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As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GREAT PEE DEE BANCORP, INC.
(Name of Small Business Issuer in Its Charter )
Delaware 6712 (To be applied for)
(State or Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Code Identification No.)
Organization) Number)
515 Market Street
Cheraw, South Carolina 29520
(803) 537-7656
(Address and Telephone Number of Principal Executive Offices)
515 Market Street
Cheraw, South Carolina 29520
(Address of Principal Place of Business or Intended Principal Place of Business)
Herbert W. Watts
515 Market Street
Cheraw, South Carolina 29520
(803) 537-7656
(Name, Address and Telephone Number of Agent for Service)
Copies to:
John J. Gorman, Esq.
Alan Schick, Esq.
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
Approximate date of proposed sale to the public: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional shares for an offering pursuant to
Rule 462(b) under the Securities Act 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, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
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]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount to maximum maximum
Title of each class of be offering aggregate Amount of
securities to be registered registered price offering registration
per share price (1) fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par 2,202,125 $10.00 $22,021,250 $6,673
value per share
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
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 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 Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
PROSPECTUS
Up to 1,897,500 Shares of Common Stock
GREAT PEE DEE BANCORP, INC.
515 Market Street
Cheraw, South Carolina 29520
(803) 537-7656
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First Federal Savings and Loan Association of Cheraw, Cheraw, South
Carolina is converting from the mutual form to the stock form of organization.
As part of the conversion, First Federal Savings and Loan Association of Cheraw
will become a wholly-owned subsidiary of Great Pee Dee Bancorp, Inc., which was
formed in September 1997. Upon the completion of the conversion, Great Pee Dee
Bancorp, Inc. will own all of the issued and outstanding common stock of First
Federal Savings and Loan Association of Cheraw. The common stock of Great Pee
Dee Bancorp, Inc. is being offered to the public under the terms of a Plan of
Conversion which must be approved by a majority of the votes eligible to be cast
by members of First Federal Savings and Loan Association of Cheraw and by the
Office of Thrift Supervision. The Conversion will not go forward if First
Federal Savings and Loan Association of Cheraw does not receive these approvals
and Great Pee Dee Bancorp, Inc. does not sell at least a minimum number of
shares.
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TERMS OF OFFERING
An independent appraiser has estimated the market value of the converted
First Federal Savings and Loan Association of Cheraw to range between
$14,025,000 to $18,975,000, which establishes the number of shares to be
offered. Subject to Office of Thrift Supervision approval, an additional 15%
above the maximum number of shares may be offered. Based on these estimates, we
are making the following offering of shares of common stock.
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<S> <C> <C>
. Price Per Share: $10
. Number of Shares
Minimum/Maximum: 1,402,500 1,897,500
. Conversion Expenses
Minimum/Maximum: $614,460 $705,540
. Net Proceeds to Great Pee Dee Bancorp, Inc.
Minimum/Maximum: $13,410,540 $18,269,460
. Net Proceeds per share to Great Pee Dee Bancorp, Inc.
Minimum/Maximum: $9.56 $9.63
</TABLE>
Please refer to Risk Factors beginning on page 8 of this document.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities regulator has approved or disapproved
these securities or determined if this Prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Trident Securities, Inc. will use its best efforts to assist Great Pee Dee
Bancorp, Inc. in selling at least the minimum number of shares but does not
guarantee that this number will be sold. All funds received from subscribers
will be held in an interest bearing savings account at First Federal Savings and
Loan Association of Cheraw until the completion or termination of the
Conversion.
For information on how to subscribe, call the Stock Information Center at (803)
___________.
TRIDENT SECURITIES, INC.
Prospectus dated ________________ ___, 1997
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TABLE OF CONTENTS
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Page
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QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING................................................................................... 1
SUMMARY.......................................................................................................................... 3
The Companies............................................................................................................... 3
The Stock Offering.......................................................................................................... 3
Stock Purchase Priorities................................................................................................... 3
Prohibition on Transfer of
Subscription Rights......................................................................................................... 4
The Offering Range and
Offering Price Per Share.................................................................................................... 4
Termination of the Offering................................................................................................. 4
Benefits to Management from the Offering.................................................................................... 4
Use of the Proceeds Raised from the Sale of Common Stock.................................................................... 4
Prospectus Delivery and Procedure for Purchasing Common Stock............................................................... 5
The Charitable Foundation................................................................................................... 5
Dividends................................................................................................................... 6
Market for the Common Stock................................................................................................. 6
Important Risks in Purchasing and Owning the Holding Company's Common Stock................................................. 6
SELECTED FINANCIAL AND OTHER DATA OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW........................................................................ 7
RISK FACTORS..................................................................................................................... 8
Decreased Return on Average Equity and Increased Expenses Immediately After Conversion...................................... 8
Potential Impact of Changes in Interest Rates and the Current Interest Rate Environment..................................... 8
Reliance on Certificate of Deposit Accounts................................................................................. 8
Competition................................................................................................................. 9
Geographic Concentration of Loans........................................................................................... 9
Establishment of the Charitable Foundation.................................................................................. 9
Intent to Remain Independent................................................................................................10
Anti-Takeover Provisions and Statutory Provisions That
Could Discourage Hostile Acquisitions of Control..........................................................................10
Possible Voting Control by Directors and Officers...........................................................................10
Possible Dilutive Effect of RRP and Stock Options...........................................................................11
Financial Institution Regulation and Future of the Thrift Industry..........................................................11
Risk of Delayed Offering....................................................................................................11
Income Tax Consequences of Subscription Rights..............................................................................11
PROPOSED PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS...........................................................................11
GREAT PEE DEE BANCORP, INC.......................................................................................................12
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW.............................................................................13
MARKET AREA......................................................................................................................13
USE OF PROCEEDS..................................................................................................................13
DIVIDENDS........................................................................................................................14
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(i)
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MARKET FOR THE COMMON STOCK......................................................................................................15
COMPETITION......................................................................................................................15
CAPITALIZATION...................................................................................................................15
PRO FORMA DATA...................................................................................................................17
Historical and Pro Forma Regulatory Capital Compliance......................................................................20
THE CONVERSION...................................................................................................................21
General.....................................................................................................................21
Reasons for Conversion......................................................................................................21
Principal Effects of Conversion.............................................................................................22
Offering of Common Stock....................................................................................................25
Subscription Offering.......................................................................................................26
Community Offering..........................................................................................................28
Delivery of Certificates....................................................................................................29
Marketing Agent.............................................................................................................29
Selected Dealers............................................................................................................29
Limitations on Common Stock Purchases.......................................................................................30
Establishment of the Charitable Foundation..................................................................................31
Voting......................................................................................................................33
Restrictions on Sale of Stock by Directors and Officers.....................................................................34
Restrictions on Purchase of Stock by Directors and Officers in the Conversion...............................................34
Restrictions on Transfer of Subscription Rights and Common Stock............................................................34
Stock Pricing...............................................................................................................35
Number of Shares to be Issued...............................................................................................36
Interpretation and Amendment of the Plan....................................................................................36
Conditions Termination......................................................................................................37
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
STATEMENTS OF OPERATIONS.............................................................................................38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................................................................39
General.....................................................................................................................39
Operating Strategy..........................................................................................................39
Interest Rate Risk..........................................................................................................40
Average Balance Sheet.......................................................................................................43
Rate/Volume Analysis........................................................................................................43
Comparison of Financial
Condition at June 30, 1997 and 1996.........................................................................................44
Comparison of Results of Operations for the Years Ended June 30, 1997 and 1996..............................................44
Capital Resources and Liquidity.............................................................................................45
Impact of Inflation and Changing Prices.....................................................................................46
Impact of New Accounting Standards..........................................................................................46
BUSINESS OF FIRST FEDERAL........................................................................................................47
General.....................................................................................................................47
Lending Activities..........................................................................................................47
Non Performing and Problem Assets...........................................................................................52
Allowance for Loan Losses...................................................................................................54
Investments.................................................................................................................56
Sources of Funds............................................................................................................58
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(ii)
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Properties..................................................................................................................61
Service Corporation Subsidiary..............................................................................................61
Employees...................................................................................................................62
Legal Proceedings...........................................................................................................62
MANAGEMENT OF GREAT PEE DEE BANCORP, INC.........................................................................................62
Directors and Executive Officers of the Holding Company.....................................................................62
MANAGEMENT OF FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW...............................................................62
Directors and Officers of First Federal.....................................................................................62
Committees of the Boards of Directors of First Federal and the Holding Company..............................................63
EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF FIRST FEDERAL.................................................................64
Remuneration of Named Executive Officer.....................................................................................64
Compensation of Directors...................................................................................................64
Benefits....................................................................................................................64
Employee Stock Ownership Plan and Trust.....................................................................................66
Stock Option Plan...........................................................................................................67
Recognition and Retention Plan..............................................................................................67
Transactions With Certain Related Persons...................................................................................68
REGULATION.......................................................................................................................68
General.....................................................................................................................68
Savings and Loan Holding
Company Regulation..........................................................................................................69
Federal Home Loan Bank System...............................................................................................70
Insurance of Deposits.......................................................................................................70
Savings Association Regulatory Capital......................................................................................71
Prompt Corrective Regulatory Action.........................................................................................72
Dividend Limitations........................................................................................................72
Limitations on Rates Paid for Deposits......................................................................................73
Safety and Soundness Standards..............................................................................................73
Loans to One Borrower.......................................................................................................73
Qualified Thrift Lender.....................................................................................................74
Acquisitions and Branching..................................................................................................74
Transactions with Affiliates................................................................................................75
Federal Securities Law......................................................................................................75
Community Reinvestment Act Matters..........................................................................................75
TAXATION.........................................................................................................................75
Federal Taxation............................................................................................................75
State Taxation..............................................................................................................76
RESTRICTIONS ACQUISITION OF THE HOLDING COMPANY..................................................................................76
General.....................................................................................................................76
Provisions of the Company's Certificate of Incorporation and Bylaws.........................................................77
DESCRIPTION OF CAPITAL STOCK.....................................................................................................80
Holding Company Capital Stock...............................................................................................80
TRANSFER AGENT...................................................................................................................81
REGISTRATION REQUIREMENTS........................................................................................................82
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(iii)
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CHANGE IN ACCOUNTANTS............................................................................................................82
LEGAL AND TAX MATTERS............................................................................................................82
EXPERTS..........................................................................................................................82
ADDITIONAL INFORMATION...........................................................................................................83
</TABLE>
This document contains forward-looking statements which involve risks and
uncertainties. Great Pee Dee Bancorp, Inc.'s actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors" beginning on page 8 of this Prospectus.
Please see the Glossary beginning on page G-l for the meaning of capitalized
terms that are used in this Prospectus.
(iv)
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QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: What is the purpose of the offering?
A: The offering is being made in connection with the conversion of First
Federal Savings and Loan Association of Cheraw from mutual-to-stock form.
As part of the conversion, you will have the opportunity to become a
shareholder of our newly formed holding company, Great Pee Dee Bancorp,
Inc., which will allow you to share in our future as an indirect owner of a
federal stock savings and loan association. The stock offering will
increase our capital for lending and investment activities. This will give
us greater flexibility to diversify operations and expand into other
geographic markets if we choose to do so. As a stock savings and loan
association-operating through a holding company structure, we will have the
ability to plan and develop long-term growth and improve our future access
to the capital markets.
Q: How do I order the stock?
A: You must complete and return the Stock Order Form to us together with your
payment, on or before December _____, 1997.
Q: How much stock may I order?
A: The minimum order is 25 shares (or $250). The maximum order in the offering
is 25,000 shares (or $250,000). For purposes of these limitations, joint
account holders may not collectively exceed the 25,000 share limit. In
certain instances, your order may be grouped together with orders by other
persons who are associated with you (such as your spouse, child or relative
living in your home), or with whom you are acting in concert, and, in that
event, the aggregate order may not exceed 25,000 shares. We may decrease or
increase the maximum purchase limitation without notifying you. However, if
we increase the maximum purchase limitation, and you previously subscribed
for the maximum number of shares, you will be given the opportunity to
subscribe for additional shares.
Q: What happens if there are not enough shares to fill all orders?
A: If the offering is oversubscribed, shares will be allocated based upon a
formula set forth in the Plan and in accordance with OTS regulations.
Q: Who will receive subscription rights?
A: The stock will be offered on a priority basis to the following persons:
. Persons who had a deposit account of at least $50 with us on June 30,
1995. (Great Pee Dee Bancorp, Inc.'s employee stock ownership plan
will have priority over such persons if more than 1,897,500 shares are
sold, to the extent of any shares sold over 1,897,500 and up to the
number of shares subscribed for by such plan). Any remaining shares
will be offered to:
. The employee stock ownership plan of Great Pee Dee Bancorp, Inc. Any
remaining shares will be offered to:
. Persons who had a deposit account of at least $50 with us on September
30, 1997. Any remaining shares will be offered to:
. Our depositors and borrowers as of October __, 1997.
If the above persons do not subscribe for all of the shares, the remaining
shares will be offered to certain members of the general public with
preference given to persons who live in Chesterfield County, South
Carolina.
<PAGE>
Q: What particular factors should I consider when deciding whether or not to
buy the stock?
A. Before you decide to purchase stock, you should read the entire Prospectus,
including the Risk Factors section on pages 8 through 11 of this document.
Q: As a depositor or borrower of First Federal, what will happen if I do not
order any stock?
A: You presently have voting rights in us; however, once we convert to the
stock form you will lose your voting rights unless you purchase stock. Even
if you do purchase stock, your voting rights will depend on the amount of
common stock that you own and not on your deposit account or lending
relationship at First Federal. You are not required to purchase common
stock. Your deposit account, certificate accounts and any loans you may
have with us will not be affected by the Conversion.
Q: Why is the Charitable Foundation being established in connection with the
Conversion?
A: As part of the Conversion, Great Pee Dee Bancorp, Inc. and First Federal
will establish a tax exempt Charitable Foundation. Great Pee Dee Bancorp,
Inc. will donate 20,000 shares, or $200,000 worth of its common stock
(based upon an initial offering price of $10 per share), to fund the
foundation. The Charitable Foundation is being formed in order to
complement First Federal's existing community reinvestment activities. The
Charitable Foundation will be dedicated to the promotion of charitable
purposes including community development, grants or donations to support
housing assistance, not-for-profit community groups and other types of
organizations or civic minded projects. As a result of the establishment of
the Charitable Foundation, the ownership interest of stockholders will be
diluted by approximately 1.2% based upon an offering of 1,650,000 shares,
at the mid-point of the offering.
Q: Who can help answer any other questions I may have about the stock
offering?
A: In order to make an informed investment decision, you should read this
entire Prospectus. This section highlights selected information and may not
contain all of the information that is important to you. In addition, you
may contact:
Stock Information Center
First Federal Savings and Loan Association of Cheraw
515 Market Street
Cheraw, South Carolina 29520
(803) -
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2
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SUMMARY
This summary highlights selected information from this document and does
not contain all the information that you need to know before making an informed
investment decision. To understand the stock offering fully, you should read
carefully this entire Prospectus, including the financial statements and the
notes to the financial statements of First Federal Savings and Loan Association
of Cheraw. References in this document to "we", "us", "our" and "First Federal"
refer to First Federal Savings and Loan Association of Cheraw. In certain
instances where appropriate, "us" or "our" refers collectively to Great Pee Dee
Bancorp, Inc. and First Federal Savings and Loan Association of Cheraw.
References in this document to "the Holding Company" refer to Great Pee Dee
Bancorp, Inc.
The Companies
Great Pee Dee Bancorp, Inc.
515 Market Street
Cheraw, South Carolina 29520
(803) 537-7656
Great Pee Dee Bancorp, Inc. is not an operating company and has not engaged
in any significant business to date. It was formed in September 1997 as a
Delaware corporation to be the holding company for First Federal Savings and
Loan Association of Cheraw. The holding company structure will provide us
greater flexibility in terms of operations, expansion and diversification. See
page _____.
First Federal Savings and Loan Association of Cheraw
515 Market Street
Cheraw, South Carolina 29520
(803) 537-7656
We are a community- and customer-oriented federal mutual savings and loan
association. We provide financial services to individuals, families and small
businesses through our office in Cheraw, South Carolina. Historically, we have
emphasized residential mortgage lending, primarily one- to four-family mortgage
loans. On June 30, 1997, we had total assets of $60.5 million, deposits of $46.9
million, and retained earnings of $11.1 million. See pages _____ to _____.
The Stock Offering
Great Pee Dee Bancorp, Inc. is offering for sale between 1,402,500 and
1,897,500 shares of its common stock, par value $.01 per share, at $10.00 per
share. This offering may be increased to 2,182,125 shares without further notice
to you if market or financial conditions change prior to the completion of this
stock offering or if additional shares of stock are needed to fill the order of
our employee stock ownership plan.
Stock Purchase Priorities
Great Pee Dee Bancorp, Inc. will offer shares of its Common Stock to our
depositors who held deposit accounts as of certain dates and to our borrowers
with outstanding loans as of October __, 1997. The shares will be offered first
in a Subscription Offering and any remaining shares may be offered in a
Community Offering. See pages _____ to _____. We have engaged Trident
Securities, Inc. to assist in the selling of the Common Stock on a best efforts
basis.
3
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Prohibition on Transfer of Subscription Rights
Selling or assigning your subscription rights is illegal. All persons
exercising their subscription rights will be required to certify that they are
purchasing shares solely for their own account and that they have no agreement
or understanding regarding the sale or transfer of such shares. We intend to
pursue any and all legal and equitable remedies in the event we become aware of
the transfer of subscription rights and we will not honor orders known by us to
involve the transfer of such rights. In addition, persons who violate the
purchase limitations may be subject to sanctions and penalties imposed by the
OTS.
The Offering Range and Offering Price Per Share
The offering range is based on an independent appraisal of the pro forma
market value of the Common Stock by Ferguson & Co., an appraisal firm
independent of us and experienced in appraisals of savings associations.
Ferguson & Co., has estimated that, in its opinion, as of September 2, 1997, the
aggregate pro forma market value of the Common Stock ranged between $14.0
million and $19.0 million (with a mid-point of $16.5 million). The pro forma
market value of the shares is our market value after taking into account the
sale of shares in this offering. The appraisal was based in part upon our
financial condition and operations and the effect of the additional capital
raised by the sale of Common Stock in this offering. The $10.00 price per share
was determined by our board of directors and is the price most commonly used in
stock offerings involving conversions of mutual savings associations. The
independent appraisal will be updated prior to the completion of the Conversion.
If the pro forma market value of the Common Stock changes to either below $14.0
million or above $21.8 million (the adjusted maximum of the offering), we will
notify you and provide you with the opportunity to modify or cancel your order.
See pages _____ to _____.
Termination of the Offering
The Subscription Offering will terminate at 12:00 noon, South Carolina
time, on November ___, 1997. The Community Offering, if one is held, is expected
to begin immediately after the termination of the Subscription Offering, but may
begin at any time during the Subscription Offering. The Community Offering may
terminate on or after November __, 1997 but in any event, no later than January
___, 1997, without approval by the OTS.
Benefits to Management from the Offering
Our full-time employees will participate in our employee stock ownership
plan, which is a form of retirement plan that will purchase shares of Great Pee
Dee Bancorp, Inc.'s Common Stock. We also intend to implement a management
recognition and retention plan and a stock option plan following completion of
the Conversion, which will benefit our officers and directors. If we adopt the
management recognition and retention plan, our executive officers and directors
will be awarded shares of Common Stock without paying for the shares. However,
the management recognition and retention plan and stock option plan may not be
adopted until at least six months after the Conversion and are subject to
shareholder approval and compliance with OTS regulations. See pages _____ to
_____.
Use of the Proceeds Raised from the Sale of Common Stock
Great Pee Dee Bancorp, Inc. will retain up to 50% of the net proceeds from
the offering and will use the balance of the proceeds to purchase all of the
capital stock to be issued by First Federal. Great Pee Dee Bancorp, Inc. intends
to use a portion of the proceeds that it retains from the stock offering to make
a loan to our employee stock ownership plan to fund its purchase of 8% of the
Common Stock issued in the Conversion. Great Pee Dee Bancorp, Inc. will retain
the balance of the proceeds as a possible source of funds for the payment of
dividends to shareholders or to repurchase shares of Common Stock in the future
and for other general corporate purposes. See pages _____ to _____.
4
<PAGE>
Prospectus Delivery and Procedure for Purchasing Common Stock
To ensure that each purchaser receives a Prospectus at least 48 hours prior
to the end of the offering, in accordance with Rule 15c2-8 under the Securities
Exchange Act of 1934, no Prospectus will be mailed later than five days or hand
delivered any later than two days prior to the end of the offering. Execution of
the Order Form will confirm receipt or delivery of a Prospectus in accordance
with Rule 15c2-8. Order Forms will be distributed only with a Prospectus.
Neither our holding company, us, nor Trident Securities is obligated to deliver
a Prospectus and an Order From 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 First Federal, on the 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 Order Form. The Holding Company is not obligated to accept
an order submitted on photocopied or telecopied Order Forms. Orders cannot and
will not be accepted without the execution of the Certification appearing on the
reverse side of the Order Form.
The Charitable Foundation
In furtherance of our commitment to our local community, the Plan provides
for the establishment of the Charitable Foundation, which will be incorporated
under Delaware law as a non-stock corporation. We will fund the Charitable
Foundation with shares of Common Stock contributed by the Holding Company, as
further described below. We believe that the funding of the Charitable
Foundation with Common Stock is a means of establishing a common bond between us
and our community and will enable our community to share in our prospects for
growth and success over the long term. While we have made charitable
contributions, we have not previously formed a charitable foundation nor have we
made contributions of the magnitude of the contribution that will be made to the
Charitable Foundation. By further enhancing our visibility and reputation in our
local community, we believe that the Charitable Foundation will enhance the
long-term value of our community banking franchise. See "The Conversion--
Establishment of the Charitable Foundation--Structure of the Foundation."
The members of the Charitable Foundation will be the Board of Directors of
the Charitable Foundation. The authority for the affairs of the Charitable
Foundation will be vested in the Board of Directors of the Charitable
Foundation, which will be comprised of members of the Holding Company's Board of
Directors, who will receive no fees for serving on the Charitable Foundation's
Board of Directors. The Directors of the Charitable Foundation will be
responsible for establishing the policies of the Charitable Foundation with
respect to grants or donations by the Charitable Foundation, consistent with the
purposes for which the Charitable Foundation was established. Although no formal
policy governing Charitable Foundation grants exist at this time, the Charitable
Foundation's Board of Directors will adopt such a policy upon establishment of
the Charitable Foundation. The Directors of the Charitable Foundation will also
be responsible for directing the activities of the Charitable Foundation,
including the management of the Common Stock held by the Charitable Foundation.
The Company proposes to fund the Charitable Foundation by contributing to
the Charitable Foundation immediately following the Conversion 20,000 shares of
authorized but unissued Common Stock with a value equal to $200,000 based upon
the Common Stock's initial offering price of $10.00. Such contribution, once
made, will not be recoverable by us. Due to the issuance of additional shares of
Common Stock to the Charitable Foundation, persons purchasing shares in the
Conversion will have their ownership and voting interests in the Company diluted
by 1.2% based upon the sale of 1,650,000 shares. See "Pro Forma Data."
5
<PAGE>
As a result of the establishment of the Charitable Foundation, the Holding
Company will recognize an expense of the full amount of the contribution, offset
in part by a corresponding tax benefit, during the quarter in which the
contribution is made, which is expected to be the fourth quarter of 1997. Such
expense will reduce earnings and have a material impact on the Holding Company's
earnings for such quarter and for the year. While management cannot predict
earnings for 1997, it expects that the establishment and funding of the
Charitable Foundation will have an adverse impact on the Holding Company's
earnings for the year in which it is made. Assuming a contribution of $200,000
in Common Stock in 1997, and an effective income tax rate of 36%, the Company
estimates an after-tax effect expense of $128,000. In addition to the
contribution of Common Stock by the Holding Company to the Charitable
Foundation, we expect to continue making ordinary charitable contributions
within our local community. We do not anticipate making future charitable
contributions to the Charitable Foundation during the first five years following
the initial contribution to the Charitable Foundation. For further discussion of
the Charitable Foundation and its impact on purchasers in the Conversion, see
"Risk Factors--Establishment of the Charitable Foundation," "Pro Forma Data" and
"The Conversion--Establishment of the Charitable Foundation."
Dividends
Management of Great Pee Dee Bancorp, Inc. intends to pay an annual dividend
of $.30 payable quarterly at $.075 per share. The payment of dividends is
expected begin the first full quarter following the completion of the
Conversion. See page _____.
Market for the Common Stock
Great Pee Dee Bancorp, Inc. is a newly organized company which has never
issued capital stock. Consequently, there is no current market for its Common
Stock. Great Pee Dee Bancorp, Inc. has received conditional approval to have its
Common Stock quoted on the National Association of Security Dealers Automated
Quotation National Market System under the symbol "_______." There can be no
assurance that an active and liquid trading market will develop. Trident
Securities, Inc. has indicated its intention to make a market in the Common
Stock subject to compliance with applicable provisions of federal and securities
laws and other regulatory requirements, and we anticipate that it will be able
to secure at least two additional market makers for the Common Stock. If you
purchase shares, you may not be able to sell them when you want to at a price
that is equal to or more than the price you paid. See pages _____ to _____.
Important Risks in Purchasing and Owning the Holding Company's Common Stock
Before you decide to purchase stock in the offering, you should read the
Risk Factors section on pages 8 to 11 of this Prospectus, in addition to the
other sections of this Prospectus.
6
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
The following selected financial data of First Federal is qualified in
its entirety by, and should be read in conjunction with, the financial
statements, including notes thereto, included elsewhere in this Prospectus.
All averages presented herein have been calculated on a monthly basis unless
otherwise stated.
<TABLE>
<CAPTION>
At or for the
Year Ended June 30
----------------------
1997 1996
------- --------
(Dollars in Thousands)
<S> <C> <C>
Financial Condition data:
Total assets............................................................. $60,538 $59,694
Investments (1).......................................................... 5,770 5,470
Loans receivable......................................................... 53,974 53,335
Savings deposits......................................................... 46,863 47,949
FHLB advances............................................................ 2,400 1,050
Retained earnings........................................................ 11,090 10,504
Operating data:
Interest income.......................................................... $ 4,558 $ 4,521
Interest expense......................................................... 2,595 2,668
------- -------
Net interest income..................................................... 1,963 1,853
Provision for loan losses................................................ 143 18
------- -------
Net interest income after provision for loan losses..................... 1,820 1,835
Other Income............................................................. 23 42
Other Expense............................................................ 915(2) 654
------- -------
Income before income taxes.............................................. 928 1,223
Income tax expense....................................................... 342 429
------- -------
Net income.............................................................. $ 586 $ 794
======= =======
Selected data:
Return on average assets................................................. 0.98% 1.33%
Return on average equity................................................. 5.47% 7.80%
Average equity to average assets......................................... 17.89% 16.99%
Interest rate spread..................................................... 2.37% 2.24%
Net yield on average interest-earning assets............................. 3.32% 3.13%
Average interest-earning assets to average interest-bearing liabilities.. 121.73% 119.79%
Ratio of noninterest expense to average total assets..................... 1.53% 1.09%
Nonperforming assets to total assets..................................... 0.18% 0.12%
Loan loss reserves to nonperforming loans at period end.................. 312.37% 367.39%
Number of:
Outstanding loans....................................................... 1,773 1,776
Deposit accounts........................................................ 4,206 4,486
Full-service offices.................................................... 1 1
</TABLE>
- ------------------------------
(1) Includes interest-bearing deposits, federal funds sold, FHLB stock and
investment securities.
(2) Includes a special assessment of $312,000 for the year ended June 30, 1997
which was paid to recapitalize the Savings Association Insurance Fund.
7
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, you should
consider carefully the following risk factors in evaluating an investment in
the Common Stock.
Decreased Return on Average Equity and Increased Expenses Immediately After
Conversion
Return on average equity (net income divided by average equity) is a
ratio commonly used to compare the performance of a public company to its
peers. For the years ended June 30, 1997 and 1996, our returns on average
equity were 5.47% and 7.80%, respectively. As a result of the Conversion, our
equity will increase substantially. Our expenses also will increase because of
the costs associated with our employee stock ownership plan ("ESOP"),
management recognition and retention plan ("RRP"), and the costs of being a
public company. Because of the increases in our equity and expenses, our
return on equity is likely to decrease significantly as compared to our
performance in previous years. Initially, First Federal intends to use a
portion of the proceeds of this offering to repay some or all of its
short-term obligations owed to the Federal Home Loan Bank of Atlanta ("FHLB of
Atlanta"). First Federal may also use some of the proceeds to purchase loan
participations and mortgage-backed securities on the secondary market and, on
an interim basis, to invest in U.S. government securities and federal agency
securities which generally have lower yields than residential mortgage loans.
See "Use of Proceeds."
Potential Impact of Changes in Interest Rates and the Current Interest Rate
Environment
Our ability to make a profit, like that of most financial institutions,
substantially depends upon our net interest income, which is the difference
between the interest income we earn on our interest earning assets (such as
mortgage loans) and the interest expense we pay on our interest-bearing
liabilities (such as deposits). Approximately 55.83% of our mortgage loans
have rates of interest which are fixed for the term of the loan ("fixed rate")
and are originated generally with terms of up to 18 years, while deposit
accounts have significantly shorter terms to maturity. Because our
interest-earning assets generally have fixed rates of interest and have longer
effective maturities than our interest-bearing liabilities, the yield on our
interest earning assets generally will adjust more slowly to changes in
interest rates than the cost of our interest-bearing liabilities. At June 30,
1997, our one year interest rate gap was negative 25.24%. As a result, our net
interest income will be adversely affected by material and prolonged increases
in interest rates. In addition, rising interest rates may adversely affect our
earnings because there might be a lack of customer demand for loans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of First Federal Savings and Loan Association of Cheraw Asset
Liability Management."
Changes in interest rates also can affect the average life of loans and
mortgage-backed securities. The relatively lower interest rates in recent
periods have resulted in increased prepayments of loans and mortgage-backed
securities, as borrowers refinanced their mortgages in order to reduce their
borrowing cost. Under these circumstances, we are subject to reinvestment risk
to the extent that we are not able to reinvest such prepayments at rates which
are comparable to the rates on the prepaid loans or securities.
Reliance on Certificate of Deposit Accounts
A significant percentage of our deposit accounts are certificates of
deposit rather than passbook or money market accounts. At June 30, 1997,
$37.9 million, or 80.83% of our total deposits were certificate of deposit
accounts. $30.5 million of our certificates of deposit mature within one
year. Certificates of deposit can be a more interest rate sensitive source of
funds than passbook or money market accounts. In the event that interest
rates significantly increase, or if we do not offer competitive rates of
interest on its certificates of deposit, First Federal may experience a
significant decrease in its deposit accounts. Management expects that a
portion of its certificates of deposit which mature within a year will not
remain with First Federal.
8
<PAGE>
Competition
We experience strong competition in our local market area in originating
loans primarily from mortgage brokers. Our competition in attracting deposits
is primarily from commercial banks, thrifts and money center banks. Such
competition may limit our growth in the future. See "Competition."
Geographic Concentration of Loans
All of our real estate mortgage loans are secured by properties located
in South Carolina, mostly in Chesterfield and Marlboro Counties. A weakening
in the local real estate market or in the local or national economy, or a
reduction in the workforce at the manufacturing facilities in the area could
result in an increase in the number of borrowers who default on their loans
and a reduction in the value of the collateral securing the loans, which would
reduce our earnings.
Establishment of the Charitable Foundation
Pursuant to the Plan, we intend to establish a charitable foundation in
connection with the Conversion. The Plan provides that we will establish the
Charitable Foundation, which will be incorporated under Delaware law as a
non-stock corporation and will be funded with shares of Common Stock
contributed by the Holding Company. The contribution of Common Stock to the
Charitable Foundation will be dilutive to the interests of stockholders and
will have an adverse impact on the reported earnings of the Holding Company in
fiscal 1998, the fiscal year in which the Charitable Foundation is to be
established.
Dilution of Stockholders' Interests. We propose to fund the Charitable
Foundation with 20,000 shares of Common Stock of the Holding Company having a
value equal to $200,000 based upon the Common Stock's initial offering price
of $10.00 per share. As a result, persons purchasing shares of Common Stock
in the Conversion will have their ownership and voting interests in the
Company diluted by 1.2% based upon the sale of 1,650,000 shares. See "Pro
Forma Data."
Impact on Earnings. The contribution of Common Stock to the Foundation
will have an adverse impact on our earnings in the year in which the
contribution is made. The Holding Company will recognize the full expense in
the amount of the contribution of Common Stock to the Foundation in the
quarter in which it occurs, which is expected to be the fourth quarter of
1997. The contribution expense will be partially offset by the tax benefit
related to the expense. We have been advised that the contribution to the
Foundation will be tax deductible, subject to an annual limitation based on
10% of the Holding Company's annual taxable income. Assuming a contribution
of $200,000 in Common Stock, the Holding Company estimates an after-tax effect
expense of $128,000 (based upon a 36% tax income rate). If the Charitable
Foundation had been established at June 30, 1997, we would have reported net
income of $458,000, rather than reporting net income of $586,000 for the year
ended June 30, 1997. Management cannot predict earnings for fiscal 1998, but
expects that the establishment and funding of the Charitable Foundation will
have an adverse impact on our earnings for the year. In addition to the
contribution to the Charitable Foundation, we expect to continue making
ordinary charitable contributions within our community, but we do not
currently anticipate making additional contributions to the Charitable
Foundation within the first five years following the initial contribution.
Tax Considerations. We have been advised that an organization created
for the above purposes would qualify as a Section 501(c)(3) exempt
organization under the Internal Revenue Code of 1986, as amended (the "Code"),
and would be classified as a "private foundation." The Holding Company should
be entitled to a deduction in the amount of the fair market value of the stock
at the time of the contribution less the nominal par value that the Charitable
Foundation is required to pay to the Holding Company for such stock, subject
to an annual limitation based on 10% of the Holding Company's annual taxable
income. The Holding Company, however, would be able to carry forward any
unused portion of the deduction for five years following the contribution.
Thus, while the Holding Company
9
<PAGE>
would have received a charitable contribution deduction of approximately
$90,000 in 1997, the Holding Company is permitted under the Code to carry over
the excess contribution in the five following years. The Holding Company
estimates that substantially all of the deduction should be deductible over
the six-year period. There can be no assurances that the IRS will recognize
the Charitable Foundation as a Section 501(c)(3) exempt organization or that
the deduction will be permitted. In such event, the Holding Company's tax
benefit related to the Charitable Foundation would have to be fully expensed,
resulting in a further reduction in earnings in the year in which the IRS
makes such a determination.
Effect of Charitable Contribution on the Valuation. The after tax effect
of the contribution to the Charitable Foundation is expected to be $128,000.
Ferguson has advised First Federal that the contribution did not materially
affect the estimated pro-forma market value of the common stock.
Potential Anti-Takeover Effect. Upon completion of the Conversion, the
Charitable Foundation will own 1.2% of the total shares of the outstanding
Common Stock, assuming the sale of 1,650,000 shares. Such shares will be
owned solely by the Charitable Foundation. The Charitable Foundation's Board
of Directors will exercise sole voting power over such shares; however, the
Board of Directors intends that with respect to matters put to a stockholder
vote, they will vote shares of Common Stock held by the Charitable Foundation
in the same proportion as shares voted by all shareholders.
Intent to Remain Independent
We have operated as an independent community oriented savings and loan
association since 1920. It is our intention to continue to operate as an
independent community oriented savings and loan association following the
Conversion. Accordingly, you are urged not to subscribe for shares of our
Common Stock if you are anticipating a quick sale by us. See "Business of
First Federal."
Anti-Takeover Provisions and Statutory Provisions That Could Discourage
Hostile Acquisitions of Control
Provisions in the Holding Company's Certificate of Incorporation and
Bylaws, the corporation law of the state of Delaware, and certain federal
regulations may make it difficult and expensive to pursue a tender offer,
change in control or takeover attempt which our management opposes. As a
result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so. Such provisions will also render the removal
of the current board of directors or management of the Holding Company, or the
appointment of new directors to the Board, more difficult. Restrictions
include: restrictions on the acquisition of the Holding Company's equity
securities and limitations on voting rights; the classification of the terms
of the members of the board of directors; certain provisions relating to
meetings of shareholders; elimination of cumulative voting by shareholders in
the election of directors; the issuance of preferred stock and additional
shares of Common Stock without shareholder approval; and supermajority
provisions for amendments to the Certificate of Incorporation and Bylaws, and
the approval of certain business combinations. See "Restrictions on
Acquisition of the Holding Company."
Possible Voting Control by Directors and Officers
Our directors and executive officers intend to subscribe for 125,000
shares of Common Stock which, at the midpoint of the Estimated Valuation
Range, would constitute 7.6% of the outstanding shares. When aggregated with
the shares of Common Stock our executive officers and directors expect to
acquire through the Stock Option Plan, ESOP and RRP, our executive officers
and directors would own approximately 488,000 shares of Common Stock, or 25.9%
of the outstanding shares at the midpoint of the Estimated Valuation Range
(assuming that Stock Option Plan grants and RRP awards are made from
authorized but unissued shares). This ownership of Common Stock by our
management could make it difficult to obtain majority support for shareholder
proposals which are opposed by management. In addition, our management may be
able to prevent the approval of transactions or actions (i.e., business
combinations and amendment to our Certificate of Incorporation and Bylaws)
requiring the approval of 80%
10
<PAGE>
of the shareholders under the Holding Company's Certificate of Incorporation
if additional shares are issued to them pursuant to the RRP and/or the Stock
Option Plan. See "Proposed Purchases by Directors and Executive Officers,"
"Executive Compensation and Related Transactions of First Federal,"
"Description of Capital Stock," and "Restrictions on Acquisition of the
Holding Company."
Possible Dilutive Effect of RRP and Stock Options
If the Conversion is completed and shareholders approve the RRP and Stock
Option Plan, we intend to issue shares to our officers and directors through
these plans. If the shares for the RRP are issued from our authorized but
unissued stock, your ownership percentage could be diluted by up to
approximately 3.85%. If the shares for the Stock Option Plan are issued from
our authorized by unissued stock, your ownership percentage could be diluted
by up to approximately 9.09%. In either case, the trading price of our Common
Stock may be reduced. See "Pro Forma Data" and "Executive Compensation and
Related Transactions of First Federal."
Financial Institution Regulation and Future of the Thrift Industry
We are subject to extensive regulation, supervision, and examination by
the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). A bill has been introduced in the Congress that
would consolidate the OTS with the Office of the Comptroller of the Currency.
If this legislation is enacted into law we could be forced to become a state
or national commercial bank, and become subject to regulation by a different
government agency. If we become a commercial bank, our investment authority
and the ability of the Holding Company to engage in diversified activities may
be limited or prohibited, which could affect our profitability. It is
impossible at this time to predict whether such legislation will be passed or
the impact of any such legislation on our operations. See "Regulation."
Risk of Delayed Offering
Although we expect to complete the Conversion within the time periods
indicated in this Prospectus, it is possible that adverse market, economic or
other factors could significantly delay the completion of the Conversion,
which could significantly increase our Conversion costs. In this case,
however, you would have the right to modify or rescind your subscription and
to have your subscription funds returned to you promptly, with interest. See
"The Conversion."
Income Tax Consequences of Subscription Rights
If the Internal Revenue Service were to determine that the subscription
rights offered to you in connection with the Conversion have an ascertainable
value, the exercise of your subscription rights could result in the
recognition of taxable income. Whether the subscription rights are considered
to have an ascertainable value is an inherently factual determination In the
opinion of Ferguson however, the subscription rights do not have an
ascertainable fair market value; however, Ferguson's conclusion is not binding
on the IRS. See "The Conversion--Principal Effects of Conversion--Tax
Effects."
PROPOSED PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the approximate purchases of Common Stock
by each director and executive officer and their Associates in the Conversion.
All shares will be purchased for investment purposes and not for purposes of
resale. The table assumes 1,650,000 that shares (the midpoint of the Estimated
Value Range) of the Common Stock will be sold at $10.00 per share and that
sufficient shares will be available to satisfy subscriptions.
11
<PAGE>
<TABLE>
<CAPTION>
Total Shares
Proposed to be Aggregate Price of
Name Position Subscribed For(1) Intended Purchases Percent of Shares %
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Herbert W. Watts(2) President and Chief 20,000 $ 200,000 1.2%
Executive Officer
Robert M. Bennett Chairman of the Board 25,000 250,000 1.5%
William Rhett Butler Director 20,000 200,000 1.2%
James C. Crawford, III Director 25,000 250,000 1.5%
Henry P. Duvall, IV Director 15,000 150,000 0.9%
Cornelius B. Young Director 15,000 150,000 0.9%
Johnnie L. Craft Secretary and Treasurer 5,000 50,000 0.3%
---------- ---------- ----------
All directors and officers $125,000 1,250,000 7.6%(3)
as a group (7 persons) ========== ========== ==========
</TABLE>
(1) Does not include shares subject to stock options which may be granted
under the Stock Option Plan, or shares which may be awarded under the RRP.
(2) In addition, a Non-Qualified Deferred Compensation Plan which has been
established for the benefit of Mr. Watts intends to purchase shares of
Common Stock in the Conversion. See "Executive Compensation and Related
Transactions of First Federal--Non-Qualified Deferred Compensation Plan."
(3) Assuming that all shares awarded under the RRP are purchased on the open
market upon (i) the full vesting of the restricted stock awards to directors
and executive officers contemplated under the RRP and (ii) the exercise in
full of all options expected to be granted to directors and executive
officers under the Stock Option Plan, all directors and executive officers
as a group would beneficially own 321,350 shares (20.8%), 356,000 shares
(19.6%), 390,650 shares (18.7%), and 430,498 shares (17.9%) upon sales at
the minimum, midpoint, maximum, and 15% above the maximum of the Estimated
Valuation Range, respectively. See "Executive Compensation and Related
Transactions of First Federal--RRP," "--Stock Option Plan."
GREAT PEE DEE BANCORP, INC.
The Holding Company was formed in September 1997 as a Delaware
corporation to be the holding company for First Federal. The Holding Company
has not engaged in any significant business to date and, for that reason, its
financial statements are not included herein. The Holding Company has received
approval from the OTS to become a savings and loan holding company through the
acquisition of all of the capital stock of First Federal to be issued and
outstanding upon completion of the Conversion.
The Holding Company will initially receive 50% of the net Conversion
proceeds, of which a portion will be used to fund the Holding Company's ESOP.
The holding company structure will provide the Holding Company with greater
flexibility than First Federal to diversify its business activities, either
through newly-formed subsidiaries or through acquisitions. The Holding Company
has no present plans regarding diversification, acquisitions or expansion,
however. The Holding Company initially will not conduct any active business
and does not intend to employ any persons other than its officers, although it
may utilize our support staff from time to time.
The office of the Holding Company is located at 515 Market Street,
Cheraw, South Carolina 29520. The telephone number is (803) 537-7656.
12
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
We were originally organized in 1920. We currently conduct our business
from one full-service office located in Cheraw, South Carolina, which is
located in Chesterfield County, South Carolina. We believe that we have
developed a solid reputation among our loyal customer base because of our
commitment to personal service and our strong support of the local community.
We offer a variety of lending, deposit and other financial services to our
retail and commercial customers.
We attract deposits from the general public and originate mortgage loans,
most of which are secured by one-to four-family residential real property in
Chesterfield County and adjacent Marlboro County. We also offer construction
loans, commercial real estate loans and home-improvement loans. We derive most
of our funds for lending from savings deposits of our customers, which consist
primarily of certificates of deposit, and savings accounts.
We have maintained a relatively strong capital position by focusing
primarily on residential real estate mortgage lending in Chesterfield County,
South Carolina and, in other nearby counties. At June 30,1997, we had total
assets of $60.5 million, deposits of $46.9 million and retained earnings of
$11.1 million, or 18.3% of assets. For the fiscal year ended June 30, 1997, we
had net income of $586,000, a return on average assets of .98% and a return on
average equity of 5.47%. We have historically experienced very few asset
quality problems in our total loan portfolio, and at June 30, 1997, our ratio
of nonperforming assets to total assets was .18%.
MARKET AREA
Our primary market area consists of Chesterfield and Marlboro counties,
South Carolina. First Federal's economy is concentrated in the areas of
manufacturing, service and trade. The largest employers in our market area
are the Chesterfield County School District, Delta Woodside (a textile
producer), Takata (an industrial airbag producer) and INA Bearings (a needle
bearing manufacturer). The economy is characterized by a number of the
industries operating in Chesterfield and Marlboro Counties. Consequently,
although there can be no assurance that our market area will not experience an
increase in unemployment, we believe our employment base will remain stable.
USE OF PROCEEDS
The Holding Company will retain up to 50% of the net proceeds from the
offering and will use the balance of the proceeds to purchase all of the
capital stock issued by First Federal in connection with the Conversion. A
portion of the net proceeds to be retained by the Holding Company will be
loaned to our ESOP to fund its purchase of 8% of the shares of the Holding
Company sold in the Conversion. On a short-term basis, the balance of the net
proceeds retained by the Holding Company initially may be invested in
short-term investments. The Holding Company may also use the proceeds as a
source of funds for the payment of dividends to shareholders or for the
repurchase of shares of Common Stock. The Holding Company will not take any
action in furtherance of an extraordinary capital distribution during the year
following the Conversion. The Holding Company may also use a portion of the
net proceeds to fund the purchase of 4% of the shares for the RRP, which we
anticipate will be adopted by our Board no earlier than six months following
the Conversion, subject to shareholder approval.
First Federal intends to use a portion of the net proceeds that it
receives from the Holding Company to make adjustable- and fixed-rate mortgage
loans and commercial real estate loans to the extent there is demand for such
loans and subject to market conditions. First Federal may also use a portion
of the net proceeds to repay some or all of its borrowings from the FHLB of
Atlanta. We anticipate that the balance of the proceeds will be used to
purchase loan participations and possibly mortgage-backed securities in the
secondary market. On an interim basis, we may use a portion of the net
proceeds to invest in U.S. government securities and other federal agency
securities. See "Business of First Federal Savings and Loan Association of
Cheraw--Investments."
13
<PAGE>
The following table shows estimated gross and net proceeds based upon
shares of Common Stock being sold in the Conversion at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range.
<TABLE>
<CAPTION>
15% Above
Midpoint, Maximum, Maximum,
Minimum, 1,650,000 1,897,500 2,182,125
1,402,500 Shares Shares Shares
Shares Sold Sold at Sold at Sold at
at Price of Price of Price of Price of
$10.00 $10.00 $10.00 $10.00(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross proceeds........... $14,025,000 $16,500,000 $18,975,000 $21,821,250
Less:
Estimated underwriting
commissions and
other expenses/(1)(2)/. 614,000 660,000 706,000 758,000
----------- ----------- ----------- -----------
Estimated net conversion
proceeds/(1)/.......... $13,411,000 $15,840,000 $18,269,000 $21,063,250
=========== =========== =========== ===========
</TABLE>
- ----------------------------
(1) In calculating estimated net proceeds, it has been assumed that no sales
will be made through selected dealers, that all shares are sold in the
Subscription Offering, that executive officers and directors of First
Federal and their Associates purchase shares of Common Stock in the
Conversion, and that the ESOP acquires 8% of the shares of Common Stock
issued in the Conversion.
(2) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to
15% to reflect changes in market and financial conditions following the
commencement of the Subscription Offering and the Community Offering, if
any, as well as to reflect the demand for the Common Stock.
The actual net proceeds may differ from the estimated net proceeds
calculated above for various reasons, including variances in the actual amount
of legal and accounting expenses incurred in connection with the Conversion,
commissions paid for sales made through other dealers, and the actual number of
shares of Common Stock sold in the Conversion. Any variance in the actual net
proceeds from the estimates provided in the table above is not expected to be
material.
DIVIDENDS
The Holding Company intends to pay annual dividends of $.30 per share,
payable on a quarterly basis beginning the first full quarter following the
completion of the Conversion. Dividends will be subject to determination and
declaration by the Board of Directors in its discretion, which will take into
account the Holding Company's consolidated financial condition and results of
operations, tax considerations, industry standards, economic conditions, capital
levels, regulatory restrictions on dividend payments by us to the Holding
Company, general business practices and other factors. See "Regulation--Savings
Association Regulatory Capital" and "--Dividend Limitations."
The Holding Company is not subject to OTS regulatory restrictions on the
payment of dividends to its shareholders although the source of such dividends
depend in part upon the receipt of dividends from us. The Holding Company is
subject, however, to the requirements of Delaware law, which generally limit the
payment of dividends to amounts that will not affect the ability of the Holding
Company, after the dividend has been distributed, to pay its debts in the
ordinary course of business and will not exceed the difference between the
Holding Company's total assets and total liabilities plus preferential amounts
payable to shareholders with rights superior to those of the holders of Common
Stock. First Federal must provide the OTS with 30 days prior notice of its
intention to make a capital distribution to the Holding Company. Additional
limits on the dollar amount of any capital distribution by First Federal to the
Holding Company are set forth in OTS regulations. See "Regulation--Dividend
Limitations."
14
<PAGE>
In addition to the foregoing, the portion of our earnings which has been
appropriated for bad debt reserves and deducted for federal income tax purposes
cannot be used by us to pay cash dividends to the Holding Company without the
payment of federal income taxes by us 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
Notes A and J to the Financial Statements. The Holding Company does not
contemplate any distribution by us that would result in a recapture of our bad
debt reserve or otherwise create federal tax liabilities.
MARKET FOR THE COMMON STOCK
The Holding Company has never issued Common Stock to the public.
Consequently, there is no established market for the Common Stock. The Holding
Company has received approval to have the Common Stock quoted on the Nasdaq
National Market under the symbol "__________" upon the successful closing of the
offering, subject to certain conditions. Trident Securities, Inc. has advised us
that it intends to act as a market maker for the Common Stock, subject to
compliance with applicable provisions of federal and state securities laws and
other regulatory requirements.
The existence of a public trading market will depend upon the presence in
the market of both willing buyers and willing sellers at any given time. The
presence of a sufficient number of buyers and sellers at any given time is a
factor over which neither the Holding Company nor any broker or dealer has
control. The absence of an active and liquid trading market may make it
difficult to sell the Common Stock and may have an adverse effect on the price
of the Common Stock. Purchasers should consider the potentially illiquid and
long-term nature of their investment in the shares offered hereby.
The aggregate price of the Common Stock is based upon an independent
appraisal of the pro forma market value of the Common Stock. However, there can
be no assurance that an investor will be able to sell the Common Stock purchased
in the Conversion at or above the Purchase Price.
COMPETITION
We originate most of our loans to and accept most of our deposits from
residents of Chesterfield and Marlboro Counties, South Carolina. We are subject
to strong competition from various financial institutions, including state and
national banks, state and federal savings associations and certain nonbanking
consumer lenders that provide similar services in Chesterfield and Marlboro
Counties. We also compete with money market funds with respect to deposit
accounts and with insurance companies with respect to individual retirement
accounts.
The primary factors influencing competition for deposits are interest
rates, service and convenience of office location. We compete for loan
originations primarily through the efficiency and quality of the services that
we provide borrowers and through interest rates and loan fees charged.
Competition is affected by, among other things, the general availability of
lendable funds, general and local economic conditions, current interest rate
levels, and other factors that we cannot readily predict.
CAPITALIZATION
The following table presents our historical capitalization at June 30,
1997, and the pro forma consolidated capitalization of the Holding Company as of
that date, giving effect to the sale of Common Stock offered by this Prospectus
based on the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, and subject to the other assumptions set forth below.
The pro forma data set forth below may change significantly at the time the
Holding Company completes the Conversion due to, among other factors, a change
in the Estimated Valuation Range or a change in the current estimated expenses
of the Conversion. If the Estimated Valuation Range changes so that between
1,402,500 and 2,182,125 shares are not sold in the Conversion,
15
<PAGE>
subscriptions will be returned to subscribers who do not affirmatively elect to
continue their subscriptions during the offering at the revised Estimated
Valuation Range.
<TABLE>
<CAPTION>
At June 30, 1997
Pro Forma Holding Company
Capitalization Based on Sale of
--------------------------------------------------
1,402,500 1,650,000 1,897,500 2,182,125
Shares Shares Shares Shares
First Sold at Sold at Sold at Sold at
Federal Price of Price of Price of Price of
Historical $10.00 $10.00 $10.00 $10.00(6)
- --------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposit/(1)/...................................... $ 46,863 $ 46,863 $ 46,863 $ 46,863 $ 46,863
FHLB advances..................................... 2,400 2,400 2,400 2,400 2,400
-------- -------- -------- -------- --------
Total deposits and borrowings................ $ 49,263 $ 49,263 $ 49,263 $ 49,263 $ 49,263
======== ======== ======== ======== ========
Stockholders equity:
Preferred Stock, $.01 par value per share:
authorized - 400,000 shares; assumed
outstanding - none................................ -- -- -- -- --
Common Stock, $.01 par value per share
3,200,00 authorized shares; shares to be
outstanding as shown/(2)/........................ -- 14 17 19 22
Paid-in capital/(2)/.............................. -- 13,469 15,895 18,322 21,113
Less: Common stock acquired by ESOP/(3)/.......... -- (1,122) (1,320) (1,518) (1,746)
Common stock to be acquired by RRP/(4)/..... -- (561) (660) (759) (873)
Retained earnings, substantially restricted/(5)/.. 11,090 11,090 11,090 11,090 11,090
-------- -------- -------- -------- --------
Total stockholders' equity........................ $ 11,090 $ 22,890 $ 25,022 $ 27,154 $ 29,606
======== ======== ======== ======== ========
</TABLE>
(1) Excludes withdrawals from deposit accounts for the purchase of Common Stock.
Such withdrawals will reduce pro forma deposits by the amount thereof.
(2) The number of shares to be issued in the Conversion may be increased or
decreased based on market and financial conditions prior to the completion
of the Conversion. Assumes estimated expenses of $614,000, $660,000,
$706,000 and $758,000 at the minimum, midpoint, maximum and adjusted maximum
of the Estimated Valuation Range, respectively. See "Use of Proceeds." Also
assumes that 20,000 shares will be contributed by the Holding Company to the
Charitable Foundation.
(3) Assumes purchases by the ESOP of a number of shares equal to 8% of the
shares issued in the Conversion. The funds used to acquire the ESOP shares
will be borrowed from the Holding Company. See "Use of Proceeds." First
Federal intends to make contributions to the ESOP sufficient to service and
ultimately retire its debt. The Common Stock acquired by the ESOP is
reflected as a reduction of shareholders' equity. See "Executive
Compensation and Related Transactions of First Federal--Employee Stock
Ownership Plan and Trust."
(4) Assuming the receipt of shareholder approval, the Holding Company intends to
implement the RRP. Assuming such implementation, the RRP will purchase an
amount of shares equal to 4% of the Common Stock sold in the Conversion for
issuance to directors and officers of the Holding Company and First Federal.
Such shares may be purchased from authorized but unissued shares or on the
open market. The Holding Company currently intends that the RRP will
purchase the shares on the open market. Under the terms of the RRP, assuming
it is adopted within one year of the Conversion, shares will vest at the
rate of 20% per year. The Common Stock to be purchased by the RRP represents
unearned compensation and is, accordingly, reflected as a reduction to pro
forma shareholders' equity. As shares of the Common Stock granted pursuant
to the RRP vest, a corresponding reduction in the charge against capital
will occur. In the event that authorized but unissued shares are acquired,
the interests of existing shareholders will be diluted. Assuming that
1,650,000 shares of Common Stock, the midpoint of the Estimated Valuation
Range, are issued in the Conversion, 20,000 shares are issued to the
Charitable Foundation and that all awards under the RRP are from authorized
but unissued shares, the Holding Company estimates that the per share book
value for the Common Stock would be diluted $.19 per share, or 1.3% on a pro
forma basis as of June 30,
16
<PAGE>
1997. The dilution would be $.23 per share (1.4%) and $.16 per share (1.1%)
at the minimum and maximum levels, respectively, of the Estimated Valuation
Range on a pro forma basis at June 30, 1997.
(5) Retained earnings are substantially restricted, see "Financial Statements."
(6) As adjusted to give effect to an increase in the number of shares which.
could occur due to an increase in the Estimated Valuation Range of up to 15%
to reflect changes in market and financial conditions following the
commencement of the Subscription Offering and Community Offering, if any.
PRO FORMA DATA
The following table sets forth the pro forma combined consolidated net
income of the Holding Company for the year ended June 30, 1997, as though the
offering had been consummated at the beginning of the year and the investable
net proceeds had been invested at 5.65% for the year ended June 30, 1997 which
was the one year treasury bill rate at June 30, 1997. The pro forma after-tax
return for the Holding Company on a consolidated basis is assumed to be 3.62%
for the year ended June 30, 1997 after giving effect to (i) the yield on
investable net proceeds from the Conversion offering and (ii) adjusting for
taxes using a combined federal and state income tax rate of 36%. Historical and
per share amounts have been calculated by dividing historical amounts and pro
forma amounts by the indicated number of shares of Common Stock, assuming that
such number of shares had been outstanding during each of the entire periods.
Book value represents the difference between the stated amount of
consolidated assets and consolidated liabilities of the Holding Company computed
in accordance with generally accepted accounting principles. Book value does not
necessarily reflect current market value of assets and liabilities, or the
amounts, if any, that would be available for distribution to shareholders in the
event of liquidation. See "The Conversion--Principal Effects of Conversion--
Effect on Liquidation Rights." Book value also does not reflect the federal
income tax consequences of the restoration to income of our special bad debt
reserve for income tax purposes, which would be required in the unlikely event
of liquidation or if a substantial portion of retained earnings were otherwise
used for a purpose other than absorption of bad debt losses. See "Taxation--
Federal Taxation." Pro forma book value includes only net proceeds from the
Conversion offering as though it occurred as of the indicated date and does not
include earnings on the proceeds for the period then ended.
The pro forma net income derived from the assumptions set forth above
should not be considered indicative of the actual results of operations of the
Holding Company that would have been attained for the year ended June 30, 1997
if the Conversion had been actually consummated at the beginning of such year
and the assumptions regarding investment yields should not be considered
indicative of the actual yield expected to be achieved during any future period.
The pro forma book values at the date indicated should not be considered as
reflecting the potential trading value of the Holding Company's stock. There can
be no assurance that an investor will be able to sell the Common Stock purchased
in the Conversion at prices within the range of the pro forma book values of the
Common Stock or at or above the Purchase Price. The pro forma data may not total
due to rounding differences.
17
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended June 30, 1997
------------------------------------------------------
2,182,125
1,402,500 1,650,000 1,897,500 Shares
Shares Shares Shares at $10.00
at $10.00 at $10.00 at $10.00 per Share
per Share per Share per Share (Maximum, as
(Minimum) (Midpoint) (Maximum) adjusted)/(1)/
---------- ---------- ---------- ---------------
(Dollars In Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds.......................................... $ 14,025 $ 16,500 $ 18,975 $ 21,821
Plus: shares acquired by Charitable Foundation/(2)/..... 200 200 200 200
---------- ---------- ---------- ----------
Pro forma market capitalization......................... $ 14,225 $ 16,700 $ 19,175 $ 22,021
========== ========== ========== ==========
Gross proceeds.......................................... $ 14,025 $ 16,500 $ 18,975 $ 21,821
Less estimated expenses................................. (614) (660) (706) (758)
---------- ---------- ---------- ----------
Estimated net Conversion proceeds....................... 13,411 15,840 18,269 21,063
Less Common Stock acquired by ESOP/(3)/................. (1,122) (1,320) (1,518) (1,746)
Less Common Stock to be acquired by RRP/(4)/............ (561) (660) (759) (873)
---------- ---------- ---------- ----------
Estimated proceeds available for investment......... $ 11,728 $ 13,860 $ 15,992 $ 18,445
========== ========== ========== ==========
Consolidated net income:/(2)/
Historical.............................................. $ 586 $ 586 $ 586 $ 586
Pro forma adjustments:
Net income from proceeds/ (5)(6)/...................... 424 501 578 667
Less pro forma ESOP adjustment/(3)/.................... (26) (30) (35) (40)
Less pro forma RRP adjustment/(4)/..................... (72) (84) (97) (112)
---------- ---------- ---------- ----------
Pro forma net income................................. $ 913 $ 973 $ 1,032 $ 1,101
========== ========== ========== ==========
Consolidated net income per share:/(2)(6)/
Historical............................................. $ 0.45 $ 0.38 $ 0.33 $ 0.29
Pro forma adjustments:
Net income from proceeds /(5)(6)/...................... 0.32 0.32 0.33 0.33
Less pro forma ESOP adjustment/(3)/.................... (0.02) (0.02) (0.02) (0.02)
Less pro forma RRP adjustment/(4)/..................... (0.05) (0.05) (0.05) (0.05)
---------- ---------- ---------- ----------
Pro forma net income per share/(7)/.................. $ 0.69 $ 0.63 $ 0.58 $ 0.54
========== ========== ========== ==========
Number of shares used in calculating earnings
per share/(7)/....................................... 1,314,307 1,542,714 1,771,121 2,033,790
========== ========== ========== ==========
Consolidated stockholders' equity (book value):/(8)/
Historical............................................. $ 11,090 $ 11,090 $ 11,090 $ 11,090
Estimated net Conversion proceeds...................... 13,411 15,840 18,269 21,063
Plus: Shares issued to Charitable Foundation/(2)/...... 200 200 200 200
Less: Contribution to Charitable Foundation/(2)/....... (200) (200) (200) (200)
Plus: Tax benefit of contribution to Charitable
Foundation/(2)/........................................ 72 72 72 72
Less common stock acquired or to be acquired by:
ESOP/(3)/............................................. (1,122) (1,320) (1,518) (1,746)
RRP /(4)/............................................. (561) (660) (759) (873)
---------- ---------- ---------- ----------
Pro forma............................................. $ 22,890 $ 25,022 $ 27,154 $ 29,606
========== ========== ========== ==========
Consolidated stockholders' equity per share: /(8)(9)/
Historical............................................. $ 7.80 $ 6.64 $ 5.78 $ 5.04
Estimated net Conversion proceeds...................... 9.43 9.49 9.53 9.56
Plus: shares issued to Charitable Foundation............ 0.14 0.12 0.10 0.09
Less: contribution to Charitable Foundation............. (0.14) (0.12) (0.10) (0.09)
Plus: tax benefit of contribution to Charitable
Foundation.............................................. 0.05 0.04 0.04 0.03
Less Common Stock acquired or to be acquired by:
ESOP/(3)/.............................................. (0.79) (0.79) (0.79) (0.79)
RRP /(4)/.............................................. (0.39) (0.40) (0.40) (0.40)
---------- ---------- ---------- ----------
Pro forma stockholders' equity per share................ $ 16.09 $ 14.98 $ 14.16 $ 13.44
========== ========== ========== ==========
Pro forma price to book value (%)/(8)(9)/............... 62.1% 66.7% 70.6% 74.4%
---------- ---------- ---------- ----------
Pro forma price to earnings (P/E ratio)................. 14.5x 15.9x 17.2x 18.5x
========== ========== ========== ==========
Number of shares used in calculating
stockholders' equity per share......................... 1,422,500 1,670,000 1,917,500 2,202,125
========== ========== ========== ==========
</TABLE>
-----------------------------
(Footnotes on following page)
18
<PAGE>
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to 15%
to reflect changes in market and financial conditions following commencement
of the Offering and the Community Offering, if any.
(2) Assumes the issuance of 20,000 shares of authorized but unissued shares to
the Charitable Foundation. Pro forma income and income per share does not
give effect to the non-recurring expense that will be recognized upon
establishment of the foundation and contribution of the shares to it. The
after tax expense is expected to be $128,000, assuming an effective tax rate
of 36%. Assuming the contribution was expensed during the year ended June
30, 1997, the pro forma net earnings per share would be $.60, $.55, $.51,
and $.48 at the minimum, midpoint, maximum and maximum as adjusted,
respectively.
(3) It is assumed that 8% of the shares of Common Stock issued in the Conversion
will be purchased by the ESOP. The funds used to acquire the ESOP shares
will be borrowed by the ESOP from the Holding Company (see 'Use of
Proceeds"). First Federal intends to make annual contributions to the ESOP
in an amount at least equal to the principal and interest requirements on
the debt. First Federal's total annual expense in payment of the ESOP debt
is based upon 28 equal annual installments of principal with an assumed
income tax benefit of 36%. The pro forma net income assumes: (i) First
Federal's total contributions are equivalent to the debt service requirement
for the year, and (ii) the effective income tax rate applicable to the debt
was 36%. Expense for the ESOP will be based on the number of shares
committed to be released to participants for the year at the average market
value of the shares during the year. Accordingly, First Federal's total
annual expense in payment of the ESOP for such years may be higher than that
discussed above. The loan to the ESOP is reflected as a reduction of
shareholders' equity.
(4) Assuming the receipt of shareholder approval, the Holding Company intends to
implement the RRP. Assuming such implementation, the RRP will purchase an
amount of shares equal to 4% of the Common Stock sold in the Conversion for
issuance to directors and officers of the Holding Company and First Federal.
Such shares may be purchased from authorized but unissued shares or on the
open market. The Holding Company currently intends that the RRP will
purchase the shares on the open market, and the estimated net Conversion
proceeds have been reduced for the purchase of the shares in determining
estimated proceeds available for investment. Under the terms of the RRP, if
it is adopted within one year of the Conversion, shares will vest at the
rate of 20% per year. An income tax benefit of 36% has been assumed. The
Common Stock to be purchased by the RRP represents unearned compensation and
is, accordingly, reflected as a reduction to pro forma shareholders' equity.
As shares of the Common Stock granted pursuant to the RRP vest, a
corresponding reduction in the charge against capital will occur. In the
event that authorized but unissued shares are acquired by the RRP, the
interests of existing shareholders will be diluted. Assuming that 1,650,000
shares of Common Stock are issued in the Conversion, the midpoint of the
Estimated Valuation Range, 20,000 shares are issued to the foundation and
that all awards under the RRP are from authorized but unissued shares, the
Holding Company estimates that the per share book value for the Common Stock
would be diluted $.19 per share, or 1.3%, on a pro forma basis as of June
30, 1997 at the midpoint of the Estimated Valuation Range. The dilution
would be $.23 per share (1.4%) and $.16 per share (1.1%) at the minimum and
maximum levels, respectively, of the Estimated Valuation Range on a pro
forma basis as of June 30, 1997.
(5) See "Use of Proceeds" for assumptions utilized to determine the investable
net proceeds of the sale of Common Stock.
(6) Assuming investable net proceeds had been invested since the beginning of
the period at 5.65%, the one year treasury bill rate at June 30, 1997, and
an assumed effective income tax rate of 36%.
(7) The number of shares used in calculating earnings per share was calculated
using the indicated number of shares issued (including 20,000 shares issued
to the charitable foundation) reduced by the assumed number of ESOP shares
that would be unallocated at the end of the allocation period. Allocation of
ESOP shares is assumed to occur on the first day of the fiscal year.
(8) Book value represents the excess of assets over liabilities. The effect of
the liquidation account is not reflected in these computations. (For
additional information regarding the liquidation account, see "The
Conversion--Principal Effects of Conversion--Effect on Liquidation Rights.")
(9) Assuming the receipt of shareholder approval at the Holding Company's first
meeting of shareholders to be held at least six months following the
Conversion, the Holding Company intends to implement the Stock Option Plan.
Assuming such implementation, Common Stock in an aggregate amount equal to
10% of the shares issued in the Conversion will be reserved for issuance by
the Holding Company upon the exercise of the stock options granted under the
Stock Option Plan. No effect has been given to the shares of Common Stock
reserved for issuance under the Stock Option Plan. Upon the exercise of
stock options granted under the Stock Option Plan, the interest of existing
shareholders will be diluted by 9.09%. The Holding Company estimates that
the per share book value for the Common Stock would be diluted $.44 per
share, or 2.9%, on a pro forma basis as of June 30, 1997, assuming the
issuance of 1,650,000 shares in the Conversion at the midpoint of the
Estimated Valuation Range, the issuance of 20,000 shares to the foundation
and the exercise of 165,000 options at an exercise price of $10.00 per
share. This dilution further assumes that the shares will be issued from
authorized, but unissued, shares. The dilution would be $.55 per share
(3.4%) and $.37 per share (2.6%) at the minimum and maximum levels,
respectively, of the Estimated Valuation Range on a pro forma basis as of
June 30, 1997.
19
<PAGE>
Historical and Pro Forma Regulatory Capital Compliance
The following table compares our historical and pro forma regulatory
capital levels as of June 30, 1997 to our capital requirements after giving
effect to the Conversion.
<TABLE>
<CAPTION>
Pro Forma Based Upon Sale of
---------------------------------------------------------------
Minimum of Midpoint of Maximum of
Estimated Valuation Estimated Valuation Estimated Valuation
Range of Range of Range of
Historical at 1,402,500 Shares 1,650,000 Shares 1,897,500 Shares
June 30, 1997 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------- ------------------- -------------------- -------------------
Amount Percent Amount Percent Amount Percent Amount Percent
-------- --------- -------- --------- ---------- -------- ------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Bank
- --------
Capital under generally
accepted accounting
principles................ $11,090 18.3% $16,113 24.2% $17,030 25.1% $17,948 26.0%
======= ==== ======= ==== ======= ==== ======= ====
Tangible capital/(2)/...... $11,090 18.3% $16,113 24.2% $17,030 25.1% $17,948 26.0%
Tangible capital
requirement/(3)/.......... 908 1.5 1,000 1.5 1,017 1.5 1,034 1.5
------- ---- ------- ---- ------- ---- ------- ----
Excess................... $10,182 16.8% $15,113 22.7% $16,013 23.6% $16,914 24.5%
======= ==== ======= ==== ======= ==== ======= ====
Core capital/(2)/.......... $11,090 18.3% $16,113 24.2% $17,030 25.1% $17,948 26.0%
Core capital
requirement/(2)/.......... 1,816 3.0 2,000 3.0 2,034 3.0 2,067 3.0
------- ---- ------- ---- ------- ---- ------- ----
Excess................... $ 9,274 15.3% $14,113 21.2% 14,996 22.1% $15,881 23.0%
======= ==== ======= ==== ======= ==== ======= ====
Risk-based capital/(2)(3)/. $11,393 36.6% $16,416 50.8% $17,333 53.2% $18,251 55.7%
Risk-based capital
requirement............... 2,488 8.0 2,586 8.0 2,604 8.0 2,622 8.0
------- ---- ------- ---- ------- ---- ------- ----
Excess................... $ 8,905 28.6% $13,830 42.8% $14,729 45.2% $15,629 47.7%
======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Based Upon Sale of
----------------------------
Maximum, as Adjusted
of Estimated Valuation
Range of
2,182,125 Shares
at $10.00 Per Share/1/
------------------
Amount Percent
------- --------
(Dollars in Thousands)
<S> <C> <C>
The Bank
- --------
Capital under generally
accepted accounting
principles................ $19,003 27.1%
======= ====
Tangible capital/(2)/...... $19,003 27.1%
Tangible capital
requirement/(3)/.......... 1,053 1.5
------- ----
Excess................... $17,950 25.6%
======= ====
Core capital/(2)/.......... $19,003 27.1%
Core capital
requirement/(2)/.......... 2,106 3.0
------- ----
Excess................... $16,897 24.1%
======= ====
Risk-based capital/(2)(3)/. $19,306 58.4%
Risk-based capital
requirement............... 2,643 8.0
------- ----
Excess................... $16,663 50.4%
======= ====
</TABLE>
______________________
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to
15% to reflect changes in market and financial conditions following
commencement of the Subscription Offering and the Community Offering, if
any, as well as to reflect demand for the Common Stock.
(2) Tangible and core capital levels are shown as a percentage of total assets;
risk-based capital levels are shown as a percentage of risk-weighted
assets.
(3) Pro forma risk-based capital amounts and percentages assume net proceeds
have been invested in 20% risk-weighted assets. Computations of ratios are
based on historical adjusted total assets of $60,538,000 and risk-weighted
assets of $31,102,000.
20
<PAGE>
THE CONVERSION
THE BOARDS OF DIRECTORS OF FIRST FEDERAL AND THE HOLDING COMPANY, AND THE
OTS HAVE APPROVED THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY OUR MEMBERS AT A
SPECIAL MEETING OF MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN OTHER
CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER, DOES NOT
CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.
General
On July 14, 1997, our Board of Directors adopted a Plan of Conversion
(the "Plan") pursuant to which we will convert from a federal mutual savings
and loan association to a federal stock savings and loan association, and
become a wholly owned subsidiary of the Holding Company. The Conversion will
include adoption of the proposed Federal Stock Charter and Bylaws which will
authorize the issuance of capital stock by us. Under the Plan, our capital
stock is being sold to the Holding Company and the Common Stock of the Holding
Company is being offered to our customers and then to the public. The Plan has
also been approved by the OTS, subject to approval of the Plan by our members.
A Special Meeting of Members (the "Special Meeting") has been scheduled for
that purpose on December ___, 1997. The approval of the Plan by the OTS does
not constitute a recommendation or endorsement of the Plan by the OTS.
We have mailed to each person eligible to vote at the Special Meeting a
proxy statement (the "Proxy Statement") containing information concerning the
business purposes of the Conversion and the effects of the Plan and the
Conversion on voting rights, liquidation rights, the continuation of our
business and existing savings accounts, FDIC insurance and loans. The Proxy
Statement also describes the manner in which the Plan may be amended or
terminated. Included with the Proxy Statement is a proxy card which should be
used to vote on the Plan and the Conversion.
The following is a summary of all of the material aspects of the Plan,
the Subscription Offering, and the Community Offering. The Plan should be
consulted for a more detailed description of its terms.
As part of the Conversion, we intend to establish a tax exempt charitable
foundation to which the Holding Company will donate $200,000 worth of Common
Stock (based upon the initial public offering price of $10.00 per share). The
Charitable Foundation is being formed as a means of complementing our existing
community reinvestment activities and to share our financial success as a
locally headquartered, community-oriented financial services institution. The
Charitable Foundation will be dedicated to the promotion of charitable
purposes including community development, grants or donations to support
housing assistance, not-for-profit community groups and other types of
organizations or civic projects.
Reasons for Conversion
As a stock institution, we will be structured in the form used by
commercial banks, most business entities, and a growing number of savings
associations. Converting to the stock form is intended to have a positive
effect on our future growth and performance by: (i) affording our depositors
and employees the opportunity to become shareholders of the Holding Company
and thereby participate more directly in our future and the Holding Company's
future; (ii) providing the Holding Company with the flexibility to grow
through mergers and acquisitions by committing the offering of equity
participations to the shareholders of acquired companies; (iii) providing
substantially increased net worth and equity capital for investment in our
business, thus enabling management to pursue new and additional lending and
investment opportunities and to expand operations; and (iv) providing future
access to capital markets through the sale of stock of the Holding Company in
order to generate additional capital to accommodate or promote future growth.
We believe that the increased capital and operating flexibility will enhance
our competitiveness with other types of financial services organizations.
Although our current members will, upon Conversion, lose the
21
<PAGE>
voting and liquidation rights they presently have as members (except to the
limited extent of their rights in the liquidation account established in the
Conversion), they are being offered a priority right to purchase shares in the
Conversion and thereby obtain voting and liquidation rights in the Holding
Company.
The net proceeds to us from the sale of Common Stock offered hereby,
after retention by the Holding Company of 50% of the net proceeds, will
increase our existing net worth and thus provide an even stronger capital base
to support our lending and investment activities. In addition, the Conversion
will provide us with new opportunities to attract and retain talented and
experienced personnel by offering stock incentive programs.
Our Board of Directors believes that the Conversion to a holding company
structure is the best way to enable us to diversify our business activities
should we choose to do so. Currently, there are no plans, written or oral, for
the Holding Company to engage in any material activities apart from holding
our shares of stock that it acquires in connection with the Conversion,
although the Board may determine to further expand the Holding Company's
activities after the Conversion.
The additional Common Stock of the Holding Company being authorized in
the Conversion will be available for future acquisitions (although the Holding
Company has no current discussions, arrangements or agreements with respect to
any acquisition) and for issuance and sale to raise additional equity capital,
subject to market conditions and generally without shareholder approval.
Although the Holding Company currently has no plans with respect to future
issuances of equity or debt securities, the more flexible operating structure
provided by the Holding Company and the stock form of ownership is expected to
assist us in competing aggressively with other financial institutions in our
market area.
The Conversion will also permit our members who subscribe for shares of
Common Stock to become shareholders of the Holding Company, thereby allowing
members to indirectly own stock in the financial institution in which they
maintain deposit accounts. Such ownership may encourage shareholders to
promote us to others, thereby further contributing to our growth.
Principal Effects of Conversion
General. Each savings depositor in a mutual savings and loan association
such as First Federal has both a savings account and a pro rata ownership in
the net worth of that institution, based upon the balance in his or her
savings account. This ownership interest has no tangible market value separate
from the savings account. Upon conversion to stock form, the ownership of our
net worth will be represented by the outstanding shares of stock to be owned
by the Holding Company. Certificates are issued to evidence ownership of the
capital stock. These stock certificates are transferable and, therefore, the
shares may be transferred with no effect on any account the seller may hold
with us.
Continuity. While the Conversion is being accomplished, our normal
business of accepting deposits and making loans will be continued without
interruption. After the Conversion, we will continue to provide services for
account holders and borrowers under current policies carried on by our present
management and staff.
Our directors at the time of Conversion will continue to serve as our
directors after the Conversion until the expiration of their current terms,
and thereafter, if reelected. All of our executive officers at the time of
Conversion will retain their positions after the Conversion.
Effect on Deposit Accounts. Under the Plan, each of our depositors at the
time of the Conversion will automatically continue as a depositor after the
Conversion, and each deposit account will remain the same with respect to
deposit balance, interest rate and other terms. Each account will also
continue to be insured by the FDIC in exactly the same way as before.
Depositors will continue to hold their existing certificates, passbooks and
other evidence of their accounts.
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Effect on Loans of Borrowers. None of our loans will be affected by the
Conversion. The amount, interest rate, maturity and security for each loan
will be unchanged.
Effect on Voting Rights of Members. Currently in our mutual form, our
depositor members have voting rights and may vote for the election of
directors. Following the Conversion, depositors will cease to have voting
rights. All voting rights in First Federal will be vested in the Holding
Company as our sole shareholder. Voting rights in the Holding Company will be
vested exclusively in its shareholders, with one vote for each share of Common
Stock. Neither the Common Stock to be sold in the Conversion nor the capital
stock of First Federal will be insured by the FDIC or by any other government
entity.
Effect on Liquidation Rights. Current federal regulations and the Plan of
Conversion provide for the establishment of a "liquidation account" by us for
the benefit of our deposit account holders with balances of no less than
$50.00 on June 30, 1995 ("Eligible Account Holders"), and our deposit account
holders with balances of no less than $50.00 on September 30, 1997
("Supplemental Eligible Account Holders"), who continue to maintain their
accounts with us after the Conversion. The liquidation account will be
credited to our net worth as reflected in the latest statement of financial
condition in the final prospectus used to sell common stock in the Conversion.
Each Eligible Account Holder and Supplemental Eligible Account Holder will,
with respect to each deposit account held, have a related inchoate interest in
a portion of the balance of the liquidation account. This inchoate interest is
referred to in the Plan as a "subaccount balance." In the event of a complete
liquidation of us after the Conversion (and only in such event), Eligible
Account Holders and Supplemental Eligible Account Holders would be entitled to
a distribution from the liquidation account in an amount equal to the then
current adjusted subaccount balance then held, before any liquidation
distribution would be made to the Holding Company as our sole shareholder. We
believe that a liquidation of First Federal is unlikely.
Each Eligible Account Holder will have a subaccount balance in the
liquidation account for each deposit account held as of June 30, 1995 (the
"Eligibility Record Date"). Each Supplemental Eligible Account Holder will
have a subaccount balance in the liquidation account for each deposit account
held as of September 30, 1997 (the "Supplemental Eligibility Record Date").
Each initial subaccount balance will be the amount determined by multiplying
the total opening balance in the liquidation account by a fraction, the
numerator of which is the amount of the qualifying deposit (a deposit of at
least $50 as of June 30, 1995, or September 30, 1997, respectively) of such
deposit account, and the denominator of which is the total of all qualifying
deposits on that date. If the amount in the deposit account on any subsequent
annual closing date of First Federal is less than the balance in such deposit
account on any other annual closing date, or the balance in such account on
the Eligibility Record Date or the Supplemental Eligibility Record Date, as
the case may be, this interest in the liquidation account will be reduced by
an amount proportionate to any such reduction, and will not thereafter be
increased despite any subsequent increase in the related deposit account. An
Eligible Account Holder's, as well as a Supplemental Eligible Account
Holder's, interest in the liquidation account will cease to exist if the
deposit account is closed. The liquidation account will never increase and
will be correspondingly reduced as the interests in the liquidation account
are reduced or cease to exist. In the event of liquidation, any assets
remaining after the above liquidation rights of Eligible Account Holders and
Supplemental Eligible Account Holders are satisfied will be distributed to the
Holding Company as our sole shareholder.
A merger, consolidation, sale of bulk assets, or similar combination or
transaction in which we are not the surviving entity would not be considered
to be a "liquidation" under which distribution of the liquidation account
could be made, provided the surviving institution is an FDIC-insured
institution. In such a transaction, the liquidation account would be assumed
by the surviving institution. The OTS has stated that the consummation of a
transaction of the type described in the preceding sentence in which the
surviving entity is not an FDIC-insured institution would be reviewed on a
case-by-case basis to determine whether the transaction should constitute a
"complete liquidation" requiring distribution of any then-remaining balance in
the liquidation account.
The creation and maintenance of the liquidation account will not restrict
the use of or application of any of the net worth accounts, except that we may
not declare or pay a cash dividend on or repurchase our capital stock if
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the effect of such dividend or repurchase would be to cause our net worth to
be reduced below the aggregate amount then required for the liquidation
account.
Tax Effects. We intend to proceed with the Conversion on the basis of an
opinion from our special counsel, Luse Lehman Gorman Pomerenk & Schick, P.C.,
Washington, D.C., as to certain tax matters that are material to the
Conversion. The opinion is based, among other things, on certain
representations made by us, including the representation that the exercise
price of the subscription rights to purchase the Common Stock will be
approximately equal to the fair market value of the stock at the time of the
completion of the Conversion. With respect to the subscription rights, we have
received an opinion of Ferguson which, based on certain assumptions, concludes
that the subscription rights to be received by Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members do not have any
economic value at the time of distribution or the time the subscription rights
are exercised, whether or not a Community Offering takes place, and Luse
Lehman Gorman Pomerenk & Schick, P.C.'s opinion is given in reliance thereon.
Luse Lehman Gorman Pomerenk & Schick, P.C.'s opinion provides substantially as
follows:
1. Our change in form from a mutual savings and loan association to a stock
savings and loan association will qualify as a reorganization under
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 us in either our
mutual form or our stock form by reason of the Conversion.
2. No gain or loss will be recognized by the converted savings association
upon receipt of money from the Holding Company for the converted savings
association's capital stock, and no gain or loss will be recognized by
the Holding Company upon the receipt of money for Common Stock of the
Holding Company.
3. The basis of the assets of the converted savings and loan association
will be the same as the basis in our hands prior to the Conversion.
4. The holding period of the assets of the converted savings and loan
association will include the period during which the assets were held by
us in our mutual form prior to Conversion.
5. No gain or loss will be realized by our deposit account holders, upon the
constructive issuance to them of withdrawable deposit accounts of the
converted savings association immediately after the Conversion, interests
in the liquidation account, and/or on the distribution to them of
nontransferable subscription rights to purchase Common Stock.
6. The basis of an account holder's deposit accounts in the converted
savings and loan association after the Conversion will be the same as the
basis of his or her deposit accounts with us prior to the Conversion.
7. The basis of each account holder's interest in the liquidation account
will be zero. The basis of the non-transferable subscription rights will
be zero.
8. The basis of the Holding Company Common Stock to its shareholders will be
the actual purchase price ($10.00) thereof, and a shareholder's holding
period for Common Stock acquired through the exercise of subscription
rights will begin on the date on which the subscription rights are
exercised.
9. No taxable income will be realized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members as a result of the
exercise of the nontransferable subscription rights.
10. The converted savings association in its stock form will succeed to and
take into account our earnings and profits or deficit in earnings and
profits, in our mutual form, as of the date of Conversion.
The opinion also concludes in effect that:
1. No taxable income will be realized by us on the issuance of subscription
rights to eligible subscribers to purchase shares of Common Stock at fair
market value.
2. The converted savings and loan association will succeed to and take into
account the dollar amounts of those accounts of First Federal in its
mutual form which represent bad debt reserves in respect of which First
Federal in its mutual form has taken a bad debt deduction for taxable
years on or before the date of the transfer.
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3. The creation of the liquidation account will have no effect on our
taxable income, deductions, or additions to bad debt reserves or
distributions to shareholders under Section 593 of the Code.
The opinions of Luse Lehman Gorman Pomerenk & Schick, P.C., unlike a
letter ruling issued by the Internal Revenue Service, are not binding on the
Service and the conclusions expressed herein may be challenged at a future
date. The Service has issued favorable rulings for transactions substantially
similar to the proposed Conversion, but any such ruling may not be cited as
precedent by any taxpayer other than the taxpayer to whom the ruling is
addressed. We do not plan to apply for a letter ruling concerning the
transactions described herein.
We have also received an opinion from Dixon, Odom & Co. that
implementation of the Plan will not result in any South Carolina income tax
liability to First Federal, its account holders, borrowers or the Holding
Company.
Offering of Common Stock
Under the Plan of Conversion, up to 1,897,500 shares of Common Stock are
being offered for sale, initially through the Subscription Offering (subject
to a possible increase to 2,182,125 shares). See "--Subscription Offering."
The Plan of Conversion requires, with certain exceptions, that a number of
shares equal to at least 1,402,500 shares be sold in order for the Conversion
to be effective.
The Subscription Offering expires at 12:00 noon, South Carolina time, on
December _, 1997. OTS regulations and the Plan of Conversion require that we
complete the sale of Common Stock within 45 days after the close of the
Subscription Offering. This 45-day period expires on January __, 1998. In the
event we are unable to complete the sale of Common Stock within this 45-day
period, we may request an extension of this time period from the OTS. No
single extension granted by the OTS, however, may exceed 90 days. No assurance
can be given that an extension would be granted if requested. The OTS has,
however, granted extensions due to the inability of mutual financial
institutions to complete a stock offering as a result of the development of
adverse conditions in the stock market. If an extension is granted, we will
promptly notify subscribers of the granting of the extension of time and will
promptly return subscriptions unless subscribers affirmatively elect to
continue their subscriptions during the period of extension. Such extensions
may not be made beyond November __, 1999.
Shares may also be offered to the public in a Community Offering, if one
is to be held. In the event a Community Offering is held, it may begin
immediately after the Subscription Offering, or any time during the
Subscription Offering. The Community Offering may end on or after the
Subscription Offering, but not later than January __, 1998, unless further
extended with the approval of the OTS. The Community Offering may expire at
any time, but no later than January ___, 1998, unless extended by us and the
Holding Company. The offering may be extended, subject to OTS approval, until
24 months following the members' approval of the Plan of Conversion, or until
July 14, 1999. The actual number of shares to be sold in the Conversion will
depend upon market and financial conditions at the time of the Conversion,
provided that no fewer than 1,402,500 shares or more than 2,182,125 shares
will be sold in the Conversion. The per share price to be paid by purchasers
in the Community Offering, if any, for any remaining shares will be $10.00,
the same price paid by subscribers in the Subscription Offering. See "- Stock
Pricing."
As permitted by OTS regulations, the Plan of Conversion provides that if,
for any reason, purchasers cannot be found for an insignificant numbers of
unsubscribed shares of the Common Stock, our Board of Directors will seek to
make other arrangements for the sale of the remaining shares. Such other
arrangements will be subject to the approval of the OTS. If such other
purchase arrangements cannot be made, the Plan of Conversion will terminate.
In the event that the Conversion is not effected, we will remain a mutual
savings and loan association, all subscription funds will be promptly returned
to subscribers with interest earned thereon at our passbook rate, which is
currently _____% per annum (except for payments to have been made through
withdrawal authorizations which will have continued to earn interest at the
contractual account rates), and all withdrawal authorizations will be
canceled.
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Subscription Offering
In accordance with OTS regulations, nontransferable rights to subscribe
for the purchase of the Holding Company's Common Stock have been granted under
the Plan of Conversion to the following persons in the following order of
priority: (1) our Eligible Account Holders; (2) the ESOP; (3) our Supplemental
Eligible Account Holders; and (4) our members other than Eligible Account
Holders and Supplemental Eligible Account Holders, at the close of business on
October __, 1997, the voting record date for the Special Meeting, including
borrowers on October __, 1997 ("Other Members"). All subscriptions received
will be subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering,
and to the maximum and minimum purchase limitations set forth in the Plan of
Conversion (and described below). The June 30, 1995, date for determination of
Eligible Account Holders and the September 30,1997 date for determination of
Supplemental Eligible Account Holders were selected in accordance with federal
regulations applicable to the Conversion.
Category I: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, nontransferable subscription rights to
subscribe for up to 25,000 shares of the Common Stock; provided, however, that
no Eligible Account Holder may purchase alone or with his or her Associates
(as defined in the Plan, and including relatives living in the same household)
and persons acting in concert, more than 25,000 shares of Common Stock.
If sufficient shares are not available in this Category I, shares will be
allocated in a manner that will allow each Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
allocation consist of the lesser of 100 shares or the amount subscribed for.
Thereafter, unallocated shares will be allocated to subscribing Eligible
Account Holders in the proportion that the amounts of their respective
qualifying deposits bear to the total amount of qualifying deposits of all
subscribing Eligible Account Holders. To ensure a proper allocation of Common
Stock, each Eligible Account Holder must list on the Stock Order Form all
accounts in which he has an ownership interest as of June 30, 1995. Failure
to list all such qualifying deposit accounts may result in the inability of
the Holding Company or First Federal to fill all or part of a subscription
order. Neither the Holding Company, First Federal nor any of their agents
shall be responsible for orders on which all qualifying deposit accounts have
not been fully and accurately disclosed.
The "qualifying deposits" of an Eligible Account Holder is the amount of
the deposit balances (provided such aggregate balance is not less than $50.00)
in his or her deposit accounts, including money market accounts, as of the
close of business on June 30, 1995. Subscription rights received by directors
and officers in this category based upon their increased deposits in First
Federal during the year preceding June 30, 1995, are subordinated to the
subscription rights of other Eligible Account Holders. Notwithstanding the
foregoing, shares of Common Stock with a value in excess of $250,000, may be
sold to the ESOP before satisfying the subscriptions of Eligible Account
Holders. For allocation purposes, qualifying deposits will be divided in the
case of multiple orders.
Category II: The Employee Stock Ownership Plan ("ESOP"). The ESOP will
receive, without payment therefor, nontransferable subscription rights to
purchase up to 10% of the total number of shares of Common Stock offered in
the Conversion on behalf of participants, provided that shares remain
available after satisfying the subscription rights of Eligible Account Holders
up to the maximum of the Estimated Valuation Range as described above. The
ESOP currently intends to purchase 8% of the shares sold in the Conversion. If
the ESOP is unable to purchase any or part of the shares of Common Stock for
which it subscribes, the ESOP may purchase such shares on the open market or
may purchase authorized but unissued shares of the Holding Company. Any
purchase by the ESOP of authorized but unissued shares could dilute the
interests of the Holding Company's shareholders.
Category III: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder will receive, without payment therefor,
nontransferable subscription rights to subscribe for up to 25,000 shares of
the Common Stock; provided, however, that no Supplemental Eligible Account
Holder may purchase alone or with his or her Associates (as defined in the
Plan, and including relatives living in the same household) and persons acting
in
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concert, more than 25,000 shares of Common Stock. Such subscription rights
will be applicable only to such shares as remain available after the
subscriptions of the Eligible Account Holders and the ESOP have been
satisfied. Any subscription rights received by a person as a result of his or
her status as an Eligible Account Holder will reduce to the extent thereof the
subscription rights granted to such person as a result of his or her status as
a Supplemental Eligible Account Holder.
If sufficient shares are not available in this Category III, shares will
be allocated in a manner that will allow each Supplemental Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make his or her allocation consist of the lesser of 100 shares or the amount
subscribed for. Thereafter, unallocated shares will be allocated to
subscribing Supplemental Eligible Account Holders in the proportion that the
amounts of their respective qualifying deposits bear to the total amount of
qualifying deposits of all subscribing Supplemental Eligible Account Holders.
To ensure a proper allocation of Common Stock, each Supplemental Eligible
Account Holder must list on the Stock Order Form all accounts in which he has
an ownership interest as of September 30, 1997. Failure to list all such
qualifying deposit accounts may result in the inability of the Holding Company
or First Federal to fill all or part of a subscription order. Neither the
Holding Company, First Federal nor any of their agents shall be responsible
for orders on which all qualifying deposit accounts have not been fully and
accurately disclosed.
The "qualifying deposits" of a Supplemental Eligible Account Holder is
the amount of the deposit balances (provided such aggregate balance is not
less than $50.00) in his or her deposit accounts, including money market
accounts, as of the close of business on September 30, 1997.
Category IV: Other Members. The Other Members of First Federal will
receive, without payment therefor, nontransferable subscription rights to
subscribe for up to 25,000 shares of the Common Stock; provided, however, that
no Other Member may purchase alone or with his or her Associates (as defined
in the Plan, and including relatives living in the same household) and persons
acting in concert, more than 25,000 shares of Common Stock. Such subscription
rights will be applicable only to such shares as remain available after the
subscriptions of Eligible Account Holders, the ESOP, and Supplemental Eligible
Account Holders have been satisfied.
If sufficient shares are not available in this Category IV, shares will
be allocated pro rata among subscribing Other Members in the same proportion
that the number of shares subscribed for by each Other Member bears to the
total number of shares subscribed for by all Other Members.
Timing of Offering and Method of Payment. The Subscription Offering will
expire at 12:00 noon, South Carolina time, on December __, 1997 (the
"Expiration Date"). The Expiration Date may be extended by First Federal and
the Holding Company for successive 90-day periods, subject to OTS approval, to
November __, 1999.
Subscribers must, before the Expiration Date, or such date to which the
Expiration Date may be extended, return Order Forms to us, properly completed,
together with checks or money orders in an amount equal to the Purchase Price
($10.00 per share) multiplied by the number of shares for which subscription
is made. Payment for stock purchases can also be accomplished through
authorization on the order form of withdrawals from accounts with us
(including a certificate of deposit). We have the right to reject any orders
transmitted by facsimile and any payments made by wire transfer.
Until completion or termination of the Conversion, subscribers who elect
to make payment through authorization of withdrawal from accounts with us will
not be permitted to reduce the deposit balance in any such accounts below the
amount required to purchase the shares for which they subscribed. In such
cases interest will continue to be credited on deposits authorized for
withdrawal until the completion of the Conversion. Interest at the passbook
rate, which is currently _____ per annum, will be paid on amounts submitted by
check. Authorized withdrawals from certificate accounts for the purchase of
Common Stock will be permitted without the imposition of early withdrawal
penalties or loss of interest. However, withdrawals from certificate accounts
that reduce the balance of such accounts below the required minimum for
specific interest rate qualification will cause the cancellation of the
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certificate accounts at the effective date of the Conversion, and the
remaining balance will earn interest at the passbook savings rate or will be
returned to the depositor. Stock subscriptions received and accepted by us are
final. Subscriptions may be withdrawn only in the event that the Conversion is
not completed by January __, 1998.
Members in Non-Qualified States or Foreign Countries. We 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, no person will be offered or sold or receive any stock
pursuant to the Subscription Offering if such person resides in a foreign
country or resides in a state in the United States with respect to which all
of the following apply: (i) a small number of persons otherwise eligible to
subscribe for shares of Common Stock reside in such state; (ii) the granting
of subscription rights or the offer or sale of Common Stock to such persons
would require us or the Holding Company or our respective officers and
directors, under the securities laws of such state, to register as a broker,
dealer, salesman or selling agent, or to register or otherwise qualify the
Common Stock for sale in such state; and (iii) such registration,
qualification or filing in our judgment or in the judgment of the Holding
Company would be impracticable or unduly burdensome for reasons of cost or
otherwise.
To assist in the Subscription Offering and the Community Offering, if
any, the Holding Company has established a Stock Information Center that you
may contact at (803) _________ . Callers to the Stock Information Center will
be able to request a Prospectus and other information relating to the
offering.
Community Offering
To the extent shares remain available for purchase after filling all
orders received in the Subscription Offering, we may offer shares of the
Common Stock in a Community Offering to the general public, with preference
given to residents of Chesterfield County. The right of any person to purchase
shares in the Community Offering is subject to our right to accept or reject
such purchase in whole or in part. We may terminate the Community Offering as
soon as we have received orders for at least the minimum number of shares
available for purchase in the Conversion.
Persons wishing to purchase stock in the Community Offering, if
conducted, should return the Order Form to us, properly completed, together
with a check or money order in the amount equal to the Purchase Price ($10.00
per share) multiplied by the number of shares which that person desires to
purchase. Order Forms will be accepted until the completion of the Community
Offering. However, we may terminate the Community Offering as soon as we
receive orders for at least the minimum number of shares available for
purchase in the Conversion.
The maximum number of shares of Common Stock which may be purchased in
the Community Offering by any person (including such person's Associates) or
persons acting in concert is 25,000 in the aggregate. A member who, together
with his Associates and persons acting in concert, has subscribed for shares
in the Subscription Offering may subscribe for a number of additional shares
in the Community Offering that does not exceed the lesser of (i) 25,000 shares
or (ii) the number of shares which, when added to the number of shares
subscribed for by the member (and his Associates and persons acting in
concert) in the Subscription Offering, would not exceed 25,000. We reserve the
right to reject any orders received in the Community Offering in whole or in
part.
If all the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the
Community Offering. In the event of an oversubscription, purchase orders
received during the Community Offering will be filled up to a maximum of 1,000
shares of Common Stock issued in the Conversion, with any remaining unfilled
purchase orders to be allocated on a pro rata basis based on the amount of
their respective subscriptions. If the Community Offering extends beyond 45
days following the expiration of the Subscription Offering, subscribers will
have the right to increase, decrease or rescind subscriptions for stock
previously submitted. All sales of Common Stock in the Community Offering will
be at the same price per share as the sales of Common Stock in the
Subscription Offering.
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Cash and checks received in the Community Offering will be placed in an
interest bearing account with us, and will earn interest at the passbook rate,
which is currently _____% per annum, from the date of deposit until completion
or termination of the Conversion. In the event that the Conversion is not
consummated for any reason, all funds submitted pursuant to the Community
Offering will be promptly refunded with interest as described above.
Delivery of Certificates
Certificates representing shares issued in the Subscription Offering and
in the Community Offering, if any, pursuant to Order Forms will be mailed to
the persons entitled to them at the last addresses of such persons appearing
on the books of First Federal or to such other addresses as may be specified
in properly completed Order Forms as soon as practicable following
consummation of the Conversion. The Holding Company will not accept orders
registered "in care of" or instructed to be mailed to a third party. Any
certificates returned as undeliverable will be held by the Holding Company
until claimed by the person legally entitled to them or otherwise disposed of
in accordance with applicable law. Purchasers may not be able to sell the
shares of Common Stock which they purchase until certificates for the Common
Stock are available and delivered to them, even though trading of the Common
Stock may have commenced. Shares sold prior to receipt of a stock certificate
are the responsibility of the purchaser.
Marketing Agent
To assist us and the Holding Company in marketing the Common Stock, we
have retained the services of Trident Securities, Inc. as our financial
advisor. Trident Securities, Inc. is a broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"). Trident Securities, Inc.
will assist us in the Conversion as follows: (1) in training and educating our
employees regarding the mechanics and regulatory requirements of the
conversion process; (2) in keeping records of all stock subscriptions; (3) in
obtaining proxies from our members with respect to the Special Meeting; and
(4) in assisting with the Community Offering. For providing these services, we
have agreed to pay Trident Securities, Inc. a management fee of $10,000 and a
commission in an amount equal to 2.0% of the aggregate dollar amount of shares
of Common Stock sold in the Conversion other than shares sold to executive
officers and directors and their Associates or to the ESOP. Trident
Securities, Inc. will also be reimbursed for out-of-pocket expenses, which are
not to exceed $10,000 without our consent (excluding certain reimbursable
expenses), and for legal fees, which are not to exceed $27,500 (excluding
reimbursable expenses), without our consent. Offers and sales in the Community
Offering will be on a best efforts basis and, as a result, Trident Securities,
Inc. is not obligated to purchase any shares of the Common Stock. Trident
Securities, Inc. intends to make a market in the Common Stock, although it is
under no obligation to do so.
We have also agreed to indemnify Trident Securities, Inc., under certain
circumstances, against liabilities and expenses (including legal fees) arising
out of Trident Securities, Inc.'s engagement by us, including liabilities
under the Securities Act of 1933 (the "1933 Act").
Selected Dealers
Trident Securities, Inc. may enter into an agreement with certain dealers
chosen by First Federal and Trident Securities, Inc. (together, the "Selected
Dealers") to assist in the sale of shares in the Community Offering. Selected
Dealers will receive commissions at an agreed upon rate for all shares sold by
such Selected Dealers. During the Community Offering, Selected Dealers may
only solicit indications of interest from their customers to place orders with
us as of a certain date (the "Order Date") for the purchase of shares of
Common Stock. When and if the Holding Company, First Federal and Trident
Securities, Inc. believe that enough indications of interest and orders have
been received in the Subscription Offering and the Community Offering, if any,
to consummate the Conversion, Trident Securities, Inc. will request, as of the
Order Date, Selected Dealers to submit orders to purchase shares for which
they have previously received indications of interest from the customers.
Selected Dealers will send confirmations of the orders to such customers on
the next business day after the Order Date. Selected Dealers will debit the
accounts
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of their customers on the date which will be three business days from the
Order Date (the "Settlement Date"). On the Settlement Date, funds received by
Selected Dealers will be remitted to us. It is anticipated that the Conversion
will be consummated on the Settlement Date. However, if consummation is
delayed after payment has been received by us from Selected Dealers, funds
will earn interest at the passbook rate, which is currently _____% per annum
until the completion of the offering. Funds will be returned promptly in the
event the Conversion is not consummated.
Limitations on Common Stock Purchases
The Plan includes a number of limitations on the number of shares of
Common Stock which may be purchased during the Conversion. These are
summarized below:
(1) No fewer than 25 shares may be purchased by any person purchasing shares
of Common Stock in the Conversion (provided that sufficient shares are
available).
(2) No person either individually or together with Associates or with other
persons acting in concert may purchase more than 25,000 shares of Common Stock
in the Offering except for the ESOP which may purchase up to 10% of the total
number of shares of Common Stock offered in the Conversion. Shares purchased
by a person's tax qualified or non-tax qualified benefit plan are not added to
a person's individual purchases for purposes of determining if the maximum
purchase limit has been reached. First Federal's and the Holding Company's
Boards of Directors may, however, 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 exceeding
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. If the Boards of
Directors decide to increase the purchase limitation, all persons who
subscribe for the maximum number of shares of Common Stock offered in the
Conversion will be, and certain other large subscribers in the sole discretion
of the Holding Company and First Federal 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 overall
purchase limitation may be reduced in the sole discretion of the Boards of
Directors of the Holding Company and First Federal.
(3) No more than 34.78% of the shares of Common Stock may be purchased in the
Conversion by directors and officers First Federal and the Holding Company and
their Associates. This restriction does not apply to shares purchased by the
ESOP or other tax qualified benefit plans which in the aggregate may purchase
up to 10% of the shares sold in the Conversion.
OTS regulations define "acting in concert" as (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.
We will presume that certain persons are acting in concert based upon various
facts, including the fact that persons have joint account relationships or the
fact that such persons have filed joint Schedules 13D with the SEC with
respect to other companies.
The term "Associate" of a person is defined to mean (i) any corporation
or organization (other than First Federal or its subsidiaries or the Holding
Company) of which such person is a director, officer, partner or 10%
shareholder; (ii) any trust or other estate in which such person has a
substantial beneficial interest or serves as trustee or in a similar fiduciary
capacity; provided, however that such term shall not include any employee
stock benefit plan of the Holding Company or First Federal in which such a
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity, and (iii) any relative or spouse of such person,
or relative of such spouse, who either has the same home as such person or who
is a director or officer of First Federal or its subsidiaries or the Holding
Company. Directors are not treated as Associates of one another solely because
of their board membership. Compliance with the foregoing limitations does not
necessarily constitute compliance with other regulatory restrictions
30
<PAGE>
on acquisitions of the Common Stock. For a further discussion of limitations
on purchases of the Common Stock during and subsequent to Conversion, see "--
Restrictions on Sale of Stock by Directors and Officers," "-- Restrictions on
Purchase of Stock by Directors and Officers Following Conversion," and
"Restrictions on Acquisition of the Holding Company."
Establishment of the Charitable Foundation
General. The Plan provides that we will establish the Charitable
Foundation, which will be incorporated under Delaware law as a non-stock
corporation, and the Holding Company will fund the Charitable Foundation with
its Common Stock, as further described below. We believe that the funding of
the Charitable Foundation with Common Stock is a means of establishing a
common bond between us and the community and thereby enables the community to
share in the potential growth and success of the Holding Company. By further
enhancing our visibility and reputation in our local community, we believe
that the Charitable Foundation will enhance the long-term value of our banking
franchise. The Charitable Foundation will be dedicated to charitable purposes
within our local community, including community development activities.
Purpose of the Charitable Foundation. The purpose of the Charitable
Foundation is to provide funding to support charitable causes and community
development activities. In recent years, we have emphasized community lending
and community development activities within our community. The Charitable
Foundation is being formed in order to complement our existing community
activities, not as a replacement for such activities. We intend to continue
to emphasize community lending and community development activities following
the Conversion. However, such activities are not our sole corporate purpose.
The Charitable Foundation, conversely, will be completely dedicated to
community activities and the promotion of charitable causes, and may be able
to support such activities in ways that are not presently available to us.
Since we have a satisfactory record of serving our community and we already
engage in community development activities, we believe that the Charitable
Foundation will enable us to assist our community in areas beyond community
development and lending. We believe the establishment of the Charitable
Foundation will enhance our current activities and is consistent with our
commitment to community service. The Board further believes that the funding
of the Charitable Foundation with Common Stock of the Holding Company is a
means of enabling our community to share in the potential growth and success
of the Holding Company long after completion of the Conversion. The
Charitable Foundation will accomplish that goal by providing for continued
ties between the Charitable Foundation and us, thereby forming a partnership
with our community. The establishment of the Charitable Foundation will also
enable us to develop a unified charitable donation strategy and will
centralize the responsibility for administration and allocation of corporate
charitable funds. Charitable foundations have been formed by other financial
institutions for this purpose, among others. We do not expect the
contribution to the Charitable Foundation to take the place of our traditional
community lending and charitable activities.
Structure of the Charitable Foundation. The Charitable Foundation will
be incorporated under Delaware law as a non-stock corporation. Pursuant to
the Charitable Foundation's Bylaws, the Charitable Foundation's Board of
Directors will be comprised of six members, all of whom are existing Directors
of the Holding Company. A Nominating Committee of the Board, which is to be
comprised of a minimum of three members of the board, will nominate
individuals eligible for election to the board of directors. The members of
the Charitable Foundation, who are comprised of its Board members, will elect
the Directors at the annual meeting of the Charitable Foundation from those
nominated by the Nominating Committee. Only persons serving as directors of
the Charitable Foundation qualify as members of the Charitable Foundation,
with voting authority. Directors will be divided into three classes with each
class appointed for three-year terms. The Certificate of Incorporation of the
Charitable Foundation provides that the corporation is organized exclusively
for charitable purposes, including community development, as set forth in
Section 501(c)(3) of the Code. The Charitable Foundation's Certificate of
Incorporation further provides that no part of the net earnings of the
Charitable Foundation will inure to the benefit of, or be distributable to its
directors, officers or members.
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<PAGE>
The authority for the affairs of the Charitable Foundation will be vested
in the Board of Directors of the Charitable Foundation. The Directors of the
Charitable Foundation will be responsible for establishing the policies of the
Charitable Foundation with respect to grants or donations by the Charitable
Foundation, consistent with the purposes for which the Charitable Foundation
was established. Although no formal policy governing Charitable Foundation
grants exists at this time, the Charitable Foundation's Board of Directors
will adopt such a policy upon establishment of the Charitable Foundation. As
directors of a non-profit corporation, directors of the Charitable Foundation
will at all times be bound by their fiduciary duty to advance the Charitable
Foundation's charitable goals, to protect the assets of the Charitable
Foundation and to act in a manner consistent with the charitable purpose for
which the Charitable Foundation is established. The Directors of the
Charitable Foundation will also be responsible for directing the activities of
the Charitable Foundation including the management of the Common Stock of the
Company held by the Charitable Foundation.
The Charitable Foundation's place of business will be located at our
office and initially the Charitable Foundation is expected to have no
employees but will utilize the members of the staff of the Holding Company or
us. The Board of Directors of the Charitable Foundation will appoint such
officers as may be necessary to mange the operations of the Charitable
Foundation. In this regard, we will comply with the affiliate restrictions
set forth in Sections 23A and 23B of the Federal Reserve Act with respect to
any transactions between us and the Charitable Foundation.
The Holding Company intends to capitalize the Charitable Foundation with
20,000 shares of Common Stock with a value equal to $200,000 (based upon an
initial offering price of $10.00 per share) of the Common Stock to be sold in
connection with the Conversion. We determined to fund the Charitable
Foundation with Common Stock rather than cash because we desire to form a bond
with our community in a manner that would allow the community to share in the
potential growth and success of the Holding Company and us over the long term.
The funding of the Charitable Foundation with stock also provides the
Charitable Foundation with a potentially larger endowment than if the Holding
Company contributed cash to the Charitable Foundation since, as a shareholder,
the Charitable Foundation will share in the potential growth and success of
the Holding Company. As such, the contribution of stock to the Charitable
Foundation has the potential to provide a self-sustaining funding mechanism
which reduces the amount of cash that the Holding Company, if it were not
making the stock donation, would have to contribute to the Charitable
Foundation in future years in order to maintain a level amount of charitable
grants and donations.
The Charitable Foundation will receive working capital from any dividends
that may be paid on the Holding Company's Common Stock in the future, and
subject to applicable federal and state laws, loans collateralized by the
Common Stock or from the proceeds of the sale of any of the Common Stock in
the open market from time to time as may be permitted to provide the
Charitable Foundation with additional liquidity. As a private foundation
under Section 501(c)(3) of the Code, the Charitable Foundation will be
required to distribute annually in grants or donations, a minimum of 5% of the
average fair market value of its net investment assets. One of the conditions
imposed on the gift of Common Stock by the Holding Company is that the amount
of Common Stock that may be sold by the Charitable Foundation in any one year
shall not exceed 5% of the average market value of the assets held by the
foundation, except where the Board of Directors of the Charitable Foundation
determines that the failure to sell an amount of Common Stock greater than
such amount would result in a long-term reduction of the value of the
Charitable Foundation's assets and as such would jeopardize the Charitable
Foundation's capacity to carry out its charitable purposes.
Tax Considerations. We have been advised that an organization created
for the above purposes would qualify as a Section 501(c)(3) exempt
organization under the Code, and would likely be classified as a private
foundation.
Under Delaware law, the Holding Company is authorized by statute to make
charitable contributions and case law has recognized the benefits of such
contributions to a Delaware corporation. In this regard, Delaware case law
provides that a charitable gift must be within reasonable limits as to amount
and purpose to be valid. Under the Code, the Holding Company may deduct up to
10% of its taxable income in any one year and any contributions made by
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<PAGE>
the Holding Company in excess of the deductible amount will be deductible over
each of the five succeeding taxable years. We believe that the Conversion
presents a unique opportunity to establish and fund a charitable foundation
given the substantial amount of capital being raised in the Conversion. In
making such a determination, we considered the dilutive impact of the
contribution of Common Stock to the Foundation on the amount of Common Stock
available to be offered for sale in the Conversion. Based on such
consideration, we believe that the contribution to the Charitable Foundation
in excess of 10% annual limitation is justified given First Federal's capital
position and its earnings, the substantial additional capital being raised in
the Conversion and the potential benefits of the Charitable Foundation to our
community. See "Regulatory Capital Compliance," "Capitalization." The amount
of the contribution will not adversely impact our financial condition and we
therefore believe that the amount of the charitable contribution is reasonable
given our pro forma capital position. As such, we believe that the
contribution does not raise safety and soundness concerns.
We have been advised that the Holding Company's contribution of its own
stock to the Charitable Foundation would not constitute an act of self-
dealing. The Holding Company will be entitled to a deduction in the amount of
the fair market value of the stock at the time of the contribution, subject to
a limitation based on 10% of the Holding Company's annual taxable income. The
Holding Company, however, would be able to carry forward any unused portion of
the deduction for five years following the contribution. If the Charitable
Foundation would have been established in fiscal 1997, the Holding Company
would have received a charitable contribution deduction of approximately
$90,000 (based on our pre-tax income for 1997). The Holding Company is
permitted under the Code to carry over the excess contribution over the five
year period following the contribution to the Charitable Foundation. The
Holding Company estimates that all of the deduction should be deductible over
the six-year period. Neither the Holding Company nor First Federal expect to
make any further contributions to the Charitable Foundation within the first
five years following the initial contribution. After that time, we may
consider future contributions to the Charitable Foundation. Any such
decisions would be based on an assessment of, among other factors, the
financial condition of the Holding Company and First Federal at that time, the
interests of shareholders and depositors of the Holding Company and First
Federal, and the financial condition and operations of the Charitable
Foundation.
There can be no assurances that the IRS will recognize the Charitable
Foundation as a Section 501(c)(3) exempt organization or that the deduction
will be permitted. In such event, the Holding Company's tax benefit related
to the contribution to the Charitable Foundation would be expensed without tax
benefit, resulting in a reduction in earnings in the year in which the IRS
makes such a determination. See "Risk Factors--Establishment of the
Charitable Foundation."
As a private foundation, earnings and gains, if any, from the sale of
Common Stock or other assets are exempt from federal and state corporate
taxation. However, investment income, such as interest, dividends and capital
gains, will be subject to a federal excise tax of ____%. The Charitable
Foundation will be required to make an annual filing with the IRS within four
and one-half months after the close of the Charitable Foundation's fiscal year
to maintain its tax-exempt status. The Charitable Foundation will be required
to publish a notice that the annual information return will be available for
public inspection for a period of 180 days after the date of such public
notice. The information return for a private foundation must include, among
other things, an itemized list of all grants made or approved, showing the
amount of each grant, the recipient, any relationship between a grant
recipient and the Charitable Foundation's managers and a concise statement of
the purpose of each grant.
Voting
Upon completion of the Conversion, the Charitable Foundation will own
1.2% of the total shares of the outstanding common stock assuming the sale of
1,650,000 shares. Such shares will be solely owned by the Charitable
Foundation. The Charitable Foundation's Board of Directors will exercise sole
voting control over such shares; however, the Board of Directors intend that
with respect to matters put to a stockholder vote they will vote shares held
by the Charitable Foundation in the same proportion of shares held by all
shareholders.
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Restrictions on Repurchase of Stock by the Holding Company
Repurchases of its shares by the Holding Company will be restricted for a
period of three years from the date of the Conversion. OTS regulations currently
prohibit that the Holding Company from repurchasing any of its shares within one
(1) year following the Conversion except in exceptional circumstances. So long
as we continue to meet certain capitalization requirements, the Holding Company
may repurchase shares in an open-market repurchase program (which cannot exceed
5% of its outstanding shares in a twelve-month period except in exceptional
circumstances) during the second and third year following the Conversion by
giving appropriate prior notice to the OTS. The OTS has authority to waive these
restrictions under certain circumstances. Unless repurchases are permitted under
the foregoing regulations, the Holding Company may not, for a period of three
years from the date of the Conversion, repurchase any of its capital stock from
any person, except in the event of an offer to purchase by the Holding Company
on a pro rata basis from all of its shareholders which is approved in advance by
the OTS, except in exceptional circumstances established to the satisfaction of
the OTS, or except for purchases of shares required to fund the RRP. The Holding
Company may use some of the net proceeds received from the sale of the Common
Stock offered by this Prospectus to repurchase such Common Stock, subject to OTS
requirements.
Restrictions on Sale of Stock by Directors and Officers
All shares of the Common Stock purchased by directors and offices of First
Federal or the Holding Company in the Conversion will be subject to the
restriction that such shares may not be sold or otherwise disposed of for value
for a period of one year following the date of purchase, except for any
disposition of such shares (i) following the death of the original purchaser or
(ii) by reason of an exchange of securities in connection with a merger or
acquisition approved by the applicable regulatory authorities. Sales of shares
of the Common Stock by the Holding Company's directors and officers will also be
subject to certain insider trading and other transfer restrictions under the
federal securities laws. See "Regulation -- Federal Securities Laws" and
"Description of Capital Stock."
Each certificate for such restricted shares will bear a legend prominently
stamped on its face giving notice of the restrictions on transfer, and
instructions will be issued to the Holding Company's transfer agent to the
effect that any transfer within such time period of any certificate or record
ownership of such shares other than as provided above is a violation of the
restriction. Any shares of Common Stock issued pursuant to a stock dividend,
stock split or otherwise with respect to restricted shares will be subject to
the same restrictions on sale.
Restrictions on Purchase of Stock by Directors and Officers in the Conversion
OTS regulations provide that for a period of three years following the
Conversion, without prior written approval of the OTS, neither directors nor
officers of First Federal or the Holding Company nor their Associates may
purchase shares of the Common Stock of the Holding Company, except from a dealer
registered with the SEC. This restriction does not, however, apply to negotiated
transactions involving more than one percent of the Holding Company's
outstanding Common Stock, to shares purchased pursuant to stock option or other
incentive stock plans approved by the Holding Company's shareholders, or to
shares purchased by employee benefit plans maintained by the Holding Company
which may be attributable to individual officers or directors.
Restrictions on Transfer of Subscription Rights and Common Stock
Prior to the completion of the Conversion, OTS regulations and the Plan of
Conversion prohibit any person with subscription rights, including our Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members, from
transferring or entering into any agreement or understanding to transfer the
legal or beneficial ownership of the subscription rights issued under the Plan
or the shares of Common Stock to be issued upon their exercise. Such rights may
be exercised only by the person to whom they are granted and only for his or her
account. Each person exercising such subscription rights will be required to
certify that he or she is purchasing shares solely for his or her own account
and that he or she has no agreement or understanding regarding the sale or
transfer of such
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<PAGE>
shares. The regulations also prohibit any person from offering or making an
announcement of an offer or intent to make an offer to purchase such
subscription rights or shares of Common Stock prior to the completion of the
Conversion. We intend to pursue any and all legal and equitable remedies in the
event we become aware of the transfer of subscription rights and will not honor
orders known by us to involve the transfer of such rights. In addition, persons
who violate the purchase limitations may be subject to sanctions and penalties
imposed by the OTS.
Stock Pricing
The aggregate purchase price of the Holding Company Common Stock being sold
in the Conversion will be based on the appraised aggregate pro forma market
value of the Common Stock, as determined by an independent valuation. We
retained Ferguson, which is experienced in the valuation and appraisal of
financial institutions, including savings associations involved in the
conversion process, to prepare an appraisal. Ferguson will receive a fee of
$30,000 for its appraisal and business plan services, including out-of-pocket
expenses. We have agreed to indemnify Ferguson, under certain circumstances,
against liabilities and expenses (including legal fees) arising out of
Ferguson's engagement by us.
Ferguson has prepared an appraisal that establishes the Estimated Valuation
Range of the pro forma market value of the Common Stock as of September 2, 1997
from a minimum of $14,025,000 to a maximum of $18,975,000, with a midpoint of
$16,500,000. A copy of the appraisal is on file and available for inspection at
the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and the
Southeast Regional Office of the OTS, 1475 Peachtree Street, N.E., Atlanta,
Georgia 30309. The appraisal has also been filed as an exhibit to the Holding
Company's Registration Statement with the SEC, and may be reviewed at the SEC's
public reference facilities. See "Additional Information." The appraisal
involved a comparative evaluation of our operating and financial statistics with
those of other financial institutions. The appraisal also took into account such
other factors as the market for savings associations generally, prevailing
economic conditions, both nationally and in South Carolina, which affect the
operations of savings associations, the competitive environment within which we
operate, and the effect of our becoming a subsidiary of the Holding Company. No
detailed individual analysis of the separate components of First Federal's and
the Holding Company's assets and liabilities was performed in connection with
the evaluation. The Board of Directors reviewed with management Ferguson's
methods and assumptions and accepted Ferguson's appraisal as reasonable and
adequate. The Holding Company, in consultation with Trident Securities, Inc.,
has determined to offer the Common Stock in the Conversion at a price of $10.00
per share. The Holding Company's decision regarding the Purchase Price was based
solely on its determination that $10.00 per share is a customary purchase price
in conversion transactions. The Estimated Valuation Range may be increased or
decreased to reflect market and financial conditions prior to the completion of
the Conversion.
Promptly after the completion of the Subscription Offering and the
Community Offering, if any, Ferguson will confirm to us that, to the best of
Ferguson's knowledge and judgment, nothing of a material nature has occurred
which would cause Ferguson to conclude that the amount of the aggregate proceeds
received from the sale of the Common Stock in the Conversion was incompatible
with its estimate of our total pro forma market value at the time of the sale.
If, however, the facts do not justify such a statement, a new Estimated
Valuation Range and price per share may be set. Under such circumstances, the
Holding Company will be required to resolicit subscriptions. In that event,
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;
provided that if our pro forma market value upon Conversion has increased to an
amount which does not exceed $21,821,250 (15% above the maximum of the Estimated
Valuation Range), the Holding Company and First Federal do not intend to
resolicit subscriptions unless it is determined after consultation with the OTS
that a resolicitation is required.
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. A change in
the number of shares to be issued in the Conversion will not
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<PAGE>
affect subscription rights, which are based on the 1,897,500 shares being
offered in the Subscription Offering. In the event of an increase in the maximum
number of shares being offered, persons who exercise their maximum subscription
rights will be notified of such increase and of their right to purchase
additional shares. Conversely, in the event of a decrease in the maximum number
of shares being offered, persons who exercise their maximum subscription rights
will be notified of such decrease and of the concomitant reduction in the number
of shares for which subscriptions may be made. In the event of a resolicitation,
subscribers will be afforded the opportunity to increase, decrease or maintain
their previously submitted order. The Holding Company will be required to
resolicit if the price per share is changed such that the total aggregate
purchase price is not within the minimum and 15% above the maximum of the
Estimated Valuation Range.
THE INDEPENDENT VALUATION IS NOT INTENDED AND MUST NOT BE CONSTRUED AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE THE
CONVERSION OR OF PURCHASING THE SHARES OF THE COMMON STOCK. MOREOVER, BECAUSE
SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER
OF MATTERS (INCLUDING CERTAIN ASSUMPTIONS AS TO THE AMOUNT OF NET PROCEEDS AND
THE EARNINGS THEREON), ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO
ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING SHARES IN THE CONVERSION WILL
THEREAFTER BE ABLE TO SELL THE SHARES AT PRICES RELATED TO THE FOREGOING
VALUATION OF THE PRO FORMA MARKET VALUE.
Number of Shares to be Issued
It is anticipated that the total offering of Common Stock (the number of
shares of Common Stock issued in the Conversion multiplied by the Purchase Price
of $10.00 per share) will be within the current minimum and 15% above the
maximum of the Estimated Valuation Range. Unless otherwise required by the OTS,
no resolicitation of subscribers will be made and subscribers will not be
permitted to modify or cancel their subscriptions so long as the change in the
number of shares to be issued in the Conversion, in combination with the
Purchase Price, results in an offering of at least the minimum and no more than
15% above the maximum of the Estimated Valuation Range.
Any increase in the total number of shares of Common Stock to be issued in
the Conversion would decrease both a subscriber's ownership interest and the
Holding Company's pro forma net worth and net income on a per share basis while
increasing (assuming no change in the per share price) pro forma net income and
net worth on an aggregate basis. A decrease in the number of shares to be issued
in the Conversion would increase both a subscriber's ownership interest and the
Holding Company's pro forma net worth and net income on a per share basis while
decreasing (assuming no change in the per share price) pro forma net income and
net worth on an aggregate basis. For a presentation of the effects of such
changes, see "Pro Forma Data."
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by First
Federal and the Holding Company will be final. The Plan provides that, if deemed
necessary or desirable by the Boards of Directors of the Holding Company and
First Federal, the Plan may be substantively amended by the Boards of Directors,
as a result of comments from regulatory authorities or otherwise, with the
concurrence of the OTS. Moreover, if the Plan of Conversion is so amended,
subscriptions which have been received prior to such amendment will not be
refunded unless otherwise required by the OTS.
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Conditions Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total number of votes of
members eligible to be cast at the Special Meeting and the sale of all shares of
the Common Stock within 24 months following approval of the Plan by the members.
If these conditions are not satisfied, the Plan will be terminated and we will
continue business in the mutual form of organization. The Plan may be terminated
by the Boards of Directors of First Federal and the Holding Company at any time
prior to the Special Meeting and, with the approval of the OTS, by such Boards
of Directors at any time thereafter. Furthermore, OTS regulations and the Plan
of Conversion require that the Holding Company complete the sale of Common Stock
within 45 days after the close of the Subscription Offering. The OTS may grant
an extension of this time period if necessary, but no assurance can be given
that an extension would be granted. See "-- Offering of Common Stock."
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FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
STATEMENTS OF OPERATIONS
The following Statements of Operations of First Federal for the fiscal
years ended June 30, 1997 and 1996 have been audited by Dixon, Odom & Co.,
independent certified public accountants, whose report on the financial
statements appears elsewhere in this Prospectus. These Statements of Operations
should be read in conjunction with the Financial Statements of First Federal and
the Notes thereto included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
June 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest Income
Loans................................................ $4,260,688 $4,174,191
Investments.......................................... 150,766 159,262
Deposits in other banks and federal funds sold....... 146,431 187,635
---------- ----------
Total Interest Income............................... 4,557,885 4,521,088
---------- ----------
Interest Expense
Savings deposits..................................... 2,480,441 2,607,329
Borrowed funds....................................... 114,369 60,503
---------- ----------
Total Interest Expense.............................. 2,594,810 2,667,832
---------- ----------
Net Interest Income............................... 1,963,075 1,853,256
Provision For Loan Losses............................. 143,000 17,967
---------- ----------
Net interest income after provision for loan losses.. 1,820,075 1,835,289
---------- ----------
Other Income.......................................... 23,361 41,418
---------- ----------
Other Expenses
Personnel costs...................................... 366,672 340,918
Occupancy............................................ 46,412 53,034
Deposit insurance premiums........................... 63,868 110,107
SAIF special assessment.............................. 311,693 --
Other................................................ 127,076 149,783
---------- ----------
Total other expenses................................ 915,721 653,842
---------- ----------
Income before income taxes.......................... 927,715 1,222,865
Income Taxes.......................................... 342,000 428,645
---------- ----------
Net Income.......................................... $ 585,715 $ 794,220
========== ==========
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Great Pee Dee Bancorp, Inc. was recently formed as a Delaware corporation
on September ___, 1997, for the purpose of issuing the Common Stock and owning
all of the capital stock of First Federal issued in the Conversion. As a newly
formed corporation, the Holding Company has no operating history. All
information in this section should be read in conjunction with the consolidated
financial statements and notes thereto included within this document.
Our principal business has historically consisted of attracting deposits
from the general public and making loans secured by residential real estate. The
primary goals of management are to increase First Federal's profitability,
monitor its capital position and enhance its banking franchise. Our results of
operations are dependent upon net interest income, which is the difference
between income earned on interest earning assets, such as loans and investments,
and the cost of its interest bearing liabilities consisting of deposits and
advances from the FHLB. First Federal's operations are affected to a much lesser
degree by non-interest income, such as transaction and other service fee income,
and other sources of income. First Federal's net income is also affected by,
amount other things, provisions for loan losses and operating expenses. First
Federal's principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, office occupancy costs, data processing
expenses and federal deposit insurance premiums. First Federal's results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in market interest rates, government
legislation and policies concerning monetary and fiscal affairs, housing and
financial institutions and the attendant actions of regulatory authorities.
Operating Strategy
In guiding our operations, management has implemented various strategies
designed to continue the institution's profitability while maintaining its
safety and soundness. These strategies include: (i) emphasizing one-to four-
family residential lending; (ii) maintaining asset quality; (iii) controlling
operating expenses; and (iv) monitoring interest-rate risk. It is anticipated,
subject to market conditions, that the strategies presently in place will be
continued following completion of the Conversion.
Emphasis of One-to Four-Family Residential Lending. Historically, First
Federal has been predominantly a one-to four-family residential lender. As of
June 30, 1997, approximately 89.78% of its total loan portfolio was composed of
permanent one-to four-family residential loans. As of such date, 5.64% of its
total loan portfolio was composed of construction loans, 2.66% was composed of
home improvement loans and 4.64% was composed of commercial real estate loans.
As a result, we believe we have developed expertise in mortgage loan
underwriting and origination. We have established methods to expand its loan
originations through contacts with realtors, homebuilders and past and present
customers. The institution also uses advertising and community involvement to
gain exposure within the communities it operates. As of June 30, 1997
approximately $20.7 million, or 44.17%, of our total loans secured by one- to
four-family properties was composed of adjustable rate loans.
Maintenance of Asset Quality. At June 30, 1997, our ratio of nonperforming
assets to total assets was .18%. For the years ended June 30, 1997 and 1996,
annual net loan charge-offs have averaged .03% of average loans outstanding. We
have attempted to maintain asset quality through its underwriting and collection
procedures.
Monitoring of Interest-Rate Risk. Although we have a significant "negative
gap" and its net interest income would likely be negatively impacted by
increases in interest rates, management considers its interest rate exposure to
be at an acceptable level, given our historical operating results and capital
position. See "--Interest Rate Risk."
39
<PAGE>
Control of General and Administrative Expenses. First Federal closely
monitors its general and administrative expenses and seeks to control them while
maintaining the necessary personnel to properly serve its customers. For the
years ended June 30, 1997 and 1996, First Federal's ratio of general and
administrative expenses, (exclusive of the SAIF special assessment), as a
percentage of average assets, has been 1.01% and 1.09%, respectively.
Following the Conversion, we intend to increase the variety of our deposit
and loans products. In particular, we intend to introduce transaction accounts,
and to offer home equity lines of credit.
Interest Rate Risk
Our asset/liability management, or interest rate risk management, program
is focused primarily on evaluating and managing the composition of its assets
and liabilities in view of various interest rate scenarios. Factors beyond our
control, such as market interest rates and competition, also have an impact on
our interest income and interest expense.
In the absence of other factors, the yield or return associated with our
earning assets generally will increase from existing levels when interest rates
rise over an extended period of time, and conversely interest income will
decrease when interest rates decrease. In general, interest expense will
increase when interest rates rise over an extended period of time, and
conversely interest expense will decrease when interest rates decrease.
Interest Rate Gap Analysis. As a part of our interest rate risk management
policy, we calculates an interest rate "gap." Interest rate "gap" analysis is a
common, though imperfect, measure of interest rate risk, which measures the
relative dollar amounts of interest-earning assets and interest-bearing
liabilities which reprice within a specific time period, either through maturity
or rate adjustment. The "gap" is the difference between the amounts of such
assets and liabilities that are subject to repricing. We have a negative gap. A
"negative" gap for a given period means that the amount of interest-bearing
liabilities maturing or otherwise repricing within that period exceeds the
amount of interest-earning assets maturing or otherwise repricing within the
same period. Accordingly, in a declining interest rate environment, an
institution with a negative gap would generally be expected, absent the effects
of other factors, to experience a lower decrease in the yield of its assets
relative to the cost of its liabilities and its income should be positively
affected. Conversely, the cost of funds for an institution with a negative gap
would generally be expected to increase more quickly than the yield on its
assets in a rigid interest rate environment, and such institution's net interest
income generally would be expected to be adversely affected by rising interest
rates. Changes in interest rates generally have the opposite effect on an
institution with a "positive gap."
Our one-year interest sensitivity gap as a percentage of total interest-
earning assets at June 30, 1997 was a negative 25.24%. At June 30, 1997, First
Federal's three-year and five-year cumulative interest sensitivity gaps as a
percentage of total interest-earning assets were a negative 32.66% and a
negative 31.45%, respectively. Our negative gap position is attributable to the
high percentage of loans in our portfolio with fixed rates of interest which
have terms of 15 years. In addition, the interest rate on our ARM loans are
indexed to the Cost of Funds Index, an index that reacts to changes in market
interest rates more slowly than other indices. As a consequence, our ARM loans
may not fully reflect current market interest rates at the time they reprice.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1997 which are projected to
reprice or mature in each of the future time periods chosen. Except as stated
below, the amounts of assets and liabilities shown which reprice or mature
within a particular period were determined in accordance with the contractual
terms of the assets or liabilities. Loans with adjustable rates are shown as
being due at the end of the next upcoming adjustment period. Passbook accounts
and money market deposit accounts are assumed to be subject to immediate
repricing and depositor availability and have been placed in the shortest
period. In making the gap computations, none of the assumptions sometimes made
regarding prepayment rates and deposit decay rates have been used for any other
interest-earning assets or interest-bearing liabilities. In addition, the table
40
<PAGE>
does not reflect scheduled principal payments which will be received throughout
the lives of the loans. The interest rate sensitivity of First Federal's assets
and liabilities illustrated in the following table would vary substantially if
different assumptions were used or if actual experience differs from that
indicated by such assumptions.
<TABLE>
<CAPTION>
Terms to Repricing at June 30, 1997
-----------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
------- --------- ---------- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning Assets:
Loans receivable:
Adjustable.............................. $ 21,638 $ -- $ -- $ -- $ 21,638
Fixed................................... 1,174 415 1,392 29,339 32,320
Other loans............................... 319 -- -- -- 319
Interest-earning balances in other banks.. 2,720 -- -- -- 2,720
Federal Funds Sold........................ 800 -- -- -- 800
Investments............................... -- 600 1,100 66 1,766
FHLB common stock......................... -- -- -- 484 484
-------- -------- -------- ------- --------
Total interest-earning assets.......... $ 26,651 $ 1,015 $ 2,492 $29,889 $ 60,047
======== ======== ======== ======= ========
Interest-bearing Liabilities:
Savings Deposits:
Regular passbook........................ $ 2,549 $ -- $ -- $ -- $ 2,649
Money market passbook................... 6,436 -- -- -- 6,436
Certificate accounts.................... 30,473 5,472 1,762 171 37,878
Advances from the Federal Home Loan Bank.. 2,350 -- -- 50 2,400
-------- -------- -------- ------- --------
Total interest-bearing liabilities..... $ 41,808 $ 5,472 $ 1,762 $ 221 $ 49,263
======== ======== ======== ======= ========
Interest Sensitivity Gap Per Period....... $(15,157) $ (4,457) $ 730 $29,668 $ 10,784
Cumulative Interest Sensitivity Gap....... $(15,157) $(19,614) $(18,884) $10,784
Cumulative Gap as a Percentage of Total
Interest-Earning Assets.................. (25.24)% (32.66)% (31.45)% 17.96%
Cumulative Interest-Earning Assets as a
Percentage of Total Interest-Bearing
Liabilities.............................. 63.75% 58.52% 61.49% 121.89%
</TABLE>
Net Portfolio Value. In addition to the interest rate gap analysis as
discussed above, management monitors First Federal's interest rate sensitivity
through the use of a model which estimates the change in net portfolio value
("NPV") in response to a range of assumed changes in market interest rates. NPV
is the present value of expected cash flows from assets, liabilities, and off-
balance sheet items. The model estimates the effect on First Federal's NPV of
instantaneous and permanent 100 to 400 basis point increases and decreases in
market interest rates.
41
<PAGE>
The following table presents information regarding possible changes in
First Federal's NPV as of June 30, 1997, based on information provided by the
OTS' interest rate risk model.
<TABLE>
<CAPTION>
Changes in Net Portfolio Value
Interest Rates ----------------------------------
In Basis Points
(Rate Shock) Amount $ Change % Change
- --------------- -------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Up 400 $ 6,470 $(5,481) (46)%
Up 300 7,897 (4,053) (34)
Up 200 9,335 (2,616) (22)
Up 100 10,722 (1,229) (10)
Static 11,951 -- --
Down 100 12,829 878 7
Down 200 13,340 1,389 12
Down 300 13,729 1,778 15
Down 400 14,328 2,378 20
</TABLE>
Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions including relative levels of market interest
rates, loan prepayments and deposit decay, and should not be relied upon as
indicative of actual results. Further, the computations do not reflect any
actions management may undertake in response to changes in interest rates.
The tables set forth above indicate that, in the event of a 200 basis point
decrease in interest rates, First Federal would be expected to experience a 12%
increase in NPV. In the event of a 200 basis point increase in interest rates,
First Federal would be expected to experience a 22% decrease in NPV.
Certain shortcomings are inherent in the method of analysis presented in
the NPV computations and in the gap computations presented in the tables above.
Although certain assets and liabilities may have similar maturities or periods
within which they will reprice, they may react differently to changes in market
interest rates. The interest rates on certain types of assets and liabilities my
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, adjustable-
rate mortgages have interest rate caps which restrict changes in interest rates
on a short-term basis and over the life of the assets. The proportion of
adjustable-rate loans could be reduced in future periods if market interest
rates should decline and remain at lower levels for a sustained period due to
increased refinancing activity. Further, in the event of a change in interest
rates, prepayment and early withdrawal levels would likely deviate significantly
from those assumed in the tables. Finally, the ability of many borrowers to
service their adjustable-rate debt may decrease in the event of a sustained
interest rate increase.
First Federal's net income during recent periods has been positively
impacted by decreasing interest rates, and its net income in the near future is
likely to be reduced if interest rates increase. However, management did not
view First Federal's interest rate sensitivity position at June 30, 1997 to be
unacceptable in view of first Federal's historical results of operation and
highly capitalized position. Nevertheless, in order to maintain its interest
rate risk position within levels management believes to be acceptable, First
Federal has begun: (i) attempting to originate adjustable rate loans when market
condition permit; (ii) maintaining a short-term investment portfolio; and (iii)
attempting to lengthen deposit maturities.
42
<PAGE>
Average Balance Sheet
The following tables sets forth information relating to average balances
of First Federal's assets and liabilities for the years ended June 30, 1997
and 1996. For the periods indicated, the table reflects the average yield on
interest-earning assets and the average cost of interest-bearing liabilities
(derived by dividing income or expense by the monthly average balance of
interest-earning assets or interest-bearing liabilities, respectively) as well
as the net yield on interest-earning assets (which reflects the impact of the
net earning balance). Nonaccruing loans were included in the computation of
average balances.
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------------------------------------
At June 30, 1997 1997 1996
---------------------- ------------------------------- ------------------------------
Average Average Average Average Average
Balance Yield/Rate Balance Interest Yield/Rate Balance Interest Yield/Rate
------- ---------- ------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest bearing cash balances. $ 3,520 6.15% $ 2,537 $ 146 5.76% $ 2,929 $ 188 6.42%
Investment securities.......... 2,251 6.68 2,367 151 6.38 2,767 159 5.75
Loans.......................... 53,974 7.94 54,199 4,261 7.86 53,454 4,174 7.81
------- ------ ------- ------ ------ ------- -------- ----------
Total interest-earning assets. 59,745 7.79 59,103 4,558 7.71 59,150 4,521 7.64
------- ------ ------- ------ ------ ------- -------- ----------
Other assets.................... 793 780 748
------- ------- -------
Total assets.................. $60,538 $59,883 $59,899
======= ======= =======
Interest bearing liabilities:
Deposits....................... $46,863 5.35 $46,568 2,481 5.33 $48,329 2,607 5.39
Borrowings..................... 2,400 5.81 1,985 114 5.74 1,050 61 5.81
------- ------ ------- ------ ------ ------- -------- ----------
Total interest-bearing
liabilities.................. 49,263 5.37 48,533 2,595 5.34 49,379 2,668 5.40
------- ------ ------- ------ ------ ------- -------- ----------
Other liabilities............... 185 618 341
Retained earnings............... 11,090 10,712 10,179
------- ------- -------
Total liabilities and retained
earnings.................... $60,538 $59,883 $59,899
======= ======= =======
Net interest income and interest
rate spread.................... 2.42% $1,963 2.37% $1,853 2.24%
====== ====== ====== ======== ==========
Net yield on average
interest-earning assets........ 3.32% 3.13%
====== ==========
Ratio of interest-earning assets
to interest-bearing liabilities 121.28% 121.78% 119.79%
====== ====== ==========
</TABLE>
Rate/Volume Analysis
The following table analyzes the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets
and interest-bearing liabilities. The table distinguishes between (i) changes
attributable to volume (changes in volume multiplied by the prior period's
rate), (ii) changes attributable to rate (changes in rate multiplied by the
prior period's volume), and (iii) net change (the sum of the precious
columns). The change attributable to both rate and volume (changes in rate
multiplied by changes in volume) has been allocated equally to both the
changes attributable to volume and the changes attributable to rate.
43
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30, 1997 vs. 1996
----------------------------------------
Increase (decrease) due to
----------------------------------------
Volume Rate Total
---------- --------- ----------
<S> <C> <C> <C>
(In Thousands)
Interest Income:
Interest-bearing cash
balances................. $ (24) (18) $ (42)
Investments............... (24) 16 (8)
Loans..................... 58 29 87
------ ------ -------
Total interest income 10 27 37
------ ------ -------
Interest expense:
Deposits.................. (94) (32) (126)
Borrowings................ 54 (1) 53
------ ------ -------
Total interest expense (40) (33) (73)
------ ------ -------
Net interest income........ $ 50 $ 60 $ 110
====== ====== =======
</TABLE>
Comparison of Financial Condition at June 30, 1997 and 1996
At June 30, 1997, First Federal's assets totaled $60.5 million as
compared to $59.7 million at June 30, 1996, an increase of 1.4%. Interest
bearing balances in other banks, federal funds sold and net loans receivable
increased by $428,000, $300,000 and $639,000; respectively, while total
deposits decreased by $1.1 million. These activities were funded by the
maturity of $430,000 in investment securities, an increase of $1.4 million in
advances from the FHLB of Atlanta, and net income of $586,000. Total retained
earnings increased from $10.5 million at June 30, 1996 to $11.1 million at
June 30, 1997. At June 30, 1997, First Federal continued to substantially
exceed all applicable regulatory capital requirements.
Comparison of Results of Operations for the Years Ended June 30, 1997 and
1996
Net Income. First Federal earned net income of $586,000 during the year
ended June 30, 1997 as compared with net income of $794,000 during the prior
year, a decrease of $208,000. The decrease resulted principally from a
special insurance assessment imposed on all SAIF-insured institutions by the
FDIC to recapitalize the SAIF fund. First Federal's assessment was $312,000.
Net of an income tax benefit of $115,000, this special assessment decreased
earnings during the year by $197,000. In addition, during the year ended June
30, 1997, the provision for loan losses was $125,000 higher than during the
preceding year.
Net Interest Income. Net interest income increased to $2.0 million
during the year ended June 30, 1997 as compared with $1.9 million during the
previous year. This increase resulted principally from a combination of a
slight increase of .07% in the weighted average yield on average interest-
earning assets and a slight reduction in the rate of interest paid on customer
deposits, which declined from a weighted average rate of 5.39% during the year
ended June 30, 1996 to a weighted average rate of 5.33% during the year ended
June 30, 1997. Average interest earning assets decreased $47,000 during
fiscal 1997. Average interest-bearing liabilities decreased $846,000 during
fiscal 1997. The decrease in interest bearing liabilities resulted from a
decrease in jumbo certificates of deposit accounts which matured during the
year.
Provision for Loan Losses. The provision for loan losses was $143,000
and $18,000 for the years ended June 30, 1997 and 1996, respectively. The
higher provision during the current year resulted from management's decision
to broaden its loan composition by originating more commercial real estate
loans and in recognition of the cyclical nature of the local economy.
Management believes that the loan loss allowance at June 30, 1997 was adequate
44
<PAGE>
to absorb losses on existing loans at that date. There were $8,000 in loan
charge-offs during the year ended June 30, 1996. Nonaccrual loans aggregated
$97,000 at June 30, 1997.
Other Income. Other income consisting of late fees, mortgage insurance
premiums and gains and losses on foreclosed real estate decreased from $41,000
during the year ended June 30, 1996 to $23,000 during the current year. The
decrease resulted from sales of foreclosed real estate which generated a gain
of $11,000 in fiscal 1996 and a loss of $9,000 in fiscal 1997.
Other Expenses. Exclusive of the costs incurred for deposit insurance,
including the SAIF Special Assessment, general and administrative expenses
consisting of personnel, occupancy expense, postage, data processing/supplies
remained relatively stable, decreasing $4,000 to $540,000 during the year
ended June 30, 1997 as compared with $544,000 during the year ended June 30,
1996.
Provision for Income Taxes. The provision for income taxes was $342,000
and $429,000 for the years ended June 30, 1997 and 1996, respectively, which
represented a percentage of income before income taxes, of 36.9% and 35.1% for
the years ended June 30, 1997 and 1996, respectively.
Capital Resources and Liquidity
The objective of First Federal's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses
First Federal's ability to meet deposit withdrawals on demand or at
contractual maturity, to repay borrowings as they mature, and to fund new
loans and investments as opportunities arise.
First Federal's primary sources of internally generated funds are
principal and interest payments on loans receivable, cash flows generated from
operation, and cash flows generated by investments. External sources of funds
include increases in deposits and advances from the FHLB of Atlanta.
First Federal is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of
United States Government, federal agency and other investments having
maturities of five years of less. Current OTS regulations require that a
savings association maintain liquid assets of not less than 5% of its average
daily balance of net withdrawable deposit accounts and borrowings payable in
one year or less, of which short-term liquid assets must consist of not less
than 1%. Monetary penalties may be imposed for failure to meet applicable
liquidity requirements. At June 30, 1997, First Federal's liquidity, as
measured for regulatory purposes, was 9.1%, or $2.0 million in excess of the
minimum OTS requirement.
At June 30, 1997, First Federal had outstanding $905,000 in commitments
to originate mortgage loans and $1.3 million in undisbursed construction
loans. First Federal believes that it has adequate resources to fund loan
commitments as they arise. If First Federal requires funds beyond its
internal funding capabilities, additional advances from the FHLB of Atlanta
are available. At June 30, 1997, approximately $30.5 million in certificates
of deposit were scheduled to mature within a year. First Federal expects that
a portion of these certificates of deposit will not be renewed upon maturity.
Following the Conversion, the Holding Company will initially conduct no
business other than holding the capital stock of First Federal and the loan it
will make to the ESOP. In order to provide sufficient funds for its
operations, the Holding Company expects to retain at the Holding Company level
and invest 50% of the net proceeds of the Conversion remaining after making
the loan to the ESOP. In the future, the Holding Company's primary source of
funds, other than income from its investments and principal and interest
payments received from the ESOP with respect to the ESOP loan, is expected to
be dividends from First Federal. As a stock savings and loan association,
First Federal may not declare or pay a cash dividend on or repurchase any of
its capital stock if the effect of such transaction would be to reduce the net
worth of the institution to an amount which is less than the minimum
45
<PAGE>
amount required by applicable federal regulations. At June 30, 1997, First
Federal was in compliance with all applicable capital requirements.
Impact of Inflation and Changing Prices
The Financial Statements and related Notes have been prepared in
accordance with generally accepted accounting principles, which generally
requires 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 impact of inflation
is reflected in the increased cost of First Federal's operations. Nearly all
the assets and liabilities of First Federal are financial, unlike most
industrial companies. As a result, First Federal's performance is directly
impacted by changes in interest rates, which are indirectly influenced by
inflationary expectations. First Federal's ability to match the interest
sensitivity of its financial assets to the interest sensitivity of it
financial liabilities in its asset/liability management may tend to minimize
the effect of changes in interest rates on First Federal's performance.
Changes in interest rates do not necessarily move to the same extent as
changes in the price of goods and services. In the current interest rate
environment, liquidity and the maturity structure of First Federal's assets
and liabilities are critical to the maintenance of acceptable performance
levels.
Impact of New Accounting Standards
FASB Statement on Earnings Per Share. In March 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 128. The Statement establishes standards for computing
and presenting earnings per share and applies to entities with publicly held
common stock or potential common stock. This Statement simplifies the
standards for computing earnings per share previously found in Accounting
Principle Board ("APB") Opinion No. 15, "Earnings per Share" ("EPS"), and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with the presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and the denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This Statement
supersedes Opinion 15 and AICPA Accounting Interpretation 1.102 of Opinion 15.
This Statement will be effective for the Association's fiscal year ending June
30, 1999. Management does not believe the impact of adopting SFAS No. 128
will be material to the Association's financial statements.
FASB Statement on Accounting for Stock-Based Compensation. In October
1995, the FASB issued SFAS No. 123. SFAS No. 123 defines a "fair value based
method" of accounting for an employee stock option whereby compensation cost
is measured at the grant date based on the value of the award and is
recognized over the service period. FASB has encouraged all entities to adopt
the fair value based method; however, it will allow entities to continue the
use of the "intrinsic value based method" prescribed by APB Opinion No. 25.
Under the intrinsic value based method, compensation cost is the excess of the
market price of the stock at the grant date over the amount an employee must
pay to acquire the stock. However, most stock option plans have no intrinsic
value at the grant date and, as such, no compensation cost is recognized under
APB Opinion No. 25. Entities electing to continue use of the accounting
treatment of APB Opinion No. 25 must make certain pro forma disclosures as if
the fair value based method had been applied. The accounting requirements of
SFAS No. 123 are effective for transactions entered into in fiscal years
beginning after December 15, 1995. Pro forma disclosures must include the
effects of all awards granted in fiscal years beginning after December 15,
1994. The Association expects to use the "intrinsic value based method" as
prescribed by APB Opinion No. 25. Accordingly, management does not believe
the impact of adopting SFAS No. 123 will be material to the Association's
financial statements.
46
<PAGE>
FASB Statement on Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.. In June 1996, the FASB issued SFAS No. 125.
This Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components
approach, after a transfer of financial assets, an entity recognizes all
financial and servicing assets it controls and liabilities it has incurred and
derecognizes financial assets it no longer control and liabilities that have
been extinguished. The financial-components approach focuses on the assets
and liabilities that exist after the transfer. If a transfer does not meet
the criteria for a sale, the transfer is accounted for as a secured borrowing
with pledge of collateral. This Statement is effective for transfer and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996, and is to be applied prospectively. The effective
date for certain provisions of this Statement have been postponed for one
year. Management anticipates that the adoption of the Statement should have no
material impact on its financial statements.
FASB Statement on Reporting Comprehensive Income. In June 1997, the FASB
issued SFAS No. 130. This Statement establishes standards of reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements. This Statement will be effective for the
Association's fiscal year ending June 30, 1999, and the Association does not
intend to early adopt. Had the Association early-adopted this Statement, it
would have reported comprehensive income in the same amounts as reported net
income for the years ended June 30, 1997 and 1996, respectively.
BUSINESS OF FIRST FEDERAL
General
We were originally organized in 1920 and became a federally-chartered
savings and loan association in 1935. Since then, we have conducted our
business from our full-service office located in Cheraw, South Carolina. Our
principal business consists of attracting deposits from the general public and
originating fixed-rate and adjustable-rate loans secured primarily by first
mortgage liens on one- to four-family residential real estate. Our deposit
accounts are insured up to applicable limits by the SAIF of the FDIC.
We believe that we have developed a reputation among our loyal customer
base because of our commitment to personal service and because of strong
support of the local community. We offer a number of financial services
including: (i) residential real estate loans;(ii) construction loans; (iii)
commercial real estate loans; (iv) home improvement loans; (v) money market
demand accounts ("MMDAs"); (vi) passbook savings accounts; and (vii)
certificates of deposit.
Lending Activities
We have historically concentrated our lending activities on the
origination of loans secured by first mortgage liens for the purchase,
construction or refinancing of one- to four-family residential real property.
One- to four-family residential mortgage loans continue to be the major focus
of our loan origination activities, representing $48.5 million or 89.78% of
our total loan portfolio at June 30,1997. We also offer commercial real estate
loans, construction loans and consumer loans. Loans secured by commercial real
estate totaled approximately $2.5 million or 4.64% of our total loan portfolio
at June 30,1997. Construction loans totaled approximately $3.0 million or
5.64% of our total loans as of June 30,1997. Home improvement loans totaled
$1.4 million, or 2.66% of our total loan portfolio at June 30,1997.
47
<PAGE>
Loan Portfolio Data. The following table sets forth the composition of
our loan portfolio by loan type and security type as of the dates indicated,
including a reconciliation of gross loans receivable after consideration of
the allowance for loan losses and loans in process.
<TABLE>
<CAPTION>
June 30,
------------------------------------
1997 1996
----------------- -----------------
Amount Percent Amount Percent
------- -------- ------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Type of loan:
Real estate loans:
One- to four-family residential..... $48,460 89.78% $48,297 90.55%
Commercial.......................... 2,502 4.64% 2,089 3.92%
Construction........................ 3,044 5.64% 3,123 5.86%
Home improvement loans.............. 1,437 2.66% 1,430 2.68%
------- ------ ------- ------
Total real estate loans.......... 55,443 102.72% 54,939 103.01%
Other loans:
Loans secured by deposits........... 319 0.59% 305 0.57%
------- ------ ------- ------
Total loans...................... 55,762 103.31% 55,244 103.58%
Less:
----
Construction loans in process....... 1,306 2.42% 1,536 2.88%
Allowance for losses................ 303 0.56% 169 0.32%
Deferred loan origination fees, net
of costs........................... 179 0.33% 204 0.38%
------- ------ ------- ------
Total, net............................. $53,974 100.00% $53,335 100.00%
======= ====== ======= ======
</TABLE>
The following table sets forth certain information at June 30, 1997,
regarding the dollar amount of loans maturing in our loan portfolio based on
the earlier of their contractual terms to maturity or their repricing. Demand
loans having no stated schedule of repayments and no stated maturity and
overdrafts are reported as due in one year or less. This schedule does not
reflect the effects of possible prepayments or enforcement of due-on-sale
clauses. We expect that prepayments will cause actual maturities to be
shorter.
<TABLE>
<CAPTION>
At June 30, 1997
---------------------------------------------------------
More Than More Than
1 Year 1 Year to 3 Years to More Than
or Less 3 Years 5 Years 5 Years Total
---------- ---------- ----------- ---------- -------
(In Thousands)
Real estate loans:
<S> <C> <C> <C> <C> <C>
Adjustable................ $21,638 $ -- $ -- $ -- $21,638
Fixed..................... 1,174 415 1,392 29,339 32,320
Other loans................. 319 -- -- -- 319
Less:
Allowance for loan losses.. (303) -- -- -- (303)
------- -------- ------- ------- -------
Total $22,828 $415 $1,392 $29,339 $53,974
======= ======== ======= ======= =======
</TABLE>
As of June 30, 1997, the dollar amount of all loans due after one year
that have fixed interest rates was $31.1 million. None of First Federal's
loans with floating or adjustable interest rates are shown as being due after
one year.
One- to Four-Family Residential Loans. Our primary lending activity
consists of the origination of one- to four-family residential mortgage loans
secured by property located in our primary market area. We generally originate
one- to four-family residential mortgage loans in amounts up to 95% of the
lesser of the appraised value or purchase price, with private mortgage
insurance required on loans with a loan-to-value ratio in excess of 80%. We
originate and retain fixed rate loans which provide for the payment of
principal and interest for up to an 18-year period.
48
<PAGE>
We also offer adjustable-rate mortgage ("ARM") loans. The interest rate
on ARM loans is indexed to the cost of funds index ("COFI"). The COFI reacts
to changes in market interest rates more slowly than other indices.
Consequently, our ARM loans may not fully reflect current market interest
rates at the time they reprice. A substantial portion of the ARM loans in our
portfolio at June 30, 1997 provide for maximum rate adjustments per year and
over the life of the loan of 1% and 5%, respectively. Our residential ARMs are
amortized for terms up to 30 years.
ARM loans decrease the risk associated with changes in interest rates by
periodically repricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing
the potential for default by the borrower. At the same time, the marketability
of the underlying collateral may be adversely affected by higher interest
rates. Upward adjustment of the contractual interest rate is also limited by
the maximum periodic and lifetime interest rate adjustment permitted by the
loan documents, and, therefore, is potentially limited in effectiveness during
periods of rapidly rising interest rates. At June 30,1997, approximately
44.17% of our one- to four-family residential loans had adjustable rates of
interest.
All of the one- to four-family residential mortgage loans that we
originate include "due-on-sale" clauses, which give us the right to declare a
loan immediately due and payable in the event that, among other things, the
borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan is not repaid. However, we occasionally permit
assumptions of existing residential mortgage loans on a case-by-case basis.
At June 30, 1997, approximately $48.5 million, or 89.78% of our portfolio
of loans, consisted of one- to four-family residential loans. Approximately
$88,000, or .17% of total loans (which were comprised of three loans secured
by one- to four-family properties), were included in non-performing assets as
of that date. See "--Non-Performing and Problem Assets."
Commercial Real Estate Loans. At June 30,1997, $2.5 million, or 4.64% of
our total loan portfolio, consisted of commercial real estate loans. Our
commercial real estate loans are secured by churches, office buildings, and
other commercial properties. We generally originate fixed rate commercial real
estate loans with maximum terms of 15 years. We also will originate
adjustable rate commercial real estate loans with terms of up to 30 years.
The interest rate on adjustable rate commercial real estate loans is indexed
to the COFI with maximum Loan-to-Value ratios of 80%. At June 30,1997, our
largest commercial loan had a principal balance of $183,000 and was secured by
a church. On June 30, 1997, there were no commercial real estate loans
included in nonperforming assets.
Loans secured by commercial real estate generally are larger than one- to
four-family residential loans and involve a greater degree of risk. Commercial
real estate loans often involve large loan balances to single borrowers or
groups of related borrowers. Payments on these loans depend to a large degree
on results of operations and management of the properties and may be affected
to a greater extent by adverse conditions in the real estate market or the
economy in general. Accordingly, the nature of the loans makes them more
difficult for management to monitor and evaluate.
Construction Loans. We offer construction loans with respect to
residential and commercial real estate and, in certain cases, to builders or
developers constructing such properties on a speculative basis (i.e., before
the builder/developer obtains a commitment from a buyer). Funds are disbursed
to borrowers upon the successful completion of particular stages of
construction. Typically, loans made to builders who do not have a commitment
for the sale of the property under construction will be for a term of no more
than six months. Except for construction loans made on speculative basis,
upon the successful completion of construction the loan can be converted into
permanent financing. At June 30,1997, $3.0 million, or 5.64% of our total
loan portfolio, consisted of construction loans. The largest construction loan
had a principal balance of $107,000 on June 30, 1997 and was secured by a one-
to four-family residence. None of our construction loans were included in
non-performing assets on that date.
49
<PAGE>
Construction loans generally match the term of the construction contract
and are written with interest calculated on the amount disbursed under the
loan and payable monthly. The maximum Loan-to-Value Ratio for a construction
loan is based upon the nature of the construction project. For example, a
construction loan for a one-to four-family residence may be written with a
maximum Loan-to-Value ratio of 95% with mortgage insurance. Inspections are
made prior to any disbursement under a construction loan.
While providing us with a comparable, and in some cases higher, yield
than a conventional mortgage loan, construction loans involve a higher level
of risk. For example, if a project is not completed and the borrower defaults,
we may have to hire another contractor to complete the project at a higher
cost. Also, a project may be completed, but may not be salable, resulting in
the borrower defaulting and our taking title to the project.
Home Improvement Loans. At June 30, 1997, home improvement loans totaled
$1.4 million, or 2.66% of total loans. Home improvement loans are typically
secured by second mortgages on the secured property. At June 30, 1997, one
home improvement loan with a balance of $9,000, was included in non-performing
assets. See "--Non-Performing and Problem Assets."
Origination, Purchase and Sale of Loans. We historically have originated
our mortgage loans pursuant to our own underwriting standards which do not
conform with the standard criteria of Freddie Mac or the FNMA because we do
not require current property surveys in most cases. In the event that we begin
originating fixed-rate residential mortgage loans for sale to Freddie Mac in
the secondary market, such loans will be originated in accordance with the
guidelines established by Freddie Mac and could be sold after they are
originated.
We confine our loan origination activities primarily to Chesterfield
County and the surrounding counties. At June 30, 1997, we had no loans secured
by property located outside of South Carolina. Our loan originations are
generated from referrals from existing customers, real estate brokers, and
advertising. Loan applications are underwritten and processed at our office.
Our loan approval process is intended to assess the borrower's ability to
repay the loan, the viability of the loan and the adequacy of the value of the
property that will secure the loan. To assess the borrower's ability to repay,
we study the employment and credit history and information on the historical
and projected income and expenses of our mortgagors. All mortgage loans are
approved by our Loan Committee.
We generally require appraisals on all real property securing our loans
and require an attorney's opinion and a valid lien on the mortgaged real
estate. Appraisals for all real property securing mortgage loans are performed
by independent appraisers who are state-licensed. We require fire and extended
coverage insurance in amounts at least equal to the principal amount of the
loan and also require flood insurance to protect the property securing its
interest if the property is in a flood plain. We also generally require
private mortgage insurance for all residential mortgage loans with Loan-to-
Value Ratios of greater than 80%. We require escrow accounts for insurance
premiums and taxes for loans that require private mortgage insurance. All
real estate loans up to $75,000 must be approved by our loan committee. All
real estate loans for amounts in excess of $75,000 must be approved by the
Board of Directors.
Our underwriting standards for home improvement loans are intended to
protect against some of the risks inherent in making home improvement loans.
Borrower paying habits and financial strengths are important considerations.
50
<PAGE>
The following table shows our loan origination, sales and repayment
activity during the years indicated. During fiscal 1997 and 1996 First Federal
did not purchase any loans.
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
(In Thousands)
Originations by Type:
- ---------------------
Adjustable rate:
Real estate:
One-to four-family................... $4,598 $ 3,909
Commercial........................... 404 62
Construction......................... -- --
Home improvement loans............... -- --
Other:
Secured by deposits................... -- --
------ -------
Total adjustable rate.................. 5,002 3,971
------ -------
Fixed rate:
Real estate:
One-to four-family................... 1,988 3,630
Commercial........................... 208 248
Construction......................... 2,265 2,648
Home improvement loans............... -- --
Other:
Secured by deposits.................. 150 287
------ -------
Total fixed-rate....................... 4,611 6,813
------ -------
Total loans originated................. 9,613 10,784
------ -------
Sales and Repayments:
- ---------------------
Real estate:
One-to four-family.................... 525 --
Commercial............................ -- --
Construction.......................... -- --
Home improvement loans................ -- --
Other:
Secured by deposits................... -- --
------ -------
Total loans sold........................ 525 --
Principal repayments................... 7,917 9,916
------ -------
Total reductions........................ 8,442 9,916
(Increase)decrease in other items, net.. 121 (330)
------ -------
Net increase (decrease)................. $1,292 $ 538
====== =======
</TABLE>
Our one-to four-family residential loan originations during the year
ended June 30, 1997 totaled $6.6 million, compared to $7.5 million during the
year ended June 30, 1996.
Origination and Other Fees. We realize income from late charges, and fees
for other miscellaneous services. We currently charge a 1% origination fee on
all loans originated. We also may charge points on a mortgage loan as
consideration for a lower interest rate, although we do so infrequently. Late
charges are generally assessed if payment is not received within a specified
number of days after it is due.
51
<PAGE>
Non Performing and Problem Assets
After a mortgage loan becomes 30 days past due, we deliver a computer
generated delinquency notice to the borrower. When loans become 60 days past
due, we send additional delinquency notices and make personal contact by letter
or telephone with the borrower to establish acceptable repayment schedules. When
a mortgage loan is 90 days delinquent, we will have either entered into a
workout plan with the borrower or referred the matter to our attorney for
collection. Management is authorized to commence foreclosure proceedings for any
loan upon making a determination that it is prudent to do so.
We review mortgage loans on a regular basis and place such loans on a
non-accrual status when they are specifically determined to be impaired or when
they become 90 days delinquent. When loans are placed on a non-accrual status,
unpaid accrued interest is written off, and further income is recognized only to
the extent received.
Nonperforming Assets. At June 30, 1997, $107,000, or .18% of our total
assets, were nonperforming (nonperforming loans and non-accruing loans). At June
30, 1997, loans secured by real estate accounted for $97,000 of our non
performing assets. We had real estate owned ("REO") properties in the amount of
$10,000 as of June 30, 1997.
The table below sets forth the amounts and categories of our
nonperforming assets (nonperforming loans and foreclosed real estate) for the
last two years. It is our policy that all earned but uncollected interest on all
loans be reviewed monthly to determine if any portion thereof should be
classified as uncollectible for any loan past due in excess of 90 days.
Delinquent loans that are 90 days or more past due are considered nonperforming
assets. During the periods presented, we did not have any troubled debt
restructurings.
<TABLE>
<CAPTION>
At June 30,
------------------------
1997 1996
-------- -----------
(Dollars In Thousands)
<S> <C> <C>
Loans not accruing interest.............. $ 97 $ 46
Accruing loans 90 days or more past due.. -- --
----- -----
Total nonperforming loans............. 97 46
Foreclosed real estate................... 10 27
----- -----
Total nonperforming assets............ $ 107 $ 73
===== =====
Nonperforming assets to total assets.. 0.18% 0.12%
===== =====
</TABLE>
Interest on loans of $10,000 would have been reported for the year ended
June 30,1997 if the non-performing loans summarized above had been current in
accordance with their original terms. Interest totaling $6,000 was reported
on nonperforming loans for the year ended June 30, 1997.
52
<PAGE>
At June 30, 1997, we held loans delinquent from 60 to 89 days totaling
approximately $482,000. Other than these loans and the other delinquent loans
disclosed elsewhere in this section, we were not aware of any other loans, the
borrowers of which were experiencing financial difficulties.
<TABLE>
<CAPTION>
Loans Delinquent For:
------------------------------------------------------------
60-89 Days 90 Days and Over Total
------------------------- --------------------------------- --------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------ ------ --------- ------ ------ ----------------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Real Estate:
One- to four-family.. 14 $388 .80% 3 $88 .18% 17 $476 .98%
Commercial........... -- -- -- -- -- -- -- -- --
Construction......... 2 93 3.06% -- -- -- 2 93 3.06%
Home improvement..... 1 1 .07% 1 9 .63% 2 10 .70%
Other loans:
Loans secured by
deposits............ -- -- -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ----- ----
Total............. 17 $482 .87% 4 $97 .17% 21 $579 1.04%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
Classified Assets. Federal regulations and our Asset Classification
Policy provide for the classification of loans and other assets such as debt and
equity securities considered by the OTS to be of lesser quality as
"substandard," "doubtful" or "loss" assets. An asset is considered "substandard"
if it is inadequately protected by the current net worth and paying capacity of
the obliger or of the collateral pledged, if any. "Substandard" assets include
those characterized by the "distinct possibility" that the institution will
sustain "some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all of the weaknesses inherent in those classified
"substandard," with the added characteristic that the weaknesses present make
"collection or liquidation in full," on the basis of currently existing facts,
conditions, and values, "highly questionable and improbable." Assets classified
as "loss" are those considered "uncollectible" and of such little value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted.
An insured institution is required to establish general allowances for
loan losses in an amount deemed prudent by management for loans classified
substandard or doubtful, as well as for other problem loans. General allowances
represent loss allowances which have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. When an insured
institution classifies problem assets as "loss," it is required either to
establish a specific allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to the classification of its assets and the amount of its valuation
allowances is subject to review by the OTS which can order the establishment of
additional general or specific loss allowances.
53
<PAGE>
At June 30, 1997, the aggregate amount of our classified assets, and of
our general and specific loss allowances were as follows:
<TABLE>
<CAPTION>
Loan Loss
Amount Allowance
------ ---------
(In Thousands)
Classified loans receivable:
<S> <C> <C>
Substandard...................... $276 $ 69
Doubtful......................... 17 9
Loss............................. -- --
---- ----
$293 78
====
General unallocated loss allowance 225
----
Total allowance.................... $303
====
</TABLE>
We regularly review our loan portfolio to determine whether any loans
require classification in accordance with applicable regulations. Not all of our
classified assets constitute non-performing assets.
Allowance for Loan Losses
We provide for loan losses on the allowance method. Accordingly, all loan
losses are charged to the related allowance and all recoveries are credited to
it. Additions to the allowance for loan losses are provided by charges to
operations based on various factors which, in management's judgment, deserve
current recognition in estimating possible losses. Such factors considered by
management include the market value of the underlying collateral, growth and
composition of the loan portfolio, the relationship of the allowance for loan
losses to outstanding loans, delinquency trends, and economic conditions. We
evaluate the carrying value of loans periodically and the allowance is adjusted
accordingly. While management uses the best information available to make
evaluations, future adjustments to the allowance may be necessary if conditions
differ substantially from the assumptions used in making the evaluations.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review our allowance for loan losses. Such
agencies may require us to recognize additions to the allowance based on their
judgments of information available to them at the time of their examination.
54
<PAGE>
Summary of Loan Loss Experience. The following table analyzes changes in
the allowance during the fiscal years ended June 30, 1997, and 1996.
<TABLE>
<CAPTION>
At June 30,
------------------------
1997 1996
-------- --------
(Dollars In Thousands)
<S> <C> <C>
Balance at beginning of period............. $ 169 $ 172
----- -----
Loans charged off:
Real estate............................. 9 21
Other................................... -- --
----- -----
Total loans charged-off................. 9 21
Recoveries:
Real estate............................. -- --
Other................................... -- --
----- -----
Total Recoveries........................ -- --
----- -----
Net loans charged-off...................... 9 21
----- -----
Provision for loan losses.................. 143 18
----- -----
Balance at end of period................... $ 303 $ 169
===== =====
Ratio of net charge-offs to average loans
outstanding during the period............ 0.02% 0.04%
===== =====
</TABLE>
Allocation of Allowance for Loan Losses. The following table presents an
analysis of the allocation of our allowance for loan losses at the dates
indicated. The allocation of the allowance to each category is not necessarily
indicative of future loss in any particular category and does not restrict our
use of the allowance to absorb losses in other categories.
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------
1997 1996
---------------------------------- --------------------------------
Percent of Percent Percent of Percent
Amount of Allowance of Loans Amount of Allowance of Loans
Loan Loss to Total to Gross Loan Loss to Total to Gross
Allowance Allowance Loans Allowance Allowance Loans
---------- ---------- ----------- --------- ---------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family residential....... $169 55.78% 86.91% $ 126 74.56% 87.42%
Commercial............................ 24 7.92 4.49 21 12.43 3.78
Construction.......................... 33 10.89 5.46 8 4.73 5.65
Home improvement loans................ 10 3.30 2.58 7 4.14 2.59
---- ------ ------ ----- ------ ------
Total real estate loans............ 236 77.89 99.43 162 95.86 99.45
Other loans:
Loans secured by deposits............. 1 0.33 0.57 1 0.59 0.55
Unallocated........................... 66 21.78 -- 6 3.55 --
---- ------ ------ ----- ------ ------
Total allowance for loan losses.. $303 100.00% 100.00% $ 169 100.00% 100.00%
==== ====== ====== ===== ====== ======
</TABLE>
55
<PAGE>
Investments
Investments. Our investment portfolio consists of short-term U.S.
Treasury and federal agency securities, interest earning deposits in other
financial institutions, federal funds sold, and to a lesser extent mortgage
back securities and FHLB stock. At June 30, 1997, approximately $5.8 million,
or 9.5%, of our total assets consisted of such investments. We had $2.7
million in interest-earning deposits as of that date.
The following table sets forth the carrying value of First Federal's
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
-------------------
1997 1996
------ ------
(In Thousands)
<S> <C> <C>
Securities held to maturity:
U.S. government and agency securities..... $1,700 $2,099
Mortgage-backed securities................ 66 97
------ ------
Total securities held to maturity...... 1,766 2,196
Interest-earning balances in other banks.. 2,720 2,292
Federal Funds sold........................ 800 500
Federal Home Loan Bank Stock.............. 484 482
------ ------
Total investments...................... $5,770 $5,470
====== ======
</TABLE>
At June 30, 1997, the market value of First Federal's investment
securities held to maturity totaled $1.8 million.
56
<PAGE>
The following table sets forth the amount of investment securities which
mature during each of the periods indicated and the weighted average yields
for each range of maturities at June 30, 1997.
<TABLE>
<CAPTION>
After One Year After Five Years
One Year or Less Through Five Years Through Ten Years After Ten Years Total
---------------- ------------------ ----------------- --------------- -------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
U.S. government and
agency securities........ $ -- -- $1,700 6.43% $ -- -- $ -- -- $1,700 6.43%
Mortgage-backed
securities............... -- -- -- -- 66 8.95% -- -- 66 8.95%
Other:
Interest-earning
balances in other banks.. 2,720 6.23% -- -- -- -- -- -- 2,720 6.23%
Federal Funds Sold........ 800 5.88% -- -- -- -- -- -- 800 5.88%
Federal Home Loan Bank
Stock.................... -- -- -- -- -- -- 484 7.25% 484 7.25%
------ ------ ----- ------ ------
Total $3,520 6.15% $1,700 6.43% $ 66 8.95% $ 484 7.25% $5,770 6.36%
====== ====== ===== ====== ======
</TABLE>
57
<PAGE>
Sources of Funds
General. Deposits have traditionally been our primary source of funds for
use in lending and investment activities. In addition to deposits, we derive
funds from scheduled loan payments, investment maturities, loan prepayments,
retained earnings, income on earning assets and borrowings. While scheduled
loan payments and income on earning assets are relatively stable sources of
funds, deposit inflows and outflows can vary widely and are influenced by
prevailing interest rates, market conditions and levels of competition.
Borrowings from the FHLB of Atlanta may be used in the short-term to
compensate for reductions in deposits or deposit inflows at less than
projected levels.
Deposits. We attract deposits principally from within Chesterfield
County and Marlboro County through the offering of a selection of deposit
instruments, including passbook accounts, money market accounts, fixed term
certificates of deposit, individual retirement accounts and savings accounts.
We do not actively solicit or advertise for deposits outside of Chesterfield
County and adjacent Marlboro County, and substantially all of our depositors
are residents of Chesterfield or Marlboro County. Deposit account terms vary,
with the principal differences being the minimum balance required, the amount
of time the funds remain on deposit and the interest rate. We do not pay
broker fees for any deposits we receive.
We establish the interest rates paid, maturity terms, service fees and
withdrawal penalties on a periodic basis. Determination of rates and terms are
predicated on funds acquisition and liquidity requirements, rates paid by
competitors, growth goals, and applicable regulations. We rely, in part, on
customer service and long-standing relationships with customers to attract and
retain our deposits. We also closely price our deposits to the rates offered
by our competitors.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and other prevailing interest rates and
competition. The variety of deposit accounts that we offer has allowed us to
be competitive in obtaining funds and to respond with flexibility to changes
in consumer demand. We have become more susceptible to short-term fluctuations
in deposit flows as customers have become more interest rate conscious. We
manage the pricing of our deposits in keeping with our asset/liability
management and profitability objectives. Based on our experience, we believe
that our passbook and MMDAs are relatively stable sources of deposits.
However, the ability to attract and maintain certificates of deposit, and the
rates we pay on these deposits, have been and will continue to be
significantly affected by market conditions. At June 30, 1997, 80.83% of our
deposit accounts were certificate of deposit accounts, of which $30.5 million
have maturities of one year or less. See "Risk Factors--Reliance on
Certificate of Deposit Accounts."
The following table sets forth an analysis of our deposit accounts by
type, maturity, and rate at June 30, 1997 and 1996, as well as the savings
flows.
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------------------ -------------------------
Weighted Increase Weighted
Average % of (Decrease) Average % of
Amount Rate Total in Amount Amount Rate Total
------ ---- ------- --------- ------ ---- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Savings deposits:
Regular passbook................... $ 2,549 2.96% 5.44% $ (34) 2,583 2.80% 5.39%
Money market passbook.............. 6,436 4.18% 13.73% 650 5,786 4.24% 12.06%
------- ---- ------ ------- ------- ---- ------
Total demand deposits............. 8,985 3.83% 19.17% 616 8,369 3.80% 17.45%
------- ---- ------ ------- ------- ---- ------
Certificate accounts with original
maturities of:
6 months or less................... 9,181 5.28% 19.59% 3,463 5,718 5.41% 11.93%
Over 6 to 12 months................ 10,578 5.63% 22.57% (1,752) 12,330 5.54% 25.71%
Over 12 months..................... 18,119 5.99% 38.66% 3,413 21,532 6.00% 44.91%
------- ---- ------ ------- ------- ---- ------
Total certificates................ 37,878 5.71% 80.83% (1,702) 39,580 5.77% 82.55%
------- ---- ------ ------- ------- ---- ------
Total deposits $46,863 5.35% 100.00% $(1,086) $47,949 5.43% 100.00%
======= ==== ====== ======= ======= ==== ======
</TABLE>
58
<PAGE>
The following table sets forth by various interest rate categories the
composition of time deposits of First Federal at the dated indicated.
<TABLE>
<CAPTION>
More Than More Than
1 Year 1 Year to 3 Years to
or Less 3 Years 5 Years
------------------------------------------------------------------------------------
Weighted Weighted Weighted
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Certificates of $100,000 or more..... $ 6,746 5.74% $ 644 6.38% $ 409 6.30%
Certificates of less than $100,000... 23,727 5.56% 4,828 6.07% 1,353 6.26%
------------ ------------ ------------
Total............................ $ 30,473 5.60% $ 5,472 6.11% $ 1,762 6.27%
============ ============ ============
<CAPTION>
More Than
5 Years Total
-----------------------------------------------------
Weighted Weighted
Amount Rate Amount Rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
(Dollars in Thousands)
Certificates of $100,000 or more..... $ -- -- $ 7,799 5.82%
Certificates of less than $100,000... 171 7.21% 30,079 5.64%
------------ ------------
Total............................ $ 171 7.21% $ 37,878 5.71%
============ ============
</TABLE>
59
<PAGE>
The following table indicates the amount of First Federal's certificates of
deposit and other deposits by time remaining until maturity as of June 30, 1997.
<TABLE>
<CAPTION>
Maturity
-----------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
-------- -------- -------- --------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less $10,305 $5,495 $7,927 $6,352 $30,079
than $100,000.................
Certificates of deposit of 2,664 1,295 1,628 1,053 6,640
$100,000 or more..............
Public funds................... 500 659 -- -- 1,159
------- ------ ------ ------ -------
Total certificates of deposit.. $13,469 $7,449 $9,555 $7,405 $37,878
======= ====== ====== ====== =======
</TABLE>
Total deposits at June 30,1997 were approximately $46.9 million, compared
to approximately $47.9 million at June 30, 1996. Our deposit base is somewhat
dependent upon the manufacturing sector of Chesterfield and Marlboro Counties.
Although the manufacturing sector in Chesterfield and Marlboro Counties is
relatively diversified and not significantly dependent upon any industry, a loss
of a material portion of the manufacturing workforce could adversely affect our
ability to attract deposits due to the loss of personal income attributable to
the lost manufacturing jobs and the attendant loss in service industry jobs.
In the unlikely event of our liquidation after the Conversion, all claims
of creditors (including those of deposit account holders, to the extent of their
deposit balances) would be paid first followed by distribution of the
liquidation account to certain deposit account holders, with any assets
remaining thereafter distributed to the Holding Company as the sole shareholder
of First Federal. See "The Conversion -- Principal Effects of Conversion --
Effect on Liquidation Rights."
Borrowings. We focus on generating high quality loans and then seek the
best source of funding from deposits, investments or borrowings. At June 30,
1997, we had borrowings in the amount of $2.4 million from the FHLB of Atlanta
which bear fixed and variable interest rates and are due at various dates
through 2003. We are required to maintain eligible loans in our portfolio of at
least 170% of outstanding advances as collateral for advances from the FHLB of
Atlanta. We do not anticipate any difficulty in obtaining advances appropriate
to meet our requirements in the future.
The following table sets forth the maximum month-end balance and average
balance of FHLB advances, for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Maximum Balance:
- ----------------
FHLB advances...................... $ 2,400,000 $ 1,050,000
Average Balance:
- ----------------
FHLB advances...................... $ 1,985,000 $ 1,050,000
</TABLE>
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<PAGE>
The following table presents certain information relating to the
maturities of FHLB of Atlanta borrowings at or for the years ended June 30, 1997
and 1996.
<TABLE>
<CAPTION>
Balance At June 30,
Maturing during the year -------------------
ended June 30, Interest Rates 1997 1996
- --------------------------- ---------------- ---- ----
<S> <C> <C> <C>
1997 5.58-5.72% $ -- $ 1,000,000
1998 5.83-5.95% $ 2,350,000 --
1999 -- -- --
2000 -- -- --
2001 -- -- --
Thereafter 3.00% 50,000 50,000
------------- --------------
Total $ 2,400,000 $ 1,050,000
============= ==============
Weighted average interest
rate 5.81% 5.51%
</TABLE>
Properties
The following table provides certain information with respect to our
office as of June 30,1997:
<TABLE>
<CAPTION>
Net Book Value of Real
Year Leased or Property and
Location Leased or Owned Acquired Equipment
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
515 Market Street Owned 1981 $ 183,000
Cheraw, SC 29520
</TABLE>
The net book value of our electronic data processing equipment, furniture
and equipment was approximately $8,000 at June 30,1997.
Service Corporation Subsidiary
We do not have any subsidiary corporations. However, OTS regulations
permit federal savings associations to invest in the capital stock, obligations
or other specified types of securities of subsidiaries (referred to as "service
corporations") and to make loans to such subsidiaries and joint ventures in
which such subsidiaries are participants in an aggregate amount not exceeding 2%
of the association's assets, plus an additional 1% of assets if the amount over
2% is used for specified community or inner-city development purposes. In
addition, federal regulations permit associations to make specified types of
loans to such subsidiaries (other than special purpose finance subsidiaries) in
which the association owns more than 10% of the stock, in an aggregate amount
not exceeding 50% of the association's regulatory capital if the association's
regulatory capital is in compliance with applicable regulations. A savings
association that acquires a non-savings association subsidiary, or that elects
to conduct a new activity within a subsidiary, must give the FDIC and the OTS at
least 30 days advance written notice. The FDIC may, after consultation with the
OTS, prohibit specified activities if it determines such activities pose a
serious threat to the SAIF. Moreover, a savings association must deduct from
capital, for purposes of meeting the core capital, tangible capital and risk-
based capital requirements, its entire investment ire and loans to a subsidiary
engaged in activities not permissible for a national bank (other than
exclusively agency activities for its customers or mortgage banking
subsidiaries).
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<PAGE>
Employees
As of June 30, 1997, we employed five persons on a full-time basis and
five persons on a part-time basis. None of our employees is represented by a
collective bargaining group and we consider our employee relations to be good.
Legal Proceedings
Although we are involved, from time to time, in various legal proceedings
in the normal course of business, other than as set forth below, there are no
material legal proceedings to which we presently are a party or to which any of
our property is subject. We have been named as a defendant in a lawsuit that
alleges that we improperly released the final installment on the plaintiffs
construction loan. The plaintiffs are requesting damages of $1.0 million. While
there can be no certainty as to the outcome of this lawsuit, we believe we acted
properly, that the lawsuit has no merit, and we intend to vigorously defend
against this action.
MANAGEMENT OF GREAT PEE DEE BANCORP, INC.
Directors and Executive Officers of the Holding Company
The Board of Directors of the Holding Company consists of the same
individuals who serve as directors of First Federal. The Holding Company's
Certificate of Incorporation and Bylaws require that directors be divided into
three classes with each class of directors to serve for a three-year period.
Approximately one-third of the directors will be elected each year. The Holding
Company's officers will be elected annually by its Board of Directors and will
serve at the Board's discretion. The Holding Company's President and Chief
Executive Officer is Herbert W. Watts, and the Secretary and Treasurer is
Johnnie L. Craft. For information regarding the directors and officers, See
"Management of First Federal Savings and Loan Association of Cheraw."
MANAGEMENT OF FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
Directors and Officers of First Federal
Our Board of Directors currently consists of six persons. Each director
holds office for a term of three years, and one-third of the Board is elected at
each annual meeting of our members.
Our Board of Directors met 24 times during the fiscal year ended June 30,
1997. No director attended fewer than 75% of the aggregate number of meetings of
the Board of Directors and the Board's committees in the past 12 months.
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<PAGE>
Listed below are the current directors of First Federal:
<TABLE>
<CAPTION>
Name Ages at June 30, 1997 Position Director Since Current Term Expires
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Herbert W. Watts 53 President, Chief 1977 1999
Executive Officer,
Director
Robert M. Bennett 65 Chairman of 1973 2000
the Board
William R. Butler 48 Director 1992 2000
James C. Crawford, III 40 Director 1992 1999
Henry P. Duvall, IV 66 Director 1964 1998
Cornelius B. Young 64 Director 1985 1999
</TABLE>
The business experience for the past five years for each of First
Federal's directors and officers is as follows:
Herbert W. Watts is the President and Chief Executive Officer of First
Federal. Mr. Watts has been employed by First Federal in various capacities
since 1973.
Robert M. Bennett is President of Bennett Motor Company, a General Motors
dealership located in Cheraw, South Carolina.
William R. Butler is the owner of P&H Pharmacy which is a retail pharmacy
located in Cheraw, South Carolina. Mr. Butler is a licensed pharmacist.
James C. Crawford III is the Chief Operating Officer of B.C. Moore &
Sons, Inc., a department store chain.
Henry P. Duvall IV is retired. Prior to his retirement, Mr. Duvall was
the President and Chief Executive Officer of Cheraw Hardware and Supply Company.
Cornelius B. Young is retired. Prior to his retirement Mr. Young was a
Senior Manager of Delta Mills, a division of Delta-Woodside, Inc., a textile
manufacturing company.
Johnnie L. Craft has been the Secretary and Treasurer of First Federal
since 1988.
Committees of the Boards of Directors of First Federal and the Holding Company
Our Board of Directors has various committees. The entire Board of
Directors establishes the compensation for our employees and officers. The
Budget and Finance Investments Committee reviews and approves our operating
budget for the following fiscal year and reviews and approves investments that
First Federal makes.
The Nominating Committee is composed of three directors who are not up
for reelection.
The Audit Committee reviews the audit and recommends to the entire Board
of Directors the appointment of the independent auditors for the upcoming fiscal
year.
The Budget and Finance Committee acts as First Federal's Compensation
Committee.
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<PAGE>
EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF FIRST FEDERAL
Remuneration of Named Executive Officer
The following table sets forth information as to annual, long-term and
other compensation for services in all capacities to our President and Chief
Executive Officer for the fiscal year ended June 30, 1997. No executive
officers earned over $100,000 in salary and bonuses during fiscal 1997. Set
forth below is information regarding the compensation of Herbert W. Watts,
President and Chief Executive Officer of the Holding Company and First
Federal.
<TABLE>
<CAPTION>
===========================================================================================================
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation/(1)/ Awards
- ---------------------------------------------------------------------------------------------
Other Restricted
Annual Stock Options/ All Other
Name and Principal Fiscal Compensation Award SARs Compensation
Position Year/(1)/ Salary($) Bonus($) ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert W. Watts,
President and Chief
Executive Officer 1997 $70,275 $8,981 $8,000/(2)/ -- -- --
===========================================================================================================
</TABLE>
- -------------------
/(1)/ In accordance with the rules on executive officer and director
compensation disclosure adopted by the SEC, Summary Compensation
information is excluded for the fiscal years ended June 30, 1996 and
1995, as the Bank was not a public company during such periods.
/(2)/ Represents director fees.
Compensation of Directors
Directors of First Federal received a monthly retainer of $310, plus $150
for each meeting of the Board of Directors during the year ended June 30,
1997. Directors will receive a monthly retainer of $700, plus $150 for each
meeting of the Board of Directors for the year ending June 30, 1998.
Directors of the Holding Company are not currently paid directors' fees.
The Holding Company may, if it believes it is necessary to attract qualified
directors or is otherwise beneficial to the Holding Company, adopt a policy of
paying directors' fees.
Benefits
Insurance Plans. Our officers and employees are covered by a contributory
medical insurance plan.
Thrift Plan. Our employees are eligible to join the Thrift Plan on the
first of the month following completion of 12 months of continuous employment
(during which 1,000 hours are completed). Employees are eligible to
contribute, on either a pre-tax or after-tax basis, up to 15% of their
eligible salary, in increments of 1%. The First Federal makes a matching
contribution equal to 100% of an employee's contributions, up to the first 6%
of an employee's eligible salary. In addition, First Federal annually
contributes an amount equal to at least 2% of the first $3,750 of every
participating employees' eligible salary. All amounts contributed under the
Thrift Plan are at all times fully 100% vested. Employees are entitled to
borrow, within tax law limits, from amounts allocated to
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<PAGE>
their profit sharing account. In addition, the Thrift Plan permits employees
to withdraw their after-tax contributions, and in certain circumstances, First
Federal's matching contributions to their accounts.
Employment Agreement. First Federal intends to enter into an employment
agreement with Mr. Watts, which provides for a term of thirty-six months. On
each anniversary date, the agreement may be extended for an additional twelve
months, so that the remaining term shall be thirty-six months. If the
agreement is not renewed, the agreement with Mr. Watts will expire thirty-six
months following the anniversary date. The current Base Salary for Mr. Watts
is $________. The Base Salary may be increased but not decreased. In addition
to the Base Salary, the agreement provides for, among other things,
participation in stock benefit plans and other employee and fringe benefits
applicable to executive personnel. The agreement provides for termination by
the Bank for cause at any time. In the event the Bank terminates the
executive's employment for reasons other than for cause, or in the event of
the executive's resignation from the Bank upon (i) failure to re-elect the
executive to his current offices, (ii) a material change in the executive's
functions, duties or responsibilities, or relocation of his principal place of
employment by more than 30 miles, (iii) liquidation or dissolution of the
Bank, or (iv) a breach of the agreement by the Bank, the executive, or in the
event of death, his beneficiary would be entitled to severance pay in an
amount equal to three times the annual rate of Base Salary (which includes any
salary deferred at the election of Mr. Watts) at the time of termination. The
Bank would also continue the executive's life, health, dental and disability
coverage for the remaining unexpired term of the agreement. In the event the
payments to the Executive would include an "excess parachute payment" as
defined by Code Section 280G (relating to payments made in connection with a
change in control), the payments would be reduced in order to avoid having an
excess parachute payment.
Mr. Watts employment may be terminated upon his attainment of normal
retirement age (i.e., age 65) or in accordance with any retirement policy
established with Mr. Watts consent with respect to him. Upon Mr. Watts
retirement, he will be entitled to all benefits available to him under any
retirement or other benefit plan maintained by First Federal. In the event of
Mr. Watts disability for a period of six months, First Federal may terminate
the Agreement provided that First Federal will be obligated to pay Mr. Watts
his Base Salary for the remaining term of the Agreement or one year, whichever
is longer, reduced by any benefits paid to Mr. Watts pursuant to any
disability insurance policy or similar arrangement maintained by the Bank. In
the event of Mr. Watts death, First Federal will pay his Base Salary to his
named beneficiaries for one year following his death, and will also continue
medical, dental, and other benefits to his family for one year.
The employment agreement provides that, following his termination of
employment, Mr. Watts will not compete with First Federal for a period of one
year, provided, however, that in the event of a termination in connection with
a change in control within the meaning of HOLA and the rules and regulations
thereunder, the non-compete provisions will not apply.
Non-Qualified Deferred Compensation Plan. We have entered into a non-
qualified deferred compensation plan ("Non-qualified Plan") for the benefit of
Mr. Herbert Watts. The Non-qualified Plan provides Mr. Watts with the
opportunity to annually defer a portion of his base salary and bonus into the
Non-qualified Plan. In addition, First Federal intends to make an additional
contribution to the Non-qualified Plan on Mr. Watts behalf. The Non-qualified
Plan will be amended to permit amounts that are credited to Mr. Watts' account
to be used to purchase stock in the offering and on the open market. In the
event of Mr. Watts termination of employment, amounts credited to his account
under the Non-qualified Plan will be paid to him in one hundred eighty (180)
equal monthly installments beginning not later than the first day of the third
month following his termination of employment. In the event of Mr. Watts
death, amounts under the Non-qualified Plan will be paid to his estate.
The Non-qualified Plan is an unfunded plan for tax purposes and for
purposes of the Employee Retirement Income Security Act ("ERISA"). All
obligations arising under the Non-qualified Plan are payable from the general
assets of First Federal, however, First Federal has set up a trust to ensure
that sufficient assets will be available to pay the benefits under the Non-
qualified Plan. As of June 30, 1997, the fair market value of Mr. Watts'
account balance under the Non-qualified Plan was approximately $285,000.
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<PAGE>
Non-Qualified Supplemental Employee Stock Ownership Plan. First Federal
has adopted a non-qualified supplemental employee stock ownership plan ("Non-
qualified ESOP") for the benefit of a select group of highly compensated and
management level employees. The Non-qualified ESOP is intended, initially, to
require a contribution for any highly compensated employee (as defined under
the Internal Revenue Code) whose allocations under the tax-qualified ESOP are
cut-back due to certain limitations under the Internal Revenue Code. For
example, a contribution would be required under the Non-qualified ESOP if the
allocation to highly compensated employees under the tax-qualified ESOP is
cut-back due to the restriction on highly compensated employees, in the
aggregate, receiving more than one-third of the shares allocated to employees
for the plan year. If no highly compensated employee is cut back in the
allocation to his or her account under the tax-qualified ESOP, no contribution
would be required for the year under the Non-qualified ESOP.
The Non-qualified ESOP is an unfunded plan for tax and ERISA purposes.
All obligations arising under the Non-qualified ESOP are payable from the
general assets of First Federal, however, First Federal has set up a trust to
ensure that sufficient assets will be available to pay the benefits under the
Non-qualified ESOP.
Employee Stock Ownership Plan and Trust
First Federal has established for our eligible employees an ESOP
effective in January 1997, subject to our conversion to stock form. Employees
with at least one year of employment with us and who have attained age 21 are
eligible to participate. As part of the Conversion, the ESOP intends to borrow
funds from the Holding Company and use those funds to purchase a number of
shares equal to 8.0% of the Common Stock to be issued in the Conversion.
Collateral for the loan will be the Common Stock purchased by the ESOP. The
loan will be repaid principally from our discretionary contributions to the
ESOP over a period of not less than twenty-eight years. It is anticipated that
the interest rate for the loan will be a floating rate equal to the prime rate
published in The Wall Street Journal from time to time. Shares purchased by
the ESOP will be held in a suspense account for allocation among participants
as the loan is repaid.
Contributions to the ESOP and shares released from the suspense accounts
in an amount proportional to the repayment of the ESOP loan will be allocated
among ESOP participants on the basis of compensation in the year of
allocation. Participants in the ESOP will receive credit for service prior to
the effective date of the ESOP. Benefits generally vest over a seven year
period. A participant will vest in 20% of his or her account balance after 2
years of credited service and will vest in an additional 20% fore each
subsequent year of credited service until a participant is 100% vested after
seven years. A participant who terminates employment for reasons other than
death, retirement, or disability prior to seven years of credited serve will
forfeit the nonvested portion of his or her benefits under the ESOP. Benefits
will be payable in the form of Common Stock and cash upon death, retirement,
early retirement, disability or separation from service. Our contributions to
the ESOP are discretionary, subject to the loan terms and tax law limits, and,
therefore, benefits payable under the ESOP cannot be estimated. In November
1993, the American Institute of Certified Public Accountants (the "AICPA")
issued Statement of Position ("SOP") 93-6, which requires us to record
compensation expense in an amount equal to the fair market value of the shares
released from the suspense account.
In connection with the establishment of the ESOP, First Federal will
establish a committee of non-employee directors to administer the ESOP. First
Federal will either appoint its non-employee directors or an independent
financial institution to serve as trustee of the ESOP. The ESOP committee may
instruct the trustee regarding investment of funds contributed to the ESOP.
The ESOP trustee, subject to its fiduciary duty, must vote all allocated
shares held in the ESOP in accordance with the instructions of participating
employees. Under the ESOP, nondirected shares, and shares held in the suspense
account, will be voted in a manner calculated to most accurately reflect the
instructions it has received from participants regarding the allocated stock
so long as such vote is in accordance with the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
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<PAGE>
Stock Option Plan
At a meeting of the Holding Company's shareholders to be held at least
six months after the completion of the Conversion, the Board of Directors
intends to submit for shareholder approval the Stock Option Plan for directors
and officers of First Federal and of the Holding Company. If approved by the
shareholders, Common Stock in an aggregate amount equal to 10% of the shares
issued in the Conversion would be reserved for issuance by the Holding Company
upon the exercise of the stock options granted under the Stock Option Plan.
Ten percent of the shares issued in the Conversion would amount to 140,250
shares, 165,000 shares, 189,750 shares or 218,213 shares at the minimum, mid-
point, maximum and 15% above the maximum of the Estimated Valuation Range,
respectively. Assuming the issuance of shares in the Conversion, an aggregate
of shares would be reserved for issuance under the Stock Option Plan. No
options would be granted under the Stock Option Plan until the date on which
shareholder approval is received.
It is anticipated that options would be granted for terms of 10 years (in
the case of incentive options) or 10 years and one day (in the case of non-
qualified options), and at an option price per share equal to the fair market
value of the shares on the date of grant of the stock options. If the Stock
Option Plan is adopted within one year following the Conversion, options will
become exercisable at a rate of 20% at the end of each twelve (12) months of
service with us after the date of grant, subject to early vesting in the event
of death or disability. Options granted under the Stock Option Plan are
adjusted for capital changes such as stock splits and stock dividends.
Notwithstanding the foregoing, awards will be 100% vested upon termination of
employment due to death or disability, and if the Stock Option Plan is adopted
more than 12 months after the Conversion, awards would be 100% vested upon
normal retirement or a change in control of First Federal or the Holding
Company. Unless the Holding Company decides to call an earlier special
meeting of shareholders, the date of grant of these options is expected to be
the date of the Holding Company's annual meeting of shareholders to be held at
least six months after the Conversion. Under OTS rules, if the Stock Option
Plan is adopted within the first 12 months after the Conversion, no individual
officer can receive more than 25% of the awards under the plan, no outside
director can receive more than 5% of the awards under the plan, and all
outside directors as a group can receive no more than 30% of the awards under
the plan in the aggregate.
The Stock Option Plan would be administered by a Committee of non-
employee members of the Holding Company's Board of Directors. Options granted
under the Stock Option Plan to employees could be "incentive" stock options
designed to result in a beneficial tax treatment to the employee but no tax
deduction to the Holding Company. Non-qualified stock options could also be
granted under the Stock Option Plan, and will be granted to the non-employee
directors who receive grants of stock options. In the event an option
recipient terminated his or her employment or service as an employee or
director, the options would terminate during certain specified periods.
Recognition and Retention Plan
At a meeting of the Holding Company's shareholders to be held at least
six months after the completion of the Conversion, the Board of Directors also
intends to submit a Recognition and Retention Plan (the "RRP") for shareholder
approval. The RRP will provide our directors and officers an ownership
interest in the Holding Company in a manner designed to encourage them to
continue their service with us. First Federal will contribute funds to the RRP
from time to time to enable it to acquire an aggregate amount of Common Stock
equal to up to 4% of the shares of Common Stock issued in the Conversion,
either directly from the Holding Company or in open market purchases. Four
percent of the shares issued in the Conversion would amount to 56,100 shares,
66,000 shares, 75,900 or 87,285 shares at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively. In the
event that additional authorized but unissued shares would be acquired by the
RRP after the Conversion, the interests of existing shareholders would be
diluted. Our executive officers and directors will be awarded Common Stock
under the RRP without having to pay cash for the shares. No awards under the
RRP would be made until the date the RRP is approved by the Holding Company's
shareholders.
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<PAGE>
Awards would be nontransferable and nonassignable, and during the
lifetime of the recipient could only be earned by him or her. If the RRP is
adopted within one year following the Conversion, the shares which are subject
to an award would vest and be earned by the recipient at a rate of 20% of the
shares awarded at the end of each full twelve (12) months of service with us
after the date of grant of the award, provided, however, that awards to
outside directors between the ages of 62 and 69 who are receiving social
security benefits shall not vest until such director attains age 70. Awards
are adjusted for capital changes such as stock dividends and stock splits.
Notwithstanding the foregoing, awards would be 100% vested upon termination of
employment or service due to death or disability, and if the RRP is adopted
more than 12 months after the Conversion, awards would be 100% vested upon
normal retirement or a change in control of First Federal or the Holding
Company. If employment or service were to terminate for other reasons, the
award recipient would forfeit any nonvested award. If employment or service is
terminated for cause (as would be defined in the RRP), shares not already
delivered under the RRP would be forfeited. Under OTS rules, if the RRP is
adopted within the first 12 months after the Conversion, no individual officer
can receive more than 25% of the awards under the plan, no outside director
can receive more than 5% of the awards under the plan, and all outside
directors as a group can receive no more than 30% of the awards under the plan
in the aggregate.
When shares become vested under the RRP, the participant will recognize
income equal to the fair market value of the Common Stock earned, determined
as of the date of vesting, unless the recipient makes an election under (S)
83(b) of the Code to be taxed earlier. The amount of income recognized by the
participant would be a deductible expense for tax purposes for the Holding
Company. If the RRP is adopted within one year following the Conversion,
dividends and other earnings will accrue and be payable to the award recipient
when the shares vest. Shares not yet vested under the RRP will be voted by
the Trustee of the RRP, taking into account the best interests of the
recipients of the RRP awards.
Transactions With Certain Related Persons
We have followed a policy of offering to our directors, officers, and
employees real estate mortgage loans secured by their principal residence as
well as other loans. All of our loans to our directors, officers and employees
are made on substantially the same terms, including interest rates and
collateral as those prevailing at the time for comparable transactions, and do
not involve more than minimal risk of collectibility. Loans to directors,
executive officers and their associates totaled $50,000 at June 30, 1997.
Current law authorizes us to make loans or extensions of credit to our
executive officers, directors, and principal shareholders on the same terms
that are available with respect to loans made to all of our employees. At
present, our loans to executive officers, directors, principal shareholders
and employees are made on the same terms generally available to the public. We
may in the future, however, adopt a program under which we may waive loan
application fees and closing costs with respect to loans made to such persons.
REGULATION
General
As a federally chartered, SAIF-insured savings association, we are
subject to extensive regulation by the OTS and the FDIC. For example, we must
obtain OTS approval before we may engage in certain activities and must file
reports with the OTS regarding our activities and financial condition. The OTS
periodically examines our books and records and, in conjunction with the FDIC
in certain situations, has examination and enforcement powers. This
supervision and regulation are intended primarily for the protection of
depositors and federal deposit insurance funds. Our semi-annual assessment
owed to the OTS, which is based upon a specified percentage of assets, is
approximately $10,000.
We are also subject to federal and state regulation as to such matters as
loans to officers, directors, or principal shareholders, required reserves,
limitations as to the nature and amount of our loans and investments,
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<PAGE>
regulatory approval of any merger or consolidation, issuance or retirements of
our securities, and limitations upon other aspects of banking operations. In
addition, our activities and operations are subject to a number of additional
detailed, complex and sometimes overlapping federal and state laws and
regulations. These include state usury and consumer credit laws, state laws
relating to fiduciaries, the Federal Truth-In-Lending Act and Regulation Z,
the Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit
Reporting Act, the Community Reinvestment Act, anti-redlining legislation and
antitrust laws.
The United States Congress is considering legislation that would require
all federal savings associations, such as First Federal, to either convert to
a national bank or a state-chartered bank by a specified date to be
determined. In addition, under the legislation, the Holding Company likely
would not be regulated as a savings and loan holding company but rather as a
bank holding company. This proposed legislation would abolish the OTS and
transfer its functions among the other federal banking regulators. Certain
aspects of the legislation remain to be resolved and, therefore, no assurance
can be given as to whether or in what form the legislation will be enacted or
its effect on the Holding Company and First Federal.
Savings and Loan Holding Company Regulation
As the holding company for First Federal, the Holding Company will be
regulated as a "non-diversified savings and loan holding company" within the
meaning of the Home Owners' Loan Act of 1933, as amended ("HOLA"), and subject
to regulatory oversight of the Director of the OTS. As such, the Holding
Company is registered with the OTS and thereby subject to OTS regulations,
examinations, supervision and reporting requirements. As a subsidiary of a
savings and loan holding company, we are subject to certain restrictions in
our dealings with the Holding Company and with other companies affiliated with
the Holding Company.
In general, the HOLA prohibits a savings and loan holding company,
without prior approval of the Director of the OTS, from acquiring control of
another savings association or savings and loan holding company or retaining
more than 5% of the voting shares of a savings association or of another
holding company which is not a subsidiary. The HOLA also restricts the ability
of a director or officer the Holding Company, or any person who owns more than
25% of the Holding Company's stock, from acquiring control of another savings
association or savings and loan holding company without obtaining the prior
approval of the Director of the OTS.
The Holding Company's Board of Directors presently intends to operate the
Holding Company as a unitary savings and loan holding company. There are
generally no restrictions on the permissible business activities of a unitary
savings and loan holding company.
Notwithstanding the above rules as to permissible business activities of
unitary savings and loan holding companies, if the savings association
subsidiary of such a holding company fails to meet the Qualified Thrift Lender
("QTL") test, then such unitary holding company would become subject to the
activities restrictions applicable to multiple holding companies. (Additional
restrictions on securing advances from the FHLB also apply.) See "--Qualified
Thrift Lender." At June 30, 1997, our asset composition was in excess of that
required to qualify us as a Qualified Thrift Lender.
If the Holding Company were to acquire control of another savings
association other than through a merger or other business combination with
First Federal, the Holding Company would thereupon become a multiple savings
and loan holding company. Except where such acquisition is pursuant to the
authority to approve emergency thrift acquisitions and where each subsidiary
savings association meets the QTL test, the activities of the Holding Company
and any of its subsidiaries (other than First Federal or other subsidiary
savings associations) would thereafter be subject to further restrictions. The
HOLA provides that, among other things, no multiple savings and loan holding
company or subsidiary thereof which is not a savings association shall
commence or continue for a limited period of time after becoming a multiple
savings and loan holding company or subsidiary thereof, any business activity
other than (i) furnishing or performing management services for a subsidiary
savings association, (ii) conducting an
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insurance agency or escrow business, (iii) holding, managing, or liquidating
assets owned by or acquired from a subsidiary savings association, (iv)
holding or managing properties used or occupied by a subsidiary savings
association, (v) acting as trustee under deeds of trust, (vi) those activities
previously directly authorized by the FSLIC 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 (the "FRB") as permissible for bank
holding companies, unless the Director of the OTS by regulation prohibits or
limits such activities for savings and loan holding companies. Those
activities described in (vii) above must also be approved by the Director of
the OTS before a multiple holding company may engage in such activities.
The Director of the OTS may also approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls
savings associations in more than one state, if the multiple savings and loan
holding company involved controls a savings association which operated a home
or branch office in the state of the association to be acquired as of March
5,1987, or if the laws of the state in which the association to be acquired is
located specifically permit associations to be acquired by state-chartered
associations or savings and loan holding companies located in the state where
the acquiring entity is located (or by a holding company that controls such
state-chartered savings associations). Also, the Director of the OTS may
approve an acquisition resulting in a multiple savings and loan holding
company controlling savings associations in more than one state in the case of
certain emergency thrift acquisitions.
No subsidiary savings association of a savings and loan holding company
may declare or pay a dividend on its permanent or nonwithdrawable stock unless
it first gives the Director of the OTS 30 days advance notice of such
declaration and payment. Any dividend declared during such period or without
giving notice shall be invalid.
Federal Home Loan Bank System
We are a member of the FHLB of Atlanta, which is one of twelve regional
FHLBs. Each FHLB serves as a reserve or central bank for its members within
its assigned region. It is funded primarily from funds deposited by savings
associations and proceeds derived from the sale of consolidated obligations of
the FHLB system. It makes loans to members ("FHLB advances") in accordance
with policies and procedures established by the Board of Directors of the
FHLB. All FHLB advances must be fully secured by sufficient collateral as
determined by the FHLB. The Federal Housing Finance Board ("FHFB"), an
independent agency, controls the FHLB System, including the FHLB of Atlanta.
As a member, we are required to purchase and maintain stock in the FHLB
of Atlanta in an amount equal to at least 1% of our aggregate unpaid
residential mortgage loans, home purchase contracts, or similar obligations at
the beginning of each year. At June 30, 1997, our investment in stock of the
FHLB of Atlanta was $485,000. The FHLB imposes various limitations on advances
such as limiting the amount of certain types of real estate-related collateral
to 30% of a member's capital and limiting total advances to a member. Interest
rates charged for advances vary depending upon maturity, the cost of funds to
the FHLB of South Carolina and the purpose of the borrowing.
The FHLBs are required to provide funds for the resolution of troubled
savings associations and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. These contributions
have adversely affected the level of FHLB dividends paid and could continue to
do so in the future. For the fiscal year ended June 30, 1997, dividends paid
by the FHLB of Atlanta to us totaled approximately $35,000, for an annual rate
of 7.25%.
Insurance of Deposits
Deposit Insurance. The FDIC is an independent federal agency that insures
savings institution deposits up to applicable limits, of banks and thrifts and
safeguards the safety and soundness of the banking and thrift industries. The
FDIC administers two separate insurance funds, the BIF for commercial banks
and state savings banks and the
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SAIF for savings associations such as First Federal and banks that have
acquired deposits from savings associations. The FDIC is required to maintain
designated levels of reserves in each fund. As of September 30,1996, the
reserves of the SAIF were below the level required by law, primarily because a
significant portion of the assessments paid into the SAIF have been used to
pay the cost of prior thrift failures, while the reserves of the BIF met the
level required by law in May, 1995. However, on September 30,1996, provisions
designed to recapitalize the SAIF and eliminate the premium disparity between
the BIF and SAIF were signed into law. See "-- Assessments" below.
Assessments. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and members of
the SAIF. The FDIC may increase assessment rates for either fund if necessary
to restore the fund's ratio of reserves to insured deposits to the target
level within a reasonable time and may decrease these rates if the target
level has been met. The FDIC has established a risk-based assessment system
for both SAIF and BIF members. Under this system, assessments vary depending
on the risk the institution poses to its deposit insurance fund. An
institution's risk level is determined based on its capital level and the
FDIC's level of supervisory concern about the institution.
On September 30, 1996, President Clinton signed into law legislation
which included provisions designed to recapitalize the SAIF and eliminate the
significant premium disparity between the BIF and the SAIF. Under the new law,
we were charged a one-time special assessment equal to $.657 per $100 in
assessable deposits at March 31,1995. We recognized this one-time assessment
as a non-recurring operating expense of $312,000 ($197,000 after tax) during
the three-month period ending September 30, 1996. The assessment was fully
deductible for both federal and state income tax purposes. Beginning January
1,1997, our annual deposit insurance premium was reduced from .23% to .0644%
of total assessable deposits. BIF institutions pay lower assessments than
comparable SAIF institutions because BIF institutions pay only 20% of the rate
paid by SAIF institutions on their deposits with respect to obligations issued
by the federally-chartered corporation which provided some of the financing to
resolve the thrift crisis in the 1980's ("FICO"). The 1996 law also provides
for the merger of the SAIF and the BIF by 1999, but not until such time as
bank and thrift charters are combined. Until the charters are combined,
savings associations with SAIF deposits may not transfer deposits into the BIF
system without paying various exit and entrance fees, and SAIF institutions
will continue to pay higher FICO assessments. Such exit and entrance fees need
not be paid if a SAIF institution converts to a bank charter or merges with a
bank, as long as the resulting bank continues to pay applicable insurance
assessments to the SAIF, and as long as certain other conditions are met.
Savings Association Regulatory Capital
Currently, savings associations are subject to three separate minimum
capital-to-assets requirements: (i) a leverage limit, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement. The leverage limit
requires that savings associations maintain "core capital" of at least 3% of
total assets. Core capital is generally defined as common shareholders' equity
(including retained income), noncumulative perpetual preferred stock and
related surplus, certain minority equity interests in subsidiaries, qualifying
supervisory goodwill, purchased mortgage servicing rights and purchased credit
card relationships (subject to certain limits) less nonqualifying intangibles.
Under the tangible capital requirement, a savings association must maintain
tangible capital (core capital less all intangible assets except purchased
mortgage servicing rights which may be included after making the above-noted
adjustment in an amount up to 100% of tangible capital) of at least 1.5% of
total assets. Under the risk-based capital requirements, a minimum amount of
capital must be maintained by a savings association to account for the
relative risks inherent in the type and amount of assets held by the savings
association. The risk-based capital requirement requires a savings association
to maintain capital (defined generally for these purposes as core capital plus
general valuation allowances and permanent or maturing capital instruments
such as preferred stock and subordinated debt less assets required to be
deducted) equal to 8.0% of risk-weighted assets. Assets are ranked as to risk
in one of four categories (0-100%). A credit risk-free asset, such as cash,
requires no risk-based capital, while an asset with a significant credit risk,
such as a non-accrual loan, requires a risk factor of 100%. Moreover, a
savings association must deduct from capital, for purposes of meeting the core
capital, tangible capital and risk-based capital requirements, its entire
investment in and loans to a subsidiary engaged in activities not permissible
for a national bank
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(other than exclusively agency activities for its customers or mortgage
banking subsidiaries). At June 30, 1997, we were in compliance with all
capital requirements imposed by law.
The OTS has promulgated a rule which sets forth the methodology for
calculating an interest rate risk component to be used by savings associations
in calculating regulatory capital. The OTS has delayed the implementation of
this rule, however. The rule requires savings associations with "above normal"
interest rate risk (institutions whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move
in interest rates) to maintain additional capital for interest rate risk under
the risk-based capital framework. If the OTS were to implement this
regulation, we would be exempt from its provisions because we have less than
$300 million in assets and our risk-based capital ratio exceeds 12%. We
nevertheless measure our interest rate risk in conformity with the OTS
regulation. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations of First Federal Savings and Loan Association of
Cheraw - Asset Liability Management."
If an association is not in compliance with the capital requirements, the
OTS is required to prohibit asset growth and to impose a capital directive
that may restrict, among other things, the payment of dividends and officers
compensation. In addition, the OTS and the FDIC generally are authorized to
take enforcement actions against a savings association that fails to meet its
capital requirements. These actions may include restricting the operations
activities of the association, imposing a capital directive, cease and desist
order, or civil money penalties, or imposing harsher measures such as
appointing a receiver or conservator or forcing the association to merge into
another institution.
Prompt Corrective Regulatory Action
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to institutions that
do not meet minimum capital requirements. For these purposes, FDICIA
establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. At June 30, 1997, we were categorized as "well capitalized,"
meaning that our total risk-based capital ratio exceeded 10%, our Tier I risk-
based capital ratio exceeded 6%, our leverage ratio exceeded 5%, and we were
not subject to a regulatory order, agreement or directive to meet and maintain
a specific capital level for any capital measure.
The FDIC may order savings associations which have insufficient capital
to take corrective actions. For example, a savings association which is
categorized as "undercapitalized" would be subject to growth limitations and
would be required to submit a capital restoration plan, and a holding company
that controls such a savings association would be required to guarantee that
the savings association complies with the restoration plan. "Significantly
undercapitalized" savings associations would be subject to additional
restrictions. Savings associations deemed by the FDIC to be "critically
undercapitalized" would be subject to the appointment of a receiver or
conservator.
Dividend Limitations
An OTS regulation imposes limitations upon all "capital distributions" by
savings associations, including cash dividends, payments by an association to
repurchase or otherwise acquire its shares, payments to shareholders of
another institution in a cash-out merger and other distributions charged
against capital. The regulation establishes a three-tiered system of
regulation, with the greatest flexibility being afforded to well-capitalized
associations. A savings association which has total capital (immediately prior
to and after giving effect to the capital distribution) that is at least equal
to its fully phased-in capital requirements would be a Tier 1 institution
("Tier 1 Institution"). An association that has total capital at least equal
to its minimum capital requirements, but less than its capital requirements,
would be a Tier 2 institution ("Tier 2 Institution"). An institution having
total capital that is less than its minimum capital requirements would be a
Tier 3 institution ("Tier 3 Institution"). However, an institution which
otherwise qualifies as a Tier 1 Institution may be designated by the OTS as a
Tier 2 or Tier 3 Institution if the OTS determines that the institution is "in
need of more than normal supervision." We are currently a Tier 1 Institution.
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A Tier 1 Institution may, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year up to the greater
of (a) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" at the beginning of
the calendar year (the smallest excess over its capital requirements), or (b)
75% of its net income over the most recent four-quarter period. Any additional
amount of capital distributions would require prior regulatory approval.
Accordingly, at June 30, 1997, we had available approximately $5.0 million for
distribution, without consideration of any capital infusion from the
Conversion.
The OTS has proposed revisions to these regulations which would permit
savings associations to declare dividends in amounts which would assure that
they remain adequately capitalized following the dividend declaration. Savings
associations in a holding company system which are rated Camel 1 or 2 and
which are not in troubled condition would need to file a prior notice with the
OTS concerning such dividend declaration.
Pursuant to the Plan of Conversion, we will establish a liquidation
account for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders. See "The Conversion -- Principal Effects of Conversion." We
will not be permitted to pay dividends to the Holding Company if our net worth
would be reduced below the amount required for the liquidation account. We
must also must file a notice with the OTS 30 days before declaring a dividend
to the Holding Company.
Limitations on Rates Paid for Deposits
Regulations promulgated by the FDIC pursuant to FDICIA place limitations
on the ability of insured depository institutions to accept, renew or roll
over deposits by offering rates of interest which are significantly higher
than the prevailing rates of interest on deposits offered by other insured
depository institutions having the same type of charter in the institution's
normal market area. Under these regulations, "well-capitalized" depository
institutions may accept, renew or roll such deposits over without restriction,
"adequately capitalized" depository institutions may accept, renew or roll
such deposits over with a waiver from the FDIC (subject to certain
restrictions on payments of rates) and "undercapitalized" depository
institutions may not accept, renew or roll such deposits over. The regulations
contemplate that the definitions of "well capitalized," "adequately
capitalized" and "undercapitalized" will be the same as the definition adopted
by the agencies to implement the corrective action provisions of FDICIA. We
do not believe that these regulations will have a materially adverse effect on
our current operations.
Safety and Soundness Standards
On February 2, 1995, the federal banking agencies adopted final safety
and soundness standards for all insured depository institutions. The
standards, which were issued in the form of guidelines rather than
regulations, relate to internal controls, information systems, internal audit
systems, loan underwriting and documentation, compensation and interest rate
exposure. In general, the standards are designed to assist the federal banking
agencies in identifying and addressing problems at insured depository
institutions before capital becomes impaired. If an institution fails to meet
these standards, the appropriate federal banking agency may require the
institution to submit a compliance plan. Failure to submit a compliance plan
may result in enforcement proceedings. On August 27, 1996, the federal banking
agencies added asset quality and earning standards to the safety and soundness
guidelines.
Loans to One Borrower
Under OTS regulations, we may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of our unimpaired
capital and surplus. Additional amounts may be lent, not in excess of 10% of
unimpaired capital and surplus, if such loans or extensions of credit are
fully secured by readily marketable collateral, including certain debt and
equity securities but not including real estate. In some cases, a savings
association may lend up to 30 percent of unimpaired capital and surplus to one
borrower for purposes of developing domestic residential housing, provided
that the association meets its regulatory capital requirements and the OTS
authorizes the association to use this expanded lending authority. At June 30,
1997, we did not have any loans or extensions of credit to a single
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or related group of borrowers in excess of our lending limits. We do not
believe that the loans-to-one-borrower limits will have a significant impact
on our business operations or earnings following the Conversion.
Qualified Thrift Lender
Savings associations must meet a QTL test. If we maintain an appropriate
level of qualified thrift investments ("QTIs") (primarily residential
mortgages and related investments, including certain mortgage-related
securities) and otherwise qualify as a QTL, we will continue to enjoy full
borrowing privileges from the FHLB of Atlanta. The required percentage of
QTIs is 65% of portfolio assets (defined as all assets minus intangible
assets, property used by the association in conducting its business and liquid
assets equal to 10% of total assets). Certain assets are subject to a
percentage limitation of 20% of portfolio assets. In addition, savings
associations may include shares of stock of the FHLBs, FNMA, and FHLMC as
QTIs. Compliance with the QTL test is determined on a monthly basis in nine
out of every twelve months. As of June 30, 1997, we were in compliance with
our QTL requirement, with approximately 89.78% of our assets invested in QTIs.
A savings association which fails to meet the QTL test must either
convert to a bank (but its deposit insurance assessments and payments will be
those of and paid to the SAIF) or be subject to the following penalties: (i)
it may not enter into any new activity except for those permissible for a
national bank and for a savings association; (ii) its branching activities
shall be limited to those of a national bank; (iii) it shall not be eligible
for any new FHLB advances; and (iv) it shall be bound by regulations
applicable to national banks respecting payment of dividends. Three years
after failing the QTL test the association must (i) dispose of any investment
or activity not permissible for a national bank and a savings association and
(ii) repay all outstanding FHLB advances. If such a savings association is
controlled by a savings and loan holding company, then such holding company
must, within a prescribed time period, become registered as a bank holding
company and become subject to all rules and regulations applicable to bank
holding companies (including restrictions as to the scope of permissible
business activities).
Acquisitions and Branching
The Bank Holding Company Act specifically authorizes a bank holding
company, upon receipt of appropriate regulatory approvals, to acquire control
of any savings association or holding company thereof wherever located.
Similarly, a savings and loan holding company may acquire control of a bank.
Moreover, federal savings associations may acquire or be acquired by any
insured depository institution. Regulations promulgated by the FRB restrict
the branching authority of savings associations acquired by bank holding
companies. Savings associations acquired by bank holding companies may be
converted to banks if they continue to pay SAIF premiums, but as such they
become subject to branching and activity restrictions applicable to banks.
Subject to certain exceptions, commonly-controlled banks and savings
associations must reimburse the FDIC for any losses suffered in connection
with a failed bank or savings association affiliate. Institutions are commonly
controlled if one is owned by another or if both are owned by the same holding
company. Such claims by the FDIC under this provision are subordinate to
claims of depositors, secured creditors, and holders of subordinated debt,
other than affiliates.
The OTS has adopted regulations which permit nationwide branching to the
extent permitted by federal statute. Federal statutes permit federal savings
associations to branch outside of their home state if the association meets
the domestic building and loan test in (S)7701(a)(19) of the Code or the asset
composition test of (S)7701(c) of the Code. Branching that would result in the
formation of a multiple savings and loan holding company controlling savings
associations in more than one state is permitted if the law of the state in
which the savings association to be acquired is located specifically
authorizes acquisitions of its state-chartered associations by state-chartered
associations or their holding companies in the state where the acquiring
association or holding company is located.
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Finally, The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal Act") permits bank holding companies to acquire
banks in other states and, with state consent and subject to certain
limitations, allows banks to acquire out-of-state branches either through
merger or de nova expansion.
Transactions with Affiliates
We are subject to Sections 22(h), 23A and 23B of the Federal Reserve Act,
which restrict financial transactions between banks and affiliated companies.
The statute limits credit transactions between a bank or savings association
and its executive officers and its affiliates, prescribes terms and conditions
for bank affiliate transactions deemed to be consistent with safe and sound
banking practices, and restricts the types of collateral security permitted in
connection with a bank's extension of credit to an affiliate.
Federal Securities Law
The shares of Common Stock of the Holding Company will be registered with
the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act")
as soon as practicable after the Conversion. The Holding Company will be
subject to the information, proxy solicitation, insider trading restrictions
and other requirements the 1934 Act and the rules of the SEC thereunder. After
three years following our conversion to stock form, if the Holding Company has
fewer than 300 shareholders, it may deregister its shares under the 1934 Act
and cease to be subject to the foregoing requirements.
Shares of Common Stock held by persons who are affiliates of the Holding
Company may not be resold without registration unless sold in accordance with
the resale restrictions of Rule 144 under the 1933 Act. If the Holding Company
meets the current public information requirements under Rule 144, 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.
Community Reinvestment Act Matters
Federal law requires that ratings of depository institutions under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure
includes both a four-unit descriptive rating--outstanding, satisfactory, needs
to improve, and substantial noncompliance--and a written evaluation of an
institution's performance. Each FHLB is required to establish standards of
community investment or service that its members must maintain for continued
access to long-term advances from the FHLBs. The standards take into account a
member's performance under the CRA and its record of lending to first time
home buyers. The OTS has designated our record of meeting community credit
needs as "outstanding."
TAXATION
Federal Taxation
Historically, savings associations, such as First Federal, have been
permitted to compute bad debt deductions using either the bank experience
method or the percentage of taxable income method. However, for years
beginning after December 31, 1995, no savings association may use the
percentage of taxable income method of computing its allowable bad debt
deduction for tax purposes. Instead, all savings associations are required to
compute their allowable deduction using the experience method. As a result of
the repeal of the percentage of taxable income method, reserves taken after
1987 using the percentage of taxable income method generally must be included
in future taxable income over a six-year period, although a two-year delay may
be permitted for associations meeting a residential mortgage
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loan origination test. First Federal will recapture approximately $20,000 over
a six-year period beginning with the fiscal 1999 income tax returns. In
addition, the pre-1988 reserve, for which no deferred taxes have been
recorded, need not be recaptured into income unless (i) the savings
association no longer qualifies as a bank under the Code, or (ii) the savings
association pays out excess dividends contributions.
Depending on the composition of its items of income and expense, a
savings association may be subject to the alternative minimum tax. A savings
association must pay an alternative minimum tax on the amount (if any) by
which 20% of alternative minimum taxable income ("AMTI"), as reduced by an
exemption varying with AMTI, exceeds the regular tax due. AMTI equals regular
taxable income increased or decreased by certain tax preferences and
adjustments, including depreciation deductions in excess of that allowable for
alternative minimum tax purposes, tax-exempt interest on most private activity
bonds issued after August 7, 1986 (reduced by any related interest expense
disallowed for regular tax purposes), the amount of the bad debt reserve
deduction claimed in excess of the deduction based on the experience method
and 75% of the excess of adjusted current earnings over AMTI (before this
adjustment and before any alternative tax net operating loss). AMTI may be
reduced only up to 90% by net operating loss carryovers, but alternative
minimum tax paid can be credited against regular tax due in later years.
For federal income tax purposes, we have been reporting our income and
expenses on the accrual method of accounting. Our federal income tax returns
have not been audited during the past five years.
State Taxation
Our state income tax returns have not been audited during the past five
years.
For further information relating to the tax consequences of the
Conversion, see "The Conversion--Principal Effects of Conversion -- Tax
Effects."
RESTRICTIONS ACQUISITION OF THE HOLDING COMPANY
General
Although the Boards of Directors of First Federal and the Holding Company
are not aware of any effort that might be made to obtain control of the
Holding Company after the Conversion, the Boards of Directors believe that it
is appropriate to include certain provisions in the Holding Company's
Certificate of Incorporation (the "Certificate") to protect the interests of
the Holding Company and its shareholders from unsolicited changes in the
control of the Holding Company in circumstances that the Board of Directors of
the Holding Company concludes will not be in the best interests of First
Federal, the Holding Company or the Holding Company's shareholders.
Although the Holding Company's Board of Directors believes that the
restrictions on acquisition described below are beneficial to shareholders,
the provisions may have the effect of rendering the Holding Company less
attractive to potential acquirers, thereby discouraging future takeover
attempts which would not be approved by the Board of Directors but which
certain shareholders might deem to be in their best interest or pursuant to
which shareholders might receive a substantial premium for their shares over
then current market prices. These provisions will also render the removal of
the incumbent Board of Directors and of management more difficult. The Board
of Directors has, however, concluded that the potential benefits of these
restrictive provisions outweigh the possible disadvantages.
The following general discussion contains a summary of the material
provisions of the Holding Company's Certificate of Incorporation By-Laws (the
"By-Laws"), and certain other regulatory provisions, that may be deemed to
have an effect of delaying, deferring or preventing a change in the control of
the Holding Company. The following description of certain of these provisions
is general and not necessarily complete, and with respect to provisions
contained in the Certificate and Bylaws, reference should be made in each case
to the document in question, each of
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which is part of our application for approval of the Conversion or the Holding
Company's Registration Statement filed with the SEC. See "Additional
Information."
Provisions of the Company's Certificate of Incorporation and Bylaws
Directors. Certain provisions of the Holding Company's Certificate of
Incorporation and Bylaws will impede changes in majority control of the Board
of Directors. The Holding Company's Certificate of Incorporation provides
that the Board of Directors of the Holding Company will be divided into three
classes, with directors in each class elected for three-year staggered terms
except for the initial directors. Thus, it would take two annual elections to
replace a majority of the Holding Company's Board. The Holding Company's
Certificate of Incorporation provides that the size of the Board of Directors
may be increased or decreased only by a majority vote of the Board. The
Certificate of Incorporation also provides that any vacancy occurring in the
Board of Directors, including a vacancy created by an increase in the number
of directors, shall be filled for the remainder of the unexpired term by a
majority vote of the directors then in office. Finally, the Certificate of
Incorporation and Bylaws impose certain notice and information requirements in
connection with the nomination by stockholders of candidates for election to
the Board of Directors or the proposal by stockholders of business to be acted
upon at an annual meeting of stockholders.
The Certificate of Incorporation provides that a director may only be
removed for cause by the affirmative vote of 80% of the shares eligible to
vote. Removal for "cause" is limited to the grounds for termination in the
federal regulations that applies to employment contracts of federally insured
savings institutions.
Restrictions on Call of Special Meetings. The Certificate of
Incorporation provides that a special meeting of stockholders may be called by
the Chairman of the Board of the Holding Company or pursuant to a resolution
adopted by a majority of the Board of Directors. Stockholders are not
authorized to call a special meeting.
Absence of Cumulative Voting. The Certificate of Incorporation provides
that there shall be no cumulative voting rights in the election of directors.
Authorization of Preferred Stock. The Certificate of Incorporation
authorizes 400,000 shares of serial preferred stock, without par value. The
Holding Company is authorized to issue preferred stock from time to time in
one or more series subject to applicable provisions of law; and the Board of
Directors is authorized to fix the designations, and relative preferences,
limitations, voting rights, if any, including without limitation, conversion
rights of such shares (which could be multiple or as a separate class). In
the event of a proposed merger, tender offer or other attempt to gain control
of the Holding Company that the Board of Directors does not approve, it might
be possible for the Board of Directors to authorize the issuance of a series
of preferred stock with rights and preferences that would impede the
completion of such a transaction. An effect of the possible issuance of
preferred stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any preferred stock but it may issue any preferred stock on terms which the
Board deems to be in the best interests of the Holding Company and its
stockholders.
Limitation on Voting Rights. The Certificate of Incorporation provides
that (i) no person shall directly or indirectly offer to acquire or acquire
the beneficial ownership of more than 10% of any class of equity security of
the Holding Company (provided that such limitation shall not apply to the
acquisition of equity securities by any one or more tax-qualified employee
stock benefit plans maintained by the Holding Company); and that (ii) shares
beneficially owned in violation of the stock ownership restriction described
above shall not be entitled to vote and shall not be voted by any person or
counted as voting stock in connection with any matter submitted to a vote of
stockholders. For these purposes, a person (including management) who has
obtained the right to vote shares of the Common Stock pursuant to revocable
proxies shall not be deemed to be the "beneficial owner" of those shares if
that person is not otherwise deemed to be a beneficial owner of those shares.
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The Certificate of Incorporation further provides that the Board of
Directors of the Holding Company, when determining to take or refrain from
taking corporate action on any matter, including making or declining to make
any recommendation to the Holding Company's stockholders, may, in connection
with the exercise of its judgment in determining what is in the best interest
of the Holding Company, First Federal, and the stockholders of the Holding
Company, give due consideration to all relevant factors, including, without
limitation, the social and economic effects of acceptance of such offer on the
Holding Company's customers and First Federal's present and future account
holders, borrowers and employees; the effect on the communities in which the
Holding Company and First Federal operate or are located; and the effect on
the ability of the Holding Company to fulfill the objectives of a financial
institution holding company and of First Federal or future subsidiaries to
fulfill the objectives of a financial institution under applicable statutes
and regulations. The Certificate of Incorporation of the Holding Company also
authorizes the Board of Directors to take certain actions to encourage a
person to negotiate for a change of control of the Holding Company or to
oppose such a transaction deemed undesirable by the Board of Directors
including the adoption of so-called shareholder rights plans. By having these
standards and provisions in the Certificate of Incorporation of the Holding
Company, the Board of Directors may be in a stronger position to oppose such a
transaction if the Board concludes that the transaction would not be in the
best interest of the Holding Company, even if the price offered is
significantly greater than the then market price of any equity security of the
Holding Company.
Procedures for Certain Business Combinations. The Certificate of
Incorporation requires that certain business combinations between the Holding
Company (or any majority-owned subsidiary thereof) and a 10% or greater
stockholder either (i) be approved by at least 80% of the total number of
outstanding voting shares of the Holding Company or (ii) be approved by a
majority of certain directors unaffiliated with such 10% or greater
stockholder or (iii) involve consideration per share generally equal to the
higher of (A) the highest amount paid by such 10% stockholder or its
affiliates in acquiring any shares of the Common Stock or (B) the "Fair Market
Value" (generally, the highest closing bid paid on the Common Stock during the
30 days preceding the date of the announcement of the proposed business
combination or on the date the 10% or greater stockholder became such,
whichever is higher).
Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Certificate of Incorporation must be approved by the Holding Company's Board
of Directors and also by a majority of the outstanding shares of the Holding
Company's voting stock; provided, however, that approval by at least 80% of
the outstanding voting stock is generally required for certain provisions
(i.e., provisions relating to number, classification, election and removal of
directors, amendment of bylaws, call of special stockholder meetings, criteria
for evaluating certain offers, offers to acquire and acquisitions of control,
director liability, certain business combinations, power of indemnification,
and amendments to provisions relating to the foregoing in the Certificate of
Incorporation).
The bylaws may be amended by the affirmative vote of the total number of
directors of the Holding Company or the affirmative vote of at least 80% of
the total votes eligible to be voted at a duly constituted meeting of
stockholders.
Purpose and Takeover Defensive Effects of the Holding Company's
Certificate of Incorporation and Bylaws. The Board of Directors believes that
the provisions described above are prudent and will reduce the Holding
Company's vulnerability to takeover attempts and certain other transactions
which have not been negotiated with and approved by its Board of Directors.
These provisions will also assist in the orderly deployment of the Stock
Conversion proceeds into productive assets during the initial period after the
Stock Conversion. The Board of Directors believes these provisions are in our
best interests and the best interests of our 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 interests
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
78
<PAGE>
transaction at prices reflective of the true value of the Holding Company and
which is in the best interests of all stockholders.
Attempts to take over financial institutions and their holding companies
have become increasingly common. Takeover attempts which have not been
negotiated with and approved by the Board of Directors present to stockholders
the risk of a takeover on terms which may be less favorable than might
otherwise be available. A transaction which 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 for the Holding Company
and 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
then-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 which is under different management and whose objectives may not be
similar to those of the remaining stockholders.
Potential Anti-Takeover Effects. Despite our belief 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 which 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. Our Boards of Directors, however, have concluded that the
potential benefits outweigh the possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Stock Conversion, the Holding Company may adopt
additional provisions to its Certificate of Incorporation regarding the
acquisition of its equity securities that would be permitted to a Delaware
corporation. We do not presently intend to propose the adoption of further
restrictions on the acquisition of the Holding Company's equity securities.
OTS Regulations. OTS regulations prohibit any person, prior to the
completion of a conversion, from transferring, or entering into any agreement
or understanding to transfer, the legal or beneficial ownership of the
subscription rights issued under a plan of conversion or the stock to be
issued upon their exercise. These regulations also prohibit any person prior
to the completion of a conversion from offering, or making an announcement of
an offer or intent to make an offer, to purchase such subscription rights or
stock. For three years following conversion, this regulation prohibits any
person, without the prior approval of the OTS, from acquiring or making an
offer (if opposed by the institution) to acquire more than 10% of the stock of
any converted savings institution if such person is, or after consummation of
such acquisition would be, the beneficial owner of more than 10% of such
stock. In the event that any person, directly or indirectly, violates this
regulation, the securities 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
a vote of stockholders.
Federal law provides that no company "directly or indirectly or acting in
concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. "Acting in
concert" is defined very broadly. In addition, federal regulations require
that, prior to obtaining control of a savings association, a person, other
than a company, must give 60 days' prior notice to the OTS and have received
no OTS objection to such acquisition of control. Any company that acquires
such control becomes a "savings and loan holding company" subject to
registration, examination and regulation as a savings and loan holding
company. Under federal law (as well as the
79
<PAGE>
regulations referred to below) the term "savings association" includes state
and federally chartered SAIF-insured institutions and federally chartered
savings banks whose accounts are insured by the FDIC's BIF and holding
companies thereof.
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 "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 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.
DESCRIPTION OF CAPITAL STOCK
Holding Company Capital Stock
The 3,600,000 shares of capital stock authorized by the Holding Company's
Certificate of Incorporation are divided into two classes, consisting of
3,200,000 shares of Common Stock ($.01 par value) and 400,000 shares of serial
preferred stock ($.01 par value). The Holding Company currently expects to
issue between 1,402,500 and 1,897,500 shares, with an adjusted maximum of
2,182,125 shares, of Common Stock in the Stock Conversion. The aggregate
stated value of the issued shares will constitute the capital account of the
Holding Company on a consolidated basis. The balance of the Purchase Price of
Common Stock, less expenses of Stock Conversion, will be reflected as paid-in
capital on a consolidated basis. See "Capitalization." 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, validly issued
and nonassessable.
Each share of the Common Stock will have the same relative rights and
will be identical in all respects with each other share of the Common Stock.
The Common Stock of the Holding Company will represent non-withdrawable
capital, will not be of an insurable type and will not be insured by the FDIC.
Under Delaware law, the holders of the Common Stock will possess
exclusive voting power in the Holding Company. Each stockholder will be
entitled to one vote for each share held on all matters voted upon by
stockholders, subject to the limitation discussed under "Restrictions on
Acquisitions of Stock and Related Takeover Defensive Provisions-- Provisions
of the Holding Company's Certificate of Incorporation and Bylaws--Limitation
on Voting Rights." If the Holding Company issues preferred stock subsequent
to the Conversion, holders of the preferred stock may also possess voting
powers.
Liquidation or Dissolution. In the unlikely event of the liquidation or
dissolution of the Holding Company, the holders of the Common Stock will be
entitled to receive -- after payment or provision for payment of all debts and
liabilities of the Holding Company (including all deposits in First Federal
and accrued interest thereon) and after distribution of the liquidation
account established upon Stock Conversion for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders who continue their deposit
accounts at First Federal -- all assets of the Holding Company available for
distribution, in cash or in kind. See "The Conversion--Effects of Conversion
to Stock
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<PAGE>
Form on Depositors and Borrowers of First Federal." If preferred stock is
issued subsequent to the Conversion, the holders thereof may have a priority
over the holders of Common Stock in the event of liquidation or dissolution.
No Preemptive Rights. Holders of the Common Stock will not be entitled
to preemptive rights with respect to any shares which may be issued. The
Common Stock will not be subject to call for redemption, and, upon receipt by
the Holding Company of the full purchase price therefor, each share of the
Common Stock will be fully paid and nonassessable.
Preferred Stock. After Stock Conversion, the Board of Directors of the
Holding Company will be authorized to issue preferred stock in series and to
fix and state the voting powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof.
Preferred stock may rank prior to the Common Stock as to dividend rights,
liquidation preferences, or both, and may have full or limited voting rights.
The holders of preferred stock will be entitled to vote as a separate class or
series under certain circumstances, regardless of any other voting rights
which such holders may have.
Except as discussed herein, the Holding Company has no present plans for
the issuance of the additional authorized shares of Common Stock or for the
issuance of any shares of preferred stock. In the future, the authorized but
unissued and unreserved shares of Common Stock will be available for general
corporate purposes including but not limited to possible issuance as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment and stock purchase plan, in a future underwritten or
other public offering or under an employee stock ownership plan, stock option
or restricted stock plan. The authorized but unissued shares of preferred
stock will similarly be available for issuance in future mergers or
acquisitions, in a future underwritten public offering or private placement or
for other general corporate purposes. Except as described above or as
otherwise required to approve the transaction in which the additional
authorized shares of Common Stock or authorized shares of preferred stock
would be issued, no stockholder approval will be required for the issuance of
these shares. Accordingly, the Board of Directors of the Holding Company,
without stockholder approval, can issue preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock.
Restrictions on Acquisitions. See "Restrictions on Acquisitions of Stock
and Related Takeover Defensive Provisions" for a description of certain
provisions of the Holding Company's Certificate of Incorporation and bylaws
which may affect the ability of the Holding Company's stockholders to
participate in certain transactions relating to acquisitions of control of the
Holding Company.
Dividends. Upon consummation of the formation of the Holding Company,
the Holding Company's only asset will be First Federal's Common Stock.
Although it is anticipated that the Holding Company will retain up to 50% of
the net proceeds in the Conversion, dividends from First Federal will be an
important source of income for the Holding Company. Should First Federal
elect to retain its income, the ability of the Holding Company to pay
dividends to its own shareholders may be adversely affected. Furthermore, if
at any time in the future the Holding Company owns less than __% of the
outstanding stock of First Federal, certain tax benefits under the Code as to
inter-company distributions will not be fully available to the Holding Company
and it will be required to pay federal income tax on a portion of the
dividends received from First Federal, thereby reducing the amount of income
available for distribution to the shareholders of the Holding Company.
TRANSFER AGENT
________________________ will act as transfer agent and registrar for the
Common Stock. __________________'s phone number is (_____) ________________ or
(800) __________________.
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<PAGE>
REGISTRATION REQUIREMENTS
The Holding Company's Common Stock will be registered pursuant to Section
12(g) of the 1934 Act and may not be deregistered for a period of at least
three years following the Conversion. As a result of the registration under
the 1934 Act, certain holders of Common Stock will be subject to certain
reporting and other requirements imposed by the 1934 Act. For example,
beneficial owners of more than 5% of the outstanding Common Stock will be
required to file reports pursuant to Section 13(d) or Section 13(g) of the
1934 Act, and officers, directors and 10% shareholders of the Holding Company
will generally be subject to reporting requirements of Section 16(a) and to
the liability provisions for profits derived from purchases and sales of
Holding Company Common Stock occurring within a six-month period pursuant to
Section 16(b) of the 1934 Act. In addition, certain transactions in Common
Stock, such as proxy solicitations and tender offers, will be subject to the
disclosure and filing requirements imposed by Section 14 of the 1934 Act and
the regulations promulgate thereunder.
CHANGE IN ACCOUNTANTS
Prior to the fiscal year ended June 30, 1997, our financial statements
were audited by Philip Lee & Company. Philip Lee & Company was replaced and
Dixon, Odom & Co. was engaged and continues as our independent auditors. The
decision to change auditors was recommended by the Audit Committee of our
Board of Directors on July 8, 1997, and was approved by the Board of
Directors.
For the fiscal year ended June 30, 1996 and up to the date of the
replacement of Philip Lee & Company, there were no disagreements with Philip
Lee & Company on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Philip Lee & Company, would have caused it to make a
reference to the subject matter of the disagreement in connection with its
reports. The independent auditors' report of Philip Lee & Company on the
financial statements for the fiscal year ended June 30, 1996 did not contain
an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.
We did not consult with Dixon, Odom & Co. during our two most recent
fiscal years nor during any subsequent interim period prior to their
engagement.
LEGAL AND TAX MATTERS
Luse Lehman Gorman Pomerenk & Schick, P.C., 5335 Wisconsin Avenue, N.W.
Suite 400, Washington, D.C. 20015, special counsel to First Federal, will pass
upon the legality and validity of the shares of Common Stock being issued in
the Conversion. Luse Lehman Gorman Pomerenk & Schick, P.C. has issued an
opinion concerning certain federal and state income tax aspects of the
Conversion and that the Conversion, as propose, constitutes a tax-free
reorganization under federal law. Luse Lehman Gorman Pomerenk & Schick, P.C.
have consented to the references herein to their opinions. Certain legal
matters related to this offering will be passed upon for Trident Securities,
Inc. by Breyer & Aguggia, Washington, D.C.
EXPERTS
Our consolidated financial statements at June 30,1997 and 1996, and for
each of the two years in the period ended June 30, 1997 appearing in this
Prospectus and Registration Statement have been audited by Dixon, Odom & Co.,
L.L.P. independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Ferguson has consented to the publication of the summary herein of its
appraisal report as to the estimated pro forma market value of the Common
Stock of the Holding Company to be issued in the Conversion, to the
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reference to its opinion relating to the value of the subscription rights, and
to the filing of the appraisal report as an exhibit to the registration
statement filed by the Holding Company under the 1933 Act.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a registration statement under
the 1933 Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the registration statement. Such information can be
inspected and copied at the SEC's public reference facilities located at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Office in
New York (Seven World Trade Center, 13th Floor, New York, New York 10048) and
Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511) and copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. This information can also be found
on the SEC's website, located at http://www.sec.gov.
First Federal has filed with the OTS an Application for Conversion from a
federal mutual savings bank to a federal stock savings bank, and the Holding
Company has filed with the OTS an Application to become a savings and loan
holding company. This Prospectus omits certain information contained in such
Applications. The Applications may be inspected at the offices of the OTS,
1700 G Street, N.W., Washington, D.C. 20552 and at the Southeast Regional
Officer of the OTS, 1475 Peachtree Street, N.E., Atlanta, Georgia 30309.
83
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHERAW
<PAGE>
First Federal Savings and Loan Association of Cheraw
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Independent Auditors' Report....................................... F-1
Financial Statements
Statements of Financial Condition............................... F-2
Statements of Operations........................................ 38
Statements of Retained Earnings................................. F-3
Statements of Cash Flows........................................ F-4
Notes to Financial Statements................................... F-6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
First Federal Savings and Loan Association of Cheraw
Cheraw, South Carolina
We have audited the accompanying statements of financial condition of First
Federal Savings and Loan Association of Cheraw as of June 30, 1997 and 1996 and
the related statements of operations, retained earnings, and cash flows for the
years then ended. These financial statements are the responsibility of the
Association's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Federal Savings and Loan
Association of Cheraw at June 30, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Dixon, Odeom & Co., L.L.P.
Southern Pines, North Carolina
August 22, 1997
--------
Page F-1
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
STATEMENTS OF FINANCIAL CONDITION
June 30, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------ -----------
<S> <C> <C>
Cash on hand and in banks $ 222,334 $ 284,592
Interest-bearing balances in other banks 2,719,538 2,291,728
Federal funds sold 800,000 500,000
Investment securities held to maturity, at amortized
cost (fair value of $1,755,793 and $2,194,520 at
June 30, 1997 and 1996, respectively) (Note B) 1,765,939 2,195,931
Loans receivable, net (Note C) 53,973,837 53,334,639
Accrued interest receivable 238,432 242,743
Premises and equipment, net (Note D) 183,440 196,326
Foreclosed real estate 10,100 27,166
Stock in the Federal Home Loan Bank, at cost 484,600 482,000
Other assets 139,327 138,903
----------- -----------
TOTAL ASSETS $60,537,547 $59,694,028
=========== ===========
LIABILITIES AND RETAINED EARNINGS
Savings deposits (Note G) $46,863,007 $47,949,233
Advances from Federal Home Loan Bank (Note F) 2,400,000 1,050,000
Accrued interest payable 105,706 73,121
Advance payments by borrowers for property taxes and
insurance 59,985 88,999
Accrued expenses and other liabilities 19,183 28,724
----------- -----------
TOTAL LIABILITIES 49,447,881 49,190,077
----------- -----------
Commitments and contingencies (Notes C, F and L)
Retained earnings, substantially restricted (Notes J
and K) 11,089,666 10,503,951
----------- -----------
TOTAL LIABILITIES AND
RETAINED EARNINGS $60,537,547 $59,694,028
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes. Page F-2
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
STATEMENTS OF RETAINED EARNINGS
Years Ended June 30, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
BALANCE, BEGINNING $10,503,951 $ 9,709,731
NET INCOME 585,715 794,220
----------- -----------
BALANCE, ENDING $11,089,666 $10,503,951
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes. Page F-3
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 585,715 $ 794,220
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 17,392 17,989
Amortization, net (25,792) (33,258)
(Gain) loss on sale of foreclosed real estate, net 9,454 (10,501)
Provision for loan losses 143,000 17,967
Deferred income taxes (23,525) 38,307
Change in assets and liabilities
(Increase) decrease in accrued interest receivable 4,311 (6,539)
(Increase) decrease in other assets 38,101 (28,182)
Increase (decrease) in accrued interest payable 32,585 (909)
Decrease in accrued expenses and other liabilities (9,541) (16,199)
----------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 771,700 772,895
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in interest bearing balances in other
banks (427,810) (292,863)
Net increase in federal funds sold (300,000) (300,000)
Purchases of held to maturity investment securities (1,300,000) (500,000)
Proceeds from maturities and calls of
held to maturity investment securities 1,730,571 632,720
Purchase of Federal Home Loan Bank stock (2,600) (8,700)
Proceeds from sale of loans 524,661 -
Net increase in loans (1,292,446) (538,067)
Purchase of premises and equipment (4,506) (1,827)
Proceeds from sale of real estate acquired in
settlement of loans 21,907 169,838
Capital expenditures for real estate acquired in
settlement of loans (3,495) (6,258)
----------- ---------
NET CASH USED BY
INVESTING ACTIVITIES (1,053,718) (845,157)
----------- ---------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes. Page F-4
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
STATEMENTS OF CASH FLOWS
Years Ended June 30, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
------------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in savings deposits $(1,086,226) $ 967
Increase (decrease) in advance payments by
borrowers for taxes and insurance (29,014) 14,553
Stock conversion costs incurred (15,000) -
Net increase in advances from Federal Home Loan
Bank 1,350,000 -
----------- ----------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 219,760 15,520
----------- ----------
NET DECREASE IN CASH ON
HAND AND IN BANKS (62,258) (56,742)
CASH ON HAND AND IN BANKS, BEGINNING 284,592 341,334
----------- ----------
CASH ON HAND
AND IN BANKS, ENDING $ 222,334 $ 284,592
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 2,562,225 $2,668,741
=========== ==========
Income taxes $ 352,500 $ 465,000
=========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Loans receivable transferred to real estate
acquired in settlement of loans $ 10,800 $ 53,535
=========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes. Page F-5
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
- ---------------------------
First Federal Savings and Loan Association of Cheraw ("First Federal" or the
"Association") is an operating federally chartered mutual savings and loan
association primarily engaged in the business of obtaining savings deposits and
providing loans to the general public.
Nature of Business
- ------------------
First Federal maintains its sole office and conducts its primary business in
Cheraw, Chesterfield County, South Carolina. The Association is primarily
engaged in the business of attracting deposits from the general public and using
such deposits to make mortgage loans secured by one-to-four family residential
real estate located in its primary market area. The Association also makes home
improvement loans, multi-family residential loans, construction loans and loans
secured by deposit accounts. First Federal is a portfolio lender in that it does
not originate its fixed or adjustable rate loans for sale in the secondary
market. First Federal has been and intends to continue to be a community-
oriented financial institution offering a variety of financial services to meet
the needs of the communities it serves.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly sensitive to significant change relate
to the determination of the allowance for losses on loans and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for losses on
loans and foreclosed real estate, management obtains independent appraisals for
significant properties.
- --------------------------------------------------------------------------------
Page F-6
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates (Continued)
- ---------------------------
A majority of the Association's loan portfolio consists of single-family
residential loans in its market area. The regional economy is currently stable
and consists of various types of industry. Real estate prices in this market are
also stable; however, the ultimate collectibility of a substantial portion of
the Association's loan portfolio is susceptible to changes in local market
conditions.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the
Association's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Association to recognize additions to the allowances
based on their judgments about information available to them at the time of
their examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change materially
in the near term.
Investment Securities
- ---------------------
The Association classifies its securities in one of three categories: trading,
available for sale, or held to maturity. There were no trading or available for
sale securities at June 30, 1997 or 1996. Securities held to maturity are those
securities for which the Association has the ability and intent to hold to
maturity.
Held to maturity securities are recorded at cost and are adjusted for the
amortization or accretion of premiums or discounts. Premiums and discounts are
amortized or accreted over the life of the related security as an adjustment to
the yield. Realized gains and losses are included in earnings, and the costs of
securities sold are derived using the specific identification method. A decline
in the market value of any held to maturity investment below cost that is deemed
other than temporary is charged to earnings and establishes a new cost basis for
the security.
- --------------------------------------------------------------------------------
Page F-7
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans Receivable
- ----------------
Loans receivable are stated at unpaid balances, less the allowance for loan
losses and net deferred loan fees.
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized as a yield adjustment over the lives of the
related loans using the interest method. Amortization of deferred loan fees is
discontinued when a loan is placed on nonaccrual status.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other nonaccrual loans is recognized only to the extent of interest payments
received.
The Association accounts for impaired loans in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan," amended for SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure." A loan is impaired
when, based on current information and events, it is probable that all amounts
due according to the contractual terms of the loan agreement will not be
collected. Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, the loan's
observable market price, or the fair value of the collateral of the loan if the
loan is collateral dependent. Interest income from impaired loans is recognized
using the cash basis method of accounting during the time within that period in
which the loans were impaired.
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 it. Additions to the allowance for loan losses are provided by
charges to operations based on various factors which, in management's judgment,
deserve current recognition in estimating possible losses. Such factors
considered by management include the market value of the underlying collateral,
growth and composition of the loan portfolio, the relationship of the allowance
for loan losses to outstanding loans, delinquency trends, and economic
conditions. Management evaluates the carrying value of loans periodically and
the allowance is adjusted accordingly. While management uses the best
information available to make evaluations, future adjustments to the allowance
may be necessary if conditions differ substantially from the assumptions used in
making the evaluations.
- --------------------------------------------------------------------------------
Page F-8
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses (Continued)
- ------------------------------------
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Association's allowance for loan
losses. Such agencies may require the Association to recognize additions to the
allowance based on their judgments of information available to them at the time
of their examination.
Premises and Equipment
- ----------------------
Association premises and equipment are stated at cost less accumulated
depreciation. Depreciation of premises and equipment is recorded on a straight-
line basis over the estimated useful lives of the related assets.
Expenditures for maintenance and repairs are charged to expense as incurred,
while those for improvements are capitalized. The costs and accumulated
depreciation relating to premises and equipment retired or otherwise disposed of
are eliminated from the accounts, and any resulting gains or losses are credited
or charged to earnings.
Investment in Federal Home Loan Bank Stock
- ------------------------------------------
As a requirement for membership, the Association invests in stock of the Federal
Home Loan Bank of Atlanta ("FHLB"). This investment is carried at cost.
Real Estate Acquired In Settlement of Loans
- -------------------------------------------
Real estate acquired in settlement of loans is carried at the lower of cost or
fair value less estimated costs to dispose. Generally accepted accounting
principles define fair value as the amount that is expected to be received in a
current sale between a willing buyer and seller other than in a forced or
liquidation sale. Fair values at foreclosure are based on appraisals. Losses
arising from the acquisition of foreclosed properties are charged against the
allowance for loan losses. Subsequent writedowns are provided by a charge to
operations through the allowance for losses on other real estate in the period
in which the need arises.
Income Taxes
- ------------
Deferred tax assets and liabilities are recorded for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Future tax
benefits are recognized to the extent that realization of such benefits is more
likely than not. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which the assets
and liabilities are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income tax
expense in the period that includes the enactment date.
- --------------------------------------------------------------------------------
Page F-9
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
- -----------------------
In the event the future tax consequences of differences between the financial
reporting bases and the tax bases of the Association's assets and liabilities
result in deferred tax assets, applicable accounting standards require an
evaluation of the probability of being able to realize the future benefits
indicated by such assets. A valuation allowance is provided when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. In assessing the realizability of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities, projected future
taxable income, and tax planning strategies.
A deferred tax liability is not recognized for portions of the allowance for
loan losses for income tax purposes in excess of the financial statement
balance, as described in Note J. Such a deferred tax liability will only be
recognized when it becomes apparent that those temporary differences will
reverse in the foreseeable future.
Recent Accounting Pronouncements
- --------------------------------
FASB Statement on Earnings Per Share. In March 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128. The Statement establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. This Statement simplifies the standards for
computing earnings per share previously found in Accounting Principles Board
("APB") Opinion No. 15, "Earnings per Share" ("EPS"), and makes them comparable
to international EPS standards. It replaces the presentation of primary EPS with
the presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and the
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This Statement
supersedes Opinion 15 and AICPA Accounting Interpretations 1-102 of Opinion 15.
This Statement will be effective for the Association's fiscal year ending June
30, 1998. Management does not believe the impact of adopting SFAS No. 128 will
be material to the Association's financial statements.
- --------------------------------------------------------------------------------
Page F-10
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
- -------------------------------------------
FASB Statement on Accounting for Stock-Based Compensation. In October 1995, the
FASB issued SFAS No. 123. SFAS No. 123 defines a "fair value based method" of
accounting for an employee stock option whereby compensation cost is measured at
the grant date based on the value of the award and is recognized over the
service period. FASB has encouraged all entities to adopt the fair value based
method; however, it will allow entities to continue the use of the "intrinsic
value based method" prescribed by APB Opinion No. 25. Under the intrinsic value
based method, compensation cost is the excess of the market price of the stock
at the grant date over the amount an employee must pay to acquire the stock.
However, most stock option plans have no intrinsic value at the grant date and,
as such, no compensation cost is recognized under APB Opinion No. 25. Entities
electing to continue use of the accounting treatment of APB Opinion No. 25 must
make certain pro forma disclosures as if the fair value based method had been
applied. The accounting requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years beginning after December 15, 1995. Pro
forma disclosures must include the effects of all awards granted in fiscal years
beginning after December 15, 1994. The Association expects to use the "intrinsic
value based method" as prescribed by APB Opinion No. 25. Accordingly, management
does not believe the impact of adopting SFAS No. 123 will be material to the
Association's financial statements.
FASB Statement on Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. In June 1996, the FASB issued SFAS No. 125. This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components approach,
after a transfer of financial assets, an entity recognizes all financial and
servicing assets it controls and liabilities it has incurred and derecognizes
financial assets it no longer controls and liabilities that have been
extinguished. The financial-components approach focuses on the assets and
liabilities that exist after the transfer. If a transfer does not meet the
criteria for a sale, the transfer is accounted for as a secured borrowing with
pledge of collateral. This Statement is effective for transfer and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996, and is to be applied prospectively. The effective date for certain
provisions of this Statement have been postponed for one year. Management
anticipates that the adoption of the Statement should have no material impact on
its financial statements.
FASB Statement on Reporting Comprehensive Income. In June 1997, the FASB issued
SFAS No. 130. This Statement establishes standards of reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This Statement will be effective for the Association's
fiscal year ending June 30, 1999, and the Association does not intend to early
adopt. Had the Association adopted this Statement early, it would have reported
comprehensive income in the same amounts as reported net income for the years
ended June 30, 1997 and 1996.
- --------------------------------------------------------------------------------
Page F-11
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE B - INVESTMENT SECURITIES
The following is a summary of the securities portfolios by major classification:
<TABLE>
<CAPTION>
June 30, 1997
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities held-to-maturity:
U. S. government securities and
obligations of U. S.
government agencies $1,699,558 $2,780 $ 5,092 $1,697,246
Mortgage-backed securities 66,381 267 8,101 58,547
---------- ------ ------- ----------
$1,765,939 $3,047 $13,193 $1,755,793
========== ====== ======= ==========
<CAPTION>
June 30, 1996
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities held-to-maturity:
U. S. government securities and
obligations of U. S.
government agencies $2,099,393 $7,587 $ 9,338 $2,097,642
Mortgage-backed securities 96,538 504 164 96,878
---------- ------ ------- ----------
$2,195,931 $8,091 $ 9,502 $2,194,520
========== ====== ======= ==========
</TABLE>
- --------------------------------------------------------------------------------
Page F-12
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE B - INVESTMENT SECURITIES (Continued)
The amortized cost and fair values of securities held to maturity at June 30,
1997 by contractual maturity are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Held to Maturity
---------------------------
Amortized Fair
Cost Value
----------- ----------
<S> <C> <C>
Due within one year $ - $ -
Due after one year through five years 1,699,558 1,697,246
Due after five years through ten years 66,381 58,547
Due after ten years - -
---------- ----------
$1,765,939 $1,755,793
========== ==========
</TABLE>
Proceeds from maturities and calls of investment securities held to maturity
during the years ended June 30, 1997 and 1996 were $1,730,571 and $632,720,
respectively. No gains or losses were realized on those maturities and calls.
Securities with a carrying value of $1,042,281 and $1,070,522 and a fair value
of $1,038,397 and $1,068,000 at June 30, 1997 and 1996, respectively, were
pledged to secure public monies on deposit as required by law.
- --------------------------------------------------------------------------------
Page F-13
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE C - LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Type of loan
Real estate loans
One-to-four family residential $48,459,996 $48,297,344
Commercial 2,502,108 2,088,530
Construction 3,043,900 3,122,950
Home improvement loans 1,437,110 1,429,711
----------- -----------
Total real estate loans 55,443,114 54,938,535
Other loans
Loans secured by deposits 319,183 305,630
----------- -----------
Total loans 55,762,297 55,244,165
Less
Construction loans in process 1,305,981 1,536,372
Allowance for loan losses 303,381 168,842
Deferred loan origination fees, net of costs 179,098 204,312
----------- -----------
$53,973,837 $53,334,639
=========== ===========
<CAPTION>
The allowance for loan losses is summarized as follows:
1997 1996
------------ ------------
<S> <C> <C>
Balance at beginning of year $ 168,842 $ 172,000
Provision for loan losses 143,000 17,967
Charge-offs (8,461) (21,125)
Recoveries - -
----------- -----------
Balance at end of year $ 303,381 $ 168,842
=========== ===========
</TABLE>
At June 30, 1997 and 1996, respectively, the Association had loans totaling
approximately $97,000 and $46,000 which were in a nonaccrual status.
- --------------------------------------------------------------------------------
Page F-14
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE C - LOANS RECEIVABLE (Continued)
Loans serviced for other investors amounted to $1,322,665 and $1,115,918 at June
30, 1997 and 1996, respectively. The Association had no loans held for sale at
June 30, 1997 or 1996.
At June 30, 1997, the Association had mortgage loan commitments outstanding of
$905,050. In management's opinion, these commitments, and undisbursed proceeds
on construction loans in process reflected above, represent no more than normal
lending risk to the Association and will be funded from normal sources of
liquidity.
The Association has had loan transactions with its directors and executive
officers. Such loans were made in the ordinary course of business and also on
substantially the same terms and collateral as those comparable transactions
prevailing at the time and did not involve more than the normal risk of
collectibility or present other unfavorable features. A summary of related party
loan transactions is as follows:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Balance at beginning of year $ 79,893 $79,830
Additional borrowings 587 8,383
Loan repayments (30,393) (8,320)
-------- -------
Balance at end of year $ 50,087 $79,893
======== =======
</TABLE>
NOTE D - PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land $ 59,250 $ 59,250
Building and improvements 316,090 316,090
Furniture and equipment 142,102 137,596
--------- ---------
517,442 512,936
Accumulated depreciation (334,002) (316,610)
--------- ---------
$ 183,440 $ 196,326
========= =========
</TABLE>
NOTE E - FEDERAL INSURANCE OF DEPOSITS
Eligible deposit accounts are insured up to $100,000 by the Federal Deposit
Insurance Corporation.
- --------------------------------------------------------------------------------
Page F-15
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE F - ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Atlanta, with weighted average
interest rates, are as follows:
<TABLE>
<CAPTION>
June 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
5.58% due on or before June 30, 1997 $ - $ 250,000
5.62% due on or before June 30, 1997 - 250,000
5.61% due on or before June 30, 1997 - 250,000
5.72% due on or before June 30, 1997 - 250,000
5.95% due on or before June 30, 1998 500,000 -
5.83% due on or before June 30, 1998 250,000 -
5.83% due on or before June 30, 1998 500,000 -
5.92% due on or before June 30, 1998 250,000 -
5.89% due on or before June 30, 1998 350,000 -
5.83% due on or before June 30, 1998 250,000 -
5.83% due on or before June 30, 1998 250,000 -
3.00% due on or before June 30, 2003 50,000 50,000
---------- ----------
$2,400,000 $1,050,000
========== ==========
</TABLE>
At June 30, 1997, First Federal also had $3,400,000 available on a line of
credit from the Federal Home Loan Bank.
All advances are secured by a blanket floating lien on the Association's one-to-
four family residential mortgage loans.
- --------------------------------------------------------------------------------
Page F-16
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE G - DEPOSIT ACCOUNTS
A comparative summary of deposit accounts at June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
Weighted Weighted
Balance Avg. Rate Balance Avg. Rate
------------ ----------- ----------- -----------
Savings deposits:
<S> <C> <C> <C> <C>
Regular passbook $ 2,548,819 2.96% $ 2,583,352 2.80%
Money market passbook 6,435,965 4.18% 5,785,953 4.24%
----------- -----------
8,984,784 8,369,305
Certificates of deposit 37,878,223 5.71% 39,579,928 5.77%
----------- -----------
Total deposit accounts $46,863,007 5.35% $47,949,233 5.43%
=========== ===========
</TABLE>
A summary of certificate accounts by maturity as of June 30, 1997 follows
(amounts in thousands):
<TABLE>
<CAPTION>
Less than $100,000
$100,000 or More Total
----------- ----------- ----------
<S> <C> <C> <C>
One year or less $ 23,727 $ 6,746 $ 30,473
More than one year to three years 4,828 644 5,472
More than three years to five years 1,353 409 1,762
More than five years 171 - 171
---------- ----------- ----------
Total certificate accounts $ 30,079 $ 7,799 $ 37,878
========== =========== ==========
</TABLE>
Interest expense on deposits for the years ended June 30 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Passbook savings accounts $ 70,007 $ 74,741
Money market savings accounts 241,970 240,427
Certificates of deposit 2,175,361 2,295,685
----------- ----------
2,487,338 2,610,853
Penalties for early withdrawal (6,897) (3,524)
----------- ----------
$ 2,480,441 $2,607,329
=========== ==========
</TABLE>
- --------------------------------------------------------------------------------
Page F-17
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE H - EMPLOYEE AND DIRECTOR BENEFIT PLANS
Deferred Compensation Plan
- --------------------------
The Association has a deferred compensation plan for certain officers whereby
the executive officers can make elective deferrals in lieu of receiving a
portion of the salary to which they otherwise would be entitled. This plan is
not entitled to favorable tax treatment under current law. Related deferred
income tax benefits are included in the accompanying financial statements.
Expenses associated with this plan were $13,044 and $16,055 for the years ended
June 30, 1997 and 1996, respectively.
401(k) Retirement Plan
- ----------------------
The Association maintains for the benefit of its eligible employees a 401(k)
plan. Under the plan, the Association contributes two percent of each
participant's base compensation and matches participant's elective contributions
up to an additional four percent of base compensation. The only eligibility
requirement is completion of one year's full time service. At June 30, 1997 and
1996, substantially all full-time employees are eligible and are covered by the
plan. 401(k) contributions are funded when accrued. The total retirement plan
expense was $14,659 and $12,984 for the years ended June 30, 1997 and 1996,
respectively.
NOTE I - SPECIAL SAIF ASSESSMENT
On September 30, 1996, the Deposit Insurance Funds Act of 1996 was signed into
law. The legislation included a special assessment to recapitalize the SAIF
insurance fund up to its statutory goal of 1.25% of insured deposits. The
assessment required the Association to pay an amount equal to 65.7 basis points
of its SAIF-assessable deposit base as of March 31, 1995, which resulted in a
charge to income during the year ended June 30, 1997 of $311,693.
NOTE J - INCOME TAXES
The components of income tax expense are as follows for the years ended June 30,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Current tax expense $365,525 $390,338
Deferred tax expense (benefit)
Tax on temporary differences (23,525) 38,307
-------- --------
$342,000 $428,645
======== ========
</TABLE>
- --------------------------------------------------------------------------------
Page F-18
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE J - INCOME TAXES (Continued)
The differences between the provision for income taxes and the amount computed
by applying the statutory federal income tax rate of 34% to income before income
taxes were as follows for the years ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Income tax at federal statutory rate $315,423 $415,774
State income tax, net of federal tax benefit 21,494 27,926
Other 5,083 (15,055)
-------- --------
$342,000 $428,645
======== ========
</TABLE>
Deferred tax assets and liabilities arising from temporary differences at June
30, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets relating to:
Deferred compensation $ 75,601 $ 69,753
Allowance for loan losses 104,153 56,621
Loan fees and costs - 29,041
--------- ---------
Gross deferred tax assets 179,754 155,415
Valuation allowance - -
--------- ---------
Total deferred tax assets 179,754 155,415
--------- ---------
Deferred tax liabilities relating to:
Premises and equipment (45,131) (45,075)
FHLB stock dividends (72,390) (72,390)
Loan fees and costs (758) -
--------- ---------
Total deferred tax liabilities (118,279) (117,465)
--------- ---------
Net deferred tax asset $ 61,475 $ 37,950
========= =========
</TABLE>
Retained earnings at June 30, 1997 includes approximately $1,670,000 for which
no deferred income tax liability has been recognized. This amount represents an
allocation of income to bad debt deductions for income tax purposes only.
Reductions of the amount so allocated for purposes other than tax bad debt
losses or adjustments arising from carryback of net operating losses would
create income for tax purposes only, which would be subject to the then current
corporate income tax rate.
- --------------------------------------------------------------------------------
Page F-19
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE J - INCOME TAXES (Continued)
During 1996, Congress enacted certain tax legislation that exempted thrift
institutions from being taxed on these pre-1987 bad debt reserves. Further, the
use of the reserve method is now required for all thrifts. The Association will
be recapturing $20,000 of its bad debt reserve created in prior years by using
the percentage of taxable income method, requiring payment of additional income
taxes of approximately $8,000. Deferred income taxes have been previously
established for the taxes arising from the reserve recapture, and thus the
ultimate payment of the taxes will not result in a charge to earnings.
NOTE K - REGULATORY MATTERS
Capital Requirements
- --------------------
The Association is subject to various regulatory capital requirements
administered by the federal banking 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 classifications are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios of total and Tier
1 capital (as defined) to risk-weighted assets (as defined), and of Tier 1
capital (as defined) to adjusted assets (as defined) and of tangible capital to
adjusted assets. Management believes, as of June 30, 1997, that the Association
meets all capital adequacy requirements to which it is subject.
As of June 30, 1997, the most recent notification from the Office of Thrift
Supervision categorized the Association as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Association must maintain minimum total risk-based, Tier 1 risk-based and
Tier 1 leverage ratios as set forth in the following table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
- --------------------------------------------------------------------------------
Page F-20
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE K - REGULATORY MATTERS (Continued)
Capital Requirements (Continued)
- --------------------
The Association's actual capital amounts and ratios are presented below.
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes
------ -----------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
As of June 30, 1997
Total Capital
(to Risk Weighted Assets) $11,393,047 36.6% (greater than $2,488,240 (greater than 8.0%
or equal to) or equal to)
Tier 1 Capital
(to Risk Weighted Assets) 11,089,666 35.6% (greater than 1,244,120 (greater than 4.0%
or equal to) or equal to)
Tier 1 Capital
(to Adjusted Assets) 11,089,666 18.3% (greater than 1,816,126 (greater than 3.0%
or equal to) or equal to)
Tangible Capital
(to Adjusted Assets) 11,089,666 18.3% (greater than 908,063 (greater than 1.5%
or equal to) or equal to)
<CAPTION>
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
-----------------
Amount Ratio
------ -----
<S> <C> <C>
As of June 30, 1997
Total Capital
(to Risk Weighted Assets) (greater than $3,110,300 (greater than 10.0%
or equal to) or equal to)
Tier 1 Capital
(to Risk Weighted Assets) (greater than 1,866,180 (greater than 6.0%
or equal to) or equal to)
Tier 1 Capital
(to Adjusted Assets) (greater than 3,026,877 (greater than 5.0%
or equal to) or equal to)
Tangible Capital
(to Adjusted Assets) N/A N/A
</TABLE>
NOTE L - CONCENTRATION OF CREDIT RISK AND OFF-BALANCE SHEET RISK
The Association generally originates single-family residential loans within its
primary lending area of Chesterfield County and surrounding counties. The
Association's underwriting policies require such loans to be made at no greater
than 80% loan-to-value based upon appraised values unless private mortgage
insurance is obtained. These loans are secured by the underlying properties.
The Association is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments consist of commitments to extend credit on mortgage
loans. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the statements of
financial condition. The contract or notional amounts of those instruments
reflect the extent of involvement the Association has in particular classes of
financial instruments.
A summary of the contract amount of the Association's exposure to off-balance
sheet risk as of June 30, 1997 is as follows:
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit, mortgage loans $ 905,050
Undisbursed construction loans in process 1,305,981
- --------------------------------------------------------------------------------
Page F-21
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE M - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The Association has implemented Statement of Financial Accounting Standards No.
107, Disclosures about Fair Value of Financial Instruments ("SFAS 107"), which
requires disclosure of the estimated fair values of the Association's financial
instruments whether or not recognized in the balance sheet, where it is
practical to estimate that value. Such instruments include cash, interest-
earning balances, federal funds sold, investment securities, loans, stock in the
Federal Home Loan Bank of Atlanta, deposit accounts, advances from the Federal
Home Loan Bank, and commitments. Fair value estimates are made at a specific
point in time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Association's entire
holdings of a particular financial instrument. Because no active market readily
exists for a portion of the Association's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash on hand and in banks, interest bearing balances in other banks, and
federal funds sold
The carrying amounts for these approximate fair value because of the
short maturities of those instruments.
Investment Securities
Fair value for investment securities equals quoted market price if such
information is available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
Loans
For certain homogenous categories of loans, such as residential
mortgages, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and
for the same remaining maturities.
- --------------------------------------------------------------------------------
Page F-22
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE M - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Stock in Federal Home Loan Bank of Atlanta
The fair value for FHLB stock is its carrying value, since this is the
amount for which it could be redeemed. There is no active market for this
stock and the Association is required to maintain a minimum balance based
on the unpaid principal of home mortgage loans.
Deposit Liabilities
The fair value of savings deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of deposit
is estimated using rates currently offered for deposits of similar
remaining maturities.
Advances from Federal Home Loan Bank
The fair value of these advances is based upon the discounted present
value using current rates at which borrowings of similar maturity could
be obtained.
Financial Instruments with Off-Balance Sheet Risk
With regard to financial instruments with off-balance sheet risk
discussed in Note L, it is not practicable to estimate the fair value of
future financing commitments.
The carrying amounts and estimated fair values of the Association's financial
instruments, none of which are held for trading purposes, are as follows at
June 30, 1997:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
----------- -----------
<S> <C> <C>
Financial assets:
Cash, interest bearing balances, federal funds sold $ 3,741,872 $ 3,741,872
Investment securities 1,765,939 1,755,793
Loans 53,973,837 54,101,000
Stock in Federal Home Loan Bank of Atlanta 484,600 484,600
Financial liabilities:
Deposits $46,863,007 $46,773,000
Advances from Federal Home Loan Bank 2,400,000 2,394,000
</TABLE>
NOTE N - PLAN OF CONVERSION
On July 14, 1997, the Board of Directors of the Association adopted a Plan of
Holding Company Conversion whereby the Association will convert from a federally
charted mutual savings and loan association to a South Carolina-chartered stock
savings bank and will become a wholly-owned subsidiary of a holding company
formed in connection with the conversion. The holding company will issue common
stock to be sold in the conversion and will use that portion of the net proceeds
thereof which it does not retain to purchase the capital stock of the Bank. The
Plan is subject to approval by regulatory authorities and the members of the
Association at a special meeting.
- --------------------------------------------------------------------------------
Page F-23
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
================================================================================
NOTE N - PLAN OF CONVERSION (Continued)
The stockholders of the holding company will be asked to approve a proposed
stock option plan and a proposed management recognition plan at a meeting of the
stockholders after the conversion. Shares issued to directors and employees
under these plans may be from authorized but unissued shares of common stock or
they may be purchased in the open market. In the event that options or shares
are issued under these plans, such issuances will be included in the earnings
per share calculation; thus, the interests of existing stockholders will be
diluted.
At the time of conversion, the Association will establish a liquidation account
in an amount equal to its net worth as reflected in its latest statement of
financial condition used in its final conversion prospectus. The liquidation
account will be maintained for the benefit of eligible deposit account holders
who continue to maintain their deposit accounts in the Bank after conversion.
Only in the event of a complete liquidation will each eligible deposit account
holder be entitled to receive a subaccount balance for deposit accounts then
held before any liquidation distribution may be made with respect to common
stock. Dividends paid by the Association subsequent to the conversion cannot be
paid from this liquidation account
The Association may not declare or pay a cash dividend on or repurchase any of
its common stock if its net worth would thereby be reduced below either the
aggregate amount then required for the liquidation account or the minimum
regulatory capital requirements imposed by federal and state regulations.
Conversion costs of approximately $15,000 have been incurred and are included in
other assets as of June 30, 1997. If the conversion is ultimately successful,
conversion costs will be accounted for as a reduction of the stock proceeds. If
the conversion is unsuccessful, conversion costs will be charged to the
Association's operations.
- --------------------------------------------------------------------------------
Page F-24
<PAGE>
GLOSSARY
1933 Act Securities Act of 1933, as amended
1934 Act Securities Exchange Act of 1934, as amended
Associate The term "Associate" of a person is defined to mean
(i) any corporation or organization (other than
First Federal or its subsidiaries or the Holding
Company) of which such person is a director,
officer, partner or 10% shareholder;
(ii) any trust or other estate in which such person
has a substantial beneficial interest or serves as
trustee or in a similar fiduciary capacity;
provided, however that such term shall not include
any employee stock benefit plan of the Holding
Company or First Federal in which such a person has
a substantial beneficial interest or as a trustee or
in a similar fiduciary capacity, and
(iii) any relative or spouse of such person, or
relative of such spouse, who either has the same
home as such person or who is a director or officer
of First Federal or its subsidiaries or the Holding
Company
ATM Automated Teller Machine
BIF Bank Insurance Fund of the FDIC
Code The Internal Revenue Code of 1986, as amended
Community Offering Offering for sale to members of the general public
of any shares of Common Stock not subscribed for in
the Subscription Offering, with preference given to
residents of Chesterfield County
Common Stock Up to 1,897,500 shares of Common Stock, par value of
$.01 per share, offered by Great Pee Dee Bancorp,
Inc. in connection with the Conversion
Conversion Simultaneous conversion of First Federal Savings and
Loan Association of Cheraw to stock form, the
issuance of First Federal's outstanding capital
stock to Great Pee Dee Bancorp, Inc. and Great Pee
Dee Bancorp, Inc.'s offer and sale of Common Stock
Eligible Holders Account Savings account holders of First Federal with
account balances of at least $50 as of the close of
business on June 30, 1995
ERISA Employee Retirement Income Security Act of 1974,
as amended
ESOP The Great Pee Dee Bancorp, Inc. Employee Stock
Ownership Plan and Trust
Estimated Valuation Estimated pro forma market value of the Common stock
Range ranging from $14,025,000 to $18,975,000
Expiration Date 12:00 noon, South Carolina Time, on __________,1997
G-1
<PAGE>
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
FDICIA Federal Deposit Insurance Corporation Improvement
Act of 1991, as amended
First Federal First Federal Savings and Loan Association of Cheraw
Freddie Mac Freddie Mac
FHLB Federal Home Loan Bank
Ferguson Ferguson & Company
FNMA Federal National Mortgage Association
Holding Company Great Pee Dee Bancorp, Inc.
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
MMDA Money Market Demand Account
NASD National Association of Securities Dealers, Inc.
Nasdaq System National Association of Securities Dealers Automated
Quotation System
NOW account Negotiable Order of Withdrawal Account
NPV Net portfolio value
Order Form Form for ordering stock accompanied by a
certification concerning certain matters
Other Members Savings account holders (other than Eligible Account
Holders and Supplemental Eligible Account Holders)
who are entitled to vote at the Special Meeting due
to the existence of a savings account on the Voting
Record Date for the Special Meeting and borrowers
who are entitled to vote at the Special Meeting
OTS Office of Thrift Supervision
Plan or Plan Plan of First Federal Savings and Loan Association
of Conversion of Cheraw to convert from a federally chartered
mutual savings and loan association to a federally
chartered stock savings and loan association and the
issuance of all of First Federal's outstanding
capital stock to Great Pee Dee Bancorp, Inc. and the
issuance of Great Pee Dee Bancorp, Inc.'s Common
Stock to the public
Purchase Price $10.00 per share price of the Common Stock
QTI Qualified thrift investment
G-2
<PAGE>
QTL Qualified thrift lender
REO Real Estate Owned
RRP Management Recognition and Retention Plan to be
submitted for approval at a meeting of the Holding
Company's shareholders to be held at least six
months after the completion of the Conversion
SAIF Savings Association Insurance Fund of the FDIC
SEC Securities and Exchange Commission
Special Meeting Special Meeting of members of First Federal called
for the purpose of approving the Plan
Stock Option Plan The Great Pee Dee Bancorp, Inc. Stock Option Plan
for directors and officers to be submitted for
approval at a meeting of the Holding Company'
shareholders to be held at least six months after
the completion of the Conversion
Subscription Offering of non-transferable rights to subscribe for
Offering the Common Stock, in order of priority, to Eligible
Account Holders, the ESOP, Supplemental Eligible
Account Holders and Other Members
Supplemental Eligible
Account Holders Depositors of First Federal Savings and Loan
Association of Cheraw who are not Eligible Account
Holders with account balances of at least $50 on
September 30, 1997
Trident Securities Trident Securities, Inc.
Valuation Conversion Valuation Report of First Federal Valued
as of September 2, 1997 prepared by Ferguson &
Company
Voting Record Date The close of business on October _____, 1997, the
date for determining members entitled to vote at the
Special Meeting
G-3
<PAGE>
No person has been authorized to give any information or to make any
representation other than as contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having
been authorized by the Holding Company or First Federal This Prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
security other than the shares of Common Stock offered hereby to any person in
any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so,
or to any person to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale hereunder shall, under
any circumstances, create any implication that information herein is correct
as of any time subsequent to the date hereof.
Great Pee Dee Bancorp, Inc.
(Proposed Holding Company for
First Federal Savings and Loan Association of Cheraw)
Up to 1,897,500 Shares
Common Stock
($.01 par value per share)
SUBSCRIPTION AND
COMMUNITY OFFERING
PROSPECTUS
TRIDENT SECURITIES, INC.
________________ __, 1997
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED
Until _____________, or 25 days after the commencement of the offerings of
common stock, 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.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers of First Federal Savings and
Loan Association of Cheraw
Generally, federal regulations define areas for indemnity coverage for federal
savings associations, as follows:
(a) Any person against whom any action is brought by reason of the
fact that such person is or was a director or officer of the savings association
shall be indemnified by the savings association for:
(i) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred by such person in
connection with proceedings related to the defense or settlement of
such action;
(ii) Any amount for which such person becomes liable by reason
of any judgment in such action;
(iii) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred in any action to enforce
his rights under this section, if the person attains a final judgment
in favor of such person in such enforcement action.
(b) Indemnification provided for in subparagraph (a) shall be made to
such officer or director only if the requirements of this subsection
are met:
(i) The savings association shall make the indemnification
provided by subparagraph (a) in connection with any such action which
results in a final judgment on the merits in favor of such officer or
director.
(ii) The savings association shall make the indemnification
provided by subparagraph (a) in case of settlement of such action,
final judgment against such director or officer or final judgment in
favor of such director or officer other than on the merits except in
relation to matters as to which he shall be adjudged to be liable for
negligence or misconduct in the performance of duty, only if a
majority of the directors of the savings association determines that
such a director or officer was acting in good faith within what he was
reasonably entitled to believe under the circumstances was the scope
of his employment or authority and for a purpose which he was
reasonably entitled to believe under the circumstances was in the best
interest of the savings association or its members.
(c) As used in this paragraph:
(i) "Action" means any action, suit or other judicial or
administrative proceeding, or threatened proceeding, whether civil,
criminal, or otherwise, including any appeal or other proceeding for
review;
(ii) "Court" includes, without limitation, any court to which
or in which any appeal or any proceeding for review is brought;
(iii) "Final Judgment" means a judgment, decree, or order which
is appealable and as to which the period for appeal has expired and no
appeal has been taken;
(iv) "Settlement" includes the entry of a judgment by consent
or by confession or upon a plea of guilty or of nolo contendere.
<PAGE>
Indemnification of Directors and Officers of the Corporation
Article TENTH of the Certificate of Incorporation of Great Pee Dee
Bancorp, Inc. (the "Corporation") sets forth circumstances under which
directors, officers, employees and agents of the Corporation may be insured or
indemnified against liability which they may incur in their capacities as such.
TENTH:
A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or an
Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
Director, Officer, employee or agent or in any other capacity while serving as a
Director, Officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter and "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director or Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, services to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expenses of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by
the indemnitee to enforce a right to indemnification or to an
<PAGE>
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article TENTH or otherwise, shall be on the
Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of the
Corporation.
Item 25. Other Expenses of Issuance and Distribution
<TABLE>
<CAPTION>
Amount
------
<S> <C> <C>
* Legal Fees and Expenses...................... $125,000
* Printing, Postage and Mailing................ 60,000
* Appraisal and Business Plan Fees and Expenses 30,000
* Accounting Fees and Expenses................. 36,000
* Blue Sky Filing Fees and Expenses
(including counsel fees)..................... 10,000
* Conversion Data Processing................... 10,000
** Underwriter's Fees and Expenses.............. 286,000
* Filing Fees (NASD, OTS and SEC).............. 37,500
* Stock Transfer Agreements & Certificates..... 10,000
* Other Expenses............................... 27,400
--------
* Total........................................ $660,000
========
</TABLE>
- -------------
* Estimated
** Great Pee Dee Bancorp, Inc. has retained Trident Securities, Inc. ("Trident
Securities") to assist in the sale of common stock on a best efforts basis
in the Offerings. Trident Securities will receive fees of $286,000,
exclusive of estimated expenses of $37,500, assuming the sale of 16,500,000
shares in the Offerings.
<PAGE>
Item 26. Recent Sales of Unregistered Securities
Not Applicable.
Item 27. Exhibits:
The exhibits filed as part of this registration statement are as
follows:
(a) List of Exhibits
1.1 Engagement Letter between First Federal Savings and Loan Association of
Cheraw and Trident Securities, Inc.
1.2 Agency Agreement among Great Pee Dee Bancorp, Inc., First Federal Savings
and Loan Association of Cheraw and Trident Securities, Inc. *
2 Plan of Conversion
3.1 Certificate of Incorporation of Great Pee Dee Bancorp, Inc.
3.2 Bylaws of Great Pee Dee Bancorp, Inc.
3.3 Proposed Charter of First Federal Savings and Loan Association of Cheraw
3.4 Proposed Bylaws of First Federal Savings and Loan Association of Cheraw
4 Form of Common Stock Certificate of Great Pee Dee Bancorp, Inc.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality of
securities being registered
8.1 Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.
8.2 Form of State Tax Opinion of Dixon, Odom & Co.
8.3 Opinion of Ferguson & Co. with respect to Subscription Rights
10.1 Form of Employment Agreement for Herbert W. Watts
10.2 Form of Employee Stock Ownership Plan
10.3 Form of Restated Non-Qualified Deferred Compensation Plan
10.4 Form of Non-Qualified Supplemental Employee Stock Ownership Plan
21 Subsidiaries of the Registrant
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
Opinions included on Exhibits 5 and 8.1)
23.2 Consent of Dixon, Odom & Co.
23.3 Consent of Ferguson & Co.
24 Power of Attorney (set forth on signature page)
27.1 EDGAR Financial Data Schedule
<PAGE>
99.1 Appraisal Agreement between First Federal Savings and Loan Association of
Cheraw and Ferguson & Co.
99.2 Appraisal Report of Ferguson & Co.
99.3 Proxy Statement
99.4 Marketing Materials
99.5 Order and Acknowledgment Form and Certification Form
<PAGE>
Item 28. Undertakings
The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) 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
duration 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) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
The small business issuer will provide to the underwriter at the
closing specified in the Underwriting Agreement certificates in such
documentation and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer 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 Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Cheraw, South Carolina on September
25, 1997.
GREAT PEE DEE BANCORP, INC.
By: /s/ Herbert W. Watts
--------------------------------------------
Herbert W. Watts
President, Chief Executive Officer and Director
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and officers of Great Pee Dee Bancorp, Inc. (the
"Company") hereby severally constitute and appoint Herbert W. Watts as our true
and lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Herbert W. Watts may deem necessary or
advisable to enable the Company to comply with the Securities Act of 1933, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the registration statement on Form SB-2 relating
to the offering of the Company's Common Stock, including specifically, but not
limited to, power and authority to sign for us in our names in the capacities
indicated below the registration statement and any and all amendments (including
post-effective amendments) thereto; and we hereby approve, ratify and confirm
all that said Herbert W. Watts shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Herbert W. Watts President, Chief Executive September 25, 1997
- ---------------------------- Officer and Director
Herbert W. Watts (Principal Executive Officer)
/s/ Johnnie Lee Craft Chief Financial Officer September 25, 1997
- ---------------------------- (Principal Accounting Officer)
Johnnie Lee Craft
/s/ Robert M. Bennett Chairman of the Board September 25, 1997
- ----------------------------
Robert M. Bennett
/s/ William Rhett Butler Director September 25, 1997
- ----------------------------
William Rhett Butler
/s/ James C. Crawford, III Director September 25, 1997
- ----------------------------
James C. Crawford, III
/s/ Henry P. Duvall Director September 25, 1997
- ----------------------------
Henry P. Duvall
/s/ Cornelius Bryd Young Director September 25, 1997
- ----------------------------
Cornelius Byrd Young
</TABLE>
<PAGE>
As filed with the Securities and Exchange Commission on September 26, 1997
Registration No. 333-[ ]
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
EXHIBITS
TO
REGISTRATION STATEMENT
ON
FORM SB-2
--------------------
GREAT PEE DEE BANCORP, INC.
Cheraw, South Carolina
<PAGE>
EXHIBIT INDEX
1.1 Engagement Letter between First Federal Savings and Loan Association of
Cheraw and Trident Securities, Inc.
1.2 Agency Agreement among Great Pee Dee Bancorp, Inc., First Federal Savings
and Loan Association of Cheraw and Trident Securities, Inc. *
2 Plan of Conversion
3.1 Certificate of Incorporation of Great Pee Dee Bancorp, Inc.
3.2 Bylaws of Great Pee Dee Bancorp, Inc.
3.3 Charter of First Federal Savings and Loan Association of Cheraw
3.4 Bylaws of First Federal Savings and Loan Association of Cheraw
4 Form of Common Stock Certificate of Great Pee Dee Bancorp, Inc.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality of
securities being registered
8.1 Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.
8.2 Form of State Tax Opinion of Dixon, Odom & Co.
8.3 Opinion of Ferguson & Co. with respect to Subscription Rights
10.1 Form of Employment Agreement for Herbert W. Watts
10.2 Employee Stock Ownership Plan
10.3 Non-Qualified Deferred Compensation Plan
10.4 Non-Qualified Supplemental Executive Retirement Plan
21 Subsidiaries of the Registrant
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
Opinions included on Exhibits 5 and 8.1)
23.2 Consent of Dixon, Odom & Co.
23.3 Consent of Ferguson & Co.
24 Power of Attorney (set forth on signature page)
27.1 EDGAR Financial Data Schedule
99.1 Appraisal Agreement between First Federal Savings and Loan Association of
Cheraw and Ferguson & Co.
99.2 Appraisal Report of Ferguson & Co.
99.3 Proxy Statement
<PAGE>
99.4 Marketing Materials
99.5 Order and Acknowledgment Form and Certification Form
- ------------------------------
* To be filed supplementally or by amendment.
<PAGE>
EXHIBIT 1.1
<PAGE>
[LETTERHEAD OF TRIDENT SECURITIES, INC. APPEARS HERE]
June 10, 1997
Board of Directors
First Federal Savings and Loan of Cheraw
515 Market Street
Cheraw, South Carolina 29520
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 of Cheraw,
Cheraw, South Carolina (the "Association") concerning our investment baking
services in connection with the conversion of the Association from the 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
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 offering circular/prospectus is
declared effective by the appropriate regulatory authorities. The price of the
shares during the subscription offering and community offering will be the price
established by the 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.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Association:
<PAGE>
TRIDENT SECURITIES INC.
Board of Directors
June 10, 1997
Page 2
1. A management fee in the amount of $10,000.
2. A commission equal to two percent (2.0%) of the aggregate dollar
amount of capital stock sold in the subscription and community
offerings, excluding any shares of conversion stock sold to the
Association's directors, executive officers and the employee
benefit plan. Additionally, commissions will be excluded on those
shares sold to "associates" of the Association's directors and
executive officers. The term "associates" as used herein shall
have the same meaning as that found in the Association's Plan of
Conversion.
3. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed
upon jointly by Trident and the Association to reflect market
requirements at the time of the stock allocation in a Syndicated
Community Offering.
4. 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.
5. 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 to exceed $27,500. 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, 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 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
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
June 10, 1997
Page 3
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. 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.
This letter is merely a statement of intent and is not a binding legal
agreement except as to paragraph (5) 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 promptly, and 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.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter along with the advance payment
of $10,000. This proposal is open for your acceptance for a period of
thirty (30) days from the date hereof.
Yours very truly
TRIDENT SECURITIES INC.
By: /s/ R. Lee Burrows, Jr.
------------------------
R. Lee Burrows, Jr.
Managing Director
Agreed and accepted to this 16th day
of June, 1997
FIRST FEDERAL SAVINGS AND LOAN OF CHERAW
By: /s/ Herbert W. Watts
--------------------------------
Herbert W. Watts
President
<PAGE>
EXHIBIT 2
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
Cheraw, South Carolina
PLAN OF CONVERSION
From Mutual to Stock Form of Organization
I. GENERAL
-------
On July 14, 1997, the Board of Directors of First Federal Savings and Loan
Association of Cheraw (the "Bank") adopted a Plan of Conversion whereby the Bank
would convert from a federal mutual savings institution to a federal stock
savings institution pursuant to the Rules and Regulations of the OTS. The Plan
includes, as part of the conversion, the concurrent formation of a holding
company. The new holding company is proposed to be chartered as a Delaware
corporation under the name "Great Pee Dee Bancorp." The Plan provides that non-
transferable subscription rights to purchase Holding Company Conversion Stock
will be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to the Bank's Tax-Qualified Employee Plans, then
to Supplemental Eligible Account Holders of record as of the Supplemental
Eligibility Record Date, and then to Other Members. Concurrently with, at any
time during, or promptly after the Subscription Offering, and on a lowest
priority basis, an opportunity to subscribe may also be offered to the general
public in a Direct Community Offering, with a priority given to natural persons
residing in the counties in the State of South Carolina where the Bank maintains
an office. The price of the Holding Company Conversion Stock will be based upon
an independent appraisal of the Bank and will reflect its estimated pro forma
market value, as converted. It is the desire of the Board of Directors of the
Bank to attract new capital to the Bank in order to increase its capital,
support future savings growth and increase the amount of funds available for
residential and other mortgage lending. The Converted Bank is also expected to
benefit from its management and other personnel having a stock ownership in its
business, since stock ownership is viewed as an effective performance incentive
and a means of attracting, retaining and compensating management and other
personnel. No change will be made in the Board of Directors or management as a
result of the Conversion.
As part of the Conversion, the Holding Company and the Bank intend to
establish a charitable foundation that will qualify as an exempt organization
under Section 501(c)(3) of the Internal Revenue Code (the "Foundation"), and to
donate to the Foundation Common Stock of the Holding Company securities in an
amount to be determined by the Board (which amount is currently anticipated to
be $200,000). The Foundation is being formed in connection with the Conversion
in order to complement the Bank's existing community reinvestment activities and
to share with the Bank's local community a part of the Bank's financial success
as a locally headquartered, community-oriented, financial services institution.
The Foundation will be dedicated to, the promotion of charitable purposes
including community development, grants or donations to support housing
assistance, not-for-profit community groups and other types of organizations or
civic-
A-1
<PAGE>
minded projects. It is expected that the Foundation will annually distribute
total grants to assist charitable organizations or to fund projects within its
local community of not less than 5% of the average fair value of Foundation
assets each year. In order to serve the purposes for which it was formed and
maintain its Section 501(c)(3) qualification, the Foundation may sell, on an
annual basis, a limited portion of any securities contributed to it by the
Holding Company. The board of directors of the Foundation will be comprised of
individuals who are Officers or Directors of the Bank. The board of directors of
the Foundation will be responsible for establishing the policies of the
Foundation with respect to grants or donations, consistent with the stated
purposes of the Foundation, respectively. The establishment and funding of the
Foundation as part of the Conversion is subject to the approval of the OTS and
the members.
II. DEFINITIONS
-----------
Acting in Concert: The term "acting in concert" shall have the same
-----------------
meaning given it in (S)574.2(c) of the Rules and Regulations of the OTS.
Actual Subscription Price: The price per share, determined as provided in
-------------------------
Section V of the Plan, at which Holding Company Conversion Stock will be sold in
the Subscription Offering.
Affiliate: An "affiliate" of, or a Person "affiliated" with, a Specified
---------
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by or is under common control with,
the Person specified.
Associate: The term "associate," when used to indicate a relationship with
---------
any Person, means (i) any corporation or organization (other than the Holding
Company, the Bank or a majority-owned subsidiary of 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, 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 Holding Company or the Bank or any subsidiary of the Holding
Company; provided, however, that any Tax-Qualified or Non-Tax-Qualified Employee
Plan shall not be deemed to be an associate of any director or officer of the
Holding Company or the Bank, to the extent provided in Section V hereof.
Bank: First Federal Savings and Loan Association of Cheraw, or such other
----
name as the institution may adopt.
Conversion: Change of the Bank's charter and bylaws to federal stock
----------
charter and bylaws; sale by the Holding Company of Holding Company Conversion
Stock; and issuance and sale by the Converted Bank of Converted Bank Common
Stock to the Holding Company, all as provided for in the Plan.
A-2
<PAGE>
Converted Bank: The federally chartered stock savings institution
--------------
resulting from the Conversion of the Bank in accordance with the Plan.
Deposit Account: Any withdrawable account or deposit in excess of $50 in
---------------
the Bank.
Direct Community Offering: The offering to the general public of any
-------------------------
unsubscribed shares which may be effected as provided in Section V hereof.
Eligibility Record Date: The close of business on June 30, 1995.
-----------------------
Eligible Account Holder: Any Person holding a Qualifying Deposit in the
-----------------------
Bank on the Eligibility Record Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Holding Company: Great Pee Dee Bancorp, a Delaware corporation, which upon
---------------
completion of the Conversion will own all of the outstanding common stock of the
Converted Bank.
Holding Company Conversion Stock: Shares of common stock, par value $.01
--------------------------------
per share, to be issued and sold by the Holding Company as a part of the
Conversion; provided, however, that for purposes of calculating Subscription
Rights and maximum purchase limitations under the Plan, references to the number
of shares of Holding Company Conversion Stock shall refer to the number of
shares offered in the Subscription Offering.
Market Maker: A dealer (i.e., any Person who engages directly or
------------
indirectly as agent, broker or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system; or (ii) furnishes bona fide competitive bid and offer quotations on
request; and (iii) is ready, willing, and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
Maximum Subscription Price: The price per share of Holding Company
--------------------------
Conversion Stock to be paid initially by subscribers in the Subscription
Offering.
Member: Any Person or entity that qualifies as a member of the Bank
------
pursuant to its charter and bylaws.
Non-Tax-Qualified Employee Plan: Any defined benefit plan or defined
-------------------------------
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock bonus plan, profit-sharing plan or other plan, which with
its related trust does not meet the requirements to be "qualified" under Section
401 of the Internal Revenue Code.
OTS: Office of Thrift Supervision, Department of the Treasury.
---
A-3
<PAGE>
Officer: An executive officer of the Holding Company or the Bank,
-------
including the Chairman of the Board, President, Executive Vice Presidents,
Senior Vice Presidents in charge of principal business functions, Secretary and
Treasurer.
Order Forms: Forms to be used in the Subscription Offering and in the
-----------
Direct Community Offering to exercise Subscription Rights.
Other Members: Members of the Bank, other than Eligible Account Holders,
-------------
Tax-Qualified Employee Plans or Supplemental Eligible Account Holders, as of the
Voting Record Date.
Person: An individual, a corporation, a partnership, an Bank, a joint-
------
stock company, a trust, any unincorporated organization, or a government or
political subdivision thereof.
Plan: This Plan of Conversion of the Bank, including any amendment
----
approved as provided in this Plan.
Public Offering: The offering for sale by the Underwriters to the general
---------------
public of any shares of Holding Company Conversion Stock not subscribed for in
the Subscription Offering or the Direct Community Offering.
Public Offering Price: The price per share at which any unsubscribed
---------------------
shares of Holding Company Conversion Stock are initially offered for sale in the
Public Offering.
Qualifying Deposit: The aggregate balance of each Deposit Account of an
------------------
Eligible Account Holder as of the Eligibility Record Date or of a Supplemental
Eligible Account Holder as of the Supplemental Eligibility Record Date.
SAIF: Savings Association Insurance Fund.
----
SEC: Securities and Exchange Commission.
---
Special Meeting: The Special Meeting of Members called for the purpose of
---------------
considering and voting upon the Plan of Conversion.
Subscription Offering: The offering of shares of Holding Company
---------------------
Conversion Stock for subscription and purchase pursuant to Section V of the
Plan.
Subscription Rights: Non-transferable, non-negotiable, personal rights of
-------------------
the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, Other Members, and directors, Officers and employees,
or trusts of any such persons including individual retirement accounts and Keogh
accounts, to subscribe for shares of Holding Company Conversion Stock in the
Subscription Offering.
Supplemental Eligibility Record Date: The last day of the calendar quarter
------------------------------------
preceding approval of the Plan by the OTS.
A-4
<PAGE>
Supplemental Eligible Account Holder: Any person holding a Qualifying
------------------------------------
Deposit in the Bank (other than an officer or director and their associates) on
the Supplemental Eligibility Record Date.
Tax-Qualified Employee Plans: Any defined benefit plan or defined
----------------------------
contribution plan of the Bank or the Holding Company, such as an employee stock
ownership plan, stock 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.
Underwriters: The investment Banking firm or firms agreeing to purchase
------------
Holding Company Conversion Stock in order to offer and sell such Holding Company
Conversion Stock in the Public Offering.
Voting Record Date: The date set by the Board of Directors in accordance
------------------
with federal regulations for determining Members eligible to vote at the Special
Meeting.
III. STEPS PRIOR TO SUBMISSION OF PLAN OF CONVERSION TO THE MEMBERS FOR APPROVAL
---------------------------------------------------------------------------
Prior to submission of the Plan of Conversion to its Members for approval,
the Bank must receive from the OTS approval of the Application for Approval of
Conversion to convert to the federal stock form of organization. The following
steps must be taken prior to such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. The Bank shall notify its Members of the adoption of the Plan
by publishing a statement in a newspaper having a general circulation in
each community in which the Bank maintains an office.
C. Copies of the Plan adopted by the Board of Directors shall be
made available for inspection at each office of the Bank.
D. The Bank will promptly cause an Application for Approval of
Conversion on Form AC to be prepared and filed with the OTS, an Application
on Form H-(e)1 (or other applicable form) to be prepared and filed with the
OTS and a Registration Statement on Form S-1 (or other applicable form) to
be prepared and filed with the SEC.
E. Upon receipt of notice from the OTS to do so, the Bank shall
notify its Members that it has filed the Application for Approval of
Conversion by posting notice in each of its offices and by publishing
notice in a newspaper having general circulation in each community in which
the Bank maintains an office.
A-5
<PAGE>
IV. CONVERSION PROCEDURE
--------------------
Following approval of the application by the OTS, the Plan will be
submitted to a vote of the Members at the Special Meeting. If the Plan is
approved by Members holding a majority of the total number of votes entitled to
be cast at the Special Meeting, the Bank will take all other necessary steps
pursuant to applicable laws and regulations to convert to a federal stock
savings institution as part of a concurrent holding company formation pursuant
to the terms of the Plan.
The Holding Company Conversion Stock will be offered for sale in the
Subscription Offering at the Maximum Subscription Price to Eligible Account
Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders,
and Other Members, prior to or within 45 days after the date of the Special
Meeting. The Bank may, either concurrently with, at any time during, or
promptly after the Subscription Offering, also offer the Holding Company
Conversion Stock to and accept subscriptions from other Persons in a Direct
Community Offering; provided that the Bank's Eligible Account Holders, Tax-
Qualified Employee Plans, Supplemental Eligible Account Holders, and Other
Members shall have the priority rights to subscribe for Holding Company
Conversion Stock set forth in Section V of this Plan. However, the Holding
Company and the Bank may delay commencing the Subscription Offering beyond such
45 day period in the event there exist unforeseen material adverse market or
financial conditions. If the Subscription Offering commences prior to the
Special Meeting, subscriptions will be accepted subject to the approval of the
Plan at the Special Meeting.
The period for the Subscription Offering will be not less than 20 days nor
more than 45 days and the period for the Direct Community Offering will be not
more than 45 days, unless extended by the Bank. Upon completion of the
Subscription Offering and the Direct Community Offering, if any, any
unsubscribed shares of Holding Company Conversion Stock will, if feasible, be
sold to the Underwriters for resale to the general public in the Public
Offering. If for any reason the Public Offering of all shares not sold in the
Subscription Offering and Direct Community Offering cannot be effected, the
Holding Company and the Bank will use their best efforts to obtain other
purchasers, subject to OTS approval. Completion of the sale of all shares of
Holding Company Conversion Stock not sold in the Subscription Offering and
Direct Community Offering is required within 45 days after termination of the
Subscription Offering, subject to extension of such 45 day period by the Holding
Company and the Bank with the approval of the OTS. The Holding Company and the
Bank may jointly seek one or more extensions of such 45 day period if necessary
to complete the sale of all shares of Holding Company Conversion Stock. In
connection with such extensions, subscribers and other purchasers will be
permitted to increase, decrease or rescind their subscriptions or purchase
orders to the extent required by the OTS in approving the extensions.
Completion of the sale of all shares of Holding Company Conversion Stock is
required within 24 months after the date of the Special Meeting.
A-6
<PAGE>
V. STOCK OFFERING
--------------
A. Total Number of Shares and Purchase Price of Conversion Stock
-------------------------------------------------------------
The total number of shares of Holding Company Conversion Stock to be issued
and sold in the Conversion will be determined jointly by the Boards of Directors
of the Holding Company and the Bank prior to the commencement of the
Subscription Offering, subject to adjustment if necessitated by market or
financial conditions prior to consummation of the Conversion. The total number
of shares of Holding Company Conversion Stock shall also be subject to increase
in connection with any oversubscriptions in the Subscription Offering or Direct
Community Offering.
The aggregate price for which all shares of Holding Company Conversion
Stock will be sold will be based on an independent appraisal of the estimated
total pro forma market value of the Holding Company and the Converted Bank.
Such appraisal shall be performed in accordance with OTS guidelines and will be
updated as appropriate under or required by applicable regulations.
The appraisal will be made by an independent investment banking or
financial consulting firm experienced in the area of thrift institution
appraisals. The appraisal will include, among other things, an analysis of the
historical and pro forma operating results and net worth of the Converted Bank
and a comparison of the Holding Company, the Converted Bank and the Conversion
Stock with comparable thrift institutions and holding companies and their
respective outstanding capital stocks.
Based upon the independent appraisal, the Boards of Directors of the
Holding Company and the Bank will jointly fix the Maximum Subscription Price.
If, following completion of the Subscription Offering and Direct Community
Offering, a Public Offering is effected, the Actual Subscription Price for each
share of Holding Company Conversion Stock will be the same as the Public
Offering Price at which unsubscribed shares of Holding Company Conversion Stock
are initially offered for sale by the Underwriters in the Public Offering. The
Public Offering Price will be a price negotiated by the Holding Company and the
Bank with the Underwriters, not in excess of the Maximum Subscription Price.
The price paid by the Underwriters for each unsubscribed share will be the
Public Offering Price less a negotiated underwriting discount.
If, upon completion of the Subscription Offering and Direct Community
Offering, all of the Holding Company Conversion Stock is subscribed for or only
a limited number of shares remain unsubscribed for, or if a Public Offering
otherwise cannot be effected, the Actual Subscription Price for each share of
Holding Company Conversion Stock will be determined by dividing the estimated
appraised aggregate pro forma market value of the Holding Company and the
Converted Bank, based on the independent appraisal as updated upon completion of
the Subscription Offering or other sale of all of the Holding Company Conversion
Stock, by the total number of shares of Holding Company Conversion Stock to be
issued and sold by the Holding Company upon Conversion. Such appraisal will
then be expressed in terms of a specific aggregate dollar amount rather than as
a range.
A-7
<PAGE>
B. Subscription Rights
-------------------
Non-transferable Subscription Rights to purchase shares will be issued
without payment therefor to Eligible Account Holders, Tax-Qualified Employee
Plans, Supplemental Eligible Account Holders, Other Members and directors,
Officers and employees of the Bank as set forth below.
1. Preference Category No. 1: Eligible Account Holders
-------------------------------------------- -------
Each Eligible Account Holder shall receive non-transferable
Subscription Rights to subscribe for shares of Holding Company Conversion
Stock in an amount equal to the greater of $250,000, one-tenth of one
percent (.10%) of the total offering of shares, 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 the qualifying deposit of the Eligible Account
Holder and the denominator is the total amount of qualifying deposits of
all Eligible Account Holders in the converting Bank in each case on the
Eligibility Record Date. If sufficient shares are not available, shares
shall be allocated first to permit each subscribing Eligible Account Holder
to purchase to the extent possible 100 shares, and thereafter among each
subscribing Eligible Account Holder pro rata in the same proportion that
his Qualifying Deposit bears to the total Qualifying Deposits of all
subscribing Eligible Account Holders whose subscriptions remain
unsatisfied.
Non-transferable Subscription Rights to purchase Holding Company
Conversion Stock received by directors and Officers of the Bank and their
Associates, based on their increased deposits in the Bank in the one year
period preceding the Eligibility Record Date, shall be subordinated to all
other subscriptions involving the exercise of non-transferable Subscription
Rights of Eligible Account Holders.
2. Preference Category No. 2: Tax-Qualified Employee Plans
--------------------------------------------------------
Each Tax-Qualified Employee Plan shall be entitled to receive non-
transferable Subscription Rights to purchase up to 10% of the shares of
Holding Company Conversion Stock, provided that singly or in the aggregate
such plans (other than that portion of such plans which is self-directed)
shall not purchase more than 10% of the shares of the Holding Company
Conversion Stock. Subscription Rights received pursuant to this Category
shall be subordinated to all rights received by Eligible Account Holders to
purchase shares pursuant to Category No. 1; provided, however, that
notwithstanding any other provision of this Plan to the contrary, the Tax-
Qualified Employee Plans shall have a first priority Subscription Right to
the extent that the total number of shares of Holding Company Conversion
Stock sold in the Conversion exceeds the maximum of the appraisal range as
set forth in the subscription prospectus.
A-8
<PAGE>
3. Preference Category No. 3: Supplemental Eligible Account
---------------------------------------------------------
Holders
-------
Each Supplemental Eligible Account Holder shall receive non-
transferable Subscription Rights to subscribe for shares of Holding Company
Conversion Stock in an amount equal to the greater of $250,000, one-tenth
of one percent (.10%) of the total offering of shares, 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 the qualifying deposit of the Supplemental
Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders in the
converting Bank in each case on the Supplemental Eligibility Record Date.
Subscription Rights received pursuant to this category shall be
subordinated to all Subscription Rights received by Eligible Account
Holders and Tax-Qualified Employee Plans pursuant to Category Nos. 1 and 2
above.
Any non-transferable Subscription Rights to purchase shares received
by an Eligible Account Holder in accordance with Category No. 1 shall
reduce to the extent thereof the Subscription Rights to be distributed to
such person pursuant to this Category.
In the event of an oversubscription for shares under the provisions
of this subparagraph, the shares available shall be allocated first to
permit each subscribing Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation (including the number of shares, if any, allocated in accordance
with Category No. 1) equal to 100 shares, and thereafter among each
subscribing Supplemental Eligible Account Holder pro rata in the same
proportion that his Qualifying Deposit bears to the total Qualifying
Deposits of all subscribing Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied.
4. Preference Category No. 4: Other Members
-----------------------------------------
Each Other Member shall receive non-transferable Subscription Rights
to subscribe for shares of Holding Company Conversion Stock remaining after
satisfying the subscriptions provided for under Category Nos. 1 through 3
above, subject to the following conditions:
a. Each Other Member shall be entitled to subscribe for an
amount of shares equal to the greater of $250,000 or one-tenth of one
percent (.10%) of the total offering of shares of common stock in the
Conversion, to the extent that Holding Company Conversion Stock is
available.
b. In the event of an oversubscription for shares under the
provisions of this subparagraph, the shares available shall be
allocated among the subscribing Other Members pro rata in the same
proportion that his number of votes on the Voting Record Date bears
to the total number of votes on the Voting Record Date of all
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<PAGE>
subscribing Other Members on such date. Such number of votes shall be
determined based on the Bank's mutual charter and bylaws in effect on
the date of approval by members of this Plan of Conversion.
C. Public Offering and Direct Community Offering
---------------------------------------------
1. Any shares of Holding Company Conversion Stock not subscribed
for in the Subscription Offering may be offered for sale in a Direct
Community Offering. This will involve an offering of all unsubscribed
shares directly to the general public with a preference to those natural
persons residing in the counties in which the Bank maintains its offices.
The Direct Community Offering, if any, shall be for a period of not more
than 45 days unless extended by the Holding Company and the Bank, and shall
commence concurrently with, during or promptly after the Subscription
Offering. The purchase price per share to the general public in a Direct
Community Offering shall be the same as the Actual Subscription Price. The
Holding Company and the Bank may use an investment banking firm or firms on
a best efforts basis to sell the unsubscribed shares in the Subscription
and Direct Community Offering. The Holding Company and the Bank may pay a
commission or other fee to such investment banking firm or firms as to the
shares sold by such firm or firms in the Subscription and Direct Community
Offering and may also reimburse such firm or firms for expenses incurred in
connection with the sale. The Direct Community Offering may include a
syndicated community offering managed by such investment banking firm or
firms. The Holding Company Conversion Stock will be offered and sold in the
Direct Community Offering, in accordance with OTS regulations, so as to
achieve the widest distribution of the Holding Company Conversion Stock. No
person, by himself or herself, or with an Associate or group of Persons
acting in concert, may subscribe for or purchase more than $250,000 of
Holding Company Conversion Stock offered in the Direct Community Offering.
Further, the Bank may limit total subscriptions under this Section V.C.1 so
as to assure that the number of shares available for the Public Offering
may be up to a specified percentage of the number of shares of Holding
Company Conversion Stock. Finally, the Bank may reserve shares offered in
the Community Offering for sales to institutional investors.
In the event of an oversubscription for shares in the Community
Offering, shares may be allocated (to the extent shares remain available)
first to cover any reservation of shares for a public offering or
institutional orders, next to cover orders of natural persons residing in
the counties in which the Bank maintains its offices, then to cover the
orders of any other person subscribing for shares in the Community Offering
so that each such person may receive 1,000 shares, and thereafter, on a pro
rata basis to such persons based on the amount of their respective
subscriptions.
The Bank and the Holding Company, in their sole discretion, may
reject subscriptions, in whole or in part, received from any Person under
this Section V.C.
2. Any shares of Holding Company Conversion Stock not sold in the
Subscription Offering or in the Direct Community Offering, if any, shall
then be sold to the Underwriters
A-10
<PAGE>
for resale to the general public at the Public Offering Price in the Public
Offering. It is expected that the Public Offering will commence as soon as
practicable after termination of the Subscription Offering and the Direct
Community Offering, if any. The Public Offering shall be completed within
45 days after the termination of the Subscription Offering, unless such
period is extended as provided in Section IV hereof. The Public Offering
Price and the underwriting discount shall be determined as provided in
Section V.A hereof and set forth in the underwriting agreement between the
Holding Company, the Bank and the Underwriters. Such underwriting agreement
shall be filed with the OTS and the SEC.
3. If for any reason a Public Offering of unsubscribed shares of
Holding Company Conversion Stock cannot be effected and any shares remain
unsold after the Subscription Offering and the Direct Community Offering,
if any, the Boards of Directors of the Holding Company and the Bank will
seek to make other arrangements for the sale of the remaining shares. Such
other arrangements will be subject to the approval of the OTS and to
compliance with applicable securities laws.
D. Additional Limitations Upon Purchases of Shares of Holding Company
------------------------------------------------------------------
Conversion Stock
----------------
The following additional limitations shall be imposed on all purchases of
Holding Company Conversion Stock in the Conversion:
1. No Person, by himself or herself, or with an Associate or group
of Persons acting in concert, may subscribe for or purchase in the
Conversion a number of shares of Holding Company Conversion Stock which
exceeds $250,000 of the Holding Company Conversion Stock offered in the
Conversion. For purposes of this paragraph, an Associate of a Person does
not include a Tax-Qualified or Non-Tax Qualified Employee Plan in which the
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity. Moreover, for purposes of this paragraph,
shares held by one or more Tax-Qualified or Non-Tax Qualified Employee
Plans attributed to a Person shall not be aggregated with shares purchased
directly by or otherwise attributable to that Person.
2. Directors and Officers and their Associates may not purchase in
all categories in the Conversion an aggregate of more than 34.78% of the
Holding Company Conversion Stock. For purposes of this paragraph, an
Associate of a Person does not include any Tax-Qualified Employee Plan.
Moreover, any shares attributable to the Officers and directors and their
Associates, but held by one or more Tax-Qualified Employee Plans shall not
be included in calculating the number of shares which may be purchased
under the limitation in this paragraph.
3. The minimum number of shares of Holding Company Conversion
Stock that may be purchased by any Person in the Conversion is 25 shares,
provided sufficient shares are available.
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<PAGE>
4. The Boards of Directors of the Holding Company and the Bank
may, in their sole discretion, increase the maximum purchase limitation
referred to in subparagraph 1. herein up to 9.99%, provided that orders for
shares exceeding 5% of the shares being offered in the Subscription
Offering shall not exceed, in the aggregate, 10% of the shares being
offered in the Subscription Offering. Requests to purchase additional
shares of Holding Company Conversion Stock under this provision will be
allocated by the Boards of Directors on a pro rata basis giving priority in
accordance with the priority rights set forth in this Section V.
Depending upon market and financial conditions, the Boards of Directors of
the Holding Company and the Bank, with the approval of the OTS and without
further approval of the Members, may increase or decrease any of the above
purchase limitations.
For purposes of this Section V, the directors of the Holding Company and
the Bank shall not be deemed to be Associates or a group acting in concert
solely as a result of their serving in such capacities.
Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the above purchase
limitations.
E. Restrictions and Other Characteristics of Holding Company Conversion
--------------------------------------------------------------------
Stock Being Sold
----------------
1. Transferability. Holding Company Conversion Stock purchased by
---------------
Persons other than directors and Officers of the Holding Company or the
Bank will be transferable without restriction. Shares purchased by
directors or Officers 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 of such shares (i) following the death of the original
purchaser, or (ii) resulting from an exchange of securities in a merger or
acquisition approved by the applicable regulatory authorities. Any
transfers that could result in a change of control of the Bank or the
Holding Company or result in the ownership by any Person or group acting in
concert of more than 10% of any class of the Bank's or the Holding
Company's equity securities are subject to the prior approval of the OTS.
The certificates representing shares of Holding Company Conversion
Stock issued to directors and Officers shall bear a legend giving
appropriate notice of the one year holding period restriction. Appropriate
instructions shall be given to the transfer agent for such stock with
respect to the applicable restrictions relating to the transfer of
restricted stock. Any shares of common stock of the Holding Company
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 Holding Company or Bank directors and Officers as
may be then applicable to such restricted stock.
No director or Officer of the Holding Company or of the Bank, or
Associate of such a director or Officer, shall purchase any outstanding
shares of capital stock of the Holding Company for a period of three years
following the Conversion without the prior written
A-12
<PAGE>
approval of the OTS, except through a broker or dealer registered with the
SEC or in a "negotiated transaction" involving more than one percent of the
then-outstanding shares of common stock of the Holding Company. As used
herein, the term "negotiated transaction" means a transaction in which the
securities are offered and the terms and arrangements relating to any sale
are arrived at through direct communications between the seller or any
Person acting on its behalf and the purchaser or his investment
representative. The term "investment representative" shall mean a
professional investment advisor acting as agent for the purchaser and
independent of the seller and not acting on behalf of the seller in
connection with the transaction.
2. Repurchase and Dividend Rights. For a period of three years
------------------------------
following Conversion, the Converted Bank shall not repurchase any shares of
its capital stock, except as permitted by OTS Regulations, and except in
the case of an offer to repurchase on a pro rata basis made to all holders
of capital stock of the Converted Bank. Any such offer shall be subject to
the prior non-objection of the OTS. A repurchase of qualifying shares of a
director shall not be deemed to be a repurchase for purposes of this
Section V.E.2.
Present regulations also provide that the Converted Bank may not
declare or pay a cash dividend on or repurchase any of its stock (i) if the
result thereof would be to reduce the regulatory capital of the Converted
Bank below the amount required for the liquidation account to be
established pursuant to Section XII hereof, and (ii) except in compliance
with requirements of Section 563.134 of the Rules and Regulations of the
OTS.
The above limitations are subject to Section 563b.3(g)(3) of the
Rules and Regulations of the OTS, which generally provides that the
Converted Bank may repurchase its capital stock provided (i) no repurchases
occur within one year following conversion, (ii) repurchases during the
second and third year after conversion are part of an open market stock
repurchase program that does not allow for a repurchase of more than 5% of
the Bank's outstanding capital stock during a twelve-month period without
OTS approval, (iii) the repurchases do not cause the Bank to become
undercapitalized, and (iv) the Bank provides notice to the OTS at least 10
days prior to the commencement of a repurchase program and the OTS does not
object. In addition, the above limitations shall not preclude payments of
dividends or repurchases of capital stock by the Converted Bank in the
event applicable federal regulatory limitations are liberalized subsequent
to OTS approval of the Plan or as otherwise permitted by the OTS.
3. Voting Rights. After Conversion, holders of deposit accounts
-------------
will not have voting rights in the Bank or the Holding Company. Exclusive
voting rights as to the Bank will be vested in the Holding Company, as the
sole stockholder of the Bank. Voting rights as to the Holding Company will
be held exclusively by its stockholders.
F. Exercise of Subscription Rights; Order Forms
--------------------------------------------
1. If the Subscription Offering occurs concurrently with the
solicitation of proxies for the Special Meeting, the subscription
prospectus and Order Form may be sent to each
A-13
<PAGE>
Eligible Account Holder, Tax-Qualified Employee Plan, Supplemental Eligible
Account Holder, and Other Member, at their last known address as shown on
the records of the Bank. However, the Bank may, and if the Subscription
Offering commences after the Special Meeting the Bank shall, furnish a
subscription prospectus and Order Form only to Eligible Account Holders,
Tax-Qualified Employee Plans, Supplemental Eligible Account Holders, and
Other Members who have returned to the Bank by a specified date prior to
the commencement of the Subscription Offering a post card or other written
communication requesting a subscription prospectus and Order Form. In such
event, the Bank shall provide a postage-paid post card for this purpose and
make appropriate disclosure in its proxy statement for the solicitation of
proxies to be voted at the Special Meeting and/or letter sent in lieu of
the proxy statement to those Eligible Account Holders, Tax-Qualified
Employee Plans or Supplemental Eligible Account Holders who are not Members
on the Voting Record Date.
2. Each Order Form will be preceded or accompanied by a
subscription prospectus describing the Holding Company and the Converted
Bank and the shares of Holding Company Conversion Stock being offered for
subscription and containing all other information required by the OTS or
the SEC or necessary to enable Persons to make informed investment
decisions regarding the purchase of Holding Company Conversion Stock.
3. The Order Forms (or accompanying instructions) used for the
Subscription Offering will contain, among other things, the following:
(i) A clear and intelligible explanation of the Subscription
Rights granted under the Plan to Eligible Account Holders, Tax-
Qualified Employee Plans, Supplemental Eligible Account Holders, and
Other Members;
(ii) A specified expiration date by which Order Forms must be
returned to and actually received by the Bank or its representative
for purposes of exercising Subscription Rights, which date will be
not less than 20 days after the Order Forms are mailed by the Bank;
(iii) The Maximum Subscription Price to be paid for each share
subscribed for when the Order Form is returned;
(iv) A statement that 25 shares is the minimum number of
shares of Holding Company Conversion Stock that may be subscribed for
under the Plan;
(v) A specifically designated blank space for indicating the
number of shares being subscribed for;
(vi) A set of detailed instructions as to how to complete the
Order Form including a statement as to the available alternative
methods of payment for the shares being subscribed for;
A-14
<PAGE>
(vii) Specifically designated blank spaces for dating and
signing the Order Form;
(viii) An acknowledgment that the subscriber has received the
subscription prospectus;
(ix) A statement of the consequences of failing to properly
complete and return the Order Form, including a statement that the
Subscription Rights will expire on the expiration date specified on
the Order Form unless such expiration date is extended by the Holding
Company and the Bank, and that the Subscription Rights may be
exercised only by delivering the Order Form, properly completed and
executed, to the Bank or its representative by the expiration date,
together with required payment of the Maximum Subscription Price for
all shares of Holding Company Conversion Stock subscribed for;
(x) A statement that the Subscription Rights are non-
transferable and that all shares of Holding Company Conversion Stock
subscribed for upon exercise of Subscription Rights must be purchased
on behalf of the Person exercising the Subscription Rights for his
own account; and
(xi) A statement that, after receipt by the Bank or its
representative, a Subscription may not be modified, withdrawn or
canceled without the consent of the Bank.
G. Method of Payment
-----------------
Payment for all shares of Holding Company Conversion Stock subscribed for,
computed on the basis of the Maximum Subscription Price, must accompany all
completed Order Forms. Payment may be made in cash (if presented in Person), by
check, or, if the subscriber has a Deposit Account in the Bank (including a
certificate of deposit), the subscriber may authorize the Bank to charge the
subscriber's account.
If a subscriber authorizes the Bank to charge his or her account, the funds
will continue to earn interest, but may not be used by the subscriber until all
Holding Company Conversion Stock has been sold or the Plan of Conversion is
terminated, whichever is earlier. The Bank will allow subscribers to purchase
shares by withdrawing funds from certificate accounts without the assessment of
early withdrawal penalties with the exception of prepaid interest in the form of
promotional gifts. 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 which event the remaining balance will 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 Holding Company
Conversion Stock under the Plan of Conversion. Interest will also be paid, at
not less than the then-current passbook rate, on all orders paid in cash, by
check or money order, from the date payment is received until consummation of
the
A-15
<PAGE>
Conversion. Payments made in cash, by check or money order will be placed by
the Bank in an escrow or other account established specifically for this
purpose.
In the event of an unfilled amount of any subscription order, the Converted
Bank will make an appropriate refund or cancel an appropriate portion of the
related withdrawal authorization, after consummation of the Conversion,
including any difference between the Maximum Subscription Price and the Actual
Subscription Price (unless subscribers are afforded the right to apply such
difference to the purchase of additional whole shares). If for any reason the
Conversion is not consummated, purchasers will have refunded to them all
payments made and all withdrawal authorizations will be canceled in the case of
subscription payments authorized from accounts at the Bank.
If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans
subscribe for shares during the Subscription Offering, such plans will not be
required to pay for the shares subscribed for at the time they subscribe, but
may pay for such shares of Holding Company Conversion Stock subscribed for upon
consummation of the Conversion. In the event that, after the completion of the
Subscription Offering, the amount of shares to be issued is increased above the
maximum of the appraisal range included in the Prospectus, the Tax Qualified and
Non-Tax Qualified Employee Plans shall be entitled to increase their
subscriptions by a percentage equal to the percentage increase in the amount of
shares to be issued above the maximum of the appraisal range provided that such
subscriptions shall continue to be subject to applicable purchase limits and
stock allocation procedures.
H. Undelivered, Defective or Late Order Forms; Insufficient Payment
----------------------------------------------------------------
The Boards of Directors of the Holding Company and the Bank shall have the
absolute right, in their sole discretion, to reject any Order Form, including
but not limited to, any Order Forms which (i) are not delivered or are returned
by the United States Postal Service (or the addressee cannot be located); (ii)
are not received back by the Bank or its representative, or are received after
the termination date specified thereon; (iii) are defectively completed or
executed; (iv) are not accompanied by the total required payment for the shares
of Holding Company Conversion Stock subscribed for (including cases in which the
subscribers' Deposit Accounts or certificate accounts are insufficient to cover
the authorized withdrawal for the required payment); or (v) are submitted by or
on behalf of a Person whose representations the Boards of Directors of the
Holding Company and the Bank believe to be false or who they otherwise believe,
either alone or acting in concert with others, is violating, evading or
circumventing, or intends to violate, evade or circumvent, the terms and
conditions of this Plan. In such event, the Subscription Rights of the Person
to whom such rights have been granted will not be honored and will be treated as
though such Person failed to return the completed Order Form within the time
period specified therein. The Bank may, but will not be required to, waive any
irregularity relating to any Order Form or require submission of corrected Order
Forms or the remittance of full payment for subscribed shares by such date as
the Bank may specify. The interpretation of the Holding Company and the Bank of
the terms and conditions of this Plan and of the proper completion of the Order
Form will be final, subject to the authority of the OTS.
A-16
<PAGE>
I. Member in Non-Qualified States or in Foreign Countries
------------------------------------------------------
The Holding Company and the Bank will make reasonable efforts to comply
with the securities laws of all states in the United States in which Persons
entitled to subscribe for Holding Company Conversion Stock pursuant to the Plan
reside. However, no shares will be offered or sold under the Plan of Conversion
to any such Person who (1) resides in a foreign country or (2) resides in a
state of the United States in which a small number of Persons otherwise eligible
to subscribe for shares under the Plan of Conversion reside or as to which the
Holding Company and the Bank determine that compliance with the securities laws
of such state would be impracticable for reasons of cost or otherwise,
including, but not limited to, a requirement that the Holding Company or the
Bank or any of their officers, directors or employees register, under the
securities laws of such state, as a broker, dealer, salesman or agent. No
payments will be made in lieu of the granting of Subscription Rights to any such
Person.
VI. FEDERAL STOCK CHARTER AND BYLAWS
--------------------------------
A. As part of the Conversion, the Bank will take all appropriate steps
to amend its charter to read in the form of federal stock savings institution
charter as prescribed by the OTS. A copy of the proposed stock charter is
available upon request. By their approval of the Plan, the Members of the Bank
will thereby approve and adopt such charter.
B. The Bank will also take appropriate steps to amend its bylaws to read
in the form prescribed by the OTS for a federal stock savings institution. A
copy of the proposed federal stock bylaws is available upon request.
C. The effective date of the adoption of the Bank's federal stock
charter and bylaws shall be the date of the issuance and sale of the Holding
Company Conversion Stock as specified by the OTS.
VII. HOLDING COMPANY CERTIFICATE OF INCORPORATION
--------------------------------------------
A copy of the proposed certificate of incorporation of the Holding
Company will be made available from the Bank upon request.
VIII. DIRECTORS OF THE CONVERTED BANK
-------------------------------
Each Person serving as a member of the Board of Directors of the Bank at
the time of the Conversion will thereupon become a director of the Converted
Bank.
IX. STOCK OPTION AND INCENTIVE PLAN AND RECOGNITION AND
---------------------------------------------------
RETENTION PLAN
--------------
In order to provide an incentive for directors, Officers and employees of
the Holding Company and its subsidiaries (including the Bank), the Board of
Directors of the Holding Company
A-17
<PAGE>
intends to adopt, subject to shareholder approval, a Stock option and incentive
plan and a recognition and retention plan following completion of the
Conversion.
X. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE PLANS
---------------------------------------------
The Converted Bank and the Holding Company may in their discretion make
scheduled contributions to any Tax-Qualified Employee Plans, provided that any
such contributions which are for the acquisition of Holding Company Conversion
Stock, or the repayment of debt incurred for such an acquisition, do not cause
the Converted Bank to fail to meet its regulatory capital requirements.
XI. SECURITIES REGISTRATION AND MARKET MAKING
-----------------------------------------
Promptly following the Conversion, the Holding Company will register its
common stock with the SEC pursuant to the Exchange Act. In connection with the
registration, the Holding Company will undertake not to deregister such common
stock, without the approval of the OTS, for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
two or more market makers to establish and maintain a market for its common
stock promptly following Conversion. The Holding Company will also use its best
efforts to cause its common stock to be quoted on the Nasdaq System or to be
listed on a national or regional securities exchange.
XII. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO
--------------------------------------------------
CONVERSION
----------
Each Deposit Account holder shall retain, without payment, a withdrawable
Deposit Account or Accounts in the Converted Bank, equal in amount to the
withdrawable value of such account holder's Deposit Account or Accounts prior to
Conversion. All Deposit Accounts will continue to be insured by the Federal
Deposit Insurance Corporation up to the applicable limits of insurance coverage,
and shall be subject to the same terms and conditions (except as to voting and
liquidation rights) as such Deposit Account in the Bank at the time of the
Conversion. All loans shall retain the same status after Conversion as these
loans had prior to Conversion.
XIII. LIQUIDATION ACCOUNT
-------------------
For purposes of granting to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain Deposit Accounts at the
Converted Bank a priority in the event of a complete liquidation of the
Converted Bank, the Converted Bank will, at the time of Conversion, establish a
liquidation account in an amount equal to the net worth of the Bank as shown on
its latest statement of financial condition contained in the final offering
circular used in connection with the Conversion. The creation and maintenance
of the liquidation account will not operate to restrict the use or application
of any of the regulatory capital accounts of the Converted Bank; provided,
however, that such regulatory capital accounts will not be voluntarily reduced
below the required dollar amount of the liquidation account. Each Eligible
Account Holder and
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<PAGE>
Supplemental Eligible Account Holder shall, with respect to the Deposit Account
held, have a related inchoate interest in a portion of the liquidation account
balance ("subaccount balance").
The initial subaccount balance of a Deposit Account held by an Eligible
Account Holder or 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 the Qualifying Deposit in the Deposit
Account on the Eligibility Record Date or the Supplemental Eligibility Record
Date and the denominator is the total amount of the Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders on such
record dates in the Bank. 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 Deposit Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the record date is less than the lesser of (i) the
deposit balance in such Deposit 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 Deposit Account on the Eligibility Record Date or Supplemental
Eligibility Record Date, the subaccount balance shall be reduced in an amount
proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Deposit
Account. If all funds in such Deposit Account are withdrawn, the related
subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Bank (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 balances for
Deposit Accounts then held before any liquidation distribution may be made to
stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Deposit Accounts and other liabilities, or similar transactions
with another institution the accounts of which are insured by the Federal
Deposit Insurance Corporation, shall be considered to be a complete liquidation.
In such transactions, the liquidation account shall be assumed by the surviving
institution.
XIV. RESTRICTIONS ON ACQUISITION OF CONVERTED BANK
---------------------------------------------
Regulations of the OTS limit acquisitions, and offers to acquire, direct
or indirect beneficial ownership of more than 10% of any class of an equity
security of the Converted Bank or the Holding Company. In addition, consistent
with the regulations of the OTS, the charter of the Converted Bank shall provide
that for a period of five years following completion of the Conversion: (i) no
Person (i.e., no individual, group acting in concert, corporation, partnership,
Bank, joint stock company, trust, or unincorporated organization or similar
company, syndicate, or any other group formed for the purpose of acquiring,
holding or disposing of securities of an insured institution) shall directly or
indirectly offer to acquire or acquire beneficial ownership of more than 10% of
any class of the Bank's equity securities. Shares beneficially owned in
violation of this charter provision shall not be counted as shares entitled to
vote and shall not be voted by any Person or counted as voting shares
A-19
<PAGE>
in connection with any matter submitted to the shareholders for a vote. This
limitation shall not apply to any offer to acquire or acquisition of beneficial
ownership of more than 10% of the common stock of the Bank by a corporation
whose ownership is or will be substantially the same as the ownership of the
Bank, provided that the offer or acquisition is made more than one year
following the date of completion of the Conversion; (ii) shareholders shall not
be permitted to cumulate their votes for elections of directors; and (iii)
special meetings of the shareholders relating to changes in control or amendment
of the charter may only be called by the Board of Directors.
XV. AMENDMENT OR TERMINATION OF PLAN
--------------------------------
If necessary or desirable, the Plan may be amended at any time prior to
submission of the Plan and proxy materials to the Members by a two-thirds vote
of the respective Boards of Directors of the Holding Company and the Bank.
After submission of the Plan and proxy materials to the Members, the Plan may be
amended by a two-thirds vote of the respective Boards of Directors of the
Holding Company and the Bank only with the concurrence of the OTS. Any
amendments to the Plan made after approval by the Members with the concurrence
of the OTS shall not necessitate further approval by the Members unless
otherwise required.
The Plan may be terminated by a two-thirds vote of the Bank's Board of
Directors at any time prior to the Special Meeting of Members, and at any time
following such Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors of the Bank may modify or terminate the Plan
upon the order or with the approval of the OTS and without further approval by
Members. The Plan shall terminate if the sale of all shares of Conversion Stock
is not completed within 24 months of the date of the Special Meeting. A
specific resolution approved by a majority of the Board of Directors of the Bank
is required in order for the Bank to terminate the Plan prior to the end of such
24 month period.
XVI. EXPENSES OF THE CONVERSION
--------------------------
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred by them in connection with the Conversion shall be
reasonable.
XVII. TAX RULING
----------
Consummation of the Conversion is expressly conditioned upon prior
receipt of either a ruling of the United States Internal Revenue Service or an
opinion of tax counsel with respect to federal taxation, and either a ruling of
the South Carolina taxation authorities or an opinion of tax counsel or other
tax advisor with respect to South Carolina taxation, to the effect that
consummation of the transactions contemplated herein will not be taxable to the
Holding Company or the Bank.
XVIII. EXTENSION OF CREDIT FOR PURCHASE OF COMMON STOCK
------------------------------------------------
The Bank may not knowingly loan funds or otherwise extend credit to any
Person to purchase in the Conversion shares of Holding Company Conversion Stock.
A-20
<PAGE>
EXHIBIT 3.1
<PAGE>
CERTIFICATE OF INCORPORATION
OF
GREAT PEE DEE BANCORP, INC.
FIRST: The name of the Corporation is Great Pee Dee Bancorp, Inc.
-----
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: A. The total number of shares of all classes of stock which the
------
Corporation shall have authority to issue is four million (4,000,000) consisting
of:
1. Four hundred thousand (400,000) shares of Preferred Stock, par
value one cent ($.01) per share (the "Preferred Stock"); and
2. Three million six hundred thousand (3,600,000) shares of Common
Stock, par value one cent ($.01) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware (such certificate being hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to the terms of any Preferred Stock Designation.
C. 1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding Common
Stock which is beneficially owned, directly or indirectly, by a person who,
as of any record date for the determination of stockholders entitled to
vote on any matter, 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. The
number of votes which may be cast by any record owner by virtue of the
provisions hereof in respect of Common Stock beneficially owned by such
person beneficially owning shares in excess of the Limit shall
<PAGE>
be a number equal to the total number of votes which a single record owner
of all Common Stock owned by such person would be entitled to cast,
(subject to the provisions of this Article FOURTH) multiplied by a
fraction, the numerator of which is the number of shares of such class or
series which are both beneficially owned by such person and owned of record
by such record owner and the denominator of which is the total number of
shares of Common Stock beneficially owned by such person owning shares in
excess of the Limit.
2. The following definitions shall apply to this Section C of this
Article FOURTH:
(a) "Affiliate" shall have the meaning ascribed to it in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, as in effect on the date of filing of
this Certificate of Incorporation.
(b) "Beneficial ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, (or any successor rule or statutory
provision), or, if said Rule 13d-3 shall be rescinded and there shall
be no successor rule or provision thereto, pursuant to said Rule 13d-3
as in effect on the date of filing of this Certificate of
Incorporation; provided, however, that a person shall, in any event,
also be deemed the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates beneficially
owns, directly or indirectly; or
(2) which such person or any of its affiliates has (i) the
right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed to be the
beneficial owner of any voting shares solely by reason of an
agreement, contract, or other arrangement with this Corporation to
effect any transaction which is described in any one or more of
clauses 1 through 5 of Section A of Article EIGHTH), or upon the
exercise of conversion rights, exchange rights, warrants, or
options or otherwise, or (ii) sole or shared voting or investment
power with respect thereto pursuant to any agreement, arrangement,
understanding, relationship or otherwise (but shall not be deemed
to be the beneficial owner of any voting shares solely by reason
of a revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for
such meeting, with respect to shares of which neither such person
nor any such Affiliate is otherwise deemed the beneficial owner);
or
(3) which is beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any of
its Affiliates
2
<PAGE>
acts as a partnership, limited partnership, syndicate or other
group pursuant to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of this Corporation;
and provided further, however, that (1) no Director or Officer of this
Corporation (or any Affiliate of any such Director or Officer) shall,
solely by reason of any or all of such Directors or Officers acting in
their capacities as such, be deemed, for any purposes hereof, to
beneficially own any Common Stock beneficially owned by any other such
Director or Officer (or any Affiliate thereof), and (2) neither any
employee stock ownership or similar plan of this Corporation or any
subsidiary of this Corporation, nor any trustee with respect thereto or
any Affiliate of such trustee (solely by reason of such capacity of
such trustee), shall be deemed, for any purposes hereof, to
beneficially own any Common Stock held under any such plan. For
purposes only of computing the percentage beneficial ownership of
Common Stock of a person, the outstanding Common Stock shall include
shares deemed owned by such person through application of this
subsection but shall not include any other Common Stock which may be
issuable by this Corporation pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise. For
all other purposes, the outstanding Common Stock shall include only
Common Stock then outstanding and shall not include any Common Stock
which may be issuable by this Corporation pursuant to any agreement, or
upon the exercise of conversion rights, warrants or options, or
otherwise.
(c) The "Limit" shall mean 10% of the then-outstanding shares of
Common Stock.
(d) A "person" shall include an individual, firm, a group acting
in concert, a corporation, a partnership, an association, a joint
venture, a pool, a joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any other group formed
for the purpose of acquiring, holding or disposing of securities or any
other entity.
3. The Board of Directors shall have the power to construe and apply
the provisions of this section and to make all determinations necessary or
desirable to implement such provisions, including but not limited to
matters with respect to (i) the number of shares of Common Stock
beneficially owned by any person, (ii) whether a person is an affiliate of
another, (iii) whether a person has an agreement, arrangement, or
understanding with another as to the matters referred to in the definition
of beneficial ownership, (iv) the application of any other definition or
operative provision of the section to the given facts, or (v) any other
matter relating to the applicability or effect of this section.
3
<PAGE>
4. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in
excess of the Limit (or holds of record Common Stock beneficially owned by
any person in excess of the Limit) supply the Corporation with complete
information as to (i) the record owner(s) of all shares beneficially owned
by such person who is reasonably believed to own shares in excess of the
Limit, and (ii) any other factual matter relating to the applicability or
effect of this section as may reasonably be requested of such person.
5. Except as otherwise provided by law or expressly provided in this
Section C, the presence, in person or by proxy, of the holders of record of
shares of capital stock of the Corporation entitling the holders thereof to
cast a majority of the votes (after giving effect, if required, to the
provisions of this Section C) entitled to be cast by the holders of shares
of capital stock of the Corporation entitled to vote shall constitute a
quorum at all meetings of the stockholders, and every reference in this
Certificate of Incorporation to a majority or other proportion of capital
stock (or the holders thereof) for purposes of determining any quorum
requirement or any requirement for stockholder consent or approval shall be
deemed to refer to such majority or other proportion of the votes (or the
holders thereof) then entitled to be cast in respect of such capital stock,
after giving effect to this Section C.
6. Any constructions, applications, or determinations made by the
Board of Directors pursuant to this section in good faith and on the basis
of such information and assistance as was then reasonably available for
such purpose shall be conclusive and binding upon the Corporation and its
stockholders.
7. In the event any provision (or portion thereof) of this Section C
shall be found to be invalid, prohibited or unenforceable for any reason,
the remaining provisions (or portions thereof) of this Section shall remain
in full force and effect, and shall be construed as if such invalid,
prohibited or unenforceable provision had been stricken herefrom or
otherwise rendered inapplicable, it being the intent of this Corporation
and its stockholders that each such remaining provision (or portion
thereof) of this Section C remain, to the fullest extent permitted by law,
shall remain applicable and enforceable as to all stockholders, including
stockholders owning an amount of stock over the Limit, notwithstanding any
such finding.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Certificate of
Incorporation or the Bylaws of the Corporation, the Directors are hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
4
<PAGE>
B. The Directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
C. Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be called only
by the Board of Directors pursuant to a resolution adopted by a majority of the
Whole Board or as otherwise provided in the Bylaws. The term "Whole Board"
shall mean the total number of authorized directorships (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption).
SIXTH: A. The number of Directors shall be fixed from time to time
-----
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The Directors shall be divided into three classes,
with the term of office of the first class to expire at the first annual meeting
of stockholders, the term of office of the second class to expire at the annual
meeting of stockholders one year thereafter and the term of office of the third
class to expire at the annual meeting of stockholders two years thereafter with
each Director to hold office until his or her successor shall have been duly
elected and qualified. At each annual meeting of stockholders following such
initial classification and election, Directors elected to succeed those
Directors whose terms expire shall be elected for a term of office to expire at
the third succeeding annual meeting of stockholders after their election with
each Director to hold office until his or her successor shall have been duly
elected and qualified.
B. Subject to the rights of holders of any series of Preferred Stock
outstanding, newly created directorships resulting from any increase in the
authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum, and Directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been chosen expires. No decrease
in the number of Directors constituting the Board of Directors shall shorten the
term of any incumbent Director.
C. Advance notice of stockholder nominations for the election of Directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
D. Subject to the rights of holders of any series of Preferred Stock then
outstanding, any Directors, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 80 percent of the voting power of all of the then-
outstanding shares of capital stock of the Corporation entitled to vote
generally in the
5
<PAGE>
election of Directors (after giving effect to the provisions of Article FOURTH
of this Certificate of Incorporation ("Article FOURTH")), voting together as a
single class.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal Bylaws of the Corporation. Any adoption, amendment or repeal of the
Bylaws of the Corporation by the Board of Directors shall require the approval
of a majority of the Whole Board. The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to adopt, amend or repeal any provisions of the Bylaws of the
Corporation.
EIGHTH: A. In addition to any affirmative vote required by law or this
------
Certificate of Incorporation, and except as otherwise expressly provided in this
Article EIGHTH:
1. any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other corporation (whether or not itself
an Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder, or any Affiliate of any Interested Stockholder, of
any assets of the Corporation or any Subsidiary having an aggregate Fair
Market Value (as hereinafter defined) equaling or exceeding 25% or more of
the combined assets of the Corporation and its Subsidiaries; or
3. the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market
Value (as hereinafter defined) equaling or exceeding 25% of the combined
Fair Market Value of the outstanding common stock of the Corporation and
its Subsidiaries, except for any issuance or transfer pursuant to an
employee benefit plan of the Corporation or any Subsidiary thereof
(established with the approval of a majority of the Disinterested
Directors); or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
6
<PAGE>
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of Directors (the "Voting Stock") (after giving effect to
the provisions of Article FOURTH), voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or by any other
provisions of this Certificate of Incorporation or any Preferred Stock
Designation or in any agreement with any national securities exchange or
otherwise.
The term "Business Combination" as used in this Article EIGHTH shall mean
any transaction which is referred to in any one or more of paragraphs 1 through
5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only the affirmative vote of the majority of the outstanding
shares of capital stock entitled to vote after giving effect to the provisions
of Article FOURTH, or such vote (if any), as is required by law or by this
Certificate of Incorporation, if, in the case of any Business Combination that
does not involve any cash or other consideration being received by the
stockholders of the Corporation solely in their capacity as stockholders of the
Corporation, the condition specified in the following paragraph 1 is met or, in
the case of any other Business Combination, all of the conditions specified in
either of the following paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by a majority of
the Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by the holders
of Common Stock in such Business Combination shall at least be equal to
the higher of the following
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder or any of its Affiliates for
7
<PAGE>
any shares of Common Stock acquired by it (i) within the two-year
period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date"), or
(ii) in the transaction in which it became an Interested
Stockholder, whichever is higher.
(2) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Article EIGHTH as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any class of outstanding Voting Stock other than Common Stock
shall be at least equal to the highest of the following (it being
intended that the requirements of this subparagraph (b) shall be
required to be met with respect to every such class of outstanding
Voting Stock, whether or not the Interested Stockholder has previously
acquired any shares of a particular class of Voting Stock):
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder for any shares of such class of Voting
Stock acquired by it (i) within the two-year period immediately
prior to the Announcement Date, or (ii) in the transaction in
which it became an Interested Stockholder, whichever is higher;
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting Stock
are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; and
(3) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
(c) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as the Interested Stockholder has previously
paid for shares of such class of Voting Stock. If the Interested
Stockholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration to be
received per share by holders of shares of such class of Voting Stock
shall be either cash or the form used to acquire the largest number of
shares of such class of Voting Stock previously acquired by the
Interested Stockholder. The price determined in
8
<PAGE>
accordance with subparagraph B.2 of this Article EIGHTH shall be
subject to appropriate adjustment in the event of any stock dividend,
stock split, combination of shares or similar event.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(1) except as approved by a majority of the Disinterested Directors (as
hereinafter defined), there shall have been no failure to declare and
pay at the regular date therefor any full quarterly dividends (whether
or not cumulative) on any outstanding stock having preference over the
Common Stock as to dividends or liquidation; (2) there shall have been
(i) no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the Common
Stock), except as approved by a majority of the Disinterested
Directors, and (ii) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding shares of
the Common Stock, unless the failure to so increase such annual rate is
approved by a majority of the Disinterested Directors, and (3) neither
such Interested Stockholder or any of its Affiliates shall have become
the beneficial owner of any additional shares of Voting Stock except as
part of the transaction which results in such Interested Stockholder
becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided, directly or indirectly, by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (or any subsequent provisions replacing such
Act, and the rules or regulations thereunder) shall be mailed to
stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group acting in concert,
a corporation, a partnership, an association, a joint venture, a pool, a
joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities or any other entity.
9
<PAGE>
2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Holding Company or Subsidiary thereof) who or which:
(a) is the beneficial owner, directly or indirectly, of more than
5% of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 5% or more of the voting
power of the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933, as amended.
3. For purposes of this Article EIGHTH, "beneficial ownership" shall
be determined in the manner provided in Section C of Article FOURTH hereof.
4. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on the
date of filing of this Certificate of Incorporation.
5. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 2 of this Section C, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
6. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any Director who is
thereafter chosen to fill any vacancy of the Board of Directors or who is
elected and who, in either event, is unaffiliated with the Interested
Stockholder and in connection with his or her initial assumption of office
is recommended for appointment or election by a majority of Disinterested
Directors then on the Board of Directors.
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<PAGE>
7. "Fair Market Value" means:
(a) in the case of stock, the highest closing sales price of the
stock during the 30-day period immediately preceding the date in
question of a share of such stock on the National Association of
Securities Dealers Automated Quotation System or any system then in
use, or, if such stock is admitted to trading on a principal United
States securities exchange registered under the Securities Exchange Act
of 1934, as amended, Fair Market Value shall be the highest sale price
reported during the 30-day period preceding the date in question, or,
if no such quotations are available, the Fair Market Value on the date
in question of a share of such stock as determined by the Board of
Directors in good faith, in each case with respect to any class of
stock, appropriately adjusted for any dividend or distribution in
shares of such stock or any stock split or reclassification of
outstanding shares of such stock into a greater number of shares of
such stock or any combination or reclassification of outstanding shares
of such stock into a smaller number of shares of such stock, and
(b) in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as determined by
the Board of Directors in good faith.
8. Reference to "Highest Per Share Price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any
dividend or distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater number
of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such
stock.
9. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Subparagraphs (a) and (b) of Paragraph 2 of Section B of this Article
EIGHTH shall include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the holders of such
shares.
D. A majority of the Directors of the Corporation shall have the power and
duty to determine for the purposes of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry: (a) whether a person is an
Interested Stockholder; (b) the number of shares of Voting Stock beneficially
owned by any person; (c) whether a person is an Affiliate or Associate of
another; and (d) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value equaling or exceeding 25% of the
combined Fair Market Value of the common stock of the Corporation and its
Subsidiaries. A majority of the Disinterested Directors shall have the further
power to interpret all of the terms and provisions of this Article EIGHTH.
11
<PAGE>
E. Nothing contained in the Article EIGHTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80 percent of the voting power of all of the then-
outstanding shares of the Voting Stock, voting together as a single class, shall
be required to alter, amend or repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating any
-----
offer of another Person (as defined in Article EIGHTH hereof) to (A) make a
tender or exchange offer for any equity security of the Corporation, (B) merge
or consolidate the Corporation with another corporation or entity or (C)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise of its judgment
in determining what is in the best interest of the Corporation and its
stockholders, give due consideration to all relevant factors, including, without
limitation, those factors that Directors of any subsidiary of the Corporation
may consider in evaluating any action that may result in a change or potential
change in the control of the subsidiary, and the social and economic effect of
acceptance of such offer: on the Corporation's present and future customers and
employees and those of its Subsidiaries (as defined in Article EIGHTH hereof);
on the communities in which the Corporation and its Subsidiaries operate or are
located; on the ability of the Corporation to fulfill its corporate objective as
a savings and loan holding company under applicable laws and regulations; and on
the ability of its subsidiary savings and loan association to fulfill the
objectives of a stock form savings and loan association under applicable
statutes and regulations.
TENTH: A. Each person who was or is made a party or is threatened to be
-----
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or an
Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
Director, Officer, employee or agent or in any other capacity while serving as a
Director, Officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the
12
<PAGE>
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this Article
TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter and "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director or Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, services to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expenses of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by
the indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to
13
<PAGE>
be indemnified, or to such advancement of expenses, under this Article TENTH or
otherwise, shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article TENTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally liable to
--------
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
TWELFTH: The Corporation reserves the right to amend or repeal any
-------
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to amend or repeal this Article TWELFTH, Section C of Article
14
<PAGE>
FOURTH, Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH, or
Article EIGHTH.
THIRTEENTH: The name and mailing address of the sole incorporator are as
----------
follows:
Name Mailing Address
---- ---------------
Edward A. Quint 5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
15
<PAGE>
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereto set my hand this 18th day of September, 1997.
/s/ Edward A. Quint
---------------------------------------
Edward A. Quint
Incorporator
16
<PAGE>
EXHIBIT 3.2
<PAGE>
GREAT PEE DEE BANCORP, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
------------------------
Section 1. Annual Meeting.
--------- --------------
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
--------- ----------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
--------- ------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
--------- ------
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation), shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is
required, a majority of the represented by prosy (after giving effect to the
provisions of Article FOURTH of the Corporation's Certificate of
<PAGE>
Incorporation) shall constitute a quorum entitled to take action with respect to
that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a,majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present in person or by prosy constituting a quorum, then except as otherwise
required by law, those present in person or by prosy at such adjourned meeting
shall constitute a quorum, and all matters shall be determined by a majority of
the votes cast at such meeting.
Section 5. Organization.
--------- ------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business.
--------- -------------------
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each matter
upon which the stockholders,will vote at the meeting shall be announced at the
meeting.
(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the Corporation not less than
ninety (90) days prior to the date of the annual meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set
2
<PAGE>
forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the Corporation's capital stock that are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 6(b). The Officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 6(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which directors are to be elected
only (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
6(c). Such nominations, other than those made,by or at the direction of the
Board of Directors, shall be made by timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than ninety (90) days prior to the date of the meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (ii) as to the stockholder giving
the notice (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request of
the Board of Directors any person nominated by the Board of Directors for
election as a Director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the Corporation unless nominated in accordance with the provisions
of this Section 6(c). The Officer of the Corporation or other person presiding
at the meeting shall, if the facts so warrant, determine that a nomination was
not made in accordance
3
<PAGE>
with such provisions and, if he or she shall so determine, he or she shall so
declare to the meeting and the defective nomination shall be disregarded.
Section 7. Proxies and Voting.
--------- ------------------
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph,may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or prosy voting and such other information as may be required
under the procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 8. Stock List.
--------- ----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
4
<PAGE>
Section 9. Consent of Stockholders in Lieu of Meeting.
--------- ------------------------------------------
Subject to the rights of the holders of any class of series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers Number and Term of Office.
--------- ----------------------------------------
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of Directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated except in the absence of such designation shall be seven. The
Board of Directors shall annually elect a Chairman of the Board from among its
members who shall, when present, preside at its meetings.
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years ,thereafter, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, Directors elected to
succeed those Directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election, with each Director to hold office until his or her successor
shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
--------- -----------------------------------------
Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such Director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board shall shorten the term of any incumbent
Director.
5
<PAGE>
Section 3. Regular Meetings.
--------- ----------------
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
--------- ----------------
Special meetings of the Board of Directors may be called by one-third (1/3)
of the Directors then in office (rounded up to the nearest whole number), by the
Chairman of the Board or the President and shall be held at such place, on such
date, and at such time as they, or he or she, shall fix. Notice of the place,
date, and time of each such special meeting shall be given each Director by whom
it is not waived by mailing written notice not less than five (5) days before
the meeting or by telegraphing or telexing or by facsimile transmission of the
same not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 5. Quorum.
--------- ------
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone.
--------- -------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
--------- -------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
6
<PAGE>
Section 8. Powers.
--------- ------
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends,from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in connection
therewith;
(4) To remove any Officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any Officer upon any
other person for the time being;
(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, Officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
--------- -------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
7
<PAGE>
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
--------- ------------------------------------
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for these committees and any others provided
for herein, elect a Director or Directors to serve as the member or members,
designating, if it desires, other Directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any
committee so designated may exercise the power and authority of the Board of
Directors to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
--------- -------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee
--------- --------------------
The Board of Directors may appoint a Nominating Committee of the
Board, consisting of not less than three (3) members. The Nominating Committee
shall have authority (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these By-laws in order to determine compliance with such By-law
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.
8
<PAGE>
ARTICLE IV - OFFICERS
Section 1. Generally.
--------- ---------
(a) The Board of Directors as soon as may be practicable after
the annual meeting of stockholders shall choose a Chairman of the Board, a Chief
Executive Officer and President, one or more Vice Presidents, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors. Any
number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next
annual election of Officers and until their respective successors are chosen but
any Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors.
(c) All Officers chosen by the Board of Directors shall have
such powers and duties as generally pertain to their respective Offices, subject
to the specific provisions of this ARTICLE IV. Such officers shall also have
such powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. Chairman of the Board of Directors.
--------- ----------------------------------
The Chairman of the Board shall, subject to the provisions of these
Bylaws and to the direction of the Board of Directors, serve in general
executive capacity and unless the Board has designated another person, when
present, shall preside at all meetings of the stockholders of the Corporation.
The Chairman of the Board shall perform all duties and have all powers which are
commonly incident to the office of Chairman of the Board or which are delegated
to him or her by the Board of Directors. He or she shall have power to sign all
stock certificates, contracts and other instruments of the Corporation which are
authorized.
Section 3. President and Chief Executive Officer.
--------- -------------------------------------
The President and Chief Executive Officer (the "President") shall have
general responsibility for the management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the offices of President and Chief Executive
Officer or which are delegated to him or her by the Board of Directors. Subject
to the direction of the Board of Directors, the President shall have power to
sign all stock certificates, contracts and other instruments of the Corporation
which are authorized and shall have general supervision of all of the other
Officers (other than the Chairman of the Board), employees and agents of the
Corporation.
9
<PAGE>
Section 4. Vice President.
--------- --------------
The Vice President or Vice Presidents shall perform the duties of the
President in his absence or during his disability to act. In addition, the Vice
Presidents shall perform the duties and exercise the powers usually incident to
their respective offices and/or such other duties and powers as may be properly
assigned to them by the Board of Directors, the Chairman of the Board or the
President. A vice President or Vice Presidents may be designated as Executive
Vice President or Senior Vice President.
Section 5. Secretary.
--------- ---------
The Secretary or Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall perform such other duties and exercise such other powers as are usually
incident to such office and/or such other duties and powers as are properly
assigned thereto by the Board of Directors, the Chairman of the Board or the
President. Subject to the direction of the Board of Directors, the Secretary
shall have the power to sign all stock certificates.
Section 6. Treasurer.
--------- ---------
The Treasurer shall be the Comptroller of the Corporation and shall
have the responsibility for maintaining the financial records of the
Corporation. He or she shall make such disbursements of the funds of the
Corporation as are authorized and shall render from time to time an account of
all such transactions and of the financial condition of the Corporation. The
Treasurer shall also perform such other duties as the Board of Directors may
from time to time prescribe. Subject to the direction of the Board of
Directors, the Treasurer shall have the power to sign all stock certificates.
Section 7. Assistant Secretaries and Other Officers.
--------- ----------------------------------------
The Board of Directors may appoint one or more Assistant Secretaries
and such other Officers who shall have such powers and shall perform such duties
as are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 8. Action with Respect to Securities of Other Corporations.
--------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or
any Officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to,any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other corporation.
10
<PAGE>
ARTICLE V - STOCK
Section 1. Certificates of Stock.
--------- ---------------------
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the Chairman of the Board or the President, and
by the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
--------- ------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
--------- -----------
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day nest preceding the day on which notice is given or,
if notice is waived, at the close of business on the nest day preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment or rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
11
<PAGE>
Section 4. Lost, Stolen or Destroyed Certificates.
--------- -------------------------------------
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
--------- -----------
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
--------- -------
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, Director, Officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, Director,
Officer, employee or agent at his or her last known ,address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
Section 2. Waivers.
--------- -------
A written waiver of any notice, signed by a stockholder, Director,
Officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, Director, Officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
--------- --------------------
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these Bylaws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
12
<PAGE>
Section 2. Corporate Seal.
--------- --------------
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an Assistant
Secretary or an assistant to the Treasurer.
Section 3. Reliance Upon Books, Reports and Records.
--------- ----------------------------------------
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
--------- -----------
The fiscal year of the Corporation shall end on June 30 of every year.
Section 5. Time Periods.
--------- ------------
In applying any provision of these Bylaws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - AMENDMENTS
The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change was given not less
than two days prior to the meeting. The stockholders shall also have power to
amend, alter or repeal these Bylaws at any meeting of stockholders provided
notice of the proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the voting stock required by law, the Certificate of Incorporation,
any Preferred Stock Designation or these Bylaws, the affirmative votes of the
holders of at least 80% of the voting power of all the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws.
13
<PAGE>
EXHIBIT 3.3
<PAGE>
FEDERAL STOCK CHARTER
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
Section 1. Corporate Title. The full corporate title of the stock savings
association is First Federal Savings and Loan Association of Cheraw (the
"Savings Association").
Section 2. Office. The home office shall be located in the City of
Cheraw, State of South Carolina.
Section 3. Duration. The duration of the Savings Association is
perpetual.
Section 4. Purpose and Powers. The purpose of the Savings Association is
to pursue any or all of the lawful objectives of a Federal savings 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 (the "Office").
Section 5. Capital Stock. The total number of shares of all classes of
the capital stock which the Savings Association has authority to issue is
30,000,000 of which 20,000,000 shares shall be common stock, par value of $1.00
per share, and of which 10,000,000 shares shall be serial preferred stock, par
value of $1.00 per share. The shares may be issued from time to time as
authorized by the board of directors without the approval of its stockholders
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 Savings Association. The consideration for the shares shall be cash,
tangible or intangible property (to the extent direct investment in such
property would be permitted to the Savings Association), labor, or services
actually performed for the Savings Association, or any combinations 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
Savings Association, shall be conclusive. Upon payment of such consideration,
such shares shall be deemed to be fully paid and nonassessable. In the case of
a stock dividend, that part of the surplus of the Savings Association which is
transferred to stated capital upon the issuance of shares as a share 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 the
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; 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 Savings Association with another corporation
or the sale, lease, or conveyance (other than by mortgage or
pledge) of properties or business in exchange for securities of a
corporation other than the Savings Association if the preferred
stock is exchanged for securities of such other corporation;
provided, that no provision may require such approval for
--------
<PAGE>
transactions undertaken with the assistance or pursuant to the
direction of the Office or the Federal Deposit Insurance
Corporation;
(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
Savings Association in a merger or consolidation for the Savings
Association, shall not be considered to be such an adverse
change.
A description of the different classes and series of the Savings
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 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 such holder, except as to the
cumulation of votes for the election of directors.
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 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 Savings
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 Savings Association available for distribution remaining after:
(i) payment or provision for payment of the Savings Association's debts and
liabilities; (ii) distributions or provision for distributions in settlement of
its liquidation account; and (iii) distributions or provision 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 Savings Association.
Each share of common stock shall have the same rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred Stock. The Savings 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;
(d) Whether the shares of such series shall be redeemable and, if so, the
price(s) at which, and the terms and conditions of 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
Savings Association;
2
<PAGE>
(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
Savings 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 Savings 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 Savings
Association shall not be entitled to preemptive rights with respect to any
shares of the Savings Association which may be issued.
Section 7. Liquidation Account. Pursuant to the requirements of the
Office's regulations (12 C.F.R. Subchapter D), the savings association shall
establish and maintain a liquidation account for the benefit of its savings
account holders as of June 30, 1995 and September 30, 1997 ("eligible savers").
In the event of a complete liquidation of the savings association, it shall
comply with such regulations with respect to the amount and the priorities on
liquidation of each of the savings association's eligible saver's inchoate
interest in the liquidation account, to the extent it is still in existence;
provided, that an eligible saver's inchoate interest in the liquidation account
- --------
shall not entitle such eligible saver to any voting rights at meetings of the
savings association's shareholders.
Section 8. Certain Provisions Applicable for Five Years. Notwithstanding
anything contained in the savings association's charter or bylaws to the
contrary, for a period of five years from the date of completion of the
conversion of the savings association from mutual to stock form, the following
provisions shall apply:
A. Beneficial Ownership Limitation. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10%
of any class of an equity security of the savings association. This limitation
shall not apply to a transaction in which the savings association forms a
holding company without change in the respective beneficial ownership interests
of its shareholders other than pursuant to the exercise of any dissenter and
appraisal rights, the purchase of shares by underwriters in connection with a
public offering, or the purchase of shares by a tax-qualified employee stock
benefit plan which is exempt from the approval requirements under (S)
574.3(c)(1)(vi) of the Office's regulations.
In the event shares are acquired in violation of this Section 8, all shares
beneficially owned by any person in excess of 10% shall be considered "excess
shares" and 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 matters
submitted to the shareholders for a vote.
3
<PAGE>
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of the equity
securities of the savings association.
(2) The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a
joint activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) 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 arrangements,
whether written or otherwise.
B. Cumulative Voting Limitation. Shareholders shall not be permitted to
cumulate their votes for election of directors.
C. Call for Special Meetings. Special meetings of shareholders relating
to changes in control of the savings association or amendments to its charter
shall be called only upon direction of the Board of Directors.
Section 9. Directors. The Savings Association shall be under the
direction of a board of directors. The authorized number of directors, as stated
in the Savings 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 10. 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 Savings
association, approved by the stockholders by a majority of the total votes
eligible to be cast at a legal meeting, unless a higher vote is otherwise
required, and approved or preapproved by the Office.
4
<PAGE>
Dated: This ______ day of ___________, 1997.
Attest:
----------------------------------
By:
----------------------------------------
Herbert W. Watts, President, Chief
Executive Officer and Director
First Federal Savings and Loan Association of Cheraw
Declared effective this _____ day of ________________, 1997.
OFFICE OF THRIFT SUPERVISION
Attest:
---------------------------------------------
Secretary of the Office of Thrift Supervision
By: --------------------------------------------
Director of the Office of Thrift Supervision
5
<PAGE>
EXHIBIT 3.4
<PAGE>
BYLAWS
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
ARTICLE I--HOME OFFICE
The home office of the association shall be at 515 Market Street in the
County of Chesterfield, 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 convenient 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 30th of June if not a legal holiday, and
if a legal holiday, then on the next day following which is not a legal holiday,
at ____ _.m., 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 the 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
1
<PAGE>
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.
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 of
record 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 any 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 the procedures prescribed in (S)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
2
<PAGE>
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. 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. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any person 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 of 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 13. 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 14. New Business. Any new business to be taken up at the annual
meting 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 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.
3
<PAGE>
Section 15. 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 six
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 or 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 majority if
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 5 of this Article III.
4
<PAGE>
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 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 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. 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.
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.
5
<PAGE>
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.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as it 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.
6
<PAGE>
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
the 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.
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.
7
<PAGE>
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 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.
8
<PAGE>
EXHIBIT 4
<PAGE>
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
Great Pee Dee Bancorp, Inc.
Cheraw, South Carolina
$.01 par value common stock--fully paid and non assessable
This certifies that _____________________________ is the owner of __________
shares of the common stock of Great Pee Dee Bancorp, Inc. (the "Corporation"), a
Delaware corporation.
The shares evidenced by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, in person or
by his duly authorized attorney or legal representative, upon surrender of this
certificate properly endorsed. This Certificate in not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
This security is not a deposit or savings account and is not federally insured
or guaranteed.
In Witness Whereof, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused its
seal to be affixed hereto.
Dated:
------------------
_____________________________ ______________________________
Secretary (SEAL) President
<PAGE>
GREAT PEE DEE BANCORP, INC.
The shares evidenced by this Certificate are subject to a limitation
contained in the Certificate of Incorporation of Great Pee Dee Bancorp, Inc.
(the "Corporation") to the effect 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
outstanding shares of Common Stock (the "Limit") be entitled or permitted to
any vote in respect of shares held in excess of the Limit. The Limit shall
not be applicable to an acquisition of Common Stock by an employee stock
purchase plan or other employee benefit plan of the Corporation or any of its
subsidiaries.
The Board of Directors of the Corporation is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the voting powers,
designations, preferences, limitations and restrictions thereof. The
Corporation will furnish to any shareholder upon request and without charge a
full description of each class of stock and any series thereof.
The shares represented by this Certificate may not be cumulatively voted on
any matter. The Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of the voting stock of the Corporation, voting
together as a single class, to approve certain business combinations and other
transactions and to amend certain provisions of the Certificate of
Incorporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____Custodian_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties
Under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right
of survivorship and not as ---------------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list
For value received, __________________ hereby sell, assign and transfer unto
--------------------------------------------
--------------------------------------------
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER
------------------------------------------------------------------------------
(please print or typewrite name and address including postal zip code of
assignee)
------------------------------------------------------------------------------
____________________________________________________________________ Shares of
the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
Attorney to transfer the said shares on the books of the within named
corporation with full power of substitution in the premises.
Dated, _____________________
In the presence of Signature:
----------------------------- -------------------------------------
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 5
<PAGE>
[Letterhead of Luse Lehman Gorman Pomerenk & Schick, P.C.]
(202) 274-2008
==============
September 25, 1997
The Board of Directors
First Federal Savings and Loan
Association of Cheraw
515 Market Street
Cheraw, South Carolina 29520
Re: Great Pee Dee Bancorp, Inc.
Common Stock Par Value $.01 Per Share
-------------------------------------
Gentlemen:
You have requested the opinion of this firm as to certain matters in
connection with the offer and sale (the "Offering") of Great Pee Dee Bancorp,
Inc. (the "Company") Common Stock, par value $.01 per share ("Common Stock").
We have reviewed the Company's Certificate of Incorporation, Registration
Statement on Form SB-2 ("Form SB-2"), as well as applicable statutes and
regulations governing the Company and the offer and sale of the Common Stock.
We are of the opinion that upon the declaration of effectiveness of the
Form SB-2, the Common Stock, when sold, will be legally issued, fully paid and
non-assessable.
This Opinion has been prepared solely for the use of the Company in
connection with the Form SB-2. We hereby consent to our firm being referenced
under the caption "Legal Opinions."
Very truly yours,
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
By: /s/ Alan Schick
---------------------
ALAN SCHICK, ESQ.
<PAGE>
EXHIBIT 8.1
<PAGE>
FORM OF
FEDERAL TAX OPINION
____________, 1997
Board of Directors
First Federal Savings and Loan
Association Of Cheraw
515 Market Street
Cheraw, South Carolina 29520
Re: Federal Income Tax Consequences Relating to Conversion of First
Federal Savings and Loan Association of Cheraw from a Federal Mutual
Savings and Loan Association to a Federal Stock Savings and Loan
Association and the Offer and Sale of Common Stock of Great Pee Dee
Bancorp, Inc.
Gentlemen:
In accordance with your request, set forth herein is the opinion of this
firm relating to the federal income tax consequences of the proposed conversion
of First Federal Savings and Loan Association of Cheraw (the "Association") from
a federal mutual savings and loan association to a federal stock savings and
loan association (the "Stock Association"), and the formation of a holding
company parent to be known as Great Pee Dee Bancorp, Inc. (the "Holding
Company"), which will acquire all of the outstanding stock of the Stock
Association.
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 on July 14, 1997 (the
"Plan"); the Federal Mutual Charter and Bylaws of the Association; and the
Certificate of Incorporation and Bylaws of the Holding Company. 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. Terms used but not
defined herein, whether capitalized or not, shall have the same meanings as
defined in said documents.
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 2
In issuing our opinion, we have assumed that the Plan has been duly and
validly authorized and has been approved and adopted by the board of directors
of the Association at a meeting duly called and held; that the Association will
comply with the terms and conditions of the Plan, and that the various
representations and warranties which are provided to us are accurate, complete,
true and correct. Accordingly, we express no opinion concerning the effect, if
any, of variations from the foregoing. We specifically express no opinion
concerning tax matters relating to the Plan under state and local tax laws and
under Federal income tax laws except on the basis of the documents and
assumptions described above.
For purposes of this opinion, we are relying on the representations
provided to us by the Association as described in the Affidavit of the
Association's President and Chief Executive Officer, as attached hereto and
incorporated herein.
In issuing the opinion set forth below, we have relied solely on existing
provisions of the Internal Revenue Code of 1986, as amended (the "Code");
existing and proposed Treasury Regulations (the "Regulations") thereunder;
current administrative rulings, notices and procedures; and court decisions.
Such laws, regulations, administrative rulings, notices and procedures and court
decisions are subject to change at any time. Any such change could affect the
continuing validity of the opinions set forth below. This opinion is as of the
date hereof, and we disclaim any obligation to advise you of any change in any
matter considered herein after the date hereof.
In rendering our opinion, we have assumed that the persons and entities
identified in the Plan of Conversion will at all times comply with the
requirements of Code Section 368(a)(1)(F), the other applicable state and
Federal laws and the representations of the Association. In addition, we have
assumed that the activities of the persons and entities identified in the Plan
will be conducted strictly in accordance with the Plan. Any variations may
affect the opinions we are rendering.
We emphasize that the outcome of litigation cannot be predicted with
certainty and, although we have attempted in good faith to opine as to the
probable outcome of the merits of each tax issue with respect to which an
opinion was requested, there can be no assurance that our conclusions are
correct or that they would be adopted by the Internal Revenue Service (the
"Service") or a court of law.
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 3
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 understand that the proposed Conversion, as defined below, and the relevant
facts with respect thereto are as follows:
The Association is a federal mutual savings and loan association which
is in the process of converting to a federal stock savings and loan association.
As a federal mutual savings and loan association, the Association has no
authorized capital stock. Instead, the Association, in mutual form, has a
unique equity structure. A depositor of the Association is entitled to payment
of interest on his account balance as declared and paid by the Association. A
depositor has no right to a distribution of any earnings of the Association
except for interest paid on his deposit, but rather such earnings become
retained earnings of the Association. However, a depositor has a right to
share, pro rata, with respect to the withdrawal value of his savings account, in
any liquidation proceeds distributed in the event the Association is ever
liquidated. Voting rights in the Association are held by its members, i.e.,
depositors and certain borrowers. Each depositor is entitled to cast one vote
for each $100 or a fraction thereof deposited in a withdrawable account, up to
1000 votes. Each borrower from the Association who remains a borrower of the
Association on the voting record date is entitled to one vote in addition to
the number of votes, if any, to which he is entitled as the holder of a
withdrawable account. All of the interests held by a depositor in the
Association cease when such depositor closes his accounts with the Association.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Association has decided that in order to
increase its net worth, support future deposit growth, increase the amount of
funds available for other lending and investment, provide greater resources for
the expansion of customer services, and to facilitate future expansion, it would
be advantageous for the Association to convert from a federal mutual savings and
loan association to a federal stock savings and loan association. Pursuant to
the Plan, the Association's federal mutual savings and loan association charter
will be amended and a new charter will be adopted to allow it to continue its
operations in the form of a federal stock savings and loan association.
Further, the Board of Directors has determined that in order to enhance
flexibility of operations, diversification of business opportunities, financial
capability for business and regulatory purposes, and to enable the Stock
Association to compete more effectively with other financial service
organizations, it is advantageous to have the stock of the Stock Association
held by a parent holding company. The Plan must be approved by the Office of
Thrift Supervision
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 4
("OTS"), and by an affirmative vote of at least a majority of the total votes
eligible to be cast at a special meeting of the Association's members called to
vote on the Plan (the "Special Meeting").
The Holding Company has been formed under the laws of the State of
Delaware for the purpose of the proposed transactions described herein, to
engage in business as a savings and loan association holding company and to hold
all of the stock of the Stock Association. The Holding Company will issue
shares of its voting common stock ("Holding Company Stock") upon completion of
the mutual-to-stock conversion of the Association, as described below, to
persons purchasing such shares through a Subscription Offering and to the
general public in a Community Offering.
As part of the Conversion, the Company and the Association intend to
establish a charitable foundation that will qualify as an exempt organization
under Section 501(c)(3) of the Internal Revenue Code (the "Foundation") and to
donate to the Foundation 20,000 shares or $200,000 worth of its Common Stock.
The establishment and funding of the Foundation as part of the Conversion is
subject to the approval of the voting members of the Association at the Special
Meeting of Members. In the event that the Foundation does not receive the
prerequisite approval, the Association may determine to complete the Conversion
without the Foundation.
The Plan of Conversion provides that the Foundation is being formed to
further the Converted Association's long term commitment to its community. The
Plan of Conversion states that the Foundation is intended to complement the
Association's existing community reinvestment activities so as to allow the
local community to share in the growth and profitability of the Holding Company
and the Converted Association over the long term.
The Foundation will be dedicated to the promotion of charitable and
educational purposes within the Association's local community, including, but
not limited to, grants or donations to support housing assistance, scholarships,
local education, not-for-profit medical facilities, not-for-profit community
groups and other types of organizations or civic minded projects. The Foundation
will annually distribute total grants and donations to assist charitable
organizations or to fund projects within its local community of not less than 5%
of the average fair value of the Foundation's assets each year.
Following regulatory approval, the Plan provides for the offer and
sale of shares of Holding Company Stock to the Association's eligible depositors
and borrowers, tax qualified employee stock benefit plans, including the
Association's Employee Stock Ownership Plan, and others as described below and
set forth in the Plan. The aggregate purchase price at which all
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 5
shares of Holding Company Stock will be offered and sold pursuant to the Plan
will be equal to the estimated pro forma market value of the Association, as
converted. 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 conversion of the Association from
mutual-to-stock form and the sale of newly issued shares of the stock of the
Stock Association to the Holding Company will be deemed effective concurrently
with the closing of the sale of Holding Company Stock.
As required by OTS regulations and described in detail in the Plan,
shares of Holding Company Stock will be offered through the Subscription
Offering pursuant to non-transferable subscription rights on the basis of
preference categories. All shares must be sold, and to the extent the stock is
available, no subscriber will be allowed to purchase fewer than 25 shares of
Holding Company Stock. Pursuant to the Plan, the Association has established
four preference categories under which shares of Holding Company Stock may be
purchased, followed by a Community Offering for the sale of shares not purchased
under the preference categories, and a Syndicated Community Offering for the
sale of shares not sold in the Community Offering.
The first preference category is reserved for Eligible Account
Holders. The Plan defines "Eligible Account Holders" as any person holding a
"Qualifying Deposit" in the Association on the Eligibility Record Date. The
Plan defines "Qualifying Deposit" as the aggregate balance of an Eligible
Account Holder's or Supplemental Eligible Account Holder's Deposit Accounts at
the Association at the close of business on June 30, 1995, or with respect to
Supplemental Eligible Account Holder's, the last day of the calendar quarter
preceding approval of the plan by the OTS. The Plan defines "Deposit Account" to
include any withdrawable account with a balance of at least $50, as defined in
the rules and regulations of the OTS, including certificates of deposit. Each
Eligible Account Holder will receive, without payment, non-transferable
subscription rights to purchase Holding Company Stock equal to the greater of
(a) $250,000; (b) one-tenth of one percent (.10%) of the total offering of
shares; or (c) fifteen times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Holding Company 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 the Qualifying Deposits of all Eligible Account Holders on the Eligibility
Record Date, subject to availability and the minimum and maximum purchase
limitations set forth in the Plan. If there is an oversubscription, shares will
be allocated among subscribing Eligible Account Holders so as to permit each
such Eligible Account Holder, to the extent possible, to purchase a number of
shares sufficient to make his total allocation equal to 100 shares or the total
amount of his subscription, whichever is less. Any shares not then allocated
shall be allocated among the subscribing Eligible Account Holders
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 6
on an equitable basis, relative to the amounts of their respective Qualifying
Deposits as compared to the total Qualifying Deposits of Eligible Account
Holders on the Eligibility Record Date. Non-transferable subscription rights to
purchase Holding Company Stock received by officers and directors of the
Association and their Associates (as defined in the Plan) 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 non-transferable subscription rights to purchase
shares of Holding Company Stock under this preference category.
The second preference category is reserved for " Tax-Qualified
Employee Plans." The Plan defines "Tax-Qualified Employee Plans" as any tax-
qualified defined benefit or defined contribution plan of the Association or the
Holding Company, such as an employee stock ownership plan, stock 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 of
1986, as amended. Under the Plan, Employee Plans receive non-transferable
subscription rights to purchase, in the aggregate, up to 10% of the shares of
Holding Company Stock. Subscription rights received under this preference
category shall be subordinated to all rights received under the first preference
category.
If there is no oversubscription of the Holding Company Stock in the
first and second preference categories, then the third preference category
becomes operational. The third preference category is reserved for Supplemental
Eligible Account Holders. The Plan defines "Supplemental Eligible Account
Holder" as any person, other than directors and officers of the Association and
their associates and other than Eligible Account Holders, holding a Qualifying
Deposit on the Supplemental Eligibility Record Date. The term Supplemental
Eligibility Record Date means the last day of the calendar quarter preceding
approval of the Plan by the OTS. Supplemental Eligible Account Holders, will
receive, without payment, nontransferable subscription rights to purchase
Holding Company Stock equal to the greater of (a) $250,000; (b) one-tenth of one
percent (.10%) of the total offering of shares; or (c) fifteen times the product
rounded down to the next whole number) obtained by multiplying the total number
of shares of Holding Company Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of Supplemental Eligible
Account Holders and the denominator is the amount of Qualifying Deposits of all
Supplemental Eligible Account Holders on the Supplemental Eligible Record Date,
subject to availability and the minimum and maximum purchase limitations set
forth in the Plan. If there is an oversubscription, shares will be allocated
among subscribing Supplemental Eligible Account Holders so as to permit each
such Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation equal to 100 shares or
the total amount of his subscription, whichever is less. Any
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 7
shares not then allocated shall be allocated among the subscribing Supplemental
Eligible Account Holders on an equitable basis, relative to the amounts of their
respective Qualifying Deposits as compared to the total Qualifying Deposits of
all Supplemental Eligible Account Holders whose subscription remain unsatisfied.
Subscription rights received under this preference category shall be
subordinated to all rights received under the first and second preference
categories.
If there is no oversubscription of the Holding Company Stock in the
first, second and third categories, then the fourth preference category becomes
operational. In the fourth preference category, members of the Association who
are not Eligible Account Holders or Supplemental Eligible Account Holders, but
who are entitled to vote at the Special Meeting ("Other Members") will receive,
without payment, non-transferable subscription rights entitling them to purchase
Holding Company Stock in an amount equal to the greater of (a)$250,000 (b) one-
tenth of one percent (.10%) of the total offering of shares subject to the
maximum and minimum purchase limitations set forth in the Plan (and exclusive of
an increase in the total number of shares issued due to an increase in the
estimated price range of up to 15% provided that such shares will be allocated
only after first allocating to persons in the preceding preference categories
all shares for which they have subscribed). In the event of an oversubscription
by Other Members, Holding Company Stock shall be allocated on a pro rata basis
in the same proportion as a subscribers total votes on the voting record date
for the Special Meeting of members bears to the total votes of all subscribing
Other Members on such date.
Any shares of Holding Company Stock not purchased through the exercise
of Subscription Rights in the Subscription Offering may be sold in a Direct
Community Offering. Shares of Holding Company Stock will be offered in the
Direct Community Offering, giving preference to natural persons residing in the
counties in which the Association has offices, and to whomever the Association
delivers a copy of the prospectus and the stock order form to be used in the
Conversion. Orders received in the Direct Community Offering shall be filled
for up to the maximum purchase limitation, and thereafter remaining shares shall
be allocated on an equitable basis. The Holding Company and the Association
shall have the sole right to accept or reject orders in the Direct Community
Offering in whole or in part.
Any shares of Holding Company Stock not purchased in the Subscription
and Direct Community Offerings shall then be sold to the underwriters for resale
to the general public.
The Plan further provides for limitations upon purchases of Holding
Company Stock. Among such limitations, a person together with associates may not
purchase more than $250,000 in shares of Holding Company Stock offered in the
Conversion. For these purposes, an Associate
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 8
of a person does not include a Tax-Qualified or Non-Qualified Employee Plan in
which such person has a beneficial interest or serves as a trustee or in a
similar fiduciary capacity. Such purchase limitation may be increased or
decreased at the discretion of the Board of Directors of the Association,
subject to the purchase limitations discussed below. Further, a person's
purchases of Holding Company Stock in the Conversion, when aggregated with other
purchases by Associates of the purchaser or by a group of persons acting in
concert with the purchaser, may not exceed $250,000 of the shares of Holding
Company Stock offered in the Conversion. Officers and directors of the
Association or the Holding Company and their Associates may not purchase in the
aggregate more than 34.78% of the shares offered in the Conversion. Directors
of the Association or the Holding Company will not be deemed Associates or a
group acting in concert solely as a result of their membership on the Board of
Directors of the Association or the Holding Company. All of the shares of
Holding Company Stock purchased by such officers and directors will be subject
to certain restrictions regarding resale for a period of one year.
The Plan also provides for the establishment of a Liquidation Account
by the Stock Association for the benefit of all Eligible Account Holders and
Supplemental Eligible Account Holders who continue to maintain Deposit Accounts
in the Association. Initially, the Liquidation Account will be equal in amount
to the net worth of the Association as shown on its latest statement of
financial condition contained in the final offering circular used 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 Stock Association, except that the Stock Association will not declare or pay
cash dividends on or repurchase any of its stock if the result thereof would be
to reduce its net worth below the amount required to maintain the Liquidation
Account. The Liquidation Account will be for the benefit of the Association's
Eligible Account Holders and Supplemental Eligible Account Holders who maintain
accounts in the Association at the time of the Conversion. All such account
holders will have an inchoate interest in a portion of the Liquidation Account
with respect to each savings account held ("Subaccount Balance"). The interest
that an Eligible Account Holder or Supplemental Eligible Account Holder will
have is a right to receive, in the event of a complete liquidation of the Stock
Association, a liquidation distribution from the Liquidation Account in the
amount of the then current adjusted Subaccount Balance for savings accounts then
held, prior to any liquidation distribution being made with respect to capital
stock.
The initial Subaccount Balance for a savings account held by an
Eligible Account Holder or 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 the Qualifying Deposit in the
savings account, and the denominator is the total amount of Qualifying Deposits
of
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 9
all Eligible Account Holders and Supplemental Eligible Account Holders in the
Association. The initial Subaccount Balance will never be increased, but may be
decreased if the deposit balance in any qualifying savings account of any
Eligible Account Holder or Supplemental Eligible Account Holder on any annual
closing date subsequent to the Eligibility Record Date, whichever is applicable,
is less than the lesser of: (1) the deposit balance in the such Deposit Account
at the close of business on any annual closing date subsequent to the
Eligibility Record Date; or (2) the amount of the Qualifying Deposit in such
Deposit Account. In such event, the Subaccount Balance for the qualifying
savings account will be adjusted by reducing each Subaccount Balance in an
amount proportionate to the reduction in the savings account balance. Once
decreased, the Plan provides that the Subaccount Balance will never be
subsequently increased, and if the qualifying savings account of an Eligible
Account Holder is closed, the related Subaccount Balance in the Liquidation
Account will be reduced to zero.
The net proceeds from the sale of all of the shares of the Holding
Company Stock will become the permanent capital of the Holding Company, and the
Holding Company will in turn purchase 100% of the stock issued by the Stock
Association, in exchange for at least 50% of the net proceeds of the Holding
Company's stock offering or such other percentage as is approved by the Board of
Directors with the concurrence of the OTS.
Following the Conversion, voting rights in the Stock Association will
rest exclusively with the shareholder of stock in the Stock Association, which
will be the Holding Company. Voting rights in the Holding Company will rest
exclusively with the holders of its capital stock. The Conversion will not
interrupt the business of the Association, and its business will continue as
usual under the Stock Association. 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 the
Conversion except to the extent funds or deposits are used to pay for Holding
Company Stock. All loans of the Association will remain unchanged and retain
their same characteristics in the Stock Association after the Conversion.
Following the Conversion, the Stock Association will continue to engage in the
same business as the Association immediately prior to the Conversion, and the
Stock Association will continue to have its savings accounts insured by the
Federal Deposit Insurance Corporation up to applicable limits.
Immediately prior to the Conversion, the Association will have a
positive net worth determined in accordance with generally accepted accounting
principles.
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 10
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 Conversion:
1. The change in the form of operation of the Association from a federal
mutual savings and loan association to a federal stock savings and
loan association, as described above, will constitute a
reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended ("Code"), and no gain or
loss will be recognized to either the Association or to the Stock
Association as a result of such conversion. (See Rev. Rul. 80-105,
1980-1 C.B. 78). The Association and the Stock Association will each
be a party to a reorganization within the meaning of Section 368(b)
of the Code. (Rev. Rul. 72-206, 1972-1 C.B. 104)
2. No gain or loss will be recognized by the Stock Association on the
receipt of money from the Holding Company in exchange for shares of
common stock of the Stock Association. (Section 1032(a) of the Code).
3. The Holding Company will recognize no gain or loss upon receipt of
money from stockholders in exchange for shares of Holding Company
Stock. (Section 1032(a) of the Code).
4. The assets of the Association will have the same basis in the hands
of the Stock Association as in the hands of the Association
immediately prior to the Conversion. (Section 362(b) of the Code).
5. The holding period of the assets of the Association to be received by
the Stock Association will include the period during which the assets
were held by the Association prior to the Conversion. (Section
1223(2) of the Code).
6. No gain or loss will be recognized by the depositors of the
Association upon the issuance to them of withdrawable savings
accounts in the Stock Association in the same dollar amount as their
savings accounts in the Association plus an interest in the
Liquidation Account of the Stock
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 11
Association, as described above, in exchange for their savings
accounts in the Association. (Section 354(a) of the Code).
7. The basis of the depositors' savings accounts in the Stock
Association received by the depositors of the Association will be the
same as the basis of their savings accounts in the Association
surrendered in exchange therefor. The basis of each account holder's
interests in the Liquidation Account of the Stock Association
received by the depositors will be zero, that being the cost of such
property. The basis of the non-transferable subscription rights will
be zero, provided that such subscription rights are not deemed to
have a fair market value and that the subscription price of such
stock issuable upon exercise of such rights is equal to the fair
market value of such stock. The basis of the Holding Company Stock to
its stockholders will be the purchase price thereof, increased by the
basis, if any, of the subscription rights exercised. (Section 1012 of
the Code). The stockholder's holding period will commence upon the
exercise of the subscription rights. (Section 1223(6) of the Code).
8. Provided that the amount to be paid for Holding Company Stock
pursuant to the exercise of subscription rights is equal to the fair
market value of such Common Stock, no gain or loss will be recognized
by depositors under the Plan upon the distribution to them of non-
transferable subscription rights to purchase shares of Holding
Company Stock. (Rev. Rul. 56-572, 1956-2 C.B. 234).
9. For purposes of Section 381 of the Code, the Stock Association will
be treated as if there had been no reorganization. Accordingly, the
taxable year of the Association will not end on the effective date of
the Conversion merely because of the transfer of assets of the
Association to the Stock Association, and the tax attributes of the
Association will be taken into account by the Stock Association as if
there had been no reorganization. (Treas. Reg. (S)1.381(b)-
(1)(a)(2)).
10. The part of the taxable year of the Association before the
reorganization and the part of the taxable year of the Stock
Association after the reorganization will constitute a single taxable
year of the Stock Association. (Treas. Reg. (S)1.381(b)-1(a)(2); Rev.
Rul. 57-276, 1957-1 C.B. 126).
<PAGE>
Board of Directors
First Federal Savings and Loan
Association of Cheraw
_________, 1997
Page 12
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 on 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.
CONSENT
-------
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-1 ("Registration Statement") of the Holding
Company filed with the Securities and Exchange Commission with respect to the
Conversion and as an exhibit to the application for Conversion on Form AC ("Form
AC") of the Association filed with the OTS with respect to the Conversion. We
also hereby consent to the references to this firm in the prospectus which is a
part of both the Registration Statement and the Form AC.
USE OF OPINION
--------------
This opinion is rendered solely for the benefit of the Holding
Company, the Association and prospective investors in connection with the
proposed transactions described herein and is not to be relied upon or used for
any other purpose without our prior written consent.
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation
<PAGE>
EXHIBIT 8.2
<PAGE>
September ____, 1997
Board of Directors
First Federal Savings and Loan Association of Cheraw
Cheraw, South Carolina
Re: State of South Carolina Income Tax Opinion regarding the conversion of
First Federal Savings and Loan Association of Cheraw from a federally-
chartered mutual savings and loan association to a federally-charted 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 of Cheraw 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 Great Pee Dee
Bancorp, Inc. (the "Holding Company"), a newly-organized Delaware-chartered
corporation. The Holding Company 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 Cheraw 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 September _____, 1997 as prepared by the law
firm of Luse, Lehman, Gorman, Pomerenk & Schick, P.C., Washington, D.C.; (2) the
letter of representation from First Federal Savings and Loan Association of
Cheraw dated September 19, 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 July 14, 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:
<PAGE>
"The term net income, as used in this chapter, [INCOME TAX ON BUILDING AND
LOAN ASSOCIATION] 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 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 Chapter 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 the Association is
taxed under Chapter 6 or Chapter 13 of the South Carolina Code, income tax
transactions involving this corporation 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 September 19, 1997, containing certain
representations of management of the Association 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
Luse, Lehman, Gorman, Pomerenk & Schick, P.C. 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
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 Association 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).
<PAGE>
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).
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;
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.
<PAGE>
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 Dixon, Odom & Co., L.L.P.
Dixon, Odom & Co., L.L.P.
<PAGE>
EXHIBIT A
First Federal Savings & Loan Association of Cheraw
Cheraw, South Carolina
September 19, 1997
Dixon, Odom & Co., L.L.P.
6 Turnberry Wood
Southern Pines, North Carolina 28387
Gentleman and Ladies:
We understand that Dixon, Odom & Co., L.L.P. is issuing an opinion letter
regarding the South Carolina income tax consequences of the conversion (the
"conversion") of First Federal Savings and Loan Association of Cheraw from a
federally-chartered stock 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 Great Pee Dee
Bancorp, Inc. (the "Holding Company"), a newly organized Delaware-chartered
corporation. The Holding Company 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 to
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 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 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.
<PAGE>
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 legible 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 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 a 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).
<PAGE>
17. Immediately following the conversion, the former depositors of the
Association will own all of the outstanding interest 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,
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
By: /s/ Herbert W. Watts
Title: President and CEO
<PAGE>
EXHIBIT 8.3
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
September 15, 1997
Board of Directors
First Federal Savings and Loan Association
515 Market Street
Cheraw, South Carolina 29520
Plan of Conversion, Subscription Rights
---------------------------------------
Dear Directors:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Conversion adopted by the Board of
Directors of First Federal Savings and Loan Association ("First Federal" or the
"Association"), under which the Association will convert from a mutual savings
association to a stock savings association and issue all of the Association's
stock to Great Pee Dee Bancorp, Inc. (the "Holding Company"). Simultaneously,
the Holding Company will issue shares of common stock.
We understand that in accordance with the Plan of Conversion, Subscription
Rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) The Association's tax qualified
employee plans, (3) Supplemental Eligible Account Holders, and (4) Other
Members. Based solely upon our observation that the Subscription Rights will be
available to such parties without cost, will be legally non-transferable and of
short duration, and will afford such parties the right only to purchase shares
of Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, we are of the belief that:
(1) the Subscription Rights will have no ascertainable market value; and
(2) the price at which the Subscription Rights are exercisable will not be
more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates and other external forces (e.g.,
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the Holding Company's
value. Accordingly, no assurance can be given that persons who subscribe to
shares of Common Stock in the Conversion will thereafter be able to sell such
shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<PAGE>
EXHIBIT 10.1
<PAGE>
FORM OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
EMPLOYMENT AGREEMENT
This Agreement is made effective as of _________, 1997 by and between First
Federal Savings and Loan Association of Cheraw (the "Bank"), a federally-
chartered stock savings and loan association, with its principal administrative
office at 515 Market Street, Cheraw, South Carolina 29520-2638 and Herbert W.
Watts (the "Executive"). Any reference to "Company" herein shall mean Great Pee
Dee Bancorp, Inc., the stock holding company parent of the Bank or any successor
thereto.
WHEREAS, the Bank wishes to assure itself of the continued services of
Executive for the period provided in this Agreement; and
WHEREAS, Executive is willing to continue to serve in the employ of the
Bank on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
President and Chief Executive Officer of the Bank and the Company. During said
period, Executive also agrees to serve, if elected, as an officer and director
of any subsidiary or affiliate of the Bank. Failure to reelect Executive as
President and Chief Executive Officer without the consent of the Executive
during the term of this Agreement shall constitute a breach of this Agreement.
2. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Commencing on the first anniversary date
of this Agreement, and continuing at each anniversary date thereafter, the
Agreement shall renew for an additional year such that the remaining term shall
be three (3) years unless written notice is provided to Executive at least ten
(10) days and not more than thirty (30) days prior to any such anniversary date,
that his employment shall cease at the end of thirty-six (36) months following
such anniversary date. Prior to each notice period for non-renewal, the
disinterested members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting.
<PAGE>
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, business companies or business
organizations, which, in such Board's judgment, will not present any conflict of
interest with the Bank, or materially affect the performance of Executive's
duties pursuant to this Agreement (it being understood that membership in
social, religious, charitable or similar organizations does not require Board
approval pursuant to this Section 2(b)).
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Bank
shall pay Executive as compensation a salary of not less than $__________ per
year ("Base Salary"). Such Base Salary shall be payable biweekly. During the
period of this Agreement, Executive's Base Salary shall be reviewed at least
annually; the first such review will be made no later than ___________, 199_.
Such review shall be conducted by a Committee designated by the Board, and the
Board may increase, but not decrease, Executive's Base Salary (any increase in
Base Salary shall become the "Base Salary" for purposes of this Agreement). In
addition to the Base Salary provided in this Section 3(a), the Bank shall
provide Executive at no cost to Executive with all such other benefits as are
provided uniformly to permanent full-time employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans, health-and-
accident plans, medical coverage or any other employee benefit plan or
arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided in
any plan of the Bank in which Executive is eligible to participate (and he shall
be entitled to a pro rata distribution under any incentive compensation or bonus
plan as to any year in which a termination of employment occurs, other than
termination for Cause). Nothing paid to the Executive under any such plan or
arrangement will be deemed to be in lieu of other compensation to which the
Executive is entitled under this Agreement.
2
<PAGE>
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement (including but not limited to rotary club dues) and may
provide such additional compensation in such form and such amounts as the Board
may from time to time determine.
(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the Company,
respectively on a pro rata basis based upon the amount of service the Executive
devotes to the Bank and Company, respectively.
(e) In addition to the foregoing, Executive shall be entitled to receive
fees for serving as a director of the Bank in the same amount and on the same
terms as fees are paid to other directors of the Bank.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 14.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term of
employment under this Agreement. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following:
(i) the termination by the Bank or the Company of Executive's full-time
employment hereunder for any reason other than (A) Disability or Retirement, as
defined in Section 5 below, or (B) Termination for Cause as defined in Section 6
hereof; or
(ii) Executive's resignation from the Bank's employ, upon any
(A) failure to elect or reelect or to appoint or reappoint Executive
as President and Chief Executive Officer of the Bank,
(B) material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to
become one of lesser responsibility, importance, or scope from the
position and attributes thereof described in Section 1, above,
(C) a relocation of Executive's principal place of employment by more
than 30 miles from its location at the effective date of this
Agreement, or a material reduction in the benefits and perquisites to
the Executive from those being provided as of the effective date of
this Agreement,
3
<PAGE>
(D) liquidation or dissolution of the Bank or Company other than
liquidations or dissolutions that are caused by reorganizations that
do not affect the status of Executive; or
(E) breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (ii) (A), (B), (C), (D) or
(E), above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon sixty (60) days prior written notice
given within a reasonable period of time not to exceed four calendar months
after the initial event giving rise to said right to elect. Notwithstanding the
preceding sentence, in the event of a continuing breach of this Agreement by the
Bank, the Executive, after giving due notice within the prescribed time frame of
an initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Bank and is
engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D) and (E) above.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 7, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a cash
payment equal to three (3) times the sum of: (i) the highest annual rate of Base
Salary (which shall include any salary deferred at the election of Executive)
paid to Executive at any time under this Agreement, and (ii) the greater of (x)
the average annual cash bonus paid to Executive with respect to the three
completed fiscal years prior to the Event of Termination, or (y) the cash bonus
paid to Executive with respect to the fiscal year ended prior to the Event of
Termination; provided however, that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance, and provided
further, that in no event shall total severance compensation from all sources
exceed three times the Executive's average annual compensation over the five
fiscal years preceding the fiscal year in which the termination of employment
occurs (except, in the case of Section 5, as to payments are being made pursuant
to disability insurance previously obtained by the Bank)(for purposes of this
provision and only for purposes of this provision, compensation shall mean any
payment of money or provision of any other thing of value in consideration of
employment, including, without limitation, base salary, commissions, bonuses,
pension and profit sharing plans, severance payments, retirement, director or
committee fees, fringe benefits, and the payment of expense items without
accountability or business purpose or that do not meet the IRS requirements for
deductibility by the Bank). At the election of the Executive, which election is
to be made within thirty (30) days of an Event of Termination, such payments
shall be made in a lump sum or paid monthly during the remaining term of the
agreement following the Executive's termination. In the event that no election
is made, payment to the Executive will be made on a monthly basis during the
remaining term of the agreement. Such payments shall not be reduced in the
event the Executive obtains other employment following termination of
employment.
4
<PAGE>
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. (S)(S) 63.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
(d) In the event that the Executive is receiving monthly payments pursuant
to Section 4(b) or (c) hereof, on an annual basis, thereafter, between the dates
of January 1 and January 31 of each year, Executive shall elect whether the
balance of the amount payable under the Agreement at that time shall be paid in
a lump sum or on a pro rata basis. Such election shall be irrevocable for the
year for which such election is made.
(e) Notwithstanding the preceding paragraphs of this Section 4, in the
event that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Code or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the "Non-
Triggering Amount"), the value of which is one dollar ($1.00)
less than an amount equal to the total amount of payments
permissible under Section 280G of the Code or any successor
thereto.
then the Termination Benefits to be paid to Executive shall be so
reduced so as to be a Non-Triggering Amount.
5. TERMINATION UPON RETIREMENT, DISABILITY OR DEATH
Termination by the Bank of the Executive based on "Retirement" shall mean
termination of Executive's employment at age 65 or in accordance with any
retirement policy established with Executive's consent with respect to him.
Upon termination of Executive upon Retirement, Executive shall be entitled to
all benefits under any retirement plan of the Bank and other plans to which
Executive is a party.
In the event Executive is unable to perform his duties under this Agreement
on a full-time basis for a period of six (6) consecutive months by reason of
illness or other physical or mental disability, the Employer may terminate this
Agreement, provided that the Employer shall continue to be obligated to pay the
Executive his Base Salary for the remaining term of the Agreement, or one year,
whichever is the longer period of time, and provided further that any amounts
actually paid to
5
<PAGE>
Executive pursuant to any disability insurance or other similar such program
which the Employer has provided or may provide on behalf of its employees or
pursuant to any workman's or social security disability program shall reduce the
compensation to be paid to the Executive pursuant to this paragraph.
In the event of Executive's death during the term of the Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive's Base Salary as defined in Paragraph 3(a)
at the rate in effect at the time Executive's death for a period of one (1) year
from the date of the Executive's death, and the Employers will continue to
provide medical, dental, family and other benefits normally provided for an
Executive's family for one (1) year after the Executive's death.
6. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the
acts or omissions shall be measured against standards generally prevailing in
the savings institutions industry. For purposes of this paragraph, no act or
failure to act on the part of Executive shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Bank. Notwithstanding the foregoing, Executive shall not be
deemed to have been Terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Board at a meeting of the
Board called and held for that purpose (after reasonable notice to Executive and
an opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying Termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause. Any stock options
granted to Executive under any stock option plan of the Bank, the Company or any
subsidiary or affiliate thereof, shall become null and void effective upon
Executive's receipt of Notice of Termination for Cause pursuant to Section 7
hereof, and shall not be exercisable by Executive at any time subsequent to such
Termination for Cause.
7. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
6
<PAGE>
(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the voluntary termination
by the Executive in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal having expired and no
appeal having been perfected) and provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice or Termination; notwithstanding the
foregoing, no compensation or benefits shall be paid to Executive in the event
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after Termination
for Cause. If such dispute is not resolved within such nine- month period, the
Bank shall not be obligated, upon final resolution of such dispute, to pay
Executive compensation and other payments accruing more than nine months from
the Date of the Termination specified in the Notice of Termination. Amounts
paid under this Section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement.
8. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 8 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.
7
<PAGE>
9. NON-COMPETITION
(a) Upon any termination of Executive's employment hereunder as a result of
which the Association is paying Executive benefits under Section 4 of this
Agreement, Executive agrees not to compete with the Bank and/or the Company for
a period of one (1) year following such termination in any city, town or county
in which the Bank and/or the Company has an office or has filed an application
for regulatory approval to establish an office, determined as of the effective
date of such termination, except as agreed to pursuant to a resolution duly
adopted by the Board. Executive agrees that during such period and within said
cities, towns and counties, Executive shall not work for or advise, consult or
otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business activities of
the Bank and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the Bank and/or the Company, its business and property in
the event of Executive's breach of this Subsection 9(a) agree that in the event
of any such breach by Executive, the Bank and/or the Company will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employers, employees and all persons acting for or with Executive.
Executive represents and admits that Executive's experience and capabilities are
such that Executive can obtain employment in a business engaged in other lines
and/or of a different nature than the Bank and/or the Company, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood. Nothing herein will be construed as prohibiting the Bank
and/or the Company from pursuing any other remedies available to the Bank and/or
the Company for such breach or threatened breach, including the recovery of
damages from Executive. This paragraph (a) shall not apply if an termination of
Executive's employment occurs in connection with a change in control of the
Bank, within the meaning of the Home Owners' Loan Act and the Rules and
Regulations promulgated by the Office of Thrift Supervision (or its predecessor
agency) thereunder.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever (except
for such disclosure as may be required to be provided to the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, or other federal banking
agency with jurisdiction over the Bank or Executive). Notwithstanding the
foregoing, Executive may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of the Bank, and Executive may
disclose any information regarding the Bank or the Company which is otherwise
publicly available. In the event of a breach or threatened breach by the
Executive of the Provisions of this Section 9, the Bank will be entitled to an
injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
8
<PAGE>
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
10. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, guarantees
payment and provision of all amounts and benefits due hereunder to Executive
and, if such amounts and benefits due from the Bank are not timely paid or
provided by the Bank, such amounts and benefits shall be paid or provided by the
Company.
11. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
12. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
13. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate
9
<PAGE>
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future as to any act other than that
specifically waived.
14. REQUIRED PROVISIONS
(a) The Bank's Board of Directors may terminate the Executive's employment
at any time, but any termination by the Bank's Board of Directors, other than
Termination for Cause, shall not prejudice Executive's right to compensation or
other benefits under this Agreement. Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause as defined in Section 7 hereinabove.
(b) If the Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C. (S) 1818(g)) of
the Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, the Bank's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Executive all or part of the compensation
withheld while their contract obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g) (12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Director, at the time
Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank; or (ii) by the Office of Thrift Supervision ("OTS") at the time the
OTS or its District Director approves a supervisory merger to resolve problems
related to the operations of the Bank or when the Bank is determined by the OTS
or FDIC to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.
10
<PAGE>
(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 USC
Section 1828(k) and any regulations promulgated thereunder.
15. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
17. GOVERNING LAW
This Agreement shall be governed by the laws of the State of South Carolina
but only to the extent not superseded by federal law.
18. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within fifty
(50) miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
19. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, provided that the dispute or interpretation has been
settled by Executive and the Bank or resolved in the Executive's favor.
11
<PAGE>
20. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, and shall indemnify Executive (and
his heirs, executors and administrators) to the fullest extent permitted under
federal law against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements (such settlements must be approved by the
Board of Directors of the Bank). If such action, suit or proceeding is brought
against Executive in his capacity as an officer or director of the Bank,
however, such indemnification shall not extend to matters as to which Executive
is finally adjudged to be liable for willful misconduct in the performance of
his duties. No Indemnification shall be paid that would violate 12 U.S.C.
1828(K) or any regulations promulgated thereunder, or 12 C.F.R. 545.121.
21. SUCCESSOR TO THE BANK
The Bank 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 Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
12
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to
be executed and their seals to be affixed hereunto by their duly authorized
officers, and Executives have signed this Agreement, on the day and date first
above written.
ATTEST: FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHERAW
By:
- ------------------- -------------------------------------
Secretary Chairman of the Board
EXECUTIVE:
WITNESS:
By:
- ------------------- ------------------------------
13
<PAGE>
EXHIBIT 10.2
<PAGE>
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF CHERAW
EMPLOYEE STOCK OWNERSHIP PLAN
(adopted effective January 1, 1997)
<PAGE>
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF CHERAW
EMPLOYEE STOCK OWNERSHIP PLAN
This Employee Stock Ownership Plan, executed on the ____ day of
_____________, 1997, by First Federal Savings & Loan Association of Cheraw, a
federal stock savings bank (the "Bank"),
W I T N E S S E T H T H A T
WHEREAS, the board of directors of the Bank has resolved to adopt an
employee stock ownership plan for eligible employees in accordance with the
terms and conditions presented to the directors;
NOW, THEREFORE, the Bank hereby adopts the following Plan setting forth the
terms and conditions pertaining to contributions by the Employer and the payment
of benefits to Participants and Beneficiaries.
IN WITNESS WHEREOF, the Bank has adopted this Plan and caused this
instrument to be executed by its duly authorized officers as of the above date.
ATTEST:
By:
- ------------------------------ -------------------------------
Secretary President
<PAGE>
C 0 N T E N T S
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Section 1. Plan Identity .................................................. -1-
-------------
1.1 Name ........................................................ -1-
----
1.2 Purpose ..................................................... -1-
-------
1.3 Effective Date .............................................. -1-
--------------
1.4 Fiscal Period ............................................... -1-
-------------
1.5 Single Plan for All Employers ............................... -1-
-----------------------------
1.6 Interpretation of Provisions ................................ -1-
----------------------------
Section 2. Definitions .................................................... -1-
-----------
Section 3. Eligibility for Participation ............................... -6-
-----------------------------
3.1 Initial Eligibility ......................................... -6-
-------------------
3.2 Definition of Eligibility Year .............................. -7-
------------------------------
3.3 Terminated Employees ........................................ -7-
--------------------
3.4 Certain Employees Ineligible ................................ -7-
----------------------------
3.5 Participation and Reparticipation ........................... -7-
---------------------------------
3.6 Omission of Eligible Employee ............................... -7-
-----------------------------
3.7 Inclusion of Ineligible Employee ............................ -7-
--------------------------------
Section 4. Contributions and Credits ...................................... -7-
-------------------------
4.1 Discretionary Contributions ................................. -7-
---------------------------
4.2 Contributions for Stock Obligations ......................... -7-
-----------------------------------
4.3 Definitions Related to Contributions ........................ -8-
------------------------------------
4.4 Conditions as to Contributions .............................. -8-
------------------------------
Section 5. Limitations on Contributions and Allocations ................... -9-
--------------------------------------------
5.1 Limitation on Annual Additions .............................. -9-
------------------------------
5.2 Coordinated Limitation With Other Plans ..................... -10-
---------------------------------------
5.3 Effect of Limitations ....................................... -11-
---------------------
5.4 Limitations as to Certain Participants ...................... -11-
--------------------------------------
Section 6. Trust Fund and Its Investment. ................................. -11-
-----------------------------
6.1 Creation of Trust Fund ...................................... -12-
----------------------
6.2 Stock Fund and Investment Fund .............................. -12-
------------------------------
6.3 Acquisition of Stock ........................................ -12-
--------------------
6.4 Participants' Option to Diversify ........................... -13-
---------------------------------
Section 7. Voting Rights and Dividends on Stock ........................... -13-
------------------------------------
7.1 Voting and Tendering of Stock ............................... -13-
-----------------------------
7.2 Dividends on Stock .......................................... -14-
------------------
Section 8. Adjustments to Accounts ........................................ -14-
-----------------------
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
8.1 Adjustments for Transactions ................................ -14-
----------------------------
8.2 Valuation of Investment Fund ................................ -15-
----------------------------
8.3 Adjustments for Investment Experience ....................... -15-
-------------------------------------
Section 9. Vesting of Participants' Interests ............................. -15-
----------------------------------
9.3 Full Vesting Upon Certain Events ............................ -16-
--------------------------------
9.3-2 ............................................................. -16-
9.4 Full Vesting Upon Plan Termination .......................... -17-
----------------------------------
9.5 Forfeiture, Repayment, and Restoral ......................... -17-
-----------------------------------
9.6 Accounting for Forfeitures .................................. -18-
--------------------------
9.7 Vesting and Nonforfeitability ............................... -18-
-----------------------------
Section 10. Payment of Benefits ........................................... -18-
-------------------
10.1 Benefits for Participants ................................... -18-
-------------------------
10.2 Time for Distribution ....................................... -18-
---------------------
10.3 Marital Status .............................................. -19-
--------------
10.4 Delay in Benefit Determination .............................. -20-
------------------------------
10.5 Accounting for Benefit Payments ............................. -20-
-------------------------------
10.6 Options to Receive and Sell Stock ........................... -20-
---------------------------------
10.7 Restrictions on Disposition of Stock ........................ -21-
------------------------------------
10.8 Continuing Loan Provisions; Creations of
----------------------------------------
Protections and Rights ..................................... -21-
----------------------
10.9 Direct Rollover of Eligible Distribution .................... -21-
----------------------------------------
10.10 Waiver of 30 Day Period After Notice of Distribution ........ -22-
----------------------------------------------------
Section 11. Rules Governing Benefit Claims and Review of Appeals .......... -22-
----------------------------------------------------
11.1 Claim for Benefits .......................................... -22-
------------------
11.2 Notification by Committee ................................... -22-
-------------------------
11.3 Claims Review Procedure ..................................... -22-
-----------------------
Section 12. The Committee and Its Functions ............................... -23-
-------------------------------
12.1 Authority of Committee ...................................... -23-
----------------------
12.2 Identity of Committee ....................................... -23-
---------------------
12.3 Duties of Committee ......................................... -23-
-------------------
12.4 Valuation of Stock .......................................... -23-
------------------
12.5 Compliance with ERISA ....................................... -24-
---------------------
12.6 Action by Committee ......................................... -24-
-------------------
12.7 Execution of Documents ...................................... -24-
----------------------
12.8 Adoption of Rules ........................................... -24-
-----------------
12.9 Responsibilities to Participants ............................ -24-
--------------------------------
12.10 Alternative Payees in Event of Incapacity ................... -24-
-----------------------------------------
12.11 Indemnification by Employers ................................ -24-
----------------------------
12.12 Nonparticipation by Interested Member ....................... -24-
-------------------------------------
Section 13. Adoption, Amendment, or Termination of the Plan ............... -25-
-----------------------------------------------
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
13.1 Adoption of Plan by Other Employers ......................... -25-
-----------------------------------
13.2 Adoption of Plan by Successor ............................... -25-
-----------------------------
13.3 Plan Adoption Subject to Qualification ...................... -25-
--------------------------------------
13.4 Right to Amend or Terminate ................................. -25-
---------------------------
Section 14. Miscellaneous Provisions ...................................... -26-
------------------------
14.1 Plan Creates No Employment Rights ........................... -26-
---------------------------------
14.2 Nonassignability of Benefits ................................ -26-
----------------------------
14.3 Limit of Employer Liability ................................. -26-
---------------------------
14.4 Treatment of Expenses ....................................... -26-
---------------------
14.5 Number and Gender ........................................... -26-
-----------------
14.6 Nondiversion of Assets ...................................... -26-
----------------------
14.7 Separability of Provisions .................................. -26-
--------------------------
14.8 Service of Process .......................................... -26-
------------------
14.9 Governing State Law ......................................... -26-
-------------------
14.10 Employer Contributions Conditioned on Deductibility ......... -27-
---------------------------------------------------
14.11 Unclaimed Accounts .......................................... -27-
------------------
14.12 Qualified Domestic Relations Order .......................... -27-
----------------------------------
Section 15. Top-Heavy Provisions .......................................... -28-
--------------------
15.1 Top-Heavy Plan .............................................. -28-
--------------
15.2 Super Top-Heavy Plan ........................................ -28-
--------------------
15.3 Definitions ................................................. -28-
-----------
15.3-4............................................................. -29-
15.4 Top-Heavy Rules of Application .............................. -29-
------------------------------
15.5 Top-Heavy Ratio ............................................. -30-
---------------
15.6 Minimum Contributions ....................................... -31-
---------------------
15.7 Minimum Vesting ............................................. -31-
---------------
15.8 Top-Heavy Provisions Control in Top-Heavy Plan .............. -31-
----------------------------------------------
</TABLE>
(iii)
<PAGE>
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF CHERAW
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Plan Identity.
-------------
1.1 Name. The name of this Plan is "First Federal Savings & Loan
----
Association of Cheraw Employee Stock Ownership Plan."
1.2 Purpose. The purpose of this Plan is to describe the terms and
-------
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The Effective Date of this Plan is January 1,
--------------
1997.
1.4 Fiscal Period. This Plan shall be operated on the basis of a
-------------
January 1 to December 31 fiscal year for the purpose of keeping the Plan's books
and records and distributing or filing any reports or returns required by law.
1.5 Single Plan for All Employers. This Plan shall be treated as a
-----------------------------
single plan with respect to all participating Employers for the purpose of
crediting contributions and forfeitures and distributing benefits, determining
whether there has been any termination of Service, and applying the limitations
set forth in Section 5.
1.6 Interpretation of Provisions. The Employers intend this Plan and
----------------------------
the Trust to be a qualified stock bonus plan under Section 401(a) of the Code
and an employee stock ownership plan within the meaning of Section 407(d)(6) of
ERISA and Section 4975(e)(7) of the Code. The Plan is intended to have its
assets invested primarily in qualifying employer securities of one or more
Employers within the meaning of Section 407(d)(3) of ERISA, and to satisfy any
requirement under ERISA or the Code applicable to such a plan.
Accordingly, the Plan and Trust Agreement shall be interpreted and
applied in a manner consistent with this intent and shall be administered at all
times and in all respects in a nondiscriminatory manner.
Section 2. Definitions.
-----------
The following capitalized words and phrases shall have the meanings
specified when used in this Plan and in the Trust Agreement, unless the context
clearly indicates otherwise:
"Account" means a Participant's interest in the assets accumulated
under this Plan as expressed in terms of a separate account balance which is
periodically adjusted to reflect his Employer's contributions, the Plan's
investment experience, and distributions and forfeitures.
"Active Participant" means any Employee who has satisfied the
eligibility requirements of Section 3 and who qualifies as an Active Participant
for a particular Plan Year under Section 4.3.
"Bank" means First Federal Savings & Loan Association of Cheraw and any
entity which succeeds to the business of First Federal Savings & Loan
Association of Cheraw and adopts this Plan as its own pursuant to Section 13.2.
<PAGE>
"Beneficiary" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation or if all the designated Beneficiaries
shall die before the Participant dies or shall die before all benefits have been
paid, the Participant's Beneficiary shall be his surviving Spouse, if any, or
his estate if he is not survived by a Spouse. The Committee may rely upon the
advice of the Participant's executor or administrator as to the identity of the
Participant's Spouse.
"Break in Service" means any Plan Year in which an Employee has 500 or
fewer Hours of Service. Solely for this purpose, an Employee shall be considered
employed for his normal hours of paid employment during a Recognized Absence
(said Employee shall not be credited with more than 501 Hours of Service to
avoid a Break in Service), unless he does not resume his Service at the end of
the Recognized Absence. Further, if an Employee is absent for any period
beginning on or after January 1, 1985, (i) by reason of the Employee's
pregnancy, (ii) by reason of the birth of the Employee's child, (iii) by reason
of the placement of a child with the Employee in connection with the Employee's
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee responsible for the administration of
this Plan in accordance with Section 12.
"Company" means Great Pee Dee Bancorp, Inc., the stock holding company
of Bank.
"Disability" means only a disability which renders the Participant
totally unable, as a result of bodily or mental disease or injury, to perform
any duties for an Employer for which he is reasonably fitted, which disability
is expected to be permanent or of long and indefinite duration. However, this
term shall not include any disability directly or indirectly resulting from or
related to habitual drunkenness or addiction to narcotics, a criminal act or
attempt, service in the armed forces of any country, an act of war, declared or
undeclared, any injury or disease occurring while compensation to the
Participant is suspended, or any injury which is intentionally self-inflicted.
Further, this term shall apply only if (i) the Participant is sufficiently
disabled to qualify for the payment of disability benefits under the federal
Social Security Act or Veterans Disability Act, or (ii) the Participant's
disability is certified by a physician selected by the Committee. Unless the
Participant is sufficiently disabled to qualify for disability benefits under
the federal Social Security Act or Veterans Disability Act, the Committee may
require the Participant to be appropriately examined from time to time by one or
more physicians chosen by the Committee, and no Participant who refuses to be
examined shall be treated as having a Disability. In any event, the Committee's
good faith decision as to whether a Participant's Service has been terminated by
Disability shall be final and conclusive.
"Early Retirement" means retirement on or after a Participant's
attainment of age 55 and the completion of ten years of employment with an
Employer. If the Participant terminates employment before satisfying the age
requirement, but has satisfied the employment requirement, the Participant will
be entitled to elect early retirement upon satisfaction of the age requirement.
"Effective Date" means January 1, 1997.
"Employee" means any individual who is or has been employed or self-
employed by an Employer. "Employee" also means an individual employed by a
leasing organization who, pursuant to an agreement
-2-
<PAGE>
between an Employer and the leasing organization, has performed services for the
Employer and any related persons (within the meaning of Section 414(n)(6) of the
Code) on a substantially full-time basis for more than one year, if such
services are performed under the primary direction or control of the Employer.
However, such a "leased employee" shall not be considered an Employee if (i) he
participates in a money purchase pension plan sponsored by the leasing
organization which provides for immediate participation, immediate full vesting,
and an annual contribution of at least 10 percent of the Employee's 415
Compensation, and (ii) leased employees do not constitute more than 20 percent
of the Employer's total work force (including leased employees, but excluding
Highly Paid Employees and any other Employees who have not performed services
for the Employer on a substantially full-time basis for at least one year).
"Employer" means the Bank or any affiliate within the purview of
section 414(b), (c) or (m) and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Bank's consent
pursuant to Section 13.1, and any entity which succeeds to the business of any
Employer and adopts the Plan pursuant to Section 13.2.
"Entry Date" means the Effective Date of the Plan and each January 1
and July 1 of each Plan Year after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974 (P.L.
93-406, as amended).
"415 Compensation"
(a) shall mean wages, as defined in Code Section 3401(a) for
purposes of income tax withholding at the source.
(b) For Plan Years beginning after December 31, 1997, any
elective deferral as defined in Code Section 402(g)(3) (any Employer
contributions made on behalf of a Participant to the extent not
includible in gross income and any Employer contributions to purchase
an annuity contract under Code Section 403(b) under a salary reduction
agreement) and any amount which is contributed or deferred by the
Employer at the election of the Participant and which is not includible
in gross income of the Participant by reason of Code Section 125
(Cafeteria Plan) shall also be included in the definition of 415
Compensation.
(c) 415 Compensation in excess of $160,000 (as indexed) shall be
disregarded for all Participants. For purposes of this sub-section, the
$160,000 limit shall be referred to as the "applicable limit" for the
Plan Year in question. The $160,000 limit shall be adjusted for
increases in the cost of living in accordance with Section
401(a)(17)(B) of the Code, effective for the Plan Year which begins
within the applicable calendar year. For purposes of the applicable
limit, 415 Compensation shall be prorated over short Plan Years.
"Highly Paid Employee" for any Plan Year means an Employee who, during
either of that or the immediately preceding Plan Year was at any time a five
percent owner of the Employer (as defined in Code Section 416(i)(1)) or had 415
Compensation exceeding $80,000 and was among the most highly compensated one-
fifth of all Employees. For this purpose:
(a) "415 Compensation" shall include any amount which is
excludable from the Employee's gross income for tax purposes pursuant
to Sections 125, 402(a)(8), 402(h)(1)(B), or 403(b) of the Code.
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(b) The number of Employees in "the most highly compensated one-
fifth of all Employees" shall be determined by taking into account all
individuals working for all related Employer entities described in the
definition of "Service", but excluding any individual who has not
completed six months of Service, who normally works fewer than 17-1/2
hours per week or in fewer than six months per year, who has not
reached age 21, whose employment is covered by a collective bargaining
agreement, or who is a nonresident alien who receives no earned income
from United States sources.
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be
paid for services to an Employer is an Hour of Service.
(b) Each hour for which an Employee is directly or indirectly
paid or is entitled to be paid for a period of vacation, holidays,
illness, disability, lay-off, jury duty, temporary military duty, or
leave of absence is an Hour of Service. However, except as otherwise
specifically provided, no more than 501 Hours of Service shall be
credited for any single continuous period which an Employee performs no
duties. No more than 501 Hours of Service will be credited under this
paragraph for any single continuous period (whether or not such period
occurs in a single computation period). Further, no Hours of Service
shall be credited on account of payments made solely under a plan
maintained to comply with worker's compensation, unemployment
compensation, or disability insurance laws, or to reimburse an Employee
for medical expenses.
(c) Each hour for which back pay (ignoring any mitigation of
damages) is either awarded or agreed to by an Employer is an Hour of
Service. However, no more than 501 Hours of Service shall be credited
for any single continuous period during which an Employee would not
have performed any duties. The same Hours of Service will not be
credited both under paragraph (a) or (b) as the case may be, and under
this paragraph (c). 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.
(d) Hours of Service shall be credited in any one period only
under one of the foregoing paragraphs (a), (b) and (c); an Employee may
not get double credit for the same period.
(e) If an Employer finds it impractical to count the actual Hours
of Service for any class or group of non-hourly Employees, each
Employee in that class or group shall be credited with 45 Hours of
Service for each weekly pay period in which he has at least one Hour of
Service. However, an Employee shall be credited only for his normal
working hours during a paid absence.
(f) Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of
Service for which the payment was made. If the period overlaps two or
more Plan Years, the Hours of Service credit shall be allocated in
proportion to the respective portions of the period included in the
several Plan Years. However, in the case of periods of 31 days or less,
the Administrator may apply a uniform policy of crediting the Hours of
Service to either the first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be
counted as required by Section 2530.200b-2(b) and (c) of the Department
of Labor's regulations under Title I of ERISA.
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<PAGE>
"Investment Fund" means that portion of the Trust Fund consisting of
assets other than Stock. Notwithstanding the above, assets from the Investment
Fund may be used to purchase Stock in the open market or otherwise, or used to
pay on the Stock Obligation, and shares so purchased will be allocated to a
Participant's Stock Fund.
"Normal Retirement" means retirement on or after the later of a
Participant's 65th birthday or fifth year of Service.
"Normal Retirement Date" means the date on which a Participant attains
age 65 and completes five years of Service.
"Participant" means any Employee who is participating in the Plan, or
who has previously participated in the Plan and still has a balance credited to
his Account.
"Plan Year" means the twelve month period commencing January 1 and
ending December 31, 1997 and each period of 12 consecutive months beginning on
January 1 of each succeeding year.
"Recognized Absence" means a period for which --
(a) an Employer grants an Employee a leave of absence for a
limited period, but only if an Employer grants such leave on a
nondiscriminatory basis; or
(b) an Employee is temporarily laid off by an Employer because of
a change in business conditions; or
(c) an Employee is on active military duty, but only to the
extent that his employment rights are protected by the Military
Selective Service Act of 1967 (38 U.S.C. Sec. 2021).
"Service" means an Employee's period(s) of employment or self-
employment with an Employer, excluding for initial eligibility purposes any
period in which the individual was a nonresident alien and did not receive from
an Employer any earned income which constituted income from sources within the
United States. An Employee's Service shall include any Service which constitutes
Service with a predecessor Employer within the meaning of Section 414(a) of the
Code. An Employee's Service shall also include any Service with an entity which
is not an Employer, but only either (i) for a period after 1975 in which the
other entity is a member of a controlled group of corporations or is under
common control with other trades and businesses within the meaning of Section
414(b) or 414(c) of the Code, and a member of the controlled group or one of the
trades and businesses is an Employer, (ii) for a period after 1979 in which the
other entity is a member of an affiliated service group within the meaning of
Section 414(m) of the Code, and a member of the affiliated service group is an
Employer, or (iii) all Employers aggregated with the Employer under Section
414(o) of the Code (but not until the Proposed Regulations under Section 414(o)
become effective).
"Spouse" means the individual, if any, to whom a Participant is
lawfully married on the date benefit payments to the Participant are to begin,
or on the date of the Participant's death, if earlier. A former Spouse shall be
treated as the Spouse or surviving Spouse to the extent provided under a
qualified domestic relations order as described in section 414(p) of the Code.
"Stock" means shares of the Company's voting common stock or preferred
stock meeting the requirements of Section 409(e)(3) of the Code issued by an
Employer which is a member of the same controlled group of corporations within
the meaning of Code Section 414(b).
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<PAGE>
"Stock Fund" means that portion of the Trust Fund consisting of Stock.
"Stock Obligation" means an indebtedness arising from any extension of
credit to the Plan or the Trust which satisfies the requirements set forth in
Section 6.3 and which was obtained for any or all of the following purposes:
(i) to acquire qualifying Employer securities as defined in
Treasury Regulations (S) 54.4975-12
(ii) to repay such Stock Obligation; or
(iii) to repay a prior exempt loan.
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trust Agreement" means the agreement between the Bank and the Trustee
concerning the Trust Fund. If any assets of the Trust Fund are held in a co-
mingled trust fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that co-
mingled trust fund. With respect to the allocation of investment responsibility
for the assets of the Trust Fund, the provisions of Article II of the Trust
Agreement are incorporated herein by reference.
"Trustee" means one or more corporate persons or individuals selected
from time to time by the Bank to serve as trustee or co-trustees of the Trust
Fund.
"Unallocated Stock Fund" means that portion of the Stock Fund
consisting of the Plan's holding of Stock which have been acquired in exchange
for one or more Stock obligations and which have not yet been allocated to the
Participant's Accounts in accordance with Section 4.2
"Valuation Date" means the last day of the Plan Year and each other
date as of which the Committee shall determine the investment experience of the
Investment Fund and adjust the Participants' Accounts accordingly.
"Valuation Period" means the period following a Valuation Date and
ending with the next Valuation Date.
"Vesting Year" means a unit of Service credited to a Participant
pursuant to Section 9.2 for purposes of determining his vested interest in his
Account.
Section 3. Eligibility for Participation.
-----------------------------
3.1 Initial Eligibility. An Employee shall enter the Plan as of the
-------------------
Entry Date coincident with or next following the later of the following dates:
(a) the last day of the Employee's first Eligibility Year, and
(b) the Employee's 21st birthday. However, if an Employee is not
in active Service with an Employer on the date he would otherwise first
enter the Plan, his entry shall be deferred until the next day he is in
Service.
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3.2 Definition of Eligibility Year. An "Eligibility Year" means an
------------------------------
applicable eligibility period (as defined below) in which the Employee has
completed 1,000 Hours of Service for the Employer. For this purpose:
(a) an Employee's first "eligibility period" is the 12-
consecutive month period beginning on the first day on which he has an
Hour of Service, and
(b) his subsequent eligibility periods will be 12-consecutive
month periods beginning on each January 1 after that first day of
Service.
3.3 Terminated Employees. No Employee shall have any interest or
--------------------
rights under this Plan if he is never in active Service with an Employer on or
after the Effective Date.
3.4 Certain Employees Ineligible. No Employee shall participate in the
----------------------------
Plan while his Service is covered by a collective bargaining agreement between
an Employer and the Employee's collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee's participation in the Plan.
3.5 Participation and Reparticipation. Subject to the satisfaction of
---------------------------------
the foregoing requirements, an Employee shall participate in the Plan during
each period of his Service from the date on which he first becomes eligible
until his termination. For this purpose, an Employee who returns before five (5)
consecutive Breaks in Service who previously satisfied the initial eligibility
requirements or who returns after five (5) consecutive one year Breaks in
Service with a vested Account balance in the Plan shall re-enter the Plan as of
the date of his return to Service with an Employer.
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 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.
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 the ineligible person
shall constitute a forfeiture for the Plan Year in which the discovery is made.
Section 4. Contributions and Credits.
-------------------------
4.1 Discretionary Contributions. The Employer shall from time to time
---------------------------
contribute, with respect to a Plan Year, such amounts as it may determine from
time to time. The Employer shall have no obligation to contribute any amount
under this Plan except as so determined in its sole discretion. The Employer's
contributions and available forfeitures for a Plan Year shall be credited as of
the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of Cash Compensation.
4.2 Contributions for Stock Obligations. If the Trustee, upon
-----------------------------------
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer may contribute for each
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<PAGE>
Plan Year an amount sufficient to cover all payments of principal and interest
as they come due under the terms of the Stock Obligation. If there is more than
one Stock Obligation, the Employer shall designate the one to which any
contribution is to be applied. Investment earnings realized on Employer
contributions and any dividends paid by the Employer on Stock held in the
Unallocated Stock Account, shall be applied to the Stock Obligation related to
that Stock, subject to Section 7.2.
In each Plan Year in which Employer contributions, earnings on
contributions, or dividends on unallocated Stock are used as payments under a
Stock Obligation, a certain number of shares of the Stock acquired with that
Stock Obligation which is then held in the Unallocated Stock Fund shall be
released for allocation among the Participants. The number of shares released
shall bear the same ratio to the total number of those shares then held in the
Unallocated Stock Fund (prior to the release) as (i) the principal and interest
payments made on the Stock Obligation in the current Plan Year bears to (ii)
the sum of (i) above, and the remaining principal and interest payments required
(or projected to be required on the basis of the interest rate in effect at the
end of the Plan Year) to satisfy the Stock Obligation.
At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.
For these purposes, each Stock Obligation, the Stock purchased with it,
and any dividends on such Stock, shall be considered separately. The Stock
released from the Unallocated Stock Fund in any Plan Year shall be credited as
of the last day of the year to the Accounts of the Active Participants in
proportion to their amounts of Cash Compensation.
4.3 Definitions Related to Contributions. For the purposes of this
------------------------------------
Plan, the following terms have the meanings specified:
"Active Participant" means a Participant who has satisfied the
eligibility requirements under Section 3 and who has at least 1000 Hours of
Service during the current Plan Year. However, a Participant shall not qualify
as an Active Participant unless (i) he is in active Service with an Employer as
of the last day of the Plan Year, or (ii) he is on a Recognized Absence as of
that date, or (iii) his Service terminated during the Plan Year by reason of
Disability, death, Early or Normal Retirement.
"Cash Compensation" means a Participant's 415 Compensation while a
Participant in the Plan, as defined in Section 2 of the Plan and shall also
include amounts contributed under a salary reduction agreement pursuant to
Section 401(k) or Section 125 of the Code.
In the event a Plan Year is a period of less than 12 months for any
reason, then Cash Compensation for the short period shall not exceed the pro
rata portion of this limit created by multiplying a fraction which is the number
of months in the short period divided by twelve times the annual compensation
limit.
4.4 Conditions as to Contributions. Employers' contributions shall in
------------------------------
all events be subject to the limitations set forth in Section 5. Contributions
may be made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. In addition to the provisions of Section
13.3 for the return of an Employer's contributions in connection with a failure
of the Plan to qualify initially under the Code, any
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amount contributed by an Employer due to a good faith mistake of fact, or based
upon a good faith but erroneous determination of its deductibility under Section
404 of the Code, shall be returned to the Employer within one year after the
date on which the contribution was originally made, or within one year after its
nondeductibility has been finally determined. However, the amount to be
returned shall be reduced to take account of any adverse investment experience
within the Trust Fund in order that the balance credited to each Participant's
Account is not less that it would have been if the contribution had never been
made.
Section 5. Limitations on Contributions and Allocations.
--------------------------------------------
5.1 Limitation on Annual Additions. Notwithstanding anything herein to
------------------------------
the contrary, allocation of Employer contributions for any Plan Year shall be
subject to the following:
5.1-1 If allocation of Employer contributions in accordance with
Section 4.1 will result in an allocation of more than one-third the
total contributions for a Plan Year to the Accounts of Highly Paid
Employees, then allocation of such amount shall be adjusted so that such
excess will not occur.
5.1-2 After adjustment, if any, required by the preceding
paragraph, the annual additions during any Plan Year to any
Participant's Account under this and any other defined contribution
plans maintained by the Employer or an affiliate (within the purview of
Section 414(b), (c) and (m) and Section 415(h) of the Code, which
affiliate shall be deemed the Employer for this purpose) shall not
exceed the lesser of $30,000 (or such other dollar amount which results
from cost-of-living adjustments under Section 415(d) of the Code) or "25
percent of the Participant's 415 Compensation for such limitation year."
In the event that annual additions exceed the aforesaid limitations,
they shall be reduced in the following priority:
(i) If the Participant is covered by the Plan at the end of the
Plan Year, any excess amount at the end of the Plan Year that cannot be
allocated to the Participant's Account shall be used to reduce the
employer contribution for such Participant in the next limitation year
and any succeeding limitation years if necessary.
(ii) If the Participant is not covered by the Plan at the end of
the Plan Year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future Employer
contributions for all remaining Participants in the next limitation year
and each succeeding limitation year if necessary.
(iii) If a suspense account is in existence at any time during a
limitation year, it will not participate in any allocation of investment
gains and losses. All amounts held in suspense accounts must be
allocated to Participant's Accounts before any contributions may be made
to the Plan for the limitation year.
(iv) If a suspense account exists at the time of Plan
termination, amounts held in the suspense account that cannot be
allocated shall revert to the Employer.
5.1-3 For purposes of this Section 5.1 and the following Section
5.2, the "annual addition" to a Participant's Accounts means the sum of
(i) Employer contributions, (ii) Employee contributions, if any, and
(iii) forfeitures. Annual additions to a defined contribution plan also
include amounts allocated, after March 31, 1984, to an individual
medical account, as defined in
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<PAGE>
Section 415(l)(2) of the Internal Revenue Code, which is part of a
pension or annuity plan maintained by the Employer, 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
under a welfare benefit fund, as defined in Section 419A(d) of the
Internal Revenue Code, maintained by the Employer. For these purposes,
annual additions to a defined contribution plan shall not include the
allocation of the excess amounts remaining in the Unallocated Stock Fund
subsequent to a sale of stock from such fund in accordance with a
transaction described in Section 8.1 of the Plan. The $30,000
limitations referred to shall, for each limitation year ending after
1988, be automatically adjusted to the new dollar limitations determined
by the Commissioner of Internal Revenue for the calendar year beginning
in that limitation year.
5.1-4 Notwithstanding the foregoing, if no more than one-third
of the Employer contributions to the Plan for a year which are
deductible under Section 404(a)(9) of the Code are allocated to Highly
Paid Employees (within the meaning of Section 414(q) of the Internal
Revenue Code), the limitations imposed herein shall not apply to:
(i) forfeitures of Employer securities (within the meaning of
Section 409 of the Code) under the Plan if such securities were acquired
with the proceeds of a loan described in Section 404(a)(9)(A) of the
Code), or
(ii) Employer contributions to the Plan which are deductible
under Section 404(a)(9)(B) and charged against a Participant's Account.
5.1-5 If the Employer contributes amounts, on behalf of
Employees covered by this Plan, to other "defined contribution plans" as
defined in Section 3(34) of ERISA, the limitation on annual additions
provided in this Section shall be applied to annual additions in the
aggregate to this Plan and to such other plans. Reduction of annual
additions, where required, shall be accomplished first by reductions
under such other plan pursuant to the directions of the named Fiduciary
for administration of such other plans or under priorities, if any,
established under the terms of such other plans and then by allocating
any remaining excess for this Plan in the manner and priority set out
above with respect to this Plan.
5.1-6 A limitation year shall mean each 12 consecutive month
period beginning each January 1.
5.2 Coordinated Limitation With Other Plans. Aside from the limitation
---------------------------------------
prescribed by Section 5.1 with respect to the annual addition to a Participant's
Accounts for any single limitation year, if a Participant has ever participated
in one or more defined benefit plans maintained by an Employer or an affiliate,
then the accrued benefit shall be limited so that the sum of his defined plan
fraction and his defined contribution plan fraction does not exceed one. For
this purpose:
5.2-1 A Participant's defined contribution plan fraction with
respect to a Plan Year shall be a fraction, (i) the numerator of which
is the sum of the annual additions to his Accounts through the current
year, and (ii) the denominator of which is the sum of the lesser of the
following amounts -A- and -B- determined for the current limitation year
and each prior limitation year of Service with an Employer: -A- is 1.25
times the dollar limit in effect for the year under Section 415(c)(1)(A)
of the Code, or 1.0 times such dollar limitation if the Plan is top-
heavy, and -B- is 35 percent of the Participant's 415 Compensation for
such year. Further, if the Participant participated in any related
defined contribution plan in any years beginning before 1976, any
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<PAGE>
excess of the sum of the actual annual additions to the Participant's
Accounts for those years over the maximum annual additions which could
have been made in accordance with Section 5.1 shall be ignored, and
voluntary contributions by the Participant during those years shall be
taken into account as to each such year only to the extent that his
average annual voluntary contribution in those years exceeded 10 percent
of his average annual 415 Compensation in those years.
5.2-2 A Participant's defined benefit plan fraction with respect
to a limitation year shall be a fraction, (i) the numerator of which is
his projected annual benefit payable at normal retirement under the
Employers' defined benefit plans, and (ii) the denominator of which is
the lesser of (a) 1.25 times $90,000, or 1.0 times such dollar
limitation if the Plan is top-heavy, and (b) 1.4 times the Participant's
average 415 Compensation during his highest-paid three consecutive
limitation years.
5.3 Effect of Limitations. The Committee shall take whatever action may
---------------------
be necessary from time to time to assure compliance with the limitations set
forth in Section 5.1 and 5.2. Specifically, the Committee shall see that each
Employer restrict its contributions for any Plan Year to an amount which, taking
into account the amount of available forfeitures, may be completely allocated to
the Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the Participant
shall be curtailed to the extent necessary to satisfy the limitations. Where an
excessive amount is contributed on account of a mistake as to one or more
Participants' compensation, or there is an amount of forfeitures which may not
be credited in the Plan Year in which it becomes available, the amount shall be
corrected in accordance with Section 5.1-2 of the Plan.
5.4 Limitations as to Certain Participants. Aside from the limitations
--------------------------------------
set forth in Section 5.1 and 5.2, if the Plan acquires any Stock in a
transaction as to which a selling shareholder or the estate of a deceased
shareholder is claiming the benefit of Section 1042 of the Code, the Committee
shall see that none of such Stock, and no other assets in lieu of such Stock,
are allocated to the Accounts of certain Participants in order to comply with
Section 409(n) of the Code.
This restriction shall apply at all times to a Participant who owns
(taking into account the attribution rules under Section 318(a) of the Code,
without regard to the exception for employee plan trusts in Section
318(a)(2)(B)(i) more than 25 percent of any class of stock of a corporation
which issued the Stock acquired by the Plan, or another corporation within the
same controlled group, as defined in Section 409(l)(4) of the Code (any such
class of stock hereafter called a "Related Class"). For this purpose, a
Participant who owns more than 25 percent of any Related Class at any time
within the one year preceding the Plan's purchase of the Stock shall be subject
to the restriction as to all allocations of the Stock, but any other Participant
shall be subject to the restriction only as to allocations which occur at a time
when he owns more than 25 percent of any Related Class.
Further, this restriction shall apply to the selling shareholder
claiming the benefit of Section 1042 and any other Participant who is related to
such a shareholder within the meaning of Section 267(b) of the Code, during the
period beginning on the date of sale and ending on the later of (1) the date
that is ten years after the date of sale, or (2) the date of the Plan allocation
attributable to the final payment of acquisition indebtedness incurred in
connection with the sale.
This restriction shall not apply to any Participant who is a lineal
descendant of a selling shareholder if the aggregate amounts allocated under the
Plan for the benefit of all such descendants do not exceed five percent of the
Stock acquired from the shareholder.
Section 6. Trust Fund and Its Investment.
-----------------------------
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<PAGE>
6.1 Creation of Trust Fund. All amounts received under the Plan from
----------------------
Employers and investments shall be held as the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Bank and the Trustee. The
benefits described in this Plan shall be payable only from the assets of the
Trust Fund, and none of the Bank, any other Employer, its board of directors or
trustees, its stockholders, its officers, its employees, the Committee, and the
Trustee shall be liable for payment of any benefit under this Plan except from
the Trust Fund.
6.2 Stock Fund and Investment Fund. The Trust Fund held by the Trustee
------------------------------
shall be divided into the Stock Fund, consisting entirely of Stock, and the
Investment Fund, consisting of all assets of the Trust other than Stock. The
Trustee shall have no investment responsibility for the Stock Fund, but shall
accept any Employer contributions made in the form of Stock, and shall acquire,
sell, exchange, distribute, and otherwise deal with and dispose of Stock in
accordance with the instructions of the Committee. The Trustee shall have full
responsibility for the investment of the Investment Fund, except to the extent
such responsibility may be delegated from time to time to one or more investment
managers pursuant to Section 2.2 of the Trust Agreement, or to the extent the
Committee directs the Trustee to purchase Stock with the assets in the
Investment Fund.
6.3 Acquisition of Stock. From time to time the Committee may, in its
--------------------
sole discretion, direct the Trustee to acquire Stock from the issuing Employer
or from shareholders, including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay
for such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may direct
the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party which indebtedness shall be called a
"Stock Obligation". The term "Stock Obligation" shall refer to a loan made to
the Plan by a disqualified person within the meaning of Section 4975(e)(2) of
the Code, or a loan to the Plan which is guaranteed by a disqualified person. A
Stock Obligation includes a direct loan of cash, a purchase-money transaction,
and an assumption of an obligation of a tax-qualified employee stock ownership
plan under Section 4975(e)(7) of the Code ("ESOP"). For these purposes, the
term "guarantee" shall include an unsecured guarantee and the use of assets of a
disqualified person as collateral for a loan, even though the use of assets may
not be a guarantee under applicable state law. An amendment of a Stock
Obligation in order to qualify as an "exempt loan" is not a refinancing of the
Stock Obligation or the making of another Stock Obligation. The term "exempt
loan" refers to a loan that satisfies the provisions of this paragraph. A "non-
exempt loan" fails to satisfy this paragraph. Any Stock Obligation shall be
subject to the following conditions and limitations:
6.3-1 A Stock Obligation shall be for a specific term, shall not be
payable on demand except in the event of default, and shall bear a
reasonable rate of interest.
6.3-2 A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the Stock
Obligation, or the Stock previously pledged in connection with a prior
Stock Obligation which is being repaid with the proceeds of the current
Stock Obligation. No other assets of the Plan and Trust may be used as
collateral for a Stock Obligation, and no creditor under a Stock Obligation
shall have any right or recourse to any Plan and Trust assets other than
Stock remaining subject to a collateral pledge.
6.3-3 Any pledge of Stock to secure a Stock Obligation must provide
for the release of pledged Stock in connection with payments on the Stock
obligations in the ratio prescribed in Section 4.2.
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<PAGE>
6.3-4 Repayments of principal and interest on any Stock Obligation
shall be made by the Trustee only from Employer cash contributions
designated for such payments, from earnings on such contributions, and from
cash dividends received on Stock, in the last case, however, subject to the
further requirements of Section 7.2.
6.3-5 In the event of default of a Stock Obligation, the value of
Plan assets transferred in satisfaction of the Stock Obligation must not
exceed the amount of the default. If the lender is a disqualified person
within the meaning of Section 4975 of the Code, a Stock Obligation must
provide for a transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the payment schedule of said
Stock Obligation. For purposes of this paragraph, the making of a guarantee
does not make a person a lender.
6.4 Participants' Option to Diversify. The Committee shall provide for a
---------------------------------
procedure under which each Participant may, during the qualified election
period, elect to "diversify" a portion of the Employer Stock allocated to his
Account, as provided in Section 401(a)(28)(B) of the Code. An election to
diversity must be made on the prescribed form and filed with the Committee
within the period specified herein. For each of the first five (5) Plan years in
the qualified election period, the Participant may elect to diversify an amount
which does not exceed 25% of the number of shares allocated to his Account since
the inception of the Plan, less all shares with respect to which an election
under this Section has already been made. For the last year of the qualified
election period, the Participant may elect to have up to 50 percent of the value
of his Account committed to other investments, less all shares with respect to
which an election under this Section has already been made. The term "qualified
election period" shall mean the six (6) Plan Year period beginning with the
first Plan Year in which a Participant has both attained age 55 and completed 10
years of participation in the Plan. A Participant's election to diversify his
Account may be made within each year of the qualified election period and shall
continue for the 90-day period immediately following the last day of each year
in the qualified election period. Once a Participant makes such election, the
Plan must complete diversification in accordance with such election within 90
days after the end of the period during which the election could be made for the
Plan Year. In the discretion of the Committee, the Plan may satisfy the
diversification requirement by any of the following methods:
6.4-1 The Plan may distribute all or part of the amount subject to
the diversification election.
6.4-2 The Plan may offer the Participant at least three other
distinct investment options, if available under the Plan. The other
investment options shall satisfy the requirements of Regulations under
Section 404(c) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
6.4-3 The Plan may transfer the portion of the Participant's Account
subject to the diversification election to another qualified defined
contribution plan of the Employer that offers at least three investment
options satisfying the requirements of the Regulations under Section 404(c)
of ERISA.
Section 7. Voting Rights and Dividends on Stock.
------------------------------------
7.1 Voting and Tendering of Stock. The Trustee generally shall vote
-----------------------------
all shares of Stock held under the Plan in accordance with the written
instructions of the Committee. However, if any Employer
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<PAGE>
has registration-type class of securities within the meaning of Section
409(e)(4) of the Code, or if a matter submitted to the holders of the Stock
involves a merger, consolidation, recapitalization, reclassification,
liquidation, dissolution, or sale of substantially all assets of an entity, then
(i) the shares of Stock which have been allocated to Participants' Accounts
shall be voted by the Trustee in accordance with the Participants' written
instructions, and (ii) the Trustee shall vote any unallocated Stock and
allocated Stock for which it has received no voting instructions in the same
proportions as it votes the allocated Stock for which it has received
instructions from Participants; provided, however, that if an exempt loan, as
defined in Section 4975(d) of the Code, is outstanding and the Plan is in
default on such exempt loan, as default is defined in the loan documents, then
to the extent that such loan documents require the lender to exercise voting
rights with respect to the unallocated shares, the loan documents will prevail.
In the event no shares of Stock have been allocated to Participants' Accounts at
the time Stock is to be voted and any exempt loan which may be outstanding is
not in default, each Participant shall be deemed to have one share of Stock
allocated to his or her Account for the sole purpose of providing the Trustee
with voting instructions.
Notwithstanding any provision hereunder to the contrary, all unallocated
shares of Stock must be voted by the Trustee in a manner determined by the
Trustee to be for the exclusive benefit of the Participants and Beneficiaries.
Whenever such voting rights are to be exercised, the Employers shall provide the
Trustee, in a timely manner, with the same notices and other materials as are
provided to other holders of the Stock, which the Trustee shall distribute to
the Participants. The Participants shall be provided with adequate opportunity
to deliver their instructions to the Trustee regarding the voting of Stock
allocated to their Accounts. The instructions of the Participants' with respect
to the voting of allocated shares hereunder shall be confidential.
7.1-1 In the event of a tender offer, Stock shall be tendered by
the Trustee in the same manner as set forth above with respect to the
voting of Stock. Notwithstanding any provision hereunder to the
contrary, Stock must be tendered by the Trustee in a manner determined
by the Trustee to be for the exclusive benefit of the Participants and
Beneficiaries.
7.2 Dividends on Stock. Dividends on Stock which are received by the
------------------
Trustee in the form of additional Stock shall be retained in the Stock Fund, and
shall be allocated among the Participant's Accounts and the Unallocated Stock
Fund in accordance with their holdings of the Stock on which the dividends have
been paid. Dividends on Stock credited to Participants' Accounts which are
received by the Trustee in the form of cash shall, at the direction of the
Employer paying the dividends, either (i) be credited to the Accounts in
accordance with Section 8.3 and invested as part of the Investment Fund, (ii) be
distributed immediately to the Participants in proportion with the Participants'
Stock Fund Account balance (iii) be distributed to the Participants within 90
days of the close of the Plan Year in which paid in proportion with the
Participants' Stock Fund Account balance or (iv) be used to make payments on the
Stock Obligation. If dividends on Stock allocated to a Participant's Account
are used to repay the Stock Obligation, Stock with a fair market value equal to
the dividends so used must be allocated to such Participant's Account in lieu of
the dividends. Dividends on Stock held in the Unallocated Stock Fund which are
received by the Trustee in the form of cash shall be allocated to Participants'
Investment Fund Accounts (pro rata based on the Participant's Account balance in
relation to all Participants' Account balances) and shall be applied as soon as
practicable to payments of principal and interest under the Stock Obligation
incurred with the purchase of the Stock.
Section 8. Adjustments to Accounts.
-----------------------
8.1 Adjustments for Transactions. An Employer contribution pursuant
----------------------------
to Section 4.1 shall be credited to the Participants' Accounts as of the last
day of the Plan Year for which it is contributed, in accordance with Section
4.1. Stock released from the Unallocated Stock Fund upon the Trust's repayment
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<PAGE>
of a Stock Obligation pursuant to Section 4.2 shall be credited to the
Participants' Accounts as of the last day of the Plan Year in which the
repayment occurred, pro rata based on the cash applied from such Participant's
Account relative to the cash applied from all Participants' Accounts. Any
excess amounts remaining from the use of proceeds of a sale of Stock from the
Unallocated Stock Fund to repay a Stock Obligation shall be allocated as
earnings of the Plan as of the last day of the Plan Year in which the repayment
occurred among the Participants' Accounts in proportion to the opening balance
in each Account. Any benefit which is paid to a Participant or Beneficiary
pursuant to Section 10 shall be charged to the Participant's Account as of the
first day of the Valuation Period in which it is paid. Any forfeiture or
restoral shall be charged or credited to the Participant's Account as of the
first day of the Valuation Period in which the forfeiture or restoral occurs
pursuant to Section 9.6.
8.2 Valuation of Investment Fund. As of each Valuation Date, the
----------------------------
Trustee shall prepare a balance sheet of the Investment Fund, recording each
asset (including any contribution receivable from an Employer) and liability at
its fair market value. Any liability with respect to short positions or options
and any item of accrued income or expense and unrealized appreciation or
depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment Fund,
including realized and unrealized capital gains and losses, net of any expenses
to be charged to the general Investment Fund and excluding any contributions by
the Employer. The determination of gain or loss shall be consistent with the
balance sheets of the Investment Fund for the current and preceding Valuation
Dates.
8.3 Adjustments for Investment Experience. Any net gain or loss of the
-------------------------------------
Investment Fund during a Valuation Period, as determined pursuant to Section
8.2, shall be allocated as of the last day of the Valuation Period among the
Participants' Accounts in proportion to the opening balance in each Account, as
adjusted for benefit payments and forfeitures during the Valuation Period,
without regard to whatever Stock may be credited to an Account. Any cash
dividends received on Stock credited to Participant's Accounts shall be
allocated as of the last day of the Valuation Period among the Participants'
Accounts based on the opening balance in each Participant's Stock Fund Account.
Section 9. Vesting of Participants' Interests.
----------------------------------
9.1 Deferred Vesting in Accounts. A Participant's vested interest in
----------------------------
his Account shall be based on his Vesting Years in accordance with the following
Table, subject to the balance of this Section 9:
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
------- ---------------
<S> <C>
Fewer than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
</TABLE>
9.2 Computation of Vesting Years. For purposes of this Plan, a
----------------------------
"Vesting Year" means generally a Plan Year in which an Employee has at least
1,000 Hours of Service, beginning with the first Plan Year in which the Employee
has completed an Hour of Service with the Employer, and including Service with
other Employers as provided in the definition of "Service". Notwithstanding the
above, an
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<PAGE>
Employee who was employed with First Federal Savings & Loan Association of
Cheraw, a federal mutual savings association (the "Mutual Association") which is
the predecessor to the Bank, shall receive credit for vesting purposes for each
calendar year of continuous employment with the Mutual Association in which such
Employee completed 1,000 Hours of Service, not to exceed 2 years of credit for
vesting purpose (such years shall also be referred to as "Vesting Years").
However, a Participant's Vesting Years shall be computed subject to the
following conditions and qualifications:
9.2-1 A Participant's Vesting Years shall not include any Service
prior to the date on which an Employee attains age 18.
9.2-2 A Participant's vested interest in his Account accumulated
before five (5) consecutive Breaks in Service shall be determined without
regard to any Service after such five consecutive Breaks in Service.
Further, if a Participant has five (5) consecutive Breaks in Service before
his interest in his Account has become vested to some extent, pre-Break
years of Service shall not be required to be taken into account for
purposes of determining his post-Break vested percentage.
9.2-3 In the case of a Participant who has 5 or more consecutive 1-
year Breaks in Service, the Participant's pre-Break Service will count in
vesting of the Employer-derived post-break accrued benefit only if either:
(i) such Participant has any nonforfeitable interest in the accrued
benefit attributable to Employer contributions at the time of
separation from Service, or
(ii) upon returning to Service the number of consecutive 1-year
Breaks in Service is less than the number of years of Service.
9.2-4 Unless otherwise specifically excluded, a Participant's Vesting
Years shall include any period of active military duty to the extent
required by the Military Selective Service Act of 1967 (38 U.S.C. Section
2021).
9.2-5 If any amendment changes the vesting schedule, including an
automatic change to or from a top-heavy vesting schedule, any Participant
with three (3) or more Vesting Years may, by filing a written request with
the Employer, elect to have his vested percentage computed under the
vesting schedule in effect prior to the amendment. The election period must
begin not later than the later of sixty (60) days after the amendment is
adopted, the amendment becomes effective, or the Participant is issued
written notice of the amendment by the Employer or the Committee.
9.3 Full Vesting Upon Certain Events.
--------------------------------
9.3-1 Notwithstanding Section 9.1, a Participant's interest in his Account
shall fully vest on the Participant's Normal Retirement Date. The Participant's
interest shall also fully vest in the event that his Service is terminated by
Early Retirement, Disability or by death.
9.3-2 The Participant's interest in his Account shall also fully vest in
the event of a "Change in Control" of the Bank, or the Company. For these
purposes, "Change in Control" shall mean an event of a nature that; (i) would be
required to be reported in response to Item 1a of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act'); or (ii) results in a
Change in Control of the Bank or the Company within the meaning of the Bank
Holding Company Act of 1956, as amended, and applicable rules and regulations
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<PAGE>
promulgated thereunder as in effect at the time of the Change in Control
(collectively, the BHCA"); or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (a) any "Person' (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Bank or the Company representing 25% or more
of the Bank's or the Company's outstanding securities except for any securities
of the Bank purchased by the Company in connection with the conversion of the
Bank to the stock form and any securities purchased by the Bank's employee stock
ownership plan and trust; or (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided, however, that this sub-section (b) shall not apply
if the Incumbent Board is replaced by the appointment by a Federal banking
agency of a conservator or receiver for the Bank and, provided further that any
person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board or whose nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Bank or the Company; or (d) a
proxy statement soliciting proxies from stockholders of the Company, by someone
other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or Bank or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to such plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Company shall be distributed and the requisite
number of proxies approving such plan of reorganization, merger or consolidation
of the Company or Bank are received and voted in favor of such transactions; or
(e) a tender offer is made for 25% or more of the outstanding securities of the
Bank or Company and shareholders owning beneficially or of record 25% or more of
the outstanding securities of the Bank or Company have tendered or offered to
sell their shares pursuant to such tender offer and such tendered shares have
been accepted by the tender offeror.
9.4 Full Vesting Upon Plan Termination. Notwithstanding Section 9.1, a
----------------------------------
Participant's interest in his Account shall fully vest if he is in active
Service upon termination of this Plan or upon the permanent and complete
discontinuance of contributions by his Employer. In the event of a partial
termination, the interest of each affected Participant who is in Service shall
fully vest with respect to that part of the Plan which is terminated.
9.5 Forfeiture, Repayment, and Restoral. If a Participant's Service
-----------------------------------
terminates before his interest in his Account is fully vested, that portion
which has not vested shall be forfeited if he either (i) receives a distribution
of his entire vested interest pursuant to Section 10.1, or (ii) incurs a one
year Break in Service. If a Participant's Service terminates prior to having
any portion of his Account become vested, such Participant shall be deemed to
have a received a distribution of his vested interest as of the Valuation Date
next following his termination of Service.
If a Participant who has received his entire vested interest returns to
Service before he has five (5) consecutive Breaks in Service, he may repay to
the Trustee an amount equal to the distribution. The Participant may repay such
amount at any time within five years after he has returned to Service. The
amount shall be credited to his Account at the time it is repaid; an additional
amount equal to that portion of his Account which was previously forfeited shall
be restored to his Account at the same time from other Employees' forfeitures
and, if such forfeitures are insufficient, from a special contribution by his
Employer for that year. A Participant who was deemed to have received a
distribution of his vested interest in the Plan shall have his Account restored
as of the first day on which he performs an Hour of Service after his return.
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<PAGE>
9.6 Accounting for Forfeitures. If a portion of a Participant's
--------------------------
Account is forfeited, Stock allocated to said Participant's Account shall be
forfeited only after other assets are forfeited. If interests in more than one
class of Stock have been allocated to a Participant's Account, the Participant
must be treated as forfeiting the same proportion of each class of Stock. A
forfeiture shall be charged to the Participant's Account as of the first day of
the first Valuation Period in which the forfeiture becomes certain pursuant to
Section 9.5. Except as otherwise provided in that Section, a forfeiture shall be
added to the contributions of the terminated Participant's Employer which are to
be credited to other Participants pursuant to Section 4.1 as of the last day of
the Plan Year in which the forfeiture becomes certain.
9.7 Vesting and Nonforfeitability. A Participant's interest in his
-----------------------------
Account which has become vested shall be nonforfeitable for any reason.
Section 10. Payment of Benefits.
-------------------
10.1 Benefits for Participants. For a Participant whose Service ends
-------------------------
for any reason, distribution will be made to or for the benefit of the
Participant or, in the case of the Participant's death, his Beneficiary, by
either, or a combination of the following methods:
10.1.1 By payment in a lump sum, in accordance with Section 10.2;
or
10.1.2 By payment in a series of substantially equal annual
installments over a period not to exceed five (5) years, provided the
maximum period over which the distribution of a Participant's Account
may be made shall be extended by 1 year, up to five (5) additional
years, for each $100,000 (or fraction thereof) by which such
Participant's Account balance exceeds $500,000 (the aforementioned
figures are subject to cost-of-living adjustments prescribed by the
Secretary of the Treasury pursuant to Section 409(o)(2) of the Code).
The Participant shall elect the manner in which his vested Account
balance will be distributed to him. If a Participant so desires, he may direct
how his benefits are to be paid to his Beneficiary. If a deceased Participant
did not file a direction with the Committee, the Participant's benefits shall be
distributed to his Beneficiary in a lump sum. Notwithstanding the foregoing, if
the balance credited to his Account exceeds $5,000, his benefits shall not be
paid before the latest of his 65th birthday or the tenth anniversary of the year
in which he commenced participation in the Plan unless he elects an early
payment date in a written election filed with the Committee. A Participant may
modify such an election at any time, provided any new benefit payment date is at
least 30 days after a modified election is delivered to the Committee, subject
to the provisions of Section 10.11 hereof.
10.2 Time for Distribution.
---------------------
10.2.1 Distribution of the balance of a Participant's Account
generally shall commence as soon as practicable after the last day of
the Plan Year next following his termination of Service for any reason,
but no later than one year after the close of the Plan Year in which the
Participant separates from Service.
10.2.2 Unless the Participant elects otherwise, the distribution
of the balance of a Participant's Account shall commence not later than the 60th
day after the latest of the close of the Plan Year in which -
(i) the Participant attains the age of 65;
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<PAGE>
(ii) occurs the tenth anniversary of the year in which the
Participant commenced participation in the Plan; or
(iii) the Participant terminates his Service with the
Employer.
10.2.3 Notwithstanding anything to the contrary, (1) with respect to a
5-percent owner (as defined in Code Section 416), distribution of a
Participant's Account shall commence (whether or not he remains in the employ of
the Employer) not later than the April 1 of the calendar year next following the
calendar year in which the Participant attains age 70-1/2, and (2) with respect
to all other Participants, payment of a Participant's benefit will commence not
later than April 1 of the calendar year following the calendar year in which the
Participant attains age 70-1/2, or, if later, the year in which the Participant
retires. A Participant's benefit from that portion of his Account committed to
the Investment Fund shall be calculated on the basis of the most recent
Valuation Date before the date of payment.
10.2.4 Distribution of a Participant's Account balance after his death
shall comply with the following requirements:
(i) If a Participant dies before his distributions have
commenced, distribution of his Account to his Beneficiary shall commence
not later than one year after the end of the Plan Year in which the
Participant died, however, if the Participant's Beneficiary is his
surviving Spouse, distributions may commence on the date on which the
Participant would have attained age 70-1/2. In either case,
distributions shall be completed within five years after the they
commence.
(ii) If the Participant dies after distribution has commenced
pursuant to Section 10.1.2 but before his entire interest in the Plan
has been distributed to him, then the remaining portion of that interest
shall, in accordance with Section 401(a)(9) of the Code, be distributed
at least as rapidly as under the method of distribution being used under
Section 10.1.2 at the date of his death.
(iii) If a married Participant dies before his benefit payments
begin, then unless he has specifically elected otherwise the Committee
shall cause the balance in his Account to be paid to his Spouse. No
election by a married Participant of a different Beneficiary shall be
valid unless the election is accompanied by the Spouse's written
consent, which (i) must acknowledge the effect of the election, (ii)
must explicitly provide either that the designated Beneficiary may not
subsequently be changed by the Participant without the Spouse's further
consent, or that it may be changed without such consent, and (iii) must
be witnessed by the Committee, its representative, or a notary public.
(This requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the Spouse may not be located.)
10.3 Marital Status. The Committee shall from time to time take whatever
--------------
steps it deems appropriate to keep informed of each Participant's marital
status. Each Employer shall provide the Committee with the most reliable
information in the Employer's possession regarding its Participants' marital
status, and the Committee may, in its discretion, require a notarized affidavit
from any Participant as to his marital status. The Committee, the Plan, the
Trustee, and the Employers shall be fully protected and discharged from any
liability to the extent of any benefit payments made as a result of the
Committee's good faith and reasonable reliance upon information obtained from a
Participant and his Employer as to his marital status.
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<PAGE>
10.4 Delay in Benefit Determination. If the Committee is unable to determine
------------------------------
the benefits payable to a Participant or Beneficiary on or before the latest
date prescribed for payment pursuant to Section 10.1 or 10.2, the benefits shall
in any event be paid within 60 days after they can first be determined, with
whatever makeup payments may be appropriate in view of the delay.
10.5 Accounting for Benefit Payments. Any benefit payment shall be charged to
-------------------------------
the Participant's Account as of the first day of the Valuation Period in which
the payment is made.
10.6 Options to Receive and Sell Stock. Unless ownership of virtually all
---------------------------------
Stock is restricted to active Employees and qualified retirement plans for the
benefit of Employees pursuant to the certificates of incorporation or by-laws of
the Employers issuing Stock, a terminated Participant or the Beneficiary of a
deceased Participant may instruct the Committee to distribute the Participant's
entire vested interest in his Account in the form of Stock. In that event, the
Committee shall apply the Participant's vested interest in the Investment Fund
to purchase sufficient Stock from the Stock Fund or from any owner of Stock to
make the required distribution. In all other cases, the Participant's vested
interest in the Stock Fund shall be distributed in shares of Stock, and his
vested interest in the Investment Fund shall be distributed in cash.
Any Participant who receives Stock pursuant to Section 10.1, and any person
who has received Stock from the Plan or from such a Participant by reason of the
Participant's death or incompetency, by reason of divorce or separation from the
Participant, or by reason of a rollover contribution described in Section
402(a)(5) of the Code, shall have the right to require the Employer which issued
the Stock to purchase the Stock for its current fair market value (hereinafter
referred to as the "put right"). The put right shall be exercisable by written
notice to the Committee during the first 60 days after the Stock is distributed
by the Plan, and, if not exercised in that period, during the first 60 days in
the following Plan Year after the Committee has communicated to the Participant
its determination as to the Stock's current fair market value. However, the put
right shall not apply to the extent that the Stock, at the time the put right
would otherwise be exercisable, may be sold on an established market in
accordance with federal and state securities laws and regulations. Similarly,
the put option shall not apply with respect to the portion of a Participant's
Account which the Employee elected to have reinvested under Code Section
401(a)(28)(B). If the put right is exercised, the Trustee may, if so directed
by the Committee in its sole discretion, assume the Employer's rights and
obligations with respect to purchasing the Stock. Notwithstanding anything
herein to the contrary, in the case of a plan established by a Bank (as defined
in Code Section 581), the put option shall not apply if prohibited by a federal
or state law and Participants are entitled to elect their benefits be
distributed in cash.
If a Participant elects to receive his distribution in the form of a lump sum
pursuant to Section 10.1.1 of the Plan, the Employer or the Trustee, as the case
may be, may elect to pay for the Stock in equal periodic installments, not less
frequently than annually, over a period not longer than five years from the day
after the put right is exercised, with adequate security and interest at a
reasonable rate on the unpaid balance, all such terms to be set forth in a
promissory note delivered to the seller with normal terms as to acceleration
upon any uncured default.
If a Participant elects to receive his distribution in the form of an
installment payment pursuant to Section 10.1.2 of the Plan, the Employer or the
Trustee, as the case may be, shall pay for the Stock distributed in the
installment distribution over a period which shall not exceed 30 days after the
exercise of the put right.
Nothing contained herein shall be deemed to obligate any Employer to register
any Stock under any federal or state securities law or to create or maintain a
public market to facilitate the transfer or disposition of any Stock. The put
right described herein may only be exercised by a person described in
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<PAGE>
the second preceding paragraph, and may not be transferred with any Stock to any
other person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right shall be nonterminable. The put right for Stock
acquired through a Stock Obligation shall continue with respect to such Stock
after the Stock Obligation is repaid or the Plan ceases to be an employee stock
ownership plan.
10.7 Restrictions on Disposition of Stock. Except in the case of Stock which
------------------------------------
is traded on an established market, a Participant who receives Stock pursuant to
Section 10.1, and any person who has received Stock from the Plan or from such a
Participant by reason of the Participant's death or incompetency, by reason of
divorce or separation from the Participant, or by reason of a rollover
contribution described in Section 402(a)(5) of the Code, shall, prior to any
sale or other transfer of the Stock to any other person, first offer the Stock
to the issuing Employer and to the Plan at the greater of (i) its current fair
market value, or (ii) the purchase price offered in good faith by an independent
third party purchaser. This restriction shall apply to any transfer, whether
voluntary, involuntary, or by operation of law, and whether for consideration or
gratuitous. Either the Employer or the Trustee may accept the offer within 14
days after it is delivered. Any Stock distributed by the Plan shall bear a
conspicuous legend describing the right of first refusal under this Section
10.7, as well as any other restrictions upon the transfer of the Stock imposed
by federal and state securities laws and regulations.
10.8 Continuing Loan Provisions; Creations of Protections and Rights. Except
---------------------------------------------------------------
as otherwise provided in Sections 10.6 and 10.7 and this Section, no shares of
Employer Stock held or distributed by the Trustee may be subject to a put, call
or other option, or buy-sell arrangement. The provisions of this Section shall
continue to by applicable to such Stock even if the Plan ceases to be an
employee stock ownership plan under Section 4975(e)(7) of the Code.
10.9 Direct Rollover of Eligible Distribution. A Participant or distributee
----------------------------------------
may elect, at the time and in the manner prescribed by the Trustee or the
Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the Participant or
distributee in a direct rollover.
10.9-1 An "eligible rollover" is any distribution that 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 Participant and the Participant's 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 included in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
10.9-2 An "eligible retirement plan" is an individual retirement account
described in Code Section 401(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
distributee's 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.
10.9-3 A "direct rollover" is a payment by the Plan to the eligible
retirement plan specified by the distributee.
10.9-4 The term "distributee" shall refer to a deceased Participant's
Spouse or a Participant's former Spouse who is the alternate payee under a
qualified domestic relations order, as defined in Code Section 414(p).
-21-
<PAGE>
10.10 Waiver of 30 Day Period After Notice of Distribution. If a
----------------------------------------------------
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 4.11(a)-11(c) of the Income Tax Regulations is given,
provided that:
(i) the Trustee or Administrative Committee, as applicable,
clearly informs the Participant that the Participant has a
right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect
a distribution (and, if applicable, a particular option),
and
(ii) the Participant, after receiving the notice, affirmatively
elects a distribution.
Section 11. Rules Governing Benefit Claims and Review of Appeals.
----------------------------------------------------
11.1 Claim for Benefits. Any Participant or Beneficiary who qualifies for
------------------
the payment of benefits shall file a claim for his benefits with the Committee
on a form provided by the Committee. The claim, including any election of an
alternative benefit form, shall be filed at least 30 days before the date on
which the benefits are to begin. If a Participant or Beneficiary fails to file a
claim by the day before the date on which benefits become payable, he shall be
presumed to have filed a claim for payment for the Participant's benefits in the
standard form prescribed by Sections 10.1 or 10.2
11.2 Notification by Committee. Within 90 days after receiving a claim for
-------------------------
benefits (or within 180 days, if special circumstances require an extension of
time and written notice of the extension is given to the Participant or
Beneficiary within 90 days after receiving the claim for benefits), the
Committee shall notify the Participant or Beneficiary whether the claim has been
approved or denied. If the Committee denies a claim in any respect, the
Committee shall set forth in a written notice to the Participant or Beneficiary:
(i) each specific reason for the denial;
(ii) specific references to the pertinent Plan provisions on which
the denial is based;
(iii) a description of any additional material or information which
could be submitted by the Participant or Beneficiary to support
his claim, with an explanation of the relevance of such
information; and
(iv) an explanation of the claims review procedures set forth in
Section 11.3.
11.3 Claims Review Procedure. Within 60 days after a Participant or
-----------------------
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee's determination.
In connection with his appeal the Participant or Beneficiary or his
representative may inspect or purchase copies of pertinent documents and records
to the extent not inconsistent with other Participants' and Beneficiaries'
rights of privacy. Within 60 days after receiving a notice of appeal from a
prior determination (or within 120 days, if special circumstances require an
extension of time and written notice of the extension is given to the
Participant or Beneficiary and his representative within 60 days after receiving
the notice of appeal), the Committee shall furnish to the Participant or
Beneficiary and his representative, if any, a written statement of the
Committee's final decision with respect to his claim, including the reasons for
such decision and the particular Plan provisions upon which it is based.
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<PAGE>
Section 12. The Committee and Its Functions.
-------------------------------
12.1 Authority of Committee. The Committee shall be the "plan administrator"
----------------------
within the meaning of ERISA and shall have exclusive responsibility and
authority to control and manage the operation and administration of the Plan,
including the interpretation and application of its provisions, except to the
extent such responsibility and authority are otherwise specifically (i)
allocated to the Bank, the Employers, or the Trustee under the Plan and Trust
Agreement, (ii) delegated in writing to other persons by the Bank, the
Employers, the Committee, or the Trustee, or (iii) allocated to other parties by
operation of law. The Committee shall have exclusive responsibility regarding
decisions concerning the payment of benefits under the Plan. The Committee
shall have no investment responsibility with respect to the Investment Fund
except to the extent, if any, specifically provided in the Trust Agreement. In
the discharge of its duties, the Committee may employ accountants, actuaries,
legal counsel, and other agents (who also may be employed by an Employer or the
Trustee in the same or some other capacity) and may pay their reasonable
expenses and compensation.
12.2 Identity of Committee. The Committee shall consists of three or more
---------------------
individuals selected by the Bank. Any individual, including a director,
trustee, shareholder, officer, or Employee of an Employer, shall be eligible to
serve as a member of the Committee. The Bank shall have the power to remove any
individual serving on the Committee at any time without cause upon 10 days
written notice, and any individual may resign from the Committee at any time
upon 10 days written notice to the Bank. The Bank shall notify the Trustee of
any change in membership of the Committee.
12.3 Duties of Committee. The Committee shall keep whatever records may be
-------------------
necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Bank. The Committee shall furnish to the
Trustee whatever information may be necessary to properly administer the Trust.
The Committee shall see to the filing with the appropriate government agencies
of all reports and returns required of the plan Committee under ERISA and other
laws.
Further, the Committee shall have exclusive responsibility and authority with
respect to the Plan's holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. The Committee shall at
all times act consistently with the Bank's long-term intention that the Plan, as
an employee stock ownership plan, be invested primarily in Stock. Subject to
the direction of the Board as to the application of Employer contributions to
Stock Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to
Participants' rights under certain circumstances to have their Accounts invested
in Stock or in assets other than Stock, the Committee shall determine in its
sole discretion the extent to which assets of the Trust shall be used to repay
Stock Obligations, to purchase Stock, or to invest in other assets to be
selected by the Trustee or an investment manager. No provision of the Plan
relating to the allocation or vesting of any interests in the Stock Fund or the
Investment Fund shall restrict the Committee from changing any holdings of the
Trust, whether the changes involve an increase or a decrease in the Stock or
other assets credited to Participants' Accounts. In determining the proper
extent of the Trust's investment in Stock, the Committee shall be authorized to
employ investment counsel, legal counsel, appraisers, and other agents to pay
their reasonable expenses and compensation.
12.4 Valuation of Stock. If the valuation of any Stock is not established by
------------------
reported trading on a generally recognized public market, the Committee shall
have the exclusive authority and responsibility to determine its value for all
purposes under the Plan. Such value shall be determined as of each Valuation
Date, and on any other date as of which the Plan purchases or sells such Stock.
The Committee shall use generally accepted methods of valuing stock of similar
corporations for purposes of arm's length business and investment transactions,
and in this connection the Committee shall obtain, and
-23-
<PAGE>
shall be protected in relying upon, the valuation of such Stock as determined by
an independent appraiser experienced in preparing valuations of similar
businesses.
12.5 Compliance with ERISA. The Committee shall perform all acts necessary
---------------------
to comply with ERISA. Each individual member or employee of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA.
12.6 Action by Committee. All actions of the Committee shall be governed by
-------------------
the affirmative vote of a number of members which is a majority of the total
number of members currently appointed, including vacancies. The members of the
Committee may meet informally and may take any action without meeting as a
group.
12.7 Execution of Documents. Any instrument executed by the Committee shall
----------------------
be signed by any member or employee of the Committee.
12.8 Adoption of Rules. The Committee shall adopt such rules and
-----------------
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.
12.9 Responsibilities to Participants. The Committee shall determine which
--------------------------------
Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever summary plan descriptions, summary annual reports,
and other notices and information may be required under ERISA. The Committee
also shall determine when a Participant or his Beneficiary qualifies for the
payment of benefits under the Plan. The Committee shall furnish to each such
Participant or Beneficiary whatever information is required under ERISA (or is
otherwise appropriate) to enable the Participant or Beneficiary to make whatever
elections may be available pursuant to Sections 6 and 10, and the Committee
shall provide for the payment of benefits in the proper form and amount from the
assets of the Trust Fund. The Committee may decide in its sole discretion to
permit modifications of elections and to defer or accelerate benefits to the
extent consistent with applicable law and the best interests of the individuals
concerned.
12.10 Alternative Payees in Event of Incapacity. If the Committee finds at
-----------------------------------------
any time that an individual qualifying for benefits under this Plan is a minor
or is incompetent, the Committee may direct the benefits to be paid, in the case
of a minor, to his parents, his legal guardian, or a custodian for him under the
Uniform Gifts to Minors Act, or, in the case of an incompetent, to his spouse,
or his legal guardian, the payments to be used for the individual's benefit.
The Committee and the Trustee shall not be obligated to inquire as to the actual
use of the funds by the person receiving them under this Section 12.10, and any
such payment shall completely discharge the obligations of the Plan, the
Trustee, the Committee, and the Employers to the extent of the payment.
12.11 Indemnification by Employers. Except as separately agreed in writing,
----------------------------
the Committee, and any member or employee of the Committee, shall be indemnified
and held harmless by the Employer, jointly and severally, to the fullest extent
permitted by law against any and all costs, damages, expenses, and liabilities
reasonably incurred by or imposed upon it or him in connection with any claim
made against it or him or in which it or he may be involved by reason of its or
his being, or having been, the Committee, or a member or employee of the
Committee, to the extent such amounts are not paid by insurance.
12.12 Nonparticipation by Interested Member. Any member of the Committee who
-------------------------------------
also is a Participant in the Plan shall take no part in any determination
specifically relating to his own participation or benefits, unless his
abstention would leave the Committee incapable of acting on the matter.
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<PAGE>
Section 13. Adoption, Amendment, or Termination of the Plan.
-----------------------------------------------
13.1 Adoption of Plan by Other Employers. With the consent of the Bank,
-----------------------------------
any entity may become a participating Employer under the Plan by (i) taking such
action as shall be necessary to adopt the Plan, (ii) becoming a party to the
Trust Agreement establishing the Trust Fund, and (iii) executing and delivering
such instruments and taking such other action as may be necessary or desirable
to put the Plan into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor. In the event that any Employer
-----------------------------
shall be reorganized by way of merger, consolidation, transfer of assets or
otherwise, so that an entity other than an Employer shall succeed to all or
substantially all of the Employer's business, the successor entity may be
substituted for the Employer under the Plan by adopting the Plan and becoming a
party to the Trust Agreement. Contributions by the Employer shall be
automatically suspended from the effective date of any such reorganization until
the date upon which the substitution of the successor entity for the Employer
under the Plan becomes effective. If, within 90 days following the effective
date of any such reorganization, the successor entity shall not have elected to
become a party to the Plan, or if the Employer shall adopt a plan of complete
liquidation other than in connection with a reorganization, the Plan shall be
automatically terminated with respect to Employees of the Employer as of the
close of business on the 90th day following the effective date of the
reorganization, or as of the close of business on the date of adoption of a plan
of complete liquidation, as the case may be.
13.3 Plan Adoption Subject to Qualification. Notwithstanding any other
--------------------------------------
provision of the Plan, the adoption of the Plan and the execution of the Trust
Agreement are conditioned upon their being determined initially by the Internal
Revenue Service to meet the qualification requirements of Section 401(a) of the
Code, so that the Employers may deduct currently for federal income tax purposes
their contributions to the Trust and so that the Participants may exclude the
contributions from their gross income and recognize income only when they
receive benefits. In the event that this Plan is held by the Internal Revenue
Service not to qualify initially under Section 401(a), the Plan may be amended
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure qualification under Section 401(a). If this Plan is held by
the Internal Revenue Service not to qualify initially under Section 401(a)
either as originally adopted or as amended, each Employer's contributions to the
Trust under this Plan (including any earnings thereon) shall be returned to it
and this Plan shall be terminated. In the event that this Plan is amended after
its initial qualification and the Plan as amended is held by the Internal
Revenue Service not to qualify under Section 401(a), the amendment may be
modified retroactively to the earliest date permitted by U.S. Treasury
Regulations in order to secure approval of the amendment under Section 401(a).
13.4 Right to Amend or Terminate. The Bank intends to continue this
---------------------------
Plan as a permanent program. However, each participating Employer separately
reserves the right to suspend, supersede, or terminate the Plan at any time and
for any reason, as it applies to that Employer's Employees, and the Bank
reserves the right to amend, suspend, supersede, merge, consolidate, or
terminate the Plan at any time and for any reason, as it applies to the
Employees of each Employer. No amendment, suspension, supersession, merger,
consolidation, or termination of the Plan shall (i) reduce any Participant's or
Beneficiary's proportionate interest in the Trust Fund, (ii) reduce or restrict,
either directly or indirectly, the benefit provided any Participant prior to the
amendment, or (iii) divert any portion of the Trust Fund to purposes other than
the exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan. Moreover, there shall not be any
transfer of assets to a successor plan or merger or consolidation with another
plan unless, in the event of the termination of the successor plan or the
surviving plan immediately following such transfer, merger, or consolidation,
each participant or beneficiary would be entitled to a benefit equal to or
greater than the benefit he would have
-25-
<PAGE>
been entitled to if the plan in which he was previously a participant or
beneficiary had terminated immediately prior to such transfer, merger, or
consolidation. Following a termination of this Plan by the Bank, the Trustee
shall continue to administer the Trust and pay benefits in accordance with the
Plan as amended from time to time and the Committee's instructions.
Section 14. Miscellaneous Provisions.
------------------------
14.1 Plan Creates No Employment Rights. Nothing in this Plan shall be
---------------------------------
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.
14.2 Nonassignability of Benefits. No assignment, pledge, or other
----------------------------
anticipation of benefits from the Plan will be permitted or recognized by the
Employer, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former spouse, child or other dependent of a Participant pursuant to
a state domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code, as more fully
set forth in Section 14.2 hereof.
14.3 Limit of Employer Liability. The liability of the Employer with
---------------------------
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.
14.4 Treatment of Expenses. All expenses incurred by the Committee and
---------------------
the Trustee in connection with administering this Plan and Trust Fund shall be
paid by the Trustee from the Trust Fund to the extent the expenses have not been
paid or assumed by the Employer or by the Trustee.
14.5 Number and Gender. Any use of the singular shall be interpreted to
-----------------
include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.
14.6 Nondiversion of Assets. Except as provided in Sections 5.3 and
----------------------
13.3, under no circumstances shall any portion of the Trust Fund be diverted to
or used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
14.7 Separability of Provisions. If any provision of this Plan is held
--------------------------
to be invalid or unenforceable, the other provisions of the Plan shall not be
affected but shall be applied as if the invalid or unenforceable provision had
not been included in the Plan.
14.8 Service of Process. The agent for the service of process upon the
------------------
Plan shall be the president of the Bank, or such other person as may be
designated from time to time by the Bank.
14.9 Governing State Law. This Plan shall be interpreted in accordance
-------------------
with the laws of the State of South Carolina to the extent those laws are
applicable under the provisions of ERISA.
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<PAGE>
14.10 Employer Contributions Conditioned on Deductibility. Employer
---------------------------------------------------
Contributions to the Plan are conditioned on deductibility under Code Section
404. In the event that the Internal Revenue Service shall determine that all or
any portion of an Employer Contribution is not deductible under that Section,
the nondeductible portion shall be returned to the Employer within one year of
the disallowance of the deduction.
14.11 Unclaimed Accounts. Neither the Employer nor the Trustees shall be
------------------
under any obligation to search for, or ascertain the whereabouts of, any
Participant or Beneficiary. The Employer or the Trustees, by certified or
registered mail addressed to his last known address of record with the Employer,
shall notify any Participant or Beneficiary that he is entitled to a
distribution under this Plan, and the notice shall quote the provisions of this
Section. If the Participant or Beneficiary fails to claim his benefits or make
his whereabouts known in writing to the Employer or the Trustees within seven
(7) calendar years after the date of notification, the benefits of the
Participant or Beneficiary under the Plan will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown but the
whereabouts of the Participant's Beneficiary is known to the Trustees,
distribution will be made to the Beneficiary.
(b) If the whereabouts of the Participant and his Beneficiary are
unknown to the Trustees, the Plan will forfeit the benefit, provided that
the benefit is subject to a claim for reinstatement if the Participant or
Beneficiary make a claim for the forfeited benefit.
Any payment made pursuant to the power herein conferred upon the Trustees
shall operate as a complete discharge of all obligations of the Trustees, to the
extent of the distributions so made.
14.12 Qualified Domestic Relations Order. Section 14.2 shall not apply to
----------------------------------
a "qualified domestic relations order" defined in Code Section 414(p), and such
other domestic relations orders permitted to be so treated under the provisions
of the Retirement Equity Act of 1984. 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.
In the case of any domestic relations order received by the Plan:
(a) The Employer or the Plan Committee shall promptly notify the
Participant and any other alternate payee of the receipt of such order and
the Plan's procedures for determining the qualified status of domestic
relations orders, and
(b) Within a reasonable period after receipt of such order, the
Employer or the Plan Committee shall determine whether such order is a
qualified domestic relations order and notify the Participant and each
alternate payee of such determination. The Employer or the Plan Committee
shall establish reasonable procedures to determine the qualified status of
domestic relations orders and to administer distributions under such
qualified orders.
During any period in which the issue of whether a domestic relations order
is a qualified domestic relations order is being determined (by the Employer or
Plan Committee, by a court of competent jurisdiction, or otherwise), the
Employer or the Plan Committee shall segregate in a separate account in the Plan
or in an escrow account the amounts which would have been payable to the
alternate payee during such period if the order had been determined to be a
qualified domestic relations order. If within eighteen (18) months the order (or
modification thereof) is determined to be a qualified domestic relations order,
the Employer or the Plan Committee shall pay the segregated amounts (plus any
interest thereon) to the
-27-
<PAGE>
person or persons entitled thereto. If within eighteen (18) months it is
determined that the order is not a qualified domestic relations order, or the
issue as to whether such order is a qualified domestic relations order is not
resolved, then the Employer or the Plan Committee shall pay the segregated
amounts (plus any interest thereon) to the person or persons who would have been
entitled to such amounts if there had been no order. Any determination that an
order is a qualified domestic relations order which is made after the close of
the eighteen (18) month period shall be applied prospectively only. The term
"alternate payee" means any Spouse, former Spouse, child or other dependent of a
Participant who is recognized by a domestic relations order as having a right to
receive all, or a portion of, the benefit payable under a Plan with respect to
such Participant.
Section 15. Top-Heavy Provisions.
--------------------
15.1 Top-Heavy Plan. For any Plan Year beginning after December 31,
--------------
1983, this Plan is top-heavy if any of the following conditions exist:
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any required aggregation group or permissive
aggregation group;
(b) If this Plan is a part of a required aggregation group (but is
not part of a permissive aggregation group) and the aggregate top-heavy ratio
for the group of Plans exceeds sixty percent (60%); or
(c) If this Plan is a part of a required aggregation group and part
of a permissive aggregation group and the aggregate top-heavy ratio for the
permissive aggregation group exceeds sixty percent (60%).
15.2 Super Top-Heavy Plan For any Plan Year beginning after December 31,
--------------------
1983, this Plan will be a super top-heavy Plan if any of the following
conditions exist:
(a) If the top-heavy ratio for this Plan exceeds ninety percent
(90%) and this Plan is not part of any required aggregation group or permissive
aggregation group.
(b) If this Plan is a part of a required aggregation group (but is
not part of a permissive aggregation group) and the aggregate top-heavy ratio
for the group of Plans exceeds ninety percent (90%), or
(c) If this Plan is a part of a required aggregation group and part
of a permissive aggregation group and the aggregate top-heavy ratio for the
permissive aggregation group exceeds ninety percent (90%).
15.3 Definitions.
-----------
In making this determination, the Committee shall use the following definitions
and principles:
15.3-1 The "Determination Date", with respect to the first Plan
Year of any plan, means the last day of that Plan Year, and with respect to
each subsequent Plan Year, means the last day of the preceding Plan Year.
If any other plan has a Determination Date which differs from this Plan's
Determination Date, the top-heaviness of this Plan shall be determined on
the basis of the other plan's Determination Date falling within the same
calendar years as this Plan's Determination Date.
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<PAGE>
15.3-2 A "Key Employee", with respect to a Plan Year, means an
Employee who at any time during the five years ending on the top-heavy
Determination Date for the Plan Year has received compensation from an
Employer and has been (i) an officer of the Employer having 415
Compensation greater than 50 percent of the limit then in effect under
Section 415(b)(1)(A) of the Code, (ii) one of the 10 Employees owning the
largest interests in the Employer having 415 Compensation greater than the
limit then in effect under Section 415(c)(1)(A), (iii) an owner of more
than five percent of the outstanding equity interest or the outstanding
voting interest in any Employer, or (iv) an owner of more than one percent
of the outstanding equity interest or the outstanding voting interest in an
Employer whose annual compensation exceeds $150,000. For purposes of
determining whether an Employee is a Key Employee, annual compensation
means compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employee pursuant to a salary
reduction agreement which are excludable from the Employee's gross income
under Section 125, Section 402(e)(3), Section 402(H)(1)(B) or Section
403(b) of the Code. The Beneficiary of a Key Employee shall also be
considered a Key Employee.
15.3-3 A "Non-key Employee" means an Employee who at any time
during the five years ending on the top-heavy Determination Date for the
Plan Year has received compensation from an Employer and who has never been
a Key Employee, and the Beneficiary of any such Employee.
15.3-4 A "required aggregation group" includes (a) each qualified
Plan of the Employer in which at least one Key Employee participates in the
Plan Year containing the Determination Date and any of the four (4)
preceding Plan Years, and (b) any other qualified Plan of the Employer
which enables a Plan described in (a) to meet the requirements of Code
Sections 401(a)(4) and 410. For purposes of the preceding sentence, a
qualified Plan of the Employer includes a terminated Plan maintained by the
Employer within the five (5) year period ending on the Determination Date.
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.
All Employers aggregated under Code Sections 414(b), (c) or (m) or (o) (but
only after the Code Section 414(o) regulations become effective) are
considered a single Employer.
15.3-5 A "permissive aggregation group" includes the required
aggregation group of Plans plus any other qualified Plan(s) of the Employer
that are not required to be aggregated but which, when considered as a
group with the required aggregation group, satisfy the requirements of Code
Sections 401(a)(4) and 410 and are comparable to the Plans in the required
aggregation 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. Only a Plan that is part of the required aggregation group
will be considered a top-heavy Plan if the permissive aggregation group is
top-heavy.
15.4 Top-Heavy Rules of Application.
------------------------------
For purposes of determining the value of Account balances and the
present value of accrued benefits the following provisions shall apply:
15.4-1 The value of Account balances and the present value of
accrued benefits will be determined as of the most recent Valuation Date
that falls within or ends with the twelve (12) month period ending on the
Determination Date.
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<PAGE>
15.4-2 For purposes of testing whether this Plan is top-heavy, the
present value of an individual's accrued benefits and an individual's
Account balances is counted only once each year.
15.4-3 The Account balances and accrued benefits of a Participant
who is not presently a Key Employee but who was a Key Employee in a Plan
Year beginning on or after January 1, 1984 will be disregarded.
15.4-4 For years beginning after December 31, 1984, Employer
contributions attributable to a salary reduction or similar arrangement
will be taken into account.
15.4-5 When aggregating Plans, the value of Account balances and
accrued benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
15.4-6 The present value of the accrued benefits or the amount of
the Account balances of an Employee shall be increased by the aggregate
distributions made to such Employee from a Plan of the Employer. No
distribution, however, made from the Plan to an individual (other than the
Beneficiary of a deceased Employee who was an Employee within the five (5)
year period ending on the Determination Date) who has not been an Employee
at any time during the five (5) year period ending on the Determination
Date shall be taken into account in determining whether the Plan is top-
heavy. Also, any amounts recontributed by an Employee upon becoming a
Participant in the Plan shall no longer be counted as a distribution under
this paragraph.
15.4-7 The present value of the accrued benefits or the amount of
the Account balances of an Employee shall be increased by the aggregate
distributions made to such Employee from a terminated Plan of the Employer,
provided that such Plan (if not terminated) would have been required to be
included in the aggregation group.
15.4-8 Accrued benefits and Account balances of an individual shall
not be taken into account for purposes of determining the top-heavy ratios
if the individual has performed no services for the Employer during the
five (5) year period ending on the applicable Determination Date.
Compensation for purposes of this subparagraph shall not include any
payments made to an individual by the Employer pursuant to a qualified or
non-qualified deferred compensation plan.
15.4-9 The present value of the accrued benefits or the amount of
the Account balances of any Employee participating in this Plan shall not
include any rollover contributions or other transfers voluntarily initiated
by the Employee except as described below. If this Plan transfers or rolls
over funds to another Plan in a transaction voluntarily initiated by the
Employee after December 31, 1983, then this Plan shall count the
distribution for purposes of determining Account balances or the present
value of accrued benefits. A transfer incident to a merger or consolidation
of two or more Plans of the Employer (including Plans of related Employers
treated as a single Employer under Code Section 414), or a transfer or
rollover between Plans of the Employer, shall not be considered as
voluntarily initiated by the Employee.
15.5 Top-Heavy Ratio.
---------------
If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer has never
maintained any defined benefit plans which have covered or could cover a
Participant in this Plan, the top-heavy ratio is a fraction, the numerator of
which is the sum of the Account balances of all Key Employees as of the
Determination Date, and the denominator of which is the sum of the Account
balances of all Employees as of the Determination Date.
-30-
<PAGE>
Both the numerator and denominator of the top-heavy ratio shall be increased to
reflect any contribution which is due but unpaid as of the Determination Date.
If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer maintains or
has maintained one (1) or more defined benefit plans which have covered or could
cover a Participant in this Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of Account balances under the defined contribution
plans for all Key Employees and the present value of accrued benefits under the
defined benefit plans for all Key Employees, and the denominator of which is the
sum of the Account balances under the defined contribution plans for all
Employees and the present value of accrued benefits under the defined benefit
plans for all Employees.
15.6 Minimum Contributions. For any Top-Heavy Year, each Employer
---------------------
shall make a special contribution on behalf of each Participant to the extent
that the total allocations to his Account pursuant to Section 4 is less than the
lesser of:
(i) three percent of his 415 Compensation for that year, or
(ii) the highest ratio of such allocation to 415 Compensation
received by any Key Employee for that year. For purposes of the special
contribution of this Section 15.2, a Key Employee's 415 Compensation shall
include amounts the Key Employee elected to defer under a qualified 401(k)
arrangement. Such a special contribution shall be made on behalf of each
Participant who is employed by an Employer on the last day of the Plan
Year, regardless of the number of his Hours of Service, and shall be
allocated to his Account.
For any Plan Year when (1) the Plan is top-heavy and (2) a Non-key Employee
is a Participant in both this Plan and a defined benefit plan included in the
plan aggregation group which is top heavy, the sum of the Employer contributions
and forfeitures allocated to the Account of each such Non-key Employee shall be
equal to at least five percent (5%) of such Non-key Employee's 415 Compensation
for that year.
15.7 Minimum Vesting. If a Participant's vested interest in his Account
---------------
is to be determined in a Top-Heavy Year, it shall be based on the following
"top-heavy table":
<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
------- ---------------
<S> <C>
Fewer than 2 years 0%
2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>
15.8 Top-Heavy Provisions Control in Top-Heavy Plan. In the event this
----------------------------------------------
Plan becomes top-heavy and a conflict arises between the top-heavy provisions
herein set forth and the remaining provisions set forth in this Plan, the top-
heavy provisions shall control.
-31-
<PAGE>
EXHIBIT 10.3
<PAGE>
FORM OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN
Effective December 12, 1977
Restated , 1997
----------
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE DECEMBER 12, 1997
RESTATED ,1997
------------
ARTICLE I
PURPOSE
-------
The purpose of this Restated Non-Qualified Deferred Compensation Plan
(hereinafter referred to as the "Plan") is to provide current tax planning
opportunities as well as supplemental funds for retirement or death for selected
officers of First Federal Savings and Loan Association of Cheraw (hereinafter
referred to as Association"). It is intended that the Plain will aid in
retaining and attracting employees of exceptional ability by providing them with
these benefits. This Plan was initially effective on December 12, 1997.
ARTICLE II
DEFINITIONS
-----------
For the purposes of this Plan, the following terms may have the meanings
indicated, unless the context clearly indicates otherwise:
2.1 Account. "Account" means the Account as maintained by the Employer in
-------
accordance with Article IV with respect to any deferral of Compensation pursuant
to this Plan. A Participant's Account shall be utilized solely as a device for
the determination and measurement of the amounts to be paid to the Participant
pursuant to the Plan. A Participant's Account shall not constitute or be
treated as a trust fund of any kind.
2.2 Beneficiary. "Beneficiary" means the person, persons or entity
-----------
entitled under Article VI to receive any Plan Benefits payable after a
Participant's death.
2.3 Board. "Board" means the Board of Directors of Association.
-----
2.4 Change in Control. "Change in Control" of the Bank or the Company
-----------------
means a change in control of a nature that: (i) would be required to be reported
in response to Item 1(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"); or (ii) results in a Change in Control of the Bank or
the Company within the meaning of the Home Owners Loan Act, as
<PAGE>
amended ("HOLA"), and applicable rules and regulations promulgated thereunder,
as in effect at the time of the Change in Control; or (iii) without limitation
such a Change in Control shall be deemed to have occurred at such time as (a)
any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of Company's outstanding securities
except for any securities purchased by the Bank's employee stock ownership plan
or trust; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company's stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b), considered
as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs; or (d) a proxy statement
soliciting proxies from stockholders of the Company, by someone other than the
current management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the Plan are to be exchanged for or
converted into cash or property or securities not issued by the Company; or (e)
a tender offer is made for 25% or more of the voting securities of the Company
and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror.
2.5 Committee. "Committee" means the Committee of non-employee directors
---------
of the Association appointed to administer the Plan pursuant to Article VII.
2.6 Company. "Company" means Great Pee Dee Bancorp, Inc.
--------
2.7 Compensation. "Compensation" means salary and bonuses payable to a
------------
Participant during the calendar year, before reduction for amounts deferred
under this Plan or any other salary reduction program.
2.8 Deferral Commitment. "Deferral Commitment" means an election to defer
-------------------
Compensation made by a Participant pursuant to Article III and for which a
Participation Agreement has been submitted by the Participant to the Committee.
2.9 Deferral Period. "Deferral Period" means the period over which a
---------------
Participant has elected to defer a portion of his Compensation. Each calendar
year shall be a separate Deferral Period, provided that the Deferral Period may
be modified pursuant to paragraph 3.4.
2
<PAGE>
2.10 Determination Date. "Determination Date" means the last day of each
------------------
calendar month.
2.11 Discretionary Contributions. Contributions by the Employer to the
---------------------------
Accounts of a Participant. The Employer Discretionary Contribution may vary
from year to year. The Employer is not obligated to make Discretionary
Contributions in any year.
2.12 Disability. "Disability" means a physical or mental condition
----------
which, in the opinion of the Committee, permanently prevents an employee from
satisfactorily performing employee's usual duties for Employer. The Committee's
decision as to Disability will be based upon medical reports and/or other
evidence satisfactory to the Committee. In no event shall a Disability be
deemed to occur or to continue after a Participant's Normal Retirement Date.
2.13 Employer. "Employer" means First Federal Savings and Loan
--------
Association of Cheraw, a federally chartered savings association, or any
successor to the business thereof, and any affiliated or subsidiary corporations
designated by the Board.
2.14 Initial Participation Date. "Initial Participation Date" means the
--------------------------
date the Participant first became eligible to participate.
2.15 Interest. "Interest " means, with respect to any calendar month,
--------
the interest earned on any investments allocated to the Plan. In the event no
investments are allocated to the Plan, "Interest" shall mean the highest rate of
interest earned by any one year certificate of deposit that could be purchased
at the Association in such month. In the event the Committee or Trustee, as
applicable, has implemented the investment instructions of a Participant, the
Participant's Account shall be credited with the interest or earnings
attributable to the investments so made or deemed to be made on behalf of the
Participant. All interest and other income earned on investments directed by
the Participant shall be credited to the Participant's Account.
2.16 Participant. "Participant" means any individual who is
-----------
participating or has participated in this Plan as provided in Article III.
2.17 Participation Agreement. "Participation Agreement" means the
-----------------------
agreement filed by a Participant which acknowledges assent to the terms of the
Plan and in which the Participant elects to defer the receipt of Compensation
during a Deferral Period. The Participation Agreement must be filed with the
Committee prior to the beginning of the Deferral Period. A new Participation
Agreement shall be submitted by the Participant for each Deferral Commitment.
2.18 Plan Benefit. "Plan Benefit" means the benefit payable to a
------------
Participant as calculated in Article V.
3
<PAGE>
2.19 Trustee. "Trustee" means the trustee, if any, of any rabbi trust
--------
which may be established by the Association to accumulate assets for the purpose
of meeting the Association's benefit obligation hereunder.
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
--------------------------------------
3.1 Eligibility and Participation.
-----------------------------
(a) Eligibility. Eligibility to participate in the Plan shall be
-----------
limited to those employees of the Employer who are designated by the
Board.
(b) Participation. An eligible employee may elect to participate in
-------------
the Plan with respect to any Deferral Period by submitting a Participation
Agreement to the Committee by December 15 of the calendar year immediately
preceding the Deferral Period. In the event that an employee first becomes
eligible to participate during a calendar year, a Participation Agreement
must be submitted to the Committee no later than thirty (30) days
following notification of the employee of eligibility to participate, and
such Participation Agreement shall be effective only with regard to
Compensation earned or payable following the submission of the
Participation Agreement to the Committee.
3.2 Deferral Commitment. A Participant may elect in the Participation
-------------------
Agreement to defer any portion of his Compensation for the calendar year
following the calendar year in which the Participation Agreement is submitted.
The amount to be deferred shall be stated as a dollar amount.
3.3 Modification of Deferral Commitment. A Deferral Commitment shall be
-----------------------------------
irrevocable except that the Committee may permit a Participant to reduce the
amount to be deferred, or waive the remainder of the Deferral Commitment upon a
finding that the Participant has suffered a severe financial hardship.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
------------------------------
4.1 Accounts. For record keeping purposes only, an Account shall be
--------
maintained for each Participant. Separate subaccounts may be maintained to the
extent necessary to properly reflect the Participant's total vested Account
balance.
4
<PAGE>
4.2 Elective Deferred Compensation. The amount of Compensation that a
------------------------------
Participant elects to defer shall be withheld from each payment of Compensation
and credited to the Participant's Account as the nondeferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation which is required by state,
federal or local law shall be withheld from the Participant's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Participant's Account.
4.3 Employer Discretionary Contributions. Employer may make Discretionary
------------------------------------
Contributions to Participants' Accounts. Discretionary Contributions shall be
credited at such times and in such amounts as the Board in its sole discretion
shall determine.
4.4 Interest. The Accounts shall be credited monthly with Interest earned
--------
at the rate specified in Section 2.13. Interest earned shall be calculated as
of each Determination Date based upon the average daily balance of the account
since the preceding Determination Date and shall be credited to the
Participant's Account at that time.
4.5 Determination of Accounts. Each Participant's Account as of each
-------------------------
Determination Date shall consist of the balance of the Participant's Account as
of the immediately preceding Determination Date, plus the Participant's Elective
Deferred Compensation,and Employer Discretionary Contributions, if any, credited
from such immediately preceding Determination Date, and Interest, earnings, or
losses allocable thereto, minus the amount of any distributions made since the
immediately preceding Determination Date.
4.6 Vesting of Accounts. Each Participant shall be vested in the amounts
-------------------
credited to such Participant's Account and earnings thereon.
4.7 Participant Recommendations Regarding Investment of Account. Each
------------------------------------------------------------
Participant with an Account balance hereunder, shall have the right to provide
investment recommendations to the Committee, with respect to amounts credited to
the Account of such Participant. Such investment recommendations shall be
limited to requests to invest the Participant's Account in (i) stock of the
Company, or its successor, or (ii) those assets which can be liquidated within
sixty (60) days with no loss of principal. Each investment recommendation
shall be provided to the Committee in writing; provided, however, that a
Participant shall not be entitled to issue more than four such recommendations
per calendar year. Within ten days of receiving a Participant's investment
recommendations, the Committee shall determine whether to implement such
recommendations or, if a rabbi trust has been established in connection with the
Plan, shall forward such recommendations to the trustee of such rabbi trust.
The Committee or the Trustee, as applicable, in its sole discretion, shall
determine whether to implement the recommendations of a Participant, and may
determine to execute such recommendations in whole or in part. The Committee
or Trustee shall not be responsible for any loss incurred as the result of
implementing a Participant's investment recommendations.
5
<PAGE>
ARTICLE V
PLAN BENEFITS
-------------
5.1 Plan Benefit. If a Participant terminates employment for any reason,
------------
including death, the Employer shall pay to the Participant or his Beneficiary a
Plan Benefit equal to the amount credited to the Participant's Account.
5.2 Hardship Distributions. Upon a finding that a Participant has
----------------------
suffered a severe financial hardship, the Committee may, in its sole discretion,
make distributions from the Participant's Account prior to the time specified
for payment of benefits under the Plan. The amount of such distribution shall
be limited to the amount reasonably necessary to meet the Participant's
requirements during the financial hardship. What constitutes a severe financial
hardship shall be determined in accordance with the regulations under Section
457 of the Internal Revenue Code.
5.3 Form of Benefit Payment. Payment of Plan Benefits hereunder shall be
-----------------------
made in One Hundred Eighty (180) approximately equal, consecutive monthly
installments; provided, however, if the Participant's Account is invested
primarily in stock of the Company and it is determined that the Account shall be
distributed in-kind, then the Participant's Account shall be distributed in
fifteen (15) annual installments such that, in the first year at least one-
fifteenth of the participant's Account shall be distributed, in the second year
one-fourteenth of the Account shall be distributed and so on, until the Account
is fully distributed. A Participant's Account may be distributed in cash or, in
the event that Company Stock has been purchased for, or credited to, the Account
of a Participant, the Participant's Account may be distributed in-kind.
Notwithstanding the foregoing, prior to the commencement of benefit payments
hereunder, a Participant may request a lump sum distribution of his Plan Benefit
from the Committee, in lieu of such installment payments. Such request shall be
made in writing on a form acceptable to the Committee. Within thirty (30) days
of receipt of such request, the Committee shall make a determination whether to
grant such request. The determination shall be within the sole discretion of
the Committee. Any denial or approval of such request shall be forwarded to the
Participant in writing.
5.4 Withholding; Payroll Taxes. The Employer shall withhold from payments
--------------------------
of Plan Benefits made to the participant hereunder any income taxes required to
be withheld from a Participant's wages for the federal or any state or local
government. The Employer shall pay, on behalf of the Participant, employment
related taxes (i.e., FICA and FUTA) due and owing on benefit payments, if any,
and such amounts will not be deducted from the Plan Benefits paid hereunder.
However, a Beneficiary may elect not to have withholding for federal income tax
purposes pursuant to section 3405(a)(2) of the Internal Revenue Code, or any
successor provision.
6
<PAGE>
5.5 Commencement of Payments. Payment shall commence not later than the
------------------------
first day of the third month following the end of the month in which the
Participant terminates employment with the Employer. All payments shall be made
as of the first business day of the month.
5.6 Payment to Guardian. If a Plan Benefit is payable to a minor or a
-------------------
person declared incompetent or to a person incapable of handling the disposition
of his property, the Committee may direct payment of such Plan Benefit to the
guardian, legal representative or person having the care and custody of such
minor, incompetent or person. The Committee may require proof of incompetency,
minority, incapacity or guardianship as it may deem appropriate prior to
distribution of the Plan Benefit. Such distribution shall completely discharge
the Committee and the Employer from all liability with respect to such benefit.
ARTICLE VI
BENEFICIARY DESIGNATION
-----------------------
6.1 Beneficiary Designation. Each Participant shall have the right, at
-----------------------
any time, to designate any person or persons as his Beneficiary or Beneficiaries
to whom benefits under this Plan shall be paid in the event of Participant's
death prior to complete distribution of the benefits due under the Plan. Each
Beneficiary designation shall be in writing and will be effective only when
filed with the Committee during the Participant's lifetime.
6.2 Amendments. Any Beneficiary designation may be changed by a
----------
Participant without the consent of any designated Beneficiary by the filing of a
new Beneficiary designation.
The filing of a new Beneficiary designation form will cancel all Beneficiary
designations previously filed.
6.3 No Participant Beneficiary Designation. If any Participant fails to
--------------------------------------
designate a Beneficiary or Beneficiaries in the manner provided above, or if all
Beneficiaries designated by a deceased Participant die before the Participant or
before complete distribution of the Participant's benefits, the Participant's
designated Beneficiary shall be the Participant's estate.
ARTICLE VII
ADMINISTRATION
--------------
7.1 Committee; Duties. This Plan shall be administered by the Committee,
-----------------
which shall consist of not less than three (3) non-employee directors appointed
by the Board. The Committee shall have the authority to make, amend, interpret,
and enforce all appropriate rules and regulations for the administration of this
Plan and decide or resolve any and all questions,
7
<PAGE>
including interpretations of this Plan, as may arise in connection with the
Plan. A majority vote of the Committee members shall control any decision.
7.2 Agents. The Committee may, from time to time, employ other agents and
------
delegate to them such administrative duties as it sees fit, and may from time to
time consult with counsel who may be counsel to the Employer.
7.3 Binding Effect of Decisions. The decision or action of the Committee
---------------------------
in respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules of
regulations promulgated hereunder shall be final, conclusive and binding upon
all persons having any interest in the Plan.
7.4 Indemnity of Committee. The Employer shall indemnify and hold
----------------------
harmless the members of the Committee against any and all claims, loss, damage,
expense or liability arising from any action or failure to act with respect to
this Plan, except in the case of gross negligence or willful misconduct.
ARTICLE VIII
CLAIMS PROCEDURE
----------------
8.1 Claim. Any person claiming a benefit, requesting an interpretation or
-----
ruling under the Plan, or requesting information under the Plan shall present
the request in writing to the Committee, which shall respond in writing within
thirty (30) days.
8.2 Denial of Claim. If the claim or request is denied, the written
---------------
notice of denial shall state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information required
and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
8.3 Review of Claim. Any person whose claim or request is denied or who
---------------
has not received a response within thirty (30) days may request review by notice
given in writing to the Committee. The claim or request shall be reviewed by
the Committee who may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
8
<PAGE>
8.4 Final Decision. The decision on review shall normally be made
--------------
within sixty (60) days. If an extension of time is required for a hearing or
other special circumstances, the claimant shall be notified and the time limit
shall be one hundred twenty (120) days. The decision shall be in writing and
shall state the reasons and the relevant Plan provisions. All decisions on
review shall be final and bind all parties concerned.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
9.1 Amendment. The Board may at any time amend the Plan in whole or in
---------
part, provided, however, that no amendment shall be effective to decrease or
restrict the amount accrued to the date of Amendment in any Account maintained
under the Plan.
9.2 Employer's Right to Terminate. The Board may at any time terminate
-----------------------------
the Plan if, in its judgment, the tax, accounting, or other effects of the
continuance of the Plan, or potential payments thereunder, would not be in the
best interests of the Employer. In the event of termination, the Plan shall
cease to operate and the Employer shall pay out to each Participant their
Account as if that Participant had terminated service as of the effective date
of the plan's termination.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Unfunded Plan. This Plan is intended to be an unfunded plan
-------------
maintained primarily to provide deferred Compensation benefits for a select
group of management or highly compensated employees. This Plan is not intended
to create an investment contract, but to provide tax planning opportunities and
retirement benefits to eligible individuals who have elected to participate in
the Plan. Eligible individuals are select members of management who, by virtue
of their position with the Employer, are uniquely informed as to the Employer's
operations and have the ability to materially affect the Employer's
profitability and operations.
10.2 Unsecured General Creditor. Participants and their Beneficiaries,
--------------------------
heirs, successors and assigns shall have no legal or equitable rights, interest
or claims in any property or assets of Employer, nor shall they be Beneficiaries
of, or have any rights, claims or interests in any life insurance policies,
annuity contracts or the proceeds therefrom owned or which may be acquired by
Employer. Such policies or other assets of Employer shall not be held under any
trust for the benefit of Participants, their Beneficiaries, heirs, successors or
assigns, or held in any way as collateral security for the fulfilling of the
obligations of Employer under this Plan. Any and all of Employer's assets and
policies shall be, and remain, the general, unpledged, unrestricted assets
9
<PAGE>
of Employer. Employer's obligation under the Plan shall be that of an unfunded
and unsecured promise of Employer to pay money in the future.
10.3 Trust Fund. The Employer shall be responsible for the payment of
----------
all benefits provided under the Plan. At its discretion, the Employer may
establish one or more trusts, with such trustees as the Board may approve, for
the purpose of providing for the payment of such benefits. Such trust or trusts
may be irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
10.4 Nonassignability. Neither a Participant nor any other person
----------------
shall have any right to commute, sell, assign, transfer, hypothecate or convey
in advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
unassignable and nontransferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant or any
other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
10.5 Not a Contract of Employment. The terms and conditions of this
----------------------------
Plan shall not be deemed to constitute a contract of employment between the
Employer and the Participant, and the Participant (or his Beneficiary) shall
have no rights against the Employer except as may otherwise be specifically
provided herein. Moreover, nothing in this Plan shall be deemed to give a
Participant the right to be retained in the service of the Employer or to
interfere with the right of the Employer to discipline or discharge him at any
time.
10.6 Governing Law. The provisions of this Plan shall be construed
-------------
and interpreted according to the laws of the State of South Carolina.
10.7 Validity. In case any provision of this Plan shall be held
--------
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and enforced
as if such illegal and invalid provision had never been inserted herein.
10.8 Notice. Any notice or filing required or permitted to be given
------
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to any member of the
Committee, the Plan Administrator, or the Secretary of the Employer. Such notice
shall be deemed given as of the date of delivery or, if delivery is made by
mail, as of the date shown on the postmark on the receipt for registration or
certification.
10.9 Successors. The provisions of this Plan shall bind and inure to
----------
the benefit of First Federal Savings and Loan Association of Cheraw and its
successors and assigns. The term
10
<PAGE>
"successors" as used herein shall include any corporate or other business entity
which shall, whether by merger, consolidation, purchase or otherwise acquire all
or substantially all of the business and assets of First Federal Savings and
Loan Association of Cheraw, and successors of any such corporation or other
business entity.
IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors of
First Federal Savings and Loan Association of Cheraw, as adopted and approved
on________,1997, such corporation has caused this instrument to be executed by
its duly authorized officers effective as of __________, 1997.
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHERAW
By:
--------------------------------
Chairman
By:
--------------------------------
Secretary
Dated:
----------------------------
11
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
BOARD RESOLUTION
At a meeting of the Board of Directors of First Federal Savings and Loan
Association of Cheraw (the "Association"), a federal savings and loan
association, held on the ___ day of ____________, 199_, the following resolution
was adopted.
WHEREAS, the Bank considers it important to provide supplemental retirement
benefits to attract and retain key executives;
WHEREAS, on December 12, 1977, the Board of Directors adopted the First
Federal Savings and Loan Association of Cheraw Non-Qualified Deferred
Compensation Plan; and
WHEREAS, in connection with the reorganization of the Association, the
Board of Directors have expressed a desire to allow participants to provide
investment guidance to the Committee with respect to their Accounts; and
NOW, THEREFORE, the Board of Directors of First Federal Savings and Loan
Association of Cheraw, in order to provide participants the opportunity to issue
investment guidance to the Committee under the Non-Qualified Deferred
Compensation Plan, hereby restates as of ______,1997, the First Federal Savings
and Loan Association of Cheraw Non-Qualified Deferred Compensation Plan as
evident in the form attached hereto. The officers of the Bank are authorized to
take any and all actions necessary to implement the restated plan.
IN WITNESS WHEREOF, I have hereunto affixed the seal of the Association and
inscribed my name on this ____ day of ____________, 199_.
(Seal) FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHERAW
By:
----------------------------------
Chairman of the Board
Witness:
-----------------------------
12
<PAGE>
EXHIBIT 10.4
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF CHERAW
FORM OF
NON-QUALIFIED SUPPLEMENTAL
EMPLOYEE STOCK OWNERSHIP PLAN
Cheraw, South Carolina
______________,1997
<PAGE>
NON-QUALIFIED SUPPLEMENTAL
EMPLOYEE STOCK OWNERSHIP PLAN
FOR
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
1. Purpose
-------
This Non-Qualified Supplemental Employee Stock Ownership Plan ("Plan")
is intended to provide Participants (as defined herein) or their Beneficiaries
with the full dollar amount of Employer-provided pension benefits obtainable
under the First Federal Savings and Loan Association of Cheraw Employee Stock
Ownership Plan ("ESOP") which may not be accrued under said ESOP due to the
limitations imposed by Section 415 of the Internal Revenue Code (the "Code") and
the limitation on includible compensation imposed by Section 401(a)(17) of the
Code. The benefits provided under the Plan (as described below) are intended to
constitute a deferred compensation plan for "a select group of management or
highly compensated employees" for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
2. Definitions
-----------
Where the following words and phrases appear in the Plan, they shall
have the respective meaning as set forth below unless the context clearly
indicates the contrary. Except to the extent otherwise indicated herein, and to
the extent inconsistent with the definitions provided below, the definitions
contained in the Retirement Plan and the ESOP are applicable under the Plan.
2.1 "Beneficiary" means the person designated by the Participant
-----------
under the Retirement Plan to receive benefits in the event of the Participant's
death.
2.2 "Board of Directors" means the Board of Directors of First Federal
------------------
Savings and Loan Association of Cheraw
2.3 "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time. Reference to a specific provision of the Code shall include such
provision, any valid regulation or ruling promulgated thereunder and any
comparable provision of future law that amends, supplements or supersedes such
provision.
2.4 "Committee" means the Supplemental ESOP Committee of the Board of
---------
Directors.
2
<PAGE>
2.5 "Company" means Great Pee Dee Bancorp, Inc.
-------
2.6 "Effective Date" means __________, 1997.
--------------
2.7 "Employee" means an employee of the Employer on whose behalf
--------
benefits are payable under the ESOP.
2.8 "ESOP" means the First Federal Savings and Loan Association of
----
Cheraw Employee Stock Ownership Plan, and any successor thereto.
2.9 "Employer" means First Federal Savings and Loan Association of
--------
Cheraw with respect to its employees, and any successors by merger, purchase,
reorganization or otherwise. If a subsidiary or affiliate of the Employer
adopts the Plan, it shall be deemed the Employer with respect to its employees.
2.10 "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time. Reference to a specific provision of ERISA
shall include such provision, any valid regulation or ruling promulgated
thereunder and any comparable provision of future law that amends, supplements
or supersedes such provision.
2.11 "Participant" means an Employee who has been designated for
-----------
participation in this Plan pursuant to Section 3.1.
2.12 "Plan" means the First Federal Savings and Loan Association of
----
Cheraw Non-Qualified Supplemental Employee Stock Ownership Plan, as set forth
herein and as may be amended from time to time.
2.13 "Plan Year" means the period from January 1, 1997 through
---------
December 31, 1997, and each January 1 to December 31 thereafter.
2.14 "Stock" means the common stock of Great Pee Dee Bancorp, Inc.,
-----
par value $.01, per share.
2.15 "Surviving Spouse" means the legal spouse of a Participant,
----------------
living at the time of the death of the Participant.
3. Participation
-------------
3.1 Designation to Participate. Upon the designation of the
--------------------------
Committee, and subject to the approval of the Board of Directors, Employees may
become Participants at any time during the Plan Year. Each Employee initially
selected by the Committee to participate in the Plan shall be set forth on
Exhibit A attached hereto and made a part hereof.
3
<PAGE>
3.2 Continuation of Participation. An Employee who has become a
-----------------------------
Participant shall remain a Participant so long as benefits are payable to or
with respect to such Participant under the Plan.
4. Benefit Requirements and Payments
---------------------------------
4.1 Supplemental ESOP Benefits. A Participant shall be entitled to
--------------------------
receive as a benefit from this Plan the supplemental ESOP benefit set forth
below. In the event of the death of a Participant prior to the commencement of
payment of benefits hereunder, the Surviving Spouse of the Participant shall be
entitled to receive as a benefit from this Plan an amount equal to 100% of the
supplemental ESOP benefit that would have been payable to the Participant at the
time of his death. The supplemental ESOP benefit is a dollar amount equal to
(a) less (b), where:
(a) is the aggregate of the fair market values (determined annually as
of the last day of the relevant ESOP plan year) of the number of
shares of Stock that would have been allocated to the account of
the Participant, and the earnings thereon, had the limitations of
Sections 401(a)(17) and 415(c)(1)(A) and 415(c)(6) of the Code not
been applicable; and
---
(b) is the aggregate of the fair market values (determined annually as
of the last day of the relevant ESOP plan year) of the number of
shares of Stock actually allocated to the account of the
Participant for the relevant ESOP plan year, and the earnings
thereon.
4.2 Incidents of Supplemental ESOP Payments. Benefits under this
---------------------------------------
Section 4 shall include all attributes in which payment is made from the ESOP,
including but not limited to:
(a) Retirement whether normal, early, or late;
(b) Disability;
(c) Death; or
(d) Termination of employment.
Except to the extent otherwise indicated, and to the extent otherwise
inconsistent with the terms of this Plan, the provisions of the ESOP are hereby
incorporated by reference.
4.3 Form of Supplemental ESOP Payments.
----------------------------------
4.3-1 A Participant's supplemental ESOP benefits under
Section 4.1 of this Plan shall be a benefit paid in cash or, if elected by the
Participant, in the form set forth in 4.3-2 below. Such benefit shall be paid to
or with respect to the Participant at the same time as the Participant's benefit
is distributed under the ESOP. Benefits under Section 4.1 of this Plan shall
cease with the cessation of benefits to the Participant, or his or her Surviving
Spouse or his or her Beneficiary under the ESOP.
4
<PAGE>
4.3-2 (A) If a trust is established and is permitted to hold
Stock of the Company, a Participant's Supplemental ESOP benefit shall be
distributed in shares of Stock of the Company, if elected by the Participant.
Any fractional shares of Stock of the Company attributable to the Participant
will be distributed in cash.
(B) If no trust is established or if established, such
trust is not permitted by applicable law to invest in Stock of the Company, a
Participant may elect upon receiving a distribution from the Plan, that the
Committee convert the cash benefit attributed to his supplemental ESOP benefit
into shares of Stock of the Company. The value of a Participant's supplemental
ESOP benefit at the time of distribution shall be converted to shares of the
Company's common stock by dividing the cash credited to the Participant's
supplemental ESOP benefit by the last price quoted for the shares of Stock of
the Company on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System. Such shares of Stock will be issued in the name of
the Participant. No shares will be issued in the name of the Administrator of
the Plan. The delivery of the shares to the Participant will act as a discharge
of the Administrator's obligation of payment on the supplemental ESOP benefit.
Any funds that cannot be converted to shares of Stock of the Company will be
distributed in cash.
5. Administration of the Plan
--------------------------
5.1 Committee; Duties. This Plan shall be administered by the
-----------------
Committee which shall consist of not less than three (3) persons appointed by
the Board of Directors. The Committee shall have the authority to make, amend,
interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions including
interpretations of this Plan, that may arise in connection with the
administration of the Plan. A majority vote of the Committee members shall
control any decision. Members of the Committee may be Participants under the
Plan.
5.2 Agents. The Committee may, from time to time, employ other agents
------
and delegate to them such administrative duties as it sees fit, and may from
time to time consult with counsel who may be counsel to the Employer.
5.3 Binding Effect of Decisions. The decision or action of the
----------------------------
Committee regarding of any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan.
5.4 Indemnity of Committee. The Association shall indemnify and hold
----------------------
harmless the members of the Committee against any and all claims, loss, damage,
expense or liability arising from any action or failure to act with respect to
this Plan, except in the case of gross negligence or willful misconduct.
5
<PAGE>
6. Claims Procedure
----------------
6.1 Claim. Any person claiming a benefit, requesting an interpretation
-----
or ruling under the Plan, or requesting information under the Plan shall present
the request in writing to the Committee which shall respond in writing within
thirty (30) days.
6.2 Denial of Claim. If the claim or request is denied, the written
---------------
notice of denial shall state:
(a) The reason for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information
required and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
6.3 Review of Claim. Any person whose claim or request is denied or
---------------
who has not received a response within thirty (30) days may request review by
notice given in writing to the Committee. The claim or request shall be reviewed
by the Committee who may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
6.4 Final Decision. The decision on review shall normally be made
--------------
within sixty (60) days. If an extension of time is required for a hearing or
other special circumstances, the claimant shall be notified and the time limit
shall be one hundred twenty (120) days. The decision shall be in writing and
shall state the reason and the relevant plan provisions. All decisions on review
shall be final and bind all parties concerned.
7. Amendment or Termination
------------------------
7.1 Amendment of Plan. A majority of the Board of Directors may amend
-----------------
this Plan at any time or from time to time. Any amendment may provide different
benefits or amounts of benefits from those herein set forth. However, no such
amendment shall adversely affect the benefits of the Participant which have
accrued prior to such action.
7.2 Termination of Plan. The Plan shall not be terminated until all
-------------------
benefits payable under the terms of the Plan are either paid or forfeited.
8. Miscellaneous
-------------
8.1 Unfunded Plan. This Plan is intended to be an unfunded plan
-------------
maintained primarily to provide deferred compensation benefits for a select
group of management or highly
6
<PAGE>
compensated employees. However, the Association may elect to fund for the
benefits of Participants as described in Section 8.3 below. This Plan will
continue to be unfunded for tax purposes and Title I of ERISA even if benefits
are funded by the Association under Section 8.3 below.
8.2 Unsecured General Creditor. The Participant and his Beneficiaries,
--------------------------
heirs, successors and assigns shall have no legal or equitable rights, interest
or claims in any property or assets of Employer, nor shall they be beneficiaries
of, or have any rights, claims or interests in any life insurance policies,
annuity contracts or the proceeds therefrom owned or which may be acquired by
Employer. Such policies or other assets of Employer shall not be held under any
trust for the benefit of Participants, their Beneficiaries, heirs, successors or
assigns, or held in any way as collateral security for the fulfilling of the
obligations of Employer under this Plan. Any and all of Employer's assets shall
be, and remain, the general, unpledged, unrestricted assets of Employer.
Employer's obligation under the Plan shall be that of an unfunded and unsecured
promise of Employer to pay money in the future.
8.3 Trust Fund. The Employer shall be responsible for the payment of
----------
all benefits provided under the Plan. At its discretion, the Employer may
establish one (1) or more trusts, with such trustees as the Board may approve,
for the purpose of providing for payment of such benefits. Such trust or trusts
may be irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Employer.
8.4 Nonassignability. Neither the Participant nor any other person
----------------
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are, expressly declared to be unassignable
and nontransferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
person, nor be transferable by operation of law in the event of a Participant's
or any other person's bankruptcy or insolvency.
8.5 Expenses of Plan. All expenses of the Plan will be paid by the
----------------
Employer.
8.6 Immediately Payable Lump Sum. Notwithstanding any other provision
----------------------------
hereof, there shall become immediately due and payable to or with respect to a
Participant a lump sum equal to the present actuarial value (determined as
provided below) of the Participant's retirement benefits pursuant to Section 4.1
if:
(a) the Employer makes a general assignment for the benefit of
creditors;
7
<PAGE>
(b) any proceedings under the Bankruptcy Act are instituted by the
Employer or, if instituted against the Employer, is consented to or acquiesced
in by it or remains undismissed for 60 days; or
(c) a receiver or trustee in bankruptcy is appointed for the
Employer.
In addition, in the event of any such proceeding by or against the Employer
under the Bankruptcy Act, or any such assignment, a Participant, a contingent
annuitant, a Surviving Spouses or Beneficiary shall be entitled to prove a claim
for any unpaid portion of the benefit provided under hereunder and, if the claim
is not discharged in full in any such proceeding, or assignment, it will survive
any discharge of the Employer under any such proceeding or assignment.
8.8 Change of Control of the Company or the Association.
---------------------------------------------------
Notwithstanding any other provision herein, there shall become immediately due
and payable upon a Change of Control of the Company or the Association, a
Participant's supplemental ESOP benefit in a lump sum payment.
For purposes of this Section 8.8, a "Change of Control" shall mean a
change in control of a nature that: (i) would be required to be reported in
response to Item 1(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"); or (ii) results in a Change in Control of the
Association or the Company within the meaning of the Home Owners Loan Act, as
amended ("HOLA"), and applicable rules and regulations promulgated thereunder,
as in effect at the time of the Change in Control; or (iii) without limitation
such a Change in Control shall be deemed to have occurred at such time as (a)
any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of Company's outstanding securities
except for any securities purchased by the Association's employee stock
ownership plan or trust; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Association or the Company or similar transaction in which the
Association or Company is not the surviving institution occurs; or (d) a proxy
statement soliciting proxies from stockholders of the Company, by someone other
than the current management of the Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more
8
<PAGE>
of the voting securities of the Company and the shareholders owning beneficially
or of record 25% or more of the outstanding securities of the Company have
tendered or offered to sell their shares pursuant to such tender offer and such
tendered shares have been accepted by the tender offeror.
8.9 Withholding; Payroll Taxes. The Employer shall withhold from
--------------------------
payments made to the Participant from the Plan any taxes required to be withheld
from the Participant's wages for the federal or any state or local government.
8.10 Participation by Subsidiaries and Affiliates. If any employer is
--------------------------------------------
now or hereafter becomes a subsidiary or affiliated company of the Employer and
its employees participate in the Retirement Plan and/or the ESOP, the Board of
Directors may authorize such subsidiary or affiliated company to participate in
this Plan upon appropriate action by such employer necessary to adopt the Plan.
8.11 Delivery of Elections to Committee. All elections, designation,
----------------------------------
requests, notices, instructions and other communications required or permitted
under the Plan from the Employer, a Participant, Beneficiary or other person to
the Committee shall be on the appropriate form, shall be mailed by first-class
mail or delivered to such address as shall be specified by such Committee, and
shall be deemed to have been given or delivered only upon actual receipt thereof
by such Committee at such location.
8.12 Delivery of Notice to Participants. All notices, statements,
----------------------------------
reports and other communications required or permitted under the Plan from the
Employer or the Committee to any Officer, Participant, Beneficiary or other
person, shall be deemed to have been duly given when delivered to, or when
mailed by first-class mail, postage prepaid, and addressed to such person at
this address last appearing on the records of the Committee.
9. Construction of the Plan
------------------------
9.1 Construction of the Plan. The provisions of this Plan shall be
------------------------
construed, regulated, and administered according to the laws of the State of
South Carolina, to the extent not superseded by Federal law.
9.2 Counterparts. This Plan has been established by the Employer in
------------
accordance with the resolutions adopted by the Board of Directors and may be
executed in any number of counterparts, each of which shall be deemed to be an
original. All the counterparts shall constitute one instrument, which may be
sufficiently evidenced by any one counterpart.
9
<PAGE>
9.3 Validity. In case any provision of this Plan shall be held
--------
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and enforced
as if such illegal or invalid provision had never been inserted herein
IN WITNESS WHEREOF, and as evidence of the adoption of the Plan by the
Employer, it has caused the same to be signed by its Officer duly authorized,
and its corporate seal to be affixed this ___ day of ______________, 199__.
ATTEST: FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
OF CHERAW
By:
- ------------------ ---------------------------------------
Chairman of the Board
10
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Exhibit A
---------
Participant Date of Participation
----------- ---------------------
11
<PAGE>
EXHIBIT 21
<PAGE>
Subsidiaries of the Registrant
First Federal Savings and Loan Association of Cheraw
<PAGE>
EXHIBIT 23.2
<PAGE>
[LETTERHEAD OF DIXON, ODOM & CO., LLP CERTIFIED PUBLIC ACCOUNTANTS APPEARS HERE]
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
First Federal Savings and Loan Association of Cheraw
Cheraw, South Carolina
We consent to the use in the Registration Statement of Great Pee Dee Bancorp,
Inc. on Form SB-2 and the Application for Conversion on Form AC of our report
dated August 22, 1997 on the financial statements of First Federal Savings and
Loan Association of Cheraw as of and for the years ended June 30, 1997 and 1996,
and to the references to our firm under the headings "Legal and Tax Matters" and
"Experts" in the related prospectus.
Dixon, Odom & Co., L.L.P.
Southern Pines, North Carolina
September 24, 1997
<PAGE>
EXHIBIT 23.3
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
September 24, 1997
Board of Directors
First Federal Savings and Loan Association
515 Market Street
Cheraw, South Carolina 29520
Directors:
We hereby consent to the use of our firm's name in the Form AC
Application for Conversion of First Federal Savings and Loan Association,
Cheraw, South Carolina, and any amendments thereto, and in the Form SB-2
Registration Statement of Great Pee Dee Bancorp, Inc. and any amendments
thereto. We also hereby consent to the inclusion of, summary of, and references
to our Appraisal Report and our opinion concerning subscription rights in such
filings including the Prospectus of Great Pee Dee Bancorp, Inc.
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> 222 285
<INT-BEARING-DEPOSITS> 2,720 2,292
<FED-FUNDS-SOLD> 800 500
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 1,766 2,196
<INVESTMENTS-MARKET> 1,756 2,195
<LOANS> 53,974 53,335
<ALLOWANCE> 303 169
<TOTAL-ASSETS> 60,538 59,694
<DEPOSITS> 46,863 47,949
<SHORT-TERM> 2,350 1,000
<LIABILITIES-OTHER> 185 191
<LONG-TERM> 50 50
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 11,090 10,504
<TOTAL-LIABILITIES-AND-EQUITY> 60,538 59,694
<INTEREST-LOAN> 4,261 4,174
<INTEREST-INVEST> 151 159
<INTEREST-OTHER> 146 188
<INTEREST-TOTAL> 4,558 4,521
<INTEREST-DEPOSIT> 2,480 2,607
<INTEREST-EXPENSE> 2,595 2,668
<INTEREST-INCOME-NET> 1,963 1,853
<LOAN-LOSSES> 143 18
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 916 654
<INCOME-PRETAX> 928 1,223
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 586 794
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 3.32 3.32
<LOANS-NON> 97 46
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 196 0
<ALLOWANCE-OPEN> 169 172
<CHARGE-OFFS> 9 21
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 303 169
<ALLOWANCE-DOMESTIC> 237 163
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 66 6
</TABLE>
<PAGE>
EXHIBIT 99.1
<PAGE>
July 3, 1997
Board of Directors
First Federal Savings and Loan Association
515 Market Street
Cheraw, South Carolina 29529
Dear Directors:
This letter sets forth the agreement between First Federal Savings and
Loan Association ("First Federal"), Cheraw, South Carolina, and Ferguson &
Company ("F&C"), Irving, Texas, under the terms of which First Federal has
engaged F&C, in connection with its conversion from mutual to stock form, to (1)
determine the pro forma market value of the shares of common stock to be issued
and sold by First Federal or its holding company; and (2) assist First Federal
in preparing a business plan to be filed with the application for approval to
convert to stock.
F&C agrees to deliver the written valuation and business plan to First
Federal at the above address on or before a mutually agreed upon date. Further,
F&C agrees to perform such other services as are necessary or required in
connection with comments from the applicable regulatory authorities relating to
the business plan and appraisal and the preparation of appraisal updates as
requested by First Federal or its counsel. It is understood that the services of
F&C under this agreement shall be limited as herein described.
F&C's fee for the business plan and initial appraisal valuation report
and any required updates shall be $25,000. In addition, First Federal shall
reimburse F&C for all out-of-pocket expenses (which we estimate to be
approximately $5,000). Payment under this agreement shall be made as follows:
1. Upon execution of this engagement letter--$7,500.
2. Upon delivery of the business plan--$7,500.
3. Upon delivery of the completed appraisal report--$10,000.
4. Out-of-pocket expenses are to be paid monthly.
If, during the course of First Federal's conversion, unforeseen events
occur so as to change materially the nature or the work content of the services
described in this contract, the terms of the contract shall be subject to
renegotiation. Such unforeseen events shall include, but not be limited to,
major changes in the conversion regulations, appraisal guidelines or processing
procedures as they relate to conversion appraisals, major changes in First
Federal's management or operating policies, execution of a merger agreement with
another institution prior to completion of conversion, and excessive delays or
suspension of processing of conversions by the regulatory authorities such that
completion of First Federal's conversion requires the preparation by F&C of a
new appraisal report or business plan, excluding appraisal updates during the
course of the engagement.
<PAGE>
Board of Directors
July 3, 1997
Page 2
To induce F&C to provide the services described above, First Federal
hereby agrees as follows:
1. First Federal shall supply to F&C such information with
respect to its business and financial condition as F&C
reasonably may request in order to make the aforesaid
valuation. Such information made available to F&C shall
include, but not be limited to, annual financial statements,
periodic regulatory filings, material agreements, debt
instruments and corporate books and records.
2. First Federal hereby represents and warrants, to the best of
its knowledge, that any information provided to F&C does not
and will not, at any time relevant hereto, contain any
misstatement or untrue statement of a material fact or omit
any and all material facts required to be stated therein or
necessary to make the statements therein not false or
misleading in light of the circumstances under which they were
made.
3. First Federal shall indemnify and hold harmless F&C and any
employees of F&C who act for or on behalf of F&C in connection
with the services called for under this agreement, from and
against any and all loss, cost, damage, claim, liability or
expense of any kind, including reasonable attorneys fees and
other expenses incurred in investigating, preparing to defend
and defending any claim or claims (specifically including, but
not limited to, claims under federal and state securities
laws) arising out of any misstatement or untrue statement of a
material fact contained in the information supplied by First
Federal to F&C or by an omission to state a material fact in
the information so provided which is required to be stated
therein in order to make the statement therein not false or
misleading.
4. F&C shall not be entitled to indemnification pursuant to
Paragraph 3 above with regard to any claim arising where, with
regard to the basis for such claim, F&C had knowledge that a
statement of a fact material to the evaluation and contained
in the information supplied by First Federal was untrue or had
knowledge that a material fact was omitted from the
information so provided and that such material fact was
necessary in order to make the statement made to F&C not false
or misleading.
5. F&C additionally shall not be entitled to indemnification
pursuant to Paragraph 3 above notwithstanding its lack of
actual knowledge of an intentional misstatement or omission of
a material fact in the information provided if F&C is
determined to have been negligent or to have failed to
exercise due diligence in the preparation of its valuation.
First Federal and F&C are not affiliated, and neither First Federal nor
F&C has an economic interest in, or held in common with, the other and has not
derived a significant portion of its gross revenue, receipts or net income for
any period from transactions with the other.
<PAGE>
Board of Directors
July 3, 1997
Page 3
In order for F&C to consider this proposal binding, please acknowledge
your consent to the foregoing by executing the enclosed copies of this letter
and returning one copy to us, together with a check payable to Ferguson &
Company in the amount of $7,500. There are three copies for the conversion
committee and the extra copy of this letter is for your conversion counsel.
Yours very truly,
Robin L. Fussell
Principal
Agreed to ($7,500 check enclosed):
First Federal Savings and Loan Association
Cheraw, South Carolina
By:
-------------------------------
Date:
-----------------------------
<PAGE>
Conversion Valuation Report
----------------------------------------
Valued as of September 2, 1997
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
Cheraw, South Carolina
Prepared By:
Ferguson & Company
Suite 550
122 W. John Carpenter Freeway
Irving, TX 75039
972/869-1177
<PAGE>
STATEMENT OF APPRAISER'S INDEPENDENCE
First Federal Savings and Loan Association
Cheraw, South Carolina
----------------------
We are the appraiser for First Federal Savings and Loan Association
("First Federal" or "Association") in connection with its mutual to stock
conversion. We are submitting our independent estimate of the pro forma market
value of the Association's stock to be issued in the conversion. In connection
with our appraisal of the Association's to-be-issued stock, we have received a
fee which was not related to the estimated final value. The estimated pro forma
market value is solely the opinion of our company and it was not unduly
influenced by the Association, its conversion counsel, its selling agent, or any
other party connected with the conversion.
First Federal has agreed to indemnify Ferguson & Company under certain
circumstances against liabilities arising out of our services. Specifically, we
are indemnified against liabilities arising from our appraisal except to the
extent such liabilities are determined to have arisen because of our negligence
or willful conduct.
Ferguson & Company
Robin L. Fussell
Principal
September 15, 1997
<PAGE>
September 15, 1997
Board of Directors
First Federal Savings and Loan Association
515 Market Street
Cheraw, South Carolina 29520
Dear Directors:
We have completed and hereby provide, as of September 2, 1997, an
independent appraisal of the estimated pro forma market value of First Federal
Savings and Loan Association ("First Federal" or the "Association"), Cheraw,
South Carolina, in connection with the conversion of First Federal from the
mutual to stock form of organization ("Conversion"). This appraisal report is
furnished pursuant to the regulatory filing of the Association's Application for
Conversion ("Form AC") with the Office of Thrift Supervision ("OTS").
Ferguson & Company ("F&C") is a consulting firm that specializes in
providing financial, economic, and regulatory services to financial
institutions. The background and experience of F&C is presented in Exhibit I.
We believe that, except for the fees we will receive for preparing the appraisal
and assisting with the Association's business plan, we are independent. F&C
personnel are prohibited from owning stock in conversion clients for a period of
at least one year after conversion.
In preparing our appraisal, we have reviewed First Federal's
Application for Approval of Conversion, including the Proxy Statement as filed
with the OTS. We conducted an analysis of First Federal that included
discussions with Dixon, Odom & Co., L.L.P., the Association's independent
auditors, and with Luse Lehman Gorman Pomerenk & Schick, P.C., the Association's
conversion counsel. In addition, where appropriate, we considered information
based on other available published sources that we believe is reliable; however,
we cannot guarantee the accuracy or completeness of such information.
We also reviewed the economy in First Federal's primary market area
and compared the Association's financial condition and operating results with
that of selected publicly traded thrift institutions. We reviewed conditions in
the securities markets in general and in the market for thrifts stocks in
particular.
Our appraisal is based on First Federal's representation that the
information contained in the Form AC and additional evidence 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 First Federal and its auditors, nor did we independently
value the Association's assets or liabilities. The valuation considers First
Federal only as a going concern and should not be considered an indication of
its liquidation value.
It is our opinion that, as of September 2, 1997, the estimated pro
forma market value of First Federal was $16,500,000, or 1,650,000 shares at
$10.00 per share. The resultant valuation range was $14,025,000 at the minimum
(1,402,500 shares at $10.00 per share) to $18,975,000 at the maximum (1,897,500
shares at
<PAGE>
Board of Directors
September 15, 1997
Page 2
$10.00 per share), based on a range of 15 percent below and above the midpoint
valuation. The supermaximum was $21,821,250 (2,182,125 shares at $10.00 per
share).
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the conversion. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing estimate of the Association's pro
forma market value. F&C is not a seller of securities within the meaning of any
federal or state securities laws and any report prepared by F&C shall not be
used as an offer or solicitation with respect to the purchase or sale of any
securities.
Our opinion is based on circumstances as of the date hereof, including
current conditions in the United States securities markets. Events occurring
after the date hereof, including, but not limited to, changes affecting the
United States securities markets and subsequent results of operations of First
Federal, could materially affect the assumptions used in preparing this
appraisal.
The valuation reported herein will be updated as provided in the OTS
conversion regulations and guidelines. Any updates will consider, among other
things, any developments or changes in First Federal's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. Should any such new developments or changes be material, in our
opinion, to the valuation of the shares, appropriate adjustments will be made to
the estimated pro forma market value. The reasons for any such adjustments will
be explained in detail at the time.
Respectfully,
FERGUSON & COMPANY
Robin L. Fussell
Principal
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS
First Federal Savings and Loan Association
Cheraw, South Carolina
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION 1
SECTION I. - FINANCIAL CHARACTERISTICS 2
PAST & PROJECTED ECONOMIC CONDITIONS 2
FINANCIAL CONDITION OF INSTITUTION 2
Balance Sheet Trends 2
Asset/Liability Management 2
Income and Expense Trends 2
Regulatory Capital Requirements 2
Lending 3
Nonperforming Assets 3
Classified Assets 3
Loan Loss Allowance 3
Mortgage-Backed Securities and Investments 3
Savings Deposits 3
Borrowings 3
Subsidiaries 4
Legal Proceedings 4
EARNINGS CAPACITY OF THE INSTITUTION 4
Asset-Size-Efficiency of Asset Utilization 4
Intangible Values 4
Effect of Government Regulations 4
Office Facilities 5
SECTION II - MARKET AREA 1
DEMOGRAPHICS 1
</TABLE>
i
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
First Federal Savings and Loan Association
Cheraw, South Carolina
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS 1
COMPARATIVE DISCUSSION 1
Selection Criteria 1
Profitability 2
Balance Sheet Characteristics 2
Risk Factors 2
Summary of Financial Comparison 3
FUTURE PLANS 3
SECTION IV - CORRELATION OF MARKET VALUE 1
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED 1
Financial Aspects 1
Market Area 2
Management 2
Dividends 2
Liquidity 2
Thrift Equity Market Conditions 3
SOUTH CAROLINA ACQUISITIONS 3
EFFECT OF INTEREST RATES ON THRIFT STOCK 3
Adjustments Conclusion 6
Valuation Approach 6
Valuation Conclusion 7
</TABLE>
ii
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
First Federal Savings and Loan Association
Cheraw, South Carolina
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<C> <S> <C>
SECTION I - FINANCIAL CHARACTERISTICS
1 Selected Financial Data 6
2 Operating Ratios 7
3 Interest Rate Shock 8
4 Interest Rate Sensitivity Analysis 9
5 Regulatory Capital Compliance 10
6 Loan Portfolio Composition 11
7 Loan Maturities 12
8 Average Balances, Rates, and Yields 13
9 Rate/Volume Analysis 14
10 Non-Performing Assets 15
11 Analysis of the Allowance for Loan Losses 16
12 Allocation of Allowance for Loan Losses 17
13 Investment Securities 18
14 Investments at June 30, 1997 19
15 Deposit Portfolio 20
16 Savings Deposits Detail 21
17 Certificate of Deposit Maturities 22
18 Large CD Maturities 23
19 Borrowings 24
20 Offices 25
SECTION II - MARKET AREA
1 Demographic Trends 3
2 Percent Employment by Industry 4
3 Market Area Deposits 5
SECTION III - COMPARISON WITH PUBLICLY
TRADED THRIFTS
1 Comparatives General Characteristics 4
2 Key Financial Indicators 5
3 Pro Forma Comparisons 6
</TABLE>
iii
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
First Federal Savings and Loan Association
Cheraw, South Carolina
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<S> <C> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Earnings Adjustments 2
2 South Carolina Acquisitions 8
3 Recent Conversions 9
4 Comparison of Pricing Ratios 12
<CAPTION>
FIGURE
NUMBER LIST OF FIGURES PAGE
- ------ --------------- ----
<S> <C> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 SNL Index 13
2 Interest Rates 14
</TABLE>
EXHIBIT TITLE
-------------
Exhibit I - Ferguson & Company Qualifications
Exhibit II - Selected Region, State, and Comparatives Information
Exhibit III - First Federal Savings and Loan Association TAFS Report
Exhibit IV - Comparative Group TAFS and BankSource Reports
Exhibit V - Selected Publicly Traded Thrifts
Exhibit VI - Comparative Group Selection
Exhibit VII - Pro Forma Calculations
Pro Forma Assumptions
Pro Forma Effect of Conversion Proceeds At the Minimum of the Range
Pro Forma Effect of Conversion Proceeds At the Midpoint of the Range
Pro Forma Effect of Conversion Proceeds At the Maximum of the Range
Pro Forma Effect of Conversion Proceeds At the SuperMax of the Range
Pro Forma Analysis Sheet
iv
<PAGE>
SECTION I
FINANCIAL CHARACTERISTICS
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
INTRODUCTION
First Federal Savings and Loan Association ("First Federal" or
"Association") is a federally chartered, federally insured mutual savings
association located in Cheraw (Chesterfield County), South Carolina. It was
formed in 1920 as Wannamaker Savings Company. It received its federal charter
and insurance of accounts and joined the Federal Home Loan Bank system in 1935.
In July 1997, the Board of Directors adopted a plan to convert the Association
from the mutual to stock form of organization. In connection with the
conversion, the Association will form a parent holding company to be known as
Great Pee Dee Bancorp, Inc. ("Bancorp" or the "Holding Company"). Bancorp will
sell stock to the public and invest part of the proceeds in exchange for all of
the shares of stock issued by First Federal.
At June 30, 1997, First Federal had total assets of $60.5 million,
loans of $54.0 million, securities of $2.3 million, cash and federal funds in
other banks of $3.7 million, deposits of $46.9 million, borrowings of $2.4
million, and equity of $11.0 million, or 18.3% of assets.
The Association has one office, which is located in Cheraw
(Chesterfield County), South Carolina. South Carolina is in the southeastern
portion of the United States. Chesterfield County is located in the
northeastern section of the State.
First Federal is a traditional thrift. It invests primarily in (1)
1-4 family loans, (2) investment securities (principally U.S. government and
agency securities), and (3) temporary cash investments. It is funded
principally by savings deposits and existing net worth. It has utilized minor
amounts of borrowings recently.
The Association offers a full spectrum of real estate loan products to
accommodate its customer base and single family loans dominate the Association's
loan portfolio. At June 30, 1997, loans on 1-4 family dwellings made up 80.0%
of total assets and 87.0% of the loan portfolio. Consumer loans were 3.2% of
the loan portfolio and non-residential real estate loans were 4.5% of the loan
portfolio. Construction loans, which are principally 1-4 family dwelling loans,
were 5.5% of the loan portfolio at June 30, 1997. Investment securities made up
3.7% of total assets. Cash and federal funds made up 6.2% of First Federal's
assets at June 30, 1997.
First Federal had $107,000 in non-performing assets at June 30, 1997,
as compared to $73,000 at June 30, 1996.
Savings deposits decreased $978 thousand during the period from June
30, 1993, to June 30, 1997, a compound annual decrease rate of .51%. Savings
increased $1 thousand from June 30, 1995, to June 30, 1996, and decreased $1.086
million (2.26%) from June 30, 1996, to June 30, 1997. First Federal has not
relied extensively on borrowings during recent years. It had $2.400 million in
borrowings at June 30, 1997, and $1.050 million at June 30, 1996 and 1995.
The Association's capital to assets ratio has increased during the
period of four years ending June 30, 1997. Equity capital, as a percentage of
assets, has increased from 13.8% at June 30, 1993, to 18.3% at June 30, 1997.
The compound annual asset growth rate was 2.01% during the period, while the
compound annual rate of growth for equity was 9.43%.
First Federal's profitability, as measured by return on average assets
("ROAA"), has been consistently high as compared to its peer group average of
thrifts filing TFR's with the OTS, consisting of OTS supervised thrifts with
assets between $50 million and $100 million. For the years ending December 31,
1994, 1995, and 1996, and the three months ending March 31, 1997, First Federal
ranked in the 96th, 84th, 93rd, and 90th percentile, respectively, in ROAA,
based on information derived from the TAFS thrift database published by
Sheshunoff Information Services Inc. (See Exhibit III, page 2). In return on
equity for the same periods, First Federal ranked in the 63rd, 49th, 75th, and
51st percentile, respectively.
1
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
I. FINANCIAL CHARACTERISTICS
PAST & PROJECTED ECONOMIC CONDITIONS
Fluctuations in thrift earnings in recent years have occurred within
the time frames as a result of changing temporary trends in interest rates and
other economic factors. However, the year-to-year results have been upward
while the general trends in the thrift industry have been improving as interest
rates declined. Interest rates began a general upward movement during late
1993, followed by a decline in interest margins and profitability. Rates began
a general decline in mid 1995 and then leveled off on the short end and
increased on the long end. First Federal's spread was 2.24% for the year ended
June 30, 1996. It increased to 2.37% for the year ended June 30, 1997.
The thrift industry generally is better equipped to cope with changing
interest rates than it was in the past, and investors have recognized the
demonstrated ability of the thrift industry to maintain interest margins in
spite of rising interest rates. However, rate increases and the shortening of
the time elapsed between increases during 1994 placed pressure on portfolio
managers to shorten maturities, which negatively impacts the future earnings of
financial institutions. First Federal has more exposure to interest rate risk
than the thrift industry in general.
FINANCIAL CONDITION OF INSTITUTION
Balance Sheet Trends
As Table I.1 shows, First Federal experienced modest growth in assets
during the period of two years ending June 30, 1997. Assets increased $1.674
million during the period (2.8%). Loans increased $1.138 million, or 2.2%.
Investment securities, cash, and federal funds combined increased $652 thousand,
or 12.2% during the period. Savings deposits decreased by $1.085 million, or
2.3%. Equity increased $1.380 million, or 14.2%.
Asset/Liability Management
Managing interest rate risk is a major component of the strategy used
in operating a thrift. Most of a thrift's interest earning assets are long-
term, while most of the interest bearing liabilities have short to intermediate
terms to contractual maturity. To compensate, asset/liability management
techniques include (1) making long term loans with interest rates that adjust to
market periodically, (2) investing in assets with shorter terms to maturity, (3)
lengthening the terms to maturities of savings deposits, and (4) seeking to
employ any combination of the aforementioned techniques artificially through the
use of synthetic hedge instruments. Table I.3 provides rate shock information
at varying levels of interest rate change and Table I.4 provides a repricing gap
analysis. The Association has some exposure to interest rate increases, but its
exposure will be reduced through the equity raised in the conversion.
First Federal's basic approach to interest rate risk management has
been to emphasize shorter term fixed rate mortgage loans and adjustable mortgage
loans. First Federal currently is not utilizing synthetic hedge instruments and
has not used borrowings extensively in recent years. First Federal's business
plan calls for emphasis on shorter term consumer and commercial loans.
Income and Expense Trends
First Federal was profitable for the fiscal years ended June 30, 1996
and 1997. Fluctuations in income over the period have resulted principally from
(1) changes in non-interest expense, principally the SAIF assessment of
approximately $312,000 in 1997; (2) additional loan loss provisions recorded in
1997, e.g., $143,000 in 1997 versus $18,000 in 1996; and (3) higher net interest
income, resulting from a reduction in interest expense for 1997.
Net interest income increased in the year ended June 30, 1997,
principally as a result of lower volumes and rates on interest bearing
liabilities.
Regulatory Capital Requirements
As Table I.5 demonstrates, First Federal meets all regulatory capital
requirements, and meets the regulatory definition of a "Well Capitalized"
institution. Moreover, the additional capital raised in the stock conversion
will add to the existing capital cushion.
2
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Lending
Table I.6 provides an analysis of the Association's loan portfolio by
type of loan and security. This analysis shows that, at June 30, 1996 and 1997,
First Federal's loan composition was dominated by 1-4 family dwelling loans.
There was little change in the composition of the portfolio from 1996 to 1997.
Table I.7 provides information on loan maturities and repricing opportunities at
June 30, 1997. The schedule shows that, at that date, approximately 54% of the
portfolio was scheduled to mature or reprice in more than five years. The table
also shows that 40% of total loans were adjustable rate loans.
Table I.8 provides rates, yields, and average balances for each of the
two years ended June 30, 1997. Interest rates earned on interest-earning assets
increased from 7.64% in 1996 to 7.71% in 1997. Interest rates paid on interest-
bearing liabilities decreased from 5.40% in 1996 to 5.34% in 1997. First
Federal's spread increased from 2.24% in 1996 to 2.37% in 1997.
Table I.9 provides a rate volume analysis, measuring differences in
interest earning assets and interest costing liabilities and the interest rates
thereon during the years ended June 30, 1996 versus 1997. The table shows that
most of the increase in net interest income from the year ended June 30, 1996 to
1997 resulted from a decline in interest expense arising from a decrease in the
average rate and average volume.
Non-performing Assets
As shown in Table I.10, the Association had $97,000 in loans that were
over 90 days delinquent at June 30, 1997. The Association had ceased to accrue
interest on these loans. First Federal also had $10,000 in repossessed assets
at June 30, 1997. The Association had $73,000 in nonperforming assets at June
30, 1996.
Classified Assets
First Federal had $293,000 in classified assets at June 30, 1997,
$276,000 of which were classified as substandard and $17,000 of which were
classified as doubtful. The Association had a loan loss allowance of $303,000,
or 103.4% of classified assets at June 30, 1997.
Loan Loss Allowance
Table I.11 provides an analysis of First Federal's loan loss
allowance. Table I.12 shows the allocation of the loan loss allowance among the
various loan categories as of June 30 1996, and 1997.
Mortgage-Backed Securities and Investments
Table I.13 provides a breakdown of investments as of June 30, 1996,
and 1997. Table I.14 provides maturity and yield information for investments as
of June 30, 1997.
Savings Deposits
At June 30, 1997, First Federal's deposit portfolio was composed as
follows: Passbook accounts--$2.549 million or 5.44%; money market accounts--
$6.436 million or 13.73%; and certificate accounts--$37.878 million or 80.83%
(see Table I.15). Table I.16 provides a break down in deposits as of June 30,
1995, 1996, and 1997 and the changes in the various categories. Table I.17
provides maturity information between jumbo certificates and non-jumbo
certificates as of June 30, 1997. It shows that 80.45% of all time deposits
mature within one year and 94.90% mature within three years.
First Federal is not overly dependent on large certificates of
deposit. At June 30, 1997, the Association had $7.799 million in certificates
that were issued for $100 thousand or more, or 16.64% of its total deposits (see
Table I.18).
Borrowings
First Federal had $2.4 million in borrowings at June 30, 1997, of
which $2.35 million matures during the year ending June 30, 1998 (see Table
I.19).
3
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Subsidiaries
First Federal has no subsidiary.
Legal Proceedings
From time to time, First Federal becomes involved in legal proceedings
principally related to the enforcement of its security interest in real estate
loans. In the opinion of Management of the Association, no legal proceedings
are in process or pending that would have a material effect on First Federal's
financial position, results of operations, or liquidity.
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity of
First Federal will be affected by the interest rate environment. Historically,
the thrift industry has performed at less profitable levels in periods of rising
interest rates. This performance is due principally to the general composition
of the assets and the limited repricing opportunities afforded even the
adjustable rate loans. The converse earnings situation (falling rates) does not
afford the same degree of profitability potential for thrifts due to the
tendency of borrowers to refinance both high rate fixed rate loans and
adjustable loans as rates decline.
First Federal is no exception to the aforementioned phenomenon. With
its current asset and liability structure, it has some exposure to rising
interest rates.
The addition of capital through the conversion will encourage First
Federal to grow. The business plan projects modest asset growth over the three
year period ending June 30, 2000. Growth for the first year is projected at
20.6% because of the conversion proceeds. Asset growth is projected at 3.3% for
the second year and 4.2% for the third year.
Asset-Size-Efficiency of Asset Utilization
At its current size and in its current asset configuration, First
Federal is an extremely efficient operation. With total assets of approximately
$60.5 million at June 30, 1997, First Federal has approximately 9 full time
equivalent employees. The business plan projects that operating expense levels
as a percentage of average assets will exceed pre-conversion rates, as a result
of conversion benefit plans and the additional costs of being a publicly held
company.
Intangible Values
First Federal's greatest intangible value lies in its loyal deposit
base. First Federal has a 77 year history of sound operations and independence.
At June 30, 1996, the Association had 16.98% of the deposit market in its area
(down from 19.21% at June 30, 1994), but it has the ability to increase market
share. First Federal has consciously lost market share in recent years as a
result of its operating strategies. Its turn around in strategic direction
(i.e., stock owned, with emphasis on bank type loan and deposit products) is
expected to help First Federal increase its market share.
First Federal has no significant intangible values that could be
attributed to unrecognized asset gains on investments and real estate, except
perhaps its main office building as shown on Table I.20.
Effect of Government Regulations
First Federal's business plan calls for changes in its strategies.
The changes will involve the types of loans sought and the efforts expended to
acquire deposits. Government regulations will have the greatest impact in the
area of cost of compliance and reporting. The conversion will create an
additional layer of regulations and reporting and thereby increase the cost to
the Association.
4
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Office Facilities
First Federal's office is a well maintained facility that was built in
1981. It has adequate amenities to service the Association's customer base.
However, the building is short on internal space needed for operations. At some
time in the coming years, the Association will have to expand its current office
or add an office. Table I.20 provides information on First Federal's office.
5
<PAGE>
FERGUSON & COMPANY Section 1
- ------------------ ---------
<TABLE>
<CAPTION>
Table I.1 - Selected Financial Data Compound
At June 30 Growth
-------------------------------------------------------
1997 1996 1995 1994 1993 Rate
---- ---- ---- ---- ---- -------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
Total assets $ 60,538 $ 59,694 $ 58,864 $ 57,796 $ 55,914 2.01%
Cash and federal funds 3,742 3,076 2,540 3,101 4,382 -3.87%
Securities held to maturity, including FHLB stock 2,251 2,678 2,801 2,905 3,416 -9.90%
Loans receivable, net 53,974 53,335 52,836 51,179 47,463 3.27%
Savings deposits 46,863 47,949 47,948 48,717 47,841 -0.51%
Borrowings 2,400 1,050 1,050 50 50 NM
Equity substantially restricted 11,090 10,504 9,710 8,782 7,735 9.43%
<CAPTION>
Year Ended June 30,
-------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
($000's)
<S> <C> <C> <C> <C> <C>
Selected Operations Data:
Interest income $ 4,558 $ 4,521 $ 4,341 $ 4,303 $ 4,461
Interest expense 2,595 2,668 2,370 2,163 2,301
-------------------------------------------------------
Net interest income 1,963 1,853 1,971 2,140 2,160
Provision for loan losses 143 18 6 6 82
-------------------------------------------------------
Net interest income after
provision for loan losses 1,820 1,835 1,965 2,134 2,078
-------------------------------------------------------
Noninterest income 23 42 37 53 45
-------------------------------------------------------
Sub-total 1,843 1,877 2,002 2,187 2,123
-------------------------------------------------------
Noninterest expense 915 654 594 531 501
-------------------------------------------------------
Income before taxes and cumulative effect 928 1,223 1,408 1,656 1,622
Income tax expense 342 429 518 612 645
-------------------------------------------------------
Net income before cumulative effect 586 794 890 1,044 977
-------------------------------------------------------
Cumulative effect adjustment - - - 4 -
=======================================================
Net income $ 586 $ 794 $ 890 $ 1,048 $ 977
=======================================================
</TABLE>
Source: Offering circular, audited financial
statements, & F&C calculations
6
<PAGE>
FERGUSON & COMPANY Table I.2 - Operating Ratios Section I
- ------------------ ---------
<TABLE>
<CAPTION>
At or for the
Year Ended June 30,
--------------------------
1997 1996
---- ----
Performance Ratios:
- ------------------
<S> <C> <C>
Return on assets (ratio of net earnings
to average total assets) 0.98% 1.33%
Return on equity (ratio of net earnings
to average equity) 5.47% 7.80%
Ratio of average interest-earning assets to
average interest-bearing liabilities 121.73% 119.79%
Ratio of net interest income, after provision
for loan losses, to noninterest expense 198.91% 280.58%
Net interest rate spread 2.37% 2.24%
Net yield on average interest-earning assets 3.32% 3.13%
Quality Ratios:
- --------------
Non-performing loans to total loans
at end of period 0.18% 0.09%
Non-performing loans to total assets 0.16% 0.08%
Non-performing assets to total assets
at end of period 0.18% 0.12%
Allowance for loan losses to non-performing
loans at end of period 312.37% 367.39%
Allowance for loan losses to total loans, net 0.56% 0.32%
Capital Ratios:
- --------------
Equity to total assets at end of period 18.32% 17.60%
Average equity to average assets 17.89% 16.99%
Other Data:
- ----------
Number of full service offices 1 1
</TABLE>
Source: Offering circular 7
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.3 - Interest Rate Shock
<TABLE>
<CAPTION>
Net Portfolio Value
June 30, 1997
---------------------------------------------------
Change Estimated
in Rates NPV $ Change % Change
- --------------------------- ---------------- -------- -------------
($000's)
<S> <C> <C> <C>
+400 bp $ 6,470 (5,481) -46%
+300 bp 7,897 (4,054) -34%
+200 bp 9,335 (2,616) -22%
+100 bp 10,722 (1,229) -10%
0 bp 11,951 - -
- -100 bp 12,829 878 7%
- -200 bp 13,340 1,389 12%
- -300 bp 13,729 1,778 15%
- -400 bp 14,328 2,377 20%
</TABLE>
Source: Office of Thrift Supervision, Risk Management Division
8
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.4 - Interest Rate Sensitivity Analysis
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Over One Over Three
One Year to Three to Five Over Five
or Less Years Years Years Total
----------------------------------------------------------------------------
Interest-earning assets:
- -----------------------
<S> <C> <C> <C> <C> <C>
Loans:
Adjustable $ 21,638 $ - $ - $ - $ 21,638
Fixed rate 1,174 415 1,392 29,339 32,320
Interest-bearing deposits 2,720 - - - 2,720
Federal funds sold 800 - - - 800
Investments - 600 1,100 66 1,766
FHLB stock - - - 484 484
----------------------------------------------------------------------------
Total interest-earning assets $ 26,332 $ 1,015 $ 2,492 $ 29,889 $ 59,728
============================================================================
Interest-bearing liabilities:
- ----------------------------
Money market deposit accounts 6,436 - - - 6,436
Savings accounts 2,549 - - - 2,549
Certificates of deposit 30,473 5,472 1,762 171 37,878
FHLB advances 2,350 - - 50 2,400
----------------------------------------------------------------------------
$ 41,808 $ 5,472 $ 1,762 $ 221 $ 49,263
============================================================================
Interest-earning assets less
interest-bearing liabilities $ (15,476) $ (4,457) $ 730 $ 29,668 $ 10,465
============================================================================
Cumulative interest-rate sensitivity gap $ (15,476) $ (19,933) $ (19,203) $ 10,465
============================================================
Cumulative interest-rate sensitivity gap
as a percentage of interest-earning assets -25.91% -33.37% -32.15% 17.52%
============================================================
Cumulative ratio of interest earning
assets to interest-bearing liabilities 62.98% 57.84% 60.84% 121.24%
============================================================
Cumulative interest rate sensitivity gap
as a percent of total assets -25.56% -32.93% -31.72% 17.29%
============================================================
</TABLE>
Source: Offering circular 9
<PAGE>
FERGUSON & COMPANY Table I.5 - Regulatory Capital Compliance Section I
- ------------------ ---------
<TABLE>
<CAPTION>
Percent of
Amount Assets
----------------------
($000's)
<S> <C> <C>
Tangible capital $ 11,090 18.3%
Tangible capital requirement 908 1.5%
----------------------
Excess (deficit) $10,182 16.8%
======================
Core capital $11,090 18.3%
Core capital requirement 1,816 3.0%
----------------------
Excess (deficit) $9,274 15.3%
======================
Risk-based capital $11,393 36.6%
Risk-based capital requirement 2,488 8.0%
----------------------
Excess (deficit) $8,905 28.6%
======================
</TABLE>
10
<PAGE>
FERGUSON & COMPANY Table I.6 - Loan Portfolio Composition Section I
- ------------------ ---------
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
Amount Percent Amount Percent
($000's)
<S> <C> <C> <C> <C>
Mortgage Loans:
1-4 family 48,460 86.91% 48,297 87.42%
Commercial 2,502 4.49% 2,089 3.78%
Construction 3,044 5.46% 3,123 5.65%
--------------------------------- ---------------------------------
Total mortgage loans 54,006 96.85% 53,509 96.86%
--------------------------------- ---------------------------------
Consumer Loans:
Loans on savings accounts 319 0.57% 305 0.55%
Home improvement loans 1,437 2.58% 1,430 2.59%
--------------------------------- ---------------------------------
Total consumer loans 1,756 3.15% 1,735 3.14%
--------------------------------- ---------------------------------
Total loans 55,762 100.00% 55,244 100.00%
---------------================== -------------------==============
Less:
Construction loans in process 1,306 1,536
Allowance for loan losses 303 169
Deferred fees and discounts 179 204
=========== ==========
Loan portfolio, net 53,974 53,335
=========== ==========
</TABLE>
Source: Offering circular 11
<PAGE>
FERGUSON & COMPANY Table I.7 - Loan Maturities Section I
- ------------------ ---------
The following table sets forth certain information at June 30, 1997, regarding
the amount of loans maturing in the loan portfolio, based on contractual terms
to maturity.
<TABLE>
<CAPTION>
1 Year 1 to 3 3 to 5 Over
or Less Years Years 5 Years Total
------------- -------------- ------------- ------------- -------------
($000,s)
<S> <C> <C> <C> <C> <C>
Adjustable loans $ 21,638 $ - $ - $ - $ 21,638
Fixed rate loans 1,174 415 1,392 29,339 32,320
Deposit loans 319 - - - 319
------------- -------------- ------------- ------------- -------------
Total $ 23,131 $ 415 $ 1,392 $ 29,339 $ 54,277
============= ============== ============= ============= =============
</TABLE>
Source: Offering circular 12
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.8 - Average Balances, Rates, and Yields
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------------------------
1997 1996
-------------------------------------- --------------------------------------
Average Interest Average Interest
Outstanding Earned/ Average Outstanding Earned/ Average
Balance Paid Yield/Rate Balance Paid Yield/Rate
-------------------------------------- --------------------------------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Interest/dividend-earning assets:
- ---------------------------------
Interest-bearing deposits $ 2,537 $ 146 5.75% $ 2,929 $ 188 6.42%
Investments 2,367 151 6.38% 2,767 159 5.75%
Loans 54,199 4,261 7.86% 53,454 4,174 7.81%
---------------------------------- ----------------------------------
Total interest\dividend-earning assets 59,103 $ 4,558 7.71% 59,150 $ 4,521 7.64%
===================== =====================
Non-interest earning assets 780 750
========= =========
Total assets $ 59,883 $ 59,900
========= =========
Interest-bearing liabilities:
- -----------------------------
Savings deposits $ 46,568 2,481 5.33% $ 48,329 $ 2,607 5.39%
FHLB advances 1,985 114 5.74% 1,050 61 5.81%
---------------------------------- ----------------------------------
Total interest-bearing liabilities 48,553 $ 2,595 5.34% 49,379 $ 2,668 5.40%
===================== =====================
Non-interest bearing liabilities 618 342
--------- ---------
Total liabilities 49,171 49,721
--------- ---------
Equity 10,712 10,179
========= =========
Total liabilities and equity $ 59,883 $ 59,900
========= =========
Net interest\dividend income $ 1,963 $ 1,853
========= =========
Net interest\dividend rate spread (1) 2.37% 2.24%
========= =========
Net interest\dividend earnings assets $ 10,550 $ 9,771
========= =========
Net interest\dividend margin (2) 3.32% 3.13%
========= =========
Average interest\dividend-earning assets to
average interest-bearing liabilities 121.73% 119.79%
========= =========
</TABLE>
(1) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on
interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
Source: Offering circular
13
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.9 - Rate/Volume Analysis
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------
1997 vs. 1996
---------------------------------------------
Increase
(Decrease)
Due to
------------------------------- Total
Increase
Volume Rate (Decrease)
------ ---- ----------
($000's)
<S> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits $ (24) $ (18) $ (42)
Investments (24) 16 (8)
Loans 58 29 87
---------------------------------------------
Total interest-earning assets 10 27 37
---------------------------------------------
Interest-bearing liabilities:
Deposits (94) (32) (126)
FHLB advances 54 (1) 53
---------------------------------------------
Total interest - bearing liabilities (40) (33) (73)
---------------------------------------------
Increase (decrease) in
net interest income $ 50 $ 60 $ 110
=============================================
</TABLE>
Source: Offering circular 14
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.10 - Non-Performing Assets
The table below sets forth the amounts and categories of non-performing assets.
Loans are placed on non-accrual status when the collection of principal or
interest becomes doubtful.
<TABLE>
<CAPTION>
June 30,
---------------------------------
1997 1996
---- ----
($000's)
<S> <C> <C>
Non-accruing loans:
Real estate:
One- to four-family 88 33
Multi-family - -
Non-residential - -
Consumer 9 13
Commercial - -
---------------------------------
Total 97 46
---------------------------------
Accruing loans delinquent 90 days or more:
Real estate:
One- to four-family - -
Multi-family - -
Non-residential - -
Construction - -
Consumer - -
Commercial - -
Other - -
---------------------------------
Total - -
---------------------------------
Total non-performing loans 97 46
---------------------------------
Repossessed assets 10 27
---------------------------------
Total non-performing assets 107 73
=================================
Total non-performing loans as a
percentage of total net loans 0.18% 0.09%
=================================
Total non-performing assets as a
percentage of total assets 0.18% 0.12%
=================================
</TABLE>
Source: Offering circular 15
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.11 - Analysis of the Allowance for Loan Losses
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------
1997 1996
----- ----
($000's)
<S> <C> <C>
Balance at beginning of period $ 169 $ 172
------------- -------------
Charge-offs 9 21
------------- -------------
Recoveries - -
------------- -------------
Net (charge-offs) 9 21
------------- -------------
Additions charged to operations 143 18
============= =============
Balance at end of period $ 303 $ 169
============= =============
Allowance for loan losses to total
non-performing loans at end of period 312.37% 367.39%
============= =============
Allowance for loan losses to net
loans at end of period 0.56% 0.32%
============= =============
Ratio of net charge-offs to average
loans outstanding during the period 0.02% 0.04%
============= =============
</TABLE>
Source: Offering circular 16
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.12 - Allocation of Allowance for Loan Losses
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------------
1997 1996
------------------------------- -------------------------------
Percent Percent
of Loans of Loans
in Each in Each
Amount of Category Amount of Category
Loan Loss to Gross Loan Loss to Gross
Allowance Loans Allowance Loans
--------- ----- --------- -----
($000's)
<S> <C> <C> <C> <C>
Mortgage Loans
1-4 family 169 86.91% 126 87.42%
Non-residential 24 4.49% 21 3.78%
Construction 33 5.46% 8 5.65%
Consumer Loans
Loans secured by deposits 1 0.57% 1 0.55%
Home improvement 10 2.58% 7 2.59%
Unallocated 66 6
------------------------- -------------------------
303 100.00% 169 100.00%
========================= =========================
</TABLE>
Source: Offering circular 17
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.13 - Investment Securities
<TABLE>
<CAPTION>
At June 30,
----------------------------------
1997 1996
--------------- ----------------
($000's)
<S> <C> <C>
Securities held to maturity:
- ----------------------------
U.S. government and agency securities $ 1,700 $ 2,099
Mortgage-backed securities 66 97
--------------- ----------------
Sub total 1,766 2,196
--------------- ----------------
Other:
Interest earning balances in other banks 2,720 2,292
Federal funds sold 800 500
FHLB stock 484 482
--------------- ----------------
Total $ 5,770 $ 5,470
=============== ================
</TABLE>
Source: Offering circular 18
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.14 - Investments at June 30, 1997
<TABLE>
<CAPTION>
Maturity Period at June 30, 1997
------------------------------------------------------------------------ ------------------
One Year or Less One to Five Years Over Five Years Total
---------------------- ----------------- ---------------- ------------------
Carrying Carrying Carrying Carrying
Value Yield Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- ----- ----- -----
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government and
agency securities $ - 0.00% $ 1,700 6.43% $ - 0.00% $ 1,700 6.43%
Mortgage-backed securities - 0.00% - 0.00% 66 8.95% 66 8.95%
FHLB stock - 0.00% - 0.00% 484 7.25% 484 7.25%
Federal funds 800 5.88% - 0.00% - 0.00% 800 5.88%
Interest earning deposits 2,720 6.23% - 0.00% - 0.00% 2,720 6.23%
-------- ------- -------- ------- ------- ------- -------- ------
Total investment securities $ 3,520 6.15% $ 1,700 6.43% $ 550 7.45% $ 5,770 6.36%
======== ======= ======== ======= ======= ======= ======== ======
</TABLE>
19
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
<TABLE>
<CAPTION>
Table I.15 - Deposit Portfolio
Balance Percent
Interest June 30, of
Category Rate (1) 1997 Deposits
- -------- --------- -------- --------
($000's)
--------
<S> <C> <C> <C>
Savings and transactions accounts
- ---------------------------------
Regular passbook 2.96% $ 2,549 5.44%
Money market accounts 4.18% 6,436 13.73%
---------- ----------
8,985 19.17%
---------- ----------
<CAPTION>
Certificates of deposit
- ----------------------------------------------
<S> <C> <C> <C>
Fixed term, fixed rate 5.28% 9,181 19.59%
Fixed term, fixed rate 5.63% 10,578 22.57%
Fixed term, fixed rate 5.99% 18,119 38.66%
---------- ----------
Total certificates of deposit 37,878 80.83%
---------- ----------
Total savings deposits $ 46,863 100.00%
========== ==========
</TABLE>
(1) Indicates weighted average interest rate at June 30, 1997.
Source: Offering circular 20
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------
Table I.16 - Savings Deposits Detail
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------------------------------
1997 1996 1995 Increase (Decrease)
--------------------------- ------------------------ ----------------------
Percent of Percent of Percent of Year Ended June 30,
----------------------
Amount Total Amount Total Amount Total 1997 1996
------ ----- ------ ----- ------ ----- ---- ----
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transactions and Savings:
- -------------------------
Passbook accounts $ 2,549 5.44% $ 2,583 5.39% $ 2,777 5.79% $ (34) $ (194)
Money market accounts 6,436 13.73% 5,786 12.07% 5,769 12.03% 650 17
-------------------------- --------------------- ------------------------- ----------------------
Total transaction accounts 8,985 19.17% 8,369 17.45% 8,546 17.82% 616 (177)
-------------------------- --------------------- ------------------------- ----------------------
Total certificates 37,878 80.83% 39,580 82.55% 39,402 82.18% (1,702) 178
-------------------------- --------------------- ------------------------- ----------------------
Total deposits $ 46,863 100.00% $ 47,949 100.00% $ 47,948 100.00% $ (1,086) $ 1
========================== ===================== ========================= ======================
</TABLE>
Source: Offering circular 21
<PAGE>
FERGUSON & COMPANY Table I.17 - Certificate of Deposit Maturities Section I
---------
The table below provides CD maturities at June 30, 1997.
<TABLE>
<CAPTION>
Less Than One to Three to After Weighted
One Year Three Years Five Years Five Years Total Rate
--------- ----------- ---------- ---------- ----- --------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Certificates maturing in:
CD's $100,000 or more $ 6,746 $ 644 $ 409 $ - $ 7,799 5.82%
CD's under $100,000 23,727 4,828 1,353 171 30,079 5.64%
-----------------------------------------------------------------------------------------
Total $ 30,473 $ 5,472 $ 1,762 $ 171 $ 37,878 5.71%
=========================================================================================
Percent of total 80.45% 14.45% 4.65% 0.45% 100.00%
===============================================================================
Weighted rate 5.60% 6.11% 6.27% 7.21%
================================================================
</TABLE>
Source: Offering circular 22
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.18 - Large CD Maturities
<TABLE>
<CAPTION>
Certificates of deposit over $100,000
maturing in period ending: Amount
- -------------------------------------------- ----------------
($000's)
<S> <C>
Within three months or less $ 3,164
Three through six months 1,954
Six through twelve months 1,628
Over 12 months 1,053
----------------
Total $ 7,799
================
</TABLE>
Source: Offering circular 23
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.19 - Borrowings
<TABLE>
<CAPTION>
Rate
Amount Range
--------------------------------
($000's)
<S> <C> <C>
Due within one year 2,350 5.83-5.95%
Due in year ending June 30, 2003 50 3.00%
=================
2,400
=================
</TABLE>
Source: Offering circular 24
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.20 - Offices
<TABLE>
<CAPTION>
Net Book Insurance Year Owned or Square
Physical address Value (1) Coverage Occupied Leased Feet
- ---------------- --------- -------- -------- ------ ----
($000's) ($000's)
<S> <C> <C> <C> <C> <C>
515 Market Street $ 116 482 1981 Owned 5,500
Cheraw, SC 29520
Main Office
</TABLE>
(1) Cost less accumulated depreciation and amortization.
Source: First Federal 25
<PAGE>
SECTION II
MARKET AREA
<PAGE>
FERGUSON & COMPANY Section II
- ------------------ ----------
II. MARKET AREA
DEMOGRAPHICS
First Federal Savings and Loan Association ("First Federal" or
"Association") conducts its operations through one office located in Cheraw,
Chesterfield County, South Carolina. South Carolina is in the southeastern
region of the United States. Chesterfield County is in the northeastern section
of South Carolina.
First Federal has determined that its principal trade area is
Chesterfield County and parts of the contiguous counties. Table II.1 presents
historical and projected trends for the United States, South Carolina,
Chesterfield County, and zip code 29520, which includes the City of Cheraw. The
information addresses population, income, employment, and housing trends.
As indicated in Table II.1, population growth rates for South Carolina
are close but slightly below the United States growth rate. Growth rates for
Chesterfield County and zip code 29520 are well below both South Carolina and
the United States. Household income growth for South Carolina, Chesterfield
County, and zip code 29520 is projected to be above that of the United States
for the period 1996 to 2001.
In the period from 1990 until 1996, the population of the State of
South Carolina grew 6.20%. During the same period, the Chesterfield County
population increased 2.44%, zip code 29520 increased 3.97%, and the United
States population increased 6.67%. Projections of population growth from 1996
through 2001 indicate that the State of South Carolina will increase 4.91%,
while Chesterfield County is projected to increase by 1.90%, zip code 29520 is
projected to increase 2.60%, and the United States population is projected to
increase by 5.09%.
Household income is projected to increase by 1.45% for Chesterfield
County from 1996 to 2001. For the same period, household income is projected to
increase by 1.96% for the State of South Carolina, increase by 1.45% for zip
code 29520, and decline by 3.88% for the United States. Per capita and
household income levels for the State of South Carolina are below those of the
United States, and per capita and household income levels for Chesterfield
County and zip code 29520 are below the State of South Carolina.
The 2001 estimate shows that, for Chesterfield County, households with
incomes less than $15,000 are expected to be 28%; those with incomes between
$15,000 and $25,000 are estimated at 19%; those with incomes between $25,000 and
$50,000 are estimated at 34%; those with incomes between $50,000 and $100,000
are estimated at 17%; and households with incomes in excess of $100,000 are
projected to be 3%. The 2001 estimates for South Carolina are 22%, 17%, 36%,
22%, and 4%, respectively. The 2001 estimate for zip code 29520 is 27%, 20%,
32%, 17%, and 4%, respectively.
The number of households in Chesterfield County is projected to
increase by 1.96% from 1996 to 2001, well below the projection for the State of
South Carolina which calls for an increase of 5.07% and in line with the
projected increase for zip code 29520 at 2.69%. While the household growth rate
for South Carolina is slightly lower than that of the United States (5.07%
versus 5.14%), the household growth rate for Chesterfield County and zip code
29520 are well below the projected growth rate for the U.S. and South Carolina.
With projections of a modest increase in population and number of
households, combined with projections of increasing household income, the market
for housing units will be steady. Zip code 29520 has approximately 5,100
housing units, of which 64.06% are owner occupied, and a vacancy rate of 6.92%.
Chesterfield County has approximately 15,100 housing units, of which 70.12% are
owner occupied, and a vacancy rate of 6.98%.
The principal sources of employment in Chesterfield County are
manufacturing--46.7%; services--18.4%; trade--14.2%; and
construction/agriculture/mining--12.4%.
Analysis of the data presented above presents a picture of steady
economic opportunity, suggesting that First Federal's growth opportunities
within its current market area will be adequate.
1
<PAGE>
FEGUSON & COMPANY Section II
- ----------------- ----------
Based on information publicly available on deposits as of June 30,
1996 (see Table II.3), Chesterfield County had $282.5 million in deposits and
First Federal had 16.98% of the deposit market, down from 19.21% of the market
at June 30, 1994. The Association's recent deposit growth rate has been below
the overall market. First Federal's competition consists of 12 commercial bank
offices and 1 other thrift office. Table II.3 shows that from June 30, 1994 to
1996, First Federal's deposits decreased by $768 thousand (1.6%), while the
overall market increased $28.816 million in deposits (11.4%). The Association's
deposits decreased $1.086 million (2.3%) from June 30, 1996, to June 30, 1997.
The Association's business plan projects that its deposits will grow after
conversion. Net deposit growth over the three year business plan period is
projected at $2.86 million, after deducting $3.2 million from existing deposits
to buy conversion stock.
Building permit information was not available. However, projected
population and household income growth rates in First Federal's market area
portend ample lending opportunities within the market. First Federal leads its
market in construction lending.
Growth opportunities for First Federal can be assessed by reviewing
economic factors in its market area. The salient factors include growth trends,
economic trends, and competition from other financial institutions. We have
reviewed these factors to assess the potential for the market area. In
assessing the growth potential of the Association, we must also assess the
willingness and flexibility of Management to respond to the competitive factors
that exist in the market area. Our analysis of the economic potential and the
potential of Management affects the valuation of the Association. The business
plan indicates that the Association will begin to alter its loan and deposit mix
to emphasize more bank type products.
2
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
Table II.1 - Demographic Trends
Key Economic Indicators
United States, South Carolina, Chesterfield County, Zip Code 29520
<TABLE>
<CAPTION>
=============================================================================================================================
United South Chesterfield Zip Code
Key Economic Indicator States Carolina County 29520 (1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 3,884,875 40,268 13,934
1996 - 2001 Percent Change, Est. 5.09 4.91 1.90 2.60
Total Population, 1996 Est. 265,294,885 3,703,009 39,517 13,581
1990 - 96 Percent Change, Est. 6.67 6.20 2.44 3.97
Total Population, 1990 248,709,873 3,486,703 38,577 13,063
- -----------------------------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 31,857 26,935 26,913
1996 - 2001 Percent Change, Est. (3.88) 1.96 1.45 1.45
Household Income, 1996 Est. 34,530 31,246 26,550 26,529
- -----------------------------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 14,527 12,118 12,891
- -----------------------------------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est. (%)
$15,000 and less 20 22 28 27
$15,000 - $25,000 16 17 19 20
$25,000 - $50,000 34 36 34 32
$50,000 - $100,000 24 22 17 17
$100,000 - $150,000 4 3 2 3
$150,000 and over 2 1 1 1
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 6.60 6.38 6.39
- -----------------------------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 33.8 34.8 34.6
Median Age of Population, 1990 32.9 32.0 33.3 33.2
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Average Housing Value, 1990 79,098 74,764 47,074 52,123
- -----------------------------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 1,408,993 14,688 5,123
1996 - 2001 Percent Change, Est. 5.14 5.07 1.96 2.69
Total Households, 1996 98,239,161 1,341,043 14,406 4,989
1990 - 96 Percent Change, Est. 6.84 6.60 2.56 4.11
Total Households, 1990 91,947,410 1,258,044 14,047 4,792
- -----------------------------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 1,424,155 15,101 5,148
% Vacant 10.07 11.66 6.98 6.92
% Occupied 89.93 88.34 93.02 93.08
% By Owner 57.78 61.70 70.12 64.06
% By Renter 32.15 26.64 22.90 29.02
=============================================================================================================================
</TABLE>
Source: Scan/US, Inc.
(1) Includes Cheraw.
3
<PAGE>
FERGUSON & COMPANY Section II
- ------------------ ----------
Table II.2 - Percent Employment by Industry
<TABLE>
<CAPTION>
Chester-
United South field
Industry States Carolina County
================================== ======== ========== =========
<S> <C> <C> <C>
Construction/Agriculture/Mining 9.5 5.8 12.4
Manufacturing 17.7 21.6 46.7
Transportation/Utilities 7.1 3.6 3.9
Trade 21.2 20.0 14.2
Finance/Insurance 6.9 3.9 2.3
Services 32.7 21.5 18.4
Public Administration 4.8 23.6 2.1
</TABLE>
Source: 1990 U.S. census
4
<PAGE>
FERGUSON & COMPANY Section II
- ------------------ ----------
Table II.3 - Market Area Deposits
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(in Thousands)
<S> <C> <C> <C>
Chesterfield County Deposits
Total First Federal S&LA $ 47,949 $ 47,948 $ 48,717
-------------- -------------- --------------
Number of Branches 1 1 1
Other Thrifts 21,468 18,626 -
-------------- -------------- --------------
Number 1 1 -
Number of Branches 1 1 -
Total Thrifts $ 69,417 $ 66,574 $ 48,717
-------------- -------------- --------------
Number 2 2 1
Number of Branches 2 2 1
Total Bank Deposits $ 213,037 $ 203,107 $ 204,921
-------------- -------------- --------------
Number 5 5 5
Number of Branches 12 12 13
Total Deposits $ 282,454 $ 269,681 $ 253,638
============== ============== ==============
Percent of Deposits Held by
First Federal S&LA 16.98% 17.78% 19.21%
============== ============== ==============
- --------------------------------------------------------------------------------------------------
</TABLE>
Source: BranchSource, a product of Sheshunoff Information Services, Inc.
5
<PAGE>
SECTION III
COMPARISON WITH PUBLICLY
TRADED THRIFTS
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
III. COMPARISON WITH PUBLICLY TRADED THRIFTS
COMPARATIVE DISCUSSION
This section presents an analysis of First Federal Savings and Loan
Association ("First Federal" or the "Association") relative to a group of twelve
publicly traded thrift institutions ("comparative group"). Such analysis is
necessary to determine the adjustments that must be made to the pro forma market
value of First Federal's stock. Table III.1 presents a listing of the
comparative group with general information about the group. Table III.2 presents
key financial indicators relative to profitability, balance sheet composition
and strength, and risk factors. Table III.3 presents a pro forma comparison of
First Federal to the comparative group. Exhibits III and IV contain selected
financial information on First Federal and the comparative group. This
information is derived from quarterly TFR's filed with the OTS and call reports
filed with the FDIC. The selection criteria and comparison with the comparative
group are discussed below.
Selection Criteria
Ideally, the comparative group would consist of thrifts in the same
geographic region with identical local economies, asset size, capital level,
earnings performance, asset quality, etc. However, there are few comparably
sized institutions with stock that is liquid enough to provide timely,
meaningful market values. Therefore, we have selected a group of comparatives
that are either listed on the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX"), or Nasdaq. We excluded companies that are apparent
takeover targets and companies with unusual characteristics that tend to distort
both mean and median calculations. For example, we have excluded all companies
with losses during the trailing twelve months. We have also excluded mutual
holding companies (see Exhibit VI).
Because of the limited number of similar size thrifts with sufficient
trading volume, we looked for members of the comparative group among thrifts
with assets up to $100 million. The Southeast Region, which includes South
Carolina, had 8 thrifts that met the size requirements. We found 60 thrifts that
met the asset size requirements in the entire country (we consider 10 to be the
minimum number), and we retained 12 and eliminated 48 for the following reasons:
(a) One was a mutual holding company; (b) Twenty-five did not have PE ratios for
the last twelve months; (c) Two had PE ratios of 50.0 or more; (d) Three had
agreed to be acquired; (e) Six had non-performing assets in excess of 1.5% of
assets; (f) Twenty-six had loans less than 65% of assets; and (g) Four had loans
serviced in excess of 40% of assets.
The principal source of data was SNL Securities, Charlottesville, Virginia.
There are approximately 400 publicly traded thrifts listed on NYSE, AMEX, or
Nasdaq. In developing statistics for the entire country, we eliminated certain
institutions that skewed the results, in order to make the data more meaningful:
. We eliminated companies with losses,
. We eliminated indicated acquisition targets,
. We eliminated companies with price/earnings ratios in excess of 25,
and
. We eliminated companies that had not reported as a stock institution
for one complete year.
The resulting group of 257 publicly traded thrifts is included in Exhibit V.
The selected group of comparatives has sufficient trading volume to provide
meaningful price data. Ten of the comparative group members are located in the
Midwest and the others are located in the Northeast (1) and Mid-Atlantic (1)
Regions. With total assets of approximately $60.5 million, First Federal is
smaller than the group selected, which has average assets of $77.7 million and
median assets of $84.4 million. First Federal's assets after conversion will be
in line with the comparative group. Pro forma assets at the midpoint are $74.4
million.
1
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FERGUSON & COMPANY Section III
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Profitability
Using the comparison of profitability components as a percentage of average
assets, First Federal was above the comparative group in net income, 1.41% to
.66%; operating expense, 1.01% to 2.54%; efficiency ratio, 30.41% to 63.56%; and
core income, 1.41% to .87%. First Federal was below the comparative group in net
interest income, 3.28% to 3.64%; loss provisions, .24% to .13%; and noninterest
income, .04% to .33%. First Federal's operating expense minus other income was
.97% versus 2.21% for the comparative group. After conversion, deployment of the
proceeds will provide additional income, and First Federal will compare more
favorably with the comparative group in terms of return on average assets, with
a return of 1.66% at the midpoint of the appraisal range. Pro forma return on
average equity is 4.98% at the midpoint, versus a mean of 5.74% and median of
5.54% for the comparative group.
As compared with the comparative group, First Federal has a much lower
level of operating expense. First Federal is below the comparative group loss
provisions. However, First Federal does not have a higher level of problem
assets--it simply added more to its loss allowance than normal in 1997. First
Federal has low operating expenses and a high capital level, coupled with a very
traditional thrift operation. This combination makes it extremely profitable.
First Federal has one serious impediment to earnings relative to the comparative
group--its spread. The proceeds from the stock sale will improve most of First
Federal's operating ratios. However, improving the spread will take some time
and require growth in higher yielding loans and lower costing liabilities. As
compared to all OTS supervised thrifts with assets between $50 million and $100
million, First Federal's spread ranked in the 30/th/ percentile, 15/th/
percentile, 11/th/ percentile, and 11/th/ percentile, for the years ending
December 31, 1994, 1995 and 1996, and the three months ending March 31, 1997,
respectively.
Balance Sheet Characteristics
The general asset composition of First Federal is similar to that of the
comparative group. First Federal has a lower level of passive investments with
10.09% of its assets invested in cash, investments, and mortgage-backed
securities, versus 20.96% for the comparative group. First Federal has a higher
percentage of its assets in loans, at 89.16% versus 75.74% for the comparative
group. First Federal's percentage of earning assets to interest costing
liabilities is higher than that of the group. First Federal has 121.28% and the
comparative group averages 116.26%. After conversion, First Federal's ratio will
we significantly higher than that of the group of comparatives.
The liability side differs mainly in that First Federal has a lower
percentage of borrowings, a higher percentage of deposits, and a higher
percentage of equity. First Federal has borrowings equal to 3.96% of assets
versus 12.53% for the comparative group and deposits equal to 77.41% of assets
versus 71.26% for the comparative group. First Federal's equity is 18.31% of
assets versus 15.08% for the comparative group. First Federal's equity ratio
after conversion will be well above that of the comparative group. First
Federal's pro forma equity ratio at the midpoint is 33.6% (37.5% at the
supermaximum).
Risk Factors
First Federal and the comparative group have low levels of non-performing
assets. First Federal's loan loss allowance is .56% of net loans, which is in
line with the comparative group at .51%. First Federal's gap table at June 30,
1997, indicates cumulative negative gaps as a percentage of assets as follows:
one year--25.56%; three years--32.93%; and five years--31.72% (see Table I.4).
Its rate shock table indicates a 22% decline in net portfolio value at a 200
basis point increase in rates and a 46% decline in net portfolio value at a 400
basis point rate increase (see Table I.3). These levels of NPV decline indicate
more than normal interest rate risk. The comparative group information indicates
a negative 6.13% one year gap to assets. However, only four of the twelve
members of the group reported their gap. Overall, we believe that First
Federal's interest rate risk management is slightly inferior to that of the
comparative group.
2
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FERGUSON & COMPANY Section III
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Summary of Financial Comparison
Based on the above discussion of operational, balance sheet, and risk
characteristics of First Federal compared with the group, we believe that First
Federal's performance is slightly above that of the comparative group. Even
though First Federal has a thin spread, its low operating expense level and high
capital level are more than enough to compensate. The conversion proceeds will
improve several of First Federal's financial aspects and, after conversion, the
Association will lead the comparative group in most financial areas. The
difficult aspect for First Federal will be trying to achieve a reasonable return
on equity, with the high equity level it will have.
FUTURE PLANS
First Federal's future plans are to be a well capitalized profitable
institution with good asset quality and a commitment to serving the needs of its
trade area. The business plan projects that the Association will grow slowly.
In recent years, First Federal has experienced moderate growth. The
Association's business plan projects that it will experience growth in loans,
savings deposits, and liquidity. The additional capital raised by the sale of
Common Stock will initially be used to purchase short term investment
securities.
Increasing market penetration by increasing the number of services and
products available and the number of locations is the most likely method to be
employed to achieve growth on a long-term basis.
3
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FERGUSON & COMPANY Section III
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Table III.1 - Comparative General Characteristics
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of Type ($000) Price Value
Ticker Short Name City State Offices Thrift (1) MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY 2 Traditional 68,628 07/26/93 23.250 5.81
CIBI Community Investors Bancorp Bucyrus OH 3 Traditional 92,304 02/07/95 15.500 14.41
CKFB CKF Bancorp Inc. Danville KY 1 Traditional 60,812 01/04/95 19.000 18.05
HZFS Horizon Financial Svcs Corp. Oskaloosa IA 3 Traditional 85,969 06/30/94 18.875 8.03
INCB Indiana Community Bank SB Lebanon IN 3 Traditional 91,329 12/15/94 15.750 14.52
JOAC Joachim Bancorp Inc. De Soto MO 1 Traditional 34,938 12/28/95 14.500 10.48
LOGN Logansport Financial Corp. Logansport IN 1 Traditional 83,152 06/14/95 14.625 18.43
MCBN Mid-Coast Bancorp Inc. Waldoboro ME 2 Traditional 59,739 11/02/89 25.500 5.93
NWEQ Northwest Equity Corp. Amery WI 3 Traditional 96,891 10/11/94 16.750 14.05
SFFC StateFed Financial Corporation Des Moines IA 2 Traditional 85,679 01/05/94 22.000 17.24
SOBI Sobieski Bancorp Inc. South Bend IN 3 Traditional 81,754 03/31/95 16.438 12.74
THR Three Rivers Financial Corp. Three Rivers MI 4 Traditional 91,165 08/24/95 16.250 13.38
Maximum 4 96,891 25.500 18.43
Minimum 1 34,938 14.500 5.81
Average 2 77,697 18.203 12.76
Median 3 84,416 16.594 13.72
</TABLE>
(1) Made determination by reference to TAFS and BankSource reports. TAFS reports
are derived from quarterly reports filed with the OTS and BankSource reports are
derived from call reports filed with the FDIC. TAFS and BankSource are published
by Sheshunoff Information Services, Austin, Texas.
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Table III.2 - Key Financial Indicators
<TABLE>
<CAPTION>
First Federal
Savings & Loan Comparative
Association Group
---------------- -------------
<S> <C> <C>
Profitability
(% of average assets)
Net income (1) 1.41 0.66
Net interest income 3.28 3.64
Loss (recovery) provisions 0.24 0.13
Other operating income 0.04 0.33
Operating expense (2) 1.01 2.54
Efficiency ratio (2) 30.41 63.56
Core income (excluding gains
and losses on asset sales)(1) 1.41 0.87
Balance Sheet Factors
(% of assets)
Cash and investments 8.99 15.75
Mortgage-backed securities (including CMO's) 1.10 5.21
Loans 89.16 75.74
Savings deposits 77.41 71.26
Borrowings 3.96 12.53
Equity 18.31 15.08
Tangible equity 18.31 15.08
Risk Factors
(%)
Earning assets/costing liabilities 121.28 116.26
Non-performing assets/assets 0.18 0.71
Loss allowance/non performing assets 283.18 68.59
Loss allowance/loans 0.56 0.51
One year gap/assets (3) (25.56) (6.13)
</TABLE>
(1) Used appraisal earnings.
(2) Excluded SAIF assessment.
(3) Only four of the twelve in the group reported one year gap.
Source: SNL Securities, F&C calculations,
and Offering Circular
5
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Table III.3 - Pro Forma Comparisons
As of September 2, 1997
<TABLE>
<CAPTION>
Ticker Name Price Mk Value PE P/Book P/TBook P/Assets Div Yld Assets
($) ($Mil) (X) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First FS&LA, Cheraw, SC
-----------------------
Before Conversion N/A N/A N/A N/A N/A N/A N/A 60,538
Pro Forma Supermaximum 10.000 21.82 16.2 74.4 74.4 27.9 3.00 78,983
Pro Forma Maximum 10.000 18.98 14.8 70.6 70.6 25.1 3.00 76,530
Pro Forma Midpoint 10.000 16.50 13.6 66.7 66.7 22.4 3.00 74,398
Pro Forma Minimum 10.000 14.03 12.1 62.1 62.1 19.7 3.00 72,266
Comparative Group
-----------------
Averages 18.203 12.76 21.4 111.1 111.1 17.1 2.30 77,697
Medians 16.594 13.72 17.5 112.6 112.6 15.6 2.18 84,416
South Carolina Thrifts
----------------------
Averages 24.563 147.49 18.8 180.7 180.7 12.7 1.46 1,166,021
Medians 24.563 147.49 18.8 180.7 180.7 12.7 1.46 1,166,021
Southeast Region Thrifts
------------------------
Averages 23.186 89.72 17.7 152.1 159.9 17.7 2.13 621,931
Medians 21.125 72.23 18.0 145.1 145.1 15.8 2.15 367,709
All Public Thrifts
------------------
Averages 23.857 251.94 16.8 149.9 157.8 15.3 1.80 1,612,216
Medians 21.250 60.07 16.7 142.7 147.1 14.3 1.76 397,730
Comparative Group
-----------------
ALBC Albion Banc Corp. 23.250 5.81 24.0 97.0 97.0 8.5 1.38 68,628
CIBI Community Investors Bancorp 15.500 14.41 15.7 129.6 129.6 15.6 2.07 92,304
CKFB CKF Bancorp Inc. 19.000 18.05 21.1 112.0 112.0 28.9 2.63 60,812
HZFS Horizon Financial Svcs Corp. 18.875 8.03 17.5 95.5 95.5 9.3 1.70 85,969
INCB Indiana Community Bank SB 15.750 14.52 32.8 128.4 128.4 15.9 2.29 91,329
JOAC Joachim Bancorp Inc. 14.500 10.48 39.2 106.5 106.5 30.0 3.45 34,938
LOGN Logansport Financial Corp. 14.625 18.43 15.6 115.5 115.5 22.2 2.74 83,152
MCBN Mid-Coast Bancorp Inc. 25.500 5.93 15.3 115.4 115.4 9.9 2.04 59,739
NWEQ Northwest Equity Corp. 16.750 14.05 15.7 117.7 117.7 14.5 3.10 96,891
SFFC StateFed Financial Corporation 22.000 17.24 15.2 113.2 113.2 20.1 1.82 85,679
SOBI Sobieski Bancorp Inc. 16.438 12.74 27.0 95.4 95.4 15.6 1.95 81,754
THR Three Rivers Financial Corp. 16.250 13.38 17.5 106.7 107.1 14.7 2.46 91,165
</TABLE>
6
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Table III.3 - Pro Forma Comparisons
As of September 2, 1997
<TABLE>
<CAPTION>
Ticker Name Eq/A TEq/A EPS ROAA ROAE
(%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
First FS&LA, Cheraw, SC
-----------------------
Before Conversion 18.3 18.3 N/A 1.41 7.83
Pro Forma Supermaximum 37.5 37.5 0.62 1.73 4.64
Pro Forma Maximum 35.5 35.5 0.67 1.70 4.81
Pro Forma Midpoint 33.6 33.6 0.74 1.66 4.98
Pro Forma Minimum 31.7 31.7 0.82 1.63 5.18
Comparative Group
-----------------
Averages 15.1 15.1 0.96 0.87 5.74
Medians 13.1 13.1 0.96 0.80 5.54
South Carolina Thrifts
----------------------
Averages 7.2 7.2 1.41 0.72 10.56
Medians 7.2 7.2 1.41 0.72 10.56
Southeast Region Thrifts
------------------------
Averages 12.2 12.0 1.38 1.08 9.23
Medians 10.8 10.4 1.32 0.99 8.82
All Public Thrifts
------------------
Averages 10.8 10.5 1.52 1.02 10.09
Medians 9.4 8.9 1.32 0.93 8.92
Comparative Group
-----------------
ALBC Albion Banc Corp. 8.7 8.7 0.97 0.37 4.03
CIBI Community Investors Bancorp 12.0 12.0 0.99 0.92 7.98
CKFB CKF Bancorp Inc. 24.0 24.0 0.90 1.33 5.37
HZFS Horizon Financial Svcs Corp. 9.8 9.8 1.08 0.55 5.25
INCB Indiana Community Bank SB 12.4 12.4 0.48 0.50 3.92
JOAC Joachim Bancorp Inc. 28.2 28.2 0.37 0.76 2.59
LOGN Logansport Financial Corp. 19.2 19.2 0.94 1.51 7.40
MCBN Mid-Coast Bancorp Inc. 8.6 8.6 1.67 0.67 7.57
NWEQ Northwest Equity Corp. 11.5 11.5 1.07 0.98 8.16
SFFC StateFed Financial Corporation 17.8 17.8 1.45 1.37 7.36
SOBI Sobieski Bancorp Inc. 15.1 15.1 0.61 0.59 3.57
THR Three Rivers Financial Corp. 13.8 13.7 0.93 0.83 5.71
</TABLE>
Note: Stock prices are closing prices or last trade. Pro
forma calculations for First Federal are based on sales at
$10 a share with a minimum of $14,025,000, midpoint of
$16,500,000, maximum of $18,975,000, and supermaximum of
$21,821,250. Sources: First Federal's audited and unaudited
financial Statements, SNL Securities, and F&C calculations.
7
<PAGE>
SECTION IV
CORRELATION OF MARKET
VALUE
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
IV. CORRELATION OF MARKET VALUE
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED
Certain factors must be considered to determine whether adjustments
are required in correlating First Federal's market value to the comparative
group. Those factors include financial aspects, market area, management,
dividends, liquidity, thrift equity market conditions, and subscription
interest.
This section addresses the aforementioned factors and the estimated
pro forma market value of the to-be-issued common shares and compares the
resulting market value of the Association to the members of its comparative
group and the selected group of publicly held thrifts.
Financial Aspects
Section III includes a discussion regarding a comparison of First
Federal's earnings, balance sheet characteristics, and risk factors with its
comparative group. Table III.2 presents a comparison of certain key indicators,
and Table III.3 presents certain key indicators on a pro forma basis after
conversion.
As shown in Table III.2, from an earnings viewpoint, First Federal is
well above its comparative group in core income as a percentage of average
assets. First Federal's core income is based on appraisal earnings which
factors out unusual or nonrecurring items and the comparative group's core
income is computed on the same basis. First Federal's net interest income as a
percent of assets is 3.28% versus 3.64% for the comparatives. The difference is
attributable to First Federal's lower spread, which is caused principally by its
high cost of funds. Exhibit III, page 2 indicates that First Federal's cost of
funds was in the 30/th/ percentile for calendar year 1994, 15/th/ percentile for
1995, 11/th/ percentile for 1996, and the 11th percentile for the three months
ending March 31, 1997. Generally, this means that First Federal's average cost
of funds was higher than approximately 85% or more of OTS supervised thrifts in
its asset range. The peer group that First Federal is compared to is all
thrifts between $50 million and $100 million in assets filing quarterly reports
with the Office of Thrift Supervision.
First Federal's loan loss provisions are above its comparative group,
with loss provisions of .24% of assets versus .13% of assets for the comparative
group. However, this is not indicative of higher levels of asset problems at
First Federal. This results simply from First Federal making a significant
addition to its loan loss allowance for this year. First Federal's other
operating income is .04% of average assets, versus .33% for the comparative
group. First Federal's lower ratio results from its loan and deposit mix.
First Federal's operating expense ratio, at 1.01% of average assets,
is well below that of the comparative group, which is 2.54%. First Federal's
lower ratio results from its more traditional and efficient operation.
After First Federal completes its stock conversion, its core income as
a percentage of average assets will increase. Table III.3 projects that First
Federal's return on assets will be 1.66% at the midpoint, versus a mean of .87%
and median of .80% for the comparative group.
First Federal's pro forma equity to assets ratio at the midpoint is
33.6%, versus a mean of 15.1% and median of 13.1% for the comparative group.
First Federal's pro forma return on equity is 4.98% at the midpoint versus a
mean of 5.74% and median of 5.54% for the comparative group.
First Federal's recorded earnings have been adjusted for appraisal
purposes. The Association recorded higher than normal loan loss provisions and
the SAIF resolution assessment.
1
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.1 - Appraisal Earnings Adjustments
<TABLE>
<S> <C>
Net income, year ended June 30, 1997 $ 586,000
Plus SAIF assessment 312,000
Plus loan loss provisions in excess of normal amount--143,000 - 50,000 93,000
Less applicable taxes on above adjustments at 36% -146,000
---------------
Appraisal earnings, year ended June 30, 1997 $ 845,000
===============
</TABLE>
First Federal's asset composition is less passive than the comparative
group. First Federal has a higher ratio of loans to assets, lower ratio of
investments and mortgage-backed securities to assets, higher ratio of deposits
to assets, lower ratio of borrowings to assets, and higher ratio of equity to
assets. From the risk factor viewpoint, First Federal is on level the
comparative group. First Federal has a lower level of non performing assets.
First Federal's loan loss allowance is .56% of net loans, compared with the
comparative group, which is .51%. Its ratio of interest earning assets to
interest bearing liabilities (121.28%) is above the comparative group (116.26%).
First Federal's ratio will be much higher than the comparative group after
conversion. Assuming no withdrawals from deposits for the purchase of stock, at
the midpoint, First Federal's ratio would be approximately 149%, and at the
supermaximum, it would be approximately 159%. From an interest rate risk factor,
First Federal probably has more exposure than the comparative group.
We believe that an upward adjustment is necessary relative to
-----------------
financial aspects of First Federal.
Market Area
Section II describes First Federal's market area.
We believe that no adjustment is required for First Federal's market
-------------
area.
Management
The President, who functions as CEO, has been with First Federal 23
years, serving as CEO the last 15 years. The Secretary/Treasurer has served in
this capacity since 1988. There is little depth in management. The Board
recognizes this and the Association is currently searching for an executive with
skills to complement Messrs. Watts and Craft. The additional executive will
bring commercial banking skills in addition to adding to First Federal's depth
in management. First Federal currently has no management succession plan.
We believe no adjustment is required for First Federal's management.
-------------
Dividends
Table III.3 provides dividend information relative to the comparative
group and the thrift industry as a whole. The comparative group is paying a
mean yield on price of 2.30% and a median of 2.18%, while all public thrifts are
paying a mean of 1.80% and median of 1.76%. First Federal intends to pay an
initial rate of 3.0% ($.30 per share).
We believe that no adjustment is required relative to First Federal's
-------------
intention to pay dividends.
Liquidity
The Holding Company has never issued capital stock to the public, and
as a result, no existing market for the Common Stock exists. Although the
Holding Company intends to list its Common Stock on
2
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
the National Association of Securities Dealers Automated Quotation National
Market System, there can be no assurance that a liquid trading market will
develop.
A public market having the desirable characteristics of depth,
liquidity, and orderliness depends upon the presence, in the market place, of
both willing buyers and sellers of the Common Stock. These characteristics are
not within the control of the Association or the market.
The peer group includes companies with sufficient trading volume to
develop meaningful pricing characteristics for the stock. The market value of
the comparative group ranges from $5.81 million to $18.43 million, with a mean
value of $12.76 million and median value of $13.72 million. The midpoint of
First Federal's valuation range is $16.5 million at $10 a share, or 1,650,000
shares.
We believe that no adjustment is required relative to the liquidity of
-------------
First Federal's stock.
Thrift Equity Market Conditions
The SNL Thrift Index is summarized in Figure IV.1. As the table
demonstrates, the Thrift Index has performed well since the end of 1990. The
Index has grown as follows: Year ended December 31, 1991--increased 49.0% from
96.6 to 143.9; Year ended December 31, 1992--increased 39.7% to 201.1; Year
ended December 31, 1993--increased 25.6% to 252.5; Year ended December 31, 1994-
- -decreased 3.1% to 244.7; Year ended December 31, 1995--increased 53.9% to
376.5; Year ended December 31, 1996--increased 28.4% to 483.6; and Period ended
September 2, 1997--increased 40.1% to 677.6. It is market value weighted with a
base value of 100 as of March 31, 1984.
As shown in Figure IV.1, which is a graph of the SNL Thrift Index
covering from December 31, 1990 through September 2, 1997, the market, as
depicted by the index, has experienced fluctuations recently. It dipped in the
latter part of 1994, but recovered during the first quarter of 1995. During
1995, the Index continued a more robust increase and moved from 244.7 at year
end 1994 to 376.5 by December 31, 1995, an increase of 53.9%. However, the
Index was flat for the first six months of 1996, but it has picked up since June
30, 1996. It closed 1996 at 483.6, up 28.4% from 1995. It is up 40.1% (to
677.6) from December 31, 1996 to September 2, 1997.
The increase in the SNL Index, in general, has been parallel with the
increases in other equity markets with some interim fluctuations caused by
changes or anticipated changes in interest rates. Another factor, however, is
also notable. In other markets, increased prices are responding to improved
profits, with price to earnings ratios increasing as earnings potentials are
anticipated. However, the thrift IPO market has been affected by speculation
that the majority of the institutions will become viable consolidation
candidates and sell at some expanded multiple of book value.
SOUTH CAROLINA ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in South Carolina between January 1, 1996 and August, 1997. There
were four thrift acquisitions and no bank acquisitions announced during that
time frame. Currently, there are seven publicly held thrifts in the State of
South Carolina. There are sixty publicly held thrifts in the southeast region of
the country. Thrift acquisitions in South Carolina since January 1, 1996, have
averaged 229.5% of tangible book value and 26.9 times earnings. The median
price has been 206.9% of tangible book value and 22.1 times earnings. The PE
ratio is skewed by one acquisition with a ratio of 63.4.
EFFECT OF INTEREST RATES ON THRIFT STOCK
The current interest rate environment and the anticipated rate
environment will affect the pricing of thrift stocks and all other interest
sensitive stocks. As the economy continues to expand, the fear of inflation can
return. The Federal Reserve, in its resolve to curb inflation, has increased
rates in the past, but has more
3
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
recently relented and passed several opportunities to increase rates until March
25, 1997, when the Federal Open Market Committee ("FOMC") increased the discount
rate 25 basis points. In some minds, this was an attempt to head off
inflationary trends. According to the FOMC, "This action was taken in light of
persisting strength in demand, which is progressively increasing the risk of
inflationary imbalances developing in the economy that would eventually
undermine the long expansion."/1/ This increase was clearly telegraphed by
Chairman Greenspan who voiced concern about the levels of the equity markets.
Following the March 25 increase, unemployment rates were announced at the 5.2%
level, down from the 5.5% level at the beginning of 1996, and significantly down
from the 6.7% level at the beginning of 1994./2/ The good news about
unemployment gave way to speculation that the March 25/th/ increase was just the
first of at least two or three increases, and the speculation was given some
credence at that time by rises in the Employment Cost index, an increase in Unit
Labor Cost, and an upward trend in the price of crude oil. By April 1, 1997,
following the rate increase, the equities markets lost all of the gains
registered since the first of the year. By the end of April 1997, the market had
begun a rebound and has trended upward since then. There have been specific days
of price adjustment, but the overall trend is up. Chairman Greenspan, in recent
public appearances, has not articulated concerns about market levels and
inflation.
The thrift equities market is following the market in general.
However, the thrift equities market can continue to be influenced by the
speculation that there will eventually be a buyout, and the fact that thrift IPO
stock can be purchased at significant discounts from book value. These two
facts could keep the thrift equities market from falling as much as the other
general markets if there is a period of adjustment. However, if the mergers and
acquisitions levels drop, if there were another sharp and sustained rise in the
interest rates, or if other equity markets have protracted adjustment, the
market in thrift equities would also adjust. Recent earnings reports by
financial institutions that have made major acquisitions in the recent past have
been disappointing. Even Wells Fargo, the master at merger profitability, had
to admit that its latest acquisition produced losses.
What is likely to happen in the short to intermediate term is that
rates will float around current levels for the next few months. The yield curve
will continue to be of normal configuration. Most economists feel that a rise
of three quarters of one percent on the short side and less on the long side
could severely dampen the economy, but such increases are highly unlikely at
this time. Following the March increase in rates, additional data has caused
the concerns about rising inflation to moderate. Since lower rates benefit
corporate earnings, the housing and stock markets, and the bond market, the
economy has continued its expansion, but at a slightly slower rate.
With the Federal Reserve always ready to raise (or lower) rates as
economic conditions warrant, it is likely that before this expansion cycle is
over, interest rates will rise. The supply and demand portion of the equation
is nicely balanced, and a continuation of such equilibrium will probably
restrain rising rates in the near term. It is even possible that in the short-
term, interest rates might ease a bit.
The consumer seems happier now than in the past. Job markets are
strong and the unemployment rate was recently 4.8%--the lowest since November
1973. Consumer confidence is at a 28 year high. Our continuing economic health
has always been dependent upon meaningful consumer participation, because
consumers (household sector) actually account for 68% of the Gross Domestic
Product ("GDP").
In the second quarter of 1997, consumers seemed to rein in their
consumption. This lowering of consumption may be only to catch their economic
breath and repay credit card debt and other personal debt which has accumulated.
Manufacturing is still strong, even with the slight drop in retail sales, home
purchases and other big ticket items.
- -------------------------
/1/ US Financial Data, published by the Research Division of the Federal Reserve
Bank of St. Louis, MO.
/2/ National Economic Trends, the Federal Reserve Bank of St. Louis, MO.
4
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
With consumer confidence at a high level, jobs plentiful, inflation
seemingly in check, and the economy healthy and continuing to expand, why
shouldn't the economy continue to roll onward and upward? From an analytical
view, there is little on the economic horizon at this time that would interfere
with continuing economic expansion for at least another 12 to 18 months.
Thrift net interest margins have remained stable. The equilibrium in
the supply and demand portion of the interest rate market has helped continue
the profitability mode of the industry that started in 1993. Access to mortgage-
backed securities and derivatives has made it possible for many to be profitable
without making loans in significant volumes. With reduced deposit insurance
premiums, perhaps they will become more willing to compete for customer
deposits. However, even with portfolios replete with adjustable rate loans and
adjustable MBS's, there remains a real fear that a quickly rising rate
environment can cause the cost of funds to rise faster than the adjustable
assets can accommodate, and accordingly, spreads would narrow. If rates rise in
a slow and orderly manner, then the negative impact on spreads will be less, and
the adjustable rate assets will have time to rise and protect rate spreads.
As clearly illustrated, the SNL Thrift Index has performed well over
the last six years. It moved in tandem with all interest sensitive stocks and
reflected the weakness in the market as investors began to consider the
importance of increases in rates and their impact on the net interest margins of
thrifts. The clear implication is that rising interest rates will have a
negative impact on earnings.
Figure IV.2 graphically displays the rate environment since February
27, 1997. At that time, the yield curve was relatively flat, with only a 119
basis point ("BP") difference between the one year treasury bill rate and the 30
year treasury. Since that time, the yield curve has changed very little with a
106 BP spread between the one year treasury bill rate and the 30 year treasury
rate at August 29, 1997.
At February 27, 1997, the spread between the 1 year T-Bill and the 5
year T-Note was 73 BP, and the spread between the 5 year T-Note and the 30 year
bond was 46 BP. On August 29, 1997, the spreads were 64 and 42 BP,
respectively.
From February 27, 1997 to August 29, 1997, the Fed Funds rate
increased 40 BP and the Prime Rate increased 25 BP.
Increased cost of funds will serve to narrow the net interest margins
of thrifts. A thrift's ability to maintain net interest margins through
business cycles is important to investors, unless thrifts can offset the decline
in net interest income by other sources of revenue or reductions in noninterest
expense. The former is difficult and the latter is unlikely.
First Federal, with its interest rate risk, is more vulnerable to
rising rates than most. Management of First Federal must pay attention to
spread management as well as gap management, to improve the Association's
profitability. Its projected growth in consumer and commercial loans combined
with its projected growth in lower rate deposits will produce a higher spread.
Also, First Federal's capital level, especially on a pro forma basis, mitigates
the level of declining net interest income associated with rising rates for an
institution with a negative repricing gap.
During 1993, conversion stocks often experienced first day 30% or more
increases in value. As Table IV.3 shows, recent price appreciation has become
quite robust, approaching 1993 levels. Table IV.3 provides information on nine
conversions completed since February 28, 1997 and listed on major exchanges.
The average change in price since conversion is a gain of 57.8% and the median
change is a gain of 55.0%. Within that group, all have increased in value with
a range of a low of 36.3% to a high of 80.0%. The average increase in value at
one day, one week, and one month after conversion has been 43.4%, 44.4%, and
47.4%, respectively. The median increase in value at one day, one week, and one
month after conversion has been 33.8%, 37.5%, and 40.0%, respectively.
5
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Because of the lack of complete earnings information on recent
conversions, a meaningful comparison of the price earnings ratios is difficult
to make. However, there is information, albeit limited, to review the price to
book ratio. The average price-to-book ratio, as of September 2, 1997, is 99.2%
and the median is 96.3%. That compares to the offering price to pro forma book,
where the average was 71.2% and the median was 71.9%.
We believe a downward adjustment is required for the new issue
-------------------
discount.
Adjustments Conclusion
Adjustments Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No Change Upward Down
<S> <C> <C> <C>
Financial Aspects X
Market Area X
Management X
Dividends X
Liquidity X
Thrift Equity Market Conditions X
- --------------------------------------------------------------------------------
</TABLE>
Valuation Approach
Typically, investors rely on the price/earnings ratio as the most
appropriate indicator of value. We consider price/earnings to be one of the
important pricing methods in valuing a thrift stock. Price/book is a well
recognized yardstick for measuring the value of financial institution stocks in
general. Another method of viewing thrift values is price/assets, which is more
meaningful in situations where the subject is thinly capitalized. Given the
healthy condition of the thrift industry today, more emphasis is placed on
price/earnings and price/book. Generally, price/earnings and price/book should
be considered in tandem.
Table III.3 presents First Federal's pro forma ratios and compares
them to the ratios of its comparative group and the publicly held thrift
industry as a whole. First Federal's net income for the twelve months ended June
30, 1997, was approximately $586,000, with adjustments of $259,000 required to
determine appraisal earnings of $845,000. Management has indicated an
intention, through its plans for diversification of deposit and loan products,
to exhibit the flexibility in operations needed to serve both the public and the
institution. The Association is well positioned to manage reasonable interest
rate variations. The Association projects modest growth.
The comparative group traded at an average of 21.4 times earnings at
September 2, 1997, and at 111.1% of book value. The comparative group traded at
a median of 17.5 times earnings and a median of 112.6% of book value. At the
midpoint of the valuation range, First Federal is priced at 13.6 times earnings
and 66.7% of book value. At the maximum end of the range, First Federal is
priced at 14.8 times earnings and 70.6% of book value. At the supermaximum,
First Federal is priced at 16.2 times earnings and 74.4% of book value.
The midpoint valuation of $16,500,000 represents a discount of 40.0%
from the average and a discount of 40.8% from the median of the comparative
group on a price/book basis. The price/earnings ratio for First Federal at the
midpoint represents a discount of 36.4% from the comparative group's mean and a
discount of 22.3% from the median price/earnings ratio.
6
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
The maximum valuation of $18,975,000 represents a discount of 36.5%
from the average and 37.3% from the median of the comparative group on a
price/book basis. The price/earnings ratio for First Federal at the maximum
represents a discount of 30.8% from the average and a discount of 15.4% from the
median of the comparative group.
As shown in Table IV.3, conversions closing since February 28, 1997,
have closed at an average price to book ratio of 71.2% and median of 71.9%.
First Federal's pro forma price to book ratio is 66.7% at the midpoint, 70.6% at
the maximum, and 74.4% at the supermaximum of the range. At the midpoint, First
Federal is 6.3% below the average and 7.2% below the median. At the maximum of
the range, First Federal is .8% below the average and 1.8% below the median. At
the supermaximum of the range, First Federal's pro forma price to book ratio is
4.5% above the average and 3.5% above the median.
Valuation Conclusion
We believe that as of September 2, 1997, the estimated pro forma
market value of First Federal was $16,500,000. The resulting valuation range
was $14,025,000 at the minimum to $18,975,000 at the maximum, based on a range
of 15% below and 15% above the midpoint valuation. The supermaximum was
$21,821,250, based on 1.15 times the maximum. Pro forma comparisons with the
comparative group are presented in Table III.3 based on calculations shown in
Exhibit VII.
7
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.2 - South Carolina Acquisitions
(Announced since January 1, 1996)
<TABLE>
<CAPTION>
Buyer ST Seller ST ($000) ($000) Date Date
- ----- -- ------ -- ------- ------- ---- ----
Buyer's Seller's
Total Total Completed/
Assets Assets Announce Terminated
<S> <C> <C> <C> <C> <C> <C> <C>
Carolina First Corp SC First SE Fin'l Corp SC 1,613,906 334,751 07/01/97 NA
First Fin'l Holdings SC Investors Savings Bk SC 1,602,018 62,021 06/25/97 NA
CCB Financial Corp NC American Federal Bnk SC 5,384,110 1,394,874 02/18/97 08/01/97
Carolina First Corp SC Lowcountry SB SC 1,501,124 75,361 01/29/97 07/21/97
Maximum 5,384,110 1,394,874
Minimum 1,501,124 62,021
Average 2,525,290 466,752
Median 1,607,962 205,056
</TABLE>
<TABLE>
<CAPTION>
Buyer ST Seller ST ($M) (%) (%) EPS (x)
- ----- -- ------ -- ----- ---- ---- -------
Ann'd Ann'd Ann'd Ann'd
Deal Deal Deal Pr/ Deal Pr/
Value Pr/Bk Tg Bk 4-Qtr
<S> <C> <C> <C> <C> <C> <C> <C>
Carolina First Corp SC First SE Fin'l Corp SC 64.7 189.1 189.1 NM
First Fin'l Holdings SC Investors Savings Bk SC 11.7 173.5 173.5 19.7
CCB Financial Corp NC American Federal Bnk SC 341.6 305.7 330.7 24.4
Carolina First Corp SC Lowcountry SB SC 13.5 224.7 224.7 63.4
Maximum 341.6 305.7 330.7 63.4
Minimum 11.7 173.5 173.5 -
Average 107.9 223.2 229.5 26.9
Median 39.1 206.9 206.9 22.1
</TABLE>
Source: SNL & F&C calculations 8
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.3 - Recent Conversions
(Completed since February 28, 1997)
<TABLE>
<CAPTION>
Conversion Gross Offering
Assets Proceeds Price
Ticker Short Name State IPO Date ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C>
FSPT FirstSpartan Financial Corp. SC 07/09/97 375,526 88,608 20.000
GOSB GSB Financial Corp. NY 07/09/97 96,323 22,483 10.000
FBNW FirstBank Corp. ID 07/02/97 133,194 19,838 10.000
CFBC Community First Banking Co. GA 07/01/97 352,532 48,271 20.000
HCBB HCB Bancshares Inc. AR 05/07/97 171,241 26,450 10.000
PSFC Peoples-Sidney Financial Corp. OH 04/28/97 86,882 17,854 10.000
HMLK Hemlock Federal Financial Corp IL 04/02/97 146,595 20,763 10.000
GSLA GS Financial Corp. LA 04/01/97 86,521 34,385 10.000
MRKF Market Financial Corp. OH 03/27/97 45,547 13,357 10.000
Maximum 375,526 88,608 20.000
Minimum 45,547 13,357 10.000
Average 166,040 32,445 12.222
Median 133,194 22,483 10.000
</TABLE>
Source: SNL & F&C calculations 9
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.3 - Recent Conversions
(Completed since February 28, 1997)
<TABLE>
<CAPTION>
Conversion Pricing Ratios
----------------------------------------------------------
Price/ Price/ Price/ Price/ Current Current Current
Pro-Forma Pro-Forma Pro-Forma Adjusted Stock Price/ Price/ Tang
Book Value Tang. Book Earnings Assets Price Book Value Book Value
Ticker (%) (%) (x) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
FSPT 73.0 73.0 26.0 19.1 35.500 NA NA
GOSB 73.4 73.4 23.2 18.9 14.625 NA NA
FBNW 71.9 71.9 19.2 13.0 18.000 NA NA
CFBC 72.7 72.7 36.1 12.0 34.500 NA NA
HCBB 72.0 72.0 29.0 13.4 13.625 NA NA
PSFC 71.2 71.2 11.5 17.0 15.500 NA NA
HMLK 71.6 71.6 37.5 12.4 15.375 105.5 105.5
GSLA 63.8 63.8 38.7 28.4 15.750 96.3 96.3
MRKF 71.1 71.1 26.2 22.7 14.188 95.7 95.7
Maximum 73.4 73.4 38.7 28.4 35.500 105.5 105.5
Minimum 63.8 63.8 11.5 12.0 13.625 95.7 95.7
Average 71.2 71.2 27.5 17.4 19.674 99.2 99.2
Median 71.9 71.9 26.2 17.0 15.500 96.3 96.3
</TABLE>
Source: SNL & F&C calculations 10
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.3 - Recent Conversions
(Completed since February 28, 1997)
<TABLE>
<CAPTION>
Post Conversion Price Increase (Decrease)
Price One Price One Price One -----------------------------------------------
Day After Week After Month After One One One To
Conversion Conversion Conversion Day Week Month Date
Ticker ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
FSPT 36.688 37.000 35.625 83.4 85.0 78.1 77.5
GOSB 14.625 14.875 14.375 46.3 48.8 43.8 46.3
FBNW 15.813 15.563 17.750 58.1 55.6 77.5 80.0
CFBC 31.875 33.000 34.000 59.4 65.0 70.0 72.5
HCBB 12.625 12.750 12.875 26.3 27.5 28.8 36.3
PSFC 12.563 12.875 13.250 25.6 28.8 32.5 55.0
HMLK 12.875 12.875 13.000 28.8 28.8 30.0 53.8
GSLA 13.375 13.750 14.000 33.8 37.5 40.0 57.5
MRKF 12.938 12.250 12.625 29.4 22.5 26.3 41.9
Maximum 36.688 37.000 35.625 83.4 85.0 78.1 80.0
Minimum 12.563 12.250 12.625 25.6 22.5 26.3 36.3
Average 18.153 18.326 18.611 43.4 44.4 47.4 57.8
Median 13.375 13.750 14.000 33.8 37.5 40.0 55.0
</TABLE>
Source: SNL & F&C calculations 11
<PAGE>
FERGUSON & COMPANY Table IV.4 Section IV
- ------------------ Comparison of Pricing Ratios ----------
<TABLE>
<CAPTION>
Group Percent Premium
First Compared to (Discount) Versus
FS&LA -------------------------- --------------------------
Cheraw, SC Average Median Average Median
----------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Comparison of PE ratio at
midpoint to:
- -----------------------------
Comparative group 13.6 21.4 17.5 (36.4) (22.3)
South Carolina thrifts 13.6 18.8 18.8 (27.7) (27.7)
Southeast Region thrifts 13.6 17.7 18.0 (23.2) (24.4)
All public thrifts 13.6 16.8 16.7 (19.0) (18.6)
Recent conversions 13.6 27.5 26.2 (50.5) (48.1)
Comparison of PE ratio at
maximum to:
- -----------------------------
Comparative group 14.8 21.4 17.5 (30.8) (15.4)
South Carolina thrifts 14.8 18.8 18.8 (21.3) (21.3)
Southeast Region thrifts 14.8 17.7 18.0 (16.4) (17.8)
All public thrifts 14.8 16.8 16.7 (11.9) (11.4)
Recent conversions 14.8 27.5 26.2 (46.2) (43.5)
Comparison of PE ratio at
supermaximum to:
- -----------------------------
Comparative group 16.2 21.4 17.5 (24.3) (7.4)
South Carolina thrifts 16.2 18.8 18.8 (13.8) (13.8)
Southeast Region thrifts 16.2 17.7 18.0 (8.5) (10.0)
All public thrifts 16.2 16.8 16.7 (3.6) (3.0)
Recent conversions 16.2 27.5 26.2 (41.1) (38.2)
Comparison of PB ratio at
midpoint to:
- -----------------------------
Comparative group 66.7 111.1 112.6 (40.0) (40.8)
South Carolina thrifts 66.7 180.7 180.7 (63.1) (63.1)
Southeast Region thrifts 66.7 152.1 145.1 (56.1) (54.0)
All public thrifts 66.7 149.9 142.7 (55.5) (53.3)
Recent conversions 66.7 71.2 71.9 (6.3) (7.2)
Comparison of PB ratio at
maximum to:
- -----------------------------
Comparative group 70.6 111.1 112.6 (36.5) (37.3)
South Carolina thrifts 70.6 180.7 180.7 (60.9) (60.9)
Southeast Region thrifts 70.6 152.1 145.1 (53.6) (51.3)
All public thrifts 70.6 149.9 142.7 (52.9) (50.5)
Recent conversions 70.6 71.2 71.9 (0.8) (1.8)
Comparison of PB ratio at
supermaximum to:
- -----------------------------
Comparative group 74.4 111.1 112.6 (33.0) (33.9)
South Carolina thrifts 74.4 180.7 180.7 (58.8) (58.8)
Southeast Region thrifts 74.4 152.1 145.1 (51.1) (48.7)
All public thrifts 74.4 149.9 142.7 (50.4) (47.9)
Recent conversions 74.4 71.2 71.9 4.5 3.5
</TABLE>
Source: SNL & F&C calculations 12
<PAGE>
FERGUSON & COMPANY Figure IV.1 - SNL Index Section IV
- ------------------ ----------
<TABLE>
<CAPTION>
% CHANGE SINCE
---------------------------------------
SNL PREVIOUS
DATE INDEX DATE 12/31/96
---- ----- ---- --------
<S> <C> <C> <C>
12/31/90 96.6
12/31/91 143.9 49.0%
12/31/92 201.1 39.7%
12/31/93 252.5 25.6%
12/31/94 244.7 -3.1%
12/31/95 376.5 53.9%
12/31/96 483.6 28.4%
3/31/97 527.7 9.1% 9.1%
4/30/97 537.2 1.8% 11.1%
5/30/97 577.9 7.6% 19.5%
6/30/97 624.6 8.1% 29.2%
7/31/97 684.5 9.6% 41.5%
9/2/97 677.6 -1.0% 40.1%
</TABLE>
[GRAPH APPEARS HERE]
Source: SNL & F&C calculations 13
<PAGE>
FERGUSON & COMPANY Figure IV.2 - Interest Rates Section IV
- ------------------ ----------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------- ---------------
1 Year 5 Year 10 Year 30 Year 1 to 30
Fed Fds (*) T-bill Treas. Treas. Treas. Yr. Spread
- --------------------------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
27-Feb-97 5.16 5.52 6.25 6.45 6.71 1.19
- --------------------------------------------------------------------------------------------------- ----------------
14-Mar-97 5.19 5.69 6.41 6.58 6.85
31-Mar-97 5.40 5.91 6.75 6.96 7.15 1.24
- --------------------------------------------------------------------------------------------------- ----------------
18-Apr-97 5.48 6.00 6.80 6.92 7.13
30-Apr-97 5.45 5.89 6.57 6.71 6.95 1.06
- --------------------------------------------------------------------------------------------------- ----------------
16-May-97 5.49 5.85 6.54 6.68 6.90
30-May-97 5.43 5.85 6.60 6.75 6.99 1.14
- --------------------------------------------------------------------------------------------------- ----------------
13-Jun-97 5.48 5.71 6.40 6.52 6.80
27-Jun-97 5.42 5.64 6.33 6.45 6.75 1.11
- --------------------------------------------------------------------------------------------------- ----------------
18-Jul-97 5.44 5.53 6.14 6.23 6.52
8-Aug-97 5.50 5.57 6.22 6.37 6.63 1.06
- --------------------------------------------------------------------------------------------------- ----------------
22-Aug-97 5.59 5.53 6.12 6.27 6.57
29-Aug-97 5.56 5.60 6.24 6.38 6.66 1.06
- --------------------------------------------------------------------------------------------------- ----------------
Rates February 27, 1997 through August 29, 1997
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------- ----------------
1 Year 5 Year 10 Year 30 Year 1 to 30
Fed Fds (*) T-bill Treas. Treas. Treas. Yr. Spread
- ----------------------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
29-Aug-97 5.56 5.60 6.24 6.38 6.66 1.06
- ----------------------------------------------------------------------------------------------- ----------------
Current Yield Curve
</TABLE>
[GRAPH APPEARS HERE]
Source: Financial Data, Federal Reserve Bank of St. Louis, MO.
14
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit I - Firm Qualifications
Ferguson & Company (F&C), is a financial, economic, and regulatory
consulting firm providing services to financial institutions. It is located in
Irving, Texas. Its services to financial institutions include:
. Mergers and acquisition services
. Business plans
. Fairness opinions and conversion appraisals
. Litigation support
. Operational and efficiency consulting
. Human resources evaluation and management
F&C developed several financial institution databases of information
derived from periodic financial reports filed with regulatory authorities by
financial institutions. For example, F&C developed TAFS and BankSource. TAFS
includes thrifts filing TFR's with the OTS and BankSource includes banks and
savings banks filing call reports with the FDIC. Both databases include
information from the periodic reports plus numerous calculations derived from
F&C's analysis. In addition, both databases are interactive, permitting the
user to conduct merger analysis, do peer group comparisons, and a number of
other items. In 1994, F&C sold its electronic publishing segment to Sheshunoff
Information Services Inc., Austin, Texas.
Brief biographical information is presented below on F&C's principals:
WILLIAM C. FERGUSON, MANAGING PARTNER
- -------------------------------------
Mr. Ferguson has approximately 30 years of experience providing various services
to financial institutions. He was a partner in a CPA firm prior to founding F&C
in 1984. Mr. Ferguson is a frequent speaker for financial institution seminars
and he has testified before Congressional Committees several times on his
analysis of the state of the thrift industry. Mr. Ferguson has a B.A. degree
from Austin Peay University and an M.S. degree from the University of Tennessee.
He is a CPA.
CHARLES M. HEBERT, PRINCIPAL
- ----------------------------
Mr. Hebert has over 30 years of experience providing services to and managing
financial institutions. He spent 7 years as a national bank examiner, 14 years
in bank management, 5 years in thrift management, and has spent the last 8 years
on the F&C consulting staff. Mr. Hebert holds a B.S. degree from Louisiana State
University.
ROBIN L. FUSSELL, PRINCIPAL
- ---------------------------
Mr. Fussell has over 25 years of experience providing professional services to
and managing financial institutions. He worked on the audit staff of a "Big
Six" accounting firm for 12 years, served as CFO of a thrift for 3 years, and
has worked in financial institution consulting for the last 13 years. He is a
co-founder of F&C. He holds a B.S. degree from East Carolina University. He is
a CPA.
1
<PAGE>
EXHIBIT 11
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 12.750
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94 24.125
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 12.125
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 21.750
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 17.375
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 50.500
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.500
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 21.000
FFBS FFBS BanCorp Inc. Columbus MS SE SAIF NASDAQ 07/01/93 23.000
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 33.000
FFDB FirstFed Bancorp Inc. Bessemer AL SE SAIF NASDAQ 11/19/91 16.531
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 29.313
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 32.000
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 7.750
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 22.500
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 20.000
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86 32.000
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 22.250
HARB Harbor Florida Bancorp (MHC) Fort Pierce FL SE SAIF NASDAQ 01/06/94 54.500
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87 19.000
KSAV KS Bancorp Inc. Kenly NC SE SAIF NASDAQ 12/30/93 18.500
LIFB Life Bancorp Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 24.625
PALM Palfed Inc. Aiken SC SE SAIF NASDAQ 12/15/85 16.125
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 26.000
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 20.625
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96 21.250
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 20.000
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80 14.125
Maximum 54.500
Minimum 7.750
Average 23.186
Median 21.125
</TABLE>
Source: SNL & F&C calculations 1
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 289.47 18.8 186.7 227.3 10.5 0.91 2,730,474 5.6 4.7 0.68 0.64
BFSB 27.56 15.5 135.9 135.9 20.4 2.32 135,455 14.2 14.2 1.56 1.28
BKUNA 107.54 21.3 159.8 197.2 6.0 - 1,807,192 5.6 4.9 0.57 0.58
CFFC 27.74 12.9 115.3 115.3 15.8 2.58 175,414 13.7 13.7 1.69 1.28
CFTP 80.42 22.9 124.5 124.5 38.5 1.73 209,035 27.5 27.5 0.76 1.61
CNIT 83.48 16.5 162.3 176.7 11.7 1.98 709,550 7.2 6.7 3.06 0.75
EBSI 93.38 16.0 132.5 132.5 11.0 3.64 848,490 8.3 8.3 1.03 0.76
FFBH 102.82 18.4 128.4 128.4 19.2 1.14 535,204 15.0 15.0 1.14 1.06
FFBS 35.82 18.7 135.5 135.5 27.4 2.17 130,762 19.2 19.2 1.23 1.46
FFCH 209.77 15.9 205.9 205.9 12.6 2.18 1,667,178 6.1 6.1 2.08 0.84
FFDB 19.03 12.5 114.2 125.2 10.8 3.03 176,528 9.4 8.7 1.32 0.94
FFFC 132.51 19.5 168.4 172.0 23.7 1.64 558,886 13.2 12.9 1.50 1.34
FFLC 74.16 22.1 142.1 142.1 19.2 1.50 387,097 13.5 13.5 1.45 1.01
FGHC 23.66 21.0 184.1 200.8 15.1 0.69 156,383 8.2 7.6 0.37 0.78
FLFC 173.81 14.7 182.9 202.9 13.5 1.78 1,288,919 7.4 6.7 1.53 0.94
FOBC 47.48 14.5 115.9 121.6 13.3 2.90 356,718 11.1 10.6 1.38 0.97
FSTC 58.85 11.4 177.9 228.7 17.3 1.38 338,857 9.7 7.7 2.80 1.90
FTF 39.83 13.3 148.0 148.0 23.3 2.52 171,358 15.7 15.7 1.67 1.73
HARB 270.88 20.7 289.1 299.0 24.3 2.57 1,116,718 8.4 8.1 2.63 1.22
HBS 23.76 15.2 113.4 117.6 15.8 2.95 150,416 13.9 13.5 1.25 1.15
KSAV 16.38 12.0 114.1 114.2 15.4 3.24 106,121 13.5 13.5 1.54 1.24
LIFB 242.48 18.7 154.5 159.1 16.3 1.95 1,488,257 10.6 10.3 1.32 0.86
PALM 85.21 21.8 155.5 155.5 12.8 0.74 664,863 8.2 8.2 0.74 0.60
PFSL 42.44 16.7 176.2 176.2 11.2 3.46 378,700 6.4 6.4 1.56 0.69
SOPN 75.88 17.6 113.0 113.0 25.8 3.88 294,217 22.8 22.8 1.17 1.69
SSM 40.33 21.0 131.7 131.7 38.0 2.12 106,115 28.9 28.9 1.01 1.71
TWIN 17.07 20.6 123.7 123.7 15.9 3.20 107,345 12.9 12.9 0.97 0.75
VABF 70.29 24.8 166.2 166.2 11.4 1.42 617,818 6.9 6.9 0.57 0.46
Maximum 289.47 24.8 289.1 299.0 38.5 3.88 2,730,474 28.9 28.9 3.06 1.90
Minimum 16.38 11.4 113.0 113.0 6.0 - 106,115 5.6 4.7 0.37 0.46
Average 89.72 17.7 152.1 159.9 17.7 2.13 621,931 12.2 12.0 1.38 1.08
Median 72.23 18.0 145.1 145.1 15.8 2.15 367,709 10.8 10.4 1.32 0.99
</TABLE>
Source: SNL & F&C calculations 2
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 10.83 N 09/02/97 0.87 19.9 0.16 0.66 11.50
BFSB 8.90 N 09/02/97 - 15.9 0.38 1.22 8.52
BKUNA 8.04 N 09/02/97 0.60 21.7 0.14 0.48 8.00
CFFC 9.23 N 09/02/97 0.39 13.9 0.39 1.16 8.41
CFTP 4.97 N 09/02/97 0.30 29.0 0.15 1.27 4.30
CNIT 10.46 N 09/02/97 0.42 15.2 0.83 0.81 11.22
EBSI 8.78 N 09/02/97 1.07 15.3 0.27 0.76 8.92
FFBH 6.61 N 09/02/97 0.19 22.8 0.23 0.81 5.24
FFBS 7.50 N 09/02/97 0.03 23.0 0.25 1.17 6.06
FFCH 13.67 N 09/02/97 1.61 15.3 0.54 0.84 13.68
FFDB 9.54 N 09/02/97 0.72 12.2 0.34 0.98 10.05
FFFC 9.56 N 09/02/97 0.18 17.9 0.41 1.35 10.37
FFLC 6.56 N 09/02/97 0.19 20.5 0.39 0.96 6.91
FGHC 9.53 N 09/02/97 1.41 16.2 0.12 1.00 11.97
FLFC 12.81 N 09/02/97 0.81 13.7 0.41 1.02 13.61
FOBC 8.35 N 09/02/97 0.15 14.7 0.34 0.93 8.36
FSTC 19.95 N 09/02/97 NA 5.2 1.55 3.68 38.97
FTF 10.43 N 09/02/97 0.12 11.8 0.47 1.86 11.74
HARB 14.82 N 09/02/97 0.46 20.3 0.67 1.21 14.61
HBS 7.72 N 09/02/97 1.97 14.4 0.33 1.12 7.99
KSAV 8.86 N 09/02/97 0.35 12.2 0.38 1.39 10.15
LIFB 8.06 N 09/02/97 0.39 18.7 0.33 0.89 8.33
PALM 7.44 N 09/02/97 2.12 16.1 0.25 0.82 9.99
PFSL 11.23 N 09/02/97 0.10 17.1 0.38 0.66 10.39
SOPN 6.96 N 09/02/97 0.08 16.1 0.32 1.80 7.60
SSM 4.84 N 09/02/97 - 38.0 0.14 0.98 2.77
TWIN 5.88 N 09/02/97 0.08 16.7 0.30 0.91 7.08
VABF 6.82 N 09/02/97 0.68 20.8 0.17 0.54 7.98
Maximum 19.95 2.12 38.0 1.55 3.68 38.97
Minimum 4.84 - 5.2 0.12 0.48 2.77
Average 9.23 0.57 17.7 0.38 1.12 10.17
Median 8.82 0.39 16.1 0.34 0.98 8.72
</TABLE>
Source: SNL & F&C calculations 3
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held South Carolina Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 33.000
PALM Palfed Inc. Aiken SC SE SAIF NASDAQ 12/15/85 16.125
Maximum 33.000
Minimum 16.125
Average 24.563
Median 24.563
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held South Carolina Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFCH 209.77 15.9 205.9 205.9 12.6 2.18 1,667,178 6.1 6.1 2.08 0.84
PALM 85.21 21.8 155.5 155.5 12.8 0.74 664,863 8.2 8.2 0.74 0.60
Maximum 209.77 21.8 205.9 205.9 12.8 2.18 1,667,178 8.2 8.2 2.08 0.84
Minimum 85.21 15.9 155.5 155.5 12.6 0.74 664,863 6.1 6.1 0.74 0.60
Average 147.49 18.8 180.7 180.7 12.7 1.46 1,166,021 7.2 7.2 1.41 0.72
Median 147.49 18.8 180.7 180.7 12.7 1.46 1,166,021 7.2 7.2 1.41 0.72
</TABLE>
Source: SNL & F&C calculations 5
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held South Carolina Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFCH 13.67 N 09/02/97 1.61 15.3 0.54 0.84 13.68
PALM 7.44 N 09/02/97 2.12 16.1 0.25 0.82 9.99
Maximum 13.67 2.12 16.1 0.54 0.84 13.68
Minimum 7.44 1.61 15.3 0.25 0.82 9.99
Average 10.56 1.87 15.7 0.40 0.83 11.84
Median 10.56 1.87 15.7 0.40 0.83 11.84
</TABLE>
Source: SNL & F&C calculations 6
<PAGE>
FERGUSON & COMPANY Exhibit II.3 - Comparatives General Characteristics
- ------------------
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY 2 68,628 07/26/93 23.250 5.81
CIBI Community Investors Bancorp Bucyrus OH 3 92,304 02/07/95 15.500 14.41
CKFB CKF Bancorp Inc. Danville KY 1 60,812 01/04/95 19.000 18.05
HZFS Horizon Financial Svcs Corp. Oskaloosa IA 3 85,969 06/30/94 18.875 8.03
INCB Indiana Community Bank SB Lebanon IN 3 91,329 12/15/94 15.750 14.52
JOAC Joachim Bancorp Inc. De Soto MO 1 34,938 12/28/95 14.500 10.48
LOGN Logansport Financial Corp. Logansport IN 1 83,152 06/14/95 14.625 18.43
MCBN Mid-Coast Bancorp Inc. Waldoboro ME 2 59,739 11/02/89 25.500 5.93
NWEQ Northwest Equity Corp. Amery WI 3 96,891 10/11/94 16.750 14.05
SFFC StateFed Financial Corporation Des Moines IA 2 85,679 01/05/94 22.000 17.24
SOBI Sobieski Bancorp Inc. South Bend IN 3 81,754 03/31/95 16.438 12.74
THR Three Rivers Financial Corp. Three Rivers MI 4 91,165 08/24/95 16.250 13.38
Maximum 4 96,891 25.500 18.43
Minimum 1 34,938 14.500 5.81
Average 2 77,697 18.203 12.76
Median 3 84,416 16.594 13.72
</TABLE>
Source: SNL & F&C calculations 7
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Total Mortgage- Investment & Loan
Total Cash and Backed Net Foreclosed Servicing Total Other Total
Assets Invest Securities Loans Real Estate Rights Intangibles Assets Deposits
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 68,628 16,964 8,580 48,247 - - - 2,863 52,322
Community Investors Bancorp 92,304 14,671 1,665 76,446 - - - 1,187 72,911
CKF Bancorp Inc. 60,812 4,479 435 55,293 - - - 1,040 42,213
Horizon Financial Svcs Corp. 85,969 31,519 - 52,193 551 - - 1,706 57,641
Indiana Community Bank SB 91,329 16,913 2,828 71,330 - - - 3,086 79,413
Joachim Bancorp Inc. 34,938 9,979 84 24,236 - - - 723 24,606
Logansport Financial Corp. 83,152 19,871 8,032 59,490 8 - - 3,783 60,400
Mid-Coast Bancorp Inc. 59,739 7,905 - 49,618 - - - 2,216 42,391
Northwest Equity Corp. 96,891 15,443 7,324 77,644 24 - - 3,362 63,213
StateFed Financial Corporation 85,679 12,496 - NA 2,703 - - 2,302 50,346
Sobieski Bancorp Inc. 81,754 18,091 13,709 61,135 11 - - 2,517 59,387
Three Rivers Financial Corp. 91,165 27,383 9,277 60,033 936 - 50 2,669 59,997
Maximum 96,891 31,519 13,709 77,644 2,703 - 50 3,783 79,413
Minimum 34,938 4,479 - 24,236 - - - 723 24,606
Average 77,697 16,310 4,328 57,788 353 - 4 2,288 55,403
Median 84,416 16,178 2,247 59,490 4 - - 2,410 58,514
</TABLE>
Source: SNL & F&C calculatins 8
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Regulatory Regulatory
Total Subord Other Total Preferred Common Total Tangible Core
Borrowings Debt Liabilities Liabilities Equity Equity Equity Capital Capital
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 9,263 - 1,052 62,637 - 5,991 5,991 NA NA
Community Investors Bancorp 7,810 - 470 81,191 - 11,113 11,113 10,408 10,408
CKF Bancorp Inc. 3,233 - 794 46,240 - 14,572 14,572 12,749 12,749
Horizon Financial Svcs Corp. 19,102 - 813 77,556 - 8,413 8,413 6,238 6,238
Indiana Community Bank SB - - 604 80,017 - 11,312 11,312 11,311 11,311
Joachim Bancorp Inc. - - 494 25,100 - 9,838 9,838 7,682 7,682
Logansport Financial Corp. 4,500 - 2,292 67,192 - 15,960 15,960 16,011 16,011
Mid-Coast Bancorp Inc. 11,940 - 268 54,599 - 5,140 5,140 4,989 4,989
Northwest Equity Corp. 21,885 - 700 85,798 - 11,093 11,093 NA 7,855
StateFed Financial Corporation 19,000 - 1,100 70,446 - 15,233 15,233 NA NA
Sobieski Bancorp Inc. 9,500 - 506 69,393 - 12,361 12,361 NA NA
Three Rivers Financial Corp. 17,344 - 1,284 78,625 - 12,540 12,540 10,581 10,581
Maximum 21,885 - 2,292 85,798 - 15,960 15,960 16,011 16,011
Minimum - - 268 25,100 - 5,140 5,140 4,989 4,989
Average 10,298 - 865 66,566 - 11,131 11,131 9,996 9,758
Median 9,382 - 747 69,920 - 11,213 11,213 10,495 10,408
</TABLE>
Source: SNL & F&C calculations 9
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Regulatory Loan Loss Publicly
Total Tangible Core Risk-Based NPAs/ Reserves/ Reserves/ Reported
Capital Capital/ Capital/ Capital/ Assets Assets NPLs B Value
($000) Tangible Adj Tangible Risk-Weightd (%) (%) (%) ($)
Short Name MRQ Assets (%) Assets (%) Assets (%) MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. NA 8.22 8.22 16.67 0.72 0.39 53.94 23.96
Community Investors Bancorp 10,856 10.16 10.16 20.36 0.63 0.52 95.08 11.96
CKF Bancorp Inc. 12,862 20.91 20.91 36.79 0.63 0.19 29.35 16.97
Horizon Financial Svcs Corp. 6,494 7.78 7.78 14.59 0.96 0.32 57.78 19.77
Indiana Community Bank SB 11,821 NA NA NA NA 0.56 NA 12.27
Joachim Bancorp Inc. 7,760 22.06 22.06 44.81 0.17 0.22 130.00 13.62
Logansport Financial Corp. 16,239 21.82 21.82 41.64 0.61 0.27 45.60 12.66
Mid-Coast Bancorp Inc. 5,297 8.60 8.60 15.45 0.73 0.52 70.32 22.10
Northwest Equity Corp. 8,321 NA NA NA 1.25 0.48 38.70 14.23
StateFed Financial Corporation NA 13.19 13.19 22.74 NA NA NA 19.44
Sobieski Bancorp Inc. NA 11.85 11.85 28.52 0.15 0.24 158.73 17.24
Three Rivers Financial Corp. 11,065 11.83 11.83 24.16 1.21 0.53 75.00 15.23
Maximum 16,239 22.06 22.06 44.81 1.25 0.56 158.73 23.96
Minimum 5,297 7.78 7.78 14.59 0.15 0.19 29.35 11.96
Average 10,079 13.64 13.64 26.57 0.71 0.39 75.45 16.62
Median 10,856 11.84 11.84 23.45 0.68 0.39 64.05 16.10
</TABLE>
Source: SNL & F&C calculations
10
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
<TABLE>
<CAPTION>
Tangible Earn Assets/ Full-Time Loans Cash & Invest
Publicly Rep Int Bearing Equivalent Serviced (sans MBS)/ MBS/
Book Value Liabilities Employees For Others Assets Assets
($) (%) (Actual) ($000) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 23.96 107.05 NA NA 12.22 12.50
Community Investors Bancorp 11.96 111.33 22 486 14.09 1.80
CKF Bancorp Inc. 16.97 131.47 8 - 6.65 0.72
Horizon Financial Svcs Corp. 19.77 109.61 28 1,613 36.66 -
Indiana Community Bank SB 12.27 112.01 48 868 15.42 3.10
Joachim Bancorp Inc. 13.62 140.00 14 - 28.32 0.24
Logansport Financial Corp. 12.66 122.75 13 - 14.24 9.66
Mid-Coast Bancorp Inc. 22.10 107.43 23 6,612 13.23 -
Northwest Equity Corp. 14.23 107.35 36 25,279 8.38 7.56
StateFed Financial Corporation 19.44 116.34 NA NA 14.58 -
Sobieski Bancorp Inc. 17.24 115.64 22 - 5.36 16.77
Three Rivers Financial Corp. 15.17 114.12 NA 14,112 19.86 10.18
Maximum 23.96 140.00 48 25,279 36.66 16.77
Minimum 11.96 107.05 8 - 5.36 -
Average 16.62 116.26 24 4,897 15.75 5.21
Median 16.07 113.07 22 677 14.16 2.45
</TABLE>
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparative Operations
<TABLE>
<CAPTION>
Net Income ROAA ROAE Loan
Average Before Before Core Before Core Loss
Assets Net Income Extra Items ROAA Extra ROAA ROAE Extra ROAE Provision
($000) ($000) ($000) (%) (%) (%) (%) (%) (%) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 63,492 67 67 0.11 0.11 0.37 1.14 1.14 4.03 140
Community Investors Bancorp 96,168 589 589 0.61 0.61 0.92 5.30 5.30 7.98 142
CKF Bancorp Inc. 59,968 1,079 1,079 1.80 1.80 1.33 7.25 7.25 5.37 1
Horizon Financial Svcs Corp. 79,717 278 278 0.35 0.35 0.55 3.31 3.31 5.25 252
Indiana Community Bank SB 90,855 150 150 0.17 0.17 0.50 1.29 1.29 3.92 460
Joachim Bancorp Inc. 35,652 163 163 0.46 0.46 0.76 1.55 1.55 2.59 13
Logansport Financial Corp. 79,217 931 931 1.18 1.18 1.51 5.74 5.74 7.40 14
Mid-Coast Bancorp Inc. 57,401 248 248 0.43 0.43 0.67 4.89 4.89 7.57 74
Northwest Equity Corp. 95,093 739 739 0.78 0.78 0.98 6.50 6.50 8.16 100
StateFed Financial Corporation 81,192 921 921 1.13 1.13 1.37 6.11 6.11 7.36 36
Sobieski Bancorp Inc. 80,309 247 247 0.31 0.31 0.59 1.87 1.87 3.57 -
Three Rivers Financial Corp. 87,986 499 499 0.57 0.57 0.83 3.91 3.91 5.71 60
Maximum 96,168 1,079 1,079 1.80 1.80 1.51 7.25 7.25 8.16 460
Minimum 35,652 67 67 0.11 0.11 0.37 1.14 1.14 2.59 -
Average 75,588 493 493 0.66 0.66 0.87 4.07 4.07 5.74 108
Median 80,013 389 389 0.52 0.52 0.80 4.40 4.40 5.54 67
</TABLE>
Source: SNL & F&C calculations 12
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Total Total Net Loan Common Dividend Interest Interest
Noninterest Noninterest Chargeoffs/ LTM EPS Dividends Payout Income/ Expense/
Income Expense Avg Loans After Extra Per Share Ratio Avg Assets Avg Assets
($000) ($000) (%) ($) ($) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 269 1,964 0.24 0.27 0.31 114.81 7.51 4.06
Community Investors Bancorp 140 1,886 0.16 0.66 0.27 40.42 7.58 4.21
CKF Bancorp Inc. 58 1,073 0.15 1.22 1.44 118.03 7.47 3.75
Horizon Financial Svcs Corp. 357 1,925 NA 0.68 0.32 47.06 7.39 4.27
Indiana Community Bank SB 870 3,546 0.54 0.15 3.36 NM 7.77 3.54
Joachim Bancorp Inc. 47 1,056 0.04 0.22 0.50 227.27 7.10 2.99
Logansport Financial Corp. 124 1,252 0.03 0.73 3.40 465.75 7.46 3.68
Mid-Coast Bancorp Inc. 206 1,697 0.04 1.08 0.52 48.15 8.09 4.31
Northwest Equity Corp. 397 2,213 0.09 0.92 0.43 46.74 7.99 4.36
StateFed Financial Corporation 108 1,138 - 1.20 0.40 33.33 7.89 4.47
Sobieski Bancorp Inc. 157 1,953 NA 0.32 0.14 43.75 7.10 3.90
Three Rivers Financial Corp. 432 2,601 0.01 0.63 0.33 52.38 7.55 3.77
Maximum 870 3,546 0.54 1.22 3.40 465.75 8.09 4.47
Minimum 47 1,056 - 0.15 0.14 33.33 7.10 2.99
Average 264 1,859 0.13 0.67 0.95 112.52 7.58 3.94
Median 182 1,906 0.07 0.67 0.42 48.15 7.53 3.98
</TABLE>
Source: SNL & F&C calculations 13
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparative Operations
- ------------------
<TABLE>
<CAPTION>
Net Interest Gain on Real Noninterest G&A Noninterest Net Oper Total
Income/ Sale/ Estate Income/ Expense/ Expense/ Expenses/ Nonrecurring
Avg Assets Avg Assets Expense Avg Assets Avg Assets Avg Assets Avg Assets Expense
(%) (%) ($000) (%) (%) (%) (%) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 3.46 0.02 (39) 0.42 3.15 3.09 2.73 275
Community Investors Bancorp 3.37 - - 0.15 1.96 1.96 1.82 458
CKF Bancorp Inc. 3.72 1.17 42 0.10 1.72 1.79 1.62 274
Horizon Financial Svcs Corp. 3.13 0.10 53 0.45 2.35 2.41 1.90 331
Indiana Community Bank SB 4.23 - - 0.96 3.90 3.90 2.95 474
Joachim Bancorp Inc. 4.11 - (7) 0.13 2.98 2.96 2.85 167
Logansport Financial Corp. 3.78 (0.11) (2) 0.16 1.58 1.58 1.43 334
Mid-Coast Bancorp Inc. 3.78 0.05 14 0.36 2.93 2.96 2.57 241
Northwest Equity Corp. 3.63 0.06 (34) 0.42 2.36 2.33 1.95 350
StateFed Financial Corporatio 3.43 - (562) 0.13 2.09 1.40 1.96 291
Sobieski Bancorp Inc. 3.20 0.08 - 0.20 2.43 2.43 2.24 414
Three Rivers Financial Corp. 3.78 0.06 (22) 0.49 2.97 2.96 2.48 411
Maximum 4.23 1.17 53 0.96 3.90 3.90 2.95 474
Minimum 3.13 (0.11) (562) 0.10 1.58 1.40 1.43 167
Average 3.64 0.12 (46) 0.33 2.54 2.48 2.21 335
Median 3.68 0.04 (1) 0.28 2.40 2.42 2.10 333
</TABLE>
Source: SNL F&C calculations 14
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Amortization Extra and Yield on Cost of Interest
of Tax After Tax Efficiency Preferred Int Earning Int Bearing Effective Yield
Intangibles Provision Items Ratio Dividends Assets Liabilities Tax Rate Spread
($000) ($000) ($000) (%) ($000) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. - 30 - 81.32 - 7.88 4.60 30.93 3.28
Community Investors Bancorp - 308 - 55.75 - 7.85 4.85 34.34 3.00
CKF Bancorp Inc. - 564 - 45.06 - 7.59 5.09 34.33 2.50
Horizon Financial Svcs Corp. - 145 - 65.68 - 8.06 4.94 34.28 3.12
Indiana Community Bank SB - 80 - 75.29 - 8.06 4.11 34.78 3.95
Joachim Bancorp Inc. - 113 - 70.30 - 7.25 4.29 40.94 2.96
Logansport Financial Corp. - 514 - 40.17 - 7.68 4.79 35.57 2.89
Mid-Coast Bancorp Inc. - 147 - 70.80 - 8.74 4.92 37.22 3.82
Northwest Equity Corp. - 506 - 58.39 - 8.48 5.00 40.64 3.48
StateFed Financial Corporation - 503 - 58.84 - 8.34 5.58 35.32 2.76
Sobieski Bancorp Inc. - 182 - 71.59 - 7.56 4.71 42.42 2.85
Three Rivers Financial Corp. 8 247 - 69.55 - 7.82 4.50 33.15 3.32
Maximum 8 564 - 81.32 - 8.74 5.58 42.42 3.95
Minimum - 30 - 40.17 - 7.25 4.11 30.93 2.50
Average 1 278 - 63.56 - 7.94 4.78 36.16 3.16
Median - 215 - 67.62 - 7.87 4.82 35.05 3.06
</TABLE>
Source: SNL & F&C calculations 15
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparative Operations
- ------------------
<TABLE>
<CAPTION>
Loan Loss
Provision/
Avg Assets
(%)
Short Name LTM
<S> <C>
Albion Banc Corp. 0.22
Community Investors Bancorp 0.15
CKF Bancorp Inc. 0.00
Horizon Financial Svcs Corp. 0.32
Indiana Community Bank SB 0.51
Joachim Bancorp Inc. 0.04
Logansport Financial Corp. 0.02
Mid-Coast Bancorp Inc. 0.13
Northwest Equity Corp. 0.11
StateFed Financial Corporation 0.04
Sobieski Bancorp Inc. -
Three Rivers Financial Corp. 0.07
Maximum 0.51
Minimum -
Average 0.13
Median 0.09
</TABLE>
Source: SNL & F&C calculations 16
<PAGE>
FERGUSON & COMPANY Exhibit II.6 - Comparatives Pricing Characteristics
- ------------------
<TABLE>
<CAPTION>
Current Current Price/ Current Current
Stock Market LTM Price/ Price/ T
Abbreviated Price Value Core EPS B Value B Value
Ticker Name City State ($) ($M) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC AlbionBancCorp-NY Albion NY 23.250 5.81 24.0 97.0 97.0
CIBI CommunityInvrs-OH Bucyrus OH 15.500 14.41 15.7 129.6 129.6
CKFB CKFBancorp-KY Danville KY 19.000 18.05 21.1 112.0 112.0
HZFS HorizonFinSvcs-IA Oskaloosa IA 18.875 8.03 17.5 95.5 95.5
INCB IndianaCommBkSB-IN Lebanon IN 15.750 14.52 32.8 128.4 128.4
JOAC JoachimBancorp-MO De Soto MO 14.500 10.48 39.2 106.5 106.5
LOGN LogansprtFinCrp-IN Logansport IN 14.625 18.43 15.6 115.5 115.5
MCBN Mid-Coast Bncp-ME Waldoboro ME 25.500 5.93 15.3 115.4 115.4
NWEQ NorthwestEqty-WI Amery WI 16.750 14.05 15.7 117.7 117.7
SFFC StateFedFinCorp-IA Des Moines IA 22.000 17.24 15.2 113.2 113.2
SOBI SobieskiBancorp-IN South Bend IN 16.438 12.74 27.0 95.4 95.4
THR ThreeRvrsFinCrp-MI Three Rivers MI 16.250 13.38 17.5 106.7 107.1
Maximum 25.500 18.43 39.2 129.6 129.6
Minimum 14.500 5.81 15.2 95.4 95.4
Average 18.203 12.76 21.4 111.1 111.1
Median 16.594 13.72 17.5 112.6 112.6
</TABLE>
Source: SNL & F&C calculations 17
<PAGE>
FERGUSON & COMPANY Exhibit 11.6 - Comparatives Pricing Characteristics
- ------------------
<TABLE>
<CAPTION>
Tangible ROACE
Current Total Equity/ Equity/ Core Core Core Before
Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Extra Merger
Assets Yield ($000) (%) (%) ($) (%) (%) (%) Target?
Ticker (%) (%) MRQ MRQ MRQ LTM LTM LTM LTM (Y/N)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 8.5 1.38 68,628 8.7 8.7 0.97 0.37 4.03 1.14 N
CIBI 15.6 2.07 92,304 12.0 12.0 0.99 0.92 7.98 5.30 N
CKFB 28.9 2.63 60,812 24.0 24.0 0.90 1.33 5.37 7.25 N
HZFS 9.3 1.70 85,969 9.8 9.8 1.08 0.55 5.25 3.31 N
INCB 15.9 2.29 91,329 12.4 12.4 0.48 0.50 3.92 1.29 N
JOAC 30.0 3.45 34,938 28.2 28.2 0.37 0.76 2.59 1.55 N
LOGN 22.2 2.74 83,152 19.2 19.2 0.94 1.51 7.40 5.74 N
MCBN 9.9 2.04 59,739 8.6 8.6 1.67 0.67 7.57 4.89 N
NWEQ 14.5 3.10 96,891 11.5 11.5 1.07 0.98 8.16 6.50 N
SFFC 20.1 1.82 85,679 17.8 17.8 1.45 1.37 7.36 6.11 N
SOBI 15.6 1.95 81,754 15.1 15.1 0.61 0.59 3.57 1.87 N
THR 14.7 2.46 91,165 13.8 13.7 0.93 0.83 5.71 3.91 N
Maximum 30.0 3.45 96,891 28.2 28.2 1.67 1.51 8.16 7.25
Minimum 8.5 1.38 34,938 8.6 8.6 0.37 0.37 2.59 1.14
Average 17.1 2.30 77,697 15.1 15.1 0.96 0.87 5.74 4.07
Median 15.6 2.18 84,416 13.1 13.1 0.96 0.80 5.54 4.40
</TABLE>
Source: SNL & F&C calculations 18
<PAGE>
FERGUSON & COMPANY Exhibit II.6 - Comparatives Pricing Characteristics
- ------------------
<TABLE>
<CAPTION>
Core Core
NPAs/ Price/ Core Income/ Income/
Current Assets Core EPS Avg Assets Avg Equity
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
ALBC 09/02/97 0.72 32.3 0.18 0.27 3.03
CIBI 09/02/97 0.63 14.9 0.26 0.96 8.28
CKFB 09/02/97 0.63 19.0 0.25 1.47 6.16
HZFS 09/02/97 0.96 22.5 0.21 0.43 4.23
INCB 09/02/97 NA 26.3 0.15 0.60 4.77
JOAC 09/02/97 0.17 33.0 0.11 0.93 3.25
LOGN 09/02/97 0.61 15.2 0.24 1.46 7.53
MCBN 09/02/97 0.73 13.0 0.49 0.75 8.76
NWEQ 09/02/97 1.25 13.1 0.32 1.02 8.96
SFFC 09/02/97 NA 12.8 0.43 1.55 8.78
SOBI 09/02/97 0.15 29.4 0.14 0.57 3.72
THR 09/02/97 1.21 18.5 0.22 0.77 5.49
Maximum 1.25 33.0 0.49 1.55 8.96
Minimum 0.15 12.8 0.11 0.27 3.03
Average 0.71 20.8 0.25 0.90 6.08
Median 0.68 18.7 0.23 0.85 5.83
</TABLE>
Source: SNL & F&C calculatioins 19
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit II.7 - Comparatives Risk Characteristics
<TABLE>
<CAPTION>
NPAs + Loans
NPAs/ 90+ Pst Due/ NPAs/ Reserves/
Assets Assets Equity Loans
(%) (%) (%) (%)
Short Name MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C>
Albion Banc Corp. 0.72 0.72 8.26 0.54
Community Investors Bancorp 0.63 0.63 5.21 0.63
CKF Bancorp Inc. 0.63 1.26 2.64 0.20
Horizon Financial Svcs Corp. 0.96 1.22 9.81 0.52
Indiana Community Bank SB NA NA NA 0.71
Joachim Bancorp Inc. 0.17 0.20 0.61 0.32
Logansport Financial Corp. 0.61 0.61 3.18 0.38
Mid-Coast Bancorp Inc. 0.73 0.73 8.52 0.62
Northwest Equity Corp. 1.25 1.26 10.93 0.59
StateFed Financial Corporation NA NA NA NA
Sobieski Bancorp Inc. 0.15 0.15 1.02 0.33
Three Rivers Financial Corp. 1.21 1.21 8.80 0.80
Maximum 1.25 1.26 10.93 0.80
Minimum 0.15 0.15 0.61 0.20
Average 0.71 0.80 5.90 0.51
Median 0.68 0.73 6.74 0.54
</TABLE>
Source: SNL & F&C calculations 20
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit II.7 - Comparatives Risk Characteristics
<TABLE>
<CAPTION>
Net Loan Intangible One Year
Reserves/ Chargeoffs/ Loans/ Assets/ Cum Gap/
NPAs Avg Loans Assets Equity Assets
(%) (%) (%) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRY
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. 53.94 0.47 71.50 - NA
Community Investors Bancorp 83.42 0.14 83.34 - NA
CKF Bancorp Inc. 29.35 0.57 91.11 - NA
Horizon Financial Svcs Corp. 32.85 0.60 61.03 - NA
Indiana Community Bank SB NA 0.91 78.66 - 25.59
Joachim Bancorp Inc. 130.00 - 69.59 - NA
Logansport Financial Corp. 44.88 0.11 71.82 - NA
Mid-Coast Bancorp Inc. 70.32 0.03 83.57 - (31.13)
Northwest Equity Corp. 38.42 0.10 81.05 - 1.38
StateFed Financial Corporation NA - NA - NA
Sobieski Bancorp Inc. 158.73 NA 75.02 - NA
Three Rivers Financial Corp. 44.02 - 66.49 0.40 (20.34)
Maximum 158.73 0.91 91.11 0.40 25.59
Minimum 29.35 - 61.03 - (31.13)
Average 68.59 0.27 75.74 0.03 (6.13)
Median 49.41 0.11 75.02 - (9.48)
</TABLE>
Source: SNL & F&C calculations 21
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit II.7 - Comparatives Risk Characteristics
<TABLE>
<CAPTION>
Earn Assets/
Net Int Bearing
Loans Liabilities
($000) (%)
Short Name MRQ MRQ
<S> <C> <C>
Albion Banc Corp. 48,247 107.05
Community Investors Bancorp 76,446 111.33
CKF Bancorp Inc. 55,293 131.47
Horizon Financial Svcs Corp. 52,193 109.61
Indiana Community Bank SB 71,330 112.01
Joachim Bancorp Inc. 24,236 140.00
Logansport Financial Corp. 59,490 122.75
Mid-Coast Bancorp Inc. 49,618 107.43
Northwest Equity Corp. 77,644 107.35
StateFed Financial Corporation NA 116.34
Sobieski Bancorp Inc. 61,135 115.64
Three Rivers Financial Corp. 60,033 114.12
Maximum 77,644 140.00
Minimum 24,236 107.05
Average 57,788 116.26
Median 59,490 113.07
</TABLE>
Source: SNL & F&C calculations 22
<PAGE>
EXHIBIT III
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
CHERAW, SC
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 58,148 59,762 59,081 59,547
% Change in Assets 3.93 2.78 (1.14) 0.79
Total Loans 52,479 53,112 53,633 54,121
Deposits 48,669 48,590 45,928 46,055
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 9,225 9,940 10,614 10,840
Tangible Capital 9,225 9,940 10,614 10,840
Core Capital 9,225 9,940 10,614 10,840
Risk-Based Capital 9,391 10,115 10,782 11,008
Equity Capital/Total Assets 15.86 16.63 17.97 18.20
Core Capital/Risk Based Assets 31.19 33.17 34.95 34.97
Core Capital/Adj Tang Assets 15.86 16.63 17.97 18.20
Tangible Cap/Tangible Assets 15.86 16.63 17.97 18.20
Risk-Based Cap/Risk-Wt Assets 31.76 33.75 35.50 35.52
PROFITABILITY:
Net Income(Loss) 935 715 674 226
Ret on Avg Assets Bef Ext Item 1.64 1.21 1.13 1.52
Return on Average Equity 10.68 7.46 6.55 8.43
Net Interest Income/Avg Assets 3.52 2.99 3.07 3.15
Noninterest Income/Avg Assets 0.36 0.37 0.66 0.28
Noninterest Expense/Avg Assets 1.13 1.39 1.90 0.97
Yield/Cost Spread 2.96 2.27 2.25 2.32
LIQUIDITY:
Int Earn Assets/Int Bear Liab 116.99 118.28 120.19 120.47
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.69 0.96 0.81 0.67
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - 0.07
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 4.16 3.99 4.34 4.36
</TABLE>
Source: TAFS, published by Sheshunoff 1
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
CHERAW, SC
SELECTED PEER GROUP RATIOS & RANKINGS
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
<S> <C> <C> <C> <C>
Peer Group Category 3 3 3 3
CAPITAL:
Equity Capital/Total Assets 15.86 16.63 17.97 18.20
Peer Group Percentile 92 90 91 91
Core Cap/Adj Tangible Assets 15.86 16.63 17.97 18.20
Peer Group Percentile 92 90 92 91
Tangible Cap/Tangible Assets 15.86 16.63 17.97 18.20
Peer Group Percentile 92 90 92 91
Risk-Based Cap/Risk-Wt Assets 31.76 33.75 35.50 35.52
Peer Group Percentile 87 86 88 88
ASSET QUALITY:
Risk Assets/Total Assets 4.29 4.05 4.41 4.43
Peer Group Percentile 67 70 67 68
Risk Weighted Assts/Tot Assts 50.86 50.14 51.41 52.05
Peer Group Percentile 48 53 53 53
Nonaccrual Loans/Gross Loans - - - -
Peer Group Percentile 100 100 100 100
Repos Assets/Tot Assets - - - 0.07
Peer Group Percentile 37 40 36 38
90+ Day Del Loans/Gross Loans 0.51 0.80 0.68 0.56
Peer Group Percentile 24 17 18 23
90Day P Due+NonAccr-(1-4)/LLR 3.61 1.14 7.74 7.74
Peer Group Percentile 64 73 58 58
LIQUIDITY:
Avg Reg Liquidity Ratio 8.71 9.53 6.71 7.64
Peer Group Percentile 29 27 13 22
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 1.64 1.21 1.13 1.52
Peer Group Percentile 96 84 93 90
Return on Equity Capital 10.14 7.19 6.35 8.34
Peer Group Percentile 63 49 75 51
Int Earn Assets/Int Bear Liab 116.99 118.28 120.19 120.47
Peer Group Percentile 92 91 92 93
Yield on Earning Assts 7.53 7.50 7.60 7.55
Peer Group Percentile 73 36 40 35
Cost of Funds 4.57 5.23 5.36 5.23
Peer Group Percentile 9 20 11 13
Yield/Cost Spread 2.96 2.27 2.25 2.32
Peer Group Percentile 30 15 11 11
</TABLE>
Source TAFS, published by Sheshunoff 2
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
CHERAW, SC
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
6/30/96 9/30/96 12/31/96 3/31/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 59,620 59,615 59,081 59,547
% Change in Assets 0.34 (0.01) (0.90) 0.79
Total Loans 53,477 54,282 53,633 54,121
Deposits 47,949 47,061 45,928 46,055
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 10,397 10,412 10,614 10,840
Tangible Capital 10,397 10,412 10,614 10,840
Core Capital 10,397 10,412 10,614 10,840
Risk-Based Capital 10,566 10,581 10,782 11,008
Equity Capital/Total Assets 17.44 17.47 17.97 18.20
Core Capital/Risk Based Assets 34.41 33.64 34.95 34.97
Core Capital/Adj Tang Assets 17.44 17.47 17.97 18.20
Tangible Cap/Tangible Assets 17.44 17.47 17.97 18.20
Risk-Based Cap/Risk-Wt Assets 34.97 34.19 35.50 35.52
PROFITABILITY:
Net Income(Loss) 307 15 202 226
Ret on Avg Assets Bef Ext Item 2.06 0.10 1.36 1.52
Return on Average Equity 11.99 0.58 7.69 8.43
Net Interest Income/Avg Assets 3.09 3.00 3.19 3.15
Noninterest Income/Avg Assets 1.59 0.38 0.31 0.28
Noninterest Expense/Avg Assets 1.36 3.22 1.31 0.97
Yield/Cost Spread 2.28 2.16 2.36 2.32
LIQUIDITY:
Int Earn Assets/Int Bear Liab 119.63 120.44 120.19 120.47
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.55 0.61 0.81 0.67
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - 0.07
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 3.93 4.24 4.34 4.36
</TABLE>
Source: TAFS, published by Sheshunoff 3
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
CHERAW, SC
<TABLE>
<CAPTION>
SELECTED PEER GROUP RATIOS & RANKINGS
6/30/96 9/30/96 12/31/96 3/31/97
<S> <C> <C> <C> <C>
Peer Group Category 3 3 3 3
CAPITAL:
Equity Capital/Total Assets 17.44 17.47 17.97 18.20
Peer Group Percentile 90 91 91 91
Core Cap/Adj Tangible Assets 17.44 17.47 17.97 18.20
Peer Group Percentile 90 91 92 91
Tangible Cap/Tangible Assets 17.44 17.47 17.97 18.20
Peer Group Percentile 90 91 92 91
Risk-Based Cap/Risk-Wt Assets 34.97 34.19 35.50 35.52
Peer Group Percentile 86 86 88 88
ASSET QUALITY:
Risk Assets/Total Assets 3.97 4.29 4.41 4.43
Peer Group Percentile 72 70 67 68
Risk Weighted Assts/Tot Assts 50.68 51.91 51.41 52.05
Peer Group Percentile 53 50 53 53
Nonaccrual Loans/Gross Loans - - - -
Peer Group Percentile 100 100 100 100
Repos Assets/Tot Assets - - - 0.07
Peer Group Percentile 43 44 36 38
90+ Day Del Loans/Gross Loans 0.49 0.54 0.68 0.56
Peer Group Percentile 25 22 18 23
90Day P Due+NonAccr-(1-4)/LLR 7.69 7.10 7.74 7.74
Peer Group Percentile 59 57 58 58
LIQUIDITY:
Avg Reg Liquidity Ratio 9.17 7.01 6.71 7.64
Peer Group Percentile 31 20 13 22
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 2.06 0.10 1.36 1.52
Peer Group Percentile 99 84 81 90
Return on Equity Capital 11.81 0.58 7.61 8.34
Peer Group Percentile 80 83 48 51
Int Earn Assets/Int Bear Liab 119.63 120.44 120.19 120.47
Peer Group Percentile 92 93 92 93
Yield on Earning Assts 7.62 7.53 7.71 7.55
Peer Group Percentile 41 31 44 35
Cost of Funds 5.34 5.37 5.35 5.23
Peer Group Percentile 9 11 11 13
Yield/Cost Spread 2.28 2.16 2.36 2.32
Peer Group Percentile 11 10 15 11
</TABLE>
Source: TAFS, published by Sheshunoff 4
<PAGE>
EXHIBIT IV
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
ALBION FS&LA
ALBION
TICKER ALBC FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 55,371 56,264 64,012 65,666
% Change in Assets 10.12 1.61 13.77 2.58
Total Loans 47,042 44,124 48,012 48,177
Deposits 38,494 46,432 48,493 50,279
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,787 4,992 4,988 5,120
Tangible Capital 4,787 4,916 4,948 5,071
Core Capital 4,787 4,916 4,948 5,071
Risk-Based Capital 5,011 5,160 5,157 5,268
Equity Capital/Total Assets 8.65 8.87 7.79 7.80
Core Capital/Risk Based Assets 15.63 16.39 15.32 15.48
Core Capital/Adj Tang Assets 8.65 8.75 7.73 7.73
Tangible Cap/Tangible Assets 8.65 8.75 7.73 7.73
Risk-Based Cap/Risk-Wt Assets 16.36 17.20 15.96 16.08
PROFITABILITY:
Net Income(Loss) 357 169 (21) 113
Ret on Avg Assets Bef Ext Item 0.68 0.30 (0.04) 0.70
Return on Average Equity 7.78 3.46 (0.42) 8.94
Net Interest Income/Avg Assets 3.83 3.38 3.44 3.33
Noninterest Income/Avg Assets 0.32 0.38 0.44 0.64
Noninterest Expense/Avg Assets 2.90 3.23 3.68 2.86
Yield/Cost Spread 3.79 3.41 3.56 3.48
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.07 105.09 103.30 102.39
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.64 0.82 1.47 1.08
Nonaccrual Loans/Gross Loans 0.46 0.73 0.52 0.63
Nonaccrual Lns/Ln Loss Reserve 99.11 131.97 120.10 153.30
Repos Assets/Tot Assets - - - 0.18
Net Chrg-Off/Av Adj Lns 0.07 0.02 0.17 -
Nonmtg 1-4 Constr&Conv Lns/TA 4.70 4.51 3.63 3.43
</TABLE>
Source: TAFS, published by Sheshunoff 1
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
FIRST FS&LA
BUCYRUS, OH
TICKER CIBI FINANCIAL HIGHLIGHTS
- -----------
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 79,922 82,948 95,274 97,007
% Change in Assets 5.42 3.79 14.86 1.82
Total Loans 58,297 62,038 72,268 73,654
Deposits 70,751 71,230 70,358 72,133
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,570 9,784 9,846 10,196
Tangible Capital 5,570 9,772 9,708 10,164
Core Capital 5,570 9,772 9,708 10,164
Risk-Based Capital 5,918 10,143 10,123 10,574
Equity Capital/Total Assets 6.97 11.80 10.33 10.51
Core Capital/Risk Based Assets 14.32 24.10 21.91 19.64
Core Capital/Adj Tang Assets 6.97 11.78 10.20 10.48
Tangible Cap/Tangible Assets 6.97 11.78 10.20 10.48
Risk-Based Cap/Risk-Wt Assets 15.21 25.01 22.84 20.43
PROFITABILITY:
Net Income(Loss) 682 787 612 257
Ret on Avg Assets Bef Ext Item 0.88 0.97 0.68 1.07
Return on Average Equity 13.00 10.25 6.17 10.26
Net Interest Income/Avg Assets 3.22 3.23 3.48 3.24
Noninterest Income/Avg Assets 0.18 0.27 0.28 0.26
Noninterest Expense/Avg Assets 1.81 1.82 2.51 1.80
Yield/Cost Spread 3.07 2.91 3.13 3.01
LIQUIDITY:
Int Earn Assets/Int Bear Liab 107.32 110.86 108.62 107.02
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.06 1.09 0.91 0.95
Nonaccrual Loans/Gross Loans 0.74 0.87 - -
Nonaccrual Lns/Ln Loss Reserve 110.91 131.58 - -
Repos Assets/Tot Assets - - - 0.06
Net Chrg-Off/Av Adj Lns 0.17 0.30 0.41 -
Nonmtg 1-4 Constr&Conv Lns/TA 4.39 4.92 4.72 4.71
</TABLE>
Source: TAFS, published by Sheshunoff 2
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
CENTRAL KENTUCKY FSB
DANVILLE, KY
TICKER CKFB FINANCIAL HIGHLIGHTS
- -----------
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 56,377 56,545 60,014 60,222
% Change in Assets 12.64 0.30 6.13 0.35
Total Loans 45,441 49,997 53,544 54,397
Deposits 44,273 43,126 44,762 43,732
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 11,290 12,295 12,431 12,682
Tangible Capital 10,989 11,781 11,967 12,224
Core Capital 10,989 11,781 11,967 12,224
Risk-Based Capital 11,065 11,881 12,074 12,353
Equity Capital/Total Assets 20.03 21.74 20.71 21.06
Core Capital/Risk Based Assets 39.04 33.63 35.07 35.22
Core Capital/Adj Tang Assets 19.65 21.03 20.10 20.45
Tangible Cap/Tangible Assets 19.65 21.03 20.10 20.45
Risk-Based Cap/Risk-Wt Assets 39.31 33.92 35.38 35.59
PROFITABILITY:
Net Income(Loss) 542 764 827 205
Ret on Avg Assets Bef Ext Item 1.02 1.35 1.40 1.36
Return on Average Equity 6.39 6.48 6.55 6.53
Net Interest Income/Avg Assets 2.98 3.83 3.71 3.64
Noninterest Income/Avg Assets 0.16 0.16 0.65 0.19
Noninterest Expense/Avg Assets 1.60 1.87 2.27 1.62
Yield/Cost Spread 2.46 3.08 2.87 2.76
LIQUIDITY:
Int Earn Assets/Int Bear Liab 123.66 125.92 123.97 124.83
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.48 1.09 1.25 1.20
Nonaccrual Loans/Gross Loans - 0.00 0.16 0.14
Nonaccrual Lns/Ln Loss Reserve - 2.00 81.31 58.91
Repos Assets/Tot Assets - - - 0.50
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 10.51 13.09 12.79 12.79
</TABLE>
Source: TAFS, published by Sheshunoff 3
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
HORIZON FSB
OSKALOOSA
TICKER HZFS FINANCIAL HIGHLIGHTS
- -----------
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 63,008 71,498 72,514 76,840
% Change in Assets 9.50 13.47 1.42 5.97
Total Loans 43,162 48,886 51,591 52,322
Deposits 50,378 53,947 55,861 56,839
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,496 6,562 5,838 5,989
Tangible Capital 6,725 6,535 5,703 6,146
Core Capital 6,725 6,535 5,703 6,146
Risk-Based Capital 6,968 6,781 5,953 6,401
Equity Capital/Total Assets 10.31 9.18 8.05 7.79
Core Capital/Risk Based Assets 19.97 16.39 13.70 14.21
Core Capital/Adj Tang Assets 10.64 9.14 7.88 7.98
Tangible Cap/Tangible Assets 10.64 9.14 7.88 7.98
Risk-Based Cap/Risk-Wt Assets 20.70 17.00 14.30 14.80
PROFITABILITY:
Net Income(Loss) 460 411 75 145
Ret on Avg Assets Bef Ext Item 0.76 0.61 0.10 0.78
Return on Average Equity 8.48 6.30 1.21 9.81
Net Interest Income/Avg Assets 3.43 3.07 2.99 3.11
Noninterest Income/Avg Assets 0.46 0.47 0.59 0.48
Noninterest Expense/Avg Assets 2.68 2.55 2.87 2.29
Yield/Cost Spread 3.35 2.86 2.84 3.03
LIQUIDITY:
Int Earn Assets/Int Bear Liab 107.83 107.16 104.89 104.80
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.81 2.53 2.57 2.17
Nonaccrual Loans/Gross Loans 0.87 2.49 1.27 0.85
Nonaccrual Lns/Ln Loss Reserve 130.58 427.34 225.17 167.80
Repos Assets/Tot Assets - - - 0.46
Net Chrg-Off/Av Adj Lns 0.22 0.03 0.78 0.05
Nonmtg 1-4 Constr&Conv Lns/TA 7.12 6.57 5.98 5.60
</TABLE>
Source: TAFS, published by Sheshunoff 4
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
INDIANA COMMTY BK SB
LEBANON, IN
TICKER INCB FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 88,347 90,666 89,476 91,582
% Change in Assets (0.41) 2.62 (1.31) 2.35
Securities-Book Value 10,314 9,320 5,657 7,769
Securities-Fair Value 10,045 9,409 5,711 7,793
Total Loans & Leases 69,380 72,948 72,836 71,839
Total Deposits 73,660 75,566 77,062 79,222
Loan/Deposit Ratio 94.19 96.54 94.52 90.68
Provision for Loan Losses 92 245 303 72
CAPITAL:
Equity Capital 13,736 14,105 11,316 11,311
Total Qualifying Capital(Est) 14,135 14,609 11,918 11,821
Equity Capital/Average Assets 15.52 15.76 12.37 12.49
Tot Qual Cap/Rk Bsd Asts(Est) 23.85 23.66 18.85 19.00
Tier 1 Cap/Rsk Bsed Asts(Est) 23.02 22.94 17.90 18.18
T1 Cap/Avg Assets(Lev Est) 15.74 15.40 12.57 12.49
Dividends Declared/Net Income - 38.38 2,305.22 122.06
PROFITABILITY:
Net Income(Loss) 78 693 134 136
Return on Average Assets 0.09 0.77 0.15 0.60
Return on Average Equity Cap 0.80 4.98 1.07 4.81
Net Interest Margin 3.67 4.61 4.53 4.65
Net Int Income/Avg Assets 3.43 4.35 4.24 4.40
Noninterest Income/Avg Assets 0.59 0.78 0.88 0.79
Noninterest Exp/Avg Assets 3.14 3.64 4.55 3.91
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.37 0.27 0.16 0.20
NPA's/Equity + LLR 1.82 1.36 0.95 1.24
LLR/Nonperf & Restrcd Lns 188.80 225.25 532.74 346.94
Foreclosed RE/Total Assets - - - -
90+ Day Del Loans/Total Loans 0.37 0.27 0.16 0.02
Loan Loss Reserves/Total Lns 0.70 0.61 0.83 0.71
Net Charge-Offs/Average Loans 0.13 0.40 0.51 0.23
Dom Risk R/E Lns/Tot Dom Lns 6.47 7.33 10.96 8.53
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 3.32 7.66 8.99 9.38
Int Earn Assets/Int Bear Liab 116.06 115.56 112.52 112.47
Pledged Sec/Total Sec - 26.82 22.98 38.62
Fair Value Sec/Amort Cost Sec 97.39 100.33 100.56 100.17
</TABLE>
Source: BankSource, published by Shenhunoff 5
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
JOACHIM FS&LA
DE SOTO
TICKER JOAC FINANCIAL HIGHLIGHTS
- -----------
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 29,034 33,539 32,329 33,341
% Change in Assets (6.65) 15.52 (3.61) 3.13
Total Loans 22,242 21,968 24,158 23,904
Deposits 24,652 25,345 24,075 24,830
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,030 7,286 7,427 7,564
Tangible Capital 4,030 7,286 7,427 7,564
Core Capital 4,030 7,286 7,427 7,564
Risk-Based Capital 4,088 7,356 7,502 7,638
Equity Capital/Total Assets 13.88 21.72 22.97 22.69
Core Capital/Risk Based Assets 25.83 44.85 45.42 46.24
Core Capital/Adj Tang Assets 13.88 21.73 22.97 22.69
Tangible Cap/Tangible Assets 13.88 21.73 22.97 22.69
Risk-Based Cap/Risk-Wt Assets 26.20 45.28 45.88 46.69
PROFITABILITY:
Net Income(Loss) 251 210 88 36
Ret on Avg Assets Bef Ext Item 0.83 0.67 0.26 0.44
Return on Average Equity 6.43 3.71 1.20 1.92
Net Interest Income/Avg Assets 3.77 3.49 3.71 3.90
Noninterest Income/Avg Assets 0.38 0.29 0.27 0.23
Noninterest Expense/Avg Assets 2.82 2.72 3.59 3.03
Yield/Cost Spread 3.76 3.08 3.04 3.21
LIQUIDITY:
Int Earn Assets/Int Bear Liab 109.88 123.18 125.87 125.21
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 3.20 0.13 1.56 1.64
Nonaccrual Loans/Gross Loans 0.37 0.07 0.66 0.49
Nonaccrual Lns/Ln Loss Reserve 141.38 21.43 213.33 156.00
Repos Assets/Tot Assets - - - 0.38
Net Chrg-Off/Av Adj Lns 0.02 0.02 0.00 0.08
Nonmtg 1-4 Constr&Conv Lns/TA 5.92 4.55 6.64 7.33
</TABLE>
Source: TAFS, published by Sheshunoff 6
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
LOGANSPORT SAVINGS BANK, FSB
LOGANSPORT, IN
TICKER LOGN FINANCIAL HIGHLIGHTS
- -----------
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 59,452 70,750 77,574 78,772
% Change in Assets 5.73 19.00 9.65 1.54
Total Loans 43,691 49,058 57,068 57,126
Deposits 51,202 52,502 57,396 59,389
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,935 16,672 16,861 15,162
Tangible Capital 7,131 16,671 17,018 15,337
Core Capital 7,131 16,671 17,018 15,337
Risk-Based Capital 7,337 16,894 17,254 15,576
Equity Capital/Total Assets 11.66 23.56 21.74 19.25
Core Capital/Risk Based Assets 21.31 42.94 40.57 36.17
Core Capital/Adj Tang Assets 11.93 23.56 21.89 19.43
Tangible Cap/Tangible Assets 11.93 23.56 21.89 19.43
Risk-Based Cap/Risk-Wt Assets 21.93 43.51 41.13 36.74
PROFITABILITY:
Net Income(Loss) 734 851 869 289
Ret on Avg Assets Bef Ext Item 1.27 1.31 1.17 1.48
Return on Average Equity 11.01 7.21 5.24 7.22
Net Interest Income/Avg Assets 3.27 3.19 3.53 3.60
Noninterest Income/Avg Assets 0.30 0.48 0.33 0.24
Noninterest Expense/Avg Assets 1.66 1.58 2.03 1.48
Yield/Cost Spread 3.09 2.69 2.77 2.92
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.43 125.00 124.78 118.92
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.64 0.63 0.71 0.62
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - 0.01 (0.00) -
Nonmtg 1-4 Constr&Conv Lns/TA 3.71 5.36 7.22 6.34
</TABLE>
Source: TAFS, published by Sheshunoff 7
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
WALDOBORO BANK FSB
WALDOBORO
TICKER MCBN FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 52,508 55,423 57,851 59,202
% Change in Assets 4.94 5.55 4.38 2.34
Total Loans 44,093 44,092 48,340 49,642
Deposits 38,161 41,932 42,490 41,814
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,472 4,857 4,937 5,025
Tangible Capital 4,472 4,857 4,937 5,025
Core Capital 4,472 4,857 4,937 5,025
Risk-Based Capital 4,650 5,077 5,233 5,320
Equity Capital/Total Assets 8.52 8.76 8.53 8.49
Core Capital/Risk Based Assets 15.23 15.64 14.37 14.24
Core Capital/Adj Tang Assets 8.52 8.76 8.53 8.49
Tangible Cap/Tangible Assets 8.52 8.76 8.53 8.49
Risk-Based Cap/Risk-Wt Assets 15.84 16.35 15.24 15.08
PROFITABILITY:
Net Income(Loss) 428 385 228 88
Ret on Avg Assets Bef Ext Item 0.83 0.71 0.41 0.60
Return on Average Equity 9.86 8.25 4.68 7.07
Net Interest Income/Avg Assets 3.61 3.48 3.72 3.60
Noninterest Income/Avg Assets 0.36 0.41 0.45 0.40
Noninterest Expense/Avg Assets 2.43 2.66 3.32 2.97
Yield/Cost Spread 3.57 3.45 3.80 3.67
LIQUIDITY:
Int Earn Assets/Int Bear Liab 104.69 104.43 103.47 103.68
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.00 1.39 0.60 0.56
Nonaccrual Loans/Gross Loans 0.24 1.19 0.41 0.37
Nonaccrual Lns/Ln Loss Reserve 59.55 240.00 67.57 62.03
Repos Assets/Tot Assets - - - 0.16
Net Chrg-Off/Av Adj Lns 0.45 0.06 0.09 0.13
Nonmtg 1-4 Constr&Conv Lns/TA 8.01 10.06 12.14 12.72
</TABLE>
Source: TAFS, published by Sheshunoff 8
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
NORTHWEST SVGS BK
AMERY, WI
TICKER NWEQ FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 66,921 83,030 96,466 94,930
% Change in Assets 8.00 24.07 16.18 (1.59)
Securities-Book Value 4,274 9,000 11,438 11,085
Securities-Fair Value 4,234 9,138 11,455 10,972
Total Loans & Leases 58,164 69,239 78,718 78,116
Total Deposits 51,817 58,825 62,460 61,576
Loan/Deposit Ratio 112 118 126 127
Provision for Loan Losses 17 24 62 25
CAPITAL:
Equity Capital 8,368 9,384 7,421 7,630
Total Qualifying Capital(Est) 8,960 9,832 7,914 8,121
Equity Capital/Average Assets 12.99 12.52 8.23 8.06
Tot Qual Cap/Rk Bsd Asts(Est) 20.50 18.24 12.94 13.52
Tier 1 Cap/Rsk Bsed Asts(Est) 19.51 17.43 12.16 12.75
T1 Cap/Avg Assets(Lev Est) 12.95 11.59 7.78 8.09
Dividends Declared/Net Income - - 376.06 -
PROFITABILITY:
Net Income(Loss) 655 865 710 225
Return on Average Assets 1.02 1.15 0.79 0.95
Return on Average Equity Cap 10.20 9.75 8.79 11.96
Net Interest Margin 3.91 3.98 3.69 3.72
Net Int Income/Avg Assets 3.81 3.87 3.50 3.54
Noninterest Income/Avg Assets 0.65 0.63 0.61 0.44
Noninterest Exp/Avg Assets 2.70 2.51 2.68 2.27
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.88 0.63 1.87 1.37
NPA's/Equity + LLR 5.85 4.45 18.63 13.24
LLR/Nonperf & Restrcd Lns 93.29 140.06 34.24 43.04
Foreclosed RE/Total Assets 0.08 0.15 0.08 -
90+ Day Del Loans/Total Loans - 0.00 0.01 0.01
Loan Loss Reserves/Total Lns 0.74 0.63 0.61 0.59
Net Charge-Offs/Average Loans 0.09 0.03 0.03 0.05
Dom Risk R/E Lns/Tot Dom Lns 12.14 14.69 11.82 11.50
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 9.74 3.76 4.86 5.13
Int Earn Assets/Int Bear Liab 114.78 112.50 108.65 108.22
Pledged Sec/Total Sec 22.70 45.34 31.38 21.43
Fair Value Sec/Amort Cost Sec 93.32 101.35 99.88 98.55
</TABLE>
9
Source: BankSource, published by Shehunoff
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
STATE FS&LA OF DES MOINES
DES MOINES, IA
TICKER SFFC FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 64,977 71,246 79,668 81,709
% Change in Assets 0.12 9.65 11.82 2.56
Total Loans 54,307 60,444 67,706 67,318
Deposits 46,043 46,201 49,422 51,482
Broker Originated Deposits - 396 1,584 1,683
CAPITAL:
Equity Capital 10,101 10,067 9,883 10,144
Tangible Capital 9,641 9,537 9,489 9,079
Core Capital 9,641 9,537 9,489 9,079
Risk-Based Capital 9,845 9,765 9,741 9,333
Equity Capital/Total Assets 15.55 14.13 12.41 12.41
Core Capital/Risk Based Assets 27.98 24.47 20.28 18.92
Core Capital/Adj Tang Assets 15.14 13.63 12.08 11.27
Tangible Cap/Tangible Assets 15.14 13.63 12.08 11.27
Risk-Based Cap/Risk-Wt Assets 28.57 25.05 20.82 19.45
PROFITABILITY:
Net Income(Loss) 803 729 709 234
Ret on Avg Assets Bef Ext Item 1.24 1.07 0.95 1.16
Return on Average Equity 9.56 7.23 6.85 9.35
Net Interest Income/Avg Assets 3.83 3.46 3.32 3.14
Noninterest Income/Avg Assets 0.28 0.35 0.44 0.39
Noninterest Expense/Avg Assets 2.05 2.02 2.27 1.62
Yield/Cost Spread 3.51 2.90 2.91 2.85
LIQUIDITY:
Int Earn Assets/Int Bear Liab 117.65 114.08 109.89 109.26
Brokered Deposits/Tot Deposits - 0.86 3.21 3.27
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.22 0.64 2.27 2.39
Nonaccrual Loans/Gross Loans 0.21 - 0.95 0.89
Nonaccrual Lns/Ln Loss Reserve 57.84 - 260.71 233.86
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns 0.07 - - 0.02
Nonmtg 1-4 Constr&Conv Lns/TA 28.11 27.78 27.96 26.17
</TABLE>
Source: TAFS, published by Sheshunoff 10
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
SOBIESKI FS&LA
SOUTH BEND, IN
TICKER SOBI FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 70,694 72,595 75,773 76,285
% Change in Assets (4.11) 2.69 4.38 0.68
Total Loans 49,594 45,893 52,234 55,213
Deposits 64,309 61,399 59,714 59,045
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,917 10,002 9,321 8,803
Tangible Capital 5,917 9,964 9,331 8,814
Core Capital 5,917 9,964 9,331 8,814
Risk-Based Capital 6,117 10,164 9,531 9,014
Equity Capital/Total Assets 8.37 13.78 12.30 11.54
Core Capital/Risk Based Assets 19.89 35.15 29.37 27.61
Core Capital/Adj Tang Assets 8.37 13.73 12.31 11.55
Tangible Cap/Tangible Assets 8.37 13.73 12.31 11.55
Risk-Based Cap/Risk-Wt Assets 20.56 35.86 30.00 28.24
PROFITABILITY:
Net Income(Loss) 686 363 74 106
Ret on Avg Assets Bef Ext Item 0.95 0.57 0.10 0.56
Return on Average Equity 12.25 5.09 0.76 4.68
Net Interest Income/Avg Assets 3.53 3.02 2.92 3.04
Noninterest Income/Avg Assets 0.22 0.23 0.37 0.27
Noninterest Expense/Avg Assets 2.20 2.40 3.08 2.41
Yield/Cost Spread 3.45 2.84 2.69 2.88
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.04 109.97 107.58 108.24
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.30 0.17 0.38 0.37
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 0.50 3.57 4.53 4.85
</TABLE>
Source: TAFS, published by Sheshunoff 11
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
<TABLE>
<CAPTION>
FIRST SAVINGS BANK, A FSB
THREE RIVERS
TICKER THR FINANCIAL HIGHLIGHTS
- ----------
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 72,928 82,184 88,952 90,869
% Change in Assets (1.71) 12.69 8.24 2.16
Total Loans 53,406 55,622 59,319 60,476
Deposits 63,174 65,579 60,421 60,048
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,997 10,264 10,510 10,631
Tangible Capital 4,893 10,197 10,458 10,581
Core Capital 4,938 10,204 10,458 10,581
Risk-Based Capital 5,270 10,621 10,928 11,065
Equity Capital/Total Assets 6.85 12.49 11.82 11.70
Core Capital/Risk Based Assets 12.74 24.51 22.86 21.81
Core Capital/Adj Tang Assets 6.81 12.48 11.76 11.65
Tangible Cap/Tangible Assets 6.75 12.48 11.76 11.65
Risk-Based Cap/Risk-Wt Assets 13.59 25.51 23.89 22.81
PROFITABILITY:
Net Income(Loss) 495 734 586 195
Ret on Avg Assets Bef Ext Item 0.67 0.95 0.68 0.87
Return on Average Equity 10.41 9.62 5.65 7.38
Net Interest Income/Avg Assets 3.59 3.54 3.62 3.40
Noninterest Income/Avg Assets 0.50 1.17 0.65 0.61
Noninterest Expense/Avg Assets 2.96 3.13 3.21 2.64
Yield/Cost Spread 3.90 3.66 3.61 3.36
LIQUIDITY:
Int Earn Assets/Int Bear Liab 100.57 107.33 107.71 106.68
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 2.67 2.02 1.82 1.80
Nonaccrual Loans/Gross Loans 0.04 0.10 0.32 0.14
Nonaccrual Lns/Ln Loss Reserve 6.59 14.08 40.68 16.87
Repos Assets/Tot Assets - - - 0.51
Net Chrg-Off/Av Adj Lns 0.10 0.01 0.01 0.01
Nonmtg 1-4 Constr&Conv Lns/TA 7.54 7.15 8.29 7.88
</TABLE>
Sources: TAFS, published by Sheshunoff 12
<PAGE>
EXHIBIT V
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 44.750
ABBK Abington Bancorp Inc. Abington MA NE BIF NASDAQ 06/10/86 30.500
ABCL Alliance Bancorp Inc. Hinsdale IL MW SAIF NASDAQ 07/07/92 31.125
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 26.750
AFCB Affiliated Community Bancorp Waltham MA NE SAIF NASDAQ 10/19/95 26.250
AHM Ahmanson & Company (H.F.) Irwindale CA WE SAIF NYSE 10/25/72 51.938
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 23.250
ALBK ALBANK Financial Corp. Albany NY MA SAIF NASDAQ 04/01/92 39.000
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 14.500
ANDB Andover Bancorp Inc. Andover MA NE BIF NASDAQ 05/08/86 30.875
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 20.875
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 13.125
ASFC Astoria Financial Corp. Lake Success NY MA SAIF NASDAQ 11/18/93 48.000
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 12.750
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 21.000
BFD BostonFed Bancorp Inc. Burlington MA NE SAIF AMSE 10/24/95 19.000
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94 24.125
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 37.750
BKCT Bancorp Connecticut Inc. Southington CT NE BIF NASDAQ 07/03/86 31.500
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 12.125
BVCC Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 25.938
CAFI Camco Financial Corp. Cambridge OH MW SAIF NASDAQ NA 18.250
CAPS Capital Savings Bancorp Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 15.625
CASB Cascade Financial Corp. Everett WA WE SAIF NASDAQ 09/16/92 13.250
CASH First Midwest Financial Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 18.000
CATB Catskill Financial Corp. Catskill NY MA BIF NASDAQ 04/18/96 16.375
CBCI Calumet Bancorp Inc. Dolton IL MW SAIF NASDAQ 02/20/92 43.000
CBSA Coastal Bancorp Inc. Houston TX SW SAIF NASDAQ NA 29.500
CBSB Charter Financial Inc. Sparta IL MW SAIF NASDAQ 12/29/95 20.375
CEBK Central Co-operative Bank Somerville MA NE BIF NASDAQ 10/24/86 19.750
CFB Commercial Federal Corp. Omaha NE MW SAIF NYSE 12/31/84 44.000
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 21.750
CFSB CFSB Bancorp Inc. Lansing MI MW SAIF NASDAQ 06/22/90 26.500
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 17.375
CFX CFX Corp. Keene NH NE BIF AMSE 02/12/87 20.563
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 15.500
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.000
CLAS Classic Bancshares Inc. Ashland KY MW SAIF NASDAQ 12/29/95 14.125
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 17.375
CMSB Commonwealth Bancorp Inc. Norristown PA MA SAIF NASDAQ 06/17/96 16.875
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 50.500
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 55.313
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 14.625
CSA Coast Savings Financial Los Angeles CA WE SAIF NYSE 12/23/85 46.750
CTZN CitFed Bancorp Inc. Dayton OH MW SAIF NASDAQ 01/23/92 46.750
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 21.000
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 29.750
DIME Dime Community Bancorp Inc. Brooklyn NY MA BIF NASDAQ 06/26/96 19.250
DME Dime Bancorp Inc. New York NY MA BIF NYSE 08/19/86 19.500
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 19.250
</TABLE>
1
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 22.250
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.500
EFBI Enterprise Federal Bancorp West Chester OH MW SAIF NASDAQ 10/17/94 20.000
EGFC Eagle Financial Corp. Bristol CT NE SAIF NASDAQ 02/03/87 36.250
EIRE Emerald Isle Bancorp Inc. Quincy MA NE BIF NASDAQ 09/08/86 21.750
EMLD Emerald Financial Corp. Strongsville OH MW SAIF NASDAQ NA 14.500
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 37.938
ESBK Elmira Savings Bank (The) Elmira NY MA BIF NASDAQ 03/01/85 23.750
FBBC First Bell Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 15.875
FBCI Fidelity Bancorp Inc. Chicago IL MW SAIF NASDAQ 12/15/93 21.250
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 34.250
FBSI First Bancshares Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 24.250
FCBF FCB Financial Corp. Neenah WI MW SAIF NASDAQ 09/24/93 27.500
FCME First Coastal Corp. Westbrook ME NE BIF NASDAQ NA 10.875
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 34.125
FESX First Essex Bancorp Inc. Andover MA NE BIF NASDAQ 08/04/87 17.000
FFBA First Colorado Bancorp Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 18.875
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 21.000
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 18.875
FFBS FFBS BanCorp Inc. Columbus MS SE SAIF NASDAQ 07/01/93 23.000
FFBZ First Federal Bancorp Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 18.500
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 33.000
FFDB FirstFed Bancorp Inc. Bessemer AL SE SAIF NASDAQ 11/19/91 16.531
FFES First Federal of East Hartford East Hartford CT NE SAIF NASDAQ 06/23/87 33.000
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 29.313
FFFD North Central Bancshares Inc. Fort Dodge IA MW SAIF NASDAQ 03/21/96 16.813
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 17.750
FFHS First Franklin Corporation Cincinnati OH MW SAIF NASDAQ 01/26/88 19.750
FFIC Flushing Financial Corp. Flushing NY MA BIF NASDAQ 11/21/95 20.250
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 22.500
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 32.000
FFOH Fidelity Financial of Ohio Cincinnati OH MW SAIF NASDAQ 03/04/96 15.438
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 13.000
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 28.000
FFWD Wood Bancorp Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 16.625
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 27.625
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 7.750
FIBC Financial Bancorp Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 20.000
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 28.500
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 22.500
FMCO FMS Financial Corporation Burlington NJ MA SAIF NASDAQ 12/14/88 25.250
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 21.000
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 13.750
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 20.000
FRC First Republic Bancorp San Francisco CA WE BIF NYSE NA 23.375
FSBI Fidelity Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 21.250
FSPG First Home Bancorp Inc. Pennsville NJ MA SAIF NASDAQ 04/20/87 20.125
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86 32.000
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 22.250
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 24.500
</TABLE>
2
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 12.000
FWWB First SB of Washington Bancorp Walla Walla WA WE SAIF NASDAQ 11/01/95 24.625
GAF GA Financial Inc. Pittsburgh PA MA SAIF AMSE 03/26/96 18.625
GBCI Glacier Bancorp Inc. Kalispell MT WE SAIF NASDAQ 03/30/84 18.875
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 84.063
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 25.000
GFSB GFS Bancorp Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 14.250
GPT GreenPoint Financial Corp. New York NY MA BIF NYSE 01/28/94 62.563
GSB Golden State Bancorp Inc. Glendale CA WE SAIF NYSE 10/01/83 29.125
GSBC Great Southern Bancorp Inc. Springfield MO MW SAIF NASDAQ 12/14/89 17.000
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 34.250
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 18.750
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 22.250
HARB Harbor Florida Bancorp (MHC) Fort Pierce FL SE SAIF NASDAQ 01/06/94 54.500
HARL Harleysville Savings Bank Harleysville PA MA SAIF NASDAQ 08/04/87 26.000
HAVN Haven Bancorp Inc. Woodhaven NY MA SAIF NASDAQ 09/23/93 38.875
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 22.000
HBNK Highland Federal Bank FSB Burbank CA WE SAIF NASDAQ NA 30.250
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87 19.000
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 15.250
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 22.000
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 12.000
HFSA Hardin Bancorp Inc. Hardin MO MW SAIF NASDAQ 09/29/95 16.875
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 11.750
HIFS Hingham Instit. for Savings Hingham MA NE BIF NASDAQ 12/20/88 24.250
HMCI HomeCorp Inc. Rockford IL MW SAIF NASDAQ 06/22/90 16.250
HMNF HMN Financial Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 25.250
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 30.000
HPBC Home Port Bancorp Inc. Nantucket MA NE BIF NASDAQ 08/25/88 22.250
HRBF Harbor Federal Bancorp Inc. Baltimore MD MA SAIF NASDAQ 08/12/94 19.000
HRZB Horizon Financial Corp. Bellingham WA WE BIF NASDAQ 08/01/86 15.250
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 18.875
IFSB Independence Federal Svgs Bank Washington DC MA SAIF NASDAQ 06/06/85 13.000
INBI Industrial Bancorp Bellevue OH MW SAIF NASDAQ 08/01/95 15.250
IPSW Ipswich Savings Bank Ipswich MA NE BIF NASDAQ 05/26/93 13.000
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 25.000
ITLA ITLA Capital Corp. La Jolla CA WE BIF NASDAQ 10/24/95 17.750
IWBK InterWest Bancorp Inc. Oak Harbor WA WE SAIF NASDAQ NA 38.750
JSB JSB Financial Inc. Lynbrook NY MA BIF NYSE 06/27/90 46.063
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 33.250
JXVL Jacksonville Bancorp Inc. Jacksonville TX SW SAIF NASDAQ 04/01/96 16.750
KFBI Klamath First Bancorp Klamath Falls OR WE SAIF NASDAQ 10/05/95 19.500
KNK Kankakee Bancorp Inc. Kankakee IL MW SAIF AMSE 01/06/93 29.000
KSAV KS Bancorp Inc. Kenly NC SE SAIF NASDAQ 12/30/93 18.500
KSBK KSB Bancorp Inc. Kingfield ME NE BIF NASDAQ 06/24/93 14.250
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 12.500
LARK Landmark Bancshares Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 24.313
LARL Laurel Capital Group Inc. Allison Park PA MA SAIF NASDAQ 02/20/87 22.500
LIFB Life Bancorp Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 24.625
LISB Long Island Bancorp Inc. Melville NY MA SAIF NASDAQ 04/18/94 40.125
</TABLE>
Source: SNL & F&C calculations 3
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.625
LONF London Financial Corporation London OH MW SAIF NASDAQ 04/01/96 15.000
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 21.500
LSBX Lawrence Savings Bank North Andover MA NE BIF NASDAQ 05/02/86 11.375
LVSB Lakeview Financial West Paterson NJ MA SAIF NASDAQ 12/22/93 33.000
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 16.000
MAFB MAF Bancorp Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 31.000
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 23.500
MASB MASSBANK Corp. Reading MA NE BIF NASDAQ 05/28/86 52.000
MBB MSB Bancorp Inc. Goshen NY MA BIF AMSE 09/03/92 23.250
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE NA 23.250
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 23.750
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 25.500
MDBK Medford Savings Bank Medford MA NE BIF NASDAQ 03/18/86 31.625
MECH Mechanics Savings Bank Hartford CT NE BIF NASDAQ 06/26/96 24.000
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 41.031
METF Metropolitan Financial Corp. Mayfield Heights OH MW SAIF NASDAQ NA 18.125
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 23.125
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 13.750
MFLR Mayflower Co-operative Bank Middleboro MA NE BIF NASDAQ 12/23/87 19.500
MFSL Maryland Federal Bancorp Hyattsville MD MA SAIF NASDAQ 06/02/87 43.000
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.500
MLBC ML Bancorp Inc. Villanova PA MA SAIF NASDAQ 08/11/94 20.750
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 13.250
MWBI Midwest Bancshares Inc. Burlington IA MW SAIF NASDAQ 11/12/92 36.000
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 6.500
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 20.750
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 49.000
NBN Northeast Bancorp Portland ME NE BIF AMSE 08/19/87 14.625
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 17.500
NHTB New Hampshire Thrift Bncshrs New London NH NE SAIF NASDAQ 05/22/86 18.250
NMSB NewMil Bancorp Inc. New Milford CT NE BIF NASDAQ 02/01/86 12.875
NSSB Norwich Financial Corp. Norwich CT NE BIF NASDAQ 11/14/86 29.000
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 16.750
NYB New York Bancorp Inc. Douglaston NY MA SAIF NYSE 01/28/88 30.750
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 25.375
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 23.250
PALM Palfed Inc. Aiken SC SE SAIF NASDAQ 12/15/85 16.125
PAMM PacificAmerica Money Center Woodland Hills CA WE BIF NASDAQ 06/25/96 23.000
PBCI Pamrapo Bancorp Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 21.000
PBHC Oswego City Savings Bk (MHC) Oswego NY MA BIF NASDAQ 11/16/95 18.000
PBKB People's Bancshares Inc. New Bedford MA NE BIF NASDAQ 10/30/86 17.250
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 21.375
PCCI Pacific Crest Capital Agoura Hills CA WE BIF NASDAQ NA 15.250
PEEK Peekskill Financial Corp. Peekskill NY MA SAIF NASDAQ 12/29/95 16.375
PERM Permanent Bancorp Inc. Evansville IN MW SAIF NASDAQ 04/04/94 22.750
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 25.625
PFNC Progress Financial Corp. Blue Bell PA MA SAIF NASDAQ 07/18/83 15.000
PFSB PennFed Financial Services Inc West Orange NJ MA SAIF NASDAQ 07/15/94 29.500
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 26.000
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 37.750
PHFC Pittsburgh Home Financial Corp Pittsburgh PA MA SAIF NASDAQ 04/01/96 18.750
PKPS Poughkeepsie Financial Corp. Poughkeepsie NY MA SAIF NASDAQ 11/19/85 7.281
PRBC Prestige Bancorp Inc. Pleasant Hills PA MA SAIF NASDAQ 06/27/96 17.125
PSBK Progressive Bank Inc. Fishkill NY MA BIF NASDAQ 08/01/84 33.000
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 24.000
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 21.250
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 20.250
PVSA Parkvale Financial Corporation Monroeville PA MA SAIF NASDAQ 07/16/87 29.625
PWBC PennFirst Bancorp Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 15.750
QCBC Quaker City Bancorp Inc. Whittier CA WE SAIF NASDAQ 12/30/93 21.250
QCFB QCF Bancorp Inc. Virginia MN MW SAIF NASDAQ 04/03/95 26.000
RARB Raritan Bancorp Inc. Raritan NJ MA BIF NASDAQ 03/01/87 24.000
REDF RedFed Bancorp Inc. Redlands CA WE SAIF NASDAQ 04/08/94 17.500
RELY Reliance Bancorp Inc. Garden City NY MA SAIF NASDAQ 03/31/94 31.500
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 27.000
RVSB Riverview Savings Bank (MHC) Camas WA WE SAIF NASDAQ 10/26/93 27.000
SFED SFS Bancorp Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 19.250
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 22.000
SFIN Statewide Financial Corp. Jersey City NJ MA SAIF NASDAQ 10/02/95 18.750
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 27.500
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 19.250
SISB SIS Bancorp Inc. Springfield MA NE BIF NASDAQ 02/08/95 29.750
SKAN Skaneateles Bancorp Inc. Skaneateles NY MA BIF NASDAQ 06/02/86 23.000
SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO MW SAIF NASDAQ 04/13/94 17.000
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 20.625
SOSA Somerset Savings Bank Somerville MA NE BIF NASDAQ 07/09/86 3.969
SPBC St. Paul Bancorp Inc. Chicago IL MW SAIF NASDAQ 05/18/87 23.500
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96 21.250
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 34.500
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 18.625
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 20.250
SWCB Sandwich Co-operative Bank Sandwich MA NE BIF NASDAQ 07/25/86 32.375
TBK Tolland Bank Tolland CT NE BIF AMSE 12/19/86 17.625
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 16.250
THRD TF Financial Corporation Newtown PA MA SAIF NASDAQ 07/13/94 19.625
TPNZ Tappan Zee Financial Inc. Tarrytown NY MA SAIF NASDAQ 10/05/95 17.250
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 22.750
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 18.500
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 20.000
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 23.625
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80 14.125
WAMU Washington Mutual Inc. Seattle WA WE BIF NASDAQ 03/11/83 63.000
WBST Webster Financial Corp. Waterbury CT NE SAIF NASDAQ 12/12/86 55.250
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 26.500
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 16.500
WFI Winton Financial Corp. Cincinnati OH MW SAIF AMSE 08/04/88 16.250
WFSL Washington Federal Inc. Seattle WA WE SAIF NASDAQ 11/17/82 27.313
WRNB Warren Bancorp Inc. Peabody MA NE BIF NASDAQ 07/09/86 17.875
WSB Washington Savings Bank, FSB Waldorf MD MA SAIF AMSE NA 6.875
</TABLE>
Source: SNL & F&C calculations 5
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WSFS WSFS Financial Corporation Wilmington DE MA BIF NASDAQ 11/26/86 15.125
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 21.375
WVFC WVS Financial Corp. Pittsburgh PA MA SAIF NASDAQ 11/29/93 27.000
WWFC Westwood Financial Corporation Westwood NJ MA SAIF NASDAQ 06/07/96 24.250
WYNE Wayne Bancorp Inc. Wayne NJ MA SAIF NASDAQ 06/27/96 24.125
YFCB Yonkers Financial Corporation Yonkers NY MA SAIF NASDAQ 04/18/96 17.625
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 24.250
Maximum 84.063
Minimum 3.969
Average 23.857
Median 21.250
</TABLE>
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 144.71 17.3 154.1 164.8 14.2 0.89 1,019,510 9.2 8.7 2.58 0.89
ABBK 56.13 17.0 162.8 180.8 11.3 1.31 501,256 6.9 6.3 1.79 0.73
ABCL 166.36 17.6 133.0 134.7 11.9 2.12 1,404,263 8.9 8.8 1.77 0.76
ABCW 242.05 7.8 101.0 102.9 6.3 1.20 1,925,866 6.2 6.1 3.44 0.96
AFCB 169.83 15.4 156.7 157.7 15.6 1.83 1,090,431 9.8 9.7 1.71 1.10
AHM 5,055.43 18.5 255.2 299.5 10.6 1.69 47,532,068 5.2 4.6 2.81 0.70
ALBC 5.81 24.0 97.0 97.0 8.5 1.38 68,628 8.7 8.7 0.97 0.37
ALBK 500.53 15.1 150.9 172.6 13.9 1.85 3,602,227 9.2 8.1 2.59 1.04
AMFC 13.98 21.3 99.2 99.2 14.8 1.66 94,179 15.0 15.0 0.68 0.80
ANDB 158.96 11.6 157.7 157.7 12.7 2.20 1,250,943 8.1 8.1 2.66 1.13
ASBI 67.43 20.5 154.7 154.9 17.0 3.07 397,730 11.0 11.0 1.02 0.84
ASBP 22.59 21.9 129.3 129.3 20.1 3.05 112,264 15.6 15.6 0.60 0.85
ASFC 999.79 17.0 167.9 199.9 13.1 1.25 7,664,495 7.8 6.7 2.83 0.79
BANC 289.47 18.8 186.7 227.3 10.5 0.91 2,730,474 5.6 4.7 0.68 0.64
BDJI 14.33 19.3 119.3 119.3 13.0 - 110,589 10.9 10.9 1.09 0.63
BFD 107.35 19.6 123.6 127.9 11.6 1.47 975,922 8.8 8.5 0.97 0.66
BFSB 27.56 15.5 135.9 135.9 20.4 2.32 135,455 14.2 14.2 1.56 1.28
BKC 87.04 14.4 173.4 180.6 14.4 3.82 605,857 8.3 8.0 2.63 1.10
BKCT 79.81 16.9 181.8 181.8 18.6 3.18 428,362 10.3 10.3 1.86 1.25
BKUNA 107.54 21.3 159.8 197.2 6.0 - 1,807,192 5.6 4.9 0.57 0.58
BVCC 336.66 17.4 171.6 204.4 10.9 1.23 3,096,213 6.3 5.4 1.49 0.63
CAFI 58.66 13.6 125.2 135.7 12.0 2.71 489,833 9.6 8.9 1.34 0.89
CAPS 29.56 14.1 138.5 138.5 12.2 1.54 242,518 8.8 8.8 1.11 0.92
CASB 34.06 21.0 150.9 150.9 9.3 - 368,126 6.1 6.1 0.63 0.52
CASH 49.21 13.0 115.2 130.1 13.1 2.00 374,824 11.4 10.2 1.38 0.93
CATB 80.21 20.2 108.6 108.6 27.2 1.71 284,238 25.0 25.0 0.81 1.41
CBCI 90.76 15.3 117.9 117.9 18.3 - 496,561 15.5 15.5 2.81 1.37
CBSA 146.66 12.8 150.3 180.8 5.0 1.63 2,964,082 3.3 2.8 2.31 0.41
CBSB 84.55 19.2 148.6 168.0 21.5 1.57 393,268 14.5 13.0 1.06 1.16
CEBK 38.81 13.4 113.5 126.9 11.3 1.62 344,420 9.9 9.0 1.47 0.88
CFB 948.32 15.5 222.6 251.0 13.4 0.64 7,096,665 6.0 5.4 2.84 0.91
CFFC 27.74 12.9 115.3 115.3 15.8 2.58 175,414 13.7 13.7 1.69 1.28
CFSB 135.06 16.7 209.5 209.5 16.0 2.26 845,438 7.6 7.6 1.59 1.07
CFTP 80.42 22.9 124.5 124.5 38.5 1.73 209,035 27.5 27.5 0.76 1.61
CFX 270.27 15.1 195.5 209.0 14.5 4.28 1,859,030 7.4 7.0 1.36 0.98
CIBI 14.41 15.7 129.6 129.6 15.6 2.07 92,304 12.0 12.0 0.99 0.92
CKFB 18.05 21.1 112.0 112.0 28.9 2.63 60,812 24.0 24.0 0.90 1.33
CLAS 18.43 19.4 95.0 112.4 14.1 1.98 130,525 14.9 12.9 0.73 0.72
CMRN 45.64 17.4 101.1 101.1 21.9 1.61 208,105 21.7 21.7 1.00 1.32
CMSB 288.49 20.3 130.9 167.4 12.6 1.66 2,288,986 9.6 7.7 0.83 0.64
CNIT 83.48 16.5 162.3 176.7 11.7 1.98 709,550 7.2 6.7 3.06 0.75
COFI 2,554.68 15.2 261.5 279.4 17.5 1.81 14,564,703 6.7 6.3 3.65 1.23
CRZY 13.96 20.9 99.6 99.6 25.7 2.74 54,275 25.8 25.8 0.70 1.30
CSA 870.29 19.6 194.3 196.8 9.6 - 9,102,743 4.9 4.9 2.38 0.52
CTZN 403.85 17.8 204.8 227.4 13.0 0.77 3,097,515 6.4 5.8 2.63 0.82
CVAL 45.40 15.9 159.7 159.7 13.4 2.00 323,673 8.4 8.4 1.32 0.91
DIBK 153.29 11.0 220.0 227.5 17.5 1.35 873,878 8.0 7.7 2.71 1.88
DIME 252.04 19.6 132.0 153.3 19.2 0.94 1,315,026 14.5 12.8 0.98 1.04
DME 2,022.52 15.1 191.0 200.2 10.1 0.82 20,087,176 5.3 5.0 1.29 0.70
DNFC 157.69 13.8 177.6 179.6 9.8 1.04 1,608,837 5.6 5.5 1.40 0.81
</TABLE>
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DSL 594.82 15.7 145.8 147.8 10.1 1.44 5,885,670 6.9 6.8 1.42 0.73
EBSI 93.38 16.0 132.5 132.5 11.0 3.64 848,490 8.3 8.3 1.03 0.76
EFBI 40.02 19.1 126.7 126.7 15.1 5.00 264,266 12.0 12.0 1.05 0.82
EGFC 228.11 23.4 164.6 210.9 11.3 2.76 2,013,359 6.9 5.4 1.55 0.45
EIRE 48.89 13.7 162.4 162.4 11.5 1.29 425,014 7.1 7.1 1.59 0.89
EMLD 73.44 14.5 160.6 163.1 12.2 1.66 603,080 7.6 7.5 1.00 0.90
EQSB 22.85 11.5 147.1 147.1 7.4 - 308,197 5.0 5.0 3.30 0.73
ESBK 16.78 21.4 114.6 119.5 7.4 2.70 227,828 6.3 6.1 1.11 0.35
FBBC 103.36 13.8 147.3 147.3 14.5 2.52 714,366 9.8 9.8 1.15 1.23
FBCI 59.33 16.2 116.6 116.9 12.1 1.51 489,843 10.4 10.4 1.31 0.77
FBHC 28.33 23.1 147.4 158.3 8.9 1.17 318,668 6.0 5.6 1.48 0.51
FBSI 26.57 16.2 119.6 119.8 16.2 0.83 163,973 13.5 13.5 1.50 1.10
FCBF 112.01 23.1 146.3 146.3 21.3 2.91 526,203 14.6 14.6 1.19 1.06
FCME 14.78 2.5 105.1 105.1 9.7 - 152,386 9.2 9.2 4.39 4.08
FED 361.07 16.8 178.3 180.3 8.6 - 4,193,203 4.8 4.8 2.03 0.52
FESX 127.56 13.4 146.9 169.2 10.2 2.82 1,245,415 7.0 6.1 1.27 0.85
FFBA 312.64 17.2 160.1 162.3 20.7 2.33 1,510,376 12.9 12.8 1.10 1.21
FFBH 102.82 18.4 128.4 128.4 19.2 1.14 535,204 15.0 15.0 1.14 1.06
FFBI 7.84 21.2 107.1 107.1 9.3 - 84,531 8.7 8.7 0.89 0.41
FFBS 35.82 18.7 135.5 135.5 27.4 2.17 130,762 19.2 19.2 1.23 1.46
FFBZ 29.08 17.5 210.0 210.2 14.5 1.30 201,262 7.6 7.5 1.06 0.96
FFCH 209.77 15.9 205.9 205.9 12.6 2.18 1,667,178 6.1 6.1 2.08 0.84
FFDB 19.03 12.5 114.2 125.2 10.8 3.03 176,528 9.4 8.7 1.32 0.94
FFES 88.31 13.4 139.7 139.7 9.0 1.82 983,594 6.4 6.4 2.46 0.70
FFFC 132.51 19.5 168.4 172.0 23.7 1.64 558,886 13.2 12.9 1.50 1.34
FFFD 54.78 15.2 113.5 113.5 25.7 1.49 212,869 22.7 22.7 1.11 1.91
FFHH 53.83 17.8 110.7 110.7 14.2 2.82 378,233 11.4 11.4 1.00 0.84
FFHS 23.54 16.7 115.0 115.8 10.4 1.62 226,944 9.0 9.0 1.18 0.64
FFIC 161.57 20.9 121.4 121.4 18.8 1.19 860,031 15.5 15.5 0.97 0.94
FFKY 93.83 16.7 181.5 192.8 24.9 2.49 377,380 13.7 13.0 1.35 1.53
FFLC 74.16 22.1 142.1 142.1 19.2 1.50 387,097 13.5 13.5 1.45 1.01
FFOH 86.14 18.6 126.9 143.7 16.4 1.81 524,743 12.9 11.6 0.83 0.95
FFSL 12.89 18.3 112.1 112.1 11.7 1.92 110,876 10.4 10.4 0.71 0.69
FFWC 19.91 11.8 116.1 128.9 11.1 2.57 180,056 9.5 8.7 2.37 1.06
FFWD 35.22 18.9 174.6 174.6 21.5 2.41 163,918 12.3 12.3 0.88 1.26
FFYF 113.68 16.5 139.3 139.3 19.1 2.53 599,249 13.7 13.7 1.67 1.27
FGHC 23.66 21.0 184.1 200.8 15.1 0.69 156,383 8.2 7.6 0.37 0.78
FIBC 34.44 12.7 130.3 131.0 12.2 2.00 282,485 9.4 9.3 1.58 1.00
FKFS 34.99 14.0 149.3 149.3 10.9 0.70 320,797 7.3 7.3 2.04 0.78
FLFC 173.81 14.7 182.9 202.9 13.5 1.78 1,288,919 7.4 6.7 1.53 0.94
FMCO 60.28 11.4 165.7 168.7 10.9 1.11 554,925 6.6 6.5 2.22 1.02
FMSB 56.74 14.5 192.5 192.5 13.1 0.95 432,034 6.8 6.8 1.45 1.00
FNGB 121.47 12.9 168.9 168.9 19.1 2.33 637,725 11.3 11.3 1.07 0.90
FOBC 47.48 14.5 115.9 121.6 13.3 2.90 356,718 11.1 10.6 1.38 0.97
FRC 226.57 18.0 141.2 141.2 10.1 - 2,238,033 7.2 7.2 1.30 0.60
FSBI 32.93 12.7 134.2 134.2 9.1 1.69 363,302 6.8 6.8 1.67 0.83
FSPG 54.51 11.4 156.6 159.2 10.4 1.99 522,396 6.7 6.6 1.77 0.97
FSTC 58.85 11.4 177.9 228.7 17.3 1.38 338,857 9.7 7.7 2.80 1.90
FTF 39.83 13.3 148.0 148.0 23.3 2.52 171,358 15.7 15.7 1.67 1.73
FTFC 224.38 15.5 221.1 235.1 14.3 1.96 1,571,981 6.4 6.1 1.58 0.91
</TABLE>
Source: SNL & F&C calculations 8
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
FTSB 17.02 24.0 115.4 115.4 18.5 2.08 96,940 16.0 16.0 0.50 0.81
FWWB 258.34 21.4 157.1 170.1 24.1 1.14 1,074,166 14.2 13.3 1.15 1.16
GAF 148.72 20.9 130.7 132.1 19.8 2.58 749,748 15.2 15.0 0.89 1.12
GBCI 128.58 15.4 232.5 238.6 22.7 2.54 567,610 9.7 9.5 1.23 1.54
GDW 4,769.61 10.5 191.5 191.5 12.2 0.52 39,095,082 6.4 6.4 7.98 1.23
GFCO 28.50 14.1 104.7 106.1 9.9 3.20 287,088 9.5 9.4 1.77 0.71
GFSB 14.08 13.8 133.7 133.7 15.3 1.83 92,063 11.5 11.5 1.03 1.21
GPT 2,709.79 19.1 182.6 324.7 21.2 1.60 13,300,046 10.3 6.1 3.27 1.03
GSB 1,466.40 20.1 186.3 209.7 9.0 - 16,218,259 6.2 5.7 1.45 0.68
GSBC 137.79 13.6 228.2 228.2 19.5 2.35 707,841 8.5 8.5 1.25 1.54
GTFN 472.80 22.7 167.9 175.3 15.5 1.75 3,046,227 9.2 8.9 1.51 0.72
GUPB 15.08 22.3 111.1 111.1 18.1 2.13 86,911 16.3 16.3 0.84 0.93
HALL 32.11 13.2 108.2 108.2 7.8 - 409,820 7.2 7.2 1.68 0.61
HARB 270.88 20.7 289.1 299.0 24.3 2.57 1,116,718 8.4 8.1 2.63 1.22
HARL 42.96 13.3 195.3 195.3 12.8 1.54 336,666 6.5 6.5 1.95 1.02
HAVN 170.40 12.3 160.6 161.2 9.6 1.54 1,781,545 6.0 5.9 3.16 0.84
HBFW 55.55 18.8 124.9 124.9 16.6 0.91 334,862 13.3 13.3 1.17 0.89
HBNK 69.58 21.8 184.6 184.6 13.8 - 504,381 7.5 7.5 1.39 0.67
HBS 23.76 15.2 113.4 117.6 15.8 2.95 150,416 13.9 13.5 1.25 1.15
HFFB 30.88 20.3 97.3 97.3 28.3 2.62 108,950 26.9 26.9 0.75 1.35
HFFC 65.55 13.8 123.7 123.7 11.7 1.91 561,664 9.4 9.4 1.60 0.89
HFGI 39.08 17.7 156.5 156.5 8.8 1.00 446,797 5.6 5.6 0.68 0.44
HFSA 14.50 19.4 107.6 107.6 13.4 2.84 108,018 12.5 12.5 0.87 0.79
HHFC 10.75 22.2 103.9 103.9 12.3 3.40 87,596 11.8 11.8 0.53 0.57
HIFS 31.61 13.0 155.3 155.3 14.5 1.98 217,586 9.4 9.4 1.86 1.22
HMCI 27.51 20.6 126.9 126.9 8.3 - 331,608 6.5 6.5 0.79 0.42
HMNF 106.35 21.4 130.0 130.0 18.8 - 566,865 14.4 14.4 1.18 0.88
HOMF 101.89 13.2 176.0 181.6 14.9 1.67 682,796 8.5 8.2 2.28 1.22
HPBC 40.98 12.9 195.4 195.4 20.6 3.60 198,748 10.6 10.6 1.72 1.68
HRBF 32.17 20.4 115.3 115.3 14.9 2.11 216,370 12.9 12.9 0.93 0.70
HRZB 113.11 14.5 139.8 139.8 21.8 2.62 518,661 15.6 15.6 1.05 1.54
HZFS 8.03 17.5 95.5 95.5 9.3 1.70 85,969 9.8 9.8 1.08 0.55
IFSB 16.65 23.6 93.6 105.9 6.4 1.69 258,460 6.9 6.1 0.55 0.27
INBI 80.47 18.8 131.1 131.1 23.2 3.15 346,596 17.7 17.7 0.81 1.27
IPSW 30.89 10.2 142.7 142.7 8.2 0.92 189,379 5.7 5.7 1.27 0.97
ISBF 172.52 22.3 142.0 166.9 18.2 1.60 947,107 12.0 10.4 1.12 0.85
ITLA 139.26 12.5 148.9 149.5 16.4 - 850,201 11.0 11.0 1.42 1.48
IWBK 311.39 16.8 250.7 256.1 17.0 1.55 1,832,582 6.8 6.6 2.31 1.10
JSB 454.82 18.2 129.6 129.6 29.6 3.04 1,531,115 22.9 22.9 2.53 1.70
JSBA 166.42 15.5 138.8 178.9 12.9 1.20 1,292,021 8.5 6.8 2.14 0.77
JXVL 41.31 7.4 123.6 123.6 18.4 2.99 226,182 14.9 14.9 2.28 1.33
KFBI 195.36 22.9 125.2 125.2 26.8 1.54 727,903 19.6 19.6 0.85 1.19
KNK 41.33 14.8 109.1 116.1 12.1 1.66 341,678 11.1 10.5 1.96 0.82
KSAV 16.38 12.0 114.1 114.2 15.4 3.24 106,121 13.5 13.5 1.54 1.24
KSBK 17.64 11.2 168.4 178.1 12.1 0.56 145,888 7.2 6.8 1.27 1.08
KYF 16.49 16.0 112.0 112.0 18.5 4.00 88,959 16.6 16.6 0.78 1.13
LARK 41.59 19.0 132.2 132.2 18.2 1.65 228,100 13.8 13.8 1.28 1.04
LARL 32.46 12.0 152.7 152.7 15.3 2.31 211,987 10.0 10.0 1.87 1.43
LIFB 242.48 18.7 154.5 159.1 16.3 1.95 1,488,257 10.6 10.3 1.32 0.86
LISB 961.73 23.7 181.0 182.8 16.3 1.50 5,908,737 9.0 8.9 1.69 0.72
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN 18.43 15.6 115.5 115.5 22.2 2.74 83,152 19.2 19.2 0.94 1.51
LONF 7.65 19.5 102.7 102.7 20.2 1.60 38,240 19.7 19.7 0.77 0.99
LSBI 19.70 15.1 108.6 108.6 10.3 1.58 194,117 8.9 8.9 1.42 0.68
LSBX 48.72 8.4 152.7 152.7 13.3 - 366,318 8.7 8.7 1.36 1.73
LVSB 74.83 18.9 165.8 207.3 15.8 0.76 481,646 9.5 7.8 1.75 0.95
LXMO 18.22 21.1 108.6 108.6 30.8 1.88 59,236 28.3 28.3 0.76 1.32
MAFB 477.39 13.6 184.6 211.3 14.4 0.90 3,321,464 7.8 6.9 2.28 1.16
MARN 41.55 15.2 106.4 106.4 24.0 3.75 173,304 22.5 22.5 1.55 1.67
MASB 139.66 15.3 144.8 144.8 15.4 2.46 905,417 10.6 10.6 3.39 1.04
MBB 66.13 21.7 109.9 224.0 8.1 2.58 813,902 8.9 5.4 1.07 0.51
MBB 66.13 21.7 109.9 224.0 8.1 2.58 813,902 8.9 5.4 1.07 0.51
MBLF 30.84 17.9 108.1 108.1 13.1 1.68 234,824 12.2 12.2 1.33 0.85
MCBN 5.93 15.3 115.4 115.4 9.9 2.04 59,739 8.6 8.6 1.67 0.67
MDBK 143.61 14.4 148.9 159.8 13.4 2.28 1,072,557 9.0 8.4 2.19 1.01
MECH 126.96 8.5 150.7 150.7 15.4 - 823,575 10.2 10.2 2.82 1.95
MERI 31.77 14.0 169.5 169.5 13.9 1.71 228,485 8.2 8.2 2.94 1.05
METF 63.90 15.0 196.6 217.3 7.8 - 821,280 4.0 3.6 1.21 0.54
MFBC 39.09 21.2 115.3 115.3 15.8 1.38 248,241 13.7 13.7 1.09 0.86
MFFC 31.69 24.6 112.2 112.2 15.9 4.36 199,886 13.1 13.1 0.56 0.69
MFLR 17.36 15.7 142.7 145.1 13.8 3.49 125,671 9.7 9.5 1.24 0.92
MFSL 138.03 13.6 142.3 144.1 11.9 1.86 1,157,445 8.4 8.3 3.17 0.89
MIVI 12.69 17.8 96.3 96.3 18.2 1.03 69,775 18.9 18.9 0.87 1.03
MLBC 219.25 18.4 151.7 154.4 10.6 1.93 2,071,285 7.0 6.9 1.13 0.68
MSBF 16.54 16.4 130.3 130.3 22.2 2.11 74,698 17.0 17.0 0.81 1.46
MWBI 12.25 12.8 123.9 123.9 8.6 1.67 146,542 6.9 6.9 2.81 0.75
MWBX 90.69 12.8 215.2 215.2 16.0 1.85 566,517 7.5 7.5 0.51 1.37
MWFD 33.77 16.7 185.1 192.0 16.3 1.64 207,050 8.8 8.5 1.24 1.09
NASB 109.58 12.8 193.1 199.8 14.8 1.63 736,585 7.7 7.4 3.82 1.20
NBN 18.90 22.2 108.4 125.4 7.5 2.19 247,525 7.8 6.9 0.66 0.50
NEIB 30.85 15.1 115.2 115.2 17.5 1.83 176,309 15.2 15.2 1.16 1.21
NHTB 37.68 22.0 154.9 182.0 11.9 2.74 315,280 7.7 6.6 0.83 0.61
NMSB 49.36 22.2 155.7 155.7 15.3 1.86 323,061 9.8 9.8 0.58 0.80
NSSB 156.98 22.3 197.3 218.5 22.0 1.93 712,699 11.2 10.2 1.30 1.05
NWEQ 14.05 15.7 117.7 117.7 14.5 3.10 96,891 11.5 11.5 1.07 0.98
NYB 663.93 15.9 397.8 397.8 20.2 1.95 3,283,653 5.1 5.1 1.93 1.45
OFCP 124.67 19.8 165.7 206.5 14.5 1.58 861,334 8.7 7.1 1.28 0.76
OHSL 27.81 15.6 109.6 109.6 12.1 3.79 230,035 11.0 11.0 1.49 0.85
PALM 85.21 21.8 155.5 155.5 12.8 0.74 664,863 8.2 8.2 0.74 0.60
PAMM 87.39 5.9 148.9 148.9 32.1 - 136,110 21.6 21.6 3.89 9.57
PBCI 59.70 14.4 126.4 127.4 16.1 4.76 370,987 12.7 12.7 1.46 1.24
PBHC 34.50 21.7 154.1 185.2 18.1 1.56 190,899 11.7 10.0 0.83 0.80
PBKB 56.02 21.6 185.3 192.5 10.6 2.55 585,678 5.7 5.5 0.80 0.53
PCBC 17.70 15.8 113.6 113.6 21.8 1.87 81,105 19.2 19.2 1.35 1.07
PCCI 44.81 15.3 170.4 170.4 12.1 - 371,126 7.1 7.1 1.00 0.98
PEEK 52.29 22.1 111.3 111.3 28.6 2.20 182,560 25.7 25.7 0.74 1.29
PERM 47.79 19.0 115.3 117.0 10.6 1.76 433,239 9.2 9.0 1.20 0.62
PFDC 58.27 13.8 133.3 133.3 20.3 2.34 287,564 15.2 15.2 1.86 1.46
PFNC 60.07 23.1 257.3 291.3 13.7 0.76 418,658 5.3 4.7 0.65 0.64
PFSB 142.25 14.1 135.1 161.6 10.8 0.95 1,321,751 7.4 6.2 2.09 0.84
PFSL 42.44 16.7 176.2 176.2 11.2 3.46 378,700 6.4 6.4 1.56 0.69
</TABLE>
Source: SNL & F&C calculations 10
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PHBK 1,036.51 15.4 239.4 284.1 18.5 2.01 5,591,180 7.7 6.6 2.46 1.31
PHFC 36.93 20.4 132.0 133.5 14.4 1.28 256,265 10.9 10.8 0.92 0.80
PKPS 91.70 20.2 124.5 124.5 10.4 1.37 880,196 8.4 8.4 0.36 0.54
PRBC 15.67 19.7 103.7 103.7 11.5 0.70 135,721 11.1 11.1 0.87 0.65
PSBK 126.09 14.7 167.8 187.8 14.4 2.06 878,823 8.6 7.7 2.24 0.97
PTRS 11.79 12.0 109.2 109.2 9.6 1.50 121,189 8.8 8.8 2.00 0.84
PULS 65.46 12.4 155.9 155.9 12.5 3.29 520,203 8.1 8.1 1.71 1.06
PVFC 51.75 8.5 206.8 206.8 14.5 - 356,251 7.0 7.0 2.39 1.35
PVSA 120.13 12.1 159.8 161.0 12.1 1.76 991,239 7.6 7.5 2.44 1.08
PWBC 83.56 14.6 126.6 135.4 10.2 2.08 816,954 8.1 7.6 1.08 0.66
QCBC 99.94 21.3 142.2 142.3 12.5 - 801,402 8.8 8.8 1.00 0.61
QCFB 37.08 14.5 137.0 137.0 24.8 - 149,637 18.1 18.1 1.79 1.66
RARB 57.88 15.9 192.3 195.4 15.3 2.00 379,428 7.9 7.8 1.51 1.03
REDF 125.55 23.7 162.8 163.4 13.8 - 912,237 8.5 8.4 0.74 0.64
RELY 276.45 17.6 169.9 235.8 14.0 2.03 1,976,764 8.2 6.1 1.79 0.87
ROSE 475.30 16.4 200.7 200.7 13.3 2.22 3,551,783 6.2 6.2 1.65 0.89
RVSB 65.30 24.6 253.1 277.2 28.4 0.89 229,652 11.2 10.4 1.10 1.20
SFED 23.70 17.5 110.4 110.4 13.8 1.46 172,849 12.5 12.5 1.10 0.79
SFFC 17.24 15.2 113.2 113.2 20.1 1.82 85,679 17.8 17.8 1.45 1.37
SFIN 88.32 13.7 134.9 135.2 13.1 2.35 673,214 9.7 9.7 1.37 0.90
SFSB 34.71 16.3 125.5 125.9 8.1 1.16 426,705 6.5 6.5 1.69 0.56
SFSL 145.95 14.9 237.1 240.9 22.3 1.66 653,226 9.4 9.3 1.29 1.34
SISB 165.91 9.0 162.5 162.5 11.6 1.88 1,434,545 7.2 7.2 3.30 1.38
SKAN 21.95 13.5 129.3 133.4 8.9 1.74 247,697 6.9 6.7 1.71 0.68
SMBC 27.84 16.7 107.3 107.3 16.8 - 165,688 15.7 15.7 1.02 1.01
SOPN 75.88 17.6 113.0 113.0 25.8 3.88 294,217 22.8 22.8 1.17 1.69
SOSA 66.09 15.9 202.5 202.5 12.8 - 514,502 6.3 6.3 0.25 0.79
SPBC 798.72 17.8 201.4 201.9 17.3 1.70 4,611,394 8.6 8.6 1.32 1.04
SSM 40.33 21.0 131.7 131.7 38.0 2.12 106,115 28.9 28.9 1.01 1.71
STFR 182.95 17.9 142.7 161.4 11.1 1.39 1,645,539 7.9 7.0 1.93 0.71
STSA 103.68 22.4 153.0 175.5 6.2 - 1,686,395 5.5 5.0 0.83 0.44
SWBI 53.67 14.8 129.2 129.2 14.2 3.75 378,325 11.0 11.0 1.37 1.01
SWCB 62.01 13.9 155.4 162.4 12.4 3.71 501,894 8.0 7.6 2.33 0.98
TBK 27.50 15.7 166.3 171.1 11.5 1.14 238,227 6.9 6.8 1.12 0.79
THR 13.38 17.5 106.7 107.1 14.7 2.46 91,165 13.8 13.7 0.93 0.83
THRD 80.13 17.4 104.1 118.7 12.5 2.04 640,746 11.1 9.9 1.13 0.73
TPNZ 25.82 20.8 122.3 122.3 20.8 1.62 124,150 17.0 17.0 0.83 1.00
TRIC 13.85 16.5 101.1 101.1 15.5 2.64 89,457 15.3 15.3 1.38 1.02
TSH 63.59 16.1 119.1 119.1 15.7 2.70 406,253 13.1 13.1 1.15 0.96
TWIN 17.07 20.6 123.7 123.7 15.9 3.20 107,345 12.9 12.9 0.97 0.75
UBMT 28.90 19.5 117.5 117.5 27.4 4.15 105,600 23.3 23.3 1.21 1.39
VABF 70.29 24.8 166.2 166.2 11.4 1.42 617,818 6.9 6.9 0.57 0.46
WAMU 15,876.83 24.6 305.8 322.3 16.3 1.71 48,763,153 5.2 5.0 2.56 0.71
WBST 749.26 17.5 221.8 259.6 11.1 1.45 5,943,766 5.0 4.3 3.15 0.71
WCBI 65.62 16.7 138.2 138.2 21.1 2.26 311,613 15.2 15.2 1.59 1.41
WEFC 32.33 15.1 112.8 112.8 16.0 2.91 202,035 14.2 14.2 1.09 1.06
WFI 32.27 12.9 143.1 146.1 10.2 2.83 317,392 7.1 7.0 1.26 0.88
WFSL 1,296.51 12.5 186.3 204.0 22.5 3.37 5,760,385 12.1 11.2 2.18 1.84
WRNB 67.71 10.9 182.0 182.0 18.9 2.91 358,021 10.4 10.4 1.64 1.83
WSB 29.20 16.8 136.1 136.1 11.3 1.46 258,330 8.3 8.3 0.41 0.73
</TABLE>
Source: SNL & F&C calculations 11
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSFS 187.87 10.9 239.3 241.2 12.5 - 1,508,540 5.2 5.2 1.39 1.34
WSTR 118.95 17.7 114.1 142.6 12.5 2.06 955,639 10.9 8.9 1.21 0.82
WVFC 47.18 12.9 143.5 143.5 16.0 2.96 294,693 11.2 11.2 2.10 1.32
WWFC 15.65 18.2 153.9 172.7 14.1 0.83 111,394 9.1 8.2 1.33 0.85
WYNE 51.14 21.7 146.8 146.8 19.6 0.83 261,027 13.4 13.4 1.11 0.92
YFCB 53.24 17.1 124.7 124.7 18.6 1.36 288,089 14.9 14.9 1.03 1.15
YFED 169.95 19.3 169.8 169.8 14.6 2.47 1,162,393 8.6 8.6 1.26 0.77
Maximum 15,876.83 24.8 397.8 397.8 38.5 5.00 48,763,153 28.9 28.9 7.98 9.57
Minimum 5.81 2.5 93.6 95.5 5.0 - 38,240 3.3 2.8 0.25 0.27
Average 251.94 16.8 149.9 157.8 15.3 1.80 1,612,216 10.8 10.5 1.52 1.02
Median 60.07 16.7 142.7 147.1 14.3 1.76 397,730 9.4 8.9 1.32 0.93
</TABLE>
Source: SNL & F&C calculations 12
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 9.89 N 09/02/97 0.44 15.5 0.72 0.98 10.77
ABBK 10.71 N 09/02/97 0.17 15.3 0.50 0.81 11.68
ABCL 8.48 N 09/02/97 0.15 17.3 0.45 0.77 8.35
ABCW 15.09 N 09/02/97 0.92 7.4 0.91 0.91 13.93
AFCB 11.14 N 09/02/97 0.39 14.9 0.44 1.10 11.18
AHM 13.79 N 09/02/97 1.90 17.3 0.75 0.73 14.74
ALBC 4.03 N 09/02/97 0.72 32.3 0.18 0.27 3.03
ALBK 11.23 N 09/02/97 0.71 14.6 0.67 1.05 11.37
AMFC 4.54 N 09/02/97 0.81 21.3 0.17 0.67 4.28
ANDB 14.33 N 09/02/97 1.01 12.9 0.60 1.00 12.54
ASBI 7.64 N 09/02/97 0.40 20.9 0.25 0.83 7.60
ASBP 4.45 N 09/02/97 0.88 17.3 0.19 1.06 6.78
ASFC 10.05 N 09/02/97 0.45 17.7 0.68 0.75 9.80
BANC 10.83 N 09/02/97 0.87 19.9 0.16 0.66 11.50
BDJI 5.48 N 09/02/97 0.23 15.9 0.33 0.69 6.37
BFD 6.48 N 09/02/97 0.52 17.6 0.27 0.65 7.14
BFSB 8.90 N 09/02/97 - 15.9 0.38 1.22 8.52
BKC 12.98 N 09/02/97 1.81 12.9 0.73 1.16 14.12
BKCT 12.07 N 09/02/97 1.19 15.8 0.50 1.29 12.72
BKUNA 8.04 N 09/02/97 0.60 21.7 0.14 0.48 8.00
BVCC 10.26 N 09/02/97 0.79 18.5 0.35 0.60 9.51
CAFI 9.59 N 09/02/97 0.34 12.0 0.38 1.02 10.59
CAPS 10.16 N 09/02/97 0.17 13.0 0.30 0.96 10.97
CASB 8.53 N 09/02/97 0.39 17.4 0.19 0.61 9.92
CASH 8.12 N 09/02/97 0.85 14.5 0.31 0.92 7.98
CATB 5.10 N 09/02/97 0.47 19.5 0.21 1.35 5.24
CBCI 8.66 N 09/02/97 1.16 12.4 0.87 1.60 10.40
CBSA 12.30 N 09/02/97 0.54 13.4 0.55 0.39 11.51
CBSB 7.78 N 09/02/97 0.56 20.4 0.25 1.08 7.67
CEBK 8.75 N 09/02/97 0.85 15.9 0.31 0.73 7.16
CFB 15.58 N 09/02/97 0.89 14.1 0.78 0.97 16.34
CFFC 9.23 N 09/02/97 0.39 13.9 0.39 1.16 8.41
CFSB 13.83 N 09/02/97 0.17 14.1 0.47 1.22 15.91
CFTP 4.97 N 09/02/97 0.30 29.0 0.15 1.27 4.30
CFX 11.60 N 09/02/97 0.72 16.1 0.32 0.96 12.20
CIBI 7.98 N 09/02/97 0.63 14.9 0.26 0.96 8.28
CKFB 5.37 N 09/02/97 0.63 19.0 0.25 1.47 6.16
CLAS 4.64 N 09/02/97 0.66 17.7 0.20 0.72 4.89
CMRN 5.51 N 09/02/97 0.24 17.4 0.25 1.26 5.63
CMSB 6.15 N 09/02/97 0.50 24.8 0.17 0.48 5.01
CNIT 10.46 N 09/02/97 0.42 15.2 0.83 0.81 11.22
COFI 18.22 N 09/02/97 0.22 14.4 0.96 1.27 18.76
CRZY 4.54 N 09/02/97 0.39 18.3 0.20 1.34 5.07
CSA 10.65 N 09/02/97 1.40 18.0 0.65 0.56 11.43
CTZN 12.75 N 09/02/97 0.41 15.6 0.75 0.89 13.88
CVAL 10.36 N 09/02/97 0.23 15.4 0.34 0.89 10.56
DIBK 23.00 N 09/02/97 0.38 9.7 0.77 1.97 25.24
DIME 6.20 N 09/02/97 0.73 28.3 0.17 0.70 47.43
DME 13.30 N 09/02/97 1.57 19.5 0.25 0.54 10.16
DNFC 14.10 N 09/02/97 0.34 13.4 0.36 0.79 13.96
</TABLE>
13
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DSL 9.65 N 09/02/97 0.95 18.5 0.30 0.57 8.03
EBSI 8.78 N 09/02/97 1.07 15.3 0.27 0.76 8.92
EFBI 6.28 N 09/02/97 0.03 17.9 0.28 0.85 6.97
EGFC 6.26 N 09/02/97 0.52 NM (0.23) (0.30) (4.20)
EIRE 12.99 N 09/02/97 0.40 13.0 0.42 0.93 13.30
EMLD 11.63 N 09/02/97 0.14 12.5 0.29 0.98 13.07
EQSB 14.49 N 09/02/97 0.15 11.6 0.82 0.70 13.83
ESBK 5.53 N 09/02/97 0.65 17.0 0.35 0.43 6.85
FBBC 8.92 N 09/02/97 0.07 14.2 0.28 0.98 10.10
FBCI 7.37 N 09/02/97 0.80 14.4 0.37 0.84 8.12
FBHC 8.10 N 09/02/97 0.37 19.9 0.43 0.60 9.70
FBSI 7.54 N 09/02/97 0.10 17.3 0.35 0.97 7.02
FCBF 6.32 N 09/02/97 0.15 22.2 0.31 1.08 6.92
FCME 53.13 N 09/02/97 1.95 13.6 0.20 0.73 7.90
FED 11.28 N 09/02/97 1.39 17.1 0.50 0.51 10.73
FESX 11.63 N 09/02/97 0.56 15.2 0.28 0.72 10.19
FFBA 8.59 N 09/02/97 0.23 16.9 0.28 1.19 9.25
FFBH 6.61 N 09/02/97 0.19 22.8 0.23 0.81 5.24
FFBI 5.11 N 09/02/97 0.39 22.5 0.21 0.38 4.64
FFBS 7.50 N 09/02/97 0.03 23.0 0.25 1.17 6.06
FFBZ 12.66 N 09/02/97 0.47 14.5 0.32 1.11 14.72
FFCH 13.67 N 09/02/97 1.61 15.3 0.54 0.84 13.68
FFDB 9.54 N 09/02/97 0.72 12.2 0.34 0.98 10.05
FFES 11.12 N 09/02/97 0.31 14.7 0.56 0.64 10.10
FFFC 9.56 N 09/02/97 0.18 17.9 0.41 1.35 10.37
FFFD 7.44 N 09/02/97 0.12 14.0 0.30 1.86 7.86
FFHH 6.65 N 09/02/97 0.03 15.3 0.29 0.87 7.55
FFHS 7.08 N 09/02/97 0.41 14.5 0.34 0.73 8.16
FFIC 5.62 N 09/02/97 0.29 17.5 0.29 1.01 6.49
FFKY 11.20 N 09/02/97 0.23 14.8 0.38 1.68 12.28
FFLC 6.56 N 09/02/97 0.19 20.5 0.39 0.96 6.91
FFOH 6.61 N 09/02/97 0.08 16.8 0.23 0.94 7.17
FFSL 6.20 N 09/02/97 0.37 18.1 0.18 0.64 6.17
FFWC 10.49 N 09/02/97 0.16 13.0 0.54 0.93 9.35
FFWD 9.76 N 09/02/97 0.02 17.3 0.24 1.29 10.36
FFYF 8.06 N 09/02/97 0.67 13.8 0.50 1.33 9.62
FGHC 9.53 N 09/02/97 1.41 16.2 0.12 1.00 11.97
FIBC 10.16 N 09/02/97 1.71 12.5 0.40 0.96 10.04
FKFS 10.49 N 09/02/97 1.60 13.0 0.55 0.78 10.93
FLFC 12.81 N 09/02/97 0.81 13.7 0.41 1.02 13.61
FMCO 15.76 N 09/02/97 1.06 10.5 0.60 1.05 16.36
FMSB 15.01 N 09/02/97 - 13.8 0.38 0.99 14.73
FNGB 7.86 N 09/02/97 0.06 22.9 0.15 0.89 7.82
FOBC 8.35 N 09/02/97 0.15 14.7 0.34 0.93 8.36
FRC 9.49 N 09/02/97 1.01 17.2 0.34 0.65 8.73
FSBI 11.94 N 09/02/97 0.31 13.3 0.40 0.75 10.90
FSPG 14.79 N 09/02/97 0.64 12.6 0.40 0.86 12.91
FSTC 19.95 N 09/02/97 NA 5.2 1.55 3.68 38.97
FTF 10.43 N 09/02/97 0.12 11.8 0.47 1.86 11.74
FTFC 13.94 N 09/02/97 NA 17.0 0.36 0.94 14.41
</TABLE>
Source: SNL & F&C calculations 14
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FTSB 4.47 N 09/02/97 1.42 13.0 0.23 1.38 8.60
FWWB 7.58 N 09/02/97 0.29 19.2 0.32 1.21 8.28
GAF 5.80 N 09/02/97 0.12 17.9 0.26 1.10 6.97
GBCI 16.25 N 09/02/97 0.12 13.9 0.34 1.64 17.10
GDW 19.73 N 09/02/97 1.31 14.0 1.50 0.88 13.91
GFCO 7.47 N 09/02/97 0.11 12.0 0.52 0.83 8.67
GFSB 10.35 N 09/02/97 NA 11.9 0.30 1.37 11.88
GPT 9.59 N 09/02/97 2.89 17.4 0.90 1.12 10.49
GSB 10.56 N 09/02/97 1.46 16.9 0.43 0.74 11.55
GSBC 17.00 N 09/02/97 1.91 11.8 0.36 1.66 19.65
GTFN 7.50 N 09/02/97 0.36 20.4 0.42 0.77 8.37
GUPB 4.89 N 09/02/97 0.18 22.3 0.21 0.81 4.74
HALL 8.62 N 09/02/97 0.15 11.8 0.47 0.67 9.40
HARB 14.82 N 09/02/97 0.46 20.3 0.67 1.21 14.61
HARL 16.03 N 09/02/97 - 12.3 0.53 1.09 16.89
HAVN 13.80 N 09/02/97 0.74 19.4 0.50 0.53 8.81
HBFW 6.29 N 09/02/97 - 17.7 0.31 0.89 6.61
HBNK 9.20 N 09/02/97 3.09 13.0 0.58 1.10 14.97
HBS 7.72 N 09/02/97 1.97 14.4 0.33 1.12 7.99
HFFB 4.99 N 09/02/97 - 19.1 0.20 1.39 5.23
HFFC 9.66 N 09/02/97 0.33 12.2 0.45 0.99 10.56
HFGI 9.25 N 09/02/97 0.25 27.3 0.11 0.30 5.89
HFSA 5.37 N 09/02/97 0.09 17.6 0.24 0.77 6.00
HHFC 4.44 N 09/02/97 0.11 15.5 0.19 0.80 6.56
HIFS 12.54 N 09/02/97 0.41 11.9 0.51 1.27 13.18
HMCI 6.80 N 09/02/97 2.91 17.7 0.23 0.51 7.88
HMNF 5.90 N 09/02/97 0.08 20.4 0.31 0.87 5.99
HOMF 14.67 N 09/02/97 0.45 13.9 0.54 1.13 13.40
HPBC 15.76 N 09/02/97 - 12.4 0.45 1.68 15.74
HRBF 5.41 N 09/02/97 0.05 19.0 0.25 0.74 5.80
HRZB 9.82 N 09/02/97 - 13.6 0.28 1.57 10.19
HZFS 5.25 N 09/02/97 0.96 22.5 0.21 0.43 4.23
IFSB 4.09 N 09/02/97 2.02 108.3 0.03 0.06 0.85
INBI 6.78 N 09/02/97 0.22 14.7 0.26 1.51 8.43
IPSW 16.21 N 09/02/97 1.52 8.8 0.37 1.03 17.52
ISBF 6.26 N 09/02/97 NA 22.3 0.28 0.76 6.27
ITLA 12.72 N 09/02/97 1.47 11.7 0.38 1.52 13.13
IWBK 16.39 N 09/02/97 0.64 15.9 0.61 1.10 16.36
JSB 7.77 N 09/02/97 NA 16.7 0.69 1.85 8.24
JSBA 9.84 N 09/02/97 0.46 15.1 0.55 0.81 9.67
JXVL 8.42 N 09/02/97 0.78 10.2 0.41 1.75 11.48
KFBI 5.37 N 09/02/97 0.08 22.2 0.22 1.16 5.77
KNK 7.89 N 09/02/97 0.61 14.5 0.50 0.88 8.12
KSAV 8.86 N 09/02/97 0.35 12.2 0.38 1.39 10.15
KSBK 15.21 N 09/02/97 1.75 11.9 0.30 0.98 13.70
KYF 5.83 N 09/02/97 - 15.6 0.20 1.17 7.19
LARK 7.02 N 09/02/97 0.04 19.6 0.31 0.97 6.90
LARL 13.65 N 09/02/97 0.43 11.7 0.48 1.39 13.70
LIFB 8.06 N 09/02/97 0.39 18.7 0.33 0.89 8.33
LISB 7.63 N 09/02/97 1.03 22.8 0.44 0.71 7.78
</TABLE>
Source: SNL & F&C calculations 15
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN 7.40 N 09/02/97 0.61 15.2 0.24 1.46 7.53
LONF 4.77 N 09/02/97 0.80 22.1 0.17 0.85 4.30
LSBI 7.38 N 09/02/97 1.17 14.1 0.38 0.70 7.88
LSBX 20.78 N 09/02/97 0.30 8.9 0.32 1.60 18.57
LVSB 9.52 N 09/02/97 0.98 15.0 0.55 1.14 11.56
LXMO 4.46 N 09/02/97 0.48 18.2 0.22 1.52 5.43
MAFB 14.83 N 09/02/97 0.43 12.1 0.64 1.24 15.73
MARN 7.28 N 09/02/97 0.81 14.7 0.40 1.72 7.53
MASB 10.20 N 09/02/97 0.16 14.1 0.92 1.13 10.85
MBB 5.95 N 09/02/97 0.71 19.4 0.30 0.56 6.37
MBB 5.95 N 09/02/97 0.71 19.4 0.30 0.56 6.37
MBLF 6.52 N 09/02/97 0.25 18.6 0.32 0.79 6.21
MCBN 7.57 N 09/02/97 0.73 13.0 0.49 0.75 8.76
MDBK 11.31 N 09/02/97 0.37 14.1 0.56 1.00 11.31
MECH 19.68 N 09/02/97 1.13 4.4 1.38 3.60 36.83
MERI 13.46 N 09/02/97 0.22 11.5 0.89 1.27 15.91
METF 13.86 N 09/02/97 0.49 13.3 0.34 0.59 15.15
MFBC 5.53 N 09/02/97 - 19.3 0.30 0.85 6.06
MFFC 4.30 N 09/02/97 0.15 22.9 0.15 0.70 5.11
MFLR 9.53 N 09/02/97 0.81 14.8 0.33 0.94 9.83
MFSL 10.76 N 09/02/97 0.44 15.1 0.71 0.80 9.60
MIVI 5.77 N 09/02/97 0.28 14.9 0.26 1.18 6.82
MLBC 9.23 N 09/02/97 0.46 22.6 0.23 0.52 7.41
MSBF 7.85 N 09/02/97 0.06 14.4 0.23 1.43 8.39
MWBI 10.82 N 09/02/97 0.77 11.5 0.78 0.81 11.75
MWBX 17.82 N 09/02/97 0.70 11.6 0.14 1.36 18.35
MWFD 12.59 N 09/02/97 0.12 15.7 0.33 1.11 12.75
NASB 16.21 N 09/02/97 3.11 12.5 0.98 1.24 15.90
NBN 6.24 N 09/02/97 1.37 14.1 0.26 0.66 8.48
NEIB 7.43 N 09/02/97 0.40 13.7 0.32 1.20 7.88
NHTB 8.22 N 09/02/97 0.70 15.2 0.30 0.87 11.73
NMSB 7.67 N 09/02/97 0.87 21.5 0.15 0.81 8.07
NSSB 9.60 N 09/02/97 1.29 22.0 0.33 1.06 9.55
NWEQ 8.16 N 09/02/97 1.25 13.1 0.32 1.02 8.96
NYB 27.70 N 09/02/97 1.09 13.3 0.58 1.63 32.18
OFCP 8.36 N 09/02/97 0.16 16.7 0.38 0.87 10.01
OHSL 7.42 N 09/02/97 0.01 14.5 0.40 0.86 7.92
PALM 7.44 N 09/02/97 2.12 16.1 0.25 0.82 9.99
PAMM 49.37 N 09/02/97 3.47 3.4 1.70 13.21 58.78
PBCI 8.63 N 09/02/97 2.14 11.9 0.44 1.37 10.69
PBHC 7.09 N 09/02/97 1.17 16.1 0.28 1.11 9.66
PBKB 9.27 N 09/02/97 0.82 22.7 0.19 0.50 8.86
PCBC 5.72 N 09/02/97 - 17.8 0.30 1.16 6.18
PCCI 12.40 N 09/02/97 1.29 12.7 0.30 1.04 14.25
PEEK 4.71 N 09/02/97 0.71 24.1 0.17 1.13 4.38
PERM 6.52 N 09/02/97 1.09 18.4 0.31 0.58 6.32
PFDC 9.55 N 09/02/97 0.34 13.4 0.48 1.53 10.08
PFNC 12.31 N 09/02/97 1.46 17.1 0.22 0.84 15.89
PFSB 10.78 N 09/02/97 0.59 13.4 0.55 0.83 11.06
PFSL 11.23 N 09/02/97 0.10 17.1 0.38 0.66 10.39
</TABLE>
16
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PHBK 16.17 N 09/02/97 0.83 14.8 0.64 1.30 16.19
PHFC 6.03 N 09/02/97 1.60 18.8 0.25 0.73 6.50
PKPS 6.52 N 09/02/97 3.81 20.2 0.09 0.58 6.85
PRBC 4.97 N 09/02/97 0.30 15.9 0.27 0.68 5.98
PSBK 11.84 N 09/02/97 0.84 14.7 0.56 0.97 11.59
PTRS 9.48 N 09/02/97 0.50 9.2 0.65 1.06 11.83
PULS 13.51 N 09/02/97 0.57 11.8 0.45 1.10 13.79
PVFC 19.93 N 09/02/97 0.90 12.7 0.40 1.24 17.94
PVSA 14.91 N 09/02/97 0.27 12.0 0.62 1.07 14.75
PWBC 8.86 N 09/02/97 0.65 14.6 0.27 0.71 9.02
QCBC 6.72 N 09/02/97 1.31 17.7 0.30 0.70 7.87
QCFB 8.76 N 09/02/97 0.27 14.4 0.45 1.55 8.53
RARB 13.25 N 09/02/97 0.29 16.2 0.37 0.99 12.53
REDF 8.06 N 09/02/97 2.19 13.3 0.33 1.06 12.65
RELY 10.51 N 09/02/97 0.77 16.4 0.48 0.90 11.10
ROSE 14.28 N 09/02/97 0.45 15.3 0.44 0.88 14.63
RVSB 10.89 N 09/02/97 0.14 22.5 0.30 1.29 11.49
SFED 6.18 N 09/02/97 0.68 20.9 0.23 0.63 5.07
SFFC 7.36 N 09/02/97 NA 12.8 0.43 1.55 8.78
SFIN 9.33 N 09/02/97 0.38 14.2 0.33 0.82 8.78
SFSB 8.52 N 09/02/97 0.48 16.0 0.43 0.55 8.49
SFSL 14.39 N 09/02/97 0.28 18.5 0.26 1.35 14.52
SISB 18.99 N 09/02/97 0.43 14.3 0.52 0.83 11.63
SKAN 10.07 N 09/02/97 1.46 12.5 0.46 0.72 10.38
SMBC 6.29 N 09/02/97 1.10 17.0 0.25 0.96 6.06
SOPN 6.96 N 09/02/97 0.08 16.1 0.32 1.80 7.60
SOSA 13.61 N 09/02/97 6.28 9.9 0.10 1.33 21.58
SPBC 11.66 N 09/02/97 0.21 16.3 0.36 1.11 12.61
SSM 4.84 N 09/02/97 - 38.0 0.14 0.98 2.77
STFR 8.11 N 09/02/97 0.16 15.1 0.57 0.79 9.57
STSA 7.84 N 09/02/97 0.61 18.6 0.25 0.49 8.97
SWBI 9.54 N 09/02/97 0.30 14.5 0.35 1.02 9.50
SWCB 12.17 N 09/02/97 0.81 14.2 0.57 0.91 11.42
TBK 11.78 N 09/02/97 2.13 14.7 0.30 0.83 11.73
THR 5.71 N 09/02/97 1.21 18.5 0.22 0.77 5.49
THRD 6.42 N 09/02/97 0.33 16.9 0.29 0.73 6.60
TPNZ 5.63 N 09/02/97 1.28 24.0 0.18 0.84 4.85
TRIC 6.79 N 09/02/97 - 14.6 0.39 1.08 7.09
TSH 6.97 N 09/02/97 0.27 16.5 0.28 0.93 6.88
TWIN 5.88 N 09/02/97 0.08 16.7 0.30 0.91 7.08
UBMT 5.99 N 09/02/97 NA 19.1 0.31 1.41 6.14
VABF 6.82 N 09/02/97 0.68 20.8 0.17 0.54 7.98
WAMU 12.58 N 09/02/97 0.81 16.9 0.93 0.98 18.47
WBST 13.33 N 09/02/97 0.85 14.4 0.96 0.82 16.31
WCBI 9.13 N 09/02/97 0.60 16.2 0.41 1.43 9.40
WEFC 7.56 N 09/02/97 0.21 14.7 0.28 1.06 7.44
WFI 12.23 N 09/02/97 0.29 12.0 0.34 0.86 12.00
WFSL 15.84 N 09/02/97 0.73 12.2 0.56 1.87 15.71
WRNB 18.86 N 09/02/97 1.08 10.9 0.41 1.85 18.09
WSB 8.66 N 09/02/97 NA 17.2 0.10 0.72 8.67
</TABLE>
17
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WSFS 23.57 N 09/02/97 1.66 11.5 0.33 1.12 21.27
WSTR 6.48 N 09/02/97 0.17 15.3 0.35 0.83 7.53
WVFC 10.73 N 09/02/97 0.30 13.5 0.50 1.21 10.88
WWFC 8.78 N 09/02/97 - 16.4 0.37 0.88 9.45
WYNE 6.16 N 09/02/97 0.91 22.3 0.27 0.83 6.02
YFCB 6.81 N 09/02/97 0.57 16.3 0.27 1.13 7.48
YFED 9.46 N 09/02/97 1.24 17.8 0.34 0.84 9.96
Maximum 53.13 6.28 108.3 1.70 13.21 58.78
Minimum 4.03 - - (0.23) (0.30) (4.20)
Average 10.09 0.68 16.4 0.40 1.05 10.59
Median 8.92 0.46 15.3 0.34 0.96 9.57
</TABLE>
Source: SNL & F&C calculations 18
<PAGE>
EXHIBIT VI
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VI - Comparative Group Selection
To search for a comparative group for First Federal, we selected all thrifts
from the entire U.S. with assets under $100 million that have sufficient trading
volume to produce meaningful market information. All of these thrifts are listed
on either AMEX, NYSE, or Nasdaq.
We found 60 thrifts in the asset size described above. We eliminated 48 and
retained a group of 12. Normally, we consider 10 to be the minimum desired
sample size.
We eliminated thrifts for the following reasons: 1) Mutual holding company; 2)
No PE information for the most recent year; 3) Merger agreement has been
executed; 4) Loans serviced more than 40% of total assets; 5) Loan to asset
ratio under 65%; 6) Non-performing assets of 1.5% or more of total assets; and
7) Price to earnings ratio of 50.0 or more.
The group of 60 from which the comparative group was selected is listed on
Exhibit VI.1 and the selected comparative group is listed on Exhibit VI.2. On
Exhibit VI.1, we have highlighted the cells that indicate which ones were not
selected and why. Set forth below is a legend for the column summarizing reasons
individual thrifts were not selected.
A Mutual holding company.
B No PE information for the most recent year.
C Price to earnings ratio of 50.0 or more.
D Non-performing assets 1.5% or more of total assets.
E Loans less than 65% of total assets.
F Loans serviced exceeds 40% of assets.
G Announced acquisition target.
1
<PAGE>
FERGUSON & COMPANY Exhibit VI.1 - Comparative Group Selection
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 22.875
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 14.750
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 12.563
CBES CBES Bancorp Inc. Excelsior Springs MO MW SAIF NASDAQ 09/30/96 17.750
CCFH CCF Holding Company Jonesboro GA SE SAIF NASDAQ 07/12/95 16.500
CENB Century Bancorp Inc. Thomasville NC SE SAIF NASDAQ 12/23/96 69.750
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 12.750
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.250
CNSB CNS Bancorp Inc. Jefferson City MO MW SAIF NASDAQ 06/12/96 16.750
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 13.250
CSBF CSB Financial Group Inc. Centralia IL MW SAIF NASDAQ 10/09/95 12.000
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 20.125
FCB Falmouth Co-Operative Bank Falmouth MA NE BIF AMSE 03/28/96 16.500
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 18.125
FFDF FFD Financial Corp. Dover OH MW SAIF NASDAQ 04/03/96 14.375
FLKY First Lancaster Bancshares Lancaster KY MW SAIF NASDAQ 07/01/96 15.500
FTNB Fulton Bancorp Inc. Fulton MO MW SAIF NASDAQ 10/18/96 19.750
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 10.500
GFSB GFS Bancorp Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 13.875
GLBK Glendale Co-Operative Bank Everett MA NE BIF NASDAQ 01/10/94 27.000
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 19.000
GWBC Gateway Bancorp Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 17.500
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 21.000
HCFC Home City Financial Corp. Springfield OH MW SAIF NASDAQ 12/30/96 13.750
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 11.000
HWEN Home Financial Bancorp Spencer IN MW SAIF NASDAQ 07/02/96 15.000
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 19.250
INCB Indiana Community Bank SB Lebanon IN MW SAIF NASDAQ 12/15/94 16.000
JOAC Joachim Bancorp Inc. De Soto MO MW SAIF NASDAQ 12/28/95 14.500
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 10.875
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 13.875
LONF London Financial Corporation London OH MW SAIF NASDAQ 04/01/96 14.750
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 16.125
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96 16.375
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 19.500
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 14.750
MONT Montgomery Financial Corp. Crawfordsville IN MW SAIF NASDAQ 07/01/97 11.313
MRKF Market Financial Corporation Mount Healthy OH MW SAIF NASDAQ 03/27/97 13.250
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 23.750
NSLB NS&L Bancorp Inc. Neosho MO MW SAIF NASDAQ 06/08/95 17.250
NTMG Nutmeg Federal S&LA Danbury CT NE SAIF NASDAQ NA 8.500
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 15.000
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 22.000
PFFC Peoples Financial Corp. Massillon OH MW SAIF NASDAQ 09/13/96 15.625
PSFC Peoples-Sidney Financial Corp. Sidney OH MW SAIF NASDAQ 04/28/97 14.125
PSFI PS Financial Inc. Chicago IL MW SAIF NASDAQ 11/27/96 14.625
PWBK Pennwood Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 07/15/96 15.500
RELI Reliance Bancshares Inc. Milwaukee WI MW SAIF NASDAQ 04/19/96 8.375
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 14.625
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 18.875
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 19.000
SFNB Security First Network Bank Atlanta GA SE SAIF NASDAQ NA 8.750
SOBI Sobieski Bancorp Inc. South Bend IN MW SAIF NASDAQ 03/31/95 14.938
SSB Scotland Bancorp Inc Laurinburg NC SE SAIF AMSE 04/01/96 16.000
SZB SouthFirst Bancshares Inc. Sylacauga AL SE SAIF AMSE 02/14/95 16.250
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 16.000
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 23.500
USAB USABancshares, Inc. Philadelphia PA MA BIF NASDAQ NA 9.875
WCFB Webster City Federal SB (MHC) Webster City IA MW SAIF NASDAQ 08/15/94 16.125
WHGB WHG Bancshares Corp. Lutherville MD MA SAIF NASDAQ 04/01/96 15.250
Maximum 69.750
Minimum 8.375
Average 16.761
Median 15.563
</TABLE>
Source: SNL & F&C calculations 2
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VI.1 - Comparative Group Selection
<TABLE>
<CAPTION>
Current Price/ Price/ Current Current Current Total
Market LTM Core Price/ Price/ T Price/ Dividend Assets
Value Core EPS EPS Book V Book V Assets Yield ($000)
Ticker ($M) (x) (x) (%) (%) (%) (%) MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 6.02 24.34 12.71 96.85 96.85 8.63 1.36 66,316
AMFC 14.22 NA 18.44 103.22 103.22 16.82 1.63 93,643
ATSB 6.61 46.53 28.55 91.57 92.58 9.31 1.59 71,031
CBES 18.19 NA 18.49 103.92 103.92 19.11 2.25 95,219
CCFH 13.60 50.00 NM 114.74 114.74 16.42 3.33 86,940
CENB 28.41 NA 14.78 94.96 94.96 28.43 2.87 99,948
CIBI 12.11 12.88 11.81 107.87 107.87 12.42 2.09 97,446
CKFB 17.85 22.38 22.92 116.03 116.03 29.65 2.29 60,197
CNSB 27.69 NA 26.17 113.71 113.71 28.23 1.19 98,104
CRZY 13.32 20.38 19.49 91.89 91.89 25.59 3.02 52,042
CSBF 11.30 37.50 50.00 93.90 99.59 23.55 - 47,996
CZF 19.36 33.54 29.60 155.41 155.41 25.84 1.99 74,942
FCB 24.00 32.35 37.50 108.77 108.77 26.59 1.21 90,267
FFBI 7.53 18.69 18.13 103.57 103.57 8.08 - 93,156
FFDF 20.91 NA 22.46 99.07 99.07 24.52 2.09 85,286
FLKY 14.86 NA 24.22 107.34 107.34 36.74 - 40,448
FTNB 33.96 NA 35.27 136.49 136.49 34.14 1.01 99,464
FTSB 14.86 22.34 17.50 103.04 103.04 16.58 2.38 94,681
GFSB 13.71 13.34 12.39 134.32 134.32 15.55 1.87 88,154
GLBK 6.68 25.23 27.00 110.38 110.38 18.08 - 36,927
GUPB 15.28 22.62 22.62 112.56 112.56 18.35 2.11 86,911
GWBC 18.83 NA 23.03 109.65 109.65 28.61 2.29 65,806
HBBI 6.54 28.00 15.91 105.63 105.63 13.98 1.43 46,804
HCFC 13.09 NA 16.37 85.67 85.67 19.19 2.33 68,235
HHFC 10.06 22.00 15.28 99.01 99.01 12.37 3.64 83,103
HWEN 7.29 NA 25.00 99.21 99.21 18.48 1.33 39,443
HZFS 8.19 18.16 13.75 99.59 99.59 10.45 1.66 78,368
INCB 14.75 33.33 26.67 130.40 130.40 16.15 2.25 91,329
JOAC 11.03 37.18 51.79 106.70 106.70 30.92 3.45 35,656
KYF 14.35 15.76 13.59 100.14 100.14 16.13 4.60 88,923
LOGN 17.46 15.42 14.45 111.80 111.80 21.98 2.88 79,298
LONF 7.60 NA 21.69 100.82 100.82 20.03 1.63 37,937
LXMO 17.54 NA 31.01 106.30 106.30 29.36 1.86 59,748
MBSP 15.85 NA 24.08 107.94 107.94 46.76 - 33,894
MCBN 4.51 13.00 9.95 90.24 90.24 7.76 2.67 57,838
MIVI 12.08 17.35 17.56 94.86 94.86 17.31 1.09 69,755
MONT 18.70 NA NA NA NA NA 3.54 93,627
MRKF 17.70 NA NA 90.82 90.82 31.41 - 56,343
MSBF 14.94 15.03 14.84 119.11 119.11 19.79 2.36 75,630
NSLB 12.20 29.74 23.96 105.44 105.44 21.01 2.90 58,089
NTMG 6.17 25.00 19.32 115.65 115.65 6.58 - 93,645
NWEQ 12.58 14.15 13.39 105.71 105.71 13.23 3.20 95,097
PCBC 17.79 16.92 17.74 121.82 121.82 22.31 1.82 79,714
PFFC 23.30 NA 27.90 96.57 96.57 25.98 3.20 89,687
PSFC 25.22 NA NA NA NA NA - 93,734
PSFI 31.91 NA 18.28 98.29 98.29 42.49 2.19 75,118
PWBK 9.46 NA 17.61 101.31 101.31 19.73 2.07 47,929
RELI 21.18 NA 29.91 94.21 NA 45.22 - 46,836
SCBS 16.63 NA 18.28 108.01 108.01 23.73 2.05 70,106
SCCB 13.29 26.96 26.22 110.32 110.32 28.64 3.18 46,412
SFFC 14.89 14.07 13.57 100.00 100.00 17.60 2.11 85,282
SFNB 73.79 NM NM 230.87 234.58 92.69 - 79,581
SOBI 11.35 26.21 20.75 85.26 85.26 14.35 1.87 79,080
SSB 29.44 NA 23.53 116.45 116.45 42.71 1.88 68,924
SZB 13.76 95.59 31.25 102.72 102.72 14.36 3.08 92,910
THR 13.18 17.20 18.18 105.06 105.47 14.45 2.25 91,165
TRIC 14.31 18.36 15.88 108.65 108.65 16.64 2.55 85,975
USAB 5.90 35.27 30.86 118.83 121.91 15.00 - 39,301
WCFB 33.86 NA 23.71 154.31 154.31 36.35 4.96 93,160
WHGB 22.30 NA 27.23 108.93 108.93 23.84 1.31 98,458
Maximum 73.79 95.59 51.79 230.87 234.58 92.69 4.96 99,948
Minimum 4.51 12.88 9.95 85.26 85.26 6.58 - 33,894
Average 16.56 26.19 22.23 109.41 109.92 23.11 1.90 73,851
Median 14.55 22.38 20.75 105.67 105.71 19.76 2.06 79,189
</TABLE>
Source: SNL & F&C calculations 3
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VI.1 - Comparative Group Selection
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE ROACE
Equity/ Equity/ Core Core Before Before Before Before
Assets T Assets EPS EPS Extra Extra Extra Extra
(%) (%) ($) ($) (%) (%) (%) (%)
Ticker MRQ MRQ LTM MRQ LTM MRQ LTM MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 8.90 8.90 0.94 0.45 0.09 0.69 0.93 7.68
AMFC 16.30 16.30 NA 0.20 0.70 1.04 3.73 6.15
ATSB 10.17 10.07 0.27 0.11 0.29 0.42 2.91 4.16
CBES 18.39 18.39 NA 0.24 0.77 1.10 NA 5.90
CCFH 14.31 14.31 0.33 (0.13) 0.27 0.14 1.49 0.97
CENB 29.94 29.94 NA 1.18 NA 1.80 NA 9.12
CIBI 11.52 11.52 0.99 0.27 0.67 1.01 5.53 8.86
CKFB 23.68 23.68 0.86 0.21 1.30 1.21 5.08 4.96
CNSB 24.81 24.81 NA 0.16 0.54 0.94 NA 3.81
CRZY 27.84 27.84 0.65 0.17 1.00 1.30 3.36 4.63
CSBF 25.07 23.98 0.32 0.06 0.44 0.48 1.62 1.90
CZF 16.62 16.62 0.60 0.17 0.51 1.03 3.00 6.16
FCB 24.45 24.45 0.51 0.11 0.84 0.80 3.44 3.22
FFBI 7.80 7.80 0.97 0.25 (0.02) 0.64 (0.26) 8.23
FFDF 24.74 24.74 NA 0.16 0.77 0.90 3.22 3.61
FLKY 34.24 34.24 NA 0.16 1.15 1.48 3.52 4.15
FTNB 25.01 25.01 NA 0.14 NA 0.91 NA 3.65
FTSB 16.09 16.09 0.47 0.15 0.50 0.97 2.48 5.58
GFSB 11.57 11.57 1.04 0.28 0.98 1.27 8.41 11.06
GLBK 16.38 16.38 1.07 0.25 0.74 0.75 4.63 4.58
GUPB 16.30 16.30 0.84 0.21 0.74 0.81 3.86 4.76
GWBC 26.09 26.09 NA 0.19 0.82 1.28 3.26 4.94
HBBI 12.07 12.07 0.75 0.33 0.20 0.83 1.48 6.78
HCFC 20.61 20.61 NA 0.21 NA 1.04 NA 5.08
HHFC 12.50 12.50 0.50 0.18 0.27 0.78 1.89 6.27
HWEN 18.63 18.63 NA 0.15 0.57 0.81 NA 4.16
HZFS 10.50 10.50 1.06 0.35 0.43 0.79 3.87 7.35
INCB 12.39 12.39 0.48 0.15 0.17 0.60 1.29 4.77
JOAC 28.98 28.98 0.39 0.07 0.51 0.63 1.74 2.13
KYF 16.11 16.11 0.69 0.20 0.80 1.17 3.95 7.02
LOGN 19.65 19.65 0.90 0.24 1.17 1.39 5.27 7.02
LONF 19.87 19.87 NA 0.17 0.74 0.86 3.51 4.17
LXMO 27.62 27.62 NA 0.13 0.90 1.00 NA 3.40
MBSP 43.32 43.32 NA 0.17 NA 1.83 NA 4.21
MCBN 8.60 8.60 1.50 0.49 0.40 0.87 4.42 9.16
MIVI 18.26 18.26 0.85 0.21 0.68 1.02 3.74 5.89
MONT 9.83 9.83 NA NA 0.31 0.62 NA NA
MRKF 34.60 34.60 NA NA NA 0.68 NA 2.56
MSBF 16.61 16.61 1.58 0.40 1.20 1.40 6.05 7.76
NSLB 19.92 19.92 0.58 0.18 0.50 0.86 2.31 4.19
NTMG 6.17 6.17 0.34 0.11 0.31 0.68 4.73 11.41
NWEQ 11.42 11.42 1.06 0.28 0.78 0.95 6.25 8.00
PCBC 18.32 18.32 1.30 0.31 0.78 1.18 4.14 6.34
PFFC 26.90 26.90 NA 0.14 0.48 0.88 NA 3.23
PSFC 10.15 10.15 NA NA NA 0.90 NA NA
PSFI 43.23 43.23 NA 0.20 NA 2.25 NA 5.32
PWBK 19.47 19.47 NA 0.22 0.61 1.02 NA 5.15
RELI 47.98 NA NA 0.07 1.76 1.54 NA 3.14
SCBS 21.97 21.97 NA 0.20 0.44 1.15 NA 5.20
SCCB 25.96 25.96 0.70 0.18 0.82 1.05 3.01 4.04
SFFC 17.60 17.60 1.35 0.35 1.04 1.27 5.61 7.18
SFNB 42.48 42.09 (4.48) (0.83) (27.53) (21.61) (71.40) (66.46)
SOBI 15.40 15.40 0.57 0.18 0.28 0.67 1.64 4.04
SSB 36.69 36.69 NA 0.17 1.47 1.73 4.07 4.70
SZB 13.98 13.98 0.17 0.13 0.04 0.51 0.29 3.65
THR 13.76 13.71 0.93 0.22 0.57 0.80 3.91 5.68
TRIC 15.31 15.31 1.28 0.37 0.77 1.07 5.16 6.93
USAB 12.62 12.34 0.28 0.08 0.53 0.55 4.66 4.31
WCFB 23.55 23.55 NA 0.17 1.01 1.50 4.44 6.38
WHGB 21.89 21.89 NA 0.14 0.55 0.84 2.39 3.69
Maximum 47.98 43.32 1.58 1.18 1.76 2.25 8.41 11.41
Minimum 6.17 6.17 (4.48) (0.83) (27.53) (21.61) (71.40) (66.46)
Average 20.42 19.92 0.63 0.20 0.13 0.62 1.79 4.17
Median 18.36 18.32 0.73 0.18 0.61 0.93 3.52 4.95
</TABLE>
Source: SNL & F&C calculations 4
<PAGE>
FERGUSON & COMPANY Exhibit VI.1 - Comparative Group Selection
- ------------------
<TABLE>
<CAPTION>
Loans Loans
NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Merger Current Assets Deposits Assets Assets Assets For Others Assets
Target? Pricing (%) (%) (%) (%) (%) ($000) (%) Reasons for
Ticker (Y/N) Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ Excluding
-----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC N 07/03/97 NA 96.00 72.82 75.86 13.98 NA NA Selected
AMFC N 07/03/97 0.58 102.67 74.08 72.16 10.14 - - B
ATSB N 07/03/97 2.84 99.62 71.64 71.92 17.12 28,600 40.26 D, F
CBES N 07/03/97 0.77 120.99 90.20 74.55 5.25 NA NA B
CCFH N 07/03/97 0.34 98.57 81.85 83.04 1.73 9,845 11.32 C
CENB N 07/03/97 0.39 85.80 59.65 69.53 - - - B, E
CIBI N 07/03/97 0.72 103.55 76.52 73.90 13.99 NA NA Selected
CKFB N 07/03/97 0.89 126.34 89.94 71.19 3.73 - - Selected
CNSB N 07/03/97 0.45 84.97 63.45 74.68 - 21,613 22.03 B, E
CRZY N 07/03/97 0.23 99.07 53.55 54.05 17.31 79 0.15 E
CSBF N 07/03/97 NA 77.10 57.40 74.45 - NA NA E
CZF Y 07/03/97 0.20 74.06 60.58 81.79 - 1,219 1.63 E, G
FCB N 07/03/97 0.02 69.97 52.09 74.45 0.87 439 0.49 E
FFBI N 07/03/97 0.27 107.55 78.27 72.77 18.20 51,539 55.33 F
FFDF N 07/03/97 NA 97.24 62.33 64.10 10.06 NA NA B, E
FLKY N 07/03/97 0.45 159.08 86.38 54.30 10.34 - - B
FTNB N 07/03/97 NA 127.14 85.77 67.46 6.54 NA NA B
FTSB N 07/03/97 2.02 123.64 89.47 72.36 10.25 - - D
GFSB N 07/03/97 1.54 131.52 87.02 66.16 21.53 19,961 22.64 D, F
GLBK Y 07/03/97 - 47.28 39.49 83.53 - - - E, G
GUPB N 07/03/97 NA 82.01 52.16 63.61 18.93 NA NA E
GWBC Y 07/03/97 0.60 41.54 30.53 73.49 - - - B, E, G
HBBI N 07/03/97 0.52 76.19 60.41 79.29 7.91 - - E
HCFC N 07/03/97 0.62 108.24 78.99 72.98 5.87 2,351 3.45 B
HHFC N 07/03/97 0.15 76.48 52.98 69.27 17.69 NA NA E
HWEN N 07/03/97 NA 136.75 83.14 60.80 20.28 - - B
HZFS N 07/03/97 1.02 92.53 66.63 72.01 16.74 1,636 2.09 Selected
INCB N 07/03/97 NA 90.47 78.66 86.95 - NA NA Selected
JOAC N 07/03/97 0.68 96.06 66.88 69.62 - - - Selected
KYF N 07/03/97 - 90.20 55.35 61.36 21.45 - - E
LOGN N 07/03/97 0.45 96.20 72.05 74.89 4.41 - - Selected
LONF N 07/03/97 0.79 99.44 76.82 77.26 2.11 - - B
LXMO N 07/03/97 0.63 105.88 75.06 70.90 - NA NA B
MBSP N 07/03/97 2.06 151.66 81.33 53.63 - - - B, D
MCBN N 07/03/97 0.40 113.92 83.59 73.38 17.62 6,941 12.00 Selected
MIVI N 07/03/97 0.21 80.25 64.36 80.20 - - - E
MONT N 07/03/97 1.36 115.47 89.62 77.61 11.14 NA NA B
MRKF N 07/03/97 - 70.50 45.19 64.10 - NA NA B, E
MSBF N 07/03/97 0.15 159.24 87.12 54.71 27.60 32,891 43.49 F
NSLB N 07/03/97 - 75.11 55.13 73.40 5.16 - - E
NTMG N 07/03/97 1.11 112.06 91.88 81.99 10.07 310,005 331.04 F
NWEQ N 07/03/97 NA 126.90 82.14 64.73 23.24 NA NA Selected
PCBC N 07/03/97 0.05 19.97 15.58 78.03 3.14 - - E
PFFC N 07/03/97 0.01 74.65 53.79 72.06 - - - B, E
PSFC N 07/03/97 0.70 106.43 92.40 86.82 2.67 - - B
PSFI N 07/03/97 0.43 85.49 47.65 55.73 - - - B, E
PWBK N 07/03/97 0.83 61.44 46.68 75.97 3.07 150 0.31 B, E
RELI N 07/03/97 - 151.52 58.38 38.53 12.81 NA NA B, E
SCBS N 07/03/97 2.20 73.15 56.76 77.59 - - - B, D, E
SCCB N 07/03/97 1.78 105.88 77.65 73.34 - NA NA D
SFFC N 07/03/97 0.70 133.97 79.59 59.41 22.28 - - Selected
SFNB N 07/03/97 NA 14.03 6.82 48.59 1.41 NA NA B, E
SOBI N 07/03/97 0.25 98.14 73.21 74.60 8.98 - - Selected
SSB N 07/03/97 - 111.91 69.00 61.66 - - - B
SZB N 07/03/97 0.50 105.19 72.25 68.69 15.16 - - C
THR N 07/03/97 1.21 101.03 66.49 65.81 19.02 14,112 15.48 Selected
TRIC N 07/03/97 0.05 73.28 41.69 56.89 26.87 159 0.18 E
USAB N 07/03/97 0.62 58.62 46.17 78.77 8.03 NA NA E
WCFB N 07/03/97 0.27 77.06 57.65 74.82 0.31 - - A, B, E
WHGB N 07/03/97 0.39 110.51 80.02 72.41 4.06 NA NA B
Maximum 2.84 159.24 92.40 86.95 27.60 310,005 331.04
Minimum - 14.03 6.82 38.53 - - -
Average 0.64 96.53 66.74 70.14 8.32 11,941 13.38
Median 0.45 98.36 70.32 72.39 5.56 - -
</TABLE>
Source: SNL & F&C calculation 5
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparative Group Selected
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 22.875
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 12.750
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.250
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 19.250
INCB Indiana Community Bank SB Lebanon IN MW SAIF NASDAQ 12/15/94 16.000
JOAC Joachim Bancorp Inc. De Soto MO MW SAIF NASDAQ 12/28/95 14.500
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 13.875
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 19.500
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 15.000
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 19.000
SOBI Sobieski Bancorp Inc. South Bend IN MW SAIF NASDAQ 03/31/95 14.938
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 16.000
Maximum 22.875
Minimum 12.750
Average 16.912
Median 16.000
</TABLE>
Source: SNL & F&C calculations 6
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparative Group Selected
- ------------------
<TABLE>
<CAPTION>
Current Price/ Price/ Current Current Current Total
Market LTM Core Price/ Price/ T Price/ Dividend Assets
Value Core EPS EPS Book V Book V Assets Yield ($000)
Ticker ($M) (x) (x) (%) (%) (%) (%) MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 6.02 24.34 12.71 96.85 96.85 8.63 1.36 66,316
CIBI 12.11 12.88 11.81 107.87 107.87 12.42 2.09 97,446
CKFB 17.85 22.38 22.92 116.03 116.03 29.65 2.29 60,197
HZFS 8.19 18.16 13.75 99.59 99.59 10.45 1.66 78,368
INCB 14.75 33.33 26.67 130.40 130.40 16.15 2.25 91,329
JOAC 11.03 37.18 51.79 106.70 106.70 30.92 3.45 35,656
LOGN 17.46 15.42 14.45 111.80 111.80 21.98 2.88 79,298
MCBN 4.51 13.00 9.95 90.24 90.24 7.76 2.67 57,838
NWEQ 12.58 14.15 13.39 105.71 105.71 13.23 3.20 95,097
SFFC 14.89 14.07 13.57 100.00 100.00 17.60 2.11 85,282
SOBI 11.35 26.21 20.75 85.26 85.26 14.35 1.87 79,080
THR 13.18 17.20 18.18 105.06 105.47 14.45 2.25 91,165
Maximum 17.85 37.18 51.79 130.40 130.40 30.92 3.45 97,446
Minimum 4.51 12.88 9.95 85.26 85.26 7.76 1.36 35,656
Average 11.99 20.69 19.16 104.63 104.66 16.47 2.34 76,423
Median 12.35 17.68 14.10 105.39 105.59 14.40 2.25 79,189
</TABLE>
7
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparative Group Selected
- ------------------
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE ROACE
Equity/ Equity/ Core Core Before Before Before Before
Assets T Assets EPS EPS Extra Extra Extra Extra
(%) (%) ($) ($) (%) (%) (%) (%)
Ticker MRQ MRQ LTM MRQ LTM MRQ LTM MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 8.90 8.90 0.94 0.45 0.09 0.69 0.93 7.68
CIBI 11.52 11.52 0.99 0.27 0.67 1.01 5.53 8.86
CKFB 23.68 23.68 0.86 0.21 1.30 1.21 5.08 4.96
HZFS 10.50 10.50 1.06 0.35 0.43 0.79 3.87 7.35
INCB 12.39 12.39 0.48 0.15 0.17 0.60 1.29 4.77
JOAC 28.98 28.98 0.39 0.07 0.51 0.63 1.74 2.13
LOGN 19.65 19.65 0.90 0.24 1.17 1.39 5.27 7.02
MCBN 8.60 8.60 1.50 0.49 0.40 0.87 4.42 9.16
NWEQ 11.42 11.42 1.06 0.28 0.78 0.95 6.25 8.00
SFFC 17.60 17.60 1.35 0.35 1.04 1.27 5.61 7.18
SOBI 15.40 15.40 0.57 0.18 0.28 0.67 1.64 4.04
THR 13.76 13.71 0.93 0.22 0.57 0.80 3.91 5.68
Maximum 28.98 28.98 1.50 0.49 1.30 1.39 6.25 9.16
Minimum 8.60 8.60 0.39 0.07 0.09 0.60 0.93 2.13
Average 15.20 15.20 0.92 0.27 0.62 0.91 3.80 6.40
Median 13.08 13.05 0.94 0.26 0.54 0.84 4.17 7.10
</TABLE>
Source: SNL & F&C calculations 8
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparative Group Selected
- ------------------
<TABLE>
<CAPTION>
Loans Loans
NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Merger Current Assets Deposits Assets Assets Assets For Others Assets
Target? Pricing (%) (%) (%) (%) (%) ($000) (%)
Ticker (Y/N) Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC N 07/03/97 NA 96.00 72.82 75.86 13.98 NA NA
CIBI N 07/03/97 0.72 103.55 76.52 73.90 13.99 NA NA
CKFB N 07/03/97 0.89 126.34 89.94 71.19 3.73 - -
HZFS N 07/03/97 1.02 92.53 66.63 72.01 16.74 1,636 2.09
INCB N 07/03/97 NA 90.47 78.66 86.95 - NA NA
JOAC N 07/03/97 0.68 96.06 66.88 69.62 - - -
LOGN N 07/03/97 0.45 96.20 72.05 74.89 4.41 - -
MCBN N 07/03/97 0.40 113.92 83.59 73.38 17.62 6,941 12.00
NWEQ N 07/03/97 NA 126.90 82.14 64.73 23.24 NA NA
SFFC N 07/03/97 0.70 133.97 79.59 59.41 22.28 - -
SOBI N 07/03/97 0.25 98.14 73.21 74.60 8.98 - -
THR N 07/03/97 1.21 101.03 66.49 65.81 19.02 14,112 15.48
Maximum 1.21 133.97 89.94 86.95 23.24 14,112 15.48
Minimum 0.25 90.47 66.49 59.41 - - -
Average 0.70 106.26 75.71 71.86 12.00 2,836 3.70
Median 0.70 99.59 74.87 72.70 13.99 - -
</TABLE>
Source: SNL & F&C calculations 9
<PAGE>
EXHIBIT VII
<PAGE>
FERGUSON & COMPANY Exhibit VII
- ------------------ Pro Forma Assumptions
1. Net proceeds from the conversion were invested at the beginning of the period
at 5.65%, which was the approximate rate on the one-year treasury bill on June
30, 1997. This rate was selected because it is considered more representative of
the rate the Association is likely to earn.
2. First Federal's ESOP will acquire 8% of the conversion stock with loan
proceeds obtained from the Holding Company; therefore, there will be no interest
expense. We assumed that the ESOP expense is 1/28th annually of the initial
purchase. The ESOP loan is expected to have a 28 year life.
3. First Federal's RP will acquire 4% of the stock through open market purchases
at $10 per share and the expense is recognized ratably over five years as the
shares vest.
4. All pro forma income and expense items are adjusted for income taxes at a
combined state and federal rate of 36.0%.
5. In calculating the pro forma adjustments to net worth, the ESOP and RP are
deducted in accordance with generally accepted accounting principles.
6. Pro forma calculations assume that First Federal contributes 20,000 shares,
valued at $200,000, from authorized but unissued shares at the time of
conversion, to a charitable foundation. Pro forma calculations assume that
outstanding shares after conversion are equal to the number of shares determined
from the appraisal plus the 20,000 shares issued to the foundation.
7. Earnings per share ("EPS") calculations have ignored AICPA SOP 93-6.
Calculating EPS under SOP 93-6 and assuming 1/28th of the ESOP shares are
committed to be released and allocated to the individual accounts at the
beginning of the period would yield EPS of $.89, $.80, $.73, and $.67, and price
to earnings ratios of 11.2, 12.5, 13.7, and 14.9, at the minimum, midpoint,
maximum, and supermaximum of the range, respectively.
1
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the Minimum of the Conversion Valuation Range
Valuation Date as of September 2, 1997
<TABLE>
<CAPTION>
First Federal S&LA, Cheraw, SC
- --------------------------------------------------------------------------------------
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Value $ 14,025,000
Less: Estimated Expenses (614,000)
------------------
Net Conversion Proceeds $ 13,411,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 13,411,000
Less: ESOP Contributions (1,122,000)
RP Contributions (561,000)
------------------
Net Conversion Proceeds after ESOP & RP $ 11,728,000
Estimated Incremental Rate of Return(1) 3.62%
------------------
Estimated Additional Income $ 424,084
Less: ESOP Expense (25,646)
RP Expense (71,808)
------------------
$ 326,631
==================
3. Pro Forma Calculations
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
----------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 845,000 $ 326,631 $ 1,171,631
b. Pro Forma Net Worth
June 30, 1997 $ 11,090,000 $ 11,800,000 $ 22,890,000
c. Pro Forma Net Assets
June 30, 1997 $ 60,538,000 $ 11,728,000 $ 72,266,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 percent.
(2) Pro forma effect on capital includes $72,000 increase
related to contribution to charitable foundation.
2
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the Midpoint of the Conversion Valuation Range
Valuation Date as of September 2, 1997
<TABLE>
<CAPTION>
First Federal S&LA, Cheraw, SC
- --------------------------------------------------------------------------------
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 16,500,000
Less: Estimated Expenses (660,000)
----------------------
Net Conversion Proceeds $ 15,840,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 15,840,000
Less: ESOP Contributions (1,320,000)
RP Contributions (660,000)
----------------------
Net Conversion Proceeds after ESOP & RP $ 13,860,000
Estimated Incremental Rate of Return(1) 3.62%
----------------------
Estimated Additional Income $ 501,178
Less: ESOP Expense (30,171)
RP Expense (84,480)
----------------------
$ 386,526
======================
3. Pro Forma Calculations
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 845,000 $ 386,526 $ 1,231,526
b. Pro Forma Net Worth
June 30, 1997 $ 11,090,000 $ 13,932,000 $ 25,022,000
c. Pro Forma Net Assets
June 30, 1997 $ 60,538,000 $ 13,860,000 $ 74,398,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 percent.
(2) Pro forma effect on capital includes $72,000 increase related to
contribution to charitable foundation.
3
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the Maximum of the Conversion Valuation Range
Valuation Date as of September 2, 1997
<TABLE>
<CAPTION>
First Federal S&LA, Cheraw, SC
- --------------------------------------------------------------------------------------
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 18,975,000
Less: Estimated Expenses (706,000)
----------------------
Net Conversion Proceeds $ 18,269,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 18,269,000
Less: ESOP Contributions (1,518,000)
RP Contributions (759,000)
----------------------
Net Conversion Proceeds after ESOP & RP $ 15,992,000
Estimated Incremental Rate of Return(1) 3.62%
----------------------
Estimated Additional Income $ 578,271
Less: ESOP Expense (34,697)
RP Expense (97,152)
----------------------
$ 446,422
----------------------
3. Pro Forma Calculations
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 845,000 $ 446,422 $ 1,291,422
b. Pro Forma Net Worth
June 30, 1997 $ 11,090,000 $ 16,064,000 $ 27,154,000
c. Pro Forma Net Assets
June 30, 1997 $ 60,538,000 $ 15,992,000 $ 76,530,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 percent.
(2) Pro forma effect on capital includes $72,000 increase related to
contribution to charitable foundation.
4
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Effect of Conversion Proceeds
At the SuperMax of the Conversion Valuation Range
Valuation Date as of September 2, 1997
<TABLE>
<CAPTION>
First Federal S&LA, Cheraw, SC
- --------------------------------------------------------------------------------------
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 21,821,250
Less: Estimated Expenses $ (758,000)
----------------------
Net Conversion Proceeds $ 21,063,250
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 21,063,250
Less: ESOP Contributions $ (1,745,700)
RP Contributions $ (872,850)
----------------------
Net Conversion Proceeds after ESOP & RP $ 18,444,700
Estimated Incremental Rate of Return(1) 3.62%
----------------------
Estimated Additional Income $ 666,960
Less: ESOP Expense $ (39,902)
RP Expense $ (111,725)
----------------------
$ 515,334
======================
3. Pro Forma Calculations
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 845,000 $ 515,334 $ 1,360,334
b. Pro Forma Net Worth
June 30, 1997 $ 11,090,000 $ 18,516,700 $ 29,606,700
c. Pro Forma Net Assets
June 30, 1997 $ 60,538,000 $ 18,444,700 $ 78,982,700
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 percent.
(2) Pro forma effect on capital includes $72,000 increase related to
contribution to charitable foundation.
5
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Analysis Sheet
<TABLE>
<CAPTION>
Name of Association: First Federal S&LA, Cheraw, SC S. Carolina Publicly All Publicly
Date of Market Prices: September 2, 1997 Comparatives Held Thrifts Held Thrifts
------------ -------------------- ------------
Symbols Value Mean Median Mean Median Mean Median
------------------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-Earnings Ratio P/E
- --------------------
Last Twelve Months N/A
At Minimum of Range 12.1
At Midpoint of Range 13.6 21.4 17.5 18.8 18.8 16.8 16.7
At Maximum of Range 14.8
At Supermax of Range 16.2
Price-Book Ratio P/B
- ----------------
At Minimum of Range 62.1%
At Midpoint of Range 66.7% 111.1 112.6 180.7 180.7 149.9 142.7
At Maximum of Range 70.6%
At Supermax of Range 74.4%
Price-Asset Ratio P/A
- -----------------
At Minimum of Range 19.7%
At Midpoint of Range 22.4% 17.1 15.6 12.7 12.7 15.3 14.3
At Maximum of Range 25.1%
At Supermax of Range 27.9%
Twelve Mo. Earnings Base Y $ 845,000
Period Ended June 30, 1997
Book Value B $ 11,090,000
As of June 30, 1997
Total Assets A $ 60,538,000
As of June 30, 1997
Return on Money (1) R 3.62%
Conversion Expense X $ 660,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimated Dividend
Dollar Amount DA $ 501,000
Yield DY 3.00%
ESOP Contributions P $ 1,320,000
RP Contributions I $ 660,000
ESOP Annual Expense E $ 30,171
RP Annual Contributions M $ 84,480
Cost of ESOP Borrowings F 0.00%
Charity Contribution CC $ 200,000
After Tax Effect of Charity
Contribution ATEC $ 128,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 percent.
(2) Pro forma effect on capital includes $72,000 increase related to
contribution to charitable foundation.
6
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Analysis Sheet
Calculation of Estimated Value (V) at Midpoint Value
1. V= P/A(A-X-P-I-CC) $ 16,700,000
-------------------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I-ATEC) $ 16,700,000
-------------------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I+CC)-(E+M)) $ 16,700,000
----------------------------
1-P/E(R(1-(CxX))
<TABLE>
<CAPTION>
Value
Estimated Value Per Share Total Shares Date
-------------------------- ------------- ----------------- -------------------------
<S> <C> <C> <C>
$16,500,000 $10.00 1,650,000 September 2, 1997
</TABLE>
Range of Value
$16.5 million x 1.15 = $18.975 million or 1,897,500 shares at $10.00 per share
$16.5 million x 0.85 = $14.025 million or 1,402,500 shares at $10.00 per share
Note: The calculated value at the midpoint above, $16,700,000, includes the
appraised value of $16,500,000 plus the $200,000 (20,000 shares) to be
contributed to a charitable foundation from authorized but unissued
shares.
7
<PAGE>
EXHIBIT 99.3
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
515 Market Street
Cheraw, South Carolina 29520
(803) 537-7656
-------------------------------------
NOTICE OF SPECIAL MEETING OF MEMBERS
-------------------------------------
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of First Federal Savings and Loan Association of Cheraw (the
"Association") will be held at the main office of the Association, located at
515 Market Street, Cheraw, South Carolina, on ______________, _______________ ,
1997 at ____ _.m., South Carolina time. The purpose of this Special Meeting is
to consider and vote upon:
A Plan of Conversion providing for the conversion of the Association
from a federally chartered mutual savings and loan association,
including the adoption of a federal stock savings association charter
and bylaws, with the concurrent sale of all the Association's common
stock to Great Pee Dee Bancorp, Inc., a Delaware corporation (the
"Holding Company"), the sale by the Holding Company to the public of
shares of its Common Stock, the establishment of a tax exempt
Charitable Foundation and the donation of 20,000 shares of its Common
Stock to the Charitable Foundation; and
such other business as may properly come before this Special Meeting or any
adjournment thereof. Management is not aware of any such other business.
The members who shall be entitled to notice of and to vote at the Special
Meeting and any adjournment thereof are depositors at the close of business on
_____________, 1997 and borrowers of the Bank as of the close of business
______________, 1997 who remained borrowers as of ____________, 1997. In the
event there are insufficient votes for approval of the Plan of Conversion at the
time of the Special Meeting, the Special Meeting may be adjourned from time to
time in order to permit further solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Herbert W. Watts
President and Chief Executive Officer
Cheraw, South Carolina
______________, 1997
- --------------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN OF CONVERSION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
<PAGE>
YOUR VOTE IS VERY IMPORTANT
- --------------------------------------------------------------------------------
SUMMARY OF PROPOSED CONVERSION
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.
Under its present mutual form of organization, the Association has no
stockholders. Its deposit account holders and certain of its borrowers are
members of the Association and have voting rights in that capacity. In the
unlikely event of liquidation, the Association's deposit account holders would
have the sole right to receive any assets of the Association remaining after
payment of its liabilities (including the claims of all deposit account holders
to the withdrawal value of their deposits). Under the Plan of Conversion (the
"Plan of Conversion") to be voted on at the Special Meeting, the Association
would be converted into a federally chartered savings and loan association
organized in stock form and all of the Association's common stock would be sold
concurrently to the Holding Company (the "Stock Conversion"). The Holding
Company will offer and sell its common stock (the "Common Stock") in a
subscription offering (1) to depositors with an account balance of $50 or more
as of June 30, 1995 ("Eligible Account Holders"), (2) tax-qualified employee
stock benefit plans of the Association ("Tax-Qualified Employee Plans"), (3)
depositors of the Association with an account balance of $50 or more as of
September 30, 1997 ("Supplemental Eligible Account Holders"), and (4)
depositors of the Association as of _____________, 1997, other then Eligible or
Supplemental Eligible Account Holders, and borrowers who remained borrowers as
of ______________, 1997 ("Other Members") (the "Subscription Offering").
Notwithstanding the foregoing, to the extent orders for shares exceed the
maximum of the appraisal range, Tax-Qualified Employee Plans shall be afforded a
first priority to purchase shares sold above the maximum of the appraisal range.
It is anticipated that Tax-Qualified Employee Plans will purchase 8% of the
Common Stock sold in the Stock Conversion.
Concurrent with, during or following completion of the Subscription
Offering, to the extent the Common Stock is not all sold to the persons in the
foregoing categories, the Holding Company may offer Common Stock to members of
the general public to whom a prospectus (the "Prospectus") has been delivered
("Other Subscribers"), with first preference to natural persons residing in
Chesterfield County, the County in which the Association maintains its office
(the "Community Offering"). The Subscription Offering and the Community
Offering are referred to collectively as the "Subscription and Community
Offering." Voting and liquidation rights with respect to the Association would
thereafter be held by the Holding Company, except to the limited extent of the
liquidation account (the "Liquidation Account") that will be established for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders of
the Association and voting and liquidation rights in the Holding Company would
be held only by those persons who become stockholders of the Holding Company
through purchase of shares of its Common Stock. See "Description of the Plan of
Conversion - Principal Effects of Conversion - Liquidation Rights of Depositor
Members."
THE CONVERSION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR FEDERAL
INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE OBLIGATED TO
PURCHASE ANY STOCK IN THE STOCK CONVERSION.
Business Purposes Net Stock Conversion proceeds are expected to increase
for Conversion the capital of the Association, which will support the
expansion of its financial services to the public. The
conversion to stock form and the use of a holding company
structure are also expected to enhance its ability to
expand through possible mergers and acquisitions
(although no such transactions are contemplated at this
time) and will facilitate its future access of the
Holding Company and the Converted Association to the
capital markets. The Association will continue to be
subject to comprehensive regulation and examination by
the Office of Thrift Supervision, Department of Treasury
(the "OTS") and the Federal Deposit Insurance Corporation
(the "FDIC").
Subscription and As part of the Stock Conversion, Common Stock is being
Community Offering offered for sale in the Subscription Offering, in the
priorities summarized below, to the Association's (1)
Eligible Account Holders, (2) Tax-Qualified Employee
Plans, (3) Supplemental Eligible Account Holders and (4)
Other Members. In addition, in the Community Offering,
Other Subscribers may
ii
<PAGE>
purchase Common Stock to the extent shares are available
after satisfaction of subscriptions in the Subscription
Offering, with a preference first to natural persons
residing in the County in which the Association maintains
its office.
Subscription Rights Each Eligible Account Holder has been given non-
of Eligible Account transferable rights to subscribe for an amount of shares
Holders equal to the greater of (i) $250,000 of the Common Stock
sold in the Stock Conversion; (ii) one-tenth of one
percent of the total offering of shares of Common Stock
in the Stock Conversion, to the extent such shares are
available; or (iii) 15 times the product (rounded down to
the whole next number) obtained by multiplying the total
number of shares to be issued by a fraction of which the
numerator is the amount of qualifying deposits of such
subscriber and the denominator is the total qualifying
deposits of all account holders in this category on the
qualifying date.
Subscription Rights The Association's Tax-Qualified Employee Plans have been
of Tax-Qualified given non-transferable rights to subscribe, individually
Employee Plans and in the aggregate, for up to 10% of the total number
of shares sold in the Stock Conversion after satisfaction
of subscriptions of Eligible Account Holders.
Notwithstanding the foregoing, to the extent orders for
shares exceed the maximum of the appraisal range, Tax-
Qualified Employee Plans shall be afforded a first
priority to purchase shares sold above the maximum of the
appraisal range. It is anticipated that Tax-Qualified
Employee Plans will purchase 8% of the Common Stock sold
in the Stock Conversion.
Subscription Rights After satisfaction of subscriptions of Eligible Account
of Supplemental Holders and Tax-Qualified Employee Plans, each
Eligible Account Supplemental Eligible Account Holder (other than
Holders directors and officers of the Association and their
associates) has been given non-transferable rights to
subscribe for an amount of shares equal to the greater of
(i) $250,000 of the Common Stock sold in the Stock
Conversion; (ii) one-tenth of one percent of the total
offering of shares of Common Stock in the Stock
Conversion, to the extent such shares are available; or
(iii) 15 times the product (rounded down to the whole
next number) obtained by multiplying the total number of
shares to be issued by a fraction of which the numerator
is the amount of qualifying deposits of such subscriber
and the denominator is the total qualifying deposits of
all account holders in this category on the qualifying
date. The subscription rights of each Supplemental
Eligible Account Holder shall be reduced to the extent of
such person's subscription rights as an Eligible Account
Holder.
Subscription Rights Each Other Member has been given non-transferable rights
of Other Members to subscribe for an amount of shares equal to the greater
of (i) $250,000 of the Common Stock sold in the Stock
Conversion; or (ii) one-tenth of one percent of the total
number of shares offered in the Stock Conversion after
satisfaction of the subscriptions of the Association's
Eligible Account Holders, Tax-Qualified Employee Plans
and Supplemental Eligible Account Holders.
Purchase No person or entity, together with associates, and
Limitations persons acting in concert, may purchase more than
$250,000 of the Common Stock offered in the Stock
Conversion based on the Estimated Valuation Range (as
calculated without giving effect to any increase in such
range subsequent to the date hereof). The Boards of
Directors of the Holding Company and the Association may,
in their sole discretion, increase the maximum purchase
limitation up to 9.99% of the shares sold, provided that
orders for shares exceeding 5% shall not exceed in the
aggregate, 10% of the shares offered in the Subscription
Offering. Should the Association increase the maximum
purchase limitation above 5% of the Common Stock offered,
persons who previously subscribed for the maximum number
of shares will be given the opportunity to subscribe for
additional shares. The aggregate purchases of directors
and executive officers and their associates may not
exceed 34.78% of the total number of shares offered in
the Stock Conversion. These purchase limitations do not
apply to the Association's non-Tax-Qualified and Tax-
Qualified Employee Plans.
Expiration Date of All subscriptions for Common Stock must be received by
Noon, South Carolina time on
iii
<PAGE>
Subscription and
Community Offerings _____________, 1997.
How to Subscribe For information on how to subscribe for Common Stock
for Shares being offered in the Stock Conversion, please read the
Prospectus and the stock order form and instructions
accompanying this Proxy Statement. Subscriptions will not
become effective until the Plan of Conversion has been
approved by the Association's members and all of the
Common Stock offered in the Stock Conversion has been
subscribed for or sold in the Subscription and Community
Offering or through such other means as may be approved
by the OTS.
Price of Common All sales of Common Stock in the Subscription and
Stock Community Offering will be made at the same price per
share which is currently expected to be $10.00 per share
on the basis of an independent appraisal of the pro forma
market value of the Association and the Holding Company
upon Stock Conversion. On the basis of a preliminary
appraisal by Ferguson & Co. ("Ferguson") which has been
reviewed by the OTS, a minimum of 1,402,500 and a maximum
of 1,897,500 shares will be offered in the Stock
Conversion. See "The Conversion -Stock Pricing and Number
of Shares to be Issued" in the Prospectus.
Tax Consequences The Association has received an opinion from its special
counsel, Luse Lehman Gorman Pomerenk & Schick, P.C.,
stating that the Stock Conversion is a nontaxable
reorganization under Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the "Code"). The
Association also has received an opinion from Dixon, Odom
& Co. ("Dixon") stating that the Stock Conversion will
not be a taxable transaction for South Carolina income
tax purposes.
Required Vote Approval of the Plan of Conversion will require the
affirmative vote of a majority of all votes eligible to
be cast at the Special Meeting.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR
---
THE PLAN OF CONVERSION
iv
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS TO BE HELD ON _____________, 1997
PURPOSE OF MEETING
This Proxy Statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of First Federal Savings and
Loan Association of Cheraw (the "Association") of the proxies to be voted at the
Special Meeting of Members (the "Special Meeting") of the Association to be held
at the main office of the Association, located at 515 Market Street, Cheraw,
South Carolina, on _____________, 1997 at _____ _.m. local time and at any
adjournments thereof. The Special Meeting is being held for the purpose of
considering and voting upon a Plan of Conversion under which the Association
would be converted (the "Stock Conversion") from its present mutual form of
organization into a federally chartered savings association organized in stock
form, the concurrent sale of all the common stock of the stock savings
association to Great Pee Dee Bancorp, Inc. (the "Holding Company"), a Delaware
corporation, the sale by the Holding Company of shares of its common stock (the
"Common Stock"), the establishment of a tax exempt Charitable Foundation and
donation of 20,000 shares of Common Stock to the Charitable Foundation and such
other business as may properly come before the meeting and any adjournment
thereof. References to the Association include the Association when organized in
stock form as indicated by the context.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE ASSOCIATION RECOMMENDS THAT YOU VOTE TO
APPROVE THE PLAN OF CONVERSION.
The Association is currently organized in mutual rather than stock form,
meaning that it has no stockholders and no authority under its federal mutual
charter to issue capital stock. The Association's Board of Directors has
adopted the Plan of Conversion providing for the Conversion. The sale of Common
Stock of the Holding Company, which was recently formed to become the holding
company of the Association, will substantially increase the Association's net
worth. The Holding Company will exchange a portion of the net proceeds from the
sale of the Common Stock for the common stock of the Association to be issued
upon Stock Conversion. The Holding Company expects to retain the balance of the
net proceeds (up to 50%), as its initial capitalization of which the Holding
Company intends to lend funds to the ESOP to fund its purchase of Common Stock.
This increased capital will support the expansion of the Association's financial
services to the public. The Board of Directors of the Association also believes
that the conversion to stock form and the use of a holding company structure
will enhance the Association's ability to expand through possible mergers and
acquisitions (although no such transactions are contemplated at this time) and
will facilitate its future access to the capital markets.
The Plan of Conversion provides for the establishment of the Charitable
Foundation, which will be incorporated under Delaware law as a non-stock
corporation. The Holding Company will fund the Charitable Foundation with
20,000 shares of Common Stock.
The Board of Directors of the Association believes that the Stock
Conversion will further benefit the Association by enabling it to attract and
retain key personnel through prudent use of stock-related incentive compensation
and benefit plans. See "EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF
FIRST FEDERAL - Employee Stock Ownership Plan and Trust, - Stock Option Plan,
and - Recognition and Retention Plan" in the accompanying Prospectus.
Voting in favor of the Plan of Conversion will not obligate any person to
purchase any Common Stock.
THE OTS HAS APPROVED THE PLAN OF CONVERSION SUBJECT TO THE APPROVAL OF THE
ASSOCIATION'S MEMBERS AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. HOWEVER,
SUCH APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF
CONVERSION BY THE OTS.
<PAGE>
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Association has fixed _____________, 1997 as
the voting record date ("Voting Record Date") for the determination of members
entitled to notice of the Special Meeting. All Association depositors are
members of the Association under its current charter. All Association members
of record as of the close of business on the Voting Record Date will be entitled
to vote at the Special Meeting or any adjournment thereof.
Each depositor (including IRA and Keogh account beneficiaries) 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 such depositor's accounts
in the Association as of the Voting Record Date, up to a maximum of 1,000 votes.
Each borrower of the savings association as of _____________, 1997 shall be able
to cast one vote as a borrower member as long as such borrower's borrowings as
of _____________, 1997 remain outstanding as of the Voting Record Date. Joint
accounts shall be entitled to no more than 1,000 votes, and any owner may cast
all the votes unless notified in writing. In general, accounts held in
different ownership capacities will be treated as separate memberships for
purposes of applying the 1,000 vote limitation. For example, if two persons
hold a $100,000 account in their joint names and each of the persons also holds
a separate account for $100,000 in his own name, each person would be entitled
to 1,000 votes for each separate account and they would together be entitled to
cast 1,000 votes on the basis of the joint account. Where no proxies are
received from IRA and Keogh account beneficiaries, after due notification, the
Association, as trustee of these accounts, is entitled to vote these accounts in
favor of the Plan of Conversion.
Approval of the Plan of Conversion requires 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 _____________, 1997, the Association had
_____________ members who were entitled to cast a total of _____________ votes
at the Special Meeting.
Association members may vote at the Special Meeting or any adjournment
thereof in person or by proxy. Any member giving a proxy will have the right to
revoke the proxy at any time before it is voted by giving written notice to the
Secretary of the Association, provided that such written notice is received by
the Secretary prior to the Special Meeting or any adjournment thereof, or upon
request if the member is present and chooses to vote in person.
All properly executed proxies received by the Board of Directors of the
Association 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, the
proxies solicited hereby will be voted on such matters in accordance with the
best judgment of the proxy holders named thereon. Management is not aware of
any other business to be presented at the Special Meeting.
If a proxy is not executed and is returned or the member does not vote in
person, the Association is prohibited by OTS regulations from using a previously
executed proxy to vote for the Conversion. As a result, failure to vote may
have the same effect as a vote against the Plan of Conversion.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited 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 a later date. Such
persons will be reimbursed by the Association for their expenses incurred in
connection with such solicitation. The Association will bear all costs of this
solicitation. The proxies solicited hereby will be used only at the Special
Meeting and at any adjournment thereof.
2
<PAGE>
DESCRIPTION OF THE PLAN OF CONVERSION
The Plan of Conversion to be presented for approval at the Special Meeting
provides for the Conversion to be accomplished through adoption of an amended
charter and bylaws for the Association to authorize the issuance of capital
stock along with the concurrent formation of a holding company, and the related
transactions provided for in the Plan of Conversion, including the adoption of
an amended Federal Stock Charter and Bylaws for the Association. As part of the
Conversion, the Plan of Conversion provides for the Subscription Offering of the
Common Stock to the Association's (i) Eligible Account Holders (deposit account
holders with an account balance of $50 or more as of June 30, 1995); (ii) Tax-
Qualified Employee Plans, (iii) Supplemental Eligible Account Holders (deposit
account holders with an account balance of $50 or more as of September 30,
1997); and (iv) Other Members (certain deposit account holders as of the close
of business on _____________, 1997 who are not Eligible Account Holders or
Supplemental Eligible Account Holders and borrowers as of the Voting Record
Date). Notwithstanding the foregoing, to the extent orders for shares exceed
the maximum of the appraisal range, Tax-Qualified Employee Plans shall be
afforded a first priority to purchase shares sold above the maximum of the
appraisal range. It is anticipated that Tax-Qualified Employee Plans will
purchase 8% of the Common Stock sold in the Stock Conversion. Concurrently with,
during or following completion of the Subscription Offering, members of the
general public, with a preference first to natural persons residing in the
County in which the Association maintains its office, will be afforded the
opportunity to purchase the Common Stock not subscribed for in the Subscription
Offering.
THE SUBSCRIPTION OFFERING HAS COMMENCED AS OF THE DATE OF MAILING OF THIS
PROXY STATEMENT. A PROSPECTUS EXPLAINING THE TERMS OF THE SUBSCRIPTION AND
COMMUNITY OFFERING, INCLUDING HOW TO ORDER AND PAY FOR SHARES AND DESCRIBING THE
BUSINESS OF THE ASSOCIATION AND THE HOLDING COMPANY, ACCOMPANIES THIS PROXY
STATEMENT AND SHOULD BE READ BY ALL PERSONS WHO WISH TO CONSIDER SUBSCRIBING FOR
COMMON STOCK. THE SUBSCRIPTION AND COMMUNITY OFFERING EXPIRES AT NOON, LOCAL
TIME ON NOVEMBER __, 1997 UNLESS EXTENDED BY THE ASSOCIATION AND THE HOLDING
COMPANY.
The federal conversion regulations require that all stock offered in a
conversion must be sold in order for the conversion to become effective. The
conversion regulations require that the offering be completed within 45 days
after completion of the Subscription Offering period unless extended by the
Association and the Holding Company with the approval of the OTS. This 45-day
period expires _____________, 1998 unless the Subscription Offering is extended.
If this is not possible, an occurrence that is currently not anticipated, the
Board of Directors of the Association and the Holding Company will consult with
the OTS to determine an appropriate alternative method of selling all
unsubscribed shares offered in the Stock Conversion. The Plan of Conversion
provides that the Stock Conversion must be completed within 24 months after the
date of the Special Meeting.
The Subscription and Community Offering or any other sale of the
unsubscribed shares will be made as soon as practicable after the date of the
Special Meeting. No sales of shares may be completed, either in the
Subscription and Community Offering or otherwise, unless the Plan of Conversion
is approved by the members of the Association.
The commencement and completion of the Subscription and Community Offering,
however, is subject to market conditions and other factors beyond the
Association's control. Due to adverse conditions in the stock market in the
past, a number of converting thrift institutions encountered significant delays
in completing their stock offerings or were not able to complete them at all.
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
Subscription and Community Offering or other sale of the Common Stock to be
offered in the Stock Conversion. If delays are experienced, significant changes
may occur in the estimated pro forma market value of the Common Stock, together
with corresponding changes in the offering price and the net proceeds realized
by the Association and the Holding Company from the sale of the Common Stock.
The Association and the Holding Company may also incur substantial additional
printing, legal, accounting and other expenses in completing the Conversion.
3
<PAGE>
The following is a brief summary of the Conversion and is qualified in its
entirety by reference to the Plan of Conversion. The Association will provide
to you a copy of the Plan of Conversion if you return the enclosed, postage-paid
postcard by _____________, 1997. A copy of the Holding Company's Certificate of
Incorporation and Bylaws are also available from the Association upon written
request.
Principal Effects of Conversion
Depositors. The Conversion will not change the amount, interest rate,
withdrawal rights or federal insurance protection of deposit accounts, or affect
deposit accounts in any way other than with respect to voting and liquidation
rights as discussed below.
Borrowers. The rights and obligations of borrowers under their loan
agreements with the Association will remain unchanged by the Conversion. The
principal amount, interest rate and maturity date of loans will remain as they
were contractually fixed prior to the Conversion.
Voting Rights of Depositors. Under the Association's current federal
mutual charter, depositors have voting rights as members of the Association with
respect to the election of directors and certain other affairs of the
Association. After the Conversion, exclusive voting rights with respect to all
such matters will be vested in the Holding Company as the sole stockholder of
the Association. Depositors will no longer have any voting rights, except to
the extent that they become stockholders of the Holding Company through the
purchase of its Common Stock. Voting rights in the Holding Company will be held
exclusively by its stockholders.
Liquidation Rights of Depositor Members. Currently, in the unlikely event
of liquidation of the Association, any assets remaining after satisfaction of
all creditors' claims in full (including the claims of all depositors to the
withdrawal value of their accounts) would be distributed pro rata among the
depositors of the Association, with the pro rata share of each being the same
proportion of all such remaining assets as the withdrawal value of each
depositor's account is of the total withdrawal value of all accounts in the
Association at the time of liquidation. After the Conversion, the assets of the
Association would first be applied, in the event of liquidation, against the
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Any remaining assets would then be
distributed to the persons who qualified as Eligible Account Holders or
Supplemental Eligible Account Holders under the Plan of Conversion to the extent
of their interests in a "Liquidation Account" that will be established at the
time of the completion of the Stock Conversion and then to the Holding Company
as the sole stockholder of the Association's outstanding common stock. The
Association's depositors who did not qualify as Eligible Account Holders or
Supplemental Eligible Account Holders would have no right to share in any
residual net worth of the Association in the event of liquidation after the
Stock Conversion, but would continue to have the right as creditors of the
Association to receive the full withdrawal value of their deposits prior to any
distribution to the Holding Company as the Association's sole stockholder. In
addition, the Association's deposit accounts will continue to be insured by the
FDIC to the maximum extent permitted by law, currently up to $100,000 per
insured account. The Liquidation Account will initially be established in an
amount equal to the net worth of the Association as of the date of the
Association's latest statement of financial condition contained in the final
prospectus used in connection with the Stock Conversion. Each Eligible Account
Holder and/or Supplemental Eligible Account Holder will receive an initial
interest in the Liquidation Account in the same proportion as the balance in all
of his qualifying deposit accounts was of the aggregate balance in all
qualifying deposit accounts of all Eligible Account Holders and Supplemental
Eligible Account Holders on June 30, 1995 or September 30, 1997, respectively.
For accounts in existence on both dates, separate subaccounts shall be
determined on the basis of the qualifying deposits in such accounts on the
record dates. However, if the amount in the qualifying deposit account on any
annual closing date of the Association is less than the lowest amount in such
deposit account on the Eligibility Record Date and/or Supplemental Eligibility
Record Date, and any subsequent annual closing date, this interest in the
Liquidation Account will be reduced by an amount proportionate to such reduction
in the related deposit account and will not thereafter be increased despite any
subsequent increase in the related deposit account.
The Association. Under federal law, the stock savings association
resulting from the Stock Conversion will be deemed to be a continuation of the
mutual association rather than a new entity and will continue to have all of the
rights, privileges, properties, assets and liabilities of the Association prior
to the Stock Conversion. The Stock Conversion will enable the Association to
issue capital stock, but will not change the general objectives, purposes or
4
<PAGE>
types of business currently conducted by the Association, and no assets of the
Association will be distributed in order to effect the Stock Conversion, other
than to pay the expenses incident thereto. After the Stock Conversion, the
Association will remain subject to examination and regulation by the OTS and
will continue to be a member of the Federal Home Loan Bank System. The Stock
Conversion will not cause any change in the executive officers or directors of
the Association.
Tax Consequences. Consummation of the Stock Conversion is expressly
conditioned upon prior receipt by the Association of either a ruling from the
Internal Revenue Service or an opinion of Luse Lehman Gorman Pomerenk & Schick,
P.C. with respect to federal taxation, and a ruling of the South Carolina
taxation authorities or an opinion of Dixon, Odom & Co. with respect to South
Carolina taxation, to the effect that consummation of the Stock Conversion will
not be taxable to the Association or the Holding Company.
An opinion has been received from Luse Lehman Gorman Pomerenk & Schick,
P.C. with respect to the proposed Stock Conversion of the Association, to the
effect that (i) the Stock Conversion will qualify as a reorganization under
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized to the
Association in either its mutual form or its stock form by reason of the
proposed Stock Conversion, (ii) no gain or loss will be recognized to the
Association upon the receipt of money from the Holding Company for stock of the
Association; and no gain or loss will be recognized to the Holding Company upon
the receipt of money for Common Stock of the Holding Company; (iii) the basis of
the assets of the Association in its stock form will have the same basis as the
assets of the Association in its mutual form prior to the Stock Conversion; (iv)
the holding period of the assets of the Association will include the period
during which the assets were held by the Association in its mutual form prior to
conversion; (v) no gain or loss will be recognized by the depositors of the
Association upon the constructive issuance to them of withdrawable deposit
accounts of the Association immediately after the Stock Conversion, interests in
the Liquidation Account, and/or on the distribution to them of nontransferable
subscription rights to purchase Common Stock; (vi) the basis of the account
holder's deposit accounts in the Association after the Stock Conversion will be
the same as the basis of his or her deposit accounts in the Association prior to
the Stock Conversion; (vii) the basis of each account holder's interest in the
Liquidation Account will be zero; the basis of the nontransferable subscription
rights will be zero; (viii) the basis of the Common Stock to its shareholders
will be the actual Purchase Price thereof plus, in the case of stock acquired by
account holders, the basis, if any, in the Subscription Rights; (ix) no taxable
income will be realized by Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members as a result of the exercise of the
nontransferable subscription rights; and (x) the Association in stock form will
succeed to and take into account Holding Company earnings and profits, or
deficit in earnings and profits of the Association in its mutual form, as of the
date of the Stock Conversion.
The opinion concludes in effect that: (i) no taxable income will be
realized by the Association on the issuance of subscription rights to eligible
subscribers to purchase shares of Common Stock at fair market value; (ii) the
Association in its stock form will succeed to and take into account the dollar
amounts of those accounts of the Association in its mutual form which represent
bad debt reserves in respect of which the Association in its mutual form has
taken a bad debt deduction for taxable years on or before the date of the
transfer; and (iii) the creation of the Liquidation Account will have no effect
on the Association's taxable income, deductions, or additions to bad debt
reserves or distributions to the Holding Company's shareholders under Section
593 of the Code.
The opinion from Luse Lehman Gorman Pomerenk & Schick, P.C. is based, among
other things, on certain assumptions, including the assumptions that the
exercise price of the Subscription Rights to purchase Holding Company Common
Stock will be approximately equal to the fair market value of that stock at the
time of the completion of the proposed Stock Conversion. The Holding Company and
the Association have received a letter issued by Ferguson & Co. ("Ferguson")
stating that pursuant to Ferguson's valuation, Ferguson is of the belief that
Subscription Rights issued in connection with the Stock Conversion will have no
value.
If it is subsequently established that the Subscription Rights received by
such persons have an ascertainable fair market value, then, in such event, the
Subscription Rights will be taxable to the recipient in the amount of their fair
market value. In this regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
5
<PAGE>
With respect to South Carolina taxation, the Association has received an
opinion from Dixon, Odom & Co. to the effect that, assuming the Stock Conversion
does not result in any federal taxable income, gain or loss to the Association
in its mutual or stock form, the Holding Company, the account holders,
borrowers, officers, directors and employees and Tax-Qualified Employee Plans of
the Association, the Stock Conversion should not result in any South Carolina
income tax liability to such entities or persons.
Approval, Interpretation, Amendment and Termination
Under the Plan of Conversion, the letter from the OTS giving approval
thereto, and applicable regulations, consummation of the Conversion is subject
to the satisfaction of the following conditions: (a) approval of the Plan of
Conversion by members of the Association casting at least a majority of the
votes eligible to be cast at the Special Meeting; (b) sale of all of the Common
Stock to be offered in the Stock Conversion; and (c) receipt of favorable
rulings or opinions of counsel as to the federal and South Carolina tax
consequences of the Stock Conversion.
The Plan of Conversion may be substantively amended by the Boards of
Directors of the Association and the Holding Company with the concurrence of the
OTS. If the Plan of Conversion is amended, proxies which have been received
prior to such amendment will not be resolicited unless otherwise required by the
OTS. Also, as required by the federal regulations, the Plan of Conversion
provides that the transactions contemplated thereby may be terminated by the
Board of Directors of the Association alone at any time prior to the Special
Meeting and may be terminated by the Board of Directors of the Association at
any time thereafter with the concurrence of the OTS, notwithstanding approval of
the Plan of Conversion by the members of the Association at the Special Meeting.
All interpretations by the Association and the Holding Company of the Plan of
Conversion and of the Stock Order Forms and related materials for the
Subscription and Community Offering will be final, except as regards or affects
the OTS.
Judicial Review
Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
(S)1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations promulgated
thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons aggrieved by
a final action of the OTS which approves, with or without conditions, or
disapproves a plan of conversion, may obtain review of such final action only by
filing a written petition in the United States Court of Appeals 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, requesting that the
final action of the OTS be modified, terminated or set aside, and (ii) that such
petition must be filed within 30 days after publication of notice of such final
action in the Federal Register, or 30 days after the date of mailing of the
notice and proxy statement for the meeting of the converting institution's
members at which the conversion is to be voted on, whichever is later. The
notice of the Special Meeting of the Association's members to vote on the Plan
of Conversion described herein is included at the beginning of this Proxy
Statement. The statute and regulation referred to above should be consulted for
further information.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including a more
detailed description of the Plan of Conversion, financial statements of the
Association and a description of the capitalization and business of the
Association and the Holding Company, including the Association's directors and
executive officers and their compensation, the anticipated use of the net
proceeds from the sale of the Common Stock and a description of the Common
Stock, is intended to help you evaluate the Conversion and is incorporated
herein by this reference.
YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO COMPLETE
AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU MAY STILL
ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE VOTED YOUR
PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING AGAINST
THE CONVERSION.
6
<PAGE>
If you have any questions, please call our Stock Information Center at
(803) ___-____.
IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY. PLEASE
SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.
--------------------------------------
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.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
7
<PAGE>
REVOCABLE PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON _____________, 1997
The undersigned member of First Federal Savings and Loan Association of
Cheraw (the "Association"), hereby appoints the full Board of Directors, with
full powers of substitution, as attorneys-in-fact and agents for and in the name
of the undersigned, to vote such votes as the undersigned may be entitled to
vote at the Special Meeting of Members of the Association, to be held at the
main office of the Association, located at 515 Market Street, Cheraw, South
Carolina on _____________, 1997, at _____________, local time, and at any and
all adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled as follows:
1. A Plan of Conversion providing for the conversion of the Association from a
federally chartered mutual savings and loan association, including the
adoption of a federal stock savings association charter and bylaws, with the
concurrent sale of all the Association's common stock to Great Pee Dee
Bancorp, Inc., a Delaware corporation (the "Holding Company"), sale by the
Holding Company to the public of shares of its Common Stock, the
establishment of a tax exempt Charitable Foundation and the donation by the
Holding Company of 20,000 shares of its Common Stock to the Charitable
Foundation.
FOR AGAINST
--- -------
[_] [_]
2. The grant of authority to the Board of Directors to adjourn the Special
Meeting if necessary for the purpose of soliciting additional votes to
approve the Plan.
FOR AGAINST
--- -------
[_] [_]
NOTE: The Board of Directors is not aware of any other matter that may come
before the Special Meeting of Members.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS
---
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY A MAJORITY OF THE BOARD OF
DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
Votes will be cast in accordance with the Proxy. Should the undersigned
be present and elect to vote at the Special Meeting or at any adjournment
thereof and after notification to the Secretary of the Association at said
Meeting of the member's decision to terminate this Proxy, then the power of said
attorney-in-fact or agents shall be deemed terminated and of no further force
and effect.
The undersigned acknowledges receipt of a Notice of Special Meeting of
Members and a Proxy Statement dated _____________, 1997, prior to the execution
of this Proxy.
-----------------------------------
Date
-----------------------------------
Signature
NOTE: Only one signature is required
in the case of a joint account.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.4
<PAGE>
Great Pee Dee Bancorp, Inc.
(Proposed Holding Company for
First Federal Savings and Loan Association of Cheraw )
Cheraw, South Carolina
Proposed Marketing Materials
Draft 9/19/97
<PAGE>
Marketing Materials for
First Federal Savings and Loan Association of Cheraw
Table of Contents
-----------------
I. Press Release
A. Explanation
B. Schedule
C. Distribution List
D. Examples
II. Question and Answer Brochure
A. Explanation
B. Method of Distribution
C. Example
III. Officer and Director Brochure
A. Explanation
B. Method of Distribution
C. Example
IV. Counter Cards, Lobby Posters and a Tombstone Announcement
A. Explanation
B. Quantity
C. Examples
V. Community Meeting Invitation and Prospect Letters
A. Explanation
B. Examples
VI. IRA Mailing
A. Explanation
B. Example
VII. Letters
A. Explanation
B. Example
VIII. Proxygram
A. Explanation
B. Example
IX Subscription Rights Notice
A. Explanation
B. Method of Distribution
C. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members, and other
interested investors receive prompt accurate information in a
simultaneous manner, Trident Securities, Inc. advises First Federal to
forward press releases to national and regional publications,
newspapers, radio stations, etc., at various points during the
conversion process.
Only press releases approved by Conversion Counsel will be forwarded
for publication in any manner.
B. Press Releases
1. Approval of Conversion by the Office of Thrift Supervision
and the Securities and Exchange Commission
2. Close of Stock Offering
C. Distribution Lists (see attached)
D. Examples (see attached)
<PAGE>
National Media Distribution List
--------------------------------
American Banker
- ---------------
One State Street Plaza
New York, New York 10004
Michael Weinstein
Business Wire
- -------------
212 South Tryon
Suite 1460
Charlotte, South Carolina 28281
Wall Street Journal
- -------------------
World Financial Center
200 Liberty
New York, New York 10004
SNL Securities
- --------------
Post Office Box 2124
Charlottesville, Virginia 22902
Barrons
- -------
Dow Jones & Company
Barron's Statistical Information
200 Burnett Road
Chicopee, Massachusetts 01020
Investors Business Daily
- ------------------------
12655 Beatrice Street
Post Office Box 661750
Los Angeles, California 90066
Local Media List
----------------
(Forthcoming)
<PAGE>
D. Press Release
FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Herbert W. Watts, President
Telephone: (803) 537-7656
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW
----------------------------------------------------
STOCK SALE APPROVED
-------------------
Cheraw, South Carolina, _________, 1997 - Mr. Herbert W. Watts,
President of First Federal Savings and Loan Association of Cheraw ("First
Federal"), Cheraw, South Carolina, announced _________, 1997 that First Federal
has received approval from the Office of Thrift Supervision to convert from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association. In connection with the Conversion, First
Federal has formed a holding company, Great Pee Dee Bancorp, Inc. ("Great Pee
Dee Bancorp") to hold all of the outstanding capital stock of First Federal.
A Prospectus and Proxy Statement describing the Plan of Conversion will
be mailed to certain members of First Federal on or about November ______, 1997.
Under the Plan of Conversion, Great Pee Dee Bancorp is offering an estimated
1,897,500 shares of common stock at $10.00 per share. Certain of First Federal's
past and present depositors and borrowers will have the opportunity to purchase
stock through a subscription offering that closes on December _________, 1997.
Shares that are not subscribed for during the subscription offering, if any,
will be offered to the general public, with preference given to natural persons
and trusts of natural persons who are permanent residents of Chesterfield
County, South Carolina, in a community offering. The offerings are being managed
by Trident Securities, Inc., of Raleigh, North Carolina.
As a result of the Conversion, First Federal will be structured in the
stock form, just like all commercial banks and an increasing number of savings
institutions, and will become a subsidiary of
<PAGE>
Great Pee Dee Bancorp.
According to Mr. Watts, "Our day to day operations will not change
as a result of the Conversion and deposits will continue to be insured by the
FDIC up to the applicable legal limits".
First Federal is headquartered in Cheraw, South Carolina. The
Association was chartered in 1935. At June 30, 1997, First Federal had total
assets of $60.5million and total equity of $11.1 million. Customers or
interested members of the community with questions concerning the stock offering
should call the institution at (803) _________ or visit First Federal's main
office.
At June 30, 1997 total assets of $60.5 million and total equity of
$11.1 million in retained earnings or 18.3% of assets.
<PAGE>
D. Press Release FOR IMMEDIATE RELEASE
---------------------
Contact: Herbert W. Watts, President
Telephone: (803) 537-7656
GREAT PEE DEE BANCORP CORP., HOLDING COMPANY FOR
------------------------------------------------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW,
-----------------------------------------------------
COMPLETES INITIAL STOCK OFFERING
--------------------------------
Cheraw, South Carolina _______, 1997 - Mr. Herbert W. Watts, President
of First Federal Savings and Loan Association of Cheraw ("First Federal"),
Cheraw, South Carolina, announced ______, 1997 today that Great Pee Dee Bancorp,
Inc. ("Great Pee Dee Bancorp"), the proposed holding company for First Federal
Savings and Loan Association of Cheraw, has completed its initial common stock
offering. It is anticipated that the common stock of Great Pee Dee Bancorp will
begin trading on the NASDAQ National Market System on _____, 1997 under the
symbol "____". Trident Securities, Inc., the manager of the offering, will be a
market maker in the stock. Great Pee Dee Bancorp will issue __________ shares of
its common stock.
The net proceeds contributed to First Federal upon conversion will
substantially increase its capital. First Federal 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. First Federal
may also intend to use a portion of the net proceeds to repay some or all of its
borrowings from the Federal Home Loan Bank of Atlanta. Further, First Federal
may use the balance of the proceeds to repay some or all of its participations
and possibly mortgage-backed securities in the secondary market.
On _______, 1997, First Federal's Plan of Conversion was approved by
First Federal's depositor and borrower members at a Special Meeting that was
held at the main office of the institution.
Mr. Watts indicated that the Officers and Board of Directors of First
Federal want to express their thanks for the response by customers and the
community to the stock offering and that First Federal looks forward to serving
the needs of its customers as a stock institution.
<PAGE>
II. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves to answer some of the most commonly asked
questions in "plain, everyday language." Although most of the answers
are taken verbatim from the Prospectus and Proxy Statement, it assists
the individual in finding answers to simple questions.
Conversion Counsel approves the language for each Question and
Answer. Trident Securities, Inc. and First Federal will be responsible
for any introductory or concluding remarks, design, layout, color, and
paper stock. This will be coordinated through Trident Securities, Inc.
in conjunction with the financial printer.
B. Method of Distribution
There are three primary methods of distribution of the Question and
Answer brochure. However, regardless of the method, the brochure is
always accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial
mailing to all members of First Federal.
2. Question and Answer brochures are available in First
Federal's offices.
3. Question and Answer brochures are sent out in a standard
information packet to all interested investors who phone
the Stock Information Center requesting information.
C. Example
<PAGE>
C. Example
First Federal Savings and Loan Association of Cheraw ("First Federal")
Cheraw, South Carolina
Questions and Answers Regarding the Subscription and Community Offering
and Voting on the Plan of Conversion
MUTUAL TO STOCK CONVERSION
--------------------------
First Federal's Board of Directors has unanimously voted to convert First
Federal from its present mutual form to a stock institution, subject to approval
of the conversion by First Federal's members and regulatory authorities.
Complete details on the conversion, including reasons for conversion, are
contained in the Prospectus and Proxy Statement. We urge you to read them
carefully.
This brochure is provided to answer basic questions you might have about the
conversion. Remember, the conversion will not affect the rate on any of your
savings accounts, deposit certificates, or loans.
1. Q. What is a "Conversion"?
A. Conversion is a change in the legal form of organization.
First Federal currently operates as a federally-chartered
mutual savings and loan association with no shareholders.
Through the conversion, First Federal will form a holding
company, Great Pee Dee Bancorp, Inc. ("Great Pee Dee
Bancorp"), which will ultimately own all of the outstanding
stock of the Association. Great Pee Dee Bancorp will issue
common stock in the conversion, as described below, and will
be a publicly-owned company.
2. Q. Why is First Federal converting?
A. As a federally-chartered mutual savings and loan, First
Federal does not have stock holders and has no authority to
issue stock. By converting to the stock form of organization,
First Federal will be structured in the form used by all
commercial banks, most business entities and a growing number
of savings institutions. The Conversion will be important to
the future growth and performance of First Federal by
providing a larger capital base on which it may operate,
enhance future access to capital markets and, if desired,
enhance First Federal's ability to diversify into other
financial service-related activities. Currently, First Federal
has no specific plans, agreements, arrangements or
understandings regarding such diversification.
3. Q. Will the conversion have any effect on savings accounts,
certificates of deposit or loans with First Federal?
<PAGE>
A. No. The conversion will not change the amount, interest rate
or withdrawal rights of any savings and checking accounts or
certificates of deposit. The rights and obligations of
borrowers under their loan agreements will not be affected.
However, upon consummation of the conversion, First Federal's
deposit account holders and borrowers will no longer have
voting rights unless they purchase common stock in Great Pee
Dee Bancorp.
4. Q. Will the conversion cause any changes in personnel or
management?
A. No. The conversion will not cause any changes in personnel or
management. The normal day-to-day operations will continue
as before.
5. Q. Did the Board of Directors of First Federal approve the
conversion?
A. Yes. The Board of Directors unanimously adopted the Plan of
Conversion on July 14, 1997.
THE SUBSCRIPTION AND COMMUNITY OFFERING
---------------------------------------
6. Q. Who is entitled to subscribe Great Pee Dee Bancorp common
stock?
A. Rights to subscribe for common stock will be given in order of
priority to (i) depositors of First Federal as of June 30,
1995 with a $50.00 minimum deposit at that date (the "Eligible
Account Holders"); (ii) First Federal's employee stock
ownership plan (the "ESOP"), a tax qualified employee stock
benefit plan; (iii) depositors of First Federal, who are not
Eligible Account Holders, with $50.00 or more on deposit as of
September 30, 1997 (the "Supplemental Eligible Account
Holders"); and (iv) certain depositors and borrowers of First
Federal as of _______________ ("Other Members"), subject to
the purchase limitations set forth in the Plan of Conversion.
Shares that are not subscribed for during the subscription
offering, if any, may be offered to the general public through
a community offering with preference given to natural persons
and trusts of natural persons who are permanent residents of
Chesterfield County, South Carolina (the "Local Community").
7. Q. How do I subscribe for shares of stock?
A. Eligible customers wishing to exercise their subscription
rights must return the enclosed Stock Order Form to First
Federal. The Stock Order Form must be completed and returned
along with full payment or appropriate instructions
authorizing a withdrawal from a deposit account at First
Federal on or prior to the close of the Subscription Offering
which is 12:00 noon, South Carolina time, on _____, 1997,
unless extended.
<PAGE>
8. Q. How can I pay for my subscription stock order?
A. First, you may pay for your stock order in cash (if delivered
in person to First Federal) or by check or money order.
Subscription funds will earn interest at First Federal's
passbook rate from the day we receive them until the
completion or termination of the conversion.
Second, you may authorize us to withdraw funds from your First
Federal savings account or certificate of deposit without
early withdrawal penalty. These funds will continue to earn
interest at the rate in effect for your account until
completion of the offering at which time your funds will be
withdrawn for your purchase. Funds remaining in this account
(if any) will continue at the contractual rate unless the
withdrawal reduces the account balance below the applicable
minimum in which case you will receive interest at the
passbook rate or the remaining funds are returned to the
depositor. A hold will be placed on your account for the
amount you specify for stock payment. You will not have access
to these funds from the day we receive your order until the
completion or termination of the conversion.
If you want to use Individual Retirement Account deposits held
at First Federal to pay for your stock order, call our Stock
Information Center at (803) ____________ for assistance. There
will be no early withdrawal or IRS penalties, but additional
paperwork is necessary.
9. Q. When must I place my order for shares of stock?
A. To exercise subscription rights in the subscription offering,
a Stock Order Form must be received by First Federal with full
payment for all shares subscribed for not later than 12:00
noon, South Carolina time, on ______, 1997.
Non-customers desiring to order shares through the community
offering, if any, must order shares before the close of the
community offering, if any, which will be no sooner than 12:00
noon, South Carolina time on _______, 1997, unless extended.
10. Q. How many shares of stock are being offered?
A. Great Pee Dee Bancorp is offering up to 1,897,500 shares of
common stock at a price of $10.00 per share. The number of
shares may be decreased to 1,402,500 or increased to 2,182,125
to reflect the independent appraiser's final determination of
the consolidated pro forma market value of Great Pee Dee
Bancorp and First Federal, as converted.
11. Q. What is the minimum and maximum number of shares that I can
order during the offering period?
A. The minimum number of shares that may be ordered is 25 shares.
No Stock Order
<PAGE>
Form will be accepted for less than $250. The maximum order of
shares may not exceed a total aggregate purchase price of
$250,000 for any individual or individuals through a single
account including associates or groups acting in concert as
defined in First Federal's Plan of Conversion.
12. Q. How was it determined that between 1,402,500 shares and
2,182,125 shares of stock would be issued at $10.00 per share?
A. The share range was determined through an appraisal of Great
Pee Dee Bancorp and First Federal, as converted, by Ferguson &
Co., an independent appraisal firm specializing in the thrift
industry.
13. Q. Must I pay a commission on the stock for which I subscribe?
A. No. You will not pay a commission on stock purchased in the
Subscription Offering or the Community Offering, if any.
14. Q. Will I receive interest on funds I submit for stock orders?
A. Yes. First Federal will pay its current passbook rate
from the date funds are received (with a completed Stock
Order Form) during the subscription and community offerings
until completion of the conversion.
15. Q. If I have misplaced my Stock Order Form, what should I do?
A. First Federal will mail you another order form or you may
obtain one from First Federal's office. If you need assistance
in obtaining or completing a Stock Order Form, please call or
visit the Stock Information Center.
16. Q. Will there be any dividends paid on the stock?
A. Subject to regulatory and other considerations, the Company
intends to establish a quarterly cash dividend following the
Conversion of $0.30 per share annually commencing during the
first full calendar quarter following 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. No assurance can be given that any dividends
(regular or special) will be paid on the Common Stock or that,
if paid, such dividends will not be reduced or eliminated in
future periods.
17. Q. How much stock do the directors and officers of First Federal
intend to order in the Subscription Offering?
A. Directors and executive officers intend to order approximately
$1.25 million (7.6% at the sale of 1,650,000 shares in the
offering) of the stock to be offered in the conversion. The
purchase price paid by directors and officers will be the same
as that paid by customers and the general public.
<PAGE>
18. Q. Are the subscription rights transferable to another party?
A. No. Pursuant to federal regulations, subscription rights
granted to Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members may be exercised only by
the person(s) to whom they are granted. Any person found to
be transferring or selling subscription rights will be
subject to forfeiture of such rights and other penalties.
19. Q. I closed my account several months ago. Someone told me that
I am still eligible to buy stock. Is that true?
A. If you were an account holder on the Eligibility Record Date,
June 30, 1995, or the Supplemental Eligibility Record Date,
September 30, 1997, you are entitled to purchase stock
regardless of whether or not you continue to hold your First
Federal account.
20. Q. May I obtain a loan from First Federal using stock as
collateral to pay for my shares?
A. No. Federal regulations do not allow First Federal to make
loans for this purpose, but other financial institutions may
make a loan for this purpose.
21. Q. Will the FDIC (Federal Deposit Insurance Corporation) insure
the shares of stock?
A. No. The shares will not be insured by the FDIC. However,
the Savings Association Insurance Fund of the FDIC will
continue to insure savings accounts and certificates of
deposit up to the applicable limits allowed by law.
22. Q. Will there be a market for the stock following the conversion?
A. Great Pee Dee Bancorp has never issued stock before, and
consequently there is no established market for its common
stock. Great Pee Dee Bancorp has received conditional approval
to have the common stock listed on the NASDAQ National Market
System under the symbol "___". Trident Securities, Inc.
intends to make a market in the common stock . However,
purchasers of common stock should recognize that no assurance
can be given than an active and liquid trading market will
develop or, if developed, will be maintained.
23. Q. Can I purchase stock using funds in a First Federal IRA
account?
A. Yes. Contact the Stock Information Center for the
additional information. It takes several days to process the
necessary IRA forms and, therefore, you must make
arrangements by ______, 1997, to accommodate your order.
<PAGE>
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
24. Q. Am I eligible to vote at the Special Meeting of Members to be
held to consider the Plan of Conversion?
A. At the Special Meeting of Members to be held on ______, 1997,
you are eligible to vote if you are one of the "Voting
Members," who are holders of First Federal's deposits or other
authorized accounts or loans as of ____________, 1997 (the
"Voting Record Date") for the Special Meeting. However,
members of record as of the close of business on the Voting
Record Date who cease to be depositors or borrowers prior to
the date of the Special Meeting are no longer members and will
not be entitled to vote at the Special Meeting. If you are a
Voting Member, you should have received a proxy statement and
proxy card with which to vote.
25. Q. How many votes do I have as a Voting Member?
A. According to First Federal's charter, each account holder is
entitled to one vote for each $100, or fraction thereof, on
deposit in such account. Each borrower who holds eligible
borrowings is entitled to cast one vote in addition to the
number of votes, if any, he or she is entitled to cast as an
account holder. No member may cast more than 1,000 votes.
26. Q. If I vote "against" the Plan of Conversion and it is approved,
will I be prohibited from ordering stock during the
subscription offering?
A. No. Voting against the Plan of Conversion in no way restricts
you from ordering stock in either the subscription offering
or the community offering.
27. Q. What happens if First Federal does not get enough votes to
approve the Plan of Conversion?
A. First Federal's Conversion would not take place and First
Federal would remain a mutual savings and loan association.
28. Q. As a qualifying depositor or borrower of First Federal, am
I required to vote?
A. No. However, failure to return your proxy card will have the
same effect as a vote "Against" the Plan of Conversion.
29. Q. What is a Proxy Card?
A. A Proxy Card gives you the ability to vote without attending the
Special Meeting in person. However, you may attend the meeting and
vote in person, even if you have returned your proxy card, if you
choose to do so.
<PAGE>
30. Q. How does the conversion affect me?
A. The conversion is intended, among other things, to assist
First Federal in maintaining and expanding its many services
to First Federal's customers and community. If you purchase
stock, you will also have the opportunity to invest in Great
Pee Dee Bancorp, the proposed holding company for First
Federal. However, there is no obligation to purchase stock;
the decision to purchase stock is strictly personal.
31. Q. How can I get further information concerning the stock
offering?
A. You may call the Stock Information Center, at (803) __________
for further information or a copy of the Prospectus, Stock
Order Form, Proxy Statement and Proxy Card.
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
FOR YOUR CONVENIENCE
In order to assist you during the stock offering period, we have
established a Stock Information Center to answer your questions. Please call:
(803)
----------
<PAGE>
III. Officer and Director Brochure
A. Explanation
An Officer and Director Brochure merely highlights the intended stock
purchases shown in the Prospectus.
B. Method of Distribution
There are three primary methods of distribution of Officer and Director
Brochures. However, regardless of the method, they are always accompanied by
a Prospectus.
1. An Officer and Director Brochure is sent out in the initial mailing to
all members of the First Federal.
2. Officer and Director Brochures will be available in any of First
Federal's offices.
3. Officer and Director Brochures are sent out in a standard information
packet to all interested investors who telephone the Stock Information
Center requesting information.
<PAGE>
OFFICER AND DIRECTOR STOCK PURCHASE COMMITMENTS
<TABLE>
<CAPTION>
Name and Anticipated Number of Anticipated Dollar
Position Shares Purchased Amount Purchased
- -------- ---------------------- ------------------
<S> <C> <C>
Herbert W. Watts 20,000 $200,000
President & CEO
Robert M. Bennett 25,000 $250,000
Chairman of the Board
William Rhett Butler 20,000 $200,000
Director
James C. Crawford III 25,000 $250,000
Director
Henry P. Duvall, Jr. 15,000 $150,000
Director
Cornelius B. Young 15,000 $150,000
Director
Johnnie L. Craft 5,000 $50,000
Secretary & Treasurer ----- -------
TOTAL 125,000 $1,250,000
======= ==========
</TABLE>
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
<PAGE>
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
IV. Counter Cards, Lobby Posters and the Tombstone Announcement
A. Explanation
Counter cards, lobby posters and the tombstone announcement serve three
-----
purposes: (1) As a notice to First Federal's customers and members of
the local community that the stock sale is underway; (2) to remind the
customers of the end of the Subscription Offering; and (3) to invite
members of the community to an informational meeting, if applicable.
Trident has learned in the past that many people need reminding of the
deadline for subscribing and therefore we suggest the use of these
simple reminders.
B. Quantity
Approximately 3 - 4 counter cards may be used at First Federal's
offices, at teller windows and on customer service representatives'
desks. These counter cards will be exact duplicates of the lobby poster
and will be no larger than 8-1/2" x 11".
Approximately 1 - 2 lobby posters may be used at the offices of First
Federal. These posters will be approximately 2' x 3'.
Tombstone announcements may be used for placement in local newspapers.
The advertisements will run no more than twice each in the local
newspaper. The ads will be no larger than 8-1/2" x 11".
C. Examples enclosed
<PAGE>
POSTER
Great Pee Dee Bancorp, Inc.
First Federal Savings and Loan Association of Cheraw
STOCK OFFERING MATERIALS
AVAILABLE HERE
Customer and Community Priority Rights, if any, for the Stock Offering
by Great Pee Dee Bancorp, Inc.
Expire on _____, 1997
<PAGE>
This announcement is neither an offer to sell nor a solicitation of an offer
to buy these securities. The offer is made only by the Prospectus.
These shares have not been approved or disapproved by the Securities and
Exchange Commission, the Office of Thrift Supervision or the Federal Deposit
Insurance Corporation, nor has such Commission, Office or Corporation
passed upon the accuracy or adequacy of the Prospectus. Any representation
to the contrary is a criminal offense.
New Issue , 1997
- --------- --------
1,897,500 Shares
These shares are being offered pursuant
to a Plan of Conversion whereby
First Federal Savings and Loan
Association of Cheraw
in Cheraw, South Carolina will convert
from a federal mutual savings and loan association
to a federal stock savings and loan association
and become the wholly-owned subsidiary of
Great Pee Dee Bancorp, Inc.
Common Stock
---------------
Price $10.00 per share
---------------
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from such of the undersigned or other brokers and dealers as may
legally offer these securities in such state.
Trident Securities, Inc.
For a copy of the Prospectus call (803) ________.
<PAGE>
V. Community Meeting Materials
A. Explanation
In order to educate the public about the stock offering, Trident
suggests holding Community meetings in various locations. In an effort
to target a group of interested investors, Trident requests that each
Director of First Federal submit a list of acquaintances that he or she
would like to invite to a Community meeting.
B. Method of Distribution of Invitations and Prospect Letters
Each Director submits his list of prospects.
Invitations are sent to each Director's prospects through the mail. All
invitations are preceded by a Prospectus and all attendees are given a
Prospectus at the meeting.
Prospect Letters are sent to prospects when appropriate.
C. Examples enclosed
<PAGE>
The Directors and Officers
of
First Federal Savings and Loan Association of Cheraw
cordially invite you to attend a brief
presentation regarding the stock offering of
Great Pee Dee Bancorp, Inc., our proposed holding company.
Please join us at the
Place
Address
Date
at 5:30 p.m.
for hors d'oeuvres.
R.S.V.P.
(803) (Collect)
<PAGE>
Example
(Introductory Letter)
(First Federal Letterhead)
, 1997
-------
Name
Address
City, State, Zip
Dear :
--------------
You have probably read recently in the newspaper that First Federal
Savings and Loan Association of Cheraw is converting from mutual to stock form.
This conversion is the biggest step in the history of First Federal in that it
allows customers, community members, employees and directors the opportunity to
subscribe for common stock in our new holding company, Great Pee Dee Bancorp,
Inc.
I have enclosed a Prospectus and a stock order form which will allow
you to subscribe for shares and possibly become a charter stockholder of Great
Pee Dee Bancorp, Inc. In addition, we will be holding several presentations for
friends of First Federal in order to explain the Conversion and review the
merits of possibly becoming a charter stockholder of Great Pee Dee Bancorp, Inc.
You will receive an invitation shortly.
I hope that if you have any questions you will feel free to call First
Federal's Stock Information Center at (803) ___________. I look forward to
seeing you at our presentation.
Sincerely,
Director
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
Example
(Thank You Letter)
(First Federal Letterhead)
, 1997
-----------
Name
Address
City, State, Zip
Dear :
--------------
On behalf of the Board of Directors and management of First Federal
Savings and Loan Association of Cheraw, I would like to thank you for attending
our recent presentation regarding the stock offering of Great Pee Dee Bancorp,
Inc. We are enthusiastic about the stock offering and look forward to completing
the Offering on _______, 1997.
I hope that you will join me in being a charter stockholder, and once
again thank you for your interest.
Sincerely,
Herbert W. Watts
President
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
Example
(Sorry You Were Unable to Attend)
(First Federal Letterhead)
, 1997
------------
Name
Address
City, State, Zip
Dear :
------------
I am sorry you were unable to attend our recent presentation regarding
First Federal's mutual to stock conversion. The Board of Directors and
management as a group intend to invest $1,250,000 of our own funds in the common
stock of Great Pee Dee Bancorp, Inc. We are enthusiastic about the stock
offering and look forward to completing the Offering on _______, 1997.
We have established a Stock Information Center to answer any questions
regarding the stock offering. Should you require any assistance between now and
_______, I encourage you either to stop by or call our Stock Information Center
at (803) ____________.
I hope you will join me in becoming a charter stockholder of Great Pee
Dee Bancorp, Inc.
Sincerely,
Herbert W. Watts
President
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
Example
(Final Reminder Letter)
(First Federal Letterhead)
, 1996
--------
Name
Address
City, State, Zip
Dear :
----------------
Just a quick note to remind you that the deadline is approaching
quickly for purchasing stock in Great Pee Dee Bancorp, Inc., the proposed
holding company for First Federal Savings and Loan Association of Cheraw. I hope
you will join me in becoming a charter stockholder in what will be South
Carolina's newest publicly owned financial institution holding company.
The deadline for subscribing for shares in the Offering is _______,
1997. If you have any questions, I hope you will call our Stock Information
Center at (803) _______________.
Once again, I look forward to having you join me as a stockholder of
Great Pee Dee Bancorp, Inc.
Sincerely,
Herbert W. Watts
President
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
VI. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of
the Association in order to alert the customers that funds held in an
IRA can be used to purchase stock. Since this transaction is not as
simple as designating funds from a certificate of deposit like a normal
stock purchase, this letter informs the customer that this process is
slightly more detailed and involves contact with the Stock Information
Center.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of First
Federal. These letters would be mailed following OTS approval for the
conversion and after each customer has received the initial mailing
containing a Proxy Statement and a Prospectus.
C. Example - Enclosed
<PAGE>
First Federal Letterhead
, 1997
--------
Dear Individual Retirement Account Participant:
As you know, First Federal Savings and Loan Association of Cheraw is in
the process of converting from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association and has
formed Great Pee Dee Bancorp, Inc. to hold all of the stock of First Federal
(the "Conversion"). Through the Conversion, certain current and former
depositors and borrowers of First Federal have the opportunity to purchase
shares of common stock of Great Pee Dee Bancorp, Inc. in a Subscription
Offering. Great Pee Dee Bancorp, Inc. currently is offering up to 1,897,500
shares of common stock, subject to adjustment, at a price of $10.00 per share.
As the holder of an individual retirement account ("IRA") at First
Federal, you may use your IRA funds to subscribe for stock. If you desire to
subscribe for shares of common stock of Great Pee Dee Bancorp, Inc. through your
IRA, First Federal can assist you in self-directing those funds. This process
can be done without an early withdrawal penalty and generally without a negative
tax consequence to your IRA.
If you are interested in receiving more information on self-directing
your IRA, please contact our Stock Information Center at (803) __________.
Because it takes several days to process the necessary IRA forms, a response
must be received by _______, 1997 to accommodate your interest.
Sincerely,
Herbert W. Watts
President
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
VII. Letters
A. Explanation
Cover letters to accompany offering materials.
B. Method of Distribution
Enclosed with the initial mailing.
C. Examples
<PAGE>
(Trident Letterhead)
,1997
------------
To Members and Friends of First Federal Savings and Loan Association of Cheraw:
Trident Securities, Inc., a member of the National Association of
Securities Dealers, Inc., is assisting First Federal Savings and Loan
Association of Cheraw in its conversion to a capital stock savings and loan
association and the concurrent offering of shares of common stock by Great Pee
Dee Bancorp, Inc. (the "Company"), a Delaware corporation recently formed for
the purpose of acquiring all of the stock of First Federal Savings and Loan
Association of Cheraw.
At the request of First Federal Savings and Loan Association of Cheraw,
we are enclosing materials explaining the conversion process and your right to
subscribe for common shares of the Company. Please read the enclosed offering
materials carefully before subscribing for stock.
If you have any questions, please call the Stock Information Center at
(803) __________.
Sincerely,
TRIDENT SECURITIES, INC.
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy
stock. The offer is made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
<PAGE>
(First Federal Letterhead)
___________, 1997
Dear Valued Customer:
First Federal Savings and Loan Association of Cheraw is pleased to announce
that we have received regulatory approval to proceed with our plan to convert to
a federally chartered stock savings and loan association, conditioned upon
receipt of approval by First Federal's members, among other things. This stock
conversion is the most significant event in the history of First Federal in that
it allows customers, community members, directors and employees an opportunity
to subscribe for stock in Great Pee Dee Bancorp, Inc., the holding company for
First Federal.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
First Federal, or the terms or conditions of any loans to existing borrowers
under their individual contract arrangements with First Federal. Let us also
assure you that the stock Conversion will not result in any changes in the
management, personnel or the Board of Directors of First Federal.
A special meeting of the members of First Federal will be held _______ at
_______, South Carolina time, at First Federal's main office, 515 Market Street,
Cheraw, South Carolina, to consider and vote upon First Federal's Plan of
Conversion. Enclosed is a proxy card. Your Board of Directors solicits your vote
"FOR" First Federal's Plan of Conversion. A vote in favor of the Plan of
Conversion does not obligate you to purchase stock. If you do not plan to attend
the special meeting, please sign and return your proxy card promptly; your vote
is important to us.
As one of our valued members, you have the opportunity to invest in First
Federal's future by having the opportunity to purchase stock in Great Pee Dee
Bancorp, Inc. during the Subscription Offering, without paying a sales
commission.
If you decide to exercise your subscription rights to subscribe for shares,
you must return a properly completed stock order form together with full payment
for the subscribed shares so that it is received by First Federal not later than
12:00 Noon, South Carolina time on December , 1997.
We also have enclosed a Prospectus and Proxy Statement which fully
describes the conversion and provides financial and other information about
Great Pee Dee Bancorp, Inc. and First Federal. Please review these materials
carefully before you vote or invest. For your convenience we have established a
Stock Information Center. If you have any questions, please call the Stock
Information Center at (803) __________.
<PAGE>
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Herbert W. Watts
President
Enclosures
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer is made only by the Prospectus. There shall be no sale of stock in any
state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
<PAGE>
(First Federal Letterhead)
____________, 1997
Dear Interested Investor:
First Federal Savings and Loan Association of Cheraw is pleased to announce
that we have received regulatory approval to proceed with our plan to convert to
a federally chartered stock savings and loan association, conditioned upon
receipt of approval by First Federal's members, among other things. This stock
conversion is the most significant event in the history of First Federal in that
it allows customers, community members, directors and employees an opportunity
to subscribe stock in Great Pee Dee Bancorp, Inc., the holding company for First
Federal.
We want to assure you that the Conversion will not result in any changes in
the management, personnel or the Board of Directors of First Federal.
Enclosed is a Prospectus which fully describes First Federal, its
management, board and financial condition. Please review it carefully before you
make an investment decision. If you decide to invest, please return to First
Federal a properly completed stock order form together with full payment for
shares at your earliest convenience. For your assistance, we have established a
Stock Information Center. If you have any questions, please call the Stock
Information Center at (803)__________.
Sincerely,
Herbert W. Watts
President
Enclosures
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer is made only by the Prospectus. There shall be no sale of stock in any
state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
<PAGE>
(First Federal Letterhead)
____________, 1997
Dear Friend:
First Federal Savings and Loan Association of Cheraw is pleased to announce
that we have received regulatory approval to proceed with our plan to convert to
a federally chartered stock savings and loan association, conditioned upon
receipt of approval by First Federal's members, among other things. This stock
conversion is the most significant event in the history of First Federal in that
it allows customers, community members, directors and employees an opportunity
to subscribe stock in Great Pee Dee Bancorp, Inc., the holding company for First
Federal.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
First Federal, or the terms or conditions of any loans to existing borrowers
under their individual contract arrangements with First Federal. Let us also
assure you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of First Federal.
Our records indicate that you were a depositor of First Federal on June 30,
1995. Therefore, under applicable law, you are entitled to subscribe for Common
Stock in the Subscription Offering. Orders submitted by you and others in the
Subscription Offering are contingent upon the current members' approval of the
Plan of Conversion at a special meeting of members to be held on , ________1997
and upon receipt of all required regulatory approvals.
If you decide to exercise your subscription rights to purchase shares, you
must return a properly completed stock order form together with full payment for
the subscribed shares so that it is received at First Federal not later than
12:00 Noon, South Carolina time on __________ , 1997.
Enclosed is a Prospectus which fully describes First Federal, its
management, board and financial condition. Please review it carefully before you
invest. For your convenience, we have established a Stock Information Center. If
you have any questions, please call the Stock Information Center at (803)
___________.
Sincerely,
Herbert W. Watts
President
Enclosures
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer is made only by the Prospectus. There shall be no sale of stock in any
state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
<PAGE>
VIII. Proxy Reminder
A. Explanation
A proxygram is used when the majority of votes needed to adopt the Plan of
Conversion is still outstanding. The proxygram is mailed to those "target
vote" depositors who have not previously returned their signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example enclosed
<PAGE>
B. Example
================================================================================
P R O X Y G R A M
(LOGO)
================================================================================
YOUR VOTE ON OUR PLAN OF CONVERSION HAS NOT BEEN RECEIVED.
---- --------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
- ---------------------------
VOTING AGAINST THE PLAN OF CONVERSION.
VOTING FOR THE PLAN OF CONVERSION WILL NOT AFFECT THE INSURANCE COVERAGE OF YOUR
ACCOUNT. IT WILL CONTINUE TO BE INSURED UP TO THE LEGAL LIMIT ($100,000 PER
----------------------
ACCOUNT AS DEFINED BY LAW) BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION, AN AGENCY OF THE U.S. GOVERNMENT.
REMEMBER, VOTING FOR THE PLAN OF CONVERSION DOES NOT OBLIGATE YOU TO BUY ANY
--------
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL OR DELIVER IT TO A
----------
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHERAW OFFICE.
WE RECOMMEND THAT YOU VOTE "FOR" THE PLAN OF CONVERSION.
---
THANK YOU!
THE BOARD OF DIRECTORS OF FIRST
FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHERAW
================================================================================
<PAGE>
IX. Subscription Rights Notice
A. Explanation
Notify members that the transfer of subscription rights is illegal
B. Method of Distribution
Notice is included in all initial meetings to members
C. Example
<PAGE>
SUBSCRIPTION RIGHTS
SPECIAL NOTICE
Any transfer of, or attempt to transfer, a subscription right to any other
person is illegal and subject to civil fines and/or penalties and even criminal
fines and/or penalties. The Association intends to prosecute vigorously any
transfer of, or attempt to transfer, subscription rights that comes to its
attention.
If you are (or have been already) contacted by anyone offering to give you
money to buy stock in exchange for transferring the stock to them later or to
share in any way proceeds upon the sale of the stock, or to transfer your
subscription rights in any other way, please call us immediately at (803) 537-
7656.
<PAGE>
EXHIBIT 99.5
<PAGE>
GREAT PEE DEE BANCORP, INC.
NUMBER OF SHARES
Fill in the number of shares you wish to purchase and the total amount due. No
fractional shares will be issued. The minimum purchase is _____ shares.
METHOD OF PAYMENT
Check the appropriate box(es). You may pay by check, bank draft or money order
and/or authorize withdrawal from your First Federal Savings and Loan Association
of Cheraw savings or certificate account(s). If paying by certified or teller's
check, please make it payable to First Federal Savings and Loan Association of
Cheraw. Your funds will earn interest at the Association's certificate rate per
annum until the offering is completed. If paying by withdrawal, please list the
appropriate account number(s); these designated funds will continue to earn
interest from a savings or certificate account at the same account rate and
cannot be withdrawn by you until the Closing Date, as defined on the front page
of the Prospectus.
STOCK REGISTRATION
Print the name(s) in which you want the stock registered. See the reverse side
of this form for registration guidelines.
Enter the social security number (or tax I.D. number) of the registered owner.
Only one number is required.
Indicate the manner in which you wish to take ownership by checking the
appropriate box. If necessary, check other and note ownership such as
corporation, estate or trust. If stock is purchased for a trust, the date of
the trust agreement and trust title must be included.
NASD AFFILIATION
Please refer to the National Association of Securities Dealers, Inc. (NASD)
affiliation section and check the box if applicable. Under the 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 the purchase of
such securities, as established by the NASD.
_____ Check here and initial below if you are a member of the NASD or a person
associated with an NASD member or a member of the immediate family of any such
person to whose support such person contributes directly or indirectly or if you
have an account in which an NASD member or person associated with an NASD member
has a beneficial interest. I agree (i) not to sell, transfer or hypothecate the
stock for a period of 150 days following issuance, and (ii) to report this
purchase order in writing to the applicable NASD member I am associated with
within one day of the payment for the stock. (Initials)_________
ACKNOWLEDGMENT
Sign and date the form. When purchasing as a custodian, corporate officer,
etc., add your full title to your signature. An additional signature is
required only when payment is by withdrawal from an account that requires more
than one signature to withdraw funds.
DEADLINE
This form along with the Form of Acknowledgment, properly executed and with the
correct payments must be received by ____ _.m., South Carolina Time,
___________, 1997 and will be deemed received upon the date and the time of
delivery of the form to our office. Please submit your order using the enclosed
postage-paid envelope or hand-delivering to First Federal Savings and Loan
Association of Cheraw.
TELEPHONE INFORMATION
Please enter both a daytime and evening telephone number where you may be
reached in the event we cannot execute your order as given.
Daytime Phone ( ) ____________________
Evening Phone ( ) ____________________
STOCK ORDER FORM
Number of Shares Offering Price Total Amount Due
X $ 10.00 =
- ------------- --------------------- ---------------
_____ Enclosed is a certified teller's check, bank draft, or money order
payable to First Federal Savings and Loan Association of Cheraw for
$________.
_____ I authorize withdrawal from the following First Federal Savings and Loan
Association of Cheraw account(s):
Account Number(s) Amount
$
$
Total Withdrawal $
_________________________________________________________________
Name(s) in which your stock is to be registered
_________________________________________________________________
Name(s) in which your stock is to be registered
__________________________________________________________________
Address
__________________________________________________________________
City County
_________________________________________________________________
State Zip Code
_________________________________________________________________
Social Security # or Tax ID #
_______ Individual _______ Joint Tenants _______ Tenants in Common
_______ Uniform Gift or Transfer to Minors
_______ Other _____________________________________________
I (we) acknowledge receipt of the Prospectus and the terms and conditions
described therein. I (we) understand that, after receipt by First Federal
Savings and Loan Association of Cheraw, this order may not be modified or
withdrawn without the consent of First Federal Savings and Loan Association of
Cheraw. Further, I (we) certify that my (our) purchase does not conflict with
the purchase limitations in the Plan of Conversion, and that the shares being
purchased are for my (our) account only and that there is no present agreement
or understanding regarding any subsequent sale or transfer of such shares.
Under penalties of perjury, I (we) certify that: (1) the Social Security number
or Taxpayer Identification number given above is correct; and (2) I am not
subject to backup withholding. Instructions: You must cross out #2 above if
you have been notified by the Internal Revenue Service that you are subject to
withholding because of under-reporting interest or dividends on your tax return.
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED AND IS NOT GUARANTEED BY FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHERAW OR ANY FEDERAL OR STATE GOVERNMENT OR AGENCY.
If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I should call the Southeast Regional Director of
the Office of Thrift Supervision, Atlanta, Georgia at (404) 888-0771.
I further certify that, before purchasing the Common Stock of Great Pee Dee
Bancorp, Inc., I received a Prospectus. The Prospectus that I received contains
disclosure concerning the nature of the security being offered and describes the
risks involved in the investment. See the "Risk Factors" section of the
Prospectus. In executing this Stock Order Form I affirm that I have read the
Prospectus and am aware of the risks associated with investing in Great Pee Dee
Bancorp, Inc. Common Stock.
____________________________________________________________
Signature Date
____________________________________________________________
Additional Signature (if required) Date
For assistance, please call the Stock Information Center, First Federal Savings
and Loan Association of Cheraw,
at (803) ___-____ from 9:00 a.m. to 5:00 p.m., South Carolina Time, Monday
through Friday.
<PAGE>
GUIDELINES FOR REGISTERING STOCK
For reasons of clarity and standardization, the stock transfer industry has
developed uniform stock ownership registration which we will use in issuing your
stock certificate. Common ownership registrations are explained below. If you
have any questions about how your Great Pee Dee Bancorp, Inc. common stock
should be registered, see your legal advisor.
To ensure correct registration, please follow the instructions for the
ownership you select.
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GENERAL INSTRUCTION: . Include the first name, middle initial, and last name
of each person listed. Avoid the use of an initial in
place of the first name.
. Do not use titles such as Mr., Mrs., Dr., etc.
. Omit words that do not affect ownership rights such as
special account, personal property, etc.
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INDIVIDUAL: Instructions: Print the first name, middle initial, and
last name of the person in whose name the stock is to be
registered. You may not list beneficiaries for this
ownership.
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JOINT TENANTS: Joint Tenancy with Right of Survivorship identifies two or
more persons as owners of the stock. Upon the death of one
of the owners, ownership automatically passes to the
surviving tenant(s).
Instructions: Print the first name, middle initial, and
last name of each co-tenant. You may not list
beneficiaries for this ownership.
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UNIFORM GIFTS TO For residents of certain states, stock may be held in
MINORS/UNIFORM the name of a custodian for the benefit of a minor under
TRANSFERS TO MINORS: the Uniform Transfers to Minors Act. For residents of
most other states, stock may be held in a similar type of
ownership under the Uniform Gifts to Minors Act of the
individual states. For either ownership, the minor is the
actual owner of the stock with the adult custodian being
responsible for the investment until the minor reaches
legal age.
Instructions: If you are a South Carolina resident and
wish to register stock in this ownership check Uniform
Transfers to Minors Act. For other states, see your legal
advisor if you are unsure about the correct registration
of your stock.
On the first NAME line, print the first name, middle
initial, and last name of the custodian, with the
abbreviation CUST after the name
Print the first name, middle initial, and last name of the
minor on the second NAME line. Only one custodian and
one minor may be designated.
Please indicate the minor's social security number in the
signature block.
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OTHER: Generally, fiduciary relationships (such as
Conservatorship, Legal Trust, Guardianship, etc.) are
established under a form of trust agreement or are
pursuant to a court order. Without a legal document
establishing a fiduciary relationship, your stock may not
be registered in a fiduciary capacity.
Instructions: On the first NAME line, print the first
name, middle initial, and last name of the fiduciary if
the fiduciary is an individual. If the fiduciary is a
corporation, list the corporate title on the first NAME
line. Following the name, print the fiduciary title such
as conservator, personal representative, etc.
On the second NAME line, print either the name of the
maker, donor or testator OR the name of the beneficiary.
Following the name, indicate the date and type of legal
document establishing the fiduciary relationship
(agreement, court order, etc.) (Use the space marked OTHER
if necessary). Please contact us if you have any
questions.
EXAMPLE OF A FIDUCIARY REGISTRATION:
John D. Smith Trustee for Tom A. Smith Under Agreement
Dated 06/09/74.
PLEASE NOTE THAT TOTTEN TRUST AND PAYABLE ON DEATH
OWNERSHIPS MAY NOT BE USED IN REGISTERING STOCK.
For example, stock cannot be registered as John Doe
Trustee for Jane Doe or John Doe Payable on Death to Jane
Doe.
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NASD AFFILIATION: Please refer to the NASD AFFILIATION statement on the face
of this form. If applicable, initial where indicated and
check the box. the National Association of Securities
Dealers, Inc. Interpretation With Respect to Free-Riding
and Withholding (the Interpretation) restricts the sale of
a hot issue (securities that trade at a premium in the
aftermarket) to NASD members, persons associated with NASD
members (i.e., an owner, director, officer, partner,
employee or agent of a NASD member) and certain members of
their families. Such persons are required to indicate that
they will comply with certain conditions required for an
exemption from the restrictions.
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<PAGE>
CERTIFICATION FORM
(This Signed Form Must Accompany A Signed Stock Order Form)
I acknowledge that the shares of common stock, $.01 par value per share
("common stock"), of great pee dee ban corp. (the "corporation"), the proposed
holding company for first federal savings and loan association of cheraw (the
"association"), are not guaranteed by the corporation, the association or the
Federal Government.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Office of Thrift Supervision
Regional Director, John E. Ryan, at (404) 888-0771.
I further certify that, before purchasing the shares of Common Stock of the
Corporation, I received a copy of the Prospectus dated ____________, 1997 which
discloses the nature of the shares of Common Stock being offered thereby, and
describes the following risks involved in an investment in the Common Stock
under the heading "Risk Factors" beginning on page 8 of the Prospectus:
1. Decreased Return on Average Equity and Increased Expenses
Immediately After Conversion
2. Potential Impact of Changes in Interest Rates and the Current
Interest Rate Environment
3. Reliance on Certificate of Deposit Accounts
4. Competition
5. Geographic Concentration of Loans
6. Establishment of the Charitable Foundation
7. Intent to Remain Independent
8. Anti-Takeover Provisions and Statutory Provisions That
Could Discourage Hostile Acquisitions of Control
9. Possible Voting Control by Directors and Officers
10. Possible Dilutive Effect of RRP and Stock Options
11. Financial Institution Regulation and Future of the Thrift Industry
12. Risk of Delayed Offering
13. Income Tax Consequences of Subscription Rights
For a more detailed description of the risks involved in the offering,
see "Risk Factors" at pages 8 through 11 of the Prospectus.
Signature:
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Signature:
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(Note: If stock is to be held jointly, both parties must sign)
----
Date:
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