated with the origination and sale of FHA and VA mortgage
loans, loan servicing fees, income from real estate owned and net gains and
losses on sales of interest-earning assets. Other expenses include compensation
and benefits, occupancy and equipment expenses, deposit insurance premiums, data
servicing expenses and other operating costs. The Association's results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, government
legislation and regulation and monetary and fiscal policies.
22
<PAGE>
The Association's business strategy is to operate as a
well-capitalized, profitable and independent financial institution dedicated to
a community-oriented approach that emphasizes management involvement with
customers and the community at large, local decision-making and quality customer
service. Management believes that it can best serve an important segment of the
marketplace and enhance the long-term value of the Company by operating
independently and continuing with and expanding its community-oriented approach,
especially in light of recent consolidations of thrift institutions with large
regional commercial banks in the Association's primary market area.
The Association believes that it has successfully implemented its
business strategy by: (i) maintaining a strong capital base (see "HISTORICAL AND
PRO FORMA CAPITAL COMPLIANCE"); (ii) seeking to reduce its exposure to
fluctuations in market interest rates (see "-- Asset and Liability Management");
(iii) promoting local loan originations (see "BUSINESS OF THE ASSOCIATION --
Lending Activities -- General"); (iv) supplementing its traditional menu of
mortgage loan products with a variety of consumer loan products (see "BUSINESS
OF THE ASSOCIATION -- Lending Activities -- Consumer and Other Lending"); (v)
providing check imaging services and offering commercial deposit accounts to
complement its commercial real estate and commercial business lending activities
(see BUSINESS OF THE ASSOCIATION -- Deposit Activities and Other Sources of
Funds); (vi) making an equity investment in a regional mortgage banking company
(see BUSINESS OF THE ASSOCIATION -- Subsidiary Activities"); and (vii) expanding
its branch office network (see BUSINESS OF THE ASSOCIATION -- Properties"). The
Association believes that the capital raised in the Offerings will enhance its
ability to continue implementing its business strategy.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996, JUNE 30, 1996 AND JUNE
30, 1995
Total assets were $375.5 million, $357.0 million and $322.7 million at
December 31, 1996, June 30, 1996 and June 30, 1995, respectively. This increase
resulted primarily from growth in the loan portfolio, which was funded primarily
by deposit growth.
Loans receivable, net, amounted to $331.7 million, $314.9 million and
$267.4 million at December 31, 1996, June 30, 1996 and June 30, 1995,
respectively. A substantial portion of the Association's loan portfolio is
secured by real estate, either as primary or secondary collateral, located in
its primary market area of Spartanburg County, South Carolina. There are certain
risks associated with this credit concentration. See "RISK FACTORS --
Concentration of Credit Risk." In addition, the period between June 30, 1995 and
December 31, 1996 saw a continuing trend in the growth of the construction loan
and consumer loan portfolios as the Association emphasized the origination of
loans with shorter maturities for asset and liability management purposes. See
"-- Asset and Liability Management." Construction and consumer loans are
generally riskier than one- to- four family mortgage loans. See "RISK FACTORS --
Certain Lending Risks" and "BUSINESS OF THE ASSOCIATION -- Lending Activities."
Loans held-for-sale were $1.4 million, $1.9 million and $15.3 million
at December 31, 1996, June 30, 1996 and June 30, 1995, respectively. The
Association sold $13.3 million of loans classified as held-for-sale whose
aggregate market value was less than their aggregate principal balances during
the year ended June 30, 1995 after determining that the prospects of their
carrying value equalling or exceeding market value in the foreseeable future was
remote. During the year ended June 30, 1996, the Association reclassified
approximately $20.9 million of loans from held-for-sale to held-for-investment
(at the lower of cost or market at the time of reclassification) after
management reevaluated its intent with respect to their disposition. See "--
Results of Operations -- Comparison of Operating Results for the Years Ended
June 30, 1995 and 1994 -- Other Income (Expense)."
23
<PAGE>
Cash and cash equivalents amounted to $17.1 million, $10.8 million and
$16.0 million at December 31, 1996, June 30, 1996 and June 30, 1995,
respectively. The decrease between June 30, 1996 and 1995 reflects the purchase
of marketable equity securities (mutual fund shares). The increase between
December 31, 1996 and June 30, 1996 reflects proceeds from the sale of such
marketable equity securities, which were sold to increase regulatory liquidity,
and, to a lesser extent, deposit growth. See "-- Liquidity and Capital
Resources."
Held-to-maturity investment securities were $5.5 million at June 30,
1995, with no similar holdings at either December 31, 1996 or June 30, 1996. In
December 1995, the Association adopted the implementation guidance allowed by
the Financial Accounting Standards Board ("FASB") under its Special Report "A
Guide to Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities, and reclassified investment securities classified
as held-to-maturity to available-for-sale classification without tainting the
remainder of the held-to-maturity investment securities portfolio. See Note 1 of
Notes to Consolidated Financial Statements.
Available-for-sale investment securities were $13.5 million, $18.2
million and $8.2 million at December 31, 1996, June 30, 1996 and June 30, 1995,
respectively. The increase between June 30, 1996 and 1995 reflects the
reclassification of held-to-maturity securities and the purchase of additional
securities, both described above. The decrease between December 31, 1996 and
June 30, 1996 resulted primarily from the sale of marketable equity securities
to increase regulatory liquidity, also described above.
Office properties and equipment, net, were $5.5 million, $5.1 million
and $4.4 million at December 31, 1996, June 30, 1996 and June 30, 1995,
respectively. The increase between June 30, 1996 and 1995 resulted primarily
from the acquisition of land for the construction of the Inman branch office and
property adjacent to the Association's main office for possible future expansion
needs (see "BUSINESS OF THE ASSOCIATION -- Properties") and the purchase of
check imaging equipment and other computer technology upgrades. The increase
between December 31, 1996 and June 30, 1996 resulted primarily from the
acquisition of land adjacent to the Boiling Springs branch office for possible
future expansion needs.
Deposit accounts totaled $324.0 million, $305.8 million and $275.9
million at December 31, 1996, June 30, 1996 and June 30, 1995, respectively. The
increases between December 31, 1996, June 30, 1996 and June 30, 1995 were the
result of aggressive marketing and promotion. See "-- Results of Operations --
Comparison of Operating Results for the Years Ended June 30, 1996 and 1995 --
Other Operating Expenses, "-- Results of Operations -- Comparison of Operating
Results for the Years Ended June 30, 1995 and 1994 -- Other Operating Expenses"
and "BUSINESS OF THE ASSOCIATION -- Deposit Activities and Other Sources of
Funds."
Total equity was $44.8 million, $44.2 million and $40.7 million at
December 31, 1996, June 30, 1996 and June 30, 1995, respectively. These
increases were primarily the result of retained earnings.
RESULTS OF OPERATIONS
The earnings of the Association depend primarily on its level of net
interest income, which is the difference between interest earned on the
Association's interest-earning assets and the interest paid on interest-bearing
liabilities. Net interest income is a function of the Association's interest
rate spread, which is the difference between the yield earned on
interest-earning assets and the rate paid on interest-bearing liabilities, as
well as a function of the average balance of interest-earning assets as compared
to the average balance of interest-bearing liabilities.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
AND 1995
NET INCOME. Net income was $607,000 for the six months ended December
31, 1996 compared to $1.9 million for the six months ended December 31, 1995, a
68.1% decline, primarily as a result of increases in the provision for loan
losses and in other operating expenses, offset by an increase in other income.
The increase in other operating expenses was primarily the result of the
legislatively-mandated, one-time assessment levied by the
24
<PAGE>
FDIC on all SAIF-insured institutions to recapitalize the SAIF. Without this
assessment, which amounted to $1.1 million after tax, net income would have been
$1.7 million for the six months ended December 31, 1996.
NET INTEREST INCOME. Net interest income increased 15.8% from $5.7
million for the six months ended December 31, 1995 to $6.6 million for the six
months ended December 31, 1996. Total investment income increased 9.2% from
$13.0 million for the six months ended December 31, 1995 to $14.2 million for
the six months ended December 31, 1996 primarily as a result of an increase in
the average balance of interest-earning assets from $326.8 million to $352.4
million. Interest expense increased 4.1% from $7.3 million for the six months
ended December 31, 1995 to $7.6 million for the six months ended December 31,
1996 as a result of an increase in the average balance of deposits from $289.8
million to $313.7 million. The increase in the average balance of deposits more
than offset a decrease in the average cost of deposits from 5.06% for the six
months ended December 31, 1995 to 4.82% for the six months ended December 31,
1996. The decrease in the average cost of deposits resulted primarily from a
lower average rate paid on certificates of deposit, offset slightly by an
increase in the weighted average rate paid on passbook accounts. The higher
average rates paid on certificates of deposits during the six months ended
December 31, 1995 resulted from a promotion that had expired by the beginning of
the six months ended December 31, 1996. The higher average rate paid on passbook
accounts during the six months ended December 31, 1996 also resulted from a
promotion. Interest rate spread increased to 3.21% for the six months ended
December 31, 1996 from 2.92% for the six months ended December 31, 1995.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charges to
earnings to bring the total allowance for loan losses to a level considered by
management as adequate to provide for estimated loan losses based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans and economic conditions. Management also
considers the level of problem assets that the Association classifies according
to OTS regulations. The Association gives greater weight to the level of
classified assets than to the level of nonperforming assets (nonaccrual loans,
accruing loans contractually past due 90 days or more, and real estate acquired
in settlement of loans) because classified assets include not only nonperforming
assets but also performing assets that otherwise exhibit, in management's
judgment, potential credit weaknesses. See "BUSINESS OF THE ASSOCIATION --
Lending Activities -- Nonperforming Assets and Delinquencies" and "-- Lending
Activities -- Asset Classification."
The provision for loan losses was $675,000 for the six months ended
December 31, 1996 compared to $4,000 for the same period in 1995. Management
deemed the increase in the provision for loan losses necessary in light of the
increase in the relative level of estimated losses caused by the growth of the
loan portfolio and a continuing increase in classified assets between December
31, 1995 and December 31, 1996. The increase in classified assets resulted
primarily from an increase in construction loan delinquencies, which management
attributes to slower sales of homes of the type sold by the Association's
construction loan borrowers in the Association's primary market area. See "RISK
FACTORS -- Certain Lending Risks." Although no assurances can be given,
management expects the trend of increased classified assets to continue
moderately based upon its expectation for continued loan growth, particularly in
the areas of construction, commercial real estate and consumer lending.
Management deemed the allowance for loan losses adequate at December 31, 1996.
25
<PAGE>
OTHER INCOME (EXPENSE). Other income increased from $599,000 for the
six months ended December 31, 1995 to $702,000 for the six months ended December
31, 1996, primarily as a result of the increase in service charges and fees
offset by a decrease in other income. Service charges and fees increased from
$413,000 for the six months ended December 31, 1995 to $596,000 for the same
period in 1996 primarily as a result of increased income associated with the
origination and sale of FHA and VA mortgage loans and increased deposit account
fees, particularly on the increased number of negotiable order of withdrawal
("NOW") accounts. Other income, net, decreased from $186,000 for the six months
ended December 31, 1995 to $85,000 for the six months ended December 31, 1996
primarily as a result of a $100,000 loss representing the Association's share of
the losses incurred by the mortgage banking company in which the Association's
service corporation subsidiary has an equity investment. See "BUSINESS OF THE
ASSOCIATION -- Subsidiary Activities" and Note 1 to Notes to Consolidated
Financial Statements.
OTHER OPERATING EXPENSES. Other operating expenses were $5.6 million
for the six months ended December 31, 1996 compared to $3.3 million for the same
period in 1995. This increase resulted primarily from the FDIC special
assessment on all SAIF-insured institutions to recapitalize the SAIF. The
Association's assessment amounted to $1.8 million and was accrued during the
quarter ended September 30, 1996. Prior to the SAIF recapitalization, the
Association's total annual deposit insurance premiums amounted to 0.23% of
assessable deposits. Effective January 1, 1997, the rate decreased to 0.065% of
assessable deposits. See "REGULATION -- Federal Regulation of Savings
Associations -- Federal Deposit Insurance Corporation" and Note 10 to Notes to
Consolidated Financial Statements. Additionally, employee compensation and
benefits increased from $1.5 million for the six months ended December 31, 1995
to $1.7 million for the same period in 1996 as a result of the hiring of
additional operations personnel to service the increased number of NOW accounts
and the hiring of the Association's current Chief Financial Officer in June
1996. The increases in other categories of other operating expenses generally is
attributable the general growth of the Association and to inflation. The
Association anticipates that other operating expenses will increase in
subsequent periods following the consummation of the Conversion as a result of
increased costs associated with operating as a public company and increased
compensation expense as a result of the adoption of the ESOP and, if approved by
the Holding Company's stockholders, the MRP. The opening of the new branch
offices also will contribute to increased operating expenses in future periods.
See "RISK FACTORS -- Return on Equity After Conversion," "-- New Expenses
Associated With the ESOP and MRP" and "BUSINESS OF THE ASSOCIATION --
Properties."
INCOME TAXES. The provision for income taxes was $365,000 for the six
months ended December 31, 1996 compared to $1.1 million for the six months ended
December 31, 1995 as a result of lower income before taxes.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
NET INCOME. Net income was $3.5 million for the year ended June 30,
1996 compared to $4.1 million a year earlier, a 14.6% decline, primarily as a
result of a decrease in net interest income and increases in the provision for
loan losses and in other operating expenses, offset by an increase in other
income.
NET INTEREST INCOME. Net interest income was $11.8 million for the year
ended June 30, 1996 compared to $12.5 million for the year ended June 30, 1995,
a 5.6% decline. A 10.9% increase in investment income, from $23.8 million in
1995 to $26.4 million in 1996, was more than offset by a 30.1% increase in
interest expense, from $11.3 million in 1995 to $14.7 million in 1996. The
increase in investment income resulted primarily from an increase in the average
balance of interest-earning assets from $302.2 million in 1995 to $331.4 million
in 1996 and an increase in the average yield on interest-earning assets from
7.89% in 1995 to 7.98% in 1996 as a result of a combination of higher market
interest rates and an increase in the average balance of higher yielding
consumer and other loans. The increase in interest expense was primarily the
result of an increase in the average cost of deposits from 4.18% for 1995 to
4.97% for 1996 as a result of a combination of higher market interest rates and
competitive pricing to increase deposit balances, coupled with an increase in
the average balance of deposits from $270.1 million for 1995 to $295.0 million
for 1996, which resulted in a decline in interest rate spread from 3.71% in 1995
to 3.01% in 1996.
26
<PAGE>
PROVISION FOR LOAN LOSSES. The provision for loan losses was $419,000
for the year ended June 30, 1996 compared to $9,000 for the year ended June 30,
1995. Management deemed the increase in the provision for loan losses necessary
in light of the growth of the loan portfolio, particularly in the areas of
construction and consumer lending, which are generally considered to have a
greater risk of loss than one- to- four family residential mortgage loans, and
an increase in non-performing assets, primarily construction loans. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities -- Construction Lending" and
"-- Lending Activities -- Nonperforming Assets and Delinquencies."
OTHER INCOME (EXPENSE). Other income was $1.3 million for the year
ended June 30, 1996 compared to $334,000 for the year ended June 30, 1995. In
1995, there was a $1.1 million loss on the sale of mortgage loans held for sale
and a $396,000 loss on the sale of investments, both of which were absent in
1996. See "-- Comparison of Financial Condition at December 31, 1996, June 30,
1996 and June 30, 1995" and "--Comparison of Operating Results for the Year
Ended June 30, 1996 and 1995 -- Other Income (Expense)."
OTHER OPERATING EXPENSES. Other operating expenses were $7.0 million
for the year ended June 30, 1996 compared to $6.2 million in 1995, an increase
of 12.9%, primarily as a result of increases in occupancy and equipment expense,
advertising and promotions expense, and office supplies, postage and printing
expenses. Occupancy and equipment expense increased to $731,000 for the year
ended June 30, 1996 from $631,000 for the year ended June 30, 1995, primarily as
a result of increased depreciation expense of computer and other equipment and,
to a lesser extent, general maintenance and repairs on the Association's
properties. Advertising and promotions expense increased to $418,000 for the
year ended June 30, 1996 from $286,000 for the year ended June 30, 1995 as a
result of increased advertising and promotions developed with the assistance of
a consultant retained to develop and implement strategies to increase the
Association's deposit base. Office supplies, postage and printing expenses
increased to $502,000 for the year ended June 30, 1996 from $334,000 for the
year ended June 30, 1995 as a result of expenses associated with the development
of product marketing materials and increased expenses associated with the
increase in NOW accounts.
INCOME TAXES. The provision for income taxes was $2.1 million for the
year ended June 30, 1996 compared to $2.5 million for the year ended June 30,
1995 as a result of lower income before taxes.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
NET INCOME. Net income was $4.1 million for the year ended June 30,
1995 compared to $4.5 million for the year ended June 30, 1994, a 8.9% decline,
primarily as a result of a decrease in net interest income and an increase in
other operating expenses, offset by an increase in other income (expense).
NET INTEREST INCOME. Net interest income remained relatively stable
between 1994 and 1995. Net interest income was $12.5 million for the year ended
June 30, 1995 compared to $12.8 million for the year ended June 30, 1994, a 2.3%
decline. Interest rate spread decreased to 3.71% in 1995 from 3.94% in 1994
primarily as a result of an increase in the average cost of interest-bearing
liabilities to 4.18% in 1995 from 3.86% in 1994, which more than offset
increases in the average balance of interest earning assets to $302.2 million in
1995 from $296.7 million in 1994 and in the average yield on interest-earning
assets to 7.89% in 1995 from 7.80% in 1994. The increase in the average cost of
liabilities resulted primarily from higher market interest rates, which affected
the weighted average rate paid on certificates of deposit, and, to a lesser
extent, by a shift in the deposit mix from passbook and other transaction
accounts to higher costing certificates of deposit. The increase in the average
yield on interest earning assets resulted primarily from the combination of a
decrease in the average balances of federal funds and overnight interest-bearing
deposits and investment securities, which generally have lower yields than
loans, and an increase in the average balance of loans receivable, net.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $9,000 for
1995. There was no provision for loan losses in 1994 as management deemed the
allowance for loan losses at June 30, 1994 adequate to provide for estimated
loan losses at that date.
27
<PAGE>
OTHER INCOME (EXPENSE). Other income was $334,000 for the year ended
June 30, 1995 compared to $84,000 for the year ended June 30, 1994. Income from
service charges and fees increased in 1995 primarily as a result of deposit
growth. The sale of mortgage loans held-for-sale during 1995 contributed to a
$1.1 million loss. At June 30, 1994, the aggregate principal balance of loans
held-for-sale exceeded their market value by $668,000. As a result, a valuation
allowance of $668,000 was established and an unrealized loss of $668,000 was
recorded as an other expense in 1994. At June 30, 1995, the aggregate market
value of such loans exceeded their aggregate principal balance. Consequently, no
valuation allowance was established and an unrealized gain of $668,000 was
recorded as other income in 1995. See "-- Comparison of Financial Condition at
December 31, 1996, June 30, 1996 and June 30, 1995."
OTHER OPERATING EXPENSES. Other operating expenses were $6.2 million in
1995 compared to $5.7 million in 1994, an increase of 8.8% primarily as a result
of general increases in all expense categories as a result of the growth of the
Association during the year.
INCOME TAXES. The provision for income taxes was $2.5 million for the
year ended June 30, 1995 compared to $2.7 million for the year ended June 30,
1994 as a result of lower income before income taxes.
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS/COST
The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. Such yields and costs for the periods indicated are derived by dividing
income or expense by the average balances of assets or liabilities,
respectively, for the periods presented. Average balances are derived from daily
balances for the six months ended December 31, 1996 and 1995 and for the year
ended June 30, 1996. Average balance for the years ended June 30, 1995 and 1994
were derived from month-end balances. Management does not believe that the use
of month-end balances instead of daily balances has caused any material
inconsistencies in the information presented.
28
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended December 31, Year Ended June 30,
1996 1995 1996
-------------------------- -------------------------- -----------------------------------
Interest Interest Interest
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1).......... $325,969 $13,305 8.16% $290,257 $11,946 8.23% $298,865 $24,421 8.17%
Mortgage-backed securities......... 148 5 6.76 366 16 8.74 333 29 8.71
Investment securities.............. 15,235 505 6.63 16,158 451 5.58 17,035 997 5.85
FHLB stock......................... 2,807 102 7.27 2,649 97 7.32 2,693 196 7.28
Federal funds sold and overnight
interest-bearing deposits......... 8,287 240 5.79 17,385 527 6.06 12,517 802 6.41
Total interest-earning assets.... 352,446 14,157 8.03 326,815 13,037 7.98 331,443 26,445 7.98
------- ------ ------- ------ ------- ------
Non-interest-earning assets......... 13,777 11,846 12,947
-------- -------- --------
Total assets..................... $366,223 $338,661 $344,390
======== ======== ========
Interest-bearing liabilities(2):
Passbook accounts.................. $54,310 1,043 3.84 $36,072 636 3.53 $39,289 1,364 3.47
Money market accounts.............. 14,521 235 3.24 17,583 319 3.63 17,196 626 3.64
NOW accounts....................... 28,346 233 1.64 25,894 261 2.02 27,351 542 1.98
Certificate accounts............... 216,528 6,057 5.59 210,261 6,116 5.82 211,179 12,137 5.75
-------- ------ -------- ------ -------- -------
Total interest-bearing liabilities 313,705 7,568 4.82 289,810 7,332 5.06 295,015 14,669 4.97
-------- ------ -------- ------ -------- -------
Non-interest-bearing liabilities.... 7,209 6,908 6,422
--------- --------- ---------
Total liabilities................ 320,914 296,718 301,437
--------- --------- ---------
Retained earnings................... 45,309 41,943 42,953
--------- --------- ---------
Total liabilities and retained
earnings $366,223 $338,661 $344,390
======== ======== ========
Net interest income................. $6,589 $5,705 $11,776
====== ====== =======
Interest rate spread................ 3.21% 2.92% 3.01%
Net interest margin................. 3.74% 3.49% 3.55%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 1.12% 1.13% 1.12%
</TABLE>
<TABLE>
<CAPTION>
Years Ended June 30,
1995 1994
---------------------------------- ----------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1).......... $273,778 $22,086 8.07% $260,135 $21,414 8.23%
Mortgage-backed securities......... 416 35 8.41 710 59 8.31
Investment securities.............. 17,357 994 5.73 22,866 1,101 4.82
FHLB stock......................... 2,649 185 6.98 2,625 140 5.33
Federal funds sold and overnight
interest-bearing deposits......... 8,020 535 6.67 10,322 439 4.25
-------- ------- -------- -------
Total interest-earning assets.... 302,220 23,835 7.89 296,658 23,153 7.80
------- ------ ------- ------
Non-interest-earning assets......... 11,734 12,250
-------- --------
Total assets..................... $313,954 $308,908
======== ========
Interest-bearing liabilities(2):
Passbook accounts.................. $33,306 979 2.94 $34,469 1,003 2.91
Money market accounts.............. 22,376 718 3.21 22,998 765 3.33
NOW accounts....................... 26,244 545 2.08 27,454 517 1.88
Certificate accounts............... 188,140 9,060 4.82 184,393 8,102 4.39
-------- ------- -------- -------
Total interest-bearing liabilities 270,066 11,302 4.18 269,314 10,387 3.86
-------- ------- -------- -------
Non-interest-bearing liabilities.... 5,341 4,884
--------- ---------
Total liabilities................ 275,407 274,198
--------- ---------
Retained earnings................... 38,547 34,710
--------- ---------
Total liabilities and retained $313,954 $308,908
earnings
======== ========
Net interest income................. $12,533 $12,766
======= =======
Interest rate spread................ 3.71% 3.94%
Net interest margin................. 4.15% 4.30%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 1.12% 1.10%
</TABLE>
(1) Includes loans held-for-sale. Does not include interest on nonaccrual
loans.
(2) Does not include escrow balances.
29
<PAGE>
YIELDS EARNED AND RATES PAID
The following table sets forth for the periods and at the dates
indicated the weighted average yields earned on the Association's assets and the
weighted average interest rates paid on the Association's liabilities, together
with the net yield on interest-earning assets.
<TABLE>
<CAPTION>
At Six Months Ended
December 31, December 31, Years Ended June 30,
---------------- --------------------------------------
1996 1996 1995 1996 1995 1994
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Weighted average yield on:
Loans receivable, net......................... 8.12% 8.16% 8.23% 8.17% 8.07% 8.23%
Mortgage-backed securities.................... 8.40 6.76 8.74 8.71 8.41 8.31
Investment securities......................... 6.34 6.63 5.58 5.85 5.73 4.82
FHLB stock.................................... 7.25 7.27 7.32 7.28 6.98 5.33
Federal funds sold and overnight
interest-bearing deposits.................... 5.14 5.79 6.06 6.41 6.67 4.25
All interest-earning assets................... 7.96 8.03 7.98 7.98 7.89 7.80
Weighted average rate paid on:
Passbook accounts............................. 3.72 3.84 3.53 3.47 2.94 2.91
Money market accounts......................... 3.17 3.24 3.63 3.64 3.21 3.33
NOW accounts.................................. 1.83 1.64 2.02 1.98 2.08 1.88
Certificate accounts.......................... 5.59 5.59 5.82 5.75 4.82 4.39
All interest-bearing liabilities.............. 4.81 4.82 5.06 4.97 4.18 3.86
Interest rate spread (spread between weighted
average rate on all interest-earning assets
and all interest-
bearing liabilities).......................... 3.18 3.21 2.92 3.01 3.71 3.94
Net interest margin (net interest
income as a percentage of average
interest-earning assets)....................... N/A 3.74 3.49 3.55 4.15 4.30
</TABLE>
30
<PAGE>
The following table sets forth the effects of changing rates and
volumes on the interest income and interest expense of the Association.
Information is provided with respect: (i) to effects attributable to changes in
volume (changes in volume multiplied by prior rate); and (ii) to effects
attributable to changes in rate (changes in rate multiplied by prior volume).
The net change attributable to the combined impact of volume and rate has been
allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
Six Months Ended December 31, 1996
Compared to Six Months Ended Year Ended June 30, 1996
December 31, 1995 Compared to Year Ended June 30, 1995
Increase (Decrease) Increase (Decrease)
Due to Due to
--------------------------------------------- ----------------------------------------
Rate Volume Total Rate Volume Total
---- ------ ----- ---- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1)............... $(101) $1,460 $1,359 $278 $2,057 $2,335
Mortgage-backed securities.............. (3) (8) (11) 1 (7) (6)
Investment securities................... 78 (24) 54 21 (18) 3
FHLB stock.............................. -- 5 5 8 3 11
Federal funds sold and overnight
interest-bearing deposits.............. (23) (264) (287) (20) 287 267
------ -------- -------- ------ ------- -------
Total net change in income
on interest-earning assets.............. (49) 1,169 1,120 288 2,322 2,610
----- ------- -------- ----- ------- -------
Interest-bearing liabilities:
Passbook accounts....................... 60 347 407 193 192 385
Money market accounts................... (32) (52) (84) 126 (218) (92)
NOW accounts............................ (57) 29 (28) (26) 23 (3)
Certificate accounts.................... (240) 181 (59) 1,883 1,194 3,077
------ ------- -------- ----- ------- -------
Total net change in expense
on interest-bearing liabilities......... (269) 505 236 2,176 1,191 3,367
-------- ------- ------- -------- ------- -------
Net change in net interest income........ $ 220 $ 664 $ 884 $(1,888) $1,131 $ (757)
======= ====== ====== ======== ====== =======
</TABLE>
Year Ended June 30, 1995
Compared to Year Ended June 30, 1994
Increase (Decrease)
Due to
------------------------------------
Rate Volume Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable, net (1).............. $(395) $1,067 $ 672
Mortgage-backed securities............. 1 (25) (24)
Investment securities.................. 384 (491) (107)
FHLB stock............................. 44 1 45
Federal funds sold and overnight
interest-bearing deposits............. 158 (62) 96
------ -------- ------
Total net change in income
on interest-earning assets............. 192 490 682
------ ------- ------
Interest-bearing liabilities:
Passbook accounts...................... 10 (34) (24)
Money market accounts.................. (27) (20) (47)
NOW accounts........................... 48 (20) 28
Certificate accounts................... 794 164 958
------ ------- ------
Total net change in expense
on interest-bearing liabilities........ 825 90 915
------ ------ ------
Net change in net interest income....... $(633) $ 400 $(233)
====== ===== ======
(1) Does not include interest on nonaccrual loans.
31
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The Association's principal financial objective is to achieve long-term
profitability while reducing its exposure to fluctuating market interest rates.
The Association has sought to reduce the exposure of its earnings to changes in
market interest rates by attempting to manage the mismatch between asset and
liability maturities and interest rates. The principal element in achieving this
objective is to increase the interest-rate sensitivity of the Association's
interest-earning assets by retaining for its portfolio loans with interest rates
subject to periodic adjustment to market conditions and periodically selling
fixed-rate one- to- four family mortgage loans. In addition, the Association
maintains an investment portfolio of U.S. Government and agency securities with
contractual maturities of between one and five years. The Association relies on
retail deposits as its primary source of funds. Management believes retail
deposits, compared to brokered deposits, reduce the effects of interest rate
fluctuations because they generally represent a more stable source of funds. As
part of its interest rate risk management strategy, the Association promotes
transaction accounts and certificates of deposit with terms up to four years.
In order to encourage institutions to reduce their interest rate risk, the OTS
adopted a rule incorporating an interest rate risk component into the risk-based
capital rules. Using data compiled by the FHLB-Atlanta, the Association receives
a report which measures interest rate risk by modeling the change in NPV over a
variety of interest rate scenarios. This procedure for measuring interest rate
risk was developed by the OTS to replace the "gap" analysis (the difference
between interest-earning assets and interest-bearing liabilities that mature or
reprice within a specific time period). NPV is the present value of expected
cash flows from assets, liabilities and off- balance sheet contracts. The
calculation is intended to illustrate the change in NPV that will occur in the
event of an immediate change in interest rates of at least 200 basis points with
no effect given to any steps that management might take to counter the effect of
that interest rate movement. Under proposed OTS regulations, an institution with
a greater than "normal" level of interest rate risk will be subject to a
deduction from total capital for purposes of calculating its risk-based capital.
An institution with a "normal" level of interest rate risk is defined as one
whose "measured interest rate risk" is less than 2.0%. Institutions with assets
of less than $300 million and a risk-based capital ratio of more than 12.0% are
exempt, however, the Association is not exempt because of its asset size. Based
on the Association's regulatory capital levels at December 31, 1996, the
Association believes that, if the proposed regulation was implemented at that
date, it would not have had a material adverse effect on the Association's
regulatory capital compliance.
The following table is provided by the FHLB-Atlanta and sets forth the change
in the Association's NPV at December 31, 1996, based on FHLB-Atlanta
assumptions, that would occur in the event of an immediate change in interest
rates, with no effect given to any steps that management might take to
counteract that change.
Basis Point ("bp") Estimated Change in
Change in Rates Net Portfolio Value
------------------ ---------------------
(Dollars in Thousands)
+400 $(28,191) (49.2)%
+300 (20,537) (35.8)
+200 (12,882) (22.5)
+100 (6,441) (11.2)
0 0 0
-100 3,862 6.7
-200 7,724 13.5
-300 8,514 14.9
-400 9,304 16.2
The above table illustrates, for example, that an instantaneous 200
basis point increase in market interest rates at December 31, 1996 would reduce
the Association's NPV by approximately $12.9 million, or 22.5%, at that date.
32
<PAGE>
Certain assumptions utilized by the FHLB-Atlanta in assessing the
interest rate risk of savings associations within its region were utilized in
preparing the preceding table. These assumptions relate to interest rates, loan
prepayment rates, deposit decay rates, and the market values of certain assets
under differing interest rate scenarios, among others.
As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in the foregoing
table. For example, although certain assets and liabilities may have similar
maturities or periods to repricing, they may react in different degrees to
changes in market interest rates. Also, 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, certain assets, such as ARM loans, have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset. Further, in the event of a change in interest rates, expected rates
of prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.
LIQUIDITY AND CAPITAL RESOURCES
The Association's primary sources of funds are customer deposits,
proceeds from principal and interest payments on and the sale of loans, maturing
securities and FHLB advances. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage prepayments
are greatly influenced by general interest rates, economic conditions and
competition.
The Association must maintain an adequate level of liquidity to ensure
the availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. The Association generally maintains sufficient cash
and short-term investments to meet short-term liquidity needs. At December 31,
1996, cash and cash equivalents totalled $17.1 million, or 4.6% of total assets,
and investment securities classified as available-for-sale with maturities of
one year or less totalled $502,000. At December 31, 1996, the Association also
maintained, but did not draw upon, an uncommitted credit facility with the
FHLB-Atlanta, which provided for immediately available advances up to an
aggregate amount of $40.0 million.
OTS regulations require savings institutions to maintain an average
daily balance of liquid assets (cash and eligible investments) equal to at least
5.0% of the average daily balance of its net withdrawable deposits and
short-term borrowings. In addition, short-term liquid assets currently must
constitute 1.0% of the sum of net withdrawable deposit accounts plus short-term
borrowings. The Association's actual short- and long-term liquidity ratios at
December 31, 1996 were 7.2% and 6.1%, respectively. In addition, although not
includable in calculating regulatory liquidity, at December 31, 1996, the
Association had an investment in marketable equity securities with a market
value of $5.0 million that is readily saleable to meet liquidity needs. See "--
Comparison of Financial Condition at December 31, 1996, June 30, 1996 and June
30, 1995" and "BUSINESS OF THE ASSOCIATION -- Investment Activities."
The Association's primary investing activity is the origination of one-
to- four family mortgage loans. During the six months ended December 31, 1996
and the years ended June 30, 1996, 1995 and 1994, the Association originated
$25.1 million, $59.3 million, $32.8 million and $91.2 million of such loans,
respectively. At December 31, 1996, the Association had loan commitments
totalling $4.4 million and undisbursed loans in process totalling $12.0 million.
The Association anticipates that it will have sufficient funds available to meet
current loan commitments. Certificates of deposit that are scheduled to mature
in less than one year from December 31, 1996 totalled $175.3 million.
Historically, the Association has been able to retain a significant amount of
its deposits as they mature.
OTS regulations require the Association to maintain specific amounts of
regulatory capital. As of December 31, 1996, the Association complied with all
regulatory capital requirements as of that date with tangible, core and
risk-based capital ratios of 11.9%, 11.9% and 20.8%, respectively. For a
detailed discussion of regulatory capital
33
<PAGE>
requirements, see "REGULATION -- Federal Regulation of Savings Associations --
Capital Requirements." See also "HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE."
IMPACT OF ACCOUNTING PRONOUNCEMENTS AND REGULATORY POLICIES
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN. See Note 1 to Notes
to Consolidated Financial Statements for a discussion of Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures." The Association adopted SFAS No. 114 and
SFAS No. 118 effective July 1, 1995, and their adoption did not have a material
effect on the Association's financial condition or results of operations.
ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS. In November 1993, the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 93-6, which requires an employer to record compensation expense in an
amount equal to the fair value of shares committed to be released to employees
from an employee stock ownership plan and to exclude unallocated shares from
earnings per share computations. The effect of SOP 93-6 on net income and book
value per share in future periods cannot be predicted due to the uncertainty of
the fair value of the shares at the time they will be committed to be released.
See "PRO FORMA DATA."
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES. In December
1994, the Accounting Standards Executive Committee issued SOP 94-6, "Disclosure
of Certain Significant Risks and Uncertainties." This SOP applies to financial
statements prepared in conformity with GAAP by all nongovernmental entities. The
disclosure requirements in SOP 94-6 focus primarily on risks and uncertainties
that could significantly affect the amounts reported in the financial statements
in the near-term functioning of the reporting entity. The risks and
uncertainties discussed in SOP 94-6 stem from the nature of the entity's
operations, from the necessary use of estimates in the preparation of the
entity's financial statements and from significant concentrations in certain
aspects of the entity's operations. SOP 94-6 is effective for financial
statements issued for fiscal years ending after December 15, 1995 and did not
have a material impact on the financial condition or results of operations of
the Association.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS. See Note 1 to Notes
to Consolidated Financial Statements for a discussion of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets
to Be Disposed Of." The Association adopted SFAS No. 121 on July 1, 1996 and it
did not have a material impact on its financial condition or results of
operations.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS. See Note 1 to Notes to Consolidated
Financial Statements for a discussion of SFAS No. 122, "Accounting for Mortgage
Servicing Rights." The Association implemented SFAS No. 122, prospectively,
effective July 1, 1996 and its implementation did not have a material impact on
the Association's financial condition or results of operations. Effective
January 1, 1997, SFAS No. 122 was superseded by SFAS No. 125 discussed below.
ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 123, "Accounting for
Stock-Based Compensation," establishes financial accounting and reporting
standards for stock-based employee compensation plans. This statement encourages
all entities to adopt a new method of accounting to measure compensation cost of
all employee stock compensation plans based on the estimated fair value of the
award at the date it is granted. Companies are, however, allowed to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting, which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with the existing
accounting method are required to disclose in a footnote to the financial
statements pro forma net income and, if presented, earnings per share, as if
this statement had been adopted. The accounting requirements of this statement
are effective for transactions entered into in fiscal years that begin after
December 15, 1995; however, companies are required to disclose information for
awards granted in their first fiscal year beginning after December 15, 1994.
Management of the Association has not completed an analysis of the potential
34
<PAGE>
effects of SFAS No. 123 on its financial condition or results of operations,
but expects to use the intrinsic value method upon consummation of the
Conversion.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENT OF LIABILITIES. See Note 1 to Notes to Consolidated Financial
Statements for a discussion of SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities, and of SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125." SFAS No. 127 defers the effective date of the application of certain
portions of SFAS No. 125 until January 1, 1998. The adoption of the provisions
of SFAS No. 125 and SFAS No. 127 did not have a material impact on the
Association's financial condition or results of operations.
EFFECT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related financial data
presented herein have been prepared in accordance with GAAP, 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 due to inflation. The primary impact of inflation is reflected in the
increased cost of the Association's operations. Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
BUSINESS OF THE HOLDING COMPANY
GENERAL
The Holding Company was organized as a Delaware business corporation
at the direction of the Association on February 4, 1997 for the purpose of
becoming a holding company for the Association upon completion of the
Conversion. As a result of the Conversion, the Association will be a
wholly-owned subsidiary of the Holding Company and all of the issued and
outstanding capital stock of the Association will be owned by the Holding
Company.
BUSINESS
Prior to the Conversion, the Holding Company has not and will not
engage in any significant activities other than of an organizational nature.
Upon completion of the Conversion, the Holding Company's sole business activity
will be the ownership of the outstanding capital stock of the Association. In
the future, the Holding Company may acquire or organize other operating
subsidiaries, although there are no current plans, arrangements, agreements or
understandings, written or oral, to do so.
Initially, the Holding Company will neither own nor lease any property
but will instead use the premises, equipment and furniture of the Association
with the payment of appropriate rental fees, as required by applicable law.
Since the Holding Company will only hold the outstanding capital stock
of the Association upon consummation of the Conversion, the competitive
conditions applicable to the Holding Company will be the same as those
confronting the Association. See "BUSINESS OF THE ASSOCIATION -- Competition."
35
<PAGE>
BUSINESS OF THE ASSOCIATION
GENERAL
The Association operates, and intends to continue to operate, as a
community oriented financial institution and is devoted to serving the needs of
its customers. The Association's business consists primarily of attracting
retail deposits from the general public and using those funds to originate real
estate loans. See "-- Lending Activities."
MARKET AREA
The Association considers Spartanburg County and adjacent counties in
Northwest South Carolina to be its primary market area because a large number of
its depositors reside in, and a substantial portion of its loan portfolio is
secured by properties located in, Spartanburg County. See "RISK FACTORS --
Concentration of Credit Risk." The City of Spartanburg, the county seat of
Spartanburg County, is located on Interstate 85 approximately 75 miles southwest
of Charlotte, North Carolina, and 35 miles northeast of Greenville, South
Carolina.
Spartanburg County and the City of Spartanburg had a 1990 population of
approximately 227,000 and 43,000, respectively, according the Spartanburg Area
Chamber of Commerce. The Spartanburg County economy is diverse and generally
stable. According to the U.S. Bureau of Labor Statistics, the Spartanburg County
unemployment rate was 4.0% for December 1996. According to the Spartanburg Area
Chamber of Commerce, major employers include Milliken & Company, Michelin Tire
Corp., Spartan Mills, Hoechst Celanese Corp., Spartanburg Regional Medical
Center and Bavarian Motor Works (BMW), among others.
The Association faces intense competition from many financial
institutions for deposits and loan originations. See "-- Competition" and "RISK
FACTORS -- Competition."
LENDING ACTIVITIES
GENERAL. At December 31, 1996, the Association's total loans receivable
portfolio amounted to $346.3 million, or 92.2% of total assets at that date. The
Association has traditionally concentrated its lending activities on
conventional first mortgage loans secured by one- to- four family properties,
with such loans amounting to $267.6 million, or 77.3% of the total loans
receivable portfolio at December 31, 1996. In addition, the Association
originates construction loans, commercial real estate loans, land loans,
consumer loans (including commercial business loans). A substantial portion of
the Association's loan portfolio is secured by real estate, either as primary or
secondary collateral, located in its primary market area. See "RISK FACTORS --
Concentration of Credit Risk."
36
<PAGE>
LOAN PORTFOLIO ANALYSIS. The following table sets forth the composition
of the Association's loan portfolio (excluding loans-held-for sale) at the dates
indicated. The Association had no concentration of loans exceeding 10% of total
gross loans other than as disclosed below.
<TABLE>
<CAPTION>
At June 30,
At December 31, 1996 1996 1995 1994
--------------------- ------------------- -------------------- --------------------
Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
One- to- four family.......... $267,593 77.3% $258,302 77.6% $217,702 77.3% $210,613 79.9%
Construction.................. 31,949 9.2 32,954 9.9 30,483 10.8 27,469 10.4
Land.......................... 2,409 0.7 3,285 1.0 1,762 0.6 1,484 0.6
Commercial and other.......... 4,571 1.3 3,546 1.1 6,203 2.2 5,648 2.1
---------- ----- -------- ----- -------- ----- -------- -----
Total mortgage loans......... $306,522 88.5 298,087 89.6 256,150 90.9 245,214 93.0
-------- ---- ------- ---- ------- ---- ------- ----
Consumer and Other Loans:
Home equity................... 32,555 9.4 28,430 8.5 20,859 7.4 15,104 5.7
Loans secured by
deposit accounts............. 1,979 0.6 1,605 0.5 1,345 0.5 1,030 0.4
Other......................... 5,235 1.5 4,681 1.4 3,482 1.2 2,266 0.9
---------- ------- -------- ----- ------- ---- -------- ----
Total consumer and other loans 39,769 11.5 34,716 10.4 25,686 9.1 18,400 7.0
--------- ------- -------- ---- ------- ---- -------- ----
Total loans receivable....... 346,291 100.00% 332,803 100.00% 281,836 100.00% 263,614 100.00%
====== ====== ====== ======
Less:
Undisbursed portion of loans
in process................... 12,008 15,839 12,761 14,587
Net deferred loan fees........ 979 1,028 1,082 1,232
Allowance for loan losses..... 1,650 1,000 600 600
---------- --------- --------- ---------
Total loans receivable, net.. $331,654 $314,936 $267,393 $247,195
======== ======== ======== ========
</TABLE>
1993 1992
--------------------- -----------------
Amount Percent Amount Percent
------ ------- ------ --------
Mortgage Loans:
One- to- four family.......... $202,348 83.2% $196,168 83.1%
Construction.................. 19,746 8.1 18,084 7.6
Land.......................... -- -- -- --
Commercial and other.......... 3,989 1.7 4,916 2.1
-------- ----- -------- -----
Total mortgage loans......... 226,083 93.0 219,168 92.8
------- ---- ------- ----
Consumer and Other Loans:
Home equity................... 14,048 5.8 13,944 5.9
Loans secured by
deposit accounts............. 1,286 0.5 1,352 0.6
Other......................... 1,693 0.7 1,651 0.7
-------- ----- -------- -----
Total consumer and other loans 17,027 7.0 16,947 7.2
-------- ----- -------- -----
Total loans receivable....... 243,110 100.00% 236,115 100.00%
====== ======
Less:
Undisbursed portion of loans
in process................... 10,311 7,227
Net deferred loan fees........ 1,031 766
Allowance for loan losses..... 600 400
--------- ---------
Total loans receivable, net.. $231,168 $227,722
======== ========
37
<PAGE>
ONE- TO- FOUR FAMILY REAL ESTATE LENDING. Historically, the Association
has concentrated its lending activities on the origination of loans secured by
first mortgage loans on existing one- to- four family residences located in its
primary market area. At December 31, 1996, $267.6 million, or 77.3% of the
Association's total loan portfolio consisted of such loans. The Association
originated $25.1 million, $59.3 million, $32.8 million and $91.2 million of one-
to- four family residential mortgage loans during the six months ended December
31, 1996 and the years ended June 30, 1996, 1995 and 1994, respectively.
The Association participates in the FHA Direct Endorsement Program,
which allows the Association's in-house, FHA-approved, direct endorsement
underwriters to approve or reject FHA-insured one- to- four family mortgage
loans up to maximum amounts established by the FHA. The Association is also a VA
"automatic approved lender," which enables designated Association personnel to
approve or reject VA-insured, one- to- four family mortgage loans on behalf of
the Association. The Association generally sells all FHA and VA loan
originations, servicing released.
Generally, the Association's fixed-rate one- to- four family mortgage
loans have maturities ranging from ten to 30 years and are fully amortizing with
monthly payments sufficient to repay the total amount of the loan with interest
by the end of the loan term. Generally, they are originated under terms,
conditions and documentation which permit them to be sold to U.S. Government
sponsored agencies such as Federal National Mortgage Association ("FNMA"). The
Association's fixed-rate loans customarily include "due on sale" clauses, which
give the Association the right to declare a loan immediately due and payable in
the event the borrower sells or otherwise disposes of the real property subject
to the mortgage and the loan is not paid.
The Association offers ARM loans at rates and terms competitive with
market conditions. At December 31, 1996, $96.3 million, or 27.8%, of the
Association's total gross loan portfolio were subject to periodic interest rate
adjustments. Substantially all of the Association's ARM loan originations meet
the underwriting standards of FNMA even though the Association originates ARM
loans primarily for its own portfolio. The Association originates for its
portfolios ARM loans which provide for an interest rate which adjusts every year
or which is fixed for five or ten years and then adjusts every year after the
initial period. Most of the Association's one-year and ten-year ARMs adjust
every year based on the one year Treasury constant maturity index while the
interest rate adjustment for its five-year ARMs after the initial fixed period
is based on the ten year U.S. Treasury securities rate. The Association's ARMs
are typically based on a 30-year amortization schedule. The Association
qualifies the borrowers on its ARM loans based on the initial rate. The one-year
ARM loan may generally be converted to a fixed-rate loan within five years of
origination. The ten year ARM provides a conversion option after seven years
have elapsed. The Association does not offer deep discount or "teaser" rates.
The Association's current ARM loans do not provide for negative amortization. At
December 31, 1996, however, 24 loans aggregating $1.1 million provide for
negative amortization at the borrowers' option. These loans were originated more
than ten years ago. The Association's ARM loans generally provide for annual and
lifetime interest rate adjustment limits of 1% to 2% and 4% to 6%, respectively.
Borrower demand for ARM loans versus fixed-rate mortgage loans is a
function of the level of interest rates, the expectations of changes in the
level of interest rates and the difference between the initial interest rates
and fees charged for each type of loan. The relative amount of fixed-rate
mortgage loans and ARM loans that can be originated at any time is largely
determined by the demand for each in a competitive environment.
The retention of ARM loans in the Association's loan portfolio helps
reduce the Association's exposure to changes in interest rates. There are,
however, unquantifiable credit risks resulting from the potential of increased
costs due to changed rates to be paid by the customer. It is possible that
during periods of rising interest rates the risk of default on ARM loans may
increase as a result of repricing and the increased payments required by the
borrower. See "RISK FACTORS -- Interest Rate Risk." In addition, although ARM
loans allow the Association to increase the sensitivity of its asset base to
changes in the interest rates, the extent of this interest sensitivity is
limited by the annual and lifetime interest rate adjustment limits. Because of
these considerations, the Association has no assurance that yields on ARM loans
will be sufficient to offset increases in the Association's cost of funds. The
Association believes these risks, which have not had a material adverse effect
on the Association to date,
38
<PAGE>
generally are less than the risks associated with holding fixed-rate loans in
portfolio during an increasing interest rate environment.
The Association generally requires title insurance insuring the status
of its lien or an acceptable attorney's opinion on all loans where real estate
is the primary source of security. The Association also requires that fire and
casualty insurance (and, if appropriate, flood insurance) be maintained in an
amount at least equal to the outstanding loan balance.
The Association's one- to- four family residential mortgage loans
typically do not exceed 80% of the appraised value of the security property.
Pursuant to underwriting guidelines adopted by the Association's Board of
Directors, the Association can lend up to 95% of the appraised value of the
property securing a one- to- four family residential loan; however, the
Association generally obtains private mortgage insurance on the portion of the
principal amount that exceeds 65% to 70% of the appraised value of the security
property. At December 31, 1996, the Association had 11 one-to-four family
mortgage loans totalling $350,000 with principal balances in excess of 80% of
the appraised value of the real estate collateral and with no private mortgage
insurance. These loans are part of the Spartanburg Residential Development
Program, an affordable housing program.
CONSTRUCTION LENDING. The Association originates residential
construction loans to local home builders, generally with whom it has an
established relationship. To a lesser extent, the Association originates such
loans to individuals who have a contract with a builder for the construction of
their residence. The Association's construction loans are secured by property
located in the Association's primary market area. At December 31, 1996,
construction loans amounted to $32.0 million, or 9.2% of the Association's total
loan portfolio.
The Association's construction loans generally have fixed interest
rates and are for a term of nine months. Construction loans to builders are
typically made with a maximum loan to value ratio of 80%. Construction loans
to individuals are typically made in connection with the granting of the
permanent financing on the property. Such loans convert to a fully amortizing
adjustable- or fixed-rate loan at the end of the construction term. The
Association typically requires that permanent financing with the Association
or some other lender be in place prior to closing any construction loan to an
individual.
The Association's construction loans to builders are made on either a
pre-sold or speculative (unsold) basis. However, the Association generally
limits the number of outstanding loans on unsold homes under construction to
individual builders, with the amount dependent on the financial strength of the
builder, the present exposure of the builder, the location of the property and
prior sales of homes in the development. At December 31, 1996, speculative
construction loans amounted to $21.1 million. At December 31, 1996, the largest
amount of construction loans outstanding to one builder was $1.5 million, all of
which was for speculative construction.
Prior to making a commitment to fund a construction loan, the
Association requires an appraisal of the property by an independent
state-licensed and qualified appraiser approved by the Board of Directors. The
Association's staff also reviews and inspects each project prior to disbursement
of funds during the term of the construction loan. Loan proceeds are disbursed
after inspection of the project based on a percentage of completion. With
respect to construction loans originated since September 1996, the Association
has enforced the contractual requirement that monthly interest payments be made
during the construction term. With respect to loans originated prior to that
time, monthly payment of accrued interest was at the borrower's option, with
all accrued interest collected at maturity. In recent periods, this former
practice contributed, in part, to the high level of accruing construction loans
contractually past due 90 day or more. See "-- Nonperforming Assets and
Delinquencies."
Construction lending affords the Association the opportunity to charge
higher interest rates with shorter terms to maturity relative to single-family
permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. The nature of these loans is such that they are generally more
difficult to evaluate and monitor. If the estimate of
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<PAGE>
construction cost proves to be inaccurate, the Association may be required to
advance funds beyond the amount originally committed to permit completion of the
project. If the estimate of value upon completion proves to be inaccurate, the
Association may be confronted at or prior to the maturity of the loan with a
project the value of which is insufficient to assure full repayment. Projects
may also be jeopardized by disagreements between borrowers and builders and by
the failure of builders to pay subcontractors. Loans to builders to construct
homes for which no purchaser has been identified carry more risk because the
payoff for the loan is dependent on the builder's ability to sell the property
prior to the time that the construction loan is due.
The Association has attempted to minimize the foregoing risks by, among
other things, limiting its construction lending to primarily residential
properties. It is also the Association's general policy to obtain personal
guarantees from the principals of its corporate borrowers. In the case of
speculative construction loans, the Association has begun limiting the number of
unsold homes to larger borrowers and, on loans originated since September 1996,
enforcing contractual clauses requiring the payment of interest monthly (rather
than at the earlier of loan maturity or sale of home) and assessing monetary
penalties on delinquent balances. The monthly interest payment requirement
provides an earlier indication of potential delinquency. The Association
originated $10.5 million of speculative construction loans during the six months
ended December 31, 1996, compared to $9.3 million during the six months ended
December 31, 1995.
COMMERCIAL REAL ESTATE LENDING. The Association originates mortgage
loans for the acquisition and refinancing of commercial real estate properties.
The Association generally offers such loans to accommodate its present
customers. Management expects to hire a commercial loan officer with experience
in the Association's primary market area in an effort to augment its commercial
lending capabilities. However, management does not anticipate that commercial
real estate loans will comprise a substantial portion of the loan portfolio in
the immediate future. At December 31, 1996, $4.6 million, or 1.3% of the
Association's total loan portfolio consisted of loans secured by existing
commercial real estate properties. The majority of the Association's commercial
real estate properties are secured by office buildings, retail shops and
manufacturing facilities, all of which are secured by property located in the
Association's primary market area.
The Association requires appraisals of all properties securing
commercial real estate loans. Appraisals are performed by an independent
appraiser designated by the Association, all of which are reviewed by
management. The Association considers the quality and location of the real
estate, the credit of the borrower, the cash flow of the project and the quality
of management involved with the property.
Loan to value ratios on the Association's commercial real estate loans
are generally limited to 75%. As part of the criteria for underwriting
commercial real estate loans, the Association generally imposes a debt coverage
ratio (the ratio of net cash from operations before payment of debt service to
debt service) of not less than 1.2. It is also the Association's policy to
obtain personal guarantees from the principals of its corporate borrowers on its
commercial real estate loans.
Commercial real estate lending affords the Association an opportunity
to receive interest at rates higher than those generally available from one- to-
four family residential lending. However, loans secured by such properties
usually are greater in amount, more difficult to evaluate and monitor and,
therefore, involve a greater degree of risk than one- to- four family
residential mortgage loans. Because payments on loans secured by multi-family
and commercial properties are often dependent on the successful operation and
management of the properties, repayment of such loans may be affected by adverse
conditions in the real estate market or the economy. The Association seeks to
minimize these risks by limiting the maximum loan-to-value ratio to 75% and
strictly scrutinizing the financial condition of the borrower, the quality of
the collateral and the management of the property securing the loan. The
Association also obtains loan guarantees from financially capable parties based
on a review of personal financial statements.
LAND LENDING. The Association originates land loans to local developers
for the purpose of developing the land (I.E., installing roads, sewers, water
and other utilities) for sale. At December 31, 1996, land loans amounted
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<PAGE>
to $2.4 million, or 0.7% of the Association's total loan portfolio. Land loans
are secured by a lien on the property, are limited to 75% of the developed value
of the secured property and made for a period of three years with an interest
rate that adjusts with the prime rate. The Association requires monthly interest
payments during the term of the land loan. The Association's land loans are
structured so that the Association is repaid in full upon the sale by the
borrower of approximately 75% of the available lots. All of the Association's
land loans are secured by property located in its primary market area. In
addition, the Association obtains personal guarantees from the principals of its
corporate borrowers and originates such loans to developers with whom its has
established relationships. At December 31, 1996, the Association had no
nonaccruing land loans.
Loans secured by undeveloped land or improved lots involve greater
risks than one- to- four family residential mortgage loans because such loans
are more difficult to evaluate. If the estimate of value proves to be
inaccurate, in the event of default and foreclosure the Association may be
confronted with a property the value of which is insufficient to assure full
repayment. The Association attempts to minimize this risk by limiting the
maximum loan-to-value ratio on land loans to 75%.
CONSUMER AND OTHER LENDING. The Association originates a variety of
consumer loans primarily on a secured basis. Consumer loans include second
mortgage loans, home equity lines of credit, savings account loans, automobile
loans, boat loans, loans secured by marketable equity securities, VISA credit
card loans and unsecured loans. Consumer loans are made with both fixed and
variable interest rates and with varying terms. At December 31, 1996, consumer
loans amounted to $39.8 million, or 11.5% of the total loan portfolio.
The Association views consumer lending as an important part of its
business because consumer loans generally have shorter terms and higher yields,
thus reducing exposure to changes in interest rates. In addition, the
Association believes that offering consumer loans helps to expand and create
stronger ties to its customer base. Subject to market conditions, the
Association intends to continue emphasizing consumer lending, particularly home
equity lines of credit and automobile loans.
At December 31, 1996, the largest component of the consumer loan
portfolio consisted of second mortgage loans and home equity lines of credit,
which totalled $32.6 million, or 9.4% of the total loan portfolio. At December
31, 1996, unused commitments to extend credit under home equity lines of credit
totalled $25.3 million. Home equity lines of credit and second mortgage loans
are made for purposes such as the improvement of residential properties, debt
consolidation and education expenses, among others. The majority of these loans
are made to existing customers and are secured by a first or second mortgage on
residential property. The Association actively solicits these loans by
contacting its customers directly. The loan-to-value ratio is typically 90% or
less, when taking into account both the first and second mortgage loans. Second
mortgage loans typically carry fixed interest rates with a fixed payment over a
term between five and 15 years. Home equity lines of credit are generally for 15
year terms and the interest rate is tied to THE WALL STREET JOURNAL prime
lending rate.
At December 31, 1996, automobile loans amounted to $2.5 million. The
Association originates automobile loans for both new and used automobiles for
terms generally not exceeding 60 months. The Association does not engage in
indirect automobile lending.
On June 1, 1995, the Association began issuing VISA credit cards to
customers within its primary market area. At December 31, 1996, there were 316
credit card accounts aggregate outstanding with outstanding balances of
$335,000. At December 31, 1996, total approved lines of credit were $878,000.
The Association does not engage in direct mailings of pre-approved credit cards.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
rapidly depreciating assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining
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<PAGE>
deficiency often does not warrant further substantial collection efforts against
the borrower beyond obtaining a deficiency judgment. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
are more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy. Furthermore, the application of various federal and state
laws, including federal and state bankruptcy and insolvency laws, may limit the
amount that can be recovered on such loans. The Association believes that these
risks are not as prevalent in the case of the Association's consumer loan
portfolio because a large percentage of the portfolio consists of second
mortgage loans and home equity lines of credit that are underwritten in a manner
such that they result in credit risk that is substantially similar to one- to-
four family residential mortgage loans. Nevertheless, second mortgage loans and
home equity lines of credit have greater credit risk than one- to- four family
residential mortgage loans because they are secured by mortgages subordinated to
the existing first mortgage on the property, which may or may not be held by the
Association. At December 31, 1996, $42,000 of consumer loans were delinquent in
excess of 90 days.
The Association employs strict underwriting procedures for consumer
loans. These procedures include an assessment of the applicant's credit history
and the ability to meet existing and proposed debt obligations. Although the
applicant's creditworthiness is the primary consideration, the underwriting
process also includes a comparison of the value of the security, if any, to the
proposed loan amount. The Association generally underwrites and originates its
consumer loans internally, which the Association believes limits its exposure to
credit risks associated with loans underwritten or purchased from brokers and
other external sources.
The Association also engages in limited amounts of commercial business
lending. At December 31, 1996, the Association had $1.2 million of commercial
business loans which represented 0.3% of the total loan portfolio. Commercial
business loans are generally made to customers who are well known to the
Association and are generally secured by business equipment. Unsecured loans
amounted to $260,000 at December 31, 1996. The Association generally requires
annual financial statements from its corporate borrowers and personal guarantees
from the corporate principals.
Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential and commercial real estate lending. Real estate
lending is generally considered to be collateral based lending with loan amounts
based on predetermined loan to collateral values and liquidation of the
underlying real estate collateral is viewed as the primary source of repayment
in the event of borrower default. Although commercial business loans are often
collateralized by equipment, inventory, accounts receivable or other business
assets, the liquidation of collateral in the event of a borrower default is
often an insufficient source of repayment because accounts receivable may be
uncollectible and inventories and equipment may be obsolete or of limited use,
among other things. Accordingly, the repayment of a commercial business loan
depends primarily on the creditworthiness of the borrower (and any guarantors),
while liquidation of collateral is a secondary and often insufficient source of
repayment.
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<PAGE>
MATURITY OF LOAN PORTFOLIO. The following table sets forth certain
information at December 31, 1996 regarding the dollar amount of loans maturing
in the Association's portfolio based on their contractual terms to maturity, but
does not include scheduled payments or potential prepayments. Demand loans,
loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as becoming due within one year. Loan balances do not
include undisbursed loan proceeds, unearned discounts, unearned income and
allowance for loans losses.
<TABLE>
<CAPTION>
After After After
One Year 3 Years 5 Years
Within Through Through Through Beyond
One Year 3 Years 5 Years 10 Years 10 Years Total
-------- ------- ------- -------- -------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to- four family........ $ 86 $ 978 $ 4,156 $27,290 $235,083 $267,593
Construction................ 30,149 -- 750 -- 1,050 31,949
Land........................ 495 1,622 292 -- -- 2,409
Commercial and other........ -- 170 1,392 1,066 1,943 4,571
Consumer and other loans...... 3,905 2,996 5,868 7,658 19,342 39,769
-------- ------- -------- -------- --------- ---------
Total..................... $34,635 $5,766 $12,458 $36,014 $257,418 $346,291
======= ====== ======= ======= ======== ========
</TABLE>
The following table sets forth the dollar amount of all loans due after
December 31, 1997, which have fixed interest rates and have floating or
adjustable interest rates.
Fixed- Floating- or
Rates Adjustable-Rates Total
------- ----------------- ------
In Thousands)
Mortgage loans:
One- to- four family....... $191,743 $75,764 $267,507
Construction............... 1,800 -- 1,800
Land....................... 1,914 -- 1,914
Commercial and other....... 3,877 694 4,571
Consumer and other loans..... 17,495 18,369 35,864
--------- -------- ---------
Total.................... $216,829 $94,827 $311,656
======== ======= ========
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<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of a loan is substantially less
than its contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give the Association the right to declare loans
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid. The
average life of mortgage loans tends to increase, however, when current mortgage
loan market rates are substantially higher than rates on existing mortgage loans
and, conversely, decrease when rates on existing mortgage loans are
substantially higher than current mortgage loan market rates. Furthermore,
management believes that a significant number of the Association's residential
mortgage loans are outstanding for a period less than their contractual terms
because of the transitory nature of many of the borrowers who reside in its
primary market area.
LOAN SOLICITATION AND PROCESSING. The Association's lending activities
are subject to the written, non-discriminatory, underwriting standards and loan
origination procedures established by the Association's Board of Directors and
management. Loan originations come from a number of sources. The customary
sources of loan originations are realtors, walk-in customers, referrals and
existing customers. A business development program has been implemented where
loan officers and sales personnel make sales calls on building contractors and
realtors. The Association also advertises its loan products by radio and
newspaper.
In its marketing, the Association emphasizes its community ties,
customized personal service and an efficient underwriting and approval process.
The Association uses professional fee appraisers for most residential real
estate loans and construction loans and all commercial real estate and land
loans. The Association requires hazard, title and, to the extent applicable,
flood insurance on all security property.
Mortgage loan applications are initiated by loan officers and are
required to be approved by the Association's Loan Committee, a management
committee consisting of the Association's President, Executive Vice President,
Senior Vice President, and two Vice Presidents. All loans in excess of $250,000
but below $300,000 (or below $275,000 in the case of commercial real estate
loans) must be approved by the Executive Board Loan Committee consisting of
Directors Painter, Salter and Sanders. Commercial real estate loans in excess of
$275,000 and all other loans in excess of $300,000 must be approved by the
Association's Board of Directors.
LOAN ORIGINATIONS, SALES AND PURCHASES. While the Association
originates both adjustable-rate and fixed-rate loans, its ability to generate
each type of loan depends upon relative customer demand for loans in its primary
market area.
The Association periodically sells conventional one- to- four family
loans (I.E., non-FHA/VA loans) with servicing retained and without recourse.
However, several pools of loans were sold with recourse in 1983 and had an
aggregate outstanding balance of $3.5 million at December 31, 1996. The
Association does not expect any material losses on these loans due to their
seasoned nature. Recent loan sales have been to the FNMA and primarily consisted
of 30 year, fixed-rate residential real estate loans. These sales reduce the
Association's interest rate risk and the proceeds of sale are used to fund
continuing operations. The Association did not sell any conventional loans
during fiscal 1996 primarily due to the success of several deposit programs
which enabled the Association to grow assets. However, management intends to
sell loans in the future as necessary to manage interest rate risk and fund
continuing operations.
When conventional loans are sold, the Association retains the
responsibility for servicing the loans, including collection and remitting
mortgage loans payments, accounting for principal and interest and holding and
disbursing escrow or impound funds for real estate taxes and insurance premiums.
The Association receives a servicing fee for performing these services for
others. The Association's servicing portfolio amounted to $58.7 million at
December 31, 1996. The Association is generally paid a fee equal to 0.25% of the
outstanding principal balance for servicing sold loans. Loan servicing income
totalled $101,000, $226,000, $245,000 and $233,000 for the six months ended
December 31, 1996 and the years ended June 30, 1996, 1995 and 1994,
respectively. The Association earns late charges collected from delinquent
customers whose loans are serviced by the Association. The Association is
allowed to invest escrow impounds (funds collected from mortgage customers for
the payment of property taxes
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<PAGE>
and insurance premiums on mortgaged real estate) until they are disbursed on
behalf of mortgage customers, but is not required to pay interest on these
funds. At December 31, 1996, borrowers' escrow funds amounted to $288,000.
The Association sells all loans originated under FHA and VA programs,
servicing released, to private investors and the South Carolina State Housing
Authority.
Historically, the Association has not been an active purchaser of loans
or participation interests in loans. However, in September 1996, the Association
began purchasing one-to-four family mortgage loans and residential construction
loans from a start-up mortgage banking company located in Greenville, South
Carolina, in which the Association made an equity investment through its service
corporation subsidiary. As of December 31, 1996, the Association had purchased
23 loans with aggregate principal balances of $2.6 million, $258,000 of which
are residential construction loans. In addition, at December 31, 1996, the
Association has committed to fund $569,000 of undisbursed construction loan
proceeds. Currently, substantially all of the loans purchased through this
mortgage company are secured by properties located in the Association's primary
market area. Such purchases are expected to continue and increase in volume as
that company's operations expand, and are likely to include purchases of loans,
including commercial real estate loans and home equity loans, secured by
properties inside and outside of the Association's primary market area.
Out-of-market lending is generally considered to involve greater risk than
in-market lending because of the lender's unfamiliarity with the other market.
However, the Association's believes this risk is mitigated in the case of any
out-of-market loan purchases from the mortgage banking company primarily because
of (i) the Association's ability to refuse to purchase any loans not meeting its
underwriting criteria and (ii) the Association's input in formulating policies
and procedures for the mortgage banking company though its representation on its
board of directors. See "-- Subsidiary Activities."
The following table sets forth total loans originated, purchased, sold
and repaid during the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
----------------- -----------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans originated:
Mortgage loans:
One- to- four family.................. $25,109 $24,544 $59,296 $32,820 $91,205
Construction.......................... 16,333 17,737 42,212 37,334 42,735
Land.................................. 118 1,190 2,950 100 --
Commercial and other.................. 1,025 316 316 237 1,191
Consumer and other..................... 15,070 13,121 28,045 21,050 12,248
------- ------- -------- ------- --------
Total loans originated............... 57,655 56,908 132,819 91,541 147,379
Loans purchased:
One- to- four family................... 3,204 -- -- -- --
Whole loans sold........................ (6,498) (2,863) (7,704) (17,966) (27,840)
Mortgage loan principal repayments...... (41,238) (40,204) (87,446) (57,514)(105,182)
Net increase in other items............. 3,128 3,733 (3,539) 2,569 (5,276)
-------- ------- -------- -------- --------
Net increase in loans receivable, net... $16,251 $17,574 $34,130 $18,630 $9,081
======= ======= ======= ======= ======
</TABLE>
LOAN COMMITMENTS. The Association issues commitments for mortgage loans
conditioned upon the occurrence of certain events. Such commitments are made in
writing on specified terms and conditions and are
45
<PAGE>
honored for up to 20 days from approval, depending on the type of transaction.
At December 31, 1996, the Association had loan commitments (excluding
undisbursed portions of interim construction loans of $12.0 million) of $4.4
million and unused lines of credit of $25.3 million. See Note 9 of Notes to
Consolidated Financial Statements.
LOAN FEES. In addition to interest earned on loans, the Association
receives income from fees in connection with loan originations, loan
modification, late payments and for miscellaneous service related to its loan.
Income from these activities varies from period to period depending upon the
volume and type of loans made and competitive conditions.
The Association charges loan origination fees which are calculated as a
percentage of the amount borrowed. In accordance with applicable accounting
procedures, loan origination fees and discount points in excess of loan
origination costs are deferred and recognized over the contractual remaining
lives of the related loans on a level yield basis. Discounts and premiums on
loans purchased are accreted and amortized in the same manner. The Association
recognized $83,000, $202,000, $254,000 and $506,000 of deferred loan fees during
the six months ended December 31, 1996 and the years ended June 30, 1996, 1995
and 1994, respectively, in connection with loan refinancings, payoffs, sales and
ongoing amortization of outstanding loans.
NONPERFORMING ASSETS AND DELINQUENCIES. When a borrowers fails to make
a required payment on a loan, the Association attempts to cure the deficiency by
contacting the borrower and seeking the payment. Contacts are generally made 15
days after a payment is due. In most cases, deficiencies are cured promptly. If
a delinquency continues, additional contact is made either through a notice or
other means and the Association will attempt to work out a payment schedule.
While the Association generally prefers to work with borrowers to resolve such
problems, the Association will institute foreclosure or other proceedings, as
necessary, to minimize any potential loss.
Loans are placed on nonaccrual status generally if, in the opinion of
management, principal or interest payments are not likely in accordance with the
terms of the loan agreement, or when principal or interest is past due 90 days
or more (except in the case of construction loans originated before September
1996 as discussed under "-- Construction Lending"). Interest accrued but not
collected at the date the loan is placed on nonaccrual status is reversed
against income in the current period. Loans may be reinstated to accrual status
when payments are under 90 days past due and, in the opinion of management,
collection of the remaining past due balances can be reasonably expected.
The Association's Board of Directors is informed monthly of the status
of all loans delinquent more than 60 days, all loans in foreclosure and all
foreclosed and repossessed property owned by the Association.
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<PAGE>
The following table sets forth information with respect to the
Association's nonperforming assets and restructured loans within the meaning of
SFAS No. 15 at the dates indicated.
<TABLE>
<CAPTION>
At December 31, At June 30,
---------------- ----------------------------------------------------
1996 1996 1995 1994 1993 1992
----------- -------- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans accounted for on
a nonaccrual basis:
Mortgage loans:
One- to- four family..................... $ 623 $ 719 $ 348 $ 754 $1,035 $ 936
Construction............................. 847 1,130 471 457 256 409
Land..................................... -- -- -- -- -- --
Commercial and other..................... -- -- 48 -- -- --
Consumer and other loans.................. 42 60 20 53 154 163
Other loans............................... -- -- -- -- -- --
-------- ------- ------- -------- -------- --------
Total nonaccrual loans............... 1,512 1,909 887 1,264 1,445 1,508
Accruing loans contractually past due
90 days or more:
Mortgage loans:
One- to- four family..................... -- -- -- -- -- --
Construction............................. 2,882 3,965 3,906 1,117 705 1,265
Land..................................... -- -- -- -- -- --
Commercial and other..................... -- -- -- -- -- --
Consumer and other loans.................. -- -- -- -- -- --
Total loans 90 days past due........ 2,882 3,965 3,906 1,117 705 1,265
-------- ------- ------- -------- -------- -------
Total of nonaccrual loans and
loans 90 days past due.................... 4,394 5,874 4,793 2,381 2,150 2,773
Real estate acquired in settlement
of loans 102 58 34 18 391 612
------- ------- ------- -------- -------- -------
Total nonperforming assets............ $4,496 $5,932 $4,827 $2,399 $2,541 $3,385
====== ====== ====== ====== ====== ======
Restructured loans......................... $1,033 $1,247 $1,049 $1,029 $1,097 $ 994
====== ====== ====== ====== ====== ======
Nonaccrual loans and loans 90 days or more
past due as a percentage of loans receivable, net 1.32% 1.87% 1.79% 0.96% 0.93% 1.22%
Nonaccrual loans and 90 loans days or more
past due as a percentage of total assets.. 1.17 1.65 1.49 0.77 0.71 0.98
Nonperforming assets as a percentage
of total assets........................... 1.20 1.66 1.50 0.77 0.84 1.19
</TABLE>
Interest income that would have been recorded for the six months ended
December 31, 1996 and the year ended June 30, 1996 had nonaccruing loans been
current in accordance with their original terms amounted to $63,000 and
$143,000, respectively. The amount of interest included in interest income on
such loans for such periods amounted to $5,000 and $65,000, respectively.
Interest income that would have been recorded for the six months ended December
31, 1996 and the year ended June 30, 1996 had restructured loans been current in
accordance with their original terms, and the amount of interest included in
interest income on such loans for such periods, were, in both cases, immaterial.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS. Real estate acquired by
the Association as a result of foreclosure or by deed-in-lieu of foreclosure is
classified as real estate acquired in settlement of loans until sold. Pursuant
to SOP 92-3, which provides guidance on determining the balance sheet treatment
of foreclosed assets in annual financial statements for periods ended on or
after December 15, 1992, there is a rebuttable presumption that foreclosed
assets are held for sale and such assets are recommended to be carried at fair
value minus estimated costs
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<PAGE>
to sell the property. After the date of acquisition, all costs incurred in
maintaining the property are expensed and costs incurred for the improvement or
development of such property are capitalized up to the extent of their net
realizable value. The Association's accounting for its real estate acquired in
settlement of loans complies with SOP 92-3. At December 31, 1996, the
Association had $102,000 of real estate acquired in settlement of loans, which
consisted of two one-to-four family residences.
RESTRUCTURED LOANS. Under GAAP, the Association is required to account
for certain loan modifications or restructuring as "troubled debt
restructuring." In general, the modification or restructuring of a debt
constitutes a troubled debt restructuring if the Association for economic or
legal reasons related to the borrower's financial difficulties grants a
concession to the borrowers that the Association would not otherwise consider.
Debt restructurings or loan modifications for a borrower do not necessarily
always constitute troubled debt restructurings, however, and troubled debt
restructurings do not necessarily result in non-accrual loans. The Association
had $1.0 million of restructured loans as of December 31, 1996, which consisted
of 25 one-to-four family mortgage loans.
ASSET CLASSIFICATION. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" and monitored by the Association.
The aggregate amounts of the Association's classified assets, and of
the Association's general and specific loss allowances at the dates indicated,
were as follows:
At December 31, At June 30
1996 1996 1995
(In thousands)
Classified assets:
Loss........................ $ 1 $ 1 $ 13
Doubtful.................... 11 -- --
Substandard assets.......... 2,907 2,586 1,247
Special mention............. 2,020 820 580
Loan loss allowances:
General loss allowances..... 1,638 999 587
Specific loss allowances.... 12 1 13
At December 31, 1996, substandard assets consisted of 23 one-to-four
family mortgage loans totaling $1.1 million, eight construction loans totaling
$1.4 million, 28 other loans totaling $301,000, and two one-to-four family
properties acquired through foreclosure totaling $108,000.
48
<PAGE>
At December 31, 1996, special mention assets consisted of 16
one-to-four family mortgage loans totaling $592,000 and nine construction loans
totaling $1.5 million.
ALLOWANCE FOR LOAN LOSSES. The Association has established a systematic
methodology for the determination of provisions for loan losses. The methodology
is set forth in a formal policy and takes into consideration the need for an
overall general valuation allowance as well as specific allowances that are tied
to individual loans.
In originating loans, the Association recognizes that 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, general economic conditions and, in the case of a secured loan, the
quality of the security for the loan. The Association increases its allowance
for loan losses by charging provisions for loan losses against the Association's
income.
The general valuation allowance is maintained to cover losses inherent
in the loan portfolio. Management's periodic evaluation of the adequacy of the
allowance is based on the Association's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying collateral,
and current economic conditions. Specific valuation allowances are established
to absorb losses on loans for which full collectibility cannot be reasonably
assured. The amount of the allowance is based on the estimated value of the
collateral securing the loan and other analyses pertinent to each situation.
Generally, a provision for losses is charged against income quarterly to
maintain the allowances.
At December 31, 1996, the Association had an allowance for loan losses
of $1.7 million. Management believes that the amount maintained in the
allowances at December 31, 1996 will be adequate to absorb losses inherent in
the portfolio. Although management believes that it uses the best information
available to make such determinations, future adjustments to the allowance for
loan losses may be necessary and results of operations could be significantly
and adversely affected if circumstances differ substantially from the
assumptions used in making the determinations. Furthermore, while the
Association believes it has established its existing allowance for loan losses
in accordance with GAAP, there can be no assurance that regulators, in reviewing
the Association's loan portfolio, will not request the Association to increase
significantly its allowance for loan losses. In addition, because future events
affecting borrowers and collateral cannot be predicted with certainty, there can
be no assurance that the existing allowance for loan losses is adequate or that
substantial increases will not be necessary should the quality of any loans
deteriorate as a result of the factors discussed above. Any material increase in
the allowance for loan losses may adversely affect the Association's financial
condition and results of operations.
49
<PAGE>
The following table sets forth an analysis of the Association's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Total loans outstanding at end of period.... $346,291 $294,289 $332,803 $281,836 $263,614 $243,110 $236,115
======== ======== ======== ======== ======== ======== ========
Average loans outstanding during period..... $325,969 $290,257 $298,865 $273,778 $260,135 $251,453 $237,877
======== ======== ======== ======== ======== ======== ========
Allowance balance at beginning of period.... $ 1,000 $ 600 $ 600 $ 600 $ 600 $ 400 $ 400
Provision for loan losses.................. 675 4 419 9 -- 208 503
Charge-offs:
Mortgage loans:
One- to- four family..................... 15 -- -- -- -- -- --
Construction............................. -- -- -- -- -- -- --
Land..................................... -- -- -- -- -- -- --
Commercial and other..................... -- -- -- -- -- -- 486
Consumer and other........................ 10 6 23 9 -- 8 17
---------- ----------- ---------------------- --------------------- ----------
Total charge-offs....................... 25 6 23 9 -- 8 503
---------- ----------- ---------------------- --------------------- ----------
Recoveries:
Mortgage loans:
One- to- four family..................... -- -- -- -- -- -- --
Construction............................. -- -- -- -- -- -- --
Land..................................... -- -- -- -- -- -- --
Commercial and other..................... -- -- -- -- -- -- --
Consumer and other........................ -- 2 4 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total recoveries........................ -- 2 4 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Allowance b alance at end of period......... $ 1,650 $ 600 $ 1,000 $ 600 $ 600 $ 600 $ 400
========= ========= ========= ========= ========= ========= =========
Allowance for loan losses as a percent of
total loans
receivable at end of period................ 0.48% 0.20% 0.30% 0.21% 0.23% 0.25% 0.17%
========= ========= ========= ========= ========= ========= =========
Net charge-offs as a percentage of average
loans outstanding during the period........ 0.01% --% 0.01% --% --% --% 0.21%
========= ========== ========= ========== ========== ========== =========
Ratio of allowance for loan losses to total
nonperforming loans at end of period....... 37.55% 31.70% 17.02% 12.52% 25.20% 27.91% 14.42%
========= ========= ========= ========= ========= ========= =========
</TABLE>
For additional discussion regarding the provisions for loan losses in
recent periods, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Results of Operations -- Comparison of Operating
Results for the Six Months Ended December 31, 1996 and 1995 -- Provision for
Loan Losses," "-- Results of Operations -- Comparison of Operating Results for
the Years Ended June 30, 1996 and 1995 -- Provision for Loan Losses," and "--
Results of Operations -- Comparison of Operating Results for the Years Ended
June 30, 1995 and 1994 -- Provision for Loan Losses." The fluctuation in the
ratio of allowance for loan losses to nonperforming loans at end of period set
forth in the above table results primarily from the Association giving greater
weight to the level of classified assets than to the level of nonperforming
assets (nonaccrual loans, accruing loans contractually past due 90 days or more,
and real estate acquired in settlement of loans) when determining the adequacy
of the allowance for loan losses. Greater weight is given to classified assets
because they include not only nonperforming assets but also performing assets
that otherwise exhibit, in management's judgment, potential credit weaknesses.
See "-- Nonperforming Assets and Delinquencies" and "-- Asset Classification."
50
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.
<TABLE>
<CAPTION>
At
December 31, At June 30,
1996 1996 1995 1994
------------------- ----------------- ------------------ -------------------
Percent Percent Percent Percent
of Loans of Loans of Loans of Loans
in Category in Category in Category in Category
to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Residential.................. $1,334 86.5% $ 675 87.5% $400 88.1% $436 90.3%
Nonresidential............... 173 2.0 28 2.1 17 2.8 46 2.7
Consumer and other loans...... 143 11.5 297 10.4 183 9.1 118 7.0
------- ------- ------ ------ ----- ----- ------ ------
Total allowance for
loan losses............... $1,650 100.0% $1,000 100.0% $600 100.0% $600 100.0%
====== ===== ====== ===== ==== ===== ==== ======
</TABLE>
At June 30,
1993 1992
------------------ -----------------
Percent Percent
of Loans of Loans
in Category in Category
to Total to total
Amount Loans Amount Loans
------ ----- ------ -----
Mortgage loans:
Residential................. $422 91.3% $300 90.7%
Nonresidential.............. 64 1.7 28 2.1
Consumer and other loans..... 114 7.0 72 7.2
----- ------ ----- -------
Total allowance for
loan losses.............. $600 100.0% $400 100.0%
==== ===== ==== =====
51
<PAGE>
INVESTMENT ACTIVITIES
The Association is permitted under federal law to invest in various
types of liquid assets, including U.S. Treasury obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
FHLB-Atlanta, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. Subject to various restrictions, the
Association may also invest a portion of its assets in commercial paper and
corporate debt securities. Savings institutions like the Association are also
required to maintain an investment in FHLB stock. The Association is required
under federal regulations to maintain a minimum amount of liquid assets. See
"REGULATION" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
The Association purchases investment securities with excess liquidity
arising when investable funds exceed loan demand. The Association's investment
securities purchases have been limited to U.S. Government and agency securities
with contractual maturities of between one and five years. At December 31, 1996,
the Association also had an investment in a mutual fund that invests in
adjustable rate mortgage-backed securities.
At December 31, 1996, the Association's management classified all
securities in the Association's investment portfolio as available for sale under
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." During the year ended June 30, 1996, pursuant to special
implementation guidance allowed by the FASB under SFAS No. 115, the Association
reclassified securities held to maturity with a fair value and amortized cost of
approximately $4.0 million as securities available for sale. Such
reclassification is disclosed as a noncash transaction in the Consolidated
Statements of Cash Flows included elsewhere herein. See Note 1 to Notes to
Consolidated Financial Statements.
The Association's investment policies generally limit investments to
U.S. Government and agency securities, municipal bonds, certificates of
deposits, marketable corporate debt obligations, mortgage-backed securities and
certain types of mutual funds. The Association's investment policy does not
permit engaging directly in hedging activities or purchasing high risk mortgage
derivative products or non-investment grade corporate bonds. Mutual funds held
by the Association may periodically engage in hedging activities and invest in
derivative securities. Investments are made based on certain considerations,
which include the interest rate, yield, settlement date and maturity of the
investment, the Association's liquidity position, and anticipated cash needs and
sources (which in turn include outstanding commitments, upcoming maturities,
estimated deposits and anticipated loan amortization and repayments). The effect
that the proposed investment would have on the Association's credit and interest
rate risk and risk-based capital is also considered.
The following table sets forth certain information with respect to each
security (other than U.S. Government and agency securities and mutual funds
which invest exclusively in such securities) which had an aggregate book value
in excess of 10% of the Association's retained earnings at the dates indicated.
<TABLE>
<CAPTION>
At December 31, At June 30,
1996 1996 1995 1994
------------------- -------------------- ----------------- ----------------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- ----- ---- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Management
Fund Inc. Adjustable
Rate Mortgage-Backed
Securities .............. $5,028 $5,024 $9,819 $9,780 $5,295 $5,272 $10,027 $9,857
</TABLE>
52
<PAGE>
The following table sets forth the amortized cost and fair value of the
Association's securities, by accounting classification and by type of security,
at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
At December 31, 1996 1996 1995 1994
-------------------- ---------------------- ---------------------- ----------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
---------- ----- ---------- ----- ---------- ----- ---------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity:
Debt securities:
U.S. Treasury obligations $ -- $ -- $ -- $ -- $ 2,001 $ 1,999 $ 3,004 $ 2,949
U.S. Government
agency obligations...... -- -- -- -- 3,501 3,450 9,992 9,592
-------- --------- --------- --------- -------- -------- -------- --------
Total.................. -- -- -- -- 5,502 5,449 12,996 12,541
Mortgage-backed securities 128 142 195 209 383 397 470 489
Marketable equity securities(1) -- -- -- -- -- -- 10,027 9,857
------------------- ---------- ---------- ---------- ---------- -------- --------
Total held to maturity . 128 142 195 209 5,885 5,846 23,493 22,887
------- -------- -------- -------- -------- -------- -------- --------
Available for Sale:
Debt securities:
U.S. Treasury obligations 1,989 1,985 1,986 1,975 500 493 -- --
U.S. Government
agency obligations....... 6,493 6,483 6,486 6,400 2,499 2,463 -- --
-------- -------- -------- -------- -------- -------- ---------- ----------
Total.................. 8,482 8,468 8,472 8,375 2,999 2,956 -- --
Marketable equity
securities(1)............... 5,028 5,024 9,819 9,780 5,295 5,272 -- --
-------- -------- -------- -------- -------- -------- ---------- ----------
Total available for sale 13,510 13,492 18,291 18,155 8,294 8,228 -- --
-------- -------- -------- -------- -------- -------- ---------- ----------
Total...................... $13,638 $13,634 $18,486 $18,364 $14,179 $14,074 $23,493 $22,887
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(1) Marketable equity securities at December 31, 1996 and June 30, 1996,
1995 and 1994 consist of a mutual fund that invests in adjustable rate
mortgage-backed securities. At December 31, 1996, the mutual fund
yielded 6.38%.
The following table sets forth certain information regarding the carrying
value, weighted average yields and maturities or periods to repricing of the
Association's debt securities and mortgage-backed securities at December 31,
1996. U.S. Treasury obligations and certain U.S. Government agency obligations
are exempt from state taxation. Their yields, however, have not been computed on
a tax equivalent basis for purposes of the table.
Less Than One to
One Year Five Years
------------------------ -------------------------
Amortized Fair Amortized Fair
Cost Value Yield Cost Value Yield
--------- ----- ----- ---------- ------ -----
(Dollars in thousands)
Debt securities:
U.S. Treasury obligations... $500 $502 6.65% $1,489 $1,483 5.64%
U.S. Government agency
obligations................ -- -- -- 6,493 6,483 6.44
Mortgage-backed securities... -- -- -- 128 142 8.40
----- ------ ------- -------
Total........................ $500 $502 6.65% $8,110 $8,108 6.32
==== ==== ====== ======
53
<PAGE>
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
GENERAL. Deposits are the major external source of funds for the
Association's lending and other investment activities. In addition, the
Association also generates funds internally from loan principal repayments and
prepayments and maturing investment securities. Scheduled loan repayments are a
relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are influenced significantly by general interest rates and money
market conditions. Borrowings from the FHLB-Atlanta may be used on a short-term
basis to compensate for reductions in the availability of funds from other
sources. Presently, the Association has no other borrowing arrangements.
DEPOSIT ACCOUNTS. A substantial number of the Association's depositors
reside in South Carolina. The Association's deposit products include a broad
selection of deposit instruments, including NOW accounts, demand deposit
accounts, money market accounts, regular passbook savings, statement savings
accounts and term certificate accounts. Deposit account terms vary with the
principal difference being the minimum balance deposit, early withdrawal
penalties and the interest rate. The Association reviews its deposit mix and
pricing weekly. The Association does not utilize brokered deposits, nor has it
aggressively sought jumbo certificates of deposit.
The Association believes it is competitive in the type of accounts and
interest rates it has offered on its deposit products. The Association does not
seek to pay the highest deposit rates but a competitive rate. The Association
determines the rates paid based on a number of conditions, including rates paid
by competitors, rates on U.S. Treasury securities, rates offered on various
FHLB-Atlanta lending programs, and the deposit growth rate the Association is
seeking to achieve.
The Association intends to continue to use premiums to attract new
checking accounts, particularly in conjunction with new branch openings. These
premium offers are reflected in the growth in the Association's advertising and
promotion expense, as well as its cost of funds, in recent periods. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS -- Results of Operations." The Association has introduced a number of
new savings products. These include VIP Checking, VIP Passbook Savings and an
18-month "Bump Rate CD", which allows for a one-time rate change during the term
of the CD. The Association also plans to seek business checking accounts and to
promote individual retirement accounts ("IRAs") and Self Employment Plan
retirement accounts to businesses.
In the unlikely event the Association is liquidated after the
Conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to the Holding Company as the sole
stockholder of the Association.
54
<PAGE>
The following table sets forth information concerning the Association's
time deposits and other interest-bearing deposits at December 31, 1996.
<TABLE>
<CAPTION>
Weighted Percentage
Average Minimum of Total
Interest Rate Term Checking and Savings Deposits Amount Balance Deposits
- ------------- ------ ----------------------------- ------- ------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
1.83% None NOW accounts $ 100 $ 30,009 9.3%
3.17 None Money market accounts 2,500 13,967 4.3
3.72 None Passbook savings accounts 100 55,869 17.2
Certificate Accounts
5.38 Within 6 months Fixed term, fixed rate 25 - 500 110,590 34.1
5.75 7 - 12 months Fixed term, fixed rate 25 - 500 62,644 19.3
5.71 13 - 36 months Fixed term, fixed rate 25 - 500 28,862 8.9
6.13 37 - 60 months Fixed term, fixed rate 25 - 500 19,007 5.9
6.20 61 - 120 months Fixed term, fixed rate 25 - 500 376 0.1
5.36 7 - 12 months Fixed term, adjustable rate 25 2,096 0.7
5.36 13 - 36 months Fixed term, adjustable rate 25 531 0.2
---------- -------
$323,951 100.0%
======== =====
</TABLE>
The following table indicates the amount of the Association's jumbo
certificate accounts by time remaining until maturity as of December 31, 1996.
Jumbo certificate accounts have principal balances of $100,000 or more.
Certificate
Maturity Period Accounts
(In Thousands)
Three months or less............... $ 9,285
Over three through six months...... 5,598
Over six through 12 months......... 5,767
Over 12 months..................... 1,542
--------
Total..................... $22,192
========
55
<PAGE>
DEPOSIT FLOW. The following table sets forth the balances (inclusive of
interest credited) and changes in dollar amounts of deposits in the various
types of accounts offered by the Association between the dates indicated.
<TABLE>
<CAPTION>
At December 31,
1996 1996 1995
-------------------------- ------------------------- -----------------------
Percent Percent Percent
of Increase of Increase of Increase
Amount Total (Decrease) Amount Total (Decrease) Amount Total (Decrease)
------ ------ ---------- ------ ------- ---------- ------ ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NOW checking................................ $ 30,009 9.3% $ (36) $ 30,045 9.8% $ 4,298 $ 25,747 9.3% $1,665
Passbook savings accounts................... 55,869 17.3 12,925 42,944 14.0 11,051 31,893 11.7 (6,042)
Money market deposit........................ 13,967 4.3 (2,727) 16,694 5.5 (2,749) 19,443 7.0 (7,321)
Fixed-rate certificate accounts which
mature in the year ending:
Within 1 year............................. 175,330 54.1 11,029 164,301 53.7 7,455 156,846 56.8 28,037
After 1 year, but within 2 years.......... 22,469 6.9 (1,521) 23,990 7.9 6,605 17,385 6.3 (14,032)
After 2 years, but within 3 years......... 6,925 2.1 (969) 7,894 2.6 1,742 6,152 2.2 256
Certificate accounts maturing thereafter.. 19,382 6.0 (581) 19,963 6.5 1,514 18,449 6.7 3,170
---------- ----- --------- --------- ------ -------- --------- ----- --------
Total.................................. $323,951 100.0% $18,120 $305,831 100.0% $29,916 $275,915 100.0% $5,733
======== ===== ======= ======== ===== ======= ======== ===== ======
</TABLE>
At June 30,
1994
--------------------
Percent
of
Amount Total
------ ------
(Dollars in thousands)
NOW checking.................................... $ 24,082 8.9%
Passbook savings accounts....................... 37,935 14.0
Money market deposit............................ 26,764 9.9
Fixed-rate certificate accounts which
mature in the year ending:
Within 1 year................................. 128,809 47.7
After 1 year, but within 2 years.............. 31,417 11.6
After 2 years, but within 3 years............. 5,896 2.2
Certificate accounts maturing thereafter...... 15,279 5.7
--------- -------
Total...................................... $270,182 100.0%
======== =====
TIME DEPOSITS BY RATES. The following table sets forth the amount of
time deposits in the Association categorized by rates at the dates indicated.
At
December 31, At June 30,
--------------------------------------
1996 1996 1995 1994
-------------- ---- ---- ----
(Dollars in thousands)
Less than 3.00%.... $ 758 $ 3,329 $ 549 $ 480
3.01% - 5.00%...... 5,755 7,656 44,027 149,669
5.01% - 7.00%...... 217,186 204,734 153,350 29,648
7.01% - 9.00%...... 407 429 906 1,604
---------- ---------- ---------- ----------
Total.............. $224,106 $216,148 $198,832 $181,401
======== ======== ======== ========
TIME DEPOSITS BY MATURITIES. The following table sets forth the amount
of time deposits in the Association categorized by maturities at December 31,
1996.
<TABLE>
<CAPTION>
Amount Due
Less Than 1-2 2-3 3-4 After
One Year Years Years Years 4 Years Total
-------- ----- ----- ----- ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Less than 3.00%.... $ 758 $ -- $ -- $ -- $ -- $ 758
3.01% - 5.00%...... 3,479 1,717 559 -- -- 5,755
5.01% - 7.00%...... 170,851 20,688 6,356 15,514 3,777 217,186
7.01% - 9.00%...... 242 64 10 60 31 407
---------- --------- -------- --------- -------- ----------
Total.............. $175,330 $22,469 $6,925 $15,574 $3,808 $224,106
======== ======= ====== ======= ====== ========
</TABLE>
DEPOSIT ACTIVITY. The following table set forth the deposit activities
of the Association for the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
------------------ -----------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance..............$305,831 $275,915 $275,915 $270,182 $267,461
-------- -------- -------- -------- --------
Net deposits (withdrawals)
before interest credited..... 11,654 17,906 17,240 (3,363) (5,979)
Interest credited.............. 6,466 6,001 12,676 9,096 8,700
-------- --------- --------- --------- ---------
Net increase in deposits....... 18,120 23,907 29,916 5,733 2,721
-------- --------- --------- --------- ---------
Ending balance.................$323,951 $299,822 $305,831 $275,915 $270,182
======== ======== ======== ======== ========
</TABLE>
57
<PAGE>
BORROWINGS. Savings deposits are the primary source of funds for the
Association's lending and investment activities and for its general business
purposes. The Association has the ability to use advances from the FHLB- Atlanta
to supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB-Atlanta functions as a central reserve bank providing
credit for savings associations and certain other member financial institutions.
As a member of the FHLB-Atlanta, the Association is required to own capital
stock in the FHLB- Atlanta and is authorized to apply for advances on the
security of such stock and certain of its mortgage loans and other assets
(principally securities that are obligations of, or guaranteed by, the U.S.
Government) provided certain creditworthiness standards have been met. Advances
are made pursuant to several different credit programs. Each credit program has
its own interest rate and range of maturities. Depending on the program,
limitations on the amount of advances are based on the financial condition of
the member institution and the adequacy of collateral pledged to secure the
credit.
In recent periods, the Association has been able to fund its lending
and other investment activities through internally generated funds and deposits.
Consequently, at December 31, 1996 and 1995 and during each of the six months
then ended, and at June 30, 1996, 1995 and 1994, and during each of the years
then ended, the Association had no borrowings from the FHLB-Atlanta outstanding.
The Association, however, may use advances from the FHLB-Atlanta should the need
for additional funds arise.
COMPETITION
The Association faces intense competition in its primary market area
for the attraction of savings deposits (its primary source of lendable funds)
and in the origination of loans. Its most direct competition for savings
deposits has historically come from commercial banks, credit unions, other
thrifts operating in its market area, and other financial institutions such as
brokerage firms and insurance companies. As of December 31, 1996, there were 14
commercial banks and three other thrifts operating in Spartanburg County, South
Carolina. Particularly in times of high interest rates, the Association has
faced additional significant competition for investors' funds from short-term
money market securities and other corporate and government securities. The
Association's competition for loans comes from commercial banks, thrift
institutions, credit unions and mortgage bankers. Such competition for deposits
and the origination of loans may limit the Association's growth in the future.
See "RISK FACTORS -- Competition."
SUBSIDIARY ACTIVITIES
Under OTS regulations, the Association generally may invest up to 3%
of its assets in service corporations, provided that at least one-half of
investment in excess of 1% is used primarily for community, inner-city and
community development projects. The Association's investment in its wholly-owned
service corporation, First Spartan Service Corporation ("First Spartan"), which
was $369,000 at December 31, 1996, did not exceed these limits.
First Spartan sells alternative investment products such as mutual
funds, deferred annuities and insurance. In addition, in August 1996 it
purchased for $400,000 a one-third equity interest in First Trust Mortgage
Corporation, Greenville, South Carolina ("First Trust"), a start-up mortgage
banking company. The Association has purchased loans from it in recent periods.
See "-- Lending Activities -- Loan Originations, Sales and Purchases." All loans
are purchased from First Trust subject to the Association's underwriting
standards. The Association intends to purchase at least $1.5 million of loans
from First Trust monthly. At December 31, 1996, the Association's financial
commitment to First Trust and its maximum exposure to share in any losses
incurred by First Trust were limited solely to its equity investment through
First Spartan. The Association, either directly or through First Spartan, may
undertake additional financial commitments in the future that would increase its
loss exposure to First Trust's operations; however, there are no such
agreements, plans or understandings at present. The Association recorded a loss
of approximately $100,000 related to First Trust's operations for the six months
ended December 31, 1996 as a result of expenses exceeding revenues, which is
typical for a start-up operation. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison
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of Operating Results for the Six Months Ended December 31, 1996 and 1995 --
Other Income (Expense)." Billy L. Painter, the Associations' President and Chief
Executive Officer, and J. Stephen Sinclair, the Association's Executive Vice
President of Lending, are directors of First Trust.
PROPERTIES
The following table sets forth certain information regarding the
Association's offices at December 31, 1996, all of which are owned except for
the Loan Production Office which is leased from month-to-month. The branch
office located at 1488 W.O. Ezzell Boulevard, Spartanburg, South Carolina, is
situated on leased land. The current lease expires in 2012 with an option to
renew for three 5-year periods.
Approximate
Location Year Opened Square Footage Deposits
- -------- ----------- -------------- ----------
(in thousands)
MAIN OFFICE:
380 E. Main Street 1974 32,820 $204,512
Spartanburg, South Carolina
BRANCH OFFICES:
280 N. Church Street 1986 1,080 32,903
Spartanburg, South Carolina
1488 W.O. Ezzell Boulevard 1980 2,453 48,110
Spartanburg, South Carolina
1585 E. Main Street 1991 2,166 19,868
Spartanburg, South Carolina
2701 Boiling Springs Road 1994 3,300 18,558
Boiling Springs, South Carolina
LOAN PRODUCTION OFFICE:
Merovan Center 1995 180 N/A
120 Woodruff Road
Building 3-A
Greenville, South Carolina
A new branch office in Inman, South Carolina, and one in Duncan, South
Carolina, are under construction and are scheduled to open by the end of the
first half of calendar 1997. The Association owns the land and building at both
of these locations.
The Association uses the services of an outside service bureau for its
significant data processing applications. At December 31, 1996, the Association
had three proprietary automated teller machines. At December 31, 1996, the net
book value of the Association's office properties and the Association's
fixtures, furniture and equipment was $5.5 million.
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PERSONNEL
As of December 31, 1996, the Association had 100 full-time and 26
part-time employees, none of which is represented by a collective bargaining
unit. The Association believes its relationship with its employees is good.
LEGAL PROCEEDINGS
Periodically, there have been various claims and lawsuits involving the
Association, such as claims to enforce liens, condemnation proceedings on
properties in which the Association holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Association's business. The Association is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Association.
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MANAGEMENT OF THE HOLDING COMPANY
Directors shall be elected by the stockholders of the Holding Company
for staggered three-year terms, or until their successors are elected and
qualified. The Holding Company's Board of Directors consists of seven persons
divided into three classes, each of which contains approximately one third of
the Board. One class, consisting of Messrs. Hammond and Salter, has a term of
office expiring at the first annual meeting of stockholders, a second class,
consisting of Messrs. Sanders and Tate, has a term of office expiring at the
second annual meeting of stockholders, and a third class, consisting of Messrs.
Painter, Handell and Odom, has a term of office expiring at the third annual
meeting of stockholders.
The executive officers of the Holding Company are elected annually and
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
Name Position
Robert R. Odom Chairman of the Board
Billy L. Painter President and Chief Executive Officer
R. Lamar Simpson Treasurer, Secretary and Chief Financial Officer
Since the formation of the Holding Company, none of the executive
officers, directors or other personnel has received remuneration from the
Holding Company. For information concerning the principal occupations,
employment and compensation of the directors and executive officers of the
Holding Company during the past five years, see "MANAGEMENT OF THE ASSOCIATION
- -- Biographical Information."
MANAGEMENT OF THE ASSOCIATION
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Association is presently composed of
seven members who are elected for terms of three years, approximately one third
of whom are elected annually in accordance with the Bylaws of the Association.
The executive officers of the Association are elected annually by the Board of
Directors and serve at the Board's discretion. The following table sets forth
information with respect to the Directors and executive officers of the
Association.
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DIRECTORS
<TABLE>
<CAPTION>
Current
Director Term
Name Age (1) Position with Association Since Expires
- ---- ------- ------------------------- ------- -------
<S> <C> <C> <C> <C>
E. Lea Salter 61 Director 1988 1997
David E. Tate 56 Director 1993 1997
Robert L. Handell 79 Director and Secretary 1950 1998
Robert R. Odom 75 Chairman of the Board 1953 1998
E.L. Sanders 62 Director 1987 1999
Billy L. Painter 51 Director, President and
Chief Executive 1984 1999
Officer
R. Wesley Hammond 47 Director 1990 1999
</TABLE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Name Age (1) Position with Association
<S> <C> <C> <C> <C>
Hugh H. Brantley 53 Executive Vice President -- --
and Chief Operating Officer
J. Stephen Sinclair 55 Executive Vice President -- Lending -- --
R. Lamar Simpson 38 Chief Financial Officer -- --
</TABLE>
(1) As of December 31, 1996.
BIOGRAPHICAL INFORMATION
Set forth below is certain information regarding the Directors and
executive officers of the Association. Unless otherwise stated, each Director
and executive officer has held his current occupation for the last five years.
There are no family relationships among or between the Directors or executive
officers.
E. LEA SALTER is President of Christman & Parson, Inc., general
contractors. Mr. Salter is a member of the Association's Personnel and Audit
Committees. He is active in the Lions Club of Spartanburg and is the past
Chairman of the Board of Visitors of Columbia College.
DAVID E. TATE has been President and sole owner of Tate Metal Works,
Inc., a tank fabrication and erection company, since 1972. Mr. Tate is an Elder
at First Presbyterian Church in Spartanburg, South Carolina.
ROBERT L. HANDELL is retired from the Association after 51 years of
service. He is the Secretary of the Civitan Rehabilitation Workshop and a
Director of the Civitan Club of Spartanburg, South Carolina. Mr. Handell is an
active member of the Bethel United Methodist Church.
ROBERT R. ODOM is a senior partner in the law firm of Odom, Terry,
Cantrell & Hammett, Spartanburg, South Carolina, with which he has been
associated with for 45 years.
E.L. SANDERS is a retired insurance executive. He is past Chairman of
the Board of Directors for Mobile Meals of Spartanburg, South Carolina, Vice
Chairman of the Board of Directors of the Foundation for the Multi- Handicapped,
Blind and Deaf of South Carolina, and on the Board of Directors of the Civitan
Club of Spartanburg, South Carolina.
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BILLY L. PAINTER has served as the Association's President and Chief
Executive Officer since 1984. Mr. Painter is a former Chairman of the
Spartanburg Area Chamber of Commerce. He serves on the Advisory Board for the
Piedmont Interstate Fair, the Advisory Board of Salvation Army, and on the Board
of the Spartanburg Development Council.
R. WESLEY HAMMOND is the President and Chief Operating Officer of
Hammond-Brown-Jennings, a furniture company. He is President-elect from South
Carolina and a member of the Executive Committee of Southern Home Furnishings
Association. He is an active member of the Church of the Advent in Spartanburg,
South Carolina.
HUGH H. BRANTLEY is the Association's Executive Vice President and
Chief Operating Officer. Mr. Brantley serves on the Boards of Directors of the
Downtown Rescue Mission, the Impact Ministries, the Upward Basketball
and the YMCA, in Spartanburg, South Carolina.
J. STEPHEN SINCLAIR is the Association's Executive Vice President of
Lending. Mr. Sinclair is Senior Vice President of First Spartan. He is a
Director and Treasurer of Safe Homes - Rape Crisis Coalition, a Director of
Communities and Schools through the Chamber of Commerce and a member of the Home
Builder Association of Greater Spartanburg.
R. LAMAR SIMPSON has served as the Association's Chief Financial
Officer since June 1996. Prior to his employment with the Association, he was a
senior manager with Deloitte & Touche LLP, where he was employed for nine years.
He is a member of the Board of Directors and Treasurer of the Boys Home of the
South, a member of the American Institute of Certified Public Accountants, a
member of the South Carolina Association of Certified Public Accountants and a
member of the Financial Managers Society.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Association is conducted through meetings and
activities of the Board of Directors and its committees. During the fiscal year
ended June 30, 1996, the Board of Directors held 12 regular meetings and nine
special meetings. No director attended fewer than 75% of the total meetings of
the Board of Directors and of committees on which such director served.
The Executive Committee, consisting of Directors Odom (Chairman),
Handell and Salter, has the authority to act on behalf of the Board of Directors
between regular meetings. All actions of the Executive Committee are presented
for ratification by the Board of Directors at its next regularly scheduled
meeting. The Executive Committee did not meet during the year ended June 30,
1996.
The Personnel Committee, consisting of Directors Odom (Chairman),
Sanders and Salter, is responsible for all personnel issues, including
recommending compensation levels for all employees and senior management to the
Board of Directors. The Personnel Committee met four times during the year ended
June 30, 1996.
The Audit Committee, consisting of Directors Salter (Chairman), Hammond
and Handell, receives and reviews all reports prepared by the Association's
external and internal auditor. The Internal Auditor reports monthly to the Audit
Committee. The Audit Committee met three times during the year ended June 30,
1996.
The full Board of Directors acts as a Nominating Committee for the
annual selection of management's nominees for election as directors. The full
Board of Directors met once in its capacity as Nominating Committee during the
year ended June 30, 1996.
The Association also maintains standing Asset/Liability, Loan, Asset
Classification, CRA, Compliance, and Conflict of Interest Committees.
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DIRECTORS' COMPENSATION
FEES. Currently, directors receive a fee of $1,500 per month.
Directors' fees totalled $84,000 for the year ended June 30, 1996. Following
consummation of the Conversion, directors' fees will continue to be paid by the
Association and, initially, no separate fees are expected to be paid for service
on the Holdings Company's Board of Directors.
DIRECTOR EMERITUS PLAN. In connection with the Conversion, the
Association has formalized, with certain modifications, its existing policy
regarding director emeritus status by adopting the First Federal Savings and
Loan Association of Spartanburg Director Emeritus Plan ("Plan"). The Plan
provides that each director elected to the Board of Directors of the Association
on or after March 17, 1989 shall become a director emeritus on the later to
occur of (i) the date the director attains age 72 or (ii) the expiration of the
director's then current term of office after attaining age 72. In addition, a
director with at least 10 years of service on the Board may, upon attaining age
65, apply to the Board to assume director emeritus status. Under the Plan, a
director emeritus receives 50% of the fee payable to regular Board members for
attendance at monthly Board meetings. If the director emeritus attends the
monthly Board meeting, the amount payable is increased to 75% of the fee payable
to regular Board members. The Board may also designated as a director emeritus a
director who becomes disabled. An additional feature of the Plan provides that,
in the event of a change in control of the Holding Company or the Association
(as defined in the Plan), each director would be treated as a director emeritus
on the effective date of the change of control. Within 30 days of such date,
each director emeritus would receive a payment equal to three times the fees
received by the director during the 12-month period ending prior to the
effective date of the change in control. Assuming a change in control had
occurred at December 31, 1996, the aggregate amount payable under the Plan to
all directors would be approximately $378,000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following information is furnished for
Messrs. Painter, Brantley and Sinclair for the year ended June 30, 1996.
ANNUAL COMPENSATION(1)
NAME AND OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(2) COMPENSATION
- -------- ---- ------ ----- -------------- ------------
Billy L. Painter 1996 $132,993 $30,000 $-- $36,661(3)
President and Chief
Executive Officer
Hugh H. Brantley 1996 83,444 11,000 -- 16,966(4)
Executive Vice
President and Chief
Operating Officer
J. Stephen Sinclair 1996 83,432 11,000 -- 16,966(5)
Executive Vice
President of Lending
(1) Compensation information for the years ended June 30, 1995 and 1994 has
been omitted as the Association was not a public company nor a subsidiary
thereof at such time.
(2) The aggregate amount of perquisites and other personal benefits was less
than 10% of the total annual salary and bonus reported.
(3) Consists of directors' fees ($12,000), employer retirement plan
contributions ($19,946), employer 401(k) Plan matching contributions
($4,035) and term life insurance premiums ($680).
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<PAGE>
(4) Consists of employer retirement plan contributions ($12,502), employer
401(k) Plan matching contributions ($4,035) and term life insurance
premiums ($428).
(5) Consists of employer retirement plan contributions ($12,502), employer
401(k) Plan matching contributions ($4,035) and term life insurance
premiums ($428).
EMPLOYMENT AGREEMENTS. In connection with the Conversion, the Holding
Company and the Association (collectively, the "Employers") will enter into
three-year employment agreements ("Employment Agreements") with Messrs. Painter,
Sinclair and Brantley (individually, the "Executive"). Under the Employment
Agreements, the initial salary levels for Messrs. Painter, Sinclair and Brantley
will be $140,000, $90,000 and $90,000, respectively, which amounts will be paid
by the Association and may be increased at the discretion of the Board of
Directors or an authorized committee of the Board. On each anniversary of the
commencement date of the Employment Agreements, the term of each agreement may
be extended for an additional year at the discretion of the Board. The agreement
is terminable by the Employers at any time, by the Executive if the Executive is
assigned duties inconsistent with his initial position, duties, responsibilities
and status, or upon the occurrence of certain events specified by federal
regulations. In the event that an Executive's employment is terminated without
cause or upon the Executive's voluntary termination following the occurrence of
an event described in the preceding sentence, the Association would be required
to honor the terms of the agreement through the expiration of the current term,
including payment of current cash compensation and continuation of employee
benefits.
The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended ("Exchange Act")) is or becomes the beneficial owner, directly or
indirectly, of securities of the Holding Company representing 25% or more of the
combined voting power of the Holding Company's then outstanding securities, (c)
the membership of the Board of Directors changes as the result of a contested
election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
The severance benefit payment from the Employers will equal 2.99 times
each Executive's average annual compensation during the five-year period
preceding the change in control. Such amount will be paid in a lump sum within
ten business days following the termination of employment. In addition, the
Association would be obligated to continue each Executive's insured employee
welfare benefits for a 36-month period following termination of employment, the
value of which would be considered for purposes of calculating each Executive's
average annual compensation during the five-year period preceding the change in
control. Assuming that a change in control had occurred at December 31, 1996,
Messrs. Painter, Sinclair and Brantley would be entitled to cash severance
benefit payment with an aggregate value of approximately $420,000, $270,000 and
$270,000, respectively. Section 280G of the Internal Revenue Code of 1986, as
amended ("Code"), states that severance payments that equal or exceed three
times the base compensation of the individual are deemed to be "excess parachute
payments" if they are contingent upon a change in control. Individuals receiving
excess parachute payments are subject to a 20% excise tax on the amount of such
excess payments, and the Employers would not be entitled to deduct the amount of
such excess payments.
The Employment Agreements restrict each Executive's right to compete
against the Employers for a period of one year from the date of termination of
the agreement if an Executive voluntarily terminates employment, except in the
event of a change in control.
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SEVERANCE AGREEMENTS. In connection with the Conversion, the Holding
Company and the Association will enter into severance agreements with R. Lamar
Simpson, the Holding Company's Treasurer, Secretary and Chief Financial Officer
and the Association's Chief Financial Officer, and Thomas Bridgeman and Rand
Peterson, each a Senior Vice President of the Association. On each anniversary
of the commencement date of the severance agreements, the term of each agreement
may be extended for an additional year at the discretion of the Board. It is
anticipated that the three severance agreements will have an initial term of two
years.
The severance agreements will provide for severance payments and
continuation of insured employee welfare benefits in the event of involuntary
termination of employment in connection with any change in control of the
Employers. Severance payments and benefits also will be provided on a similar
basis in connection with a voluntary termination of employment where, subsequent
to a change in control, an officer is assigned duties inconsistent with his
position, duties, responsibilities and status immediately prior to such change
in control. The term "change in control" is defined in the agreement as having
occurred when, among other things, (a) a person other than the Holding Company
purchases shares of Common Stock pursuant to a tender or exchange offer for such
shares, (b) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Holding Company representing 25% or more of the combined
voting power of the Holding Company's then outstanding securities, (c) the
membership of the Board of Directors changes as the result of a contested
election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
Assuming that a change in control had occurred at December 31, 1996,
and excluding any other benefits due under the severance agreements, the
aggregate cash severance benefit payments payable to the three officers would be
approximately $438,000.
EMPLOYEE SEVERANCE COMPENSATION PLAN. In connection with the
Conversion, the Board of Directors of the Association intends to adopt an
Employee Severance Compensation Plan ("Severance Plan") to provide benefits to
eligible employees in the event of a change in control of the Holding Company or
the Association. In general, all employees (except for officers who enter into
separate employment or severance agreements with the Holding Company and the
Association) will be eligible to participate in the Severance Plan. Under the
Severance Plan, in the event of a change in control of the Holding Company or
the Association, eligible employees, other than officers of the Association, who
are terminated or who terminate employment (but only upon the occurrence of
events specified in the Severance Plan) within 12 months of the effective date
of a change in control will be entitled to a payment based on years of service
with the Association. However, the maximum payment for any eligible employee
would be equal to 52 weeks of their current compensation. In addition, vice
presidents of the Association would be eligible to receive a severance payment
equal to 18 months of their current compensation. The Severance Plan also
provides that employees who have not met the three year service requirement for
participation would receive a payment equal to two weeks' compensation and other
officers would receive between six and twelve months of their current
compensation depending on years of service and position. Assuming that a change
in control had occurred at December 31, 1996 and the termination of all eligible
employees, the maximum aggregate payment due under the Severance Plan would be
approximately $1.2 million.
BENEFITS
GENERAL. The Association currently pays 100% of the premiums for
medical, life and disability insurance benefits for full-time employees,
subject to certain deductibles.
401(K) PLAN. The Association maintains the First Federal Savings and
Loan Association of Spartanburg 401(k) Plan ("401(k) Plan") for the benefit of
eligible employees of the Association. The 401(k) Plan is intended
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to be a tax-qualified plan under Sections 401(a) and 401(k) of the Code.
Employees of the Association who have completed 1,000 hours of service during 12
consecutive months and who have attained age 21 are eligible to participate in
the 401(k) Plan. Participants may contribute from 2%-10% of their annual
compensation to the 401(k) Plan through a salary reduction election. The
Association matches participant contributions on a discretionary basis to a
maximum of 5% of compensation contributed by the participant. In addition to
employer matching contributions, the Association may contribute a discretionary
amount to the 401(k) Plan in any plan year which is allocated to individual
participants in the proportion that their annual compensation bears to the total
compensation of all participants during the plan year. To be eligible to receive
a discretionary employer contribution, the participant must complete 1,000 hours
of service during the plan year and remain employed by the Association on the
last day of the plan year. Participants are at all times 100% vested in salary
reduction contributions. With respect to employer matching and discretionary
employer contributions, participants vest in such contributions at the rate of
20% per year beginning with the completion of one year of participation with
full vesting occurring after five years of participation. For the year ended
June 30, 1996, the Association incurred total contribution-related expenses of
$72,000 in connection with the 401(k) Plan.
The Association previously maintained a tax-qualified money purchase
pension plan for the benefit of eligible employees. The money purchase pension
plan was merged with and into the 401(k) Plan, effective ______________, 1997.
Participant account balances under the money purchase plan were fully vested in
connection with the merger and the accounts of former money purchase pension
plan participants have been maintained as separate accounts under the 401(k)
Plan, subject to certain rights of the participants under the terms of the money
purchase pension plan.
Generally, the investment of 401(k) Plan assets is directed by plan
participants. In connection with the Conversion, the investment options
available to participants will be expanded to include the opportunity to direct
the investment of up to 100% of their 401(k) Plan account balance to purchase
shares of the Common Stock. A participant in the 401(k) Plan who elects to
purchase Common Stock in the Conversion through the 401(k) Plan will receive the
same subscription priority and be subject to the same individual purchase
limitations as if the participant had elected to make such purchase using other
funds. See "THE CONVERSION -- Limitations on Purchases of Shares."
EMPLOYEE STOCK OWNERSHIP PLAN. The Board of Directors has authorized
the adoption by the Association of an ESOP for employees of the Association to
become effective upon the completion of the Conversion. The ESOP is intended to
satisfy the requirements for an employee stock ownership plan under the Code and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Full-time employees of the Holding Company and the Association who have been
credited with at least 1,000 hours of service during a 12-month period and who
have attained age 21 will be eligible to participate in the ESOP.
In order to fund the purchase of up to 8% of the Common Stock to be
issued in the Conversion, it is anticipated that the ESOP will borrow funds from
the Holding Company. Such loan will equal 100% of the aggregate purchase price
of the Common Stock. The loan to the ESOP will be repaid principally from the
Association's contributions to the ESOP and dividends payable on Common Stock
held by the ESOP over the anticipated 12-year term of the loan. The interest
rate for the ESOP loan is expected to be the prime rate as published in THE WALL
STREET JOURNAL on the closing date of the Conversion. See "PRO FORMA DATA." To
the extent that the ESOP is unable to acquire 8% of the Common Stock issued in
the Conversion, such additional shares will be acquired following the Conversion
through open market purchases.
In any plan year, the Association may make additional discretionary
contributions to the ESOP for the benefit of plan participants in either cash or
shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders or which
constitute authorized but unissued shares or shares held in treasury by Holding
Company. The timing, amount, and manner of such discretionary contributions
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will be affected by several factors, including applicable regulatory policies,
the requirements of applicable laws and regulations, and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held
in a suspense account and released on a pro rata basis as the loan is repaid.
Discretionary contributions to the ESOP and shares released from the suspense
account will be allocated among participants on the basis of each participant's
proportional share of total compensation. Forfeitures will be reallocated among
the remaining plan participants.
Participants will vest in their accrued benefits under the ESOP at the
rate of 20% per year, beginning upon the completion of one year of
participation. A participant is fully vested at retirement, in the event of
disability or upon termination of the ESOP. Benefits are distributable upon a
participant's retirement, early retirement, death, disability, or termination of
employment. The Association's contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated.
It is anticipated that Messrs. _________, ________ and _________ will
be appointed by the Board of Directors of the Association to serve as trustees
of the ESOP. Under the ESOP, the trustees must vote all allocated shares held in
the ESOP in accordance with the instructions of plan participants and
unallocated shares and allocated shares for which no instructions are received
must be voted in the same ratio on any matter as those shares for which
instructions are given.
Pursuant to SOP 93-6, compensation expense for a leveraged ESOP is
recorded at the fair market value of the ESOP shares when committed to be
released to participants' accounts. See "PRO FORMA DATA" and "MANAGEMENT'S
DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of
Operating Results for the Six Months Ended December 31, 1996 and 1995."
If the ESOP purchases newly issued shares from the Holding Company,
total stockholders' equity would neither increase nor decrease. However, on a
per share basis, stockholders' equity and per share net earnings would decrease
because of the increase in the number of outstanding shares.
The ESOP will be subject to the requirements of ERISA and the
regulations of the IRS and the Department of Labor issued thereunder. The
Association intends to request a determination letter from the IRS regarding the
tax-qualified status of the ESOP. Although no assurance can be given that a
favorable determination letter will be issued, the Association expects that a
favorable determination letter will be received by the ESOP.
1997 STOCK OPTION PLAN. The Board of Directors of the Holding Company
intends to adopt the Stock Option Plan and to submit the Stock Option Plan to
the stockholders for approval at a meeting held no earlier than six months
following consummation of the Conversion. Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares is
required prior to the implementation of the Stock Option Plan within one year of
the consummation of the Conversion. The Stock Option Plan will comply with all
applicable regulatory requirements. However, the Stock Option Plan will not be
approved or endorsed by the OTS.
The Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Association, and to reward officers and key employees for outstanding
performance. The Stock Option Plan will provide for the grant of incentive stock
options ("ISOs") intended to comply with the requirements of Section 422 of the
Code and for nonqualified stock options ("NQOs"). Upon receipt of stockholder
approval of the Stock Option Plan, stock options may be granted to key employees
of the Holding Company and its subsidiaries, including the Association. Unless
sooner terminated, the Stock Option Plan will continue in effect for a period of
ten years from the date the Stock Option Plan is approved by stockholders.
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A number of authorized shares of Common Stock equal to 10% of the
number of shares of Common Stock issued in connection with the Conversion will
be reserved for future issuance under the Stock Option Plan (385,250 shares
based on the issuance of 3,852,500 shares at the maximum of the Estimated
Valuation Range). Shares acquired upon exercise of options will be authorized
but unissued shares or treasury shares. In the event of a stock split, reverse
stock split, stock dividend, or similar event, the number of shares of Common
Stock under the Stock Option Plan, the number of shares to which any award
relates and the exercise price per share under any option may be adjusted by the
Committee (as defined below) to reflect the increase or decrease in the total
number of shares of Common Stock outstanding.
The Stock Option Plan will be administered and interpreted by a
committee of the Board of Directors ("Committee"). Subject to applicable OTS
regulations, the Committee will determine which nonemployee directors, officers
and key employees will be granted options, whether, in the case of officers and
employees, such options will be ISOs or NQOs, the number of shares subject to
each option, and the exercisability of such options. All options granted to
nonemployee directors will be NQOs. The per share exercise price of all options
will equal at least 100% of the fair market value of a share of Common Stock on
the date the option is granted.
Under current OTS regulations, if the Stock Option Plan is implemented
within one year of the consummation of the Conversion, (i) no officer or
employees could receive an award of options covering in excess of 25%, (ii) no
nonemployee director could receive in excess of 5% and (iii) nonemployee
directors, as a group, could not receive in excess of 30% of the number of
shares reserved for issuance under the Stock Option Plan.
It is anticipated that all options granted under the Stock Option Plan
will be granted subject to a vesting schedule whereby the options become
exercisable over a specified period following the date of grant. Under OTS
regulations, if the Stock Option plan is implemented within the first year
following consummation of the Conversion the minimum vesting period will be five
years. All unvested options will be immediately exercisable in the event of the
recipient's death or disability. Unvested options also will be exercisable
following a change in control (as defined in the Stock Option Plan) of the
Holding Company or the Association to the extent authorized or not prohibited by
applicable law or regulations. OTS regulations currently provide that if the
Stock Option Plan is implemented prior to the first anniversary of the
Conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Association.
Each stock option that is awarded to an officer or key employee will
remain exercisable at any time on or after the date it vests through the earlier
to occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Committee. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board. All stock options are
nontransferable except by will or the laws of descent or distribution.
Under current provisions of the Code, the federal tax treatment of ISOs
and NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements. With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference between
the fair market value of the Common Stock on the date of exercise and the option
exercise price generally
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will be treated as compensation to the optionee upon exercise, and the Holding
Company will be entitled to a compensation expense deduction in the amount of
income realized by the optionee.
Although no specific award determinations have been made at this time,
the Holding Company and the Association anticipate that if stockholder approval
is obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable regulations.
The size of individual awards will be determined prior to submitting the Stock
Option Plan for stockholder approval, and disclosure of anticipated awards will
be included in the proxy materials for such meeting.
MANAGEMENT RECOGNITION PLAN. Following the Conversion, the Board of
Directors of the Holding Company intends to adopt an MRP for officers,
employees, and nonemployee directors of the Holding Company and the Association,
subject to shareholder approval. The MRP will enable the Holding Company and the
Association to provide participants with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Association. The MRP will comply with all applicable regulatory
requirements. However, the MRP will not be approved or endorsed by the OTS.
Under current OTS regulations, the approval of a majority vote of the Holding
Company's outstanding shares is required prior to the implementation of the MRP
within one year of the consummation of the Conversion.
The MRP expects to acquire a number of shares of Common Stock equal to
4% of the Common Stock issued in connection with the Conversion (154,100 shares
based on the issuance of 3,852,500 shares in the Conversion at the maximum of
the Estimated Valuation Range). Such shares will be acquired on the open market,
if available, with funds contributed by the Holding Company or the Association
to a trust which the Holding Company may establish in conjunction with the MRP
("MRP Trust") or from authorized but unissued shares or treasury shares of the
Holding Company.
A committee of the Board of Directors of the Holding Company will
administer the MRP, the members of which will also serve as trustees of the MRP
Trust, if formed. The trustees will be responsible for the investment of all
funds contributed by the Holding Company or the Association to the MRP Trust.
The Board of Directors of the Holding Company may terminate the MRP at any time
and, upon termination, all unallocated shares of Common Stock will revert to the
Holding Company.
Shares of Common Stock granted pursuant to the MRP will be in the form
of restricted stock payable ratably over a specified vesting period following
the date of grant. During the period of restriction, all shares will be held in
escrow by the Holding Company or by the MRP Trust. Under OTS regulations, if the
MRP is implemented within the first year following consummation of the
Conversion, the minimum vesting period will be five years. All unvested MRP
awards will vest in the event of the recipient's death or disability. Unvested
MRP awards will also vest following a change in control (as defined in the MRP)
of the Holding Company or the Association to the extent authorized or not
prohibited by applicable law or regulations. OTS regulations currently provide
that, if the MRP is implemented prior to the first anniversary of the
Conversion, vesting may not be accelerated upon a change in control of the
Holding Company or the Association.
A recipient of an MRP award in the form of restricted stock generally
will not recognize income upon an award of shares of Common Stock, and the
Holding Company will not be entitled to a federal income tax deduction, until
the termination of the restrictions. Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will be entitled to a deduction
in the same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In that
event, the Holding Company will be entitled to a deduction in such year and in
the same amount. Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.
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Although no specific award determinations have been made at this time,
the Holding Company and the Association anticipate that if stockholder approval
is obtained it would provide awards to its directors, officers and employees to
the extent and under terms and conditions permitted by applicable regulations.
Under current OTS regulations, if the MRP is implemented within one year of the
consummation of the Conversion, (i) no officer or employees could receive an
award covering in excess of 25%, (ii) no nonemployee director could receive in
excess of 5% and (iii) nonemployee directors, as a group, could not receive in
excess of 30%, of the number of shares reserved for issuance under the MRP. The
size of individual awards will be determined prior to submitting the MRP for
stockholder approval, and disclosure of anticipated awards will be included in
the proxy materials for such meeting.
TRANSACTIONS WITH THE ASSOCIATION
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and must not involve more
than the normal risk of repayment or present other unfavorable features. The
Association is therefore prohibited from making any new loans or extensions of
credit to the Association's executive officers and directors at different rates
or terms than those offered to the general public and has adopted a policy to
this effect. In addition, loans made to a director or executive officer in an
amount that, when aggregated with the amount of all other loans to such person
and his related interests, are in excess of the greater of $25,000, or 5% of the
Association's capital and surplus (up to a maximum of $500,000) must be approved
in advance by a majority of the disinterested members of the Board of Directors.
See "REGULATION -- Federal Regulation of Savings Associations -- Transactions
with Affiliates." The aggregate amount of loans by the Association to its
executive officers and directors was $957,000 at December 31, 1996, or
approximately 0.9% of pro forma stockholders' equity (based on the issuance of
the maximum of the Estimated Valuation Range).
Robert R. Odom, Chairman of the Board of the Holding Company and the
Association, is a senior partner with the law firm of Odom, Terry, Cantrell &
Hammett, Spartanburg, South Carolina, which serves as general counsel to the
Association. The Association paid a retainer of $18,000 and legal fees of
$10,200 to the firm during the year ended June 30, 1996 for services rendered to
the Association.
E. Lea Salter, a Director of the Holding Company and the Association,
is the President of Christman & Parson, Inc., a general contractor. In recent
years, it has submitted sealed bids for and has been awarded contracts to
perform work for the Association. The Association did not award any contract or
pay any material amount of monies to Christman & Parson, Inc. during the year
ended June 30, 1996.
REGULATION
GENERAL
The Association is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits. The activities of federal savings institutions are governed by the
Home Owners' Loan Act, as amended (the "HOLA") and, in certain respects, the
Federal Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and
the FDIC to implement these statutes. These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage. Lending activities and other investments must comply with various
statutory and regulatory capital requirements. In addition, the Association's
relationship with its depositors and borrowers is also regulated to a great
extent, especially in such matters as the ownership of deposit accounts and the
form and content of the Association's mortgage documents. The Association must
file reports with the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other financial
institutions. There are periodic examinations by the OTS and the FDIC to review
the Association's compliance with various regulatory requirements. The
regulatory structure also
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gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or Congress, could have a material
adverse impact on the Holding Company, the Association and their operations. The
Holding Company, as a savings and loan holding company, will also be required to
file certain reports with, and otherwise comply with the rules and regulations
of, the OTS.
FEDERAL REGULATION OF SAVINGS ASSOCIATIONS
OFFICE OF THRIFT SUPERVISION. The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the Treasury.
The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
FEDERAL HOME LOAN BANK SYSTEM. The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to: supervise the FHLBs; ensure that the FHLBs
carry out their housing finance mission; ensure that the FHLBs remain adequately
capitalized and able to raise funds in the capital markets; and ensure that the
FHLBs operate in a safe and sound manner.
The Association, as a member of the FHLB-Atlanta, is required to
acquire and hold shares of capital stock in the FHLB-Atlanta in an amount equal
to the greater of (i) 1.0% of the aggregate outstanding principal amount of
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or (ii) 1/20 of its advances (borrowings) from the
FHLB-Atlanta. The Association is in compliance with this requirement with an
investment in FHLB-Atlanta stock of $2.8 million at December 31, 1996.
Among other benefits, the FHLB-Atlanta provides a central credit
facility primarily for member institutions. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It makes
advances to members in accordance with policies and procedures established by
the FHFB and the Board of Directors of the FHLB-Atlanta.
FEDERAL DEPOSIT INSURANCE CORPORATION. The FDIC is an independent
federal agency established originally to insure the deposits, up to prescribed
statutory limits, of federally insured banks and to preserve the safety and
soundness of the banking industry. In 1989 the FDIC also became the insurer, up
to the prescribed limits, of the deposit accounts held at federally insured
savings associations and established two separate insurance funds: the BIF and
the SAIF. As insurer of the Association's deposits, the FDIC has examination,
supervisory and enforcement authority over all savings associations.
The Association's deposit accounts are insured by the FDIC under the
SAIF to the maximum extent permitted by law. The Association currently pays
deposit insurance premiums to the FDIC based on a risk-based assessment system
established by the FDIC for all SAIF-member institutions. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital - - "well capitalized,"
"adequately capitalized," and "undercapitalized" -- which are defined in the
same manner as the regulations establishing the prompt corrective action system
under Section 38 of the FDIA, as discussed below. These three groups are then
divided into three subgroups which reflect varying levels of supervisory
concern, from those which are considered to be healthy to those which are
considered to be of substantial supervisory concern. The Association's
assessments expensed for the year ended June 30, 1996 equaled $737,000.
The FDIC's current assessment schedule for SAIF deposit insurance
provides that the assessment rate for well-capitalized institutions with the
highest supervisory ratings would be reduced to zero and institutions in the
lowest risk assessment classification will be assessed at the rate of 0.27% of
insured deposits. Until December 31, 1999, however, SAIF-insured institutions,
will be required to add to their assessments to the FDIC at the rate of 6.5
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basis points to help fund interest payments on certain bonds issued by the
Financing Corporation ("FICO"), an agency of the federal government established
to finance takeovers of insolvent thrifts. During this period, BIF members will
be assessed for FICO obligations at the rate of 1.3 basis points. After December
31, 1999, both BIF and SAIF members will be assessed at the same rate for FICO
payments.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Association.
LIQUIDITY REQUIREMENTS. Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
5.0%) of its net withdrawable accounts plus short-term borrowings. OTS
regulations also require each savings institution to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1.0%)
of the total of its net withdrawable savings accounts and borrowings payable in
one year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
PROMPT CORRECTIVE ACTION. Under Section 38 of the FDIA, as added by the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), each
federal banking agency is required to implement a system of prompt corrective
action for institutions that it regulates. The federal banking agencies have
promulgated substantially similar regulations to implement this system of prompt
corrective action. Under the regulations, an institution shall be deemed to be
(i) "well capitalized" if it has a total risk-based capital ratio of 10.0% or
more, has a Tier I risk-based capital ratio of 6.0% or more, has a leverage
ratio of 5.0% or more and is not subject to specified requirements to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier
I risk-based capital ratio of 4.0% or more and a leverage ratio of 4.0% or more
(3.0% under certain circumstances) and does not meet the definition of "well
capitalized;" (iii) "undercapitalized" if it has a total risk-based capital
ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less
than 4.0% or a leverage ratio that is less than 4.0% (3.0% under certain
circumstances); (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital
ratio that is less than 3.0% or a leverage ratio that is less than 3.0%; and (v)
"critically undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2.0%.
Section 38 of the FDIA and the implementing regulations also provide
that a federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity. (The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.)
An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an
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institution shall become subject to the provisions of Section 38 of the FDIA,
which sets forth various mandatory and discretionary restrictions on its
operations.
At December 31, 1996, the Association was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.
STANDARDS FOR SAFETY AND SOUNDNESS. The FDIA requires the federal
banking regulatory agencies to prescribe, by regulation, standards for all
insured depository institutions relating to: (i) internal controls, information
systems and internal audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; (v) asset growth; and (vi)
compensation, fees and benefits. The federal banking agencies recently adopted
final regulations and Interagency Guidelines Prescribing Standards for Safety
and Soundness ("Guidelines") to implement safety and soundness standards
required by the FDIA. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. The agencies
also proposed asset quality and earnings standards which, if adopted in final,
would be added to the Guidelines. Under the final regulations, if the OTS
determines that the Association fails to meet any standard prescribed by the
Guidelines, the agency may require the Association to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by the
FDIA. The final regulations establish deadlines for the submission and review of
such safety and soundness compliance plans.
QUALIFIED THRIFT LENDER TEST. All savings associations are required to
meet a qualified thrift lender ("QTL") test set forth in Section 10(m) of the
HOLA and regulations of the OTS thereunder to avoid certain restrictions on
their operations. A savings institution that fails to become or remain a QTL
shall either become a national bank or be subject to the following restrictions
on its operations: (i) the association may not make any new investment or engage
in activities that would not be permissible for national banks; (ii) the
association may not establish any new branch office where a national bank
located in the savings institution's home state would not be able to establish a
branch office; (iii) the association shall be ineligible to obtain new advances
from any FHLB; and (iv) the payment of dividends by the association shall be
subject to the statutory and regulatory dividend restrictions applicable to
national banks. Also, beginning three years after the date on which the savings
institution ceases to be a QTL, the savings institution would be prohibited from
retaining any investment or engaging in any activity not permissible for a
national bank and would be required to repay any outstanding advances to any
FHLB. In addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a bank
holding company and become subject to the rules applicable to such companies. A
savings institution may requalify as a QTL if it thereafter complies with the
QTL test.
Currently, the QTL test requires that either an institution qualify as
a domestic building and loan association under the Internal Revenue Code or that
65% of an institution's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in nine out of
every 12 months. Assets that qualify without limit for inclusion as part of the
65% requirement are loans made to purchase, refinance, construct, improve or
repair domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by FHLMC or FMNA. Portfolio assets consist of
total assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets. At December 31, 1996,
the qualified thrift investments of the Association were approximately 93.6% of
its portfolio assets.
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CAPITAL REQUIREMENTS. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in order
to comply with the capital requirements. The Holding Company is not subject to
any minimum capital requirements.
OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital is
defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries. Institutions that
fail to meet the core capital requirement would be required to file with the OTS
a capital plan that details the steps they will take to reach compliance. In
addition, the OTS's prompt corrective action regulation provides that a savings
institution that has a leverage ratio of less than 4% (3% for institutions
receiving the highest CAMEL examination rating) will be deemed to be
"undercapitalized" and may be subject to certain restrictions. See "-- Federal
Regulation of Savings Associations -- Prompt Corrective Action."
As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the CAMEL rating system for savings
associations will be permitted to operate at or near the regulatory minimum
leverage ratio of 3%. All other savings associations will be required to
maintain a minimum leverage ratio of 4% to 5%. The OTS will assess each
individual savings association through the supervisory process on a case-by-case
basis to determine the applicable requirement. No assurance can be given as to
the final form of any such regulation, the date of its effectiveness or the
requirement applicable to the Association.
Savings associations also must maintain "tangible capital" not less
than 1.5% of the Association's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal
to at least 8% of risk-weighted assets. Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
cannot exceed core capital, as previously defined. Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt and mandatory convertible
subordinated debt, (ii) maturing capital instruments such as subordinated debt,
intermediate-term preferred stock and mandatory convertible subordinated debt,
subject to an amortization schedule, and (iii) general valuation loan and lease
loss allowances up to 1.25% of risk-weighted assets.
The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not included
for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans are
assigned a 100% risk weight, as are nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets.
Off-balance sheet items are included in risk- weighted assets by converting them
to an approximate balance sheet "credit equivalent amount" based on a
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conversion schedule. These credit equivalent amounts are then assigned to risk
categories in the same manner as balance sheet assets and included risk-weighted
assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital requirement. Under
the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not subject to
the interest rate risk component, unless the OTS determines otherwise. The rule
also provides that the Director of the OTS may waive or defer an association's
interest rate risk component on a case-by-case basis. Under certain
circumstances, a savings association may request an adjustment to its interest
rate risk component if it believes that the OTS-calculated interest rate risk
component overstates its interest rate risk exposure. In addition, certain
"well- capitalized" institutions may obtain authorization to use their own
interest rate risk model to calculate their interest rate risk component in lieu
of the OTS-calculated amount. The OTS has postponed the date that the component
will first be deducted from an institution's total capital.
See "HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE" for a table that sets
forth in terms of dollars and percentages the OTS tangible, core and risk-based
capital requirements, the Association's historical amounts and percentages at
December 31, 1996 and pro forma amounts and percentages based upon the
assumptions stated therein.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Association to give the OTS 30
days' advance notice of any proposed declaration of dividends, and the OTS has
the authority under its supervisory powers to prohibit the payment of dividends.
The regulation utilizes a three-tiered approach which permits various levels of
distributions based primarily upon a savings association's capital level.
A Tier 1 savings association has capital in excess of its fully
phased-in capital requirement (both before and after the proposed capital
distribution). Tier 1 savings association may make (without application but upon
prior notice to, and no objection made by, the OTS) capital distributions during
a calendar year up to 100% of its net income to date during the calendar year
plus one-half its surplus capital ratio (i.e., the amount of capital in excess
of its fully phased-in requirement) at the beginning of the calendar year or the
amount authorized for a Tier 2 association. Capital distributions in excess of
such amount require advance notice to the OTS. A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
fully phased-in capital requirement (both before and after the proposed capital
distribution). Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the previous
four quarters depending on how close the association is to meeting its fully
phased-in capital requirement. Capital distributions exceeding this amount
require prior OTS approval. Tier 3 associations are savings associations with
capital below the minimum capital requirement (either before or after the
proposed capital distribution). Tier 3 associations may not make any capital
distributions without prior approval from the OTS.
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The Association currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.
LOANS TO ONE BORROWER. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Association's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such loan
is secured by readily-marketable collateral, which is defined to include certain
financial instruments and bullion. The OTS by regulation has amended the loans
to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower in
additional amounts under circumstances limited essentially to loans to develop
or complete residential housing units. At December 31, 1996, the Association's
limit on loans to one borrower was $7.0 million. At December 31, 1996, the
Association's largest aggregate amount of loans to one borrower was $2.8
million.
ACTIVITIES OF ASSOCIATIONS AND THEIR SUBSIDIARIES. When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require. Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.
The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
TRANSACTIONS WITH AFFILIATES. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions. Any loan or extension of credit by the Association to an affiliate
must be secured by collateral in accordance with Section 23A.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC-insured banks. The Association has not been significantly affected by the
rules regarding transactions with affiliates.
The Association's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Among other things, these regulations generally require
that such loans be made on terms
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and conditions substantially the same as those offered to unaffiliated
individuals and not involve more than the normal risk of repayment. Generally,
Regulation O also places individual and aggregate limits on the amount of loans
the Association may make to such persons based, in part, on the Association's
capital position, and requires certain board approval procedures to be followed.
The OTS regulations, with certain minor variances, apply Regulation O to savings
institutions.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act
("CRA"), a federal statute, all federally-insured financial institutions have a
continuing and affirmative obligation consistent with safe and sound operations
to help meet all the credit needs of its delineated community. The CRA does not
establish specific lending requirements or programs nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to meet all the credit needs of its delineated
community. The CRA requires the federal banking agencies, in connection with
regulatory examinations, to assess an institution's record of meeting the credit
needs of its delineated community and to take such record into account in
evaluating certain regulatory applications filed by an institution. The CRA
requires public disclosure of an institution's CRA rating. The Association
received an "outstanding" rating as a result of its latest evaluation.
REGULATORY AND CRIMINAL ENFORCEMENT PROVISIONS. Under the FDIA, the OTS
has primary enforcement responsibility over savings institutions and has the
authority to bring action against all "institution-affiliated parties,"
including stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to have an adverse
effect on an insured institution. Formal enforcement action may range from the
issuance of a capital directive or cease and desist order to removal of officers
or directors, receivership, conservatorship or termination of deposit insurance.
Civil penalties cover a wide range of violations and can amount to $27,500 per
day, or $1.1 million per day in especially egregious cases. Under the FDIA, the
FDIC has the authority to recommend to the Director of the OTS that enforcement
action be taken with respect to a particular savings institution. If action is
not taken by the Director, the FDIC has authority to take such action under
certain circumstances. Federal law also establishes criminal penalties for
certain violations.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS
HOLDING COMPANY ACQUISITIONS. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof. They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any savings association not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.
HOLDING COMPANY ACTIVITIES. As a unitary savings and loan holding
company, the Holding Company generally is not subject to activity restrictions
under the HOLA. If the Holding Company acquires control of another savings
association as a separate subsidiary other than in a supervisory acquisition, it
would become a multiple savings and loan holding company. There generally are
more restrictions on the activities of a multiple savings and loan holding
company than on those of a unitary savings and loan holding company. The HOLA
provides that, among other things, no multiple savings and loan holding company
or subsidiary thereof which is not an insured association shall commence or
continue for more than two years after becoming a multiple savings and loan
association holding company or subsidiary thereof, any business activity other
than: (i) furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
insured institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by regulation as of March 5,
1987 to be engaged in by multiple holding companies or (vii) those activities
authorized by the Federal Reserve Board as permissible for bank holding
companies, unless the OTS by regulation, prohibits or limits such activities for
savings and loan holding companies.
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Those activities described in (vii) above also must be approved by the OTS prior
to being engaged in by a multiple savings and loan holding company.
QUALIFIED THRIFT LENDER TEST. The HOLA requires any savings and loan
holding company that controls a savings association that fails the QTL test, as
explained under "-- Federal Regulation of Savings Associations -- Qualified
Thrift Lender Test," must, within one year after the date on which the
association ceases to be a QTL, register as and be deemed a bank holding company
subject to all applicable laws and regulations.
TAXATION
FEDERAL TAXATION
GENERAL. The Holding Company and the Association will report their
income on a fiscal year basis using the accrual method of accounting and will be
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly the Association's reserve for bad debts
discussed below. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to the Association or the Holding Company.
BAD DEBT RESERVE. Historically, savings institutions such as the
Association which met certain definitional tests primarily related to their
assets and the nature of their business ("qualifying thrift") were permitted to
establish a reserve for bad debts and to make annual additions thereto, which
may have been deducted in arriving at their taxable income. The Association's
deductions with respect to "qualifying real property loans," which are generally
loans secured by certain interest in real property, were computed using an
amount based on the Association's actual loss experience, or a percentage equal
to 8% of the Association's taxable income, computed with certain modifications
and reduced by the amount of any permitted additions to the non-qualifying
reserve. Due to the Association's loss experience, the Association generally
recognized a bad debt deduction equal to 8% of taxable income.
In August 1996, the provisions repealing the current thrift bad debt
rules were passed by Congress as part of "The Small Business Job Protection Act
of 1996." The new rules eliminate the 8% of taxable income method for deducting
additions to the tax bad debt reserves for all thrifts for tax years beginning
after December 31, 1995. These rules also require that all institutions
recapture all or a portion of their bad debt reserves added since the base year
(last taxable year beginning before January 1, 1988). The Association has
previously recorded a deferred tax liability equal to the bad debt recapture and
as such, the new rules will have no effect on the net income or federal income
tax expense. For taxable years beginning after December 31, 1995, the
Association's bad debt deduction will be determined under the experience method
using a formula based on actual bad debt experience over a period of years or,
if the Association is a "large" association (assets in excess of $500 million)
on the basis of net charge-offs during the taxable year. The new rules allow an
institution to suspend bad debt reserve recapture for the 1996 and 1997 tax
years if the institution's lending activity for those years is equal to or
greater than the institutions average mortgage lending activity for the six
taxable years preceding 1996 adjusted for inflation. For this purpose, only home
purchase or home improvement loans are included and the institution can elect to
have the tax years with the highest and lowest lending activity removed from the
average calculation. If an institution is permitted to postpone the reserve
recapture, it must begin its six year recapture no later than the 1998 tax year.
The unrecaptured base year reserves will not be subject to recapture as long as
the institution continues to carry on the business of banking. In addition, the
balance of the pre-1988 bad debt reserves continue to be subject to provision of
present law referred to below that require recapture in the case of certain
excess distributions to shareholders.
DISTRIBUTIONS. To the extent that the Association makes "nondividend
distributions" to the Holding Company, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of December
31, 1987 (or a letter amount if the Association's loan portfolio decreased since
December 31, 1987) and then from the supplemental reserve for losses on loans
("Excess Distributions"), and an amount based on the Excess Distributions will
be included in the Association's taxable income. Nondividend distributions
include
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distributions in excess of the Association's current and accumulated earnings
and profits, distributions in redemption of stock and distributions in partial
or complete liquidation. However, dividends paid out of the Association's
current or accumulated earnings and profits, as calculated for federal income
tax purposes, will not be considered to result in a distribution from the
Association's bad debt reserve. The amount of additional taxable income created
from an Excess Distribution is an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the distribution. Thus,
if, after the Conversion, the Association makes a "nondividend distribution,"
then approximately one and one-half times the Excess Distribution would be
includable in gross income for federal income tax purposes, assuming a 34%
corporate income tax rate (exclusive of state and local taxes). See "REGULATION"
and "DIVIDEND POLICY" for limits on the payment of dividends by the Association.
The Association does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.
CORPORATE ALTERNATIVE MINIMUM TAX. The Code imposes a tax on
alternative minimum taxable income ("AMTI") at a rate of 20%. The excess of the
tax bad debt reserve deduction using the percentage of taxable income method
over the deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI. In addition,
only 90% of AMTI can be offset by net operating loss carryovers. AMTI is
increased by an amount equal to 75% of the amount by which the Association's
adjusted current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses). For taxable years
beginning after December 31, 1986, and before January 1, 1996, an environmental
tax of .12% of the excess of AMTI (with certain modification) over $2.0 million
is imposed on corporations, including the Association, whether or not an
Alternative Minimum Tax ("AMT") is paid.
DIVIDENDS-RECEIVED DEDUCTION. The Holding Company may exclude from its
income 100% of dividends received from the Association as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Association will not file a consolidated
tax return, except that if the Holding Company or the Association owns more than
20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.
AUDITS. The Association's federal income tax returns have not been
audited within the past five years.
STATE TAXATION
SOUTH CAROLINA. The provisions of South Carolina tax law mirror the
Code, with certain modifications, as it relates to savings and loan
associations. The Association is subject to South Carolina income tax at the
rate of 6%. This rate of tax is imposed on savings and loan associations in lieu
of the general state business corporation income tax. The Association's state
income tax returns have not been audited within the last five years.
DELAWARE. As a Delaware holding company not earning income in Delaware,
the Holding Company is exempt from Delaware corporate income tax, but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.
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THE CONVERSION
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY
THE MEMBERS OF THE ASSOCIATION ENTITLED TO VOTE THEREON AND TO THE SATISFACTION
OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION.
GENERAL
On February 3, 1997, the Board of Directors of the Association
unanimously adopted the Plan of Conversion, pursuant to which the Association
will be converted from a federally chartered mutual savings and loan association
to a federally chartered stock savings and loan association to be held as a
wholly-owned subsidiary of the Holding Company, a newly formed Delaware
corporation. THE FOLLOWING DISCUSSION OF THE PLAN OF CONVERSION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION, WHICH IS ATTACHED AS
EXHIBIT A TO THE ASSOCIATION'S PROXY STATEMENT AND IS AVAILABLE TO MEMBERS OF
THE ASSOCIATION UPON REQUEST. The Plan of Conversion is also filed as an exhibit
to the Registration Statement. See "ADDITIONAL INFORMATION." The OTS has
approved the Plan of Conversion subject to its approval by the members of the
Association entitled to vote on the matter at a Special Meeting called for that
purpose to be held on June 25, 1997, and subject to the satisfaction of certain
other conditions imposed by the OTS in its approval.
If the Board of Directors of the Association decides for any reason,
such as possible delays resulting from overlapping regulatory processing or
policies or conditions that could adversely affect the Association's or the
Holding Company's ability to consummate the Conversion and transact its business
as contemplated herein and in accordance with the Association's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Association
will promptly refund all subscriptions or orders received together with accrued
interest, will withdraw the Holding Company's registration statement from the
SEC and will take all steps necessary to complete the Conversion and proceed
with a new offering without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Association
determines not to complete the Conversion, the Association will issue and sell
the common stock of the Association. There can be no assurance that the OTS
would approve the Conversion if the Association decided to proceed without the
Holding Company. The following description of the Plan of Conversion assumes
that a holding company form of organization will be utilized in the Conversion.
In the event that a holding company form of organization is not utilized, all
other pertinent terms of the Plan of Conversion as described below will apply to
the Conversion of the Association from mutual to stock form of organization and
the sale of the Association's common stock.
The Conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the
Association. Pursuant to the Plan of Conversion, 2,847,500 to 3,852,500 shares
of Common Stock are being offered for sale by the Holding Company at the
Purchase Price of $20.00 per share. As part of the Conversion, the Association
will issue all of its newly issued common stock (1,000 shares) to the Holding
Company in exchange for 50% of the net proceeds from the sale of Common Stock by
the Holding Company.
The Plan of Conversion provides generally that: (i) the Association
will convert from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association; (ii) the Common Stock
will be offered by the Holding Company in the Subscription Offering to persons
having Subscription Rights; (iii) if necessary, shares of Common Stock not
subscribed for in the Subscription Offering will be offered in a Direct
Community Offering to certain members of the general public, with preference
given to natural persons and trusts of natural persons residing in the Local
Community, and then to certain members of the general public in a Syndicated
Community Offering through a syndicate of registered broker-dealers pursuant to
selected dealers agreements; and (iv) the Holding Company will purchase all of
the capital stock of the Association to be issued in
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connection with the Conversion. The Conversion will be effected only upon
completion of the sale of at least $56,950,000 of Common Stock to be issued
pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of December 31, 1995); (ii) the Association's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of March 31, 1997); and (iv) Other Members (depositors of the Association as
of May 1, 1997 and borrowers of the Association with loans outstanding as of
March 12, 1997 which continue to be outstanding as of May 1, 1997).
Shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in the Direct Community Offering to members of the
general public, with priority being given to natural persons and trusts of
natural persons residing in the Local Community. The Direct Community Offering,
if one is held, is expected to begin immediately after the Expiration Date, but
may begin at any time during the Subscription Offering. Shares of Common Stock
not sold in the Subscription and Direct Community Offerings may be offered in
the Syndicated Community Offering. Regulations require that the Direct Community
and Syndicated Community Offerings be completed within 45 days after completion
of the Subscription Offering unless extended by the Association or the Holding
Company with the approval of the regulatory authorities. If the Syndicated
Community Offering is determined not to be feasible, the Board of Directors of
the Association will consult with the regulatory authorities to determine an
appropriate alternative method for selling the unsubscribed shares of Common
Stock. The Plan of Conversion provides that the Conversion must be completed
within 24 months after the date of the approval of the Plan of Conversion by the
members of the Association.
No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the Association.
The completion of the Offerings, however, is subject to market
conditions and other factors beyond the Association's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Meeting that will be required to complete the Direct Community or
Syndicated Community Offerings or other sale of the Common Stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of the Holding Company and the Association as converted, together with
corresponding changes in the net proceeds realized by the Holding Company from
the sale of the Common Stock. In the event the Conversion is terminated, the
Association would be required to charge all Conversion expenses against current
income.
Orders for shares of Common Stock will not be filled until at least
2,847,500 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is not
completed within 45 days after the last day of the fully extended Subscription
Offering and the OTS consents to an extension of time to complete the
Conversion, subscribers will be given the right to increase, decrease or rescind
their subscriptions. Unless an affirmative indication is received from
subscribers that they wish to continue to subscribe for shares, the funds will
be returned promptly, together with accrued interest at the Association's
passbook rate from the date payment is received until the funds are returned to
the subscriber. If such period is not extended, or, in any event, if the
Conversion is not completed, all withdrawal authorizations will be terminated
and all funds held will be promptly returned together with accrued interest at
the Association's passbook rate from the date payment is received until the
Conversion is terminated.
PURPOSES OF CONVERSION
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The Board of Directors and management believe that the Conversion is in
the best interests of the Association, its members and the communities it
serves. The Association's Board of Directors has formed the Holding Company to
serve as a holding company, with the Association as its subsidiary, upon the
consummation of the Conversion. By converting to the stock form of organization,
the Holding Company and the Association will be structured in the form used by
holding companies of commercial banks and by a growing number of savings
institutions. Management of the Association believes that the Conversion offers
a number of advantages which will be important to the future growth and
performance of the Association. The capital raised in the Conversion is intended
to support the Association's current lending and investment activities and may
also support possible future expansion and diversification of operations,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any such expansion or diversification. The Conversion
is also expected to afford the Association's members and others the opportunity
to become stockholders of the Holding Company and participate more directly in,
and contribute to, any future growth of the Holding Company and the Association.
The Conversion will also enable the Holding Company and the Association to raise
additional capital in the public equity or debt markets should the need arise,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any such financing activities. The Association, as a
mutual savings and loan association, does not have the authority to issue
capital stock or debt instruments, other than by accepting deposits.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE
ASSOCIATION
VOTING RIGHTS. Savings members and borrowers will have no voting rights
in the converted Association or the Holding Company and therefore will not be
able to elect directors of the Association or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings members of the
Association. Subsequent to the Conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Association and the
holders of the Common Stock as to matters pertaining to the Holding Company.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Holding Company. A stockholder will be
entitled to one vote for each share of Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Association's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion. Furthermore, the Conversion will not affect the loan
accounts, loan balances or obligations of borrowers under their individual
contractual arrangements with the Association.
TAX EFFECTS. The Association has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that: (i) no gain or loss will be recognized to the Association
in its mutual or stock form by reason of the Conversion; (ii) no gain or loss
will be recognized to its account holders upon the issuance to them of accounts
in the Association immediately after the Conversion, in the same dollar amounts
and on the same terms and conditions as their accounts at the Association in its
mutual form plus interest in the liquidation account; (iii) the tax basis of
account holders' accounts in the Association immediately after the Conversion
will be the same as the tax basis of their accounts immediately prior to
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account will be zero; (v) the tax basis of the Common Stock
purchased in the Conversion will be the amount paid and the holding period for
such stock will commence at the date of purchase; and (vi) no gain or
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loss will be recognized to account holders upon the receipt or exercise of
Subscription Rights in the Conversion, except to the extent Subscription Rights
are deemed to have value as discussed below. Unlike a private letter ruling
issued by the IRS, an opinion of counsel is not binding on the IRS and the IRS
could disagree with the conclusions reached therein. In the event of such
disagreement, no assurance can be given that the conclusions reached in an
opinion of counsel would be sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. RP Financial, a financial consulting firm retained by the
Association, whose findings are not binding on the IRS, has indicated that the
Subscription Rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration and afford the recipients the right only to purchase shares of the
Common Stock at a price equal to its estimated fair market value, which will be
the same price paid by purchasers in the Direct Community Offering for
unsubscribed shares of Common Stock. If the Subscription Rights are deemed to
have a fair market value, the receipt of such rights may only be taxable to
those Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members who exercise their Subscription Rights. The Association could also
recognize a gain on the distribution of such Subscription Rights. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members are
encouraged to consult with their own tax advisors as to the tax consequences in
the event the Subscription Rights are deemed to have a fair market value.
The Association has also received an opinion from Deloitte & Touche
LLP, Greenville, South Carolina, that, assuming the Conversion does not result
in any federal income tax liability to the Association, its account holders, or
the Holding Company, implementation of the Plan of Conversion will not result in
any South Carolina income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Deloitte & Touche LLP and the
letter from RP Financial are filed as exhibits to the Registration Statement.
See "ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each depositor in the Association
would receive a pro rata share of any assets of the Association remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account to the total value of all deposit accounts in the Association at the
time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the
Association, including certificates of deposit ("Savings Account(s)"), shall not
be entitled to share in any residual assets in the event of liquidation of the
Association. However, pursuant to OTS regulations, the Association shall, at the
time of the Conversion, establish a liquidation account in an amount equal to
its total equity as of the date of the latest statement of financial condition
contained herein.
The liquidation account shall be maintained by the Association
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Association. 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 ("subaccount").
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 opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's "qualifying
deposit" in the Savings Account and the
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denominator is the total amount of the "qualifying deposits" of all such
holders. Such initial subaccount balance shall not be increased, and it 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 day of the Association subsequent to December 31, 1995 or March
31, 1997 is less than the lesser of (i) the deposit balance in such Savings
Account at the close of business on any other annual closing date subsequent to
December 31, 1995 or March 31, 1997 or (ii) the amount of the "qualifying
deposit" in such Savings Account on December 31, 1995 or March 31, 1997, 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, such subaccount balance
shall not be subsequently increased, notwithstanding any increase in the deposit
balance of the related Savings Account. If any such Savings Account is closed,
the related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Association (and only in
such event) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Association is not the surviving institution shall be considered to
be a complete liquidation. In any such transaction the liquidation account shall
be assumed by the surviving institution.
In the unlikely event the Association is liquidated after the
Conversion, depositors will be entitled to full payment of their deposit
accounts before any payment is made to the Holding Company as the sole
stockholder of the Association.
THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED COMMUNITY OFFERINGS
SUBSCRIPTION OFFERING. In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Common Stock have been
issued to all persons and entities entitled to purchase the Common Stock in the
Subscription Offering. The amount of the Common Stock which these parties may
purchase will be subject to the availability of the Common Stock for purchase
under the categories set forth in the Plan of Conversion. Subscription
priorities have been established for the allocation of stock to the extent that
the Common Stock is available. These priorities are as follows:
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS. Each depositor with $50.00 or
more on deposit at the Association as of December 31, 1995 will receive
nontransferable Subscription Rights to subscribe for up to the greater of
$325,000 of Common Stock, one-tenth of one percent of the total offering of
Common Stock or 15 times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common Stock to be issued
by a fraction of which the numerator is the amount of qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders. If the exercise of Subscription Rights
in this category results in an oversubscription, shares of Common Stock will be
allocated among subscribing Eligible Account Holders so as to permit each
Eligible Account Holder, to the extent possible, to purchase a number of shares
sufficient to make such person's total allocation equal 100 shares or the number
of shares actually subscribed for, whichever is less. Thereafter, unallocated
shares will be allocated among subscribing Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Eligible Account Holders.
Subscription Rights received by officers and directors in this category based on
their increased deposits in the Association in the one year period preceding
December 31, 1995 are subordinated to the Subscription Rights of other Eligible
Account Holders.
CATEGORY 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable Subscription Rights to purchase up to 10% of the shares
of Common Stock issued in the Conversion. The ESOP
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intends to purchase 8% of the shares of Common Stock issued in the Conversion.
In the event the number of shares offered in the Conversion is increased above
the maximum of the Estimated Valuation Range, the ESOP shall have a priority
right to purchase any such shares exceeding the maximum of the Estimated
Valuation Range up to an aggregate of 8% of the Common Stock.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each depositor with
$50.00 or more on deposit as of March 31, 1997 will receive nontransferable
Subscription Rights to subscribe for up to the greater of $325,000 of Common
Stock, one-tenth of one percent of the total offering of Common Stock or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of qualifying deposits of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of Subscription Rights in this category results in an oversubscription,
shares of Common Stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the number of shares actually subscribed for,
whichever is less. Thereafter, unallocated shares will be allocated among
subscribing Supplemental Eligible Account Holders proportionately, based on the
amount of their respective qualifying deposits as compared to total qualifying
deposits of all Supplemental Eligible Account Holders.
CATEGORY 4: OTHER MEMBERS. Each depositor of the Association as of the
Voting Record Date (May 1, 1997) and each borrower with a loan outstanding on
March 12, 1997 which continues to be outstanding as of the Voting Record Date
will receive nontransferable Subscription Rights to purchase up to $325,000 of
Common Stock in the Conversion to the extent shares are available following
subscriptions by Eligible Account Holders, the Association's ESOP and
Supplemental Eligible Account Holders. In the event of an oversubscription in
this category, the available shares will be allocated proportionately based on
the amount of the respective subscriptions.
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE SUBSCRIPTION
OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER PERSON WILL BE
SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER SANCTIONS AND
PENALTIES IMPOSED BY THE OTS OR ANOTHER AGENCY OF THE U.S. GOVERNMENT. Each
person exercising Subscription Rights will be required to certify that he or she
is purchasing such shares solely for his or her own account and that he or she
has no agreement or understanding with any other person for the sale or transfer
of such shares. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT THE
CONSENT OF THE ASSOCIATION AND THE HOLDING COMPANY.
The Holding Company and the Association will make reasonable attempts
to provide a Prospectus and related offering materials to holders of
Subscription Rights. However, the Subscription Offering and all Subscription
Rights under the Plan of Conversion will expire at ______ ___.m., Eastern Time,
on the Expiration Date, whether or not the Association has been able to locate
each person entitled to such Subscription Rights. ORDERS FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING RECEIVED IN HAND BY THE ASSOCIATION AFTER THE EXPIRATION
DATE WILL NOT BE ACCEPTED. The Subscription Offering may be extended by the
Holding Company and the Association up to _________, 1997 without the OTS's
approval. OTS regulations require that the Holding Company complete the sale of
Common Stock within 45 days after the close of the Subscription Offering. If the
Direct Community Offering and the Syndicated Community Offerings are not
completed by _______, 1997 (or ________, 1997, if the Subscription Offering is
fully extended), all funds received will be promptly returned with interest at
the Association's passbook rate and all withdrawal authorizations will be
canceled or, if regulatory approval of an extension of the time period has been
granted, all subscribers and purchasers will be given the right to increase,
decrease or rescind their orders. If an extension of time is obtained, all
subscribers will be notified of such extension and of the duration of any
extension that has been granted, and will be given the right to increase,
decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days.
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DIRECT COMMUNITY OFFERING. Any shares of Common Stock which remain
unsubscribed for in the Subscription Offering will be offered by the Holding
Company to certain members of the general public in a Direct Community Offering,
with preference given to natural persons and trusts of natural persons residing
in the Local Community. Purchasers in the Direct Community Offering are eligible
to purchase up to $325,000 of Common Stock in the Conversion. In the event an
insufficient number of shares are available to fill orders in the Direct
Community Offering, the available shares will be allocated on a pro rata basis
determined by the amount of the respective orders. The Direct Community
Offering, if held, is expected to commence immediately subsequent to the
Expiration Date, but may begin at anytime during the Subscription Offering. The
Direct Community Offering may terminate on or at any time subsequent to the
Expiration Date, but no later than 45 days after the close of the Subscription
Offering, unless extended by the Holding Company and the Association, with
approval of the OTS. Any extensions beyond 45 days after the close of the
Subscription Offering would require a resolicitation of orders, wherein
subscribers for the maximum numbers of shares of Common Stock would be, and
certain other large Subscribers in the discretion of the Holding Company and the
Association may be, given the opportunity to continue their orders, in which
case they will need to affirmatively reconfirm their subscriptions prior to the
expiration of the resolicitation offering or their subscription funds will be
promptly refunded with interest at the Association's passbook rate, or be
permitted to modify or cancel their orders. THE RIGHT OF ANY PERSON TO PURCHASE
SHARES IN THE DIRECT COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE RIGHT OF THE
HOLDING COMPANY AND THE ASSOCIATION TO ACCEPT OR REJECT SUCH PURCHASES IN WHOLE
OR IN PART. IF AN ORDER IS REJECTED IN PART, THE PURCHASER DOES NOT HAVE THE
RIGHT TO CANCEL THE REMAINDER OF THE ORDER. THE HOLDING COMPANY PRESENTLY
INTENDS TO TERMINATE THE DIRECT COMMUNITY OFFERING AS SOON AS IT HAS RECEIVED
ORDERS FOR ALL SHARES AVAILABLE FOR PURCHASE IN THE CONVERSION.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering.
SYNDICATED COMMUNITY OFFERING. The Plan of Conversion provides that, if
necessary, all shares of Common Stock not purchased in the Subscription Offering
and Direct Community Offering, if any, may be offered for sale to certain
members of the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers to be managed by Trident Securities
acting as agent of the Holding Company. THE HOLDING COMPANY AND THE ASSOCIATION
HAVE THE RIGHT TO REJECT ORDERS, IN WHOLE OR 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.
Stock sold in the Syndicated Community Offering also will be sold at
the $20.00 Purchase Price. See "-- Stock Pricing and Number of Shares to be
Issued." No person will be permitted to subscribe in the Syndicated Community
Offering for shares of Common Stock with an aggregate purchase price of more
than $325,000. See "-- Plan of Distribution for the Subscription, Community and
Syndicated Community Offerings" for a description of the commission to be paid
to the selected dealers and to Trident Securities.
Trident Securities may enter into agreements with selected dealers to
assist in the sale of shares in the Syndicated Community Offering. 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 ("Order Date") for the purchase of shares of Conversion Stock. When
and if Trident Securities and the Holding Company believe that enough
indications of interest and orders have been received in the Subscription
Offering, the Direct Community Offering and the Syndicated Community Offering 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 to such customers on the next business day after the Order
Date. Selected dealers may debit the accounts of their customers on a date which
will be three business days from the Order Date ("Settlement 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 Settlement
Date. On the Settlement Date, selected dealers will remit funds to the account
that the Holding Company established
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for each selected dealer. Each customer's funds so forwarded to the Holding
Company, along with all other accounts held in the same title, will be insured
by the FDIC up to the applicable $100,000 legal limit. After payment has been
received by the Holding Company from selected dealers, funds will earn interest
at the Association's passbook rate until the completion of the Offerings. At the
completion of the Conversion, the funds received in the Offerings will be used
to purchase the shares of Common Stock ordered. The shares issued in the
Conversion cannot and will not be insured by the FDIC or any other government
agency. 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 terminate no more than 45 days
following the Expiration Date, unless extended by the Holding Company with the
approval of the OTS.
In the event the Association is unable to find purchasers from the
general public for all unsubscribed shares, other purchase arrangements will be
made by the Board of Directors of the Association, if feasible. Such other
arrangements will be subject to the approval of the OTS. The OTS may grant one
or more extensions of the offering period, provided that (i) no single extension
exceeds 90 days, (ii) subscribers are given the right to increase, decrease or
rescind their subscriptions during the extension period, and (iii) the
extensions do not go more than two years beyond the date on which the members
approved the Plan of Conversion. If the Conversion is not completed within 45
days after the close of the Subscription Offering, either all funds received
will be returned with interest (and withdrawal authorizations canceled) or, if
the OTS has granted an extension of time, all subscribers will be given the
right to increase, decrease or rescind their subscriptions at any time prior to
20 days before the end of the extension period. If an extension of time is
obtained, all subscribers will be notified of such extension and of their rights
to modify their orders. If an affirmative response to any resolicitation is not
received by the Holding Company from a subscriber, the subscriber's order will
be rescinded and all funds received will be promptly returned with interest (or
withdrawal authorizations will be canceled).
PERSONS IN NON-QUALIFIED STATES. The Holding Company and the
Association will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons entitled to subscribe for stock
pursuant to the Plan of Conversion reside. However, the Holding Company and the
Association are not required to offer stock in the Subscription Offering to any
person who resides in a foreign country or resides in a state of the United
States with respect to which (i) a small number of persons otherwise eligible to
subscribe for shares of Common Stock reside in such state or (ii) the Holding
Company or the Association 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 request or requirement that the Holding Company and the
Association or their officers, directors or trustees register as a broker,
dealer, salesman or selling agent, under the securities laws of such state, or a
request or requirement to register or otherwise qualify the Subscription Rights
or Common Stock for sale or submit any filing with respect thereto in such
state. Where the number of persons eligible to subscribe for shares in one state
is small, the Holding Company and the Association will base their decision as to
whether or not to offer the Common Stock in such state on a number of factors,
including the size of accounts held by account holders in the state, the cost of
reviewing the registration and qualification requirements of the state (and of
actually registering or qualifying the shares) or the need to register the
Holding Company, its officers, directors or employees as brokers, dealers or
salesmen.
PLAN OF DISTRIBUTION FOR THE SUBSCRIPTION, DIRECT COMMUNITY AND SYNDICATED
COMMUNITY OFFERINGS
The Association and the Holding Company have retained Trident
Securities to consult with and advise the Association and to assist the
Association and the Holding Company, on a best efforts basis, in the
distribution of shares in the Offerings. Trident Securities is a broker-dealer
registered with the SEC and a member of the NASD. Trident Securities will assist
the Association in the Conversion as follows: (i) it will act as marketing
advisor with respect to the Subscription Offering and will represent the
Association as placement agent on a best efforts basis in the sale of the Common
Stock in the Direct Community Offering if one is held; (ii) it will conduct
training sessions with directors, officers and employees of the Association
regarding the Conversion process; and (iii) it will assist
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in the establishment and supervision of the Stock Information Center and, with
management's input, will train the Association's staff to record properly and
tabulate orders for the purchase of Common Stock and to respond appropriately to
customer inquiries.
Based upon negotiations between Trident Securities on the one hand and
the Holding Company and the Association on the other hand concerning fee
structure, Trident Securities will receive a commission equal to 1.35% of the
aggregate amount of Common Stock sold to investors who reside in South Carolina
and a commission equal to 1.15% of the aggregate amount of Common Stock sold to
investors who reside outside of South Carolina; provided, however, that such
commissions shall be capped at the midpoint of the Estimated Valuation Range as
set forth on the cover page of this Prospectus. In the event that the number of
shares of Common Stock issued in the Offerings exceeds the midpoint of the
Estimated Valuation Range as set forth on the cover page of this Prospectus,
such commissions will be applied pro rata as if the Offerings had closed at such
point. Trident and selected dealers participating in the Syndicated Community
Offering may receive a commission in the Syndicated Community Offering in an
amount to be agreed upon by the Holding Company and the Association. Fees and
commissions paid to Trident Securities and to any selected dealers may be deemed
to be underwriting fees, and Trident Securities and such selected dealers may be
deemed to be underwriters. Trident Securities will also be reimbursed for its
reasonable out-of-pocket expenses not to exceed $10,000 and its legal fees not
to exceed $35,000. Trident Securities has received an advance of $10,000 towards
its reimbursable expenses. For additional information, see "-- Stock Pricing and
Number of Shares to be Issued" and "USE OF PROCEEDS."
Subject to certain limitations, the Holding Company and the Association
have also agreed to indemnify Trident Securities against liabilities and
expenses (including legal fees) incurred in connection with certain claims or
litigation arising out of or based upon untrue statements or omissions contained
in the offering material for the Common Stock or with regard to allocations of
shares (in the event of oversubscription) or determinations of eligibility to
purchase shares.
DESCRIPTION OF SALES ACTIVITIES
The Common Stock will be offered in the Subscription Offering and
Direct Community Offering principally by the distribution of this Prospectus and
through activities conducted at the Association's Stock Information Center at
its main office facility. The Stock Information Center is expected to operate
during normal business hours throughout the Subscription Offering and Direct
Community Offering. It is expected that at any particular time, one or more
Trident Securities employees will be working at the Stock Information Center.
Such employees of Trident Securities will be responsible for mailing materials
relating to the Offerings, responding to questions regarding the Conversion and
the Offerings and processing stock orders.
Sales of Common Stock will be made by registered representatives
affiliated with Trident Securities or by the selected dealers managed by Trident
Securities. The management and employees of the Association may participate in
the Offerings in clerical capacities, providing administrative support in
effecting sales transactions or, when permitted by state securities laws,
answering questions of a mechanical nature relating to the proper execution of
the Order Form. Management of the Association may answer questions regarding the
business of the Association when permitted by state securities laws. Other
questions of prospective purchasers, including questions as to the advisability
or nature of the investment, will be directed to registered representatives. The
management and employees of the Holding Company and the Association have been
instructed not to solicit offers to purchase Common Stock or provide advice
regarding the purchase of Common Stock.
No officer, director or employee of the Association or the Holding
Company will be compensated, directly or indirectly, for any activities in
connection with the offer or sale of securities issued in the Conversion.
None of the Association's personnel participating in the Offerings is
registered or licensed as a broker or dealer or an agent of a broker or dealer.
The Association's personnel will assist in the above-described sales activities
pursuant to an exemption from registration as a broker or dealer provided by
Rule 3a4-1 ("Rule 3a4-1")
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promulgated under the Exchange Act. Rule 3a4-1 generally provides that an
"associated person of an issuer" of securities shall not be deemed a broker
solely by reason of participation in the sale of securities of such issuer if
the associated person meets certain conditions. Such conditions include, but are
not limited to, that the associated person participating in the sale of an
issuer's securities not be compensated in connection therewith at the time of
participation, that such person not be associated with a broker or dealer and
that such person observe certain limitations on his participation in the sale of
securities. For purposes of this exemption, "associated person of an issuer" is
defined to include any person who is a director, officer or employee of the
issuer or a company that controls, is controlled by or is under common control
with the issuer.
PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERINGS
To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no Prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
Order Form will confirm receipt or delivery in accordance with Rule 15c2-8.
Stock Order Forms will only be distributed with a Prospectus. The Association
will accept for processing only orders submitted on original Stock Order Forms.
The Association is not obligated to accept orders submitted on photocopied or
telecopied Stock Order Forms. ORDERS CANNOT AND WILL NOT BE ACCEPTED WITHOUT THE
EXECUTION OF THE CERTIFICATION APPEARING ON THE REVERSE SIDE OF THE STOCK ORDER
FORM.
To purchase shares in the Subscription Offering, an executed Order Form
with the required full payment for each share subscribed for, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Association (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Association by
__:__ a.m., Eastern Time, on the Expiration Date. Order Forms which are not
received by such time or are executed defectively or are received without full
payment (or without appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Association have the right to waive or
permit the correction of incomplete or improperly executed Order Forms, but do
not represent that they will do so. Pursuant to the Plan of Conversion, the
interpretation by the Holding Company and the Association of the terms and
conditions of the Plan of Conversion and of the Order Form will be final. In
order to purchase shares in the Direct Community Offering, the Stock Order Form,
accompanied by the required payment for each share subscribed for, must be
received by the Association prior to the time the Direct Community Offering
terminates, which may be at any time subsequent to the Expiration Date. Once
received, an executed Order Form may not be modified, amended or rescinded
without the consent of the Association unless the Conversion has not been
completed within 45 days after the end of the Subscription Offering, unless such
period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (December 31,
1995) and/or the Supplemental Eligibility Record Date (March 31, 1997) and/or
the Voting Record Date (May 1, 1997) must list all accounts on the Order Form
giving all names in each account, the account number and the approximate account
balance as of such date.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Association, (ii) by check, bank draft, or money order, or (iii)
by authorization of withdrawal from deposit accounts maintained with the
Association. Appropriate means by which such withdrawals may be authorized are
provided on the Order Form. No wire transfers will be accepted. Interest will be
paid on payments made by cash, check, bank draft or money order at the
Association's passbook rate from the date payment is received until the
completion or termination of the Conversion. If payment is made by authorization
of withdrawal from deposit accounts, the funds authorized to be withdrawn from a
deposit account will continue to accrue interest at the contractual rates until
completion or termination of the Conversion (unless the certificate matures
after the date of receipt of the Order Form but prior to closing, in which case
funds will earn interest at the passbook rate from the date of maturity until
consummation of the Conversion), but a hold will be placed on such funds,
thereby making them unavailable to the depositor until completion or termination
of the Conversion. At the completion of the Conversion, the funds received in
the
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Offerings will be used to purchase the shares of Common Stock ordered. THE
SHARES OF COMMON STOCK ISSUED IN THE CONVERSION CANNOT AND WILL NOT BE INSURED
BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. In the event that the Conversion is
not consummated for any reason, all funds submitted will be promptly refunded
with interest as described above.
If a subscriber authorizes the Association to withdraw the amount of
the aggregate Purchase Price from his deposit account, the Association will do
so as of the effective date of Conversion, though the account must contain the
full amount necessary for payment at the time the subscription order is
received. The Association will waive any applicable penalties for early
withdrawal from certificate accounts. If the remaining balance in a certificate
account is reduced below the applicable minimum balance requirement at the time
that the funds actually are transferred under the authorization the certificate
will be canceled at the time of the withdrawal, without penalty, and the
remaining balance will earn interest at the Association's passbook rate.
The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but rather may pay for such shares of Common Stock
subscribed for at the Purchase Price upon consummation of the Conversion,
provided that there is in force from the time of its subscription until such
time, a loan commitment from an unrelated financial institution or the Holding
Company to lend to the ESOP, at such time, the aggregate Purchase Price of the
shares for which it subscribed.
IRAs maintained in the Association do not permit investment in the
Common Stock. A depositor interested in using his IRA funds to purchase Common
Stock must do so through a self-directed IRA. Since the Association does not
offer such accounts, it will allow such a depositor to make a trustee-to-trustee
transfer of the IRA funds to a trustee offering a self-directed IRA program with
the agreement that such funds will be used to purchase the Holding Company's
Common Stock in the Offerings. There will be no early withdrawal or IRS interest
penalties for such transfers. The new trustee would hold the Common Stock in a
self-directed account in the same manner as the Association now holds the
depositor's IRA funds. An annual administrative fee may be payable to the new
trustee. Depositors interested in using funds in an Association IRA to purchase
Common Stock should contact the Stock Information Center so that the necessary
forms may be forwarded for execution and returned prior to the Expiration Date.
In addition, the provisions of ERISA and IRS regulations require that officers,
directors and 10% shareholders who use self-directed IRA funds to purchase
shares of Common Stock in the Subscription Offering, make such purchases for the
exclusive benefit of IRAs.
Certificates representing shares of Common Stock purchased, and any
refund due, will be mailed to purchasers at such address as may be specified in
properly completed Order Forms or to the last address of such persons appearing
on the records of the Association as soon as practicable following consummation
of the sale of all shares of Common Stock. Any certificates returned as
undeliverable will be disposed of in accordance with applicable law. Until
certificates for the Common Stock are available and delivered to purchasers,
purchasers may not be able to sell the shares of Common Stock which they
purchased, even though trading of the Common Stock may have commenced.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the Conversion be based upon an estimated pro
forma value of the Holding Company and the Association as converted (i.e.,
taking into account the expected receipt of proceeds from the sale of securities
in the Conversion), as determined by an independent appraisal. The Association
and the Holding Company have retained RP Financial to prepare an appraisal of
the pro forma market value of the Holding Company and the Association as
converted, as well as a business plan. RP Financial will receive a fee expected
to total approximately $42,500 for its appraisal services and assistance in the
preparation of a business plan, plus reasonable out-of-pocket expenses incurred
in connection with the appraisal. The Association has agreed to indemnify RP
Financial under certain circumstances against liabilities and expenses
(including legal fees) arising out of, related to, or based upon the Conversion.
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RP Financial has prepared an appraisal of the estimated pro forma
market value of the Holding Company and the Association as converted taking into
account the formation of the Holding Company as the holding company for the
Association. For its analysis, RP Financial undertook substantial investigations
to learn about the Association's business and operations. Management supplied
financial information, including annual financial statements, information on the
composition of assets and liabilities, and other financial schedules. In
addition to this information, RP Financial reviewed the Association's Form AC
Application for Approval of Conversion and the Holding Company's Form S-1
Registration Statement. Furthermore, RP Financial visited the Association's
facilities and had discussions with the Association's management and its special
conversion legal counsel, Breyer & Aguggia. No detailed individual analysis of
the separate components of the Holding Company's or the Association's assets and
liabilities was performed in connection with the evaluation.
In estimating the pro forma market value of the Holding Company and the
Association as converted, as required by applicable regulatory guidelines, RP
Financial's analysis utilized three selected valuation procedures, the
Price/Book ("P/B") method, the Price/Earnings ("P/E") method, and Price/Assets
("P/A") method, all of which are described in its report. RP Financial placed
the greatest emphasis on the P/E and P/B methods in estimating pro forma market
value. In applying these procedures, RP Financial reviewed, among other factors,
the economic makeup of the Association's primary market area, the Association's
financial performance and condition in relation to publicly-traded institutions
that RP Financial deemed comparable to the Association, the specific terms of
the offering of the Holding Company's Common Stock, the pro forma impact of the
additional capital raised in the Conversion, conditions of securities markets in
general, and the market for thrift institution common stock in particular. RP
Financial's analysis provides an approximation of the pro forma market value of
the Holding Company and the Association as converted based on the valuation
methods applied and the assumptions outlined in its report. Included in its
report were certain assumptions as to the pro forma earnings of the Holding
Company after the Conversion that were utilized in determining the appraised
value. These assumptions included expenses of $1,400,000 at the midpoint of the
Estimated Valuation Range, an assumed after-tax rate of return on the net
Conversion proceeds of 4.02%, purchases by the ESOP of 8% of the stock sold in
the Conversion and purchases in the open market by the MRP of a number of shares
equal to 4% of the stock sold in the Conversion at the Purchase Price. See "PRO
FORMA DATA" for additional information concerning these assumptions. The use of
different assumptions may yield somewhat different results.
On the basis of the foregoing, RP Financial has advised the Holding
Company and the Association that, in its opinion, as of February 21, 1997, the
aggregate estimated pro forma market value of the Holding Company and the
Association as converted and, therefore, the Common Stock was within the
valuation range of $56,950,000 to $77,050,000 with a midpoint of $67,000,000.
After reviewing the methodology and the assumptions used by RP Financial in the
preparation of the appraisal, the Board of Directors established the Estimated
Valuation Range which is equal to the valuation range of $56,950,000 to
$77,050,000 with a midpoint of $67,000,000. Assuming that the shares are sold at
$20.00 per share in the Conversion, the estimated number of shares would be
between 2,847,500 and 3,852,500 with a midpoint of 3,350,000. The Purchase Price
of $20.00 was determined by discussion among the Boards of Directors of the
Association and the Holding Company and Trident Securities, taking into account,
among other factors (i) the requirement under OTS regulations that the Common
Stock be offered in a manner that will achieve the widest distribution of the
stock, (ii) desired liquidity in the Common Stock subsequent to the Conversion,
and (iii) the expense of issuing shares for purposes of Delaware franchise
taxes. Since the outcome of the Offerings relate in large measure to market
conditions at the time of sale, it is not possible to determine the exact number
of shares that will be issued by the Holding Company at this time. The Estimated
Valuation Range may be amended, with the approval of the OTS, if necessitated by
developments following the date of such appraisal in, among other things, market
conditions, the financial condition or operating results of the Association,
regulatory guidelines or national or local economic conditions.
RP Financial's appraisal report is filed as an exhibit to the
Registration Statement. See "ADDITIONAL INFORMATION."
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If, upon completion of the Subscription Offering, at least the minimum
number of shares are subscribed for, RP Financial, after taking into account
factors similar to those involved in its prior appraisal, will determine its
estimate of the pro forma market value of the Holding Company and the
Association as converted, as of the close of the Subscription Offering.
No sale of the shares will take place unless prior thereto RP Financial
confirms to the OTS that, to the best of RP Financial's knowledge and judgment,
nothing of a material nature has occurred that would cause it to conclude that
the actual total purchase price on an aggregate basis was incompatible with its
estimate of the total pro forma market value of the Holding Company and the
Association as converted at the time of the sale. If, however, the facts do not
justify such a statement, the Offerings or other sale may be canceled, a new
Estimated Valuation Range and price per share set and new Subscription, Direct
Community and Syndicated Community Offerings held. Under such circumstances,
subscribers would have the right to modify or rescind their subscriptions and to
have their subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced.
Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares shown above. In
the event the total amount of shares issued is less than 2,847,500 or more than
4,430,375 (15% above the maximum of the Estimated Valuation Range), for
aggregate gross proceeds of less than $56,950,000 or more than $88,607,500,
subscription funds will be returned promptly with interest to each subscriber
unless he indicates otherwise. In the event a new valuation range is established
by RP Financial, such new range will be subject to approval by the OTS.
If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase arrangements will be
made by the Boards of Directors of the Association and the Holding Company, if
possible. Such other purchase arrangements will be subject to the approval of
the OTS and may provide for purchases for investment purposes by directors,
officers, their associates and other persons in excess of the limitations
provided in the Plan of Conversion and in excess of the proposed director
purchases set forth herein, although no such purchases are currently intended.
If such other purchase arrangements cannot be made, the Plan of Conversion will
terminate.
In formulating its appraisal, RP Financial relied upon the
truthfulness, accuracy and completeness of all documents the Association
furnished it. RP Financial also considered financial and other information from
regulatory agencies, other financial institutions, and other public sources, as
appropriate. While RP Financial believes this information to be reliable, RP
Financial does not guarantee the accuracy or completeness of such information
and did not independently verify the financial statements and other data
provided by the Association and the Holding Company or independently value the
assets or liabilities of the Holding Company and the Association. THE APPRAISAL
BY RP FINANCIAL IS NOT INTENDED TO BE, AND MUST NOT BE INTERPRETED AS, A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE THE PLAN
OF CONVERSION OR OF PURCHASING SHARES OF COMMON STOCK. MOREOVER, BECAUSE THE
APPRAISAL IS NECESSARILY BASED ON MANY FACTORS WHICH CHANGE FROM TIME TO TIME,
THERE IS NO ASSURANCE THAT PERSONS WHO PURCHASE SUCH SHARES IN THE CONVERSION
WILL LATER BE ABLE TO SELL SHARES THEREAFTER AT PRICES AT OR ABOVE THE PURCHASE
PRICE.
LIMITATIONS ON PURCHASES OF SHARES
The Plan of Conversion provides for certain limitations to be placed
upon the purchase of Common Stock by eligible subscribers and others in the
Conversion. Each subscriber must subscribe for a minimum of 25 shares. With the
exception of the ESOP, which is expected to subscribe for 8% of the shares of
Common Stock issued in the Conversion, the Plan of Conversion provides for the
following purchase limitations: (i) No Eligible Account Holder, Supplemental
Account Holder or Other Member, including, in each case, all persons on a joint
account, may purchase shares of Common Stock with an aggregate purchase price of
more than $325,000, (ii) no person (including all persons on a joint account),
either alone or together with associates of or persons acting in concert with
such person, may purchase in the Direct Community Offering, if any, or in the
Syndicated Community Offering, if any,
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shares of Common Stock with an aggregate purchase price of more than $325,000,
and (iii) no person, either alone or together with associates of or persons
acting in concert with such person, may purchase in the aggregate more than the
overall maximum purchase limitation of 1% of the total number of shares of
Common Stock issued in the Conversion (exclusive of any shares issued pursuant
to an increase in the Estimated Valuation Range of up to 15%), or shares with an
aggregate purchase price of more than $770,500. For purposes of the Plan of
Conversion, the directors are not deemed to be acting in concert solely by
reason of their Board membership. Pro rata reductions within each Subscription
Rights category will be made in allocating shares to the extent that the maximum
purchase limitations are exceeded.
The Association's and the Holding Company's Boards of Directors may, in
their sole discretion, increase the maximum purchase limitation set forth above
up to 9.99% of the shares of Common Stock sold in the Conversion, provided that
orders for shares which exceed 5% of the shares of Common Stock sold in the
Conversion may not exceed, in the aggregate, 10% of the shares sold in the
Conversion. The Association and the Holding Company do not intend to increase
the maximum purchase limitation unless market conditions are such that an
increase in the maximum purchase limitation is necessary to sell a number of
shares in excess of the minimum of the Estimated Valuation Range. If the Boards
of Directors decide to increase the purchase limitation above, persons who
subscribed for the maximum number of shares of Common Stock will be, and other
large subscribers in the discretion of the Holding Company and the Association
may be, given the opportunity to increase their subscriptions accordingly,
subject to the rights and preferences of any person who has priority
Subscription Rights.
The term "acting in concert" is defined in the Plan of Conversion 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; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. In general, a person who acts in concert with another other party
shall also be deemed to be acting in concert with any person who is also acting
in concert with that other party.
The term "associate" of a person is defined in the Plan of Conversion
to mean (i) any corporation or organization (other than the Association or a
majority-owned subsidiary of the Association) 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 (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 the Association or any of its parents or subsidiaries. For example, a
corporation of which a person serves as an officer would be an associate of such
person and, therefore, all shares purchased by such corporation would be
included with the number of shares which such person could purchase individually
under the above limitations.
The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Association, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.
Common Stock purchased pursuant to the Conversion will be freely
transferable, except for shares purchased by directors and officers of the
Association and the Holding Company and by NASD members. See "-- Restrictions on
Transferability by Directors and Officers and NASD Members."
RESTRICTIONS ON REPURCHASE OF STOCK
Pursuant to OTS regulations, OTS-regulated savings associations (and
their holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a
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purchase in the open market by a tax-qualified or non-tax-qualified employee
stock benefit plan in an amount reasonable and appropriate to fund the plan.
Furthermore, repurchases any of its common stock are prohibited if the effect
thereof would cause the association's regulatory capital to be reduced below (a)
the amount required for the liquidation account or (b) the regulatory capital
requirements imposed by the OTS. Repurchases are generally prohibited during the
first year following conversion. However, recent OTS policy has relaxed this
restriction, particularly during the second six months after conversion, and the
OTS has approved requests by institutions to repurchase 5% or more of an
institution's outstanding common stock. While an applicant needs to demonstrate
the existence of "exceptional circumstances" during the first six months after
conversion, the OTS has indicated that it would analyze repurchases during
months six through 12 after conversion on a case-by-case basis. Upon ten days'
written notice to the OTS, and if the OTS does not object, an institution may
make open market repurchases of its outstanding common stock during years two
and three following the conversion, provided that certain regulatory conditions
are met and that the repurchase would not adversely affect the financial
condition of the association. No assurances, however, can be given that the OTS
will approve a repurchase program under current policy or that such policy will
not change or become more restrictive.
RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS
Shares of Common Stock purchased in the Offerings by directors and
officers of the Holding Company may not be sold for a period of one year
following consummation of the Conversion, except in the event of the death of
the stockholder or in any exchange of the Common Stock in connection with a
merger or acquisition of the Holding Company. Shares of Common Stock received by
directors or officers through the ESOP or the MRP or upon exercise of options
issued pursuant to the Stock Option Plan or purchased subsequent to the
Conversion are not subject to this restriction. Accordingly, shares of Common
Stock issued by the Holding Company to directors and officers shall bear a
legend giving appropriate notice of the restriction, and, in addition, the
Holding Company will give appropriate instructions to the transfer agent for the
Holding Company's Common Stock with respect to the restriction on transfers. Any
shares issued to directors and officers as a stock dividend, stock split or
otherwise with respect to restricted Common Stock shall be subject to the same
restrictions.
Purchases of outstanding shares of Common Stock of the Holding Company
by directors, executive officers (or any person who was an executive officer or
director of the Association after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the OTS. This restriction does not apply, however, to
negotiated transactions involving more than 1% of the Holding Company's
outstanding Common Stock or to the purchase of stock pursuant to the Stock
Option Plan.
The Holding Company has filed with the SEC a registration statement
under the Securities Act of 1933, as amended ("Securities Act") for the
registration of the Common Stock to be issued pursuant to the Conversion. The
registration under the Securities Act of shares of the Common Stock to be issued
in the Conversion does not cover the resale of such shares. Shares of Common
Stock purchased by persons who are not affiliates of the Holding Company may be
resold without registration. Shares purchased by an affiliate of the Holding
Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Holding Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the Holding
Company who complies with the other conditions of Rule 144 (including those that
require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i) 1%
of the outstanding shares of the Holding Company or (ii) the average weekly
volume of trading in such shares during the preceding four calendar weeks.
Provision may be made in the future by the Holding Company to permit affiliates
to have their shares registered for sale under the Securities Act under certain
circumstances.
Under guidelines of the NASD, members of the NASD and their associates
are subject to certain restrictions on the transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.
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RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of certain provisions of federal
law and regulations and Delaware corporate law, as well as the Certificate of
Incorporation and Bylaws of the Holding Company, relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations and to the Certificate of Incorporation and Bylaws of the Holding
Company contained in the Registration Statement filed with the SEC. See
"ADDITIONAL INFORMATION" as to how to obtain a copy of these documents.
CONVERSION REGULATIONS
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
As permitted by OTS regulations, the Association's Federal Stock
Charter will contain a provision whereby the acquisition or offer to acquire
ownership of more than 10% of the issued and outstanding shares of any class of
equity securities of the Association by any person, either directly or through
an affiliate of such person, will be prohibited for a period of five years
following the date of consummation of the Conversion. Any stock in excess of 10%
acquired in violation of the Federal Stock Charter provision will not be counted
as outstanding for voting purposes. Furthermore, for five years, stockholders of
the Association will not be permitted to call a special meeting of stockholders
relating to a change of control of the Association or a charter amendment and
will not be permitted to cumulate their votes in the election of directors.
CHANGE OF CONTROL REGULATIONS
Under the Change in Bank Control Act, no person may acquire control of
an insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight
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"control factors," constitutes a rebuttable determination of control under the
regulations. Such control factors include the acquiror being one of the two
largest stockholders. The determination of control may be rebutted by submission
to the OTS, prior to the acquisition of stock or the occurrence of any other
circumstances giving rise to such determination, of a statement setting forth
facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings. The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock must file with the OTS
a certification form that the holder is not in control of such institution, is
not subject to a rebuttable determination of control and will take no action
which would result in a determination or rebuttable determination of control
without prior notice to or approval of the OTS, as applicable. There are also
rebuttable presumptions in the regulations concerning whether a group "acting in
concert" exists, including presumed action in concert among members of an
"immediate family."
The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
ANTI-TAKEOVER PROVISIONS IN THE HOLDING COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS AND DELAWARE LAW
A number of provisions of the Holding Company's Certificate of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of certain
provisions of the Holding Company's Certificate of Incorporation and Bylaws and
regulatory provisions relating to stock ownership and transfers, the Board of
Directors and business combinations, which might be deemed to have a potential
"anti-takeover" effect. These provisions may have the effect of discouraging a
future takeover attempt which is not approved by the Board of Directors but
which individual Holding Company stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have an opportunity to do
so. Such provisions will also render the removal of the incumbent Board of
Directors or management of the Holding Company more difficult. The following
description of certain of the provisions of the Certificate of Incorporation and
Bylaws of the Holding Company is necessarily general and reference should be
made in each case to such Certificate of Incorporation and Bylaws, which are
incorporated herein by reference. See "ADDITIONAL INFORMATION" as to where to
obtain a copy of these documents.
LIMITATION ON VOTING RIGHTS. The Certificate of Incorporation of the
Holding Company provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of common stock (the "Limit") be entitled or permitted to any vote in respect of
the shares held in excess of the Limit, unless permitted by a resolution adopted
by a majority of the board of directors. Beneficial ownership is determined
pursuant to Rule 13d-3 of the General Rules and Regulations of the Exchange Act
and includes shares beneficially owned by such person or any of his affiliates
(as defined in the Certificate of Incorporation), shares which such person or
his affiliates have the right to acquire upon the exercise of conversion rights
or options and shares as to which such person and his affiliates have or share
investment or voting power, but shall not include shares beneficially owned by
the ESOP or directors, officers and employees of the Association or Holding
Company or shares that are subject to a revocable proxy and that are not
otherwise beneficially, or deemed by the Holding Company to be beneficially,
owned by such person and his affiliates.
BOARD OF DIRECTORS. The Board of Directors of the Holding Company is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. The members of each class shall
be elected for a term of three years, with the terms of office of all members of
one class expiring each year so that approximately one-third of the total number
of directors are elected each year. The Holding
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Company's Certificate of Incorporation provides that the size of the Board shall
be as set forth in the Bylaws. The Bylaws currently set the number of directors
at seven. The Certificate of Incorporation provides that any vacancy occurring
in the Board, including a vacancy created by an increase in the number of
directors, shall be filled by a vote of two-thirds of the directors then in
office and any director so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which the
director has been chosen expires. The classified Board is intended to provide
for continuity of the Board of Directors and to make it more difficult and time
consuming for a stockholder group to fully use its voting power to gain control
of the Board of Directors without the consent of the incumbent Board of
Directors of the Holding Company. The Certificate of Incorporation of the
Holding Company provides that a director may be removed from the Board of
Directors prior to the expiration of his term only for cause and only upon the
vote of 80% of the outstanding shares of voting stock. In the absence of this
provision, the vote of the holders of a majority of the shares could remove the
entire Board, but only with cause, and replace it with persons of such holders'
choice.
CUMULATIVE VOTING, SPECIAL MEETINGS AND ACTION BY WRITTEN CONSENT. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, the Certificate of Incorporation provides that special
meetings of stockholders of the Holding Company may be called only by the Board
of Directors of the Holding Company and that stockholders may take action only
at a meeting and not by written consent.
AUTHORIZED SHARES. The Certificate of Incorporation authorizes the
issuance of 12,000,000 shares of Common Stock and 250,000 shares of preferred
stock. The shares of Common Stock and preferred stock were authorized in an
amount greater than that to be issued in the Conversion to provide the Holding
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits, restricted stock grants and the exercise of stock options. However,
these additional authorized shares may also be used by the Board of Directors,
consistent with fiduciary duties, to deter 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, and liquidation preferences. As a result of the ability to fix
voting rights for a series of preferred stock, the Board has the power, to the
extent consistent with its fiduciary duty, to issue a series of preferred stock
to persons friendly to management in order to attempt to block a tender offer,
merger or other transaction by which a third party seeks control of the Holding
Company, and thereby assist members of management to retain their positions. The
Holding Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of shares of Common Stock upon exercise of stock
options and in connection with the MRP.
STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH
PRINCIPAL STOCKHOLDERS. The Certificate of Incorporation requires the approval
of the holders of at least 80% of the Holding Company's outstanding shares of
voting stock to approve certain "Business Combinations" (as defined therein)
involving a "Related Person" (as defined therein) except in cases where the
proposed transaction has been approved in advance by a majority of those members
of the Holding Company's Board of Directors who are unaffiliated with the
Related Person and were directors prior to the time when the Related Person
became a Related Person. The term "Related Person" is defined to include any
individual, corporation, partnership or other entity (other than the Holding
Company or its subsidiary) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of the Holding
Company or an affiliate of such person or entity. This provision of the
Certificate of Incorporation applies to any "Business Combination," which is
defined to include: (i) any merger or consolidation of the Holding Company with
or into any Related Person; (ii) any sale, lease, exchange, mortgage, transfer,
or other disposition of 25% or more of the assets of the Holding Company or
combined assets of the Holding Company and its subsidiaries to a Related Person;
(iii) any merger or consolidation of a Related Person with or into the Holding
Company or a subsidiary of the Holding Company; (iv) any sale, lease, exchange,
transfer, or other disposition of 25% or more of the assets of a Related Person
to the Holding Company or a subsidiary of the Holding Company; (v) the issuance
of any securities of the Holding Company or a subsidiary of the Holding Company
to a Related Person; (vi) the acquisition by the Holding Company or a subsidiary
of the Holding Company of any securities of a Related Person; (vii) any
reclassification of common stock of the Holding Company or any recapitalization
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involving the common stock of the Holding Company; or (viii) any agreement or
other arrangement providing for any of the foregoing.
Under Delaware law, absent this provision, business combinations,
including mergers, consolidations and sales of substantially all of the assets
of a corporation must, subject to certain exceptions, be approved by the vote of
the holders of a majority of the outstanding shares of common stock of the
Holding Company and any other affected class of stock. One exception under
Delaware law to the majority approval requirement applies to stockholders owning
15% or more of the common stock of a corporation for a period of less than three
years. Such 15% stockholder, in order to obtain approval of a business
combination, must obtain the approval of two-thirds of the outstanding stock,
excluding the stock owned by such 15% stockholder, or satisfy other requirements
under Delaware law relating to board of director approval of his or her
acquisition of the shares of the Holding Company. The increased stockholder vote
required to approve a business combination may have the effect of foreclosing
mergers and other business combinations which a majority of stockholders deem
desirable and place the power to prevent such a merger or combination in the
hands of a minority of stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Holding Company's Certificate of Incorporation must be approved by a majority
vote of its Board of Directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of at least 80%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
directors, director and officer indemnification by the Holding Company and
amendment of the Holding Company's Bylaws and Certificate of Incorporation. The
Holding Company's Bylaws may be amended by its Board of Directors, or by a vote
of 80% of the total votes eligible to be voted at a duly constituted meeting of
stockholders.
STOCKHOLDER NOMINATIONS AND PROPOSALS. The Certificate of Incorporation
of the Holding Company requires a stockholder who intends to nominate a
candidate for election to the Board of Directors, or to raise new business at a
stockholder meeting to give not less than 30 nor more than 60 days' advance
notice to the Secretary of the Holding Company. The notice provision requires a
stockholder who desires to raise new business to provide certain information to
the Holding Company concerning the nature of the new business, the stockholder
and the stockholder's interest in the business matter. Similarly, a stockholder
wishing to nominate any person for election as a director must provide the
Holding Company with certain information concerning the nominee and the
proposing stockholder.
PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF THE HOLDING COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS. The Board of Directors of the
Association believes that the provisions described above are prudent and will
reduce the Holding Company's vulnerability to takeover attempts and certain
other transactions that have not been negotiated with and approved by its Board
of Directors. These provisions will also assist the Association in the orderly
deployment of the Conversion proceeds into productive assets during the initial
period after the Conversion. The Board of Directors believes these provisions
are in the best interest of the Association and Holding Company and its
stockholders. In the judgment of the Board of Directors, the Holding Company's
Board will be in the best position to determine the true value of the Holding
Company and to negotiate more effectively for what may be in the best interests
of its stockholders. Accordingly, the Board of Directors believes that it is in
the best interest of the Holding Company and its stockholders to encourage
potential acquirors to negotiate directly with the Board of Directors of the
Holding Company and that these provisions will encourage such negotiations and
discourage hostile takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at a price reflective of the true value of the
Holding Company and that is in the best interest of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts that have
not been negotiated with and approved by the Board of Directors
99
<PAGE>
present to stockholders the risk of a takeover on terms that may be less
favorable than might otherwise be available. A transaction that is negotiated
and approved by the Board of Directors, on the other hand, can be carefully
planned and undertaken at an opportune time in order to obtain maximum value of
the Holding Company for its stockholders, with due consideration given to
matters such as the management and business of the acquiring corporation and
maximum strategic development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
that is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than 300, thereby allowing for deregistration under the Exchange Act.
Despite the belief of the Association and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's
Certificate of Incorporation and Bylaws, these provisions may also have the
effect of discouraging a future takeover attempt that would not be approved by
the Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board of Directors of the Association and the Holding Company, however, have
concluded that the potential benefits outweigh the possible disadvantages.
Following the Conversion, pursuant to applicable law and, if required,
following the approval by stockholders, the Holding Company may adopt additional
anti-takeover charter provisions or other devices regarding the acquisition of
its equity securities that would be permitted for a Delaware business
corporation.
The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Certificate of Incorporation and Bylaws of the Holding
Company and in Federal and Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
GENERAL
The Holding Company is authorized to issue 12,000,000 shares of Common
Stock having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 3,852,500 shares of Common Stock and no shares of preferred stock in
the Conversion. Each share of the Holding Company's Common Stock will have the
same relative rights as, and will be identical in all respects with, each other
share of Common Stock. Upon payment of the Purchase Price for the Common Stock,
in accordance with the Plan of Conversion, all such stock will be duly
authorized, fully paid and nonassessable.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF ANY TYPE, AND WILL NOT BE INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY.
100
<PAGE>
COMMON STOCK
DIVIDENDS. The Holding Company can pay dividends out of statutory
surplus or from certain net profits if, as and when declared by its Board of
Directors. The payment of dividends by the Holding Company is subject to
limitations which are imposed by law and applicable regulation. See "DIVIDEND
POLICY" and "REGULATION." The holders of Common Stock of the Holding Company
will be entitled to receive and share equally in such dividends as may be
declared by the Board of Directors of the Holding Company out of funds legally
available therefor. If the Holding Company issues preferred stock, the holders
thereof may have a priority over the holders of the Common Stock with respect to
dividends.
STOCK REPURCHASES. The Plan of Conversion and OTS regulations place
certain limitations on the repurchase of the Holding Company's capital stock.
See "THE CONVERSION -- Restrictions on Repurchase of Stock" and "USE OF
PROCEEDS."
VOTING RIGHTS. Upon Conversion, the holders of Common Stock of the
Holding Company will possess exclusive voting rights in the Holding Company.
They will elect the Holding Company's Board of Directors and act on such other
matters as are required to be presented to them under Delaware law or as are
otherwise presented to them by the Board of Directors. Except as discussed in
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder of Common
Stock will be entitled to one vote per share and will not have any right to
cumulate votes in the election of directors. If the Holding Company issues
preferred stock, holders of the Holding Company preferred stock may also possess
voting rights. Certain matters require a vote of 80% of the outstanding shares
entitled to vote thereon. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
As a federal mutual savings and loan association, corporate powers and
control of the Association are vested in its Board of Directors, who elect the
officers of the Association and who fill any vacancies on the Board of Directors
as it exists upon Conversion. Subsequent to Conversion, voting rights will be
vested exclusively in the owners of the shares of capital stock of the
Association, all of which will be owned by the Holding Company, and voted at the
direction of the Holding Company's Board of Directors. Consequently, the holders
of the Common Stock will not have direct control of the Association.
LIQUIDATION. In the event of any liquidation, dissolution or winding up
of the Association, the Holding Company, as holder of the Association's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Association (including all deposit accounts and
accrued interest thereon) and after distribution of the balance in the special
liquidation account to Eligible Account Holders and Supplemental Eligible
Account Holders (see "THE CONVERSION"), all assets of the Association available
for distribution. In the event of liquidation, dissolution or winding up of the
Holding Company, the holders of its common stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Holding Company available for distribution. If Holding Company
preferred stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of liquidation or dissolution.
PREEMPTIVE RIGHTS. Holders of the Common Stock of the Holding Company
will not be entitled to preemptive rights with respect to any shares that may be
issued. The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the authorized Holding Company preferred stock
will be issued in the Conversion and there are no plans to issue the preferred
stock. Such stock may be issued with such designations, powers, preferences and
rights as the Board of Directors may from time to time determine. The Board of
Directors can, without stockholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights that could dilute the voting
strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
101
<PAGE>
RESTRICTIONS ON ACQUISITION
Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies. See "REGULATION" and "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC
pursuant to Section 12(g) of the Exchange Act upon the completion of the
Conversion and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion. Upon such registration,
the proxy and tender offer rules, insider trading reporting and restrictions,
annual and periodic reporting and other requirements of the Exchange Act will be
applicable.
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C. The federal tax consequences of
the Offerings have been opined upon by Breyer & Aguggia and the South Carolina
tax consequences of the Offerings have been opined upon by Deloitte & Touche
LLP, Greenville, South Carolina. Breyer & Aguggia and Deloitte & Touche LLP have
consented to the references herein to their opinions. Certain legal matters will
be passed upon for Trident Securities by Housley Kantarian & Bronstein, P.C.,
Washington, D.C.
EXPERTS
The consolidated financial statements of the Association as of June 30,
1996 and 1995 and for the years ended June 30, 1996, 1995 and 1994 included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
RP Financial has consented to the publication herein of the summary of
its report to the Association setting forth its opinion as to the estimated pro
forma market value of the Holding Company and the Association as converted and
its letter with respect to subscription rights and to the use of its name and
statements with respect to it appearing herein.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on
Form S-1 (File No. 333-23015) under the Securities Act with respect to the
Common Stock offered in the Conversion. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at its
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
may be obtained at prescribed rates from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement
also is available through the SEC's World Wide Web site on the Internet
(http://www.sec.gov).
The Association has filed with the OTS an Application for Approval of
Conversion, which includes proxy materials for the Association's Special Meeting
and certain other information. This Prospectus omits certain information
contained in such Application. The Application, including the proxy materials,
exhibits and certain other information that are a part thereof, may be
inspected, without charge, at the offices of the OTS, 1700 G Street, N.W.,
Washington, D.C. 20552 and at the office of the Regional Director of the OTS at
the Southeast Regional Office of the OTS, 1475 Peachtree Street, N.E., Atlanta,
Georgia 30309.
102
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG AND SUBSIDIARY
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Auditors' Report ............................................................................. F-1
Consolidated Balance Sheets as of December 31, 1996 (unaudited)
and June 30, 1996 and 1995 .............................................................................. F-2
Consolidated Statements of Income for the
Six Months Ended December 31, 1996 and 1995 (unaudited)
and the Years Ended June 30, 1996, 1995 and 1994 ........................................................ 21
Consolidated Statements of Equity for the Six Months Ended December 31, 1996 and
1995 (unaudited) and for the Years
Ended June 30, 1996, 1995 and 1994 ...................................................................... F-3
Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1996
and 1995 (unaudited)
and the Years Ended June 30, 1996, 1995 and 1994 ........................................................ F-4
Notes to Consolidated Financial Statements................................................................ F-6
</TABLE>
* * *
All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.
Separate financial statements for the Holding Company have not been
included herein because the Holding Company, which has engaged in only
organizational activities to date, has no significant assets, liabilities
(contingent or otherwise), revenues or expenses.
103
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Federal Savings and Loan Association of Spartanburg
Spartanburg, South Carolina
We have audited the accompanying consolidated balance sheets of First Federal
Savings and Loan Association of Spartanburg and its subsidiary (the
"Association") as of June 30, 1996 and 1995, and the related consolidated
statements of income, equity, and cash flows for each of the three years in the
period ended June 30, 1996. These consolidated financial statements are the
responsibility of the Association's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Association 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 1 to the financial statements, effective July 1, 1994, the
Association changed its method of accounting for investments in debt and equity
securities to conform with the provisions of Statement of Financial Accounting
Standards No. 115.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Greenville, South Carolina
August 23, 1996 (October 1, 1996 as to
the 4th paragraph of Note 1)
F-1
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SPARTANBURG AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996, JUNE 30, 1996 AND 1995
(IN THOUSANDS OF DOLLARS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
-----------------------------
ASSETS 1996 1996 1995
<S> <C> <C> <C>
Cash $ 5,918 $ 6,798 $ 6,362
Federal funds sold and overnight interest bearing deposits 11,186 3,986 9,605
--------- --------- ---------
Total cash and cash equivalents 17,104 10,784 15,967
Investment securities (Note 2):
Held-to-maturity - at amortized cost (fair value: $5,449) -- -- 5,502
Available-for-sale - at fair value (amortized cost: $13,510,
$18,291 and $8,294 at December 31, 1996 and June 30, 1996
and 1995, respectively) 13,492 18,155 8,228
Mortgage-backed securities held-to-maturity - at amortized cost
(fair value: $142, $209, and $397 at December 31, 1996 and
June 30, 1996 and 1995, respectively) 128 195 383
Loans receivable, net (Note 3) 331,654 314,936 267,393
Loans held-for-sale - at lower of cost or market (market value:
$1,444, $1,911 and $15,580 at December 31, 1996 and June 30,
1996 and 1995, respectively) 1,444 1,911 15,324
Office properties and equipment, net (Note 4) 5,481 5,112 4,379
Federal Home Loan Bank Stock - at cost 2,806 2,806 2,649
Accrued interest receivable 2,439 2,427 2,127
Real estate acquired in settlement of loans 102 58 34
Other assets 876 582 749
---------- --------- ---------
TOTAL $ 375,526 $ 356,966 $ 322,735
========= ========= =========
LIABILITIES AND EQUITY
LIABILITIES:
Deposit accounts (Note 5) $ 323,951 $ 305,831 $ 275,915
Advances from borrowers for taxes and insurance 894 1,247 1,439
Other liabilities 5,848 5,734 4,721
--------- --------- --------
Total liabilities 330,693 312,812 282,075
--------- --------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 9)
EQUITY (Notes 6 and 10):
Retained earnings 44,845 44,238 40,701
Unrealized loss on securities available-for-sale (net of
deferred taxes of $6, $52 and $25, respectively) (12) (84) (41)
--------- --------- ---------
Total equity 44,833 44,154 40,660
--------- --------- ---------
TOTAL $ 375,526 $ 356,966 $ 322,735
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SPARTANBURG AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EQUITY
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 AND
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Marketable Equity
Securities and
Securities Available- Retained
for-Sale (1) Earnings Total
<S> <C> <C> <C>
BALANCE, JUNE 30, 1993 $ -- $ 32,088 $ 32,088
Net income for the year ended June 30, 1994 -- 4,472 4,472
Net unrealized loss on marketable equity
securities (105) -- (105)
------- ------- --------
BALANCE, JUNE 30, 1994 (105) 36,560 36,455
Net income for the year ended June 30, 1995 -- 4,141 4,141
Net unrealized loss on securities available-for-sale
upon adoption of SFAS No. 115 (194) -- (194)
Change in net unrealized loss on securities
available-for-sale for the year ended June 30, 1995 258 -- 258
------ ------ ------
BALANCE JUNE 30, 1995 (41) 40,701 40,660
Net income for the year ended June 30, 1996 -- 3,537 3,537
Change in net unrealized loss on securities
available-for-sale for the year ended June 30, 1996 (43) -- (43)
----- ------ -------
BALANCE, JUNE 30, 1996 (84) 44,238 44,154
Net income for the six month period ended
December 31, 1996 (unaudited) -- 607 607
Change in net unrealized loss on securities
available-for-sale for the six months ended
December 31, 1996 (unaudited) 72 -- 72
--------- -------- ---------
BALANCE, DECEMBER 31, 1996 (UNAUDITED) $ (12) $ 44,845 $ 44,833
========= ======== =========
</TABLE>
F-3
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SPARTANBURG AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 AND
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
December 31, Year Ended June 30,
-------------------------- ----------------------------------------
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 607 $ 1,859 $ 3,537 $ 4,141 $ 4,472
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 675 4 419 9 --
Deferred income tax provision (benefit) (325) 90 175 476 366
Amortization of deferred income (83) (113) (202) (254) (506)
Amortization (accretion) of premiums
and discounts on investments and
mortgage-backed securities (11) 1 (3) (3) (26)
Depreciation 300 145 311 277 247
(Increase) decrease in other assets (306) 121 (133) 1,441 (1,541)
Additions to loans held-for-sale (6,031) (4,210) (15,198) (16,009) (19,276)
Proceeds from sale of loans 6,535 2,863 7,704 16,888 26,946
(Gain) loss on sale of mortgage loans (37) -- -- 1,078 894
Unrealized (gain) loss on loans held-
for-sale -- -- -- (668) 668
(Gain) loss on disposal of property and
equipment 16 -- (3) -- --
Loss (gain) on sale of real estate acquired
in settlement of loans -- 8 10 (1) (76)
Loss on sale of investments available-
for-sale 16 -- -- 396 --
Loss on sale of investment securities -- -- -- -- 109
Increase (decrease) in other liabilities 41 (339) 672 1,188 (1,001)
FHLB stock dividend -- -- -- -- (103)
------ ------- ------- -------- --------
Net cash provided by (used in)
in operating activities 1,397 429 (2,711) 8,959 11,173
------ -------- -------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net loan originations and principal
collections (20,616) (16,141) (26,968) (19,749) (17,937)
Purchase of loans 3,204 -- -- -- --
Purchase of investment securities (1,226) (6,231) (9,992) (395) (11,628)
Proceeds from sale of investments
available-for-sale 5,000 -- -- 7,727 --
Proceeds from maturities of investments
available-for-sale 1,000 2,000 5,500 1,500 --
Proceeds from sale and maturities of
investments -- -- -- -- 8,847
Principal repayments and proceeds from
maturities of mortgage-backed securities 68 35 189 88 460
Proceeds from sale of real estate
acquired in settlement of loans 58 49 81 60 570
</TABLE>
F-4
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SPARTANBURG AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 AND
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
December 31, Year Ended June 30,
-------------------------- ----------------------------------------
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES (Continued):
Purchase of Federal Home Loan Bank stock $ -- $ -- $ (157) $ -- $ --
Purchase of property and equipment (685) (321) (1,168) (899) (689)
Proceeds from sale of property and
equipment -- -- 127 -- --
-------- -------- ---------- -------- ---------
Net cash used in investing activities (13,197) (20,609) (32,388) (11,668) (20,377)
-------- -------- ---------- -------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES - Net increase in deposits 18,120 23,924 29,916 5,783 2,721
-------- -------- ---------- -------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 6,320 3,744 (5,183) 3,074 (6,483)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 10,784 15,967 15,967 12,893 19,376
-------- -------- ---------- -------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 17,104 $ 19,711 $ 10,784 $ 15,967 $ 12,893
======== ======== ======== ======== ==========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 7,279 $ 6,933 $ 14,461 $ 10,962 $ 10,478
======== ======== ======== ======== ========
Income taxes $ 469 $ 1,185 $ 2,274 $ 2,130 $ 2,700
======== ======== ======== ======== ========
Transfers from loans to real estate
acquired in settlement of loans $ 102 $ 23 $ 115 $ 75 $ 130
======== ======== ======== ======== ========
Increase (decrease) in net unrealized
losses on available-for-sale investments
and marketable equity securities $ (118) $ (99) $ 70 $ (103) $ 170
======== ======== ======== ======== ========
Increase (decrease) in deferred tax asset
related to unrealized losses on
investments $ (46) $ (38) $ 27 $ (40) $ 65
======== ======== ======== ======== =======
Investment securities transferred from
held-to-maturity to available-for-sale,
at fair value $ -- $ 4,002 $ 4,002 $ -- $ --
======== ======== ======== ======== =========
Loans held-for-sale transferred to loans
held-for-investments, at lower of
cost or market $ -- $ -- $ 20,907 $ -- $ --
======== ======== ======== ======== =========
Investment securities transferred from
held-for-investments to available-
for-sale, at fair value $ -- $ -- $ -- $ 5,211 $ --
======== ======== ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. ORGANIZATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND CUSTOMER CONCENTRATION - First Federal Savings
and Loan Association of Spartanburg and Subsidiary (the "Association") is
a federally chartered, mutual savings and loan association engaged in the
business of accepting savings and demand deposits and providing mortgage,
consumer and commercial loans to its members and others. The Association's
business is primarily limited to the Spartanburg and adjacent county areas
of South Carolina.
BASIS OF ACCOUNTING - The accounting and reporting policies of the
Association conform to generally accepted accounting principles and to
general practices within the savings and loan industry.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Association and its wholly-owned subsidiary,
First Spartan Service Corporation ("First Spartan"). Significant
intercompany balances and transactions have been eliminated in
consolidation.
EQUITY METHOD OF ACCOUNTING FOR INVESTMENT - On August 22, 1996, First
Spartan purchased approximately a one-third ownership interest in a
mortgage banking company (the "Company") located in Greenville, South
Carolina, for $400,000. The investment is accounted for under the equity
method of accounting whereby the Association's investment will be
increased by any additional investment in the Company and the
Association's share of the Company's earnings and decreased by dividends
received and the Association's share of the Company's losses.
The investment is included in Other Assets in the December 31, 1996
balance sheet. The Association's share of the Company's losses in the six
month period ended December 31, 1996 totaled approximately $100,000 and
the amount is included in Other Income in the Statement of Income.
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.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash
includes cash on hand and amounts due from depository institutions,
federal funds sold and overnight interest-bearing deposits.
INVESTMENT SECURITIES - The Association adopted Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, effective July 1, 1994. SFAS No. 115 requires investments to
be classified in three categories. Debt securities that the enterprise has
the positive intent and ability to hold to maturity are to be classified
as "held-to-maturity" securities and reported at amortized cost. Debt and
equity securities that are bought and held principally for the purpose of
selling them in the near term are to be
F-6
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
classified as "trading" securities and reported at fair value with
unrealized gains and losses included in earnings. Debt and equity
securities not classified as either held-to-maturity securities or trading
securities are classified as "available-for-sale" securities and reported
at fair value, with unrealized gains and losses excluded from earnings and
reported in a separate component of equity net of taxes. No securities
have been classified as trading securities.
Prior to the adoption of SFAS No. 115, all investments were classified as
held-for-investment. Under this classification, investments in debt
securities and mortgage-backed securities were stated at amortized cost.
Investments in marketable equity securities (mutual funds) were stated at
the lower of cost or market with any unrealized losses being reported as a
separate component of equity. Concurrent with the adoption of SFAS No.
115, management reevaluated its intent with respect to its portfolio and,
accordingly, reclassified securities with a fair value of approximately
$5.2 million (amortized cost approximately $5.4 million) previously
classified as held-for-investment to available-for-sale securities.
In November 1995, the FASB issued a Special Report, A GUIDE TO
IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN DEBT AND EQUITY
SECURITIES, which included a transition provision allowing entities that
adopted SFAS No. 115 to reassess the appropriateness of the
classifications of securities held and account for any resulting
reclassifications at fair value. Reclassifications from the
held-to-maturity category resulting from this one-time reassessment will
not call into question, or "taint," the intent of the entity to hold other
debt securities to maturity in the future. In accordance with this Special
Report, on December 28, 1995, the Association transferred securities with
a fair value and amortized cost of approximately $4.0 million from
held-to-maturity to available-for-sale. This transfer is disclosed as a
noncash transaction in the statement of cash flows.
Gains and losses on sales of securities are determined on the specific
identification method. Premiums and discounts are amortized to maturity on
a method which approximates the level yield method.
LOANS - Loans held for investment are recorded at cost.
Nonaccrual loans are those loans on which the accrual of interest has
ceased. Loans are placed on nonaccrual status if, generally, in the
opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the loan agreement, or when principal or
interest is past due 90 days or more. Interest accrued but not collected
at the date a loan is placed on nonaccrual status is reversed against
interest income in the current period.
F-7
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
Restructured loans are those for which concessions, such as the reduction
of interest rates or deferral of interest or principal payments, have been
granted due to a deterioration in the borrowers' financial condition.
Interest on restructured loans is accrued at the restructed rates. The
difference between interest that would have been recognized under the
original terms of nonaccrual and restructed loans and interest actually
recognized on such loans was not a material amount for the six months
ended December 31, 1996 and 1995 and for the years ended June 30, 1996,
1995 and 1994.
Effective July 1, 1995, the Association adopted SFAS No. 114, ACCOUNTING
BY CREDITORS FOR IMPAIRMENT OF A LOAN and SFAS No. 118, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURES.
SFAS No. 114 requires that the carrying value of an impaired loan be based
on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral, if the loan
is collateral-dependent. Under SFAS No. 114, a loan is considered impaired
when, based on current information, it is probable that the borrower will
be unable to pay contractual interest or principal payments as scheduled
in the loan agreement. SFAS No. 114 applies to all loans except
smaller-balance homogenous mortgage and consumer loans, loans carried at
fair value or the lower of cost or fair value, debt securities, and
leases. Generally, the Association applies SFAS No. 114 to nonaccrual
commercial loans and renegotiated loans. The adoption of the statements
did not affect operating results, the level of the overall allowance or
the comparability of credit related data. Income recognition or charge-off
policies were not changed as a result of SFAS No. 114 and SFAS No. 118.
The total principal balances of impaired loans at December 31, 1996 and
June 30, 1996 was not material.
ALLOWANCE FOR LOAN LOSSES - The Association provides for loan losses on
the allowance method. Accordingly, all loan losses are charged to the
related allowance, and all recoveries are credited to the allowance.
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 losses. Because of the
uncertainty inherent in the estimation process, management's estimate of
the allowance for loan losses may change in the near term. However, the
amount of the change that is reasonably possible cannot be estimated.
LOAN SALES - The Association periodically sells and retains servicing on
certain whole and participating interests in real estate loans. The
Association does not recognize gains or losses on loan sales if the loans
sold have the same approximate average interest rate, adjusted for normal
servicing fees, as the contractual yield to the purchaser. However, gains
or losses are recognized if, at the time of sale, the average interest
rate on the loans sold, adjusted for normal servicing costs, differs from
the contractual yield to the purchaser. Gains or losses on such loan sales
are determined based on the present value of the difference between
estimated future receipts and normal servicing costs. The stated value of
the resulting asset (in the case of a gain) is reviewed periodically and,
if necessary, adjustments are charged to income to reflect changes in the
repayments of the serviced loans. Such adjustments, if any, are determined
on a disaggregated basis using the discount rate inherent in the original
present value calculation. Such assets are amortized over the estimated
lives of the serviced loans using a method approximating a level yield.
F-8
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
LOANS HELD-FOR-SALE - Loans originated and intended for sale in the
secondary market are stated at the lower of cost or estimated market
value. Net unrealized losses are recognized in a valuation allowance by
charges to income. During the year ended June 30, 1996, the Association
reclassified approximately $20.9 million of loans from held-for-sale to
held-for-investment at the lower of cost or market at the time the loans
were reclassified.
OFFICE PROPERTIES AND EQUIPMENT - Office properties and equipment are
stated at cost less accumulated depreciation. Depreciation is computed
over the estimated useful lives of the related assets using the
straight-line method.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS - Real estate acquired in
settlement of loans is initially recorded at fair value less estimated
cost of disposal at the date of foreclosure, establishing a new cost
basis. Any accrued interest on the related loan at the date of acquisition
is charged to operations. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of
cost or fair value minus estimated costs to sell. Revenues, expenses and
additions to the valuation allowance related to real estate acquired in
settlement of loans are charged to operations. Such amounts were not
material in the six months ended December 31, 1996 and 1995 and in the
years ended June 30, 1996, 1995 and 1994 and are included in other
operating expenses.
DEFERRED LOAN ORIGINATION FEES AND COSTS - Nonrefundable loan fees and
certain direct loan origination costs are deferred and recognized over the
contractual lives of the loans using the level yield method. Amortization
of these deferrals is recognized as interest income.
ADVERTISING - The Association expenses the production cost of advertising
as incurred.
INCOME TAXES - Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled.
As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
RECENTLY ADOPTED ACCOUNTING STANDARDS - In March 1995, the FASB issued
SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangible assets and goodwill related to those assets to be held and used
and for long-lived assets to be held and certain intangible assets to be
disposed of. This standard was adopted July 1, 1996 and the adoption did
not have a significant impact on financial conditions or results of
operations.
The FASB has issued SFAS No. 122, ACCOUNTING FOR MORTGAGE SERVICING
RIGHTS, which amends SFAS No. 65 and the principal effect for the
Association is the elimination of the accounting distinction between
rights to service mortgage loans for others that are acquired through loan
origination activities and those acquired through purchase transactions.
When a mortgage banking enterprise purchases or originates mortgage loans
and sells or securitizes those loans with servicing rights retained, it
should allocate the
F-9
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
total cost of the mortgage loans to the mortgage servicing rights and the
loans (without the mortgage servicing rights) based on their relative fair
values if it is practicable to estimate those fair values. Any cost
allocated to mortgage servicing rights should be recognized as a separate
asset and amortized in proportion to and over the period of the estimated
net servicing income. SFAS No. 122 was implemented, prospectively,
effective July 1, 1996 and implementation of its provisions did not have a
material impact on the Association's financial condition or results of
operations.
In June 1996, the FASB issued SFAS No. 125, ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES. This
Statement amends SFAS Nos. 65 and 115 and supersedes SFAS Nos. 76, 77 and
122 and provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. It
requires that liabilities and derivatives incurred or obtained by
transferors as part of financial assets be initially measured at fair
value, if practicable. It also requires that servicing assets and other
retained interests in the transferred assets be measured by allocating the
previous carrying amount between the assets sold, if any, and retained
interests, if any, based on their relative fair values at the date of the
transfer. Servicing assets and liabilities must be subsequently measured
by amortization in proportion to and over the period of estimated net
servicing income or loss and assessment for asset impairment or increased
obligation based on their fair values. This Statement is effective for
transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. In December 1996, the FASB
issued SFAS No. 127, DEFERRAL OF THE EFFECTIVE DATE OF CERTAIN PROVISIONS
OF FASB STATEMENT NO. 125. This Statement defers the effective date of
application of certain transfer and collateral provisions of SFAS No. 125
until January 1, 1998.
The adoption of the provisions of SFAS Nos. 125 and 127 did not have a
significant impact on financial position or results of operations.
UNAUDITED FINANCIAL INFORMATION - Information as of December 31, 1996 and
for the six month periods ended December 31, 1996 and 1995 is unaudited.
The unaudited information furnished reflects all adjustments, which
consist solely of normal recurring accruals, which are, in the opinion of
management, necessary for a fair presentation of the financial position at
December 31, 1996 and the results of operations and cash flows for the
six-month periods ended December 31, 1996 and 1995. The results of the
six-month periods are not necessarily indicative of the results of the
Association which may be expected for the entire year.
RECLASSIFICATIONS - Certain June 30, 1996, 1995 and 1994 amounts have been
reclassified to conform to the December 31, 1996 presentation.
F-10
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
2. INVESTMENT AND MORTGAGE-BACKED SECURITIES
Investment securities at December 31, 1996 and June 30, 1996 and 1995 are
summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
Debt securities:
U.S. Treasury obligations $ 1,989 $ 2 $ (6) $ 1,985
U.S. Government Agency
obligations 6,493 11 (21) 6,483
------- ------- ------- --------
Total 8,482 13 (27) 8,468
Marketable equity securities 5,028 -- (4) 5,024
------- ------- -------- -------
Total $13,510 $ 13 $ (31) $13,492
======= ======= ======== =======
June 30, 1996
Available for sale:
Debt securities:
U.S. Treasury obligations $ 1,986 $ 4 $ (15) $ 1,975
U.S. Government Agency
obligations 6,486 -- (86) 6,400
-------- -------- ------- --------
Total 8,472 4 (101) 8,375
Marketable equity securities 9,819 -- (39) 9,780
-------- -------- ------- --------
Total $18,291 $ 4 $ (140) $18,155
======== ======== ========= ========
June 30, 1995
Held to maturity:
U.S. Treasury obligations $ 2,001 $ 7 $ (9) $ 1,999
U.S. Government Agency
obligations 3,501 1 (52) 3,450
-------- -------- ------- --------
Total $ 5,502 $ 8 $ (61) $ 5,449
======== ======== ========= ========
</TABLE>
F-11
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 30, 1995 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
Debt securities:
U.S. Treasury obligations $ 500 $- $ (7) $ 493
U.S. Government Agency
obligations 2,499 1 (37) 2,463
-------- -------- ------- --------
Total 2,999 1 (44) 2,956
Marketable equity securities 5,295 - (23) 5,272
-------- -------- ------- --------
Total $ 8,294 $ 1 $ (67) $ 8,228
======== ======== ========= ========
</TABLE>
Marketable equity securities at December 31, 1996, June 30, 1996 and 1995
consist principally of a mutual fund that invests in adjustable rate
mortgages.
Investment securities totaling approximately $2.0 million at December 31,
1996 were pledged as collateral for public deposits.
The contractual maturities of debt securities (at amortized cost and
estimated fair value) are summarized as follows at December 31, 1996 (in
thousands of dollars):
<TABLE>
<CAPTION>
Available for Sale
-----------------------------
Amortized Fair
Cost Value
<S> <C> <C>
Due within one year $ 500 $ 502
Due after one through five years 7,982 7,966
</TABLE>
Mortgage-backed securities at December 31, 1996, June 30, 1996 and 1995
consist of U.S. Government Agency obligations. Gross unrealized gains were
approximately $14,000 and gross unrealized losses were $0 at December 31,
1996 and June 30, 1996 and 1995. The contractual maturity of the entire
balance of mortgage-backed securities at June 30, 1996 is due within five
to ten years.
F-12
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
3. LOANS RECEIVABLE
Loans receivable at December 31, 1996 and June 30, 1996 and 1995 consisted
of the following (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, June 30,
--------------------------------
1996 1996 1995
<S> <C> <C> <C>
Real estate mortgage loans:
Residential (1-4 family) $ 267,593 $ 258,302 $ 217,702
Construction 31,949 32,954 30,483
Land 2,409 3,285 1,762
Commercial and other 4,571 3,546 6,203
-------- -------- --------
Total real estate mortgage loans 306,522 298,087 256,150
--------- --------- ---------
Consumer and commercial loans:
Home equity 32,555 28,430 20,859
Loans secured by deposit accounts 1,979 1,605 1,345
Other 5,235 4,681 3,482
--------- --------- ---------
Total consumer and commercial loans 39,769 34,716 25,686
--------- --------- ---------
Total 346,291 332,803 281,836
Less:
Undisbursed portion of loans in process (12,008) (15,839) (12,761)
Net deferred loan fees (979) (1,028) (1,082)
Allowance for loan losses (1,650) (1,000) (600)
--------- --------- ---------
Total, net $ 331,654 $ 314,936 $ 267,393
========== ========== ==========
</TABLE>
The changes in the allowance for loan losses consisted of the following
(in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------------------
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Allowance, beginning of year $ 1,000 $ 600 $ 600 $ 600 $ 600
Provision 675 4 419 9 -
Write-offs (25) (6) (23) (9) -
Recoveries - 2 4 - -
------------------------- -----------------------------------
Total $ 1,650 $ 600 $ 1,000 $ 600 $ 600
=========== ====== ======== ====== =====
</TABLE>
Residential real estate loans are presented net of loans serviced for
others totaling approximately $58.7 million, $64.7 million, $59.2 million,
$69.1 million and $62.5 million at December 31, 1996 and 1995 and June 30,
1996, 1995 and 1994, respectively. Servicing loans for others generally
consists of collecting mortgage payments, maintaining escrow accounts,
disbursing payments to investors and foreclosure processing. In connection
with these loans serviced for others, the Association held borrower's
escrow balances of $288,000, $502,000, $390,000, $560,000 and $588,000 at
December 31, 1996 and 1995 and June 30, 1996, 1995 and 1994, respectively.
F-13
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
The Association originates loans to officers and directors at terms
substantially identical to other borrowers. Mortgage and consumer loans to
officers and directors at December 31, 1996, June 30, 1996 and 1995 were
approximately $957,000, $975,000 and $1,091,000, respectively.
4. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment at December 31, 1996 and June 30, 1996 and
1995 are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, June 30,
---------------------------
Major Classification 1996 1996 1995
<S> <C> <C> <C>
Land $ 1,658 $ 1,389 $ 1,004
Office buildings and improvements 4,914 4,791 4,659
Furniture, fixtures and equipment 2,090 2,119 1,619
Automobiles 37 37 57
-------- -------- --------
Total 8,699 8,336 7,339
Less accumulated depreciation (3,218) (3,224) (2,960)
-------- -------- --------
Office properties and equipment, net $ 5,481 $ 5,112 $ 4,379
======== ======== ========
</TABLE>
5. DEPOSIT ACCOUNTS
Deposit accounts at December 31, 1996 and June 30, 1996 and 1995 are
summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996 June 30, 1995
------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Demand accounts:
Passbook $ 55,869 3.72 % $ 42,944 3.40 % $ 31,893 3.04 %
NOW 30,009 1.83 30,045 1.84 25,747 2.01
Money market 13,967 3.17 16,694 3.36 19,443 3.60
Certificate accounts 224,106 5.59 216,148 5.54 198,832 5.56
--------- --------- ---------
Total $ 323,951 4.81 $ 305,831 4.76 $ 275,915 4.80
========= ========= =========
</TABLE>
F-14
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
Scheduled maturities of certificate accounts at December 31, 1996 are as
follows (in thousands of dollars):
Within 1 year $175,330
After 1 but within 2 years 22,469
After 2 but within 3 years 6,925
Thereafter 19,382
--------
Total certificate accounts $224,106
========
The aggregate amount of certificate accounts in excess of $100,000 was
$22.2 million, $24.5 million and $26.7 million at December 31, 1996 and
June 30, 1996 and 1995, respectively. Deposits in excess of $100,000 are
not federally insured.
Interest expense by type of deposit is summarized as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, June 30,
--------------------------- ---------------------------------------------
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C>
Demand accounts:
Passbook $ 1,043 $ 636 $ 1,364 $ 979 $ 1,003
NOW 233 261 542 545 517
Money market 235 319 626 718 765
Certificate accounts 6,057 6,116 12,137 9,060 8,102
-------- ------- -------- -------- --------
Total $ 7,568 $ 7,332 $ 14,669 $ 11,302 $ 10,387
======== ======= ======== ======== =========
</TABLE>
F-15
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
6. INCOME TAXES
The tax effects of significant items comprising the Association's net
deferred tax liability (included in other liabilities on the balance
sheet) as of December 31, 1996 and June 30, 1996 and 1995 are as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
December 31, June 30,
---------------------------
1996 1996 1995
<S> <C> <C> <C>
Deferred tax liabilities:
Tax basis bad debt reserves arising after
December 31, 1987 in excess of book reserves $ 390 $ 649 $ 662
Differences between book and tax basis of
Federal Home Loan Bank stock 431 431 431
Unamortized premiums on loans sold 93 106 142
Differences between book and tax basis of property 110 133 107
Deferred loan fees 157 85 26
Other 85 187 48
--------- ------- --------
Total 1,266 1,591 1,416
--------- ------- --------
Deferred tax asset - Unrealized loss on securities available
for sale 6 52 25
---------- -------- --------
Net deferred tax liability $ 1,260 $ 1,539 $ 1,391
========= ======== ========
</TABLE>
The Association has been permitted under the Internal Revenue Code to
deduct an annual addition to a reserve for bad debts in determining
taxable income, subject to certain limitations. The deduction was based on
either specified experience formulas or a percentage of taxable income
before such deduction. The Association used the percentage of taxable
income method for the years ended June 30, 1996, 1995 and 1994. This
deduction was historically greater than the loan loss provisions recorded
for financial accounting purposes. Deferred income taxes are provided on
differences between the bad debt reserve for tax and financial reporting
purposes only to the extent of the tax reserves arising subsequent to
December 31, 1987. Retained earnings as of December 31, 1996, includes
approximately $4,092,000 representing such bad debt deductions prior to
December 31, 1987 for which no deferred income taxes have been provided.
Legislation enacted in August 1996 repealed the reserve method for
determining income tax deductions described above. Under the legislation,
the Association will be required to recapture the post-1987 additions to
its bad debt reserve as taxable income over a six to eight year period. As
a tax deferred liability has been recorded, this legislation will have no
impact on equity or results of operations.
The legislation also eliminated certain conditions under which recapture
of the pre-1987 additions to the tax bad debt reserve would be required.
Such conditions are principally conversion to a commercial bank charter or
merger with a commercial bank. The pre-1987 reserves would be required to
be recaptured under certain other conditions such as payment of dividends
in excess of accumulated earnings and profits or other distributions made
in connection with the dissolution or liquidation of the Association.
F-16
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
The provision for income taxes is summarized as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
-------------------------- -----------------------------------------
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Current provision:
Federal $ 600 $ 888 $ 1,679 $ 1,792 $ 2,022
State 90 137 257 227 319
------- -------- --------- --------- ---------
Total current 690 1,025 1,936 2,019 2,341
------- -------- --------- --------- ---------
Deferred provision:
Federal (275) 77 148 400 278
State (50) 13 27 76 88
------- -------- ---------- --------- ----------
Total deferred (325) 90 175 476 366
------- -------- ---------- --------- ----------
Total provision for income taxes $ 365 $ 1,115 $ 2,111 $ 2,495 $ 2,707
======= ======== ========= ========= ==========
</TABLE>
For the six months ended December 31, 1996 and 1995 and for the years
ended June 30, 1996, 1995 and 1994, a tax provision (benefit) of $46,000,
$38,000, $(27,000), $40,000 and $(65,000), respectively, was allocated to
equity for the tax effects of unrealized losses on securities
available-for-sale and marketable equity securities.
The Association's effective tax rate is greater than the statutory Federal
income tax rate for the following reasons (in thousands of dollars):
<TABLE>
<CAPTION>
Six Months Ended
December 31, Years Ended June 30,
-------------------------- ----------------------------------------
1996 1995 1996 1995 1994
<S>
Tax at statutory Federal income <C> <C> <C> <C> <C>
tax rate (34%) $330 $1,011 $1,920 $2,256 $2,440
Increase (decrease) resulting from:
State income taxes 26 99 187 200 269
Other - net 9 5 4 39 (2)
---- ------- ------ ------ -----
Total $365 $1,115 $2,111 $2,495 $2,707
===== ======= ====== ===== ======
Effective rate 37.6% 37.5% 37.4% 37.6% 37.7%
===== ======= ====== ====== ======
</TABLE>
F-17
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
7. EMPLOYEE BENEFIT PLANS
The Association has a noncontributory defined-contribution retirement plan
("retirement plan") to which the Association contributes fifteen percent
of eligible employee salaries. Expense under the plan amounted to
approximately $182,000, $163,000, $331,000, $283,000 and $272,000 in the
six months ended December 31, 1996 and 1995 and in the years ended June
30, 1996, 1995 and 1994, respectively.
During the year ended June 30, 1995, the Association adopted a 401(k) plan
to which eligible employees may elect to contribute 2% - 10% of their
compensation, with limitations. The Association makes discretionary
matching contributions, with certain limitations. Expense under the Plan
amounted to approximately $42,000, $42,000, $72,000 and $17,000 in the six
months ended December 31, 1996 and 1995 and in the years ended June 30,
1996 and 1995, respectively.
All employees with 1,000 hours or greater who have completed twelve months
of continuous employment as of each Plan's entry dates are eligible to
participate in the Plans.
On February 3, 1997 the Board of Directors adopted a resolution to merge
the retirement plan with the 401(k) plan. All balances in the retirement
plan will be vested and contributions discontinued effective with the
merger. The balances related to the retirement plan will be maintained as
a separate account in the 401(k) plan.
8. BORROWING ARRANGEMENTS WITH FEDERAL HOME LOAN BANK OF ATLANTA
The Association has executed an advance and collateral agreement with the
Federal Home Loan Bank of Atlanta ("FHLB"). This agreement allows the
Association to borrow funds under various credit programs offered by the
FHLB. Terms, credit availability and collateral requirements vary by
program.
9. COMMITMENTS AND CONTINGENT LIABILITIES
LOAN COMMITMENTS - The Association, in the normal course of business, is a
party to financial instruments and commitments which involve, to varying
degrees, elements of risk in excess of the amounts recognized in the
consolidated financial statements. These financial instruments and
commitments include unused consumer lines of credit and commitments to
extend credit. The Association had loan commitments, excluding undisbursed
portions of interim construction loans, of approximately $4.4 million
($3.9 million at fixed rates ranging from 7.000% - 8.875%) at December 31,
1996. Commitments, which are disbursed subject to certain limitations,
extend over periods of time with the majority of such commitments
disbursed within a 30-day period. Additionally, at December 31, 1996,
customers of the Association had unused lines of credit extended by the
Association (principally variable-rate consumer lines secured by real
estate) of approximately $25.3 million.
F-18
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
LOANS SOLD WITH RECOURSE - At December 31, 1996, approximately $3.5
million of loans serviced for others had been sold by the Association with
recourse (i.e., the Association retained all credit risk associated with
these loans). Loans sold with recourse resulted from the sale of several
pools of loans in 1983. Due to the seasoned nature of these loans and
their typical low loan-to-value ratios, management of the Association
believes that these loans do not present a significant risk to the
Association.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK - The Association has no
other additional financial instruments with off-balance sheet risk.
CONCENTRATION OF CREDIT RISK - The Association's business activity is
principally with customers located in South Carolina. Except for loans in
the Association's market area, the Association has no other significant
concentration of credit risk. The majority of the Association's loans are
residential mortgage loans, construction loans, home equity loans and
other mortgage loans. The Association's policy will generally allow first
mortgage loans up to 80% of the value of the real estate pledged as
collateral or up to 95% with private mortgage insurance. Home equity loans
are generally allowed up to 90% of the value of the real estate pledged as
collateral.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES - The Association's
profitability depends to a large extent on its net interest income, which
is the difference between interest income on loans and investments and
interest expense on deposits. Like most financial institutions, the
Association's interest income and interest expense are significantly
affected by changes in market interest rates and other economic factors
beyond its control. The Association's interest earning assets consist
primarily of mortgage loans and investments which adjust more slowly to
changes in interest rates than its interest-bearing savings deposits.
Accordingly, the Association's earnings would be adversely affected during
periods of rising interest rates.
LITIGATION - The Association is involved in legal actions in the normal
course of business. Management, based on advice of counsel, does not
expect any significant losses from any current litigation.
10. REGULATORY CAPITAL REQUIREMENTS
The Association is subject to various regulatory capital requirements
administered by the federal financial institution regulatory agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the
Association's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Association
must meet specific capital guidelines that involve quantitative measures
of the Association's assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. The
Association's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings
and other factors.
F-19
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios. Under
regulations of the Office of Thrift Supervision ("OTS"), the Association
must have: (i) core capital equal to 3.0% of adjusted total assets, (ii)
tangible capital equal to 1.5% of adjusted total assets and (iii) total
capital equal to 8.0% of risk-weighted assets. In measuring compliance
with all three capital standards, institutions must deduct from their
capital (with several exceptions primarily for mortgage banking
subsidiaries and insured depository institution subsidiaries) their
investments in, and advances to, subsidiaries engaged (as principal) in
activities not permissible for national banks, and certain other
adjustments. Management believes, as of December 31, 1996, that the
Association meets all capital adequacy requirements to which it is
subject.
The following is a reconciliation of the Association's equity reported in
the consolidated financial statements under generally accepted accounting
principles to OTS regulatory capital requirements (in thousands of
dollars):
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
<S> <C> <C> <C>
December 31, 1996
Total equity as reported in the consolidated financial
statements $ 44,833 $ 44,833 $ 44,833
General allowance for loan losses - - 1,638
Unrealized loss on available-for-sale securities 12 12 12
-------- -------- --------
Regulatory capital $ 44,845 $ 44,845 46,483
========= ========= ========
June 30, 1996
Total equity as reported in the consolidated financial
statements $ 44,154 $ 44,154 $ 44,154
General allowance for loan losses - - 999
Unrealized loss on available-for-sale securities 84 84 84
-------- -------- --------
Regulatory capital $ 44,238 $ 44,238 $ 45,237
======== ======== ========
June 30, 1995
Total equity as reported in the consolidated financial
statements $ 40,660 $ 40,660 $ 40,660
General allowance for loan losses - - 587
Unrealized loss on available-for-sale securities 41 41 41
-------- -------- ----------
Regulatory capital $ 40,701 $ 40,701 $ 41,288
========= ======== ========
</TABLE>
F-20
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
The Association's actual and required capital amounts and ratios are
summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Minimum
Actual Requirement
-------------------------- --------------------------
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
December 31, 1996
Tangible capital (to total assets) $ 44,845 11.9% $ 5,633 1.5%
Core capital (to adjusted total assets) $ 44,845 11.9% $ 11,266 3.0%
Risk-based capital (to risk-weighted assets) $ 46,483 20.8% $ 17,897 8.0%
June 30, 1996
Tangible capital (to total assets) $ 44,238 12.4% $ 5,356 1.5%
Core capital (to adjusted total assets) $ 44,238 12.4% $ 10,712 3.0%
Risk-based capital (to risk-weighted assets) $ 45,237 21.5% $ 16,806 8.0%
June 30, 1995
Tangible capital (to total assets) $ 40,701 12.6% $ 4,841 1.5%
Core capital (to adjusted total assets) $ 40,701 12.6% $ 9,682 3.0%
Risk-based capital (to risk-weighted assets) $ 41,288 22.1% $ 14,918 8.0%
</TABLE>
As of December 31, 1996, June 30, 1996 and June 30, 1995, the most recent
respective notifications from the OTS classified the Association as well
capitalized under the regulatory framework for prompt corrective action.
There are no conditions or events since the most recent notification that
management believes have changed the Association's category. To be
categorized as well capitalized, the Association must maintain minimum
ratios of total capital to risk-weighted assets, core capital to
risk-weighted assets and core capital to adjusted total assets. The
Association's actual and minimum capital requirements to be well
capitalized under prompt corrective action provisions are as follows:
<TABLE>
<CAPTION>
Minimum
Actual Requirement
-------------------------- --------------------------
Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
December 31, 1996
Tier I Capital (to adjusted total assets) $ 44,845 11.9% $ 18,776 5.0%
Tier I Capital (to risk-weighted assets) $ 44,845 20.0% $ 13,422 6.0%
Total Capital (to risk-weighted assets) $ 46,483 20.8% $ 22,371 10.0%
June 30, 1996
Tier I Capital (to adjusted total assets) $ 44,238 12.4% $ 17,848 5.0%
Tier I Capital (to risk-weighted assets) $ 44,238 21.1% $ 12,605 6.0%
Total Capital (to risk-weighted assets) $ 45,237 21.5% $ 21,008 10.0%
June 30, 1995
Tier I Capital (to adjusted total assets) $ 40,701 12.6% $ 16,137 5.0%
Tier I Capital (to risk-weighted assets) $ 40,701 21.8% $ 11,189 6.0%
Total Capital (to risk-weighted assets) $ 41,288 22.1% $ 18,648 10.0%
</TABLE>
F-21
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
On September 30, 1996, legislation was enacted to recapitalize the Savings
Association Insurance Fund. The effect of this legislation is to require a
one-time assessment on all federally insured savings associations'
deposits and was levied by the Federal Depository Insurance Corporation
("FDIC") at .657% of insured deposits at March 31, 1995. The amount of the
Association's assessment was approximately $1.78 million. The assessment
was accrued as a charge to earnings in the quarter ended September 30,
1996 and paid on November 27, 1996.
11. FINANCIAL INSTRUMENTS
The stated and fair value amounts of financial instruments as of December
31, 1996 and June 30, 1996 and 1995, are summarized below (in thousands of
dollars):
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996 June 30, 1995
-------------------- --------------------- --------------------
Stated Fair Stated Fair Stated Fair
Amount Value Amount Value Amount Value
<S> <C> <C> <C> <C> <C> <C>
Financial Assets:
Cash and cash
equivalents $ 17,104 $ 17,104 $ 10,784 $ 10,784 $ 15,967 $ 15,967
Investment securities 13,492 13,492 18,155 18,155 13,730 13,677
Mortgage-backed
securities 128 142 195 209 383 397
Loans receivable, net 331,654 333,585 314,936 313,727 267,393 269,486
Loans held for sale 1,444 1,444 1,911 1,911 15,324 15,580
Federal Home Loan
Bank Stock 2,806 2,806 2,806 2,806 2,649 2,649
Other assets 2,439 2,439 2,427 2,427 2,127 2,127
Retained servicing
on mortgage
loans -- 614 -- 640 -- 143
-------- ------- -------- -------- ------- ----------
Total $369,067 $371,626 $351,214 $350,659 $317,573 $320,026
======== ======== ======== ======== ======== ========
Financial Liabilities:
Deposits:
Demand accounts $ 99,845 $ 99,845 $ 89,683 $ 89,683 $ 77,083 $ 77,083
Certificate accounts 224,106 224,224 216,148 215,660 198,832 197,298
Other liabilities 4,561 4,561 4,781 4,781 4,015 4,015
-------- -------- -------- -------- -------- --------
Total $328,512 $328,630 $310,612 $310,124 $279,930 $278,396
======== ======== ======== ======== ======== ========
</TABLE>
The Association had off-balance sheet financial commitments, which include
$29.7 million, $27.4 million and $21.6 million at December 31, 1996, June
30, 1996 and 1995, respectively, to originate loans and unused consumer
lines of credit. Since these commitments are based on current rates, the
commitment amount is considered to be a reasonable estimate of fair market
value.
The following methods and assumptions were used by the Association in
estimating its fair value disclosures for financial instruments:
F-22
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - Both cash and cash equivalents have maturities
of three months or less, and, accordingly, the stated amount of such
instruments is deemed to be a reasonable estimate of fair value.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES - Fair values for investments
and mortgage-backed securities are based on quoted market prices. If a
quoted market price is not available, fair value is estimated using market
prices of similar securities.
LOANS - Fair values of loans held for investment are estimated by
segregating the portfolio by type of loan and discounting scheduled cash
flows using interest rates currently being offered for loans with similar
terms, reduced by an estimate of credit losses inherent in the portfolio.
A prepayment assumption is used as an estimate of the portion of loans
that will be repaid prior to their scheduled maturity. Loans held for sale
are valued at the lower of cost or market as determined by outstanding
commitments from investors or current investor yield requirements
calculated on the aggregate loan basis.
FEDERAL HOME LOAN BANK STOCK - No ready market exists for this stock, and
it has no quoted market value. However, redemption of this stock has
historically been at par value. Accordingly, the stated amount is deemed
to be a reasonable estimate of fair value.
RETAINED SERVICING ON MORTGAGE LOANS - The fair value of retained
servicing is calculated by discounting the expected future cash flows
using current rates.
DEPOSITS - The fair values disclosed for demand deposits are equal to the
amounts payable on demand at the reporting date (i.e., their stated
amounts). The fair value of certificates of deposit are estimated by
discounting the amounts payable at the certificate rate using the rates
currently offered for deposits of similar remaining maturities.
OTHER ASSETS AND OTHER LIABILITIES - Other assets represent principally
accrued interest receivable; other liabilities represent advances from
borrowers for taxes and insurance, outstanding checks and accrued interest
payable. Since these financial instruments will typically be received or
paid within three months, the stated amounts of such instruments are
deemed to be a reasonable estimate of fair value.
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 the Association's entire holdings of a
particular financial instrument. Because no active market exists for a
significant portion of the Association's financial instruments, fair value
estimates are based on judgments regarding future expected loss
experience, current economic conditions, current interest rates and
prepayment trends, risk characteristics of various financial
F-23
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
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 any of these
assumptions used in calculating fair value also would significantly effect
the estimates. Further, the fair value estimates were calculated as of
December 31, 1996 and June 30, 1996 and 1995. Changes in market interest
rates and prepayment assumptions could change significantly the fair
value.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. For example, the Association has
significant assets and liabilities that are not considered financial
assets or liabilities including loan servicing portfolio, real estate,
deferred tax liabilities and premises and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have not
been considered in any of these estimates.
12. CONVERSION TO CAPITAL STOCK FORM OF OWNERSHIP
On February 3, 1997, the Board of Directors of the Association adopted a
Plan of Conversion to convert from a federally chartered mutual savings
and loan association to a federally chartered capital stock savings and
loan association with the concurrent formation of a holding company,
subject to approval by regulatory authorities and depositors of the
Association. The conversion is expected to be accomplished through the
adoption of a federal stock charter for the Association, the sale of all
of the Association's stock to the holding company and the sale of the
holding company's common stock to the public. A subscription offering of
the shares of common stock will be offered initially to eligible account
holders, employee benefit plans of the Association, supplemental eligible
account holders and other members of the Association. Shares of common
stock remaining unsold after the subscription offering, if any, will be
offered for sale in a community offering.
The plan of conversion provides for the establishment, upon the completion
of the conversion, of a liquidation account in an amount equal to its
retained income as of the date of the latest statement of financial
condition appearing in the final prospectus used in connection with the
conversion. The liquidation account will be maintained for the benefit of
eligible account holders and supplemental eligible account holders who
continue to maintain their accounts at the Association after the
conversion. The liquidation account will be reduced annually to the extent
that eligible account holders and supplemental eligible account holders
have reduced their qualifying deposits as of each anniversary date.
Subsequent increases will not restore an eligible or supplemental eligible
account holder's interest in the liquidation account. In the event of a
complete liquidation (and only in such event) of the Association, each
eligible account holder and supplemental eligible account holder will be
entitled to receive a distribution from the liquidation account in an
amount proportionate to the current adjusted qualifying balances for
accounts then held.
F-24
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATON
OF SPARTANBURG AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
Subsequent to the conversion, the Association may not declare or pay cash
dividends on or repurchase any of its shares of common stock if the effect
thereof would cause equity to be reduced below applicable regulatory
capital maintenance requirements or if such declaration and payment would
otherwise violate regulatory requirements.
Conversion costs will be deferred and reduce the proceeds from the shares
sold in the conversion. If the conversion is not completed, all costs will
be charged as an expense. As of December 31, 1996, no significant
conversion costs have been incurred.
**********
F-25
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by FirstSpartan Financial Corp. or First Federal Savings and Loan
Association of Spartanburg. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any of the securities offered hereby to any
person or in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified 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 FirstSpartan Financial Corp. or First
Federal Savings and Loan Association of Spartanburg since any of the dates as of
which information is furnished herein or since the date hereof.
Table of Contents Page
Prospectus Summary............................................
Selected Consolidated Financial Information...................
Recent Developments...........................................
Risk Factors..................................................
FirstSpartan Financial Corp...................................
First Federal Savings and Loan Association of Spartanburg.....
Use of Proceeds...............................................
Dividend Policy...............................................
Market for Common Stock.......................................
Capitalization................................................
Historical and Pro Forma Regulatory Capital Compliance........
Pro Forma Data................................................
Shares to be Purchased by Management Pursuant
to Subscription Rights......................................
First Federal Savings and Loan Association of Spartanburg
and Subsidiary Consolidated Statements of Income.............
Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................
Business of the Holding Company...............................
Business of the Association...................................
Management of the Holding Company.............................
Management of the Association.................................
Regulation....................................................
Taxation......................................................
The Conversion................................................
Restrictions on Acquisition of the Holding Company............
Description of Capital Stock of the Holding Company ..........
Registration Requirements.....................................
Legal and Tax Opinions........................................
Experts.......................................................
Additional Information........................................
Index to Consolidated Financial Statements....................
UNTIL THE LATER OF ___________, 1997, OR 25 DAYS AFTER COMMENCEMENT OF THE
SYNDICATED COMMUNITY OFFERING OF COMMON STOCK, IF ANY, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
FIRSTSPARTAN FINANCIAL CORP.
[Logo]
(Proposed Holding Company for
First Federal Savings and Loan)
Association of Spartanburg)
2,847,500 to 3,852,500 Shares of
Common Stock
PROSPECTUS
TRIDENT SECURITIES, INC.
May ____, 1997
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution(1)
Legal fees and expenses................................ $ 200,000
Securities marketing legal fees........................ 35,000
Printing, postage and mailing.......................... 90,000
Appraisal and business plan preparation................ 47,000
Accounting fees........................................ 100,000
Securities marketing fees and expenses................. 797,000
Data processing fees................................... 17,500
SEC registration fee................................... 27,000
Blue Sky filing fees and expenses...................... 10,000
OTS filing fees........................................ 8,400
Other expenses......................................... 68,100
-----------
Total............................................ $1,400,000
==========
(1) Assumes all of the Common Stock will be sold in the Subscription
Offering to residents of the State of South Carolina for which Trident
Securities, Inc. will receive a fee of 1.35% of the aggregate dollar amount of
stock sold (excluding shares purchased by officers and directors of the
Registrant and its affiliates, including the ESOP), not to exceed $797,000.
Item 14. Indemnification of Officers and Directors
Article XVII of the Certificate of Incorporation of FirstSpartan
Financial Corp. requires indemnification of directors, officers and
employees to the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may
incur in their capacities:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred
II-1
<PAGE>
by him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
II-2
<PAGE>
and references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Item 15. Recent Sales of Unregistered Securities.
Not Applicable
Item 16. Exhibits and Financial Statement Schedules:
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
(a) List of Exhibits
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1 -- Form of proposed Agency Agreement among FirstSpartan Financial Corp.,
First Federal Savings and Loan Association of Spartanburg and Trident
Securities, Inc.
1.2 -- Engagement Letter between First Federal Savings and Loan Association
of Spartanburg and Trident Securities, Inc.
2 -- Plan of Conversion of First Federal Savings and Loan Association of
Spartanburg (attached as an exhibit to the Proxy Statement included
herein as Exhibit 99.5)
3.1 -- Certificate of Incorporation of FirstSpartan Financial Corp. (a)
3.2 -- Bylaws of FirstSpartan Financial Corp. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights (a)
10.1 -- Proposed Form of Employment Agreement For Certain Executive Officers (a)
10.2 -- Proposed Form of Severance Agreement For Certain Senior Officers (a)
10.3 -- Proposed Form of Employee Stock Ownership Plan (a)
II-3
<PAGE>
10.4 -- First Federal Savings and Loan Association of Spartanburg 401(k) Plan
10.5 -- Form of First Federal Savings and Loan Association of Spartanburg Employee Severance Compensation
Plan (a)
10.6 -- Form of Director Emeritus Plan
21 -- Subsidiaries of FirstSpartan Financial Corp. (a)
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Breyer & Aguggia (contained in opinion included as Exhibit 5) (a)
23.3 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion (a)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (contained in signature page to the Registration Statement) (a)
99.1 -- Order and Acknowledgement Form (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of First Federal Savings
and Loan Association of Spartanburg
</TABLE>
- ---------------------
(a) Previously filed.
Financial Statements and Schedules
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG AND SUBSIDIARY
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Auditors' Report.............................................................................. F-1
Consolidated Balance Sheets as of
December 31, 1996 (unaudited) and June 30, 1996 and 1995 ................................................ F-2
Consolidated Statements of Income for the Six Months Ended December 31, 1996 and
1995 (unaudited) and for the Years Ended
June 30, 1996, 1995 and 1994 ............................................................................ 21
Consolidated Statements of Equity for the Six Months Ended December 31, 1996
(unaudited) and for the Years Ended
June 30, 1996, 1995 and 1994............................................................................. F-3
II-4
<PAGE>
Consolidated Statements of Cash Flows for the Six Months
Ended December 31, 1996 (unaudited) and for
the Years Ended June 30, 1996, 1995 and 1994 ............................................................ F-4
Notes to Consolidated Financial Statements................................................................ F-6
</TABLE>
All schedules are omitted because the required information is either
not applicable or is included in the financial statements or related notes.
Item 17. Undertakings
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, as amended ("Securities Act");
(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. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective 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.
(2) That, for the purpose of determining any liability under the
Securities Act, 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 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) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") (and, where
applicable, each filing of any employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement 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.
Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Amended Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Spartanburg, South Carolina on the 25th day of April 1997.
FIRSTSPARTAN FINANCIAL CORP.
By: /s/ Billy L. Painter
Billy L. Painter
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Billy L. Painter President, Chief Executive Officer April 25, 1997
- ------------------------------------------- and Director (Principal Executive Officer)
Billy L. Painter
/s/ Lamar Simpson* Treasurer, Secretary and Chief April 25, 1997
- ---------------------------------------- Financial Officer (Principal
Lamar Simpson Financial and Accounting
Officer)
/s/ Robert R. Odom* Chairman of the Board April 25, 1997
- ----------------------------------------
Robert R. Odom
/s/ E. Lea Salter* Director April 25, 1997
- -------------------------------------------
E. Lea Salter
/s/ David E. Tate* Director April 25, 1997
- ------------------------------------------
David E. Tate
/s/ Robert L. Handell* Director April 25, 1997
- -----------------------------------------
Robert L. Handell
/s/ E.L. Sanders* Director April 25, 1997
- ------------------------------------------
E.L. Sanders
/s/ R. Wesley Hammond* Director April 25, 1997
- -------------------------------------
R. Wesley Hammond
</TABLE>
- ---------------
* By power of attorney dated March 7, 1997.
<PAGE>
As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 333-23015
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FIRSTSPARTAN FINANCIAL CORP.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Delaware 6035 56-2015272
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
380 E. MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29302
(864) 582-2391
(Address and telephone number of principal executive offices)
Paul M. Aguggia, Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East 1300 I Street, N.W.
Washington, D.C. 20005
(Name and address of agent for service)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1 -- Form of proposed Agency Agreement among FirstSpartan Financial Corp.,
First Federal Savings and Loan Association of Spartanburg and Trident
Securities, Inc.
1.2 -- Engagement Letter between First Federal Savings and Loan Association
of Spartanburg and Trident Securities, Inc.
2 -- Plan of Conversion of First Federal Savings and Loan Association of
Spartanburg (attached as an exhibit to the Proxy Statement included
herein as Exhibit 99.5)
3.1 -- Certificate of Incorporation of FirstSpartan Financial Corp. (a)
3.2 -- Bylaws of FirstSpartan Financial Corp. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities registered (a)
8.1 -- Federal Tax Opinion of Breyer & Aguggia
8.2 -- State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights (a)
10.1 -- Proposed Form of Employment Agreement For Certain Executive Officers (a)
10.2 -- Proposed Form of Severance Agreement For Certain Senior Officers (a)
10.3 -- Proposed Form of Employee Stock Ownership Plan (a)
10.4 -- First Federal Savings and Loan Association of Spartanburg 401(k) Plan
10.5 -- Form of First Savings and Loan Association of Spartanburg Employee Severance
Compensation Plan (a)
10.6 -- Form of Directors Emeritus Plan
21 -- Subsidiaries of FirstSpartan Financial Corp. (a)
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Breyer & Aguggia (contained in opinion included as Exhibit 5) (a)
23.3 -- Consent of Breyer & Aguggia as to its Federal Tax Opinion (a)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (contained in signature page to the Registration Statement) (a)
<PAGE>
99.1 -- Order and Acknowledgement Form (a)
99.2 -- Solicitation and Marketing Materials (a)
99.3 -- Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of First Federal Savings
and Loan Association of Spartanburg
</TABLE>
- ---------------------
(a) Previously filed.
EXHIBIT 1.1
FORM OF PROPOSED AGENCY AGREEMENT AMONG FIRSTSPARTAN FINANCIAL CORP.,
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG AND
TRIDENT SECURITIES, INC.
<PAGE>
FIRSTSPARTAN FINANCIAL CORP.
2,847,500 TO 3,852,500 SHARES
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
PURCHASE PRICE: $20.00 PER SHARE
SALES AGENCY AGREEMENT
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
FirstSpartan Financial Corp., a Delaware corporation (the "Company"),
and First Federal Savings and Loan Association of Spartanburg, Spartanburg,
South Carolina, a federally chartered and insured mutual savings and loan
association (the "Association"), hereby confirm, as of _____________ __, 1997
their respective agreements with Trident Securities, Inc. ("Trident"), a
broker-dealer registered with the Securities and Exchange Commission
("Commission") and a member of the National Association of Securities Dealers,
Inc. ("NASD"), as follows:
1. Introductory. The Association intends to convert from a federally
chartered mutual savings and loan association to a federally chartered capital
stock savings and loan association as a wholly owned subsidiary of the Company
(together with the Offerings, as defined below, the issuance of shares of common
stock of the Association to the Company and the incorporation of the Company,
the "Conversion") pursuant to a plan of conversion adopted by the Association's
Board of Directors on February 4, 1997 (the "Plan"). In accordance with the
Plan, the Company is offering shares of its common stock, par value $.01 per
share (the "Common Stock"), pursuant to nontransferable subscription rights in a
subscription offering (the "Subscription Offering") to certain depositors and
borrowers of the Association and to the Association's tax-qualified employee
benefit plans (I.E., the Association's Employee Stock Ownership Plan (the
"ESOP")). Any shares of the Common Stock not sold in the Subscription Offering
are being offered to the general public in a direct community offering (the
"Direct Community Offering"), with preference given to natural persons and the
trusts of natural persons who are permanent residents of Spartanburg County,
South Carolina (the "Local Community") (the Subscription and Direct Community
Offerings are sometimes referred to collectively as the "Subscription and Direct
Community Offering"), subject to the right of the Company and the Association,
in their absolute discretion, to reject orders in the Direct Community Offering
in whole or in part. It is anticipated that shares of Common Stock not
subscribed for in the Subscription and Direct Community Offering (if any) will
be offered to certain members of the general public on a best efforts basis by a
selling group of broker dealers managed by Trident in a syndicated offering
("Syndicated Community Offering") (the Subscription and Direct Community
Offering and the Syndicated Community Offering are referred to collectively as
the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 2
"Offerings"). In the Subscription Offering (and the Direct Community Offering
and the Syndicated Community Offering if applicable), the Company is offering
between 2,847,500 and 3,852,500 shares of Common Stock (the "Shares"), with the
possibility of offering up to 4,430,375 shares without a resolicitation of
subscribers, as contemplated by Title 12 of the Code of Federal Regulations,
Part 563b. With the exception of the ESOP, no individual person or other entity,
together with associates of and persons acting in concert with such person or
other entity, may purchase shares of Common Stock with an aggregate purchase
price of more than $325,000 in the Conversion. No person (including all persons
on a joint account), either alone or together with associates of or persons
acting in concert with such person, may purchase in the aggregate more than the
overall maximum purchase limitation of 1% of the total number of shares of
Common Stock issued in the Conversion (exclusive of any shares issued pursuant
to an increase in the estimated valuation range of up to 15%).
The Company and the Association have been advised by Trident that it
will utilize its best efforts to assist the Company with the sale of the Shares
in the Offerings. Prior to the execution of this Agreement, the Company has
delivered to Trident the Prospectus dated _______ __, 1997 (as hereinafter
defined) and all supplements thereto, if any, to be used in the Offerings have
also been delivered to Trident (or if after the date of this Agreement, will be
promptly delivered to Trident). Such Prospectus contains information with
respect to the Company, the Association and the Shares.
2. Representations and Warranties.
(a) The Company and the Association jointly and severally
represent and warrant to Trident that:
(i) The Company has filed with the Commission a
registration statement, including exhibits and an amendment or
amendments thereto, on Form S-1 (No. 333-23015), including a
Prospectus relating to the Offerings, for the registration of
the Shares under the Securities Act of 1933, as amended (the
"Act"). Such registration statement has become effective under
the Act and no stop order has been issued with respect thereto
and no proceedings therefor have been initiated or, to the
Company's best knowledge, threatened by the Commission. Such
registration statement, as amended or supplemented, on file
with the Commission at the time the registration statement
became effective, including the Prospectus, financial
statements, schedules, exhibits and all other documents filed
as part thereof, as amended and supplemented, is herein called
the "Registration Statement," and the prospectus, as amended
or supplemented, on file with the Commission at the time the
Registration Statement became effective is herein called the
"Prospectus," except that if the prospectus filed by the
Company with the Commission pursuant to Rule 424(b) of the
general rules
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 3
and regulations of the Commission under the Act (the "SEC
Regulations") differs from the form of prospectus on file at
the time the Registration Statement became effective, the term
"Prospectus" shall refer to the Rule 424(b) prospectus from
and after the time it is filed with the Commission and shall
include any amendments or supplements thereto from and after
their dates of effectiveness or use, respectively. If any
Shares remain unsubscribed following completion of the
Offerings thereby requiring a resolicitation of subscribers,
the Company (i) will promptly file with the Commission a
post-effective amendment to such Registration Statement
relating to the results of the Offerings, any additional
information with respect to the proposed plan of distribution
and any revised pricing information or (ii) if no such
post-effective amendment is required, will file with the
Commission a prospectus or prospectus supplement containing
information relating to the results of the Subscription and
the Community Offerings and pricing information pursuant to
Rule 424(c) of the SEC Regulations, in either case in a form
reasonably acceptable to the Company and Trident.
(ii) The Association has filed an Application for
Approval of Conversion on Form AC, including exhibits (as
amended or supplemented, the "Form AC" and together with the
Form H-(e)1-S referred to below, the "Conversion Application")
with the Office of Thrift Supervision (the "Office") under the
Home Owners' Loan Act, as amended (the "HOLA") and the
published rules and regulations, of the Office thereunder (the
"OTS Regulations"), which Form AC has been approved by the
Office; the Prospectus and the proxy statement for the
solicitation of proxies from members of the Association for
the special meeting to approve the Plan (the "Proxy
Statement") included as part of the Form AC have been approved
for use by the Office. No order has been issued by the Office
preventing or suspending the use of the Prospectus or the
Proxy Statement; and no action by or before the Office
revoking such approvals is pending or, to the Association's
best knowledge, threatened. The Company has filed with the
Office the Company's application on Form H-e(1)-S under the
savings and loan holding company provisions of the HOLA and
the regulations promulgated thereunder and will have received
as of the Closing Date, approval of its acquisition of the
Association from the Office.
(iii) At the date of the Prospectus and at all times
subsequent thereto through and including the Closing Date (i)
the Registration Statement and the Prospectus (as amended or
supplemented, if amended or supplemented) complied and will
comply as to form in all material respects with the Act and
the SEC Regulations, (ii) the Registration Statement (as
amended or supplemented, if amended or supplemented) did not
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 4
the statements therein not misleading, and (iii) the
Prospectus (as amended or supplemented, if amended or
supplemented) did not contain any untrue statement of a
material fact or omit to state 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. Representations or warranties in this subsection
shall not apply to statements or omissions made in reliance
upon information furnished to the Company or the Association
relating to Trident by or on behalf of Trident expressly for
use in the Registration Statement or Prospectus.
(iv) The Company is duly incorporated as a Delaware
corporation, the Association's sole subsidiary, First Spartan
Service Corporation (the "Subsidiary"), has been duly
incorporated as a South Carolina corporation, and the
Association has been duly organized as a mutual savings and
loan association under the laws of the United States, and each
of them is validly existing and in good standing under the
laws of the jurisdiction of its organization with full power
and authority to own its property and conduct its business as
described in the Prospectus; the Association is a member of
the Federal Home Loan Bank of Atlanta; and the Association is
an insured depository institution under the provisions of
Section 4(a) of the Federal Deposit Insurance Act, as amended
("FDIA"), with deposit accounts insured by the Savings
Association Insurance Fund ("SAIF") administered by the
Federal Deposit Insurance Corporation ("FDIC") up to the
applicable legal limits. Each of the Company, the Association
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
Company, the Association and the Subsidiary, taken as a whole.
The Association does not own equity securities of or an equity
interest in any business enterprise other than the Subsidiary,
except as described in the Prospectus. Upon amendment of the
Association's charter and bylaws as provided in the OTS
Regulations and completion of the sale by the Company of the
Shares as contemplated by the Prospectus, (i) the Association
will be converted pursuant to the Plan to a federally
chartered capital stock savings and loan association with full
power and authority to own its property and conduct its
business as described in the Prospectus, (ii) all of the
authorized and outstanding capital stock of the Association
will be owned of record and beneficially by the Company, and
(iii) the Company will have no direct subsidiaries other than
the Association.
(v) Each of the Association and the Subsidiary has
good and marketable title to all assets material to its
business and to those assets described in the Prospectus as
owned by it, free and clear of all material liens, charges,
encumbrances or restrictions, except for liens for taxes not
yet due, except as
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 5
described in the Prospectus and except as do not in the
aggregate have a material adverse effect upon the operations
or financial condition of the Association and the Subsidiary,
taken as a whole; and all of the leases and subleases material
to the operations of the Association and the Subsidiary, under
which they hold properties, including those described in the
Prospectus, are in full force and effect as described therein.
(vi) The Association and the Subsidiary have obtained
all licenses, permits and other governmental authorizations
currently required for the conduct of their business, all such
licenses, permits and other governmental authorizations are in
full force and effect and the Association and the Subsidiary
are in all material respects complying therewith, except where
the failure to hold such licenses, permits or governmental
authorizations or the failure to so comply would not have a
material adverse effect on the Company, the Association and
the Subsidiary, taken as a whole.
(vii) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary actions
on the part of each of the Company and the Association, and
this Agreement is a valid and binding obligation with valid
execution and delivery of each of the Company and the
Association, enforceable in accordance with its terms (except
as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of savings and loan
holding companies the accounts of whose subsidiary are insured
by the FDIC or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in
equity or at law, and except to the extent that the provisions
of Sections 8 and 9 hereof may be unenforceable as against
public policy or pursuant to Section 23A of the Federal
Reserve Act, 12 U.S.C. Section 371c ("Section 23A")).
(viii) There is no litigation or governmental
proceeding pending or, to the best knowledge of the Company or
the Association, threatened against or involving the Company,
the Association, 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 financial
condition, results of operations and business, including the
assets and properties, of the Company, the Association and the
Subsidiary, taken as a whole.
(ix) The Company and the Association have received
the opinions of Breyer & Aguggia with respect to federal
income tax consequences of the Conversion, and of Deloitte &
Touche LLP, with respect to South Carolina tax
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 6
consequences of the Conversion, to the effect that the
Conversion will constitute a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and will not be a
taxable transaction for the Association or the Company under
the laws of South Carolina, and the facts relied upon in such
opinions are accurate and complete.
(x) Each of the Company and the Association has all
such corporate power, authority, authorizations, approvals and
orders as may be required to enter into this Agreement and to
carry out the provisions and conditions hereof, subject to the
limitations set forth herein and subject to the satisfaction
of certain conditions imposed by the Office in connection with
its approvals of the Form AC and the Application H-(e)1-S, and
except as may be required under the securities, or "blue sky,"
laws of various jurisdictions, and in the case of the Company,
as of the Closing Date, will have such approvals and orders to
issue and sell the Shares to be sold by the Company as
provided herein, and in the case of the Association, as of the
Closing Date, will have such approvals and orders to issue and
sell the Shares of its Common 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 federally chartered capital
stock savings and loan associations (the "Stock Charter"), the
form of which Stock Charter has been approved by the Office.
(xi) Neither the Company, the Association nor the
Subsidiary is in violation of any rule or regulation of the
Office or the FDIC that could reasonably be expected to result
in any enforcement action against the Company, the
Association, the Subsidiary or their officers or directors
that would have a material adverse effect on the financial
condition, operations, businesses, assets or properties of the
Company, the Association and the Subsidiary, taken as a whole.
(xii) The consolidated financial statements and the
related notes which are included in the Registration Statement
and are part of the Prospectus fairly present the consolidated
financial condition, income, retained earnings and cash flows
of the Association and the Subsidiary 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 the SEC Regulations and the
applicable accounting regulations of the Office. Such
financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth therein,
and such financial statements are in all material respects
consistent with financial statements and other reports filed
by the Association with supervisory and regulatory authorities
except as such generally accepted accounting principles may
otherwise require. The tables in the Prospectus accurately
present the information
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 7
purported to be shown thereby at the respective dates thereof
and for the respective periods therein.
(xiii) There has been no material change in the
financial condition, results of operations or business,
including assets and properties, of the Company, the
Association and the Subsidiary, taken as a whole, since the
latest date as of which such condition is set forth in the
Prospectus, except as set forth therein; and the
capitalization, assets, properties and business of each of the
Company, the Association and the Subsidiary conform in all
material respects to the descriptions thereof contained in the
Prospectus. None of the Company, the Association or the
Subsidiary has any material liabilities of any kind,
contingent or otherwise, except as set forth in the
Prospectus.
(xiv) There has been no breach or default (or the
occurrence of any event which, with notice or lapse of time or
both, would constitute a default) under, or creation or
imposition of any lien, charge or other encumbrance upon any
of the properties or assets of the Company, the Association or
the Subsidiary pursuant to any of the terms, provisions or
conditions of, any agreement, contract, indenture, bond,
debenture, note, instrument or obligation to which the
Company, the Association or the Subsidiary is a party or by
which any of them or any of their respective assets or
properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published
law, administrative regulation or order or court order, writ,
injunction or decree, which breach, default, encumbrance or
violation would have a material adverse effect on the
financial condition, operations, business, assets or
properties of the Company, the Association and the Subsidiary
taken as a whole; all agreements which are material to the
financial condition, results of operations or business of the
Company, the Association and the Subsidiary taken as a whole
are in full force and effect, and no party to any such
agreement has instituted or, to the best knowledge of the
Company, the Association or the Subsidiary, threatened any
action or proceeding wherein the Company, the Association or
the Subsidiary would be alleged to be in default thereunder.
(xv) None of the Company, the Association or the
Subsidiary is in violation of its respective certificate of
incorporation or charter or bylaws. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby by the Company and the Association do not
conflict with or result in a breach of the certificate of
incorporation or charter or bylaws of the Company, the
Association (in either mutual or stock form) or the Subsidiary
or constitute a material breach of or default (or an event
which, with notice or lapse of time or both, would constitute
a default) under, give rise to any right of termination,
cancellation or acceleration contained in, or result in the
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Trident Securities, Inc.
Sales Agency Agreement
Page 8
creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the
Company, the Association or the Subsidiary 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, the Association
or the Subsidiary is a party or violate any governmental
license or permit or any enforceable published law,
administrative regulation or order or court order, writ,
injunction or decree (subject to the satisfaction of certain
conditions imposed by the Office in connection with its
approval of the Conversion Application), which breach,
default, encumbrance or violation would have a material
adverse effect on the financial condition, operations or
business of the Company, the Association and the Subsidiary,
taken as a whole.
(xvi) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus and prior to the Closing Date, except as otherwise
may be indicated or contemplated therein, none of the Company,
the Association or the Subsidiary has issued any securities
which will remain issued at the Closing Date or incurred any
liability or obligation, direct or contingent, or borrowed
money, except borrowings in the ordinary course of business,
or entered into any other transaction not in the ordinary
course of business and consistent with prior practices, which
is material in light of the business of the Company, the
Association and the Subsidiary, taken as a whole.
(xvii) Upon consummation of the Conversion, the
authorized, issued and outstanding equity capital of the
Company shall be within the range as set forth in the
Prospectus under the caption "Capitalization," and no Common
Stock of the Company shall be outstanding immediately prior to
the Closing Date; the issuance and the sale of the Shares have
been duly authorized by all necessary corporate action of the
Company and approved by the Office and, when issued in
accordance with the terms of the Plan in exchange for the
consideration therefor, the Shares shall be validly issued,
fully paid and nonassessable and shall conform in all material
respects to the description thereof contained in the
Prospectus; the issuance of the Shares is not subject to
preemptive rights, except as set forth in the Prospectus; and
good title to the Shares will be transferred by the Company to
the purchasers thereof upon issuance thereof against payment
therefor, free and clear of all claims, encumbrances, security
interests and liens against the Company whatsoever. The
certificates representing the Shares will conform in all
material respects with the requirements of applicable laws and
regulations. The issuance and sale of the capital stock of the
Association to the Company has been duly authorized by all
necessary corporate action of the Association and the Company
and appropriate regulatory authorities (subject to the
satisfaction of various conditions imposed by the Office in
connection with its approval of the Conversion Application),
and such capital stock, when issued in
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Trident Securities, Inc.
Sales Agency Agreement
Page 9
accordance with the terms of the Plan, will be fully paid and
nonassessable and will confirm in all material respects to the
description thereof contained in the Prospectus.
(xviii) No 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 thereof by the Office and approval of the Company's
application on Form H-(e)1-S by the Office, the issuance of
the Stock Charter by the Office and as may be required under
the securities laws of various jurisdictions.
(xix) All contracts and other documents required to
be filed as exhibits to the Registration Statement or the
Conversion Application have been filed with the Commission
and/or the Office, as the case may be.
(xx) Deloitte & Touche LLP, which has audited the
consolidated financial statements of the Association at
September 30, 1996 and 1995 and for the years ended September
30, 1996, 1995 and 1994 included in the Prospectus, is an
independent public accountant with respect to the Company and
the Association within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public
Accountants and Title 12 of the Code of Federal Regulations,
Section 571.2(c)(3).
(xxi) For the past five years, the Company, the
Association and the Subsidiary have timely filed all required
federal, state and local franchise tax returns, and no
deficiency has been asserted with respect to such returns by
any taxing authorities, and the Company, the Association and
the Subsidiary have paid all taxes that have become due and,
to the best of their knowledge, have made adequate reserves
for known 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 financial condition of the Company, the Association and
the Subsidiary, taken as a whole.
(xxii) All of the loans represented as assets of the
Association on the most recent statement of financial
condition of the Association included in the Prospectus meet
or are exempt from all requirements of federal, state or local
law pertaining to lending, including without limitation truth
in lending (including the requirements of Regulation Z and 12
C.F.R. Part 226 and Section 563.99), real estate settlement
procedures, consumer credit protection, equal credit
opportunity and all disclosure laws applicable to such loans,
except for violations which, if
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 10
asserted, would not have a material adverse effect on the
Company, the Association and the Subsidiary, taken as a whole.
(xxiii) The records of account holders, depositors,
borrowers and other members of the Association delivered to
Trident by the Association or its agent for use during the
Conversion have been prepared or reviewed by the Association
and, to the best knowledge of the Company and the Association,
are reliable and accurate.
(xxiv) None of the Company, the Association, the
Subsidiary or the employees of the Company, the Association or
the Subsidiary, has made any payment of funds of the Company,
the Association or the Subsidiary prohibited by law, and no
funds of the Company, the Association or any Subsidiary have
been set aside to be used for any payment prohibited by law.
(xxv) To the best knowledge of the Company and the
Association, the Company, the Association and the Subsidiary
are in compliance with all laws, rules and regulations
relating to the discharge, storage, handling and disposal of
hazardous or toxic substances, pollutants or contaminants and
neither the Company nor the Association believes that the
Company, the Association or the Subsidiary are subject to
liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any
similar law, except for violations which, if asserted, would
not have a material adverse effect on the Company, the
Association and the Subsidiary, taken as a whole. There are no
actions, suits, regulatory investigations or other proceedings
pending or, to the best knowledge of the Company or the
Association, threatened against the Company, the Association
or the Subsidiary relating to the discharge, storage, handling
and disposal of hazardous or toxic substances, pollutants or
contaminants. To the best knowledge of the Company and the
Association, no disposal, release or discharge of hazardous or
toxic substances, pollutants or contaminants, including
petroleum and gas products, as any of such terms may be
defined under federal, state or local law, has been caused by
the Company, the Association or the Subsidiary or, to the best
knowledge of the Company or the Association, has occurred on,
in or at any of the facilities or properties of the Company,
the Association or the Subsidiary, except such disposal,
release or discharge which would not have a material adverse
effect on the Company, the Association and the Subsidiary,
taken as a whole.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 11
(b) Trident represents and warrants to the Company
and the Association that:
(i) Trident is registered as a broker-dealer with the
Commission and a member of the NASD, and is in good standing
with the Commission and the NASD.
(ii) Trident is validly existing as a corporation in
good standing 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
Association hereunder.
(iii) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary action
on the part of Trident, and this Agreement is a legal, valid
and binding obligation of Trident, enforceable in accordance
with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of
registered broker-dealers the accounts of whom may be
protected 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).
(iv) Each of Trident and its employees, and to
Trident's knowledge, its 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 the
jurisdictions listed in Exhibit A hereto and will remain
registered in such jurisdictions in which the Company is
relying on such registration for the sale of the Shares, until
the Conversion is consummated or terminated.
(v) 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
violate or conflict with the corporate charter or bylaws of
Trident or violate, conflict with or constitute a breach of,
or default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, any 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, injunction or order.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 12
(vi) All funds received by Trident to purchase the
Shares will be handled in accordance with Rule 15c2-4 under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(vii) There is not now pending or, to Trident's best
knowledge, threatened against Trident any action or proceeding
before the Commission, the 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 Association 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 Trident
hereunder shall terminate (a) forty-five (45) days after the Offerings close,
unless the Company and the Association, with the approval of the Office, are
permitted to extend such period of time, (b) upon consummation of the
Conversion, or (c) upon termination of the Conversion, whichever date shall
first occur.
In the event the Company is unable to sell a minimum of 2,847,500
shares of Common Stock (or such lesser amount as the Office may permit) within
the period herein provided, this Agreement shall terminate, and the Company and
the Association shall refund promptly to any persons who have subscribed for any
of the Shares, the full amount which it may have received from them, together
with accrued interest as provided in the Prospectus, and no party to this
Agreement shall have any obligation to the other party hereunder, except as set
forth in Sections 6, 8 and 9 hereof. Appropriate arrangements for placing the
funds received from subscriptions for Shares as described in the Prospectus will
be made prior to the commencement of the Subscription and Direct Community
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 conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on the Closing Date against
payment to the Company by any means authorized pursuant to the Prospectus, at
the offices of Breyer & Aguggia, Washington, D.C. or at such other place as
shall be agreed upon between the parties hereto. The date upon which Trident is
paid the compensation due hereunder is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the aggregate offering price of the Common Stock ordered
on or before twelve noon on the next business day following receipt or execution
of an order form by Trident to the Association for deposit in a segregated
account or (b) to solicit indications of interest in which event (i) Trident
will subsequently contact any potential subscriber indicating interest to
confirm
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 13
the interest and give instructions to execute and return an order form or to
receive authorization to execute the order form on the subscriber's behalf, (ii)
Trident will mail acknowledgements of receipt of orders to each subscriber
confirming interest on the third business day following such confirmation, (iii)
Trident will debit accounts of such subscribers on the third business day
("debit date") following receipt of the confirmation referred to in (i), and
(iv) Trident will forward completed order forms together with such funds to the
Association on or before twelve noon on the next business day following the
debit date for deposit in a segregated account. Trident acknowledges that if the
procedure in (b) is adopted, subscribers' funds are not required to be in their
accounts until the debit date.
In addition to the expenses specified in Section 6 hereof, Trident
shall receive the following compensation for its services hereunder:
(a) A commission equal to 1.35% of the aggregate dollar
amount of Common Stock sold in the Subscription
Offering and Community Offering to investors who
reside in the State of South Carolina and a
commission equal to 1.15% of the aggregate dollar
amount of Common Stock sold in the Subscription
Offering and Community Offering to investors residing
outside the State of South Carolina. No commissions
shall be payable on Shares purchased by the
Association's officers, directors, employees or their
"associates", as such term is defined in the Plan, or
employee benefit plans. Further, all commissions
shall be based on the amount of stock sold; however,
fees shall be capped at the midpoint of the estimated
valuation range as set forth on the cover page of the
Prospectus. In addition, in the event that the
Offerings are closed above the midpoint of the
Estimated Valuation Range, the above described fee
schedule will be applied on a pro rata basis as if
the Offerings had closed at the midpoint of the
Estimated Valuation Range. For stock sold by other
NASD member firms under selected dealer's agreements,
the commission shall not exceed a fee to be agreed
upon by Trident and the Company and the Association
to reflect market requirements at the time of the
stock allocation in a Syndicated Community Offering.
(b) Trident shall be reimbursed for reasonable allocable
expenses, including but not limited to travel,
communications, legal fees and expenses and postage,
incurred by it whether or not the Offerings are
successfully completed; provided, however, that
neither the Company nor the Association shall pay or
reimburse Trident for any of the foregoing expenses
accrued after Trident shall have notified the Company
or the Association of its election to terminate this
Agreement pursuant to Section 11 hereof or after such
time as the Company or the Association shall have
given notice in accordance with Section 12 hereof
that Trident is in breach
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 14
of this Agreement. Trident's reimbursable out of
pocket expenses will not exceed $10,000, and its
reimbursable legal fees will not exceed $35,000.
Trident will use its best efforts to ensure that the
expenses of its counsel are reasonable. Full payment
to defray Trident's reimbursable expenses 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) business days of receipt by
the Company of a written request from Trident for
reimbursement of its expenses. Trident acknowledges
receipt of $10,000 advance payment from the
Association which shall be credited against the total
reimbursement due Trident hereunder.
(c) Notwithstanding the limitations on reimbursement of
Trident for allocable expenses provided in the
immediately preceding paragraph (b), in the event
that a resolicitation or other event causes the
Offerings to be extended beyond their original
expiration date, Trident shall be reimbursed for its
reasonable allocable expenses incurred during such
extended period, provided that the allowance for
allocable expenses provided for in the immediately
preceding paragraph (b) above have been exhausted and
subject to the following: Such reimbursement shall be
in amount equal to the product obtained by dividing
$10,000 (original out-of-pocket 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 multiplying such
product by the number of days of the extension (that
number of days from the date of the supplemental
prospectus used in the extended Subscription Offering
to the closing of the extension of the Subscription
Offering described in such supplemental prospectus).
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 Association
shall also pay all expenses of the Conversion incurred by them or on their prior
approval including but not limited to their attorneys' fees, NASD filing fees,
and attorneys' fees relating to any required state securities laws research and
filings, telephone charges, air freight, rental equipment, supplies, transfer
agent charges, fees relating to auditing and accounting and costs of printing
all documents necessary in connection with the Conversion.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 15
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
assisting the Company on a best efforts basis in offering a minimum of 2,847,500
and a maximum of 3,852,500 Shares, with the possibility of offering up to
4,430,375 Shares (except as the Office may permit to be decreased or increased)
in the Subscription and Direct Community Offering, and if necessary, the
Syndicated Community Offering. The Shares are to be offered to the public at the
price set forth on the cover page of the Prospectus and the first page of this
Agreement.
5. Further Agreements. The Company and the Association 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 any
lawful manner in connection with the offer and sale of the Shares.
(b) The Company will notify Trident or its counsel immediately
upon discovery, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement becomes
effective or any supplement to the Prospectus has been filed, (ii) of
the issuance by the Commission of any stop order relating to the
Registration Statement or 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 staff of the Commission relating to the Registration
Statement. If the Commission enters a stop order relating to the
Registration Statement at any time, the Company will make every
reasonable effort to obtain the lifting of such order at the earliest
possible moment.
(c) During the time when the Prospectus is required to be
delivered under the Act, the Company will comply so far as it is able
with all requirements imposed upon it by the Act, as now in effect and
hereafter amended, and by the SEC 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
required to be delivered in connection with the offer and sale of the
Shares any event relating to or affecting the Company, the Association
and the Subsidiary, taken as a whole, shall occur as a result of which
it is necessary, in the opinion of counsel for the Company and the
Association after consultation with counsel for Trident, to amend or
supplement the Prospectus in order to make the Prospectus not false or
misleading in light of the circumstances existing at the time it is
delivered to a purchaser of the Shares, the Company 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
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 16
satisfactory to counsel for Trident) which shall amend or supplement
the Prospectus so that, as amended or supplemented, the Prospectus
shall not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the
Prospectus is delivered to a purchaser of the Shares, not misleading.
The Company will not file or use any amendment or supplement to the
Registration Statement or the Prospectus of which Trident has not first
been furnished a copy or to which Trident shall reasonably object after
having been furnished such copy. For the purposes of this subsection
the Company and the Association shall furnish such information with
respect to themselves as Trident from time to time may reasonably
request.
(d) The Company has taken or will take all reasonably
necessary action as may be required to qualify or register the Shares
for offer and sale by the Company under the securities or blue sky laws
of such jurisdictions as Trident and either the Company or its counsel
may 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 Association sufficient to establish a liquidation account upon
consummation of the Conversion for the benefit of eligible account
holders and supplemental eligible account holders in accordance with
the requirements of the Office.
(f) The Company will file a registration statement for the
Common Stock under Section 12(g) of the Exchange Act prior to
completion of the stock offering pursuant to the Plan and shall request
that such registration statement be effective upon completion of the
Conversion. The Company shall maintain the effectiveness of such
registration for a minimum period of three years or for such shorter
period as may be required by applicable law.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 of the regulations
promulgated under the Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following
the effective date (as defined in said Rule 158) of the Registration
Statement.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 17
(h) For a period of three (3) years from the date of this
Agreement (unless the Common Stock shall have been deregistered under
the Exchange Act), the Company will furnish to Trident, as soon as
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 Exchange Act or mailed to shareholders, and (ii)
from time to time, such other public information concerning the Company
as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of
the Shares consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and
every condition set forth in Section 7 hereof has been satisfied,
unless such condition is waived by Trident.
(k) The Company shall advise Trident, if necessary, as to the
allocation of deposits, in the case of eligible account holders and
supplemental eligible account holders, and votes, in the case of other
members, and of the Shares in the event of an oversubscription and
shall provide Trident final instructions as to the allocation of the
Shares ("Allocation Instructions") in such event and such information
shall be accurate and reliable. Trident shall be entitled to rely on
such instructions and shall have no liability in respect of its
reliance thereon, including without limitation, no liability for or
related to any denial or grant of a subscription in whole or in part.
(l) The Company and the Association will take such actions and
furnish such information as are reasonably requested by Trident in
order for Trident to ensure compliance with the NASD's "Interpretation
Relating to Free-Riding and Withholding."
(m) At the Closing Date, the Company and the Association will
have completed the conditions precedent to, and shall have conducted
the Conversion in all material respects in accordance with, the Plan,
the OTS Regulations and all other applicable laws, regulations,
published decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed by the
Office.
6. Payment of Expenses. Whether or not the Conversion is consummated,
the Company and the Association shall pay or reimburse Trident for (a) all
filing fees paid or incurred by Trident in connection with all filings with the
NASD with respect to the Subscription and Community Offerings and, (b) in
addition, if the Company is unable to sell a minimum of 2,847,500 shares of
Common Stock or such lesser amount as the Office may permit or the Conversion is
otherwise terminated, the Company and the Association shall reimburse Trident
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 18
for allocable expenses incurred by Trident relating to the offering of the
Shares as provided in Section 3 hereof; provided, however, that neither the
Company nor the Association shall pay or reimburse Trident for any of the
foregoing expenses accrued after Trident shall have notified the Company or the
Association of its election to terminate this Agreement pursuant to Section 11
hereof or after such time as the Company or the Association shall have given
notice in accordance with Section 12 hereof that Trident is in breach of this
Agreement.
7. Conditions of Trident's Obligations. Except as may be waived 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 performance by the Company
and the Association of their obligations hereunder and to the following
conditions:
(a) At the Closing Date, Trident shall receive the favorable
opinions of Breyer & Aguggia, special counsel for the Company and the
Association, or Odom, Terry, Cantrell & Hammett, local counsel to the
Association ("Local Counsel"), dated the Closing Date, addressed to
Trident, in form and substance reasonably satisfactory to counsel for
Trident and to the effect that:
(i) The Company has been duly incorporated, and each
of the Company and the Subsidiary is a corporation validly
existing in good standing under the laws of its jurisdiction
of incorporation, and the Association is validly existing as a
mutual savings and loan association under the laws of the
United States, each with full power and authority to own its
properties and conduct its business as described in the
Prospectus;
(ii) each of the Company, the Association and the
Subsidiary has been qualified to do business and, to such
counsel's knowledge, is in good standing as a foreign
corporation in each jurisdiction where the ownership or
leasing of its properties or the conduct of its business
requires such qualification or, if not so qualified and in
good standing, failure to so qualify would not have any
material adverse effect on the Company, the Association and
the Subsidiary, taken as a whole;
(iii) the Association is a member of the Federal Home
Loan Bank of Atlanta, and the deposit accounts of the Bank are
insured by the SAIF up to the applicable legal limits;
(iv) to the knowledge of such counsel, the activities
of each of the Association and the Subsidiary as such
activities are described in the Prospectus are permitted under
federal and Delaware law to subsidiaries of a Delaware
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 19
business corporation and the Association does not have any
subsidiaries other than the Subsidiary;
(v) the Plan complies with and, to the knowledge of
such counsel, the Conversion has been effected in all material
respects in accordance with the HOLA and the OTS Regulations;
to such counsel's knowledge, all of the terms, conditions,
requirements and provisions with respect to the Plan and the
Conversion imposed by the Office, except with respect to the
filing or submission of certain required post-Conversion
reports or other materials by the Company or the Association,
have been complied with by the Company and the Association in
all material respects; and, to the knowledge of such counsel,
no person has sought to obtain regulatory or judicial review
of the final action of the Office in approving the Plan;
(vi) the Company has authorized Common Stock as set
forth in the Registration Statement and the Prospectus, and
the description of the Common Stock in the Registration
Statement and the Prospectus is accurate in all material
respects;
(vii) the issuance and sale of the Shares have been
duly authorized by all necessary corporate action on the part
of the Company; 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, except as disclosed in the Prospectus, free of preemptive
rights, and to the knowledge of such counsel, good title
thereto shall be transferred by the Company free and clear of
all claims, encumbrances, security interests and liens against
the Company;
(viii) the certificates for the Shares comply in all
material respects with the applicable requirements of Delaware
law;
(ix) the issuance and sale of the capital stock of
the Association to the Company have been duly authorized by
all necessary corporate action of the Association and the
Company and have received the approval of the Office, and such
capital stock, upon receipt of payment and issuance in
accordance with the terms of the Plan, will be validly issued,
fully paid and nonassessable and owned of record by the
Company;
(x) subject to the satisfaction of the conditions to
the Office's approval of the Conversion Application, no
further approval, authorization, consent or other order of any
public board or body is required in connection with the
execution and delivery of this Agreement, the issuance of the
Shares and the
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Trident Securities, Inc.
Sales Agency Agreement
Page 20
consummation of the Conversion, except as may be required
under the "blue sky" or state securities laws of various
jurisdictions as to which counsel need express no opinion;
(xi) the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the
part of each of the Company and the Association; and this
Agreement is a legal, valid and binding obligation of each of
the Company and the Association, enforceable in accordance
with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or similar laws relating to or
affecting the enforcement of creditors' rights generally or
the rights of creditors of depository institutions whose
accounts are insured by the FDIC or savings and loan holding
companies the accounts of whose subsidiary are insured by the
FDIC or by general equity principles, regardless of whether
such enforceability is considered in a proceeding in equity or
at law, and except to the extent that the provisions of
Sections 8 and 9 hereof may be unenforceable as against public
policy or pursuant to Section 23A, as to which no opinion need
be rendered);
(xii) to the knowledge of such counsel, there are no
material legal or governmental proceedings pending or
threatened against or involving the assets of the Company, the
Association or the Subsidiary (provided that for this purpose
such counsel need not regard any litigation or governmental
procedure to be "threatened" unless the potential litigant or
government authority has manifested to the management of the
Company, the Association or the Subsidiary, or to such
counsel, a present intention to initiate such litigation or
proceeding);
(xiii) to the knowledge of such counsel, there are no
statutes or regulations required to be described or disclosed
in the Prospectus which are not so described or disclosed;
(xiv) the statements in the Prospectus under the
captions "Dividend Policy," "Regulation," "Taxation,"
"Restrictions on Acquisition of the Holding Company,
"Registration Requirements" and "Description of Capital Stock
of the Holding Company" and in response to Items 7(d)(1), 7(g)
and 7(i) of Form PS of the Office's conversion regulations,
insofar as they are, or refer to, statements of law or legal
conclusions, have been prepared or reviewed by such counsel
and are correct in all material respects;
(xv) the Form AC has been approved by the Office, and
the Prospectus and the Proxy Statement have been authorized
for use by the Office; the
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Trident Securities, Inc.
Sales Agency Agreement
Page 21
Registration Statement and any post-effective amendment
thereto has been declared effective by the Commission; and no
proceedings are pending by or before the Commission or the
Office seeking to revoke or rescind the orders declaring the
Registration Statement effective or approving the Conversion
Application or, to the knowledge of such counsel, are
contemplated or threatened (provided that for this purpose
such counsel need not regard any litigation or governmental
procedure to be "threatened" unless the potential litigant or
government authority has manifested to the management of the
Company or the Association, or to such counsel, a present
intention to initiate such litigation or proceeding); and the
Office has issued its letter of approval in connection with
the Application H-(e)1-S under the savings and loan holding
company provisions of the HOLA and the regulations thereunder;
(xvi) the execution and delivery by the Company and
the Association of, and performance by the Company and the
Association of their obligations under, this Agreement, do not
(i) violate the certificate of incorporation, charter or
bylaws of the Company, the Association (in either mutual or
stock form) or the Subsidiary, (ii) to the 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 default) under, give rise to any right of
termination, cancellation or acceleration contained in, or
result in the creation or imposition of any material lien,
charge or other encumbrance upon any of the properties or
assets of the Company, the Association or the Subsidiary
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, the
Association or the Subsidiary is a party or (iii) violate the
HOLA or the OTS Regulations or, to such counsel's knowledge,
any existing material obligation of the Company, the
Association or the Subsidiary under any court order, writ,
injunction or decree that specifically name the Company, the
Association or the Subsidiary and that are specifically
directed to any of them or their property (subject to the
satisfaction of certain conditions imposed by the Office in
connection with its approval of the Conversion Application);
(xvii) The Conversion Application, the Registration
Statement, the Prospectus and the Proxy Statement comply as to
form in all material respects with the requirements of the Act
and the SEC Regulations, the HOLA and the OTS Regulations
(except as to financial statements, notes to financial
statements, financial tables and other financial and
statistical data and the appraisal included therein, as to
which no opinion need be expressed); to the knowledge of such
counsel all documents and exhibits required to be filed with
the Conversion Application and the Registration Statement have
been so filed; the description in the Conversion Application
and the Registration Statement of such documents and
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Trident Securities, Inc.
Sales Agency Agreement
Page 22
exhibits is accurate in all material respects; and to the
knowledge of such counsel, there are no contracts or other
documents of a character required to be described in the
Conversion Application, the Registration Statement or the
Prospectus which have not been described therein;
(xviii) to the knowledge of such counsel, the
Association and the Subsidiary have obtained all licenses,
permits and other governmental authorizations currently
required for the conduct of their business as such business is
described in the Prospectus, all such licenses, permits and
other governmental authorizations are in full force and effect
and the Association and the Subsidiary are in all material
respects complying therewith, except where the failure to hold
such licenses, permits or governmental authorizations or the
failure to hold such licenses, permits or governmental
authorizations or the failure to so comply would not have a
material adverse effect on the Company, the Association and
the Subsidiary, taken as a whole; and
(xix) to the knowledge of such counsel, there has
been no material breach of any provision of the Company's, the
Association's or the Subsidiary's certificate of
incorporation, charter or bylaws or breach or default (or the
occurrence of any event which, with notice or lapse of time or
both, would constitute a default) under any agreement,
contract, indenture, debenture, bond, note, instrument or
obligation to which the Company, the Association or the
Subsidiary is a party or by which any of them or any of their
respective assets or properties may be bound, or any
governmental license or permit, or a violation of any
enforceable published law, administrative regulation or order,
or court order, writ, injunction or decree which breach,
default, encumbrance or violation would have a material
adverse effect on the condition (financial or otherwise),
operations, business, assets or properties of the Company, the
Association and the Subsidiary, taken as a whole;
In rendering such opinions, such counsel may rely as to
matters of fact on certificates of officers and directors of the
Company, the Association and the Subsidiary and certificates of public
officials delivered pursuant hereto. Such counsel may assume that any
agreement is the valid and binding obligation of any parties to such
agreement other than the Company and the Association. Such opinions may
be governed by, and interpreted in accordance with, the Legal Opinion
Accord (the "Accord") of the ABA Section of Business Law (1991), and,
as a consequence, references in such opinions to such counsel's
"knowledge" may be limited to "actual knowledge" as defined in the
Accord (or knowledge based on certificates). Such opinions may be
limited to present statutes, regulations and judicial interpretations
and to facts as they presently exist; in rendering such opinions, such
counsel need assume no obligation to revise or supplement them should
the present laws be changed by legislative or regulatory action,
judicial
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 23
decision or otherwise; and such counsel need express no view, opinion
or belief with respect to whether any proposed or pending legislation,
if enacted, or any regulations or any policy statements issued by any
regulatory agency, whether or not promulgated pursuant to any such
legislation, would affect the validity of the execution and delivery by
the Company and the Association of this Agreement or the issuance of
the Shares.
(b) At the Closing Date, Trident shall receive the letter of
Breyer & Aguggia, special counsel for the Company and the Association,
dated the Closing Date, addressed to Trident, in form and substance
reasonably satisfactory to counsel for Trident and to the effect that
no facts have come to such counsel's attention that would lead it to
believe that the Registration Statement, as amended (except as to
information in respect of Trident contained therein and except as to
the appraisal, financial statements, notes to financial statements,
financial tables and other financial and statistical data contained
therein, as to which such counsel need express no comment), at the time
it became effective contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading, or that
the Prospectus, as amended (except as to information in respect of
Trident contained therein and except as to the appraisal, financial
statements, notes to financial statements, financial tables and other
financial and statistical data contained therein as to which such
counsel need express no comment), as of its date and at the Closing
Date, contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
(in making this statement such counsel may state that it has not
undertaken to verify independently the information 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 Board of Directors of
the Company and the Association regarding the authorization of this
Agreement and the transactions contemplated hereby.
(d) At the Closing Date, Trident shall receive such opinion of
Housley Kantarian & Bronstein, P.C., counsel for Trident, with respect
to such matters as Trident may reasonably request, and such counsel
shall have received such documents, papers and records as they may
request for the purpose of enabling them to pass upon such matters.
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Trident Securities, Inc.
Sales Agency Agreement
Page 24
(e) Prior to and at the Closing Date, in the reasonable
opinion of Trident, (i) there shall have been no material change in the
financial condition, business or results of operations of the Company,
the Association and the Subsidiary, taken as a whole, since 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 transaction
entered into by the Company, the Association or the Subsidiary after
the latest date as of which the financial condition of the Company, the
Association or the Subsidiary is set forth in the Prospectus other than
transactions referred to or contemplated therein, transactions in the
ordinary course of business, and transactions which are not material to
the Company, the Association and the Subsidiary, taken as a whole;
(iii) none of the Company, the Association or the Subsidiary shall have
received from the Office or Commission any direction (oral or written)
to make any change in the method of conducting their respective
businesses which is material to the business of the Company, the
Association and the Subsidiary, taken as a whole, 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, the Association or the Subsidiary or affecting any of their
respective assets, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the business, operations,
financial condition or income of the Company, the Association and the
Subsidiary, taken as a whole; and (v) the Shares shall have been
qualified or registered for offering and sale by the Company under the
securities or blue sky laws of such jurisdictions as Trident and the
Company shall have agreed upon.
(f) At the Closing Date, Trident shall receive a certificate
of the principal executive officer and the principal financial officer
of each of the Company and the Association, dated the Closing Date, to
the effect that: (i) they have examined the Prospectus and, at the time
the Prospectus became authorized by the Commission and the Office for
use, the Prospectus did not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading with respect to the Company, the Association or
the Subsidiary; (ii) since the date the Prospectus became authorized by
the Commission and the Office for use, no event has occurred which
should have been set forth in an amendment or supplement to the
Prospectus which has not been so set forth, including specifically, but
without limitation, any material change in the business, financial
condition or results of operations of the Company, the Association or
the Subsidiary, and the conditions set forth in clauses (ii) through
(iv) inclusive of subsection (e) of this Section 7 have been satisfied;
(iii) to the best knowledge of such officers, no order has been issued
by the Commission or the Office to suspend the Subscription Offering or
the Community Offering or the effectiveness of the Registration
Statement, and no action for such purposes has been instituted or
threatened by the Commission or the Office; (iv) to the best knowledge
of such officers, no person has sought to obtain review of the final
actions of the Office approving the
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Trident Securities, Inc.
Sales Agency Agreement
Page 25
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.
(g) At the Closing Date, Trident shall receive, among other
documents, (i) copies of the letters from the Office authorizing the
use of the Prospectus and the Proxy Statement, (ii) a copy of the order
of the Commission declaring the Registration Statement effective; (iii)
copies of the letters from the Office evidencing the corporate
existence of the Association; (iv) a copy of the letter from the
appropriate Delaware authority evidencing the incorporation (and, if
generally available from such authority, good standing) of the Company;
(v) a copy of the Company's certificate of incorporation certified by
the appropriate Delaware governmental authority; and, (vi) if
available, a copy of the letter from the Office approving the
Association's Stock Charter.
(h) As soon as available after the Closing Date, Trident shall
receive a certified copy of the Association's Stock Charter executed by
the Office.
(i) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Deloitte & Touche LLP,
independent certified public accountants, addressed to Trident and the
Company, in substance and form satisfactory to counsel for Trident,
with respect to the financial statements and certain financial
information contained in the Prospectus.
(j) At the Closing Date, Trident shall receive a letter in
form and substance satisfactory to Trident from Deloitte & Touche LLP,
independent certified public accountants, dated the Closing Date and
addressed to Trident and the Company, 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) days prior to
the Closing Date.
(k) At the Closing Date, the Company and the Association shall
have completed the conditions precedent to, and shall have conducted
the Conversion in all material respects in accordance with, the Plan
and the OTS Regulations and all other applicable laws, regulations,
decisions and orders, including all terms, conditions, requirements and
provisions precedent to the Conversion and the approval of the
Conversion Application imposed upon them by the Office.
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, satisfactory to Trident. Any certificates signed by an
officer or director of the Company or the Association prepared for Trident's
reliance and delivered to Trident or to counsel for Trident shall be deemed a
representation and warranty by the Company and the Association to Trident as to
the statements
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 26
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 and the Association
shall reimburse Trident for its expenses as provided in Sections 3(b) and 6
hereof.
8. Indemnification.
(a) The Company and the Association jointly and severally
agree 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 Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage and expense
whatsoever 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 or based upon (A) any misrepresentation by the Company or the
Association in this Agreement or any breach of warranty by the Company
or the Association 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 or the Prospectus or (ii) any
application (including the Form AC and the Form H-(e)1-S) or other
document or communication (in this Section 8 collectively called
"Application") prepared or executed by or on behalf of the Company, the
Association or the Subsidiary or based upon information furnished by or
on behalf of the Company, the Association or the Subsidiary, whether or
not filed in any jurisdiction, to effect the Conversion or qualify the
Shares under the securities laws thereof or filed with the Office or
Commission, unless such statement or omission was made in reliance upon
and in conformity with information furnished to the Company, the
Association or the Subsidiary with respect to Trident by or on behalf
of Trident expressly for use in the Registration Statement, the
Prospectus or any amendment or supplement thereof or in any
Application, as the case may be, or (B) the participation by Trident in
the Conversion, provided, however, that this indemnification agreement
will not apply to any loss, liability, claim, damage or expense found
in a final judgment by a court of competent jurisdiction to have
resulted primarily from the bad faith, willful misconduct or gross
negligence of any party who may otherwise be entitled to
indemnification pursuant to this Section 8(a). This indemnity shall be
in addition to any liability the Company and the Association may have
to Trident otherwise.
(b) The Company shall indemnify and hold Trident harmless for
any liability whatsoever arising out of (i) the Allocation Instructions
or (ii) any records of account holders, depositors, borrowers and other
members of the Association delivered to Trident by the Association or
its agents for use during the Conversion. This indemnity shall be
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 27
in addition to any liability the Company and the Association may have
to Trident otherwise.
(c) Trident agrees to indemnify and hold harmless the Company,
the Association and the Subsidiary, their officers, directors and
employees and each person, if any, who controls the Company, the
Association and the Subsidiary within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and the Association to Trident,
but only with respect to (A) statements or omissions, if any, made in
the Prospectus or any amendment or supplement thereof, in any
Application or to a purchaser of the Shares in reliance upon, and in
conformity with, information furnished to the Company, the Association
or the Subsidiary with respect to Trident by or on behalf of Trident
expressly for use in the Prospectus or in any Application; (B) any
misrepresentation by Trident in Section 2(b) of this Agreement; or (C)
any liability of the Company or the Association which is found in a
final judgment by a court of competent jurisdiction (not subject to
further appeal) to have principally and directly resulted from gross
negligence or willful misconduct of Trident, provided, however, that
this indemnification agreement will not apply to any loss, liability,
claim, damage or expense found in a final judgment by a court of
competent jurisdiction to have resulted primarily from the bad faith,
willful misconduct or gross negligence of any party who may otherwise
be entitled to indemnification pursuant to this Section 8(c).
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, 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 will 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 will be entitled to participate therein and, to the
extent that it may wish, jointly with the other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will 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 reasonable 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
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 28
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 reasonable fees and expenses of such
counsel. An indemnifying party against whom indemnity may be sought
shall not be liable to indemnify an indemnified party under this
Section 8 if any settlement of any such action is effected without such
indemnifying party's consent. To the extent required by law, this
Section 8 is subject to and limited by the provisions of Section 23A.
9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 8 above is for any reason held to be unavailable to Trident, the Company
and/or the Association other than in accordance with its terms, the Company or
the Association 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 Association and Trident (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Association, 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 or the Association, on the one hand, and
Trident, on the other hand, 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 Association, on the one hand, and Trident on the other,
shall be deemed to be in the same proportions as the total net proceeds from the
Conversion received by the Company and the Association bear to the total fees
and expenses received by Trident under this Agreement. The relative fault of the
Company or the Association, 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 or the
Association or by Trident and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Association 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 the 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
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 29
the amount by which fees owed Trident pursuant to this Agreement exceeds the
amount of any damages which Trident has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. To the extent required by law, this
Section 8 is subject to and limited by the provisions of Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the Company and the Association and Trident and the
representations and warranties of the Company and the Association and of 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 or the Association
or any controlling person or indemnified party referred to in Section 8 hereof,
and shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative of Trident, the Company,
the Association and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
11. Termination. Trident may terminate this Agreement by giving the
notice indicated below in this Section 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 reasonable opinion,
impracticable to proceed with the offering of the Shares; or if trading
on the New York Stock Exchange shall have 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 South Carolina or
federal authority which has material effect on the Association or the
Conversion; 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, financial
condition or business of the Company, or if the Association shall have
sustained a material or substantial loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious
act, whether or not said loss shall have been insured.
(b) If Trident elects to terminate this Agreement as provided
in this Section, the Company and the Association shall be notified
promptly by Trident by telephone or telegram, confirmed by letter.
(c) If this Agreement is terminated by Trident for any of the
reasons set forth in subsection (a) above, and to fulfill its
obligations, if any, pursuant to Sections 3, 6, 8(a), 8(b) and 9 of
this Agreement and upon demand, the Company and the Association shall
pay Trident the full amount so owing thereunder.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 30
(d) The Association 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 and the Association shall be
required to fulfill their obligations pursuant to Sections 3(b), 3(c),
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 faxed 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 Housley Kantarian & Bronstein, P.C., 1220 19th
Street, N.W., Washington, DC 20036, Attention: Gary R. Bronstein, Esquire) and
if sent to the Company, the Association or the Subsidiary, shall be mailed,
delivered or telegraphed and confirmed to FirstSpartan Financial Corp., First
Federal Savings and Loan Association of Spartanburg, 380 E. Main Street,
Spartanburg, South Carolina 29302, Attention: Mr. Billy L. Painter, President
and Chief Executive Officer (with a copy to Breyer & Aguggia, 1301 I Street,
N.W., Suite 470 East, Washington, D.C. 20005, Attention: Paul M. Aguggia,
Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, Trident, the Company, the Association 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. Construction. Unless governed by preemptive federal law, this
Agreement shall be governed by and construed in accordance with the substantive
laws of South Carolina.
15. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
FIRSTSPARTAN FINANCIAL CORP. FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF SPARTANBURG
By:___________________ By:_______________________
Billy L. Painter Billy L. Painter
President and Chief President and Chief
Executive Officer Executive Officer
Date:___________________ Date:_____________________
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:_____________________
Date:___________________
<PAGE>
Exhibit A
Trident Securities, Inc. is a registered selling agent in the jurisdictions
listed below:
<TABLE>
<S> <C>
Alabama Missouri
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Securities, Inc. only, no agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
</TABLE>
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
listed below:
Alaska
Hawaii
Montana
South Dakota
Utah
<PAGE>
EXHIBIT 1.2
ENGAGEMENT LETTER BETWEEN FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF SPARTANBURG AND TRIDENT SECURITIES, INC.
<PAGE>
TRIDENT SECURITIES, INC.
4601 SIX FORKS ROAD, SUITE 400
RALEIGH, NORTH CAROLINA 27609
TELEPHONE (919) 781-6900
FACSIMILE (919) 787-1870
October 31, 1996
Board of Directors
First Federal Savings and Loan
Association of Spartanburg
380 East Main Street
Spartanburg, South Carolina 29304
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and First Federal Savings and Loan Association of
Spartanburg (the "Association") concerning our investment banking services in
connection with the conversion of the Association from a mutual to a capital
stock form of organization.
Trident is prepared to assist the Association in connection with the offering of
its shares of common stock during the subscription offering and community
offering as such terms are defined in the Association's Plan of Conversion (the
"Plan"). The specific terms of the services contemplated hereunder shall be set
forth in a definitive sales agency agreement (the "Agreement") between Trident
and the Association to be executed on the date the prospectus is declared
effective by the appropriate regulatory authorities. The price of the shares
during the subscription offering and community offering will be the price
established by the Association's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident and the Association.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the
Association in the sale of its common stock during the subscription offering and
community offering. Additionally, Trident may enter into agreements with other
National Association of Securities Dealers, Inc., ("NASD") member firms to act
as selected dealers, assisting in the sale of the common stock. Trident and the
Association will determine the selected dealers to assist the Association during
the community offering. At the appropriate time, Trident in conjunction with its
counsel, will conduct an examination of the relevant documents and records of
the Association as Trident deems necessary and appropriate. The Association will
make all documents, records and other information deemed necessary by Trident or
its counsel available to them upon request.
<PAGE>
Board of Directors
October 31, 1996
Page 2
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Association:
1. A commission equal to 1.35% of the aggregate dollar amount of
capital stock sold to investors who reside in the state
of South Carolina and a commission equal to 1.15% on sales to
investors residing outside the State of South Carolina. No
commissions shall be payable on shares purchased by officers,
directors, employees or their associates or employee benefit
plans. Further, all commissions shall be based on the amount
of stock sold; however, fees shall be capped at the midpoint
of the estimated valuation range as set forth on the cover
page of the prospectus first used in connection with the
subscription and community offering. In addition, in the
event that the offering is closed above the midpoint of
the appraised value, the above described fee schedule will
be applied on a pro rata basis as if the offering had
closed at the midpoint.
2. For stock sold by other NASD member firms under selected
dealer's agreements, the commission shall not exceed a fee to
be set by the Association to reflect market requirements at
the time of the stock allocation in a Syndicated Community
Offering.
3. The foregoing fees and commissions are to be payable to
Trident at closing as defined in the Agreement to be entered
into between the Association and Trident.
4. Trident shall be reimbursed for allocable expenses incurred by
them, including legal fees, whether or not the Agreement is
consummated. Trident's out-of-pocket expenses will not exceed
$10,000 and its legal fees will not exceed $35,000. Trident
will use its best efforts to ensure that the expenses of its
counsel are reasonable. The Association will forward to
Trident a check in the amount of $10,000 as an advance payment
to defray the allocable expenses of Trident.
It further is understood that the Association will pay all other expenses of the
conversion including but not limited to its attorneys' fees (including
out-of-pocket expenses), NASD filing fees, and filing and registration fees and
fees of either Trident's attorneys or the attorneys relating to any required
state securities law filings, telephone charges, air freight, rental equipment,
supplies, transfer agent charges, fees relating to auditing and accounting and
costs of printing all documents necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except as
contemplated
<PAGE>
Board of Directors
October 31, 1996
Page 3
by this engagement letter with Trident, the Association has no financial or
management consulting contracts outstanding with any other person; (e) the
Association has not granted Trident a right of first refusal with respect to the
underwriting of any future offering of the Association stock; and (f) there has
been no intermediary between Trident and the Association in connection with the
public offering of the Association's shares, and no person is being compensated
in any manner for providing such service.
The Association agrees to indemnify and hold harmless Trident and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense thereof
(collectively, "Losses"), to which they may become subject under the securities
laws or under the common law, that arise out of or are based upon the conversion
or the engagement hereunder of Trident provided, however, that the Association
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (i) arises out of or is based upon any untrue
statement of a material fact or the omission of a material fact required to be
stated therein or necessary to make not misleading any statements contained in
any prospectus, or any amendment or supplement thereto, made in reliance on and
in conformity with information forwarded to the Association by Trident expressly
for use therein, or (ii) is attributable to the gross negligence, willful
misconduct or bad faith of Trident. If the foregoing indemnification is
unavailable for any reason, the Association agrees to contribute to such Losses
in the proportion that its financial interest in the conversion bears to that of
the indemnified parties. If the Agreement is entered into with respect to the
common stock to be issued in the conversion, the Agreement will provide for
indemnification, which will be in addition to any rights that Trident or any
other indemnified party may have at common law or otherwise. The indemnification
provision of this paragraph will be superseded by the indemnification provisions
of the Agreement entered into by the Association and Trident.
It is understood that if Trident's engagement hereunder is terminated prior to
consummation of the subscription and community offering or the subject
conversion is terminated for any reason, no fees shall be owed to Trident
hereunder. This letter, therefore, is merely a statement of intent and is not a
binding legal agreement except as to paragraph (4) above with regard to the
obligation to reimburse Trident for allocable expenses to be incurred prior to
the execution of the Agreement and the indemnity described in the preceding
paragraph. While Trident and the Association agree in principle to the contents
hereof and propose to proceed in good faith to work out the arrangements with
respect to the proposed offering, any legal obligations between Trident and the
Association shall be only as set forth in a duly executed Agreement. Such
Agreement shall be in form and content satisfactory to Trident and the
Association, as well as their counsel, and Trident's obligations thereunder
shall be subject to, among other things, there being in Trident's opinion no
material adverse change in the condition or obligations of the Association or no
market conditions which might render the sale of the shares by the Association
hereby contemplated inadvisable.
<PAGE>
Board of Directors
October 31, 1996
Page 4
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter. Trident acknowledges receipt of
the advance payment of $10,000.
Yours very truly,
TRIDENT
SECURITIES, INC.
By: /s/ Timothy E. Lavelle
-------------------------
Timothy E. Lavelle
Managing Director
RLB/cs
10-1-3
Agreed and accepted to this 31 day of January , 1997
------ ----------------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
By: /s/ Bill L. Painter
--------------------
Bill L. Painter
President
<PAGE>
EXHIBIT 8.1
FEDERAL TAX OPINION OF BREYER & AGUGGIA
<PAGE>
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Telephone (202) 737-7900
BREYER & AGUGGIA Facsimile (202) 737-7979
- --------------------------------------------------------------------------------
ATTORNEYS AT LAW
March 31, 1997
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
380 E. Main Street
Spartanburg, South Carolina 29302
Re: Certain Federal Income Tax Consequences Relating to
Proposed Holding Company Conversion of First Federal
Savings and Loan Association of Spartanburg
Gentlemen and Ladies:
In accordance with your request, set forth herein is the opinion of
this firm relating to certain federal income tax consequences of (i) the
proposed conversion of First Federal Savings and Loan Association of Spartanburg
(the "Association") from a federally-chartered mutual savings and loan
association to a federally-chartered stock savings and loan association (the
"Converted Association") (the "Stock Conversion") and (ii) the concurrent
acquisition of 100% of the outstanding capital stock of the Converted
Association by a parent holding company formed at the direction of the Board of
Directors of the Association and to be known as FirstSpartan Financial Corp.
(the "Holding Company").
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including but
not limited to, the Plan of Conversion as adopted by the Association's Board of
Directors on February 3, 1997 (the "Plan"); the federal mutual charter and
bylaws of the Association; the certificate of incorporation and bylaws of
Holding Company; the Affidavit of Representations dated March 28, 1997 provided
to us by the Association and the Holding Company (the "Affidavit"), and the
Prospectus (the "Prospectus") included in the Registration Statement on Form S-1
filed with the Securities and Exchange Commission ("SEC") on March 7, 1997 (the
"Registration Statement"). In such examination, we have assumed, and have not
independently verified, the genuineness of all signatures on original documents
where due execution and delivery are requirements to the effectiveness thereof.
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 2
Terms used but not defined herein, whether capitalized or not, shall have the
same meaning as defined in the Plan.
BACKGROUND
Based solely upon our review of such documents, and upon such
information as the Association has provided to us (which we have not attempted
to verify in any respect), and in reliance upon such documents and information,
we set forth herein a general summary of the relevant facts and proposed
transactions, qualified in its entirety by reference to the documents cited
above.
The Association is a federally-chartered mutual savings and loan
association which is in the process of converting to a federally-chartered stock
savings and loan association. The Association was initially organized in 1935.
The Association is also a member of the Federal Home Loan Bank System and its
deposits are federally insured under the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation. The Association operates
out of its main office in Spartanburg, South Carolina and branch offices in
Spartanburg and neighboring communities.
The Association is primarily engaged in the business of attracting
deposits from the general public and originating permanent loans secured by
first mortgages on one- to four-family residential properties. At December 31,
1996, the Association had total assets of $375.5 million, deposits of $324
million, and total equity of $44.8 million.
As a federally-chartered mutual savings and loan association, the
Association has no authorized capital stock. Instead, the Association, in mutual
form, has a unique equity structure. A savings depositor of the Association is
entitled to payment of interest on his account balance as declared and paid by
the Association, but has no right to a distribution of any earnings of the
Association except for interest paid on his deposit. Rather, such earnings
become retained earnings of the Association.
However, a savings depositor does have a right to share pro rata, with
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Association is ever liquidated. Savings
depositors and certain borrowers are members of the Association and thereby have
voting rights in the Association. Each savings depositor is entitled to cast
votes in proportion to the size of their account balances or fraction thereof
held in a withdrawable deposit account of the Association, and each borrower
member (hereinafter "borrower") is entitled to one vote in addition to the votes
(if any) to which such person is
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 3
entitled in such borrower's capacity as a savings depositor of the Association.
All of the interests held by a savings depositor in the Association cease when
such depositor closes his accounts with the Association.
The Holding Company was incorporated in February 1997 under the laws
of the State of Delaware as a general business corporation in order to act as a
savings institution holding company. The Holding Company has an authorized
capital structure of 12 million shares of common stock and 250,000 shares of
preferred stock.
PROPOSED TRANSACTION
Management of the Association believes that the Stock Conversion
offers a number of advantages which will be important to the future growth and
performance of the Converted Association in that it is intended to (i) provide
substantially increased capital for investment in its business to expand the
operations of the Converted Association; (ii) provide future access to capital
markets; (iii) enhance the ability to diversify its operations into new business
activities; and (iv) afford depositors and others the opportunity to become
stockholders of the Converted Association and thereby participate more directly
in any future growth of the Converted Association.
Accordingly, pursuant to the Plan, the Association will undergo the
Stock Conversion whereby it will be converted from a federally-chartered mutual
savings and loan association to a federally-chartered stock savings association.
As part of the Stock Conversion, the Association will amend its existing mutual
savings association charter and bylaws to read in the form of a Federal Stock
Charter and Bylaws. The Converted Association will then issue to the Holding
Company shares of the Converted Association's common stock, representing all of
the shares of capital stock to be issued by the Converted Association in the
Conversion, in exchange for payment by the Holding Company of 50% of the net
proceeds realized by the Holding Company from such sale of its Common Stock,
less amounts necessary to fund the Employee Stock Ownership Plan of the
Association, or such other percentage as the Office of Thrift Supervision
("OTS") may authorize or require.
Also pursuant to the Plan, the Holding Company will offer its shares
of Common Stock for sale in a Subscription Offering and, if necessary, a Direct
Community Offering. The aggregate purchase price at which all shares of Common
Stock will be offered and sold pursuant to the Plan and the total number of
shares of Common Stock to be offered in the Conversion will be determined by the
Boards of Directors of the Association and the Holding Company on the basis of
the estimated pro forma market value of the Converted Association as a
subsidiary of
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 4
the Holding Company. The estimated pro forma market value will be determined by
an independent appraiser. Pursuant to the Plan, all such shares will be issued
and sold at a uniform price per share. The Stock Conversion, including the sale
of newly issued shares of the stock of the Converted Association to the Holding
Company, will be deemed effective concurrently with the closing of the sale of
the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the
shares of Common Stock will first be offered through the Subscription Offering
pursuant to nontransferable subscription rights on the basis of preference
categories in the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the Association;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered in the Direct Community Offering in the following order
of priority:
(a) Natural persons and trust of natural persons who are permanent
residents of Spartanburg County, South Carolina; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Direct Community
Offering may be offered to certain members of the general public on a best
efforts basis by a selling group of broker dealers in a Syndicated Community
Offering.
The Plan also provides for the establishment of a Liquidation Account
by the Converted Association for the benefit of all Eligible Account Holders and
any Supplemental Eligible Account Holders in an amount equal to the net worth of
the Association as of the date of the latest statement of financial condition
contained in the final prospectus issued in connection with the Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the net worth accounts of the Converted Association. The
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with respect to each savings account held and will be paid
by the Converted Association in event of liquidation prior to any liquidation
distribution being made with respect to capital stock.
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 5
Following the Stock Conversion, voting rights in the Converted
Association shall be vested in the sole holder of stock in the Converted
Association, which will be the Holding Company. Voting rights in the Holding
Company after the Stock Conversion will be vested in the holders of the Common
Stock.
The Stock Conversion will not interrupt the business of the
Association. The Converted Association will continue to engage in the same
business as the Association immediately prior to the Stock Conversion, and the
Converted Association will continue to have its savings accounts insured by the
SAIF. Each depositor will retain a withdrawable savings account or accounts
equal in dollar amount to, and on the same terms and conditions as, the
withdrawable account or accounts at the time of Stock Conversion except to the
extent funds on deposit are used to pay for Common Stock purchased in the Stock
Conversion. All loans of the Association will remain unchanged and retain their
same characteristics in the Converted Association.
The Plan must be approved by the OTS and by an affirmative vote of at
least a majority of the total votes eligible to be cast at a meeting of the
Association's members called to vote on the Plan.
Immediately prior to the Conversion, the Association will have a
positive net worth determined in accordance with generally accepted accounting
principles.
OPINION
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within
the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended (the "Code"), and no gain or loss
will be recognized to either the Association or the Converted
Association as a result of the Stock Conversion (see Rev.
Rul. 80-105, 1980-1 C.B. 78).
2. The assets of the Association will have the same basis in the
hands of the Converted Association as in the hands of the
Association immediately prior to the Stock Conversion
(Section 362(b) of the Code).
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 6
3. The holding period of the assets of the Association to be
received by the Converted Association will include the period
during which the assets were held by the Association prior to
the Stock Conversion (Section 1223(2) of the Code).
4. No gain or loss will be recognized by the Converted
Association on the receipt of money from the Holding Company
in exchange for shares of common stock of the Converted
Association (Section 1032(a) of the Code). The Holding
Company will be transferring solely cash to the Converted
Association in exchange for all the outstanding capital stock
of the Converted Association and therefore will not recognize
any gain or loss upon such transfer. (Section 351(a) of the
Code; see Rev. Rul. 69-357, 1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company
upon receipt of money from stockholders in exchange for
shares of Common Stock (Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account
Holders and Supplemental Eligible Account Holders of the
Association upon the issuance of them of deposit accounts in
the Converted Association in the same dollar amount and on
the same terms and conditions in exchange for their deposit
accounts in the Association held immediately prior to the
Stock Conversion (Section 1001(a) of the Code; Treas. Reg.
ss.1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and
Supplemental Eligible Account Holders' savings accounts in
the Converted Association received as part of the Stock
Conversion will equal the tax basis of such account holders'
corresponding deposit accounts in the Association surrendered
in exchange therefor (Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account
holders of the Association upon the constructive receipt of
their interest in the liquidation account of the Converted
Association and on the nontransferable subscription rights to
purchase stock of the Holding Company in exchange for their
proprietary rights in the Association. Any such gain will be
recognized by the Association deposit account holders, but
only in an amount not in excess of the fair market value of
the liquidation account and subscription rights received.
(Section 1001 of the Code; Paulsen v. Commissioner, 469 U.S.
131 (1985); Rev. Rul. 69-646, 1969-2 C.B. 54.)
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 7
9. The basis of each account holder's interest in the
Liquidation Account received in the Stock Conversion and to
be established by the Converted Association pursuant to the
Stock Conversion will be equal to the value, if any, of that
interest.
10. No gain or loss will be recognized upon the exercise of a
subscription right in the Stock Conversion. (Rev. Rul.
56-572, 1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock
Conversion will be equal to the purchase price of such stock,
increased, in the case of such stock acquired pursuant to the
exercise of subscription rights, by the fair market value, if
any, of the subscription rights exercised (Section 1012 of
the Code).
12. The holding period of the Common Stock acquired in the Stock
Conversion pursuant to the exercise of subscription rights
will commence on the date on which the subscription rights
are exercised (Section 1223(6) of the Code). The holding
period of the Common Stock acquired in the Community Offering
will commence on the date following the date on which such
stock is purchased (Rev. Rul. 70-598, 1970-2 C.B. 168; Rev.
Rul. 66-97, 1966-1 C.B. 190).
SCOPE OF OPINION
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
federal, state, local, foreign or other tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion. This opinion is not binding on the Internal Revenue
Service and there can be no assurance, and none is hereby given, that the
Internal Revenue Service will not take a position contrary to one or more of the
positions reflected in the foregoing opinion, or that our opinion will be upheld
by the courts if challenged by the Internal Revenue Service.
Regarding the valuation of subscription rights, we understand that the
Association has received the opinion of RP Financial, LC. dated February 21,
1997 to the effect that the
<PAGE>
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
March 31, 1997
Page 8
subscription rights have no ascertainable market value. We express no opinion
regarding the valuation of the subscription rights.
CONSENTS
We hereby consent to the filing of this opinion with the OTS as an
exhibit to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and
the OTS as exhibits to the Registration Statement and the Association's
Application for Conversion on Form AC ("Form AC"), respectively, and the
reference on our firm in the Prospectus, which is a part of both the
Registration Statement and the Form AC, under the headings "THE CONVERSION - -
Effect of Conversion to Stock Form on Depositors and Borrowers of the
Association -- Tax Effects" and "LEGAL AND TAX OPINIONS."
Very truly yours,
/s/ Breyer & Aguggia
BREYER & AGUGGIA
<PAGE>
AFFIDAVIT OF REPRESENTATIONS
The following statements, representations, and declarations are made
in support of the federal tax opinion to be issued by Breyer & Aguggia,
Washington, D.C., in connection with the (i) the proposed conversion of First
Federal Savings and Loan Association of Spartanburg ("Association") from a
federally-chartered mutual savings and loan association to a federallychartered
stock savings and loan association ("Converted Association") (the "Stock
Conversion") and (ii) the concurrent acquisition of 100% of the outstanding
capital stock of Converted Association by a parent holding company formed at
the direction of the Board of Directors of Association and to be known as
FirstSpartan Financial Corp. (the "Holding Company"). All capitalized terms
have the same meaning as in the federal tax opinion, unless otherwise
indicated.
1. Neither Converted Association nor Holding Company have a plan or
intention to redeem or otherwise acquire any of the stock issued by
either, respectively, in the proposed transaction.
2. Immediately following the consummation of the proposed transaction,
Converted Association will possess the same assets and liabilities as
Association held immediately prior to the proposed transaction, plus
the proceeds from the sale of its stock to Holding Company.
3. Following the conversion, Converted Association will continue to engage
in its business in substantially the same manner as Association engaged
in prior to the conversion. Converted Association has no plan or
intention to sell or otherwise dispose of any of its assets, except in
the ordinary COURSE OF BUSINESS.
4. Association is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Code.
5. Compensation to be paid to depositor/employees will be commensurate
with amounts paid to third parties bargaining at arm's length for
similar services. Holding Company, after conversion, intends to adopt
stock option and other stock benefit plans as part of the compensation
of certain of its employees and/or directors. The employees and
directors may recognize taxable income as a result of these plans.
6. No shares of Holding Company will be issued to or purchased by
depositors/employees at a discount or as compensation in the proposed
transaction.
7. The aggregate fair market value of the qualifying deposits held by
Eligible Account Holders and Supplemental Eligible Account Holders as
of tne close of business on the Eligibility Record Date and
Supplemental Eligibility Record Date, as applicable, will equal or
exceed 99 percent of the aggregate fair market value of all savings
accounts (INCLUDING THOSE ACCOUNTS OF LESS THAN $50) IN ASSOCIATION AS
OF THE CLOSE OF BUSINESS ON said dates.
<PAGE>
8. No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders, or others in lieu of (a)
nontransferable subscription rights or (b) an interest in the
Liquidation Account of Converted Association.
9. At the time of the proposed conversion, the fair market value of the
assets of Association on a going concern basis will exceed the amount
of its liabilities plus the amount of liabilities to which its assets
are subject.
10. Association, Converted Association and Holding Company are corporations
within the meaning of section 7701(a)(3) of the Code.
11. Holding Company is not an investment company as described in section
1.351-l(c) of the Income Tax Regulations.
12. Holding Company has no plan or intention to sell or otherwise dispose
of the stock of Converted Association received by it in the proposed
transaction. There is no plan or intention for Converted Association to
be liquidated or merged into another corporation following consummation
of the proposed transaction. Similarly, Holding Company is aware of no
plan or intention on the part of its shareholders to sell or otherwise
dispose of Holding Company Stock to be purchased in the proposed
transaction.
13. Association, as a mutual savings association prior to its conversion to
stock form, and Converted Association, as a stock savings association,
and Holding Company will each pay their own expenses of the transaction
and will not pay expenses, if any, solely attributable to Holding
Company shareholders. Association's depositors will pay expenses of the
conversion solely attributable to them, if any.
14. The Eligible Account Holders' and Supplemental Eligible Account
Holders' proprietary interest in Association arises solely by virtue of
the fact that they are account holders in Association.
15. The transaction does not involve a receivership, foreclosure or similar
proceeding before a federal or state agency involving a financial
institution to which Code sections 585 or 593 apply.
16. No amount of savings accounts or deposits held by Eligible Account
Holders or the Supplemental Eligible Account Holders will be excluded
from a participation in the Liquidation Account.
17. The fair market value of the withdrawable deposit accounts plus
interest in the Liquidation Account of Converted Association to be
constructively received in the proposed transaction will, in each
instance, be equal to the fair market value of the withdrawable savings
accounts of Association plus related proprietary rights surrendered in
exchange therefor. All proprietary rights in Association form an
integral part of the withdrawable savings accounts being surrendered in
the exchange.
2
<PAGE>
18. The exercise price of the subscription rights received by Association's
Eligible Account Holders and Supplemental Eligible Account Holders to
purchase Holding Company stock will be approximately equal to the fair
market value of the stock of Holding Company at the time of the
completion of the proposed transaction as determined by an independent
appraisal. There will be no purchase price advantage for Eligible
Account Holders and Supplemental Eligible Account Holders, or other
recipients of the Subscription Rights purchasing share in the
Subscription Offering, over persons purchasing shares in the Community
Offering because all purchasers will pay the same price for the stock.
19. Converted Association has no plan or intention to issue any additional
shares of stock following the proposed conversion.
20. The liabilities of Association to be assumed by Converted Association,
plus the liabilities, if any, to which the assets of Association are
subject, were incurred by Association in the ordinary course of its
business. This Affidavit of Representations was executed by a
duly-authorized officer of the undersigned entities on this 28th day of
March 1997.
FIRST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF SPARTANBURG
By: /s/ Billy L. Painter
BILLY PAINTER
PRESIDENT
FIRSTSPARTAN FINANCIAL CORP.
By: /s/ Billy L. Painter
BILLY PAINTER
PRESIDENT
<PAGE>
EXHIBIT 8.2
STATE INCOME TAX OPINION
OF DELOITTE & TOUCHE LLP
<PAGE>
[logo]
1200 NationsBank Plaza Telephone: (864) 240-5700
7 North Laurens Street Facsimile: (864) 235-8563
Greenville, South Carolina 29601
April 2, 1997
Boards of Directors
First Federal Savings and Loan
Association of Spartanburg
FirstSpartan Financial Corp.
380 E. Main Street
Spartanburg, South Carolina 29302-1944
Re: State of South Carolina Income Tax Opinion regarding the conversion
of First Federal Savings and Loan Association of Spartanburg from a
federally- chartered mutual savings and loan association to a
federally-chartered stock savings and loan association.
Gentlemen:
In accordance with your request, we are providing our opinion regarding the
South Carolina income tax consequences of the conversion (the "Stock
Conversion") of First Federal Savings and Loan Association from a
federally-chartered mutual savings and loan association (the "Association") to a
federally-chartered stock savings and loan association (the "Converted
Association"). Concurrent with the Stock Conversion, all of the Converted
Association's to-be-issued capital stock will be acquired by FirstSpartan
Financial Corp. (the "Holding Company"), a newly-organized Delaware-chartered
corporation. The Holding Company, which has an authorized capital structure of
12 million shares of common stock and 250,000 shares of preferred stock, will,
in accordance with the Plan of Conversion, offer its shares of common stock for
sale in a Subscription Offering and, if necessary, a Direct Community Offering.
FACTS
For purposes of our opinion, we have relied on: (1) the facts and assumptions
set forth in and the opinion rendered in the Federal Income Tax Opinion relating
to the conversion of First Federal Savings and Loan Association of Spartanburg
from a federally-chartered mutual savings and loan association to a
federally-chartered stock savings and loan association under Section
368(a)(1)(F) of the Internal Revenue Code (the "Code") dated March 31, 1997 as
prepared by the law firm of Breyer & Aguggia, Washington, D.C.; (2) the letter
of
<PAGE>
April 2, 1997
Board of Directors
Page 2
representation from FirstSpartan Financial Corp. and First Federal Savings and
Loan Association of Spartanburg dated March 28, 1997 (the "Letter of
Representation") attached hereto as Exhibit A; and (3) the Plan of Conversion as
adopted by the Association's Board of Directors on February 3, 1997 (the "Plan
of Conversion").
ANALYSIS
Chapter 6 of Title 12 of the Code of Laws of South Carolina imposes an income
tax on corporations. With respect to such taxation, Section 12-6-1110 provides:
"For South Carolina income tax purposes, gross income,
adjusted gross income, and taxable income as calculated under
the Internal Revenue Code are modified as provided in this
article and subject to allocation and apportionment as
provided in Article 17 of this chapter."
Section 12-6-40, entitled "Application of federal Internal Revenue Code to State
tax laws," provides in part:
"(A) `Internal Revenue Code' means the Internal Revenue Code
of 1986 as amended through December 31, 1995. . . ."
Chapter 13 of Title 12 of the Code of Laws of South Carolina imposes an income
tax on associations which meet the qualified thrift lender test set forth in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (P.L.
101-73), as amended. With respect to such taxation, Section 12-13-20 provides in
part:
"The term `net income,' as used in this chapter, [INCOME TAX
ON BUILDING AND LOAN ASSOCIATIONS] means taxable income as
determined for a regular corporation in Chapter 7 [NOW CHAPTER
6 AS DISCUSSED BELOW] of this title after deducting all
earnings accrued, paid, credited, or set aside for the benefit
of holders of savings or investment accounts, any additions to
reserves which are required by law, regulation, or direction
of appropriate supervisory agencies, and a bad debt deduction.
. . ."
The South Carolina Income Tax Act (the "Act"), which is codified in Chapter 6 of
Title 12 of the Code of Laws of South Carolina (1976, as amended), is effective
for taxable years
<PAGE>
April 2, 1997
Board of Directors
Page 3
beginning after 1995. Chapter 6 of Title 12 of Code of Laws of South Carolina
replaces Chapter 7 of Title 12. Section 21 of Act 76, Laws of 1995, states in
part:
"Except where inappropriate, or as provided in Section 20 of
this act, a reference in law, regulation, or other document to
Chapters 7, 9, and 19 of Title 12 of the 1976 Code . . . is
considered a reference to the appropriate provisions of
Chapters 6, 8, 20, . . . of Title 12 of the 1976 Code."
The Act does not contain specific Sections which are identical to the Internal
Revenue Code but merely adopts the entire Internal Revenue Code with certain
exclusions then makes specific adjustments thereto.
As indicated above, taxable income as determined under Chapter 6 is determined
under the Internal Revenue Code as of December 31, 1995, except to the extent
the Code is modified or specifically not adopted; therefore, taxable income
under Chapter 13 is also determined under the Code. Since Association and
Holding Company are taxed under Chapter 6 or Chapter 13 of the South Carolina
Code, income tax transactions involving these corporations are taxed based on
the Internal Revenue Code as of December 31, 1995, except to the extent it is
modified or specifically not adopted.
Section 12-6-50 of the Code of Laws of South Carolina provides that none of the
Internal Revenue Code sections presented in the opinion below is specifically
excluded from South Carolina law, and none of the Code sections presented is
modified by Chapter 6 of Title 12.
REPRESENTATIONS
We have received a signed letter, dated March 28, 1997, containing certain
representations of management of the Association and the Holding Company in
connection with this opinion. This letter is attached hereto as Exhibit A and is
incorporated herein by reference and shall be considered an integral part of
this opinion.
OPINION
Based on the facts and assumptions set forth in and the opinions rendered in the
Breyer & Aguggia Federal Income Tax Opinion letter, all of which are
incorporated herein by reference, and our review and analysis of the Code of
Laws of South Carolina (1976, as amended), the Letter of Representation, and the
Plan of Conversion, it is our opinion that, provided the
<PAGE>
April 2, 1997
Board of Directors
Page 4
transaction is undertaken in accordance with the Plan of Conversion, the
following will be the result for South Carolina income tax purposes:
1. The Stock Conversion will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Association and the Converted Associaton each will be a party
to the reorganization within the meaning of Section 368(b) of the Code. No
gain or loss will be recognized to either the Association or the Converted
Association as a result of the Stock Conversion.
2. The assets of the Association will have the same basis in the hands of the
Converted Association as in the hands of the Association immediately prior
to the Stock Conversion (Section 362(b) of the Code).
3. The holding period of the assets of the Association to be received by the
Converted Association will include the period during which the assets were
held by the Association prior to the Stock Conversion (Section 1223(2) of
the Code).
4. No gain or loss will be recognized by the Converted Association on the
receipt of money from the Holding Company in exchange for shares of common
stock of the Converted Association. (Section 1032(a) of the Code). The
Holding Company will be transferring solely cash to the Converted
Association in exchange for all the outstanding capital stock of the
Converted Association and therefore will not recognize any gain or loss
upon such transfer (Section 351(a) of the Code).
5. No gain or loss will be recognized by the Holding Company upon receipt of
money from stockholders in exchange for shares of Common Stock (Section
1032(a) of the Code).
6. No gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders of the Association upon the issuance
to them of deposit accounts in the Converted Association in the same dollar
amount and on the same terms and conditions in exchange for their deposit
accounts in the Association held immediately prior to the Stock Conversion
(Section 1001(a) of the Code).
7. The tax basis of the Eligible Account Holders' and Supplemental Eligible
Account Holders' deposit accounts in the Converted Association received as
part of the Stock Conversion will equal the tax basis of such account
holders' corresponding deposit accounts in the Association surrendered in
exchange therefor (Section 1012 of the Code).
<PAGE>
April 2, 1997
Board of Directors
Page 5
8. The Eligible Account Holders and Supplemental Eligible Account Holders of
the Association will realize gain or loss, if any, upon the constructive
receipt of their interest in the liquidation account of the Converted
Association and on the nontransferable subscription rights to purchase
stock of the Holding Company in exchange for their proprietary rights in
the Association. Any such gain will be recognized by the Association
deposit account holders, but only in an amount not in excess of the fair
market value of the liquidation account and subscription rights received
(Section 1001 of the Code).
9. The basis of each account holder's interest in the liquidation account
received in the Stock Conversion and to be established by the Converted
Association pursuant to the Stock Conversion will be equal to the value, if
any, of that interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Stock Conversion.
11. The tax basis to the shareholders of the common stock of the Holding
Company acquired in the Stock Conversion will be equal to the purchase
price of such stock increased, in the case of such stock acquired pursuant
to the exercise of subscription rights, by the fair market value, if any,
of the subscription rights exercised (Section 1012 of the Code).
12. A shareholder's holding period of the common stock of the Holding Company
acquired in the Stock Conversion pursuant to the exercise of subscription
rights shall begin on the date on which the subscription rights are
exercised (Section 1223(6) of the Code). The holding period of the common
stock of the Holding Company acquired in the community offering will
commence on the date following the date on which such stock is purchased
This opinion is based solely upon:
a) The representations, information, documents, and facts ("representations")
that we have included or referenced in this opinion letter;
b) Our assumptions (without independent investigation or review) that all of
the representations and all of the original, copies, and signatures of
documents are accurate, true and authentic;
c) Our assumption (without independent investigation or review) that there
will be timely execution, delivery, and performance as required by the
representations and documents;
<PAGE>
April 2, 1997
Board of Directors
Page 6
d) The understanding that only the South Carolina income tax issues and tax
consequences opined upon herein are covered by this tax opinion; and
e) The law, regulations, cases, rulings and other tax authority in effect as
of the date of this letter.
If there are any significant changes of the foregoing tax authorities (for which
we have no responsibility to advise you), it may result in our opinion being
rendered invalid, or necessitate (upon your request) a reconsideration of the
opinion.
While this opinion represents our considered judgment as to the proper tax
treatment to the parties involved, it is not binding on South Carolina or the
state or federal courts.
This opinion letter is solely for your information, for the information of your
shareholders and for inclusion in certain filings with regard to the transaction
described herein as follows: (a) with the OTS as an exhibit to Application
H-(e)1-S filed by the Holding Company; (b) with the SEC as an exhibit to the
Registration Statement; and (c) with the OTS as an exhibit to the Association's
Application for Conversion. Other than the uses indicated in the preceding
sentence, our opinion may not be relied upon, distributed, or disclosed by
anyone without the prior written consent of Deloitte & Touche LLP.
Yours truly,
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
<PAGE>
EXHIBIT A
FirstSpartan Financial Corp.
First Federal Savings & Loan Association
of Spartanburg
380 E. Main Street
Spartanburg, South Carolina 29302
March 28, 1997
Deloitte & Touche LLP
1200 NationsBank Plaza
7 North Laurens Street
Greenville, South Carolina 29601
Gentleman and Ladies:
We understand that Deloitte & Touche LLP is issuing an opinion letter regarding
the South Carolina income tax consequences of the conversion (the "Conversion")
of First Federal Savings and Loan Association from a federally-chartered mutual
savings and loan association (the "Association") to a federally-chartered stock
savings and loan association (the "Converted Association"). Concurrent with the
Conversion, all of the Converted Association's to-be-issued common stock will be
acquired by FirstSpartan Financial Corp. (the "Holding Company"), a
newly-organized Delaware-chartered corporation. The Holding Company, which has
an authorized capital structure of 12 million shares of common stock and 250,000
shares of preferred stock, will, in accordance with the Plan of Conversion,
offer its shares of common stock for sale in a Subscription Offering and, if
necessary, a Direct Community Offering.
Your opinion is based upon certain assumptions of fact set forth in your letter,
certain of which you need us to confirm are true and correct.
We hereby represent and confirm to you as follows:
1. The Converted Association has no plan or intention to redeem or otherwise
acquire any of its stock issued in the proposed transaction.
2. The Holding Company has no plan or intention to redeem or otherwise acquire
any of its stock issued in the proposed transaction.
3. Immediately following the consummation of the proposed transaction, the
Converted Association will possess the same assets and liabilities as the
Association held immediately prior to the proposed transaction, plus a
portion of the proceeds from the sale of the Holding Company stock by the
Holding Company. Assets used to pay expenses of the reorganization (without
reference to the expenses incurred in the distribution of the subscription
rights and
<PAGE>
public offering) and all distributions (except for regular, normal interest
payments made by the Association immediately preceding the transaction)
will in the aggregate constitute less than one percent of the net assets of
the Association and any such expenses and distributions will be paid by the
Holding Company and the Converted Association from the proceeds of the
subscription rights offering and public offering.
4. Following the Conversion, the Converted Association will continue to engage
in its business in substantially the same manner as engaged in by the
Association prior to the Conversion, and has no plan or intention to sell
or otherwise dispose of any of its assets, except in the ordinary course of
business.
5. The Association is not under any jurisdiction of a court in any Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
6. The Holding Company has no plan or intention to sell or otherwise dispose
of the stock of the Converted Association received by it in the proposed
transaction.
7. Compensation to be paid to depositor-employees will be commensurate with
amounts paid to third parties bargaining at arm's length for similar
services.
8. The aggregate fair market value of the "qualifying deposits" (as that term
is defined in the Plan of Conversion) held by eligible account holders and
supplemental eligible account holders as of the close of business on the
eligibility record date and supplemental eligibility record date,
respectively, will equal or exceed 99% of the aggregate fair market value
of all savings accounts (including those accounts of less than $50) in the
Association as of the close of business on such date.
9. No shares of the Holding Company stock will be issued to or purchased by
depositor-employees at a discount or as compensation in the proposed
transaction.
10. No cash or property will be given to eligible account holders or
supplemental eligible account holders in lieu of (a) non-transferable
subscription rights, or (b) an interest in the liquidation account of the
Converted Association.
11. At the time of the proposed transaction, the fair market value of the
assets of the Association on a going concern basis will exceed the amount
of its liabilities plus the amount of liabilities to which its assets are
subject. Immediately before the Conversion, the Association will have a
positive net worth.
12. The Association, the Converted Association, and the Holding Company are
corporations within the meaning of Section 7701(a)(3) of the Code.
13. The Association's savings depositors will pay the expenses of the
Conversion solely attributable to them, if any. The Holding Company, the
Association, and the Converted
<PAGE>
Association will each pay its own expenses of the transaction and will not
pay any expenses solely attributable to the savings depositors or to the
Holding Company shareholders.
14. No eligible account holders or supplemental eligible account holders of
qualifying deposits will be excluded from participation in the liquidation
account.
15. The fair market value of the withdrawable savings accounts plus interests
in the liquidation account of the Converted Association to be
constructively received under the Plan of Conversion will in each instance
be equal to the fair market value of the withdrawable savings accounts of
the Association surrendered in exchange therefor. All proprietary rights in
the Association form an integral part of the withdrawable savings accounts
being surrendered in the exchange.
16. The Holding Company is not an investment company as described in Treasury
Regulation Section 1.351-1(c).
17. Immediately following the Conversion, the former depositors of the
Association will own all of the outstanding interests in the Converted
Association liquidation account and will own such interests solely by
reason of their ownership of deposits in the Association (including the
attendant rights to liquidation proceeds) immediately before the
Conversion.
18. At the time of the Conversion, the Association will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Converted
Association.
19. The liabilities of the Association assumed by the Converted Association
plus the liabilities, if any, to which the transferred assets are subject
were incurred by the Association in the ordinary course of its business.
Very truly yours,
FIRSTSPARTAN FINANCIAL CORP.
By /s/ Billy L. Painter
Title President
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF SPARTANBURG
By /s/ Billy L. Painter
Title President
<PAGE>
EXHIBIT 10.4
FORM OF FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
401(K) PLAN
<PAGE>
FIRST FEDERAL SAVINGS & LOAN 401(K) PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS 19
2.2 DETERMINATION OF TOP HEAVY STATUS 20
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER 24
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY 24
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 25
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR 25
2.7 RECORDS AND REPORTS 27
2.8 APPOINTMENT OF ADVISERS 27
2.9 INFORMATION FROM EMPLOYER 27
2.10 PAYMENT OF EXPENSES 27
2.11 MAJORITY ACTIONS 28
2.12 CLAIMS PROCEDURE 28
2.13 CLAIMS REVIEW PROCEDURE 28
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY 29
3.2 APPLICATION FOR PARTICIPATION 29
3.3 EFFECTIVE DATE OF PARTICIPATION 29
3.4 DETERMINATION OF ELIGIBILITY 30
<PAGE>
3.5 TERMINATION OF ELIGIBILITY 30
3.6 OMISSION OF ELIGIBLE EMPLOYEE 30
3.7 INCLUSION OF INELIGIBLE EMPLOYEE 31
3.8 ELECTION NOT TO PARTICIPATE 31
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION 31
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION 32
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 36
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS 37
4.5 ACTUAL DEFERRAL: PERCENTAGE TESTS 44
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS 47
4.7 MAXIMUM ANNUAL ADDITIONS 49
4.8 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS 54
4.9 TRANSFERS FROM QUALIFIED PLANS 55
4.10 DIRECTED INVESTMENT ACCOUNT 58
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND 58
5.2 METHOD OF VALUATION 59
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT 59
6.2 DETERMINATION OF BENEFITS UPON DEATH 59
<PAGE>
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY 61
6.4 DETERMINATION OF BENEFITS UPON TERMINATION 61
6.5 DISTRIBUTION OF BENEFITS 66
6.6 DISTRIBUTION OF BENEFITS UPON DEATH 72
6.7 TIME OF SEGREGATION OR DISTRIBUTION 76
6.8 DISTRIBUTION FOR MINOR BENEFICIARY 76
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 76
6.10 PRE-RETIREMENT DISTRIBUTION 77
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP 77
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION 79
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 80
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 80
7.3 OTHER POWERS OF THE TRUSTEE 81
7.4 LOANS TO PARTICIPANTS 84
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 86
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 86
7.7 ANNUAL REPORT OF THE TRUSTEE 86
7.8 AUDIT 87
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 88
7.10 TRANSFER OF INTEREST 89
7.11 DIRECT ROLLOVER 89
7.12 EMPLOYER SECURITIES AND REAL PROPERTY 91
<PAGE>
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT 91
8.2 TERMINATION 92
8.3 MERGER OR CONSOLIDATION 92
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS 93
9.2 ALIENATION 93
9.3 CONSTRUCTION OF PLAN 94
9.4 GENDER AND NUMBER 94
9.5 LEGAL ACTION 94
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS 95
9.7 BONDING 95
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE 96
9.9 INSURER'S PROTECTIVE CLAUSE 96
9.10 RECEIPT AND RELEASE FOR PAYMENTS 96
9.11 ACTION BY THE EMPLOYER 96
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY 97
9.13 HEADINGS 97
9.14 APPROVAL BY INTERNAL REVENUE SERVICE 98
9.15 UNIFORMITY 98
<PAGE>
FIRST FEDERAL SAVINGS & LOAN 401(K)) PLAN
THIS AGREEMENT, hereby made and entered into this _______ day of
____________, 19__, by and between FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF
SPARTANBURG (herein referred to as the "Employer") and TRUSTEE COMMITTEE OF
FIRST FEDERAL SAVINGS & LOAN ASSOC. (herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer desires to recognize the contribution made to its
successful operation by its employees and to reward such contribution by means
of a 401(k) Profit Sharing Plan for those employees who shall qualify as
Participants hereunder;
NOW, THEREFORE, effective JANUARY 1, 1995, (hereinafter called the
"Effective Date"), the Employer hereby establishes a 401(k)) Profit Sharing Plan
and creates this trust (which plan and trust are hereinafter called the "Plan")
for the exclusive benefit of the Participants and their Beneficiaries, and the
Trustee hereby accepts the Plan on the following terms:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414 (b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o)).
1
<PAGE>
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 2.2.
1.5 "Anniversary Date" means 123195.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subjects to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.8 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a)) and all other payments
of compensation by the Employer (in the course of the Employer's trade or
business) for a Plan Year for which the Employer is required to furnish the
Participant a written statement under Code Sections 6041(d)), 6051(a)(3) and
6052. Compensation must be determined without regard to any rules under Code
Section 3401(a)) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by:
(a) excluding commissions.
(b) excluding discretionary bonuses.
(c) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125,
402(e)(3)), 402(h)(1)(B), 403(b) or 457, and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions.
For a Participant's initial year of participation, Compensation shall
be recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or
2
<PAGE>
within such calendar year and the first adjustment to the $200,000 limitation
shall be effective on January 1, 1990. For any short Plan Year the Compensation
limit shall be an amount equal to the Compensation limit for the calendar year
in which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the close of
the year. If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then the limitation shall be prorated among the affected
Family Members in proportion to each such Family Member's Compensation prior to
the application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined [determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taker, into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period.
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For this purpose, for determination periods beginning before the first day of
the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.7(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.8(a) pro rata among all affected Family Members.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.8(a).
1.11 "Early Retirement Date" means the first day of the month (prior to
the Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age 55 and has completed at least 7
Years of Service with the Employer (Early Retirement Age). A Participant shall
become fully Vested upon satisfying this requirement if still employed at his
Early Retirement Age.
A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
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1.12 "Elective Contribution" means the Employer's contributions to the
Plan of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.8(a). In addition, the Employer's
matching contribution made pursuant to Section 4.1(b) and any Employer Qualified
Non-Elective Contribution made pursuant to Section 4.6 shall be considered an
Elective Contribution for purposes of the Plan. Any such contributions deemed to
be Elective Contributions shall be subject to the requirements of Sections
4.2(b) and 4.2(c) and shall further be required to satisfy the discrimination
requirements of Regulation 1.401(k)-1(b)(5), the provisions of which are
specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees who are Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall not be eligible to participate in this Plan.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701 (a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties will not be eligible to
participate in this Plan unless such agreement expressly provides for coverage
in this Plan or two percent or more of the Employees of the Employer who are
covered pursuant to that agreement are professionals as defined in Regulation
1.410(b)-9.
Employees who are nonresident aliens (within the meaning of Code
Section 7701(b)(1)(B)) and who receive no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer which constitutes income from sources
within the United States (within the meaning of Code Section 861(a)(3) shall not
be eligible to participate in this Plan.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
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1.15 "Employer" means FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF
SPARTANBURG and any successor which shall maintain this Plan; and any
predecessor which has maintained this Plan. The Employer is a corporation, with
principal offices in the State of South Carolina.
1.16 "Excess Contributions" means, with respect to a Plan Year, the
excess of Elective Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such contributions
permitted under Section 4.5(a). Excess Contributions shall be treated as an
"annual addition" pursuant to Section 4.7(b).
1.17 "Excess Deferred Compensation" means, with respect to any taxable
year of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.7(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for purpose
of Sections 2.2 and 4.4(h), Excess Deferred Compensation shall continue to be
treated as Employer even if distributed pursuant to Section 4.2(f). However,
Excess Deferred Compensation of Non-Highly Compensated Participants is not taken
into account for purposes of Section 4.5(a) to the extent such Excess Deferred
Compensation occurs pursuant to Section 4.2(d).
1.18 "Family Member" means, with respect to an affected Participant,
such Participant's spouse and such Participant's lineal descendants and
ascendants and their spouses, all as described in Code Section 414(q)(6)(B).
1.19 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any moneys or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
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1.20 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on July 1st of each year and ending the following June 30th.
1.21 "Forfeiture" means that portion of a Participant's Account that is
not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Terminated Participant's Account, or
(b) the last day of the Plan Year in which the Participant
incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(f)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
1.22 "Former Participant" means a person who has been a Participant,
but who has ceased to be a Participant for any reason.
1.23 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
1.24 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agree met and which are not includible
in the gross income of the
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Participant under Code Sections 125, 4)2(e)(3), 402(h)(1)(B), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated as
Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the 4200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12). In
applying this limitation, the family group of a Highly Compensated Participant
who is subject to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the Employer or one
of the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, shall be treated as a single Participant, except
that for this purpose Family Members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1954, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
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If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
1.25 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year"
or "look-back year" were "five percent owners" as defined in Section
1.31(c).
(b) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $50,000 and were in the
Top Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of
the Employer (as that term` is defined within the meaning of the
Regulations under Code Section 416) and received "415 Compensation"
during the "look-back year" from the Employer greater than 50 percent
of the limit in effect under Code Section 415(b)(1)(A) for any such
Plan Year. The number of officers shall be limited to the lesser of (i)
50 employees; or (ii) the greater of 3 employees or 10 percent of all
employees. For the purpose of determining the number of officers,
Employees described in Section 1.56(a), (b), (c) and (d) shall be
excluded, but such Employees shall still be considered for the purpose
of identifying the particular Employees who are officers. If the
Employer does not have at least one officer whose annual "415
Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will
be treated as a Highly Compensated Employee.
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(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b), (c) or (d) above
when these paragraphs are modified to substitute "determination year"
for "look-back year."
The "look-back year" shall be the calendar year ending with or within
the Plan Year for which testing is being performed, and the "determination year"
(if applicable) shall be the period of time, if any, which extends beyond the
"look-back year" and ends on the last day of the Plan Year for which testing is
being performed (the "lag period"). If the "lag period" is less than twelve
months long, the dollar threshold amounts specified in (b), (c) and (d) above
shall be prorated based upon the number of months in the "lag period."
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulator. In the case of such an
adjustment, the dollar limits which shall be applied are those for the calendar
year in which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting Untied States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
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1.26 "Highly Compensated Former Employee" means a former Employee who
had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.25. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
1.27 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.28 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties ate performed is not required to be credited to the
Employee if such payment is made or due
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under a plan maintained solely for the purpose of complying with applicable
worker's compensation, or unemployment compensation or disability insurance
laws; and (iii) Hours of Service are not required to be credited for a payment
which solely reimburses an Employee for medical or medically related expenses
incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a
Year of Service, a year of participation for purposes of accrued benefits, a
1-Year Break in Service, and employment commencement date (or reemployment
commencement date). In addition, Hours of Service will be credited for
employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.29 "Income" means the income or losses allocable to Excess preferred
Compensation or Excess Contributions which amount shall be allocated in the same
manner as income or losses are allocated pursuant to Section 4.4(g).
1.30 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.31 "Key Employee" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or former Employee (as
well as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
"415 Compensation" greater than 50 percent of the amount in effect
under Code Section 415(b)(1)(A) for any such Plan Year.
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(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(C)(1)(A) for the calendar year in which
such Plan Year ends and owning (or considered as owning within the
meaning of Code Section 318) both more than one-half percent interest
and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five percent
owner" means any person who owns or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Employer or stock possessing more than five
percent (5%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than five percent (5%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual
"415 Compensation" from the Employer of more than $150,000. "One
percent owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than one percent (1%) of
the outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined power of all stock of the Employer
or, in the case of an unincorporated business, any person who owns mere
than one percent (1%) of the capital or profits interest in the
Employer. In determining percentage ownership hereunder, employers that
would otherwise be aggregated under Code Sections 414(b), (c), (m) and
(o) shall be treated as separate employers. However, In determining
whether an individual has "415 Compensation" of more than $150.000.
"415 Compensation" from each employer required to be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "445 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3), 402
(h)(1)(B), 403(b) or 457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
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1.32 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.33 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
(a) if such employee is covered by a money purchase pension
plan providing:
(1) a non-integrated employer contribution rate of at least
10% of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 433(b) or 457, and
Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.34 "Net Profit" means with respect to any Fiscal Year the Employer's
net income or profit for such Fiscal Year determined upon the basis of the
Employer's books of account in accordance with generally accepted accounting
principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan.
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1.35 "Non-Elective Contribution" means the Employer's contributions to
the Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2, matching contributions made
pursuant to Section 4.1(b) and any Qualified Non-Elective Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65 birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age
1.39 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed mere than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally
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credited, eight (8) Hours of Service per day. The total Hours of Service
required to be credited for a "maternity or paternity leave of absence" shall
not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the
Plan as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.42 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Non-Elective
Contributions.
1.43 "Participant's Combined Account" means the total aggregate amount
of each Participant's Elective Account and Participant's Account.
1.44 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2, Employer matching contributions pursuant
to Section 4.1(b) and any Employer Qualified Non-Elective Contributions.
1.45 "Plan" means this instrument, including all amendments thereto.
1.46 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.47 "Pre-Retirement Survivor Annuity" is an immediate annuity for the
life of the Participant's spouse the payments under which must be equal to the
amount of benefit which can be purchased with the accounts of a Participant used
to provide the death benefit under the Plan.
1.48 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.
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1.49 "Regulation" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his delegate, and as amended from time to time.
1.50 "Retired Participant" means a person who has been a Participant,
but who has become entitled to retirement benefits under the Plan.
1.51 "Retirement Date" means the date as of which a Participant retires
for reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.52 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.53 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death, Total
and Permanent Disability or retirement.
1.54 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.55 "Top Heavy Plan Year" means a Plan Year during which the Plan is a
Top Heavy Plan.
1.56 "Top Paid Group" means the top 20 percent of Employees who
performed services for the Employer during the applicable year, ranked according
to the amount of "415 Compensation" (determined for this purpose in accordance
with Section 1.25) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded; however, such Employees shall still be
considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
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(b) Employees who normally work less than 17 1/2 hours per
week;
(c) Employees who normally work less than six (6) months
during a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer are
covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.57 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any gainful occupation and
which condition constitutes total disability under the federal Social Security
Acts.
1.58 "Trustee" means the person or entity named as trustee herein or in
any separate trust forming a part of this Plan, and any successors.
1.59 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.60 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
1.61 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period beginning after a 1-Year Break in
Service shall be measured from the date on which an Employee again performs an
Hour of Service. The participation computation period shall shift to the Plan
Year which includes the anniversary of
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the date on which the Employee first performed an Hour of Service. An Employee
who is credited with the required Hours of Service in both the Initial
computation period (or the computation period beginning after a l-Year Break in
Service) and the Plan Year which includes the anniversary of the date on which
the Employee first performed an Hour of Service, shall be credited with two (2)
Years of Service for purposes of eligibility to participate.
For vesting purposes, the computation period shall be the Plan Year,
including periods prior to the Effective Date of the Plan.
For all other, purposes, the computation period shall be the Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c). However,
in determining whether an Employee has completed a Year of Service for benefit
accrual purposes in the short Plan Year, the number of the Hours of Service
required shall be proportionately reduced based on the number of full months in
the short Plan Year.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.4 of the Plan.
However, for Plan Years beginning prior to January 1, 1989, the Plan
shall provide the special Compensation and "415 Compensation" limitations of
Code Section 416(d).
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2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds sixty percent (60%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of determining
whether this Plan is a Top Heavy or Super Top Heavy Plan (or whether
any Aggregation Group which includes this Plan is a Top Heavy Group).
In addition, if a Participant or Former Participant has not performed
any services for any Employer maintaining the Plan at any time during
the five year period ending on the Determination Date, any accrued
benefit for such Participant or Former Participant shall not be taken
into account for the purposes of determining whether this Plan is a Top
Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan
Year in which, as of the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees and (2) the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of
the Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most
recent valuation occurring within a twelve (12) month period
ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of any
contributions actually made
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after the valuation date but due on or before the
Determination. Date, except for the first Plan Year when such
adjustment shall also reflect the amount of any contributions
made after the Determination Date that are allocated as of a
date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the Determination
Date, such distributions are not included as distributions for
top heavy purposes to the extent that such distributions are
already included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and distributions
under a terminated plan which if it had not been terminated
would have been required to be included in an Aggregation
Group, will be counted. Further, distributions from the Plan
(including the cash value of life insurance policies) of a
Participant's account balance because of death shall be
treated as a distribution for the purposes of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate Account
balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and
made from a plan maintained by one employer to a plan
maintained by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always consider
such rollovers or plan-to-plan transfers as a distribution for
the purposes of this Section. If this Plan is the plan
accepting such rollovers or plan-to-plan transfers, it shall
not consider such rollovers or plan-to-plan transfers as part
of the Participant's Aggregate Account balance.
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(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section. If
this Plan is the plan accepting such rollover or plan-to-plan
transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account
balance, irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are
to be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and
(o) are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation
Group or a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group thereunder, each plan of the Employer in
which a Key Employee is a participant in the Plan Year
containing the Determination Date or any of the four preceding
Plan Years, and each other plan of the Employer which enables
any plan in which a Key Employee participates to meet the
requirements of Code Sections 401(a)(4) or 410, will be
required to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the
Required Aggregation Group will be considered a Top Heavy Plan
if the Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also
include any other plan not required to be included in the
Required Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such group shall be known as
a Permissive Aggregation Group.
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In the case of a Permissive Aggregation Group, only a plan
that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar year shall
be aggregated in order to determine whether such plans are Top
Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of
the Employer if it was maintained within the last five (5)
years ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first Plan Year, the
last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall be determined as of the most
recent valuation date that falls within or ends with the 12-month
period ending on the Determination Date except as provided in Code
Section 416 and the Regulations thereunder for the first and second
plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as
of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees
under all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
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<PAGE>
exceeds sixty percent (60%) of a similar sum determined for
all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and
method," i.e., it shall determine whether the Plan has a short run need
for liquidity (e.g., to pay benefits) or whether liquidity is a long
run goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. The
Employer or its delegate shall communicate such needs and goals to the
Trustee, who shall coordinate such Plan needs with its investment
policy. The communication of such a "funding policy and method" shall
not, however, constitute a directive to the Trustee as to investment of
the Trust Funds. Such "funding policy and method" shall be consistent
with the objectives of this Plan and with the requirements of Title I
of the Act.
(c) The Employer shall periodically review the performance of
any Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
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The Employer, upon the resignation or removal of an Administrator,
shall promptly designate in writing a successor to this position. If the
Employer does not appoint an Administrator, the Employer will function as the
Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the Plan.
Any such determination by the Administrator shall be conclusive and binding upon
all persons. The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
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(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect
to the amount and the kind of benefits to which any Participant shall
be entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration
of the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with
the terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which
such Contract shall be purchased;
(g) to compute and certify to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to be
contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the
Trustee can exercise any investment discretion in a manner designed to
accomplish specific objectives;
(i) to prepare and distribute to Employees a procedure for
notifying Participants and Beneficiaries of their rights to elect joint
and survivor annuities and Pre-Retirement Survivor Annuities as
required by the Act and Regulations thereunder;
(j) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their Compensation
deferred or paid to them in cash;
(k) to assist any Participant regarding his rights, benefits,
or elections available under the Plan.
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2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer
shall supply full and timely information to the Administrator on all matters
relating to the Compensation of all Participants, their Hours of Service, their
Years of Service, their retirement, death, disability, or termination of
employment, and such other pertinent facts as the Administrator may require; and
the Administrator shall advise the Trustee of such of the foregoing facts as may
be pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
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2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation
as to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation on of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court
28
<PAGE>
reporter to attend the hearing. A final decision as to the allowance of the
claim shall be made by the Administrator within 60 days of receipt of the appeal
(unless there has been an extension of 60 days due to special circumstances,
provided the delay and the special circumstances occasioning it are communicated
to the claimant within the 60 day period). Such communication shall be written
in a manner calculated to be understood by the claimant and shall include
specific reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of Service and has
attained age 21 shall be eligible to participate hereunder as of the date he has
satisfied such requirements. The Employer shall give each prospective Eligible
Employee written notice of his eligibility to participate in the Plan prior to
the close of the Plan Year in which he first becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee
shall make application to the Employer for participation in the Plan and agree
to the terms hereof. Upon the acceptance of any benefits under this Plan, such
Employee shall automatically be deemed to have made application and shall be
bound by the terms and conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
earlier of the first day of the Plan Year or the first day of the seventh month
of such Plan Year coinciding with or next following the date such Employee met
the eligibility requirements of Section 3.1, provided said Employee was still
employed as of such date (or if not employed on such date, as of the date of
rehire if a 1-Year Break in Service has not occurred.
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
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3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification
of an Eligible Employee to an ineligible Employee, such Former
Participant shall continue to vest in his interest in the Plan for each
Year of Service completed while a noneligible Employee, until such time
as his Participant's Account shall be forfeited or distributed pursuant
to the terms of the Plan. Additionally, his interest in the Plan shall
continue to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate but
has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of the
Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
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3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a Forfeiture (except for Deferred
Compensation which shall be distributed to the ineligible person) for the Plan
Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be
deemed an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share in
matching contributions for the Plan Year, a discretionary matching
contribution equal to a percentage of each such Participant's Deferred
Compensation, the exact percentage to be determined each year by the
Employer, which amount shall be deemed an Employer's Elective
Contribution.
Except, however, in applying the matching percentage specified
above, only salary reductions up to 5% of Compensation shall be
considered.
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(c) A discretionary amount out of its current or accumulated
Net Profit, which amount shall be deemed an Employer's Non-Elective
Contribution.
(d) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash or
in such property as is acceptable to the Trustee.
(e) Except, however, to the extent necessary to provide the
top heavy minimum allocations, the Employer shall make a contribution
even if it exceeds current or accumulated Net Profit or the amount
which is deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 2% to 10% of his
Compensation which would have been received in the Plan Year, but for
the deferral election. A deferral election (or modification of an
earlier election) may not be made with respect to Compensation which is
currently available on or before the date the Participant executed such
election or, if later, the latest of the date the Employer adopts this
cash or deferred arrangement, or the date such arrangement first became
effective.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer
Elective Contribution and allocated to that Participant's Elective
Account.
(b) The balance in each Participant's Elective Account shall
be fully Vested at all times and shall not be subject to Forfeiture for
any reason.
(c) Amounts held in the Participant's Elective Account may not
be distributable earlier than:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan,"
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as that term is described in Regulation 1.401(k)-l(d)(3);
(4) the-date of disposition by the Employer to an entity that
is not an Affiliated Employer of substantially all of the
assets (within the meaning of Code Section
409(d)(2)) used in a trade or business of such corporation if
such corporation continues to maintain this Plan after the
disposition with respect to a Participant who continues
employment with the corporation acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a
subsidiary (within the meaning of Code Section 409(d)(3)) to
an entity which is not an Affiliated Employer but only with
respect to a Participant who continues employment with such
subsidiary; or
(6) the proven financial hardship of a Participant, subject to
the limitations of Section 6.11.
(d) For each Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed, during any taxable year of the Participant, the
limitation imposed by Code Section 402(g), as in effect at the
beginning of such taxable year. If such dollar limitation is exceeded,
a Participant will be deemed to have notified the Administrator of such
excess amount which shall be distributed in a manner consistent with
Section 4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in accordance
with Regulations.
(e) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to
Section 6.11 or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any
other plan maintained by the Employer, then such Participant shall not
be permitted to elect to have Deferred Compensation contributed to the
Plan on his behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar limitation under
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Code Section 402(q) shall be reduced, with respect to the Participant's
taxable year following the taxable year in which the hardship
distribution was made, by the amount of such Participant's Deferred
Compensation, if any, pursuant to this Plan (and any other plan
maintained by the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation
1.402(g)-1(b)) under another qualified cash or deferred arrangement (as
defined in Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction arrangement (within
the meaning of Code Section 3121(a)(5)(D)), a deferred compensation
plan under Code Section 457, or a trust described in Code Section
501(c)(18) cumulatively exceed the limitation imposed by Code Section
402(g) (as adjusted annually in accordance with the method provided in
Code Section 415(d) pursuant to Regulations) for such Participant's
taxable year, the Participant may, not later than March 1 following the
close of the Participant's taxable year, notify the Administrator in
writing of such excess and request that his Deferred Compensation under
this Plan be reduced by an amount specified by the Participant. In such
event, the Administrator may direct the Trustee to distribute such
excess amount (and any Income allocable to such excess amount) to the
Participant not later than the first April 15th following the close of
the Participant's taxable year. Any distribution of less than the
entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the Participant's
Deferred Compensation under the Plan for the taxable year. Any
distribution on or before the last day of the Participant's taxable
year must satisfy each of the following conditions:
(1) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution
of Excess Deferred Compensation.
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Any distribution made pursuant to this Section 4.2(f) shall be made
first from unmatched Deferred Compensation and, thereafter, simultaneously from
Deferred Compensation which is matched and matching contributions which relate
to such Deferred Compensation.
(g) Notwithstanding Section 4.2(f) above, a Participant's
Excess Deferred Compensation shall be reduced, but not below zero, by
any distribution of Excess Contributions pursuant to Section 4.6(a) for
the Plan Year beginning with or within the taxable year of the
Participant.
(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market
value of the Participant's Elective Account shall be used to provide
additional benefits to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective Account
may be treated as a Directed Investment Account pursuant to Section
4.10.
(j) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a
bank or savings and loan association, money market certificate, or
other short-term debt security acceptable to the Trustee until such
time as the allocations pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall implement the
salary reduction elections provided for herein in accordance with the
following:
(1) A Participant may commence making elective deferrals to
the Plan only after first satisfying the eligibility and
participation requirements specified in Article III. However,
the Participant must make his initial salary deferral election
within a reasonable time, not to exceed thirty (30) days,
after entering the Plan pursuant to Section 3.3. If the
Participant fails to make an initial salary deferral election
within such time, then such Participant may thereafter make an
election in accordance with the rules governing modifications.
The
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<PAGE>
Participant shall make such an election by entering into a
written salary reduction agreement with the Employer and
filing such agreement with the Administrator. Such election
shall initially be effective beginning with the pay period
following the acceptance of the salary reduction agreement by
the Administrator, shall not have retroactive effect and shall
remain in force until revoked.
(2) A Participant may modify a prior election during the Plan
Year and concurrently make a new election by filing a written
notice with the Administrator within a reasonable time before
the pay period for which such modification is to be effective.
However, modifications to a salary deferral election shall
only be permitted quarterly, during election periods
established by the Administrator prior to the first day of
each Plan Year quarter. Any modification shall not have
retroactive effect and shall remain in force until revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the
Plan Year by providing the Administrator with thirty (30) days
written notice of such revocation (or upon such shorter notice
period as may be acceptable to the Administrator). Such
revocation shall become effective as of the beginning of the
first pay period coincident with or next following the
expiration of the notice period. Furthermore, the termination
of the Participant's employment, or the cessation of
participation for any reason, shall be deemed to revoke any
salary reduction agreement then in effect, effective
immediately following the close of the pay period within which
such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the
Plan for each Plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
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<PAGE>
However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the employer's general assets,
but in any event within ninety (90) days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the close of such Plan
Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account
in the name of each Participant to which the Administrator shall credit
as of each Anniversary Date all amounts allocated to each such
Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation
of the Employer's contributions for each Plan Year. Within a reasonable
period of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution as
follows:
(1) with respect to the Employer's Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective
Account in an amount equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer's Elective Contribution made
pursuant to Section 4.1(b), to each Participant's Elective
Account in accordance with Section 4.1(b).
Only Participants who have completed a Year of Service during
the Plan Year and are actively employed on the last day of the
Plan Year shall be eligible to share in the matching
contribution for the year.
(3) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(c), to each Participant's Account
in the same proportion
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<PAGE>
that each such Participant's Compensation for the year bears
to the total Compensation of all Participants for such year.
Only Participants who have completed a Year of Service during
the Plan Year and are actively employed on the last day of the
Plan Year shall be eligible to share in the discretionary
contribution for the year.
(c) As of each Anniversary Date, any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balances of Former
Participants, if any, in accordance with Section 6.4(f)(2). The
remaining Forfeitures, if any, shall be allocated each year among the
Participants' Accounts of Participants otherwise eligible to share in
the allocation of discretionary contributions pursuant to Section
4.4(b) in the same proportion that each such Participant's Compensation
for the year bears to the total Compensation of all such Participants
for the year.
(1) Forfeitures attributable to Employer matching
contributions made pursuant to Section 4.1(b) shall be
allocated among the Participants' Accounts in the same
proportion that each such Participant's Compensation for the
year bears to the total Compensation of all Participants for
the year.
Except, however, Participants who are not eligible to
share in matching contributions (whether or not a deferral
election was made or suspended pursuant to Section 4.2(e)) for
a Plan Year shall not share in Plan Forfeitures attributable
to Employer matching contributions for that year.
Provided, however, that in the event the allocation of Forfeitures
provided herein shall cause the" annual addition" (as defined in Section 4.7) to
any Participant's Account to exceed the amount allowable by the Code, the excess
shall be reallocated in accordance with Section 4.8.
(d) For any Top Heavy Plan Year, Employees not otherwise
eligible to share in the allocation of
38
<PAGE>
contributions and Forfeitures as provided above, "hall receive the
minimum allocation provided for in Section 4.4(h) if eligible pursuant
to the provisions of Section 4.4(k).
(e) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Retirement
(Early, Normal or Late) shall share in the allocation of contributions
and Forfeitures for that Plan Year.
(f) Participants who are not actively employed on the last day
of the Plan Year due to Total and Permanent Disability or death shall
share in the allocation of contributions and Forfeitures for that Plan
Year only if otherwise eligible in accordance with this Section.
(g) As of each Anniversary Date or other valuation date, any
earnings or losses (net appreciation or net depreciation) of the Trust
Fund shall be allocated in the same proportion that each Participant's
and Former Participant's time weighted average nonsegregated accounts
bear to the total of all Participants' and Former Participants' time
weighted average nonsegregated accounts as of such date.
Participants' transfers from other qualified plans deposited
in the general Trust Fund shall share in any earnings and losses (net
appreciation or net depreciation) of the Trust Fund in the same manner
provided above. Each segregated account maintained on behalf of a
Participant shall be credited or charged with its separate earnings and
losses.
(h) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions and Forfeitures allocated to the
Participant's Combined Account of each Employee shall be equal to at
least three percent (3%) of such Employee's "415 Compensation" (reduced
by contributions and forfeitures, if any, allocated to each Employee in
any defined contribution plan included with this plan in a Required
Aggregation Group). However, if (1) the sum of the Employer's
contributions and Forfeitures allocated to the Participant's Combined
Account of each Key Employee for such Top Heavy Plan Year is less than
three percent (3%) of each Key Employee's "415
39
<PAGE>
Compensation" and (2) this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to meet the
requirements of Code Section 401(a)(4) or 410, the sum of the
Employer's contributions and Forfeitures allocated to the Participant's
Combined Account of each Employee shall be equal to the largest
percentage allocated to the Participant's Combined Account of any Key
Employee. However, for Plan Years beginning after December 31, 1988, in
determining whether a Non-Key Employee has received the required
minimum allocation, such Non-Key Employee's Deferred Compensation and
matching contributions needed to satisfy the "Actual Deferral
Percentage" tests pursuant to Section 4.5(a) shall not be taken into
account.
However, no such minimum allocation shall be required in this
Plan for any Employee who participates in another defined contribution
plan subject to Code Section 412 providing such benefits included with
this Plan in a Required Aggregation Group.
(i) For any Plan Year when (1) the Plan is a Top Heavy Plan
but not a Super Top Heavy Plan and (2) a Key employee is a Participant
in both this Plan and a defined benefit plan included in a Required
Aggregation Group which is top heavy, the extra minimum allocation
(required by Section 4.7(m) to provide higher limitations) shall be
provided for each Employee who is a Participant only in this Plan by
substituting four percent (4%) for three percent (3%) in the paragraph
above.
(j) For purposes of the minimum allocations set forth above,
the percentage allocated to the Participant's Combined Account of any
Key Employee shall be equal to the ratio of the sum of the Employer's
contributions and Forfeitures allocated on behalf of such Key Employee
divided by the "415 Compensation" for such Key Employee.
(k) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Combined Account of
all Employees who are Participants and who are employed by the Employer
on the last day of the Plan Year, including Employees who have (1)
failed to complete a Year of Service; and (2) declined to make
mandatory contributions (if required) or, in the case of a cash or
deferred arrangement, elective contributions to the Plan.
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<PAGE>
(l) In lieu of the above, in any Plan Year in which an
Employee is a Participant in both this Plan and a defined benefit
pension plan included in a Required Aggregation Group which is top
heavy, the Employer shall not be required to provide such Employee with
both the full separate defined benefit plan minimum benefit and the
full separate defined contribution plan minimum allocation.
Therefore, for any Plan Year when (1! the Plan is a Top Heavy
Plan but not a Super Top Heavy Plan, and (2) a Key Employee is a
Participant in both this Plan and a defined benefit plan included in a
Required Aggregation Group which is top heavy, an Employee who is
participating in this Plan and a defined benefit plan maintained by the
Employer shall receive a minimum monthly accrued benefit in the defined
benefit plan equal to the product of (1) one-twelfth (1/12th) of "415
Compensation" averaged over the five (5) consecutive "limitation years"
(or actual "limitation years," if less) which produce the highest
average and (2) the lesser of (i) three percent (3%) multiplied by
years of service when the plan is top heavy or (ii) thirty percent
(30%). Further, the extra minimum allocation (required by Section
4.7(m) to provide higher limitations) shall be provided.
Except, however, in the event this Plan is a Super Top Heavy
Plan, the three percent (3%) minimum accrual shall be reduced to two
percent (2%) and 20% shall be substituted for 30% in the paragraph
above.
(m) For the purposes of this Section, "415 Compensation" shall
be limited to $200,00. Such amount shall be adjusted at the same time
and in the same manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any calendar year
shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall
be effective on January 1, 1990. For any short Plan Year the "415
Compensation" limit shall be an amount equal to the "415 Compensation"
limit for the calendar year in which the Plan Year begins multiplied by
the ratio obtained by dividing the number of full months in the short
Plan Year by twelve (12). However, for Plan Years beginning prior to
January 1, 1989, the $200,000 limit shall apply only for Top Heavy Plan
Years and shall not be adjusted.
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<PAGE>
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision. of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination on period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination period
is subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.
(n) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during the Plan
Year shall share in the salary reduction contributions made by the
Employer for the year of termination without regard to the Hours of
Service credited.
(o) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be
maintained as follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
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<PAGE>
(2) one account representing his status in the Plan
attributable to post-break service.
(p) Notwithstanding anything to the contrary, for Plan Years
beginning after December 31, 1989, if this is a Plan that would
otherwise fail to meet the requirements of Code Sections 401 (a)(26),
410(b)(1) or 410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a sufficient number or
percentage of Participants for a Plan Year, then the following rules
shall apply:
(1) The group of Participants eligible to share in the
Employer's contribution and Forfeitures for the Plan Year
shall be expanded to include the minimum number of
Participants who would not otherwise be eligible as are
necessary to satisfy the applicable test specified above. The
specific Participants who shall become eligible under the
terms of this paragraph shall be those who are actively
employed on the last day of the Plan Year and, when compared
to similarly situated Participants, have completed the
greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the
applicable test is still not satisfied, then the group of
Participants eligible to share in the Employer's contribution
and Forfeitures for the Plan Year shall be further expanded to
include the minimum number of Participants who are not
actively employed on the last day of the Plan Year as are
necessary to satisfy the applicable test. The specific
Participants who shall become eligible to share shall be those
Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours
of Service in the Plan Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be
reallocated to satisfy these requirements. In such event, the
Employer shall make an additional contribution equal to the
amount such affected Participants would have received had they
been included in the allocations, even if it exceeds the
amount which
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<PAGE>
would be deductible under Code Section 404. Any adjustment to
the allocations pursuant to this paragraph shall be considered
a retroactive amendment adopted by the last day of the Plan
Year.
(4) Notwithstanding the foregoing, for any Top Heavy Plan Year
beginning after December 31, 1992, if the portion of the Plan
which is not a Code Section 401(k) or 401(m) plan would fail
to satisfy Code Section 410 (by if the coverage tests were
applied by treating those Participants whose only allocation
(under such portion of the Plan) would otherwise be provided
under the top heavy formula as if they were not currently
benefiting under the Plan, then, for purposes of this Section
4.4(p), such Participants shall be treated as not benefiting
and shall therefore be eligible to be included in the expanded
class of Participants who will share in the allocation
provided under the Plan's non top heavy formula.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year, the annual
allocation derived from Employer Elective Contributions to a
Participant's Elective Account shall satisfy one of the following
tests:
(1) The "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not be more than the
"Actual Deferral Percentage" of the Non-Highly Compensated
Participant group multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the
Highly Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
shall not be more than two percentage points. Additionally,
the "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
multiplied by 2. The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-1 (b) are incorporated herein by
reference.
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<PAGE>
However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method
described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions under any
other plan maintained by the Employer or an Affiliated
Employer shall have his actual contribution ratio reduced
pursuant to Regulation 1.401(m)-2, the provisions of which are
incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated Participant
group and Non-Highly Compensated Participant group for a Plan Year, the
average of the ratios, calculated separately for each Participant in
such group, of the amount of Employer Elective Contributions allocated
to each Participant's Elective Account for such Plan Year, to such
Participant's "414(s) Compensation" for such Plan Year. The actual
deferral ratio for each Participant and the "Actual Deferral
Percentage" for each group shall be calculated to the nearest
one-hundredth of one percent for Plan Years beginning after December
31, 1988. Employer Elective Contributions allocated to each Non-Highly
Compensated Participant's Elective Account shall be reduced by Excess
Deferred Compensation to the extent such excess amounts are made under
this Plan or any other plan maintained by the Employer and any matching
contributions which relate to such Excess Deferred Compensation.
(c) For the purpose of determining the actual deferral ratio
of a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all
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<PAGE>
eligible Family Members (including Highly Compensated
Participants). However, in applying the $200,000 limit to
414(s) Compensation," for Plan Years beginning after December
31, 1988, Family Members shall include only the affected
Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect to Plan Years
beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance
with this paragraph.
(2) The Employer Elective Contributions and "414(s)
Compensation" of all Family Members shall be disregarded for
purposes of determining the "Actual Deferral Percentage" of
the Non-Highly Compensated Participant group except to the
extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member
of more than one family group in a plan, all Participants who
are members of those family groups that include the
Participant are aggregated as one family group in accordance
with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly
Compensated Participant and a Non-Highly Compensated Participant shall
include any Employee eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was made or
suspended pursuant to Section 4.2.
(e) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include cash
or deferred arrangements are considered one plan for the purposes of
Code Section 401(a)(4) or 410(b) (other than Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December
31, 1988), the cash or deferred arrangements included in such plans
shall be treated as one
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<PAGE>
arrangement. In addition, two or more cash or deferred arrangements may
be considered as a single arrangement for purposes of determining
whether or not such arrangements satisfy Code Sections 401(a)(4),
410(b) and 401(k). In such a case, the cash or deferred arrangements
included in such plans and the plans including such arrangements shall
be treated as one arrangement and as one plan for purposes of this
Section and Code Sections 401(a)(4), 410(b) and 401(k). Plans may be
aggregated under this paragraph (e) only if they have the same plan
year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) or 409 may not be combined with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and Code Sections 401(a)(4), 410(b)
and 401(k).
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part
of an employee stock ownership plan as defined in Code Section
4975(e)(7) or 409 for Plan Years beginning after December 31, 1988) of
the Employer or an Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred arrangement for
the purpose of determining the actual deferral ratio with respect to
such Highly Compensated participant. However, for Plan Years beginning
after December 31, 1988, if the cash or deferred arrangements have
different plan years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same calendar
year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a), the Administrator shall adjust Excess Contributions
pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month
following the end of each Plan Year, the Highly Compensated Participant
having the highest actual deferral ratio shall have his portion of
Excess Contributions distributed to him until one of the tests set
forth in Section 4.5(a) is satisfied, or until his actual deferral
ratio equals the actual deferral ratio of the Highly Compensated
Participant having the second highest actual deferral ratio. This
process shall continue until one of the tests set forth in Section
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<PAGE>
4.5(a) is satisfied. For each Highly Compensated Participant, the
amount of Excess Contributions is equal to the Elective Contributions
on behalf of such Highly Compensated Participant (determined prior to
the application of this paragraph) minus the amount determined by
multiplying the Highly Compensated Participant's actual deferral ratio
(determined after application of this paragraph) by his "414(s)
Compensation." However, in determining the amount of Excess
Contributions to be distributed with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be
reduced by any Excess Deferred Compensation previously distributed to
such affected Highly Compensated Participant for his taxable year
ending with or within such Plan Year and any matching contributions
which relate to such Excess Deferred Compensation.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of
the Plan Year following the Plan Year to which they
are allocable;
(ii) shall be made first from unmatched Deferred
Compensation and, thereafter, simultaneously from
Deferred Compensation which is matched and matching
contributions which relate to such Deferred
Compensation;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a
distribution of Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of
Excess Contributions and Income.
(3) The determination and correction of Excess Contributions
of a Highly Compensated Participant whose actual deferral
ratio is determined under the family aggregation rules shall
be accomplished by reducing the actual deferral ratio as
required herein, and the Excess
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<PAGE>
Contributions of a Highly Compensated Participant whose
actual deferral ratio is determined under the family
aggregation rules shall be accomplished by reducing the
actual deferral ratio as required herein, and the Excess
Contributions for the family unit shall then be allocated
among the Family Members in proportion to the Elective
Contributions of each Family Member that were combined to
determine the group actual deferral ratio. Notwithstanding
the foregoing, with respect to Plan Years beginning prior to
January 1, 1990, compliance with the Regulations then in
effect shall be deemed to be compliance with this paragraph.
(b) Within twelve (12) months after the end of the Plan Year,
the Employer may make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an amount sufficient
to satisfy one of the tests set forth in Section 4.5(a). Such
contribution shall be allocated to the Participant's Elective Account
of each Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated
Participants.
(c) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.5(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order
provided in Section 4.6(a) each affected Highly Compensated
Participant's deferral election made pursuant to Section 4.2 by an
amount necessary to satisfy one of the tests set forth in Section
4.5(a).
4.7 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation
year" shall equal the lesser of: ( 1) $30,000 (or, if greater,
one-fourth of the dollar limitation in effect under Code Section
415(b)(1)(A)) or (2) twenty-five percent (25%) of the Participant's
"415 Compensation" for such "limitation year." For any short
"limitation year," the dollar limitation in (1) above shall be reduced
by a fraction, the numerator of which is the number of full months in
the short "limitation year" and the denominator of which is twelve
(12).
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<PAGE>
(b) For purposes of applying the limitations of Code Section
415, "annual additions" means the sum credited to a Participant's
accounts for any "limitation year" of (1) Employer contributions, (2)
Employee contributions for "limitation years" beginning after December
31, 1986, (3) forfeitures, (4) amounts allocated, after March 31, 1984,
to an individual medical account, as defined Ln Code Section 415(1)(2)
which is part of a pension or annuity plan maintained by the Employer
and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition" under Code Section
415(1)(11.
(c) For purposes of applying the limitations of Code Sect~on
415, the transfer of funds from one qualified plan to another is not an
"annual addition." In addition, the following are not Employee
contributions for the purposes of Section 4.7(b)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant
from the Plan; (3) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an employee pursuant to Code Section
411(a)(3)(D) (mandatory contributions); and (5) Employee contributions
to a simplified employee pension excludable from gross income under
Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section
415, the "limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A)
stated in paragraph (a)(1) above shall be adjusted annually as provided
in Code Section 415(d)
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<PAGE>
pursuant to the Regulations. The adjusted limitation is effective as of
January 1st of each calendar year and is applicable to "limitation
years" ending with or within that calendar year.
(f) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined benefit plan, and all
qualified defined contribution plans "whether terminated or not) ever
maintained by the Employer shall be treated as one defined contribution
plan.
(g) For the purpose of this Section, if the Employer is a
member of a controlled group of corporations, trades or businesses
under common control (as defined by Code Section 1563(a) or Code
Section 414(b) and (c) as modified by Code Section 415(h)), is a member
of an affiliated service group (as defined by Code Section 414(m)), or
is a member of a group of entities required to be aggregated pursuant
to Regulations under Code Section 414(o), all Employees of such
Employers shall be considered to be employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.
(i)(1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maxim~m "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus
any "annual additions" previously credited to such Participant's
accounts during the "limitation year."
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, "annual additions" will
be credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to creating "annual
additions" to the Participant's accounts under the defined contribution
plan not subject to Code Section 412.
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<PAGE>
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the maximum
"annual additions" for the "limitation year" minus any "annual
additions" previously credited under subparagraphs (1) or (2) above,
multiplied by (B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's accounts under
this Plan without regard to the limitations of Code Section 415 and
(ii) the denominator of which is such "annual additions" for all plans
described in this subparagraph.
(j) If an Employee is (or has been) a Participant in one or
more defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any "limitation
year" may not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the
Participant's projected annual benefits under all the defined benefit
plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar
limitation determined for the "limitation year" under Code Sections
415(b) and (d) or 140 percent of the highest average compensation,
including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year"
beginning after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125 percent of the
sum of the annual benefits under such plans which the Participant had
accrued as of the close of the last "limitation year" beginning before
January 1, 1987, disregarding any changes in the terms and conditions
of the plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate satisfied
the requirements of Code Section 415 for all "limitation years"
beginning before January 1, 1987.
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<PAGE>
(l) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior "limitation years" (including
the annual additions attributable to the Participant's nondeductible
Employee contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to ail welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in Code Section
415(l)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
"limitation years" of service with the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code Sections 415(b)
and (d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first
day of the first "limitation year" beginning after December 31, 1986,
in one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator of this fraction
will be adjusted if the sum of this fraction and the defined benefit
fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the excess of the
sum of the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they
would be computed as of the end of the last "limitation year" beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using the Code
Section 415 limitation applicable to the first "limitation year"
beginning on or after January 1, 1987. The annual addition for any
"limitation year" beginning before January 1, 1987 shall not be
recomputed to treat all Employee contributions as annual additions.
53
<PAGE>
(m) Notwithstanding the foregoing, for any "limitation year"
ln which the Plan is a Top Heavy Plan, 100 percent shall be substituted
for 125 percent in Sections 4.7(k) and 4.7(l) unless the extra minimum
allocation is being provided pursuant to Section 4.4. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.
(n) If the sum of the defined benefit plan fraction and the
defined contribution plan fraction shall exceed 1.0 in any "limitation
year" for any Participant in this Plan, the Administrator shall limit,
to the extent necessary, the "annual additions" to such Participant's
accounts for such "limitation year." If, after limiting the "annual
additions" to such Participant's accounts for the "limitation year,"
the sum of the defined benefit plan fraction and the defined
contribution plan fraction still exceed 1.0, the Administrator shall
then adjust the numerator of the defined contribution plan fraction so
that the sum of both fractions shall not exceed 1.0 in any "limitation
year" for such Participant.
(o) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements
prescribed in this Section shall at all times comply with the
provisions of Code Section 415 and the Regulations thereunder, the
terms of which are specifically incorporated herein by reference.
4.8 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of elective deferrals
(within the meaning of Code Section 402(g)(3)) that may be made with
respect to any Participant under the limits of Section 4.7 or other
facts and circumstances to which Regulation 1.415-6(b)(6) shall be
applicable, the "annual additions" under this Plan would cause the
maximum "annual additions" to be exceeded for any Participant, the
Administrator shall (1) distribute any elective deferrals (within the
meaning of Code Section 402(g)(3)) or return any voluntary Employee
contributions credited for the "limitation year" to the extent that the
return would reduce the "excess amount" in the Participant's accounts
(2) hold any "excess
54
<PAGE>
amount" remaining after, the return of any elective deferrals or
voluntary Employee contributions in a "Section 415 suspense account"
(3) use the "Section 415 suspense account" in the next "limitation
year" (and succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that Participant is
covered by the Plan as of the end of the "limitation year," or if the
Participant is not so covered, allocate and reallocate the "Section 415
suspense account" ln the next "limitation year" (and succeeding
"limitation years" if necessary) to all Participants in the Plan before
any Employer or Employee contributions which would constitute "annual
additions" are made to the Plan for such "limitation year" (4) reduce
Employer contributions to the Plan for such "limitation year" by the
amount of the "Section 4.5 suspense account" allocated and reallocated
during such "limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of
(1) the "annual additions" which would be credited to his account under
the terms of the Plan without regard to the limitations of Code Section
415 over (2) the maximum "annual additions" determined pursuant to
Section 4.7.
(c) For purposes of this Section, "Section 415 suspense
account" shall mean an unallocated account equal to the sum of "excess
amounts" for all Participants in the Plan during the "limitation year."
The "Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
4.9 TRANSFERS FROM QUALIFIED PLANS
(a) with the consent of the Administrator, amounts may be
transferred from other qualified plans by Employees, provided that the
trust from which such funds are transferred permits the transfer to be
made and the transfer will not jeopardize the tax exempt status of the
Plan or Trust or create adverse tax consequences for the Employer. The
amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account." Such account shall
be fully Vested at all times and shall not be subject to Forfeiture for
any reason.
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<PAGE>
(b) Amounts in a Participant's Rollover Account shall be held
by the Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as defined
in Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-1(d).
(d) At Normal Retirement Date, or such other date when the
Participant or his beneficiary shall be entitled to receive benefits,
the fair market value of the Participant's Rollover Account shall
be used to provide additional benefits to the Participants or his
Beneficiary. Any distributions of amounts held in a Participant's
Rollover Account shall be made in a manner which in consistent with and
satisfies the provisions of Section 6.5, including, but not limited to,
all notice and consent requirement of Code Section 417 and 411(a)(11)
and the Regulations thereunder. Furthermore, such amounts shall be
considered as part of a Participant's benefit in determining whether an
involuntary cash-out of benefits without Participant consent may be
made.
(e) The administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account
may be treated as a Directed Investment Account pursuant to Section
4.10.
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<PAGE>
(g) For purposes of this Section, the term "qualified plan"
shall mean any tax qualified plan under Code Section 401(a). The term
"amounts transferred from other qualified plans" shall mean: (i)
amounts transferred to this Plan directly from another qualified plan;
(ii) distributions from another qualified plan which are eligible
rollover distributions and which are either transferred by the employee
to this Plan within sixty (60) days following his receipt thereof or
are transferred pursuant to a direct rollover; (iii) amounts
transferred to this Plan from a conduit individual retirement account
provided that the conduit individual retirement account has no assets
other than assets which (A) were previously distributed to the Employee
by another qualified plan as a lump-sum distribution (B) were eligible
for tax-free rollover to a qualified plan and (C) were deposited in
such conduit individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets; and (iv)
amounts distributed to the Employee from a conduit individual
retirement account meeting the requirements of clause (iii) above, and
transferred by the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement account.
(h) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of
this Section and may also require the Employee to provide an opinion of
counsel satisfactory to the Employer that the amounts to be transferred
meet the requirements of this Section.
(i) notwithstanding anything herein to the contrary, a
transfer directly to this Plan from another qualified plan (or a
transaction having the effect of such a transfer) shall only be
permitted if it will not result in the elimination or reduction of any
"Section 411(d)(6) protected benefit" as described in Section 8.1.
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<PAGE>
4.10 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine
that ale Participants be permitted to direct the Trustee as to the
investment of all or a portion of the interest in any one or more of
their individual account balances. If such authorization is given,
Participants may, subject to a procedure established by the
Administrator and applied in a uniform nondiscriminatory manner, direct
the Trustee in writing to invest any portion of their account in
specific assets, specific funds or other investments permitted under
the Plan and the directed investment procedure. That portion of the
account of any Participant so directing will thereupon be considered a
Directed Investment Account, which shall not share in Trust Fund
earnings.
(b) A separate Directed Investment Account shall be
established for each Participant who has directed an investment.
Transfers between the Participant's regular account and his Directed
Investment Account shall be charged and credited as the case may be to
each account. The Directed Investment Account shall not share in Trust
Fund earnings but it shall be charged or credited as appropriate with
the net earnings, gains, losses and expenses as well as any
appreciation or depreciation in market value during each Plan Year
attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary
Date, and at such other date or dates deemed necessary by the Administrator,
herein called "valuation date," to determine the net worth of the assets
comprising the Trust Fund as it exists on the "valuation date." In determining
such net worth, the Trustee shall value the assets comprising the Trust Fund at
their fair market value as of the "valuation date" and shall deduct all expenses
for which the Trustee has not yet obtained reimbursement from the Employer or
the Trust Fund.
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<PAGE>
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust
Fund which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date." If such
securities were not traded on the "valuation date," or if the exchange on which
they are traded was not open for business on the "valuation date," then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date." Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date," which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date or Early Retirement
Date. However, a Participant may postpone the termination of his employment with
the Employer to a later date, in which event the participation of such
Participant in the Plan, including the right to receive a locations pursuant to
Section 4.4, shall continue until his Late Retirement Date. Upon a Participant's
Retirement Date or attainment of his Normal Retirement Date without termination
of employment with the Employer, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such Participant's Combined
Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute the value of the
deceased Participant's accounts to the Participant's Beneficiary.
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<PAGE>
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections
6.6 and 6.7, to distribute any remaining Vested amounts credited to the
accounts of a deceased Former Participant to such Former Participant's
Beneficiary.
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be
taken into account in determining the amount of the Pre-Retirement
Survivor Annuity.
(d) The Administrator may require such proper proof of death
and such evidence of the right of any person to receive payment of the
value of the account of a deceased Participant or Former Participant as
the Administrator may deem desirable. The Administrator's determination
of death and of the right of any person to receive payment shall be
conclusive.
(e) Unless otherwise elected in the manner prescribed in
Section 6.6, the Beneficiary of the death benefit shall be the
Participant's spouse, who shall receive such benefit in the form of a
Pre-Retirement Survivor Annuity pursuant to Section 6.6. Except,
however, the Participant may designate a Beneficiary other than his
spouse if:
(1) the Participant and his spouse have validly waived the
Pre-Retirement Survivor Annuity in the manner prescribed in
Section 5.6, and the spouse has waived his or her right to be
the Participant's Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a
court order to such effect (and there is no "qualified
domestic relations order" as defined in Code Section 414(p)
which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made
on a form satisfactory to the Administrator. A Participant may at any
time revoke his
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<PAGE>
designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator.
However, the Participant's spouse must again consent in writing to any
change in Beneficiary unless the original consent acknowledged that the
spouse had the right to limit consent only to a specific Beneficiary
and that the spouse voluntarily elected to relinquish such right. In
the event no valid designation of Beneficiary exists at the time of the
Participant's death, the death benefit shall be payable to his estate.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Combined Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of the
Vested portion of such Terminated Participant's Combined Account and
invest the aggregate amount thereof in a separate, federally insured
savings account, certificate of deposit, common or collective trust
fund of a bank or a deferred annuity. In the event the Vested portion
of a Participant's Combined Account is not segregated, the amount shall
remain in a separate account for the Terminated Participant and share
in allocations pursuant to Section 4.4 until such time as a
distribution is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability, Early or Normal Retirement). However, at the election of
the Participant, the
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Administrator shall direct the Trustee to cause the entire Vested
portion of the Terminated Participant's Combined Account to be payable
to such Terminated Participant after a 1-Year Break in Service. Any
distribution under this paragraph shall be made in a manner which is
consistent with and satisfies the provisions of Section 6.5, including,
but not limited to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed $3,503
and has never exceeded $3,500 at the time of any prior distribution,
the Administrator shall direct the Trustee to cause the entire Vested
benefit to be paid to such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall
be deemed to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
Years of Service Percentage
Less than 3 0 %
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %
(c) Notwithstanding the vesting provided for in paragraph (b)
above, for any Top Heavy Plan Year, the Vested portion of the
Participant's Account of any Participant who has an Hour of Service
after the Plan becomes top heavy shall be a percentage of the total
amount credited to his Participant's Account determined on the basis of
the Participant's number of Years of Service according to the following
schedule:
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<PAGE>
Vesting Schedule
Years of Service Percentage
Less than 2 0 %
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
If in any subsequent Plan Year, the Plan ceases to be a Top
Heavy Plan, the Administrator shall revert to the vesting schedule in
effect before this Plan became a Top Heavy Plan. Any such reversion
shall be treated as a Plan amendment pursuant to the terms of the Pian.
(d) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer's contributions to the Plan or
upon any full or partial termination of the Plan, all amounts credited
to the account of any affected Participant shall become 100% Vested and
shall not thereafter be subject to Forfeiture.
(e) The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be reduced as the
result of any direct or indirect amendment to this Plan. For this
purpose, the Plan shall be treated as having been amended if the Plan
provides for an automatic change in vesting due to a change in top
heavy status. In the event that the Plan is amended to change or modify
any vesting schedule, a Participant with at least three (3) Years of
Service as of the expiration date of the election period may elect to
have his nonforfeitable percentage computed under the Pian without
regard to such amendment. Notwithstanding the foregoing, for Plan Years
beginning before January 1, 1989, or with respect to Employees who fail
to complete at least one (1) Hour of Service in a Plan Year beginning
after December 31, 1988, five (5) shall be substituted for three (3) in
the preceding sentence. If a Participant fails to make such election,
then such Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of
the amendment and shall end 60 days after the latest of:
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(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(f)(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate ln the Plan in the same manner as if such termination had
not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service, and such
Former Participant had received, or was deemed to have received, a
distribution of his entire Vested interest prior to his reemployment,
his forfeited account shall be reinstated only if he repays the full
amount distributed to him before the earlier of five (5) years after
the first date on which the Participant is subsequently reemployed by
the Employer or the close of the first period of five (5) consecutive
1-Year Breaks in Service commencing after the distribution, or in the
event of a deemed distribution, upon the reemployment of such Former
Participant. In the event the Former Participant does repay the full
amount distributed to him, or in the event of a deemed distribution,
the undistributed portion of the Participant's Account must be restored
in full, unadjusted by any gains or losses occurring subsequent to the
Anniversary Date or other valuation date coinciding with or preceding
his termination. The source for such reinstatement shall first be any
Forfeitures occurring during the year. If such source is insufficient,
then the Employer shall contribute an amount which is sufficient to
restore any such forfeited Accounts provided, however, that if a
discretionary contribution is made for such year pursuant to Section
4.1(c), such contribution shall first be applied to restore any such
Accounts and the remainder shall be allocated in accordance with
Section 4.4.
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(3) If any Former Participant is reemployed after a 1-Year
Break in Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a 1-Year Break in Service, his
pre-break and post-break service shall be used for computing
Years of Service for eligibility and for vesting purposes only
after he has been employed for one (1) Year of Service
following the date of his reemployment with the Employer;
(ii) Any Former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting
from Employer contributions shall lose credits otherwise
allowable under (i) above if his consecutive 1-Year Breaks in
Service equal or exceed the greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to
pre-break service shall not be increased as a result of
post-break service;
(iv) If a Former Participant who has not had his Years of
Service before a 1-year Break in Service disregarded pursuant
to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively from
his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant
to (ii) above completes a Year of Service (a 1-Year Break in
Service previously occurred, but employment had not
terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he completes
one (1) Year of Service.
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(g) In determining Years of Service for purposes of vesting
under the Pian, Years of Service prior to the vesting computation
period in which an Employee attained his eighteenth birthday shall be
excluded.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a
Participant who is married on the "annuity starting date" and who does
not die before the "annuity starting date" shall receive the value of
all of his benefits in the form of a joint and survivor annuity. The
joint and survivor annuity is an annuity that commences immediately and
shall be equal in value to a single life annuity. Such joint and
survivor benefits following the Participant's death shall continue to
the spouse during the spouse's lifetime at a rate equal to 50% of the
rate at which such benefits were payable to the Participant. This joint
and 50% survivor annuity shall be considered the designated qualified
joint and survivor annuity and automatic form of payment for the
purposes of this Plan. However, the Participant may elect to receive a
smaller annuity benefit with continuation of payments to the spouse at
a rate of seventy-five percent (75%) or one hundred percent (100%) of
the rate payable to a Participant during his lifetime, which
alternative joint and survivor annuity shall be equal in value to the
automatic joint and 50% survivor annuity. An unmarried Participant
shall receive the value of his benefit in the form of a life annuity.
Such unmarried Participant, however, may elect in writing to waive the
life annuity. The election must comply with the provisions of this
Section as if it were an election to waive the joint and survivor
annuity by a married Participant, but without the spousal consent
requirement. The Participant may elect to have any annuity provided for
in this Section distributed upon the attainment of the "earliest
retirement age" under the Plan. The "earliest retirement age" is the
earliest date on which, under the Plan, the Participant could elect to
receive retirement benefits.
(2) Any election to waive the joint and survivor annuity must
be made by the Participant in writing during the election
period and be consented to by the Participant's spouse. If the
spouse is legally incompetent to give consent, the spouse's
legal guardian, even if such
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guardian is the Participant, may give consent. Such election
shall designate a Beneficiary (or a form of benefits) that may
not be changed without spousal consent (unless the consent of
the spouse expressly permits designations by the Participant
without the requirement of further consent by the spouse).
Such spouse's consent shall be irrevocable and must
acknowledge the effect of such election and to witnessed by a
Plan representative or a notary public. Such consent shall not
be required if it is established to the satisfaction of the
Administrator that the required consent cannot be obtained
because there is no spouse, the spouse cannot be located, or
other circumstances that may be prescribed by Regulations. The
election made by the Participant and consented to by his
spouse may be revoked by the Participant in writing without
the consent of the spouse at any time during the election
period. The number of revocations shall not be limited. Any
new election must comply with the requirements of this
paragraph. A former spouse's waiver shall not be binding on a
new spouse.
(3) The election period to waive the joint and survivor
annuity shall be the 90 day period ending on the "annuity
starting date."
(4) For purposes of this Section, the "annuity starting date"
means the first day of the first period for which an amount is
paid as an annuity, or, in the case of a benefit not payable
to the form of an annuity, the first day on which all events
have occurred which entitle the Participant to such benefit.
(5) With regard to the election, the Administrator shall
provide to the Participant no less than 30 days and no more
than 90 days before the "annuity starting date" a written
explanation of:
(i) the terms and conditions of the joint and
survivor annuity, and
(ii) the Participant's right to make, and the effect
of, an election to waive the joint and survivor
annuity, and
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starting date".
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent
to the distribution.
(e) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits, whether under the Plan or
through the purchase of an annuity contract, shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are incorporated
herein by reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later
of (i) the calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the Participant
retires, provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5) Plan Year period ending
in the calendar year in which he attains age 70 1/2 or, in the
case of a Participant who becomes a "five (5) percent owner"
during any subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be the April 1st
of the calendar year following the calendar year in which such
subsequent Plan Year ends. Alternatively, distributions to a
Participant must begin no later than the applicable April 1st
as determined under the preceding sentence and must be made
over the life of the Participant (or the lives of the
Participant and the Participant's designated Beneficiary) or
the life expectancy of the Participant (or the life
expectancies of the Participant and his designated
Beneficiary) in accordance with Regulations. Notwithstanding
the foregoing, clause (ii) above shall not apply to any
Participant unless the Participant had attained age 70 l/2
before January 1, 1988 and was not a "five (5) percent owner"
at any time during the Plan Year ending with or within the
calendar year in which the Participant attained age 66 1/2 or
any subsequent Plan Year.
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(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
Additionally, for calendar years beginning before 1989,
distributions may also be made under an alternative method
which provides that the then present value of the payments to
be made over the period of the Participant's life expectancy
exceeds fifty percent (50%) of the then present value of the
total payments to be made to the Participant and his
Beneficiaries.
(f) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the case of a
life annuity) shall be redetermined annually in accordance with
Regulations. Life expectancy and joint and last survivor expectancy
shall be computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any
annuity Contract purchased and distributed to a Participant or spouse
shall comply with all of the requirements of the Plan.
(h) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account (employment has not
terminated) and the Participant may increase the Vested percentage in
such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X")
determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance at
the relevant time, D is the
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amount of distribution, and R is the ratio of the account
balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested
Participant who dies before the annuity starting date and who has a
surviving spouse shall have his death benefit paid to his surviving
spouse in the form of a Pre-Retirement Survivor Annuity. The
Participant's spouse may direct that payment of the Pre-Retirement
Survivor Annuity commence within a reasonable period after the
Participant's death. If the spouse does not so direct, payment of such
benefit will commence at the time the Participant would have attained
the later of his Normal Retirement Age or age 62. However, the spouse
may elect a later commencement date. Any distribution to the
Participant's spouse shall be subject to the rules specified in Section
6.6(g).
(b) Any election to waive the Pre-Retirement Survivor Annuity
before the Participant's death must be made by the Participant in
writing during the election period and shall require the spouse's
irrevocable consent in the same manner provided for to Section
6.5(a)(2). Further, the spouse's consent must acknowledge the specific
nonspouse Beneficiary. Notwithstanding the foregoing, the nonspouse
Beneficiary need not be acknowledged, provided the consent of the
spouse acknowledges that the spouse has the right to limit consent only
to a specific Beneficiary and that the spouse voluntarily elects to
relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor
Annuity shall begin on the first day of the Plan Year in which the
Participant attains age 35 and end on the date of the Participant's
death. An earlier waiver (with spousal consent) may be made provided a
written explanation of the Pre-Retirement Survivor Annuity is given to
the Participant and such waiver becomes invalid at the beginning of the
Plan Year in which the Participant turns age 35. In the event a Vested
Participant separates from service prior to the beginning of the
election period, the election period shall begin on the date of such
separation from service.
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(d) With regard to the election, the Administrator shall
provide each Participant within the applicable period, with respect to
such Participant (and consistent with Regulations, a written
explanation of the Pre-Retirement Survivor Annuity containing
comparable information to that required pursuant to Section 6.5(a)(5).
For the purposes of this paragraph, the term "applicable period" means,
with respect to a Participant, whichever of the following periods ends
last:
(1) The period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age 35;
(2) A reasonable period after the individual becomes a
Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity
with respect to the Participant;
(4) A reasonable period ending after Code Section 401(a)(11)
applies to the Participant; or
(5) A reasonable period after separation from service in the
case of a Participant who separates before attaining age 35.
For this purpose, the Administrator must provide the
explanation beginning one year before the separation from
service and ending one year after such separation. If such a
Participant thereafter returns to employment with the
Employer, the applicable period for such Participant shall be
redetermined.
For purposes of applying this Section 6.6(d), a reasonable
period ending after the enumerated events described in paragraphs (2),
(3) and (4) is the end of the two year period beginning one year prior
to the date the applicable event occurs, and ending one year after that
date.
(e) If the present value of the Pre-Retirement Survivor
Annuity derived from Employer and Employee contributions does not
exceed $3,500 and has never
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exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such amount to
the Participant's spouse. No distribution may be made under the
preceding sentence after the annuity starting date unless the spouse
consents in writing. If the value exceeds, or has ever exceeded, $3,500
at the time of any prior distribution, an immediate distribution of the
entire amount may be made to the surviving spouse, provided such
surviving spouse consents in writing to such distribution. Any written
consent required under this paragraph must be obtained not more than 90
days before commencement of the distribution and shall be made in a
manner consistent with Section 6.5(a)(2).
(f)(1) In the event the death benefit is not paid in the form
of a Pre-Retirement Survivor Annuity, it shall be paid to the
Participant's Beneficiary by either of the following methods, as
elected by the Participant (or if no election has been made prior to
the Participant's death, by his Beneficiary), subject to the rules
specified in Section 6.6(g):
(i) One lump-sum payment in cash or in property:
(ii) Payment in monthly, quarterly, semi-annual, or annual
cash installments over a period to be determined by the
Participant or his Beneficiary. After periodic installments
commence, the Beneficiary shall have the right to direct the
Trustee to reduce the period over which such periodic
installments shall be made, and the Trustee shall adjust the
cash amount of such periodic installments accordingly.
(2) In the event the death ben fit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the
Participant, the Administrator may direct the Trustee to segregate the
death benefit into a separate account, and the Trustee shall invest
such segregated account separately, and the funds accumulated in such
account shall be used for the payment of the installments.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a
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Participant shall be made in accordance with the following requirements
and shall otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder. If it is determined pursuant to Regulations
that the distribution of a Participants interest has begun and the
Participant dies before his entire interest has been distributed to
him, the remaining portion of such interest shall be distributed at
least as rapidly as under the method of distribution selected pursuant
to Section 6.5 as of his date of death. If a Participant dies before he
has begun to receive any distributions of his interest under the Plan
or before distributions are deemed to have begun pursuant to
Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, the 5-year distribution requirement of the preceding
paragraph shall not apply to any portion of the deceased Participant's
interest which is payable to or for the benefit of a designated
Beneficiary. In such event, such portion shall be distributed over the
life of such designated Beneficiary (or over a period not extending
beyond the life expectancy of such designated Beneficiary) provided
such distribution begins not later than December 31st of the calendar
year immediately following the calendar year in which the Participant
died. However, in the event the Participant's spouse (determined as of
the date of the Participant's death) is his Beneficiary, the
requirement that distributions commence within one year of a
Participant's death shall not apply. In lieu thereof, distributions
must commence on or before the later of: (1) December 31st of the
calendar year immediately following the calendar year in which the
Participant died; or (2) December 31st of the calendar year in which
the Participant would have attained age 70 1/2. If the surviving spouse
dies before distributions to such spouse begin, then the 5 year
distribution requirement of this Section shall apply as if the spouse
was the Participant.
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(h) For purposes of this Section, the life expectancy of a
Participant and a Participants spouse (other than in the case of a life
annuity) shall be redetermined annually in accordance with Regulations.
Life expectancy and joint and last survivor expectancy shall be
computed using the return multiples in Tables V and VI of Regulation
1.72-9.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution or to commence a series of payments on or as of an
Anniversary Date, the distribution may be made or begun on such date or as soon
thereafter as is practicable. However, unless a Former Participant elects in
writing to defer the receipt of benefits (such election may not result in a
death benefit that is more than incidental), the payment of benefits shall begin
not later than the 60th day after the close of the Plan Year in which the latest
of the following events occurs: (a) the date on which the Participant attains
the earlier of age 65 or the Normal Retirement Age specified herein; (b) the
1Oth anniversary of the year in which the Participant commenced participation in
the Plan; or (c) the date the Participant terminates his service with the
Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be mad to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so
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distributable shall be treated as a Forfeiture pursuant to the Plan. In the
event a Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 65 years,
the Administrator, at the election of the Participant, shall direct the Trustee
to distribute all or a portion of the amount then credited to the accounts
maintained on behalf of the Participant. However, no distribution from the
Participant's Account shall occur prior to 100% vesting. In the event that the
Administrator makes such a distribution, the Participant shall continue to be
eligible to participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59 1/2 except as otherwise permitted under the terms of the Plan.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant in any one
Plan Year up to the lesser of 100% of his Participant's Elective
Account valued as of the last Anniversary Date or other valuation date
or the amount necessary to satisfy the immediate and heavy financial
need of the Participant. Any distribution made pursuant to this Section
shall be deemed to be made as of the first day of the Plan Year or, if
later, the valuation date immediately preceding the date of
distribution, and the Participant's Elective Account shall be reduced
accordingly. Withdrawal under this Section shall be authorized only if
the distribution is on account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of
his dependents (as defined in Code Section 152) or necessary
for these persons to obtain medical care;
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(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Payment of tuition and related educational fees for the
next twelve ( 12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(b) No distribution shall be made pursuant to this Section
unless the Administrator, based upon the Participant's representation
and such other facts as are known to the Administrator, determines that
all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The
amount of the immediate and heavy financial need may include
any amounts necessary to pay any federal, state, or local
income taxes or penalties reasonably anticipated to result
from the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by
the Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and
voluntary Employee contributions will be suspended for at
least twelve (12) months after receipt of the hardship
distribution or, the Participant, pursuant to a legally
enforceable agreement, will suspend his elective deferrals and
voluntary Employee contributions to the Plan and all other
plans maintained by the Employer for at least twelve (12)
months after receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may
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not make elective deferrals for the Participant's taxable year
immediately following the taxable year of the hardship
distribution in excess of the applicable limit under Code
Section 402(g) for such next taxable year less the amount of
such Participant's elective deferrals for the taxable year of
the hardship distribution.
(c) Notwithstanding the above, for Plan Years beginning after
December 31, 1988, distributions from the Participant's Elective
Account pursuant to this Section shall be limited, as of the date of
distribution, to the Participant's Elective Account as of the end of
the last Plan Year ending before July 1, 1989, plus the total
Participant's Deferred Compensation after such date, reduced by the
amount of any previous distributions pursuant to this Section and
Section 6.10.
(d) Notwithstanding the above, distributions from the
Participant's Elective Account pursuant to this Section shall be
limited solely to the Participant's total Deferred Compensation as of
the date of distribution, reduced by the amount of any previous
distributions pursuant to this Section and Section 6.10.
(e) Any distribution made pursuant to this Section shall be
made in a manner which is consistent with and satisfies the provisions
of Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).
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ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined
by the Employer, to invest, manage, and control the Plan assets
subject, however, to the direction of an Investment Manager if the
Trustee should appoint such manager as to all or a portion of the
assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of
their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and
furnish to the Employer and/or Administrator for each Plan Year a
written annual report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by
a majority of their number, but may authorize one or more of them to
sign papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to
keep the Trust Fund invested without distinction between principal and
income and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, bonds and other evidences of
indebtedness or ownership, and real estate or any interest therein. The
Trustee shall at all times in making investments of the Trust Fund
consider, among other factors, the short and long-term financial needs
of the Plan on the basis of information furnished by the Employer. In
making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by
the applicable law for trust investments; however, the Trustee shall
give due regard to any limitations imposed by the Code or the Act so
that at
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all times the Plan may qualify as a qualified Profit Sharing Plan and
Trust.
(b) The Trustee may employ a bank or trust company pursuant to
the terms of its usual and customary bank agency agreement, under which
the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
(c) The Trustee may from time to time with the consent of the
Employer transfer to a common, collective, or pooled trust fund
maintained by any corporate Trustee hereunder, all or such part of the
Trust Fund as the Trustee may deem advisable, and such part or all of
the Trust Fund so transferred shall be subject to all the terms and
provisions of the common, collective, or pooled trust fund which
contemplate the commingling for investment purposes of such trust
assets with trust assets of other trusts. The Trustee may, from time to
time with the consent of the Employer, withdraw from such common,
collective, or pooled trust fund all or such part of the Trust Fund as
the Trustee may deem advisable.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common
law, statutory authority, including the Act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the application of
the purchase money or to inquire into the validity, expediency, or
propriety of any such sale or other disposition, with or without
advertisement;
(c) To vote upon any stocks, bonds, or other securities; to
give general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
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subscription rights or other options, and to make any payments
incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganization or other changes affecting
corporate securities, and to delegate discretionary powers, and to pay
any assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property;
(d) To cause any securities or other property to be registered
in the Trustee's own name or in the name of one or more of the
Trustee's nominees, and to hold any investments in bearer form, but the
books and records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise honey for the purposes of the Plan in
such amount, and upon such terms and conditions, as the Trustee shall
deem advisable; and for any sum so borrowed, to issue a promissory note
as Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to
inquire into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the Plan, to commence
or defend suits or legal or administrative proceedings, and to
represent the Plan in all suits and legal and administrative
proceedings;
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(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of the
Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at
any time or from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect, receive,
and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;
(1) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United
States government obligations;
(n) To invest in shares of investment companies registered
under the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time,
with assets belonging to any other qualified employee pension benefit
trust created by the Employer or an affiliated company of the Employer,
and to commingle such assets and make joint or common investments and
carry joint accounts on behalf of this Plan and such other trust or
trusts, allocating undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts in accordance
with their respective interests;
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(r) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the
Trustee shall be exercised in the sole fiduciary discretion of the
Trustee. However, if Participants are so empowered by the
Administrator, each Participant may direct the Trustee to separate and
keep separate all or a portion of his account; and further each
Participant is authorized and empowered, in his sole and absolute
discretion, to give directions to the Trustee pursuant to the procedure
established by the Administrator and in such form as the Trustee may
require concerning the investment of the Participant's Directed
Investment Account. The Trustee shall comply as promptly as practicable
with directions given by the Participant hereunder. The Trustee may
refuse to comply with any direction from the Participant in the event
the Trustee, in its sole and absolute discretion, deems such directions
improper by virtue of applicable law. The Trustee shall not be
responsible or liable for any loss or expense which may result from the
Trustee's refusal or failure to comply with any directions from the
Participant. Any costs and expenses related to compliance with the
Participant's directions shall be borne by the Participant's Directed
Investment Account.
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make loans
to Participants and Beneficiaries under the following circumstances:
(1) loans shall be made available to all Participants and Beneficiaries
on a reasonably equivalent basis; (2) loans shall not be made available
to Highly Compensated Employees in an amount greater than the amount
made available to other Participants and Beneficiaries; (3) loans shall
bear a reasonable rate of interest; (4) loans shall be adequately
secured; and (5) shall provide for repayment over a reasonable period
of time.
(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other-loans made by the Plan to the
Participant) shall be limited to the lesser of:
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(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date
on which such loan is made, over the outstanding balance of
loans from the Plan to the Participant on the date on which
such loan was made, or
(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
(c) Loans shall provide for level amortization with payments
to be made not less frequently than quarterly over a period not to
exceed five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the time
the loan is made) as a principal residence of the Participant shall
provide for periodic repayment over a reasonable period of time that
may exceed five (5) years.
(d) Any loan made pursuant to this Section where the Vested
interest of the Participant is used to secure such loan shall require
the written consent of the Participant's spouse in a manner consistent
with Section 6.5(a). Such written consent must be obtained within the
90 day period prior to the date the loan is made. However, no spousal
consent shall be required under this paragraph if the total accrued
benefit subject to the security is not in excess of $3,500.
(e) Any loans granted or renewed shall be made pursuant to a
Participant loan program. Such loan program shall be established in
writing and must include, but need not be limited to, the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans
offered;
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(5) the procedure under the program for determining a
reasonable rate of interest;
(6) the types of collateral which may secure a Participant
loan; and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program shall be contained in a separate
written document which, when properly executed, is hereby incorporated
by reference and made a part of the Plan. Furthermore, such Participant
loan program may be modified or amended in writing from time to time
without the necessity of amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of any
kind and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof, shall
be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer's contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
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(b) the gains, or losses, realized by the Trust Fund upon
sales or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund;
and
(e) such further information as the Trustee and/or
Administrator deems appropriate. The Employer, forthwith upon its
receipt of each such statement of account, shall acknowledge receipt
thereof in writing and advise the Trustee and/or Administrator of its
approval or disapproval thereof. Failure by the Employer to disapprove
any such statement of account within thirty (30) days after its receipt
thereof shall be deemed an approval thereof. The approval by the
Employer of any statement of account shall be binding as to all matters
embraced therein as between the Employer and the Trustee to the same
extent as if the account of the Trustee had been settled by judgment or
decree in an action for a judicial settlement of its account in a court
of competent jurisdiction in which the Trustee, the Employer and all
persons having or claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall deprive the
Trustee of its right to have its accounts judicially settled if the
Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan
in accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are
required by Act Section 103 or the Secretary of Labor to be filed with
the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
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election of the Administrator, be paid from the Trust Fund.
(b) If done or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a
written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by
registered or certified mall, addressed to such Trustee at his last
known address, at least thirty (30) days before its effective date, a
written notice of his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with
all the estate, rights, powers, discretions, and duties of his
predecessor with like respect as if he were originally named as a
Trustee herein. Until such a successor is appointed, the remaining
Trustee or Trustees shall have full authority to act under the terms of
the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
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(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either to) included as part
of the annual statement of account for the Plan Year required under
Section 7.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than
the due date of the annual statement of account for the Plan Year. The
procedures set forth in Section 7.7 for the approval by the Employer of
annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such
special statement in the manner provided in Section 7.7 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty
or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 7.7 and this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee
at the direction of the Administrator shall transfer the Vested interest, if
any, of such Participant in his account to another trust forming part of a
pension, profit sharing or stock bonus plan maintained by such Participant's new
employer and represented by said employer in writing as meeting the requirements
of Code Section 401(a), provided that the trust to which such transfers are made
permits the transfer to be made.
7.11 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributes in a direct rollover.
(b) For purposes of this Section the following definitions
shall apply:
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(1) An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the
distributed except that an eligible-rollover distribution does
not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributed and the distributes designated beneficiary, or
for a specified period of ten years or more; any distribution
to the extent such distribution is required under Code section
401(a)(9); and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(2) An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an
annuity plan described in Code Section 403(a), or a qualified
trust described in Code Section 401(a), that accepts the
distributes eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employees surviving spouse
and the Employee's or former Employees spouse or former spouse
who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p), are
distributees with regard to the interest of the spouse or
former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
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7.12 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying Employer
securities" and "qualifying Employer real property," as those terms are defined
in the Act, provided, however, that the Trustee shall not be permitted to
acquire any qualifying Employer securities or qualifying Employer real property
if, immediately after the acquisition of such securities or property, the fair
market value of all qualifying Employer securities and qualifying Employer real
property held by the Trustee hereunder should amount to more than 100% of the
fair market value of all the assets in the Trust Fund.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. Any such amendment
shall be adopted by formal action of the Employer's board of directors
and executed by an officer authorized to act on behalf of the Employer.
However, any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be made with
the Trustee's and Administrators written consent. Any such amendment
shall become effective as provided therein upon its execution. The
Trustee shall not be required to execute any such amendment unless the
Trust provisions contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it
authorizes or permits any part of the Trust Fund (other than such part
as is required to pay taxes and administration expenses) to be used for
or diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction
in the amount credited to the account of any Participant; or causes or
permits any portion of the Trust Fund to revert to or become property
of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
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benefits" the result of which is a further restriction on such benefit
unless such protected-benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any full or partial termination, all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested as provided in Section 6.4 and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be allocated
to the accounts of all Participants in accordance with the provisions
hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to Participants
in a manner which is consistent with and satisfies the provisions of
Section 6.5. Distributions to a Participant shall be made in cash or in
property or through the purchase of irrevocable nontransferable
deferred commitments from an insurer. Except as permitted by
Regulations, the termination of the Plan shall not result in the
reduction of "Section 411(d)(6) protected benefits" in accordance with
Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer,merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
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ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to the extent a Participant
or Beneficiary is indebted to the Plan, as a result of a loan from the
Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall be paid by the
Trustee to the Trustee or the Administrator, at the direction of the
Administrator, to apply against or discharge such loan indebtedness.
Prior to making a payment, however, the Participant or Beneficiary must
be given written notice by the Administrator that such loan
indebtedness is to be so paid in whole or part from his Participant's
Combined Account. If the Participant or Beneficiary does not agree that
the loan indebtedness is a valid claim against his Vested Participant's
Combined Account, he shall be entitled to a review of the validity of
the
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claim in accordance with procedures provided in Sections 2.12 and 2.13.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of South Carolina, other than its laws respecting
choice of law, to the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
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9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan or of
the Trust, by termination of either, by power of revocation or
amendment, by the happening of any contingency, by collateral
arrangement or by any other means, for any part of the corpus or income
of ar.y trust fund maintained pursuant to the Plan or any funds
contributed thereto to be used for, or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants, or their
Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan attributable to
the excess contributions say not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted
by the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the funds such Fiduciary handles; provided, however,
that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount
of funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Act Section 412(a)(2)), and the bond shall be in a form approved
by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.
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9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
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9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
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9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification,
then the Plan may return such contributions to the Employer within one
year after such determination, provided the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(e), any contribution by the Employer to the
Trust Fund is conditioned upon the deductibility of the contribution by
the Employer under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
98
<PAGE>
IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Signed, sealed, and delivered in the presence of:
FIRST FEDERAL SAVINGS & LOAN
ASSOCIATION OF SPARTANBURG
/s/ Amelia Thompson By:/s/ Billy S. Painter
EMPLOYER
/s/ Tina Tucker
WITNESS AS TO EMPLOYER
TRUSTEE COMMITTEE OF FIRST
FEDERAL SAVINGS & LOAN ASSOC.
/s/ Amelia Thompson By:/s/ Cheryl B. Pack
TRUSTEE
/s/ Tina Tucker
WITNESS AS TO TRUSTEE
ATTEST/s/ Robert L. Handell, Sect.
99
<PAGE>
<PAGE>
EXHIBIT 10.6
FORM OF DIRECTOR EMERITUS PLAN
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
DIRECTOR EMERITUS PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Association hereby establishes this Plan upon the terms and
conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of this Plan is to reward and retain Directors of
experience and ability in key positions of responsibility by providing such
Directors with a benefit upon their retirement from the Board, and as
compensation for their past services to the Association and as an incentive to
perform such services in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
"Association" means First Federal Savings and Loan Association of
Spartanburg, Spartanburg, South Carolina.
"Board" means the Board of Directors of the Association.
"Change in Control" shall mean an event deemed to occur if and when
(a)there occurs a change in control of the Association or the Holding Company
within the meaning of the Home Owners Loan Act of 1933 and 12 C.F.R. Part 574,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company or the Association representing twenty-five percent
(25%) or more of the combined voting power of the Company's or the Association's
then outstanding securities, (c) the membership of the board of directors of the
Company or the Association changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the
<PAGE>
date of adoption of this Plan) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the Company or the Association
approve a merger, consolidation, sale or disposition of all or substantially all
of the Company's or the Association's assets, or a plan of partial or complete
liquidation. If any of the events enumerated in clauses (a) - (d) occur, the
Board shall determine the effective date of the change in control resulting
therefrom, for purposes of the Plan.
"Change in Control Payment" shall mean a lump-sum amount equal to three
(3) times the amount received by a Director for attendance at regular monthly
Board meetings (or, in the case of a Director Emeritus, the amount received by
the Director Emeritus pursuant to Section 5.01(b)) during the twelve (12) month
period ending on the last day of the month preceding the effective date of a
Change in Control.
"Company" means FirstSpartan Financial Corp., a Delaware corporation.
"Director" means a regular member of the Board.
"Director Emeritus" means a Director who assumes such status pursuant
to Sections 5.01, 5.02 or 5.03.
"Disability" shall mean a Director's inability to serve as a member of
the Board (or, in the case of a Director Emeritus, inability to attend meetings
of the Board) by reason of physical or mental illness or condition.
"Plan" means this First Federal Savings and Loan Association of
Spartanburg Director Emeritus Plan.
"Termination for Cause" shall mean termination of service as a Director
because of a Director's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, or a willful violation of any law, rule, or regulation
(other than traffic violations or similar offenses).
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Administration of the Plan. The Plan shall be administered and
interpreted by the Board. The Board shall have all of the powers allocated to it
in this and other Sections of the Plan. Except as limited by the express
provisions of the Plan, the Board shall have sole and complete authority and
discretion (1) to interpret the Plan, (2) to prescribe, amend and rescind rules
and regulations relating to the Plan, and (3) to make other determinations
necessary or advisable for the administration of the Plan. The interpretation
and construction by the Board of any provisions of the Plan shall be final and
binding. No Director shall participate in any deliberations or decisions of the
Board relating to the entitlement of such Director to benefits under the Plan.
2
<PAGE>
4.02 Limitation on Liability. No member of the Board shall be liable
for any determination made in good faith with respect to the Plan or the
benefits payable hereunder. If a member of the Board is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of anything done or not done by him in such capacity under or with respect to
the Plan, the Association shall indemnify such member against expenses
(including attorney's fees), judgements, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interest of the Association and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
ARTICLE V
BENEFITS
5.01 Director Emeritus Benefit.
(a) Each Director elected to the Board on or after March 17,
1987 shall, without further action by the Board, become a Director Emeritus on
the later to occur of (i) the date the Director attains age 72 or (ii) the
expiration date of the Director's then current term of office after attaining
age 72; provided, however, that a Director with at least ten (10) years of
service may, upon attaining age 65, become a Director Emeritus upon application
to, and unanimous approval of, the remaining members of the Board.
(b) Each Director who becomes a Director Emeritus shall
receive fifty (50) percent of the monthly fee payable to a Director for
attendance at the monthly meeting of the Board; provided, however, that such
amount shall be increased to seventy-five (75) percent of the applicable Board
fee in any month that the Director Emeritus attends the monthly Board meeting.
The Board may, in its sole discretion, waive the attendance requirement in the
event of the Disability of a Director Emeritus.
5.02 Disability Benefits. In the event of a Director's Disability, the
Board may, in its sole discretion, confer Director Emeritus status on such
Director without regard to any minimum service or age requirements. A Director
who becomes a Director Emeritus by reason of Disability shall receive the same
monthly fee payable to a Director for attendance at regular Board meetings for
the period of the Director's Disability (as determined by the Board).
5.03 Change in Control. For purposes of this Plan, each Director shall
become a Director Emeritus on the effective date of a Change in Control. Within
thirty (30) days of such date, each Director Emeritus (or in the event of the
Director Emeritus' death prior to payment, the Director Emeritus' surviving
spouse or estate) shall receive a Change in Control Payment in full satisfaction
of any obligation of the Association under this Plan. This Section 5.03 shall
also apply to a person who was a Director Emeritus prior to the effective date
of a Change of Control.
3
<PAGE>
5.04 Source of Benefits. The benefits payable under the Plan shall
constitute an unfunded, unsecured promise by the Association to provide such
benefits in the future, as and to the extent such benefits become payable, and
no person shall, by virtue of this Plan, have any interest in such assets (other
than as an unsecured creditor of the Association).
5.05 Termination for Cause. Notwithstanding anything herein to the
contrary, no benefits shall be payable hereunder to a Director or his surviving
spouse in the event of the Director's Termination for Cause.
ARTICLE VI
ASSIGNMENT
6.01 Except as otherwise provided by this Plan, it is agreed that
neither a Director nor his surviving spouse (if any) shall have any right to
commute, sell, assign, transfer, encumber, pledge or otherwise convey the right
to receive any benefits hereunder, which benefits and the rights thereto are
expressly declared to be nonassignable and nontransferable.
ARTICLE VII
NO RETENTION OF SERVICES
7.01 This Plan shall not be deemed to constitute a contract, express or
implied, for future services by any Director.
ARTICLE VIII
RIGHTS OF THE DIRECTORS
8.01 The rights of a Director and his surviving spouse (if any) under
this Plan shall be solely those of an unsecured creditor of the Association.
ARTICLE IX
MISCELLANEOUS
9.01 Amendment and Termination of Plan. The Board may, by resolution,
at any time amend or terminate the Plan, provided that no such action shall
adversely affect any Director or his surviving spouse who has become entitled to
receive any benefits under the Plan, without such person's written consent.
9.02 Governing Law. The Plan shall be governed and construed under the
laws of the State of South Carolina determined without regard to the choice of
law principles thereof.
9.03 Successor to the Association. The Association, or the Company
acting on behalf of the Association, shall require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all the business or assets of the Association, expressly
and unconditionally to assume and agree to perform the Association's
4
<PAGE>
obligations under this Agreement, in the same manner and to the same extent that
the Association would be required to perform if no such succession or assignment
had taken place.
AS ADOPTED BY THE BOARD OF DIRECTORS
ON _________, 1997.
------------------------------------
Chairman of the Board
5
<PAGE>
EXHIBIT 23.1
CONSENT OF DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-23015 of FirstSpartan Financial Corp. on Form S-1 of our report dated August
23, 1996 (October 1, 1996 as to the 4th paragraph of Note 1) appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the headings "Experts" and "Legal and Tax Opinions" in such
Prospectus.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
April 24, 1997
<PAGE>
EXHIBIT 99.4
APPRAISAL REPORT OF RP FINANCIAL, LC.
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
FIRSTSPARTAN FINANCIAL CORP.
PROPOSED HOLDING COMPANY FOR
FIRST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF SPARTANBURG
Spartanburg, South Carolina
Dated As of:
February 21, 1997
Prepared By:
RP Financial, L.C.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
RP Financial, LC.
Financial Services Industry Consultants
February 21, 1997
Board of Directors
First Federal Savings and Loan Association of Spartanburg
380 East Main Street
Spartanburg, South Carolina 29302-1944
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion of
First Federal Savings and Loan Association of Spartanburg, South Carolina
("First Federal" or the "Association"). The common stock issued in connection
with the Association's conversion will simultaneously be acquired by a holding
company, FirstSpartan Financial Corp. (the "Holding Company"). The conversion
involves the issuance of shares of common stock to depositors, the Association's
employee stock ownership plan ("ESOP"), members of the local community and the
public at large.
This appraisal is furnished pursuant to the requirements of Regulation
563b.7 and has been prepared in accordance with the "Guidelines for Appraisal
Reports for the Valuation of Savings and Loan Associations Converting from
Mutual to Stock Form of Organization" of the Office of Thrift Supervision
("OTS"), including the most recent revisions as of October 21, 1994, and
applicable regulatory interpretations thereof.
DESCRIPTION OF REORGANIZATION
The Board of Directors of the Association has adopted a Plan of
Conversion pursuant to which the Association will convert from a
federally-chartered mutual savings and loan association to a federally-chartered
stock savings and loan association and issue all of its outstanding shares to
the Holding Company. The Holding Company will sell in Subscription and Community
offerings Holding Company stock in the amount equal to the appraised value of
the Association. Immediately following the conversion, the primary assets of the
Holding Company will be the capital stock of the Association and the net
conversion proceeds remaining after purchase of the Association's common stock
by the Holding Company to fund the ESOP loan. The Holding Company will use 50
percent of the net conversion proceeds to purchase the Association's common
stock. It is anticipated that the majority of funds infused into the Association
will be initially deployed into investment securities while up to $1.5 millon
will be utilized to construct and/or expand First Federal's offices. A portion
of the remaining 50 percent of the net conversion proceeds will be used to fund
a loan to the ESOP with the remainder to be used as general working capital.
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
RP FINANCIAL, LC.
Board of Directors
February 21, 1997
Page 2
RP FINANCIAL, LC.
RP Financial, LC. ("RP Financial") is a financial consulting firm
serving the financial services industry nationwide that, among other things,
specializes in financial valuations and analyses of business enterprises and
securities, including the pro forma valuation for savings institutions
converting from mutual-to-stock form. The background and experience of RP
Financial is detailed in Exhibit V-1. We believe that, except for the fee we
will receive for our appraisal and assisting the Association in the preparation
of its business plan, we are independent of the Association and the other
parties engaged by the Association to assist in the stock conversion process.
VALUATION METHODOLOGY
In preparing our appraisal, we have reviewed First Federal's
application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS, and the Holding Company's Form S-1 registration statement as filed
with the Securities Exchange Commission ("SEC"). We have conducted a financial
analysis of the Association that has included due diligence related discussions
with the Association's management; Deloitte & Touche, L.L.P., the Association's
independent auditor; Breyer & Aguggia, the Association's conversion counsel; and
Trident Securities, Inc., which has been retained by the Association as a
financial and marketing advisor in connection with the Holding Company's stock
offering. All conclusions set forth in the appraisal were reached independently
from such discussions. In addition, where appropriate, we have considered
information based on other available published sources that we believe are
reliable. While we believe the information and data gathered from all these
sources are reliable, we cannot guarantee the accuracy and completeness of such
information.
We have investigated the competitive environment within which the
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of First Federal. We have reviewed the economy in
the Association's primary market area and have compared the Association's
financial performance and condition with selected publicly-traded thrift
institutions with similar characteristics as the Association's, as well as all
publicly-traded thrifts. We have reviewed conditions in the securities markets
in general and in the market for thrift stocks in particular, including the
market for existing thrift issues and the market for initial public offerings by
thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of First Federal.
<PAGE>
RP FINANCIAL, LC.
Board of Directors
February 21, 1997
Page 3
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability and may materially impact the value of thrift stocks as a
whole or the Association's value alone. It is our understanding that First
Federal intends to remain an independent institution and there are no current
plans for selling control of the Association as a converted institution. To the
extent that such factors can be foreseen, they have been factored into our
analysis.
Pro forma market value is defined as the price at which First Federal's
stock, immediately upon completion of the conversion offering, would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
VALUATION CONCLUSION
It is our opinion that, as of February 21, 1997, the aggregate pro
forma market value of the shares to be issued was $67,000,000 at the midpoint,
equal to 3,350,000 shares offered at a per share value of $20.00. Pursuant to
the conversion guidelines, the 15 percent offering range indicates a minimum
value of $56,950,000 and a maximum value of $77,050,000. Based on the $20.00 per
share offering price, this valuation range equates to an offering of 2,847,500
shares at the minimum to 3,852,500 shares at the maximum. In the event that the
Association's appraised value is subject to an increase, up to 4,430,375 shares
may be sold at an issue price of $20.00 per share, for an aggregate market value
of $88,607,500, without a resolicitation.
LIMITING FACTORS AND CONSIDERATIONS
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
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 buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial
condition and operations of the Association as of December 31, 1996, the date of
the financial data included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
<PAGE>
RP FINANCIAL, LC.
Board of Directors
February 21, 1997
Page 4
The valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things, any
developments or changes in the Association's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. These updates may also consider changes in other external factors
which impact value including, but not limited to: various changes in the
legislative and regulatory environment, the stock market and the market for
thrift stocks, and interest rates. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
(sig of Ronald S. Riggins)
Ronald S. Riggins
President
(sig of James P. Hennessey)
James P. Hennessey
Senior Vice President
<PAGE>
RP FINANCIAL, LC.
TABLE OF CONTENTS
FIRSTSPARTAN FINANCIAL CORP.
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
PAGE
DESCRIPTION NUMBER
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
Introduction 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.8
Interest Rate Risk Management 1.13
Lending Activities and Strategy 1.14
Asset Quality 1.18
Funding Composition and Strategy 1.19
Subsidiary 1.20
Legal Proceedings 1.20
CHAPTER TWO MARKET AREA
Introduction 2.1
Market Area Demographics 2.2
National Economy 2.3
Local Economy 2.4
Market Area Deposit Characteristics 2.6
CHAPTER THREE PEER GROUP ANALYSIS
Selection of Peer Group 3.1
Financial Condition 3.6
Income and Expense Components 3.9
Loan Composition 3.12
Credit Risk 3.14
Interest Rate Risk 3.16
Summary 3.16
<PAGE>
TABLE OF CONTENTS
FIRSTSPARTAN FINANCIAL CORP.
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
(CONTINUED)
PAGE
DESCRIPTION NUMBER
CHAPTER FOUR VALUATION ANALYSIS
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.5
4. Primary Market Area 4.6
5. Dividends 4.7
6. Liquidity of the Shares 4.8
7. Marketing of the Issue 4.8
A. The Public Market 4.9
B. The New Issue Market 4.13
C. The Acquisition Market 4.16
8. Management 4.16
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.17
Valuation Approaches 4.18
1. Price-to-Book ("P/B") 4.19
2. Price-to-Earnings ("P/E") 4.20
3. Price-to-Assets ("P/A") 4.21
Valuation Conclusion 4.22
<PAGE>
RP FINANCIAL, LC.
LIST OF TABLES
FIRSTSPARTAN FINANCIAL CORP.
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
<S> <C> <C> <C>
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statement 1.11
2.1 Largest Employers in Spartanburg County 2.5
2.2 Unemployment Trends 2.6
2.3 Deposit Summary 2.7
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.7
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.10
3.4 Loan Portfolio Composition and Related Information 3.13
3.5 Credit Risk Measured and Related Information 3.15
3.6 Interest Rate Risk Measured and Net Interest Income Volatility 3.17
4.1 Recent Conversions - Conversion Pricing Characteristics 4.14
4.2 Market Pricing Comparatives 4.15
4.3 Public Market Pricing 4.23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
PAGE 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
First Federal Savings and Loan Association of Spartanburg ("First
Federal" or the "Association") is a federally-chartered mutual savings and loan
association headquartered in Spartanburg, South Carolina. In addition to its
main office facility, which includes a full service branch, the Association
maintains four full service branch offices and a loan production office ("LPO").
All of the Association's full service branch offices are located in Spartanburg
County, which is located within the greater Greenville-Spartanburg-Anderson
metropolitan statistical area ("MSA"). The Association considers its primary
market to consist principally of Spartanburg County, although First Federal
originates loans in contiguous counties including through its LPO in Greenville,
South Carolina. First Federal's deposits are insured up to the maximum allowable
amount by the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation ("FDIC"). At December 31, 1996, First Federal had $375.5
million in assets, $324.0 million in deposits and net worth of $44.8 million, or
11.9 percent of total assets.
FirstSpartan Financial Corp. ("FirstSpartan Financial" or the "Holding
Company"), a Delaware corporation, was recently organized to facilitate the
conversion of First Federal. In the course of the conversion, the Holding
Company will acquire all of the capital stock the Association will issue upon
its conversion from the mutual to stock form of ownership. Going forward,
FirstSpartan Financial will own 100 percent of the Association's stock, and the
Association will be FirstSpartan Financial's sole subsidiary. Approximately 50
percent of the net proceeds received from the sale of common stock will be used
to purchase all of the then to-be-issued and outstanding capital stock of the
Association, with the balance of the proceeds being retained by the Holding
Company. At this time, no other activities are contemplated for FirstSpartan
Financial other than the ownership of the Association, a loan to the
newly-formed employee stock ownership plan ("ESOP"), payment of a regular
quarterly cash dividend equal to 3 percent of the initial offering price on an
annual basis and investment of the cash retained at the Holding Company in
investment securities. In the future, FirstSpartan Financial may increase the
<PAGE>
RP FINANCIAL, LC.
PAGE 1.2
regular dividend or pay special dividends, repurchase shares, diversify its
business through existing or newly-formed subsidiaries and pursue mergers or
acquisitions of banks or thrifts. There are currently no arrangements,
understandings or agreements regarding any such acquisition or merger.
Strategic Overview
First Federal is a community-oriented thrift, with the primary
strategic objective of meeting the borrowing and savings needs of its local
customer base. The Association is headquartered in Spartanburg, South Carolina,
which is situated approximately 70 miles southwest of Charlotte and 170 miles
northeast of Atlanta. First Federal's primary market area in Spartanburg County
is supported by a growing and diversified economy. In fact, the
Greenville-Spartanburg-Anderson MSA is one of the most rapidly growing areas of
South Carolina and has recorded strong population, employment and personal
income growth. The attractive characteristics of the market area, as well as the
Association's location near Charlotte, a major banking center, has fostered
significant competition for the Association from all aspects of the financial
services industry. Most notably, First Federal faces competition from a number
of regional and superregional banks, including three large North Carolina-based
banking companies including NationsBank, Wachovia and First Union. The
Association's growth has been above average despite such competition due to rate
and service competition by First Federal.
Throughout its history, First Federal has pursued a traditional thrift
operating strategy and, thus, 1-4 family permanent mortgage lending has
consistently been the focus of the Association's lending activities.
Construction (primarily speculative construction loans) and home equity loans
represent the primary areas of lending diversification for First Federal and, to
a lesser extent, commercial real estate, multi-family, land loans and
non-mortgage consumer loans.
The Association's emphasis on originating 1-4 family permanent mortgage
loans has generally supported favorable credit quality measures, although the
Association has experienced an increase in the level of loans more than 90 days
delinquent, primarily within the construction loan portfolio. As of December 31,
1996, First Federal's portfolio of non-performing assets ("NPAs") totaled $4.5
million, or 1.20 percent of total assets, which included $2.9 million of
<PAGE>
RP FINANCIAL, LC.
PAGE 1.3
accruing construction loans which were 90 days or more past due. As will be
explained more fully herein, the Association's construction loans have been to
local builders. The market characteristics have attracted a number of national
builders, whose activity and success have adversely impacted the smaller local
builders First Federal typically has as borrowers. Such competition appears to
have increased the supply of new homes and led to a slowdown in new home sales
and increased construction loan delinquencies.
First Federal's emphasis on fixed rate lending funded primarily by
short-term deposits has resulted in a balance sheet that is highly liability
sensitive, as highlighted by the Association's negative 22.5 percent change in
net portfolio value ("NPV") pursuant to a 200 basis point instantaneous and
permanent increase in rates. The Association's philosophy is that over time
earnings can be more fully maximized by incurring some interest rate risk, while
First Federal's strong capital position and resultant favorable interest-earning
assets/interest-bearing liabilities ratio ("IEA/IBL") ratio will sustain
earnings at lower but profitable levels during periods of rising and higher
interest rates. Accordingly, First Federal's yield-cost spread and net interest
margin increased dramatically during the declining and low interest rate
environment that generally prevailed during fiscal years 1992 through 1994; the
margin has been lower more currently.
In addition to maintaining a strong IEA/IBL ratio, strategies pursued
by First Federal to support management of interest rate risk include
diversifying into interest-sensitive types of lending, primarily construction
and home equity loans, and increasing core deposit accounts. At the same time,
however, such diversification along with additional office expansion with
Spartanburg County has increased operating expenses. As a result, the
Association's earnings power has declined in recent years.
Retail deposits have consistently served as the primary funding source
for the Association, as borrowed funds have only been used to a limited extent
in the past and not at all over the last three fiscal years. First Federal's
funding costs have been relatively high, despite the lack of borrowings, as the
Association faces significant competition for deposits and relies primarily on
rate and other inducements to attract and retain deposits. A relatively low
level of transaction and savings accounts has also contributed to First
Federal's higher deposit costs.
<PAGE>
RP FINANCIAL, LC.
PAGE 1.4
The Association's return on assets ("ROA") and return on equity ("ROE")
measures have diminished relative to the strong levels reported from fiscal 1992
through fiscal 1995, due to the following: (1) growth of the loan portfolio
coupled with higher levels of problem assets including weakness observed in the
construction loan portfolio has required the establishment of additional loan
loss provisions; (2) targeted asset growth has resulted in increased operating
expenses without a commensurate increase in revenue; and (3) funding costs have
increased as a result of management's efforts to fund asset growth through
retail deposits in a highly competitive market. Based on the foregoing, it is
apparent that interest rate risk and credit risk represent potential sources of
earnings volatility for the Association in the future.
To enhance the competitive posture of the Association, facilitate
expansion and enhance profitability, the Board of Directors has elected to
convert to the stock form of ownership. The additional capital realized from
conversion proceeds will increase liquidity to support funding of future loan
growth, reduce credit risk by strengthening the Association's equity position
and reduce interest rate risk by enhancing the Association's IEA/IBL ratio,
which will, in turn, reduce the repricing mismatch between the Association's
interest-sensitive assets and interest-sensitive liabilities. The additional
funds realized from the stock offering will serve as an alternative funding
source to deposits in meeting the Association's future funding needs, and,
thereby, support more competitive pricing. Additionally, First Federal's higher
equity-to-assets ratio will also better position the Association to take
advantage of favorable expansion opportunities as they arise. Such expansion
will include the establishment of two additional branch offices in Duncan and
Inman, South Carolina in the second to third calendar quarters of 1997 The
Association's projected internal uses of proceeds are highlighted below.
o Holding Company. The Holding Company will retain
approximately 50 percent of the net conversion proceeds, or
$32.8 million at the midpoint. The Holding Company funds, net
of the loan to the ESOP, are expected to be invested initially
into short- and intermediate-term investment securities with
maturities up to three years. Over time, the Holding Company
funds may be utilized for various corporate purposes,
including payment of dividends and possible repurchases of
common stock consistent with OTS limitations.
o First Federal. Approximately 50 percent of the net proceeds
of the conversion will be infused into the Association in
exchange for all of the Association's newly-
<PAGE>
RP FINANCIAL, LC.
PAGE 1.5
issued stock.
Proceeds infused into the Association will initially be
invested into short-term investments. Over time the proceeds
are expected to be primarily redeployed into the Association's
loan growth.
Overall, it is the Association's objective to pursue growth that will
serve to increase returns, while, at the same time, growth will not be pursued
that increases the overall risk associated with First Federal's operations. The
Association has acknowledged that it intends to operate with excess capital in
the near term, operating with a below market return on equity, until such time
as the new capital can be leveraged in a safe and sound manner over an extended
period of time.
Balance Sheet Trends
From June 30, 1992 through December 31, 1996, First Federal exhibited
annual asset growth of approximately 6.5 percent (see Table 1.1), although
nearly 60 percent of such growth took place in the last 18 months. Asset growth
was funded primarily by expansion of the deposit base as well as growth of
equity. The most recent growth reflected a more aggressive posture in pricing
products and services as well as a stepped-up marketing campaign. The growth in
the balance sheet took place in all major asset categories, including primarily
residential loans which have consistently comprised the largest segment of
interest-earning assets. Overall, notwithstanding the balance sheet growth
realized by the Association, asset composition has remained relatively
consistent with loans receivable, including loans held for sale, typically
approximating 85 to 90 percent of total assets. The balance of First Federal's
interest-earning assets were primarily comprised of cash and investment
securities with maturities generally ranging up to 5 years (the average is much
less). A summary of First Federal's key operating ratios for the past five
fiscal years are presented in Exhibit I-3.
While the balance of loans receivable has increased at a compounded
annual rate of 6.7 percent over the period, the balance dropped in 1993 as the
level of mortgage loans held for sale sharply increased. As lending remained
strong and a portion of the held for sale portfolio were designated as held for
investment, the balance of loans receivable steadily rose as a percent of
assets. The loan composition has steadily increased in terms of the proportion
of higher risk
<PAGE>
<PAGE>
RP Financial, LC.
Page 1.6
Table 1.1
First Federal Savings and Loan Association
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
------------------------------------------------------------------------
1992 1993 1994 1995
--------------- ---------------- ---------------- -----------------
Amount Pct Amount Pct Amount Pct Amount Pct
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $283,332 100.0% $302,516 100.0% $309,879 100.0% $322,735 100.0%
Loans Receivable (net) 247,551 87.4% 231,168 76.4% 247,571 79.9% 267,393 82.9%
Mortgage Loans Held For Sale 565 0.2% 23,837 7.9% 16,516 5.3% 15,324 4.7%
Investment Securities Held to Maturity 12,152 4.3% 20,327 6.7% 22,854 7.4% 5,502 1.7%
Investment Securities Available for Sale 0 0.0% 0 0.0% 0 0.0% 8,228 2.5%
Mortgage-Backed Securities 1,444 0.5% 930 0.3% 470 0.2% 383 0.1%
Cash, Federal Funds Sold and
Interest-Bearing Deposits 12,912 4.6% 17,236 5.7% 11,728 3.8% 15,967 4.9%
Deposits 253,616 89.5% 267,461 88.4% 270,182 87.2% 275,915 85.5%
Total Equity 26,689 9.4% 32,088 10.6% 36,455 11.8% 40,660 12.6%
<CAPTION>
For the Fiscal Year
Ended June 30,
---------------- As of
1996 December 31, 1996
---------------- ------------------
Amount Pct Amount Pct
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Total Amount of:
Assets $356,966 100.0% $375,526 100.0%
Loans Receivable (net) 314,936 88.2% 331,654 88.3%
Mortgage Loans Held For Sale 1,911 0.5% 1,444 0.4%
Investment Securities Held to Maturity 0 0.0% 0 0.0%
Investment Securities Available for Sale 18,155 5.1% 13,492 3.6%
Mortgage-Backed Securities 195 0.1% 128 0.0%
Cash, Federal Funds Sold and
Interest-Bearing Deposits 10,784 3.0% 17,104 4.6%
Deposits 305,831 85.7% 323,951 86.3%
Total Equity 44,154 12.4% 44,832 11.9%
</TABLE>
- ----------------------------
(1) Ratios are as a percent of ending assets.
Source: First Federal's prospectus and audited financial reports. RP Financial
calculations.
<PAGE>
RP FINANCIAL, LC.
PAGE 1.7
weight loans, as permanent 1-4 family loans declined from 83 to 77
percent. The Association has nearly doubled its portfolio of construction loans
up to $31.9 million (9.2 percent of gross loans as of December 31, 1996) and
more than doubled home equity loans up to $32.5 million (9.4 percent of gross
loans as of December 31, 1996). To further illustrate the emphasis of such
lending over the last three and one-half years, construction loans and consumer
loans have represented approximately one-half of all loan originations.
A number of factors have contributed to the relatively strong loan
growth achieved by First Federal. First, the Association has been willing to
accept the interest rate risk associated with originating 15 and 30 year fixed
rate loans for portfolio. Second, the Association has recently sought to
capitalize on its position as the largest independent institution headquartered
in Spartanburg through aggressive marketing, pricing and service. Third, First
Federal has implemented a niche strategy of financing both speculative
construction loans to local builders ("spec loans"), as well as
construction/permanent loans to homeowners.
First Federal's investment securities equaled $13.5 million, or 3.6
percent of total assets, as of December 31, 1996, while cash and cash
equivalents totaled $17.1 million, or 4.6 percent of assets. As of December 31,
1996, the cash and investments portfolio consisted of cash, interest-earning
deposits in other financial institutions, U.S. Treasury and agency obligations,
an investment in an adjustable rate mortgage-backed securities mutual fund and a
nominal amount of mortgage-backed securities ("MBS"). The Association's
philosophy with respect to the management of cash and investments has been to
maintain the portfolio at relatively modest levels in short- to
intermediate-term high quality securities. No major changes to the composition
and practices with respect to the management of the investment portfolio are
anticipated over the near term and, accordingly, the level of cash and
investments is expected to remain at low to moderate levels. The level of cash
and investments is expected to increase initially following conversion although
it is management's expectation that such funds will gradually be redeployed into
whole loans receivable and other specified uses. Additionally, management
anticipates that up to $1.5 million of the funds received in the conversion will
be utilized to construct two de novo offices and expand one existing office.
<PAGE>
RP FINANCIAL, LC.
PAGE 1.8
Over the past five fiscal years, First Federal's funding needs have
been substantially met through retail deposits, internal cash flows and retained
earnings. From fiscal year end 1992 through 1996, the Association's deposits
increased at a compounded annual rate of 5.6 percent, although, like the asset
growth trends, nearly 70 percent of the growth has occurred in the last 18
months. First Federal's use of borrowings has typically been limited, being
principally for the purpose of supplementing the Association's liquidity during
periods of strong loan demand or deposit outflows. Certificates of deposit
("CDs") comprised the largest component of the Association's deposit base,
equaling 69.1 percent of total deposits as of December 31, 1996, slightly higher
than the level three and one-half years previously. The majority of deposits are
taken in by the Association's five full service retail offices from depositors
who reside in First Federal's primary market area (consisting principally of
Spartanburg County).
Positive earnings since June 30, 1992 translates into compounded annual
capital growth of 12.2 percent, outpacing asset growth, thus equity-to-assets
increased from 9.4 percent of assets at June 30, 1992 to 11.9 percent as of
December 31, 1996. At the same time, despite recent growth, the declining
profitability (explored in the following section) has led to a diminishing
return on equity (i.e., capital growth has slowed). All of the Association's
capital is tangible capital, and First Federal maintains capital surpluses
relative to all of its minimum regulatory requirements. The addition of the net
proceeds of the stock offering will serve to strengthen the Association's
financial condition, support planned expansion including additional capital
investment in new office facilities and potential acquisition opportunities
which may arise.
Income and Expense Trends
The Association has reported positive earnings over the past five and
one-half fiscal years, ranging from a low of 0.61 percent of average assets for
the twelve months ended December 31, 1996, to a high of 1.83 percent of average
assets for the fiscal year ended June 30, 1993. In addition, fiscal 1993
earnings (in dollar terms) were also at a peak, and earnings have steadily
declined since despite the recent growth. Consistent with First Federal's
traditional thrift operating mode, net interest income and operating expenses
have been the dominant earnings factors. Non-interest operating income has been
a comparatively modest contributor to the
<PAGE>
RP FINANCIAL, LC.
PAGE 1.9
Association's earnings, and,
similarly, gains and losses from the sale of assets typically have not been a
significant earnings factor, excluding the September 30, 1996 special SAIF
assessment. Credit quality related losses recorded by the Association have
recently been subject to increase in conjunction with growth of the loan
portfolio and the higher level of delinquent loans reported, particularly in the
construction loan portfolio.
Net interest income before provisions for loan losses peaked at 4.26
percent of average assets in fiscal 1993 and trended lower in the subsequent
three fiscal years to 3.44 percent for fiscal 1996. The Association's net
interest margin increased marginally for the twelve months ended December 31,
1996, to 3.54 percent of average assets. The increases recorded in First
Federal's net interest income ratio from fiscal 1992 to 1993 was primarily
attributable to the Association's negative short-term gap position in a
declining interest rate environment. First Federal's improving capital position
and resulting stronger IEA/IBL ratio further supported the upward trend in the
Association's net interest margin. First Federal's net interest margin
subsequently declined due primarily to a higher cost of funds resulting, in
part, from the faster growth strategy. The infusion of stock proceeds will serve
to further strengthen First Federal's capital position and IEA/IBL ratio, which,
in turn, should enhance the net interest margin.
The notable impact of interest rates on First Federal's net interest
margin is further revealed through examination of the Association's historical
net interest rate spreads and yields and costs, as set forth in Exhibit I-5. As
indicated by the general downward trend in First Federal's yield-cost spread
from fiscal 1994 through fiscal 1996, the Association's higher concentration of
short-term interest-sensitive liabilities relative to short-term
interest-sensitive assets served to reduce the Association's spreads and net
interest margin. Other factors contributing to First Federal's higher funding
costs for the period from 1994 through 1996 are attributable to the relatively
strong loan demand experienced by the Association, which necessitated more
aggressive marketing and pricing of deposits. Specifically, the Association's
growth mode was effected through the implementation of a number of strategies as
set forth below, some of which resulted in an increase in the Association's
funding costs: (1) increased the advertising budget in the range of $150,000 to
$300,000 annually; (2) special higher rate CD programs including 7-11 month CDs
and a 13 month CD; (3) utilization of various premium
<PAGE>
RP FINANCIAL, LC.
PAGE 1.10
programs; (4) raised the rate paid on passbook accounts; and (5) implementation
of a VIP checking program with an initial 5 percent annual rate.
Overall, First Federal's funding costs increased by 111 basis points
between fiscal 1994 and 1996 to equal 5.07 percent for the year ended June 30,
1996. Asset yields over the corresponding time frame remained relatively
consistent ranging between 7.80 percent and 8.15 percent. As a result, the
Association's spread declined from 3.94 percent in fiscal 1994 to 3.02 percent
in fiscal 1996. During the last six months, First Federal's cost of funds
diminished modestly and its net interest spread improved to 4.83 percent and
3.21 percent, respectively.
Consistent with the Association's adherence to a traditional thrift
operating philosophy and resultant limited diversification, sources of
non-interest operating income have been a relatively moderate albeit consistent
contributor to the Association's earnings. Throughout the period shown in Table
1.2, sources of non-interest operating income ranged from 0.48 percent to 0.39
percent of average assets. For the twelve months ended December 31, 1996,
non-interest operating income amounted to $1.4 million, or 0.39 percent of
average assets. Fees and service charges earned from originating loans and
retail banking activities have accounted for most of the Association's
non-interest operating income, with the balance of non-interest operating income
consisting of miscellaneous sources of income. In the future, First Federal will
be seeking to increase the level of non-interest income primarily by increasing
the sales of alternative investment products such as annuities and mutual funds.
Additionally, the Association will be seeking to increase the sale of other
non-traditional products such as credit life insurance.
While the Association's non-interest income has remained relatively
consistent as a percent of average assets, First Federal's growth strategy has
resulted in an increase in operating expenses, both in dollar terms and as a
percent of average assets. Specifically, First Federal's operating expenses have
increased significantly since 1993, when operating expense levels equaled $5.1
million, or 1.72 percent of average assets, through the twelve months ended
December 31, 1996, when operating expenses equaled $7.6 million, or 2.13 percent
of average assets. Growth of the Association's operating expense over the last
several fiscal years is attributable to several factors. First, the
Association's growth strategy has resulted in higher expenses in a number of
areas including the promotional and advertising areas and postage and mailing.
Additionally, growth in
<PAGE>
RP Financial, LC.
Page 1.11
Table 1.2
First Federal Savings and Loan Association
Historical Income Statement
(Amount and Percent of Average Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
-----------------------------------------------------------------------------------
1992 1993 1994 1995
----------------- ----------------- ---------------- ------------------
Amount Pct Amount Pct Amount Pct Amount Pct
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $24,825 9.03% $24,167 8.20% $23,153 7.51% $23,835 7.60%
Interest Expense (14,817) -5.39% (11,623) -3.94% (10,387) -3.37% (11,302) -3.60%
Net Interest Income $10,009 3.64% $12,544 4.26% $12,766 4.14% $12,533 4.00%
Provision for Loan Losses (503) -0.18% (208) -0.07% 0 0.00% (9) -0.00%
Net Interest Income after Provisions $9,506 3.46% $12,336 4.19% $12,766 4.14% $12,524 3.99%
Other Non-Interest Income 1,318 0.48% 1,239 0.42% 1,087 0.35% 1,140 0.36%
Operating Expense (5,345) -1.94% (5,061) -1.72% (5,671) -1.84% (6,222) -1.98%
Net Operating Income $5,479 1.99% $8,514 2.89% $8,182 2.65% $7,442 2.37%
Gain on Sale of MBS and Investments $313 0.11% $0 0.00% ($109) -0.04% ($396) -0.13%
Gain on Sale of Mortgage Loans 268 0.10% 326 0.11% (226) -0.07% (1,078) -0.34%
Unrealized Gain/(Loss) on Loans Held for Sale 0 0.00% 0 0.00% (668) -0.22% 668 0.21%
Special SAIF Assessment 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Gains and Net Non-Operating Income $581 0.21% $326 0.11% ($1,003) -0.33% ($806) -0.26%
Net Income Before Tax $6,060 2.20% $8,840 3.00% $7,179 2.33% $6,636 2.12%
Income Taxes (1,962) -0.71% (3,446) -1.17% (2,707) -0.88% (2,495) -0.80%
Net Income (Loss) $4,097 1.49% $5,394 1.83% $4,472 1.45% $4,141 1.32%
Estimated Core Net Income Calculations
Net Income (Loss) Bef. Extra. Items $4,097 1.49% $5,394 1.83% $4,472 1.45% $4,141 1.32%
Adjust. for Net Non-Oper. Income (581) -0.21% (326) -0.11% 1,003 0.33% 806 0.26%
Taxes on Adjustments(2) 221 0.08% 124 0.04% (381) -0.12% (306) -0.10%
Estimated Core Net Income $3,737 1.36% $5,192 1.76% $5,094 1.65% $4,641 1.48%
<CAPTION>
For the Fiscal Year
Ended June 30,
------------------- Twelve Months End.
1996 December 31, 1996
------------------ ----------------------
Amount Pct Amount Pct
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Interest Income $26,481 7.71% $27,601 7.70%
Interest Expense (14,669) -4.27% (14,905) -4.16%
Net Interest Income $11,812 3.44% $12,696 3.54%
Provision for Loan Losses (419) -0.12% (1,090) -0.30%
Net Interest Income after Provisions $11,393 3.32% $11,606 3.24%
Other Non-Interest Income 1,325 0.39% 1,407 0.39%
Operating Expense (7,070) -2.06% (7,618) -2.13%
Net Operating Income $5,648 1.64% $5,395 1.51%
Gain on Sale of MBS and Investments $0 0.00% 0 0.00%
Gain on Sale of Mortgage Loans 0 0.00% 21 0.01%
Unrealized Gain/(Loss) on Loans Held for Sale 0 0.00% 0 0.00%
Special SAIF Assessment 0 0.00% (1,770) -0.49%
Gains and Net Non-Operating Income $0 0.00% ($1,749) -0.49%
Net Income Before Tax $5,648 1.64% $3,646 1.02%
Income Taxes (2,111) -0.61% (1,462) -0.41%
Net Income (Loss) $3,537 1.03% $2,184 0.61%
Estimated Core Net Income Calculations
Net Income (Loss) Bef. Extra. Items $3,537 1.03% $2,184 0.61%
Adjust. for Net Non-Oper. Income 0 0.00% 1,749 0.49%
Taxes on Adjustments(2) 0 0.00% (665) -0.19%
Estimated Core Net Income $3,537 1.03% $3,268 0.91%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 38 percent throughout periods shown.
Source: First Federal's prospectus and audited financial reports. RP Financial
calculations.
<PAGE>
RP FINANCIAL, LC.
PAGE 1.12
NOW accounts has required the Association to employ additional
personnel to service the increased number of NOW accounts. Finally, loan
diversification has also increased the personnel needs.
The Association's operating expenses are subject to upward pressure in
the future due to several factors. First, the Association is planning to
significantly expand its Westgate office which will increase depreciation
expense but business volume is not expected to increase substantially relative
to current levels. The expansion is required as the capacity of the office is
insufficient to handle current customer demand. In addition, the Association
plans to open to additional offices in Duncan (on Highway 290) and Inman, South
Carolina. Both offices represent new markets within Spartanburg County and are
believed to be growth areas with both deposit and lending potential. Both
offices are targeted to be opened late in the second quarter or early in the
third quarter of 1997. Other branches may likely be opened by the Association in
the future within its targeted market but no sites have been identified nor have
the costs been quantified.
Total capital expenditures for the renovation of the Westgate office
and opening of the two de novo offices are anticipated to be in the range of
$1.5 million, and the new fixed assets will be depreciated over a period ranging
from 20 to 30 years. At present, the Association anticipates incurring
additional operating expenses of approximately $640,000 annually as a result of
the opening of these two new offices, including the required staffing. No
revenue is expected from these branches initially and, thus, management
anticipates that the new offices will impair earnings until such time as they
grow to a profitable size over the next few years.
Loan loss provisions reported by First Federal have increased over the
last several fiscal years to equal $1.1 million, or 0.30 percent of average
assets, for the twelve months ended December 31, 1996. The upward trend in the
loan loss provisions is the result of several factors including loan growth,
increased credit risk profile and increased classified and non-performing loans.
As of December 31, 1996, the Association maintained valuation allowances of
$1.65 million, equal to 0.48 percent of net loans receivable and 31.48 percent
of non-performing assets. A later section will more fully discuss the increase
in classified and non-performing assets. Exhibit I-6 sets forth the
Association's loan loss allowance activity since fiscal 1992.
<PAGE>
RP FINANCIAL, LC.
PAGE 1.13
Non-operating items have impacted First Federal's earnings to varying
degrees and have primarily consisted of gains and losses on the sale of mortgage
loans, MBS and investments as well as gains and losses on loans held for sale.
During fiscal 1996, First Federal did not report any non-operating gains or
losses while the Association reported a net non-operating loss of $1.749
million, or 0.49 percent of assets for the twelve months ended December 31,
1996. The most recent non-operating loss was primarily attributable to the
$1.770 million special SAIF assessment; only partially offsetting the loss were
gains on the sale of mortgage loans equal to $21,000. One advantage of the
recent BIF/SAIF legislation is the resulting reduction in First Federal's
deposit insurance premium to the lowest rate.
Interest Rate Risk Management
First Federal's December 31, 1996 NPV analysis shows that the
Association's NPV would decline by approximately $12.9 million, or 22.5 percent,
relative to base case levels (i.e., no change in market interest rates) pursuant
to a 200 basis point instantaneous and permanent increase in interest rates,
while the NPV would increase by $7.7 million, or 13.5 percent assuming a 200
basis point decrease in rates. Assuming a 400 basis point instantaneous and
sustained increase in interest rates, the Association's NPV is estimated to
diminish by $28.2 million or 49.2 percent relative to base case levels.
The foregoing NPV values indicates a liability sensitive position which
has resulted from an emphasis on fixed rate lending funded primarily by
short-term deposits. As of December 31, 1996, fixed rate loans comprised 70.0
percent of loans with maturities of one year or more carrying fixed rates (see
Exhibit I-11). ARM loans secured by 1-4 family properties equaled $75.8 million
or 24.3 percent of total loans with maturities of one year or more as of
December 31, 1996. First Federal manages interest rate risk primarily from the
asset side of the balance sheet, with the intent of maintaining a certain degree
of interest rate risk that will provide for enhanced profitability during
periods of low and declining interest rates. Strategies implemented by the
Association to support control of interest rate risk include limiting the
maturities of the investment portfolio to five years or less, diversifying into
loans with relatively short-terms, such
<PAGE>
RP FINANCIAL, LC.
PAGE 1.14
as consumer and construction loans, and maintaining a strong capital position
which provides for a favorable level of interest-earning assets relative to
interest-bearing liabilities.
The short-term repricing mismatch between the Association's
interest-sensitive assets and liabilities indicates that net interest income
will be highly inconsistent in various interest rate environments, with
declining and low interest rate environments being very beneficial to First
Federal's net interest margin. This is highlighted by the recent extreme
narrowing of the First Federal's yield-cost spread, reflecting in part, higher
short term funding costs for the Association. As noted previously, the
Association's yield-cost spread has narrowed from 3.94 percent during fiscal
1994 to 3.02 percent as of June 30, 1996, while subsequently increasing modestly
to 3.21 percent for the six months ended December 31, 1996. However, given the
Association's current IEA/IBL ratio of 112.4 percent, which will become stronger
following the infusion of conversion proceeds, First Federal has the capacity to
take on a certain degree of interest rate risk and sustain positive, although
lower, core earnings during periods of moderately rising interest rates.
Lending Activities and Strategy
The Association's lending activities have traditionally concentrated on
the origination and retention of 1-4 family mortgage loans (see Exhibits I-9 and
I-10, which reflect loan composition and lending activity, respectively). As of
December 31, 1996, 77.3 percent of First Federal's total loan portfolio was
comprised of permanent mortgage loans secured by residential properties. The
Association's two most prominent areas of lending diversification consist of
construction loans, which accounted for 9.2 percent of gross loans outstanding,
and home equity loans, which equaled 9.4 percent of gross loans outstanding as
of December 31, 1996. The balance of the loan portfolio was comprised of
consumer, commercial real estate, land and commercial business loans. Exhibit
I-11 provides the contractual maturity of the Association's loan portfolio by
loan type, as of December 31, 1996.
First Federal originates both fixed rate and adjustable rate 1-4 family
loans, with substantially all originations currently being retained for
portfolio. In the past, the Association has sold fixed rate loans to support
control of interest rate risk, although the Association has elected to retain
most loans in the current interest rate environment (the Association has sold
some 30
<PAGE>
RP FINANCIAL, LC.
PAGE 1.15
year fixed rate loans). Fixed rate loans offered by the Association currently
have terms ranging from 10 to 30 years and are generally underwritten to conform
to agency secondary market standards, including Federal Home Loan Mortgage
Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA"). Jumbo
loans are typically underwritten to FHLMC/FNMA standards with the exception of
the size of the loan.
Historically, First Federal has not been very aggressive in originating
one-year ARM loans, due, in part, to limited customer demand and the significant
rate discounts (i.e., teaser rates) which must be offered in order to induce
customers to accept a one-year adjustable rate loan. To shorten asset duration
without significantly diluting interest income, First Federal also offers 5 and
10 year adjustable loans, which appeals to many of the professionals relocating
to the Spartanburg area who believe they will subsequently be relocated. First
Federal also offers a convertible ARM loans indexed to the one-year U.S.
Treasury bill rate with a current repricing margin of 2.875 percent, a 1 percent
annual rate cap and a 4 percent lifetime cap.
The Association originates 1-4 family loans up to a loan-to-value
("LTV") ratio of 95.0 percent, with private mortgage insurance ("PMI") being
required for loans in excess of a 80.0 percent LTV ratio. The substantial
portion of 1-4 family mortgage loans originated by First Federal are secured by
residences in the defined normal lending territory.
Construction lending is also an important aspect of First Federal's 1-4
family lending activities, as construction loans constituted the second largest
component of the loan portfolio at December 31, 1996. Construction loans are
almost exclusively originated for the purpose of constructing detached single
family houses. First Federal has two principal types of loans in its
construction loan portfolio. Construction/permanent loans are made to owners and
are converted to permanent loans at the end of the construction phase.
Speculative loans ("spec loans") to builders are also made by the Association
and totaled $20.9 million, or approximately 66 percent of construction loans
outstanding, as of December 31, 1996. Construction/permanent loans require
payment of interest only during the construction period (up to 1 year) and
convert to permanent status for terms up to 30 years. Speculative construction
loans have terms of either 9 or 12 months. The Association originates
owner-occupied construction/permanent loans up to a
<PAGE>
RP FINANCIAL, LC.
PAGE 1.16
LTV ratio of 95.0 percent (with PMI). The rate offered on spec loans typically
exceeds the Association's 1-4 family loan rate. The number of spec loans
extended to a builder at one time is dependent upon the financial strength and
credit history of the builder. As of December 31, 1996, the largest amount
outstanding to one builder was $1.5 million. The origination of construction
loans is expected to remain an active lending area for the Association, in view
of projected population increases, with all of the Association's construction
lending activities continuing to be conducted within the primary market area. At
the same time, the Association will monitor local market conditions in view of
the recent influx of national homebuilders.
On a more limited basis, the Association originates land loans. Land
loans extended by First Federal are primarily to developers who will be
developing residential building lots. Land loans amounted to $2.4 million, or
0.7 percent of gross loans receivable, as of December 31, 1996. Terms of land
loans offered by the Association generally require a LTV ratio of 75 percent or
less of the appraised value and require payment of interest only until the lots
are sold. Land lending is expected to increase modestly in the future although
it will remain a small part of overall loan volumes.
The balance of the mortgage loan portfolio consists of commercial real
estate/multi-family loans, which are collateralized by properties in the
Association's normal lending territory. Commercial real estate/multi-family
loans are generally extended up to a 75.0 percent LTV ratio and require a
debt-coverage ratio of at least 1.2 times. To date, commercial and multi-family
mortgage loans have typically been made only to customers with strong credit
histories and balance sheets. Although the level of commercial real estate
lending has been limited in the past, the Association is currently seeking to
employ an experienced commercial lender with significant experience in the
Spartanburg market to expand such lending. The commercial lender, who would have
substantial experience with a commercial bank, would first establish the loan
underwriting policies and procedures as well as the processing and servicing
functions prior to the origination of any loans.
Diversification into non-mortgage lending consists primarily of
consumer loans, with home equity loans constituting the major area of the
Association's consumer lending activities. Home
<PAGE>
RP FINANCIAL, LC.
PAGE 1.17
equity loans serve as a complement to the Association's 1-4 family mortgage
lending activities, which include both lines of credit and amortizing loans.
Home equity lines of credit account for most of the Association's home equity
loans, which have maximum terms of 15 years and are floating rate loans tied to
the Prime rate. Home equity lines of credit and home improvement loans are
subject to a LTV ratio of below 90 percent for the sum of all debt outstanding
on the property. Credit cards are a relatively new product offered by First
Federal, with VISA cards offered primarily to existing customers. Interest
charged on over due credit balances is at a premium to the Prime rate. The
balance of the consumer loan portfolio consists of loans secured by deposits and
other miscellaneous consumer loans.
Exhibit I-10, which shows the Association's loan originations,
purchases, sales and repayments over the past three fiscal years, highlights
First Federal's lending emphasis on construction and home equity loans.
Refinancing activity supported higher originations of 1-4 family loans during
fiscal 1994, which was substantially offset by repayments and loan sales.
Comparatively, notwithstanding a significant decline in 1-4 family loan
originations during fiscal 1995 and 1996, the Association's loan portfolio
balance exhibited growth as loan principal repayments also slowed.
The sharp drop-off in the Association's fiscal 1995 residential loan
volume ($147.4 million of originations in fiscal 1994 versus $91.5 million of
originations in fiscal 1995) was attributable to the decline in refinancing
activity, as well as First Federal's decision to forego aggressively competing
for ARM loans which were in higher demand in the rising interest rate
environment that prevailed in fiscal 1995. The origination of construction loans
has consistently accounted for a notable portion of First Federal's loan volume
and construction loan volume equaled $42.2 million in fiscal 1996 as compared to
$59.3 million of 1-4 family residential loans. The other significant component
of First Federal's loan originations consisted of consumer loans, including
primarily home equity loans as originations totaled $28.0 million in fiscal 1996
and $15.1 million for the six months ended December 31, 1996.
First Federal's lending strategy going forward is expected to remain
consistent with recent historical trends, and, thus, originations of 1-4 family
permanent mortgage loans, construction
<PAGE>
RP FINANCIAL, LC.
PAGE 1.18
loans and home equity loans are expected to account for the major portion of the
Association's lending activities. Loan purchases may increase in the future as
First Federal, who recently purchased a one-third interest in a start-up
mortgage company in Greenville, South Carolina, anticipates purchasing a portion
of the mortgage company's adjustable rate and construction loan originations.
Asset Quality
As shown in Exhibit I-12, the Association's credit quality was very
strong through the end of fiscal 1994, as the level of non-performing assets to
total assets remained well below one percent. Subsequently, the level of
non-performing assets has increased to a level equal to $5.3 million or 1.58
percent of assets as of December 31, 1996. In addition, restructured loans
amounted to $1.0 million as of December 31, 1996.
The increase in NPAs is primarily attributable to several factors
related to the construction loan portfolio. In the past, for certain borrowers,
the Association has not enforced its requirement that interest on construction
loans be paid monthly. Instead, First Federal has permitted unpaid interest to
accrue and be paid in one lump sum at the end of the construction phase of the
house or when the house was sold. As a result, construction loans contractually
delinquent but still accruing interest is at relatively high levels ($3.7
million or 0.99 percent of total assets). In the future, the Association intends
to enforce this contractual provision and expects that the level of
non-performing assets will decline as a result. Additionally, the management of
First Federal has observed that the favorable market conditions which supported
the construction loan market over the last decade have weakened, as the
marketing period for newly constructed homes has lengthened in some cases.
Additionally, local builders are facing significant competition from a number of
nationally-based home builders which have begun to develop large residential
tracts in Spartanburg.
The Association has established allowances for loan losses in the
normal course of operations to account for the inherent risk in its loan
portfolio. As of December 31, 1996, First Federal maintained allowances for loan
losses equal to $1.6 million, which represents 0.48 percent
<PAGE>
RP FINANCIAL, LC.
PAGE 1.19
of gross loans receivable and 31.48 percent of the non-performing asset balance.
Relative to standards for publicly-traded institutions, these reserve levels are
comparatively lower.
Funding Composition and Strategy
Deposits have consistently been the Association's primary source of
funds (see Exhibits I-13 and I-14), and consisted of the sole source of
interest-bearing liabilities as of December 31, 1996. The Association's deposit
composition has consistently been concentrated in CDs, consisting mostly of
short-term CDs. As of December 31, 1996, the CD portfolio totaled $224.1
million, or 69.2 percent of total deposits, with 78.2 percent of those CDs
having maturities of one year or less. Jumbo CDs (CD accounts with balances of
$100,000 or more) amounted to $21.6 million, or 9.7 percent of total CDs. The
high level of CDs, coupled with the Association's growth objectives and highly
competitive market, have all contributed to a comparatively high degree of rate
sensitivity, which is evidenced by First Federal's high cost of deposits. In
fact, the Association's deposit costs increased dramatically from fiscal 1994 to
fiscal 1996, as First Federal pursued CD growth by paying attractive market
rates on certain CDs.
Lower costing savings and transaction accounts comprise the remainder
of First Federal's deposits, amounting to $99.8 million, or 30.8 percent of
total deposits, at December 31, 1996. Importantly, while passbook and NOW
checking accounts have increased modestly as a percent of total deposits over
the last several years, such growth has not been without costs to the
Association. Specifically, in order to achieve growth in savings and transaction
accounts, First Federal has increased its advertising budget, utilized various
premium programs, and offered interest rates well above the market average to
attract such deposits including a 5 percent rate on its VIP checking account.
As of December 31, 1996, the Association was not utilizing any borrowed
funds and had not utilized any borrowed funds for the prior three fiscal years.
The Association will utilize borrowings however, if necessary, primarily for the
purpose of generating additional liquidity. However, First Federal does not
currently have any plans to utilize borrowed funds.
<PAGE>
RP FINANCIAL, LC.
PAGE 1.20
Subsidiary
First Federal maintains one wholly-owned subsidiary, First Spartan
Service Corporation ("First Spartan"), with an equity investment of $369,000 as
of December 31, 1996. First Spartan sells alternative investment products such
as mutual funds, deferred annuities, and insurance products. In addition, in
August 1996, First Spartan purchased a one-third equity interest in First Trust
Mortgage Corporation ("First Trust"), a start-up mortgage company. First Trust
operates in Greenville, South Carolina, and it is the Association's intention to
purchase a portion of First Trust's mortgage loan volume including primarily
residential ARM loans and construction loans.
Legal Proceedings
The Association is not involved in litigation which management expects
to have a material impact on the Association's financial condition or
operations.
<PAGE>
RP FINANCIAL, LC.
PAGE 2.1
II. MARKET AREA
Introduction
First Federal, based in Spartanburg, South Carolina, serves Spartanburg
and surrounding towns and cities in Spartanburg County through five full service
retail offices. Additionally, First Federal maintains a loan production office
("LPO") in Greenville, South Carolina. Established in 1935, First Federal has
been operated as a community-oriented financial institution.
The Spartanburg County market is part of the larger
Greenville-Spartanburg-Anderson metropolitan statistical area ("MSA") which
possessed a population of approximately 830,563 in 1990; Spartanburg County's
population represents approximately one-third of the MSA population. The MSA and
Spartanburg County is a mix of small- to medium-sized cities and towns located
on the Interstate 85 corridor between Charlotte and Atlanta. Spartanburg is
situated approximately 70 miles southwest of Charlotte and 170 miles northeast
of Atlanta.
Spartanburg serves as the focal point of the market area's economy, and
the manufacturing sector accounts for over one-third of the total employment.
The local economy is influenced by agriculture (particularly peaches), textiles,
machinery, and wood and metal products, among other manufacturing industries.
Spartanburg County's location in the I-85 corridor between Atlanta and
Charlotte, coupled with a "business friendly" government and low cost of living
and labor, has resulted in significant growth in the local economy over the last
several decades. These characteristics coupled with aggressive marketing by the
local and state government have also resulted in an influx of industrial
investment including such prominent companies as BMW Manufacturing Corp and
Hoechst Celanese Corporation. These favorable economic conditions have led to
considerable market entry or local expansion by larger regional financial
institutions. As a result, competition faced by the Association is intense,
particularly with respect to the North Carolina-based banking companies (i.e.,
Wachovia, NationsBank and First Union) as well as other regional and
locally-based financial institutions. Many of the Association's competitors are
much larger in terms of deposits, loans, scope of operations, number of branches
and geographic presence and offer more products and services.
<PAGE>
RP FINANCIAL, LC.
PAGE 2.2
Future growth opportunities for First Federal depends in part upon
growth in the market area, which has been measured by indicators such as
demographic growth trends, the health and stability of the regional and local
economy, and the nature and intensity of the competitive environment for
financial institutions. These factors have been briefly examined to help
determine the growth potential that exists for the Association.
Market Area Demographics
Demographic growth in Spartanburg County has been measured by changes
in population, number of households and median household income, with trends in
those areas summarized by the data presented in Exhibit II-1. Spartanburg
County's 1996 estimated population totaled 242,930, which reflected a 1.2
percent annual growth rate since the beginning of the decade. Population growth
in Spartanburg County modestly exceeded the comparative South Carolina and U.S.
growth rates during the first half of the 1990s, and that trend is expected to
continue for the balance of the decade. Household growth trends paralleled the
population growth trends, and household growth in Spartanburg County modestly
exceeded the South Carolina and U.S. growth rates over the same period.
Income levels in Spartanburg County are generally above the comparative
South Carolina measures but at or below the level registered for the U.S. as a
whole. Specifically, per capita income equaled $15,186 in 1996 for Spartanburg
County, which was above the South Carolina average of $14,527 but below the
national average of $16,738. Likewise, Spartanburg's median household income
figure of $32,946 as of 1996 fell between the state and national average.
Spartanburg County's higher income levels relative to the state average have
been realized through growth of relatively high paying manufacturing jobs in the
Association's market.
Overall, the characteristics of the Association's primary market area
are considered to be favorable in terms of supporting real estate values and the
Association's growth in-market objectives. At the same time, the influx of
national builders, coupled with a large supply of newly-constructed homes, has
adversely affected some local builders and, in some cases, has slowed sales and
increased construction loan delinquencies. At this point, there is inadequate
data to
<PAGE>
RP FINANCIAL, LC.
PAGE 2.3
determine the longer run ramifications of the increased competition from
national builders on the Spartanburg housing market.
National Economy
U.S. economic growth was steady throughout most of calendar 1996. The
year began with a major slowdown in economic activity when January snowstorms
shutdown the economy throughout the Northeast, MidAtlantic and Midwest for
several weeks. The economy rebounded sharply in February and March when pent-up
demand for goods and services sparked a surge in consumer spending, and strong
employment growth brought unemployment down to 5.5 percent. GDP was measured at
2.2 percent in the first quarter. The economy continued to pick up steam in the
second quarter, as low interest rates led to a surge in housing activity, a boom
in durable goods orders supported strong job growth and consumer spending
continued to rise. As a result, second quarter GDP growth was very high at 4.7
percent, the strongest quarterly growth rate in several years. GDP growth rate
began to ebb in the middle of the third quarter due to a combination of the rise
in long-term interest rates due to inflationary concerns, which forced a decline
in the housing markets, and a rise in consumer debt, which reduced orders for
durable goods and resulted in lower retail sales. Third quarter GDP growth was
measured at a more sustainable level of 2.2 percent. Economic growth surged to a
level of 4.7 percent in the fourth quarter as retailers posted strong holiday
sales and exports increased. Overall, GDP growth in calendar 1996 reached 3.4
percent, well above the level of 1.3 percent recorded in calendar 1995. Most
economists do not predict that this growth is sustainable, however, and are
predicting lower GDP growth in the range of 2 to 3 percent for calendar 1997.
The interest rate environment remained favorable to financial
institutions during 1996. After several rate hikes during 1995, the Fed cut the
discount rate at the end of January 1996 in response to sluggish economic
conditions. As unemployment dropped and manufacturing activity increased
throughout the spring months and into the summer, concerns of inflation led to
rising long term interest rates and the 30 year T-Bond rate peaked at 7.19
percent on June 12. The rise in long-term rates during the first six months of
calendar 1996 had the effect of stifling the housing markets by the middle of
the third quarter, which contributed to the slowdown in
<PAGE>
RP FINANCIAL, LC.
PAGE 2.4
economic activity in the third quarter, precluding any action by the Fed.
Inflation fears triggered a sell-off in bonds and a concurrent rise in long term
rates in mid-July and late September, although long term rates have trended
downward since June 1996 due to Fed inaction and a continuation of unusually low
inflation. However, rates have remained above levels of one year ago, and there
is widespread speculation of an increase in rates by the Fed as well as a rise
in the Prime rate in coming months. As of February 21, 1997, the rate on 30-year
T-Bonds was equal to 6.64 percent, 27 basis points above the level of one year
ago.
While a small rise in interest rates is not expected to significantly
adversely impact home sales, a larger increase could be expected to slow housing
demand, which is a concern in view of the Association's construction lending
program and higher recent construction loan delinquencies.
Local Economy
As noted above, First Federal's market area economy is concentrated in
the manufacturing sector, which provides employment for approximately one-third
of the civilian labor force. Beyond manufacturing, wholesale and retail trade,
services and government are other major components of the local economy.
Overall, the economy is fairly diversified, which, along with economic expansion
occurring in the market area, has provided for a relatively stable economic
environment. Table 2.1 provides a list of the largest employers in the
Spartanburg metropolitan area, underscoring the prevalence of textiles and metal
industries. Projected growth in the market area is anticipated to provide a
favorable climate for the primary industries comprising Spartanburg County's
economy.
<PAGE>
RP FINANCIAL, LC.
PAGE 2.5
Table 2.1
First Federal Savings and Loan Association
Largest Employers in Spartanburg County
(500 employees or more)
Amoco Fabrics & Fibers Co. MEMC Electronic Materials
Arrow Automotive Ind. Phillips Fibers
BMG Music R.R. Donnelley & Sons
BMW Manufacturing Corp. Reeves Brothers
Beverage-Air S&S Manufacturing Co.
City of Spartanburg S.C. School for the Deaf & Blind
Cryovac (Div. W.R. Grace) Spartan Mills
Flagstar Corporation Spartanburg Co. School Districts
Helima Helvetion International Spartanburg Herald-Journal
Hoechst Celanese Corporation Spartanburg Regional Medical Center
Inman Mills Spartanburg Steel Products, Inc.
Kohler Company Springs Industries
Leigh Fibers, Inc. Stedor Enterprises, Inc.
Mary Black Memorial Hospital Thomas & Betts Corp.
Mayfair Mills Tietex Corporation
Metromont Materials Toledo Scale Corporation
Michelin Tire Corporation Union Camp Corporation
Milliken & Company University of S.C. at Spartanburg
Source: The Spartanburg Chamber of Commerce
Growth in the local market area has provided for a relatively low level
of unemployment at the present time. Spartanburg County's December 1996
unemployment rate of 4.0 percent fell below the South Carolina and U.S. rates of
5.3 percent and 5.0 percent, respectively, as indicated in Table 2.2. In
contrast to the unemployment trend in the U.S., unemployment in South Carolina
and Spartanburg County was slightly higher compared to the one year earlier
period but remains low by historical standards.
<PAGE>
RP FINANCIAL, LC.
PAGE 2.6
Table 2.2
First Federal Savings and Loan Association
Unemployment Trends(1)
Dec. 1995 Dec. 1996
Region Unemployment Unemployment
United States 5.2% 5.0%
South Carolina 5.0 5.3
Spartanburg County 3.5 4.0
(1) Data is not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
Market Area Deposit Characteristics
Competition for deposits in the Association's primary market area is
intense, which is supported by the size and attractiveness of Spartanburg County
and the greater metropolitan area. Led by NationsBank and Wachovia, commercial
banks maintain a dominant market share of the deposits in Spartanburg County.
The historical deposit data in Table 2.3 indicates that thrifts lost deposit
market share in South Carolina between 1994 and 1996 while savings institutions
maintained their deposit market share in Spartanburg County. Overall, the total
deposit market increased in the South Carolina and Spartanburg markets by
approximately 4 percent.
First Federal's deposit base increased at a 6.4 percent annual rate
from June 30, 1994 to June 30, 1996, which exceeded competitive averages,
leading to an improved market share. In this regard, the Association's
locally-owned status coupled with its strong capital position and niche strategy
has supported the Association's ability to grow. The Association maintains a
relatively strong deposit market share of 15.6 percent in Spartanburg County and
expects to continue to focus its marketing efforts in-market. The two new
branches planned, coupled with the planned expansion of the Westgate office, are
expected to facilitate the Association's efforts to achieve targeted growth
rates.
Given the significant competition faced by First Federal, which can be
expected to intensify in light of the attractive demographic characteristics of
Spartanburg County, the
<PAGE>
--------------------------------------------------------
Table 2.3
First FS&LA of Spartanburg
Deposit Summary
--------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
As of June 30,
-----------------------------------------------------------------------------
1994 1996
------------------------------------- ------------------------------------ Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
State of South Carolina $31,251,639 100.0% 1,344 $33,757,074 100.0% 1,228 3.9%
Commercial Banks 22,295,702 71.3% 1,015 25,207,082 74.7% 920 6.3%
Credit Unions 2,807,358 9.0% 116 2,897,213 8.6% 109 1.6%
Savings Institutions 6,148,579 19.7% 213 5,652,779 16.7% 199 -4.1%
Spartanburg County $1,810,141 100.0% 83 $1,961,997 100.0% 73 4.1%
Commercial Banks 1,275,571 70.5% 63 1,371,664 69.9% 51 3.7%
Credit Unions 35,621 2.0% 7 39,711 2.0% 7 5.6%
Savings Institutions 498,949 27.6% 13 550,622 28.1% 15 5.1%
First FS&LA of Spartanburg 270,001 14.9% 4 305,415 15.6% 5 6.4%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sources: FDIC; OTS; Thompson Credit Union Directory.
<PAGE>
RP FINANCIAL, LC.
PAGE 2.8
Association anticipates continued growth in deposit market share may
also periodically require competitive deposit pricing.
Despite the high number of lenders in the Spartanburg market area, many
of whom are substantially larger than First Federal, the Association in recent
years has consistently ranked at the top residential mortgage lender in terms of
loans closed in Spartanburg County with a market share approximating 20 percent.
First Federal is also a significant competitor with respect to the residential
construction loan market, although there is concern that strong competition from
national builders entering the market coupled with current weakness observed in
certain credits in the construction loan portfolio could adversely impact this
lending niche.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of First Federal's operations versus
a group of comparable public companies (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The basis of the fair
market valuation of First Federal is provided by these public companies. Factors
affecting the Association's value such as financial condition, credit risk,
interest rate risk, and recent operating results can be readily assessed in
relation to the Peer Group. Current market pricing of the Peer Group, subject to
appropriate adjustments to account for differences between First Federal and the
Peer Group, will then be used as a basis for the pro forma valuation of First
Federal's to-be-issued common stock.
Selection of Peer Group
The Peer Group selection process utilized herein is consistent with
procedures set forth in the regulatory valuation guidelines. Accordingly, the
Peer Group is comprised of only those publicly-traded savings institutions whose
common stock is either listed on a national exchange or is NASDAQ listed, since
the market for such companies tends to be more regular than non-listed
companies. Non-listed institutions are considered inappropriate since the
trading activity for thinly-traded stocks is typically highly irregular in terms
of frequency and price and, thus, may not be a reliable indicator of market
value. We have excluded from the Peer Group all publicly-traded subsidiary
institutions of mutual holding companies, because their pricing ratios are
distorted by the minority issuance of their shares. We have also excluded from
the Peer Group those companies under acquisition and/or companies whose market
prices appear to be distorted by speculative factors or unusual operating
conditions. The universe of publicly-traded institutions is included as Exhibit
III-1. Pricing characteristics of the universe of thrift institutions are
included as Exhibit IV-2 (institutions excluded from the calculation of averages
are denoted with a footnote (8)).
Under ideal circumstances, the Peer Group would be comprised of a
minimum of ten South Carolina institutions with capital, earnings, credit
quality and interest rate risk features
<PAGE>
RP FINANCIAL, LC.
PAGE 3.2
comparable to First Federal. However, of the six publicly-traded institutions
based in South Carolina, none were considered to be comparable to First Federal
based on the following factors:
o American Federal Bank. Is subject to a recently announced acquisition
offer from CCB Bancorp and, accordingly, its pricing ratios incorporate
the acquisition premium;
o Coastal Financial Corp. Excluded from the Peer Group primarily based on
its comparatively higher return on equity ("ROE") relative to First
Federal on a pro forma basis and unusual pricing characteristics;
o First Financial Holdings, Inc. First Financial operates with a
substantially higher ROE than the Association's pro forma ROE and its
asset size ($1.6 billion) is significantly larger than that of the
Association;
o First Southeast Financial Corp. This company is highly unusual in that
it paid a one-time special dividend to shareholders of $10.00 per share
in the quarter ended June 30, 1996. The pro forma impact of the large
special dividend has not been fully reflected in trailing twelve month
earnings;
o Palfed, Inc. Excluded based on the actions of a large activist
shareholder which is believed to unduly influence Palfed's pricing
ratios; and
o South Carolina Community Bancshares. With total assets of only $43
million, we believe the comparability to First Federal is limited given
the Association's greater management depth, scope of operations and
more extensive branch network than South Carolina Community Bancshares.
Exhibit III-2 provides summary financial data of all the
publicly-traded South Carolina institutions. Given the absence of comparable
South Carolina institutions, we expanded our search beyond South Carolina and
applied a "screen" to the universe of all public companies in selecting First
Federal's Peer Group, as denoted below.
Screen #1. Southeast institutions with total assets exceeding $150
million. A total of 32 institutions met the selection criteria and ten
were selected for the Peer Group (see Exhibit III-3). The 22
institutions not included in the Peer Group were excluded based on a
number of factors including their status as a recent conversion,
comparatively high ROE, or a significantly different balance sheet
structure or operating strategy (such as a mortgage banking operating
strategy).
Table 3.1 on the following page shows the general characteristics of
each of the Peer Group companies and Exhibit III-4 provides summary demographic
data for the primary market areas served by each of the Peer Group companies.
While the Peer Group is not exactly
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,420 20 12-31 10/94 19.75 194
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 902 8 06-30 12/95 21.75 374
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 686 S 16 12-31 04/95 23.87 168
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 642 S 10 03-31 04/86 16.75 76
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 534 11 12-31 10/94 24.75 116
TSH Teche Holding Company of LA AMEX Southern LA Thrift 380 S 8 09-30 04/95 15.87 55
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 266 5 06-30 01/94 19.25 71
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 176 S 3 09-30 04/96 17.50 75
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 166 S 5 09-30 07/95 17.00 31
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 161 S 3 03-31 03/88 22.00 28
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 03/25/97
<PAGE>
RP FINANCIAL, LC.
PAGE 3.4
comparable to First Federal, we believe that it provides a good representation
of publicly-traded thrifts with operations comparable to those of the
Association and thus forms a good basis for valuation. The following sections
present a comparison of First Federal's financial condition, income and expense
trends, loan composition, interest rate risk and credit risk versus the Peer
Group. The conclusions drawn from the comparative analysis are then factored
into the valuation analysis discussed in the final chapter.
A summary description of the key characteristics of each of the Peer
Group companies, which we determined warranted their inclusion as a comparable
institution to First Federal is detailed below.
o Life Bancorp of Norfolk, VA. Selected based on its strong capital
position, moderate return on equity and emphasis on investment in
residential mortgages, although Life Bancorp maintains a more
significant investment in MBS, larger asset size and more extensive
branch network than First Federal.
o HFNC Financial Corp. of NC. Included in the Peer Group based on its
location approximately 70 miles from the Association's primary market,
strong capital ratio in excess of 20 percent of assets, and similarity
of operations, including a construction lending emphasis.
o ISB Financial Corp. of LA. Warrants inclusion in the Peer Group based
on its strong capital position, relatively comparable asset size and
moderate return on equity. ISB Financial is also primarily a
residential lender, but has diversified its portfolio into non-mortgage
business loans to a greater extent than First Federal.
o Eagle Bancshares of Tucker GA. Included in the Peer Group
notwithstanding its comparatively lower equity ratio based on its
moderate ROE. Eagle Bancshares maintains a much larger construction
portfolio.
o FFVA Financial Corp. of VA. Selected due to comparable asset size,
strong capital position and residential mortgage lending orientation.
o Teche Holding Company of LA. Selected based on its highly comparable
asset size, strong capital level and moderate ROE. Teche Holding
Company also maintains a high level of loans to assets and the
portfolio primarily consists of 1-4 family residential mortgage loans
as well as construction loans.
o First Savings Bank, SSB, of NC. Warrants inclusion in the Peer Group
based on First Savings' comparable asset size, residential lending
emphasis and location in central North
<PAGE>
RP FINANCIAL, LC.
PAGE 3.5
Carolina. Additionally, First
Savings' operates with a very strong capital ratio in excess of 20
percent of assets and a moderate ROE.
o Green Street Financial Corp. of NC. Included in the Peer Group based on
its strong capital ratio and moderate ROE. Additionally, Green Street
Financial is also primarily a residential lender.
o Texarkana First Financial Corp. of AR. Texarkana First maintains a
traditional thrift orientation investing primarily in residential
mortgages, and maintains a similar proportion of its loan portfolio in
construction loans. Other similarities to First Federal include its
strong capital position and moderate ROE.
o Community Financial Corp. of Virginia. Selected based region and
concentration of loan portfolio maintained in 1-4 family loans.
In aggregate, the Peer Group companies are better capitalized than the
industry average (18.17 percent of assets versus 12.89 percent for the all SAIF
average), generate higher earnings (1.00 percent return on assets ("ROA") versus
0.61 percent for the all SAIF average), and generate a comparable ROE (5.83
percent versus 5.26 percent for the all SAIF average). Overall, the Peer Group's
average price-to-book ("P/B") ratio and core price-to-earnings ("P/E") multiple
was relatively comparable to the SAIF average (see below).
Ideally, the Peer Group companies would be comparable to First Federal
in terms of all of the selection criteria, but the universe of publicly-traded
thrifts does not provide for 10 such companies. However, in general, the
companies selected for the Peer Group were quite comparable to First Federal, as
will be highlighted in the following comparative analysis.
As of February 21, 1997
Peer All SAIF
Group Insured
Capital-to-Assets 18.17% 12.89%
ROA 1.00% 0.61%
ROE 5.83% 5.26%
P/B ratio 129.13% 126.24%
P/E multiple 19.45x 19.70x
Price-to-Assets ratio 23.33% 15.40%
Source: Table 4.3 - Chapter IV Valuation Analysis.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.6
Financial Condition
Table 3.2 shows comparative balance sheet measures for First Federal
and the Peer Group, reflecting the expected similarities and some differences
given the selection procedures outlined above. The Association's ratios reflect
balances as of December 31, 1996, while the Peer Group's ratios reflect balances
as of either September 30, 1996 or December 31, 1996. First Federal's
pre-conversion net worth base of 11.9 percent of assets was below the Peer
Group's average net worth ratio of 18.2 percent; however, with the addition of
stock proceeds, the Association's pro forma capital position (consolidated with
the holding company) can be expected to be higher than the Peer Group's ratio.
Both First Federal's and the Peer Group's capital ratios reflect considerable
capital surpluses with respect to the regulatory capital requirements. All of
First Federal's capital was tangible capital, while the Peer Group's capital
included a minor amount of goodwill. First Federal's stronger pro forma capital
position will be favorable from a risk perspective and in terms of future
earnings potential that could be realized through leverage and lower funding
costs. At the same time, First Federal's higher pro forma capital position will
depress the Association's ROE below the level for the Peer Group.
The asset composition of the Association's and the Peer Group's balance
sheets were similar in broad terms, with loans constituting the majority of
interest-earning assets ("IEA") for both First Federal and the Peer Group. First
Federal's ratio of loans to assets was higher than the Peer Group's ratio (88.7
percent of assets versus 69.3 percent for the Peer Group), and the Association's
cash and investments to assets ratio was correspondingly lower than the
comparable Peer Group ratio (8.2 percent for First Federal versus 17.4 percent
for the Peer Group). Additionally, MBS comprised 9.5 percent of the Peer Group's
assets while the Association's investment in MBS was nominal. The Association's
higher level of loans as a percent of assets is primarily the result of
management's overall philosophy of seeking to enhance asset yields. Overall,
First Federal's IEA totaled 96.9 percent, which was slightly higher than the
Peer Group's ratio of 96.2 percent. On a pro forma basis, the ratio of IEA can
be expected to improve with the planned use of proceeds.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg
- --------------------------
December 31, 1996 8.2 88.7 0.0 86.3 0.0 0.0 11.9 0.0 11.9 0.0
SAIF-Insured Thrifts 18.0 65.7 12.1 71.2 14.3 0.1 12.5 0.2 12.3 0.0
State of SC 14.2 77.2 5.2 74.3 11.9 0.0 12.2 0.1 12.1 0.0
Comparable Group Average 17.4 69.3 9.5 66.8 13.6 0.0 18.2 0.1 18.1 0.0
South-East Companies 17.4 69.3 9.5 66.8 13.6 0.0 18.2 0.1 18.1 0.0
Comparable Group
- ----------------
South-East Companies
- --------------------
CFFC Community Fin. Corp. of VA(1) 7.8 88.9 0.0 68.6 16.2 0.0 13.9 0.0 13.9 0.0
EBSI Eagle Bancshares of Tucker GA(1) 14.4 57.9 11.2 64.2 22.8 0.0 8.9 0.0 8.9 0.0
FFFC FFVA Financial Corp. of VA 19.3 60.2 18.0 74.5 11.2 0.0 14.0 0.3 13.7 0.0
SOPN First SB, SSB, Moore Co. of NC 28.5 69.4 0.6 74.0 0.1 0.0 25.0 0.0 25.0 0.0
GSFC Green Street Fin. Corp. of NC(1) 29.3 69.8 0.0 63.2 0.0 0.0 35.3 0.0 35.3 0.0
HFNC HFNC Financial Corp. of NC 17.3 65.9 13.8 49.2 21.8 0.0 27.9 0.0 27.9 0.0
ISBF ISB Financial Corp. of LA(1) 20.5 71.6 4.2 75.4 7.0 0.0 16.4 0.5 15.9 0.0
LIFB Life Bancorp of Norfolk VA 15.9 43.8 37.7 51.6 37.0 0.0 10.6 0.3 10.3 0.0
TSH Teche Holding Company of LA(1) 6.3 83.3 8.5 67.1 17.6 0.0 13.8 0.0 13.8 0.0
FTF Texarkana Fst. Fin. Corp of AR(1) 15.0 81.8 0.9 80.3 1.7 0.0 15.9 0.0 15.9 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.40 11.45 10.21 11.85 0.00 3.07 3.07 11.94 11.94 20.78
10.93 5.53 12.25 5.59 18.39 -1.55 -1.70 10.52 10.59 22.45
5.97 -27.43 10.06 4.51 40.83 2.58 2.79 11.14 11.14 21.84
11.55 1.16 16.86 7.42 9.39 -6.19 -6.91 14.74 15.60 30.37
11.55 1.16 16.86 7.42 9.39 -6.19 -6.91 14.74 15.60 30.37
3.18 18.73 2.23 0.79 4.00 9.43 9.43 11.67 11.67 17.78
21.57 19.65 5.02 25.87 6.62 NM NM 7.60 7.60 13.30
7.35 0.27 9.36 5.15 NM -15.42 -15.59 13.47 13.47 27.11
3.09 -5.85 7.25 6.04 -86.99 -1.05 -1.05 NM 25.58 58.24
16.69 60.38 4.96 -12.63 NM NM NM 28.13 28.13 51.16
-2.66 -65.85 59.33 -5.50 NM 3.24 3.24 20.83 20.83 40.25
16.44 3.21 18.87 18.44 57.49 -4.59 -7.44 NM 12.43 23.27
29.42 28.60 29.51 20.62 65.83 -6.22 -8.94 8.40 8.40 22.18
17.21 -22.70 21.79 8.95 NM -15.55 -15.55 11.30 11.30 21.90
3.17 -24.86 10.24 6.50 NM -19.34 -19.34 16.55 16.55 28.54
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.8
First Federal's funding liabilities reflected a funding strategy
similar to that of the Peer Group's funding composition, with deposits
constituting the major portion of the Association's and the Peer Group's
interest-bearing liabilities. The Association's deposits equaled 86.3 percent of
assets, which was higher than the Peer Group average of 66.8 percent. The
disparity is primarily the result of the Peer Group's utilization of borrowed
funds (13.6 percent of assets) while the Association did not employ borrowed
funds as of December 31, 1996. Total interest-bearing liabilities maintained by
the Association and the Peer Group, as a percent of assets, equaled 86.3 percent
and 80.4 percent, respectively, with the Peer Group's lower ratio being
supported by maintenance of a higher capital position. On a pro forma basis,
First Federal's IBL ratio can be expected to be more similar to the Peer Group
average.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Association's IEA/IBL ratio is lower than the Peer
Group's, based on respective ratios of 112.3 percent and 119.7 percent. Both the
Association's and the Peer Group's IEA/IBL ratios are considered to be favorable
and provide the basis for strong net interest margins. The additional capital
realized from stock proceeds should address the lower IEA/IBL ratio currently
maintained by the Association, as the interest-free capital realized in the
First Federal's stock offering will be deployed into interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. First Federal's growth rates reflect annualized results for
the six months ended December 31, 1996, while the Peer Group's figures reflect
annual growth for the most recent twelve month period for which data is publicly
available. Asset growth rates of 10.4 percent and 11.6 percent were posted by
the Association and the Peer Group, respectively. Growth in the Association's
balance sheet was broad based as expansion of the cash and investments
portfolio, equal to 11.5 percent, was nearly equaled by the 10.2 percent
annualized growth in the loan portfolio. The Peer Group companies generally
reported strong positive growth in their loan and MBS portfolios (16.9 percent
on average), while the balance of cash and investments did not change
significantly on average.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.9
Deposit growth and the retention of earnings were largely sufficient to
fund First Federal's asset growth. Increases to deposits and borrowed funds were
nearly equal for the Peer Group (7.42 percent and 9.39 percent, respectively).
The retention of earnings provided First Federal with a 3.07 capital growth rate
on an annualized basis for the six months ended December 31, 1996, which
reflected the special SAIF assessment. Comparatively, despite recording a higher
return on assets than the Association, the Peer Group exhibited a reduction in
capital of 6.19 percent on average. The reduction in the Peer Group's capital
was primarily attributable to factors such as dividend payments and stock
repurchases which are not employed by First Federal as a mutual institution, as
well as the special SAIF assessment.
Income and Expense Components
For the most recent twelve months, First Federal reported earnings
equal to 0.61 percent of average assets in comparison to 1.01 percent for the
Peer Group (see Table 3.3 for details). The Peer Group's earnings were superior,
outperforming First Federal in all key areas of operations (i.e., the Peer Group
reported higher net interest and non-interest income and modestly lower
operating expenses). Additionally, loan loss provisions were higher for First
Federal owing, in part, to its comparatively higher non-performing assets while
net non-operating losses were also a slightly more significant factor in First
Federal's operating results.
The Association's net interest margin equaled 3.54 percent of average
assets, which was only slightly below the 3.61 percent average of the Peer
Group. First Federal's higher interest income to average assets ratio was more
than offset by its greater ratio of interest expense to average assets. The
Association's higher interest income, and higher asset yields, reflected a
higher concentration of loans/assets as well as fixed rate mortgage loans. The
Association's higher expense reflected a lower capital ratio despite a lower
cost of funds.
First Federal reported modestly higher operating expenses than the Peer
Group, partially explained by its less favorable staff leverage ratio.
Specifically, assets per full time equivalent employee equaled $3.3 million for
the Association, versus a comparative measure of $5.0 million for the Peer
Group. The Association's and the Peer Group's operating expense ratios were
lower than the average operating expense ratio for all publicly-traded SAIF
insured institutions (2.23
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg
- --------------------------
December 31, 1996 0.61 7.70 4.16 3.54 0.30 3.24 0.00 0.00 0.39 0.39
SAIF-Insured Thrifts 0.56 7.36 4.13 3.23 0.14 3.10 0.12 -0.01 0.31 0.42
State of SC 0.56 7.72 4.20 3.52 0.13 3.39 0.10 0.00 0.51 0.60
Comparable Group Average 1.01 7.61 4.00 3.61 0.07 3.54 0.18 0.03 0.24 0.45
South-East Companies 1.01 7.61 4.00 3.61 0.07 3.54 0.18 0.03 0.24 0.45
Comparable Group
- ----------------
South-East Companies
- --------------------
CFFC Community Fin. Corp. of VA(1) 1.02 7.95 4.14 3.82 0.22 3.60 0.06 0.00 0.24 0.30
EBSI Eagle Bancshares of Tucker GA(1) 0.65 8.13 4.53 3.60 0.40 3.20 1.33 0.21 0.43 1.97
FFFC FFVA Financial Corp. of VA 1.05 7.88 4.07 3.81 0.01 3.80 0.09 0.00 0.12 0.21
SOPN First SB, SSB, Moore Co. of NC 1.33 7.30 3.55 3.75 0.00 3.75 0.00 0.00 0.15 0.15
GSFC Green Street Fin. Corp. of NC(1) 1.19 7.23 3.58 3.65 0.01 3.64 0.01 0.01 0.06 0.07
HFNC HFNC Financial Corp. of NC 1.14 7.26 3.53 3.72 0.03 3.69 0.00 -0.02 0.13 0.12
ISBF ISB Financial Corp. of LA(1) 0.81 7.50 3.84 3.66 0.01 3.65 0.08 -0.01 0.42 0.50
LIFB Life Bancorp of Norfolk VA 0.68 7.47 4.79 2.69 -0.02 2.71 0.03 0.01 0.18 0.22
TSH Teche Holding Company of LA(1) 0.72 7.60 4.00 3.60 0.09 3.51 0.00 0.05 0.48 0.53
FTF Texarkana Fst. Fin. Corp of AR(1) 1.47 7.81 3.97 3.84 0.00 3.84 0.21 0.03 0.23 0.46
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg
- --------------------------
December 31, 1996 2.13 0.00 -0.49 0.00 8.02 4.86 3.16 3,323 40.10
SAIF-Insured Thrifts 2.23 0.02 -0.39 0.00 7.52 4.74 2.78 4,239 34.99
State of SC 2.55 0.01 -0.53 0.00 8.09 4.89 3.20 2,160 37.04
Comparable Group Average 2.01 0.01 -0.42 0.00 7.84 5.01 2.84 4,890 34.82
South-East Companies 2.01 0.01 -0.42 0.00 7.84 5.01 2.84 4,890 34.82
Comparable Group
- ----------------
South-East Companies
- --------------------
CFFC Community Fin. Corp. of VA(1) 1.85 0.00 -0.42 0.00 8.22 4.84 3.38 4,346 37.26
EBSI Eagle Bancshares of Tucker GA(1) 3.97 0.00 -0.32 0.00 8.83 5.21 3.62 NM 25.49
FFFC FFVA Financial Corp. of VA 1.96 0.02 -0.38 0.00 8.08 4.86 3.23 3,733 35.75
SOPN First SB, SSB, Moore Co. of NC 1.42 0.00 -0.45 0.00 7.40 4.84 2.57 6,818 34.56
GSFC Green Street Fin. Corp. of NC(1) 1.44 0.00 -0.46 0.00 7.29 4.66 2.63 5,874 34.68
HFNC HFNC Financial Corp. of NC 1.67 0.00 -0.37 0.00 7.45 5.48 1.97 7,156 35.75
ISBF ISB Financial Corp. of LA(1) 2.44 0.02 -0.43 0.00 7.73 4.76 2.97 2,788 36.57
LIFB Life Bancorp of Norfolk VA 1.40 0.07 -0.34 0.00 7.68 5.50 2.17 5,867 39.83
TSH Teche Holding Company of LA(1) 2.46 0.00 -0.50 0.00 7.76 4.87 2.88 2,692 33.50
FTF Texarkana Fst. Fin. Corp of AR(1) 1.53 0.00 -0.51 0.00 7.99 5.04 2.95 4,736 34.81
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.11
percent), which was consistent with the comparatively limited diversification
exhibited by First Federal and most of the Peer Group companies. The Peer
Group's operating expenses included a nominal amount of goodwill amortization
(0.01 percent of assets), while First Federal's earnings were not affected by
goodwill amortization.
As discussed in Section I, the management of First Federal anticipates
that the Association's overhead costs will be subject to upward pressures over
the next several years owing to: (1) the planned opening of two new branch
offices and significant expansion of an existing office, all scheduled for
completion by the second or third calendar quarter of 1997, resulting in an
increase in occupancy and personnel costs; (2) the incremental expense of
operating as a stock institution; and (3) the costs of the stock based benefit
plans. While expected asset growth may diminish growth in the operating expense
ratio, we expect that First Federal's operating expenses ratio may continue to
increase over the near term.
Sources of non-interest operating income made a larger contribution to
the Peer Group's earnings, amounting to 0.39 percent and 0.45 percent of the
Association's and the Peer Group's average assets, respectively. Both the
Association's and the Peer Group's non-interest operating income ratios are
indicative of a traditional thrift operating strategy, which provides for
relatively limited diversification into lines of business that generate
non-interest operating income. At the same time, the traditional thrift
operating strategy pursued by First Federal and most of the Peer Group companies
has supported control of operating expenses.
When viewed together, net interest income, operating expense and
non-interest income levels provide considerable insight into a thrift's earnings
strength, since those sources of income and expense are typically the most
prominent components of earnings and are generally more predictable than losses
and gains realized from the sale of assets or other non-recurring activities. In
this regard, as measured by their respective efficiency coverage ratios
(operating expenses divided by net interest and non-interest income), First
Federal and the Peer Group both have favorable recurring earnings potential. For
the twelve months ended December 31, 1996, First Federal's efficiency ratio of
54.2 percent was less favorable than the Peer Group's ratio of 49.5
<PAGE>
RP FINANCIAL, LC.
PAGE 3.12
percent. Both the Peer Group and First Federal have efficiency ratios which are
indicative of strong core earnings and the Association's ratio stands to improve
following the conversion.
Loan loss provisions reported by First Federal equaled 0.30 percent of
assets for the twelve months ended December 31, 1996, which was above the 0.07
percent of assets level reported by the Peer Group. The additional provisions
were required to increase reserve levels based on management's estimates for
future losses in the portfolio after considering among other factors, recent
growth of the portfolio and trends with respect to classified assets. Future
loan loss provisions could be expected to be higher than the Peer Group going
forward, given the Association's higher risk-weighted assets ratio, higher
proportion of loans as a percent of assets, and higher level of NPAs.
Non-operating expenses impacted the Association's and Peer Group's
operations to approximately the same degree, and primarily consisted of charges
related to the special SAIF assessment. Specifically, non-operating expenses
equaled 0.49 percent of average assets for the Association and 0.42 percent of
average assets for the Peer Group on average. Given the non-recurring nature of
such expenses, they will be discounted in evaluating the relative strengths and
weaknesses of First Federal's and the Peer Group's earnings.
Extraordinary items were not a factor in either the Association's or
the Peer Group's earnings. Both the Association and the Peer Group exhibited
relatively normal effective tax rates, with First Federal recording a higher
effective tax rate than the Peer Group (40.10 percent versus 34.82 percent for
the Peer Group). Accordingly, overall, the Association's and the Peer Group's
reported earnings adjusted for net non-operating items on a tax effected basis,
were fairly reflective of their core earnings.
Loan Composition
Table 3.4 presents data related to the loan composition of First
Federal and the Peer Group. An emphasis on residential lending was apparent in
both the Association's and the Peer Group's loan compositions, with 1-4 family
permanent mortgage loans and mortgage-backed securities accounting for 86.6
percent and 67.5 percent of First Federal's and the Peer Group's loan and
mortgage-backed securities portfolios, respectively. The Peer Group's lower
ratio was
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- ------ ------ ------ ------ ------ -------- ------ ---------- --------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg 0.04 86.64 9.92 1.32 0.00 2.08 59.57 58,757 0
SAIF-Insured Thrifts 15.81 61.56 5.22 11.63 6.30 1.61 50.59 366,441 2,607
State of SC 5.97 69.47 8.58 11.07 5.95 2.31 60.30 68,082 69
Comparable Group Average 10.66 67.45 8.14 10.94 4.38 1.89 51.62 24,191 3
Comparable Group
- ----------------
CFFC Community Fin. Corp. of VA(1) 0.00 63.69 3.98 26.61 4.62 2.11 68.19 10,983 6
EBSI Eagle Bancshares of Tucker GA(1) 14.54 50.58 37.60 4.25 1.18 6.55 59.95 0 0
FFFC FFVA Financial Corp. of VA 22.99 56.27 3.51 12.05 3.67 2.82 51.50 6,008 23
SOPN First SB, SSB, Moore Co. of NC 1.64 88.47 1.12 7.80 0.97 0.00 43.36 764 0
GSFC Green Street Fin. Corp. of NC(1) 0.00 82.75 1.51 17.41 0.13 0.00 49.32 0 0
HFNC HFNC Financial Corp. of NC 9.43 71.24 13.98 8.07 4.04 0.38 45.41 34,534 0
ISBF ISB Financial Corp. of LA(1) 5.98 67.54 3.39 4.44 13.95 4.72 53.54 4,523 0
LIFB Life Bancorp of Norfolk VA 40.42 41.42 5.02 12.03 3.56 0.03 38.93 161,265 0
TSH Teche Holding Company of LA(1) 10.04 81.66 4.07 2.94 4.61 0.00 54.36 0 0
FTF Texarkana Fst. Fin. Corp of AR(1) 1.54 70.88 7.27 13.83 7.11 2.34 NA 23,836 0
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.14
partially attributable to a larger average investment in MBS, but primarily
reflected greater loan diversification than First Federal. First Federal
maintained a higher balance of loans serviced for others than the Peer Group,
although, unlike several of the Peer Group members, the Association has not been
as active in selling loans recently. Servicing intangibles were not a
significant factor in the Association's balance sheet due to reduced loan sales,
and only one Peer Group company (FFVA Financial) maintained a small amount of
loan servicing intangibles.
The Peer Group's portfolio reflected a modestly greater degree of
diversification into high risk weight assets with construction loans and
multi-family/commercial mortgage loans equaling 8.1 percent and 10.9 percent of
gross loans and MBS, respectively. First Federal's portfolio exhibited a
slightly heavier weighting in construction and land loans (9.9 percent of loans
and MBS) while other loan portfolio diversification was comparatively small.
Consumer loans (excludes home equity loans) and commercial non-mortgage loans
were at relatively low levels for both First Federal and the Peer Group. Coupled
with First Federal's higher ratio of loans to assets, First Federal maintains a
higher risk-weighted assets ratio relative to the Peer Group.
Credit Risk
Overall, First Federal's credit risk exposure appears to be greater
than the Peer Group's, as indicated by the higher level of non-performing assets
maintained by the Association. As shown in Table 3.5, First Federal's ratio of
non-performing assets (REO, non-accruing loans, and accruing loans more than 90
days past due) to assets was significantly higher than the Peer Group average,
based on comparative ratios of 1.20 percent and 0.43 percent, respectively.
Similarly, First Federal's non-performing loans to loans ratio was substantially
higher than the Peer Group's (1.32 percent versus 0.55 percent for the Peer
Group). Loss reserve ratios further indicated less significant credit risk
exposure for the Peer Group, as the Peer Group maintained a higher level of loss
reserves as a percent of non-performing assets (223.92 percent versus 37.28
percent for the Association). Similarly, loss reserves as a percent of
non-performing loans equaled 31.25 percent for the Association versus 227.66
percent for the Peer Group on average. To date, net loan charge-offs have not
been material for either the Association or the Peer Group.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg 0.03 1.20 1.32 0.49 31.25 37.28 40 0.01
SAIF-Insured Thrifts 0.27 0.86 0.94 0.85 183.44 127.80 258 0.10
State of SC 0.67 1.03 0.89 0.99 370.85 328.03 149 0.12
Comparable Group Average 0.30 0.43 0.55 0.91 227.66 223.92 120 0.02
Comparable Group
- ----------------
CFFC Community Fin. Corp. of VA(1) 0.04 0.20 0.19 0.72 388.10 317.33 7 0.02
EBSI Eagle Bancshares of Tucker GA(1) 2.46 1.06 1.23 0.84 67.98 53.91 966 0.91
FFFC FFVA Financial Corp. of VA 0.01 0.44 0.71 1.04 146.30 143.89 7 0.01
SOPN First SB, SSB, Moore Co. of NC 0.00 0.10 0.15 0.33 224.72 224.72 0 0.00
GSFC Green Street Fin. Corp. of NC(1) 0.02 0.20 0.25 0.19 75.81 68.31 0 0.00
HFNC HFNC Financial Corp. of NC 0.15 1.15 1.51 1.39 92.56 80.19 45 0.03
ISBF ISB Financial Corp. of LA(1) 0.14 NA NA 1.03 NA NA 165 0.14
LIFB Life Bancorp of Norfolk VA 0.09 0.38 0.69 1.76 256.58 197.80 2 -0.94
TSH Teche Holding Company of LA(1) 0.01 0.16 0.18 1.00 569.23 525.95 0 0.00
FTF Texarkana Fst. Fin. Corp of AR(1) 0.04 0.17 0.05 0.84 NA 403.17 4 0.01
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.16
Interest Rate Risk
Table 3.6 reflects the relative interest rate risk exposure of First
Federal and the Peer Group companies. First Federal's lower capital has been the
a key factor in the lower average IEA/IBL ratio maintained by the Association
relative to the Peer Group's ratio (112.3 percent versus 121.2 percent for the
Peer Group), thus historical increase in funding costs seemed to be more
detrimental to First Federal's net interest margin than the Peer Group's.
However, the Association's capital ratio and IEA/IBL ratio will increase on a
post-conversion basis based on the expected use of proceeds. The level of
non-interest earning assets was 3.1 percent of assets for the Association versus
3.8 percent for the Peer Group.
To analyze the interest rate risk in the absence of comparative NPV
and/or gap data for the Peer Group, we have analyzed the quarterly changes in
net interest income as a percent of average assets for the Association and the
Peer Group (Table 3.6). This data shows that the Association's quarterly change
in net interest income as a percent of average assets have generally been more
volatile than the Peer Group average. Factors which may tend to contribute to
the Association's interest rate risk exposure include its significant investment
in fixed rate residential loans and competitive conditions prevailing in its
primary market which necessitate the offering of relatively high rates in order
to increase market share.
Summary
Based on the above analysis and the criteria employed by RP Financial
in the selection of the companies for the Peer Group, RP Financial concluded
that the Peer Group forms a reasonable basis for determining the pro forma
market value of First Federal. Such general characteristics as asset size,
capital position, interest-earning asset composition, funding composition, core
earnings measures and loan composition all tend to support the reasonability of
the Peer Group from a financial standpoint, incorporating appropriate valuation
adjustments.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
-------------------------- Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 12/31/96 09/30/96 06/30/96 03/31/96 12/31/95 09/30/95
----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg 11.9 112.3 3.1 18 16 10 -14 1 -72
SAIF-Insured Thrifts 12.3 112.6 4.1 -2 -2 8 4 4 3
State of SC 12.1 113.0 3.5 2 -7 11 8 3 -3
Comparable Group Average 18.1 121.2 3.8 -8 -2 20 -0 -8 1
Market Interest Rates
---------------------
1 Year Treasury Bill -- -- -- -20 1 20 24 -54 5
30 Year Treasury Bond -- -- -- -28 5 20 71 -45 12
Comparable Group
----------------
CFFC Community Fin. Corp. of VA(1) 13.9 114.1 3.2 NA 9 -2 3 1 7
EBSI Eagle Bancshares of Tucker GA(1) 8.9 96.1 16.4 NA -12 46 -8 -15 1
FFFC FFVA Financial Corp. of VA 13.7 113.9 2.4 -5 4 3 1 0 -7
SOPN First SB, SSB, Moore Co. of NC 25.0 132.8 1.5 -5 6 9 7 2 -1
GSFC Green Street Fin. Corp. of NC(1) 35.3 156.8 0.9 NA 41 98 -34 15 -15
HFNC HFNC Financial Corp. of NC 27.9 136.3 3.1 -18 -28 57 NA -34 -48
ISBF ISB Financial Corp. of LA(1) 15.9 116.9 3.7 NA 1 15 -7 -9 -16
LIFB Life Bancorp of Norfolk VA 10.3 110.0 2.5 -2 -22 -8 20 -3 8
TSH Teche Holding Company of LA(1) 13.8 115.8 1.9 NA -13 -22 14 -24 -2
FTF Texarkana Fst. Fin. Corp of AR(1) 15.9 119.2 2.3 NA -3 1 2 -9 82
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources we
believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.1
IV. VALUATION ANALYSIS
Introduction
This chapter presents the valuation analysis, prepared pursuant to the
valuation methodology promulgated by the OTS, as set forth in their 1994
guidelines, and valuation factors used to determine the estimated pro forma
market value of the common stock of the Holding Company. The common stock will
be issued in conjunction with the conversion of First Federal from the
mutual-to-stock form of ownership.
Appraisal Guidelines
The OTS appraisal guidelines, originally released in October 1983 and
amended October 1994, specify the methodology for estimating the pro forma
market value of an institution. The methodology provides for: (1) selection of a
peer group of comparable publicly-traded institutions, subsequent guidance from
the OTS limited eligibility to only seasoned public companies in the peer group;
(2) a financial and operational comparison of the subject company to the peer
group; and (3) a valuation analysis in which the pro forma market value of the
subject company is determined based on the market pricing of the peer group as
of the date of valuation. The current valuation guidelines limit the amount of a
new issue discount which may be incorporated into the valuation, thereby
curtailing the potential price appreciation in the after-market.
RP Financial Approach to the Valuation
RP Financial's valuation analysis complies with the appraisal
guidelines as revised and issued as of October 21, 1994. Accordingly, the
valuation incorporates a detailed analysis based on the Peer Group discussed in
Chapter III, incorporating "fundamental analysis" techniques. Additionally, the
valuation incorporates a "technical analysis" of recently completed stock
conversions, including closing pricing and aftermarket trading of such
conversions. It should be noted that such analyses cannot possibly fully account
for all the market forces which impact trading activity and pricing
characteristics of a particular stock on a given day.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.2
The pro forma market value determined herein is a preliminary value for
the Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and financial
condition; (2) monitor the Association's operations and financial condition
relative to the Peer Group to identify any fundamental changes; (3) monitor the
external factors affecting value including, but not limited to, local and
national economic conditions, interest rates, and the stock market environment,
including the market for thrift stocks; and (4) monitor pending conversion
offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market
and operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability) may materially impact the market value of
all thrift stocks, including First Federal, or First Federal's value alone. To
the extent a change in factors impacting the Association's value can be
reasonably anticipated and/or quantified, RP Financial has incorporated the
estimated impact into our analysis.
Valuation Analysis
A fundamental analysis discussing similarities and differences relative
to the Peer Group was presented in Chapter III. The following sections summarize
the key differences between the Association and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Association relative to the Peer Group in such
key areas as financial condition, profitability, growth and viability of
earnings, asset growth, primary market area, dividends, liquidity of the issue,
marketing of the issue, management, and the effect of government regulations
and/or regulatory reform. We have also
<PAGE>
RP FINANCIAL, LC.
PAGE 4.3
considered the market for thrift stocks, and in particular new issues, to assess
the impact on value of First Federal coming to market at this time.
1. Financial Condition
The financial condition of an institution is an important determinant
in pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Association's and the Peer Group's financial conditions are noted as follows:
o Overall A/L Composition. Residential assets, including 1-4
family permanent mortgage loans, funded by retail deposits
were the primary components of both First Federal's and the
Peer Group's balance sheets. The Association's
interest-earning asset composition exhibited a higher
proportion of loans and modestly higher level of construction
loans, relative to the comparative Peer Group measures.
Conversely, the Peer Group possessed a higher level of
commercial real estate loans and non-mortgage loans on
average. Overall, First Federal maintained a higher
risk-weighted asset ratio than the Peer Group. Accordingly, in
comparison to the Peer Group, First Federal's interest-earning
asset composition would tend to indicate higher credit risk
exposure and greater yield potential. First Federal's and the
Peer Group's funding compositions were broadly similar, as
retail deposits comprised the major portion of their
respective funding liabilities. The Peer Group supplemented
their utilization of deposit funds with borrowings, however.
As a result of the Association's lower capital currently, the
Peer Group has an earnings power advantage in terms of its
IEA/IBL ratio; on a post-conversion basis, however, the
Association's disadvantage will diminish.
o Credit Quality. The Peer Group recorded more favorable credit
quality measures than the Association, as indicated by the
Peer Group's lower non-performing assets to assets ratio and
maintenance of a higher level of loss reserves as a percent of
non-performing assets. First Federal's higher risk weighted
assets to assets ratio further indicated potentially higher
credit risk exposure for the Association.
o Balance Sheet Liquidity. The Association maintains a
comparatively lower level of cash and investment securities
and a nominal balance of MBS. Following the infusion of the
stock proceeds, First Federal's level of liquid assets will
initially increase pending a longer term use of proceeds.
First Federal appears to have greater current borrowings
capacity than the Peer Group, as the Association has not
utilized its ability to borrow over the last several fiscal
years. At the same time, the Association does not appear to
have interest in funding through borrowings except on a
short-term basis.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.4
o Capital. The Association operates with a lower pre-conversion
capital ratio than the Peer Group, 11.9 percent of assets
versus 18.2 percent, respectively. This disadvantage will be
addressed as a result of the stock offering, as the
Association's pro forma capital position should exceed the
Peer Group's equity-to-assets ratio. However, the increase in
capital will also serve to depress the Association's return on
equity until the proceeds can be effectively leveraged.
On balance, we believe the Association, on a pro forma basis, has less
favorable financial condition characteristics than the Peer Group. Therefore, we
concluded that a moderate downward valuation adjustment was warranted for the
Association's financial strength.
2. Profitability, Growth and Viability of Earnings
Earnings are a key factor in determining pro forma market value, as the
level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Earnings. The Association reported lower
profitability than the Peer Group, with both reflecting the
special SAIF assessment. The Association compared less
favorably than the Peer Group in every major component of the
earnings statement.
o Core Earnings. The Association also maintains a less favorable
core earnings posture relative to the Peer Group, even net of
the special SAIF assessment. While redeployment of conversion
proceeds into interest-earning assets should enhance First
Federal's net interest income, operating expenses for the
Association are expected to increase as well. Additionally,
given First Federal's higher risk weighted asset ratio, higher
NPAs and lower reserve coverage ratios, the Association's
earnings are subject to greater fluctuation relative to the
Peer Group due to credit related factors as well. On a pro
forma basis, First Federal's core profitability is expected to
remain below that of the Peer Group.
o Interest Rate Risk. First Federal is believed to have greater
interest rate risk exposure in comparison to the Peer Group,
primarily as a result of its strategy of retaining 15 and 30
year fixed rate residential loans for portfolio and also as a
result of its growth strategy which has required the
Association to price its deposits relatively aggressively. The
Association's interest rate risk posture should be moderated
by the redeployment of stock proceeds into interest-earning
assets; however, in light of the Association's emphasis on
funding longer terms fixed rate loans and investments with
short-term deposits, First Federal's earnings can be expected
to remain more liability sensitive than the Peer Group's.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.5
o Credit Risk. Loss provisions had a greater impact on First
Federal's earnings in comparison to the Peer Group. In terms
of future exposure to credit quality related losses, the
Association maintained a higher level of non-performing assets
and lower loss reserves as a percent of non-performing assets.
The Association's greater earnings exposure to credit risk was
also indicated by its higher risk weighted assets to total
assets ratio.
o Earnings Growth Potential. Several factors were considered in
assessing earnings growth potential. First, the Association
maintained lower levels of cash and investments relative to
the Peer Group, indicating a relatively lower capacity to fund
loan growth with liquidity. Second, opportunities for lending
growth in the Association's market area were considered to be
more favorable than in the primary areas served by the Peer
Group companies, although this has created a highly
competitive environment for financial institutions. Third, it
is anticipated that over time, the Association will gradually
reinvest a major portion of the stock proceeds into higher
yielding assets through its normal lending activities. Lastly,
the Association will have greater capacity to leverage than
the Peer Group, based on a pro forma capital position that
will be above the Peer Group's equity-to-asset ratio.
Moreover, the Association has demonstrated its capacity to
realize asset and earnings growth based on its actual
performance since the beginning of fiscal 1992.
As discussed previously, a portion of the net conversion
proceeds will be utilized to fund additional investments in a
total of two new de novo branches and significant expansion of
one branch office scheduled for completion in 1997 (a total
investment of $1.5 million). Additionally, the Association may
likely seek to expand its product line in the future through
the employment of a loan officer with commercial real estate
lending expertise. Such activities provide the Association
with long-term earnings growth potential, if First Federal is
able to meet the volume and cost targets established by
management, but are initially anticipated to impair earnings
due to the required fixed asset investments, depreciation, and
one-time start-up costs. Furthermore, there is risk that such
activities may never be as profitable as anticipated by
management, which could diminish the long term profitability.
Overall, a moderate downward valuation adjustment was
warranted for profitability, growth and viability of the Association's earnings
relative to the Peer Group's.
3. Asset Growth
First Federal's ability to grow will be enhanced on a post-conversion
basis following the infusion of stock proceeds and the Association 's higher pro
forma equity-to-assets ratio will facilitate greater growth. At the same time,
the Association's history does not indicate that it will
<PAGE>
RP FINANCIAL, LC.
PAGE 4.6
grow any faster than the Peer Group. First Federal is planning to increase the
number of branches over the next several years which may facilitate its efforts
to achieve targeted expansion of its asset base. At the same time, competition
has become increasingly strong, particularly through market entry and
consolidation through acquisition of community financial institutions by large
superregional banks. Overall, we have applied a slight upward adjustment for
this factor.
4. Primary Market Area
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. First Federal's primary market
area of Spartanburg County has been experiencing relatively strong demographic
growth, which has been supported by the vibrant Spartanburg economy to date. In
terms of credit risk exposure, the Association's primary market area has
favorable characteristics, as the expanding economy has been beneficial for real
estate values and the unemployment rate in Spartanburg County is well below the
national unemployment rate. Somewhat mitigating the favorable characteristics of
the Spartanburg County market area is the significant competition faced by the
Association, as Spartanburg is situated only approximately 70 miles from
Charlotte and NationsBank, First Union and Wachovia are major competitors of
First Federal. Accordingly, the Association has been required to price its
products at highly competitive rates to promote its growth objectives, a factor
supporting its appreciable loan and deposit market share.
Summary demographic and deposit market share data for the Association
and the Peer Group companies is provided in Exhibit III-4. In general, the Peer
Group companies also operate in markets where there is significant competition
from larger and more diversified financial institutions, as indicated by the
comparable deposit market share. Population growth and per capita income in the
markets served by the Peer Group companies were not as favorable as the
comparative Spartanburg County measures, indicating less growth potential for
the financial institutions serving those markets. Unemployment rates in the
primary market areas served by the Peer Group companies were generally lower
than the unemployment rate in Spartanburg County.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.7
On balance, we concluded a slight upward adjustment was appropriate for the
Association's market area.
5. Dividends
The Holding Company has indicated its intention to pay an annual cash
dividend of $0.60 per share payable quarterly, reflecting a 3 percent dividend
yield based on the initial offering price. Historically, thrifts typically have
not established dividend policies at the time of their conversion to stock
ownership. Newly converted institutions, in general, have preferred to gain
market seasoning, establish an earnings track record and fully invest the
conversion proceeds before establishing a dividend policy. However, during the
late-1980s and early-1990s, with negative publicity surrounding the thrift
industry, there was a tendency for more thrifts to initiate moderate dividend
policies concurrent with their conversion as a means of increasing the
attractiveness of the stock offering. Today, fewer institutions are compelled to
initially establish dividend policies at the time of their conversion offering
as (1) industry profitability has improved, (2) the number of problem thrift
institutions has declined, and (3) the stock market cycle for thrift stocks is
generally more favorable than in the early-1990s. At the same time, with ROE
ratios under pressure, due to high equity levels, well-capitalized institutions
are subject to increased competitive pressures to offer dividends.
As publicly-traded thrifts' capital levels and profitability have
improved and as weakened institutions have been resolved, the proportion of
institutions with cash dividend policies has increased. All ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.29 percent to 3.58 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.43 percent as of February 21,
1997, representing an average earnings payout ratio of 43.00 percent. As of
February 21, 1997, approximately 80 percent of all publicly-traded SAIF-insured
thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an
average yield of 2.18 percent and an average payout ratio of 42.59 percent. The
dividend paying thrifts generally maintain higher than average profitability
ratios, facilitating their ability to pay cash dividends, which supports a
market pricing premium on average relative to non-dividend paying thrifts.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.8
Given the Holding Company's comparable dividend yield and pro forma
dividend payout ratio, and considering other factors such as the higher pro
forma capital and lower pro forma earnings and return on equity relative to the
Peer Group, we have applied no adjustment for this factor.
6. Liquidity of the Shares
The Peer Group is by definition composed of companies that are traded
in the public markets, all of which trade on the NASDAQ system. Typically, the
number of shares outstanding and market capitalization provides an indication of
how much liquidity there will be in a particular stock. The market
capitalization of the Peer Group companies ranged from $28.0 million to $373.9
million as of February 21, 1997, with an average market value of $118.9 million.
The shares outstanding of the Peer Group members ranged from 1.6 million to 9.5
million, with average shares outstanding of approximately 4.5 million. The
Association's pro forma market value and shares outstanding will fall short of
the comparative Peer Group averages, but not to a significant degree in terms of
providing for lesser liquidity in First Federal's stock. Additionally, First
Federal's pro forma market capitalization closely approximates the median value
for the Peer Group. Accordingly, in general, we anticipate the market for the
Association's stock will share similarities to the stock liquidity exhibited by
the Peer Group companies, on average. Thus, no adjustment was required for this
factor.
7. Marketing of the Issue
Three separate markets exist for thrift stocks: (1) the after-market
for public companies, in which trading activity is regular and investment
decisions are made based upon financial condition, earnings, capital, ROE and
dividends; (2) the new issue market in which converting thrifts are evaluated on
the basis of the same factors but on a pro forma basis without the benefit of a
stock trading history and reporting quarterly operating results as a
publicly-held company; and (3) the thrift acquisition market. All three of these
markets were considered in the valuation of the Association's to-be-issued
stock.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.9
A. The Public Market
The value of publicly-traded thrift stocks is easily
measurable, and is tracked by most investment houses and related organizations.
In general, thrift stock values react to market stimuli such as interest rates,
inflation, perceived industry health, projected rates of economic growth,
regulatory issues and stock market conditions in general. In terms of assessing
general stock market conditions, the stock market has trended sharply higher
over the past year.
The stock market began 1996 on a down note, reflecting concern
over the budget stalemate in Washington. A sell-off in technology stocks
sustained the decline. Favorable inflation data and strong fourth quarter
earnings by some blue chip issues abbreviated the decline in the market, and the
DJIA posted several new highs in the second half of January. Stock prices were
also boosted by increasing expectations of another rate cut by the Federal
Reserve, which occurred at the end of January. The stock market moved sharply
higher in early-February, led by the cut in short-term interest rates and a
surge in demand for technology stocks. Low inflation and modest economic growth
translated into renewed interest for cyclical stocks as well, and the DJIA
posted five consecutive all-time highs during the week ended February 9. The
stock market fluctuated throughout the remainder of February due to
Congressional testimony by the Federal Reserve Chairman, which clouded investor
predictions of future rate cuts. March began with a sharp one day sell-off in
the stock market on an unexpectedly large drop in the February unemployment
rate. However, the market recovered the following week, alleviated by additional
economic data which indicated a more modest pace of economic growth than was
suggested by the unemployment data. After trading in a narrow range through the
end of March, merger activity and a jump in IBM's stock price propelled the DJIA
to a new record in early-April. The upturn was brief, as bond and stock prices
slumped following the stronger than expected March employment report which
rekindled inflation fears.
Mid-April 1996 saw day-to-day fluctuations in the market,
reflecting changing investor sentiment regarding the strength of first quarter
earnings and future earnings expectations. Favorable fourth quarter earnings
among technology issues pushed the NASDAQ Composite Index to new highs in
late-April and early-May, while blue chips lagged the overall
<PAGE>
RP FINANCIAL, LC.
PAGE 4.10
market. Stronger than expected first quarter GDP growth triggered major
sell-offs in stocks and bonds in early May, and the 30-year bond edged above 7.0
percent. Inflation concerns receded somewhat in mid-May on benign inflation news
and reduced expectations of an interest rate hike. The market rose sharply and
then fell again through the rest of May based on the Fed's decision to leave
rates unchanged and signs of economic acceleration.
Stronger than expected job growth in May depressed bond prices
in early-June, and the stock market stalled as well. The yield on long bonds
dropped below 7.0 percent in late-June on dwindling expectations that the
Federal Reserve would tighten interest rates at its July 1996 meeting. The
positive interest rate outlook also served to buoyed the stock market into
early-July.
The rally was cut short by a larger than expected drop in June
unemployment; the DJIA fell 115 points and bond yields shot up to 7.18 percent.
Stock market volatility continued throughout July on second quarter earnings
reports, particularly in the technology driven NASDAQ Composite Index. However,
the long bond yield dropped below 7.0 percent following statements by the
Federal Reserve Chairman which indicated he expected the economy to slow down in
the second half of 1996.
Stocks and bonds rallied in late-July and early-August on news
of a healthy but moderating economy, but expectations of a September rate hike
deflated the rally by late-August. The stock market heated up again in early
September on August inflation data. Oil stocks drove this market as renewed
tension between the U.S. and Iraq pushed crude oil prices to their highest level
in five years. Both bond and stock prices pushed higher throughout the remainder
of September on news of continued economic growth with no inflation.
The upward momentum in the stock market continued into the
fourth quarter. Investors were cheered by the "status quo" election results, and
stocks rallied strongly immediately following the election with the DJIA posting
13 new record highs through the end of the month. Supporting the market's surge
was more low inflation data, no increase in rates at the November FOMC meeting,
and a surge in blue chip stocks on third quarter earnings. On
<PAGE>
RP FINANCIAL, LC.
PAGE 4.11
November 15, 1996, the DJIA closed at 6348.03, translating into an increase of
24.1 percent from year end 1995.
During the first half of December the market took a downturn
as investors interpreted Greenspan's comments on the "irrational exuberance" of
the market to mean that a rate hike was coming. Contributing to the market
decline was profit-taking by Japanese investors. However, the market surged in
the middle of December after the Fed left rates unchanged and jobless claims
were reported at a five month high in November. The upward momentum carried the
market through the end of 1996.
The market rally continued into 1997 on a combination of
demand for cyclicals, more low inflation data, and the anticipation of strong
earnings. The year began with the most heaviest traded week in history. The DJIA
posted ten new record high between the beginning of the year and January 21. The
last two weeks of January experienced a fluctuating market, with a brief
correction of 228 points partially erased by a rise of 177 points through
February 4. After a sell-off in technology stocks the market took off once again
on cherry picking in the same sector. On February 21, 1997, the DJIA closed at
6931.6, a level 25.66 percent above the close one year ago.
Similar to the overall stock market, the market for thrift
stocks has generally been favorable during the past twelve months. Thrift stocks
followed the stock market generally lower in early-1996, reflecting concern that
the absence of a budget agreement would lead to higher interest rates. The
downturn in thrift stocks was brief, as thrift prices trended higher in the
second half of January 1996. Favorably low inflation data and a cut in
short-term interest rates boosted thrift prices at the end of January 1996.
Mixed indications on the future direction of interest rates translated into a
relatively narrow trading range for thrift stocks throughout February 1996.
Thrift prices were negatively affected by news of the February
1996 unemployment rate, as prospects for further near-term rate cuts by the
Federal Reserve were substantially eliminated by the explosive job growth.
However, thrift prices rebounded in late-March and early-April as interest rates
stabilized. Thrift prices declined again following the release of the March
employment report, as interest sensitive stocks were pulled lower by the
unfavorable
<PAGE>
RP FINANCIAL, LC.
PAGE 4.12
interest rate outlook, but the downturn was abbreviated and by mid-April thrift
prices rose on strong first quarter earnings among bank and thrift issues.
Thrift prices dropped sharply in early-May following the rise in interest rates,
but rebounded in mid-May when interest rates declined slightly on tame inflation
news. The market was flat through the end of May and into mid-June due to
uncertainty over future interest rate trends.
The Supreme Court's favorable goodwill ruling boosted thrift
prices in early July, but the upturn was abbreviated by a sharp increase in
interest rates in early-July. Favorable second quarter earnings and lower
interest rates supported a modest recovery in thrift prices in mid-July,
although concerns about future interest rate trends moderated the impact of the
healthy second quarter earnings. Lower interest rates and the announced
acquisitions of two large California thrifts, American Savings with $20 billion
in assets and CalFed Bancorp with $14 billion in assets, pushed the SNL Index
higher in late-July, and the rise continued through mid-August. Thrift stocks
settled into a narrow trading range in late-August and early-September, as
higher interest rates dampened interest in the thrift sector. Higher thrift
prices were recorded in mid-September with a decline in long term rates, but the
rally faltered in late-September due to renewed fears about higher interest
rates and rising consumer debt on credit cards.
Thrift prices trended upward during October and November 1996
supported by lower interest rates. Investors also reacted positively to the SAIF
rescue legislation, which resolved the disparity in deposit insurance premiums
paid by SAIF-insured thrifts following the one-time special assessment. The
exuberance of the thrift market continued through the end of November and into
early December as rates stayed low with the rise of the dollar.
The thrift market dropped sharply during the second week of
December due to the expectations of an interest rate increase after the
"irrational exuberance" comment. However, after the Fed's decision to leave
rates where they were, the market for financial institution stocks surged with
the rest of the market. The thrift market trended upward through the rest of
1996.
Thrift prices moved up throughout most of January in the
beginnings of market speculation regarding acquisition activity among large
California thrifts. February 1997 has seen a new record high in the SNL index on
all but one trading day due to a combination of a decline in
<PAGE>
RP FINANCIAL, LC.
PAGE 4.13
interest rates and the takeover bid by H.F. Ahmanson for Great Western
Financial. On February 21, 1997, the SNL index was measured at 571.8, a level
51.99 percent higher than one year ago.
B. The New Issue Market
In addition to thrift stock market conditions in general, the
new issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. Demand for converting issues was
strong in the first quarter of 1996, with most offerings being oversubscribed
and posting healthy increases in near term aftermarket trading. Comparatively,
offerings completed in the second quarter reflected a cooling interest in thrift
IPOs, as indicated by fewer oversubscriptions and generally weak aftermarket
trading performance. There was resurgent interest in the new issue market
following the SAIF legislation enacted in November, and investor interest in new
issues has remained very strong. As shown in Table 4.1, the median one week
change in price for offerings completed during the latest three months equaled
positive 32.1 percent.
In examining the current pricing characteristics of
institutions completing their conversions during the last three months (see
Table 4.2), we note there exists a considerable difference in pricing ratios
compared to the universe of all publicly-traded thrifts. Specifically, the
current average P/B ratio of the conversions completed in the most recent three
month period of 103.84 percent reflects a discount of 17.7 percent from the
average P/B ratio of all publicly-traded SAIF-insured thrifts (equal to 126.24
percent), and the average core P/E ratio of 21.30 times reflects a premium of
21.92 percent from the all SAIF-insured public average core P/E ratio of 17.32
times. The pricing ratios of the better capitalized but lower earning (based on
return on equity measures) recently converted thrifts suggest that the
investment community has determined to discount their stocks on a book basis
until the earnings improve through redeployment and leveraging of the proceeds
over the longer term.
In determining our valuation adjustment for marketing of the
issue, we considered trends in both the overall thrift market and the new issue
market. The overall market for thrift stocks is considered to be healthy, as
thrift stocks are currently exhibiting pricing ratios that are approaching
historically high levels. Investor interest in the new issue market has been
favorable,
<PAGE>
----------------------------------------------------------------------------
Table 4
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Information Pre-Conversion Data Offering
Financial Info. Asset Quality Information
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
($Mil) (%) (%)(2) (%) ($Mil) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Empire Federal Bancorp MT 01/27/97 EFBC $87 18.36% 0.00% NA $25.9 132% 2.4%
FirstFed America Bancorp MA 01/15/97 FAB $874 5.37% 0.42% 199% $87.1 132% 2.6%
Roslyn Bancorp(1) NY 01/13/97 RSLN 1,973 11.55% 0.82% 137% 436.4 132% 2.1%
Advance Fin. Bancorp WV 01/02/97 AFBC 93 6.49% 0.41% 86% 10.8 132% 4.5%
Home City Fin. Corp. OH 12/31/96 HCFC 58 9.01% 0.43% 146% 9.5 132% 4.2%
IFB Holdings MO 12/30/96 P.Sheet 54 5.91% 0.19% 277% 5.9 132% 6.4%
Century Bancorp(1) NC 12/23/96 CENB 82 13.75% 0.60% 109% 20.4 132% 4.5%
Southern Comm. Bancshares AL 12/23/96 SCBS 63 8.97% 0.24% 227% 11.4 132% 5.0%
Big Foot Fin. Corp. IL 12/20/96 BFFC 195 6.98% 0.06% 254% 25.1 132% 4.4%
River Valley Bancorp IN 12/20/96 RIVR 84 7.74% 0.27% 187% 11.9 132% 6.2%
PS Financial IL 11/27/96 PSFI 55 22.48% 1.06% 32% 21.8 132% 2.7%
Carolina Fincorp(1) NC 11/25/96 CFNC 94 9.18% 0.06% 659% 18.5 132% 4.8%
Delphos Citizens Bancorp OH 11/21/96 DCBI 92 12.65% 1.04% 10% 20.4 132% 2.7%
Averages: $293 10.65% 0.43% 194% $54.3 132% 4.0%
Medians: 87 9.01% 0.41% 166% 20.4 132% 4.4%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Pro Forma Data Post-IPO Pricing Trends
--------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Pricing Ratios(4) Fin. Characteristics Closing Price:
- --------------------------------------------------------------------------- --------------------------------------------------
First After After
IPO Trading % First % First %
P/TB P/E P/A ROA TE/A ROE Price Day Chg. Week(5) Chg. Month(6) Chg.
(%) (x) (%) (%) (%) (%) ($) ($) (%) ($) (%) ($) (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Empire Federal Bancorp 67.8% 28.8 23.6% 0.8% 34.9% 2.4% $10.00 $13.25 32.5% $13.38 33.8% $14.25 42.5%
FirstFed America Bancorp 74.4% 20.1 9.2% 0.5% 12.4% 3.7% 10.00 13.63 36.3% 14.13 41.3% 14.88 48.8%
Roslyn Bancorp(1) 73.8% 13.9 18.6% 1.3% 25.2% 5.3% 10.00 15.00 50.0% 15.88 58.8% 16.00 60.0%
Advance Fin. Bancorp 71.8% 31.1 10.6% 0.3% 14.8% 2.3% 10.00 12.88 28.8% 12.88 28.8% 14.13 41.3%
Home City Fin. Corp. 71.9% 16.9 14.4% 0.8% 19.9% 4.2% 10.00 11.88 18.8% 12.25 22.5% 13.50 35.0%
IFB Holdings 73.6% 22.0 10.0% 0.5% 13.6% 3.3% 10.00 12.25 22.5% 12.50 25.0% 12.56 25.6%
Century Bancorp(1) 72.0% 22.2 20.5% 0.9% 28.5% 3.2% 50.00 62.63 25.3% 66.00 32.0% 64.00 28.0%
Southern Comm. Bancshares 75.2% 25.2 15.6% 0.6% 20.8% 3.0% 10.00 13.00 30.0% 13.75 37.5% 13.50 35.0%
Big Foot Fin. Corp. 72.7% 32.9 11.7% 0.4% 16.0% 2.2% 10.00 12.31 23.1% 12.50 25.0% 14.00 40.0%
River Valley Bancorp 73.3% 15.2 12.7% 0.8% 17.3% 4.8% 10.00 13.69 36.9% 13.88 38.8% 15.25 52.5%
PS Financial 70.5% 14.2 29.7% 2.1% 42.1% 5.0% 10.00 11.64 16.4% 11.88 18.8% 12.50 25.0%
Carolina Fincorp(1) 77.0% 19.3 16.9% 0.9% 22.0% 4.0% 10.00 13.00 30.0% 13.00 30.0% 13.75 37.5%
Delphos Citizens Bancorp 70.2% 13.6 18.6% 1.4% 26.5% 5.2% 10.00 12.13 21.3% 12.50 25.0% 11.75 17.5%
Averages: 72.6% 21.2 16.3% 0.9% 22.6% 3.7% $13.08 $16.71 28.6% $17.27 32.1% $17.70 37.6%
Medians: 72.7% 20.1 15.6% 0.8% 20.8% 3.7% 10.00 13.00 28.8% 13.00 30.0% 14.00 37.5%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrifts.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Second-step conversions.
- ----------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.2
Market Pricing Comparatives
Prices As of February 21, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- -------- -
Financial Institution
- ---------------------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.27 143.25 1.17 15.96 19.70 126.24 15.40 128.35 17.47
State of SC 20.49 69.52 1.10 13.00 24.03 143.11 17.57 144.54 19.59
Comparable Group Average 19.85 118.91 1.14 15.41 19.45 129.13 23.33 130.36 17.56
South-East Companies 19.85 118.91 1.14 15.41 19.45 129.13 23.33 130.36 17.56
Comparable Group
- ----------------
South-East Companies
- --------------------
CFFC Community Fin. Corp. of VA 22.00 27.98 1.62 17.59 17.19 125.07 17.40 125.07 13.58
EBSI Eagle Bancshares of Tucker GA 16.75 76.25 1.13 12.62 19.71 132.73 11.87 132.73 14.82
FFFC FFVA Financial Corp. of VA 24.75 116.15 1.44 15.87 21.34 155.95 21.76 159.37 17.19
SOPN First SB, SSB, Moore Co. of NC 19.25 71.01 1.15 18.03 20.48 106.77 26.71 106.77 16.74
GSFC Green Street Fin. Corp. of NC 17.50 75.22 0.60 14.47 NM 120.94 42.68 120.94 29.17
HFNC HFNC Financial Corp. of NC 21.75 373.93 0.67 14.62 NM 148.77 41.48 148.77 NM
ISBF ISB Financial Corp. of LA 23.87 168.31 0.99 15.93 NM 149.84 24.54 154.50 24.11
LIFB Life Bancorp of Norfolk VA 19.75 194.48 1.16 15.33 22.70 128.83 13.70 133.09 17.03
TSH Teche Holding Company of LA 15.87 54.55 1.07 15.21 21.74 104.34 14.37 104.34 14.83
FTF Texarkana Fst. Fin. Corp of AR 17.00 31.20 1.61 14.40 12.98 118.06 18.82 118.06 10.56
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------ ------ ------- ------ ------- ------- ------- ------- ------- -------
Financial Institution
- ---------------------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.36 1.81 28.92 1,166 12.89 0.86 0.61 5.26 0.83 7.36
State of SC 0.35 1.70 24.10 547 12.16 1.03 0.56 6.07 0.90 9.18
Comparable Group Average 0.47 2.43 43.00 533 18.17 0.43 1.00 5.83 1.28 7.50
South-East Companies 0.47 2.43 43.00 533 18.17 0.43 1.00 5.83 1.28 7.50
Comparable Group
- ----------------
South-East Companies
- --------------------
CFFC Community Fin. Corp. of VA 0.56 2.55 34.57 161 13.92 0.20 1.03 7.49 1.30 9.48
EBSI Eagle Bancshares of Tucker GA 0.60 3.58 53.10 642 8.95 1.06 0.65 7.91 0.87 10.51
FFFC FFVA Financial Corp. of VA 0.40 1.62 27.78 534 13.95 0.44 1.05 6.69 1.30 8.30
SOPN First SB, SSB, Moore Co. of NC 0.68 3.53 59.13 266 25.01 0.10 1.33 5.18 1.63 6.34
GSFC Green Street Fin. Corp. of NC 0.40 2.29 66.67 176 35.29 0.20 1.18 5.35 1.48 6.68
HFNC HFNC Financial Corp. of NC 0.28 1.29 41.79 902 27.88 1.15 1.13 3.83 1.38 4.67
ISBF ISB Financial Corp. of LA 0.34 1.42 34.34 686 16.38 NA 0.81 4.38 1.09 5.94
LIFB Life Bancorp of Norfolk VA 0.44 2.23 37.93 1,420 10.63 0.38 0.67 5.64 0.90 7.52
TSH Teche Holding Company of LA 0.50 3.15 46.73 380 13.77 0.16 0.72 4.29 1.05 6.29
FTF Texarkana Fst. Fin. Corp of AR 0.45 2.65 27.95 166 15.94 0.17 1.47 7.54 1.81 9.27
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a tax
effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.16
as most of the recently completed offerings have been oversubscribed and have
recorded healthy price increases in initial post-conversion trading activity.
C. The Acquisition Market
Also considered in the valuation was the potential impact on
First Federal's stock price of recently completed and pending acquisitions of
other thrifts operating in First Federal's market area. As shown in Exhibit
IV-4, there was one publicly-traded South Carolina thrift acquired since 1995,
and one acquisition is currently pending. First Federal's relatively high pro
forma capital position may tend to lessen acquisition speculation in the
Association's stock, based on expectations that an acquiror would be reluctant
to pay an acquisition premium for First Federal's excess capital. However, at
the same time, the fairly active acquisition market for South Carolina thrifts
may imply a certain degree of acquisition speculation for the Association's
stock. To the extent that acquisition speculation may impact the Association's
offering, we have largely taken this into account in selecting companies, which
operate in markets that have experienced comparable or in some cases a greater
degree of thrift acquisition activity than the market served by First Federal.
Taking these factors and trends into account, primarily recent
trends in the new issue market, market conditions overall, and recent trends in
the acquisition market, RP Financial concluded that no adjustment was
appropriate in the valuation analysis for purposes of marketing of the issue.
8. Management
First Federal's management team has experience and expertise in all of
the key areas of the Association's operations. Exhibit IV-5 provides summary
resumes of First Federal's Board of Directors and executive management. Healthy
core profitability, a strong capital position, and recent balance sheet growth
trends indicate that the Association is being effectively managed. First Federal
has no apparent senior management vacancies and there appears to be a
well-defined organizational structure.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.17
Similarly, the returns, capital positions, and other operating measures
of the Peer Group companies are indicative of well-managed financial
institutions, which have Boards and management teams that have been effective in
implementing conservative and competitive operating strategies. Therefore, on
balance, we concluded no valuation adjustment relative to the Peer Group was
appropriate for this factor.
9. Effect of Government Regulation and Regulatory Reform
The Association and most of the Peer Group companies were similarly
impacted by the recently enacted SAIF rescue legislation, as the affected
institutions are SAIF-insured and subject to the same one time assessment and
their deposits will be assessed at the same rate going forward. In summary, as a
fully-converted SAIF-insured savings association, First Federal will operate in
substantially the same regulatory environment as the Peer Group members -- all
of whom are adequately capitalized institutions and are operating with no
apparent restrictions. Exhibit IV-6 reflects the Bank's pro forma regulatory
capital ratios. On balance, RP Financial concluded that no adjustment to the
Association's value was warranted for this factor.
Summary of Adjustments
Overall, we believe the Association's pro forma market value should be
discounted relative to the Peer Group as follows:
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
<S> <C>
Financial Condition Moderate Downward
Profitability, Growth and Viability of Earnings Moderate Downward
Asset Growth Slight Upward
Primary Market Area Slight Upward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
</TABLE>
<PAGE>
RP FINANCIAL, LC.
PAGE 4.18
Valuation Approaches
In applying the accepted valuation methodology promulgated by the OTS
and adopted by the FDIC, i.e., the pro forma market value approach, we
considered the three key pricing ratios in valuing First Federal's to-be-issued
stock -- price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") --
all performed on a pro forma basis including the effects of the conversion
proceeds. In computing the pro forma impact of the conversion and the related
pricing ratios, we have incorporated the valuation parameters disclosed in First
Federal's prospectus for offering expenses, the effective tax rate and stock
benefit plan assumptions (summarized in Exhibits IV-7 and IV-8). A reinvestment
rate of 6.44 percent was utilized, equal to the arithmetic average of the
Association's average yield on interest-earnings assets and cost of deposits for
the twelve months ended December 31, 1996 (the reinvestment rate calculation
specified by OTS conversion guidelines). The 6.44 percent reinvestment rate is
reasonably similar (1) to the blended rate reflecting the Association's business
plan as converted, incorporating the impact of deposit withdrawals to fund a
portion of the stock issued in conversion, and (2) the current market rate on
the short-term securities the proceeds would initially be reinvested. Consistent
with the prospectus, we have reflected $1.5 million of the net conversion
proceeds invested in non-interest earning fixed assets (which incorporates the
estimated additional cost of the two branch offices and the expansion of an
existing office). With regard to the employee stock ownership plan and stock
reward plans, we have performed the valuation assuming the ESOP purchases 8
percent of the shares at the initial offering prices and the MRP acquires 4
percent of the shares in the open market at the $20.00 per share issue price (we
also considered the impact of issuance of MRP shares out of authorized but
unissued shares). In our estimate of value, we assessed the relationship of the
pro forma pricing ratios relative to the Peer Group and the recent conversions.
RP Financial's valuation placed an emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator
of long-term value for a stock. Given the traditional thrift
operating strategies employed by the Association and the Peer
Group provided a certain degree of comparability between the
Association's and the Peer Group's earnings and overall
financial condition, the P/E approach was carefully considered
in this valuation.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.19
o P/B Approach. P/B ratios have generally served as a useful
benchmark in the valuation of thrift stocks, with the greater
determinant of long term value being earnings. RP Financial
considered the P/B approach to be a reliable indicator of
value given current market conditions, particularly the market
for new conversions which often exhibit P/E multiples that are
well above industry averages and since the P/E multiples do
not reflect the actual impact of reinvestment, leveraging and
capital management strategies. We have modified the P/B
approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"). Since the Association
and the Peer Group maintained only nominal balances of
intangibles, the resulting differences in the P/B and P/TB
ratios did not lead to different valuation results.
o P/A Approach. P/A ratios are generally a less reliable
indicator of market value, as investors do not
place significant weight on the size of total assets as a
determinant of market value. Furthermore, this approach does
not take into account the amount of stock purchases funded by
deposit withdrawals, thus understating the P/A ratio.
Investors place significantly greater weight on book value and
earnings -- which have received greater weight in our
valuation analysis. At the same time, the P/A ratio is an
indicator of franchise value, and, in the case of highly
capitalized institutions, the high P/A ratio limits the
investment community's willingness to pay market multiples for
other pricing ratios when ROE is low.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/E and P/B approaches, RP Financial concluded that the
pro forma market value of the Association's conversion stock is $67,000,000 at
the midpoint at this time.
1. Price-to-Book ("P/B"). The application of the P/B valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/B ratio to First Federal's pro forma book value. In applying the P/B
approach, we considered both reported book value and tangible book value. Based
on the $67.0 million midpoint valuation, First Federal's pro forma P/B and P/TB
ratios were 65.43 percent (First Federal has no goodwill). In comparison to the
average P/B and P/TB ratios for the Peer Group of 129.13 percent and 130.36
percent, respectively, First Federal's valuation reflected 49.33 and 49.81
percent discounts relative to the Peer Group. RP Financial considered the
discount under the P/B approach to be reasonable, in light of the previously
referred valuation adjustments. Additionally, the discounted P/B and P/TB
<PAGE>
RP FINANCIAL, LC.
PAGE 4.20
ratios are also warranted by First Federal's significantly lower pro forma ROE
(4.41 percent, based on core earnings, versus 7.50 percent for the Peer Group)
and resulting P/E multiple.
As indicated at the beginning of this chapter, RP Financial's
analysis of recent conversion pricing characteristics has been limited to a
technical analysis and, thus, the pricing characteristics of recent conversions
is not the primary determinate of valuation. Given the emphasis in the revised
appraisal guidelines on limiting the new issue discount, RP Financial also
considered the pro forma P/B ratios of recent conversions in its valuation
analysis, both at the time of conversion and in the aftermarket. At the midpoint
and supermaximum values, First Federal's pro forma P/B ratio of 65.4 and 73.0
percent, respectively, reflected small to no discount from the average of the
recently completed stock conversions of 72.6 percent at conversion (see Tables
4.1 and 4.2). We consider this discount to be appropriate since First Federal's
investment characteristics are not as favorable as most of the recent
conversions, most notably with respect to the Association's higher level of
non-performing assets. There is a discount at both values from the current
trading level of recent conversions.
2. Price-to-Earnings ("P/E"). The application of the P/E valuation
method requires calculating the Association's pro forma market value by applying
a valuation P/E multiple times the pro forma earnings base. Ideally, the pro
forma earnings base is composed principally of the Association's recurring
earnings base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. First Federal's reported earnings were $2.184 million for
the twelve months ended December 31, 1996. In deriving First Federal's core
earnings, two adjustments were made to reported earnings to account for the one
time expense of the special SAIF assessment and the incremental operating
expenses related to the cost of operating the two new branch offices (in Duncan
and Inman) and the incremental depreciation cost related to the expansion of the
Westgate office. The special SAIF assessment recorded by the Association
amounted to $1,770,000. On a tax effected basis, assuming an effective tax rate
of 38.0 percent, the elimination of the SAIF assessment resulted in a $1,097,000
increase to the Association's reported earnings. The incremental branch expenses
(for which there will be no offsetting revenue initially)
<PAGE>
RP FINANCIAL, LC.
PAGE 4.21
is estimated to approximate $639,000, or $396,000 after taxes. As shown below,
after factoring in the two adjustments, First Federal's core earnings were
determined to equal $2,885,000 for the twelve months ended December 31, 1996.
(Note: see Exhibit IV-9 for the adjustments applied to the Peer Group's earnings
in the calculation of core earnings).
Amount
($000)
Net income $2,184
Adjustment for SAIF assessment(1) 1,097
Adjustment for additional branch exp. (1) (396)
----
Core earnings estimate $2,885
(1) Tax effected at 38.0 percent.
Based on First Federal's estimated core earnings, and
incorporating the impact of the pro forma assumptions discussed previously, the
Association's pro forma core P/E multiple at the $67,000,000 midpoint value was
14.84 times, which provided for a discount of 11.4 percent relative to the Peer
Group median of 16.74 times core earnings. The discounted core P/E multiple was
consistent with the valuation adjustments applied to the Association's value.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
market value by applying a valuation P/A ratio to the Association's pro forma
asset base, conservatively assuming no deposit withdrawals are made to fund
stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, First Federal's value equaled 15.47 percent of
pro forma assets. Comparatively, the Peer Group companies exhibited an average
P/A ratio of 23.33 percent, which implies a 33.69 percent discount being applied
to the Association's pro forma P/A ratio. While generally emphasized less than
the P/E and P/B approaches, the P/A ratio is an indicator of franchise value
and, thus, was a factor in the resulting discounts applied to the Association's
value under the P/B and P/E approaches.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.22
Valuation Conclusion
Based on the foregoing, it is our opinion that, as of February 21,
1997, the aggregate pro forma market value of the shares to be issued was
$67,000,000 at the midpoint, equal to 3,350,000 shares offered at a per share
value of $20.00. Pursuant to OTS conversion guidelines, the 15 percent offering
range indicates a minimum value of $56,950,000 and a maximum value of
$77,050,000. Based on the $20.00 per share offering price, this valuation range
equates to an offering of 2,847,500 shares at the minimum to 3,852,500 shares at
the maximum. In the event that the Association's appraised value is subject to
an increase, up to 4,430,375 shares may be sold at an issue price of $20.00 per
share, for an aggregate market value of $88,607,500, without a resolicitation.
The comparative pro forma valuation ratios relative to the Peer Group are shown
in Table 4.3, and the key valuation assumptions are detailed in Exhibit IV-7.
The pro forma calculations for the range are detailed in Exhibit IV-8.
<PAGE>
RP FINANCIAL, LC.
_________________________________________
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Table 4.3
Public Market Pricing
First FS&LA of Spartanburg and the Comparables
As of February 21, 199
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ------------ Pricing Ratios(3) Dividends(4)
-------------- Core Book ----------------------------------- ------------------------
Price/ Market 120Mth Value/ Amount Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
------ ----- ---- ----- ----- ---- ---- ---- ------ ----- ------ --------
($) (X) (%) (%) (%) (X) ($) (%) (%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg
__________________________
Superrange 20.00 88.61 1.15 27.40 20.25 72.98 19.60 72.98 17.45 0.60 3.00 52.36
Range Maximum 20.00 77.05 1.24 28.87 18.91 69.27 17.43 69.27 16.13 0.60 3.00 48.40
Range Midpoint 20.00 67.00 1.35 30.56 17.57 65.43 15.47 65.43 14.84 0.60 3.00 44.53
Range Minimum 20.00 56.95 1.50 32.90 16.01 60.80 13.42 60.80 13.38 0.60 3.00 40.13
SAIF-Insured Thrifts(7)
_______________________
Averages 20.27 143.25 1.17 15.96 19.70 126.24 15.40 128.35 17.47 0.36 1.81 28.92
Medians --- --- --- --- 19.72 118.80 14.02 120.23 16.65 --- --- ----
All Non-MHC State of SC(7)
__________________________
Averages 19.39 79.76 1.05 11.73 22.37 145.27 17.36 147.05 19.66 0.42 2.04 30.13
Medians --- --- --- --- 22.37 146.63 14.80 153.79 20.29 --- --- ----
Comparable Group Averages
_________________________
Averages 19.85 118.91 1.14 15.41 19.45 129.13 23.33 130.36 17.56 0.47 2.43 43.00
Medians --- --- --- --- 20.48 126.95 20.29 128.90 16.74 --- --- ---
State of SC
___________
AMFB American Federal Bank of SC(7) 28.75 314.96 1.61 9.88 22.29 NM 22.58 NM 17.86 0.48 1.67 29.81
CFCP Coastal Fin. Corp. of SC 24.12 83.26 1.16 8.02 22.33 NM 18.11 NM 20.79 0.44 1.82 37.93
FFCH First Fin. Holdings Inc. of SC 28.00 176.43 1.96 15.28 22.40 183.25 11.15 183.25 14.29 0.72 2.57 36.73
FSFC First So.east Fin. Corp. of SC 11.00 48.27 0.68 7.69 NM 143.04 14.80 143.04 16.18 0.20 1.82 29.41
PALM Palfed, Inc. of Aiken SC 14.81 77.43 0.73 10.10 NM 146.63 11.73 153.79 20.29 0.12 0.81 16.44
SCCB S. Carolina Comm. Bnshrs of SC 19.00 13.40 0.71 17.57 NM 108.14 30.98 108.14 26.76 0.60 3.16 NM
Comparable Group
________________
CFFC Community Fin. Corp. of VA 22.00 27.98 1.62 17.59 17.19 125.07 17.40 125.07 13.58 0.56 2.55 34.57
EBSI Eagle Bancshares of Tucker GA 16.75 76.25 1.13 12.62 19.71 132.73 11.87 132.73 14.82 0.60 3.58 53.10
FFFC FFVA Financial Corp. of VA 24.75 116.15 1.44 15.87 21.34 155.95 21.76 159.37 17.19 0.40 1.62 27.78
SOPN First SB, SSB, Moore Co. of NC 19.25 71.01 1.15 18.03 20.48 106.77 26.71 106.77 16.74 0.68 3.53 59.13
GSFC Green Street Fin. Corp. of NC 17.50 75.22 0.60 14.47 NM 120.94 42.68 120.94 29.17 0.40 2.29 66.67
HFNC HFNC Financial Corp. of NC 21.75 373.93 0.67 14.62 NM 148.77 41.48 148.77 NM 0.28 1.29 41.79
ISBF ISB Financial Corp. of LA 23.87 168.31 0.99 15.93 NM 149.84 24.54 154.50 24.11 0.34 1.42 34.34
LIFB Life Bancorp of Norfolk VA 19.75 194.48 1.16 15.33 22.70 128.83 13.70 133.09 17.03 0.44 2.23 37.93
TSH Teche Holding Company of LA 15.87 54.55 1.07 15.21 21.74 104.34 14.37 104.34 14.83 0.50 3.15 46.73
FTF Texarkana Fst. Fin. Corp of AR 17.00 31.20 1.61 14.40 12.98 118.06 18.82 118.06 10.56 0.45 2.65 27.95
</TABLE>
<TABLE>
<CAPTION>
Financial Characteristic (6)
------------------------------------------------------
Reported Core
Total Equity/ NPAs/ ------------ ----------------
Assets Assets Assets ROA ROE ROA ROE
_______ _______ _______ _______ _______ _______ ______
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
First FS&LA of Spartanburg
__________________________
Superrange 452 26.85 0.99 0.97 3.60 1.12 4.18
Range Maximum 442 25.17 1.02 0.92 3.66 1.08 4.29
Range Midpoint 433 23.64 1.04 0.88 3.72 1.04 4.41
Range Minimum 424 22.07 1.06 0.84 3.80 1.00 4.54
SAIF-Insured Thrifts(7
_______________________
Averages 1,166 12.89 0.86 0.61 5.26 0.83 7.36
Medians --- --- --- --- --- --- ---
All Non-MHC State of SC(7
__________________________
Averages 614 11.82 1.24 0.52 5.92 0.87 9.07
Medians --- --- --- --- --- --- ---
Comparable Group Averages
_________________________
Averages 533 18.17 0.43 1.00 5.83 1.28 7.50
Medians --- --- --- --- --- --- ---
State of SC
___________
AMFB American Federal Bank of SC(7) 1,395 7.76 0.51 1.04 13.07 1.30 16.31
CFCP Coastal Fin. Corp. of SC 460 6.02 0.17 0.85 14.01 0.92 15.05
FFCH First Fin. Holdings Inc. of SC 1,582 6.08 1.28 0.52 8.22 0.82 12.89
FSFC First So.east Fin. Corp. of SC 326 10.35 0.07 -0.01 -0.09 0.88 6.18
PALM Palfed, Inc. of Aiken SC 660 8.00 3.44 0.37 4.51 0.59 7.31
SCCB S. Carolina Comm. Bnshrs of SC 43 28.65 NA 0.85 2.93 1.14 3.92
Comparable Group
________________
CFFC Community Fin. Corp. of VA 161 13.92 0.20 1.03 7.49 1.30 9.48
EBSI Eagle Bancshares of Tucker GA 642 8.95 1.06 0.65 7.91 0.87 10.51
FFFC FFVA Financial Corp. of VA 534 13.95 0.44 1.05 6.69 1.30 8.30
SOPN First SB, SSB, Moore Co. of NC 266 25.01 0.10 1.33 5.18 1.63 6.34
GSFC Green Street Fin. Corp. of NC 176 35.29 0.20 1.18 5.35 1.48 6.68
HFNC HFNC Financial Corp. of NC 902 27.88 1.15 1.13 3.83 1.38 4.67
ISBF ISB Financial Corp. of LA 686 16.38 NA 0.81 4.38 1.09 5.94
LIFB Life Bancorp of Norfolk VA 1,420 10.63 0.38 0.67 5.64 0.90 7.52
TSH Teche Holding Company of LA 380 13.77 0.16 0.72 4.29 1.05 6.29
FTF Texarkana Fst. Fin. Corp of AR 166 15.94 0.17 1.47 7.54 1.81 9.27
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted to
omit the impact of non-operating items (including the SAIF assessment) on a
tax effected basis, and is shown on a pro forma basis where appropriate.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB =
Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and total
assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the accuracy
or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
RP FINANCIAL, LC.
LIST OF EXHIBITS
Exhibit
Number Description
I-1 Map of Office Locations
I-2 First Federal's Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 NPV Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Sources of Personal Income/Employment Sectors
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
(CONTINUED)
Exhibit
Number Description
III-1 General Characteristics of Publicly-Traded Institutions
III-2 Financial Analysis of South Carolina Institutions
III-3 Financial Analysis of Peer Group Candidates
III-4 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: February 21, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
First Federal Savings and Loan Association
Map of Office Locations
<PAGE>
First FS&LA of Spartanburg
Market Area
(A map appears on this page showing the counties of Spartanburg, Cherokee,
Union and Greenville and major market cities are indicated by a square.)
<PAGE>
EXHIBIT I-2
First Federal Savings and Loan Association
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
First Federal Savings and Loan Association
Key Operating Ratios
<PAGE>
<TABLE>
<CAPTION>
At or For Six
Months Ended At or For
December 31, Year Ended June 30,
----------------- ----------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C>
SELECTED FINANCIAL RATIOS(1):
Performance Ratios:
Return on average assets(2) ........... 0.33% 1.10% 1.03% 1.32% 1.45% 1.83% 1.49%
Return on average equity(3)............ 2.68 8.86 8.23 10.74 12.88 18.17 16.73
Interest rate spread(4)................ 3.21 3.08 3.01 3.71 3.94 4.14 3.42
Net interest margin(5)................. 3.75 3.66 3.55 4.15 4.30 4.46 3.81
Average interest-earning assets
to average interest-bearing liabilities 1.12 1.13 1.12 1.12 1.10 1.08 1.07
Noninterest expense as a
percent of average total assets....... 3.08 1.96 2.05 1.98 1.84 1.71 1.94
Efficiency ratio(6).................... 0.53 0.53 0.54 0.48 0.44 0.36 0.45
Asset Quality Ratios:
Nonperforming loans as a percent
of loans receivable, net(7)........... 1.32 0.66 1.87 1.79 0.96 0.93 1.22
Nonperforming assets as a
percent of total assets(8)............ 1.20 0.54 1.66 1.50 0.77 0.84 1.19
Allowance for losses as a percent
of gross loans receivable............. 0.48 0.20 0.30 0.21 0.23 0.25 0.17
Allowance for losses as a
percent of nonperforming loans........ 37.55 31.70 17.02 12.52 25.20 27.91 14.42
Net charge-offs to average
outstanding loans..................... 0.01 -- 0.01 -- -- -- 0.21
Capital Ratios:
Total equity to total assets........... 11.94 12.22 12.37 12.60 11.76 10.61 9.40
Average equity to average assets....... 12.37 12.38 12.47 12.28 11.24 10.04 8.91
</TABLE>
- ----------
(1) Annualized, where appropriate, for the six months ended December 31, 1996
and 1995.
(2) Net income divided by average total assets.
(3) Net income divided by average total equity.
(4) Difference between weighted average yield on interest-earning assets and
weighted average cost of interest-bearing liabilities.
(5) Net interest income as a percentage of average interest-earning assets.
(6) Other expenses (excluding the one-time SAIF assessment with respect to
the six months ended December 31, 1996) divided by the sum of net interest
income and other income.
(7) Nonperforming loans consist of loans accounted for on a nonaccrual basis
and accruing loans contractually past due 90 days or more.
(8) Nonperforming assets consist of nonperforming loans and real estate
acquired in settlement of loans, but excludes restructured loans. See
"BUSINESS OF THE ASSOCIATION -- Lending Activities -- Nonperforming Assets
and Delinquencies."
(x)
<PAGE>
EXHIBIT I-4
First Federal Savings and Loan Association
Investment Portfolio Composition
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------------------
At December 31, 1996 1996 1995 1994
-------------------- ----------------- ---------------- ------------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
---------- ----- ---------- ----- ---------- ----- ---------- -----
(In thousands)
<S><C>
Held to Maturity:
Debt securities:
U.S. Treasury obligations $ -- $ -- $ -- $ -- $ 2,001 $1,999 $ 3,004 $ 2,949
U.S. Government
agency obligations...... -- -- -- -- 3,501 3,450 9,992 9,592
------ ------- --------- ------- -------- ------ --------- --------
Total.................. -- -- -- -- 5,502 5,449 12,996 12,541
Mortgage-backed securities 128 142 195 209 383 397 470 489
Marketable equity securities(1) -- -- -- -- -- -- 10,027 9,857
------ ------- --------- ------- -------- ------- --------- --------
Total held to maturity . 128 142 195 209 5,885 5,846 23,493 22,887
------ ------- --------- ------- -------- ------- --------- --------
Available for Sale:
Debt securities:
U.S. Treasury obligations 1,989 1,985 1,986 1,975 500 493 -- --
U.S. Government
agency obligations..... 6,493 6,483 6,486 6,400 2,499 2,463 -- --
------- ------- -------- ------ -------- ------- --------- --------
Total.................. 8,482 8,468 8,472 8,375 2,999 2,956 -- --
Marketable equity securities(1) 5,028 5,024 9,819 9,780 5,295 5,272 -- --
------- ------- -------- ------ -------- ------- --------- --------
Total available for sale 13,510 13,492 18,291 18,155 8,294 8,228 -- --
------- ------- -------- ------ -------- ------- --------- --------
Total...................... $13,638 $13,634 $18,486 $18,364 $14,179 $14,074 $23,493 $22,887
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- ----------
(1) Marketable equity securities at December 31, 1996 and June 30, 1996,
1995 and 1994 consist of a mutual fund that invests in adjustable rate
mortgage-backed securities. At December 31, 1996, the mutual fund
yielded 6.38%.
<PAGE>
EXHIBIT I-5
First Federal Savings and Loan Association
Yields and Costs
<TABLE>
<CAPTION>
Six Months Ended December 31, Years Ended June 30,
------------------------------------------------------- --------------------------
1996 1995 1996
-------------------------- -------------------------- --------------------------
Interest Interest Interest
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C>
Interest-earning assets:
Loans receivable, net (1).......... $325,969 $13,323 8.17% $290,257 $12,223 8.42% $298,865 $24,421 8.17%
Mortgage-backed securities......... 148 5 6.76 366 16 8.74 333 29 8.71
Investment securities.............. 15,235 504 6.62 16,158 451 5.58 17,035 997 5.85
FHLB stock......................... 2,807 102 7.27 2,649 97 7.32 2,693 196 7.28
Federal funds sold and overnight
interest-bearing deposits......... 8,287 240 5.79 17,385 527 6.06 12,517 802 6.41
-------- ------- -------- ------- -------- -------
Total interest-earning assets.... 352,446 14,174 8.04 326,815 13,314 8.15 331,443 26,445 7.98
------- ------ ------- ------- ------- -------
Non-interest-earning assets......... 13,777 11,846 12,947
-------- -------- --------
Total assets..................... $366,223 $338,661 $344,390
======== ======== ========
Interest-bearing liabilities(2):
Passbook accounts.................. $54,310 1,043 3.84 $36,072 636 3.53 $39,289 1,364 3.47
Money market accounts.............. 14,521 235 3.24 17,583 327 3.72 17,196 626 3.64
NOW accounts....................... 28,346 233 1.64 25,894 261 2.02 27,351 542 1.98
Certificate accounts............... 216,528 6,060 5.60 210,261 6,116 5.82 211,179 12,137 5.75
-------- ------ -------- ------ -------- -------
Total interest-bearing liabilities 313,705 7,571 4.83 289,810 7,340 5.07 295,015 14,669 4.97
-------- ------ ----- -------- ------ -------- -------
Non-interest-bearing liabilities.... 7,209 6,908 6,422
-------- -------- --------
Total liabilities................ 320,914 296,718 301,437
-------- -------- --------
Retained earnings................... 45,309 41,943 42,953
-------- -------- --------
Total liabilities and retained
earnings $366,223 $338,661 $344,390
======== ======== ========
Net interest income................. $6,603 $5,974 $11,776
====== ====== =======
Interest rate spread................ 3.21% 3.08% 3.01%
Net interest margin................. 3.75% 3.66% 3.55%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 1.12% 1.13% 1.12%
</TABLE>
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------------------------------------
1995 1994
--------------------------------- -----------------------------------
Interest Interest
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C>
Interest-earning assets:
Loans receivable, net (1).......... $273,778 $22,086 8.07% $260,135 $21,414 8.23%
Mortgage-backed securities......... 416 35 8.41 710 59 8.31
Investment securities.............. 17,357 994 5.73 22,866 1,101 4.82
FHLB stock......................... 2,649 185 6.98 2,625 140 5.33
Federal funds sold and overnight
interest-bearing deposits......... 8,020 535 6.67 10,322 439 4.25
-------- ------- -------- -------
Total interest-earning assets.... 302,220 23,835 7.89 296,658 23,153 7.80
------- ------- ------- -------
Non-interest-earning assets......... 11,734 12,250
-------- --------
Total assets..................... $313,954 $308,908
======== ========
Interest-bearing liabilities(2):
Passbook accounts.................. $33,306 979 2.94 $34,469 1,003 2.91
Money market accounts.............. 22,376 718 3.21 22,998 765 3.33
NOW accounts....................... 26,244 545 2.08 27,454 517 1.88
Certificate accounts............... 188,140 9,060 4.82 184,393 8,102 4.39
-------- ------- -------- ------
Total interest-bearing liabilities 270,066 11,302 4.18 269,314 10,387 3.86
-------- ------- ------
Non-interest-bearing liabilities.... 5,341 4,884
-------- --------
Total liabilities................ 275,407 274,198
-------- --------
Retained earnings................... 38,547 34,710
-------- --------
Total liabilities and retained
earnings $313,954 $308,908
======== ========
Net interest income................. $12,533 $12,766
======= =======
Interest rate spread................ 3.71% 3.94%
Net interest margin................. 4.15% 4.30%
Ratio of average interest-earning
assets to average interest-
bearing liabilities................ 1.12% 1.10%
</TABLE>
- ----------
(1) Includes loans held-for-sale. Does not include interest on non-accrual
loans.
(2) Does not include escrow balances.
<PAGE>
EXHIBIT I-6
First Federal Savings and Loan Association
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
------------------- -----------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C>
Total loans outstanding at end of period.......... $346,291 $294,289 $332,803 $281,836 $263,614 $243,110 $236,115
======== ======== ======== ======== ======== ======== ========
Average loans outstanding during period........... $325,969 $290,257 $298,865 $273,778 $260,135 $251,453 $237,877
======== ======== ======== ======== ======== ======== ========
Allowance balance at beginning of period.......... $ 1,000 $ 600 $ 600 $ 600 $ 600 $ 400 $ 400
Provision for loan losses........................ 675 4 419 9 -- 208 503
Charge-offs (recoveries), net.................... 25 4 19 9 -- 8 503
-------- -------- -------- -------- -------- -------- --------
Balance at end of period.......................... $ 1,650 $ 600 $ 1,000 $ 600 $ 600 $ 600 $ 400
======== ======== ======== ======== ======== ======== ========
Allowance for loan losses as a percent of total loans
receivable at end of period...................... 0.48% 0.20% 0.30% 0.21% 0.23% 0.25% 0.17%
======== ======== ======== ======== ======== ======= ========
Net charge-offs as a percentage of average loans
outstanding during the period................... 0.01% --% 0.01% --% --% --% 0.21%
========= ========= ======== ======== ======== ======= ========
Ratio of allowance for loan losses to total
nonperforming loans at end of period............. 37.55% 31.70% 17.02% 12.52% 25.20% 27.91% 14.42%
========= ========= ======== ======== ======== ======= ========
</TABLE>
<PAGE>
EXHIBIT I-7
First Federal Savings and Loan Association
NPV Analysis
<PAGE>
EXHIBIT I-7
First Federal Savings and Loan Association
NPV Analysis
Basis Point ("bp") Estimated Change in
Change in Rates Net Portfolio Value
------------------ -------------------------
(Dollars in Thousands)
+400 $(28,191) (49.2)%
+300 (20,537) (35.8)
+200 (12,882) (22.5)
+100 (6,441) (11.2)
0 0 0
-100 3,862 6.7
-200 7,724 13.5
-300 8,514 14.9
-400 9,304 16.2
<PAGE>
EXHIBIT I-8
First Federal Savings and Loan Association
Fixed Rate and Adjustable Rate Loans
<PAGE>
EXHIBIT I-8
First Federal Savings and Loan Association
Fixed Rate and Adjustable Rate Loans
Fixed- Floating- or
Rates Adjustable-Rates Total
-------- ---------------- --------
(In Thousands)
Mortgage loans:
One- to- four family.........$191,743 $75,764 $267,507
Construction................. 1,800 -- 1,800
Land......................... 1,914 -- 1,914
Commercial and other......... 3,877 694 4,571
Consumer and other loans....... 17,495 18,369 35,864
-------- -------- --------
Total......................$216,829 $94,827 $311,656
======== ======= ========
<PAGE>
EXHIBIT I-9
First Federal Savings and Loan Association
Loan Portfolio Composition
<PAGE>
EXHIBIT I-9
First Federal Savings and Loan Association
Loan Portfolio Composition
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------
At December 31, 1996 1996 1995
--------------------- ------------------------ ----------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C>
Mortgage Loans:
One- to- four family.......... $267,593 77.3% $258,302 77.6% $217,702 77.3%
Construction.................. 31,949 9.2 32,954 9.9 30,483 10.8
Land.......................... 2,409 0.7 3,285 1.0 1,762 0.6
Commercial and other.......... 4,571 1.3 3,546 1.1 6,203 2.2
-------- ---- -------- ---- -------- ----
Total mortgage loans......... $306,522 88.5 298,087 89.6 256,150 90.9
-------- ---- -------- ---- -------- ----
Consumer and Other Loans:
Home equity................... 32,555 9.4 28,430 8.5 20,859 7.4
Loans secured by
deposit accounts............. 1,979 0.6 1,605 0.5 1,345 0.5
Other......................... 5,235 1.5 4,681 1.4 3,482 1.2
-------- ---- -------- ---- -------- ----
Total consumer and other loans 39,769 11.5 34,716 10.4 25,686 9.1
-------- ---- -------- ---- -------- ----
Total loans receivable....... 346,291 100.00% 332,803 100.00% 281,836 100.00%
====== ====== ======
Less:
Undisbursed portion of loans
in process................... 12,008 15,839 12,761
Net deferred loan fees........ 979 1,028 1,082
Allowance for loan losses..... 1,650 1,000 600
-------- ------ --------
Total loans receivable, net.. $331,654 $314,936 $267,393
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------------------------------------------
1994 1993 1992
------------------------- -------------------------- ----------------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C>
Mortgage Loans:
One- to- four family.......... $210,613 79.9% $202,348 83.2% $196,168 83.1%
Construction.................. 27,469 10.4 19,746 8.1 18,084 7.6
Land.......................... 1,484 0.6 -- -- -- --
Commercial and other.......... 5,648 2.1 3,989 1.7 4,916 2.1
-------- ---- -------- ----- -------- ----
Total mortgage loans......... 245,214 93.0 226,083 93.0 219,168 92.8
------- ---- ------- ----- -------- ----
Consumer and Other Loans:
Home equity................... 15,104 5.7 14,048 5.8 13,944 5.9
Loans secured by
deposit accounts............. 1,030 0.4 1,286 0.5 1,352 0.6
Other......................... 2,266 0.9 1,693 0.7 1,651 0.7
-------- ---- -------- ----- -------- -----
Total consumer and other loans 18,400 7.0 17,027 7.0 16,947 7.2
--------
Total loans receivable....... 263,614 100.00% 243,110 100.00% 236,115 100.00%
====== ====== ======
Less:
Undisbursed portion of loans
in process................... 14,587 10,311 7,227
Net deferred loan fees........ 1,232 1,031 766
Allowance for loan losses..... 600 600 400
-------- -------- --------
Total loans receivable, net.. $247,195 $231,168 $227,722
======== ======== ========
</TABLE>
<PAGE>
EXHIBIT I-10
First Federal Savings and Loan Association
Loan Originations, Purchases, and Sales
<PAGE>
EXHIBIT I-10
First Federal Savings and Loan Association
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
----------------- --------------------------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C>
Loans originated:
Mortgage loans:
One- to- four family.............. $25,109 $24,544 $59,296 $32,820 $91,205
Construction...................... 16,333 17,737 42,212 37,334 42,735
Land.............................. 118 1,190 2,950 100 --
Commercial and other.............. 1,025 316 316 237 1,191
Consumer and other................. 15,070 13,121 28,045 21,050 12,248
------- ------- -------- ------- --------
Total loans originated........... 57,655 56,908 132,819 91,541 147,379
Loans purchased:
One- to- four family............... 3,204 -- -- -- --
Whole loans sold.................... (6,498) (2,863) (7,704) (17,966) (27,840)
Mortgage loan principal repayments.. (41,238) (40,204) (87,446) (57,514) (105,182)
Net increase (decrease)
in other items..................... 3,128 3,733 (3,539) 2,569 (5,276)
-------- -------- -------- -------- --------
Net increase (decrease)
in loans receivable, net........... $16,251 $17,574 $34,130 $18,630 $9,081
======= ======= ======= ======= ======
</TABLE>
<PAGE>
EXHIBIT I-11
First Federal Savings and Loan Association
Contractual Maturity By Loan Type
<PAGE>
EXHIBIT I-11
First Federal Savings and Loan Association
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
After After After
One Year 3 Years 5 Years
Within Through Through Through Beyond
One Year 3 Years 5 Years 10 Years 10 Years Total
-------- ------- ------- -------- -------- -----
(In Thousands)
<S> <C>
Mortgage loans:
One- to- four family........ $ 86 $ 978 $ 4,156 $27,290 $235,083 $267,593
Construction................ 30,149 -- 750 -- 1,050 31,949
Land........................ 495 1,622 292 -- -- 2,409
Commercial and other........ -- 170 1,392 1,066 1,943 4,571
Consumer and other loans...... 3,905 2,996 5,868 7,658 19,342 39,769
-------- ------- ------- ------- -------- --------
Total..................... $34,635 $5,766 $12,458 $36,014 $257,418 $346,291
======= ====== ======= ======= ======== ========
</TABLE>
<PAGE>
EXHIBIT I-12
First Federal Savings and Loan Association
Non-Performing Assets
<PAGE>
EXHIBIT I-12
First Federal Savings and Loan Association
Non-Performing Assets
<TABLE>
<CAPTION>
At June 30,
At December 31, --------------------------------------------------------------
1996 1996 1995 1994 1993 1992
------------------- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C>
Loans accounted for on
a nonaccrual basis:
Mortgage loans:
One- to- four family..................... $ 623 $ 719 $ 348 $ 754 $1,035 $ 936
Construction............................. 847 1,130 471 457 256 409
Land..................................... -- -- -- -- -- --
Commercial and other..................... -- -- 48 -- -- --
Consumer and other loans.................. 42 60 20 53 154 163
Other loans............................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total nonaccrual loans............... 1,512 1,909 887 1,264 1,445 1,508
Accruing loans contractually past due 90 days or more:
Mortgage loans:
One- to- four family..................... -- -- -- -- -- --
Construction............................. 2,882 3,965 3,906 1,117 705 1,265
Land..................................... -- -- -- -- -- --
Commercial and other..................... -- -- -- -- -- --
Consumer and other loans.................. -- -- -- -- -- --
-- -- -- -- -- --
Total loans 90 days past due........ 2,882 3,965 3,906 1,117 705 1,265
-------- -------- -------- -------- -------- -------
Total of nonaccrual loans and
loans 90 days past due.................... 4,394 5,874 4,793 2,381 2,150 2,773
Real estate acquired in settlement of loans 102 58 34 18 391 612
------- -------- -------- -------- -------- -------
Total nonperforming assets............ $4,496 $5,932 $4,827 $2,399 $2,541 $3,385
====== ====== ====== ====== ====== ======
Restructured loans......................... $1,033 $1,247 $1,049 $1,029 $1,097 $ 994
====== ====== ====== ====== ====== ======
Nonaccrual loans and loans 90 days or more
past due as a percentage of loans receivable, net 1.32% 1.87% 1.79% 0.96% 0.93% 1.22%
Nonaccrual loans and 90 loans days or more
past due as a percentage of total assets.. 1.17 1.65 1.49 0.77 0.71 0.98
Nonperforming assets as a percentage
of total assets........................... 1.20 1.66 1.50 0.77 0.84 1.19
</TABLE>
<PAGE>
EXHIBIT I-13
First Federal Savings and Loan Association
Deposit Composition
<PAGE>
EXHIBIT I-13
First Federal Savings and Loan Association
Deposit Composition
<TABLE>
<CAPTION>
Weighted Percentage
Average Minimum of Total
Interest Rate Term Checking and Savings Deposits Amount Balance Deposits
- ------------- ---- ----------------------------- -------- ------- ----------
(In Thousands)
<S> <C>
1.83% None NOW accounts $ 100 $ 30,009 9.3%
3.17 None Money market accounts 2,500 13,967 4.3
3.72 None Passbook savings accounts 100 55,869 17.2
Certificate Accounts
--------------------
5.38 Within 6 months Fixed term, fixed rate 25 - 500 110,590 34.1
5.75 7 - 12 months Fixed term, fixed rate 25 - 500 62,644 19.3
5.71 13 - 36 months Fixed term, fixed rate 25 - 500 28,862 8.9
6.13 37 - 60 months Fixed term, fixed rate 25 - 500 19,007 5.9
6.20 61 - 120 months Fixed term, fixed rate 25 - 500 376 0.1
5.36 7 - 12 months Fixed term, adjustable rate 25 2,096 0.7
5.36 13 - 36 months Fixed term, adjustable rate 25 531 0.2
-------- -----
$323,951 100.0%
======== =====
</TABLE>
Certificate
Maturity Period Accounts
(In Thousands)
Three months or less............... $ 9,285
Over three through six months...... 5,598
Over six through 12 months......... 5,767
Over 12 months..................... 1,542
--------
Total......................... $22,192
=======
<PAGE>
EXHIBIT I-14
First Federal Savings and Loan Association
Time Deposit Rate/Maturity
<PAGE>
EXHIBIT I-14
First Federal Savings and Loan Association
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
At At June 30,
December 31, -----------------------------------------------
1996 1996 1995 1994
---------------- ---- ---- ----
(Dollars in thousands)
<S> <C>
Less than 3.00%..... $ 758 $ 3,329 $ 549 $ 480
3.01% - 5.00%....... 5,755 7,656 44,027 149,669
5.01% - 7.00%....... 217,186 204,734 153,350 29,648
7.01% - 9.00%....... 407 429 906 1,604
---------- ---------- ---------- ----------
Total............... $224,106 $216,148 $198,832 $181,401
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------------------
Less Than 1-2 2-3 3-4 After
One Year Years Years Years 4 Years Total
-------- ----- ----- ----- ------- -----
(Dollars in thousands)
<S> <C>
Less than 3.00%.... $ 758 $ -- $ -- $ -- $ -- $ 758
3.01% - 5.00%...... 3,479 1,717 559 -- -- 5,755
5.01% - 7.00%...... 170,851 20,688 6,356 15,514 3,777 217,186
7.01% - 9.00%...... 242 64 10 60 31 407
---------- --------- -------- --------- -------- ----------
Total.............. $175,330 $22,469 $6,925 $15,574 $3,808 $224,106
======== ======= ====== ======= ====== ========
</TABLE>
<PAGE>
EXHIBIT II-1
First Federal Savings and Loan Association
List of Branch Offices
<PAGE>
EXHIBIT II-1
First Federal Savings and Loan Association
List of Branch Offices
<TABLE>
<CAPTION>
Approximate
Location Year Opened Square Footage Deposits
- -------- ----------- -------------- --------
(in thousands)
<S> <C>
Main Office:
380 E. Main Street 1974 32,820 $204,512
Spartanburg, South Carolina
Branch Offices:
280 N. Church Street 1986 1,080 32,903
Spartanburg, South Carolina
1488 W.O. Ezzell Boulevard 1980 2,453 48,110
Spartanburg, South Carolina
1585 E. Main Street 1991 2,166 19,868
Spartanburg, South Carolina
2701 Boiling Springs Road 1994 3,300 18,558
Boiling Springs, South Carolina
Loan Production Office:
Merovan Center 1995 180 N/A
120 Woodruff Road
Building 3-A
Greenville, South Carolina
</TABLE>
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
Historical Interest Rates(1)
<TABLE>
<CAPTION>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
<S> <C> <C> <C> <C>
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
February 21, 1997 8.25% 5.08% 5.45% 6.64%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Sources of Personal Income/Employment Sectors
<PAGE>
<TABLE>
<CAPTION>
March 04, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(45-000) SOUTH CAROLINA
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Income by place of residence
Total personal income ($000) 47,995,224 52,854,509 55,073,570 58,241,058 61,264,381 64,888,886
Nonfarm personal income 47,623,446 52,572,925 54,675,453 57,873,902 60,904,543 64,408,397
Farm income 2/ 371,778 281,584 398,117 367,156 359,838 480,489
Population (thousands) 3/ 3,456.8 3,498.9 3,557.3 3,595.5 3,630.0 3,663.9
Per capita personal income (dollars) 13,884 15,106 15,482 16,198 16,877 17,710
Derivation of total personal income
Earnings by place of work 36,218,914 38,830,766 40,084,739 42,366,669 44,538,681 47,094,404
Less: Personal cont. for social insur. 4/ 2,237,841 2,502,751 2,601,939 2,810,613 2,983,946 3,223,296
Plus: Adjustment for residence 5/ 491,187 507,831 504,236 542,414 559,825 621,947
Equals: Net earn. by place of residence 34,472,260 36,835,846 37,987,036 40,098,470 42,114,560 44,493,055
Plus: Dividends, interest, and rent 6/ 6,062,947 7,630,842 7,642,737 7,639,044 7,910,851 8,368,816
Plus: Transfer payments 7,460,017 8,387,821 9,443,797 10,503,544 11,238,970 12,027,015
Earnings by place of work
Components of Earnings:
Wages and salaries 30,182,222 32,422,525 33,155,523 34,868,011 36,403,686 38,225,244
Other labor income 2,893,033 3,194,509 3,449,628 3,842,178 4,213,593 4,538,000
Proprietors' income 7/ 3,143,659 3,213,732 3,479,588 3,656,480 3,921,402 4,331,160
Farm proprietors' income 285,080 183,724 305,691 278,227 259,889 384,475
Nonfarm proprietors' income 2,858,579 3,030,008 3,173,897 3,378 253 3,661,513 3,946,685
Earnings by Industry:
Farm earnings 371,778 281,584 398,117 367,156 359,838 480,489
Nonfarm earnings 35,847,136 38,549,182 39,686,622 41,999,513 44,178,843 46,613,915
Private earnings 28,439,659 30,628,239 31,229,214 33,213,619 35,199,776 37,567,356
Ag. serv., for., fish., and other 8/ 182,450 207,671 219,366 234,098 250,775 268,172
Mining 57,757 61,636 60,283 61,505 65,981 68,743
Construction 2,596,042 3,059,406 2,745,167 2,606,177 2,784,421 2,964,612
Manufacturing 10,038,403 10,362,988 10,609,317 11,423,413 11,925,898 12,514,748
Nondurable goods 6,399,600 6,551,981 6,745,774 7,208,517 7,454,690 7,672,070
Durable goods 3,638,803 3,811,007 3,863,543 4,214,896 4,471,208 4,842,678
Transportation and public utilities 2,125,403 2,195,441 2,233,548 2,311,301 2,444,077 2,636,998
Wholesale trade 1,652,026 1,792,672 1,799,066 1,852,083 1,931,745 2,083,337
Retail trade 3,875,586 4,223,836 4,362,234 4,668,746 4,991,068 5,378,036
Finance, insurance, and real estate 1,679,947 1,742,514 1,821,294 1,910,579 2,018,991 2,126,761
Services 6,232,045 6,982,075 7,378,939 8,145,717 8,786,820 9,525,949
Government and government enterprises 7,407,477 7,920,943 8,457,408 8,785,894 8,979,067 9,046,559
Federal, civilian 1,244,384 1,261,404 1,316,728 1,303,489 1,337,808 1,290,071
Military 1,396,728 1,473,800 1,566,080 1,599,773 1,440,792 1,338,887
State and local 4,766,365 5,185,739 5,574,600 5,882,632 6,200,467 6,417,601
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
<TABLE>
<CAPTION>
March 04, 1997
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
For Counties and Metropolitan Areas
(thousands of dollars)
(45-083) SPARTANBURG SOUTH CAROLINA
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Income by place of residence
Total personal income ($000) 3,282,408 3,514,295 3,662,981 3,877,502 4,105,444 4,364,510
Nonfarm personal income 3,273,856 3,510,590 3,653,657 3,865,378 4,092,557 4,351,434
Farm income 2/ 8,552 3,705 9,324 12,124 12,887 13,076
Population (thousands) 3/ 224.9 227.5 230.4 232.8 234.7 237.6
Per capita personal income (dollars) 14,597 15,447 15,896 16,659 17,489 18,372
Derivation of total personal income
Earnings by place of work 2,630,930 2,769,731 2,850,478 3,073,183 3,264,239 3,499,149
Less: Personal cont. for social insur. 4/ 166,830 183,825 191,421 211,086 225,766 247,138
Plus: Adjustment for residence 5/ -51,897 -39,825 -47,231 -91,578 -95,469 -120,055
Equals: Net earn. by place of residence 2,412,203 2,546,081 2,611,826 2,770,519 2,943,004 3,131,956
Plus: Dividends, interest, and rent 6/ 414,615 460,185 479,744 473,556 489,603 518,508
Plus: Transfer payments 455,590 508,029 571,411 633,427 672,837 714,046
Earnings by place of work
Components of Earnings:
Wages and salaries 2,188,938 2,321,360 2,370,505 2,557,773 2,694,051 2,881,686
Other labor income 224,596 242,790 261,972 296,002 327,898 360,262
Proprietors' income 7/ 217,396 205,581 218,001 219,408 242,290 257,201
Farm proprietors' income 5,660 440 6,240 9,157 9,551 9,871
Nonfarm proprietors' income 211,736 205,141 211,761 210,251 232,739 247,330
Earnings by Industry:
Farm earnings 8,552 3,705 9,324 12,124 12,887 13,076
Nonfarm earnings 2,622,378 2,766,026 2,841,154 3,061,059 3,251,352 3,486,073
Private earnings 2,328,324 2,439,777 2,495,208 2,705,345 2,881,213 3,099,033
Ag. serv., for., fish., and other 8/ 7,132 8,625 9,728 10,234 11,473 12,338
Mining 2,662 3,043 3,367 6,979 8,531 10,237
Construction 175,385 192,600 168,601 169,423 177,854 189,402
Manufacturing 1,082,580 1,090,759 1,115,258 1,211,013 1,278,983 1,364,333
Nondurable goods 773,653 771,312 773,626 823,906 846,934 877,314
Durable goods 308,927 319,447 341,632 387,107 432,049 487,019
Transportation and public utilities 136,286 134,855 138,082 150,193 165,259 183,593
Wholesale trade 156,853 181,265 188,193 197,759 205,275 223,477
Retail trade 288,256 293,074 310,624 354,838 382,422 412,853
Finance, insurance, and real estate 64,982 70,930 73,090 77,332 81,991 87,000
Services 414,188 464,626 488,265 527,574 569,425 615,800
Government and government enterprises 294,054 326,249 345,946 355,714 370,139 387,040
Federal, civilian 15,350 17,476 16,800 17,848 18,367 18,675
Military 10,662 10,885 10,868 11,692 12,000 12,747
State and local 268,042 297,888 318,278 326,174 339,772 355,618
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA05
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-94 based on
1987 SIC.
2/ Farm income consists of proprietors' net farm income, the wages of hired
farm labor. the pay-in-kind of hired farm labor, and the salaries of
officers of corporate farms.
3/ Census Bureau midyear population estimates. Estimates for 1990-94 reflect
county population estimates available as of October 1995.
4/ Personal contributions for social insurance are included in earnings by
type and industry but excluded from personal income.
5/ U.S. adjustment for residence consists of adjustments for border workers:
income of U.S. residents commuting outside U.S. borders to work less
income of foreign residents commuting inside U.S. borders to work plus
certain Caribbean seasonal workers.
6/ Includes the capital consumption adjustment for rental income of persons.
7/ Includes the inventory valuation and capital consumption adjustments.
8/ "Other" consists of wages and salaries of U.S. residents employed by
international organizations and foreign embassies and consulates in the
U.S.
13/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census: those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Borough
and Aleutians West Census Area. Denali and Lake + Peninsula Boroughs begin
in 1991. Estimates from 1993 forward separate Skagway-Yakutat-Angoon
Census Area into Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
14/ Cibola. NM was separated from Valencia in June 1981, but in these estimates,
Valencia includes Cibola through the end of 1981.
15/ La Paz county, AZ was separated from Yuma county on January 1, 1983.
E The estimate shown here constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
<TABLE>
<CAPTION>
March 04, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(45-000) SOUTH CAROLINA
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Employment by Place of Work
Total full- & part-time employment 1,856,795 1,910,374 1,887,123 1,902,675 1,936,625 1,982,660
By Type:
Wage and salary employment 1,644,941 1,687,746 1,656,075 1,668,010 1,699,134 1,741,357
Proprietors' employment 211,854 222,628 231,048 234,665 237,491 241,303
Farm proprietors' employment 26,332 25,749 25,040 25,205 24,827 24,525
Nonfarm proprietors' employment 2/ 185,522 196,879 206,008 209,460 212,664 216,778
By Industry:
Farm employment 37,389 36,917 35,096 34,943 34,681 33,675
Nonfarm employment 1,819,406 1,873,457 1,852,027 1,867,732 1,901,944 1,948,985
Private employment 1,466,692 1,513,504 1,489,467 1,500,274 1,538,348 1,588,068
Ag.serv.,for.,fish., and other 3/ 14,270 15,291 15,937 15,858 17,314 18,073
Mining 2,574 2,581 2,487 2,281 2,347 2,343
Construction 121,049 131,731 119,516 113,212 115,835 118,800
Manufacturing 395,087 389,408 376,452 378,253 381,528 385,540
Transportation and public utilities 70,766 74,187 73,569 72,512 74,708 78,016
Wholesale trade 65,251 66,172 64,428 63,024 62,957 65,777
Retail trade 319,363 331,837 328,519 335,095 343,764 358,551
Finance, insurance, and real estate 109,071 107,212 106,874 104,329 105,564 107,078
Services 369,261 395,085 401,685 415,710 434,331 453,890
Government and government enterprises 352,714 359,953 362,560 367,458 363,596 360,917
Federal, civilian 39,356 40,636 38,077 36,175 34,383 32,725
Military 84,865 82,862 81,228 81,017 73,244 68,083
State and local 228,493 236,455 243,255 250,266 255,969 260,109
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
<TABLE>
<CAPTION>
March 04, 1997
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
For Counties and Metropolitan Areas
(number of jobs)
(45-083) SPARTANBURG SOUTH CAROLINA
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Employment by Place of Work
Total full- & part-time employment 127,293 129,144 126,477 128,087 131,307 136,529
By Type:
Wage and salary employment 114,055 115,178 112,119 114,396 117,444 122,406
Proprietors' employment 13,238 13,966 14,358 13,691 13,863 14,123
Farm proprietors' employment 1,273 1,247 1,213 1,220 1,202 1,187
Nonfarm proprietors' employment 2/ 11,965 12,719 13,145 12,471 12,661 12,936
By Industry:
Farm employment 1,633 1,610 1,540 1,537 1,522 1,485
Nonfarm employment 125,660 127,534 124,937 126,550 129,785 135,044
Private employment 111,009 112,151 109,391 111,168 114,429 119,332
Ag.serv.,for.,fish and other 3/ 668 736 809 799 888 951
Mining 155 175 149 241 254 298
Construction 7,698 8,133 7,301 7,034 7,210 7,506
Manufacturing 40,296 39,054 38,422 38,449 38,705 39,651
Transportation and public utilities 4,719 4,834 4,789 4,932 5,344 5,850
Wholesale trade 5,534 6,377 6,430 6,268 6,304 6,690
Retail trade 22,261 22,049 21,246 22,175 22,864 23,976
Finance, insurance, and real estate 4,623 4,720 4,609 4,428 4,444 4,547
Services 25,055 26,073 25,636 26,842 28,416 29,863
Government and government enterprises 14,651 15,383 15,546 15,382 15,356 15,712
Federal, civilian 495 571 464 459 462 477
Military 1,701 1,649 1,630 1,674 1,598 1,577
State and local 12,455 13,163 13,452 13,249 13,296 13,658
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA25
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-94 based on
1987 SIC.
2/ Excludes limited partners.
3/ "Other" consists of the number of jobs held by U.S. residents employed by
international organizations and foreign embassies and consulates in the
United States.
4/ Cibola, NM was separated from Valencia in June 1981. but in these
estimates Valencia includes Cibola through the end of 1981.
5/ La Paz county. Al was separated from Yuma county on January 1. 1983.
6/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census: those for prior years reflect Alaska Census
Divisions as defined in the 1970 Decennial Census. Estimates from 1988
forward separate Aleutian Islands Census Area into Aleutians East Bor.
and Aleutians West Census Area. Denali and Lake + Peninsula Boroughs begin
in 1991. Estimates from 1993 forward separate Skagway-Yakutat-Angoon
Census Area into Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
E Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
<TABLE>
<CAPTION>
March 04, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(45-000) SOUTH CAROLINA
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Place of Residence Profile
Total personal income ($000) 47,995,224 52,854,509 55,073,570 58,241,058 61,264,381 64,888,886
Nonfarm personal income 47,623,446 52,572,925 54,675,453 57,873,902 60,904,543 64,408,397
Farm income 371,778 281,584 398,117 367,156 359,838 480,489
Derivation of Total Personal Income
Net earnings 1/ 34,472,260 36,835,846 37,987,036 40,098,470 42,114,560 44,493,055
Transfer payments 7,460,017 8,387,821 9,443,797 10,503,544 11,238,970 12 027,015
Income maintenance 2/ 654,527 655,153 785,899 980,759 1,037,609 1 068,746
Unemployment insurance 110,632 153,452 253,922 335,747 288,597 206,035
Retirement and other 6,694,858 7,579,216 8,403,976 9,187,038 9,912,764 10,752,234
Dividends, interest, and rent 6,062,947 7,630,842 7,642,737 7,639,044 7,910,851 8,368,816
Population (thousands) 3/ 3,456.8 3,498.9 3,557.3 3,595.5 3,630.0 3,663.9
Per Capita Incomes ($) 4/
Per capita personal income 13,884 15,106 15,482 16,198 16,877 17,710
Per capita net earnings 9,972 10,528 10,679 11,153 11,602 12,144
Per capita transfer payments 2,158 2,397 2,655 2,921 3,096 3,283
Per capita income maintenance 189 187 221 273 286 292
Per capita unemployment insurance 32 44 71 93 80 56
Per capita retirement & other 1,937 2,166 2,362 2,555 2 731 2,935
Per capita dividends, interest, & rent 1,754 2,181 2,148 2,125 2 179 2,284
Place of Work Profile
Total earnings (place of work, $000) 36,218,914 38,830,766 40,084,739 42,366,669 44,538,681 47,094,404
Wages and salaries 30,182,222 32,422,525 33,155,523 34,868,011 36,403,686 38,225,244
Other labor income 2,893,033 3,194,509 3,449,628 3,842,178 4,213,593 4,538,000
Proprietors' income 3,143,659 3,213,732 3,479,588 3,656,480 3,921,402 4,331,160
Nonfarm proprietors' income 2,858,579 3,030,008 3,173,897 3,378,253 3,661,513 3,946,685
Farm proprietors' income 285,080 183,724 305,691 278,227 259,889 384,475
Total employment (full & part-time) 1,856,795 1,910,374 1,887,123 1,902,675 1,936,625 1 982,660
Wage and salary jobs 1,644,941 1,687,746 1,656,075 1,668,010 1,699,134 1 741,357
Number of proprietors 211,854 222,628 231,048 234,665 237,491 241,303
Number of nonfarm proprietors /5 185,522 196,879 206,008 209,460 212,664 216,778
Number of farm proprietors 26,332 25,749 25,040 25,205 24,827 24,525
Average earnings per job ($) 19,506 20,326 21,241 22,267 22,998 23,753
Wage & salary earnings per job ($) 18,349 19,211 20,021 20,904 21,425 21,951
Average earnings per nonfarm proprietor ($) 15,408 15,390 15,407 16,128 17,217 18,206
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
<TABLE>
<CAPTION>
March 04, 1997
REGIONAL ECONOMIC PROFILE
For Counties and Metropolitan Areas
(45-083) SPARTANBURG SOUTH CAROLINA
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Item 1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------------------------------------------------
Place of Residence Profile
Total personal income ($000) 3,282,408 3,514,295 3,662,981 3,877,502 4,105,444 4,364,510
Nonfarm personal income 3,273,856 3,510,590 3,653,657 3,865,378 4,092,557 4,351,434
Farm income 8,552 3,705 9,324 12,124 12,887 13,076
Derivation of Total Personal Income
Net earnings 1/ 2,412,203 2,546,081 2,611,826 2,770,519 2,943,004 3,131,956
Transfer payments 455,590 508,029 571,411 633,427 672,837 714,046
Income maintenance 2/ 30,511 32,222 39,841 50,749 53,579 53,951
Unemployment insurance 7,735 11,919 18,414 21,266 17,430 11,423
Retirement and other 417,344 463,888 513,156 561,412 601,828 648,672
Dividends, interest, and rent 414,615 460,185 479,744 473,556 489,603 518,508
Population (thousands) 3/ 224.9 227.5 230.4 232.8 234.7 237.6
Per Capita Incomes ($) 4/
Per capita personal income 14,597 15,447 15,896 16,659 17,489 18,372
Per capita net earnings 10,727 11,191 11,334 11,903 12,537 13,183
Per capita transfer payments 2,026 2,233 2,480 2,721 2,866 3,006
Per capita income maintenance 136 142 173 218 228 227
Per capita unemployment insurance 34 52 80 91 74 48
Per capita retirement & other 1,856 2,039 2,227 2,412 2,564 2,730
Per capita dividends, interest, & rent 1,844 2,023 2,082 2,035 2,086 2,183
Place of Work Profile
Total earnings (place of work, $000) 2,630,930 2,769,731 2,850,478 3,073,183 3,264,239 3,499,149
Wages and salaries 2,188,938 2,321,360 2,370,505 2,557,773 2,694,051 2,881,686
Other labor income 224,596 242,790 261,972 296,002 327,898 360,262
Proprietors' income 217,396 205,581 218,001 219,408 242,290 257,201
Nonfarm proprietors' income 211,736 205,141 211,761 210,251 232,739 247,330
Farm proprietors' income 5,660 440 6,240 9,157 9,551 9,871
Total employment (full & part-time) 127,293 129,144 126,477 128,087 131,307 136,529
Wage and salary jobs 114,055 115,178 112,119 114,396 117,444 122,406
Number of proprietors 13,238 13,966 14,358 13,691 13,863 14,123
Number of nonfarm proprietors /5 11,965 12,719 13,145 12,471 12,661 12,936
Number of farm proprietors 1,273 1,247 1,213 1,220 1,202 1,187
Average earnings per job ($) 20,668 21,477 22,538 23,993 24,860 25,629
Wage & salary earnings per job ($) 19,192 20,155 21,143 22,359 22,939 23,542
Average earnings per nonfarm proprietor ($) 17,696 16,129 16,110 16,859 18,382 19,120
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 June 1996 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA30
1/ Total earnings less personal contributions for social insurance adjusted
to place of residence.
2/ Includes supplemental security income payments, payments to families with
dependent children (AFDC), general assistance payments, food stamp payments,
and other assistance payments, including emergency assistance.
3/ Census Bureau midyear population estimates. Estimates for 1990-94 reflect
county population estimates available as of October 1995.
4/ Type of income divided by population yields a per capita for that type of
income.
5/ Excludes limited partners.
6/ Cibola, NM was separated from Valencia in June 1981, but in these estimates
Valencia includes Cibola through the end of 1981.
7/ La Pay county, AZ was separated from Yuma county on January 1, 1983.
8/ Estimates for 1979 forward reflect Alaska Census Areas as defined in the
1980 Decennial Census; those for prior years reflect Alaska Census Divisions
as defined in the 1970 Decennial Census. Estimates from 1988 forward
separate Aleutian Islands Census Area Into Aleutians East Bor. and Aleutians
West Census Area. Denali and Lake + Peninsula Boroughs begin in 1991.
Estimates from 1993 forward separate Skagway-Yakutat-Angoon Census Area into
Skagway-Hoonah-Angoon Census Area and Yakutat Borough.
(L) Less than $50,000 or less than 10 jobs as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
California Companies
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 49,902 345 12-31 10/72 41.12 4,201
GWF Great Western Fin. Corp. of CA NYSE CA,FL Div. 43,548 S 416 12-31 / 46.37 6,393
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 37,730 232 12-31 05/59 71.75 4,114
GLN Glendale Fed. Bk, FSB of CA NYSE CA Div. 15,128 150 06-30 10/83 27.75 1,382
CSA Coast Savings Financial of CA NYSE California R.E. 8,549 S 89 12-31 12/85 47.62 885
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 4,954 S 52 12-31 01/71 22.75 579
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,144 25 12-31 12/83 27.00 284
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,323 S 33 12-31 / 13.25 242
BVFS Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,300 27 12-31 05/86 56.75 379
WES Westcorp Inc. of Orange CA NYSE California Div. 3,181 S 25 12-31 05/86 19.62 510
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,525 22 03-31 03/96 15.63 310
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,209 36 12-31 / 34.50 207
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,185 18 12-31 10/91 34.38 177
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 2,157 11 12-31 / 23.37 179
CFHC California Fin. Hld. Co. of CA OTC Central CA Thrift 1,337 22 12-31 04/83 28.81 137
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 866 S 14 12-31 04/94 15.44 109
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 828 S 9 12-31 / 11.75 31
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 827 J 12 06-30 06/95 13.87 87
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 764 8 06-30 12/93 18.75 71
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 736 S 11 12-31 / 16.00 125
PROV Provident Fin. Holdings of CA OTC M.B. 580 S 0 06-30 06/96 17.00 87
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 490 11 12-31 / 23.50 54
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 370 6 06-30 06/95 12.87 32
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 327 S 6 12-31 02/95 18.00 59
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 265 S 4 12-31 / 13.00 38
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 117 S 3 12-31 01/96 10.25 9
FSSB First FS&LA of San Bern. CA OTC San Bernard. CA Thrift 100 S 4 06-30 12/92 10.50 3
</TABLE>
Florida Companies
-----------------
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Florida Companies (continued)
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,170 S 43 12-31 11/83 15.50 228
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,490 S 31 09-30 09/93 27.00 136
HARB Harbor FSB, MHC of FL (46.0) OTC Eastern FL Thrift 1,060 22 09-30 01/94 35.50 175
FFFL Fidelity FSB, MHC of FL (47.4) OTC Southeast FL Thrift 876 20 12-31 01/94 18.25 123
BKUNA BankUnited SA of FL OTC Miami FL Thrift 824 S 7 09-30 12/85 10.12 58
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 655 17 09-30 10/94 19.00 93
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 346 8 12-31 01/94 23.50 57
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 311 S 11 12-31 10/88 3.75 32
Mid-Atlantic Companies
----------------------
DME Dime Savings Bank, FSB of NY (3) NYSE NY,NJ,FL M.B. 18,870 87 12-31 08/86 17.50 1,833
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,326 82 06-30 01/94 62.75 2,979
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 9,433 120 12-31 08/86 15.00 746
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 7,273 46 12-31 11/93 40.50 870
LISB Long Island Bancorp of NY OTC Long Island NY M.B. 5,364 S 36 09-30 04/94 38.37 938
COFD Collective Bancorp Inc. of NJ OTC Southern NJ Thrift 5,253 S 79 06-30 02/84 37.00 754
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,049 J 34 11-30 04/86 33.87 519
ALBK ALBANK Fin. Corp. of Albany NY OTC NY,MA Thrift 3,506 63 06-30 04/92 35.75 462
ROSE TR Financial Corp. of NY OTC New York, NY Thrift 3,140 S 15 12-31 06/93 35.12 309
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 3,122 29 09-30 01/88 30.00 497
GRTR Greater New York SB of NY (3) OTC New York NY Div. 2,567 S 14 12-31 06/87 14.87 201
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 2,460 15 12-31 03/90 24.62 305
RSLN Roslyn Bancorp of NY (3) OTC Long Island NY M.B. 2,348 P 6 12-31 01/97 15.87 693
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,085 S 39 06-30 06/96 15.37 276
NWSB Northwest SB, MHC of PA (29.9) OTC Pennsylvania Thrift 1,912 53 06-30 11/94 15.63 365
RELY Reliance Bancorp of NY OTC NYC NY Thrift 1,878 28 06-30 03/94 21.37 189
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 1,875 18 03-31 08/94 17.37 203
HARS Harris SB, MHC of PA (24.2) OTC Southeast PA Thrift 1,724 S 31 12-31 01/94 21.88 245
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,565 S 9 12-31 09/93 30.62 132
JSBF JSB Financial, Inc. of NY OTC New York City R.E. 1,519 S 13 12-31 06/90 40.00 391
QCSB Queens County SB of NY (3) OTC New York City NY R.E. 1,359 9 12-31 11/93 54.12 413
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,307 S 14 12-31 11/86 11.87 153
DIME Dime Community Bancorp of NY OTC Thrift 1,232 0 06-30 06/96 18.25 265
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,214 17 06-30 07/94 23.12 111
OCFC Ocean Fin. Corp. of NJ OTC Thrift 1,190 S 0 12-31 07/96 29.87 271
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,160 22 06-30 02/84 18.50 126
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,128 J 25 02-28 06/87 38.25 120
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 975 S 17 12-31 06/92 21.25 152
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 945 28 06-30 07/87 25.75 104
PSBK Progressive Bank, Inc. of NY (3) OTC Eastern NY Thrift 886 S 17 12-31 08/84 23.25 89
PKPS Poughkeepsie SB of NY OTC Poughkeepsie NY R.E. 861 S 9 12-31 11/85 5.75 72
MBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 848 S 17 09-30 08/92 18.75 53
FFIC Flushing Fin. Corp. of NY (3) OTC New York, NY Thrift 775 7 12-31 11/95 19.75 163
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 742 S 8 09-30 10/94 17.87 178
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 701 S 9 12-31 06/90 13.50 53
PSAB Prime Bancorp, Inc. of PA OTC Southeastern PA Thrift 677 S 18 12-31 11/88 20.25 107
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 668 S 14 12-31 12/86 21.75 64
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 662 S 16 03-31 10/95 15.87 79
FSNJ First SB of NJ, MHC (45.9) OTC Northern NJ Thrift 651 J 4 05-31 01/95 23.75 73
BFSI BFS Bankorp, Inc. of NY OTC New York NY R.E. 651 5 09-30 05/88 50.75 84
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 648 11 06-30 07/94 18.62 80
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 634 10 12-31 03/96 16.37 138
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 577 S 7 12-31 06/95 15.63 121
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 542 16 12-31 12/88 20.50 49
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 524 S 10 12-31 08/95 16.25 147
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 510 4 09-30 09/86 18.50 56
AHCI Ambanc Holding Co. of NY (3) OTC East-Central NY Thrift 496 S 9 12-31 12/95 13.19 64
PBIX Patriot Bank Corp. of PA OTC Southeast PA Thrift 490 S 7 12-31 12/95 15.25 68
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 487 S 10 12-31 04/87 17.00 46
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 487 S 9 07-31 11/95 12.75 46
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 473 S 8 07-31 12/93 30.25 75
CNSK Covenant Bank for Svgs. of NJ (3) OTC Southern NJ Thrift 387 S 12 12-31 / 14.50 40
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 384 S 4 12-31 04/93 25.00 52
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 384 9 12-31 07/83 8.87 33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CARV Carver FSB of New York, NY OTC New York, NY Thrift 365 S 8 03-31 10/94 9.87 23
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 363 8 12-31 10/89 20.00 63
FFWM First Fin. Corp of Western MD OTC Western MD Thrift 361 9 06-30 01/92 33.00 72
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 354 S 5 12-31 03/87 23.50 36
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 342 9 12-31 01/95 17.75 44
HARL Harleysville SA of PA OTC Southeastern PA Thrift 324 4 09-30 08/87 20.00 33
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 318 S 8 09-30 06/88 22.75 31
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 311 5 09-30 01/95 21.62 28
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 290 6 06-30 03/87 20.75 34
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 287 4 09-30 09/93 31.50 19
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 284 S 3 09-30 04/96 15.37 80
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 281 S 7 12-31 01/96 14.00 40
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 276 5 06-30 11/93 25.75 45
LFED Leeds FSB, MHC of MD (36.2) OTC Baltimore MD Thrift 275 S 1 06-30 03/94 19.00 66
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 262 4 09-30 04/96 13.50 43
FIBC Financial Bancorp of NY OTC New York, NY Thrift 259 5 09-30 08/94 18.12 32
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 255 S 3 07-31 / 5.50 23
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 250 S 2 09-30 04/96 14.62 44
IFSB Independence FSB of DC OTC Washington DC Ret. 248 S 2 12-31 06/85 9.00 12
CTBK Center Banks, Inc. of NY (3) OTC Central NY Thrift 242 7 12-31 05/86 19.12 18
WYNE Wayne Bancorp of NJ OTC Thrift 240 S 0 12-31 06/96 16.87 38
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 236 7 12-31 03/95 11.00 36
ESBK Elmira SB of Elmira NY (3) OTC NY,PA Ret. 221 S 6 12-31 03/85 18.50 13
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 219 6 03-31 08/94 17.37 30
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 202 6 06-30 02/87 19.50 30
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 197 S 4 04-30 11/94 14.00 25
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 195 S 6 09-30 04/96 14.62 30
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 186 S 3 06-30 12/95 15.00 51
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 166 S 3 12-31 06/95 16.50 21
TPNZ Tappan Zee Fin. Corp. of NY OTC Southeast NY Thrift 120 S 1 03-31 10/95 15.00 23
PRBC Prestige Bancorp of PA OTC Thrift 115 0 12-31 06/96 14.62 14
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 102 P 2 06-30 01/97 14.00 15
THBC Troy Hill Bancorp of PA OTC Pittsburgh PA Thrift 99 S 2 06-30 06/94 20.00 21
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 98 J 5 09-30 04/96 13.87 22
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 94 S 2 03-31 06/96 18.00 12
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 60 S 2 09-30 07/93 16.56 4
BRFC Bridgeville SB, FSB of PA OTC Western PA Thrift 55 1 12-31 10/94 15.25 17
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 46 S 3 12-31 07/96 14.37 9
Mid-West Companies
------------------
SFB Standard Fed. Bancorp of MI NYSE MI,IN,OH M.B. 15,651 166 12-31 01/87 57.50 1,839
COFI Charter One Financial of OH OTC OH,MI Div. 13,905 155 12-31 01/88 48.25 2,241
RFED Roosevelt Fin. Grp. Inc. of MO OTC MO,IL,KS Div. 7,797 79 12-31 01/87 22.50 994
TCB TCF Financial Corp. of MN NYSE MN,IL,MI,WI,OH Div. 7,091 184 12-31 06/86 46.37 1,612
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK M.B. 6,868 98 06-30 12/84 36.75 790
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,700 129 12-31 12/80 28.13 1,035
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,357 52 12-31 05/87 26.12 595
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,658 42 06-30 01/94 84.75 780
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,230 13 06-30 01/90 39.75 417
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 2,918 33 03-31 01/92 36.12 310
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,897 41 12-31 03/94 34.25 484
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,340 S 13 12-31 08/94 20.50 332
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,869 33 03-31 07/92 43.25 200
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,496 28 12-31 08/83 30.00 249
DNFC D&N Financial Corp. of MI OTC MI,WI Ret. 1,473 35 12-31 02/85 18.00 150
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,469 S 44 12-31 11/89 28.75 177
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,409 13 09-30 06/93 27.25 146
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,128 S 21 12-31 04/93 30.00 125
FFSW First Fed Fin. Serv. of OH OTC Northeastern OH Thrift 1,111 S 18 12-31 04/87 37.50 135
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,032 15 09-30 03/92 35.75 117
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 830 18 12-31 06/90 20.50 96
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 827 S 26 12-31 08/94 18.87 98
IFSL Indiana Federal Corp. of IN OTC Northwestern IN Thrift 809 S 15 12-31 02/87 26.25 124
FFEC First Fed. Bancshares of WI OTC Northwest WI Thrift 729 S 20 12-31 10/94 18.50 127
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASB North American SB of MO OTC KS,MO M.B. 711 S 8 09-30 09/85 39.25 89
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 668 10 09-30 07/92 30.50 82
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 665 22 12-31 07/92 6.75 29
GSBC Great Southern Bancorp of MO OTC Southwest MO Div. 658 S 25 06-30 12/89 17.00 148
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 633 S 15 06-30 01/88 27.50 92
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 624 13 03-31 01/88 17.75 88
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 615 20 12-31 12/83 17.50 77
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 613 S 6 03-31 04/95 18.25 64
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 582 10 06-30 06/93 25.12 108
SSBK Strongsville SB of OH OTC Cleveland OH Thrift 568 13 12-31 / 24.00 61
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 555 7 12-31 06/94 23.50 104
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 553 19 06-30 04/92 18.00 54
FFDP FirstFed Bancshares of IL OTC Chicago IL Thrift 541 3 12-31 07/92 17.50 54
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 524 S 9 06-30 10/95 13.00 129
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 510 5 06-30 02/92 35.25 84
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 510 S 8 12-31 05/96 19.50 101
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 476 S 5 09-30 12/93 19.00 53
FFSX First FS&LA. MHC of IA (46.0) OTC Western IA Thrift 457 12 06-30 06/92 30.25 57
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 413 11 03-31 04/94 22.00 46
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 404 12 12-31 02/92 22.25 28
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 400 S 8 12-31 02/87 16.00 53
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 397 3 06-30 01/94 18.12 26
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 389 4 12-31 03/94 19.25 37
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 388 S 6 09-30 12/95 15.87 67
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 388 S 9 09-30 09/93 16.62 48
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 382 5 12-31 06/92 19.75 52
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 378 S 7 12-31 / 15.87 33
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 373 5 09-30 04/94 18.50 30
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 371 S 5 12-31 09/96 15.00 105
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 367 7 06-30 07/87 21.00 88
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 362 11 09-30 10/94 16.50 53
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 356 7 09-30 06/94 26.56 54
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 351 10 03-31 12/92 27.00 38
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 348 9 06-30 12/92 16.37 38
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 347 10 12-31 03/85 18.75 36
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 340 S 9 12-31 06/90 21.25 24
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 333 J 6 12-31 07/94 21.50 47
INBI Industrial Bancorp of OH OTC Northern OH Thrift 327 10 12-31 08/95 12.75 70
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 323 S 8 09-30 03/95 19.62 52
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 316 S 7 12-31 07/95 15.50 58
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 308 S 1 12-31 06/92 21.37 55
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 298 7 12-31 06/94 28.25 41
WFCO Winton Financial Corp. of OH OTC Cincinnati OH R.E. 292 S 4 09-30 08/88 12.30 24
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 280 6 09-30 07/87 20.00 46
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 279 J 6 06-30 11/90 20.00 24
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 269 S 6 03-31 09/93 22.25 55
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 266 S 6 12-31 05/96 15.37 43
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 260 1 06-30 04/87 28.75 20
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 260 4 06-30 08/87 8.75 22
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 256 S 4 12-31 03/96 12.75 52
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 251 S 6 03-31 06/93 26.75 40
OSBF OSB Fin. Corp. of Oshkosh WI OTC Eastern WI Thrift 250 S 7 12-31 06/92 32.00 37
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 236 7 06-30 12/93 14.50 27
DFIN Damen Fin. Corp. of Chicago IL OTC Chicago IL Thrift 235 3 11-30 10/95 14.37 54
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 235 S 5 09-30 10/94 15.25 31
CBIN Community Bank Shares of IN OTC Southeast IN Thrift 235 S 7 12-31 04/95 14.00 28
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 224 4 09-30 03/94 18.75 33
LARK Landmark Bancshares of KS OTC Central KS Thrift 222 5 09-30 03/94 18.75 34
SBCN Suburban Bancorp. of OH OTC Cincinnati OH Thrift 219 8 06-30 09/93 16.25 24
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 218 S 7 12-31 01/88 16.00 19
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 218 S 4 12-31 02/93 21.75 27
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 216 P 3 07-31 12/96 14.00 35
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 209 2 06-30 06/93 20.25 27
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 201 S 7 12-31 04/95 15.63 32
CBCO CB Bancorp of Michigan City IN OTC Northwest IN Thrift 200 S 3 03-31 12/92 28.62 33
FFFD North Central Bancshares of IA OTC Central IA Thrift 198 S 4 12-31 03/96 15.63 54
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 195 S 9 12-31 07/92 18.00 29
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 191 4 06-30 04/95 12.00 38
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 189 6 09-30 06/92 17.00 27
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 186 S 3 09-30 04/95 16.37 47
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 179 S 5 09-30 05/94 16.75 35
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 178 S 3 12-31 02/95 20.00 18
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 177 S 3 12-31 08/96 15.31 41
MARN Marion Capital Holdings of IN OTC Central IN Thrift 176 2 06-30 03/93 21.00 39
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 176 2 09-30 10/94 14.37 32
EGLB Eagle BancGroup of IL OTC Central IL Thrift 173 1 12-31 07/96 15.87 21
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 160 S 3 12-31 06/95 14.25 28
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 160 J 8 06-30 04/94 16.25 27
FFWD Wood Bancorp of OH OTC Northern OH Thrift 160 6 06-30 08/93 15.75 24
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 158 3 06-30 03/93 25.00 18
FBSI First Bancshares of MO OTC Southcentral MO Thrift 157 5 06-30 12/93 20.50 24
SJSB SJS Bancorp of St. Joseph MI OTC Southwest MI Thrift 152 S 4 06-30 02/95 24.87 23
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 148 S 2 06-30 04/95 18.50 26
JXSB Jcksnville SB,MHC of IL (44.6) OTC Central IL Thrift 144 S 4 12-31 04/95 16.25 21
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 140 S 2 06-30 03/95 11.37 21
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 136 4 12-31 11/92 26.75 9
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 136 S 1 03-31 12/95 13.62 18
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 129 S 3 06-30 07/95 10.25 35
PTRS The Potters S&L Co. of OH OTC Northeast OH Thrift 125 S 4 12-31 12/93 19.62 10
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 124 S 3 09-30 03/94 14.87 21
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 120 2 12-31 09/96 13.75 39
GTPS Great American Bancorp of IL OTC East Central IL Thrift 120 J 3 09-30 06/95 15.94 31
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 117 2 06-30 12/93 17.50 19
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 116 S 6 09-30 10/92 8.50 14
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 12.00 21
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 110 5 09-30 04/95 18.50 13
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 110 P 1 09-30 11/96 14.12 29
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 S 2 09-30 10/95 17.25 35
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 109 1 09-30 10/93 11.25 12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FTNB Fulton Bancorp of MO OTC Central MO Thrift 100 S 2 04-30 10/96 16.37 28
CNSB CNS Bancorp of MO OTC Central MO Thrift 99 S 5 12-31 06/96 15.50 26
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 97 S 2 12-31 10/93 16.50 7
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 97 3 03-31 09/95 13.75 13
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 96 S 3 03-31 10/94 13.62 13
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 95 S 3 06-30 02/95 17.37 11
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 S 1 12-31 08/94 13.75 29
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 94 P 7 12-31 12/96 15.25 18
CBES CBES Bancorp of MO OTC Western MO Thrift 92 2 06-30 09/96 17.00 17
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 91 2 09-30 06/95 13.00 20
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 91 S 3 06-30 12/94 16.75 15
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 89 S 2 09-30 09/96 14.87 22
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 11.87 16
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 88 1 06-30 01/94 21.50 11
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 87 S 4 06-30 08/95 14.37 12
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 85 S 1 06-30 04/96 13.87 20
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 84 S 4 12-31 04/96 13.75 15
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 S 1 09-30 02/95 17.25 15
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 81 S 2 06-30 01/94 18.00 14
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 79 3 06-30 03/95 14.00 12
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 79 S 3 09-30 10/94 10.12 9
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 78 1 12-31 06/95 13.00 16
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 77 S 3 06-30 06/94 17.75 8
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 73 P 1 12-31 11/96 13.69 30
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 72 S 3 06-30 03/95 11.87 6
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 71 S 1 09-30 03/95 14.62 13
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 69 S 2 06-30 01/95 14.75 16
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 67 2 06-30 02/95 20.75 13
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 62 S 2 09-30 06/95 16.00 12
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 62 S 1 09-30 06/96 14.25 18
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 61 P 1 06-30 12/96 14.00 12
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 18.00 17
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 50 S 1 09-30 10/95 10.12 10
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 48 S 1 June 04/96 7.12 18
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 45 2 09-30 02/95 21.00 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 39 S 0 06-30 07/96 14.00 7
LONF London Financial Corp. of OH OTC Central OH Thrift 37 1 09-30 04/96 15.25 8
FLKY First Lancaster Bncshrs of KY OTC Thrift 37 0 06-30 07/96 15.50 15
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 36 S 1 03-31 12/95 14.00 11
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (37.4) (3) OTC Southwestern CT Div. 7,645 84 12-31 07/88 35.81 1,452
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH Div. 4,456 S 82 12-31 12/86 31.75 896
WBST Webster Financial Corp. of CT OTC Central CT Thrift 3,918 64 12-31 12/86 39.50 313
CFX Cheshire Fin. Corp. of NH (3) AMEX S.W. NH,MA M.B. 1,521 S 23 12-31 02/87 17.62 229
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 1,403 S 19 09-30 02/87 29.25 133
SISB SIS Bank of Springfield MA (3) OTC Central MA Div. 1,349 21 12-31 02/95 26.75 153
ANDB Andover Bancorp, Inc. of MA (3) OTC Northeastern MA M.B. 1,205 11 12-31 05/86 29.25 150
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,067 10 12-31 08/87 16.00 119
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 1,039 16 12-31 03/86 28.75 130
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,005 S 10 12-31 / 25.87 133
FAB FirstFed America Bancorp of MA AMEX Southeast MA M.B. 949 P 14 12-31 01/97 14.87 130
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 943 S 12 12-31 06/87 25.87 68
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 888 14 12-31 05/86 41.37 111
EBCP Eastern Bancorp of NH OTC VT, NH M.B. 866 25 09-30 11/83 25.50 94
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 797 S 8 12-31 10/95 15.87 99
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 710 S 0 12-31 06/96 17.12 91
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 692 S 10 12-31 07/86 20.75 106
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 683 18 12-31 11/86 20.37 110
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 637 S 8 12-31 06/94 25.37 61
GROV GroveBank for Savings of MA (3) OTC Eastern MA Thrift 599 S 7 12-31 08/86 50.50 78
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 558 15 12-31 12/81 28.13 65
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 549 S 9 06-30 05/86 26.25 64
MWBX Metro West of MA (3) OTC Eastern MA Thrift 523 9 12-31 10/86 5.06 70
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 513 S 14 12-31 10/86 13.00 44
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 511 S 5 12-31 07/86 2.53 42
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 487 7 12-31 06/86 22.50 43
PBNB Peoples Sav. Fin. Corp. of CT (3) OTC Central CT Thrift 482 8 12-31 08/86 30.19 58
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 465 11 04-30 07/86 32.25 61
PETE Primary Bank of NH (3) OTC Southern NH Ret. 427 8 12-31 10/93 17.37 36
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 419 3 12-31 07/86 22.75 58
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 410 7 12-31 09/86 19.25 43
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 359 6 12-31 07/86 16.00 59
MIDC Midconn Bank of Kensington CT (3) OTC Central CT Thrift 358 S 10 09-30 09/86 24.00 47
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 338 6 12-31 05/86 9.87 42
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 326 S 11 04-30 10/86 18.00 35
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 312 12 06-30 02/86 9.75 39
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 269 S 3 12-31 02/88 16.06 92
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 264 S 10 12-31 05/86 11.75 20
NEBC Northeast Bancorp of ME (3) OTC Eastern ME Thrift 230 S 8 06-30 08/87 14.00 17
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 228 S 7 12-31 12/86 14.75 17
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 202 4 12-31 12/88 19.00 25
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 189 S 2 12-31 08/88 18.25 34
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 184 5 12-31 11/86 4.12 27
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 159 4 12-31 05/93 16.00 19
AFED AFSALA Bancorp of NY OTC Central NY Thrift 149 P 4 09-30 10/96 13.50 20
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 133 J 8 12-31 06/93 34.00 14
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 116 S 4 04-30 12/87 17.00 15
NTMG Nutmeg FS&LA of CT OTC CT M.B. 94 S 3 12-31 / 7.00 5
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 89 1 09-30 03/96 15.00 22
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 56 S 2 03-31 11/89 19.00 4
GLBK Glendale Co-op. Bank of MA (3) OTC Boston MA Thrift 37 J 1 04-30 01/94 23.00 6
North-West Companies
--------------------
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 22,414 S 290 12-31 03/83 56.75 7,159
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
North-West Companies (continued)
--------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,869 89 09-30 11/82 26.87 1,275
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,703 31 12-31 / 36.25 290
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,531 S 41 06-30 / 16.50 91
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 947 S 16 03-31 11/95 21.00 222
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 673 7 09-30 10/95 15.56 156
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 500 S 12 03-31 08/86 15.50 99
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 401 S 6 12-31 12/85 20.50 50
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 348 6 06-30 08/92 17.00 35
RVSB Rvrview SB,FSB MHC of WA(41.7) OTC Southwest WA M.B. 224 9 03-31 10/93 18.25 40
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 06-30 01/97 14.19 37
South-East Companies
--------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,582 32 09-30 11/83 28.00 176
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,420 20 12-31 10/94 19.75 194
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,395 S 41 12/31 01/89 28.75 315
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,342 62 06-30 03/91 19.75 271
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 991 J 29 9-30 12/83 22.00 134
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 902 8 06-30 12/95 21.75 374
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 781 S 23 06-30 01/78 15.37 89
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 686 S 16 12-31 04/95 23.87 168
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 660 S 19 12-31 12/85 14.81 77
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 656 J 15 12-31 08/92 45.00 73
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 642 S 10 03-31 04/86 16.75 76
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 604 S 12 12-31 11/80 11.12 55
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 534 11 12-31 10/94 24.75 116
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 460 S 9 09-30 09/90 24.12 83
TSH Teche Holding Company of LA AMEX Southern LA Thrift 380 S 8 09-30 04/95 15.87 55
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 341 17 03-31 08/91 20.75 31
FFRV Fid. Fin. Bkshrs. Corp. of VA OTC Southern VA Thrift 329 S 7 12-31 05/86 27.87 64
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 326 11 06-30 10/93 11.00 48
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 266 5 06-30 01/94 19.25 71
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
South-East Companies (continued)
--------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 265 S 4 12-31 07/96 17.50 48
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 264 S 9 12-31 07/80 8.13 25
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 231 S 8 12-31 / 35.50 27
FLAG Flag Financial Corp of GA OTC Western GA M.B. 229 S 4 12-31 12/86 12.37 25
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 210 S 5 09-30 10/96 26.00 39
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 208 P 2 09-30 10/96 15.63 70
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 206 1 09-30 03/96 19.87 85
PLE Pinnacle Bank of AL AMEX Central AL Thrift 192 S 5 06-30 12/86 22.50 20
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 176 S 3 09-30 04/96 17.50 75
ESX Essex Bancorp of VA AMEX VA,NC M.B. 172 S 12 12-31 / 1.50 2
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 166 S 5 09-30 07/95 17.00 31
FSTC First Citizens Corp of GA OTC Western GA M.B. 162 J 8 03-31 03/86 21.25 34
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 161 S 3 03-31 03/88 22.00 28
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 144 J 7 09-30 02/87 9.75 20
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 127 S 3 09-30 08/94 19.00 22
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 126 S 3 06-30 06/93 22.00 34
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 125 2 06-30 12/95 10.50 29
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B. 115 S 3 06-30 / 9.62 9
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 109 P 4 06-30 11/96 14.37 27
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 108 S 4 06-30 10/95 13.62 17
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 S 3 12-31 01/95 18.12 16
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 S 2 12-31 04/96 26.37 48
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 101 3 12-31 12/93 19.75 13
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 99 P 1 06-30 12/96 65.25 27
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 90 S 2 09-30 02/95 13.75 11
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 80 S 3 09-30 07/95 16.25 15
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 76 S 5 12-31 07/95 13.87 13
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 73 P 3 09-30 12/96 13.75 16
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 S 2 09-30 04/96 15.37 28
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 43 S 1 06-30 07/94 19.00 13
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 S 1 12-31 07/96 15.00 15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
March 25, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,859 S 40 12-31 / 25.87 128
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 279 5 03-31 06/93 23.56 19
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 218 S 6 09-30 04/96 15.00 40
LOAN Horizon Bancorp, Inc of TX (3) OTC Austin TX R.E. 149 S 8 04-30 / 24.00 33
LBFI L&B Financial of S. Springs TX OTC Northeast TX Thrift 142 6 06-30 09/94 17.00 27
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 114 S 2 09-30 01/95 18.25 20
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 109 S 3 12-31 08/86 5.25 4
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 80 S 1 06-30 06/95 16.00 14
Western Companies (Excl CA)
---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,501 J 26 12-31 01/96 17.00 309
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 564 20 06-30 01/94 20.75 91
GBCI Glacier Bancorp of MT OTC Western MT Div. 412 S 13 06-30 03/84 24.00 81
SFBM Security Bancorp of MT OTC Southcentral MT Thrift 382 S 16 06-30 11/86 31.00 46
UBMT United Fin. Corp. of MT OTC Central MT Thrift 108 S 4 12-31 09/86 19.75 24
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 86 2 12-31 09/93 18.75 11
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 53 1 09-30 03/96 13.50 14
Other Areas
-----------
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified,
and Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 03/25/97
<PAGE>
EXHIBIT III-2
Financial Analysis of South Carolina Thrifts
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 18.0 65.7 12.1 71.2 14.3 0.1 12.5 0.2 12.3 0.0
State of SC 14.2 77.2 5.2 74.3 11.9 0.0 12.2 0.1 12.1 0.0
Comparable Group
----------------
State of SC
-----------
AMFB American Federal Bank of SC(1)(2) 5.9 60.7 30.5 70.4 20.3 0.0 7.8 0.6 7.2 0.0
CFCP Coastal Fin. Corp. of SC(1) 9.5 80.6 5.9 68.2 23.9 0.0 6.0 0.0 6.0 0.0
FFCH First Fin. Holdings Inc. of SC 8.1 83.2 6.3 67.0 25.4 0.0 6.1 0.0 6.1 0.0
FSFC First So.east Fin. Corp. of SC 14.4 78.1 4.9 85.3 3.6 0.0 10.4 0.0 10.4 0.0
PALM Palfed, Inc. of Aiken SC(1) 7.9 77.1 10.1 79.0 11.2 0.0 8.0 0.4 7.6 0.0
PERT Perpetual of SC, MHC (46.8)(1) 24.9 67.1 3.8 76.1 7.6 0.0 13.9 0.0 13.9 0.0
SCCB S. Carolina Comm. Bnshrs of SC(1) 20.1 77.1 0.1 70.1 0.0 0.0 28.7 0.0 28.7 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 10.93 5.53 12.25 5.59 18.39 -1.55 -1.70 10.52 10.59 22.45
State of SC 5.97 -27.43 10.06 4.51 40.83 2.58 2.79 11.14 11.14 21.84
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(1)(2) 6.34 41.40 4.92 1.13 29.69 2.52 -5.24 7.20 7.20 13.72
CFCP Coastal Fin. Corp. of SC(1) 14.58 NM 6.83 14.77 14.47 11.53 11.53 5.93 5.93 10.41
FFCH First Fin. Holdings Inc. of SC 11.69 -13.84 14.98 0.26 65.85 1.77 1.77 6.49 6.49 10.76
FSFC First So.east Fin. Corp. of SC -7.96 -56.47 13.71 -0.52 NM NM NM 10.10 10.10 21.79
PALM Palfed, Inc. of Aiken SC(1) 2.65 -21.06 5.43 6.11 -17.00 5.41 6.27 6.50 6.50 10.50
PERT Perpetual of SC, MHC (46.8)(1) 17.65 NM 17.77 7.31 100.00 NM NM 13.20 13.20 24.50
SCCB S. Carolina Comm. Bnshrs of SC(1) -2.77 -18.34 1.64 -0.84 NM -8.39 -8.39 24.60 24.60 53.10
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income G&A/Other Exp.
---------------------------- ------------------- ---------------
Loss NII Total
Net Provis. After Loan R.E. Other Other G&A Goodwill
Income Income Expense NII on IEA Provis. Fees Oper. Income Income Expense Amort.
------ ------ ------- ------ ------- ------- ---- ----- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.56 7.36 4.13 3.23 0.14 3.10 0.12 -0.01 0.31 0.42 2.23 0.02
State of SC 0.56 7.72 4.20 3.52 0.13 3.39 0.10 0.00 0.51 0.60 2.55 0.01
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(1)(2) 1.04 7.67 3.76 3.91 0.31 3.60 0.13 0.02 0.95 1.10 2.65 0.05
CFCP Coastal Fin. Corp. of SC(1) 0.85 7.95 4.37 3.58 0.18 3.40 0.32 0.08 0.39 0.79 2.74 0.00
FFCH First Fin. Holdings Inc. of SC 0.53 7.60 4.50 3.10 0.14 2.97 0.08 -0.02 0.63 0.69 2.37 0.00
FSFC First So.east Fin. Corp. of SC -0.01 7.44 4.22 3.22 0.05 3.17 0.09 0.03 0.21 0.33 2.00 0.00
PALM Palfed, Inc. of Aiken SC(1) 0.36 7.81 4.49 3.31 0.21 3.11 0.07 -0.10 0.64 0.61 2.75 0.04
PERT Perpetual of SC, MHC (46.8)(1) 0.75 7.82 3.89 3.93 0.21 3.72 0.03 0.01 1.07 1.11 3.20 0.00
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.85 7.69 3.70 4.00 0.00 4.00 0.00 0.00 0.10 0.10 2.23 0.00
<CAPTION>
Non-Op. Items Yields, Costs, and Spreads
-------------- -------------------------
MEMO: MEMO:
Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts -0.39 0.00 7.52 4.74 2.78 4,239 34.99
State of SC -0.53 0.00 8.09 4.89 3.20 2,160 37.04
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(1)(2) -0.39 0.00 7.92 4.16 3.76 2,156 34.71
CFCP Coastal Fin. Corp. of SC(1) -0.10 0.00 8.20 4.74 3.46 2,769 36.75
FFCH First Fin. Holdings Inc. of SC -0.45 0.00 7.80 4.90 2.90 2,930 37.23
FSFC First So.east Fin. Corp. of SC -1.35 0.00 7.63 4.98 2.65 2,651 NM
PALM Palfed, Inc. of Aiken SC(1) -0.35 0.00 8.21 4.96 3.25 NM 36.50
PERT Perpetual of SC, MHC (46.8)(1) -0.49 0.00 8.84 4.46 4.37 2,141 34.66
SCCB S. Carolina Comm. Bnshrs of SC(1) -0.44 0.00 7.87 5.29 2.58 311 40.03
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
!R! RES; FTMD 15; FONT 36; EXIT;
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Service Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
----------- ------ ------ ------ ------ ------ -------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
SAIF-Insured Thrifts 15.81 61.56 5.22 11.63 6.30 1.61 50.59 366,441 2,607
State of SC 5.97 69.47 8.58 11.07 5.95 2.31 60.30 68,082 69
Comparable Group
----------------
State of SC
-----------
AMFB American Federal Bank of SC(1)(2) 34.05 30.07 3.84 9.64 16.25 7.60 57.44 172,222 577
CFCP Coastal Fin. Corp. of SC(1) 7.80 60.35 14.16 11.70 5.23 5.61 64.31 115,100 0
FFCH First Fin. Holdings Inc. of SC 7.36 60.68 5.89 17.35 8.58 2.09 63.68 216,128 0
FSFC First So.east Fin. Corp. of SC 6.90 82.10 5.48 0.56 7.86 1.36 48.53 3,551 0
PALM Palfed, Inc. of Aiken SC(1) 7.61 51.51 13.49 21.33 7.23 2.48 68.10 411 411
PERT Perpetual of SC, MHC (46.8)(1) NA NA NA NA NA NA 56.88 73,303 0
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.19 92.71 3.88 4.39 0.83 0.00 NA 0 0
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable,but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
!R! RES; FTMD 15; FONT 36; EXIT;
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
----------- ------ ------ ------ ------ ------ -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(%) (%) (%) (%) (%) (%) ($000) (%)
SAIF-Insured Thrifts 0.27 0.86 0.94 0.85 183.44 127.80 258 0.10
State of SC 0.67 1.03 0.89 0.99 370.85 328.03 149 0.12
Comparable Group
----------------
State of SC
-----------
AMFB American Federal Bank of SC(1)(2) 0.03 0.51 0.78 1.25 159.95 150.52 1,444 0.68
CFCP Coastal Fin. Corp. of SC(1) 0.07 0.17 0.12 1.09 937.53 543.23 15 0.02
FFCH First Fin. Holdings Inc. of SC 0.15 1.28 1.25 0.87 69.24 56.63 348 0.11
FSFC First So.east Fin. Corp. of SC 0.23 0.07 0.08 0.50 639.69 577.21 36 0.06
PALM Palfed, Inc. of Aiken SC(1) 2.32 3.44 2.68 1.51 56.34 34.31 429 0.34
PERT Perpetual of SC, MHC (46.8)(1) 0.67 0.17 0.25 1.08 432.39 428.77 66 0.19
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.58 NA 0.97 0.87 89.88 NA 0 0.00
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
Source: Audited and unaudited financial statements, corporate reports
and offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
!R! RES; FTMD 15; FONT 36; EXIT;
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Non-Earn
Equity/ IEA/ Assets/
Institution Assets IBL Assets
- ----------- ------ ------ ------
<S> <C> <C> <C>
(%) (%) (%)
SAIF-Insured Thrifts 12.3 112.6 4.1
State of SC 12.1 113.0 3.5
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(1)(2) 7.2 107.1 2.9
CFCP Coastal Fin. Corp. of SC(1) 6.0 104.2 4.1
FFCH First Fin. Holdings Inc. of SC 6.1 105.6 2.4
FSFC First So.east Fin. Corp. of SC 10.4 109.7 2.5
PALM Palfed, Inc. of Aiken SC(1) 7.6 105.5 4.8
PERT Perpetual of SC, MHC (46.8)(1) 13.9 114.4 4.2
SCCB S. Carolina Comm. Bnshrs of SC(1) 28.7 138.8 2.7
Quarterly Change in Net Interest Income
<CAPTION>
----------------------------------------------------------
12/31/96 09/30/96 06/30/96 03/31/96 12/31/95 09/30/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts -2 -2 8 4 4 3
State of SC 2 -7 11 8 3 -3
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(1)(2) NA 5 10 5 12 -6
CFCP Coastal Fin. Corp. of SC(1) NA -15 8 6 23 16
FFCH First Fin. Holdings Inc. of SC 4 -4 -5 9 1 12
FSFC First So.east Fin. Corp. of SC 1 -31 21 5 1 -20
PALM Palfed, Inc. of Aiken SC(1) NA 11 24 3 0 15
PERT Perpetual of SC, MHC (46.8)(1) NA -8 -5 40 NA NA
SCCB S. Carolina Comm. Bnshrs of SC(1) NA 4 20 -16 -9 -36
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
!R! RES; FTMD 15; FONT 36; EXIT;
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of February 21, 1997
<TABLE>
<CAPTION>
Per Share Data
Market _______________
Capitalization Core Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- -------
Financial Institution
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
SAIF-Insured Thrifts 20.27 143.25 1.17 15.96 19.70 126.24 15.40 128.35 17.47
State of SC 20.49 69.52 1.10 13.00 24.03 143.11 17.57 144.54 19.59
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(7) 28.75 314.96 1.61 9.88 22.29 NM 22.58 NM 17.86
CFCP Coastal Fin. Corp. of SC 24.12 83.26 1.16 8.02 22.33 NM 18.11 NM 20.79
FFCH First Fin. Holdings Inc. of SC 28.00 176.43 1.96 15.28 22.40 183.25 11.15 183.25 14.29
FSFC First So.east Fin. Corp. of SC 11.00 48.27 0.68 7.69 NM 143.04 14.80 143.04 16.18
PALM Palfed, Inc. of Aiken SC 14.81 77.43 0.73 10.10 NM 146.63 11.73 153.79 20.29
PERT Perpetual of SC, MHC (46.8) 26.00 18.33 1.35 19.33 27.37 134.51 18.65 134.51 19.26
SCCB S. Carolina Comm. Bnshrs of SC 19.00 13.40 0.71 17.57 NM 108.14 30.98 108.14 26.76
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- ---------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- - ------- ------ ------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
SAIF-Insured Thrifts
State of SC
0.36 1.81 28.92 1,166 12.89 0.86 0.61 5.26 0.83 7.36
0.35 1.70 24.10 547 12.16 1.03 0.56 6.07 0.90 9.18
Comparable Group
- ----------------
State of SC
- -----------
AMFB American Federal Bank of SC(7)
CFCP Coastal Fin. Corp. of SC
FFCH First Fin. Holdings Inc. of SC 0.48 1.67 29.81 1,395 7.76 0.51 1.04 13.07 1.30 16.31
FSFC First So.east Fin. Corp. of SC 0.44 1.82 37.93 460 6.02 0.17 0.85 14.01 0.92 15.05
PALM Palfed, Inc. of Aiken SC 0.72 2.57 36.73 1,582 6.08 1.28 0.52 8.22 0.82 12.89
PERT Perpetual of SC, MHC (46.8) 0.20 1.82 29.41 326 10.35 0.07 -0.01 -0.09 0.88 6.18
SCCB S. Carolina Comm. Bnshrs of SC 0.12 0.81 16.44 660 8.00 3.44 0.37 4.51 0.59 7.31
0.00 0.00 0.00 210 13.86 0.17 0.75 6.82 1.06 9.69
0.60 3.16 NM 43 28.65 NA 0.85 2.93 1.14 3.92
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month
data, adjusted to omit non-operating items (including the SAIF assessment)
on a tax effected basis.(3) P/E = Price to earnings; P/B = Price to book;
P/A = Price to assets; P/TB = Price to tangible book value; and P/CORE =
Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.(5) Indicated dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.(7) Excludes from averages those companies the subject of actual
or rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
Financial Analysis of Peer Group Candidates
<PAGE>
(MSP 164-178 TO COME ON DISK 4/3/97-INSERT HERE)
<PAGE>
EXHIBIT III-4
Peer Group Market Area Comparative Analysis
<PAGE>
Exhibit III-4
Peer Group Primary Market Area Demographic/Competition Trends
<TABLE>
<CAPTION>
Proj.
Population Pop. 1990-96 1996-2001
Institution County 1990 1996 2001 % Change % Change
(000) (000)
<S> <C> <C> <C> <C> <C> <C>
Eagle Bancshares of Tucker, GA DeKalb 546 588 622 7.8% 5.7%
Community Fin. Corp. of VA Staunton 24 25 25 2.1% 1.6%
FFVA Financial Corp of VA Lynchburg 66 66.9 68 1.3% 1.0%
First SB, SSB, Moore Co. of NC Moore 59 69 77 16.8% 11.5%
Green Street Fin. Corp of NC Cumberland 275 289 300 5.1% 3.8%
HFNC Financial Corp of NC Mecklenburg 511 594 661 16.2% 11.2%
ISB Financial Corp. of LA Iberia 68 72 75 5.2% 4.0%
Life Bancorp of Norfolk, VA Norfolk 261 233 223 -11.0% -4.1%
Teche Holding Company of LA St. Mary 58 57 57 -1.0% -0.8%
Texarkana First Corp. of AR Miller 38 39 40 1.9% 1.5%
Averages: 190.7438 203.3114 214.6805 4.4% 3.5%
Medians: 67 70 76 3.6% 2.7%
First FS&LA of Spartanburg, SC Spartanburg 227 243 256 7.1% 5.3%
</TABLE>
Exhibit III-4
Peer Group Primary Market Area Demographic/Competition Trends
<TABLE>
<CAPTION>
Per Capita Income Deposit Unempl.
% State Market Rate
Institution County Median Age Amount Average Share(1) 12/96
<S> <C> <C> <C> <C> <C> <C>
Eagle Bancshares of Tucker, GA DeKalb 33.9 20,067 120.1% 5.1% 4.3%
Community Fin. Corp. of VA Staunton 38.4 13,649 77.6% 18.0% 3.4%
FFVA Financial Corp of VA Lynchburg 33.9 13,573 77.2% 11.1% 3.2%
First SB, SSB, Moore Co. of NC Moore 40.0 16,524 109.1% 21.3% 3.6%
Green Street Fin. Corp of NC Cumberland 28.5 13,875 91.6% 5.8% 4.2%
HFNC Financial Corp of NC Mecklenburg 33.8 19,764 130.5% 3.4% 2.6%
ISB Financial Corp. of LA Iberia 31.0 10,096 81.8% 38.4% 4.7%
Life Bancorp of Norfolk, VA Norfolk 28.3 13,663 77.7% 15.6% 5.9%
Teche Holding Company of LA St. Mary 31.1 9,461 76.6% 19.2% 6.9%
Texarkana First Corp. of AR Miller 34.0 12,290 93.9% 16.1% 6.6%
Averages: 33.3 14,296 93.6% 15.4% 4.5%
Medians: 33.9 13,656 86.7% 15.9% 4.3%
First FS&LA of Spartanburg, SC Spartanburg 35.7 15,186 104.5% 15.6% 4.0%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total county
deposits.
Sources: CACI, Inc; FDIC; OTS, Bureau of Labor Statistics
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of February 21, 1997
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(321) 20.27 5,544 149.3 21.03 14.72 19.86 1.95 174.42 9.56
NYSE Traded Companies(11) 37.86 38,458 1,595.2 39.29 23.98 36.46 5.58 278.35 15.49
AMEX Traded Companies(18) 16.65 3,791 71.7 17.63 12.11 16.22 2.14 266.62 9.81
NASDAQ Listed OTC Companies(292) 19.92 4,578 107.0 20.64 14.58 19.55 1.82 162.12 9.35
California Companies(24) 25.64 17,272 627.9 26.32 16.00 24.29 6.65 115.25 18.62
Florida Companies(5) 15.97 7,267 102.2 16.02 11.40 15.10 3.41 76.53 10.40
Mid-Atlantic Companies(65) 20.74 6,204 143.9 21.33 14.64 20.54 0.92 158.01 11.35
Mid-West Companies(153) 19.95 3,980 107.4 20.75 14.95 19.64 1.36 183.97 7.79
New England Companies(11) 20.25 3,931 92.5 20.97 15.19 20.16 -0.12 247.56 4.83
North-West Companies(6) 21.06 12,606 314.0 21.41 14.75 20.45 3.24 115.25 9.01
South-East Companies(43) 18.84 3,528 67.9 19.90 13.90 18.26 3.22 222.06 11.00
South-West Companies(7) 17.32 1,856 37.6 18.29 12.58 17.04 1.35 -22.22 2.64
Western Companies (Excl CA)(7) 18.96 4,808 88.5 19.33 14.75 18.50 2.64 300.05 5.15
Thrift Strategy(249) 18.85 3,496 75.0 19.61 14.01 18.54 1.69 134.77 9.08
Mortgage Banker Strategy(40) 24.15 11,797 401.2 25.01 16.66 23.66 2.29 268.55 12.26
Real Estate Strategy(14) 22.60 7,668 179.6 23.34 15.42 21.77 2.74 160.13 11.50
Diversified Strategy(14) 34.10 23,261 773.3 34.68 22.39 32.56 5.13 248.17 9.45
Retail Banking Strategy(4) 15.50 3,519 60.4 15.81 10.94 15.31 1.06 227.86 7.41
Companies Issuing Dividends(258) 20.80 5,754 162.2 21.65 15.19 20.41 1.78 189.72 8.78
Companies Without Dividends(63) 18.19 4,712 98.6 18.59 12.84 17.69 2.64 106.99 12.81
Equity/Assets <6%(28) 22.27 14,950 434.1 23.05 14.27 21.60 3.03 167.89 12.46
Equity/Assets 6-12%(153) 22.47 6,285 183.3 23.19 16.05 22.00 2.13 182.23 10.14
Equity/Assets >12%(140) 17.53 2,907 57.2 18.31 13.37 17.23 1.55 133.96 8.34
Converted Last 3 Mths (no MHC)(8) 14.22 2,536 36.6 14.38 12.69 14.08 1.09 0.00 8.91
Actively Traded Companies(49) 29.07 15,666 548.9 29.70 19.67 28.23 3.30 204.46 12.81
Market Value Below $20 Million(70) 15.60 884 13.1 16.31 12.53 15.52 0.57 116.13 6.83
Holding Company Structure(281) 20.61 5,447 152.0 21.35 15.02 20.18 2.03 162.02 9.40
Assets Over $1 Billion(65) 31.11 17,234 565.5 31.72 20.51 30.13 3.47 216.31 12.70
Assets $500 Million-$1 Billion(54) 20.12 5,292 96.0 20.58 14.35 19.47 3.73 213.90 11.66
Assets $250-$500 Million(69) 18.37 2,718 45.3 19.31 13.73 18.12 1.40 121.41 8.86
Assets less than $250 Million(133) 16.06 1,421 22.3 16.91 12.57 15.94 0.77 109.38 7.53
Goodwill Companies(130) 23.57 9,156 256.0 24.28 16.23 22.96 2.62 210.93 10.82
Non-Goodwill Companies(191) 18.13 3,194 80.0 18.92 13.74 17.85 1.52 109.89 8.73
Acquirors of FSLIC Cases(13) 31.19 34,866 1,330.7 32.07 20.29 30.50 2.39 269.08 13.97
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(321) 0.86 1.18 16.11 15.67 159.42
NYSE Traded Companies(11) 1.75 2.54 19.90 19.03 349.37
AMEX Traded Companies(18) 0.59 0.86 14.10 13.95 106.53
NASDAQ Listed OTC Companies(292) 0.85 1.15 16.11 15.67 156.48
California Companies(24) 0.72 1.11 17.68 16.72 272.75
Florida Companies(5) 0.52 0.65 12.50 12.17 153.31
Mid-Atlantic Companies(65) 1.02 1.38 16.25 15.58 171.72
Mid-West Companies(153) 0.85 1.15 16.54 16.26 143.93
New England Companies(11) 1.21 1.39 16.95 15.78 222.69
North-West Companies(6) 0.91 1.17 13.27 12.65 148.69
South-East Companies(43) 0.72 1.03 14.07 13.90 119.69
South-West Companies(7) 0.46 1.00 16.02 15.21 223.53
Western Companies (Excl CA)(7) 0.93 1.13 16.56 16.53 101.98
Thrift Strategy(249) 0.75 1.04 16.08 15.69 142.25
Mortgage Banker Strategy(40) 1.22 1.54 15.83 15.04 230.94
Real Estate Strategy(14) 0.85 1.43 15.73 15.52 203.68
Diversified Strategy(14) 1.85 2.45 18.70 18.31 221.43
Retail Banking Strategy(4) 0.54 0.74 13.03 12.56 160.59
Companies Issuing Dividends(258) 0.96 1.28 16.31 15.85 158.54
Companies Without Dividends(63) 0.46 0.76 15.32 14.97 162.88
Equity/Assets <6%(28) 0.71 1.16 13.64 12.66 282.52
Equity/Assets 6-12%(153) 1.10 1.48 16.48 15.81 199.88
Equity/Assets >12%(140) 0.63 0.86 16.19 16.11 91.84
Converted Last 3 Mths (no MHC)(8) 0.48 0.66 13.87 13.87 72.19
Actively Traded Companies(49) 1.71 2.19 18.00 17.31 244.69
Market Value Below $20 Million(70) 0.47 0.78 15.60 15.47 130.22
Holding Company Structure(281) 0.87 1.19 16.50 16.05 157.37
Assets Over $1 Billion(65) 1.52 2.00 19.36 18.09 264.69
Assets $500 Million-$1 Billion(54) 1.01 1.26 15.28 14.71 162.27
Assets $250-$500 Million(69) 0.73 1.09 15.37 15.10 158.69
Assets less than $250 Million(133) 0.54 0.79 15.25 15.18 107.66
Goodwill Companies(130) 1.10 1.47 16.47 15.47 207.62
Non-Goodwill Companies(191) 0.70 0.99 15.87 15.80 128.07
Acquirors of FSLIC Cases(13) 1.46 2.27 17.01 16.07 276.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 21.64 9,396 288.8 22.09 14.61 21.11 2.78 160.39 11.52
NYSE Traded Companies(3) 34.54 53,300 1,663.9 35.25 16.33 32.79 5.84 246.64 30.09
AMEX Traded Companies(5) 18.60 4,123 76.0 19.15 13.49 18.27 2.19 67.18 13.81
NASDAQ Listed OTC Companies(65) 21.22 7,515 234.1 21.65 14.62 20.74 2.67 163.54 10.29
California Companies(3) 17.46 6,142 114.2 18.12 10.79 16.17 7.75 419.33 19.74
Mid-Atlantic Companies(19) 23.16 15,473 411.2 23.63 15.30 22.72 1.59 86.39 10.13
Mid-West Companies(2) 10.12 942 9.5 10.62 8.87 10.12 0.00 0.00 0.00
New England Companies(39) 20.12 4,467 91.3 20.51 13.54 19.61 3.27 179.72 11.34
North-West Companies(4) 28.44 36,394 1,882.5 29.56 15.66 27.92 1.23 128.56 19.33
South-East Companies(5) 25.55 2,093 37.2 25.70 21.80 24.95 2.69 0.00 8.49
Thrift Strategy(47) 21.06 4,271 126.9 21.49 14.89 20.59 2.50 145.58 9.19
Mortgage Banker Strategy(10) 23.03 24,301 464.7 23.53 14.98 22.40 2.65 236.16 21.14
Real Estate Strategy(8) 20.42 5,135 117.4 20.75 12.54 19.62 5.11 207.25 11.23
Diversified Strategy(6) 26.33 32,326 1,446.8 26.98 14.81 25.73 2.72 120.65 18.17
Retail Banking Strategy(2) 17.94 1,396 24.6 18.38 12.97 17.50 2.48 28.74 7.67
Companies Issuing Dividends(56) 22.50 8,141 308.5 22.98 14.74 22.01 2.56 157.47 11.13
Companies Without Dividends(17) 18.83 13,495 224.2 19.19 14.20 18.16 3.52 185.98 12.88
Equity/Assets <6%(6) 16.65 26,418 459.5 17.01 10.60 15.77 5.14 167.97 18.30
Equity/Assets 6-12%(48) 22.17 8,743 337.5 22.68 14.41 21.70 2.53 163.76 11.28
Equity/Assets >12%(19) 21.81 6,001 118.3 22.13 16.29 21.23 2.72 15.41 10.02
Converted Last 3 Mths (no MHC)(3) 31.83 15,300 248.6 32.21 30.00 31.25 1.79 0.00 3.93
Actively Traded Companies(26) 23.75 15,260 518.9 24.31 15.21 23.20 2.76 205.77 14.82
Market Value Below $20 Million(12) 16.19 890 13.8 16.35 11.29 15.35 4.97 93.03 10.01
Holding Company Structure(46) 22.47 9,347 311.7 22.96 15.52 21.99 2.43 169.50 11.55
Assets Over $1 Billion(16) 29.41 29,541 1,053.8 29.99 17.05 28.61 2.77 163.87 19.27
Assets $500 Million-$1 Billion(17) 20.78 5,509 98.2 21.39 14.97 20.46 1.66 149.26 9.17
Assets $250-$500 Million(20) 18.75 2,870 49.0 19.20 12.69 18.41 2.49 195.58 9.76
Assets less than $250 Million(20) 18.44 1,577 21.7 18.64 14.06 17.76 4.06 125.54 8.96
Goodwill Companies(36) 23.73 14,033 510.9 24.37 15.28 23.18 2.43 164.75 12.93
Non-Goodwill Companies(37) 19.80 5,304 92.8 20.08 14.02 19.28 3.09 152.61 10.23
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 1.32 1.31 15.62 14.86 157.75
NYSE Traded Companies(3) 1.81 1.82 18.99 14.58 247.25
AMEX Traded Companies(5) 0.94 0.87 15.04 14.61 143.14
NASDAQ Listed OTC Companies(65) 1.33 1.32 15.50 14.90 154.26
California Companies(3) 1.30 1.20 11.90 11.90 155.17
Mid-Atlantic Companies(19) 1.29 1.32 16.71 15.05 178.02
Mid-West Companies(2) 0.25 0.38 13.57 12.80 53.10
New England Companies(39) 1.48 1.41 14.35 13.87 163.12
North-West Companies(4) 1.27 1.25 12.15 11.58 127.16
South-East Companies(5) 0.63 0.84 25.53 25.53 96.32
Thrift Strategy(47) 1.24 1.24 16.91 15.90 151.92
Mortgage Banker Strategy(10) 1.49 1.48 14.18 14.00 189.77
Real Estate Strategy(8) 1.36 1.33 11.92 11.92 112.32
Diversified Strategy(6) 1.74 1.61 11.86 11.18 167.64
Retail Banking Strategy(2) 1.11 1.09 16.71 16.26 258.75
Companies Issuing Dividends(56) 1.43 1.40 15.49 14.51 165.89
Companies Without Dividends(17) 0.96 1.00 16.06 15.99 131.16
Equity/Assets <6%(6) 1.09 0.95 10.72 10.61 188.63
Equity/Assets 6-12%(48) 1.56 1.51 14.68 13.57 179.12
Equity/Assets >12%(19) 0.81 0.91 19.41 19.29 95.86
Converted Last 3 Mths (no MHC)(3) 1.17 1.35 32.03 32.03 118.80
Actively Traded Companies(26) 1.70 1.67 15.08 14.41 183.69
Market Value Below $20 Million(12) 0.86 0.87 15.13 14.65 153.05
Holding Company Structure(46) 1.34 1.36 16.28 15.56 149.06
Assets Over $1 Billion(16) 1.79 1.75 15.78 14.43 188.30
Assets $500 Million-$1 Billion(17) 1.41 1.31 15.54 14.28 169.04
Assets $250-$500 Million(20) 1.21 1.23 14.13 13.83 147.64
Assets less than $250 Million(20) 0.94 0.98 17.06 16.78 130.94
Goodwill Companies(36) 1.51 1.47 15.73 14.10 197.83
Non-Goodwill Companies(37) 1.16 1.16 15.53 15.53 122.38
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics. (9) For MHC institutions, market
value reflects share price multiplied by public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 20.18 4,758 35.0 21.05 14.67 20.15 0.36 157.50 7.91
BIF-Insured Thrifts(2) 23.41 21,913 274.9 24.13 14.47 23.63 -2.09 355.02 15.06
NASDAQ Listed OTC Companies(21) 20.52 6,564 60.2 21.37 14.65 20.51 0.10 223.34 8.66
Florida Companies(3) 24.25 5,531 61.2 25.42 16.67 24.50 -1.32 0.00 -1.73
Mid-Atlantic Companies(8) 17.13 8,378 46.7 18.27 12.28 17.13 0.03 112.50 13.05
Mid-West Companies(7) 19.18 1,943 14.8 19.86 14.34 19.39 -0.76 202.50 8.00
New England Companies(1) 35.81 40,553 542.7 36.50 19.69 35.75 0.17 355.02 24.04
North-West Companies(1) 18.25 2,196 16.7 18.75 14.37 17.25 5.80 0.00 4.29
South-East Companies(1) 26.00 1,505 18.3 26.00 20.25 24.75 5.05 0.00 7.22
Thrift Strategy(19) 19.75 4,822 34.4 20.64 14.37 19.81 -0.23 157.50 8.02
Mortgage Banker Strategy(1) 18.25 2,196 16.7 18.75 14.37 17.25 5.80 0.00 4.29
Diversified Strategy(1) 35.81 40,553 542.7 36.50 19.69 35.75 0.17 355.02 24.04
Companies Issuing Dividends(20) 20.21 6,845 62.6 21.12 14.34 20.28 -0.17 223.34 8.74
Companies Without Dividends(1) 26.00 1,505 18.3 26.00 20.25 24.75 5.05 0.00 7.22
Equity/Assets 6-12%(15) 21.59 8,031 76.3 22.72 15.06 21.71 -0.47 223.34 8.83
Equity/Assets >12%(6) 17.50 2,456 15.4 17.60 13.50 17.15 1.70 0.00 8.20
Actively Traded Companies(1) 21.25 7,164 72.3 23.50 13.18 22.00 -3.41 112.50 14.86
Holding Company Structure(1) 21.25 7,164 72.3 23.50 13.18 22.00 -3.41 112.50 14.86
Assets Over $1 Billion(4) 27.21 20,021 198.0 27.72 17.24 27.00 1.24 355.02 15.03
Assets $500 Million-$1 Billion(5) 19.50 6,273 58.5 21.25 13.14 20.00 -2.45 112.50 3.45
Assets $250-$500 Million(4) 23.63 2,116 20.8 24.44 16.90 24.00 -1.52 202.50 9.27
Assets less than $250 Million(8) 16.00 2,169 11.8 16.72 12.80 15.72 1.31 0.00 7.13
Goodwill Companies(10) 23.67 11,038 108.3 24.62 15.71 23.78 -0.06 223.34 12.02
Non-Goodwill Companies(11) 17.68 2,537 17.0 18.45 13.70 17.58 0.25 0.00 5.65
MHC Institutions(21) 20.52 6,564 60.2 21.37 14.65 20.51 0.10 223.34 8.66
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 0.61 1.00 13.27 12.91 130.90
BIF-Insured Thrifts(2) 0.95 0.85 11.87 11.86 130.37
NASDAQ Listed OTC Companies(21) 0.65 0.99 13.12 12.80 130.84
Florida Companies(3) 1.06 1.48 15.12 14.85 159.33
Mid-Atlantic Companies(8) 0.20 0.61 11.07 10.41 105.65
Mid-West Companies(7) 0.59 0.94 13.12 13.09 134.85
New England Companies(1) 1.96 1.53 15.24 15.22 188.52
North-West Companies(1) 0.95 1.13 11.11 10.01 102.22
South-East Companies(1) 0.95 1.35 19.33 19.33 139.42
Thrift Strategy(19) 0.55 0.94 13.11 12.82 129.13
Mortgage Banker Strategy(1) 0.95 1.13 11.11 10.01 102.22
Diversified Strategy(1) 1.96 1.53 15.24 15.22 188.52
Companies Issuing Dividends(20) 0.63 0.97 12.78 12.43 130.36
Companies Without Dividends(1) 0.95 1.35 19.33 19.33 139.42
Equity/Assets 6-12%(15) 0.68 1.07 13.40 12.96 148.26
Equity/Assets >12%(6) 0.56 0.76 12.34 12.34 82.08
Actively Traded Companies(1) 0.63 1.14 12.59 11.04 136.07
Holding Company Structure(1) 0.63 1.14 12.59 11.04 136.07
Assets Over $1 Billion(4) 1.10 1.35 13.58 12.79 159.67
Assets $500 Million-$1 Billion(5) 0.66 1.05 13.40 12.85 133.13
Assets $250-$500 Million(4) 0.80 1.34 15.51 15.46 179.75
Assets less than $250 Million(8) 0.34 0.61 11.59 11.45 91.11
Goodwill Companies(10) 0.85 1.18 13.67 12.98 151.41
Non-Goodwill Companies(11) 0.47 0.81 12.63 12.63 112.33
MHC Institutions(21) 0.65 0.99 13.12 12.80 130.84
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NYSE Traded Companies
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 41.12 102,153 4,200.5 44.87 22.62 40.50 1.53 119.31 26.52
CSA Coast Savings Financial of CA 47.62 18,585 885.0 47.62 28.25 43.62 9.17 311.94 30.04
CFB Commercial Federal Corp. of NE 36.75 21,490 789.8 37.75 24.00 37.25 -1.34 895.93 14.84
DME Dime Savings Bank, FSB of NY* 17.50 104,744 1,833.0 17.87 11.00 17.37 0.75 73.96 18.64
DSL Downey Financial Corp. of CA 22.75 25,459 579.2 23.37 13.50 21.50 5.81 99.04 15.95
FRC First Republic Bancorp of CA* 23.37 7,676 179.4 24.62 12.25 20.75 12.63 419.33 39.52
FED FirstFed Fin. Corp. of CA 27.00 10,530 284.3 27.00 14.00 24.12 11.94 67.18 22.73
GLN Glendale Fed. Bk, FSB of CA 27.75 49,809 1,382.2 27.75 15.63 25.62 8.31 70.77 19.35
GDW Golden West Fin. Corp. of CA 71.75 57,342 4,114.3 74.25 49.50 72.00 -0.35 173.96 13.67
GWF Great Western Fin. Corp. of CA(8) 46.37 137,876 6,393.3 46.37 21.12 34.25 35.39 166.95 59.90
GPT GreenPoint Fin. Corp. of NY* 62.75 47,481 2,979.4 63.25 25.75 60.25 4.15 N.A. 32.11
SFB Standard Fed. Bancorp of MI(8) 57.50 31,990 1,839.4 58.00 37.75 57.37 0.23 517.62 1.11
TCB TCF Financial Corp. of MN 46.37 34,757 1,611.7 47.12 32.12 46.50 -0.28 599.40 6.60
WES Westcorp Inc. of Orange CA 19.62 25,997 510.1 23.87 16.19 17.00 15.41 167.67 -10.33
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* 17.50 2,731 47.8 17.50 11.69 17.00 2.94 N.A. 17.69
BKC American Bank of Waterbury CT* 28.13 2,293 64.5 29.87 24.12 28.00 0.46 50.03 0.46
BFD BostonFed Bancorp of MA 15.87 6,260 99.3 15.87 11.62 15.87 0.00 N.A. 7.59
CFX Cheshire Fin. Corp. of NH* 17.62 12,981 228.7 18.50 11.90 17.75 -0.73 48.07 13.68
CZF Citisave Fin. Corp. of LA 13.87 962 13.3 16.50 13.00 13.75 0.87 N.A. -0.93
CBK Citizens First Fin.Corp. of IL 15.37 2,817 43.3 15.37 9.50 15.12 1.65 N.A. 6.96
ESX Essex Bancorp of VA(8) 1.50 1,053 1.6 3.56 1.00 1.37 9.49 -91.04 -31.51
FCB Falmouth Co-Op Bank of MA* 15.00 1,455 21.8 15.12 10.25 15.00 0.00 N.A. 14.33
FAB FirstFed America Bancorp of MA 14.87 8,713 129.6 15.12 13.62 14.87 0.00 N.A. N.A.
GAF GA Financial Corp. of PA 16.37 8,455 138.4 17.25 10.25 17.25 -5.10 N.A. 8.27
KNK Kankakee Bancorp of IL 27.00 1,415 38.2 27.00 18.50 26.12 3.37 170.00 9.09
KYF Kentucky First Bancorp of KY 11.87 1,389 16.5 15.25 10.75 11.87 0.00 N.A. 9.20
NYB New York Bancorp, Inc. of NY 30.00 16,570 497.1 30.00 14.50 29.12 3.02 323.13 16.14
PDB Piedmont Bancorp of NC 10.50 2,751 28.9 19.12 9.25 10.37 1.25 N.A. 0.00
PLE Pinnacle Bank of AL 22.50 890 20.0 22.50 15.50 20.87 7.81 233.33 29.53
SSB Scotland Bancorp of NC 15.37 1,840 28.3 15.37 11.62 15.00 2.47 N.A. 8.85
SZB SouthFirst Bancshares of AL 13.75 824 11.3 13.75 11.37 13.12 4.80 N.A. 3.77
SRN Southern Banc Company of AL 13.62 1,230 16.8 13.87 11.37 13.50 0.89 N.A. 3.81
SSM Stone Street Bancorp of NC 26.37 1,825 48.1 26.37 16.25 23.50 12.21 N.A. 28.63
TSH Teche Holding Company of LA 15.87 3,437 54.5 16.12 12.00 15.75 0.76 N.A. 10.44
FTF Texarkana Fst. Fin. Corp of AR 17.00 1,835 31.2 17.00 13.62 16.62 2.29 N.A. 8.77
THR Three Rivers Fin. Corp. of MI 14.37 851 12.2 14.50 12.37 14.37 0.00 N.A. 2.64
TBK Tolland Bank of CT* 14.75 1,157 17.1 14.75 9.50 13.62 8.30 103.45 22.92
WSB Washington SB, FSB of MD 5.50 4,220 23.2 5.69 4.38 5.37 2.42 340.00 12.94
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN 28.75 697 20.0 30.50 24.76 29.00 -0.86 N.A. 0.88
AFED AFSALA Bancorp of NY 13.50 1,455 19.6 13.50 11.31 13.25 1.89 N.A. 12.50
ALBK ALBANK Fin. Corp. of Albany NY 35.75 12,911 461.6 36.50 22.92 34.50 3.62 53.76 13.96
AMFC AMB Financial Corp. of IN 13.75 1,124 15.5 13.75 9.75 13.28 3.54 N.A. 3.77
ASBP ASB Financial Corp. of OH 12.00 1,721 20.7 18.25 12.00 12.37 -2.99 N.A. -7.69
ABBK Abington Savings Bank of MA(8)* 22.50 1,893 42.6 22.50 14.50 22.12 1.72 239.88 15.38
AABC Access Anytime Bancorp of NM 5.25 732 3.8 7.00 5.25 5.25 0.00 -22.22 -4.55
AFBC Advance Fin. Bancorp of WV 14.00 1,084 15.2 14.50 12.75 14.50 -3.45 N.A. N.A.
AADV Advantage Bancorp of WI 35.75 3,275 117.1 35.75 30.75 33.25 7.52 288.59 10.85
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
---------------------
<S> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 0.97 2.40 19.09 16.08 488.50
CSA Coast Savings Financial of CA 0.54 2.12 22.24 21.89 460.00
CFB Commercial Federal Corp. of NE 2.00 2.85 18.37 16.15 319.60
DME Dime Savings Bank, FSB of NY* 1.00 1.30 9.76 9.67 180.15
DSL Downey Financial Corp. of CA 0.80 1.28 15.07 14.82 194.60
FRC First Republic Bancorp of CA* 1.63 1.51 16.47 16.45 280.95
FED FirstFed Fin. Corp. of CA 0.78 1.71 18.48 18.22 393.53
GLN Glendale Fed. Bk, FSB of CA 0.58 1.34 16.98 15.84 303.72
GDW Golden West Fin. Corp. of CA 6.34 7.76 40.99 40.99 657.99
GWF Great Western Fin. Corp. of CA(8) 1.52 2.18 17.78 15.64 315.85
GPT GreenPoint Fin. Corp. of NY* 2.79 2.64 30.74 17.61 280.65
SFB Standard Fed. Bancorp of MI(8) 2.98 3.94 29.91 24.84 489.24
TCB TCF Financial Corp. of MN 2.46 2.87 15.81 15.21 204.01
WES Westcorp Inc. of Orange CA 1.30 0.52 12.09 12.05 122.37
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* -0.43 -0.40 17.03 17.03 97.06
BKC American Bank of Waterbury CT* 2.89 2.34 20.57 19.65 243.54
BFD BostonFed Bancorp of MA 0.36 0.58 14.19 14.19 127.30
CFX Cheshire Fin. Corp. of NH* 0.58 0.77 9.96 9.24 117.15
CZF Citisave Fin. Corp. of LA 0.63 0.84 12.58 12.57 78.62
CBK Citizens First Fin.Corp. of IL 0.21 0.44 14.32 14.32 94.57
ESX Essex Bancorp of VA(8) -7.61 -4.57 0.54 -0.23 162.87
FCB Falmouth Co-Op Bank of MA* 0.46 0.45 15.20 15.20 60.84
FAB FirstFed America Bancorp of MA 0.50 0.96 13.45 13.45 108.87
GAF GA Financial Corp. of PA 0.66 0.86 14.48 14.48 74.99
KNK Kankakee Bancorp of IL 1.26 1.69 25.79 24.10 247.80
KYF Kentucky First Bancorp of KY 0.53 0.69 10.85 10.85 63.26
NYB New York Bancorp, Inc. of NY 2.08 2.28 9.60 9.60 188.41
PDB Piedmont Bancorp of NC -0.10 0.06 7.14 7.14 45.47
PLE Pinnacle Bank of AL 1.08 1.70 16.65 16.07 215.35
SSB Scotland Bancorp of NC 0.41 0.53 13.47 13.47 37.29
SZB SouthFirst Bancshares of AL -0.02 0.54 15.64 15.64 109.57
SRN Southern Banc Company of AL 0.20 0.51 15.98 15.81 87.70
SSM Stone Street Bancorp of NC 0.67 0.83 20.48 20.48 58.29
TSH Teche Holding Company of LA 0.73 1.07 15.21 15.21 110.44
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.61 14.40 14.40 90.33
THR Three Rivers Fin. Corp. of MI 0.52 0.78 14.87 14.80 102.67
TBK Tolland Bank of CT* 1.19 1.18 12.43 11.94 197.11
WSB Washington SB, FSB of MD 0.29 0.25 4.98 4.98 60.44
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN 0.63 -0.09 30.67 30.67 373.33
AFED AFSALA Bancorp of NY 0.61 0.61 14.05 14.05 102.70
ALBK ALBANK Fin. Corp. of Albany NY 2.03 2.56 24.72 21.35 271.56
AMFC AMB Financial Corp. of IN 0.33 0.52 14.40 14.40 74.33
ASBP ASB Financial Corp. of OH 0.39 0.56 10.21 10.21 64.98
ABBK Abington Savings Bank of MA(8)* 1.87 1.58 17.72 15.83 257.24
AABC Access Anytime Bancorp of NM -0.90 -0.34 6.82 6.82 148.79
AFBC Advance Fin. Bancorp of WV 0.32 0.64 13.93 13.93 94.27
AADV Advantage Bancorp of WI 0.98 2.54 27.53 25.50 314.98
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AFCB Affiliated Comm BC, Inc of MA 25.87 5,149 133.2 25.87 16.37 24.87 4.02 N.A. 21.06
ALBC Albion Banc Corp. of Albion NY 16.56 250 4.1 18.00 16.50 17.12 -3.27 27.38 -1.13
ABCL Allied Bancorp of IL 30.50 2,695 82.2 31.25 21.00 28.75 6.09 205.00 22.00
ATSB AmTrust Capital Corp. of IN 11.87 531 6.3 11.87 8.50 11.87 0.00 N.A. 18.70
AHCI Ambanc Holding Co. of NY* 13.19 4,880 64.4 13.50 9.38 12.87 2.49 N.A. 17.24
ASBI Ameriana Bancorp of IN 16.00 3,291 52.7 16.37 12.87 16.00 0.00 73.35 0.00
AFFFZ America First Fin. Fund of CA 34.50 6,011 207.4 34.50 25.87 32.50 6.15 84.00 14.05
AMFB American Federal Bank of SC(8) 28.75 10,955 315.0 28.75 14.75 21.50 33.72 505.26 52.36
ANBK American Nat'l Bancorp of MD 12.75 3,604 46.0 13.25 9.50 12.81 -0.47 N.A. 5.20
ABCW Anchor Bancorp Wisconsin of WI 43.25 4,621 199.9 43.25 30.25 41.00 5.49 47.26 20.98
ANDB Andover Bancorp, Inc. of MA* 29.25 5,134 150.2 29.50 17.81 28.62 2.20 172.09 14.17
ASFC Astoria Financial Corp. of NY 40.50 21,473 869.7 40.94 23.31 39.62 2.22 54.29 9.85
AVND Avondale Fin. Corp. of IL 18.25 3,525 64.3 18.37 12.50 17.75 2.82 N.A. 6.60
BFSI BFS Bankorp, Inc. of NY 50.75 1,658 84.1 55.00 36.00 50.75 0.00 460.15 3.05
BKCT Bancorp Connecticut of CT* 22.75 2,571 58.5 23.75 16.46 22.75 0.00 160.00 1.11
BPLS Bank Plus Corp. of CA 13.25 18,245 241.7 13.75 8.62 12.12 9.32 N.A. 15.22
BWFC Bank West Fin. Corp. of MI 11.37 1,819 20.7 12.25 8.94 11.62 -2.15 N.A. 7.06
BANC BankAtlantic Bancorp of FL 15.50 14,720 228.2 15.50 10.20 14.87 4.24 198.08 15.93
BKUNA BankUnited SA of FL 10.12 5,706 57.7 10.12 7.12 9.75 3.79 86.37 1.20
BKCO Bankers Corp. of NJ(8)* 24.62 12,378 304.7 24.62 16.87 24.44 0.74 293.92 22.37
BVFS Bay View Capital Corp. of CA 56.75 6,675 378.8 57.12 30.50 55.75 1.79 187.34 33.94
BFSB Bedford Bancshares of VA 19.00 1,144 21.7 19.25 16.00 18.87 0.69 80.95 7.83
BFFC Big Foot Fin. Corp. of IL 14.00 2,513 35.2 14.25 12.31 13.75 1.82 N.A. 7.69
BSBC Branford SB of CT* 4.12 6,559 27.0 4.25 2.75 3.87 6.46 94.34 6.46
BRFC Bridgeville SB, FSB of PA(8) 15.25 1,124 17.1 16.00 13.00 15.25 0.00 7.02 -4.69
BYFC Broadway Fin. Corp. of CA 10.25 893 9.2 11.00 9.00 10.25 0.00 N.A. 10.81
CBCO CB Bancorp of Michigan City IN 28.62 1,162 33.3 29.37 16.25 28.62 0.00 160.18 20.51
CBES CBES Bancorp of MO 17.00 1,025 17.4 17.00 12.62 16.00 6.25 N.A. 19.30
CCFH CCF Holding Company of GA 16.25 916 14.9 16.25 11.31 16.00 1.56 N.A. 10.17
CENF CENFED Financial Corp. of CA 34.38 5,155 177.2 34.50 20.75 31.87 7.88 119.26 17.54
CFSB CFSB Bancorp of Lansing MI 20.50 4,706 96.5 21.14 17.73 20.12 1.89 127.78 5.13
CKFB CKF Bancorp of Danville KY 18.00 927 16.7 20.75 17.50 18.00 0.00 N.A. -11.11
CNSB CNS Bancorp of MO 15.50 1,653 25.6 16.25 11.00 15.50 0.00 N.A. 2.51
CSBF CSB Financial Group Inc of IL* 10.12 942 9.5 10.62 8.87 10.12 0.00 N.A. 0.00
CFHC California Fin. Hld. Co. of CA(8) 28.81 4,741 136.6 29.06 19.75 28.75 0.21 174.38 -0.21
CBCI Calumet Bancorp of Chicago IL 35.25 2,377 83.8 35.87 27.50 35.00 0.71 74.07 6.02
CAFI Camco Fin. Corp. of OH 15.87 2,076 32.9 19.29 14.75 16.00 -0.81 N.A. 0.00
CMRN Cameron Fin. Corp. of MO 16.37 2,849 46.6 16.50 13.50 16.00 2.31 N.A. 2.31
CAPS Capital Savings Bancorp of MO 14.50 1,892 27.4 14.75 8.87 14.25 1.75 9.43 11.54
CFNC Carolina Fincorp of NC* 14.37 1,851 26.6 14.37 13.00 14.00 2.64 N.A. 7.48
CARV Carver FSB of New York, NY 9.87 2,314 22.8 10.37 7.37 10.12 -2.47 57.92 19.64
CASB Cascade SB of Everett WA 17.00 2,053 34.9 17.50 12.40 16.75 1.49 32.81 5.46
CATB Catskill Fin. Corp. of NY* 15.37 5,183 79.7 15.37 9.87 15.25 0.79 N.A. 9.79
CNIT Cenit Bancorp of Norfolk VA 45.00 1,633 73.5 45.75 31.75 45.75 -1.64 183.38 8.43
CTBK Center Banks, Inc. of NY* 19.12 948 18.1 19.12 13.12 18.75 1.97 73.82 17.66
CEBK Central Co-Op. Bank of MA* 18.00 1,965 35.4 18.50 14.75 17.50 2.86 242.86 2.86
CENB Century Bancshares of NC* 65.25 407 26.6 66.00 62.00 64.00 1.95 N.A. 0.38
CBSB Charter Financial Inc. of IL 15.87 4,253 67.5 16.00 10.87 15.75 0.76 N.A. 26.96
COFI Charter One Financial of OH 48.25 46,443 2,240.9 48.25 29.34 47.87 0.79 175.71 14.88
CVAL Chester Valley Bancorp of PA 20.75 1,634 33.9 20.75 17.26 20.00 3.75 83.14 12.16
CTZN CitFed Bancorp of Dayton OH 36.12 8,584 310.1 36.50 22.50 35.75 1.03 301.33 9.45
CLAS Classic Bancshares of KY 13.62 1,322 18.0 13.62 10.37 13.62 0.00 N.A. 17.21
CMSB Cmnwealth Bancorp of PA 15.37 17,954 276.0 15.37 9.75 15.00 2.47 N.A. 2.47
CBSA Coastal Bancorp of Houston TX 25.87 4,967 128.5 26.25 16.50 25.00 3.48 N.A. 13.12
CFCP Coastal Fin. Corp. of SC 24.12 3,452 83.3 24.12 15.00 21.62 11.56 141.20 14.86
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AFCB Affiliated Comm BC, Inc of MA 1.16 1.67 19.04 18.91 195.26
ALBC Albion Banc Corp. of Albion NY -0.24 0.47 23.07 23.07 239.44
ABCL Allied Bancorp of IL 1.16 1.74 21.01 20.43 247.85
ATSB AmTrust Capital Corp. of IN 0.34 0.15 13.46 13.31 135.80
AHCI Ambanc Holding Co. of NY* 0.23 0.22 14.42 14.42 101.74
ASBI Ameriana Bancorp of IN 0.70 1.06 13.22 13.20 121.46
AFFFZ America First Fin. Fund of CA 5.23 6.41 29.52 29.05 367.50
AMFB American Federal Bank of SC(8) 1.29 1.61 9.88 9.13 127.33
ANBK American Nat'l Bancorp of MD 0.19 0.68 12.36 12.36 135.03
ABCW Anchor Bancorp Wisconsin of WI 2.82 3.75 24.94 24.33 404.50
ANDB Andover Bancorp, Inc. of MA* 2.43 2.50 18.67 18.67 234.67
ASFC Astoria Financial Corp. of NY 1.72 2.54 27.42 22.75 338.69
AVND Avondale Fin. Corp. of IL 0.65 0.68 16.67 16.67 173.86
BFSI BFS Bankorp, Inc. of NY 5.37 6.35 31.49 31.49 392.35
BKCT Bancorp Connecticut of CT* 1.95 1.86 16.62 16.62 163.13
BPLS Bank Plus Corp. of CA -3.63 -3.08 8.66 8.64 182.14
BWFC Bank West Fin. Corp. of MI 0.50 0.32 13.30 13.30 76.70
BANC BankAtlantic Bancorp of FL 1.05 0.96 9.49 8.82 147.45
BKUNA BankUnited SA of FL 0.45 0.38 7.85 7.42 144.47
BKCO Bankers Corp. of NJ(8)* 1.97 2.12 15.58 15.31 198.72
BVFS Bay View Capital Corp. of CA 1.64 3.03 29.97 28.44 494.42
BFSB Bedford Bancshares of VA 1.14 1.46 15.93 15.93 111.33
BFFC Big Foot Fin. Corp. of IL 0.30 0.35 13.76 13.76 85.81
BSBC Branford SB of CT* 0.28 0.28 2.51 2.51 27.98
BRFC Bridgeville SB, FSB of PA(8) 0.46 0.59 14.22 14.22 49.27
BYFC Broadway Fin. Corp. of CA -0.21 0.27 14.11 14.11 131.30
CBCO CB Bancorp of Michigan City IN 1.88 2.22 16.68 16.68 172.12
CBES CBES Bancorp of MO 0.81 1.09 16.89 16.89 89.44
CCFH CCF Holding Company of GA 0.52 0.77 15.76 15.76 87.65
CENF CENFED Financial Corp. of CA 2.20 2.71 22.12 22.08 423.83
CFSB CFSB Bancorp of Lansing MI 1.16 1.60 13.27 13.27 176.33
CKFB CKF Bancorp of Danville KY 0.82 0.81 16.29 16.29 64.77
CNSB CNS Bancorp of MO 0.20 0.35 14.60 14.60 59.83
CSBF CSB Financial Group Inc of IL* 0.25 0.38 13.57 12.80 53.10
CFHC California Fin. Hld. Co. of CA(8) 1.46 2.11 18.96 18.87 282.09
CBCI Calumet Bancorp of Chicago IL 2.27 2.96 34.40 34.40 214.65
CAFI Camco Fin. Corp. of OH 1.32 1.50 13.81 13.81 182.12
CMRN Cameron Fin. Corp. of MO 0.74 0.91 16.43 16.43 65.41
CAPS Capital Savings Bancorp of MO 0.72 1.05 10.54 10.54 124.57
CFNC Carolina Fincorp of NC* 0.52 0.52 12.99 12.99 59.15
CARV Carver FSB of New York, NY -0.05 0.38 14.96 14.28 157.76
CASB Cascade SB of Everett WA 0.82 0.86 10.34 10.34 169.53
CATB Catskill Fin. Corp. of NY* 0.64 0.64 15.89 15.89 54.75
CNIT Cenit Bancorp of Norfolk VA 1.91 2.13 29.22 28.18 401.57
CTBK Center Banks, Inc. of NY* 1.58 1.50 17.12 16.74 255.47
CEBK Central Co-Op. Bank of MA* 0.85 0.92 16.30 14.36 165.86
CENB Century Bancshares of NC* 2.26 2.87 69.47 69.47 243.46
CBSB Charter Financial Inc. of IL 0.72 0.95 13.26 12.24 91.33
COFI Charter One Financial of OH 2.75 3.52 20.00 18.54 299.39
CVAL Chester Valley Bancorp of PA 1.04 1.54 15.72 15.72 177.58
CTZN CitFed Bancorp of Dayton OH 1.58 2.32 21.55 19.09 339.95
CLAS Classic Bancshares of KY 0.23 0.39 14.22 11.89 103.04
CMSB Cmnwealth Bancorp of PA 0.43 0.62 12.67 9.72 116.13
CBSA Coastal Bancorp of Houston TX 1.32 2.23 18.25 15.03 575.69
CFCP Coastal Fin. Corp. of SC 1.08 1.16 8.02 8.02 133.17
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFD Collective Bancorp Inc. of NJ 37.00 20,391 754.5 37.00 23.00 35.12 5.35 385.56 5.35
CMSV Commty. Svgs, MHC of FL (48.5) 19.00 4,910 45.0 20.50 14.25 19.00 0.00 N.A. -7.32
CBIN Community Bank Shares of IN 14.00 1,984 27.8 14.75 12.00 14.50 -3.45 N.A. 7.69
CBNH Community Bankshares Inc of NH* 26.25 2,449 64.3 26.25 17.12 26.12 0.50 600.00 28.05
CFTP Community Fed. Bancorp of MS 19.87 4,282 85.1 19.87 12.25 19.37 2.58 N.A. 16.88
CFFC Community Fin. Corp. of VA 22.00 1,272 28.0 22.50 18.00 22.00 0.00 214.29 6.02
CIBI Community Inv. Bancorp of OH 17.37 633 11.0 18.25 14.25 17.37 0.00 N.A. 2.18
COOP Cooperative Bk.for Svgs. of NC 20.75 1,492 31.0 20.87 16.50 20.00 3.75 107.50 2.47
CNSK Covenant Bank for Svgs. of NJ* 14.50 2,742 39.8 14.50 10.88 14.50 0.00 N.A. 1.75
CRZY Crazy Woman Creek Bncorp of WY 13.50 1,058 14.3 13.50 10.00 13.50 0.00 N.A. 12.50
DNFC D&N Financial Corp. of MI 18.00 8,348 150.3 18.12 12.00 17.75 1.41 105.71 7.46
DFIN Damen Fin. Corp. of Chicago IL 14.37 3,771 54.2 14.75 11.00 14.00 2.64 N.A. 11.66
DCBI Delphos Citizens Bancorp of OH 14.12 2,039 28.8 14.12 11.75 14.00 0.86 N.A. 17.67
DIME Dime Community Bancorp of NY 18.25 14,547 265.5 18.37 11.69 18.25 0.00 N.A. 23.73
DIBK Dime Financial Corp. of CT* 20.75 5,129 106.4 21.25 12.75 20.25 2.47 97.62 20.29
EGLB Eagle BancGroup of IL 15.87 1,303 20.7 16.25 10.50 16.25 -2.34 N.A. 6.72
EBSI Eagle Bancshares of Tucker GA 16.75 4,552 76.2 17.00 13.62 16.00 4.69 131.03 8.06
EGFC Eagle Financial Corp. of CT 29.25 4,543 132.9 30.75 22.25 29.00 0.86 234.29 -4.10
ETFS East Texas Fin. Serv. of TX 18.25 1,079 19.7 18.75 14.25 18.25 0.00 N.A. 11.48
EBCP Eastern Bancorp of NH(8) 25.50 3,671 93.6 25.62 15.17 25.50 0.00 103.19 8.51
ESBK Elmira SB of Elmira NY* 18.50 706 13.1 19.00 14.75 18.00 2.78 28.74 1.37
EIRE Emerald Island Bancorp, MA* 19.25 2,211 42.6 20.00 11.20 17.87 7.72 152.62 20.31
EFBC Empire Federal Bancorp of MT 14.19 2,592 36.8 14.44 13.00 14.06 0.92 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 15.25 2,026 30.9 16.00 12.75 14.75 3.39 N.A. 5.17
EQSB Equitable FSB of Wheaton MD 31.50 600 18.9 32.50 21.00 31.50 0.00 N.A. 11.50
FFFG F.F.O. Financial Group of FL 3.75 8,430 31.6 4.00 2.50 4.00 -6.25 -54.87 11.28
FCBF FCB Fin. Corp. of Neenah WI 22.25 2,460 54.7 23.50 17.00 23.50 -5.32 N.A. 20.27
FFBS FFBS Bancorp of Columbus MS 22.00 1,566 34.5 24.25 17.00 22.00 0.00 N.A. -4.35
FFDF FFD Financial Corp. of OH 13.87 1,455 20.2 14.00 10.00 14.00 -0.93 N.A. 4.68
FFLC FFLC Bancorp of Leesburg FL 23.50 2,438 57.3 23.50 17.25 23.00 2.17 N.A. 9.30
FFFC FFVA Financial Corp. of VA 24.75 4,693 116.2 24.75 14.62 23.00 7.61 N.A. 20.73
FFWC FFW Corporation of Wabash IN 25.00 702 17.6 25.00 16.50 24.62 1.54 N.A. 14.26
FFYF FFY Financial Corp. of OH 25.12 4,319 108.5 25.87 21.88 25.25 -0.51 N.A. -0.75
FMCO FMS Financial Corp. of NJ 20.50 2,393 49.1 20.50 14.75 20.25 1.23 127.78 12.33
FFHH FSF Financial Corp. of MN 16.50 3,230 53.3 16.50 11.37 16.00 3.13 N.A. 9.13
FOBC Fed One Bancorp of Wheeling WV 17.75 2,459 43.6 17.75 13.25 17.75 0.00 77.50 12.70
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 27.87 2,299 64.1 28.50 12.00 28.50 -2.21 218.51 12.06
FBCI Fidelity Bancorp of Chicago IL 19.00 2,787 53.0 19.37 15.00 18.00 5.56 N.A. 11.76
FSBI Fidelity Bancorp, Inc. of PA 22.75 1,381 31.4 23.00 15.46 21.50 5.81 194.31 13.75
FFFL Fidelity FSB, MHC of FL (47.4) 18.25 6,745 58.2 19.75 12.00 19.00 -3.95 N.A. 2.82
FFED Fidelity Fed. Bancorp of IN 8.75 2,489 21.8 13.25 8.75 9.12 -4.06 24.11 -10.26
FFOH Fidelity Financial of OH 12.75 4,077 52.0 13.00 9.62 12.37 3.07 N.A. 10.87
FIBC Financial Bancorp of NY 18.12 1,748 31.7 18.25 12.37 17.87 1.40 N.A. 20.80
FBSI First Bancshares of MO 20.50 1,195 24.5 20.75 15.00 20.25 1.23 60.78 23.35
FBBC First Bell Bancorp of PA 15.63 7,758 121.3 17.37 13.12 13.62 14.76 N.A. 17.96
FBER First Bergen Bancorp of NJ 14.62 3,015 44.1 14.62 9.00 14.12 3.54 N.A. 27.13
FCIT First Cit. Fin. Corp of MD 21.75 2,927 63.7 22.50 16.00 21.75 0.00 150.29 19.18
FSTC First Citizens Corp of GA 21.25 1,588 33.7 26.75 16.00 22.62 -6.06 70.00 -15.84
FFBA First Colorado Bancorp of Co 17.00 18,184 309.1 17.75 11.50 17.00 0.00 415.15 0.00
FDEF First Defiance Fin.Corp. of OH 13.00 9,912 128.9 13.00 9.87 12.50 4.00 N.A. 5.09
FESX First Essex Bancorp of MA* 16.00 7,421 118.7 16.75 10.00 14.87 7.60 166.67 21.95
FFES First FS&LA of E. Hartford CT 25.87 2,626 67.9 26.00 16.50 25.12 2.99 298.00 12.48
FSSB First FS&LA of San Bern. CA 10.50 328 3.4 11.50 9.00 10.50 0.00 5.00 16.67
FFSX First FS&LA. MHC of IA (46.0) 30.25 1,883 26.2 31.50 21.36 31.50 -3.97 202.50 3.42
FFSW First Fed Fin. Serv. of OH 37.50 3,612 135.5 39.75 21.82 37.62 -0.32 120.59 -3.52
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COFD Collective Bancorp Inc. of NJ 2.24 2.76 17.85 16.71 257.59
CMSV Commty. Svgs, MHC of FL (48.5) 0.82 1.23 15.50 15.50 133.44
CBIN Community Bank Shares of IN 0.66 1.01 12.83 12.81 118.25
CBNH Community Bankshares Inc of NH* 1.71 1.39 16.05 16.05 224.06
CFTP Community Fed. Bancorp of MS 0.60 0.73 16.09 16.09 48.11
CFFC Community Fin. Corp. of VA 1.28 1.62 17.59 17.59 126.41
CIBI Community Inv. Bancorp of OH 0.95 1.37 17.88 17.88 149.76
COOP Cooperative Bk.for Svgs. of NC -2.18 0.07 17.07 17.07 228.75
CNSK Covenant Bank for Svgs. of NJ* 0.52 0.64 7.55 7.55 141.20
CRZY Crazy Woman Creek Bncorp of WY 0.39 0.51 14.79 14.79 49.71
DNFC D&N Financial Corp. of MI 1.08 1.41 10.32 10.20 176.46
DFIN Damen Fin. Corp. of Chicago IL 0.45 0.59 14.27 14.27 62.39
DCBI Delphos Citizens Bancorp of OH 0.73 0.73 14.26 14.26 53.80
DIME Dime Community Bancorp of NY 0.68 0.78 15.23 13.33 84.69
DIBK Dime Financial Corp. of CT* 2.29 2.47 11.58 11.10 134.89
EGLB Eagle BancGroup of IL -0.38 0.03 16.99 16.99 132.51
EBSI Eagle Bancshares of Tucker GA 0.85 1.13 12.62 12.62 141.07
EGFC Eagle Financial Corp. of CT 3.05 1.88 22.26 16.32 308.78
ETFS East Texas Fin. Serv. of TX 0.42 0.75 19.40 19.40 106.00
EBCP Eastern Bancorp of NH(8) 0.88 1.24 17.65 16.71 235.91
ESBK Elmira SB of Elmira NY* 0.58 0.54 19.93 19.06 312.61
EIRE Emerald Island Bancorp, MA* 1.08 1.09 12.64 12.64 185.27
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.71 0.67 16.32 16.29 116.09
EQSB Equitable FSB of Wheaton MD 1.87 3.19 23.88 23.88 477.73
FFFG F.F.O. Financial Group of FL 0.07 0.22 2.23 2.23 36.90
FCBF FCB Fin. Corp. of Neenah WI 0.95 1.17 18.92 18.92 109.47
FFBS FFBS Bancorp of Columbus MS 0.85 1.11 15.73 15.73 80.29
FFDF FFD Financial Corp. of OH 0.34 0.47 14.72 14.72 58.72
FFLC FFLC Bancorp of Leesburg FL 0.90 1.34 22.00 22.00 142.10
FFFC FFVA Financial Corp. of VA 1.16 1.44 15.87 15.53 113.75
FFWC FFW Corporation of Wabash IN 1.89 2.35 22.96 22.96 225.36
FFYF FFY Financial Corp. of OH 1.13 1.71 19.30 19.30 134.83
FMCO FMS Financial Corp. of NJ 1.26 2.00 14.14 13.80 226.37
FFHH FSF Financial Corp. of MN 0.61 0.81 13.91 13.91 112.19
FOBC Fed One Bancorp of Wheeling WV 0.95 1.35 16.26 15.45 139.04
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 0.92 1.34 12.07 12.06 143.21
FBCI Fidelity Bancorp of Chicago IL 0.77 1.15 17.52 17.46 170.74
FSBI Fidelity Bancorp, Inc. of PA 0.95 1.67 15.77 15.74 230.18
FFFL Fidelity FSB, MHC of FL (47.4) 0.53 0.77 12.12 12.00 129.87
FFED Fidelity Fed. Bancorp of IN 0.18 0.33 5.06 5.06 104.53
FFOH Fidelity Financial of OH 0.36 0.54 12.46 12.46 62.76
FIBC Financial Bancorp of NY 0.72 1.27 14.74 14.66 148.23
FBSI First Bancshares of MO 1.01 1.26 19.38 19.35 131.39
FBBC First Bell Bancorp of PA 0.99 1.14 13.71 13.71 74.37
FBER First Bergen Bancorp of NJ 0.09 0.47 14.12 14.12 82.91
FCIT First Cit. Fin. Corp of MD 0.99 1.41 13.51 13.51 228.38
FSTC First Citizens Corp of GA 2.35 2.05 13.07 13.00 102.14
FFBA First Colorado Bancorp of Co 0.87 0.87 13.48 13.32 82.56
FDEF First Defiance Fin.Corp. of OH 0.49 0.64 12.17 12.17 52.89
FESX First Essex Bancorp of MA* 1.23 1.06 11.20 9.61 143.80
FFES First FS&LA of E. Hartford CT 1.53 2.31 21.96 21.91 358.97
FSSB First FS&LA of San Bern. CA -3.34 -3.89 14.36 13.71 305.90
FFSX First FS&LA. MHC of IA (46.0) 0.96 1.69 19.86 19.68 242.86
FFSW First Fed Fin. Serv. of OH 2.52 2.27 16.50 13.48 307.51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Fed. Bancorp. of MN 18.50 701 13.0 18.75 12.25 18.50 0.00 N.A. 0.00
FFBH First Fed. Bancshares of AR 19.50 5,154 100.5 19.50 10.00 18.69 4.33 N.A. 22.87
FFEC First Fed. Bancshares of WI(8) 18.50 6,855 126.8 18.56 13.75 18.50 0.00 N.A. 1.37
FTFC First Fed. Capital Corp. of WI 28.75 6,169 177.4 29.25 19.50 27.75 3.60 155.56 22.34
FFKY First Fed. Fin. Corp. of KY 21.00 4,182 87.8 22.00 16.12 19.25 9.09 33.33 3.70
FFBZ First Federal Bancorp of OH 17.00 1,572 26.7 17.50 11.00 16.50 3.03 70.00 6.25
FFWM First Fin. Corp of Western MD(8) 33.00 2,168 71.5 33.25 17.75 32.37 1.95 230.00 3.13
FFCH First Fin. Holdings Inc. of SC 28.00 6,301 176.4 28.00 17.50 24.50 14.29 128.57 24.44
FFBI First Financial Bancorp of IL 16.50 452 7.5 16.50 15.50 15.50 6.45 N.A. 3.97
FFHC First Financial Corp. of WI 28.13 36,802 1,035.2 28.13 16.00 25.87 8.74 78.60 14.82
FFHS First Franklin Corp. of OH 16.00 1,158 18.5 17.25 13.50 16.44 -2.68 21.95 -3.03
FGHC First Georgia Hold. Corp of GA 9.75 2,035 19.8 10.50 6.00 10.00 -2.50 154.57 14.71
FSPG First Home Bancorp of NJ 17.00 2,708 46.0 17.50 13.12 15.34 10.82 183.33 22.57
FFSL First Independence Corp. of KS 11.25 1,058 11.9 11.25 8.81 11.00 2.27 N.A. 8.49
FISB First Indiana Corp. of IN 30.00 8,303 249.1 30.37 21.00 30.00 0.00 122.22 12.15
FKFS First Keystone Fin. Corp of PA 21.62 1,292 27.9 21.62 16.75 20.75 4.19 N.A. 12.31
FLKY First Lancaster Bncshrs of KY 15.50 959 14.9 16.25 13.12 15.50 0.00 N.A. 6.02
FLFC First Liberty Fin. Corp. of GA 22.00 6,070 133.5 22.00 13.50 19.25 14.29 333.07 19.76
CASH First Midwest Fin. Corp. of IA 16.62 2,897 48.1 17.50 14.50 16.50 0.73 N.A. 8.41
FMBD First Mutual Bancorp of IL 15.50 3,769 58.4 15.75 11.62 15.00 3.33 N.A. 3.33
FMSB First Mutual SB of Bellevue WA* 20.50 2,453 50.3 20.50 12.25 20.25 1.23 164.52 17.14
FNGB First Northern Cap. Corp of WI 17.50 4,387 76.8 18.62 15.25 17.50 0.00 20.19 7.69
FFPB First Palm Beach Bancorp of FL 27.00 5,040 136.1 27.00 19.94 23.87 13.11 N.A. 14.31
FSLA First SB SLA MHC of NJ (47.5) 21.25 7,164 72.3 23.50 13.18 22.00 -3.41 112.50 14.86
FSNJ First SB of NJ, MHC (45.9)(8) 23.75 3,062 33.4 24.00 13.75 23.62 0.55 N.A. 3.26
SOPN First SB, SSB, Moore Co. of NC 19.25 3,689 71.0 19.87 16.75 19.50 -1.28 N.A. 2.67
FWWB First Savings Bancorp of WA* 21.00 10,569 221.9 22.12 12.37 20.50 2.44 N.A. 14.32
SHEN First Shenango Bancorp of PA 25.00 2,060 51.5 25.75 20.00 25.25 -0.99 N.A. 11.11
FSFC First So.east Fin. Corp. of SC 11.00 4,388 48.3 20.12 9.12 9.87 11.45 N.A. 17.27
FFDP FirstFed Bancshares of IL 17.50 3,063 53.6 18.25 14.08 17.87 -2.07 162.76 1.45
FLAG Flag Financial Corp of GA 12.37 2,037 25.2 13.50 9.75 12.62 -1.98 26.22 15.07
FFIC Flushing Fin. Corp. of NY* 19.75 8,250 162.9 19.94 14.50 18.87 4.66 N.A. 9.00
FBHC Fort Bend Holding Corp. of TX 23.56 820 19.3 25.75 16.87 23.25 1.33 N.A. -7.61
FTSB Fort Thomas Fin. Corp. of KY 13.00 1,574 20.5 17.75 12.50 13.00 0.00 N.A. -11.08
FKKY Frankfort First Bancorp of KY 10.25 3,440 35.3 15.87 10.00 10.12 1.28 N.A. -9.85
FTNB Fulton Bancorp of MO 16.37 1,719 28.1 16.75 12.50 16.12 1.55 N.A. 6.51
GFSB GFS Bancorp of Grinnell IA 21.50 500 10.8 21.50 20.00 20.50 4.88 N.A. 1.18
GUPB GFSB Bancorp of Gallup NM 16.00 901 14.4 16.25 13.25 15.75 1.59 N.A. 0.82
GWBC Gateway Bancorp of KY 14.75 1,076 15.9 15.25 13.00 14.75 0.00 N.A. 3.51
GBCI Glacier Bancorp of MT 24.00 3,374 81.0 25.25 18.64 24.50 -2.04 396.89 -2.04
GLBK Glendale Co-op. Bank of MA* 23.00 247 5.7 23.00 16.50 19.00 21.05 N.A. 15.00
GFCO Glenway Financial Corp. of OH 20.00 1,187 23.7 22.75 18.09 20.00 0.00 N.A. -2.44
GTPS Great American Bancorp of IL 15.94 1,950 31.1 16.00 13.19 16.00 -0.38 N.A. 7.63
GTFN Great Financial Corp. of KY 34.25 14,117 483.5 34.75 23.19 33.62 1.87 N.A. 17.62
GSBC Great Southern Bancorp of MO 17.00 8,730 148.4 18.00 11.75 17.00 0.00 482.19 -4.55
GDVS Greater DV SB,MHC of PA (19.9)* 11.00 3,272 7.2 11.75 9.25 11.50 -4.35 N.A. 6.08
GRTR Greater New York SB of NY* 14.87 13,534 201.3 15.06 10.12 13.87 7.21 59.72 9.18
GSFC Green Street Fin. Corp. of NC 17.50 4,298 75.2 17.62 12.12 16.62 5.29 N.A. 12.90
GROV GroveBank for Savings of MA(8)* 50.50 1,542 77.9 50.50 24.50 50.50 0.00 469.33 1.51
GSLC Guaranty Svgs & Loan FA of VA 9.62 924 8.9 9.87 7.25 9.75 -1.33 N.A. 9.94
GFED Guarnty FS&LA,MHC of MO (31.0) 12.00 3,125 11.6 12.50 9.75 11.75 2.13 N.A. -0.50
HEMT HF Bancorp of Hemet CA 13.87 6,282 87.1 13.87 9.25 12.75 8.78 N.A. 24.73
HFFC HF Financial Corp. of SD 18.00 2,992 53.9 18.50 13.44 18.00 0.00 260.00 3.99
HFNC HFNC Financial Corp. of NC 21.75 17,192 373.9 21.75 13.12 19.25 12.99 N.A. 21.71
HMNF HMN Financial, Inc. of MN 23.50 4,434 104.2 23.75 14.50 21.50 9.30 N.A. 29.69
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BDJI First Fed. Bancorp. of MN 0.48 1.01 17.78 17.78 156.53
FFBH First Fed. Bancshares of AR 0.58 0.88 16.17 16.17 98.88
FFEC First Fed. Bancshares of WI(8) 0.67 0.88 14.27 13.73 106.32
FTFC First Fed. Capital Corp. of WI 1.56 1.72 15.10 14.24 238.19
FFKY First Fed. Fin. Corp. of KY 1.04 1.22 11.95 11.20 87.77
FFBZ First Federal Bancorp of OH 0.89 1.20 9.12 9.11 120.27
FFWM First Fin. Corp of Western MD(8) 1.48 1.99 19.44 19.44 166.44
FFCH First Fin. Holdings Inc. of SC 1.25 1.96 15.28 15.28 251.11
FFBI First Financial Bancorp of IL 0.22 0.70 16.62 16.62 214.92
FFHC First Financial Corp. of WI 1.35 1.90 11.15 10.81 154.89
FFHS First Franklin Corp. of OH 0.52 1.15 17.07 16.92 188.54
FGHC First Georgia Hold. Corp of GA 0.60 0.60 5.87 5.23 70.77
FSPG First Home Bancorp of NJ 1.57 2.08 11.62 11.36 179.91
FFSL First Independence Corp. of KS 0.58 0.85 11.32 11.32 102.94
FISB First Indiana Corp. of IN 1.65 1.83 16.70 16.48 180.23
FKFS First Keystone Fin. Corp of PA 1.05 1.65 18.03 18.03 240.48
FLKY First Lancaster Bncshrs of KY 0.38 0.49 14.27 14.27 38.43
FLFC First Liberty Fin. Corp. of GA 1.52 1.26 11.27 9.54 163.30
CASH First Midwest Fin. Corp. of IA 0.83 1.10 14.92 13.16 133.93
FMBD First Mutual Bancorp of IL 0.35 0.55 16.73 16.73 83.94
FMSB First Mutual SB of Bellevue WA* 1.55 1.49 10.79 10.79 163.31
FNGB First Northern Cap. Corp of WI 0.75 1.14 16.01 16.01 140.30
FFPB First Palm Beach Bancorp of FL 0.11 0.33 20.92 20.36 295.64
FSLA First SB SLA MHC of NJ (47.5) 0.63 1.14 12.59 11.04 136.07
FSNJ First SB of NJ, MHC (45.9)(8) 0.38 0.85 16.01 16.01 212.49
SOPN First SB, SSB, Moore Co. of NC 0.94 1.15 18.03 18.03 72.08
FWWB First Savings Bancorp of WA* 0.68 0.68 14.13 12.97 89.60
SHEN First Shenango Bancorp of PA 1.29 1.75 22.39 22.39 186.45
FSFC First So.east Fin. Corp. of SC -0.01 0.68 7.69 7.69 74.30
FFDP FirstFed Bancshares of IL 0.52 0.63 16.31 15.53 176.68
FLAG Flag Financial Corp of GA -0.08 0.12 9.89 9.89 112.38
FFIC Flushing Fin. Corp. of NY* 0.81 0.82 16.16 16.16 93.98
FBHC Fort Bend Holding Corp. of TX 0.75 1.75 21.84 20.20 339.67
FTSB Fort Thomas Fin. Corp. of KY 0.29 0.44 9.97 9.97 57.88
FKKY Frankfort First Bancorp of KY 0.32 0.43 9.84 9.84 37.42
FTNB Fulton Bancorp of MO 0.30 0.47 14.24 14.24 58.38
GFSB GFS Bancorp of Grinnell IA 1.60 2.06 20.10 20.10 175.25
GUPB GFSB Bancorp of Gallup NM 0.62 0.79 16.37 16.37 88.47
GWBC Gateway Bancorp of KY 0.56 0.77 16.19 16.19 64.59
GBCI Glacier Bancorp of MT 1.61 1.81 11.54 11.53 122.12
GLBK Glendale Co-op. Bank of MA* 1.16 0.97 23.71 23.71 149.55
GFCO Glenway Financial Corp. of OH 1.30 1.32 22.56 22.08 234.89
GTPS Great American Bancorp of IL 0.42 0.41 17.09 17.09 61.37
GTFN Great Financial Corp. of KY 1.38 1.35 19.87 19.07 205.23
GSBC Great Southern Bancorp of MO 1.02 1.16 7.62 7.62 75.33
GDVS Greater DV SB,MHC of PA (19.9)* -0.06 0.16 8.49 8.49 72.21
GRTR Greater New York SB of NY* 1.34 0.70 11.32 11.32 189.64
GSFC Green Street Fin. Corp. of NC 0.48 0.60 14.47 14.47 41.00
GROV GroveBank for Savings of MA(8)* 3.37 3.16 25.21 25.20 388.14
GSLC Guaranty Svgs & Loan FA of VA 0.49 0.58 6.86 6.86 124.71
GFED Guarnty FS&LA,MHC of MO (31.0) 0.45 0.38 8.53 8.53 61.09
HEMT HF Bancorp of Hemet CA -0.36 -2.62 12.91 0.00 131.63
HFFC HF Financial Corp. of SD 1.14 1.47 17.11 17.06 184.74
HFNC HFNC Financial Corp. of NC 0.55 0.67 14.62 14.62 52.44
HMNF HMN Financial, Inc. of MN 0.96 1.15 18.52 18.52 125.11
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HALL Hallmark Capital Corp. of WI 18.12 1,443 26.1 18.12 14.50 18.00 0.67 N.A. 2.08
HARB Harbor FSB, MHC of FL (46.0) 35.50 4,939 80.6 36.00 23.75 35.50 0.00 N.A. -0.70
HRBF Harbor Federal Bancorp of MD 17.37 1,754 30.5 18.25 12.37 18.12 -4.14 73.70 10.29
HFSA Hardin Bancorp of Hardin MO 13.75 955 13.1 14.12 11.00 13.75 0.00 N.A. 10.00
HARL Harleysville SA of PA 20.00 1,629 32.6 21.60 13.60 20.80 -3.85 12.68 26.58
HARS Harris SB, MHC of PA (24.2) 21.88 11,216 59.4 22.62 14.75 21.75 0.60 N.A. 19.89
HFFB Harrodsburg 1st Fin Bcrp of KY 17.25 2,030 35.0 19.00 13.25 17.25 0.00 N.A. -8.59
HHFC Harvest Home Fin. Corp. of OH 10.12 935 9.5 13.75 9.25 10.00 1.20 N.A. 3.79
HAVN Haven Bancorp of Woodhaven NY 30.62 4,325 132.4 31.25 22.50 30.44 0.59 N.A. 6.99
HVFD Haverfield Corp. of OH 18.75 1,906 35.7 19.75 13.75 18.50 1.35 20.97 -1.94
HTHR Hawthorne Fin. Corp. of CA 11.75 2,599 30.5 11.75 4.38 10.25 14.63 -57.27 44.53
HBNK Highland Federal Bank of CA 23.50 2,296 54.0 24.00 14.25 22.37 5.05 N.A. 38.24
HIFS Hingham Inst. for Sav. of MA* 19.00 1,297 24.6 19.25 13.75 18.50 2.70 316.67 1.33
HBEI Home Bancorp of Elgin IL 15.00 7,009 105.1 15.25 11.81 15.00 0.00 N.A. 11.11
HBFW Home Bancorp of Fort Wayne IN 19.62 2,653 52.1 19.75 13.75 19.50 0.62 N.A. 3.26
HBBI Home Building Bancorp of IN 21.00 312 6.6 21.25 16.25 19.50 7.69 N.A. 6.33
HCFC Home City Fin. Corp. of OH 14.00 876 12.3 14.00 12.00 13.44 4.17 N.A. 5.66
HOMF Home Fed Bancorp of Seymour IN 27.50 3,352 92.2 27.75 16.33 26.87 2.34 173.63 6.80
HWEN Home Financial Bancorp of IN 14.00 506 7.1 14.87 9.87 14.87 -5.85 N.A. 9.80
HPBC Home Port Bancorp, Inc. of MA* 18.25 1,842 33.6 18.75 12.25 18.00 1.39 128.13 10.61
HMCI Homecorp, Inc. of Rockford IL 21.25 1,129 24.0 21.25 17.00 21.25 0.00 112.50 11.14
LOAN Horizon Bancorp, Inc of TX(8)* 24.00 1,387 33.3 24.00 8.25 22.50 6.67 N.A. 11.63
HZFS Horizon Fin'l. Services of IA 17.75 426 7.6 17.75 14.00 17.75 0.00 N.A. 17.39
HRZB Horizon Financial Corp. of WA* 15.50 6,412 99.4 16.75 11.75 15.75 -1.59 15.41 14.81
IBSF IBS Financial Corp. of NJ 17.87 9,936 177.6 17.87 12.50 16.37 9.16 N.A. 14.33
ISBF ISB Financial Corp. of LA 23.87 7,051 168.3 24.00 13.62 22.00 8.50 N.A. 32.61
ITLA Imperial Thrift & Loan of CA* 16.00 7,820 125.1 16.62 12.62 16.00 0.00 N.A. 6.67
IFSB Independence FSB of DC 9.00 1,280 11.5 9.75 6.75 9.00 0.00 350.00 12.50
INCB Indiana Comm. Bank, SB of IN 16.75 922 15.4 17.00 12.50 16.75 0.00 N.A. 3.08
IFSL Indiana Federal Corp. of IN(8) 26.25 4,737 124.3 27.25 16.25 26.75 -1.87 248.14 17.34
INBI Industrial Bancorp of OH 12.75 5,504 70.2 16.00 9.87 13.00 -1.92 N.A. 0.00
IWBK Interwest SB of Oak Harbor WA 36.25 8,001 290.0 36.25 19.87 35.50 2.11 262.50 12.40
IPSW Ipswich SB of Ipswich MA* 16.00 1,188 19.0 16.00 7.75 14.75 8.47 N.A. 33.33
JSBF JSB Financial, Inc. of NY 40.00 9,764 390.6 40.00 31.87 37.87 5.62 247.83 5.26
JXVL Jacksonville Bancorp of TX 15.00 2,638 39.6 15.75 9.38 14.75 1.69 N.A. 2.60
JXSB Jcksnville SB,MHC of IL (44.6) 16.25 1,272 9.2 17.25 11.50 16.25 0.00 N.A. 22.64
JSBA Jefferson Svgs Bancorp of MO 30.00 4,182 125.5 30.75 22.25 28.25 6.19 N.A. 15.38
JOAC Joachim Bancorp of MO 14.00 760 10.6 15.25 11.50 14.00 0.00 N.A. -3.45
KSAV KS Bancorp of Kenly NC 19.75 663 13.1 21.00 17.12 19.75 0.00 N.A. -0.60
KSBK KSB Bancorp of Kingfield ME(8)* 34.00 411 14.0 34.00 17.27 26.30 29.28 N.A. 47.83
KFBI Klamath First Bancorp of OR 15.56 10,002 155.6 16.25 12.56 15.25 2.03 N.A. -1.21
LBFI L&B Financial of S. Springs TX(8) 17.00 1,584 26.9 18.00 13.87 17.75 -4.23 N.A. 0.00
LSBI LSB Fin. Corp. of Lafayette IN 20.00 918 18.4 20.00 14.50 19.75 1.27 N.A. 2.56
LVSB Lakeview SB of Paterson NJ 30.25 2,487 75.2 32.50 16.14 30.50 -0.82 N.A. 21.63
LARK Landmark Bancshares of KS 18.75 1,836 34.4 19.00 14.50 18.75 0.00 N.A. 4.17
LARL Laurel Capital Group of PA 19.50 1,515 29.5 19.50 14.50 19.25 1.30 52.34 18.18
LSBX Lawrence Savings Bank of MA* 9.87 4,250 41.9 10.25 5.12 9.80 0.71 186.92 21.40
LFED Leeds FSB, MHC of MD (36.2) 19.00 3,455 23.7 19.00 13.00 18.75 1.33 N.A. 18.75
LXMO Lexington B&L Fin. Corp. of MO 14.25 1,265 18.0 14.25 9.50 13.62 4.63 N.A. 5.56
LIFB Life Bancorp of Norfolk VA 19.75 9,847 194.5 21.00 14.00 19.50 1.28 N.A. 9.72
LFBI Little Falls Bancorp of NJ 14.00 2,890 40.5 14.00 9.50 13.75 1.82 N.A. 9.80
LOGN Logansport Fin. Corp. of IN 13.00 1,256 16.3 14.75 11.12 12.31 5.61 N.A. 15.56
LONF London Financial Corp. of OH 15.25 529 8.1 15.25 9.75 15.00 1.67 N.A. 8.00
LISB Long Island Bancorp of NY 38.37 24,458 938.5 39.12 26.37 38.62 -0.65 N.A. 9.63
MAFB MAF Bancorp of IL 39.75 10,490 417.0 39.75 22.25 37.50 6.00 367.65 14.39
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HALL Hallmark Capital Corp. of WI 1.09 1.46 19.46 19.46 274.99
HARB Harbor FSB, MHC of FL (46.0) 1.83 2.43 17.75 17.04 214.69
HRBF Harbor Federal Bancorp of MD 0.38 0.68 16.08 16.08 124.73
HFSA Hardin Bancorp of Hardin MO 0.45 0.75 14.99 14.99 101.59
HARL Harleysville SA of PA 1.12 1.71 12.52 12.52 199.04
HARS Harris SB, MHC of PA (24.2) 0.03 0.61 13.15 11.09 153.68
HFFB Harrodsburg 1st Fin Bcrp of KY 0.54 0.71 14.89 14.89 53.67
HHFC Harvest Home Fin. Corp. of OH 0.14 0.41 10.40 10.40 84.19
HAVN Haven Bancorp of Woodhaven NY 1.99 3.01 21.72 21.59 361.78
HVFD Haverfield Corp. of OH 0.79 1.77 14.88 14.86 181.98
HTHR Hawthorne Fin. Corp. of CA 2.66 1.67 12.25 12.25 318.50
HBNK Highland Federal Bank of CA 0.29 1.04 15.18 15.18 213.28
HIFS Hingham Inst. for Sav. of MA* 1.58 1.58 14.81 14.81 155.42
HBEI Home Bancorp of Elgin IL 0.06 0.31 14.12 14.12 52.87
HBFW Home Bancorp of Fort Wayne IN 0.62 1.03 17.61 17.61 121.64
HBBI Home Building Bancorp of IN -0.49 -0.02 17.84 17.84 142.83
HCFC Home City Fin. Corp. of OH 0.59 0.77 13.90 13.90 69.69
HOMF Home Fed Bancorp of Seymour IN 1.79 2.12 15.41 14.85 188.96
HWEN Home Financial Bancorp of IN 0.36 0.52 15.31 15.31 76.45
HPBC Home Port Bancorp, Inc. of MA* 1.64 1.65 10.66 10.66 102.41
HMCI Homecorp, Inc. of Rockford IL 0.29 0.99 18.09 18.09 301.55
LOAN Horizon Bancorp, Inc of TX(8)* 1.02 0.94 8.52 8.27 107.35
HZFS Horizon Fin'l. Services of IA 0.23 0.57 19.31 19.31 179.93
HRZB Horizon Financial Corp. of WA* 1.15 1.12 12.44 12.44 78.03
IBSF IBS Financial Corp. of NJ 0.46 0.74 14.52 14.52 74.68
ISBF ISB Financial Corp. of LA 0.73 0.99 15.93 15.45 97.27
ITLA Imperial Thrift & Loan of CA* 1.17 1.17 11.06 11.06 94.06
IFSB Independence FSB of DC 0.26 0.39 13.03 11.28 193.66
INCB Indiana Comm. Bank, SB of IN 0.15 0.48 12.10 12.10 98.37
IFSL Indiana Federal Corp. of IN(8) 1.07 1.50 14.77 13.78 170.81
INBI Industrial Bancorp of OH 0.44 0.85 11.28 11.28 59.34
IWBK Interwest SB of Oak Harbor WA 1.55 2.18 14.51 14.16 212.88
IPSW Ipswich SB of Ipswich MA* 1.51 1.22 8.29 8.29 133.79
JSBF JSB Financial, Inc. of NY 2.60 2.60 33.60 33.60 155.55
JXVL Jacksonville Bancorp of TX 0.54 0.81 13.43 13.43 82.58
JXSB Jcksnville SB,MHC of IL (44.6) 0.21 0.52 13.01 12.98 112.98
JSBA Jefferson Svgs Bancorp of MO 0.62 1.65 19.53 16.10 269.81
JOAC Joachim Bancorp of MO 0.19 0.33 14.05 14.05 47.54
KSAV KS Bancorp of Kenly NC 1.25 1.66 20.70 20.68 152.10
KSBK KSB Bancorp of Kingfield ME(8)* 2.76 2.76 22.00 20.37 322.46
KFBI Klamath First Bancorp of OR 0.58 0.86 15.25 15.25 67.30
LBFI L&B Financial of S. Springs TX(8) 0.51 0.69 15.66 15.66 89.90
LSBI LSB Fin. Corp. of Lafayette IN 0.90 0.82 18.21 18.21 193.73
LVSB Lakeview SB of Paterson NJ 2.25 0.95 19.47 15.51 190.07
LARK Landmark Bancshares of KS 0.89 1.09 17.82 17.82 120.90
LARL Laurel Capital Group of PA 1.45 1.86 14.31 14.31 133.65
LSBX Lawrence Savings Bank of MA* 1.23 1.23 6.83 6.83 79.50
LFED Leeds FSB, MHC of MD (36.2) 0.59 0.85 12.80 12.80 79.51
LXMO Lexington B&L Fin. Corp. of MO 0.36 0.50 14.83 14.83 48.75
LIFB Life Bancorp of Norfolk VA 0.87 1.16 15.33 14.84 144.18
LFBI Little Falls Bancorp of NJ 0.16 0.43 14.45 13.31 97.09
LOGN Logansport Fin. Corp. of IN 0.73 0.93 12.28 12.28 61.84
LONF London Financial Corp. of OH 0.52 0.76 15.11 15.11 70.53
LISB Long Island Bancorp of NY 1.32 1.60 21.22 21.22 219.31
MAFB MAF Bancorp of IL 1.73 2.61 23.89 20.62 307.94
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MBLF MBLA Financial Corp. of MO(8) 20.25 1,339 27.1 26.00 19.00 20.50 -1.22 N.A. 6.58
MFBC MFB Corp. of Mishawaka IN 18.75 1,774 33.3 19.25 13.75 18.00 4.17 N.A. 12.82
MLBC ML Bancorp of Villanova PA 17.37 11,664 202.6 17.50 11.06 17.00 2.18 N.A. 23.02
MBB MSB Bancorp of Middletown NY* 18.75 2,834 53.1 20.50 15.00 19.00 -1.32 87.50 -4.43
MSBF MSB Financial Corp. of MI 20.75 648 13.4 21.25 15.75 20.75 0.00 N.A. 9.21
MGNL Magna Bancorp of MS 19.75 13,741 271.4 22.50 14.37 20.25 -2.47 295.00 12.86
MARN Marion Capital Holdings of IN 21.00 1,844 38.7 22.00 19.25 21.00 0.00 N.A. 9.09
MFCX Marshalltown Fin. Corp. of IA(8) 14.87 1,411 21.0 16.75 14.25 14.87 0.00 N.A. 0.00
MFSL Maryland Fed. Bancorp of MD 38.25 3,131 119.8 38.25 26.91 37.75 1.32 264.29 10.07
MASB MassBank Corp. of Reading MA* 41.37 2,687 111.2 41.37 32.50 40.75 1.52 235.52 8.53
MFLR Mayflower Co-Op. Bank of MA* 17.00 889 15.1 17.50 11.25 16.12 5.46 240.00 0.00
MECH Mechanics SB of Hartford CT* 17.12 5,290 90.6 17.37 11.00 17.37 -1.44 N.A. 8.70
MDBK Medford Savings Bank of MA* 28.75 4,535 130.4 29.12 19.75 29.00 -0.86 310.71 11.65
MERI Meritrust FSB of Thibodaux LA 35.50 774 27.5 35.50 29.25 35.50 0.00 N.A. 12.27
MWBX Metro West of MA* 5.06 13,889 70.3 5.37 3.50 4.94 2.43 22.82 -5.77
MCBS Mid Continent Bancshares of KS 26.56 2,017 53.6 27.00 17.37 27.00 -1.63 N.A. 13.65
MIFC Mid Iowa Financial Corp. of IA 8.50 1,656 14.1 8.50 6.00 7.62 11.55 70.00 33.44
MCBN Mid-Coast Bancorp of ME 19.00 230 4.4 20.25 18.00 19.00 0.00 232.75 0.00
MIDC Midconn Bank of Kensington CT(8)* 24.00 1,953 46.9 24.00 14.25 23.75 1.05 128.57 21.52
MWBI Midwest Bancshares, Inc. of IA 26.75 349 9.3 28.25 24.50 26.75 0.00 167.50 0.94
MWFD Midwest Fed. Fin. Corp of WI 18.00 1,604 28.9 24.50 9.87 18.00 0.00 260.00 -2.70
MFFC Milton Fed. Fin. Corp. of OH 14.37 2,205 31.7 16.00 11.50 14.00 2.64 N.A. -0.90
MIVI Miss. View Hold. Co. of MN 14.62 855 12.5 14.75 10.75 14.75 -0.88 N.A. 21.83
MBSP Mitchell Bancorp of NC* 15.00 980 14.7 15.00 10.19 14.75 1.69 N.A. 5.26
MBBC Monterey Bay Bancorp of CA 18.00 3,259 58.7 18.25 11.37 16.75 7.46 N.A. 22.03
MSBK Mutual SB, FSB of Bay City MI 6.75 4,274 28.8 7.12 5.12 6.88 -1.89 -22.86 22.73
NHTB NH Thrift Bancshares of NH 11.75 1,698 20.0 13.37 9.25 12.12 -3.05 154.33 -6.89
NSLB NS&L Bancorp of Neosho MO 16.00 759 12.1 16.50 12.00 16.25 -1.54 N.A. 17.47
NMSB Newmil Bancorp. of CT* 9.75 4,042 39.4 9.75 6.62 9.00 8.33 53.06 0.00
NASB North American SB of MO 39.25 2,264 88.9 39.50 29.25 36.50 7.53 823.53 14.60
NBSI North Bancshares of Chicago IL 17.50 1,058 18.5 17.87 14.00 17.37 0.75 N.A. 6.06
FFFD North Central Bancshares of IA 15.63 3,429 53.6 15.63 10.12 14.62 6.91 N.A. 15.27
NEBC Northeast Bancorp of ME* 14.00 1,232 17.2 14.00 12.00 14.00 0.00 19.15 0.00
NEIB Northeast Indiana Bncrp of IN 14.25 1,954 27.8 14.25 11.50 14.00 1.79 N.A. 4.63
NWEQ Northwest Equity Corp. of WI 13.62 929 12.7 14.19 9.87 13.50 0.89 N.A. 12.38
NWSB Northwest SB, MHC of PA (29.9) 15.63 23,376 109.2 15.75 10.75 15.00 4.20 N.A. 16.90
NSSY Norwalk Savings Society of CT* 25.37 2,392 60.7 25.37 18.75 24.75 2.51 N.A. 8.56
NSSB Norwich Financial Corp. of CT* 20.37 5,400 110.0 20.50 12.62 19.00 7.21 191.00 3.82
NTMG Nutmeg FS&LA of CT 7.00 712 5.0 8.00 6.25 7.50 -6.67 N.A. -6.67
OHSL OHSL Financial Corp. of OH 21.75 1,223 26.6 22.50 19.25 21.75 0.00 N.A. 1.78
OSBF OSB Fin. Corp. of Oshkosh WI(8) 32.00 1,160 37.1 33.25 22.75 32.75 -2.29 178.26 17.43
OCFC Ocean Fin. Corp. of NJ 29.87 9,059 270.6 30.12 19.62 30.00 -0.43 N.A. 17.14
OFCP Ottawa Financial Corp. of MI 18.87 5,179 97.7 18.87 16.00 18.50 2.00 N.A. 12.25
PFFB PFF Bancorp of Pomona CA 15.63 19,837 310.1 15.63 10.37 14.62 6.91 N.A. 5.11
PSFI PS Financial of Chicago IL 13.69 2,182 29.9 13.69 11.62 13.37 2.39 N.A. 16.51
PVFC PVF Capital Corp. of OH 16.37 2,323 38.0 17.25 12.00 16.00 2.31 272.05 3.94
PCCI Pacific Crest Capital of CA* 13.00 2,930 38.1 13.12 7.50 11.75 10.64 N.A. 13.04
PALM Palfed, Inc. of Aiken SC 14.81 5,228 77.4 15.25 11.62 15.00 -1.27 -3.64 5.79
PBCI Pamrapo Bancorp, Inc. of NJ 20.00 3,156 63.1 22.25 18.25 20.00 0.00 255.24 0.00
PFED Park Bancorp of Chicago IL 15.31 2,701 41.4 15.63 10.19 15.50 -1.23 N.A. 17.77
PVSA Parkvale Financial Corp of PA 25.75 4,046 104.2 26.50 19.60 25.37 1.50 210.99 -0.96
PBIX Patriot Bank Corp. of PA 15.25 4,457 68.0 16.25 10.42 16.25 -6.15 N.A. 12.96
PEEK Peekskill Fin. Corp. of NY 15.00 3,378 50.7 15.00 11.12 14.75 1.69 N.A. 5.26
PFSB PennFed Fin. Services of NJ 23.12 4,821 111.5 25.25 14.62 24.12 -4.15 N.A. 14.17
PWBC PennFirst Bancorp of PA 13.50 3,909 52.8 14.75 11.87 14.25 -5.26 69.17 -0.88
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MBLF MBLA Financial Corp. of MO(8) 1.02 1.29 21.23 21.23 156.01
MFBC MFB Corp. of Mishawaka IN 0.62 0.96 19.43 19.43 126.24
MLBC ML Bancorp of Villanova PA 1.13 1.02 12.10 11.80 160.76
MBB MSB Bancorp of Middletown NY* 0.44 0.49 19.59 7.70 299.31
MSBF MSB Financial Corp. of MI 1.19 1.47 19.60 19.60 102.69
MGNL Magna Bancorp of MS 1.28 1.57 9.48 9.10 97.66
MARN Marion Capital Holdings of IN 1.10 1.36 21.68 21.68 95.34
MFCX Marshalltown Fin. Corp. of IA(8) 0.05 0.36 13.71 13.71 88.01
MFSL Maryland Fed. Bancorp of MD 2.81 1.97 30.23 29.75 360.41
MASB MassBank Corp. of Reading MA* 3.51 3.30 34.33 34.33 330.57
MFLR Mayflower Co-Op. Bank of MA* 1.15 1.10 12.90 12.65 130.78
MECH Mechanics SB of Hartford CT* -0.44 -0.42 13.48 13.48 134.22
MDBK Medford Savings Bank of MA* 2.30 2.25 20.40 18.82 229.13
MERI Meritrust FSB of Thibodaux LA 1.59 2.70 21.67 21.67 298.52
MWBX Metro West of MA* 0.47 0.48 2.82 2.82 37.62
MCBS Mid Continent Bancshares of KS 1.62 1.97 18.76 18.76 176.26
MIFC Mid Iowa Financial Corp. of IA 0.50 0.71 6.40 6.39 69.93
MCBN Mid-Coast Bancorp of ME 0.82 1.39 21.37 21.37 243.29
MIDC Midconn Bank of Kensington CT(8)* 0.95 1.19 17.84 15.03 183.53
MWBI Midwest Bancshares, Inc. of IA 1.81 3.00 27.51 27.51 390.90
MWFD Midwest Fed. Fin. Corp of WI 1.17 1.14 10.19 9.74 121.39
MFFC Milton Fed. Fin. Corp. of OH 0.49 0.62 12.29 12.29 79.69
MIVI Miss. View Hold. Co. of MN 0.65 0.88 15.16 15.16 82.71
MBSP Mitchell Bancorp of NC* 0.18 0.55 15.02 15.02 35.69
MBBC Monterey Bay Bancorp of CA 0.13 0.39 14.04 13.91 100.38
MSBK Mutual SB, FSB of Bay City MI -0.03 -0.04 9.47 9.47 155.52
NHTB NH Thrift Bancshares of NH 0.60 0.90 11.31 11.31 155.49
NSLB NS&L Bancorp of Neosho MO 0.43 0.61 16.05 16.05 81.43
NMSB Newmil Bancorp. of CT* 0.61 0.59 8.10 8.10 77.16
NASB North American SB of MO 3.41 3.54 22.59 21.77 314.08
NBSI North Bancshares of Chicago IL 0.47 0.71 16.80 16.80 111.03
FFFD North Central Bancshares of IA 0.83 0.98 16.35 16.35 57.72
NEBC Northeast Bancorp of ME* 0.78 0.63 13.15 11.13 186.61
NEIB Northeast Indiana Bncrp of IN 0.75 0.90 14.29 14.29 81.90
NWEQ Northwest Equity Corp. of WI 0.66 0.86 12.48 12.48 102.80
NWSB Northwest SB, MHC of PA (29.9) 0.56 0.81 8.17 7.79 81.79
NSSY Norwalk Savings Society of CT* 1.90 1.56 19.21 18.43 266.37
NSSB Norwich Financial Corp. of CT* 1.23 1.16 14.17 13.25 126.54
NTMG Nutmeg FS&LA of CT 0.40 0.41 7.08 7.08 131.92
OHSL OHSL Financial Corp. of OH 0.96 1.44 20.58 20.58 177.95
OSBF OSB Fin. Corp. of Oshkosh WI(8) 0.08 1.01 26.76 26.76 215.92
OCFC Ocean Fin. Corp. of NJ -0.36 1.08 27.23 27.23 131.37
OFCP Ottawa Financial Corp. of MI 0.48 0.98 14.55 11.50 159.74
PFFB PFF Bancorp of Pomona CA 0.06 0.44 14.15 13.99 127.27
PSFI PS Financial of Chicago IL 0.71 0.71 14.18 14.18 33.67
PVFC PVF Capital Corp. of OH 1.41 1.87 10.24 10.24 149.62
PCCI Pacific Crest Capital of CA* 1.09 0.93 8.18 8.18 90.49
PALM Palfed, Inc. of Aiken SC 0.45 0.73 10.10 9.63 126.22
PBCI Pamrapo Bancorp, Inc. of NJ 0.94 1.36 16.95 16.82 114.99
PFED Park Bancorp of Chicago IL 0.29 0.47 15.38 15.38 65.43
PVSA Parkvale Financial Corp of PA 1.76 2.42 17.56 17.40 233.64
PBIX Patriot Bank Corp. of PA 0.31 0.52 11.53 11.53 109.84
PEEK Peekskill Fin. Corp. of NY 0.58 0.76 16.27 16.27 55.21
PFSB PennFed Fin. Services of NJ 1.23 1.87 19.03 15.47 251.75
PWBC PennFirst Bancorp of PA 0.73 1.11 12.52 11.35 179.28
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PWBK Pennwood SB of PA* 14.37 610 8.8 14.50 9.00 14.37 0.00 N.A. 4.51
PBKB People's SB of Brockton MA* 13.00 3,395 44.1 13.00 8.75 12.37 5.09 118.86 22.41
PFDC Peoples Bancorp of Auburn IN 20.00 2,308 46.2 21.00 18.75 20.00 0.00 14.29 -1.23
PBCT Peoples Bank, MHC of CT (37.4)* 35.81 40,553 542.7 36.50 19.69 35.75 0.17 355.02 24.04
PFFC Peoples Fin. Corp. of OH 14.87 1,491 22.2 15.25 10.87 14.81 0.41 N.A. 10.15
PHBK Peoples Heritage Fin Grp of ME* 31.75 28,221 896.0 31.75 19.00 31.25 1.60 107.38 13.39
PBNB Peoples Sav. Fin. Corp. of CT* 30.19 1,906 57.5 30.50 20.00 29.81 1.27 205.88 8.79
PERM Permanent Bancorp of IN 22.00 2,083 45.8 22.25 14.00 21.25 3.53 N.A. 8.64
PMFI Perpetual Midwest Fin. of IA 19.25 1,907 36.7 22.00 16.75 19.25 0.00 N.A. 0.00
PERT Perpetual of SC, MHC (46.8) 26.00 1,505 18.3 26.00 20.25 24.75 5.05 N.A. 7.22
PCBC Perry Co. Fin. Corp. of MO 17.25 853 14.7 19.00 15.50 18.00 -4.17 N.A. 1.47
PHFC Pittsburgh Home Fin. of PA 14.62 2,073 30.3 14.62 9.50 14.59 0.21 N.A. 9.35
PFSL Pocahnts Fed, MHC of AR (46.4) 18.50 1,628 13.9 20.00 14.25 19.75 -6.33 N.A. 5.71
POBS Portsmouth Bank Shrs Inc of NH(8)* 16.06 5,740 92.2 16.12 12.62 15.87 1.20 54.27 14.71
PKPS Poughkeepsie SB of NY 5.75 12,592 72.4 5.81 4.75 5.63 2.13 -25.81 9.52
PRBC Prestige Bancorp of PA 14.62 963 14.1 15.00 9.75 15.00 -2.53 N.A. 8.30
PETE Primary Bank of NH* 17.37 2,086 36.2 17.75 11.19 17.00 2.18 N.A. 13.98
PSAB Prime Bancorp, Inc. of PA 20.25 5,291 107.1 20.62 17.50 20.00 1.25 191.79 -1.22
PFNC Progress Financial Corp. of PA 8.87 3,744 33.2 8.87 5.50 8.25 7.52 -19.44 5.97
PSBK Progressive Bank, Inc. of NY* 23.25 3,825 88.9 24.50 17.17 23.25 0.00 73.90 2.20
PROV Provident Fin. Holdings of CA 17.00 5,125 87.1 17.19 10.12 15.63 8.77 N.A. 21.43
PULB Pulaski SB, MHC of MO (29.0) 16.75 2,094 10.1 16.75 12.25 16.75 0.00 N.A. 15.52
PULS Pulse Bancorp of S. River NJ 18.50 3,050 56.4 18.50 14.50 17.25 7.25 49.56 17.46
QCFB QCF Bancorp of Virginia MN 18.50 1,426 26.4 19.25 13.87 19.25 -3.90 N.A. 1.37
QCBC Quaker City Bancorp of CA 18.75 3,792 71.1 19.00 12.75 18.50 1.35 150.00 -1.32
QCSB Queens County SB of NY* 54.12 7,630 412.9 54.12 30.94 52.75 2.60 N.A. 14.25
RCSB RCSB Financial, Inc. of NY* 33.87 15,331 519.3 34.75 22.50 32.62 3.83 175.14 16.79
RARB Raritan Bancorp. of Raritan NJ* 23.50 1,531 36.0 24.50 20.25 23.50 0.00 141.03 1.08
REDF RedFed Bancorp of Redlands CA 15.44 7,083 109.4 15.44 8.37 13.87 11.32 N.A. 14.37
RELY Reliance Bancorp of NY 21.37 8,825 188.6 22.37 14.44 21.37 0.00 N.A. 9.59
RELI Reliance Bancshares Inc of WI(8)* 7.12 2,528 18.0 10.12 6.50 6.88 3.49 N.A. 5.48
RIVR River Valley Bancorp of IN 15.25 1,190 18.1 15.25 13.25 15.25 0.00 N.A. 10.91
RFED Roosevelt Fin. Grp. Inc. of MO 22.50 44,183 994.1 22.69 15.63 22.31 0.85 476.92 7.14
RSLN Roslyn Bancorp of NY* 15.87 43,642 692.6 16.25 15.00 15.75 0.76 N.A. N.A.
RVSB Rvrview SB,FSB MHC of WA(41.7) 18.25 2,196 16.7 18.75 14.37 17.25 5.80 N.A. 4.29
SCCB S. Carolina Comm. Bnshrs of SC 19.00 705 13.4 20.50 15.00 20.50 -7.32 N.A. 26.67
SBFL SB Fngr Lakes MHC of NY (33.1) 14.00 1,785 8.3 17.00 12.75 13.75 1.82 N.A. 1.82
SFED SFS Bancorp of Schenectady NY 16.50 1,278 21.1 17.00 11.75 17.00 -2.94 N.A. 11.86
SGVB SGV Bancorp of W. Covina CA 12.87 2,522 32.5 12.87 7.75 12.25 5.06 N.A. 14.40
SISB SIS Bank of Springfield MA* 26.75 5,724 153.1 27.37 16.75 27.12 -1.36 N.A. 16.97
SJSB SJS Bancorp of St. Joseph MI(8) 24.87 918 22.8 25.87 18.50 25.50 -2.47 N.A. -1.50
SWCB Sandwich Co-Op. Bank of MA* 32.25 1,902 61.3 34.00 18.87 32.75 -1.53 274.13 8.40
SFBM Security Bancorp of MT(8) 31.00 1,485 46.0 31.25 20.00 30.00 3.33 300.00 5.08
SECP Security Capital Corp. of WI 84.75 9,203 780.0 84.75 54.75 79.37 6.78 N.A. 14.92
SFSL Security First Corp. of OH 17.75 4,974 88.3 19.25 11.50 18.75 -5.33 12.70 -2.04
SMFC Sho-Me Fin. Corp. of MO 28.25 1,454 41.1 29.50 14.50 28.25 0.00 N.A. 29.89
SOBI Sobieski Bancorp of S. Bend IN 14.00 882 12.3 16.00 11.75 13.75 1.82 N.A. -3.45
SOSA Somerset Savings Bank of MA(8)* 2.53 16,652 42.1 2.69 1.12 2.50 1.20 -50.59 28.43
SSFC South Street Fin. Corp. of NC* 15.63 4,496 70.3 15.63 12.12 15.00 4.20 N.A. 11.64
SCBS Southern Commun. Bncshrs of AL 13.75 1,137 15.6 13.75 13.00 13.37 2.84 N.A. 3.77
SMBC Southern Missouri Bncrp of MO 16.25 1,638 26.6 17.25 13.50 16.25 0.00 N.A. 8.33
SWBI Southwest Bancshares of IL 19.75 2,637 52.1 19.75 17.67 19.56 0.97 97.50 8.22
SVRN Sovereign Bancorp of PA 15.00 49,701 745.5 15.25 9.62 14.87 0.87 235.57 14.33
STFR St. Francis Cap. Corp. of WI 27.25 5,356 146.0 28.00 24.00 27.00 0.93 N.A. 4.81
SPBC St. Paul Bancorp, Inc. of IL 26.12 22,776 594.9 26.25 17.80 24.75 5.54 54.83 11.15
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PWBK Pennwood SB of PA* 0.24 0.60 15.17 15.17 75.78
PBKB People's SB of Brockton MA* 0.97 0.61 8.49 8.06 151.23
PFDC Peoples Bancorp of Auburn IN 1.35 1.78 18.63 18.63 121.46
PBCT Peoples Bank, MHC of CT (37.4)* 1.96 1.53 15.24 15.22 188.52
PFFC Peoples Fin. Corp. of OH 0.05 0.24 15.90 15.90 59.86
PHBK Peoples Heritage Fin Grp of ME* 1.54 1.66 13.36 12.02 157.91
PBNB Peoples Sav. Fin. Corp. of CT* 2.11 2.13 24.24 22.66 253.09
PERM Permanent Bancorp of IN 0.46 1.01 19.23 19.04 198.26
PMFI Perpetual Midwest Fin. of IA 0.17 0.55 17.61 17.61 203.74
PERT Perpetual of SC, MHC (46.8) 0.95 1.35 19.33 19.33 139.42
PCBC Perry Co. Fin. Corp. of MO 0.54 0.87 17.67 17.67 95.13
PHFC Pittsburgh Home Fin. of PA 0.37 0.61 14.65 14.65 94.23
PFSL Pocahnts Fed, MHC of AR (46.4) 1.26 1.80 14.32 14.32 229.17
POBS Portsmouth Bank Shrs Inc of NH(8)* 1.06 0.86 11.66 11.66 46.80
PKPS Poughkeepsie SB of NY 0.98 1.55 5.57 5.57 68.37
PRBC Prestige Bancorp of PA 0.15 0.50 16.02 16.02 119.04
PETE Primary Bank of NH* 1.64 1.63 13.49 13.46 204.89
PSAB Prime Bancorp, Inc. of PA 0.86 1.12 10.87 10.20 128.01
PFNC Progress Financial Corp. of PA 0.33 0.43 5.33 4.62 102.56
PSBK Progressive Bank, Inc. of NY* 2.41 2.48 19.01 16.64 231.65
PROV Provident Fin. Holdings of CA 0.23 -0.01 16.57 16.57 113.20
PULB Pulaski SB, MHC of MO (29.0) 0.42 0.67 10.75 10.75 85.39
PULS Pulse Bancorp of S. River NJ 1.15 1.73 12.99 12.99 167.11
QCFB QCF Bancorp of Virginia MN 1.32 1.32 18.35 18.35 104.01
QCBC Quaker City Bancorp of CA 0.52 1.02 17.88 17.84 201.60
QCSB Queens County SB of NY* 2.74 2.78 27.71 27.71 178.07
RCSB RCSB Financial, Inc. of NY* 2.31 2.25 18.14 17.53 264.08
RARB Raritan Bancorp. of Raritan NJ* 1.89 2.09 18.13 17.76 231.34
REDF RedFed Bancorp of Redlands CA -0.94 -0.57 9.86 9.86 122.30
RELY Reliance Bancorp of NY 1.04 1.60 17.62 12.27 212.83
RELI Reliance Bancshares Inc of WI(8)* 0.25 0.25 11.59 11.59 18.98
RIVR River Valley Bancorp of IN 0.66 0.66 13.65 13.65 78.84
RFED Roosevelt Fin. Grp. Inc. of MO 0.12 1.71 9.80 9.21 176.46
RSLN Roslyn Bancorp of NY* 0.72 0.66 13.63 13.63 53.80
RVSB Rvrview SB,FSB MHC of WA(41.7) 0.95 1.13 11.11 10.01 102.22
SCCB S. Carolina Comm. Bnshrs of SC 0.53 0.71 17.57 17.57 61.32
SBFL SB Fngr Lakes MHC of NY (33.1) -0.58 0.10 11.22 11.22 110.61
SFED SFS Bancorp of Schenectady NY 0.58 1.05 16.57 16.57 129.91
SGVB SGV Bancorp of W. Covina CA 0.10 0.41 12.34 12.34 146.64
SISB SIS Bank of Springfield MA* 3.17 3.07 17.81 17.81 235.61
SJSB SJS Bancorp of St. Joseph MI(8) 0.28 0.79 17.23 17.23 165.45
SWCB Sandwich Co-Op. Bank of MA* 2.18 2.19 20.31 19.28 244.25
SFBM Security Bancorp of MT(8) 1.32 1.57 20.83 17.94 257.45
SECP Security Capital Corp. of WI 3.69 4.77 61.74 61.74 397.47
SFSL Security First Corp. of OH 1.05 1.44 11.59 11.38 125.51
SMFC Sho-Me Fin. Corp. of MO 1.51 1.86 20.65 20.65 204.98
SOBI Sobieski Bancorp of S. Bend IN 0.19 0.45 15.81 15.81 89.54
SOSA Somerset Savings Bank of MA(8)* 0.14 0.14 1.74 1.74 30.67
SSFC South Street Fin. Corp. of NC* 0.62 0.66 13.15 13.15 46.25
SCBS Southern Commun. Bncshrs of AL 0.40 0.71 13.30 13.30 64.05
SMBC Southern Missouri Bncrp of MO 0.90 0.84 16.01 16.01 97.59
SWBI Southwest Bancshares of IL 1.00 1.42 15.12 15.12 145.00
SVRN Sovereign Bancorp of PA 0.91 1.20 7.63 5.39 189.80
STFR St. Francis Cap. Corp. of WI 1.78 1.85 23.51 22.33 263.13
SPBC St. Paul Bancorp, Inc. of IL 1.15 1.71 17.04 16.99 191.31
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
Shares Market 52 Week (1) % Change From
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
-------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STND Standard Fin. of Chicago IL 20.50 16,173 331.5 21.25 14.50 20.69 -0.92 N.A. 4.49
SFFC StateFed Financial Corp. of IA 18.00 789 14.2 18.00 15.00 18.00 0.00 N.A. 9.09
SFIN Statewide Fin. Corp. of NJ 15.87 4,995 79.3 17.12 11.25 16.50 -3.82 N.A. 10.44
STSA Sterling Financial Corp. of WA 16.50 5,539 91.4 16.50 12.75 15.00 10.00 81.52 16.86
SSBK Strongsville SB of OH 24.00 2,531 60.7 24.00 18.50 24.00 0.00 N.A. 6.67
SFSB SuburbFed Fin. Corp. of IL 22.25 1,255 27.9 22.25 16.00 22.00 1.14 233.58 17.11
SBCN Suburban Bancorp. of OH 16.25 1,475 24.0 17.75 14.25 16.25 0.00 N.A. 6.56
THRD TF Financial Corp. of PA 18.62 4,281 79.7 18.62 13.75 18.37 1.36 N.A. 14.58
ROSE TR Financial Corp. of NY 35.12 8,787 308.6 35.62 24.81 34.62 1.44 N.A. -1.07
TPNZ Tappan Zee Fin. Corp. of NY 15.00 1,539 23.1 15.12 11.37 15.00 0.00 N.A. 10.13
PTRS The Potters S&L Co. of OH 19.62 506 9.9 20.12 15.50 20.12 -2.49 N.A. -1.90
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 16.25 9,037 50.7 16.25 12.37 16.25 0.00 N.A. 1.56
TRIC Tri-County Bancorp of WY 18.75 609 11.4 19.00 17.00 18.75 0.00 N.A. 4.17
THBC Troy Hill Bancorp of PA(8) 20.00 1,068 21.4 21.00 12.75 20.00 0.00 N.A. 0.00
TWIN Twin City Bancorp of TN 18.12 861 15.6 19.00 16.00 18.12 0.00 N.A. 5.04
UFRM United FS&LA of Rocky Mount NC 8.13 3,065 24.9 8.75 7.00 8.13 0.00 150.15 -4.35
UBMT United Fin. Corp. of MT 19.75 1,223 24.2 19.75 17.50 19.25 2.60 88.10 2.60
VABF Va. Beach Fed. Fin. Corp of VA 11.12 4,970 55.3 11.12 6.88 10.25 8.49 137.10 17.80
VFFC Virginia First Savings of VA 15.37 5,775 88.8 15.37 10.75 13.75 11.78 ***.** 20.55
WHGB WHG Bancshares of MD 13.87 1,620 22.5 14.12 10.87 14.00 -0.93 N.A. 5.72
WSFS WSFS Financial Corp. of DE* 11.87 12,912 153.3 12.06 6.75 12.06 -1.58 63.72 16.49
WVFC WVS Financial Corp. of PA* 25.75 1,737 44.7 26.50 19.50 25.87 -0.46 N.A. 4.59
WRNB Warren Bancorp of Peabody MA* 16.00 3,662 58.6 16.37 10.25 15.50 3.23 374.78 6.67
WFSL Washington FS&LA of Seattle WA 26.87 47,450 1,275.0 27.50 17.90 26.12 2.87 84.17 11.54
WAMU Washington Mutual Inc. of WA* 56.75 126,142 7,158.6 58.87 26.25 55.19 2.83 205.77 31.03
WYNE Wayne Bancorp of NJ 16.87 2,231 37.6 18.00 10.75 17.37 -2.88 N.A. 10.62
WAYN Wayne S&L Co. MHC of OH (47.8) 26.75 1,498 19.2 27.25 19.00 26.00 2.88 N.A. 9.18
WCFB Wbstr Cty FSB MHC of IA (45.2) 13.75 2,100 13.1 13.75 12.25 13.75 0.00 N.A. 0.00
WBST Webster Financial Corp. of CT 39.50 7,926 313.1 41.00 26.75 40.00 -1.25 318.43 7.48
WEFC Wells Fin. Corp. of Wells MN 15.63 2,078 32.5 15.75 10.00 14.12 10.69 N.A. 19.13
WCBI WestCo Bancorp of IL 21.37 2,567 54.9 22.25 18.33 20.25 5.53 113.70 -0.60
WSTR WesterFed Fin. Corp. of MT 20.75 4,397 91.2 20.75 13.87 18.00 15.28 N.A. 13.70
WOFC Western Ohio Fin. Corp. of OH 21.50 2,187 47.0 24.00 19.50 21.56 -0.28 N.A. -1.15
WWFC Westwood Fin. Corp. of NJ 18.00 647 11.6 18.00 10.25 17.25 4.35 N.A. 9.09
WEHO Westwood Hmstd Fin Corp of OH 13.75 2,843 39.1 13.75 10.37 13.31 3.31 N.A. 13.45
WFCO Winton Financial Corp. of OH(8) 12.30 1,986 24.4 15.00 11.00 12.50 -1.60 N.A. 6.96
FFWD Wood Bancorp of OH 15.75 1,493 23.5 17.25 12.17 16.25 -3.08 N.A. -7.35
YFCB Yonkers Fin. Corp. of NY 13.50 3,172 42.8 14.12 9.31 13.87 -2.67 N.A. 4.90
YFED York Financial Corp. of PA 18.50 6,792 125.7 19.75 14.54 18.87 -1.96 95.77 13.85
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STND Standard Fin. of Chicago IL 0.74 1.01 16.28 16.25 144.67
SFFC StateFed Financial Corp. of IA 0.93 1.17 18.48 18.48 102.74
SFIN Statewide Fin. Corp. of NJ 0.47 1.09 13.08 13.05 132.55
STSA Sterling Financial Corp. of WA 0.39 0.69 10.78 8.83 276.46
SSBK Strongsville SB of OH 1.40 1.76 17.05 16.74 224.22
SFSB SuburbFed Fin. Corp. of IL 0.84 1.51 20.92 20.82 321.99
SBCN Suburban Bancorp. of OH 0.26 0.87 17.51 17.51 148.29
THRD TF Financial Corp. of PA 0.81 1.09 16.95 14.80 151.33
ROSE TR Financial Corp. of NY 3.31 2.65 22.69 22.69 357.40
TPNZ Tappan Zee Fin. Corp. of NY 0.52 0.48 13.96 13.96 77.88
PTRS The Potters S&L Co. of OH 0.06 0.89 20.36 20.36 248.02
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 0.95 0.74 11.24 11.00 57.99
TRIC Tri-County Bancorp of WY 0.89 1.19 21.59 21.59 141.03
THBC Troy Hill Bancorp of PA(8) 0.82 0.96 16.87 16.87 93.14
TWIN Twin City Bancorp of TN 0.94 1.19 15.58 15.58 124.35
UFRM United FS&LA of Rocky Mount NC 0.23 0.41 6.44 6.44 86.00
UBMT United Fin. Corp. of MT 1.05 1.28 19.89 19.89 88.26
VABF Va. Beach Fed. Fin. Corp of VA 0.04 0.27 8.02 8.02 121.54
VFFC Virginia First Savings of VA 1.77 1.77 10.58 10.26 135.30
WHGB WHG Bancshares of MD 0.43 0.43 14.36 14.36 60.23
WSFS WSFS Financial Corp. of DE* 1.43 1.45 6.25 6.19 101.20
WVFC WVS Financial Corp. of PA* 1.57 1.98 20.21 20.21 158.85
WRNB Warren Bancorp of Peabody MA* 1.80 1.70 9.41 9.41 98.02
WFSL Washington FS&LA of Seattle WA 1.76 1.96 13.99 12.54 123.69
WAMU Washington Mutual Inc. of WA* 1.70 1.72 11.23 10.12 177.69
WYNE Wayne Bancorp of NJ 0.02 0.13 16.10 16.10 107.40
WAYN Wayne S&L Co. MHC of OH (47.8) 0.41 1.00 15.04 15.04 167.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.40 0.55 10.30 10.30 45.00
WBST Webster Financial Corp. of CT 3.09 3.20 24.79 19.20 494.27
WEFC Wells Fin. Corp. of Wells MN 0.52 0.88 13.36 13.36 96.88
WCBI WestCo Bancorp of IL 1.18 1.61 18.58 18.58 119.90
WSTR WesterFed Fin. Corp. of MT 0.80 1.12 18.08 18.08 128.18
WOFC Western Ohio Fin. Corp. of OH 1.05 0.86 25.44 23.93 152.05
WWFC Westwood Fin. Corp. of NJ 0.06 1.02 14.75 12.93 144.74
WEHO Westwood Hmstd Fin Corp of OH 0.13 0.25 14.06 14.06 42.19
WFCO Winton Financial Corp. of OH(8) 0.84 1.07 10.49 10.23 147.15
FFWD Wood Bancorp of OH 0.90 1.15 13.67 13.67 106.96
YFCB Yonkers Fin. Corp. of NY 0.57 0.81 13.74 13.74 82.63
YFED York Financial Corp. of PA 0.89 1.21 13.92 13.92 170.79
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios
----------------------------------------------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5)
- --------------------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured
- ----------------
Thrifts(no MHCs)
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(321) 12.98 12.75 0.61 5.29 3.90 0.84 7.34
NYSE Traded Companies(11) 6.26 6.01 0.57 8.25 4.24 0.73 11.71
AMEX Traded Companies(18) 15.90 15.83 0.58 4.60 3.27 0.86 6.43
NASDAQ Listed OTC Companies(292) 13.01 12.78 0.62 5.24 3.93 0.84 7.26
California Companies(24) 7.65 7.10 0.13 1.82 2.08 0.20 3.39
Florida Companies(5) 8.09 7.91 0.42 5.34 3.46 0.56 6.86
Mid-Atlantic Companies(65) 11.09 10.71 0.61 6.42 4.53 0.85 8.96
Mid-West Companies(153) 14.34 14.20 0.66 5.18 3.98 0.89 7.15
New England Companies(11) 8.67 8.36 0.52 6.52 5.39 0.64 7.71
North-West Companies(6) 14.28 13.94 0.81 7.25 4.03 1.03 9.25
South-East Companies(43) 14.91 14.78 0.72 5.62 3.65 0.99 7.66
South-West Companies(7) 11.21 11.03 0.30 1.49 0.15 0.58 5.16
Western Companies (Excl CA)(7) 17.91 17.88 0.97 6.59 4.77 1.17 7.77
Thrift Strategy(249) 14.40 14.18 0.61 4.70 3.76 0.85 6.56
Mortgage Banker Strategy(40) 7.62 7.29 0.58 7.63 4.64 0.70 9.40
Real Estate Strategy(14) 8.50 8.37 0.49 4.15 2.90 0.83 8.82
Diversified Strategy(14) 8.28 8.12 0.88 10.70 5.42 1.12 14.43
Retail Banking Strategy(4) 8.62 8.37 0.34 4.66 3.34 0.49 6.45
Companies Issuing Dividends(258) 12.98 12.76 0.67 5.97 4.31 0.90 8.01
Companies Without Dividends(63) 12.95 12.71 0.37 2.61 2.23 0.57 4.70
Equity/Assets <6%(28) 4.97 4.66 0.24 4.78 2.91 0.40 7.93
Equity/Assets 6-12%(153) 8.59 8.24 0.57 6.67 4.50 0.77 9.04
Equity/Assets >12%(140) 19.26 19.18 0.73 3.91 3.44 0.99 5.41
Converted Last 3 Mths (no MHC)(8) 22.27 22.27 0.80 3.46 3.36 1.03 4.76
Actively Traded Companies(49) 8.54 8.29 0.79 9.80 5.97 1.01 12.52
Market Value Below $20 Million(70) 14.80 14.70 0.49 3.01 3.07 0.75 4.92
Holding Company Structure(281) 13.54 13.31 0.61 5.14 3.81 0.84 7.20
Assets Over $1 Billion(65) 8.17 7.66 0.62 7.84 4.44 0.82 10.59
Assets $500 Million-$1 Billion(54) 10.90 10.52 0.66 6.63 4.86 0.84 8.25
Assets $250-$500 Million(69) 10.96 10.79 0.53 4.97 3.78 0.79 7.53
Assets less than $250 Million(133) 17.17 17.11 0.63 3.68 3.30 0.87 5.32
Goodwill Companies(130) 8.99 8.50 0.61 6.80 4.53 0.80 9.09
Non-Goodwill Companies(191) 15.57 15.51 0.61 4.31 3.49 0.86 6.21
Acquirors of FSLIC Cases(13) 7.04 6.65 0.64 8.24 5.01 0.98 13.60
Asset Quality Ratios Pricing Ratios Dividend Data(6)
----------------------- ----------------------------------------- -------------------
Price/ Price/ Ind. Divi-
NPAs Resvs/ Resvs/ Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Assets NPAs Loans Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
(%) (%) (%) (X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. SAIF-Insured
- ------------------------------
Thrifts(no MHCs)
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(321) 0.88 124.57 0.85 19.59 124.77 15.31 126.65 17.37 0.35 1.74 33.11
NYSE Traded Companies(11) 1.48 69.91 1.38 18.41 178.42 11.96 179.98 16.52 0.34 0.95 15.27
AMEX Traded Companies(18) 0.61 139.52 0.65 22.40 111.05 18.41 111.90 19.60 0.36 2.26 47.09
NASDAQ Listed OTC Companies(292) 0.87 125.70 0.84 19.46 124.00 15.23 126.14 17.26 0.35 1.73 32.92
California Companies(24) 2.21 57.13 1.34 13.58 138.77 10.09 138.47 15.66 0.22 0.71 10.91
Florida Companies(5) 1.19 81.80 1.17 21.12 139.26 10.67 143.94 19.34 0.25 1.05 16.90
Mid-Atlantic Companies(65) 1.02 89.48 0.98 19.07 125.42 13.34 130.38 16.54 0.35 1.71 35.19
Mid-West Companies(153) 0.60 149.73 0.70 20.09 119.59 16.24 120.20 17.59 0.34 1.78 32.30
New England Companies(11) 0.77 85.55 0.97 19.30 115.46 9.79 125.00 16.34 0.41 1.79 29.26
North-West Companies(6) 0.56 146.37 0.70 21.55 159.59 18.57 152.74 18.42 0.29 1.10 22.31
South-East Companies(43) 0.98 128.72 0.87 18.99 133.61 19.24 136.20 18.25 0.41 2.20 45.74
South-West Companies(7) 0.86 63.15 0.81 24.39 105.02 11.40 111.54 17.63 0.30 1.61 44.94
Western Companies (Excl CA)(7) 0.27 282.65 0.67 20.05 121.05 19.88 121.33 18.16 0.56 2.94 49.64
Thrift Strategy(249) 0.78 133.21 0.77 20.17 116.85 16.21 119.34 17.77 0.35 1.84 36.07
Mortgage Banker Strategy(40) 1.19 91.44 1.01 18.01 149.82 11.16 155.07 16.54 0.32 1.29 24.49
Real Estate Strategy(14) 1.92 87.01 1.43 13.21 142.47 11.46 144.30 14.86 0.19 0.83 17.71
Diversified Strategy(14) 0.80 104.98 1.20 18.36 188.01 16.13 178.51 14.65 0.69 2.13 34.73
Retail Banking Strategy(4) 0.69 108.51 0.93 22.37 122.85 10.59 126.04 20.89 0.15 1.15 0.00
Companies Issuing Dividends(258) 0.76 126.56 0.82 19.60 126.42 15.55 128.36 17.12 0.43 2.18 42.59
Companies Without Dividends(63) 1.42 115.44 1.00 19.51 118.35 14.37 120.04 18.60 0.00 0.00 0.00
Equity/Assets <6%(28) 1.83 69.74 1.05 17.24 155.73 8.07 157.42 16.47 0.20 0.80 9.38
Equity/Assets 6-12%(153) 0.96 122.94 0.99 18.42 134.98 11.62 138.99 15.52 0.39 1.78 33.55
Equity/Assets >12%(140) 0.57 138.94 0.64 21.80 108.20 20.69 108.85 19.78 0.33 1.88 37.61
Converted Last 3 Mths (no MHC)(8) 0.42 115.42 0.58 23.96 102.66 22.49 102.66 19.55 0.00 0.00 0.00
Actively Traded Companies(49) 1.32 90.67 0.96 17.05 156.84 13.30 158.54 14.35 0.51 1.86 26.65
Market Value Below $20 Million(70) 0.79 105.52 0.69 20.33 101.11 14.90 102.33 18.92 0.29 1.83 34.79
Holding Company Structure(281) 0.84 125.31 0.82 19.95 123.80 15.83 125.83 17.53 0.36 1.79 34.22
Assets Over $1 Billion(65) 1.04 85.97 1.02 18.47 160.02 12.89 165.54 16.05 0.50 1.62 30.82
Assets $500 Million-$1 Billion(54) 1.16 127.80 0.98 18.93 132.22 14.10 136.24 16.22 0.30 1.51 30.38
Assets $250-$500 Million(69) 0.81 163.56 0.80 20.19 122.16 13.11 124.56 16.74 0.33 1.81 33.93
Assets less than $250 Million(133) 0.70 121.02 0.72 20.41 106.83 18.09 107.53 19.03 0.30 1.84 35.53
Goodwill Companies(130) 0.96 97.02 0.95 18.86 142.99 12.50 148.56 16.07 0.41 1.73 32.92
Non-Goodwill Companies(191) 0.83 143.62 0.78 20.24 112.99 17.13 113.02 18.34 0.31 1.74 33.26
Acquirors of FSLIC Cases(13) 1.54 51.76 0.88 17.28 166.73 12.12 171.16 15.43 0.43 1.73 18.88
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
--------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/_____________________________________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------------- ------- -------------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages.
- -----------------
BIF-Insured
- -----------
Thrifts(no MHCs)
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 11.72 11.36 0.92 9.92 6.24 0.94 9.78 1.33 115.29 1.43
NYSE Traded Companies(3) 7.41 5.83 0.70 10.07 5.71 0.72 10.69 2.53 29.95 1.19
AMEX Traded Companies(5) 13.16 12.91 0.58 6.01 4.45 0.58 6.00 1.37 94.13 1.46
NASDAQ Listed OTC
Companies(65) 11.83 11.52 0.97 10.27 6.43 0.98 10.07 1.26 121.72 1.44
California Companies(3) 8.89 8.88 1.08 13.60 7.56 1.00 12.56 2.23 50.98 1.43
Mid-Atlantic Companies(19) 11.69 11.10 0.82 8.57 5.62 0.85 8.94 1.81 75.54 1.40
Mid-West Companies(2) 25.56 24.11 0.54 2.08 2.47 0.82 3.16 0.50 46.43 0.43
New England Companies(39) 9.23 8.95 1.00 11.66 7.34 0.96 11.14 1.21 107.93 1.63
North-West Companies(4) 11.16 10.68 1.13 11.51 5.30 1.11 11.35 0.23 383.36 0.99
South-East Companies(5) 27.71 27.71 0.64 1.46 1.96 0.92 2.27 0.99 207.55 0.76
Thrift Strategy(47) 13.32 12.87 0.87 8.34 5.82 0.90 8.33 1.20 107.75 1.38
Mortgage Banker Strategy(10) 9.21 9.10 0.88 10.81 6.22 0.89 11.02 1.14 182.35 1.20
Real Estate Strategy(8) 10.29 10.29 1.29 13.58 7.40 1.25 13.04 1.56 110.68 1.70
Diversified Strategy(6) 7.05 6.61 1.15 16.83 8.07 1.08 15.70 2.27 109.49 1.92
Retail Banking Strategy(2) 6.48 6.33 0.51 8.05 6.29 0.50 7.91 1.17 59.03 1.03
Companies Issuing
Dividends(56) 11.23 10.79 0.95 10.25 6.43 0.96 10.01 1.24 121.13 1.45
Companies Without
Dividends(17) 13.35 13.24 0.83 8.85 5.62 0.86 9.05 1.66 96.12 1.38
Equity/Assets <6%(6) 5.64 5.57 0.61 11.03 6.55 0.53 9.68 3.04 42.42 1.43
Equity/Assets 6-12%(48) 8.37 7.89 0.99 12.09 7.34 0.97 11.78 1.31 115.22 1.59
Equity/Assets >12%(19) 21.81 21.64 0.85 4.24 3.44 0.98 4.88 0.83 143.58 1.02
Converted Last 3 Mths
(no MHC)(3) 25.28 25.28 1.05 4.18 3.87 1.09 4.33 0.42 326.36 0.74
Actively Traded
Companies(26) 8.51 8.15 1.05 12.58 7.58 1.03 12.32 1.09 100.09 1.53
Market Value Below $20
Million(12) 14.60 14.26 0.62 6.97 5.16 0.75 7.14 1.48 58.72 1.12
Holding Company
Structure(46) 13.18 12.80 1.00 9.78 6.15 1.04 9.84 1.09 124.03 1.46
Assets Over $1 Billion(16) 9.18 8.58 1.04 12.71 6.77 1.03 12.51 1.80 92.58 1.53
Assets $500 Million-$1
Billion(17) 10.10 9.55 0.97 10.15 6.59 0.93 9.48 1.21 105.07 1.54
Assets $250-$500 Million(20) 10.72 10.58 0.88 9.91 6.42 0.88 9.97 1.19 142.28 1.52
Assets less than $250
Million(20) 16.40 16.20 0.82 7.28 5.28 0.92 7.45 1.19 115.46 1.16
Goodwill Companies(36) 8.60 7.83 0.85 10.69 6.59 0.85 10.49 1.30 94.41 1.41
Non-Goodwill Companies(37) 14.48 14.48 0.99 9.25 5.93 1.02 9.16 1.36 136.18 1.44
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages.
- -----------------
BIF-Insured
- -----------
Thrifts(no MHCs)
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(73) 15.28 139.46 15.51 142.51 16.44 0.41 1.83 25.06
NYSE Traded Companies(3) 18.11 175.11 13.46 161.52 17.57 0.33 0.53 11.95
AMEX Traded Companies(5) 11.06 126.75 15.35 131.77 15.80 0.60 2.92 35.78
NASDAQ Listed OTC
Companies(65) 15.27 138.66 15.63 142.80 16.41 0.39 1.80 25.20
California Companies(3) 13.31 148.49 13.23 148.55 14.38 0.00 0.00 0.00
Mid-Atlantic Companies(19) 17.34 137.77 15.10 144.73 17.75 0.41 1.61 21.22
Mid-West Companies(2) 0.00 74.58 19.06 79.06 26.63 0.00 0.00 0.00
New England Companies(39) 13.44 145.35 13.00 147.03 14.70 0.46 2.20 29.77
North-West Companies(4) 13.35 154.40 21.95 158.83 13.80 0.45 1.57 33.98
South-East Companies(5) 27.24 105.21 28.99 105.21 25.33 0.30 1.89 17.20
Thrift Strategy(47) 15.95 128.93 15.92 134.34 17.04 0.42 1.98 28.04
Mortgage Banker Strategy(1 15.59 163.93 14.02 166.70 16.91 0.37 1.53 14.43
Real Estate Strategy(8) 14.46 164.23 17.20 164.23 14.82 0.30 1.33 19.24
Diversified Strategy(6) 12.29 170.40 15.68 159.95 14.47 0.48 1.69 29.11
Retail Banking Strategy(2) 10.59 110.79 7.20 113.06 10.66 0.32 1.73 0.00
Companies Issuing
Dividends(56) 14.59 141.55 15.50 145.51 16.04 0.53 2.39 33.22
Companies Without
Dividends(17) 17.55 132.74 15.54 133.30 17.76 0.00 0.00 0.00
Equity/Assets <6%(6) 16.84 159.55 8.95 161.55 18.83 0.11 0.82 10.41
Equity/Assets 6-12%(48) 13.20 148.15 12.93 152.65 14.01 0.49 2.12 28.06
Equity/Assets >12%(19) 22.16 112.58 23.79 113.62 22.62 0.28 1.40 22.16
Converted Last 3 Mths
(no MHC)(3) 26.18 106.99 26.86 106.99 24.81 0.00 0.00 0.00
Actively Traded
Companies(26) 13.64 150.25 13.58 151.88 14.09 0.51 2.08 29.80
Market Value Below $20
Million(12) 14.61 112.06 14.88 115.87 19.73 0.33 2.05 19.73
Holding Company
Structure(46) 15.59 137.44 17.32 142.48 16.57 0.45 1.99 27.03
Assets Over $1 Billion(16) 15.14 167.88 16.48 163.99 16.50 0.51 1.65 23.37
Assets $500 Million-$1
Billion(17) 13.43 139.57 13.95 153.99 14.87 0.44 2.02 27.33
Assets $250-$500 Million(2 15.28 137.39 13.69 139.45 14.78 0.39 1.75 25.79
Assets less than $250
Million(20) 17.27 118.02 17.83 120.26 19.30 0.30 1.89 23.81
Goodwill Companies(36) 14.21 143.57 12.78 150.77 15.75 0.51 2.11 28.84
Non-Goodwill Companies(37) 16.19 135.95 17.91 135.95 17.03 0.31 1.58 21.66
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Dividend Data(6)
---------------------------------------------------------- ---------------------
Tang. Ind. Divi-
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ Div./ dend Payout
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) ($) (%) (%)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 11.31 11.05 0.51 4.68 2.87 0.81 7.57 0.63 3.20 42.09
BIF-Insured Thrifts(2) 9.92 9.92 0.51 6.56 2.46 0.54 6.32 0.62 2.87 44.90
NASDAQ Listed OTC Companies(21) 11.17 10.93 0.51 4.88 2.83 0.78 7.44 0.63 3.16 42.56
Florida Companies(3) 9.74 9.60 0.66 6.84 4.12 0.93 9.58 1.00 4.18 0.00
Mid-Atlantic Companies(8) 10.97 10.48 0.22 1.85 0.85 0.63 5.53 0.46 2.71 60.32
Mid-West Companies(7) 12.05 12.04 0.50 4.50 3.14 0.74 6.91 0.72 3.94 66.67
New England Companies(1) 8.08 8.07 1.10 13.81 5.47 0.86 10.78 0.88 2.46 44.90
North-West Companies(1) 10.87 9.79 0.97 8.90 5.21 1.16 10.59 0.22 1.21 23.16
South-East Companies(1) 13.86 13.86 0.75 6.82 3.65 1.06 9.69 0.00 0.00 0.00
Thrift Strategy(19) 11.37 11.16 0.45 4.12 2.54 0.76 7.06 0.63 3.32 46.83
Mortgage Banker Strategy(1) 10.87 9.79 0.97 8.90 5.21 1.16 10.59 0.22 1.21 23.16
Diversified Strategy(1) 8.08 8.07 1.10 13.81 5.47 0.86 10.78 0.88 2.46 44.90
Companies Issuing Dividends(20) 11.02 10.77 0.49 4.77 2.79 0.77 7.32 0.66 3.34 51.07
Companies Without Dividends(1) 13.86 13.86 0.75 6.82 3.65 1.06 9.69 0.00 0.00 0.00
Equity/Assets 6-12%(15) 9.49 9.16 0.43 4.86 2.70 0.72 7.78 0.65 2.98 51.07
Equity/Assets >12%(6) 15.88 15.88 0.73 4.92 3.19 0.96 6.50 0.57 3.67 0.00
Actively Traded Companies(1) 9.25 8.11 0.47 5.02 2.96 0.85 9.08 0.40 1.88 63.49
Holding Company Structure(1) 9.25 8.11 0.47 5.02 2.96 0.85 9.08 0.40 1.88 63.49
Assets Over $1 Billion(4) 8.72 8.19 0.69 7.93 3.59 0.90 9.92 0.79 2.77 51.02
Assets $500 Million-$1 Billion(5) 10.07 9.66 0.51 4.93 3.39 0.81 7.84 0.67 3.49 63.49
Assets $250-$500 Million(4) 9.88 9.86 0.49 5.38 3.66 0.80 8.79 0.79 3.48 66.67
Assets less than $250 Million(8) 13.45 13.31 0.42 3.08 1.83 0.70 5.38 0.44 3.07 11.58
Goodwill Companies(10) 9.34 8.83 0.58 6.29 3.32 0.82 8.71 0.64 2.60 47.17
Non-Goodwill Companies(11) 12.82 12.82 0.44 3.61 2.39 0.75 6.30 0.62 3.67 33.33
MHC Institutions(21) 11.17 10.93 0.51 4.88 2.83 0.78 7.44 0.63 3.16 42.56
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. MHC Institutions
---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 22.63 152.11 16.91 157.61 19.57 0.63 3.20 42.09
BIF-Insured Thrifts(2) 18.27 182.27 17.11 182.42 23.41 0.62 2.87 44.90
NASDAQ Listed OTC Companies(21) 22.08 155.29 16.94 160.22 19.84 0.63 3.16 42.56
Florida Companies(3) 21.28 157.72 14.94 161.00 17.92 1.00 4.18 0.00
Mid-Atlantic Companies(8) 27.91 154.88 16.79 165.53 20.10 0.46 2.71 60.32
Mid-West Companies(7) 20.67 144.89 17.24 145.13 20.99 0.72 3.94 66.67
New England Companies(1) 18.27 234.97 19.00 235.28 23.41 0.88 2.46 44.90
North-West Companies(1) 19.21 164.27 17.85 182.32 16.15 0.22 1.21 23.16
South-East Companies(1) 27.37 134.51 18.65 134.51 19.26 0.00 0.00 0.00
Thrift Strategy(19) 23.20 150.07 16.76 154.51 19.85 0.63 3.32 46.83
Mortgage Banker Strategy(1) 19.21 164.27 17.85 182.32 16.15 0.22 1.21 23.16
Diversified Strategy(1) 18.27 234.97 19.00 235.28 23.41 0.88 2.46 44.90
Companies Issuing Dividends(20) 21.33 156.44 16.84 161.65 19.89 0.66 3.34 51.07
Companies Without Dividends(1) 27.37 134.51 18.65 134.51 19.26 0.00 0.00 0.00
Equity/Assets 6-12%(15) 20.44 159.82 14.96 166.52 18.62 0.65 2.98 51.07
Equity/Assets >12%(6) 27.02 142.59 22.47 142.59 22.90 0.57 3.67 0.00
Actively Traded Companies(1) 0.00 168.78 15.62 192.48 18.64 0.40 1.88 63.49
Holding Company Structure(1) 0.00 168.78 15.62 192.48 18.64 0.40 1.88 63.49
Assets Over $1 Billion(4) 21.86 198.17 17.22 210.39 19.10 0.79 2.77 51.02
Assets $500 Million-$1 Billion(5) 23.17 147.31 14.64 155.72 19.26 0.67 3.49 63.49
Assets $250-$500 Million(4) 14.68 151.95 15.10 152.30 19.32 0.79 3.48 66.67
Assets less than $250 Million(8) 24.42 138.50 18.57 140.79 21.35 0.44 3.07 11.58
Goodwill Companies(10) 21.20 172.61 15.92 183.04 19.10 0.64 2.60 47.17
Non-Goodwill Companies(11) 22.97 139.69 17.85 139.69 20.58 0.62 3.67 33.33
MHC Institutions(21) 22.08 155.29 16.94 160.22 19.84 0.63 3.16 42.56
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized (3)
EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price. (6) Annualized, based on last regular quarterly cash
dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness
of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NYSE Traded Companies
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA 3.91 3.29 0.20 4.61 2.36 0.49 11.40 2.14 36.71 1.23
CSA Coast Savings Financial of CA 4.83 4.76 0.12 2.40 1.13 0.47 9.42 1.53 48.84 1.08
CFB Commercial Federal Corp. of NE 5.75 5.05 0.64 11.13 5.44 0.92 15.86 1.07 69.60 1.01
DME Dime Savings Bank, FSB of NY* 5.42 5.37 0.54 10.47 5.71 0.70 13.61 2.45 24.13 1.09
DSL Downey Financial Corp. of CA 7.74 7.62 0.43 5.30 3.52 0.69 8.48 1.36 44.87 0.68
FRC First Republic Bancorp of CA* 5.86 5.86 0.61 10.81 6.97 0.57 10.01 2.22 38.80 0.97
FED FirstFed Fin. Corp. of CA 4.70 4.63 0.20 4.28 2.89 0.43 9.39 2.15 83.45 2.42
GLN Glendale Fed. Bk, FSB of CA 5.59 5.22 0.20 3.66 2.09 0.45 8.45 1.76 66.28 1.56
GDW Golden West Fin. Corp. of CA 6.23 6.23 1.01 15.68 8.84 1.23 19.19 1.37 35.24 0.59
GWF Great Western Fin. Corp. of CA(8) 5.63 4.95 0.48 8.44 3.28 0.68 12.11 1.79 41.34 1.03
GPT GreenPoint Fin. Corp. of NY* 10.95 6.27 0.95 8.92 4.45 0.90 8.44 2.91 26.91 1.52
SFB Standard Fed. Bancorp of MI(8) 6.11 5.08 0.65 10.21 5.18 0.86 13.49 0.59 53.01 0.43
TCB TCF Financial Corp. of MN 7.75 7.46 1.20 16.05 5.31 1.41 18.72 0.76 132.47 1.36
WES Westcorp Inc. of Orange CA 9.88 9.85 1.09 11.14 6.63 0.44 4.46 1.16 111.77 2.49
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* 17.55 17.55 -0.47 -5.89 -2.46 -0.44 -5.48 0.56 159.79 1.32
BKC American Bank of Waterbury CT* 8.45 8.07 1.26 14.61 10.27 1.02 11.83 2.39 38.52 1.42
BFD BostonFed Bancorp of MA 11.15 11.15 0.32 2.88 2.27 0.52 4.65 0.54 97.04 0.63
CFX Cheshire Fin. Corp. of NH* 8.50 7.89 0.71 7.64 3.29 0.95 10.14 0.74 140.06 1.47
CZF Citisave Fin. Corp. of LA 16.00 15.99 0.78 4.47 4.54 1.04 5.97 0.22 40.85 0.15
CBK Citizens First Fin.Corp. of IL 15.14 15.14 0.25 2.32 1.37 0.52 4.87 0.53 35.95 0.24
ESX Essex Bancorp of VA(8) 0.33 -0.14 -2.71 NM NM -1.63 -40.51 3.44 51.87 2.16
FCB Falmouth Co-Op Bank of MA* 24.98 24.98 0.78 3.48 3.07 0.76 3.41 0.02 NA 1.22
FAB FirstFed America Bancorp of MA 12.35 12.35 0.46 3.72 3.36 0.88 7.14 NA NA NA
GAF GA Financial Corp. of PA 19.31 19.31 0.97 5.04 4.03 1.26 6.56 0.19 85.78 0.42
KNK Kankakee Bancorp of IL 10.41 9.73 0.50 4.97 4.67 0.67 6.67 0.90 74.47 0.99
KYF Kentucky First Bancorp of KY 17.15 17.15 0.88 3.96 4.47 1.14 5.15 0.09 486.84 0.81
NYB New York Bancorp, Inc. of NY 5.10 5.10 1.19 21.94 6.93 1.31 24.05 1.32 49.76 1.04
PDB Piedmont Bancorp of NC 15.70 15.70 -0.22 -0.82 -0.95 0.13 0.49 0.76 62.96 0.66
PLE Pinnacle Bank of AL 7.73 7.46 0.50 6.42 4.80 0.79 10.11 0.83 82.73 1.02
SSB Scotland Bancorp of NC 36.12 36.12 1.16 4.04 2.67 1.50 5.22 NA NA 0.50
SZB SouthFirst Bancshares of AL 14.27 14.27 -0.02 -0.12 -0.15 0.50 3.22 0.60 45.97 0.40
SRN Southern Banc Company of AL 18.22 18.03 0.23 1.30 1.47 0.58 3.32 NA NA 0.24
SSM Stone Street Bancorp of NC 35.13 35.13 1.22 4.38 2.54 1.51 5.42 0.17 272.78 0.61
TSH Teche Holding Company of LA 13.77 13.77 0.72 4.29 4.60 1.05 6.29 0.16 525.95 1.00
FTF Texarkana Fst. Fin. Corp of AR 15.94 15.94 1.47 7.54 7.71 1.81 9.27 0.17 403.17 0.84
THR Three Rivers Fin. Corp. of MI 14.48 14.42 0.52 3.44 3.62 0.78 5.17 1.22 42.90 0.79
TBK Tolland Bank of CT* 6.31 6.06 0.63 10.20 8.07 0.62 10.11 3.16 38.16 1.87
WSB Washington SB, FSB of MD 8.24 8.24 0.48 5.88 5.27 0.41 5.07 0.95 49.34 0.96
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN 8.22 8.22 0.17 2.05 2.19 -0.02 -0.29 0.44 79.07 0.51
AFED AFSALA Bancorp of NY 13.68 13.68 0.59 4.34 4.52 0.59 4.34 NA NA NA
ALBK ALBANK Fin. Corp. of Albany NY 9.10 7.86 0.79 8.22 5.68 0.99 10.37 1.15 69.91 1.12
AMFC AMB Financial Corp. of IN 19.37 19.37 0.49 3.04 2.40 0.76 4.79 0.43 98.60 0.56
ASBP ASB Financial Corp. of OH 15.71 15.71 0.60 2.77 3.25 0.86 3.98 1.89 40.89 1.25
ABBK Abington Savings Bank of MA(8)* 6.89 6.15 0.74 11.12 8.31 0.62 9.40 0.27 135.80 0.59
AABC Access Anytime Bancorp of NM 4.58 4.58 -0.57 -12.10 -17.14 -0.22 -4.57 1.58 24.19 0.97
AFBC Advance Fin. Bancorp of WV 14.78 14.78 0.34 2.30 2.29 0.68 4.59 0.41 85.64 0.40
AADV Advantage Bancorp of WI 8.74 8.10 0.32 3.45 2.74 0.83 8.93 0.47 119.85 1.02
AFCB Affiliated Comm BC, Inc of MA 9.75 9.68 0.64 6.11 4.48 0.93 8.79 0.62 119.38 1.19
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NYSE Traded Companies
---------------------
<S> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NM 215.40 8.42 NM 17.13 0.88 2.14 NM
CSA Coast Savings Financial of CA NM 214.12 10.35 217.54 22.46 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 18.38 200.05 11.50 227.55 12.89 0.28 0.76 14.00
DME Dime Savings Bank, FSB of NY* 17.50 179.30 9.71 180.97 13.46 0.00 0.00 0.00
DSL Downey Financial Corp. of CA 28.44 150.96 11.69 153.51 17.77 0.32 1.41 40.00
FRC First Republic Bancorp of CA* 14.34 141.89 8.32 142.07 15.48 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA NM 146.10 6.86 148.19 15.79 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA NM 163.43 9.14 175.19 20.71 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 11.32 175.04 10.90 175.04 9.25 0.44 0.61 6.94
GWF Great Western Fin. Corp. of CA(8) NM NM 14.68 NM 21.27 1.00 2.16 65.79
GPT GreenPoint Fin. Corp. of NY* 22.49 204.13 22.36 NM 23.77 1.00 1.59 35.84
SFB Standard Fed. Bancorp of MI(8) 19.30 192.24 11.75 231.48 14.59 0.80 1.39 26.85
TCB TCF Financial Corp. of MN 18.85 NM 22.73 NM 16.16 0.75 1.62 30.49
WES Westcorp Inc. of Orange CA 15.09 162.28 16.03 162.82 NM 0.40 2.04 30.77
AMEX Traded Companies
---------------------
ANA Acadiana Bancshares of LA* NM 102.76 18.03 102.76 NM 0.36 2.06 NM
BKC American Bank of Waterbury CT* 9.73 136.75 11.55 143.16 12.02 1.36 4.83 47.06
BFD BostonFed Bancorp of MA NM 111.84 12.47 111.84 27.36 0.20 1.26 55.56
CFX Cheshire Fin. Corp. of NH* NM 176.91 15.04 190.69 22.88 0.88 4.99 NM
CZF Citisave Fin. Corp. of LA 22.02 110.25 17.64 110.34 16.51 0.40 2.88 63.49
CBK Citizens First Fin.Corp. of IL NM 107.33 16.25 107.33 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) NM NM 0.92 NM NM 0.00 0.00 NM
FCB Falmouth Co-Op Bank of MA* NM 98.68 24.65 98.68 NM 0.20 1.33 43.48
FAB FirstFed America Bancorp of MA 29.74 110.56 13.66 110.56 15.49 0.00 0.00 0.00
GAF GA Financial Corp. of PA 24.80 113.05 21.83 113.05 19.03 0.32 1.95 48.48
KNK Kankakee Bancorp of IL 21.43 104.69 10.90 112.03 15.98 0.48 1.78 38.10
KYF Kentucky First Bancorp of KY 22.40 109.40 18.76 109.40 17.20 0.50 4.21 NM
NYB New York Bancorp, Inc. of NY 14.42 NM 15.92 NM 13.16 0.60 2.00 28.85
PDB Piedmont Bancorp of NC NM 147.06 23.09 147.06 NM 0.40 3.81 NM
PLE Pinnacle Bank of AL 20.83 135.14 10.45 140.01 13.24 0.72 3.20 66.67
SSB Scotland Bancorp of NC NM 114.11 41.22 114.11 29.00 0.30 1.95 73.17
SZB SouthFirst Bancshares of AL NM 87.92 12.55 87.92 25.46 0.50 3.64 NM
SRN Southern Banc Company of AL NM 85.23 15.53 86.15 26.71 0.35 2.57 NM
SSM Stone Street Bancorp of NC NM 128.76 45.24 128.76 NM 0.44 1.67 65.67
TSH Teche Holding Company of LA 21.74 104.34 14.37 104.34 14.83 0.50 3.15 68.49
FTF Texarkana Fst. Fin. Corp of AR 12.98 118.06 18.82 118.06 10.56 0.45 2.65 34.35
THR Three Rivers Fin. Corp. of MI 27.63 96.64 14.00 97.09 18.42 0.36 2.51 69.23
TBK Tolland Bank of CT* 12.39 118.66 7.48 123.53 12.50 0.20 1.36 16.81
WSB Washington SB, FSB of MD 18.97 110.44 9.10 110.44 22.00 0.10 1.82 34.48
NASDAQ Listed OTC Companies
---------------------------
FBCV 1st Bancorp of Vincennes IN NM 93.74 7.70 93.74 NM 0.40 1.39 63.49
AFED AFSALA Bancorp of NY 22.13 96.09 13.15 96.09 22.13 0.00 0.00 0.00
ALBK ALBANK Fin. Corp. of Albany NY 17.61 144.62 13.16 167.45 13.96 0.60 1.68 29.56
AMFC AMB Financial Corp. of IN NM 95.49 18.50 95.49 26.44 0.24 1.75 72.73
ASBP ASB Financial Corp. of OH NM 117.53 18.47 117.53 21.43 0.40 3.33 NM
ABBK Abington Savings Bank of MA(8)* 12.03 126.98 8.75 142.14 14.24 0.40 1.78 21.39
AABC Access Anytime Bancorp of NM NM 76.98 3.53 76.98 NM 0.00 0.00 NM
AFBC Advance Fin. Bancorp of WV NM 100.50 14.85 100.50 21.88 0.00 0.00 0.00
AADV Advantage Bancorp of WI NM 129.86 11.35 140.20 14.07 0.40 1.12 40.82
AFCB Affiliated Comm BC, Inc of MA 22.30 135.87 13.25 136.81 15.49 0.60 2.32 51.72
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. of Albion NY 9.63 9.63 -0.10 -1.00 -1.45 0.20 1.96 0.37 139.82 0.65
ABCL Allied Bancorp of IL 8.48 8.24 0.47 5.68 3.80 0.70 8.53 0.17 211.76 0.41
ATSB AmTrust Capital Corp. of IN 9.91 9.80 0.25 2.42 2.86 0.11 1.07 2.62 26.14 0.95
AHCI Ambanc Holding Co. of NY* 14.17 14.17 0.26 1.73 1.74 0.25 1.66 3.63 26.16 1.70
ASBI Ameriana Bancorp of IN 10.88 10.87 0.61 5.09 4.38 0.92 7.70 0.48 58.85 0.39
AFFFZ America First Fin. Fund of CA 8.03 7.90 1.37 19.48 15.16 1.68 23.87 0.58 54.76 0.50
AMFB American Federal Bank of SC(8) 7.76 7.17 1.04 13.07 4.49 1.30 16.31 0.51 150.52 1.25
ANBK American Nat'l Bancorp of MD 9.15 9.15 0.15 1.44 1.49 0.54 5.14 1.37 69.91 1.56
ABCW Anchor Bancorp Wisconsin of WI 6.17 6.01 0.72 11.15 6.52 0.96 14.83 0.75 157.67 1.54
ANDB Andover Bancorp, Inc. of MA* 7.96 7.96 1.07 13.89 8.31 1.10 14.29 1.30 77.05 1.40
ASFC Astoria Financial Corp. of NY 8.10 6.72 0.53 6.41 4.25 0.78 9.47 0.66 29.17 0.55
AVND Avondale Fin. Corp. of IL 9.59 9.59 0.39 3.69 3.56 0.40 3.86 0.71 104.44 1.46
BFSI BFS Bankorp, Inc. of NY 8.03 8.03 1.46 18.53 10.58 1.73 21.91 1.04 90.39 1.03
BKCT Bancorp Connecticut of CT* 10.19 10.19 1.24 11.61 8.57 1.19 11.07 1.45 84.76 1.98
BPLS Bank Plus Corp. of CA 4.75 4.74 -2.00 -37.58 -27.40 -1.69 -31.88 3.35 56.47 2.24
BWFC Bank West Fin. Corp. of MI 17.34 17.34 0.66 3.39 4.40 0.42 2.17 0.10 126.57 0.18
BANC BankAtlantic Bancorp of FL 6.44 5.98 0.83 11.86 6.77 0.76 10.85 0.76 118.19 1.52
BKUNA BankUnited SA of FL 5.43 5.14 0.36 7.19 4.45 0.30 6.07 0.95 27.57 0.33
BKCO Bankers Corp. of NJ(8)* 7.84 7.70 1.13 12.97 8.00 1.21 13.96 1.20 25.55 0.43
BVFS Bay View Capital Corp. of CA 6.06 5.75 0.34 5.41 2.89 0.63 10.00 0.72 157.67 1.49
BFSB Bedford Bancshares of VA 14.31 14.31 1.09 7.00 6.00 1.40 8.97 0.54 95.03 0.59
BFFC Big Foot Fin. Corp. of IL 16.04 16.04 0.35 2.18 2.14 0.41 2.54 NA NA NA
BSBC Branford SB of CT* 8.97 8.97 1.04 11.76 6.80 1.04 11.76 2.19 96.45 2.95
BRFC Bridgeville SB, FSB of PA(8) 28.86 28.86 0.93 3.25 3.02 1.19 4.17 0.21 128.21 0.74
BYFC Broadway Fin. Corp. of CA 10.75 10.75 -0.17 -1.88 -2.05 0.21 2.42 2.24 43.23 1.17
CBCO CB Bancorp of Michigan City IN 9.69 9.69 1.11 11.72 6.57 1.31 13.84 1.70 54.83 2.02
CBES CBES Bancorp of MO 18.88 18.88 0.92 7.15 4.76 1.24 9.62 NA NA 0.49
CCFH CCF Holding Company of GA 17.98 17.98 0.60 2.89 3.20 0.89 4.28 0.75 89.85 1.04
CENF CENFED Financial Corp. of CA 5.22 5.21 0.53 10.49 6.40 0.65 12.92 1.34 49.80 0.94
CFSB CFSB Bancorp of Lansing MI 7.53 7.53 0.69 8.61 5.66 0.95 11.87 0.20 271.42 0.64
CKFB CKF Bancorp of Danville KY 25.15 25.15 1.29 4.87 4.56 1.28 4.81 1.47 13.42 0.22
CNSB CNS Bancorp of MO 24.40 24.40 0.36 2.18 1.29 0.63 3.82 0.33 111.42 0.62
CSBF CSB Financial Group Inc of IL* 25.56 24.11 0.54 2.08 2.47 0.82 3.16 0.50 46.43 0.43
CFHC California Fin. Hld. Co. of CA(8) 6.72 6.69 0.53 7.95 5.07 0.76 11.49 1.21 45.60 0.76
CBCI Calumet Bancorp of Chicago IL 16.03 16.03 1.07 6.56 6.44 1.40 8.55 1.29 86.03 1.45
CAFI Camco Fin. Corp. of OH 7.58 7.58 0.78 9.70 8.32 0.88 11.02 0.57 50.44 0.34
CMRN Cameron Fin. Corp. of MO 25.12 25.12 1.20 4.45 4.52 1.47 5.47 0.83 87.40 0.87
CAPS Capital Savings Bancorp of MO 8.46 8.46 0.63 6.69 4.97 0.92 9.75 0.20 141.28 0.38
CFNC Carolina Fincorp of NC* 21.96 21.96 0.88 4.00 3.62 0.88 4.00 0.07 568.18 0.53
CARV Carver FSB of New York, NY 9.48 9.05 -0.03 -0.33 -0.51 0.24 2.52 1.26 20.65 1.03
CASB Cascade SB of Everett WA 6.10 6.10 0.51 8.18 4.82 0.53 8.57 0.51 168.34 1.19
CATB Catskill Fin. Corp. of NY* 29.02 29.02 1.19 6.60 4.16 1.19 6.60 0.61 106.20 1.47
CNIT Cenit Bancorp of Norfolk VA 7.28 7.02 0.50 6.96 4.24 0.55 7.76 0.82 71.39 1.03
CTBK Center Banks, Inc. of NY* 6.70 6.55 0.66 9.63 8.26 0.63 9.15 1.59 54.86 1.03
CEBK Central Co-Op. Bank of MA* 9.83 8.66 0.52 5.32 4.72 0.56 5.76 1.69 53.35 1.25
CENB Century Bancshares of NC* 28.53 28.53 0.93 3.25 3.46 1.18 4.13 0.77 84.54 0.94
CBSB Charter Financial Inc. of IL 14.52 13.40 0.93 5.39 4.54 1.23 7.11 0.67 93.40 0.87
COFI Charter One Financial of OH 6.68 6.19 0.93 14.10 5.70 1.19 18.05 0.37 129.94 0.84
CVAL Chester Valley Bancorp of PA 8.85 8.85 0.61 6.72 5.01 0.90 9.95 0.76 127.23 1.14
CTZN CitFed Bancorp of Dayton OH 6.34 5.62 0.51 7.68 4.37 0.74 11.27 0.91 71.24 1.12
CLAS Classic Bancshares of KY 13.80 11.54 0.38 1.79 1.69 0.64 3.04 0.86 71.29 1.06
CMSB Cmnwealth Bancorp of PA 10.91 8.37 0.44 4.47 2.80 0.64 6.45 0.41 116.96 0.94
CBSA Coastal Bancorp of Houston TX 3.17 2.61 0.24 7.12 5.10 0.40 12.02 0.59 39.07 0.54
CFCP Coastal Fin. Corp. of SC 6.02 6.02 0.85 14.01 4.48 0.92 15.05 0.17 543.23 1.09
COFD Collective Bancorp Inc. of NJ 6.93 6.49 0.90 12.90 6.05 1.10 15.90 0.43 55.96 0.47
CMSV Commty. Svgs, MHC of FL (48.5) 11.62 11.62 0.64 5.36 4.32 0.96 8.04 0.51 69.93 0.61
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. of Albion NY NM 71.78 6.92 71.78 NM 0.31 1.87 NM
ABCL Allied Bancorp of IL 26.29 145.17 12.31 149.29 17.53 0.00 0.00 0.00
ATSB AmTrust Capital Corp. of IN NM 88.19 8.74 89.18 NM 0.20 1.68 58.82
AHCI Ambanc Holding Co. of NY* NM 91.47 12.96 91.47 NM 0.00 0.00 0.00
ASBI Ameriana Bancorp of IN 22.86 121.03 13.17 121.21 15.09 0.60 3.75 NM
AFFFZ America First Fin. Fund of CA 6.60 116.87 9.39 118.76 5.38 1.60 4.64 30.59
AMFB American Federal Bank of SC(8) 22.29 NM 22.58 NM 17.86 0.48 1.67 37.21
ANBK American Nat'l Bancorp of MD NM 103.16 9.44 103.16 18.75 0.12 0.94 63.16
ABCW Anchor Bancorp Wisconsin of WI 15.34 173.42 10.69 177.76 11.53 0.50 1.16 17.73
ANDB Andover Bancorp, Inc. of MA* 12.04 156.67 12.46 156.67 11.70 0.60 2.05 24.69
ASFC Astoria Financial Corp. of NY 23.55 147.70 11.96 178.02 15.94 0.44 1.09 25.58
AVND Avondale Fin. Corp. of IL 28.08 109.48 10.50 109.48 26.84 0.00 0.00 0.00
BFSI BFS Bankorp, Inc. of NY 9.45 161.16 12.93 161.16 7.99 0.00 0.00 0.00
BKCT Bancorp Connecticut of CT* 11.67 136.88 13.95 136.88 12.23 0.82 3.60 42.05
BPLS Bank Plus Corp. of CA NM 153.00 7.27 153.36 NM 0.00 0.00 NM
BWFC Bank West Fin. Corp. of MI 22.74 85.49 14.82 85.49 NM 0.28 2.46 56.00
BANC BankAtlantic Bancorp of FL 14.76 163.33 10.51 175.74 16.15 0.15 0.97 14.29
BKUNA BankUnited SA of FL 22.49 128.92 7.00 136.39 26.63 0.00 0.00 0.00
BKCO Bankers Corp. of NJ(8)* 12.50 158.02 12.39 160.81 11.61 0.64 2.60 32.49
BVFS Bay View Capital Corp. of CA NM 189.36 11.48 199.54 18.73 0.64 1.13 39.02
BFSB Bedford Bancshares of VA 16.67 119.27 17.07 119.27 13.01 0.48 2.53 42.11
BFFC Big Foot Fin. Corp. of IL NM 101.74 16.32 101.74 NM 0.00 0.00 0.00
BSBC Branford SB of CT* 14.71 164.14 14.72 164.14 14.71 0.08 1.94 28.57
BRFC Bridgeville SB, FSB of PA(8) NM 107.24 30.95 107.24 25.85 0.32 2.10 69.57
BYFC Broadway Fin. Corp. of CA NM 72.64 7.81 72.64 NM 0.20 1.95 NM
CBCO CB Bancorp of Michigan City IN 15.22 171.58 16.63 171.58 12.89 0.00 0.00 0.00
CBES CBES Bancorp of MO 20.99 100.65 19.01 100.65 15.60 0.00 0.00 0.00
CCFH CCF Holding Company of GA NM 103.11 18.54 103.11 21.10 0.50 3.08 NM
CENF CENFED Financial Corp. of CA 15.63 155.42 8.11 155.71 12.69 0.36 1.05 16.36
CFSB CFSB Bancorp of Lansing MI 17.67 154.48 11.63 154.48 12.81 0.48 2.34 41.38
CKFB CKF Bancorp of Danville KY 21.95 110.50 27.79 110.50 22.22 0.44 2.44 53.66
CNSB CNS Bancorp of MO NM 106.16 25.91 106.16 NM 0.20 1.29 NM
CSBF CSB Financial Group Inc of IL* NM 74.58 19.06 79.06 26.63 0.00 0.00 0.00
CFHC California Fin. Hld. Co. of CA(8) 19.73 151.95 10.21 152.68 13.65 0.44 1.53 30.14
CBCI Calumet Bancorp of Chicago IL 15.53 102.47 16.42 102.47 11.91 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 12.02 114.92 8.71 114.92 10.58 0.48 3.02 36.36
CMRN Cameron Fin. Corp. of MO 22.12 99.63 25.03 99.63 17.99 0.28 1.71 37.84
CAPS Capital Savings Bancorp of MO 20.14 137.57 11.64 137.57 13.81 0.24 1.66 33.33
CFNC Carolina Fincorp of NC* 27.63 110.62 24.29 110.62 27.63 0.00 0.00 0.00
CARV Carver FSB of New York, NY NM 65.98 6.26 69.12 25.97 0.00 0.00 NM
CASB Cascade SB of Everett WA 20.73 164.41 10.03 164.41 19.77 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 24.02 96.73 28.07 96.73 24.02 0.28 1.82 43.75
CNIT Cenit Bancorp of Norfolk VA 23.56 154.00 11.21 159.69 21.13 1.00 2.22 52.36
CTBK Center Banks, Inc. of NY* 12.10 111.68 7.48 114.22 12.75 0.40 2.09 25.32
CEBK Central Co-Op. Bank of MA* 21.18 110.43 10.85 125.35 19.57 0.32 1.78 37.65
CENB Century Bancshares of NC* 28.87 93.93 26.80 93.93 22.74 0.00 0.00 0.00
CBSB Charter Financial Inc. of IL 22.04 119.68 17.38 129.66 16.71 0.24 1.51 33.33
COFI Charter One Financial of OH 17.55 241.25 16.12 NM 13.71 0.92 1.91 33.45
CVAL Chester Valley Bancorp of PA 19.95 132.00 11.68 132.00 13.47 0.44 2.12 42.31
CTZN CitFed Bancorp of Dayton OH 22.86 167.61 10.63 189.21 15.57 0.32 0.89 20.25
CLAS Classic Bancshares of KY NM 95.78 13.22 114.55 NM 0.28 2.06 NM
CMSB Cmnwealth Bancorp of PA NM 121.31 13.24 158.13 24.79 0.24 1.56 55.81
CBSA Coastal Bancorp of Houston TX 19.60 141.75 4.49 172.12 11.60 0.40 1.55 30.30
CFCP Coastal Fin. Corp. of SC 22.33 NM 18.11 NM 20.79 0.44 1.82 40.74
COFD Collective Bancorp Inc. of NJ 16.52 207.28 14.36 221.42 13.41 1.00 2.70 44.64
CMSV Commty. Svgs, MHC of FL (48.5) 23.17 122.58 14.24 122.58 15.45 0.80 4.21 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares of IN 10.85 10.83 0.59 5.15 4.71 0.90 7.88 0.22 117.84 0.46
CBNH Community Bankshares Inc of NH* 7.16 7.16 0.86 11.93 6.51 0.70 9.70 0.38 178.91 1.02
CFTP Community Fed. Bancorp of MS 33.44 33.44 1.31 4.38 3.02 1.59 5.32 0.35 79.78 0.48
CFFC Community Fin. Corp. of VA 13.92 13.92 1.03 7.49 5.82 1.30 9.48 0.20 317.33 0.72
CIBI Community Inv. Bancorp of OH 11.94 11.94 0.68 5.06 5.47 0.98 7.30 0.88 53.98 0.64
COOP Cooperative Bk.for Svgs. of NC 7.46 7.46 -1.01 -11.74 -10.51 0.03 0.38 0.42 56.37 0.31
CNSK Covenant Bank for Svgs. of NJ* 5.35 5.35 0.43 8.00 3.59 0.52 9.85 1.62 48.97 1.35
CRZY Crazy Woman Creek Bncorp of WY 29.75 29.75 0.86 3.03 2.89 1.13 3.96 0.12 452.46 1.06
DNFC D&N Financial Corp. of MI 5.85 5.78 0.68 11.92 6.00 0.88 15.56 0.66 112.57 0.94
DFIN Damen Fin. Corp. of Chicago IL 22.87 22.87 0.72 3.08 3.13 0.94 4.04 0.15 98.29 0.38
DCBI Delphos Citizens Bancorp of OH 26.51 26.51 1.36 5.12 5.17 1.36 5.12 NA NA NA
DIME Dime Community Bancorp of NY 17.98 15.74 0.80 5.41 3.73 0.92 6.21 1.03 68.42 1.41
DIBK Dime Financial Corp. of CT* 8.58 8.23 1.76 21.77 11.04 1.89 23.48 1.01 197.32 3.33
EGLB Eagle BancGroup of IL 12.82 12.82 -0.31 -3.17 -2.39 0.02 0.25 1.76 31.80 0.87
EBSI Eagle Bancshares of Tucker GA 8.95 8.95 0.65 7.91 5.07 0.87 10.51 1.06 53.91 0.84
EGFC Eagle Financial Corp. of CT 7.21 5.29 1.02 14.04 10.43 0.63 8.65 1.22 50.16 1.04
ETFS East Texas Fin. Serv. of TX 18.30 18.30 0.39 2.04 2.30 0.70 3.65 0.39 64.22 0.60
EBCP Eastern Bancorp of NH(8) 7.48 7.08 0.38 5.06 3.45 0.54 7.13 1.81 18.17 0.58
ESBK Elmira SB of Elmira NY* 6.38 6.10 0.18 2.90 3.14 0.17 2.70 0.93 72.34 0.89
EIRE Emerald Island Bancorp, MA* 6.82 6.82 0.64 9.52 5.61 0.64 9.60 0.23 281.89 1.04
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.47 1.09 3.12 NA NA NA
EFBI Enterprise Fed. Bancorp of OH 14.06 14.03 0.68 4.31 4.66 0.64 4.07 0.09 201.97 0.27
EQSB Equitable FSB of Wheaton MD 5.00 5.00 0.42 8.11 5.94 0.71 13.84 1.19 19.13 0.32
FFFG F.F.O. Financial Group of FL 6.04 6.04 0.20 3.17 1.87 0.62 9.95 2.94 55.67 2.35
FCBF FCB Fin. Corp. of Neenah WI 17.28 17.28 0.91 4.91 4.27 1.11 6.04 0.11 408.42 0.52
FFBS FFBS Bancorp of Columbus MS 19.59 19.59 1.08 5.49 3.86 1.41 7.18 0.63 83.16 0.77
FFDF FFD Financial Corp. of OH 25.07 25.07 0.68 3.69 2.45 0.95 5.10 0.15 116.80 0.29
FFLC FFLC Bancorp of Leesburg FL 15.48 15.48 0.66 3.98 3.83 0.98 5.92 0.23 133.73 0.48
FFFC FFVA Financial Corp. of VA 13.95 13.65 1.05 6.69 4.69 1.30 8.30 0.44 143.89 1.04
FFWC FFW Corporation of Wabash IN 10.19 10.19 0.88 8.33 7.56 1.09 10.36 0.16 205.83 0.48
FFYF FFY Financial Corp. of OH 14.31 14.31 0.84 4.91 4.50 1.27 7.43 0.84 69.96 0.78
FMCO FMS Financial Corp. of NJ 6.25 6.10 0.58 8.96 6.15 0.93 14.21 1.18 45.42 0.91
FFHH FSF Financial Corp. of MN 12.40 12.40 0.58 4.03 3.70 0.77 5.35 0.06 354.34 0.36
FOBC Fed One Bancorp of Wheeling WV 11.69 11.11 0.69 5.72 5.35 0.98 8.13 0.27 151.30 1.07
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) 8.43 8.42 0.66 7.78 3.30 0.96 11.33 1.14 84.83 1.16
FBCI Fidelity Bancorp of Chicago IL 10.26 10.23 0.50 4.17 4.05 0.74 6.23 0.67 25.45 0.23
FSBI Fidelity Bancorp, Inc. of PA 6.85 6.84 0.44 5.96 4.18 0.77 10.47 0.48 100.13 1.00
FFFL Fidelity FSB, MHC of FL (47.4) 9.33 9.24 0.43 4.41 2.90 0.63 6.41 0.40 65.35 0.35
FFED Fidelity Fed. Bancorp of IN 4.84 4.84 0.17 3.30 2.06 0.31 6.04 0.17 415.56 0.83
FFOH Fidelity Financial of OH 19.85 19.85 0.60 3.45 2.82 0.91 5.18 0.42 77.55 0.43
FIBC Financial Bancorp of NY 9.94 9.89 0.49 4.76 3.97 0.86 8.40 3.44 17.16 1.11
FBSI First Bancshares of MO 14.75 14.73 0.82 5.13 4.93 1.02 6.41 0.65 52.74 0.43
FBBC First Bell Bancorp of PA 18.43 18.43 1.41 6.72 6.33 1.63 7.74 0.10 114.26 0.13
FBER First Bergen Bancorp of NJ 17.03 17.03 0.11 0.86 0.62 0.59 4.51 1.22 120.06 3.00
FCIT First Cit. Fin. Corp of MD 5.92 5.92 0.46 7.45 4.55 0.66 10.62 2.58 41.67 1.50
FSTC First Citizens Corp of GA 12.80 12.73 2.23 19.62 11.06 1.95 17.11 NA NA 1.41
FFBA First Colorado Bancorp of Co 16.33 16.13 1.09 8.26 5.12 1.09 8.26 0.22 102.47 0.32
FDEF First Defiance Fin.Corp. of OH 23.01 23.01 0.93 3.75 3.77 1.21 4.90 0.23 168.53 0.49
FESX First Essex Bancorp of MA* 7.79 6.68 1.04 13.76 7.69 0.90 11.86 0.55 140.92 1.18
FFES First FS&LA of E. Hartford CT 6.12 6.10 0.44 6.90 5.91 0.66 10.41 0.65 42.47 1.53
FSSB First FS&LA of San Bern. CA 4.69 4.48 -1.07 -20.30 NM -1.24 -23.65 3.02 35.25 1.49
FFSX First FS&LA. MHC of IA (46.0) 8.18 8.10 0.40 4.92 3.17 0.71 8.66 0.13 288.03 0.54
FFSW First Fed Fin. Serv. of OH 5.37 4.38 0.91 16.56 6.72 0.82 14.91 0.16 155.53 0.35
BDJI First Fed. Bancorp. of MN 11.36 11.36 0.32 2.46 2.59 0.68 5.18 0.38 112.10 0.88
FFBH First Fed. Bancshares of AR 16.35 16.35 0.63 5.48 2.97 0.95 8.32 0.15 159.31 0.31
FFEC First Fed. Bancshares of WI(8) 13.42 12.91 0.69 4.76 3.62 0.91 6.25 0.03 398.60 0.16
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBIN Community Bank Shares of IN 21.21 109.12 11.84 109.29 13.86 0.34 2.43 51.52
CBNH Community Bankshares Inc of NH* 15.35 163.55 11.72 163.55 18.88 0.64 2.44 37.43
CFTP Community Fed. Bancorp of MS NM 123.49 41.30 123.49 27.22 0.30 1.51 50.00
CFFC Community Fin. Corp. of VA 17.19 125.07 17.40 125.07 13.58 0.56 2.55 43.75
CIBI Community Inv. Bancorp of OH 18.28 97.15 11.60 97.15 12.68 0.40 2.30 42.11
COOP Cooperative Bk.for Svgs. of NC NM 121.56 9.07 121.56 NM 0.00 0.00 NM
CNSK Covenant Bank for Svgs. of NJ* 27.88 192.05 10.27 192.05 22.66 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY NM 91.28 27.16 91.28 26.47 0.40 2.96 NM
DNFC D&N Financial Corp. of MI 16.67 174.42 10.20 176.47 12.77 0.00 0.00 0.00
DFIN Damen Fin. Corp. of Chicago IL NM 100.70 23.03 100.70 24.36 0.24 1.67 53.33
DCBI Delphos Citizens Bancorp of OH 19.34 99.02 26.25 99.02 19.34 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 26.84 119.83 21.55 136.91 23.40 0.00 0.00 0.00
DIBK Dime Financial Corp. of CT* 9.06 179.19 15.38 186.94 8.40 0.36 1.73 15.72
EGLB Eagle BancGroup of IL NM 93.41 11.98 93.41 NM 0.00 0.00 NM
EBSI Eagle Bancshares of Tucker GA 19.71 132.73 11.87 132.73 14.82 0.60 3.58 70.59
EGFC Eagle Financial Corp. of CT 9.59 131.40 9.47 179.23 15.56 0.92 3.15 30.16
ETFS East Texas Fin. Serv. of TX NM 94.07 17.22 94.07 24.33 0.20 1.10 47.62
EBCP Eastern Bancorp of NH(8) 28.98 144.48 10.81 152.60 20.56 0.64 2.51 72.73
ESBK Elmira SB of Elmira NY* NM 92.82 5.92 97.06 NM 0.64 3.46 NM
EIRE Emerald Island Bancorp, MA* 17.82 152.29 10.39 152.29 17.66 0.28 1.45 25.93
EFBC Empire Federal Bancorp of MT NM 96.14 33.55 96.14 NM 0.00 0.00 0.00
EFBI Enterprise Fed. Bancorp of OH 21.48 93.44 13.14 93.62 22.76 0.00 0.00 0.00
EQSB Equitable FSB of Wheaton MD 16.84 131.91 6.59 131.91 9.87 0.00 0.00 0.00
FFFG F.F.O. Financial Group of FL NM 168.16 10.16 168.16 17.05 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 23.42 117.60 20.33 117.60 19.02 0.72 3.24 NM
FFBS FFBS Bancorp of Columbus MS 25.88 139.86 27.40 139.86 19.82 0.50 2.27 58.82
FFDF FFD Financial Corp. of OH NM 94.23 23.62 94.23 29.51 0.20 1.44 58.82
FFLC FFLC Bancorp of Leesburg FL 26.11 106.82 16.54 106.82 17.54 0.48 2.04 53.33
FFFC FFVA Financial Corp. of VA 21.34 155.95 21.76 159.37 17.19 0.40 1.62 34.48
FFWC FFW Corporation of Wabash IN 13.23 108.89 11.09 108.89 10.64 0.60 2.40 31.75
FFYF FFY Financial Corp. of OH 22.23 130.16 18.63 130.16 14.69 0.70 2.79 61.95
FMCO FMS Financial Corp. of NJ 16.27 144.98 9.06 148.55 10.25 0.20 0.98 15.87
FFHH FSF Financial Corp. of MN 27.05 118.62 14.71 118.62 20.37 0.50 3.03 NM
FOBC Fed One Bancorp of Wheeling WV 18.68 109.16 12.77 114.89 13.15 0.58 3.27 61.05
FFRV Fid. Fin. Bkshrs. Corp. of VA(8) NM 230.90 19.46 231.09 20.80 0.20 0.72 21.74
FBCI Fidelity Bancorp of Chicago IL 24.68 108.45 11.13 108.82 16.52 0.32 1.68 41.56
FSBI Fidelity Bancorp, Inc. of PA 23.95 144.26 9.88 144.54 13.62 0.36 1.58 37.89
FFFL Fidelity FSB, MHC of FL (47.4) NM 150.58 14.05 152.08 23.70 0.80 4.38 NM
FFED Fidelity Fed. Bancorp of IN NM 172.92 8.37 172.92 26.52 0.40 4.57 NM
FFOH Fidelity Financial of OH NM 102.33 20.32 102.33 23.61 0.20 1.57 55.56
FIBC Financial Bancorp of NY 25.17 122.93 12.22 123.60 14.27 0.40 2.21 55.56
FBSI First Bancshares of MO 20.30 105.78 15.60 105.94 16.27 0.20 0.98 19.80
FBBC First Bell Bancorp of PA 15.79 114.00 21.02 114.00 13.71 0.40 2.56 40.40
FBER First Bergen Bancorp of NJ NM 103.54 17.63 103.54 NM 0.12 0.82 NM
FCIT First Cit. Fin. Corp of MD 21.97 160.99 9.52 160.99 15.43 0.00 0.00 0.00
FSTC First Citizens Corp of GA 9.04 162.59 20.80 163.46 10.37 0.44 2.07 18.72
FFBA First Colorado Bancorp of Co 19.54 126.11 20.59 127.63 19.54 0.36 2.12 41.38
FDEF First Defiance Fin.Corp. of OH 26.53 106.82 24.58 106.82 20.31 0.32 2.46 65.31
FESX First Essex Bancorp of MA* 13.01 142.86 11.13 166.49 15.09 0.48 3.00 39.02
FFES First FS&LA of E. Hartford CT 16.91 117.81 7.21 118.07 11.20 0.60 2.32 39.22
FSSB First FS&LA of San Bern. CA NM 73.12 3.43 76.59 NM 0.00 0.00 NM
FFSX First FS&LA. MHC of IA (46.0) NM 152.32 12.46 153.71 17.90 0.72 2.38 NM
FFSW First Fed Fin. Serv. of OH 14.88 227.27 12.19 NM 16.52 0.48 1.28 19.05
BDJI First Fed. Bancorp. of MN NM 104.05 11.82 104.05 18.32 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR NM 120.59 19.72 120.59 22.16 0.20 1.03 34.48
FFEC First Fed. Bancshares of WI(8) 27.61 129.64 17.40 134.74 21.02 0.28 1.51 41.79
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FTFC First Fed. Capital Corp. of WI 6.34 5.98 0.70 10.32 5.43 0.77 11.38 0.12 457.67 0.74
FFKY First Fed. Fin. Corp. of KY 13.62 12.76 1.23 8.80 4.95 1.44 10.32 0.55 90.93 0.57
FFBZ First Federal Bancorp of OH 7.58 7.57 0.78 10.14 5.24 1.05 13.67 0.56 156.26 1.00
FFWM First Fin. Corp of Western MD(8) 11.68 11.68 0.95 7.82 4.48 1.27 10.52 1.75 129.77 2.82
FFCH First Fin. Holdings Inc. of SC 6.08 6.08 0.52 8.22 4.46 0.82 12.89 1.28 56.63 0.87
FFBI First Financial Bancorp of IL 7.73 7.73 0.12 1.27 1.33 0.37 4.03 0.43 106.97 0.61
FFHC First Financial Corp. of WI 7.20 6.98 0.89 12.41 4.80 1.26 17.46 0.29 147.30 0.67
FFHS First Franklin Corp. of OH 9.05 8.97 0.28 2.99 3.25 0.62 6.61 0.52 81.80 0.62
FGHC First Georgia Hold. Corp of GA 8.29 7.39 0.87 10.77 6.15 0.87 10.77 1.39 46.70 0.77
FSPG First Home Bancorp of NJ 6.46 6.31 0.91 14.08 9.24 1.21 18.65 0.78 98.58 1.42
FFSL First Independence Corp. of KS 11.00 11.00 0.58 4.79 5.16 0.85 7.01 0.57 112.38 1.01
FISB First Indiana Corp. of IN 9.27 9.14 0.92 10.20 5.50 1.02 11.32 1.76 63.33 1.34
FKFS First Keystone Fin. Corp of PA 7.50 7.50 0.47 5.84 4.86 0.74 9.17 2.35 37.98 1.52
FLKY First Lancaster Bncshrs of KY 37.13 37.13 0.98 1.94 2.45 1.26 2.50 0.83 31.75 0.31
FLFC First Liberty Fin. Corp. of GA 6.90 5.84 0.99 14.67 6.91 0.82 12.16 1.11 72.71 1.14
CASH First Midwest Fin. Corp. of IA 11.14 9.83 0.74 6.08 4.99 0.98 8.05 0.70 86.24 0.96
FMBD First Mutual Bancorp of IL 19.93 19.93 0.46 1.90 2.26 0.72 2.99 0.14 275.66 0.46
FMSB First Mutual SB of Bellevue WA* 6.61 6.61 1.02 15.36 7.56 0.98 14.77 0.12 723.09 1.07
FNGB First Northern Cap. Corp of WI 11.41 11.41 0.56 4.62 4.29 0.85 7.03 0.12 377.58 0.51
FFPB First Palm Beach Bancorp of FL 7.08 6.89 0.04 0.50 0.41 0.12 1.51 1.08 73.82 1.16
FSLA First SB SLA MHC of NJ (47.5) 9.25 8.11 0.47 5.02 2.96 0.85 9.08 0.75 70.10 1.01
FSNJ First SB of NJ, MHC (45.9)(8) 7.53 7.53 0.19 2.28 1.60 0.43 5.10 0.91 51.83 1.27
SOPN First SB, SSB, Moore Co. of NC 25.01 25.01 1.33 5.18 4.88 1.63 6.34 0.10 224.72 0.33
FWWB First Savings Bancorp of WA* 15.77 14.48 1.01 5.46 3.24 1.01 5.46 0.21 311.17 1.08
SHEN First Shenango Bancorp of PA 12.01 12.01 0.75 5.68 5.16 1.02 7.71 0.50 140.23 1.04
FSFC First So.east Fin. Corp. of SC 10.35 10.35 -0.01 -0.09 -0.09 0.88 6.18 0.07 577.21 0.50
FFDP FirstFed Bancshares of IL 9.23 8.79 0.26 2.95 2.97 0.32 3.57 0.14 167.24 0.37
FLAG Flag Financial Corp of GA 8.80 8.80 -0.07 -0.77 -0.65 0.11 1.15 3.67 52.67 2.77
FFIC Flushing Fin. Corp. of NY* 17.20 17.20 0.89 4.87 4.10 0.90 4.93 0.71 95.82 1.46
FBHC Fort Bend Holding Corp. of TX 6.43 5.95 0.24 3.48 3.18 0.55 8.11 1.31 43.41 1.29
FTSB Fort Thomas Fin. Corp. of KY 17.23 17.23 0.51 2.36 2.23 0.78 3.58 1.34 31.02 0.47
FKKY Frankfort First Bancorp of KY 26.30 26.30 0.81 2.52 3.12 1.09 3.39 0.16 48.04 0.09
FTNB Fulton Bancorp of MO 24.39 24.39 0.58 4.24 1.83 0.91 6.65 NA NA NA
GFSB GFS Bancorp of Grinnell IA 11.47 11.47 0.96 8.11 7.44 1.23 10.45 1.63 49.75 0.92
GUPB GFSB Bancorp of Gallup NM 18.50 18.50 0.81 3.56 3.88 1.03 4.53 0.25 159.18 0.75
GWBC Gateway Bancorp of KY 25.07 25.07 0.83 3.27 3.80 1.15 4.49 0.45 25.80 0.44
GBCI Glacier Bancorp of MT 9.45 9.44 1.37 14.32 6.71 1.54 16.10 0.29 173.40 0.70
GLBK Glendale Co-op. Bank of MA* 15.85 15.85 0.79 4.97 5.04 0.66 4.16 0.30 96.33 0.70
GFCO Glenway Financial Corp. of OH 9.60 9.40 0.55 5.72 6.50 0.56 5.81 0.41 52.03 0.27
GTPS Great American Bancorp of IL 27.85 27.85 0.69 2.42 2.63 0.68 2.36 0.13 192.81 0.35
GTFN Great Financial Corp. of KY 9.68 9.29 0.72 6.97 4.03 0.71 6.82 3.23 14.46 0.65
GSBC Great Southern Bancorp of MO 10.12 10.12 1.35 13.44 6.00 1.54 15.28 1.83 121.83 2.59
GDVS Greater DV SB,MHC of PA (19.9)* 11.76 11.76 -0.08 -0.70 -0.55 0.22 1.85 2.91 42.41 2.06
GRTR Greater New York SB of NY* 5.97 5.97 0.71 12.35 9.01 0.37 6.45 7.90 9.80 1.94
GSFC Green Street Fin. Corp. of NC 35.29 35.29 1.18 5.35 2.74 1.48 6.68 0.20 68.31 0.19
GROV GroveBank for Savings of MA(8)* 6.50 6.49 0.90 14.23 6.67 0.84 13.34 0.58 100.03 0.77
GSLC Guaranty Svgs & Loan FA of VA 5.50 5.50 0.44 7.17 5.09 0.52 8.49 2.06 35.12 0.96
GFED Guarnty FS&LA,MHC of MO (31.0) 13.96 13.96 0.76 5.28 3.75 0.64 4.45 1.57 73.15 1.47
HEMT HF Bancorp of Hemet CA 9.81 0.00 -0.31 -2.63 -2.60 -2.27 -19.11 0.98 62.27 1.37
HFFC HF Financial Corp. of SD 9.26 9.23 0.61 6.69 6.33 0.79 8.63 0.59 127.45 0.96
HFNC HFNC Financial Corp. of NC 27.88 27.88 1.13 3.83 2.53 1.38 4.67 1.15 80.19 1.39
HMNF HMN Financial, Inc. of MN 14.80 14.80 0.77 4.89 4.09 0.93 5.85 0.08 531.92 0.65
HALL Hallmark Capital Corp. of WI 7.08 7.08 0.43 5.82 6.02 0.58 7.79 0.05 715.63 0.56
HARB Harbor FSB, MHC of FL (46.0) 8.27 7.94 0.91 10.75 5.15 1.21 14.28 0.50 208.24 1.41
HRBF Harbor Federal Bancorp of MD 12.89 12.89 0.34 2.37 2.19 0.61 4.24 0.43 41.21 0.28
HFSA Hardin Bancorp of Hardin MO 14.76 14.76 0.49 2.83 3.27 0.82 4.72 0.19 90.18 0.29
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
---------------------------------------
FTFC First Fed. Capital Corp. of WI 18.43 190.40 12.07 201.90 16.72 0.64 2.23 41.03
FFKY First Fed. Fin. Corp. of KY 20.19 175.73 23.93 187.50 17.21 0.52 2.48 50.00
FFBZ First Federal Bancorp of OH 19.10 186.40 14.13 186.61 14.17 0.24 1.41 26.97
FFWM First Fin. Corp of Western MD(8) 22.30 169.75 19.83 169.75 16.58 0.48 1.45 32.43
FFCH First Fin. Holdings Inc. of SC 22.40 183.25 11.15 183.25 14.29 0.72 2.57 57.60
FFBI First Financial Bancorp of IL NM 99.28 7.68 99.28 23.57 0.00 0.00 0.00
FFHC First Financial Corp. of WI 20.84 NM 18.16 NM 14.81 0.60 2.13 44.44
FFHS First Franklin Corp. of OH NM 93.73 8.49 94.56 13.91 0.32 2.00 61.54
FGHC First Georgia Hold. Corp of GA 16.25 166.10 13.78 186.42 16.25 0.08 0.82 13.33
FSPG First Home Bancorp of NJ 10.83 146.30 9.45 149.65 8.17 0.40 2.35 25.48
FFSL First Independence Corp. of KS 19.40 99.38 10.93 99.38 13.24 0.25 2.22 43.10
FISB First Indiana Corp. of IN 18.18 179.64 16.65 182.04 16.39 0.60 2.00 36.36
FKFS First Keystone Fin. Corp of PA 20.59 119.91 8.99 119.91 13.10 0.20 0.93 19.05
FLKY First Lancaster Bncshrs of KY NM 108.62 40.33 108.62 NM 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 14.47 195.21 13.47 230.61 17.46 0.40 1.82 26.32
CASH First Midwest Fin. Corp. of IA 20.02 111.39 12.41 126.29 15.11 0.36 2.17 43.37
FMBD First Mutual Bancorp of IL NM 92.65 18.47 92.65 28.18 0.32 2.06 NM
FMSB First Mutual SB of Bellevue WA* 13.23 189.99 12.55 189.99 13.76 0.20 0.98 12.90
FNGB First Northern Cap. Corp of WI 23.33 109.31 12.47 109.31 15.35 0.64 3.66 NM
FFPB First Palm Beach Bancorp of FL NM 129.06 9.13 132.61 NM 0.60 2.22 NM
FSLA First SB SLA MHC of NJ (47.5) NM 168.78 15.62 192.48 18.64 0.40 1.88 63.49
FSNJ First SB of NJ, MHC (45.9)(8) NM 148.34 11.18 148.34 27.94 0.50 2.11 NM
SOPN First SB, SSB, Moore Co. of NC 20.48 106.77 26.71 106.77 16.74 0.68 3.53 72.34
FWWB First Savings Bancorp of WA* NM 148.62 23.44 161.91 NM 0.20 0.95 29.41
SHEN First Shenango Bancorp of PA 19.38 111.66 13.41 111.66 14.29 0.48 1.92 37.21
FSFC First So.east Fin. Corp. of SC NM 143.04 14.80 143.04 16.18 0.20 1.82 NM
FFDP FirstFed Bancshares of IL NM 107.30 9.90 112.69 27.78 0.40 2.29 NM
FLAG Flag Financial Corp of GA NM 125.08 11.01 125.08 NM 0.34 2.75 NM
FFIC Flushing Fin. Corp. of NY* 24.38 122.22 21.02 122.22 24.09 0.16 0.81 19.75
FBHC Fort Bend Holding Corp. of TX NM 107.88 6.94 116.63 13.46 0.28 1.19 37.33
FTSB Fort Thomas Fin. Corp. of KY NM 130.39 22.46 130.39 29.55 0.25 1.92 NM
FKKY Frankfort First Bancorp of KY NM 104.17 27.39 104.17 23.84 0.36 3.51 NM
FTNB Fulton Bancorp of MO NM 114.96 28.04 114.96 NM 0.00 0.00 0.00
GFSB GFS Bancorp of Grinnell IA 13.44 106.97 12.27 106.97 10.44 0.40 1.86 25.00
GUPB GFSB Bancorp of Gallup NM 25.81 97.74 18.09 97.74 20.25 0.40 2.50 64.52
GWBC Gateway Bancorp of KY 26.34 91.11 22.84 91.11 19.16 0.40 2.71 71.43
GBCI Glacier Bancorp of MT 14.91 207.97 19.65 208.15 13.26 0.64 2.67 39.75
GLBK Glendale Co-op. Bank of MA* 19.83 97.01 15.38 97.01 23.71 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 15.38 88.65 8.51 90.58 15.15 0.68 3.40 52.31
GTPS Great American Bancorp of IL NM 93.27 25.97 93.27 NM 0.40 2.51 NM
GTFN Great Financial Corp. of KY 24.82 172.37 16.69 179.60 25.37 0.48 1.40 34.78
GSBC Great Southern Bancorp of MO 16.67 223.10 22.57 223.10 14.66 0.40 2.35 39.22
GDVS Greater DV SB,MHC of PA (19.9)* NM 129.56 15.23 129.56 NM 0.36 3.27 NM
GRTR Greater New York SB of NY* 11.10 131.36 7.84 131.36 21.24 0.20 1.34 14.93
GSFC Green Street Fin. Corp. of NC NM 120.94 42.68 120.94 29.17 0.40 2.29 NM
GROV GroveBank for Savings of MA(8)* 14.99 200.32 13.01 200.40 15.98 0.72 1.43 21.36
GSLC Guaranty Svgs & Loan FA of VA 19.63 140.23 7.71 140.23 16.59 0.10 1.04 20.41
GFED Guarnty FS&LA,MHC of MO (31.0) 26.67 140.68 19.64 140.68 NM 0.36 3.00 NM
HEMT HF Bancorp of Hemet CA NM 107.44 10.54 NM NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 15.79 105.20 9.74 105.51 12.24 0.36 2.00 31.58
HFNC HFNC Financial Corp. of NC NM 148.77 41.48 148.77 NM 0.28 1.29 50.91
HMNF HMN Financial, Inc. of MN 24.48 126.89 18.78 126.89 20.43 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.62 93.11 6.59 93.11 12.41 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.0) 19.40 200.00 16.54 208.33 14.61 1.40 3.94 NM
HRBF Harbor Federal Bancorp of MD NM 108.02 13.93 108.02 25.54 0.40 2.30 NM
HFSA Hardin Bancorp of Hardin MO NM 91.73 13.53 91.73 18.33 0.40 2.91 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HARL Harleysville SA of PA 6.29 6.29 0.61 9.29 5.60 0.94 14.19 0.09 602.74 0.75
HARS Harris SB, MHC of PA (24.2) 8.56 7.22 0.02 0.23 0.14 0.49 4.58 0.75 63.17 0.84
HFFB Harrodsburg 1st Fin Bcrp of KY 27.74 27.74 1.01 3.58 3.13 1.33 4.71 0.79 34.30 0.38
HHFC Harvest Home Fin. Corp. of OH 12.35 12.35 0.18 1.07 1.38 0.52 3.13 0.21 67.68 0.26
HAVN Haven Bancorp of Woodhaven NY 6.00 5.97 0.57 9.09 6.50 0.86 13.75 1.01 64.99 1.38
HVFD Haverfield Corp. of OH 8.18 8.17 0.44 5.36 4.21 0.98 12.00 0.28 276.81 0.94
HTHR Hawthorne Fin. Corp. of CA 3.85 3.85 0.90 23.39 22.64 0.57 14.69 10.58 17.32 2.16
HBNK Highland Federal Bank of CA 7.12 7.12 0.14 1.94 1.23 0.52 6.94 3.30 46.96 2.00
HIFS Hingham Inst. for Sav. of MA* 9.53 9.53 1.09 11.13 8.32 1.09 11.13 0.78 88.21 0.90
HBEI Home Bancorp of Elgin IL 26.71 26.71 0.13 1.00 0.40 0.68 5.18 0.49 50.03 0.35
HBFW Home Bancorp of Fort Wayne IN 14.48 14.48 0.52 3.21 3.16 0.87 5.34 0.07 600.00 0.55
HBBI Home Building Bancorp of IN 12.49 12.49 -0.35 -2.61 -2.33 -0.01 -0.11 0.35 51.68 0.27
HCFC Home City Fin. Corp. of OH 19.95 19.95 0.85 4.24 4.21 1.10 5.54 0.43 145.20 0.75
HOMF Home Fed Bancorp of Seymour IN 8.16 7.86 0.98 12.05 6.51 1.16 14.27 0.46 108.25 0.58
HWEN Home Financial Bancorp of IN 20.03 20.03 0.50 5.11 2.57 0.72 7.39 0.96 44.47 0.58
HPBC Home Port Bancorp, Inc. of MA* 10.41 10.41 1.73 15.77 8.99 1.74 15.87 0.40 307.31 1.54
HMCI Homecorp, Inc. of Rockford IL 6.00 6.00 0.10 1.59 1.36 0.33 5.44 3.64 11.70 0.53
LOAN Horizon Bancorp, Inc of TX(8)* 7.94 7.70 1.06 12.58 4.25 0.98 11.59 0.38 135.94 0.72
HZFS Horizon Fin'l. Services of IA 10.73 10.73 0.13 1.15 1.30 0.33 2.86 1.12 45.26 0.76
HRZB Horizon Financial Corp. of WA* 15.94 15.94 1.51 9.40 7.42 1.47 9.15 0.01 NA 0.81
IBSF IBS Financial Corp. of NJ 19.44 19.44 0.62 3.00 2.57 0.99 4.83 0.11 123.82 0.55
ISBF ISB Financial Corp. of LA 16.38 15.88 0.81 4.38 3.06 1.09 5.94 NA NA 1.03
ITLA Imperial Thrift & Loan of CA* 11.76 11.76 1.43 14.06 7.31 1.43 14.06 2.24 61.01 1.64
IFSB Independence FSB of DC 6.73 5.82 0.13 1.97 2.89 0.20 2.96 NA NA 0.38
INCB Indiana Comm. Bank, SB of IN 12.30 12.30 0.15 1.06 0.90 0.48 3.41 NA NA NA
IFSL Indiana Federal Corp. of IN(8) 8.65 8.07 0.68 7.23 4.08 0.96 10.14 1.32 64.27 1.12
INBI Industrial Bancorp of OH 19.01 19.01 0.75 3.70 3.45 1.45 7.15 0.46 101.75 0.54
IWBK Interwest SB of Oak Harbor WA 6.82 6.65 0.83 12.18 4.28 1.17 17.12 0.54 87.60 0.82
IPSW Ipswich SB of Ipswich MA* 6.20 6.20 1.22 20.19 9.44 0.99 16.31 1.81 47.96 1.19
JSBF JSB Financial, Inc. of NY 21.60 21.60 1.66 7.56 6.50 1.66 7.56 1.37 24.80 0.61
JXVL Jacksonville Bancorp of TX 16.26 16.26 0.68 4.82 3.60 1.02 7.23 1.03 48.82 0.69
JXSB Jcksnville SB,MHC of IL (44.6) 11.52 11.49 0.19 1.60 1.29 0.47 3.96 0.37 131.69 0.59
JSBA Jefferson Svgs Bancorp of MO 7.24 5.97 0.23 3.21 2.07 0.61 8.55 1.02 48.29 0.67
JOAC Joachim Bancorp of MO 29.55 29.55 0.41 1.53 1.36 0.71 2.66 0.33 63.87 0.32
KSAV KS Bancorp of Kenly NC 13.61 13.60 0.88 6.02 6.33 1.17 7.99 0.55 55.35 0.37
KSBK KSB Bancorp of Kingfield ME(8)* 6.82 6.32 0.89 13.40 8.12 0.89 13.40 1.38 47.56 0.90
KFBI Klamath First Bancorp of OR 22.66 22.66 0.91 3.62 3.73 1.35 5.36 0.04 356.92 0.20
LBFI L&B Financial of S. Springs TX(8) 17.42 17.42 0.56 3.25 3.00 0.76 4.39 0.51 103.00 1.08
LSBI LSB Fin. Corp. of Lafayette IN 9.40 9.40 0.50 4.76 4.50 0.46 4.33 1.37 70.21 1.09
LVSB Lakeview SB of Paterson NJ 10.24 8.16 1.24 11.79 7.44 0.52 4.98 1.00 67.13 1.85
LARK Landmark Bancshares of KS 14.74 14.74 0.79 4.92 4.75 0.97 6.03 0.19 186.40 0.57
LARL Laurel Capital Group of PA 10.71 10.71 1.11 10.51 7.44 1.43 13.48 0.64 148.64 1.27
LSBX Lawrence Savings Bank of MA* 8.59 8.59 1.60 20.13 12.46 1.60 20.13 0.85 129.65 2.42
LFED Leeds FSB, MHC of MD (36.2) 16.10 16.10 0.76 4.69 3.11 1.10 6.76 0.02 942.86 0.25
LXMO Lexington B&L Fin. Corp. of MO 30.42 30.42 0.83 3.84 2.53 1.15 5.33 1.26 25.84 0.44
LIFB Life Bancorp of Norfolk VA 10.63 10.29 0.67 5.64 4.41 0.90 7.52 0.38 197.80 1.76
LFBI Little Falls Bancorp of NJ 14.88 13.71 0.17 1.44 1.14 0.45 3.86 1.18 28.24 0.84
LOGN Logansport Fin. Corp. of IN 19.86 19.86 1.19 4.98 5.62 1.51 6.34 0.36 81.47 0.42
LONF London Financial Corp. of OH 21.42 21.42 0.75 3.94 3.41 1.10 5.75 0.71 71.65 0.69
LISB Long Island Bancorp of NY 9.68 9.68 0.64 6.17 3.44 0.77 7.48 1.36 46.38 1.08
MAFB MAF Bancorp of IL 7.76 6.70 0.68 9.51 4.35 1.02 14.34 0.47 119.22 0.74
MBLF MBLA Financial Corp. of MO(8) 13.61 13.61 0.66 4.84 5.04 0.84 6.12 0.19 127.59 0.50
MFBC MFB Corp. of Mishawaka IN 15.39 15.39 0.52 2.94 3.31 0.81 4.55 0.09 171.72 0.22
MLBC ML Bancorp of Villanova PA 7.53 7.34 0.72 9.34 6.51 0.65 8.43 0.61 129.89 1.81
MBB MSB Bancorp of Middletown NY* 6.55 2.57 0.18 2.32 2.35 0.20 2.58 0.78 26.77 0.54
MSBF MSB Financial Corp. of MI 19.09 19.09 1.29 6.04 5.73 1.59 7.46 0.78 72.91 0.61
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HARL Harleysville SA of PA 17.86 159.74 10.05 159.74 11.70 0.40 2.00 35.71
HARS Harris SB, MHC of PA (24.2) NM 166.39 14.24 197.29 NM 0.58 2.65 NM
HFFB Harrodsburg 1st Fin Bcrp of KY NM 115.85 32.14 115.85 24.30 0.40 2.32 74.07
HHFC Harvest Home Fin. Corp. of OH NM 97.31 12.02 97.31 24.68 0.40 3.95 NM
HAVN Haven Bancorp of Woodhaven NY 15.39 140.98 8.46 141.82 10.17 0.60 1.96 30.15
HVFD Haverfield Corp. of OH 23.73 126.01 10.30 126.18 10.59 0.54 2.88 68.35
HTHR Hawthorne Fin. Corp. of CA 4.42 95.92 3.69 95.92 7.04 0.00 0.00 0.00
HBNK Highland Federal Bank of CA NM 154.81 11.02 154.81 22.60 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 12.03 128.29 12.22 128.29 12.03 0.36 1.89 22.78
HBEI Home Bancorp of Elgin IL NM 106.23 28.37 106.23 NM 0.00 0.00 0.00
HBFW Home Bancorp of Fort Wayne IN NM 111.41 16.13 111.41 19.05 0.20 1.02 32.26
HBBI Home Building Bancorp of IN NM 117.71 14.70 117.71 NM 0.30 1.43 NM
HCFC Home City Fin. Corp. of OH 23.73 100.72 20.09 100.72 18.18 0.00 0.00 0.00
HOMF Home Fed Bancorp of Seymour IN 15.36 178.46 14.55 185.19 12.97 0.40 1.45 22.35
HWEN Home Financial Bancorp of IN NM 91.44 18.31 91.44 26.92 0.20 1.43 55.56
HPBC Home Port Bancorp, Inc. of MA* 11.13 171.20 17.82 171.20 11.06 0.80 4.38 48.78
HMCI Homecorp, Inc. of Rockford IL NM 117.47 7.05 117.47 21.46 0.00 0.00 0.00
LOAN Horizon Bancorp, Inc of TX(8)* 23.53 NM 22.36 NM 25.53 0.16 0.67 15.69
HZFS Horizon Fin'l. Services of IA NM 91.92 9.86 91.92 NM 0.32 1.80 NM
HRZB Horizon Financial Corp. of WA* 13.48 124.60 19.86 124.60 13.84 0.40 2.58 34.78
IBSF IBS Financial Corp. of NJ NM 123.07 23.93 123.07 24.15 0.32 1.79 69.57
ISBF ISB Financial Corp. of LA NM 149.84 24.54 154.50 24.11 0.34 1.42 46.58
ITLA Imperial Thrift & Loan of CA* 13.68 144.67 17.01 144.67 13.68 0.00 0.00 0.00
IFSB Independence FSB of DC NM 69.07 4.65 79.79 23.08 0.22 2.44 NM
INCB Indiana Comm. Bank, SB of IN NM 138.43 17.03 138.43 NM 0.36 2.15 NM
IFSL Indiana Federal Corp. of IN(8) 24.53 177.73 15.37 190.49 17.50 0.72 2.74 67.29
INBI Industrial Bancorp of OH 28.98 113.03 21.49 113.03 15.00 0.40 3.14 NM
IWBK Interwest SB of Oak Harbor WA 23.39 249.83 17.03 NM 16.63 0.56 1.54 36.13
IPSW Ipswich SB of Ipswich MA* 10.60 193.00 11.96 193.00 13.11 0.20 1.25 13.25
JSBF JSB Financial, Inc. of NY 15.38 119.05 25.72 119.05 15.38 1.40 3.50 53.85
JXVL Jacksonville Bancorp of TX 27.78 111.69 18.16 111.69 18.52 0.50 3.33 NM
JXSB Jcksnville SB,MHC of IL (44.6) NM 124.90 14.38 125.19 NM 0.40 2.46 NM
JSBA Jefferson Svgs Bancorp of MO NM 153.61 11.12 186.34 18.18 0.40 1.33 64.52
JOAC Joachim Bancorp of MO NM 99.64 29.45 99.64 NM 0.50 3.57 NM
KSAV KS Bancorp of Kenly NC 15.80 95.41 12.98 95.50 11.90 0.60 3.04 48.00
KSBK KSB Bancorp of Kingfield ME(8)* 12.32 154.55 10.54 166.91 12.32 0.20 0.59 7.25
KFBI Klamath First Bancorp of OR 26.83 102.03 23.12 102.03 18.09 0.28 1.80 48.28
LBFI L&B Financial of S. Springs TX(8) NM 108.56 18.91 108.56 24.64 0.40 2.35 NM
LSBI LSB Fin. Corp. of Lafayette IN 22.22 109.83 10.32 109.83 24.39 0.32 1.60 35.56
LVSB Lakeview SB of Paterson NJ 13.44 155.37 15.92 195.04 NM 0.25 0.83 11.11
LARK Landmark Bancshares of KS 21.07 105.22 15.51 105.22 17.20 0.40 2.13 44.94
LARL Laurel Capital Group of PA 13.45 136.27 14.59 136.27 10.48 0.44 2.26 30.34
LSBX Lawrence Savings Bank of MA* 8.02 144.51 12.42 144.51 8.02 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.2) NM 148.44 23.90 148.44 22.35 0.68 3.58 NM
LXMO Lexington B&L Fin. Corp. of MO NM 96.09 29.23 96.09 28.50 0.00 0.00 0.00
LIFB Life Bancorp of Norfolk VA 22.70 128.83 13.70 133.09 17.03 0.44 2.23 50.57
LFBI Little Falls Bancorp of NJ NM 96.89 14.42 105.18 NM 0.10 0.71 62.50
LOGN Logansport Fin. Corp. of IN 17.81 105.86 21.02 105.86 13.98 0.40 3.08 54.79
LONF London Financial Corp. of OH 29.33 100.93 21.62 100.93 20.07 0.24 1.57 46.15
LISB Long Island Bancorp of NY 29.07 180.82 17.50 180.82 23.98 0.60 1.56 45.45
MAFB MAF Bancorp of IL 22.98 166.39 12.91 192.77 15.23 0.36 0.91 20.81
MBLF MBLA Financial Corp. of MO(8) 19.85 95.38 12.98 95.38 15.70 0.40 1.98 39.22
MFBC MFB Corp. of Mishawaka IN NM 96.50 14.85 96.50 19.53 0.32 1.71 51.61
MLBC ML Bancorp of Villanova PA 15.37 143.55 10.80 147.20 17.03 0.38 2.19 33.63
MBB MSB Bancorp of Middletown NY* NM 95.71 6.26 243.51 NM 0.60 3.20 NM
MSBF MSB Financial Corp. of MI 17.44 105.87 20.21 105.87 14.12 0.50 2.41 42.02
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MGNL Magna Bancorp of MS 9.71 9.32 1.36 13.93 6.48 1.67 17.08 3.81 19.52 1.09
MARN Marion Capital Holdings of IN 22.74 22.74 1.15 4.90 5.24 1.42 6.06 0.95 121.70 1.37
MFCX Marshalltown Fin. Corp. of IA(8) 15.58 15.58 0.06 0.36 0.34 0.41 2.63 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.39 8.25 0.79 9.61 7.35 0.55 6.74 0.48 84.24 0.46
MASB MassBank Corp. of Reading MA* 10.39 10.39 1.08 10.62 8.48 1.02 9.98 0.27 100.30 0.94
MFLR Mayflower Co-Op. Bank of MA* 9.86 9.67 0.92 9.28 6.76 0.88 8.88 1.13 82.25 1.44
MECH Mechanics SB of Hartford CT* 10.04 10.04 -0.34 -6.20 -2.57 -0.32 -5.92 2.06 56.89 1.71
MDBK Medford Savings Bank of MA* 8.90 8.21 1.05 11.73 8.00 1.02 11.47 0.53 139.29 1.34
MERI Meritrust FSB of Thibodaux LA 7.26 7.26 0.55 7.37 4.48 0.93 12.52 0.48 62.95 0.61
MWBX Metro West of MA* 7.50 7.50 1.33 17.67 9.29 1.36 18.05 2.21 46.46 1.39
MCBS Mid Continent Bancshares of KS 10.64 10.64 1.04 8.88 6.10 1.26 10.79 0.15 82.23 0.23
MIFC Mid Iowa Financial Corp. of IA 9.15 9.14 0.73 7.82 5.88 1.03 11.11 0.13 181.46 0.44
MCBN Mid-Coast Bancorp of ME 8.78 8.78 0.34 3.85 4.32 0.58 6.53 0.41 120.43 0.60
MIDC Midconn Bank of Kensington CT(8)* 9.72 8.19 0.51 5.39 3.96 0.64 6.75 1.96 27.19 0.68
MWBI Midwest Bancshares, Inc. of IA 7.04 7.04 0.46 6.68 6.77 0.77 11.07 0.47 103.85 0.82
MWFD Midwest Fed. Fin. Corp of WI 8.39 8.02 1.04 11.36 6.50 1.01 11.07 0.24 322.17 1.04
MFFC Milton Fed. Fin. Corp. of OH 15.42 15.42 0.62 3.29 3.41 0.78 4.16 0.34 79.06 0.42
MIVI Miss. View Hold. Co. of MN 18.33 18.33 0.80 4.19 4.45 1.08 5.67 0.07 NA 1.99
MBSP Mitchell Bancorp of NC* 42.08 42.08 0.50 1.20 1.20 1.54 3.66 2.56 17.67 0.60
MBBC Monterey Bay Bancorp of CA 13.99 13.86 0.13 0.89 0.72 0.39 2.68 0.48 83.49 0.56
MSBK Mutual SB, FSB of Bay City MI 6.09 6.09 -0.02 -0.32 -0.44 -0.02 -0.43 0.13 208.44 0.73
NHTB NH Thrift Bancshares of NH 7.27 7.27 0.40 5.27 5.11 0.60 7.90 1.10 58.61 0.79
NSLB NS&L Bancorp of Neosho MO 19.71 19.71 0.56 2.44 2.69 0.79 3.46 0.04 186.36 0.13
NMSB Newmil Bancorp. of CT* 10.50 10.50 0.81 7.53 6.26 0.78 7.28 1.86 86.77 3.07
NASB North American SB of MO 7.19 6.93 1.13 15.81 8.69 1.17 16.41 NA NA 0.93
NBSI North Bancshares of Chicago IL 15.13 15.13 0.43 2.62 2.69 0.65 3.96 NA NA 0.30
FFFD North Central Bancshares of IA 28.33 28.33 1.52 6.32 5.31 1.79 7.46 0.21 474.69 1.19
NEBC Northeast Bancorp of ME* 7.05 5.96 0.44 5.86 5.57 0.35 4.74 1.36 79.76 1.43
NEIB Northeast Indiana Bncrp of IN 17.45 17.45 1.01 4.97 5.26 1.22 5.96 0.20 320.13 0.73
NWEQ Northwest Equity Corp. of WI 12.14 12.14 0.70 5.17 4.85 0.91 6.73 1.19 39.21 0.58
NWSB Northwest SB, MHC of PA (29.9) 9.99 9.52 0.72 6.94 3.58 1.04 10.04 0.86 81.23 0.93
NSSY Norwalk Savings Society of CT* 7.21 6.92 0.81 10.33 7.49 0.67 8.48 2.21 38.08 1.18
NSSB Norwich Financial Corp. of CT* 11.20 10.47 0.95 8.84 6.04 0.90 8.33 1.66 134.62 3.29
NTMG Nutmeg FS&LA of CT 5.37 5.37 0.32 5.67 5.71 0.33 5.81 NA NA 0.51
OHSL OHSL Financial Corp. of OH 11.57 11.57 0.57 4.63 4.41 0.85 6.95 0.22 107.97 0.33
OSBF OSB Fin. Corp. of Oshkosh WI(8) 12.39 12.39 0.04 0.29 0.25 0.46 3.66 0.17 247.22 0.62
OCFC Ocean Fin. Corp. of NJ 20.73 20.73 -0.29 -2.66 -1.21 0.88 7.99 0.80 62.07 0.91
OFCP Ottawa Financial Corp. of MI 9.11 7.20 0.40 3.14 2.54 0.83 6.42 0.32 113.73 0.44
PFFB PFF Bancorp of Pomona CA 11.12 10.99 0.05 0.47 0.38 0.39 3.47 1.93 53.40 1.42
PSFI PS Financial of Chicago IL 42.11 42.11 2.11 5.01 5.19 2.11 5.01 NA NA NA
PVFC PVF Capital Corp. of OH 6.84 6.84 0.99 14.81 8.61 1.31 19.64 0.68 107.66 0.82
PCCI Pacific Crest Capital of CA* 9.04 9.04 1.19 15.94 8.38 1.02 13.60 2.24 53.13 1.69
PALM Palfed, Inc. of Aiken SC 8.00 7.63 0.37 4.51 3.04 0.59 7.31 3.44 34.31 1.51
PBCI Pamrapo Bancorp, Inc. of NJ 14.74 14.63 0.81 5.27 4.70 1.17 7.63 3.45 23.22 1.35
PFED Park Bancorp of Chicago IL 23.51 23.51 0.50 3.51 1.89 0.81 5.69 0.15 188.68 0.76
PVSA Parkvale Financial Corp of PA 7.52 7.45 0.77 10.40 6.83 1.06 14.30 0.26 596.13 2.23
PBIX Patriot Bank Corp. of PA 10.50 10.50 0.40 2.96 2.03 0.67 4.97 0.15 247.00 0.70
PEEK Peekskill Fin. Corp. of NY 29.47 29.47 1.07 3.85 3.87 1.40 5.05 1.31 25.21 1.42
PFSB PennFed Fin. Services of NJ 7.56 6.14 0.55 6.47 5.32 0.83 9.84 0.86 28.23 0.38
PWBC PennFirst Bancorp of PA 6.98 6.33 0.42 5.51 5.41 0.64 8.38 0.59 75.76 1.46
PWBK Pennwood SB of PA* 20.02 20.02 0.33 3.41 1.67 0.83 8.52 1.46 51.48 1.60
PBKB People's SB of Brockton MA* 5.61 5.33 0.75 13.51 7.46 0.47 8.50 1.02 90.38 1.79
PFDC Peoples Bancorp of Auburn IN 15.34 15.34 1.11 7.27 6.75 1.47 9.59 0.40 79.14 0.40
PBCT Peoples Bank, MHC of CT (37.4)* 8.08 8.07 1.10 13.81 5.47 0.86 10.78 1.42 85.13 1.82
PFFC Peoples Fin. Corp. of OH 26.56 26.56 0.09 0.58 0.34 0.45 2.77 0.03 772.00 0.43
PHBK Peoples Heritage Fin Grp of ME* 8.46 7.61 1.19 14.00 4.85 1.28 15.09 1.14 120.91 1.89
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MGNL Magna Bancorp of MS 15.43 208.33 20.22 217.03 12.58 0.60 3.04 46.88
MARN Marion Capital Holdings of IN 19.09 96.86 22.03 96.86 15.44 0.80 3.81 72.73
MFCX Marshalltown Fin. Corp. of IA(8) NM 108.46 16.90 108.46 NM 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 13.61 126.53 10.61 128.57 19.42 0.80 2.09 28.47
MASB MassBank Corp. of Reading MA* 11.79 120.51 12.51 120.51 12.54 1.08 2.61 30.77
MFLR Mayflower Co-Op. Bank of MA* 14.78 131.78 13.00 134.39 15.45 0.48 2.82 41.74
MECH Mechanics SB of Hartford CT* NM 127.00 12.76 127.00 NM 0.00 0.00 NM
MDBK Medford Savings Bank of MA* 12.50 140.93 12.55 152.76 12.78 0.68 2.37 29.57
MERI Meritrust FSB of Thibodaux LA 22.33 163.82 11.89 163.82 13.15 0.70 1.97 44.03
MWBX Metro West of MA* 10.77 179.43 13.45 179.43 10.54 0.12 2.37 25.53
MCBS Mid Continent Bancshares of KS 16.40 141.58 15.07 141.58 13.48 0.40 1.51 24.69
MIFC Mid Iowa Financial Corp. of IA 17.00 132.81 12.16 133.02 11.97 0.08 0.94 16.00
MCBN Mid-Coast Bancorp of ME 23.17 88.91 7.81 88.91 13.67 0.52 2.74 63.41
MIDC Midconn Bank of Kensington CT(8)* 25.26 134.53 13.08 159.68 20.17 0.78 3.25 NM
MWBI Midwest Bancshares, Inc. of IA 14.78 97.24 6.84 97.24 8.92 0.60 2.24 33.15
MWFD Midwest Fed. Fin. Corp of WI 15.38 176.64 14.83 184.80 15.79 0.30 1.67 25.64
MFFC Milton Fed. Fin. Corp. of OH 29.33 116.92 18.03 116.92 23.18 0.60 4.18 NM
MIVI Miss. View Hold. Co. of MN 22.49 96.44 17.68 96.44 16.61 0.16 1.09 24.62
MBSP Mitchell Bancorp of NC* NM 99.87 42.03 99.87 27.27 0.80 5.33 NM
MBBC Monterey Bay Bancorp of CA NM 128.21 17.93 129.40 NM 0.10 0.56 NM
MSBK Mutual SB, FSB of Bay City MI NM 71.28 4.34 71.28 NM 0.00 0.00 NM
NHTB NH Thrift Bancshares of NH 19.58 103.89 7.56 103.89 13.06 0.50 4.26 NM
NSLB NS&L Bancorp of Neosho MO NM 99.69 19.65 99.69 26.23 0.50 3.13 NM
NMSB Newmil Bancorp. of CT* 15.98 120.37 12.64 120.37 16.53 0.24 2.46 39.34
NASB North American SB of MO 11.51 173.75 12.50 180.29 11.09 0.80 2.04 23.46
NBSI North Bancshares of Chicago IL NM 104.17 15.76 104.17 24.65 0.48 2.74 NM
FFFD North Central Bancshares of IA 18.83 95.60 27.08 95.60 15.95 0.25 1.60 30.12
NEBC Northeast Bancorp of ME* 17.95 106.46 7.50 125.79 22.22 0.32 2.29 41.03
NEIB Northeast Indiana Bncrp of IN 19.00 99.72 17.40 99.72 15.83 0.32 2.25 42.67
NWEQ Northwest Equity Corp. of WI 20.64 109.13 13.25 109.13 15.84 0.44 3.23 66.67
NWSB Northwest SB, MHC of PA (29.9) 27.91 191.31 19.11 200.64 19.30 0.32 2.05 57.14
NSSY Norwalk Savings Society of CT* 13.35 132.07 9.52 137.66 16.26 0.20 0.79 10.53
NSSB Norwich Financial Corp. of CT* 16.56 143.75 16.10 153.74 17.56 0.48 2.36 39.02
NTMG Nutmeg FS&LA of CT 17.50 98.87 5.31 98.87 17.07 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 22.66 105.69 12.22 105.69 15.10 0.76 3.49 NM
OSBF OSB Fin. Corp. of Oshkosh WI(8) NM 119.58 14.82 119.58 NM 0.64 2.00 NM
OCFC Ocean Fin. Corp. of NJ NM 109.70 22.74 109.70 27.66 0.00 0.00 NM
OFCP Ottawa Financial Corp. of MI NM 129.69 11.81 164.09 19.26 0.36 1.91 NM
PFFB PFF Bancorp of Pomona CA NM 110.46 12.28 111.72 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 19.28 96.54 40.66 96.54 19.28 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH 11.61 159.86 10.94 159.86 8.75 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 11.93 158.92 14.37 158.92 13.98 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC NM 146.63 11.73 153.79 20.29 0.12 0.81 26.67
PBCI Pamrapo Bancorp, Inc. of NJ 21.28 117.99 17.39 118.91 14.71 0.90 4.50 NM
PFED Park Bancorp of Chicago IL NM 99.54 23.40 99.54 NM 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 14.63 146.64 11.02 147.99 10.64 0.52 2.02 29.55
PBIX Patriot Bank Corp. of PA NM 132.26 13.88 132.26 29.33 0.33 2.16 NM
PEEK Peekskill Fin. Corp. of NY 25.86 92.19 27.17 92.19 19.74 0.36 2.40 62.07
PFSB PennFed Fin. Services of NJ 18.80 121.49 9.18 149.45 12.36 0.28 1.21 22.76
PWBC PennFirst Bancorp of PA 18.49 107.83 7.53 118.94 12.16 0.36 2.67 49.32
PWBK Pennwood SB of PA* NM 94.73 18.96 94.73 23.95 0.28 1.95 NM
PBKB People's SB of Brockton MA* 13.40 153.12 8.60 161.29 21.31 0.36 2.77 37.11
PFDC Peoples Bancorp of Auburn IN 14.81 107.35 16.47 107.35 11.24 0.60 3.00 44.44
PBCT Peoples Bank, MHC of CT (37.4)* 18.27 234.97 19.00 235.28 23.41 0.88 2.46 44.90
PFFC Peoples Fin. Corp. of OH NM 93.52 24.84 93.52 NM 0.30 2.02 NM
PHBK Peoples Heritage Fin Grp of ME* 20.62 237.65 20.11 NM 19.13 0.72 2.27 46.75
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBNB Peoples Sav. Fin. Corp. of CT* 9.58 8.95 0.92 8.97 6.99 0.92 9.06 0.61 55.81 0.61
PERM Permanent Bancorp of IN 9.70 9.60 0.24 2.35 2.09 0.52 5.16 1.71 31.61 1.07
PMFI Perpetual Midwest Fin. of IA 8.64 8.64 0.08 0.93 0.88 0.27 3.00 0.45 151.55 0.88
PERT Perpetual of SC, MHC (46.8) 13.86 13.86 0.75 6.82 3.65 1.06 9.69 0.17 428.77 1.08
PCBC Perry Co. Fin. Corp. of MO 18.57 18.57 0.58 2.96 3.13 0.94 4.77 NA NA 0.21
PHFC Pittsburgh Home Fin. of PA 15.55 15.55 0.43 4.09 2.53 0.71 6.74 1.22 47.30 0.83
PFSL Pocahnts Fed, MHC of AR (46.4) 6.25 6.25 0.55 9.19 6.81 0.79 13.13 0.32 141.55 1.25
POBS Portsmouth Bank Shrs Inc of NH(8)* 24.91 24.91 2.27 9.02 6.60 1.85 7.32 0.29 89.58 0.76
PKPS Poughkeepsie SB of NY 8.15 8.15 1.48 18.05 17.04 2.35 28.55 4.49 21.98 1.33
PRBC Prestige Bancorp of PA 13.46 13.46 0.14 1.20 1.03 0.47 4.00 0.18 170.81 0.43
PETE Primary Bank of NH* 6.58 6.57 0.84 13.19 9.44 0.84 13.11 1.40 45.71 1.16
PSAB Prime Bancorp, Inc. of PA 8.49 7.97 0.73 7.99 4.25 0.95 10.41 1.34 45.65 1.00
PFNC Progress Financial Corp. of PA 5.20 4.50 0.34 6.59 3.72 0.45 8.58 0.98 61.67 0.96
PSBK Progressive Bank, Inc. of NY* 8.21 7.18 1.14 13.13 10.37 1.17 13.51 1.05 94.69 1.53
PROV Provident Fin. Holdings of CA 14.64 14.64 0.21 2.06 1.35 -0.01 -0.09 1.95 46.19 1.08
PULB Pulaski SB, MHC of MO (29.0) 12.59 12.59 0.49 3.91 2.51 0.78 6.24 NA NA 0.34
PULS Pulse Bancorp of S. River NJ 7.77 7.77 0.72 7.81 6.22 1.09 11.75 1.23 39.65 1.79
QCFB QCF Bancorp of Virginia MN 17.64 17.64 1.24 6.25 7.14 1.24 6.25 NA NA NA
QCBC Quaker City Bancorp of CA 8.87 8.85 0.27 2.91 2.77 0.54 5.70 1.81 61.38 1.30
QCSB Queens County SB of NY* 15.56 15.56 1.61 9.81 5.06 1.63 9.95 0.72 98.47 0.83
RCSB RCSB Financial, Inc. of NY* 6.87 6.64 0.91 11.05 6.82 0.88 10.76 0.74 94.44 1.37
RARB Raritan Bancorp. of Raritan NJ* 7.84 7.68 0.83 11.06 8.04 0.92 12.23 0.44 183.19 1.26
REDF RedFed Bancorp of Redlands CA 8.06 8.06 -0.77 -12.38 -6.09 -0.46 -7.51 3.94 29.77 1.40
RELY Reliance Bancorp of NY 8.28 5.77 0.54 5.96 4.87 0.84 9.16 0.97 25.31 0.54
RELI Reliance Bancshares Inc of WI(8)* 61.06 61.06 1.32 2.16 3.51 1.32 2.16 NA NA 0.56
RIVR River Valley Bancorp of IN 17.31 17.31 0.84 4.84 4.33 0.84 4.84 NA NA NA
RFED Roosevelt Fin. Grp. Inc. of MO 5.55 5.22 0.06 1.20 0.53 0.85 17.17 0.83 28.67 0.51
RSLN Roslyn Bancorp of NY* 25.33 25.33 1.34 5.28 4.54 1.23 4.84 NA NA NA
RVSB Rvrview SB,FSB MHC of WA(41.7) 10.87 9.79 0.97 8.90 5.21 1.16 10.59 0.20 166.22 0.52
SCCB S. Carolina Comm. Bnshrs of SC 28.65 28.65 0.85 2.93 2.79 1.14 3.92 NA NA 0.87
SBFL SB Fngr Lakes MHC of NY (33.1) 10.14 10.14 -0.57 -5.05 -4.14 0.10 0.87 1.15 49.69 1.27
SFED SFS Bancorp of Schenectady NY 12.75 12.75 0.45 3.23 3.52 0.81 5.85 0.66 59.05 0.55
SGVB SGV Bancorp of W. Covina CA 8.42 8.42 0.08 0.79 0.78 0.31 3.23 0.92 31.65 0.39
SISB SIS Bank of Springfield MA* 7.56 7.56 1.50 20.09 11.85 1.45 19.46 0.59 203.71 2.55
SJSB SJS Bancorp of St. Joseph MI(8) 10.41 10.41 0.17 1.51 1.13 0.49 4.26 0.35 129.05 0.66
SWCB Sandwich Co-Op. Bank of MA* 8.32 7.89 0.93 11.17 6.76 0.94 11.23 0.75 102.83 1.13
SFBM Security Bancorp of MT(8) 8.09 6.97 0.53 6.24 4.26 0.63 7.42 0.39 86.91 0.61
SECP Security Capital Corp. of WI 15.53 15.53 0.99 6.03 4.35 1.27 7.80 0.10 NA 1.51
SFSL Security First Corp. of OH 9.23 9.07 0.95 10.43 5.92 1.31 14.30 0.21 377.44 0.89
SMFC Sho-Me Fin. Corp. of MO 10.07 10.07 0.79 7.17 5.35 0.98 8.83 0.06 980.22 0.70
SOBI Sobieski Bancorp of S. Bend IN 17.66 17.66 0.21 1.19 1.36 0.51 2.83 0.11 222.22 0.37
SOSA Somerset Savings Bank of MA(8)* 5.67 5.67 0.46 8.38 5.53 0.46 8.38 8.41 14.61 1.58
SSFC South Street Fin. Corp. of NC* 28.43 28.43 1.34 4.71 3.97 1.43 5.02 NA NA 0.39
SCBS Southern Commun. Bncshrs of AL 20.77 20.77 0.62 3.01 2.91 1.11 5.34 NA NA NA
SMBC Southern Missouri Bncrp of MO 16.41 16.41 0.94 5.51 5.54 0.88 5.15 0.71 56.68 0.64
SWBI Southwest Bancshares of IL 10.43 10.43 0.72 6.38 5.06 1.03 9.06 0.22 93.24 0.30
SVRN Sovereign Bancorp of PA 4.02 2.84 0.51 12.69 6.07 0.67 16.74 0.68 53.74 0.57
STFR St. Francis Cap. Corp. of WI 8.93 8.49 0.72 7.28 6.53 0.75 7.56 NA NA 0.82
SPBC St. Paul Bancorp, Inc. of IL 8.91 8.88 0.62 6.89 4.40 0.92 10.24 0.57 149.12 1.19
STND Standard Fin. of Chicago IL 11.25 11.23 0.55 4.40 3.61 0.75 6.01 0.16 176.36 0.47
SFFC StateFed Financial Corp. of IA 17.99 17.99 0.97 4.98 5.17 1.22 6.27 1.27 23.88 0.37
SFIN Statewide Fin. Corp. of NJ 9.87 9.85 0.38 3.40 2.96 0.89 7.89 0.92 57.17 1.09
STSA Sterling Financial Corp. of WA 3.90 3.19 0.14 3.41 2.36 0.25 6.03 0.58 93.09 0.88
SSBK Strongsville SB of OH 7.60 7.47 0.67 8.42 5.83 0.85 10.58 0.42 62.45 0.34
SFSB SuburbFed Fin. Corp. of IL 6.50 6.47 0.28 4.06 3.78 0.50 7.29 0.28 84.20 0.42
SBCN Suburban Bancorp. of OH 11.81 11.81 0.19 1.48 1.60 0.62 4.95 0.13 NA 1.84
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PBNB Peoples Sav. Fin. Corp. of CT* 14.31 124.55 11.93 133.23 14.17 0.92 3.05 43.60
PERM Permanent Bancorp of IN NM 114.40 11.10 115.55 21.78 0.30 1.36 65.22
PMFI Perpetual Midwest Fin. of IA NM 109.31 9.45 109.31 NM 0.30 1.56 NM
PERT Perpetual of SC, MHC (46.8) 27.37 134.51 18.65 134.51 19.26 0.00 0.00 0.00
PCBC Perry Co. Fin. Corp. of MO NM 97.62 18.13 97.62 19.83 0.30 1.74 55.56
PHFC Pittsburgh Home Fin. of PA NM 99.80 15.52 99.80 23.97 0.24 1.64 64.86
PFSL Pocahnts Fed, MHC of AR (46.4) 14.68 129.19 8.07 129.19 10.28 0.84 4.54 66.67
POBS Portsmouth Bank Shrs Inc of NH(8)* 15.15 137.74 34.32 137.74 18.67 0.60 3.74 56.60
PKPS Poughkeepsie SB of NY 5.87 103.23 8.41 103.23 3.71 0.10 1.74 10.20
PRBC Prestige Bancorp of PA NM 91.26 12.28 91.26 29.24 0.12 0.82 NM
PETE Primary Bank of NH* 10.59 128.76 8.48 129.05 10.66 0.00 0.00 0.00
PSAB Prime Bancorp, Inc. of PA 23.55 186.29 15.82 198.53 18.08 0.68 3.36 NM
PFNC Progress Financial Corp. of PA 26.88 166.42 8.65 191.99 20.63 0.08 0.90 24.24
PSBK Progressive Bank, Inc. of NY* 9.65 122.30 10.04 139.72 9.38 0.68 2.92 28.22
PROV Provident Fin. Holdings of CA NM 102.60 15.02 102.60 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.0) NM 155.81 19.62 155.81 25.00 1.00 5.97 NM
PULS Pulse Bancorp of S. River NJ 16.09 142.42 11.07 142.42 10.69 0.70 3.78 60.87
QCFB QCF Bancorp of Virginia MN 14.02 100.82 17.79 100.82 14.02 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA NM 104.87 9.30 105.10 18.38 0.00 0.00 0.00
QCSB Queens County SB of NY* 19.75 195.31 30.39 195.31 19.47 1.00 1.85 36.50
RCSB RCSB Financial, Inc. of NY* 14.66 186.71 12.83 193.21 15.05 0.60 1.77 25.97
RARB Raritan Bancorp. of Raritan NJ* 12.43 129.62 10.16 132.32 11.24 0.70 2.98 37.04
REDF RedFed Bancorp of Redlands CA NM 156.59 12.62 156.59 NM 0.00 0.00 NM
RELY Reliance Bancorp of NY 20.55 121.28 10.04 174.16 13.36 0.56 2.62 53.85
RELI Reliance Bancshares Inc of WI(8)* 28.48 61.43 37.51 61.43 28.48 0.00 0.00 0.00
RIVR River Valley Bancorp of IN 23.11 111.72 19.34 111.72 23.11 0.00 0.00 0.00
RFED Roosevelt Fin. Grp. Inc. of MO NM 229.59 12.75 244.30 13.16 0.68 3.02 NM
RSLN Roslyn Bancorp of NY* 22.04 116.43 29.50 116.43 24.05 0.00 0.00 0.00
RVSB Rvrview SB,FSB MHC of WA(41.7) 19.21 164.27 17.85 182.32 16.15 0.22 1.21 23.16
SCCB S. Carolina Comm. Bnshrs of SC NM 108.14 30.98 108.14 26.76 0.60 3.16 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 124.78 12.66 124.78 NM 0.40 2.86 NM
SFED SFS Bancorp of Schenectady NY 28.45 99.58 12.70 99.58 15.71 0.24 1.45 41.38
SGVB SGV Bancorp of W. Covina CA NM 104.29 8.78 104.29 NM 0.00 0.00 0.00
SISB SIS Bank of Springfield MA* 8.44 150.20 11.35 150.20 8.71 0.48 1.79 15.14
SJSB SJS Bancorp of St. Joseph MI(8) NM 144.34 15.03 144.34 NM 0.44 1.77 NM
SWCB Sandwich Co-Op. Bank of MA* 14.79 158.79 13.20 167.27 14.73 1.20 3.72 55.05
SFBM Security Bancorp of MT(8) 23.48 148.82 12.04 172.80 19.75 0.46 1.48 34.85
SECP Security Capital Corp. of WI 22.97 137.27 21.32 137.27 17.77 1.20 1.42 32.52
SFSL Security First Corp. of OH 16.90 153.15 14.14 155.98 12.33 0.44 2.48 41.90
SMFC Sho-Me Fin. Corp. of MO 18.71 136.80 13.78 136.80 15.19 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 88.55 15.64 88.55 NM 0.28 2.00 NM
SOSA Somerset Savings Bank of MA(8)* 18.07 145.40 8.25 145.40 18.07 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 25.21 118.86 33.79 118.86 23.68 0.32 2.05 51.61
SCBS Southern Commun. Bncshrs of AL NM 103.38 21.47 103.38 19.37 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO 18.06 101.50 16.65 101.50 19.35 0.50 3.08 55.56
SWBI Southwest Bancshares of IL 19.75 130.62 13.62 130.62 13.91 0.76 3.85 NM
SVRN Sovereign Bancorp of PA 16.48 196.59 7.90 NM 12.50 0.10 0.67 10.99
STFR St. Francis Cap. Corp. of WI 15.31 115.91 10.36 122.03 14.73 0.48 1.76 26.97
SPBC St. Paul Bancorp, Inc. of IL 22.71 153.29 13.65 153.74 15.27 0.48 1.84 41.74
STND Standard Fin. of Chicago IL 27.70 125.92 14.17 126.15 20.30 0.40 1.95 54.05
SFFC StateFed Financial Corp. of IA 19.35 97.40 17.52 97.40 15.38 0.40 2.22 43.01
SFIN Statewide Fin. Corp. of NJ NM 121.33 11.97 121.61 14.56 0.40 2.52 NM
STSA Sterling Financial Corp. of WA NM 153.06 5.97 186.86 23.91 0.00 0.00 0.00
SSBK Strongsville SB of OH 17.14 140.76 10.70 143.37 13.64 0.48 2.00 34.29
SFSB SuburbFed Fin. Corp. of IL 26.49 106.36 6.91 106.87 14.74 0.32 1.44 38.10
SBCN Suburban Bancorp. of OH NM 92.80 10.96 92.80 18.68 0.60 3.69 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of February 21, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Reported Earnings Core Earnings
Equity/ Equity/ ______________________ _______________ NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THRD TF Financial Corp. of PA 11.20 9.78 0.61 4.72 4.35 0.82 6.36 0.32 79.91 0.57
ROSE TR Financial Corp. of NY 6.35 6.35 0.97 15.00 9.42 0.78 12.01 NA NA 0.86
TPNZ Tappan Zee Fin. Corp. of NY 17.93 17.93 0.69 4.16 3.47 0.64 3.84 2.12 26.73 1.22
PTRS The Potters S&L Co. of OH 8.21 8.21 0.03 0.28 0.31 0.39 4.17 2.20 76.26 3.61
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 19.38 18.97 1.66 8.70 5.85 1.29 6.78 0.36 91.15 0.52
TRIC Tri-County Bancorp of WY 15.31 15.31 0.71 4.18 4.75 0.95 5.59 0.07 801.92 1.19
THBC Troy Hill Bancorp of PA(8) 18.11 18.11 1.01 4.92 4.10 1.18 5.76 1.39 49.75 0.81
TWIN Twin City Bancorp of TN 12.53 12.53 0.78 5.80 5.19 0.99 7.34 0.53 37.63 0.27
UFRM United FS&LA of Rocky Mount NC 7.49 7.49 0.28 3.47 2.83 0.49 6.19 1.20 93.51 1.62
UBMT United Fin. Corp. of MT 22.54 22.54 1.20 5.25 5.32 1.46 6.40 0.70 9.92 0.22
VABF Va. Beach Fed. Fin. Corp of VA 6.60 6.60 0.03 0.49 0.36 0.21 3.29 1.42 51.34 1.00
VFFC Virginia First Savings of VA 7.82 7.58 1.40 18.17 11.52 1.40 18.17 2.32 44.65 1.17
WHGB WHG Bancshares of MD 23.84 23.84 0.75 4.87 3.10 0.75 4.87 0.50 40.63 0.26
WSFS WSFS Financial Corp. of DE* 6.18 6.12 1.46 24.96 12.05 1.48 25.31 2.86 65.77 2.95
WVFC WVS Financial Corp. of PA* 12.72 12.72 1.07 7.76 6.10 1.35 9.79 0.36 204.24 1.31
WRNB Warren Bancorp of Peabody MA* 9.60 9.60 1.86 20.41 11.25 1.76 19.27 1.75 73.15 2.03
WFSL Washington FS&LA of Seattle WA 11.31 10.14 1.62 13.75 6.55 1.80 15.31 1.15 25.89 0.41
WAMU Washington Mutual Inc. of WA* 6.32 5.70 0.98 15.83 3.00 0.99 16.01 0.56 115.82 0.98
WYNE Wayne Bancorp of NJ 14.99 14.99 0.02 0.18 0.12 0.14 1.16 1.17 61.42 1.26
WAYN Wayne S&L Co. MHC of OH (47.8) 8.98 8.98 0.25 2.71 1.53 0.60 6.61 0.61 58.24 0.42
WCFB Wbstr Cty FSB MHC of IA (45.2) 22.89 22.89 0.87 3.89 2.91 1.20 5.35 0.45 92.96 0.73
WBST Webster Financial Corp. of CT 5.02 3.88 0.65 12.43 7.82 0.68 12.87 0.85 110.74 1.45
WEFC Wells Fin. Corp. of Wells MN 13.79 13.79 0.55 3.80 3.33 0.93 6.44 0.34 87.34 0.33
WCBI WestCo Bancorp of IL 15.50 15.50 0.98 6.33 5.52 1.34 8.63 0.53 54.54 0.40
WSTR WesterFed Fin. Corp. of MT 14.11 14.11 0.61 4.49 3.86 0.86 6.29 0.23 155.72 0.54
WOFC Western Ohio Fin. Corp. of OH 16.73 15.74 0.89 3.89 4.88 0.73 3.19 NA NA 0.55
WWFC Westwood Fin. Corp. of NJ 10.19 8.93 0.04 0.40 0.33 0.71 6.86 0.14 155.97 0.54
WEHO Westwood Hmstd Fin Corp of OH 33.33 33.33 0.35 1.51 0.95 0.67 2.90 0.03 459.38 0.18
WFCO Winton Financial Corp. of OH(8) 7.13 6.95 0.66 8.78 6.83 0.84 11.18 0.51 57.75 0.34
FFWD Wood Bancorp of OH 12.78 12.78 0.91 6.64 5.71 1.16 8.49 0.29 120.40 0.45
YFCB Yonkers Fin. Corp. of NY 16.63 16.63 0.76 5.18 4.22 1.08 7.36 1.30 27.74 1.07
YFED York Financial Corp. of PA 8.15 8.15 0.55 6.54 4.81 0.74 8.89 2.14 29.56 0.73
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THRD TF Financial Corp. of PA 22.99 109.85 12.30 125.81 17.08 0.40 2.15 49.38
ROSE TR Financial Corp. of NY 10.61 154.78 9.83 154.78 13.25 0.88 2.51 26.59
TPNZ Tappan Zee Fin. Corp. of NY 28.85 107.45 19.26 107.45 NM 0.20 1.33 38.46
PTRS The Potters S&L Co. of OH NM 96.37 7.91 96.37 22.04 0.28 1.43 NM
TSBS Trenton SB, FSB MHC of NJ(35.0(8) 17.11 144.57 28.02 147.73 21.96 0.35 2.15 36.84
TRIC Tri-County Bancorp of WY 21.07 86.85 13.30 86.85 15.76 0.60 3.20 67.42
THBC Troy Hill Bancorp of PA(8) 24.39 118.55 21.47 118.55 20.83 0.40 2.00 48.78
TWIN Twin City Bancorp of TN 19.28 116.30 14.57 116.30 15.23 0.64 3.53 68.09
UFRM United FS&LA of Rocky Mount NC NM 126.24 9.45 126.24 19.83 0.20 2.46 NM
UBMT United Fin. Corp. of MT 18.81 99.30 22.38 99.30 15.43 0.94 4.76 NM
VABF Va. Beach Fed. Fin. Corp of VA NM 138.65 9.15 138.65 NM 0.20 1.80 NM
VFFC Virginia First Savings of VA 8.68 145.27 11.36 149.81 8.68 0.10 0.65 5.65
WHGB WHG Bancshares of MD NM 96.59 23.03 96.59 NM 0.20 1.44 46.51
WSFS WSFS Financial Corp. of DE* 8.30 189.92 11.73 191.76 8.19 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 16.40 127.41 16.21 127.41 13.01 0.80 3.11 50.96
WRNB Warren Bancorp of Peabody MA* 8.89 170.03 16.32 170.03 9.41 0.44 2.75 24.44
WFSL Washington FS&LA of Seattle WA 15.27 192.07 21.72 214.27 13.71 0.87 3.24 49.43
WAMU Washington Mutual Inc. of WA* NM NM 31.94 NM NM 1.00 1.76 58.82
WYNE Wayne Bancorp of NJ NM 104.78 15.71 104.78 NM 0.00 0.00 0.00
WAYN Wayne S&L Co. MHC of OH (47.8) NM 177.86 15.97 177.86 26.75 0.92 3.44 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 133.50 30.56 133.50 25.00 0.80 5.82 NM
WBST Webster Financial Corp. of CT 12.78 159.34 7.99 205.73 12.34 0.72 1.82 23.30
WEFC Wells Fin. Corp. of Wells MN NM 116.99 16.13 116.99 17.76 0.00 0.00 0.00
WCBI WestCo Bancorp of IL 18.11 115.02 17.82 115.02 13.27 0.60 2.81 50.85
WSTR WesterFed Fin. Corp. of MT 25.94 114.77 16.19 114.77 18.53 0.40 1.93 50.00
WOFC Western Ohio Fin. Corp. of OH 20.48 84.51 14.14 89.85 25.00 1.00 4.65 NM
WWFC Westwood Fin. Corp. of NJ NM 122.03 12.44 139.21 17.65 0.20 1.11 NM
WEHO Westwood Hmstd Fin Corp of OH NM 97.80 32.59 97.80 NM 0.28 2.04 NM
WFCO Winton Financial Corp. of OH(8) 14.64 117.25 8.36 120.23 11.50 0.42 3.41 50.00
FFWD Wood Bancorp of OH 17.50 115.22 14.73 115.22 13.70 0.40 2.54 44.44
YFCB Yonkers Fin. Corp. of NY 23.68 98.25 16.34 98.25 16.67 0.20 1.48 35.09
YFED York Financial Corp. of PA 20.79 132.90 10.83 132.90 15.29 0.60 3.24 67.42
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
Historical Stock Price Indices(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
February 21, 1997 6931.6 801.8 1,334.3 571.8 319.3
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
<TABLE>
<CAPTION>
MONTHLY MARKET REPORT
Index Values
Index Values Percent Change
<S> <C> <C> <C> <C> <C> <C> <C>
01/31/97 12/31/96 12/31/96 02/01/96 1 Month YTD 52 Week
All Pub. Traded Thrifts 520.1 483.6 483.6 371.0 7.5 7.5 40.2
MHC Index 585.7 538.0 538.0 460.5 8.9 8.9 27.2
Insurance Indices
- ---------------------------------------------------------------------------------------------------
SAIF Thrifts 460.1 439.2 439.2 348.7 4.8 4.8 31.9
BIF Thrifts 700.0 616.8 616.8 438.1 13.5 13.5 59.8
Stock Exchange Indices
- ----------------------------------------------------------------------------------------------------
AMEX Thrifts 165.2 156.2 156.2 136.1 5.8 5.8 21.4
NYSE Thrifts 296.7 277.3 277.3 243.8 7.0 7.0 21.7
OTC Thrifts 609.5 569.7 569.7 450.0 7.0 7.0 35.4
Geographic Indices
- ----------------------------------------------------------------------------------------------------
New England Thrifts 463.8 428.9 428.9 320.9 8.1 8.1 44.5
Mid-Atlantic Thrifts 1,029.5 970.7 970.7 716.7 6.1 6.1 43.6
Southwestern Thrifts 325.9 315.9 315.9 254.7 3.2 3.2 28.0
Midwestern Thrifts 1,192.9 1,159.3 1,159.3 949.9 2.9 2.9 25.6
Southeastern Thrifts 462.5 447.2 447.2 367.1 3.4 3.4 26.0
Western Thrifts 527.6 474.7 474.7 361.2 11.1 11.1 46.1
Asset Size Indices
- ----------------------------------------------------------------------------------------------------
Les than $250 M 607.3 586.6 586.6 539.5 3.5 3.5 12.6
$250M to $500 M 832.2 789.8 789.8 680.8 5.4 5.4 22.2
$500 M to $1B 540.4 521.8 521.8 428.8 3.6 3.6 26.0
$1B to $5B 565.7 546.0 546.0 420.3 3.6 3.6 34.6
Over $5B 335.5 305.8 305.8 225.2 9.7 9.7 49.0
Comparative Indices
- ----------------------------------------------------------------------------------------------------
Dow Jones Industrials 6,813.1 6,448.3 6,448.3 5,405.1 5.7 5.7 26.0
S&P 500 782.2 740.7 740.7 638.5 6.1 6.1 23.1
</TABLE>
All SNL indices are market-value weighted; i.e. an institution's effect on an
index is proportionate to that institution's market capitalization. ALL SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201,082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1,164.9.
New England: CT, ME, MA, NH, RI, VT: Mid-Atlantic: DE, DC, PA, MD, NJ, NY, PR;
Southwest: CO, LA, NM, OK, TX, UT; Midwest: IA, IL, IN, KS, KY, MI, MN, MO, ND,
OH, SD, WI; Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV; West: AZ, AK, CA,
HI, ID, MT, NV, OR, WA, WY
FEBRUARY 1997 -50-
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
All South-East Companies:
February 24, 1997 (1)
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat. (2) Assets Offices Year Date Price Value
- ----- ---------------------------- ----- --------- -------------- ------ ------- ------- ------ ----- -----
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,582 32 09-30 11/83 28.00 176
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,420 20 12-31 10/94 19.75 194
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,395 S 41 12/31 01/89 28.75 315
MGNL Magna Bancorp of MS OTC MS, AL M.B. 1,342 62 06-30 03/91 19.75 271
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 991 J 29 9-30 12/83 22.00 134
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 902 8 06-30 12/95 21.75 374
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 781 S 23 06-30 01/78 15.37 89
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 686 S 16 12-31 04/95 23.87 168
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 660 S 19 12-31 12/85 14.81 77
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 656 J 15 12-31 08/92 45.00 73
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 642 S 10 03-31 04/86 16.75 76
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 604 S 12 12-31 11/80 11.12 55
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 534 11 12-31 10/94 24.75 116
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 460 S 9 09-30 09/90 24.12 83
TSH Teche Holding Company of LA AMEX Southern LA Thrift 380 S 8 09-30 04/95 15.87 55
COOP Cooperative Bk. for Svgs. of NC OTC Eastern NC Thrift 341 17 03-31 08/91 20.75 31
FFRV Fid. Fin. Bkshrs. Corp. of VA OTC Southern VA Thrift 329 S 7 12-31 05/86 27.87 64
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 326 11 06-30 10/93 11.00 48
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 266 5 06-30 01/94 19.25 71
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 265 S 4 12-31 07/96 17.50 48
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 264 S 9 12-31 07/80 8.13 25
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 231 S 8 12-31 / 35.50 27
FLAG Flag Financial Corp of GA OTC Western GA M.B. 229 S 4 12-31 12/86 12.37 25
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 210 S 5 09-30 10/96 26.00 39
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 208 P 2 09-30 10/96 15.63 70
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 206 1 09-30 03/96 19.87 85
PLE Pinnacle Bank of AL AMEX Central AL Thrift 192 S 5 06-30 12/86 22.50 20
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 176 S 3 09-30 04/96 17.50 75
ESX Essex Bancorp of VA AMEX VA, NC M.B. 172 S 12 12-31 / 1.50 2
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 166 S 5 09-31 07/95 17.00 31
FSTC First Citizens Corp of GA OTC Western GA M.B. 162 J 8 03-31 03/86 21.25 34
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 161 S 3 03-31 03/88 22.00 28
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 144 J 7 09-30 02/87 9.75 20
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 127 S 3 09-30 08/94 19.00 22
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 126 S 3 06-30 06/93 22.00 34
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 125 2 06-30 12/95 10.50 29
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B. 115 S 3 06-30 / 9.62 9
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 109 P 4 06-30 11/96 14.37 27
<PAGE>
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 108 S 4 06-30 10/95 13.62 17
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 S 3 12-31 01/95 18.12 16
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 106 S 2 12-31 04/96 26.37 48
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 101 3 12-31 12/93 19.75 13
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 99 P 1 06-30 12/96 65.25 27
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 90 S 2 09-30 02/95 13.75 11
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 80 S 3 09-30 07/95 16.25 15
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 76 S 5 12-31 07/95 13.87 13
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 73 P 3 09-30 12/96 13.75 16
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 69 S 2 09-30 04/96 15.37 28
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 43 S 1 06-30 07/94 19.00 13
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 S 1 12-31 07/96 15.00 15
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 18.0 65.7 12.1 71.2 14.3 0.1 12.5 0.2 12.3 0.0
Special Selection Grouping(4) 19.5 69.1 7.7 73.7 8.8 0.0 15.8 0.1 15.7 0.0
State of SC 14.2 77.2 5.2 74.3 11.9 0.0 12.2 0.1 12.1 0.0
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1)(3) 17.3 67.3 13.2 73.6 7.6 0.0 17.5 0.0 17.5 0.0
AMFB American Federal Bank of SC(1)(2) 5.9 60.7 30.5 70.4 20.3 0.0 7.8 0.6 7.2 0.0
BFSB Bedford Bancshares of VA(1) 12.1 85.5 0.0 74.9 9.4 0.0 14.3 0.0 14.3 0.0
CCFH CCF Holding Company of GA(1) 21.2 64.1 12.5 77.0 3.1 0.0 18.0 0.0 18.0 0.0
CENB Century Bancshares of NC(1)(3) 26.6 68.6 0.0 85.3 0.0 0.0 13.7 0.0 13.7 0.0
CZF Citisave Fin. Corp. of LA(1) 34.9 58.4 3.1 81.8 0.0 0.0 16.0 0.0 16.0 0.0
CFCP Coastal Fin. Corp. of SC(1) 9.5 80.6 5.9 68.2 23.9 0.0 6.0 0.0 6.0 0.0
CFTP Community Fed. Bancorp of MS 29.1 58.9 11.1 63.7 0.7 0.0 33.4 0.0 33.4 0.0
CFFC Community Fin. Corp. of VA(1) 7.8 88.9 0.0 68.6 16.2 0.0 13.9 0.0 13.9 0.0
COOP Cooperative Bk.for Svgs. of NC 16.4 77.1 4.0 81.5 10.4 0.0 7.5 0.0 7.5 0.0
EBSI Eagle Bancshares of Tucker GA(1) 14.4 57.9 11.2 64.2 22.8 0.0 8.9 0.0 8.9 0.0
ESX Essex Bancorp of VA(1)(2) 10.3 79.6 2.7 75.4 14.6 0.0 8.6 0.1 8.5 8.7
FFBS FFBS Bancorp of Columbus MS(1) 28.5 67.7 1.9 79.0 0.0 0.0 19.6 0.0 19.6 0.0
FFFC FFVA Financial Corp. of VA 19.3 60.2 18.0 74.5 11.2 0.0 14.0 0.3 13.7 0.0
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 11.7 81.8 2.5 75.7 14.4 0.0 8.4 0.0 8.4 0.0
FFCH First Fin. Holdings Inc. of SC 8.1 83.2 6.3 67.0 25.4 0.0 6.1 0.0 6.1 0.0
SOPN First SB, SSB, Moore Co. of NC 28.5 69.4 0.6 74.0 0.1 0.0 25.0 0.0 25.0 0.0
FSFC First So.east Fin. Corp. of SC 14.4 78.1 4.9 85.3 3.6 0.0 10.4 0.0 10.4 0.0
FLAG Flag Financial Corp of GA(1) 17.8 67.4 7.7 80.3 8.3 0.0 8.8 0.0 8.8 0.0
GSFC Green Street Fin. Corp. of NC(1) 29.3 69.8 0.0 63.2 0.0 0.0 35.3 0.0 35.3 0.0
GSLC Guaranty Svgs & Loan FA of VA(1) 19.8 74.7 0.0 68.3 24.7 0.0 5.5 0.0 5.5 0.0
HFNC HFNC Financial Corp. of NC 17.3 65.9 13.8 49.2 21.8 0.0 27.9 0.0 27.9 0.0
ISBF ISB Financial Corp. of LA(1) 20.5 71.6 4.2 75.4 7.0 0.0 16.4 0.5 15.9 0.0
KSAV KS Bancorp of Kenly NC 15.0 80.8 1.4 81.7 4.0 0.0 13.6 0.0 13.6 0.0
LIFB Life Bancorp of Norfolk VA 15.9 43.8 37.7 51.6 37.0 0.0 10.6 0.3 10.3 0.0
MGNL Magna Bancorp of MS 12.1 63.7 11.9 67.2 19.5 0.0 9.7 0.4 9.3 0.0
MERI Meritrust FSB of Thibodaux LA(1) 30.5 49.8 16.4 90.9 0.0 0.0 7.3 0.0 7.3 0.0
MBSP Mitchell Bancorp of NC(1)(3) 23.9 74.4 0.0 54.9 0.0 0.0 42.1 0.0 42.1 0.0
PALM Palfed, Inc. of Aiken SC(1) 7.9 77.1 10.1 79.0 11.2 0.0 8.0 0.4 7.6 0.0
PERT Perpetual of SC, MHC (46.8)(1) 24.9 67.1 3.8 76.1 7.6 0.0 13.9 0.0 13.9 0.0
PDB Piedmont Bancorp of NC 17.4 73.9 3.5 64.7 18.8 0.0 15.7 0.0 15.7 0.0
PLE Pinnacle Bank of AL(1) 15.1 67.0 13.6 86.8 3.5 0.0 7.7 0.3 7.5 0.0
SCCB S. Carolina Comm. Bnshrs of SC(1) 20.1 77.1 0.1 70.1 0.0 0.0 28.7 0.0 28.7 0.0
SSB Scotland Bancorp of NC(1) 31.6 65.7 0.8 61.8 0.0 0.0 36.1 0.0 36.1 0.0
SSFC South Street Fin. Corp. of NC(1)(3) 45.1 50.4 2.5 88.6 0.0 0.0 9.6 0.0 9.6 0.0
SZB SouthFirst Bancshares of AL(1) 20.5 69.1 6.7 71.0 12.1 0.0 14.3 0.0 14.3 0.0
SRN Southern Banc Company of AL(1) 24.9 30.6 42.7 80.6 0.0 0.0 18.2 0.2 18.0 0.0
SCBS Southern Commun. Bncshrs of AL(1)(3)21.8 62.4 13.3 90.1 0.0 0.0 9.0 0.0 9.0 0.0
SSM Stone Street Bancorp of NC(1) 19.9 75.5 3.0 62.8 0.0 0.0 35.1 0.0 35.1 0.0
TSH Teche Holding Company of LA(1) 6.3 83.3 8.5 67.1 17.6 0.0 13.8 0.0 13.8 0.0
FTF Texarkana Fst. Fin. Corp of AR(1) 15.0 81.8 0.9 80.3 1.7 0.0 15.9 0.0 15.9 0.0
TWIN Twin City Bancorp of TN(1) 12.5 73.5 10.6 80.1 4.9 0.0 12.5 0.0 12.5 0.0
UFRM United FS&LA of Rocky Mount NC(1) 16.8 68.5 10.9 88.5 0.0 0.0 7.5 0.0 7.5 0.0
VABF Va. Beach Fed. Fin. Corp of VA(1) 20.3 71.7 5.0 71.7 19.7 0.0 6.6 0.0 6.6 0.0
VFFC Virginia First Savings of VA(1) 7.6 81.1 1.7 73.3 17.5 0.0 7.8 0.2 7.6 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 10.93 5.53 12.25 5.59 18.39 -1.55 -1.70 10.52 10.59 22.45
Special Selection Grouping(4) 9.99 -1.46 10.40 4.90 14.02 -4.02 -3.73 12.30 13.33 27.56
State of SC 5.97 -27.43 10.06 4.51 40.83 2.58 2.79 11.14 11.14 21.84
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1)(3) 23.58 NM 11.26 -7.23 NM NM NM 13.07 13.07 27.00
AMFB American Federal Bank of SC(1)(2) 6.34 41.40 4.92 1.13 29.69 2.52 -5.24 7.20 7.20 13.72
BFSB Bedford Bancshares of VA(1) 10.70 15.49 11.46 5.90 NM -2.45 -2.45 12.40 12.40 23.10
CCFH CCF Holding Company of GA(1) 0.58 -32.31 15.88 1.13 NM -16.64 -16.64 15.83 15.83 37.60
CENB Century Bancshares of NC(1)(3) 4.26 -17.49 8.35 2.42 NM 1.81 NM NM NM NM
CZF Citisave Fin. Corp. of LA(1) -4.86 -22.61 7.57 -2.40 NM -14.12 -14.02 13.78 13.78 29.99
CFCP Coastal Fin. Corp. of SC(1) 14.58 NM 6.83 14.77 14.47 11.53 11.53 5.93 5.93 10.41
CFTP Community Fed. Bancorp of MS 22.70 82.25 8.31 -5.65 NM NM NM 31.42 31.42 77.46
CFFC Community Fin. Corp. of VA(1) 3.18 18.73 2.23 0.79 4.00 9.43 9.43 11.67 11.67 17.78
COOP Cooperative Bk.for Svgs. of NC 9.45 11.31 10.77 2.99 NM -12.42 -0.04 7.69 7.90 15.37
EBSI Eagle Bancshares of Tucker GA(1) 21.57 19.65 5.02 25.87 6.62 NM NM 7.60 7.60 13.30
ESX Essex Bancorp of VA(1)(2) -50.82 -40.02 -52.06 -55.47 -25.02 -34.99 4.61 8.58 8.58 14.52
FFBS FFBS Bancorp of Columbus MS(1) 4.52 4.70 4.63 4.39 NM 3.52 3.52 15.80 15.80 29.30
FFFC FFVA Financial Corp. of VA 7.35 0.27 9.36 5.15 NM -15.42 -15.59 13.47 13.47 27.11
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 6.68 -10.66 8.59 6.69 4.51 6.36 6.45 7.85 7.85 11.86
FFCH First Fin. Holdings Inc. of SC 11.69 -13.84 14.98 0.26 65.85 1.77 1.77 6.49 6.49 10.76
SOPN First SB, SSB, Moore Co. of NC 3.09 -5.85 7.25 6.04 -86.99 -1.05 -1.05 NM 25.58 58.24
FSFC First So.east Fin. Corp. of SC -7.96 -56.47 13.71 -0.52 NM NM NM 10.10 10.10 21.79
FLAG Flag Financial Corp of GA(1) -0.53 -22.11 5.10 4.76 -31.36 -8.52 -8.52 8.36 8.36 13.77
GSFC Green Street Fin. Corp. of NC(1) 16.69 60.38 4.96 -12.63 NM NM NM 28.13 28.13 51.16
GSLC Guaranty Svgs & Loan FA of VA(1) 22.76 83.72 8.91 40.27 -7.27 2.72 2.72 5.71 5.71 12.78
HFNC HFNC Financial Corp. of NC -2.66 -65.85 59.33 -5.50 NM 3.24 3.24 20.83 20.83 40.25
ISBF ISB Financial Corp. of LA(1) 16.44 3.21 18.87 18.44 57.49 -4.59 -7.44 NM 12.43 23.27
KSAV KS Bancorp of Kenly NC 14.24 6.37 15.18 16.41 33.33 -1.03 -0.98 NM NM 13.85
LIFB Life Bancorp of Norfolk VA 29.42 28.60 29.51 20.62 65.83 -6.22 -8.94 8.40 8.40 22.18
MGNL Magna Bancorp of MS 11.38 0.21 8.53 -1.35 76.11 5.34 8.66 7.79 7.79 15.94
MERI Meritrust FSB of Thibodaux LA(1) 5.52 3.54 6.74 4.85 NM 4.80 4.80 7.26 7.26 17.11
MBSP Mitchell Bancorp of NC(1)(3) 31.93 NM 18.12 -13.36 NM NM NM NM 32.40 70.10
PALM Palfed, Inc. of Aiken SC(1) 2.65 -21.06 5.43 6.11 -17.00 5.41 6.27 6.50 6.50 10.50
PERT Perpetual of SC, MHC (46.8)(1) 17.65 NM 17.77 7.31 100.00 NM NM 13.20 13.20 24.50
PDB Piedmont Bancorp of NC 2.13 -24.55 6.62 10.67 NM -47.19 -47.19 NM 19.20 36.04
PLE Pinnacle Bank of AL(1) -1.04 -18.14 1.41 2.84 -51.26 1.19 1.53 NM 7.60 13.40
SCCB S. Carolina Comm. Bnshrs of SC(1) -2.77 -18.34 1.64 -0.84 NM -8.39 -8.39 24.60 24.60 53.10
SSB Scotland Bancorp of NC(1) 18.89 56.22 9.00 -12.02 NM NM NM NM NM NM
SSFC South Street Fin. Corp. of NC(1)(3) 61.06 NM 4.72 67.53 NM 1.42 NM NM NM NM
SZB SouthFirst Bancshares of AL(1) 5.60 -12.65 10.78 2.01 80.54 -12.75 -12.75 11.98 11.98 26.39
SRN Southern Banc Company of AL(1) -1.37 -22.00 8.21 -12.12 NM NM NM NM NM 67.94
SCBS Southern Commun. Bncshrs of AL(1)(3) -6.01 -12.33 -6.40 -7.82 NM -11.28 NM NM NM NM
SSM Stone Street Bancorp of NC(1) 25.15 NM 15.02 -7.04 NM NM NM NM NM NM
TSH Teche Holding Company of LA(1) 17.21 -22.70 21.79 8.95 NM -15.55 -15.55 11.30 11.30 21.90
FTF Texarkana Fst. Fin. Corp of AR(1) 3.17 -24.86 10.24 6.50 NM -19.34 -19.34 16.55 16.55 28.54
TWIN Twin City Bancorp of TN(1) 6.28 3.95 6.17 6.34 30.00 -3.83 -3.83 11.64 11.64 20.91
UFRM United FS&LA of Rocky Mount NC(1) 0.81 -36.32 14.41 7.75 -100.00 1.48 1.48 7.35 7.35 12.80
VABF Va. Beach Fed. Fin. Corp of VA(1) -11.19 -26.11 -5.90 -14.09 -0.45 -1.41 -1.41 6.60 6.60 12.30
VFFC Virginia First Savings of VA(1) 11.59 24.23 3.14 7.22 26.54 19.79 21.15 7.52 7.54 11.88
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
(3) Growth rates have been annualized from available financial information.
(4) Includes South-East Companies;
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.56 7.36 4.13 3.23 0.14 3.10 0.12 -0.01 0.31 0.42
Special Selection Grouping(4) 0.58 7.61 4.06 3.55 0.16 3.39 0.17 0.00 0.35 0.53
State of SC 0.56 7.72 4.20 3.52 0.13 3.39 0.10 0.00 0.51 0.60
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1) -0.47 12.38 7.33 5.05 0.57 4.48 0.04 -0.05 0.56 0.55
AMFB American Federal Bank of SC(1)(2) 1.04 7.67 3.76 3.91 0.31 3.60 0.13 0.02 0.95 1.10
BFSB Bedford Bancshares of VA(1) 1.09 7.76 3.76 4.00 0.02 3.98 0.39 0.03 0.20 0.62
CCFH CCF Holding Company of GA(1) 0.59 7.01 3.18 3.83 0.16 3.67 0.10 0.06 0.30 0.46
CENB Century Bancshares of NC(1)(3) -0.09 6.15 3.55 2.60 0.01 2.58 0.00 0.00 0.07 0.07
CZF Citisave Fin. Corp. of LA(1) 0.78 7.17 3.29 3.87 0.01 3.86 0.44 -0.03 0.96 1.37
CFCP Coastal Fin. Corp. of SC(1) 0.85 7.95 4.37 3.58 0.18 3.40 0.32 0.08 0.39 0.79
CFTP Community Fed. Bancorp of MS 1.31 7.04 3.48 3.56 0.01 3.55 0.08 -0.01 0.04 0.11
CFFC Community Fin. Corp. of VA(1) 1.02 7.95 4.14 3.82 0.22 3.60 0.06 0.00 0.24 0.30
COOP Cooperative Bk.for Svgs. of NC -1.01 7.08 4.23 2.84 0.05 2.80 0.00 -0.01 0.17 0.16
EBSI Eagle Bancshares of Tucker GA(1) 0.65 8.13 4.53 3.60 0.40 3.20 1.33 0.21 0.43 1.97
ESX Essex Bancorp of VA(1)(2) -2.71 7.69 5.46 2.22 0.51 1.71 0.57 -0.02 0.60 1.15
FFBS FFBS Bancorp of Columbus MS(1) 1.09 7.34 3.73 3.61 0.00 3.61 0.16 -0.01 0.34 0.49
FFFC FFVA Financial Corp. of VA 1.05 7.88 4.07 3.81 0.01 3.80 0.09 0.00 0.12 0.21
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 0.66 8.19 4.51 3.69 0.17 3.52 0.09 0.03 0.12 0.25
FFCH First Fin. Holdings Inc. of SC 0.53 7.60 4.50 3.10 0.14 2.97 0.08 -0.02 0.63 0.69
SOPN First SB, SSB, Moore Co. of NC 1.33 7.30 3.55 3.75 0.00 3.75 0.00 0.00 0.15 0.15
FSFC First So.east Fin. Corp. of SC -0.01 7.44 4.22 3.22 0.05 3.17 0.09 0.03 0.21 0.33
FLAG Flag Financial Corp of GA(1) -0.07 7.70 4.10 3.60 1.54 2.06 0.00 -0.03 1.05 1.02
GSFC Green Street Fin. Corp. of NC(1) 1.19 7.23 3.58 3.65 0.01 3.64 0.01 0.01 0.06 0.07
GSLC Guaranty Svgs & Loan FA of VA(1) 0.44 7.67 5.19 2.48 0.10 2.37 0.60 0.00 0.25 0.85
HFNC HFNC Financial Corp. of NC 1.14 7.26 3.53 3.72 0.03 3.69 0.00 -0.02 0.13 0.12
ISBF ISB Financial Corp. of LA(1) 0.81 7.50 3.84 3.66 0.01 3.65 0.08 -0.01 0.42 0.50
KSAV KS Bancorp of Kenly NC 0.88 8.04 4.28 3.76 0.07 3.69 0.00 0.05 0.14 0.20
LIFB Life Bancorp of Norfolk VA 0.68 7.47 4.79 2.69 -0.02 2.71 0.03 0.01 0.18 0.22
MGNL Magna Bancorp of MS 1.36 8.49 3.40 5.09 0.20 4.89 0.98 -0.14 2.10 2.93
MERI Meritrust FSB of Thibodaux LA(1) 0.55 7.12 3.94 3.18 0.04 3.14 0.17 0.00 0.46 0.63
MBSP Mitchell Bancorp of NC(1)(3) 0.50 7.63 3.13 4.49 0.07 4.43 0.00 0.00 0.01 0.01
PALM Palfed, Inc. of Aiken SC(1) 0.36 7.81 4.49 3.31 0.21 3.11 0.07 -0.10 0.64 0.61
PERT Perpetual of SC, MHC (46.8)(1) 0.75 7.82 3.89 3.93 0.21 3.72 0.03 0.01 1.07 1.11
PDB Piedmont Bancorp of NC -0.21 7.60 3.44 4.16 0.52 3.64 0.10 0.00 0.17 0.27
PLE Pinnacle Bank of AL(1) 0.50 7.66 4.46 3.20 0.13 3.07 0.20 0.09 0.26 0.56
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.85 7.69 3.70 4.00 0.00 4.00 0.00 0.00 0.10 0.10
SSB Scotland Bancorp of NC(1) 1.17 7.49 3.40 4.09 0.04 4.05 0.00 0.00 0.12 0.12
SSFC South Street Fin. Corp. of NC(1)(3) -0.18 6.37 3.88 2.49 0.00 2.49 0.00 0.00 0.07 0.07
SZB SouthFirst Bancshares of AL(1) -0.02 7.51 4.04 3.47 0.00 3.47 0.00 0.01 0.59 0.60
SRN Southern Banc Company of AL(1) 0.22 7.14 4.23 2.91 0.00 2.91 0.00 0.00 0.07 0.07
SCBS Southern Commun. Bncshrs of AL(1)(3) -1.09 6.00 3.50 2.50 1.10 1.40 0.00 0.00 0.38 0.38
SSM Stone Street Bancorp of NC(1) 1.21 7.61 3.71 3.90 0.03 3.87 0.04 0.00 0.08 0.11
TSH Teche Holding Company of LA(1) 0.72 7.60 4.00 3.60 0.09 3.51 0.00 0.05 0.48 0.53
FTF Texarkana Fst. Fin. Corp of AR(1) 1.47 7.81 3.97 3.84 0.00 3.84 0.21 0.03 0.23 0.46
TWIN Twin City Bancorp of TN(1) 0.78 7.77 3.93 3.84 0.14 3.71 0.32 0.07 0.11 0.50
UFRM United FS&LA of Rocky Mount NC(1) 0.27 7.78 4.66 3.13 0.07 3.05 0.69 0.00 0.25 0.94
VABF Va. Beach Fed. Fin. Corp of VA(1) 0.03 7.61 5.10 2.51 0.04 2.47 0.10 -0.09 0.20 0.21
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 2.23 0.02 -0.39 0.00 7.52 4.74 2.78 4,239 34.99
Special Selection Grouping(4) 2.38 0.01 -0.57 0.00 7.41 4.61 2.80 3,879 36.88
State of SC 2.55 0.01 -0.53 0.00 8.09 4.89 3.20 2,160 37.04
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1) 5.40 0.00 -0.04 0.00 12.73 8.53 4.20 10,195 31.67
AMFB American Federal Bank of SC(1)(2) 2.65 0.05 -0.39 0.00 7.92 4.16 3.76 2,156 34.71
BFSB Bedford Bancshares of VA(1) 2.41 0.00 -0.46 0.00 7.95 4.51 3.44 3,442 36.67
CCFH CCF Holding Company of GA(1) 2.91 0.00 -0.44 0.00 7.15 4.09 3.06 2,007 23.21
CENB Century Bancshares of NC(1)(3) 1.13 0.00 -1.65 0.00 0.00 0.00 0.00 7,470 NM
CZF Citisave Fin. Corp. of LA(1) 3.67 0.02 -0.39 0.00 7.39 4.09 3.29 1,576 32.06
CFCP Coastal Fin. Corp. of SC(1) 2.74 0.00 -0.10 0.00 8.20 4.74 3.46 2,769 36.75
CFTP Community Fed. Bancorp of MS 1.21 0.00 -0.42 0.00 7.12 5.14 1.98 8,584 35.53
CFFC Community Fin. Corp. of VA(1) 1.85 0.00 -0.42 0.00 8.22 4.84 3.38 4,346 37.26
COOP Cooperative Bk.for Svgs. of NC 2.14 0.07 -1.58 0.00 7.30 4.68 2.62 3,047 NM
EBSI Eagle Bancshares of Tucker GA(1) 3.97 0.00 -0.32 0.00 8.83 5.21 3.62 NM 25.49
ESX Essex Bancorp of VA(1)(2) 3.48 0.46 -1.64 0.00 8.24 5.92 2.31 1,466 NM
FFBS FFBS Bancorp of Columbus MS(1) 2.05 0.00 -0.49 0.00 7.50 4.70 2.79 4,191 30.15
FFFC FFVA Financial Corp. of VA 1.96 0.02 -0.38 0.00 8.08 4.86 3.23 3,733 35.75
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 2.28 0.01 -0.45 0.00 8.49 4.99 3.50 2,940 35.90
FFCH First Fin. Holdings Inc. of SC 2.37 0.00 -0.45 0.00 7.80 4.90 2.90 2,930 37.23
SOPN First SB, SSB, Moore Co. of NC 1.42 0.00 -0.45 0.00 7.40 4.84 2.57 6,818 34.56
FSFC First So.east Fin. Corp. of SC 2.00 0.00 -1.35 0.00 7.63 4.98 2.65 2,651 NM
FLAG Flag Financial Corp of GA(1) 2.99 0.00 -0.26 0.00 8.21 4.63 3.58 2,488 59.59
GSFC Green Street Fin. Corp. of NC(1) 1.44 0.00 -0.46 0.00 7.29 4.66 2.63 5,874 34.68
GSLC Guaranty Svgs & Loan FA of VA(1) 2.44 0.00 -0.11 0.00 8.03 5.61 2.41 2,619 34.81
HFNC HFNC Financial Corp. of NC 1.67 0.00 -0.37 0.00 7.45 5.48 1.97 7,156 35.75
ISBF ISB Financial Corp. of LA(1) 2.44 0.02 -0.43 0.00 7.73 4.76 2.97 2,788 36.57
KSAV KS Bancorp of Kenly NC 2.01 0.01 -0.45 0.00 8.25 5.07 3.18 4,034 37.75
LIFB Life Bancorp of Norfolk VA 1.40 0.07 -0.34 0.00 7.68 5.50 2.17 5,867 39.83
MGNL Magna Bancorp of MS 5.04 0.26 -0.47 0.00 9.42 3.89 5.53 1,132 33.73
MERI Meritrust FSB of Thibodaux LA(1) 2.29 0.00 -0.58 0.00 7.37 4.32 3.05 2,567 43.36
MBSP Mitchell Bancorp of NC(1)(3) 2.09 0.00 -1.57 0.00 0.00 0.00 0.00 500 NM
PALM Palfed, Inc. of Aiken SC(1) 2.75 0.04 -0.35 0.00 8.21 4.96 3.25 NM 36.50
PERT Perpetual of SC, MHC (46.8)(1) 3.20 0.00 -0.49 0.00 8.84 4.46 4.37 2,141 34.66
PDB Piedmont Bancorp of NC 2.22 0.00 -0.52 0.00 7.89 4.74 3.15 4,313 21.30
PLE Pinnacle Bank of AL(1) 2.35 0.02 -0.44 0.00 7.94 4.93 3.02 2,522 38.45
SCCB S. Carolina Comm. Bnshrs of SC(1) 2.23 0.00 -0.44 0.00 7.87 5.29 2.58 311 40.03
SSB Scotland Bancorp of NC(1) 1.89 0.00 -0.49 0.00 7.68 4.88 2.80 5,279 34.96
SSFC South Street Fin. Corp. of NC(1)(3) 1.50 0.00 -1.61 0.00 6.96 4.75 2.21 5,891 NM
SZB SouthFirst Bancshares of AL(1) 3.93 0.00 -0.79 0.00 7.76 4.90 2.86 NM NM
SRN Southern Banc Company of AL(1) 2.09 0.05 -0.54 0.00 7.29 5.17 2.12 NM 28.78
SCBS Southern Commun. Bncshrs of AL(1)(3) 0.32 0.00 -2.03 0.00 0.00 0.00 0.00 NM NM
SSM Stone Street Bancorp of NC(1) 1.65 0.00 -0.45 0.00 7.84 5.32 2.52 6,648 35.55
TSH Teche Holding Company of LA(1) 2.46 0.00 -0.50 0.00 7.76 4.87 2.88 2,692 33.50
FTF Texarkana Fst. Fin. Corp of AR(1) 1.53 0.00 -0.51 0.00 7.99 5.04 2.95 4,736 34.81
TWIN Twin City Bancorp of TN(1) 2.63 0.00 -0.32 0.00 8.02 4.64 3.38 2,185 37.71
UFRM United FS&LA of Rocky Mount NC(1) 3.00 0.00 -0.34 0.00 8.08 5.26 2.82 2,075 58.27
VABF Va. Beach Fed. Fin. Corp of VA(1) 2.35 0.00 -0.27 0.00 7.86 5.56 2.30 3,799 41.34
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
Special Comparative Group(4) (continued)
----------------------------------------
VFFC Virginia First Savings of VA(1) 1.40 8.18 4.46 3.72 0.34 3.38 0.35 -0.04 0.38 0.69
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
Special Comparative Group(4) (continued)
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VFFC Virginia First Savings of VA(1) 2.81 0.03 0.00 0.00 8.58 4.89 3.70 2,141 62.39
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
(3) Income and expense information has been annualized from available
financial information.
(4) Includes South-East Companies;
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of December 31, 1996
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- ------ ------ ------ ------ ------ -------- ------ ---------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 15.81 61.56 5.22 11.63 6.30 1.61 50.59 366,441 2,607
Special Selection Grouping(4) 10.31 66.86 9.33 9.26 5.62 2.07 52.92 117,165 421
State of SC 5.97 69.47 8.58 11.07 5.95 2.31 60.30 68,082 69
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1) 12.56 67.38 2.51 7.02 8.74 2.07 48.50 120 0
AMFB American Federal Bank of SC(1)(2) 34.05 30.07 3.84 9.64 16.25 7.60 57.44 172,222 577
BFSB Bedford Bancshares of VA(1) 0.49 75.72 12.86 4.83 7.39 2.29 55.72 2,716 0
CCFH CCF Holding Company of GA(1) 18.15 72.73 12.38 2.72 1.59 0.00 42.90 0 0
CENB Century Bancshares of NC(1) NA NA NA NA NA NA 51.53 0 0
CZF Citisave Fin. Corp. of LA(1) 5.10 77.05 7.77 8.38 5.45 1.24 45.61 1,333 0
CFCP Coastal Fin. Corp. of SC(1) 7.80 60.35 14.16 11.70 5.23 5.61 64.31 115,100 0
CFTP Community Fed. Bancorp of MS 12.41 75.23 3.16 6.63 2.73 1.20 40.52 0 0
CFFC Community Fin. Corp. of VA(1) 0.00 63.69 3.98 26.61 4.62 2.11 68.19 10,983 6
COOP Cooperative Bk.for Svgs. of NC 5.73 88.55 0.35 4.07 1.79 0.00 50.23 64,718 17
EBSI Eagle Bancshares of Tucker GA(1) 14.54 50.58 37.60 4.25 1.18 6.55 59.95 0 0
ESX Essex Bancorp of VA(1)(2) 1.76 85.03 19.63 3.88 2.75 0.98 65.06 1,107,679 1,298
FFBS FFBS Bancorp of Columbus MS(1) 2.89 70.40 4.88 10.28 9.90 1.68 53.49 17 0
FFFC FFVA Financial Corp. of VA 22.99 56.27 3.51 12.05 3.67 2.82 51.50 6,008 23
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 3.04 43.85 25.33 21.73 5.94 8.05 71.60 102,666 685
FFCH First Fin. Holdings Inc. of SC 7.36 60.68 5.89 17.35 8.58 2.09 63.68 216,128 0
SOPN First SB, SSB, Moore Co. of NC 1.64 88.47 1.12 7.80 0.97 0.00 43.36 764 0
FSFC First So.east Fin. Corp. of SC 6.90 82.10 5.48 0.56 7.86 1.36 48.53 3,551 0
FLAG Flag Financial Corp of GA(1) 8.04 51.74 6.73 17.51 7.38 11.30 67.11 0 1,629
GSFC Green Street Fin. Corp. of NC(1) 0.00 82.75 1.51 17.41 0.13 0.00 49.32 0 0
GSLC Guaranty Svgs & Loan FA of VA(1) 10.32 75.51 9.31 7.99 0.09 0.10 49.39 166,005 945
HFNC HFNC Financial Corp. of NC 9.43 71.24 13.98 8.07 4.04 0.38 45.41 34,534 0
ISBF ISB Financial Corp. of LA(1) 5.98 67.54 3.39 4.44 13.95 4.72 53.54 4,523 0
KSAV KS Bancorp of Kenly NC 1.99 91.56 5.08 1.04 0.33 0.00 100.98 0 0
LIFB Life Bancorp of Norfolk VA 40.42 41.42 5.02 12.03 3.56 0.03 38.93 161,265 0
MGNL Magna Bancorp of MS 16.06 69.04 2.37 6.79 8.62 0.12 51.22 2,904,072 6,985
MERI Meritrust FSB of Thibodaux LA(1) 24.56 51.46 3.05 1.49 21.19 0.10 42.98 15,224 132
MBSP Mitchell Bancorp of NC(1) 0.00 83.17 0.00 16.71 0.65 0.00 0.09 0 0
PALM Palfed, Inc. of Aiken SC(1) 7.61 51.51 13.49 21.33 7.23 2.48 68.10 411 411
PERT Perpetual of SC, MHC (46.8)(1) NA NA NA NA NA NA 56.88 73,303 0
PDB Piedmont Bancorp of NC 4.92 84.46 0.83 8.01 1.17 0.61 54.82 12,293 0
PLE Pinnacle Bank of AL(1) 18.08 45.94 18.59 11.95 5.87 6.70 61.41 97,624 63
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.19 92.71 3.88 4.39 0.83 0.00 NA 0 0
SSB Scotland Bancorp of NC(1) 1.29 91.39 2.21 4.35 0.58 0.18 NA 0 0
SSFC South Street Fin. Corp. of NC(1) 4.99 82.49 4.54 7.72 0.26 0.00 NA 715 0
SZB SouthFirst Bancshares of AL(1) 9.54 68.12 27.02 0.06 4.56 0.66 55.15 0 0
SRN Southern Banc Company of AL(1) 60.24 36.22 0.00 0.21 3.30 0.09 NA 0 0
SCBS Southern Commun. Bncshrs of AL(1) NA NA NA NA NA NA 51.58 900 0
SSM Stone Street Bancorp of NC(1) 2.89 83.98 8.06 3.23 0.25 2.83 NA 0 0
TSH Teche Holding Company of LA(1) 10.04 81.66 4.07 2.94 4.61 0.00 54.36 0 0
FTF Texarkana Fst. Fin. Corp of AR(1) 1.54 70.88 7.27 13.83 7.11 2.34 NA 23,836 0
TWIN Twin City Bancorp of TN(1) 13.61 52.69 4.25 4.15 25.28 2.27 56.34 53,933 449
UFRM United FS&LA of Rocky Mount NC(1) 15.01 42.36 28.31 13.05 10.30 2.66 60.89 451,151 2,608
VABF Va. Beach Fed. Fin. Corp of VA(1) 6.82 67.40 13.73 14.48 2.41 1.58 59.25 258,534 363
VFFC Virginia First Savings of VA(1) 0.86 65.67 22.86 7.20 5.12 2.96 66.90 34,033 0
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
<PAGE>
(3) Includes South-East Companies;
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.27 0.86 0.94 0.85 183.44 127.80 258 0.10
Special Selection Grouping(4) 0.29 0.94 1.01 0.87 182.20 150.97 74 0.05
State of SC 0.67 1.03 0.89 0.99 370.85 328.03 149 0.12
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1) 0.09 0.56 0.70 1.32 189.99 159.79 72 0.16
AMFB American Federal Bank of SC(1)(2) 0.03 0.51 0.78 1.25 159.95 150.52 1,444 0.68
BFSB Bedford Bancshares of VA(1) 0.00 0.54 NA 0.59 NA 95.03 12 0.04
CCFH CCF Holding Company of GA(1) 0.00 0.75 1.15 1.04 89.85 89.85 0 0.00
CENB Century Bancshares of NC(1) 0.34 0.77 0.63 0.94 150.56 84.54 0 0.00
CZF Citisave Fin. Corp. of LA(1) 0.12 0.22 0.21 0.15 73.63 40.85 14 0.13
CFCP Coastal Fin. Corp. of SC(1) 0.07 0.17 0.12 1.09 937.53 543.23 15 0.02
CFTP Community Fed. Bancorp of MS 0.00 0.35 0.61 0.48 79.78 79.78 0 0.00
CFFC Community Fin. Corp. of VA(1) 0.04 0.20 0.19 0.72 388.10 317.33 7 0.02
COOP Cooperative Bk.for Svgs. of NC 0.01 0.42 0.26 0.31 117.04 56.37 0 0.00
EBSI Eagle Bancshares of Tucker GA(1) 2.46 1.06 1.23 0.84 67.98 53.91 966 0.91
ESX Essex Bancorp of VA(1)(2) 1.26 3.44 2.60 2.16 82.80 51.87 3,047 5.89
FFBS FFBS Bancorp of Columbus MS(1) 0.00 0.63 0.48 0.77 159.85 83.16 9 0.04
FFFC FFVA Financial Corp. of VA 0.01 0.44 0.71 1.04 146.30 143.89 7 0.01
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 0.37 1.14 0.93 1.16 124.68 84.83 142 0.21
FFCH First Fin. Holdings Inc. of SC 0.15 1.28 1.25 0.87 69.24 56.63 348 0.11
SOPN First SB, SSB, Moore Co. of NC 0.00 0.10 0.15 0.33 224.72 224.72 0 0.00
FSFC First So.east Fin. Corp. of SC 0.23 0.07 0.08 0.50 639.69 577.21 36 0.06
FLAG Flag Financial Corp of GA(1) 0.21 3.67 4.93 2.77 56.19 52.67 53 0.13
GSFC Green Street Fin. Corp. of NC(1) 0.02 0.20 0.25 0.19 75.81 68.31 0 0.00
GSLC Guaranty Svgs & Loan FA of VA(1) 0.11 2.06 2.48 0.96 38.66 35.12 0 0.00
HFNC HFNC Financial Corp. of NC 0.15 1.15 1.51 1.39 92.56 80.19 45 0.03
ISBF ISB Financial Corp. of LA(1) 0.14 NA NA 1.03 NA NA 165 0.14
KSAV KS Bancorp of Kenly NC 0.22 0.55 0.67 0.37 55.35 55.35 0 0.00
LIFB Life Bancorp of Norfolk VA 0.09 0.38 0.69 1.76 256.58 197.80 2 -0.94
MGNL Magna Bancorp of MS 0.84 3.81 2.47 1.09 44.28 19.52 490 0.23
MERI Meritrust FSB of Thibodaux LA(1) 0.18 0.48 0.46 0.61 133.78 62.95 39 0.14
MBSP Mitchell Bancorp of NC(1) 0.24 2.56 3.09 0.60 19.51 17.67 0 0.00
PALM Palfed, Inc. of Aiken SC(1) 2.32 3.44 2.68 1.51 56.34 34.31 429 0.34
PERT Perpetual of SC, MHC (46.8)(1) 0.67 0.17 0.25 1.08 432.39 428.77 66 0.19
PDB Piedmont Bancorp of NC 0.00 0.76 0.77 0.66 86.05 62.96 0 0.00
PLE Pinnacle Bank of AL(1) 0.52 0.83 0.46 1.02 221.04 82.73 42 0.13
SCCB S. Carolina Comm. Bnshrs of SC(1) 0.58 NA 0.97 0.87 89.88 NA 0 0.00
SSB Scotland Bancorp of NC(1) 0.00 NA NA 0.50 NA NA 0 0.00
SSFC South Street Fin. Corp. of NC(1) 0.01 NA NA 0.39 NA NA 0 0.00
SZB SouthFirst Bancshares of AL(1) 0.00 0.60 0.32 0.40 123.65 45.97 2 0.01
SRN Southern Banc Company of AL(1) 0.00 NA NA 0.24 NA NA 0 0.00
SCBS Southern Commun. Bncshrs of AL(1) 0.00 NA NA NA NA NA 2 0.00
SSM Stone Street Bancorp of NC(1) 0.01 0.17 NA 0.61 NA 272.78 0 0.00
TSH Teche Holding Company of LA(1) 0.01 0.16 0.18 1.00 569.23 525.95 0 0.00
FTF Texarkana Fst. Fin. Corp of AR(1) 0.04 0.17 0.05 0.84 NA 403.17 4 0.01
TWIN Twin City Bancorp of TN(1) 0.41 0.53 NA 0.27 NA 37.63 28 0.14
UFRM United FS&LA of Rocky Mount NC(1) 0.07 1.20 1.35 1.62 119.59 93.51 23 0.05
VABF Va. Beach Fed. Fin. Corp of VA(1) 0.45 1.42 1.32 1.00 75.33 51.34 155 -0.17
VFFC Virginia First Savings of VA(1) 0.75 2.32 1.77 1.17 66.15 44.65 2 0.00
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
<PAGE>
(3) Includes South-East Companies;
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 12/31/96 09/30/96 06/30/96 03/31/96 12/31/95 09/30/95
- ----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 12.3 112.6 4.1 -2 -2 8 4 4 3
Special Selection Grouping(4) 14.9 117.5 3.8 -3 -3 13 1 3 2
State of SC 12.1 113.0 3.5 2 -7 11 8 3 -3
Market Interest Rates
- ---------------------
1 Year Treasury Bill -- -- -- 24 5 -84 -74 127 45
30 Year Treasury Bond -- -- -- 71 -12 -80 -45 6 21
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
ANA Acadiana Bancshares of LA(1) 17.5 120.4 2.2 NA 50 -8 NA NA NA
AMFB American Federal Bank of SC(1)(2) 7.2 107.1 2.9 NA 5 10 5 12 -6
BFSB Bedford Bancshares of VA(1) 14.3 115.8 2.4 NA -13 -8 14 -5 2
CCFH CCF Holding Company of GA(1) 18.0 122.1 2.2 NA -15 25 5 2 NA
CENB Century Bancshares of NC(1) 13.7 111.5 4.9 NA NA NA NA NA NA
CZF Citisave Fin. Corp. of LA(1) 16.0 117.8 3.6 NA 11 5 3 3 69
CFCP Coastal Fin. Corp. of SC(1) 6.0 104.2 4.1 NA -15 8 6 23 16
CFTP Community Fed. Bancorp of MS 33.4 153.9 0.9 -3 8 91 6 -1 -8
CFFC Community Fin. Corp. of VA(1) 13.9 114.1 3.2 NA 9 -2 3 1 7
COOP Cooperative Bk.for Svgs. of NC 7.5 106.2 2.4 1 5 17 15 12 -16
EBSI Eagle Bancshares of Tucker GA(1) 8.9 96.1 16.4 NA -12 46 -8 -15 1
ESX Essex Bancorp of VA(1)(2) 8.5 102.8 7.5 NA 35 -3 20 40 -22
FFBS FFBS Bancorp of Columbus MS(1) 19.6 124.2 2.0 NA 13 4 -7 -1 -32
FFFC FFVA Financial Corp. of VA 13.7 113.9 2.4 -5 4 3 1 0 -7
FFRV Fid. Fin. Bkshrs. Corp. of VA(1)(2) 8.4 106.6 4.0 NA 5 13 2 -12 -1
FFCH First Fin. Holdings Inc. of SC 6.1 105.6 2.4 4 -4 -5 9 1 12
SOPN First SB, SSB, Moore Co. of NC 25.0 132.8 1.5 -5 6 9 7 2 -1
FSFC First So.east Fin. Corp. of SC 10.4 109.7 2.5 1 -31 21 5 1 -20
FLAG Flag Financial Corp of GA(1) 8.8 104.9 7.1 NA -5 27 0 36 14
GSFC Green Street Fin. Corp. of NC(1) 35.3 156.8 0.9 NA 41 98 -34 15 -15
GSLC Guaranty Svgs & Loan FA of VA(1) 5.5 101.7 5.5 NA 8 3 -5 -0 2
HFNC HFNC Financial Corp. of NC 27.9 136.3 3.1 -18 -28 57 NA -34 -48
ISBF ISB Financial Corp. of LA(1) 15.9 116.9 3.7 NA 1 15 -7 -9 -16
KSAV KS Bancorp of Kenly NC 13.6 113.5 2.8 8 -10 5 17 -11 -22
LIFB Life Bancorp of Norfolk VA 10.3 110.0 2.5 -2 -22 -8 20 -3 8
MGNL Magna Bancorp of MS 9.3 101.2 12.3 3 -23 12 -24 -9 -5
MERI Meritrust FSB of Thibodaux LA(1) 7.3 106.3 3.3 NA -3 2 -4 3 -1
MBSP Mitchell Bancorp of NC(1) 42.1 179.4 1.6 NA NA NA NA NA NA
PALM Palfed, Inc. of Aiken SC(1) 7.6 105.5 4.8 NA 11 24 3 0 15
PERT Perpetual of SC, MHC (46.8)(1) 13.9 114.4 4.2 NA -8 -5 40 NA NA
PDB Piedmont Bancorp of NC 15.7 113.5 5.2 -16 3 -19 15 30 -26
PLE Pinnacle Bank of AL(1) 7.5 105.9 4.3 NA -8 13 10 5 21
SCCB S. Carolina Comm. Bnshrs of SC(1) 28.7 138.8 2.7 NA 4 20 -16 -9 -36
SSB Scotland Bancorp of NC(1) 36.1 158.7 1.9 NA -11 NA -18 -8 NA
SSFC South Street Fin. Corp. of NC(1) 9.6 110.7 2.0 NA -37 NA NA NA NA
SZB SouthFirst Bancshares of AL(1) 14.3 115.9 3.7 NA -8 7 -9 -22 0
SRN Southern Banc Company of AL(1) 18.0 121.8 1.8 NA -8 -6 15 50 -27
SCBS Southern Commun. Bncshrs of AL(1) 9.0 108.2 2.5 NA NA NA NA NA NA
SSM Stone Street Bancorp of NC(1) 35.1 156.5 1.7 NA 30 NA -47 61 NA
TSH Teche Holding Company of LA(1) 13.8 115.8 1.9 NA -13 -22 14 -24 -2
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of December 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 12/31/96 09/30/96 06/30/96 03/31/96 12/31/95 09/30/95
- ----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Special Comparative Group(4) (continued)
- ----------------------------------------
FTF Texarkana Fst. Fin. Corp of AR(1) 15.9 119.2 2.3 NA -3 1 2 -9 82
TWIN Twin City Bancorp of TN(1) 12.5 113.9 3.3 NA -23 14 11 -11 17
UFRM United FS&LA of Rocky Mount NC(1) 7.5 108.8 3.8 NA 3 1 -16 63 6
VABF Va. Beach Fed. Fin. Corp of VA(1) 6.6 106.2 3.0 NA 4 36 17 12 6
VFFC Virginia First Savings of VA(1) 7.6 99.6 9.6 NA -21 29 14 -28 18
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
(2) Excluded from averages due to announced or pending acquisition.
(3) Includes South-East Companies;
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of February 21, 1997
<TABLE>
<CAPTION>
Per Share Data
Market _______________
Capitalization Core Book Pricing Ratios(3) Dividends(4)
--------------- -------------------------------------------------------------
Price/ Market 12-Mth Value/ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------ ------- ------ -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 20.27 143.25 1.17 15.96 19.70 126.24 15.40 128.35 17.47 0.36 1.81 28.92
Special Selection Grouping(8) 19.67 62.83 1.03 15.41 19.99 130.20 20.25 132.40 18.79 0.39 2.13 35.72
State of SC 20.49 69.52 1.10 13.00 24.03 143.11 17.57 144.54 19.59 0.35 1.70 24.10
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
ANA Acadiana Bancshares of LA 17.50 47.79 -0.40 17.03 NM 102.76 18.03 102.76 NM 0.36 2.06 NM
AMFB American Federal Bank of SC(7) 28.75 314.96 1.61 9.88 22.29 NM 22.58 NM 17.86 0.48 1.67 29.81
BFSB Bedford Bancshares of VA 19.00 21.74 1.46 15.93 16.67 119.27 17.07 119.27 13.01 0.48 2.53 32.88
CCFH CCF Holding Company of GA 16.25 14.89 0.77 15.76 NM 103.11 18.54 103.11 21.10 0.50 3.08 64.94
CFNC Carolina Fincorp of NC 14.37 26.60 0.52 12.99 27.63 110.62 24.29 110.62 27.63 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 45.00 73.49 2.13 29.22 23.56 154.00 11.21 159.69 21.13 1.00 2.22 46.95
CENB Century Bancshares of NC 65.25 26.56 2.87 69.47 28.87 93.93 26.80 93.93 22.74 0.00 0.00 0.00
CZF Citisave Fin. Corp. of LA 13.87 13.34 0.84 12.58 22.02 110.25 17.64 110.34 16.51 0.40 2.88 47.62
CFCP Coastal Fin. Corp. of SC 24.12 83.26 1.16 8.02 22.33 NM 18.11 NM 20.79 0.44 1.82 37.93
CFTP Community Fed. Bancorp of MS 19.87 85.08 0.73 16.09 NM 123.49 41.30 123.49 27.22 0.30 1.51 41.10
CFFC Community Fin. Corp. of VA 22.00 27.98 1.62 17.59 17.19 125.07 17.40 125.07 13.58 0.56 2.55 34.57
COOP Cooperative Bk.for Svgs. of NC 20.75 30.96 0.07 17.07 NM 121.56 9.07 121.56 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 16.75 76.25 1.13 12.62 19.71 132.73 11.87 132.73 14.82 0.60 3.58 53.10
ESX Essex Bancorp of VA(7) 1.50 1.58 -4.57 0.54 NM NM 0.92 NM NM 0.00 0.00 NM
FFBS FFBS Bancorp of Columbus MS 22.00 34.45 1.11 15.73 25.88 139.86 27.40 139.86 19.82 0.50 2.27 45.05
FFFC FFVA Financial Corp. of VA 24.75 116.15 1.44 15.87 21.34 155.95 21.76 159.37 17.19 0.40 1.62 27.78
FFRV Fid. Fin. Bkshrs. Corp. of VA(7) 27.87 64.07 1.34 12.07 NM 230.90 19.46 231.09 20.80 0.20 0.72 14.93
FSTC First Citizens Corp of GA 21.25 33.75 2.05 13.07 9.04 162.59 20.80 163.46 10.37 0.44 2.07 21.46
FFCH First Fin. Holdings Inc. of SC 28.00 176.43 1.96 15.28 22.40 183.25 11.15 183.25 14.29 0.72 2.57 36.73
FGHC First Georgia Hold. Corp of GA 9.75 19.84 0.60 5.87 16.25 166.10 13.78 186.42 16.25 0.08 0.82 13.33
FLFC First Liberty Fin. Corp. of GA 22.00 133.54 1.26 11.27 14.47 195.21 13.47 230.61 17.46 0.40 1.82 31.75
SOPN First SB, SSB, Moore Co. of NC 19.25 71.01 1.15 18.03 20.48 106.77 26.71 106.77 16.74 0.68 3.53 59.13
FSFC First So.east Fin. Corp. of SC 11.00 48.27 0.68 7.69 NM 143.04 14.80 143.04 16.18 0.20 1.82 29.41
FLAG Flag Financial Corp of GA 12.37 25.20 0.12 9.89 NM 125.08 11.01 125.08 NM 0.34 2.75 NM
GSFC Green Street Fin. Corp. of NC 17.50 75.22 0.60 14.47 NM 120.94 42.68 120.94 29.17 0.40 2.29 66.67
GSLC Guaranty Svgs & Loan FA of VA 9.62 8.89 0.58 6.86 19.63 140.23 7.71 140.23 16.59 0.10 1.04 17.24
HFNC HFNC Financial Corp. of NC 21.75 373.93 0.67 14.62 NM 148.77 41.48 148.77 NM 0.28 1.29 41.79
ISBF ISB Financial Corp. of LA 23.87 168.31 0.99 15.93 NM 149.84 24.54 154.50 24.11 0.34 1.42 34.34
KSAV KS Bancorp of Kenly NC 19.75 13.09 1.66 20.70 15.80 95.41 12.98 95.50 11.90 0.60 3.04 36.14
LIFB Life Bancorp of Norfolk VA 19.75 194.48 1.16 15.33 22.70 128.83 13.70 133.09 17.03 0.44 2.23 37.93
MGNL Magna Bancorp of MS 19.75 271.38 1.57 9.48 15.43 208.33 20.22 217.03 12.58 0.60 3.04 38.22
MERI Meritrust FSB of Thibodaux LA 35.50 27.48 2.70 21.67 22.33 163.82 11.89 163.82 13.15 0.70 1.97 25.93
MBSP Mitchell Bancorp of NC 15.00 14.70 0.55 15.02 NM 99.87 42.03 99.87 27.27 0.80 5.33 NM
PALM Palfed, Inc. of Aiken SC 14.81 77.43 0.73 10.10 NM 146.63 11.73 153.79 20.29 0.12 0.81 16.44
PERT Perpetual of SC, MHC (46.8) 26.00 18.33 1.35 19.33 27.37 134.51 18.65 134.51 19.26 0.00 0.00 0.00
PDB Piedmont Bancorp of NC 10.50 28.89 0.06 7.14 NM 147.06 23.09 147.06 NM 0.40 3.81 NM
PLE Pinnacle Bank of AL 22.50 20.03 1.70 16.65 20.83 135.14 10.45 140.01 13.24 0.72 3.20 42.35
SCCB S. Carolina Comm. Bnshrs of SC 19.00 13.40 0.71 17.57 NM 108.14 30.98 108.14 26.76 0.60 3.16 NM
SSB Scotland Bancorp of NC 15.37 28.28 0.53 13.47 NM 114.11 41.22 114.11 29.00 0.30 1.95 56.60
SSFC South Street Fin. Corp. of NC 15.63 70.27 0.66 13.15 25.21 118.86 33.79 118.86 23.68 0.32 2.05 48.48
SZB SouthFirst Bancshares of AL 13.75 11.33 0.54 15.64 NM 87.92 12.55 87.92 25.46 0.50 3.64 NM
SRN Southern Banc Company of AL 13.62 16.75 0.51 15.98 NM 85.23 15.53 86.15 26.71 0.35 2.57 68.63
SCBS Southern Commun. Bncshrs of AL 13.75 15.63 0.71 13.30 NM 103.38 21.47 103.38 19.37 0.00 0.00 0.00
SSM Stone Street Bancorp of NC 26.37 48.13 0.83 20.48 NM 128.76 45.24 128.76 NM 0.44 1.67 53.01
TSH Teche Holding Company of LA 15.87 54.55 1.07 15.21 21.74 104.34 14.37 104.34 14.83 0.50 3.15 46.73
FTF Texarkana Fst. Fin. Corp of AR 17.00 31.20 1.61 14.40 12.98 118.06 18.82 118.06 10.56 0.45 2.65 27.95
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------------
Total Equity/ NPAs/ Reported Core
---------------- ---------------
Assets Assets Assets ROA ROE ROA ROE
------ ------- ------- ------- ------- ------- -------
($Mil) (%) (%) (%) (%) (%) (%)
<C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,166 12.89 0.86 0.61 5.26 0.83 7.36
Special Selection Grouping(8) 357 16.27 0.94 0.73 5.24 1.00 7.16
State of SC 547 12.16 1.03 0.56 6.07 0.90 9.18
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
ANA Acadiana Bancshares of LA 265 17.55 0.56 -0.47 -5.89 -0.44 -5.48
AMFB American Federal Bank of SC(7) 1,395 7.76 0.51 1.04 13.07 1.30 16.31
BFSB Bedford Bancshares of VA 127 14.31 0.54 1.09 7.00 1.40 8.97
CCFH CCF Holding Company of GA 80 17.98 0.75 0.60 2.89 0.89 4.28
CFNC Carolina Fincorp of NC 109 21.96 0.07 0.88 4.00 0.88 4.00
CNIT Cenit Bancorp of Norfolk VA 656 7.28 0.82 0.50 6.96 0.55 7.76
CENB Century Bancshares of NC 99 28.53 0.77 0.93 3.25 1.18 4.13
CZF Citisave Fin. Corp. of LA 76 16.00 0.22 0.78 4.47 1.04 5.97
CFCP Coastal Fin. Corp. of SC 460 6.02 0.17 0.85 14.01 0.92 15.05
CFTP Community Fed. Bancorp of MS 206 33.44 0.35 1.31 4.38 1.59 5.32
CFFC Community Fin. Corp. of VA 161 13.92 0.20 1.03 7.49 1.30 9.48
COOP Cooperative Bk.for Svgs. of NC 341 7.46 0.42 -1.01 -11.74 0.03 0.38
EBSI Eagle Bancshares of Tucker GA 642 8.95 1.06 0.65 7.91 0.87 10.51
ESX Essex Bancorp of VA(7) 172 0.33 3.44 -2.71 NM -1.63 -40.51
FFBS FFBS Bancorp of Columbus MS 126 19.59 0.63 1.08 5.49 1.41 7.18
FFFC FFVA Financial Corp. of VA 534 13.95 0.44 1.05 6.69 1.30 8.30
FFRV Fid. Fin. Bkshrs. Corp. of VA(7) 329 8.43 1.14 0.66 7.78 0.96 11.33
FSTC First Citizens Corp of GA 162 12.80 NA 2.23 19.62 1.95 17.11
FFCH First Fin. Holdings Inc. of SC 1,582 6.08 1.28 0.52 8.22 0.82 12.89
FGHC First Georgia Hold. Corp of GA 144 8.29 1.39 0.87 10.77 0.87 10.77
FLFC First Liberty Fin. Corp. of GA 991 6.90 1.11 0.99 14.67 0.82 12.16
SOPN First SB, SSB, Moore Co. of NC 266 25.01 0.10 1.33 5.18 1.63 6.34
FSFC First So.east Fin. Corp. of SC 326 10.35 0.07 -0.01 -0.09 0.88 6.18
FLAG Flag Financial Corp of GA 229 8.80 3.67 -0.07 -0.77 0.11 1.15
GSFC Green Street Fin. Corp. of NC 176 35.29 0.20 1.18 5.35 1.48 6.68
GSLC Guaranty Svgs & Loan FA of VA 115 5.50 2.06 0.44 7.17 0.52 8.49
HFNC HFNC Financial Corp. of NC 902 27.88 1.15 1.13 3.83 1.38 4.67
ISBF ISB Financial Corp. of LA 686 16.38 NA 0.81 4.38 1.09 5.94
KSAV KS Bancorp of Kenly NC 101 13.61 0.55 0.88 6.02 1.17 7.99
LIFB Life Bancorp of Norfolk VA 1,420 10.63 0.38 0.67 5.64 0.90 7.52
MGNL Magna Bancorp of MS 1,342 9.71 3.81 1.36 13.93 1.67 17.08
MERI Meritrust FSB of Thibodaux LA 231 7.26 0.48 0.55 7.37 0.93 12.52
MBSP Mitchell Bancorp of NC 35 42.08 2.56 0.50 1.20 1.54 3.66
PALM Palfed, Inc. of Aiken SC 660 8.00 3.44 0.37 4.51 0.59 7.31
PERT Perpetual of SC, MHC (46.8) 210 13.86 0.17 0.75 6.82 1.06 9.69
PDB Piedmont Bancorp of NC 125 15.70 0.76 -0.22 -0.82 0.13 0.49
PLE Pinnacle Bank of AL 192 7.73 0.83 0.50 6.42 0.79 10.11
SCCB S. Carolina Comm. Bnshrs of SC 43 28.65 NA 0.85 2.93 1.14 3.92
SSB Scotland Bancorp of NC 69 36.12 NA 1.16 4.04 1.50 5.22
SSFC South Street Fin. Corp. of NC 208 28.43 NA 1.34 4.71 1.43 5.02
SZB SouthFirst Bancshares of AL 90 14.27 0.60 -0.02 -0.12 0.50 3.22
SRN Southern Banc Company of AL 108 18.22 NA 0.23 1.30 0.58 3.32
SCBS Southern Commun. Bncshrs of AL 73 20.77 NA 0.62 3.01 1.11 5.34
SSM Stone Street Bancorp of NC 106 35.13 0.17 1.22 4.38 1.51 5.42
TSH Teche Holding Company of LA 380 13.77 0.16 0.72 4.29 1.05 6.29
FTF Texarkana Fst. Fin. Corp of AR 166 15.94 0.17 1.47 7.54 1.81 9.27
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Market Pricing Comparatives
Prices As of February 21, 1997
<TABLE>
<CAPTION>
Per Share Data
Market _______________
Capitalization Core Book Pricing Ratios(3) Dividends(4)
--------------- -------------------------------------- -----------------------
Price/ Market 12-Mth Value/ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
------- ------- ------- ------- ------ ------- ------- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Institution
- ---------------------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%) (%)
Special Comparative Group(8)
(continued)
- ------------------------------------
TWIN Twin City Bancorp of TN 18.12 15.60 1.19 15.58 19.28 116.30 14.57 116.30 15.23 0.64 3.53 53.78
UFRM United FS&LA of Rocky Mount NC 8.13 24.92 0.41 6.44 NM 126.24 9.45 126.24 19.83 0.20 2.46 48.78
VABF Va. Beach Fed. Fin. Corp of VA 11.12 55.27 0.27 8.02 NM 138.65 9.15 138.65 NM 0.20 1.80 74.07
VFFC Virginia First Savings of VA 15.37 88.76 1.77 10.58 8.68 145.27 11.36 149.81 8.68 0.10 0.65 5.65
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------------
Total Equity/ NPAs/ Reported Core
---------------- ---------------
Assets Assets Assets ROA ROE ROA ROE
------ ------- ------- ------- ------- ------- -------
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Financial Institution
- ---------------------
Special Comparative Group(8) (continued)
- ----------------------------------------
TWIN Twin City Bancorp of TN 107 12.53 0.53 0.78 5.80 0.99 7.34
UFRM United FS&LA of Rocky Mount NC 264 7.49 1.20 0.28 3.47 0.49 6.19
VABF Va. Beach Fed. Fin. Corp of VA 604 6.60 1.42 0.03 0.49 0.21 3.29
VFFC Virginia First Savings of VA 781 7.82 2.32 1.40 18.17 1.40 18.17
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes South-East Companies;
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
<TABLE>
<CAPTION>
Page No. 1 Date: 02/24/97
Time: 10:50 am
Pending Acquisition of SC Thrifts
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Seller: Ann'd Ann'd
Completed/ 1: Total Deal Deal
Announce Terminated Assets Value Price Per Consider
Date Date Status Buyer ST Seller ST ($000) ($M) Share ($) Type
- -------- ---------- ------- ----------------- -- -------------------- -- --------- ----- --------- ---------
02/18/97 NA Pending CCB Financial Corp NC American Federal Bnk SC 1,394,874 341.6 30.260 Com Stock
TABLE CONTINUED:
<C> <C> <C> <C> <C>
Ann'd Ann'd Ann'd Ann'd Ann'd
Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBk Prem/
Pr/Bk Tg Bk 4-Qtr Assets CoreDeps
(%) (%) EPS (x) (%) (%)
- ------ -------- -------- -------- ----------
305.66 330.71 24.40 24.49 26.61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page No. 1 Date: 02/24/97
Time: 10:38 am
Completed Acquisition of SC Thrifts 1995-Present
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Seller: Final Final
Completed/ 1: Total Deal Deal
Announce Terminated Assets Value Price Per
Date Date Status Buyer ST Seller ST ($000) ($M) Share ($)
- -------- ---------- ------- ----------------- -- -------------------- -- --------- ----- ---------
02/21/95 10/05/95 Completed First Union Corp SC United Fin'l of SC SC 758,783 139.6 22.102
TABLE CONTINUED:
<C> <C> <C> <C> <C>
Final Final Final Final Final
Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBk Prem/
Pr/Bk Tg Bk 4-Qtr Assets CoreDeps
(%) (%) EPS (x) (%) (%)
- ------ -------- -------- -------- ----------
195.08 195.08 19.91 17.87 15.32
</TABLE>
<PAGE>
EXHIBIT IV-5
Directors and Senior Management Summary Resumes
<PAGE>
DIRECTOR RESUMES
E. Lea Salter is President of Christman & Parson, Inc., general
contractors. Mr. Salter is a member of the Association's Personnel and Audit
Committees. He is active in the Lions Club of Spartanburg and is a past Chairman
of the Board of Visitors of Columbia College.
David E. Tate has been President and sole owner of Tate Metal Works, Inc.,
a tank fabrication and erection company, since 1972. Mr. Tate is an elder at
First Presbyterian Church in Spartanburg, South Carolina.
Robert L. Handell is a retired savings and loan executive with 51 years of
service with the Association. he is the Secretary of the Civitan Rehabilitation
Workshop and a Director of the Civitan Club of Spartanburg, South Carolina.
Robert R. Odom is a senior partner in the law firm of Odom, Terry,
Cantrell & Hammet, Spartanburg, South Carolina, with which he has been
associated with for 45 years.
E.L. Sanders is a retired insurance executive. He is past Chairman of the
Board of Directors for Mobile Meals of Spartanburg, South Carolina, Vice
Chairman of the Board of Directors of the Foundation for the Multi-Handicapped,
Blind and Deaf of South Carolina, and on the Board of Directors of the Civitan
Club of Spartanburg, South Carolina.
Billy L. Painter has served as the Association's President and Chief
Executive Officer since 1984. Mr. Painter is a former Chairman of the
Spartanburg Area Chamber of Commerce. He serves on the Board for the Piedmont
Interstate Fair and serves on the Board for the Spartanburg Development
Council.
R. Wesley Hammond is the President and Chief Operating Officer of
Hammond-Brown-Jennings, a furniture company. He is president-elect from South
Carolina and a member of the Executive Committee of Southern Home Furnishings
Association. He is an active member of the Church of the Advent in Spartanburg,
South Carolina.
<PAGE>
EXHIBIT IV-6
Pro Forma Regulatory Capital Ratios
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
<TABLE>
<CAPTION>
PRO FORMA AT DECEMBER 31, 1996
------------------------------
Minimum of Estimated Midpoint of Estimated Maximum of Estimated
Valuation Range Valuation Range Valuation Range
-------------------- --------------------- ----------------------
2,847,500 Shares 3,350,000 Shares 3,852,500 Shares
December 31, 1996 at $20.00 Per Share at $20.00 Per Share at $20.00 Per Share
--------------------- -------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted
Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
------- ----------- ------ ---------- ------ ---------- ------ -----------
(Dollars in Thousands)
GAAP capital ................ $44,833 11.94% $65,836 16.41% $69.592 17.16% $73,411 17.89%
------- ------ ------- ------ ------ ------ ------- ------
Tangible capital ............ $44,847 11.94% $65,851 16.41% $69,607 17.15% $73,426 17.89%
Tangible capital requirement. 5,636 1.50 6,020 1.50 6,088 1.50 6,157 1.50
------- ------ ------- ------ ------- ------ ------- ------
Excess ...................... $39,211 10.44% $59,831 14.91% $63,519 15.65% $67,269 16.39
------- ------ ------ ------ ------- ------ ------- -----
------- ------ ------ ------ ------- ------ ------- -----
Core capital ................ $44,847 11.94% $65,851 16.41% $69,607 17.15% $73,426 17.89%
Core capital requirement(2).. 11,272 3.00 12,039 3.00 12,176 3.00 12,315 3.00
------- ------ ------ ------ ------- ------ ------- -----
Excess....................... $33,575 8.94% $53,811 13.41% $57,431 14.15% $61,111 14.89%
------- ------ ------ ------ ------- ------ ------- -----
------- ------ ------ ------ ------- ------ ------- -----
Total capital (3)........... $46,497 20.78% $67,501 29.50 $71,257 31.02% $75,076 32.55%
Risk-based
capital requirement...... 17,897 8.00 18,306 8.00 18,379 8.00 18,453 8.00
------- ------ ------ ------ ------- ------ ------- -----
Excess...................... $28,600 12.78% $49,195 21.50% $52,878 23.02% $56,623 24.55%
TABLE CONTINUED
<S> <C> <C>
PRO FORMA AT DECEMBER 31, 1996
------------------------------
15% above
Maximum of Estimated
Valuation Range
--------------------
4,430,375 Shares
at $20.00 Per Share
---------------------
Percent of
Adjusted
Total
Amount Assets (1)
------- -----------
GAAP capital ................ $77,803 18.72%
------- ------
Tangible capital ............ $77,818 18.72%
Tangible capital requirement. 6,237 1.50
------- ------
Excess ...................... $71,581 17.22%
------- ------
------- ------
Core capital ................ $77,818 18.72%
Core capital requirement(2).. 12,474 3.00
------- ------
Excess....................... $65,344 15.74%
------- ------
------- ------
Total capital (3)........... $79,468 34.29%
Risk-based
capital requirement...... 18,538 8.00
------- ------
Excess...................... $60,930 26.29%
</TABLE>
(1) Based upon adjusted total assets for purposes of the tangible capital and
core capital requirements, and risk-weighted assets for purposes of the
risk-based capital requirement.
(2) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and soundness
and a core capital ratio of 4% to 5% for all other thrifts.
(3) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that carry
a 20% risk-weighting.
<PAGE>
EXHIBIT IV-7
Pro Forma Analysis
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
First FS&LA of Spartanburg
Prices as of February 21, 1997
<TABLE>
<CAPTION>
Comparable All SC All SAIF
Companies Companies Companies
------------- ------------- -------------
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
-------------- ------ ---------- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 17.57x 19.45x 20.48x 22.37x 22.37x 19.70x 19.72x
Price-core earnings = P/CORE 14.84x 17.56x 16.74x 19.66x 20.29x 17.47x 16.65x
Price-book ratio = P/B 65.43% 129.13% 126.95% 145.27% 146.63% 126.24% 118.80%
Price-tng book ratio = P/TB 65.43% 130.36% 128.90% 147.05% 153.79% 128.35% 120.23%
Price-assets ratio = P/A 15.47% 23.33% 20.29% 17.36% 14.80% 15.40% 14.02%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
--------------------
<S> <C> <C> <C>
Pre-Conv Earnings (Y) $ 2,184,000 Est ESOP Borrowings (E) $ 5,360,000
Pre-Conv Book Value (B) $ 44,832,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 375,526,000 Amort of ESOP Borrowings (T) 12 Years
Reinvestment Rate(2) (R) 3.99% Recognition Plan Amount (M)$ 2,680,000
Est Conversion Exp(3) (X) 1,400,000 Recognition Plan Expense (N) $ 536,000
Proceeds Not Reinvested (Z) $ 9,540,000
</TABLE>
Calculation of Pro Forma Value After Conversion
-----------------------------------------------
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) V = $ 66,987,767
-------------------------------------------
1-(P/E)R
2. V = P/B (B-X-E-M) V = $66,985,784
-----------------------
1-P/B
3. V = P/A (A-X-M-E) V = $ 66,998,112
----------------------
1-P/A
Total Price Total
Conclusion Shares Per Share Value
---------- -------- --------- --------
Appraised Value 3,350,000 $20.00 $ 67,000,000
RANGE:
------
- Minimum 2,847,500 $20.00 $ 56,950,000
- Maximum 3,852,500 $20.00 $ 77,050,000
- Superrange 4,430,375 $20.00 $ 88,607,500
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 6.44 percent, and a tax rate
of 38.00 percent.
(3) Conversion expenses reflect estimated expenses as presented in offering
document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 38.00
percent.
<PAGE>
RP Financial, Inc.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
First FS&LA of Spartanburg
Prices as of February 21, 1997
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
Valuation Approach Subject Peers (Disc) Peers (Disc)
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 17.57x 19.45x -9.65% 20.48x -14.20%
P/CORE Price-core earnings 14.84x 17.56x -15.47% 16.74x -11.33%
P/B Price-book 65.43% 129.13% -49.33% 126.95% -48.46%
P/TB Price-tang. book 65.43% 130.36% -49.81% 128.90% -49.24%
P/A Price-assets 15.47% 23.33% -33.70% 20.29% -23.75%
Average Premium (Discount) -31.59% -29.39%
</TABLE>
<PAGE>
EXHIBIT IV-8
Pro Forma Effect of Conversion Proceeds
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First FS&LA of Spartanburg
At the Minimum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 56,950,000
Less: Estimated offering expenses --------------- 1,274,000
-----------
Net Conversion Proceeds ----------------------------- $ 55,676,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 55,676,000
Less: Held in Non-Earning Assets(5)(1) ---------- 8,334,000
-----------
Net Proceeds Reinvested ----------------------------- $ 47,342,000
Estimated net incremental rate of return ------------ 3.99 %
-----------
Earnings Increase ----------------------------------- $ 1,890,271
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 235,393
Less: Recognition Plan Expense(4)---------------- 282,472
-----------
Net Earnings Increase ------------------------------- $ 1,372,406
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended December 31, 1996 $ 2,184,000 $ 3,556,406
12 Months ended December 31, 1996 (Core)$ 2,885,000 $ 4,257,406
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ---------------
<S> <C> <C> <C>
December 31, 1996 $ 44,832,000 $ 48,842,000 (3)(4) $ 93,674,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
December 31, 1996 $ 375,526,000 $ 48,842,000 $ 424,368,000
</TABLE>
NOTE: Shares for calculating per share amounts: 2,847,500
(1) Estimated ESOP borrowings of $ 4,556,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 12 years, amortization is
tax-effected.
(3) ESOP borrowings of $ 4,556,000 are omitted from net worth.
(4) $2,278,000 purchased by the Recognition Plan with an estimated pre-tax
expense of $ 455,600 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plan does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First FS&LA of Spartanburg
At the Midpoint of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 67,000,000
Less: Estimated offering expenses --------------- 1,400,000
-----------
Net Conversion Proceeds ----------------------------- $ 65,600,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 65,600,000
Less: Held in Non-Earning Assets(5)(1) ---------- 9,540,000
-----------
Net Proceeds Reinvested ----------------------------- $ 56,060,000
Estimated net incremental rate of return ------------ 3.99 %
-----------
Earnings Increase ----------------------------------- $ 2,238,364
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 276,933
Less: Recognition Plan Expense(4)---------------- 332,320
-----------
Net Earnings Increase ------------------------------- $ 1,629,110
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended December 31, 1996 $ 2,184,000 $ 3,813,110
12 Months ended December 31, 1996 (Core)$ 2,885,000 $ 4,514,110
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ---------------
<S> <C> <C> <C>
December 31, 1996 $ 44,832,000 $ 57,560,000 (3)(4) $102,392,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
December 31, 1996 $ 375,526,000 $ 57,560,000 $ 433,086,000
</TABLE>
NOTE: Shares for calculating per share amounts: 3,350,000
(1) Estimated ESOP borrowings of $ 5,360,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 12 years, amortization is
tax-effected.
(3) ESOP borrowings of $ 5,360,000 are omitted from net worth.
(4) $2,680,000 purchased by the Recognition Plan with an estimated pre-tax
expense of $ 536,000 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plan does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First FS&LA of Spartanburg
At the Maximum of the Range
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 77,050,000
Less: Estimated offering expenses --------------- 1,400,000
-----------
Net Conversion Proceeds ----------------------------- $ 75,650,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 75,650,000
Less: Held in Non-Earning Assets(5)(1) ---------- 10,746,000
-----------
Net Proceeds Reinvested ----------------------------- $ 64,904,000
Estimated net incremental rate of return ------------ 3.99 %
-----------
Earnings Increase ----------------------------------- $ 2,591,487
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 318,473
Less: Recognition Plan Expense(4)---------------- 382,168
-----------
Net Earnings Increase ------------------------------- $ 1,890,846
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended December 31, 1996 $ 2,184,000 $ 4,074,846
12 Months ended December 31, 1996 (Core)$ 2,885,000 $ 4,775,846
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ---------------
<S> <C> <C> <C>
December 31, 1996 $ 44,832,000 $ 66,404,000 (3)(4) $111,236,000
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
December 31, 1996 $ 375,526,000 $ 66,404,000 $ 441,930,000
</TABLE>
NOTE: Shares for calculating per share amounts: 3,852,500
(1) Estimated ESOP borrowings of $ 6,164,000 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 12 years, amortization is
tax-effected.
(3) ESOP borrowings of $ 6,164,000 are omitted from net worth.
(4) $3,082,000 purchased by the Recognition Plan with an estimated pre-tax
expense of $ 616,400 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plan does not generate reinvestment
income.
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
First FS&LA of Spartanburg
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value ------------------------------ $ 88,607,500
Less: Estimated offering expenses --------------- 1,400,000
-----------
Net Conversion Proceeds ----------------------------- $ 87,207,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ----------------------------- $ 87,207,500
Less: Held in Non-Earning Assets(5)(1) ---------- 12,132,900
-----------
Net Proceeds Reinvested ----------------------------- $ 75,074,600
Estimated net incremental rate of return ------------ 3.99 %
-----------
Earnings Increase ----------------------------------- $ 2,997,579
Less: Estimated cost of ESOP borrowings(1) ------ 0
Less: Amortization of ESOP borrowings(2) -------- 366,244
Less: Recognition Plan Expense(4)---------------- 439,493
-----------
Net Earnings Increase ------------------------------- $ 2,191,841
3. Pro-Forma Earnings (rounded)
<TABLE>
<CAPTION>
Period Before Conversion After Conversion
------ ----------------- ----------------
<S> <C> <C>
12 Months ended December 31, 1996 $ 2,184,000 $ 4,375,841
12 Months ended December 31, 1996 (Core)$ 2,885,000 $ 5,076,841
</TABLE>
4. Pro-Forma Net Worth (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ---------------
<S> <C> <C> <C>
December 31, 1996 $ 44,832,000 $ 76,574,600 (3)(4) $121,406,600
</TABLE>
5. Pro-Forma Net Assets (rounded)
<TABLE>
<CAPTION>
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
December 31, 1996 $ 375,526,000 $ 76,574,600 $ 452,100,600
</TABLE>
NOTE: Shares for calculating per share amounts: 4,430,375
(1) Estimated ESOP borrowings of $ 7,088,600 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 12 years, amortization is
tax-effected.
(3) ESOP borrowings of $ 7,088,600 are omitted from net worth.
(4) $3,544,300 purchased by the Recognition Plan with an estimated pre-tax
expense of $ 708,860 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plan does not generate reinvestment
income.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains (Loss) @34% Items to Common Shares Core EPS
($000) ($000) ($000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
CFFC Community Fin. Corp. of VA(1) 1,623 664 -226 0 2,061 1,272 1.62
EBSI Eagle Bancshares of Tucker GA(1) 3,858 1,921 -653 0 5,126 4,552 1.13
FFFC FFVA Financial Corp. of VA 5,463 1,978 -673 0 6,768 4,693 1.44
SOPN First BS, SSB, Moore Co. of NC 3,471 1,159 -394 0 4,236 3,689 1.15
GSFC Green Street Fin. Corp. of NC(1) 2,070 793 -270 0 2,593 4,298 0.60
HFNC HFNC Financial Corp. of NC 9,533 3,062 -1,041 0 11,554 17,192 0.67
ISBF ISB Financial Corp. of LA(1) 5,154 2,735 -930 0 6,959 7,051 0.99
LIFB Life Bancorp of Norfolk VA 8,614 4,266 -1,450 0 11,430 9,847 1.16
TSH Teche Holding Company of LA(1) 2,521 1,733 -589 0 3,665 3,437 1.07
FTF Texarkana Fst. Fin. Corp of AR(1) 2,401 835 -284 0 2,952 1,835 1.61
</TABLE>
(1) Financial information is for the quarter ending September 30, 1996.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation
services to the financial services industry nationwide, particularly
federally-insured financial institutions. RP Financial establishes
long-term client relationships through its wide array of services,
emphasis on quality and timeliness, hands-on involvement by our principals
and senior consulting staff, and careful structuring of strategic plans
and transactions. RP Financial's staff draws from backgrounds in consulting,
regulatory agencies and investment banking, thereby providing our clients
with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions
and assisting in implementing post-acquisition strategies. Through our
financial simulations, comprehensive in-house data bases, valuation
expertise and regulatory knowledge, RP Financial's M&A consulting
focuses on structuring transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a
variety of purposes including mergers and acquisitions, mutual-to-stock
conversions, ESOPs, subsidiary companies, mark-to-market transactions,
loan and servicing portfolios, non-traded securities, core deposits, FAS
107 (fair market value disclosure), FAS 122 (loan servicing rights)
and FAS 123 (stock options). Our principals and staff are highly
experienced in performing valuation appraisals which conform with
regulatory guidelines and appraisal industry standards. RP Financial
is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching
strategies, feasibility studies and special research studies, which are
complemented by our quantitative and computer skills. RP Financial's
consulting services are aided by its in-house data base resources
for commercial banks and savings institutions and proprietary valuation
and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (11)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (9)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Director-Community Banking (15)
___________________________________________________________________________
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210
Arlington, VA 22209 Telephone: (703) 528-1700
Fax No.: (703) 528-1788
<PAGE>
EXHIBIT 99.5
PROXY STATEMENT FOR SPECIAL MEETING OF MEMBERS OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
380 EAST MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29302
(864) 582-2391
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD ON JUNE 25, 1997
Notice is hereby given that a special meeting ("Special Meeting") of
members of First Federal Savings and Loan Association of Spartanburg
("Association") will be held at the Association's main office at 380 East Main
Street, Spartanburg, South Carolina, on Wednesday, June 25, 1997, at 2:00
p.m., Eastern Time. Business to be taken up at the Special Meeting shall be:
(1) To approve a Plan of Conversion adopted by the Board of Directors
on February 3, 1997 to convert the Association from a federally chartered mutual
savings and loan association to a federally chartered capital stock savings and
loan association, to be held as a wholly-owned subsidiary of a new holding
company, FirstSpartan Financial Corp., including the adoption of a Federal Stock
Charter and Bylaws for the Association, pursuant to the laws of the United
States and the rules and regulations of the Office of Thrift Supervision; and
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of Directors
is not aware of any other matters that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those
members of the Association at the close of business on May 1, 1997, and who
continue as members until the Special Meeting, and should the Special Meeting
be, from time to time, adjourned to a later time, until the final adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT L. HANDELL
SECRETARY
Spartanburg, South Carolina
May __, 1997
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY BY
WRITTEN INSTRUMENT DELIVERED TO ROBERT L. HANDELL, SECRETARY, FIRST FEDERAL
SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG, AT THE ABOVE ADDRESS AT ANY TIME
PRIOR TO OR AT THE SPECIAL MEETING.
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
380 EAST MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29302
(864) 582-2391
PROXY STATEMENT
JUNE 25, 1997
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF
DIRECTORS OF FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG FOR USE
AT A SPECIAL MEETING OF MEMBERS TO BE HELD ON WEDNESDAY, JUNE 25, 1997, AND ANY
ADJOURNMENT OF THAT MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE
OF SPECIAL MEETING. YOUR BOARD OF DIRECTORS AND MANAGEMENT URGE YOU TO VOTE FOR
THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of First Federal
savings and Loan Association of Spartanburg ("Association") will be held at the
Association's main office at 380 East Main Street, Spartanburg, South Carolina,
on Wednesday, June 25, 1997, at 2:00 p.m., Eastern Time, for the purpose of
considering and voting upon a Plan of Conversion from Federal Mutual Savings and
Loan Association to Federal Stock Savings and Loan Association and Formation of
a Holding Company ("Plan of Conversion"), which, if approved by a majority of
the total votes of the members eligible to be cast, will permit the Association
to convert from a federally chartered mutual savings and loan association to a
federally chartered capital stock savings and loan association, to be held as a
subsidiary of FirstSpartan Financial Corp. ("Holding Company"), a newly
organized Delaware corporation formed by the Association. The conversion of the
Association and the acquisition of control of the Association by the Holding
Company are collectively referred to herein as the "Conversion."
Members entitled to vote on the Plan of Conversion are members of the
Association as of May 1, 1997 ("Voting Record Date") who continue as members
until the Special Meeting, and should the Special Meeting be, from time to time,
adjourned to a later time, until the final adjournment thereof. The Conversion
requires the approval of not less than a majority of the total votes eligible to
be cast at the Special Meeting.
The Plan of Conversion provides, among other things, that, after
receiving final authorization from the Office of Thrift Supervision ("OTS"), the
Association will offer for sale shares of common stock of the Holding Company
("Common Stock"), through the issuance of nontransferable subscription rights
("Subscription Rights"), first to depositors of the Association with $50.00 or
more on deposit as of December 31, 1995 ("Eligible Account Holders"), then to
the Association's employee stock ownership plan ("ESOP"), then to depositors of
the Association with $50.00 or more on deposit as of March 31, 1997
("Supplemental Eligible Account Holders"), then to depositors of the Association
as of May 1, 1997 (the "Voting Record Date") and borrowers with loans
outstanding as of March 12, 1997, which continue to be outstanding as of the
Voting Record Date ("Other Members"), in a subscription offering ("Subscription
Offering"), and then, if necessary, to certain members of the general public in
a direct community offering ("Direct Community Offering"). The Subscription and
Direct Community Offerings are referred to herein as the "Subscription and
Direct Community Offerings." It is anticipated that shares of Common Stock not
subscribed for in the Subscription and Direct Community Offerings will be
offered to the general public with the assistance of Trident Securities, Inc.
("Trident Securities") and, if necessary, a syndicate of registered
broker-dealers to be managed by Trident Securities pursuant to selected dealers'
agreements in a syndicated offering ("Syndicated Offering"). The Subscription,
Direct Community and Syndicated Offerings are referred to herein as the
"Offerings."
1
<PAGE>
Adoption of a Federal Stock Charter ("Federal Stock Charter") and
Bylaws ("Bylaws") of the Association is an integral part of the Plan of
Conversion. Copies of the Plan of Conversion and the proposed Federal Stock
Charter and Bylaws for the Association are attached to this Proxy Statement as
exhibits. They provide, among other things, for the termination of voting rights
of members and of their rights to receive any surplus remaining after
liquidation of the Association. These rights, except for the rights of Eligible
Account Holders and Supplemental Eligible Account Holders in the liquidation
account, will vest exclusively in the holders of the stock in the Holding
Company and the Association. For further information, see "THE CONVERSION --
Effects of Conversion to Stock Form on Depositors and Borrowers of the
Association."
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
Chartered in 1935, the Association is a federal mutual savings and loan
association headquartered in Spartanburg, South Carolina. As a result of the
Conversion, the Association will convert to a federal capital stock savings and
loan association and will become a wholly-owned subsidiary of the Holding
Company. The Association is regulated by the OTS, its primary regulator, and by
the Federal Deposit Insurance Corporation ("FDIC"), the insurer of its deposits.
The Association's deposits have been federally-insured since 1935 and are
currently insured by the FDIC under the Savings Association Insurance Fund
("SAIF"). The Association has been a member of the Federal Home Loan Bank
("FHLB") System since 1935. At December 31, 1996, the Association had total
assets of $375.5 million, total deposits of $324.0 million and total equity of
$44.8 million on a consolidated basis.
The Association is a community oriented financial institution whose
primary business is attracting retail deposits from the general public and using
these funds to originate primarily one- to- four family residential mortgage
loans within its primary market area. The Association is an approved Federal
Housing Administration and Veterans Administration lender and participates in
the Spartanburg Residential Development Program, an affordable housing program.
The Association also actively originates construction loans and consumer loans.
To a lesser extent, the Association originates land loans, commercial real
estate loans and commercial business loans. The Association expects to hire an
experienced commercial loan officer familiar with the Association's primary
market area in an attempt to augment its commercial real estate and commercial
business lending. At December 31, 1996, one- to- four family residential
mortgage loans, consumer loans (including commercial business loans),
construction loans, commercial real estate loans and land loans amounted to
77.3%, 11.5%, 9.2%, 1.3% and 0.7% of its total loan portfolio, respectively.
Loans receivable, net, constituted 88.3% of total assets at December 31, 1996.
The Association considers Spartanburg County and adjacent counties in
Northwest South Carolina to be its primary market area because a large number of
its depositors reside, and a substantial portion of its loan portfolio is
secured by properties located, in that geographic area. Since August 1996, the
Association has purchased a limited number of one- to- four family residential
mortgage loans and residential construction loans from a regional start-up
mortgage banking company in which the Association's service corporation
subsidiary has an equity investment. At December 31, 1996, a substantial portion
of these purchased loans were secured by properties located in the Association's
primary market area. Such loan purchases are expected to continue and increase
in volume as that company's mortgage banking operations expand, and are likely
to include purchases of loans, including commercial loans and home equity loans,
secured by properties inside and outside of the Association's primary market
area.
In addition to its lending activities, the Association invests excess
liquidity in short term U.S. Government and agency securities, a mutual fund
that invests in adjustable rate mortgage loans and, to a substantially lesser
extent, short term mortgage-backed securities issued by U.S. Government
agencies. Investment securities and mortgage-backed securities, which
constituted 3.6% of total assets at December 31, 1996, had an amortized cost and
a fair value of $13.6 million at December 31, 1996.
The Association conducts its operations from its main office and three
branch offices located in Spartanburg, South Carolina, a branch office in
Boiling Springs, South Carolina (Spartanburg County) and a loan production
office in Greenville, South Carolina, in adjacent Greenville County. Two
additional branch offices are under construction in Inman, South Carolina
(Spartanburg County), and in Duncan, South Carolina (Spartanburg County). Both
offices
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are scheduled to open by the end of the first half of calendar 1997. See
"BUSINESS OF THE ASSOCIATION -- Properties" in the Prospectus. The main office
is located at 380 E. Main Street, Spartanburg, South Carolina 29302, and its
telephone number is (864) 582-2391.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The Association's Board of Directors has fixed the close of business on
May 1, 1997 as the record date for the determination of members entitled to
notice of and to vote at the Special Meeting. All holders of the Association's
savings or other authorized accounts are members of the Association under its
current charter. All members of record as of the close of business on the Voting
Record Date who continue to be members on the date of the Special Meeting or any
adjournment thereof will be entitled to vote at the Special Meeting or such
adjournment.
Each eligible depositor member will be entitled at the Special Meeting
to cast one vote for each $100, or fraction thereof, of the aggregate withdrawal
value of all of the depositor's savings accounts in the Association as of the
Voting Record Date. Borrowers with loans outstanding as of March 12, 1997 which
continue to be outstanding as of the Voting Record Date will be entitled to cast
one vote for the period of time such borrowings remain in existence. No member
is entitled to cast more than 1,000 votes. Any number of members present and
voting, represented in person or by proxy, at the Special Meeting will
constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of
a majority of the total outstanding votes of the Association's members eligible
to be cast at the Special Meeting. As of the Voting Record Date for the Special
Meeting, there were approximately ___________ votes eligible to be cast, of
which ________ votes may be cast by depositor members and ____________ votes may
be cast by borrower members.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible member
to vote on the Plan of Conversion. All properly executed proxies received by
management will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. If no instructions are given, such proxies
will be voted in favor of the Plan of Conversion. If any other matters are
properly presented at the Special Meeting and may properly be voted on, all
proxies will be voted on such matters in accordance with the best judgment of
the proxy holders named therein. If the enclosed proxy is returned, it may be
revoked at any time before it is voted by written notice to the Secretary of the
Association, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. The proxies being solicited are only for use at
the Special Meeting and at any and all adjournments thereof and will not be used
for any other meeting. Management is not aware of any other business to be
presented at the Special Meeting.
The Association, as trustee for individual retirement accounts at the
Association, will vote in favor of the Plan of Conversion, unless the beneficial
owner executes and returns the enclosed proxy for the Special Meeting or attends
the Special Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by representatives of Trident Securities and by
officers, directors or regular employees of the Association, in person, by
telephone or through other forms of communication and, if necessary, the Special
Meeting may be adjourned to an alternative date. Such persons will be reimbursed
by the Association for their reasonable out-of-pocket expenses incurred in
connection with such solicitation.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION WILL NOT OBLIGATE
ANY VOTER TO PURCHASE ANY STOCK.
THE CONVERSION
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO ITS APPROVAL BY
THE MEMBERS OF THE ASSOCIATION ENTITLED TO VOTE THEREON AND TO THE SATISFACTION
OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL
DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION.
GENERAL
On February 3, 1997, the Board of Directors of the Association
unanimously adopted the Plan of Conversion, pursuant to which the Association
will be converted from a federally chartered mutual savings and loan association
to a federally chartered stock savings and loan association to be held as a
wholly-owned subsidiary of the Holding Company, a newly formed Delaware
corporation. THE FOLLOWING DISCUSSION OF THE PLAN OF CONVERSION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION, WHICH IS ATTACHED AS
EXHIBIT A TO THE ASSOCIATION'S PROXY STATEMENT AND IS AVAILABLE TO MEMBERS OF
THE ASSOCIATION UPON REQUEST. The Plan of Conversion is also filed as an exhibit
to the Registration Statement. See "ADDITIONAL INFORMATION." The OTS has
approved the Plan of Conversion subject to its approval by the members of the
Association entitled to vote on the matter at the Special Meeting and to the
satisfaction of certain other conditions imposed by the OTS in its approval.
If the Board of Directors of the Association decides for any reason,
such as possible delays resulting from overlapping regulatory processing or
policies or conditions that could adversely affect the Association's or the
Holding Company's ability to consummate the Conversion and transact its business
as contemplated herein and in accordance with the Association's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Association
will promptly refund all subscriptions or orders received together with accrued
interest, will withdraw the Holding Company's registration statement from the
Securities and Exchange Commission ("SEC") and will take all steps necessary to
complete the Conversion and proceed with a new offering without the Holding
Company, including filing any necessary documents with the OTS. In such event,
and provided there is no regulatory action, directive or other consideration
upon which basis the Association determines not to complete the Conversion, the
Association will issue and sell the common stock of the Association. There can
be no assurance that the OTS would approve the Conversion if the Association
decided to proceed without the Holding Company. The following description of the
Plan of Conversion assumes that a holding company form of organization will be
utilized in the Conversion. In the event that a holding company form of
organization is not utilized, all other pertinent terms of the Plan of
Conversion as described below will apply to the Conversion of the Association
from mutual to stock form of organization and the sale of the Association's
common stock.
The Conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the
Association. Pursuant to the Plan of Conversion, 2,847,500 to 3,852,500 shares
of Common Stock are being offered for sale by the Holding Company at the
Purchase Price of $20.00 per share. As part of the Conversion, the Association
will issue all of its newly issued common stock (1,000 shares) to the Holding
Company in exchange for 50% of the net proceeds from the sale of Common Stock by
the Holding Company.
The Plan of Conversion provides generally that: (i) the Association
will convert from a federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association; (ii) the Common Stock
will be offered by the Holding Company in the Subscription Offering to persons
having Subscription Rights;
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(iii) if necessary, shares of Common Stock not subscribed for in the
Subscription Offering will be offered in a Direct Community Offering to certain
members of the general public, with preference given to natural persons and
trusts of natural persons residing in the Local Community, and then to certain
members of the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers pursuant to selected dealers agreements;
and (iv) the Holding Company will purchase all of the capital stock of the
Association to be issued in connection with the Conversion. The Conversion will
be effected only upon completion of the sale of at least $56,950,000 of Common
Stock to be issued pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of December 31, 1995); (ii) the Association's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of March 31, 1997); and (iv) Other Members (depositors of the Association as
of May 1, 1997 and borrowers of the Association with loans outstanding as of
March 12, 1997 which continue to be outstanding as of May 1, 1997).
Shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in the Direct Community Offering to members of the
general public, with priority being given to natural persons and trusts of
natural persons residing in the Local Community. The Direct Community Offering,
if one is held, is expected to begin immediately after the Expiration Date, but
may begin at any time during the Subscription Offering. Shares of Common Stock
not sold in the Subscription and Direct Community Offerings may be offered in
the Syndicated Community Offering. Regulations require that the Direct Community
and Syndicated Community Offerings be completed within 45 days after completion
of the Subscription Offering unless extended by the Association or the Holding
Company with the approval of the regulatory authorities. If the Syndicated
Community Offering is determined not to be feasible, the Board of Directors of
the Association will consult with the regulatory authorities to determine an
appropriate alternative method for selling the unsubscribed shares of Common
Stock. The Plan of Conversion provides that the Conversion must be completed
within 24 months after the date of the approval of the Plan of Conversion by the
members of the Association.
No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the Association.
The completion of the Offerings, however, is subject to market
conditions and other factors beyond the Association's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Meeting that will be required to complete the Direct Community or
Syndicated Community Offerings or other sale of the Common Stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of the Holding Company and the Association as converted, together with
corresponding changes in the net proceeds realized by the Holding Company from
the sale of the Common Stock. In the event the Conversion is terminated, the
Association would be required to charge all Conversion expenses against current
income.
Orders for shares of Common Stock will not be filled until at least
2,847,500 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is not
completed within 45 days after the last day of the fully extended Subscription
Offering and the OTS consents to an extension of time to complete the
Conversion, subscribers will be given the right to increase, decrease or rescind
their subscriptions. Unless an affirmative indication is received from
subscribers that they wish to continue to subscribe for shares, the funds will
be returned promptly, together with accrued interest at the Association's
passbook rate from the date payment is received until the funds are returned to
the subscriber. If such period is not extended, or, in any event, if the
Conversion is not completed, all withdrawal authorizations will be terminated
and all funds held will be promptly returned together with accrued interest at
the Association's passbook rate from the date payment is received until the
Conversion is terminated.
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PURPOSES OF CONVERSION
The Board of Directors and management believe that the Conversion is in
the best interests of the Association, its members and the communities it
serves. The Association's Board of Directors has formed the Holding Company to
serve as a holding company, with the Association as its subsidiary, upon the
consummation of the Conversion. By converting to the stock form of organization,
the Holding Company and the Association will be structured in the form used by
holding companies of commercial banks and by a growing number of savings
institutions. Management of the Association believes that the Conversion offers
a number of advantages which will be important to the future growth and
performance of the Association. The capital raised in the Conversion is intended
to support the Association's current lending and investment activities and may
also support possible future expansion and diversification of operations,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any such expansion or diversification. The Conversion
is also expected to afford the Association's members and others the opportunity
to become stockholders of the Holding Company and participate more directly in,
and contribute to, any future growth of the Holding Company and the Association.
The Conversion will also enable the Holding Company and the Association to raise
additional capital in the public equity or debt markets should the need arise,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any such financing activities. The Association, as a
mutual savings and loan association, does not have the authority to issue
capital stock or debt instruments, other than by accepting deposits.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE
ASSOCIATION
VOTING RIGHTS. Savings members and borrowers will have no voting rights
in the converted Association or the Holding Company and therefore will not be
able to elect directors of the Association or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings members of the
Association. Subsequent to the Conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Association and the
holders of the Common Stock as to matters pertaining to the Holding Company.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Holding Company. A stockholder will be
entitled to one vote for each share of Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Association's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion. Furthermore, the Conversion will not affect the loan
accounts, loan balances or obligations of borrowers under their individual
contractual arrangements with the Association.
TAX EFFECTS. The Association has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended. Among other things, the opinion states that: (i) no gain or loss
will be recognized to the Association in its mutual or stock form by reason of
the Conversion; (ii) no gain or loss will be recognized to its account holders
upon the issuance to them of accounts in the Association immediately after the
Conversion, in the
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same dollar amounts and on the same terms and conditions as their accounts at
the Association in its mutual form plus interest in the liquidation account;
(iii) the tax basis of account holders' accounts in the Association immediately
after the Conversion will be the same as the tax basis of their accounts
immediately prior to Conversion; (iv) the tax basis of each account holder's
interest in the liquidation account will be zero; (v) the tax basis of the
Common Stock purchased in the Conversion will be the amount paid and the holding
period for such stock will commence at the date of purchase; and (vi) no gain or
loss will be recognized to account holders upon the receipt or exercise of
Subscription Rights in the Conversion, except to the extent Subscription Rights
are deemed to have value as discussed below. Unlike a private letter ruling
issued by the Internal Revenue Service ("IRS"), an opinion of counsel is not
binding on the IRS and the IRS could disagree with the conclusions reached
therein. In the event of such disagreement, no assurance can be given that the
conclusions reached in an opinion of counsel would be sustained by a court if
contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that
the receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. RP Financial, a financial consulting firm retained by the
Association, whose findings are not binding on the IRS, has indicated that the
Subscription Rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration and afford the recipients the right only to purchase shares of the
Common Stock at a price equal to its estimated fair market value, which will be
the same price paid by purchasers in the Direct Community Offering for
unsubscribed shares of Common Stock. If the Subscription Rights are deemed to
have a fair market value, the receipt of such rights may only be taxable to
those Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members who exercise their Subscription Rights. The Association could also
recognize a gain on the distribution of such Subscription Rights. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members are
encouraged to consult with their own tax advisors as to the tax consequences in
the event the Subscription Rights are deemed to have a fair market value.
The Association has also received an opinion from Deloitte & Touche
LLP, Greenville, South Carolina, that, assuming the Conversion does not result
in any federal income tax liability to the Association, its account holders, or
the Holding Company, implementation of the Plan of Conversion will not result in
any South Carolina income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Deloitte & Touche LLP and the
letter from RP Financial are filed as exhibits to the Registration Statement.
See "ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each depositor in the Association
would receive a pro rata share of any assets of the Association remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account to the total value of all deposit accounts in the Association at the
time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the
Association, including certificates of deposit ("Savings Account(s)"), shall not
be entitled to share in any residual assets in the event of liquidation of the
Association. However, pursuant to OTS regulations, the Association shall, at the
time of the Conversion, establish a liquidation account in an amount equal to
its total equity as of the date of the latest statement of financial condition
contained herein.
The liquidation account shall be maintained by the Association
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
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Association. 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 ("subaccount").
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 opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's "qualifying
deposit" in the Savings Account and the denominator is the total amount of the
"qualifying deposits" of all such holders. Such initial subaccount balance shall
not be increased, and it 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 day of the Association subsequent to December 31, 1995 or March
31, 1997 is less than the lesser of (i) the deposit balance in such Savings
Account at the close of business on any other annual closing date subsequent to
December 31, 1995 or March 31, 1997 or (ii) the amount of the "qualifying
deposit" in such Savings Account on December 31, 1995 or March 31, 1997, 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, such subaccount balance
shall not be subsequently increased, notwithstanding any increase in the deposit
balance of the related Savings Account. If any such Savings Account is closed,
the related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Association (and only in
such event) each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Association is not the surviving institution shall be considered to
be a complete liquidation. In any such transaction the liquidation account shall
be assumed by the surviving institution.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves a plan of conversion pursuant to this part
may obtain review of such action by filing in the court of appeals of the United
States for the circuit in which the principal office or residence of such person
is located, or in the United States Court of Appeals for the District of
Columbia, a written petition praying that the final action of the OTS be
modified, terminated or set aside. Such petition must be filed within 30 days
after the publication of notice of such final action in the Federal Register, or
30 days after the mailing by the applicant of the notice to members as provided
for in 12 C.F.R. ss.563b.6(c), whichever is later. The further procedure for
review is as follows: A copy of the petition is forthwith transmitted to the OTS
by the clerk of the court and thereupon the OTS files in the court the record in
the proceeding, as provided in Section 2112 of Title 28 of the United States
Code. Upon the filing of the petition, the court has jurisdiction, which upon
the filing of the record is exclusive, to affirm, modify, terminate, or set
aside in whole or in part, the final action of the OTS. Review of such
proceedings is as provided in Chapter 7 of Title 5 of the United States Code.
The judgment and decree of the court is final, except that they are subject to
review by the United States Supreme Court upon certiorari as provided in Section
1254 of Title 28 of the United States Code.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on
Form S-1 (File No. 333-23015) under the Securities Act of 1933, as amended, with
respect to the Common Stock offered in the Conversion. The accompanying
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Such information may be inspected at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Room 1100, Chicago,
Illinois 60661; and 75 Park Place, New York,
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New York 10007. Copies may be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Association has filed with the OTS an Application for Approval of
Conversion. The accompanying Prospectus omits certain information contained in
such Application. The Application, including exhibits and certain other
information that are a part thereof, may be inspected, without charge, at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552
and at the office of the Regional Director of the OTS at the Midwest Regional
Office of the OTS, 1475 Peachtree Street, N.E., Atlanta, Georgia 30309.
Copies of the Holding Company's Certificate of Incorporation and Bylaws
may be obtained by written request to the Association.
All persons eligible to vote at the Special Meeting should review both
this Proxy Statement and the accompanying Prospectus carefully. However, no
person is obligated to purchase any Common Stock. For additional information,
you may call the Stock Information Center at (864) ___-____.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT L. HANDELL
SECRETARY
Spartanburg, South Carolina
May __, 1997
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND THE PROSPECTUS AND, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES
WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND
THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED
TO THE SECRETARY OF THE ASSOCIATION AT ANY TIME PRIOR TO OR AT THE SPECIAL
MEETING OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS IN THOSE
JURISDICTIONS IN WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
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EXHIBIT A
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
SPARTANBURG, SOUTH CAROLINA
PLAN OF CONVERSION
FROM FEDERAL MUTUAL SAVINGS AND LOAN ASSOCIATION
TO FEDERAL STOCK SAVINGS AND LOAN ASSOCIATION
AND FORMATION OF A HOLDING COMPANY
INTRODUCTION
I. General
The Board of Directors of First Federal Savings and Loan Association of
Spartanburg ("Association") desires to attract new capital to the Association to
increase its net worth, to support future savings growth, to increase the amount
of funds available for other lending and investment, to provide greater
resources for the expansion of customer services and to facilitate future
expansion by the Association. In addition, the Board of Directors intends to
implement stock option plans and other stock benefit plans as part of the
Conversion in order to attract and retain qualified directors and officers. It
is the further desire of the Board of Directors to reorganize the Association as
the wholly owned subsidiary of a holding company to enhance flexibility of
operations, diversification of business opportunities and financial capability
for business and regulatory purposes and to enable the Association to compete
more effectively with other financial service organizations. Accordingly, on
February 3, 1997, the Board of Directors, after careful study and consideration,
adopted by unanimous vote this Plan of Conversion ("Plan"), which provides for
the conversion of the Association from a federally chartered mutual savings and
loan association to a federally chartered stock savings and loan association and
the concurrent formation of a holding company for the Association ("Holding
Company").
All capitalized terms contained in the Plan shall have the meanings
ascribed to them in Section II hereof.
Pursuant to this Plan, shares of Conversion Stock will be offered as
part of the Conversion in a Subscription Offering pursuant to nontransferable
Subscription Rights at a predetermined and uniform price first to the
Association's Eligible Account Holders, second to the Tax-Qualified Employee
Stock Benefit Plans, third to Supplemental Eligible Account Holders, and fourth
to Other Members of the Association. Shares not subscribed for in the
Subscription Offering will be offered as part of the Conversion to the general
public in a Direct Community Offering. Shares still remaining may then be
offered to the general public in a Syndicated Community Offering, an
underwritten public offering, or otherwise. The aggregate Purchase Price of the
Conversion Stock will be based upon an independent appraisal of the Association
and will reflect the estimated pro forma market value of the Association as a
subsidiary of the Holding Company.
The Conversion is subject to the regulations of the Director of the OTS
(Part 563b of the Rules and Regulations Applicable to All Savings Associations)
as promulgated pursuant to Section 5(i) of the Home Owners' Loan Act.
Consummation of the Conversion is subject to the approval of this Plan
and the Conversion by the OTS and by the affirmative vote of Members of the
Association holding not less than a majority of the total votes eligible to be
cast at a special meeting of the Members to be called to consider the
Conversion.
No change will be made in the Board of Directors or management of the
Association as a result of the Conversion.
II. Definitions
As used in this Plan, the terms set forth below have the following
meanings:
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A. Acting in Concert: (i) Knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (ii) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a Person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
means (i) any corporation or organization (other than the Association or a
majority-owned subsidiary of the Association, or the Holding Company) of which
such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten 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 that it does not include a Tax-Qualified Employee Stock Benefit
Plan 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 Association, any of its subsidiaries, or the Holding Company.
C. Association: First Federal Savings and Loan Association of
Spartanburg, in its present form as a federally chartered mutual savings and
loan association.
D. Capital Stock: Any and all authorized capital stock in the Converted
Association.
E. Common Stock: Any and all authorized common stock in the Holding
Company subsequent to the Conversion.
F. Conversion: (i) Amendment of the Association's Charter and Bylaws to
authorize issuance of shares of Capital Stock by the Converted Association and
to conform to the requirements of a Federal stock savings and loan association
under the laws of the United States and rules and regulations of the OTS; (ii)
issuance and sale of Conversion Stock by the Holding Company in the Subscription
Offering and Direct Community Offering; and (iii) purchase by the Holding
Company of all of the issued and outstanding shares of Capital Stock of the
Converted Association to be issued in the Conversion immediately following or
concurrently with the close of the sale of all Conversion Stock.
G. Conversion Stock: Holding Company common stock to be issued and sold
by the Holding Company pursuant to the Plan.
H. Converted Association: First Federal Savings and Loan Association of
Spartanburg, in its converted form as a federally chartered stock savings and
loan association.
I. Direct Community Offering: The offering for sale of Conversion Stock
to the public.
J. Eligibility Record Date: December 31, 1995.
K. Eligible Account Holder: Holder of a Qualifying Deposit in the
Association on the Eligibility Record Date.
L. FDIC: Federal Deposit Insurance Corporation.
M. Form AC Application: The application submitted to the OTS on OTS
Form AC for approval of the Conversion.
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N. H-(e)1 Application: The application submitted to the OTS on OTS Form
H-(e)1 or, if applicable, Form H-(e)1-S for approval of the Holding Company's
acquisition of all of the Capital Stock of the Converted Association.
O. Holding Company: A corporation to be formed by the Association under
state law for the purpose of becoming a holding company through the issuance and
sale of its stock under the Plan, and concurrent acquisition of 100% of the
Capital Stock of the Converted Association to be issued pursuant to the Plan.
P. Holding Company Stock: Any and all authorized capital stock of the
Holding Company.
Q. Local Community: Spartanburg County, South Carolina.
R. 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 furnishes bona fide competitive bid and offer quotations on request
and (ii) is ready, willing and able to effect transactions in reasonable
quantities at his quoted prices with other brokers or dealers.
S. Members: All Persons or entities who qualify as members of the
Association pursuant to its Charter and Bylaws prior to the Conversion.
T. Officer: An executive officer of the Association, which includes the
Chairman of the Board, President, Vice President, Secretary, Treasurer or
Principal Financial Officer, Comptroller or Principal Accounting Officer, and
Senior Vice Presidents, Vice Presidents in charge of principal business
functions, the Secretary and the Treasurer as well as any other person
performing similar functions.
U. Order Forms: Forms to be used for the purchase of Conversion Stock
sent to Eligible Account Holders and other parties eligible to purchase
Conversion Stock in the Subscription Offering pursuant to the Plan.
V. Other Member: Holder of a Savings Account (other than Eligible
Account Holders and Supplemental Eligible Account Holders) as of the Record
Date, and borrowers from the Association as provided in the Association's
Federal Mutual Charter who continue as borrowers from the Association as of the
Record Date.
W. OTS: Office of Thrift Supervision of the United States Department of
the Treasury.
X. Person: An individual, corporation, partnership, association, joint
stock company, trusts of natural Persons, unincorporated organization or a
government or any political subdivision thereof.
Y. Plan: This Plan of Conversion, which provides for the conversion of
the Association from a federally chartered mutual savings and loan association
to a federally chartered capital stock savings and loan association as a wholly
owned subsidiary of the Holding Company, as originally adopted by the Board of
Directors or as amended in accordance with the terms hereof.
Z. Qualifying Deposit: The deposit balance in any Savings Account as of
the close of business on the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable; provided, however, that no Savings
Account with a deposit balance of less than $50.00 shall constitute a Qualifying
Deposit.
AA. Record Date: Date which determines which Members are entitled to
vote at the Special Meeting.
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BB. Registration Statement: The registration statement on SEC Form S-1
or other applicable form filed by the Holding Company with the SEC for the
purpose of registering the Conversion Stock under the Securities Act of 1933, as
amended.
CC. Savings Account(s): Withdrawable deposit(s) in the Association,
including certificates of deposit.
DD. SEC: Securities and Exchange Commission.
EE. Special Meeting: The special meeting of Members called for the
purpose of considering the Plan for approval.
FF. Subscription Offering: The offering of Conversion Stock to Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Members under the Plan.
GG. Subscription Rights: Nontransferable, non-negotiable, personal
rights of Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members to purchase Conversion
Stock.
HH. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Plan by the OTS.
II. Supplemental Eligible Account Holder: Holder of a Qualifying
Deposit in the Association (other than an Officer or director of the Association
or their Associates) on the Supplemental Eligibility Record Date.
JJ. Syndicated Community Offering: The offering for sale by a syndicate
of broker-dealers to the general public of shares of Conversion Stock not
purchased in the Subscription Offering and the Direct Community Offering.
KK. Tax-Qualified Employee Stock Benefit Plan: Any defined benefit plan
or defined contribution plan of the Association or Holding Company, such as an
employee stock ownership plan, bonus plan, profit-sharing plan or other plan,
which, with its related trust, meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code. A "non-tax-qualified employee stock
benefit plan" is any defined benefit plan or defined contribution plan that is
not so qualified.
III. Steps Prior to Submission of the Plan to the Members for Approval
Prior to submission of the Plan to the Members for approval, the
Association must receive approval from the OTS of the Form AC Application. Prior
to such regulatory approval:
A. The Board of Directors shall adopt the Plan by a vote of not less
than two-thirds of its entire membership.
B. The Association shall notify the Members of the adoption of the Plan
by publishing legal notice in a newspaper having a general circulation in each
community in which the Association maintains an office.
C. A press release relating to the proposed Conversion may be submitted
to the local media.
D. Copies of the Plan as adopted by the Board of Directors shall be
made available for inspection at each office of the Association.
E. The Association shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
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F. As soon as practicable following the adoption of this Plan, the
Association shall file the Form AC Application, and the Holding Company shall
file the Registration Statement and the H-(e)1 Application. Upon filing the Form
AC Application, the Association shall publish legal notice of the filing of the
Form AC Application in a newspaper having a general circulation in each
community in which the Association maintains an office and/or by mailing a
letter to each of its Members, and shall publish such other notices of the
Conversion as may be required in connection with the H-(e)1 Application and by
the regulations and policies of the OTS.
G. The Association shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which shall
state that the Conversion will not result in any gain or loss for Federal income
tax purposes to the Association or its Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members. Receipt of a favorable opinion or
ruling is a condition precedent to completion of the Conversion.
IV. Meeting of Members
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Association's Bylaws. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Association shall distribute proxy solicitation materials
to all Members and beneficial owners of accounts held in fiduciary capacities
where the beneficial owners possess voting rights, as of the Record Date. The
proxy solicitation materials shall include a copy of the proxy statement to be
used in connection with such solicitation ("Proxy Statement") and other
documents authorized for use by the regulatory authorities and may also include
a copy of the Plan and/or a prospectus ("Prospectus") as provided in Paragraph V
below. The Association shall also advise each Eligible Account Holder and
Supplemental Eligible Account Holder not entitled to vote at the Special Meeting
of the proposed Conversion and the scheduled Special Meeting, and provide a
postage prepaid card on which to indicate whether he wishes to receive the
Prospectus, if the Subscription Offering is not held concurrently with the proxy
solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy. The OTS shall be notified
promptly of the actions of the Members.
V. Summary Proxy Statement
The Proxy Statement furnished to Members may be in summary form,
provided that a statement is made in bold-face type that a more detailed
description of the proposed transaction may be obtained by returning an enclosed
postage prepaid card or other written communication requesting supplemental
information. Without prior approval of the OTS, the Special Meeting shall not be
held less than 20 days after the last day on which the supplemental information
statement is mailed to requesting Members. The supplemental information
statement may be combined with the Prospectus if the Subscription Offering is
commenced concurrently with or during the proxy solicitation of Members for the
Special Meeting.
VI. Offering Documents
The Holding Company may commence the Subscription Offering and,
provided that the Subscription Offering has commenced, may commence the Direct
Community Offering concurrently with or during the proxy solicitation of
Members. The Holding Company may close the Subscription Offering 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 Association's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members to return to
the Association by a reasonable certain date a postage prepaid card or other
written communication requesting receipt of a Prospectus with respect to the
Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the
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Association may transmit, not more than 30 days prior to the commencement of the
Subscription Offering, to each Eligible Account Holder, Supplemental Eligible
Account Holder and other eligible subscribers who had been furnished with proxy
solicitation materials a notice which shall state that the Association is not
required to furnish a Prospectus to them unless they return by a reasonable
date certain a postage prepaid card or other written communication requesting
the receipt of the Prospectus.
Prior to commencement of the Subscription Offering, the Direct
Community Offering and the Syndicated Community Offering, the Holding Company
shall file the Registration Statement. The Holding Company shall not distribute
the final Prospectus until the Registration Statement containing same has been
declared effective by the SEC and the Prospectus has been declared effective by
the OTS.
VII. Combined Subscription and Direct Community Offering
Instead of a separate Subscription Offering, all Subscription Rights
may be exercised by delivery of properly completed and executed Order Forms to
the Association or selling group utilized in connection with the Direct
Community Offering and the Syndicated Community Offering. If a separate
Subscription Offering is not held, orders for Conversion Stock in the Direct
Community Offering shall first be filled pursuant to the priorities and
limitations stated in Paragraph IX.C., below.
VIII. Consummation of the Conversion
After receipt of all orders for Conversion Stock, the amendment of the
Association's Federal Mutual Charter and Bylaws to authorize the issuance of
shares of Capital Stock and to conform to the requirements of a federal stock
savings and loan association, as approved by the Members at the Special Meeting
will be declared effective by the OTS. At such time, the Conversion Stock will
be issued and sold by the Holding Company, the Capital Stock to be issued in the
Conversion will be issued and sold to the Holding Company, and the Converted
Association will become a wholly owned subsidiary of the Holding Company. The
Converted Association will issue to the Holding Company 1,000 shares of its
common stock, representing all of the shares of Capital Stock to be issued by
the Converted Association, and the Holding Company will make payment to the
Converted Association of that portion of the aggregate net proceeds realized by
the Holding Company from the sale of the Conversion Stock under the Plan as may
be authorized or required by the OTS.
IX. Stock Offering
A. Number of Shares
The number of shares of Conversion Stock to be offered pursuant to the
Plan shall be determined initially by the Board of Directors of the Association
and the Board of Directors of the Holding Company in conjunction with the
determination of the Purchase Price (as that term is defined in Paragraph IX.B.
below). The number of shares to be offered may be subsequently adjusted by the
Board of Directors prior to completion of the offering.
B. Independent Evaluation and Purchase Price of Shares
All shares of Conversion Stock sold in the Conversion, including shares
sold in any Direct Community Offering, shall be sold at a uniform price per
share, referred to herein as the "Purchase Price." The Purchase Price shall be
determined by the Board of Directors of the Association and the Board of
Directors of the Holding Company immediately prior to the simultaneous
completion of all such sales contemplated by this Plan on the basis of the
estimated pro forma market value of the Converted Association at such time. The
estimated pro forma market value of the Converted Association shall be
determined for such purpose by an independent appraiser on the basis of such
appropriate factors not inconsistent with the regulations of the OTS.
Immediately prior to the Subscription Offering, a subscription price range shall
be established which shall vary from 15% above to 15% below the average of the
minimum and maximum of the estimated price range. The maximum subscription price
(i.e., the per share amount
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to be remitted when subscribing for shares of Conversion Stock) shall
then be determined within the subscription price range by the Board of
Directors of the Association. The subscription price range and
the number of shares to be offered may be revised after the completion of the
Subscription Offering with OTS approval without a resolicitation of proxies or
Order Forms or both.
C. Method of Offering Shares
Subscription Rights shall be issued at no cost to Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible
Account Holders and Other Members pursuant to priorities established by this
Plan and the regulations of the OTS. In order to effect the Conversion, all
shares of Conversion Stock proposed to be issued in connection with the
Conversion must be sold and, to the extent that shares are available, no
subscriber shall be allowed to purchase less than 25 shares; provided, however,
that if the purchase price is greater than $20.00 per share, the minimum number
of shares which must be subscribed for shall be adjusted so that the aggregate
actual purchase price required to be paid for such minimum number of shares does
not exceed $500.00. The priorities established for the purchase of shares are as
follows:
1. Category 1: Eligible Account Holders
a. Each Eligible Account Holder shall receive,
without payment, Subscription Rights entitling such Eligible
Account Holder to purchase that number of shares of Conversion
Stock which is equal to the greater of the maximum purchase
limitation established for the Direct Community Offering,
one-tenth of one percent of the total offering or 15 times the
product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to
be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Eligible Account Holder and
the denominator is the total amount of Qualifying Deposits of
all Eligible Account Holders. If the allocation made in this
paragraph results in an oversubscription, shares of Conversion
Stock shall be allocated among subscribing Eligible Account
Holders so as to permit each such account holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation equal to 100
shares of Conversion Stock or the total amount of his
subscription, whichever is less. Any shares of Conversion
Stock not so allocated shall be allocated among the
subscribing Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying Deposits
as compared to the total Qualifying Deposits of all Eligible
Account Holders.
b. Subscription Rights received by Officers and
directors of the Association and their Associates, as Eligible
Account Holders, based on their increased deposits in the
Association in the one-year period preceding the Eligibility
Record Date shall be subordinated to all other subscriptions
involving the exercise of Subscription Rights pursuant to this
Category.
2. Category 2: Tax-Qualified Employee Stock Benefit Plans
a. Tax-Qualified Employee Stock Benefit Plans shall
receive, without payment, nontransferable Subscription Rights
to purchase in the aggregate up to 8% of the Conversion Stock,
including shares of Conversion Stock to be issued in the
Conversion as result of an increase in the estimated price
range after commencement of the Subscription Offering and
prior to the completion of the Conversion. The Subscription
Rights granted to Tax-Qualified Stock Benefit Plans shall be
subject to the availability of shares of Conversion Stock
after taking into account the shares of Conversion Stock
purchased by Eligible Account Holders; provided, however, that
in the event the number of shares offered in the Conversion is
increased to an amount greater than the maximum of the
estimated price range as set forth in the Prospectus ("Maximum
Shares"), the Tax-Qualified Employee Stock Benefit Plans shall
have a priority right to purchase any such shares exceeding
the Maximum Shares up to an aggregate of 8% of the Conversion
Stock. Tax-Qualified Employee
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Stock Benefit Plans may use funds contributed or borrowed
by the Holding Company or the Association and/or borrowed
from an independent financial institution to exercise such
Subscription Rights, and the Holding Company and the
Association may make scheduled discretionary contributions
thereto, provided that such contributions do not cause
the Holding Company or the Association to fail to meet
any applicable capital requirements.
3. Category 3: Supplemental Eligible Account Holders
a. In the event that the Eligibility Record Date is
more than 15 months prior to the date of the latest amendment
to the Form AC Application filed prior to OTS approval, then,
and only in that event, each Supplemental Eligible Account
Holder shall receive, without payment, Subscription Rights
entitling such Supplemental Eligible Account Holder to
purchase that number of shares of Conversion Stock which is
equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of
one percent of the total offering or 15 times the product
(rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to
be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Supplemental Eligible Account
Holder and the denominator is the total amount of the
Qualifying Deposits of all Supplemental Eligible Account
Holders.
b. Subscription Rights received pursuant to this
category shall be subordinated to Subscription Rights granted
to Eligible Account Holders and Tax-Qualified Employee Stock
Benefit Plans.
c. Any Subscription Rights to purchase shares of
Conversion Stock received by an Eligible Account Holder in
accordance with Category Number 1 shall reduce to the extent
thereof the Subscription Rights to be distributed pursuant to
this Category.
d. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of
Conversion Stock shall be allocated among the subscribing
Supplemental Eligible Account Holders as follows:
(1) Shares of Conversion Stock shall be
allocated so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to
purchase a number of shares of Conversion Stock
sufficient to make his total allocation (including
the number of shares of Conversion Stock, if any,
allocated in accordance with Category Number 1) equal
to 100 shares of Conversion Stock or the total amount
of his subscription, whichever is less.
(2) Any shares of Conversion Stock not
allocated in accordance with subparagraph (1) above
shall be allocated among the subscribing Supplemental
Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying
Deposits as compared to the total Qualifying Deposits
of all Supplemental Eligible Account Holders.
4. Category 4: Other Members
a. Other Members shall receive, without payment,
Subscription Rights to purchase shares of Conversion Stock,
after satisfying the subscriptions of Eligible Account
Holders, Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders pursuant to Category
Nos. l, 2 and 3 above, subject to the following conditions:
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(1) Each such Other Member shall be entitled
to subscribe for the greater of the maximum purchase
limitation established for the Direct Community
Offering or one-tenth of one percent of the total
offering.
(2) In the event of an oversubscription for
shares of Conversion Stock pursuant to Category No.
4, the shares of Conversion Stock available shall be
allocated among the subscribing Other Members pro
rata on the basis of the amounts of their respective
subscriptions.
D. Direct Community Offering and Syndicated Community Offering
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights set forth in Category Nos. 1 through 4
above may be sold by the Holding Company to Persons under such terms
and conditions as may be established by the Association's Board of
Directors with the concurrence of the OTS. The Direct Community
Offering may commence concurrently with or as soon as possible after
the completion of the Subscription Offering and must be completed
within 45 days after completion of the Subscription Offering, unless
extended with the approval of the OTS. No Person, either alone or
together with Associates of or Persons Acting in Concert with such
Person, may purchase shares of Conversion Stock in the Direct Community
Offering having an aggregate purchase price of more than $325,000. The
right to purchase shares of Conversion Stock under this Category is
subject to the right of the Association or the Holding Company to
accept or reject such subscriptions in whole or in part. In the event
of an oversubscription for shares in this Category, the shares
available shall be allocated among prospective purchasers pro rata on
the basis of the amounts of their respective orders. The offering price
for which such shares are sold to the general public in the Direct
Community Offering shall be the Purchase Price.
2. Orders received in the Direct Community Offering first
shall be filled up to a maximum of 2% of the Conversion Stock and
thereafter remaining shares shall be allocated on an equal number of
shares basis per order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community
Offering shall be offered and sold in a manner that will achieve the
widest distribution thereof. Preference shall be given in the Direct
Community Offering to natural Persons and trusts of natural Persons
residing in the Local Community.
4. Subject to such terms, conditions and procedures as may be
determined by the Association and the Holding Company, all shares of
Conversion Stock not subscribed for in the Subscription Offering or
ordered in the Direct Community Offering may be sold by a syndicate of
broker-dealers to the general public in a Syndicated Community
Offering. No Person, either alone or together with Associates of or
Persons Acting in Concert with such Person, may purchase shares of
Conversion Stock in the Syndicated Community Offering having an
aggregate purchase price of more than $325,000. Each order for
Conversion Stock in the Syndicated Community Offering shall be subject
to the absolute right of the Association and the Holding Company to
accept or reject any such order in whole or in part either at the time
of receipt of an order or as soon as practicable after completion of
the Syndicated Community Offering. The Association and the Holding
Company may commence the Syndicated Community Offering concurrently
with, at any time during, or as soon as practicable after the end of
the Subscription Offering and/or Direct Community Offering, provided
that the Syndicated Community Offering must be completed within 45 days
after the completion of the Subscription Offering, unless extended by
the Association and the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of shares
of Conversion Stock not sold in the Subscription Offering and the
Direct Community Offering cannot be effected, or in the event that any
insignificant residue of shares of Conversion Stock is not sold in the
Subscription Offering, Direct Community Offering or Syndicated
Community Offering, the Association and the Holding Company shall
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use their best efforts to obtain other purchasers for such shares in
such manner and upon such conditions as may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated
Community Offering do not appear feasible, the Association will
immediately consult with the OTS to determine the most viable
alternative available to effect the completion of the Conversion.
Should no viable alternative exist, the Association may terminate the
Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
The following additional limitations and exceptions shall be imposed
upon purchases of shares of Conversion Stock:
1. No Person, together with Associates of or Persons Acting in
Concert with such Person, may purchase in the aggregate more than the
overall maximum purchase limitation of 1% of the total number of shares
of Conversion Stock issued in the Conversion (exclusive of any shares
issued pursuant to an increase in the range of minimum and maximum
aggregate values within which the aggregate amount of Conversion Stock
issued in the Conversion will fall), except that Tax-Qualified Employee
Stock Benefit Plans may purchase up to 8% of the total Conversion Stock
issued and shares held or to be held by the Tax-Qualified Employee
Stock Benefit Plans and attributable to a Person shall not be
aggregated with other shares purchased directly by or otherwise
attributable to such Person.
2. Officers and directors of the Association and Associates
thereof may not purchase in the aggregate more than 28% of the shares
issued in the Conversion.
3. The Association's and Holding Company's Boards of Directors
will not be deemed to be Associates or a group of Persons Acting in
Concert with other directors or trustees solely as a result of
membership on the Board of Directors.
4. The Association's Board of Directors, with the approval of
the OTS and without further approval of Members, may, as a result of
market conditions and other factors, increase or decrease the purchase
limitation in paragraphs 1 and 4 above or the number of shares of
Conversion Stock to be sold in the Conversion. If the Association or
the Holding Company, as the case may be, increases the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in
the Conversion, the Association or the Holding Company, as the case may
be, is only required to resolicit Persons who subscribed for the
maximum purchase amount and may, in the sole discretion of the
Association or the Holding Company, as the case may be, resolicit
certain other large subscribers. If the Association or the Holding
Company, as the case may be, decreases the maximum purchase limitations
or the number of shares of Conversion Stock to be sold in the
Conversion, the orders of any Person who subscribed for the maximum
purchase amount shall be decreased by the minimum amount necessary so
that such Person shall be in compliance with the then maximum number of
shares permitted to be subscribed for by such Person.
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. In
the event that such purchase limitations are violated by any Person (including
any Associate or group of Persons affiliated or otherwise Acting in Concert with
such Person), the Holding Company shall have the right to purchase from such
Person at the actual Purchase Price per share all shares acquired by such Person
in excess of such purchase limitations or, if such excess shares have been sold
by such Person, to receive from such Person the difference between the actual
Purchase Price per share paid for such excess shares and the price at which such
excess shares were sold by such Person. This right of the Holding Company to
purchase such excess shares shall be assignable by the Holding Company.
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F. Restrictions On and Other Characteristics of the Conversion Stock
1. Transferability. Conversion Stock purchased by Officers and
directors of the Association and officers and directors of the Holding
Company shall not be sold or otherwise disposed of for value for a
period of one year from the date of Conversion, except for any
disposition (i) following the death of the original purchaser or (ii)
resulting from an exchange of securities in a merger or acquisition
approved by the regulatory authorities having jurisdiction.
The Conversion Stock issued by the Holding Company to such
Officers and directors shall bear a legend giving appropriate notice of
the one-year holding period restriction. Said legend shall state as
follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this
certificate pursuant to Part 563b of the Rules and Regulations
of the Office of Thrift Supervision. These shares may not be
transferred prior thereto without a legal opinion of counsel
that said transfer is permissible under the provisions of
applicable laws and regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent of the Holding Company Stock with
respect to the foregoing restrictions. Any shares of Holding Company
Stock 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 such Persons as may be then
applicable to such restricted stock.
2. Subsequent Purchases by Officers and Directors. Without
prior approval of the OTS, if applicable, Officers and directors of the
Association and officers and directors of the Holding Company, and
their Associates, shall be prohibited for a period of three years
following completion of the Conversion from purchasing outstanding
shares of Holding Company Stock, except from a broker or dealer
registered with the SEC. Notwithstanding this restriction, purchases
involving more than 1% of the total outstanding shares of Holding
Company Stock and purchases made and shares held by a Tax-Qualified or
non-Tax-Qualified Employee Stock Benefit Plan which may be attributable
to such directors and Officers may be made in negotiated transactions
without OTS permission or the use of a broker or dealer.
3. Repurchase and Dividend Rights. For a period of three years
following the consummation of the Conversion, any repurchases of
Holding Company Stock by the Holding Company from any Person shall be
subject to the then applicable rules and regulations and policies of
the OTS. The Converted Association may not declare or pay a cash
dividend on or repurchase any of its Capital Stock if the result
thereof would be to reduce the regulatory capital of the Converted
Association below the amount required for the liquidation account
described in Paragraph XIII. Further, any dividend declared or paid on
the Capital Stock shall comply with the then applicable rules and
regulations of the OTS.
4. Voting Rights. After the Conversion, holders of Savings
Accounts in and obligors on loans of the Converted Association will not
have voting rights in the Converted Association. Exclusive voting
rights with respect to the Holding Company shall be vested in the
holders of Holding Company Stock; holders of Savings Accounts in and
obligors on loans of the Converted Association will not have any voting
rights in the Holding Company except and to the extent that such
Persons become stockholders of the Holding Company, and the Holding
Company will have exclusive voting rights with respect to the Converted
Association's Capital Stock.
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G. Mailing of Offering Materials and Collation of Subscriptions
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days
nor more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Association. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the Holding Company with
the approval of the OTS.
H. Method of Payment
Payment for all shares of Conversion Stock may be made in cash, by
check or by money order, or if a subscriber has a Savings Account(s) in the
Association, such subscriber may authorize the Association to charge the
subscriber's Savings Account(s). The Association shall pay interest at not less
than the passbook rate on all amounts paid in cash or by check or money order to
purchase shares of Conversion Stock in the Subscription Offering from the date
payment is received until the Conversion is completed or terminated. The
Association is not permitted knowingly to loan funds or otherwise extend any
credit to any Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Association to charge the subscriber's
Savings Account(s), the funds shall remain in the subscriber's Savings
Account(s) and shall continue to earn interest, but may not be used by such
subscriber until the Conversion is completed or terminated, whichever is
earlier. The withdrawal shall be given effect only concurrently with the sale of
all shares of Conversion Stock proposed to be sold in the Conversion and only to
the extent necessary to satisfy the subscription at a price equal to the
aggregate Purchase Price. The Association shall allow subscribers to purchase
shares of Conversion Stock by withdrawing funds from certificate accounts held
with the Association without the assessment of early withdrawal penalties,
subject to the approval, if necessary, of the applicable regulatory authorities.
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 shall earn interest at the passbook 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.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order Form, along with evidence of a loan commitment from a
financial institution for the purchase of shares, if applicable, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion.
I. Undelivered, Defective or Late Order Forms; Insufficient Payment
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Association by the United States Postal Service (or the Holding
Company or Association is unable to locate the addressee); (ii) is not returned
to the Holding Company or Association, or is returned to the Holding Company or
Association after expiration of the date specified thereon; (iii) is defectively
completed or executed; or (iv) is not accompanied by the total required payment
for the shares of Conversion Stock subscribed for (including cases in which the
subscribers'
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<PAGE>
Savings Accounts are insufficient to cover the authorized withdrawal
for the required payment), the Subscription Rights of the Person to
whom such rights have been granted shall not be honored and shall be treated as
though such Person failed to return the completed Order Form within the time
period specified therein. Alternatively, the Holding Company or Association may,
but shall 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 the shares of Conversion Stock subscribed for by such date as the
Holding Company or Association may specify. Subscription orders, once tendered,
shall not be revocable. The Holding Company's and Association's interpretation
of the terms and conditions of the Plan and of the Order Forms shall be final.
J. Members in Non-Qualified States or in Foreign Countries
The Holding Company and the Association will make reasonable efforts to
comply with the securities laws of all states in the United States in which
persons entitled to subscribe for stock pursuant to the Plan reside. However,
the Holding Company and the Association are not required to offer stock in the
Subscription Offering to any person who resides in a foreign country or resides
in a state of the United States with respect to which (i) a small number of
persons otherwise eligible to subscribe for shares of Common Stock reside in
such state; or (ii) the Holding Company or the Association 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 request or
requirement that the Holding Company and the Association or their officers,
directors or trustees register as a broker, dealer, salesman or selling agent,
under the securities laws of such state, or a request or requirement to register
or otherwise qualify the Subscription Rights or Common Stock for sale or submit
any filing with respect thereto in such state. Where the number of persons
eligible to subscribe for shares in one state is small relative to other states,
the Holding Company and the Association will base their decision as to whether
or not to offer the Common Stock in such state on a number of factors, including
the size of accounts held by account holders in the state, the cost of reviewing
the registration and qualification requirements of the state (and of actually
registering or qualifying the shares) or the need to register the Holding
Company, its officers, directors or employees as brokers, dealers or salesmen.
X. Federal Stock Charter and Bylaws
As part of the Conversion, a Federal Stock Charter and Bylaws will be
adopted to authorize the Converted Association to operate as a federal stock
savings and loan association. By approving the Plan, the Members of the
Association will thereby approve the Federal Stock Charter and Bylaws. Prior to
completion of the Conversion, the Federal Stock Charter and Bylaws may be
amended in accordance with the provisions and limitations for amending the Plan
under Paragraph XVII below. The effective date of the adoption of the Federal
Stock Charter and Bylaws shall be the date of the issuance of the Conversion
Stock, which shall be the date of consummation of the Conversion.
XI. Post Conversion Filing and Market Making
In connection with the Conversion, the Holding Company shall register
the Conversion Stock with the SEC pursuant to the Securities Exchange Act of
1934, as amended, and shall undertake not to deregister such Conversion Stock
for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the shares of its
stock. The Holding Company shall also use its best efforts to list its stock
through The Nasdaq Stock Market or on a national or regional securities
exchange.
XII. Status of Savings Accounts and Loans Subsequent to Conversion
All Savings Accounts shall retain the same status after Conversion as
these accounts had prior to Conversion. Each Savings Account holder shall
retain, without payment, a withdrawable Savings Account(s) after the Conversion,
equal in amount to the withdrawable value of such holder's Savings Account(s)
prior to Conversion.
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All Savings Accounts will continue to be insured by the Savings Association
Insurance Fund of the FDIC up to the applicable limits of insurance
coverage. All loans shall retain the same status after the Conversion
as they had prior to the Conversion. See Paragraph IX.F.4. with respect to the
termination of voting rights of Members.
XIII. Liquidation Account
After the Conversion, holders of Savings Accounts shall not be entitled
to share in any residual assets in the event of liquidation of the Converted
Association. However, the Association shall, at the time of the Conversion,
establish a liquidation account in an amount equal to its total net worth as of
the date of the latest statement of financial condition contained in the final
Prospectus. The function of the liquidation account shall be to establish a
priority on liquidation and, except as provided in Paragraph IX.F.3 above, the
existence of the liquidation account shall not operate to restrict the use or
application of any of the net worth accounts of the Converted Association.
The liquidation account shall be maintained by the Converted
Association subsequent to the Conversion for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders who retain their Savings
Accounts in the Converted Association. 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 ("subaccount").
The initial subaccount balance for a Savings Account held by an
Eligible Account Holder and/or a Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the liquidation account by a
fraction of which the numerator is the amount of such holder's Qualifying
Deposit in the Savings Account and the denominator is the total amount of the
Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible
Account Holders. Such initial subaccount balance shall not be increased, and it
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 is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or the Supplemental Eligibility Record Date or (ii) the amount of the
Qualifying Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, 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, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Association,
each Eligible Account Holder and Supplemental Eligible Account Holder shall be
entitled to receive a liquidation distribution from the liquidation account in
the amount of the then current adjusted subaccount balance(s) for Savings
Account(s) then held by such holder before any liquidation distribution may be
made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Savings Accounts and other liabilities or similar transactions
with another Federally-insured institution in which the Converted Association is
not the surviving institution shall be considered to be a complete liquidation.
In any such transaction, the liquidation account shall be assumed by the
surviving institution.
XIV. Regulatory Restrictions on Acquisition of Holding Company
A. OTS regulations provide that for a period of three years following
completion of the Conversion, no Person (i.e, individual, a group Acting in
Concert, a corporation, a partnership, an association, a joint stock company, a
trust, or any unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution or its holding company) shall directly, or
indirectly, offer to purchase or actually acquire the beneficial ownership of
more than 10% of any class
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<PAGE>
of equity security of the Holding Company without the prior approval of the
OTS. However, approval is not required for purchases directly from
the Holding Company or the underwriters or selling group acting on its behalf
with a view towards public resale, or for purchases not exceeding 1%
per annum of the shares outstanding. Civil penalties may be imposed by the OTS
for willful violation or assistance of any violation. Where any Person, directly
or indirectly, acquires beneficial ownership of more than 10% of any class of
equity security of the Holding Company within such three-year period, without
the prior approval of the OTS, stock of the Holding Company beneficially owned
by such Person in excess of 10% shall not be counted as shares entitled to vote
and shall not be voted by any Person or counted as voting shares in connection
with any matter submitted to the stockholders for a vote. The provisions of this
regulation shall not apply to the acquisition of securities by Tax-Qualified
Employee Stock Benefit Plans provided that such plans do not have beneficial
ownership of more than 25% of any class of equity security of the Holding
Company.
B. The Holding Company may provide in its articles\certificate of
incorporation, or similar document, a provision that, for a specified period of
up to five years following the date of the completion of the Conversion, no
Person shall directly or indirectly offer to acquire or actually acquire the
beneficial ownership of more than 10% of any class of equity security of the
Holding Company. Such provisions would not apply to acquisition of securities by
Tax-Qualified Employee Stock Benefit Plans provided that such plans do not have
beneficial ownership of more than 25% of any class of equity security of the
Holding Company. The Holding Company may provide in its articles\certificate of
incorporation, or similar document, for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XV. Directors and Officers of the Converted Association
The Conversion is not intended to result in any change in the directors
or Officers. Each Person serving as a director of the Association at the time of
Conversion shall continue to serve as a member of the Converted Association's
Board of Directors, subject to the Converted Association's Federal Stock Charter
and Bylaws. The Persons serving as Officers immediately prior to the Conversion
will continue to serve at the discretion of the Board of Directors in their
respective capacities as Officers of the Converted Association. In connection
with the Conversion, the Association and the Holding Company may enter into
employment agreements on such terms and with such officers as shall be
determined by the Boards of Directors of the Association and the Holding
Company.
XVI. Executive Compensation
The Association and the Holding Company may adopt, subject to any
required approvals, executive compensation or other benefit programs, including
but not limited to compensation plans involving stock options, stock
appreciation rights, restricted stock grants, employee recognition programs and
the like.
XVII. Amendment or Termination of Plan
If necessary or desirable, the Plan may be amended by a two-thirds vote
of the Association's Board of Directors, at any time prior to submission of the
Plan and proxy materials to the Members. At any time 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 only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting, and at any time following such Special Meeting
with the concurrence of the OTS. In its discretion, the Board of Directors may
modify or terminate the Plan upon the order of the regulatory authorities
without a resolicitation of proxies or another meeting of the Members.
In the event that mandatory new regulations pertaining to conversions
are adopted by the OTS prior to the completion of the Conversion, the Plan shall
be amended to conform to the new mandatory regulations without a resolicitation
of proxies or another meeting of Members. In the event that new conversion
regulations adopted by the OTS prior to completion of the Conversion contain
optional provisions, the Plan may be amended to utilize such
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<PAGE>
optional provisions at the discretion of the Board of Directors without a
resolicitation of proxies or another meeting of Members.
By adoption of the Plan, the Members authorize the Board of Directors
to amend and/or terminate the Plan under the circumstances set forth above.
XVIII. Expenses of the Conversion
The Holding Company and the Association shall use their best efforts to
assure that expenses incurred in connection with the Conversion shall be
reasonable.
XIX. Contributions to Tax-Qualified Plans
The Holding Company and/or the Association may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Association to fail to meet its regulatory
capital requirements.
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EXHIBIT B
FEDERAL STOCK CHARTER
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
Section 1. Corporate title. The full corporate title of the association
is First Federal Savings and Loan Association of Spartanburg ("Association").
Section 2. Office. The home office shall be located in Spartanburg,
South Carolina.
Section 3. Duration. The duration of the Association is perpetual.
Section 4. Purpose and powers. The purpose of the Association is to
pursue any or all of the lawful objectives of a Federal savings and loan
association chartered under section 5 of the Home Owners' Loan Act 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
Constitution and laws of 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 the Office of Thrift Supervision ("Office").
Section 5. Capital stock. The total number of shares of all classes of
capital stock that the Association has the authority to issue is 10,000, of
which 1,000 shares shall be common stock of par value of $1.00 per share and of
which 9,000 shares shall be serial preferred stock, having no par value. The
shares may be issued from time to time as authorized by the board of directors
without further approval of shareholders, except as otherwise provided in this
Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the Association. The consideration for the
shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted), labor, or services actually
performed for the Association, or any combination of the foregoing. In the
absence of actual fraud in the transaction, the value of such property, labor,
or services, as determined by the board of directors of the Association, shall
be conclusive. In the case of a stock dividend, that part of the retained
earnings of the Association that is transferred to common stock or paid-in
capital accounts upon the issuance of shares as a stock dividend shall be deemed
to be the consideration for their issuance.
Except for shares issued in the initial organization of the Association
or in connection with the conversion of the Association from the mutual to stock
form of capitalization, no shares of capital stock (including shares issuable
upon conversion, exchange or exercise of other securities) shall be issued,
directly or indirectly, to officers, directors, or controlling persons of the
Association other than as part of a general public offering or as qualifying
shares to a director, unless their issuance or the plan under which they would
be issued has been approved by a majority of the total votes eligible to be cast
at a legal meeting.
Nothing contained in this section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors, unless the charter
otherwise provides that there shall be no such cumulative voting: Provided, that
this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of
preferred stock, voting as a class or series, to elect some members of
the board of directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of preferred
stock;
(ii) To any provision which would require the holders of
preferred stock, voting as a class or series, to approve the merger or
consolidation of the Association with another corporation or the sale,
lease, or conveyance (other than by mortgage or pledge) of properties
or business in
<PAGE>
exchange for securities of a corporation other than the Association if
the preferred stock is exchanged for securities of such other
corporation: Provided, that no provision may require such
approval for transactions undertaken with the assistance or pursuant to
the direction of the Office of the Federal Deposit Insurance
Corporation;
<PAGE>
(iii) To any amendment which would adversely change the
specific terms of any class or series of capital stock as set forth in
this Section 5 (or in any supplementary sections hereto), including any
amendment which would create or enlarge any class or series ranking
prior thereto in rights and preferences. An amendment which increases
the number of authorized shares of any class or series of capital
stock, or substitutes the surviving Association in a merger or
consolidation for the Association, shall not be considered to be such
an adverse change.
A description of the different classes and series (if any) of the
Association's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by each holder, except as to the
cumulation of votes for the election of directors, unless the charter otherwise
provides that there shall be no such cumulative voting.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund, or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
Association, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the Association available for distribution remaining after: (i)
payment or provision for payment of the Association's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provisions for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the Association. Each share of
common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred stock. The Association may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
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(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the
Association;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the
Association and, if so, the conversion price(s) or the rate(s) of exchange, and
the adjustments thereof, if any, at which such conversion or exchange may be
made, and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
Association shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
Section 6. Preemptive rights. Holders of the capital stock of the
Association shall not be entitled to preemptive rights with respect to any
shares of the Association which may be issued.
Section 7. Liquidation account. Pursuant to the requirements of the
Office's Regulations (12 CFR Subchapter D), the Association shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of December 31, 1995 and March 31, 1997. In the event of a complete liquidation
of the Association, it shall comply with such regulations with respect to the
amount and the priorities on liquidation of each of the Association's eligible
savers' inchoate interest in the liquidation account, to the extent it is still
in existence: Provided, that an eligible savers' inchoate interest in the
liquidation account shall not entitle such eligible saver to any voting rights
at meetings of the Association's stockholders.
Section 8. Directors. The Association shall be under the direction of a
Board of Directors. The authorized number of directors, as stated in the
Association's bylaws, shall not be fewer than five nor more than fifteen except
when a greater or lesser number is approved by the Director of the Office, or
his or her delegate.
Section 9. Amendment of charter. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is proposed by the Board of Directors of the Association,
approved by the shareholders by a majority of the votes eligible to be cast at a
legal meeting, unless a higher vote is otherwise required, and approved or
preapproved by the Office.
* * *
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<TABLE>
<S> <C>
Attest: ___________________________ By: ____________________________
_____________________________________ President of Chief Officer
Secretary of the Association of the Association
By: By: ____________________________
_____________________________________ Director of the Officer
Secretary of the of Thrift Supervision
Office of Thrift Supervision
</TABLE>
<PAGE>
EXHIBIT C
BYLAWS
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF SPARTANBURG
ARTICLE I - Home Office
The home office of First Federal Savings and Loan Association of
Spartanburg ("Association"), shall be located at 380 East Main Street, the
County of Spartanburg, in the State of South Carolina.
ARTICLE II - Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Association or at such
other place as the Board of Directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
Association for the election of directors and for the transaction of any other
business of the Association shall be held annually within 150 days after the end
of the Association's fiscal year on the fourth Wednesday of October, if not a
legal holiday, and if a legal holiday, then on the next day following which is
not a legal holiday, at 2:00 p.m., Eastern Time, or at such other date and time
within such 150-day period as the Board of Directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by the regulations of
the Office of Thrift Supervision ("Office"), may be called at any time by the
Chairman of the Board, the President, or a majority of the Board of Directors,
and shall be called by the Chairman of the Board, the President, or the
Secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the Association entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the Association addressed to the
Chairman of the Board, the President, or the Secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall
be conducted in accordance with the most current edition of Robert's Rules of
Order unless otherwise prescribed by regulations of the Office or these bylaws
or the Board of Directors adopts another written procedure for conduct of
meetings. The Board of Directors shall designate, when present, either the
Chairman of the Board or President to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place,
day, and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 20 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board, the President, or the Secretary, or the directors calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Association as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more than
60 days and, in case of a meeting of shareholders, not fewer than 10 days prior
to the date on which the particular action requiring such determination of
shareholders is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment.
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Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the Association shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by each. This
list of shareholders shall be kept on file at the home office of the Association
and shall be subject to inspection by any shareholder of record or the
shareholder's agent at any time during usual business hours for a period of 20
days prior to such meeting. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to inspection by any
shareholder of record or the shareholder's agent during the entire time of the
meeting. The original stock transfer book shall constitute prima facie evidence
of the shareholders entitled to examine such list or transfer books or to vote
at any meeting of shareholders. In lieu of making the shareholder list available
for inspection by shareholders as provided in the preceding paragraph, the Board
of Directors may elect to follow procedures prescribed in Section 552.6(d) of
the Office's regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the
Association entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the identity
of the shareholder. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Board of Directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons.
When ownership stands in the name of two or more persons, in the absence of
written directions to the Association to the contrary, at any meeting of the
shareholders of the Association any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing
in the name of another corporation may be voted by any officer, agent, or proxy
as the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine. Shares
held by an administrator, executor, guardian, or conservator may be voted by him
or her, either in person or by proxy, without a transfer of such shares into his
or her name. Shares standing in the name of a trustee may be voted by him or
her, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him or her without a transfer of such shares into his or her
name. Shares held in trust in an IRA or Keogh Account, however, may be voted by
the Association if no other instructions are received. Shares standing in the
name of a receiver may be voted by such receiver, and shares held by or under
the control of a receiver may be voted by such receiver without the transfer
into his or her name if authority to do so is contained in an appropriate order
of the court or other public authority by which such receiver was appointed.
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A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Association
nor shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Association, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Every shareholder entitled to vote
at an election for directors shall have the right to vote, in person or by
proxy, the number of shares owned by the shareholder for as many persons as
there are directors to be elected and for whose election the shareholder has a
right to vote, or to cumulate the votes by giving one candidate as many votes as
the number of such directors to be elected multiplied by the number of shares
shall equal or by distributing such votes on the same principle among any number
of candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the Chairman of the Board or the President may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the Board of
Directors in advance of the meeting or at the meeting by the Chairman of the
Board or the President.
Unless otherwise prescribed by regulations of the Office, the
duties of such inspectors shall include: determining the number of shares and
the voting power of each share, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity and effect of proxies;
receiving votes, ballots, or consents; hearing and determining all challenges
and questions in any way arising in connection with the rights to vote; counting
and tabulating all votes or consents; determining the result; and such acts as
may be proper to conduct the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The Board of Directors shall act
as a nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Association. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the Secretary of the Association at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the Association. Ballots bearing the
names of all persons nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the Secretary of the
Association at least five days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
Secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special, or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval
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or disapproval at the annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided.
Section 16. Informal Action by Shareholders. Any action required
to be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - Board of Directors
Section 1. General Powers. The business and affairs of the
Association shall be under the direction of its Board of Directors. The Board of
Directors shall annually elect a Chairman of the Board and a President from
among its members and shall designate, when present, either the Chairman of the
Board or the President to preside at its meetings.
Section 2. Number and Term. The Board of Directors shall consist
of seven members and shall be divided into three classes as nearly equal in
number as possible. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified. One class
shall be elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution. Directors may participate in a
meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Association
unless the Association is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President, or one-third of the directors. The persons authorized to call special
meetings of the Board of Directors may fix any place, within the Association's
normal lending territory, as the place for holding any special meeting of the
Board of Directors called by such persons.
Members of the Board of Directors may participate in special
meetings by means of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be
given to each director at least 24 hours prior thereto when delivered personally
or by telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the Association receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the Secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice of waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors; but if less than such
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majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 6 of this Article III.
Section 8. Manner of Acting. 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, unless a greater number is prescribed by regulation of
the Office or by these bylaws.
Section 9. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by
sending a written notice of such resignation to the home office of the
Association addressed to the Chairman of the Board or the President. Unless
otherwise specified, such resignation shall take effect upon receipt by the
Chairman of the Board or the President. More than three consecutive absences
from regular meetings of the Board of Directors, unless excused by resolution of
the Board of Directors, shall automatically constitute a resignation, effective
when such resignation is accepted by the Board of Directors.
Section 11. Vacancies. Any vacancy occurring on the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall be elected to serve only until the next election
of directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the Board of Directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors. Members
of either standing or special committees may be allowed such compensation for
attendance at committee meetings as the Board of Directors may determine.
Section 13. Presumption of Assent. A director of the Association
who is present at a meeting of the Board of Directors at which action on any
Association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a 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
Association within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders
called expressly for that purpose, any director may be removed only for cause by
a vote of the holders of a majority of the shares then entitled to vote at an
election of directors. If less than the entire board is to be removed, no one of
the directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
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ARTICLE IV - Executive And Other Committees
Section 1. Appointment. The Board of Directors, by resolution
adopted by a majority of the full board, may designate the chief executive
officer and two or more of the other directors to constitute an executive
committee. The designation of any committee pursuant to this Article IV and the
delegation of authority shall not operate to relieve the Board of Directors, or
any director, of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the Board of
Directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the Association, or recommending to the shareholders a plan
of merger, consolidation, or conversion; the sale, lease, or other disposition
of all or substantially all of the property and assets of the Association
otherwise than in the usual and regular course of its business; a voluntary
dissolution of the Association; a revocation of any of the foregoing; or the
approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the Board of Directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee
may be held without notice at such times and places as the executive committee
may fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one day's
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may
be filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the President or Secretary of the Association. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these bylaws. It shall keep regular minutes of
its proceedings and report the same to the Board of Directors for its
information at the meeting held next after the proceedings shall have occurred.
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Section 10. Other Committees. The Board of Directors may by
resolution establish an audit, loan, or other committee composed of directors as
they may determine to be necessary or appropriate for the conduct of the
business of the Association and may prescribe the duties, constitution, and
procedures thereof.
ARTICLE V - Officers
Section 1. Positions. The officers of the Association shall be a
President, one or more Vice Presidents, a Secretary, and a Treasurer or
Comptroller, each of whom shall be elected by the Board of Directors. The Board
of Directors may also designate the Chairman of the Board as an officer. The
offices of the Secretary and Treasurer or Comptroller may be held by the same
person and a Vice President may also be either the Secretary or the Treasurer or
Comptroller. The Board of Directors may designate one or more vice presidents as
Executive Vice President or Senior Vice President. The Board of Directors may
also elect or authorize the appointment of such other officers as the business
of the Association may require. The officers shall have such authority and
perform such duties as the Board of Directors may from time to time authorize or
determine. In the absence of action by the Board of Directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
Section 2. Election and Term of Office. The officers of the
Association shall be elected annually at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee, or agent shall not of itself create contractual rights. The
Board of Directors may authorize the Association to enter into an employment
contract with any officer in accordance with regulations of the Office; but no
such contract shall impair the right of the Board of Directors to remove any
officer at any time in accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Association will be
served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the Board of Directors.
ARTICLE VI - Contracts, Loans, Checks, and Deposits
Section 1. Contracts. To the extent permitted by regulations of
the Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee, or agent of the Association to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Association. Such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Association and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other
orders for the payment of money, notes, or other evidences of indebtedness
issued in the name of the Association shall be signed by one or more officers,
employees, or agents of the Association in such manner as shall from time to
time be determined by the Board of Directors.
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Section 4. Deposits. All funds of the Association not otherwise
employed shall be deposited from time to time to the credit of the Association
in any duly authorized depositories as the Board of Directors may select.
ARTICLE VII - Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing
shares of capital stock of the Association shall be in such form as shall be
determined by the Board of Directors and approved by the Office. Such
certificates shall be signed by the Chief Executive Officer or by any other
officer of the Association authorized by the Board of Directors, attested by the
Secretary or an Assistant Secretary, and sealed with the corporate seal or a
facsimile thereof. The signatures of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar other than the Association itself or one of its employees. Each
certificate for shares of capital stock shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Association. All certificates surrendered to the
Association for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares has been
surrendered and canceled, except that in the case of a lost or destroyed
certificate, a new certificate may be issued upon such terms and indemnity to
the Association as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock
of the Association shall be made only on its stock transfer books. Authority for
such transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the Association. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Association shall be deemed by the Association
to be the owner for all purposes.
ARTICLE VIII - Fiscal Year
The fiscal year of the Association shall end on the 30th day of
June of each year. The appointment of accountants shall be subject to annual
ratification by the shareholders.
ARTICLE IX - Dividends
Subject to the terms of the Association's charter and the
regulations and orders of the Office, the Board of Directors may, from time to
time, declare, and the Association may pay, dividends on its outstanding shares
of capital stock.
ARTICLE X - Corporate Seal
The Board of Directors shall provide an Association seal, which
shall be two concentric circles between which shall be the name of the
Association. The year of incorporation or an emblem may appear in the center.
ARTICLE XI - Amendments
These bylaws may be amended in a manner consistent with
regulations of the Office and shall be effective after: (i) approval of the
amendment by a majority vote of the authorized Board of Directors, or by a
majority vote of the votes cast by the shareholders of the Association at any
legal meeting, and (ii) receipt of any applicable regulatory approval. When an
Association fails to meet its quorum requirements, solely due to vacancies on
the Board, then the affirmative vote of a majority of the sitting Board will be
required to amend the bylaws.
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